MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2021-22

MAHINDRA & MAHINDRA LIMITED 22 Sr. No. Particulars 3. Any advance paid or received for the contract or arrangement, if any Based on the nature of transaction, advance for part or full amount of the transaction / arrangement could be paid / received in the ordinary course of business. 4. Tenure Existing (as on 1 st April, 2022) and new Contracts / arrangements / agreements / transactions for a period of 5 years i.e. upto 31 st March, 2027. In case of Mahindra Electric Mobility Limited, the tenure is upto 31 st March, 2027 or the effective date of the Scheme of Merger by Absorption of Mahindra Electric Mobility Limited with Mahindra and Mahindra Limited and their respective Shareholders, whichever is earlier. 5. Justification for why the proposed transaction is in the interest of the Company 5a. Mahindra Logistics Limited (“MLL”): 5b. Swaraj Engines Limited (“SEL”): MLL is a leading integrated logistics & mobility solutions provider with over a decade of experience and has a strong presence across the country. It has an asset-light business model with a focus on technology and emphasis on customer centricity. MLL creates customised, technology- enabled logistics solutions that offer flexibility and scalability. It offers Supply Chain solutions to diverse industry verticals such as Automotive, Engineering, Consumer Goods, Pharmaceuticals, Telecom, Commodities, and E-commerce and also offers integrated employee transportation solutions to enterprise across IT, ITeS, manufacturing, Banking, Financial Services, Insurance and Consulting Businesses. T he rich experience of MLL enables the Company to bring operational synergies, cost optimisation, assurance of service, etc. A significant portion of the MLL’s revenue/turnover, constituting about 52% of its annual turnover on standalone basis as on 31 st March, 2022, is derived from business with the Company. MLL plays a vital role in managing the supply chain covering inbound, in-factory and outbound operations for the Auto and Farm Sector (AFS) of the Company. Transactions with MLL are expected to grow in future, in line with MLL’s vision of becoming a Rs. 10,000 crore Logistics Service Provider by financial year 2026. Keeping in mind the potential quantum of transactions with MLL over the next few years, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with MLL as per the limits stated in point 1. SEL is an India-based company, which is primarily engaged in the business of diesel engines, diesel engine components and spare parts. It manufactures diesel engines for fitment into Swaraj tractors, which are manufactured by the Company. SEL is into manufacturing and supplying of diesel engines in the range of 20 HP to above 65 HP. It is equipped with highly productive & precise quality analysing machines. It is also manufacturing hi-tech engine components. Common Vendors for Tractor and Engine Parts, provide operating synergies to the Company. In the Financial Year 2021-22, the Company sold 3,54,698 tractors (under the Mahindra, Swaraj and Trakstar brands, a flat growth over the previous year, albeit with a marginal increase of 200 units over last year). However, this is the highest ever tractor sales in any year by Mahindra's Farm Equipment Sector. Your Company's F22 market share at 40% continues to position it as the domestic market leader for the 39 th consecutive year. Your Company's performance was supported by good performance of all products in the portfolio across all three brands viz. Mahindra, Swaraj and Trakstar. SEL is primarily manufacturing diesel engines for fitment into "Swaraj" tractors being manufactured by the Company. The Company has built adequate manufacturing capacity for the immediate future and is in the process of investing in additional capacity as part of its mid to long-term strategy for its Farm Equipment Sector. Swaraj Division has invested in creating additional manufacturing capacity by setting up a new manufacturing plant in Mohali. Thus, keeping in view the expected future business prospects of the Company, it is proposed to seek approval of the Members for Related Party Transactions entered/ to be entered into with SEL as per the limits stated in point 1. 5c. Classic Legends Private Limited (“CLPL”): 5d. Mahindra Electric Mobility Limited (“MEML”): CLPL is mainly engaged in sales & marketing of two wheelers, spares, accessories & related activities. CLPL aims to revive classic motorcycle brands and has launched motorcycles such as Jawa and Yezdi. Y our Company being a promoter of CLPL, was approached by CLPL to manufacture and supply motorcycles to CLPL under its brand name. In line with the strategy for the two-wheeler business, the Company through CLPL had reintroduced the iconic brand 'Jawa' to the Indian market in the Financial Year 2019, with the launch of new range of JAWA motorcycles - Jawa and Jawa FortyTwo. In FY22 another iconic brand 'Yezdi' has been reintroduced with three new models at the same time – Yezdi Adventure, Yezdi Scrambler and Yezdi Roadster. The Company will be benefited by using its manufacturing facility at Pithampur plant and R&D facility for two wheelers of CLPL. CLPL will be able to utilise the expertise of the Company for manufacturing, sourcing, etc. This in turn will contribute towards Mahindra Group synergy. Transactions with CLPL are expected to grow in future with strong collection of Brands such as Jawa, Yezdi and BSA. Keeping in mind the potential quantum of transactions with CLPL over the next few years, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with CLPL as per the limits stated in point 1. MEML is India's No. 1 Electric 3-wheeler company. MEML is involved in designing and manufacturing of compact electric vehicles. MEML manufactures electric vehicles (“EV”) and is a service provider for e-systems and electric powertrains, including battery technology, power electronics, drivetrain components, testing facilities and integration services. The Board of Directors of the Company on 28 th May, 2021, subject to requisite approvals/consents, approved the Scheme of Merger by Absorption of MEML with the Company and their respective shareholders (“Scheme”) under the provisions of sections 230 to 232 and other applicable provisions of the Companies Act, 2013. MEML has expertise in EV technology while the Company has expertise in automotive design, engineering and manufacturing, sourcing network and sales, marketing & service channels. Thus, the value chain required for end-to-end EV development, manufacturing and sales is currently spread between the Company and MEML. The proposed consolidation will bring this entire value chain under one umbrella driving sharper focus for smooth and efficient management of the value chain requirements with scale and agility required to meet the increasing focus on EVs. The Company envisages significant investments in the EV business to scale up the business and develop a robust EV product pipeline and hence the approvals for material RPTs are sought in this regard to cover the Related Party transactions upto 31 st March, 2027 or the effective date of the Scheme, whichever is earlier. 5e. Tech Mahindra Limited: 5f. Mahindra CIE Automotive Limited (“Mahindra CIE”): Tech Mahindra Limited, being one of the global IT services providers participates in the digitisation initiatives of entities within Mahindra Group and partners in the growth and transformation journey. The transactions with Tech Mahindra Limited relate to IT, ITES including IT, Infrastructure, Cloud, IOT and Digital Engineering, Digital Transformation, Analytics, Cyber Security, etc. aim at bringing efficiencies in the businesses and providing enhanced level of user experience to the end-consumers of the Company to enable achieve its growth objectives. The dividend received by the Company from Tech Mahindra Limited in FY22 exceeded Rs.1,000 crores which is the threshold for Material Related Party Transaction. Considering the above, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with Tech Mahindra Limited as per the limits stated in point 1. Mahindra CIE, part of the global auto component player, is a diversified multi- technology company and a player with complex & value-added parts. Its global customer base includes major Original Equipment Manufacturers (“OEMs”) of India and overseas. It being a leading producer of forgings, castings, magnetics, stampings with wider range of product technologies, well established and certified plants provide assurance of the quality and timeliness of production and supplies. Also, several years of established relationship between the Company and Mahindra CIE has resulted in operational synergies and cost optimisation besides assurance of product quality. Mahindra CIE being an auto component maker, targets to have all key OEMs in its customer portfolio. The Company is one of the leading OEMs in India and has been a major customer for Mahindra CIE. Other transactions with Mahindra CIE are also linked to or relevant for ensuring smooth supply of products to the Company. Transactions with Mahindra CIE are expected to grow in future. Keeping in mind the potential quantum of transactions with Mahindra CIE over the next few years, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with Mahindra CIE as per the limits stated in point 1. Besides the specific company-wise justification stated above in point 5a to 5f, the Company benefits through operational synergies, cost optimisation, assurance of product/service quality, utilising the expertise within the group for manufacturing, sourcing, etc. thereby bringing efficiencies in the businesses, providing enhanced level of user experience to the consumers of the Company to enable achieve growth objectives, access to and utilisation of strong R&D and design capabilities. Financial assistance would drive growth in subsidiary's/associate's business and will enable them to innovate, scale up and pursue growth opportunities in a more focused manner.