Mahindra Group News: Mahindra Group is likely to split the auto business into 3 units. | Tech US News

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The Mahindra Group has embarked on a restructuring to carve out its flagship automobile business, which contributes 55 percent of the group’s revenue.

The exercise, which is considered to be in its early stages, will see the electric vehicle, tractor and passenger vehicle (PV) businesses split into three independent companies through a demerger process, people familiar with the plan said. Currently, these are kept as separate divisions under Mahindra & Mahindra.

The EV business, along with its manufacturing plant in Pune, will be merged with Italian design house Automobili Pininfarina to form one company, the people said. The group is also looking to raise funds for an EV venture.

The farm equipment and tractor division is likely to become another stand-alone entity. After acquiring Mahindra’s Punjab Tractors in 2007, the division is the largest tractor manufacturer in India with a market share of 43%. It is also the most profitable of Mahindra’s automobile businesses. The PV business is likely to become a third standalone firm with brands like Scorpio, XUV range and Thar.

The justification for the divestment, people close to the group said, was unlocking value in each business.

An M&M spokesman said the company “would not like to comment on market speculation”.

At least two global consulting and investment banking firms are engaged in strategic plans, people familiar with the matter said.

Creating better value for shareholders

“The group will take a decision after receiving the external consultant’s report,” said a person close to the group. “Unlocking value by carving out businesses, particularly for the EV unit, will be key. They are looking for one like the Tata Group, which raised $1 billion from a clutch of investors including TPG Capital. ” the person added.

Mahindra

Last year, Mahindra Group sought to list Pinanfarina – the Italian firm it had acquired in 2015 – through a special purpose vehicle in the US. However, according to current plans, Pinnacle is likely to be part of the EV project. A final call will be taken after the report of the external consultant, another person in the know said.

Instead of burdening existing investors, Mahindra can create a new set of investors and create better value for shareholders, said the head of a Mumbai-based brokerage. “Mahindra clearly wants to ride the coming EV wave and is taking that route,” he said.

Rajeev Mishra, chief executive of SoftBank Vision Fund for India, said at the ET Global Business Summit in March that the Japanese firm was in talks to invest in subsidiaries of Tata and Mahindra.

In early 2020, Mahindra Vehicle Manufacturers Limited (MVML) was merged with its parent Mahindra & Mahindra, as part of a plan to rationalize the group holding structure by reducing the number of entities. MVML, the company’s manufacturing unit, was earlier operating as a wholly owned subsidiary of M&M.

A wider presence

M&M has a presence in over 100 countries across 20 industries. Although it has lost the market leadership in the UV space that it held for years, the company has expanded its global presence and product portfolio through strategic partnerships with Mitsubishi Agricultural Machinery (Japan) and Sampo Rosenlio (Finland). is strengthening

“Market share losses in the UV segment have been offset by strong gains for MM in the tractor segment,” Maybank Securities said in a note on the company on February 14.

The brokerage house said, “Going forward, we believe that M&M will lead the development of EVs in India as the trend picks up and charging infrastructure improves. Currently, it is in the combined mobility segment and three-wheelers. is the largest seller of EVs,” said the brokerage house. that Mahindra Electric could have a possible listing in the next few years.

Finance

In FY21, of the combined operating profit of Rs 5,025 crore, Rs 4,192 crore, or about 83%, came from the farm equipment division. In the first nine months of FY22, the farm business contributed more than 80 percent to the operating profit.

“The company’s farm equipment division is the most profitable with an EBIT margin of around 20%. With a 40% market share in tractors, it has leveraged its leadership position in the sector over the years,” Matul said. Shah, head of research said. Reliance Securities. “The auto division is gradually improving with new launches, but the competitive pressure in this segment is relatively high,” said Shah.

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