Mahindra War Room 2016 Mahindra Partners Division-Marine Business Caselet

MAHINDRA PARTNERS SECTOR:

MARINE BUSINESS CASELET: MAHINDRA MARINE BUSINESS STRATEGY

Mahindra Marine Pvt. Ltd., a luxury and speed boat manufacturing business, is part of
Mahindra Partners, the 1 Billion USD Private Equity & Venture Capital division of the
Mahindra Group, whose mission is to accelerate value creation through a diversified
global portfolio of emergent businesses. Mahindra Partners adapts the Groups unique
strengths of constant innovation, prudence and creative business models with a
mandate of incubating new ventures for the Group. The division provides growth capital
to bring our stakeholders diversified products and services.

Apart from Mahindra Marine, Mahindra Partners also manages portfolio companies in
various industry sectors like Logistics, Cleantech, Retail, Steel, Conveyor Systems,
Consulting, Media, Vocational Education, and Water Utilities.

BUSINESS BACKGROUND:

India has over 7500km of verdant coastline - the third longest in the world - touching 13
states and union territories, mostly straight and regular. The East Coast of India,
spanning Utkal, Andhra, Tamil Nadu and Coramandel Coasts; and the West Coast of
India, spanning the Konkan Coast, the Karnataka Coast and the Malabar Coast dotted
with coves, creeks and estuaries. The opportunities around water - whether ports,
harbours, transportation or recreation & leisure, and grossly under-realised in India.
With the emergence of the next generation of consumers, these opportunities are
bound to come alive in the coming years.

TIMELINE OF MAHINDRA MARINE

2008 Mahindra enters the leisure boating industry with Mahindra Odyssea
2009 Launches the 7m and 10m speed boats at the India Boat Show
2012 Launches its own boat building yard in Ambernath
2012 Launches the MO33 cabin and MO35 diesel variants
2013 Forays into the tender segment. It secures L1 for a tender for 14 m a patrol boat.
2014 Launches the MO17 in the sub Rs. 15 lac category, the first of its kind
speedboat
2015 Gains traction in the tender segment. Gets L1 for two 16m boats and seventeen
11m boats. Aggressively participates in tenders. In the meantime, the personal
ownership market is subdued with low buying sentiments.

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Mahindra War Room 2016 Mahindra Partners Division-Marine Business Caselet

PRODUCT PORTFOLIO:

LIVE CHALLENGE: MAHINDRA MARINE BUSINESS STRATEGY

Being a first and a fast mover, Mahindra Marines strengths include having a state-of-
the-art FRP boat manufacturing capacity, the ability to customize to meet different client
requirements, and an experienced team of designers and architects. However the
Industry is in a very early stage of evolution in India, with just one Marina (infrastructure
to dock, service and refuel boats) in Kochi. Plans for Marinas in Goa and Mumbai have
got mired in criticisms, adding uncertainty to the policy on core infrastructure required
for this business. Along with the Marina Infrastructure, Funding options through Banks
and Financial Institutions for purchase of boats, Market for used boats and Professional
talent required for supporting different aspects of the business remain bottlenecks to be
cleared to realize the potential. The availability of cheap chartered services also
threatens the boat-building industry.

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Mahindra War Room 2016 Mahindra Partners Division-Marine Business Caselet

In 2016, two distinct segments have started emerging in this Industry - the Institutional
Segment, accounting for ~70% of the addressable market, and the Personal Segment
accounting for ~30%.

The Institutional Segment shifted noticeably into a Tender-based business. Those

impatient with Institutional Sales call it the L1 syndrome, where the business is
steered towards cost reduction, with unrelenting focus on cutting corners or deploying
only the mandatory features. Participating in tenders and getting costs down to rock-
bottom, orienting the product only to mandatory features and materials at the lowest
cost typify this segment. The second phase of the Coastal Security Scheme is being
implemented, with an outlay of INR. 1,580 crores over 5 years, with an expected
demand of 225 boats under this scheme itself. In 2013, India spent Rs. 1863 Crores on
acquiring equipment for the navy, which is another potential opportunity.

The Personal Segment too is expected to hold significant potential in India, once the
bottlenecks mentioned in the previous page are addressed robustly. India has an
estimated 125,000 high net worth individuals, growing at an average of 20% every year.
Yet, there are very few hundred boats in the market today. The new government at the
centre seems committed to Infrastructure building in the waterways too - the new Jal
Marg Yojana, recently proposed by Minister Nitin Gadkari, aims to convert Indias 101
rivers into national waterways, allowing for water transport for both cargo & leisure.
create a network of inland waterways. The Government has already started work on the
USD. 75 million fairway between Allahabad and Haldia. Also, India has 12 major ports
and 176 smaller ports. With the Government securing INR. 20,700 Crore investment in
port projects, India is on track to double its port capacity to 3,200 million tons by 2020.
The Ministry of Tourism has emphasised water-tourism as an important strategic focus
area, sanctioning funds to transform existing water circuits into mega circuits.

These 2 segments, though pertaining to the same product, require drastically different
offerings - while the tender based business requires low-cost, stringent adherence to
specifications, the personal segment lays emphasis on cutting-edge technology,
gadgets, plush interiors with high speed engines, with high decibel marketing and
branding efforts. It is therefore natural that each function, from Sales and Marketing to
HR and Procurement will need a completely different focus for the 2 streams of
businesses.

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Mahindra War Room 2016 Mahindra Partners Division-Marine Business Caselet

While the Institutional segment is directly dependent on the Government for revenues,
the Personal segment too is indirectly dependent on it, for de-regulation and opening up
of water-ways and creation of the requisite Infrastructure. What, therefore, should be
the focus area of the business? How can the business meet the immediate demand
through tender business, while build capability for the emerging personal segment too?
What innovative steps can be taken to align the teams to both segments? What new
and innovative revenue models can be pursued and why? Are there big opportunities
outside India, either for revenue generation or inorganic growth?

Evolve a strategy for the Mahindra Marine business to achieve revenues of INR.
500 crores, through detailed segment strategies, as well as hitherto unknown
innovative areas for revenue growth.

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