Swaraj Engines - Great cash flows!


Another great quarterly results posted by the company.


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Dear All,

Please help me in getting the below clarifications -

What is the incentive does M&M have to increase the Sales / Profitability of Swaraj Engines? As M&M has only 33% ownership ? Wont there be any conflict of interest to increase the value received by M&M in related party transactions ?

The receivables in 2021 has jumped to 22 days from 5-7 days of the past. This is due to the change in credit terms & this change is directly benefitting M&M. ? Why is this change brought in 2021 & not earlier ? Does Swaraj has low negotiation power and supports M&M in the transactions ?

As the company has single customer ? How are the sales assured ? & Do we have any predefined cost + price/percentage margin in the transactions ? What kind of pricing model is it ?

The company has high ROCE/ROE ratios - Why no other company is able to compete or trying to take the market share ?

From 2021 Annual Report, I understand that company is planning to expand the capacity to 1,50,000 units/year . How long can the company use existing facility for the expansion ( how long can the brown field expansion ) ?

M&M is planning for greenfield plant that can build 50,000 tractors & also highlighted that “the maker of Swaraj brand of tractors is fully maxed out on capacity” . How does it effect our company ?

What is the threat from EV ?


Swaraj Engines FY22 annual report is out. The volume growth is a paltry 3% but the value growth or average realization growth is quite interesting given how low this number has been historically.

Hi Dhiraj,

Given you’ve been closely tracking this business, would be great to know your thoughts on the cause of sharp 12% jump in average realization or ASP per engine from FY21 to FY22.

FY22 - Rs 97,435 ASP
FY21 - Rs 87,100 ASP

As you’ve shared on this thread earlier that the CAGR for average realization is just 1.6%, a 12% jump in 1 year itself is hard to understand without EBITDA margin pressures.

Disc: Invested from 1320 levels

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While not done detailed work, the company has passed on of raw material cost (steel mainly). Swaraj engine increase in realisation would be due to cost pass on in my understanding. I find contribution per engine (sales realisation less material cost per unit of engine sold) as a better paramter to evaluate real growth prospect in the company. I need to complete excel working, so would revert with more details later.

Thanks for your appreciation.

Disl: Holding in core portfolio for more than 10 years as dividend yield idea. Critically evaluating my holding and evaluating HCL Tech/Heidelberg. Not a SEBi registered analyst. Not recommending any investment.


when is the Dividend credited to our accounts ?

apx in july last week


Quarterly results are out.Revenue has jumped from 317 crore to 401 crore,And profit jumped from 33 odd crores to 39 crore.It seems to be a good result and market giving its a thumbs up.
Board Outcome attached.

8f7a325c-ef98-42f1-a2be-ee80621712a8.pdf (1.8 MB)



Swaraj Engine would now become M&M group subsidiary with Mahindra buying Kirloskar Group holding as per BSE announcement.

I have been happy investor with Swaraj Engine for almost decade now. However, after this announcement, I found other opportunities like Azko Noble/Cochin Shipyard and Heidelberg as good dividend yield investment along with growth in dividend over longer terms and hence moved from Swaraj Engine (except for token position) today.

The company has been wornderful learning experience and also excellent clean company on corporate governance on my portfiolio. While it has not gain much in share price over decade, the dividend growth has been excellent to make for that.

Shift in Control in the company would provide better visibility of future growth for the company. Previously, the company was controlled by two diverse management group, which would may have different view about future path of the company. That may have kept company on path of brownfield expansion in capacity at appropriate time and distribute exceess cashflow to the shareholders by dividend/buyback. With Mahindra group now in control, the long term future prospect would depend what additional products/path Mahindra group add to this company business. Tractor engine is likely to be cash cow business but would offer limited growth. The new products are essential for the company to maintain the terminal value in my view.

The deal at Rs 1400 per share between two promoter group which know inside out about operation of the company as compared yesterday close of ~ Rs 1,700/- was not seen positively by me. While there would have issue about exiting from the company for Kirloskar group, nearly 17% discount to market price was very steep in my limited understanding. Also, there was jump of 10-12% post announcement which I am not able to understand. Hence, I exited from the company.

In past Mahindra group has been only customer of the company. While economies of scale was achieved by Swaraj by supplying tractors, It was making major profit from spare part and other small business which was attributing to higher profitability margin. Over period, non-tractor business decline to insignificance, hence despite growth in volume, Swaraj Profitability decline its past level.

Also, in last 2 years, Mahindra changed arrangement of trade and started buying at 1 month credit period. Generally, nothing negative but change in trade terms would result in lower free cash flow from shareholders and also raise concern about future dealing with the only customer which is also controlling shareholder. Till now, there was another independent stakeholder which would have protected interest of minority shareholder, but now the dealing with Related parties would be between the Parent and subsidiary. Having said that, both Mahindra and Swaraj Engine management and corporate governance are kind of gold standard in Indian listed spacce, still this concern need to be addressed properly.

Last, Tractor engine business, while it is good cashflow generator for medium term, the company need new porducts/segment to sustain its working for long term.

Considering all factors mentioned above and also other opportunities available in current market, I decided to exit (except for token holding) from the company. Swaraj has special contribution in my investment jounery and I would alway greateful to this wonderful company for same. I wish we have many Swaraj Like companies in listed space and (also in my portfolio :grinning: ).

Thank you Swaraj Egnine and all the best for future.

Disclosure : My view may be negatively biased due to my selling decision. Not a SEBI registered advisor. Not suggesting any investment action. The purpose of the post is to keep reasons for my investment decision for my future evaluation.


Could you share the original file of your working in excel that u shared in the image.