Rank-5 : The Engineering Centrifuge

Mahindra & Mahindra makes its debut in our top five groups this year,
primarily because of its acquisition of Satyam, now rebranded as Mahindra Satyam;
though non-availability of the exact revenue of Mahindra Satyam means it does
not reflect in the group revenue. This year, another group company, Mahindra
Engineering Servicesthat provides engineering design services to automotive and
aerospace sectorshas also made its debut in the DQ Top 200 companies list,
published in the Vol I of DQ Top20.

Mahindra Group is the only one other than the Tatas in our list which is a
group, in the classic sense of the word. Also, though it is strongly identified
with automotive and farm equipments, it is increasingly becoming more and more
diversified, with IT becoming one of the important components of its
portfolioand probably the most well known outside its core business.

While most traditional diversified groups in India do not have a very
coherent group strategy beyond some shared core values, the Mahindra Group has
tried to follow a controlled growth with common corporate governance standards
across all its businesses in the recent years. That has meant even leveraging
synergies within the group. What is more, its expansion strategyincluding
inorganic growthhas also been guided by this. While there are many examples of
this strategy, there are a few that are relevant for the areas that we address.

Rank - 5 : MAHINDRA GROUP
	Anand Mahindra, vice chairman, Mahindra
The Mahindra Satyam numbers are not here yet; so it does not give the right picture of the group. But the low profile Mahindra Engineering Services may be the company to watch

The setting up of the Systems & Technology Group (Systech) is a case in
point. The group foresaw the opportunity arising out of increasing pressure on
the global automakers to lower costs by moving sourcing and manufacturing to
lower cost locations, like India. But soon it realized that these customers were
also looking at lowering the cost of product engineering and design. That is
when it created Mahindra Engineering Services. To catch up for its late entry,
it acquired Engines, an established design firm. That explains why Mahindra
Engineering kept itself focused on automotiveits traditional areawhile most IT
services firms have got into engineering services by tapping into all areas that
came on their way. That also explains why it continues to be a part of the
Systech group and not IT group. In fact, as more and more customers look at
design the manufacturing and sourcing capability (in the same Systech division)
and the design capability of Mahindra Engineering put the group in an
advantageous position to bag new projects as compared to most pure play
design/IT firms.

In fact, the company has already been rewarded for its focus. While today
there is a lot of talk around end-to-end design outsourcing, few have actually
done it. Mahindra Engineering actually completed such a project for Navistar
wherein it designed a twenty seater minibus from scratch for selling in the
Columbian market.

In IT, Mahindra Group ventured into the space long back with a joint venture
with BTinitially called Mahindra BTfor serving the joint venture partner.
While there has been a name change and a reduction in the dependence on the
partner for business over the years, what has not changed for Tech Mahindra is
its focus on one vertical: telecom. That is there till now. But, when the group
acquired a majority stake in Satyam, it made it very clear that Satyam would
ultimately be integrated with Tech Mahindra. That is also evident from the fact
that it has deputed a few of its senior executives to Mahindra Satyam. While
Tech Mahindra vice chairman Vineet Nayyar is the chairman of Mahindra Satyam; CP
Gurnani has been appointed as the CEO of the company. Atul Kunwar, another
senior executive, has been appointed as the president of Mahindra Satyam and is
based in the USworking to restore the credibility of the company in the
marketplace. The strength of brand Mahindra has been proved by the fact that
Mahindra Satyam has already started winning new contracts.

Last year, however, saw some technical changes happening with the ownership
of Tech Mahindra. Based on a 2005 agreement, AT&T decided to exercise certain
options and acquired 8.07% of the paid-up equity share of capital of Tech
Mahindra on March 22, 2010. This reduced the shareholding of Mahindra Group and
its subsidiaries to 44.01%, resulting in Tech Mahindra ceasing to be a
subsidiary of the company and became a joint venture. AT&T sold 7% of the equity
a month later.

Mahindra Group also has a subsidiary, Bristlecone, that is a leader in supply
chain consulting.

New Areas, New Opportunities

Mahindra Group has forayed into aerospace and defence in a big way. Last year,
it acquired two Australian companiesAerostaff Australia, that manufactures high
precision close-tolerance aircraft components and assemblies for large aerospace
companies, and Gippsland Aeronautics, an established brand in general aviation.
It is also developing NM5, a five seater aircraft with Hindustan Aeronautics. In
defence, it got into a joint venture with one of the largest defence equipment
companies in the world, BAE. Keeping pace was Mahindra Engineering, which also
ventured into the aerospace area to tap the design outsourcing opportunity
there. Mahindra Engineering was involved in the design of the five seater light
aircraft. Similarly, Mahindra Group has got into real estate. It will be
interesting to see how it taps the opportunity there.

Also, the group company, Bristleconewhich is a significant player in the SAP
space and a leader in supply chain consultingcan be leveraged to supply the
base of clients in the manufacturing space.

However, one thing is very clear in Mahindra Group and every senior manager
knows it. While the company encourages group companies to leverage the synergy
and expand to contiguous/synergetic areas, there is no diktat from the group to
use a sister company. Each company is free to select its vendors on a
competitive basis.

However, what needs to be seen is how it tackles the engineering services
positioning going forward. Satyam had a good capability in engineering services,
in areas such as automotive and aerospace. Will they be moved to Mahindra
Engineering? What about telecom/embedded engineering for automotive/aerospace/defense
sectors? These questions have no clear answers for the time being.

Also, the group is now big enough to have a centralized approach in corporate
IT. While there is an executive director in charge of corporate IT and a group
CIO, its group IT strategy is not well articulated. Vendors however saywe could
not confirm itthat the company is now looking at centralizing and optimizing IT
infrastructure across the group without affecting the applications for the time
being. In fact, many say that it is evaluating options for building a private
cloud across the group.

Shyamanuja Das

shyamanujad@cybermedia.co.in