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M&M buys major stake in Kinetic Motor Company

— PHOTO: PAUL NORONHA

ENTERING NEW SEGMENT: Sulajja Firodia Motwani (right), Managing Director, Kinetic Motor, with Anand Mahindra (centre), Vice-Chairman and Managing Director, Mahindra Group, and Bharat Doshi, Executive Director and Group CFO, M&M, at a press conference in Mumbai on Wednesday.

MUMBAI: Mahindra & Mahindra (M&M) on Wednesday announced that its board of directors has approved the acquisition of the business assets of Pune-based Kinetic Motor Company Ltd. (KMCL). The acquisition will be done through a new company which is to be formed and the consideration is Rs. 110 crore (subject to closing due diligence). M&M will have 80 per cent stake in the new company and Kinetic the balance.

The deal will enable M&M to design and market a range of scooters, value-engineered motorcycles and high-end motorcycles for the Indian and global markets. “The acquisition of business assets of KMCL is a defining moment in the history of Mahindra as it will give us an opportunity to emerge as a full range player with a presence in almost every segment of the automobile industry. KMCL is a strategic fit with our overall two-wheeler strategy,” said Anand Mahindra, Vice-Chairman and Managing Director, Mahindra Group.Anoop Mathur, President Designate, two-wheeler sector, will spearhead the new venture. According to Sulajja Firodia Motwani, Managing Director, Kinetic Motor, who will also be a non-executive director in the new company, “We are delighted to associate with Mahindra, another pioneering automobile company with a rich legacy which will add long-term value to the business and take it to greater heights.”

The boards of Mahindra & Mahindra and Punjab Tractors Ltd. (PTL) have approved a scheme of amalgamation of PTL, an M&M subsidiary, with M&M.

Equity shares of M&M will be issued to the shareholders of PTL in the ratio of one share of Rs. 10 each for every three shares of Rs. 10 each held in PTL. The appointed date under this scheme is August 1, 2008. Upon the scheme becoming effective, M&M will transfer all the equity shares held by it in PTL to a Trust, of which M&M is the beneficiary.

Gross revenues and other income of Mahindra & Mahindra for the quarter ended June 30, 2008, is Rs. 3,749.20 crore as against Rs. 2,972.80 crore during the corresponding period last year, a growth of 26 per cent.

The net profit after tax is Rs. 159.30 crore against Rs. 191.20 crore. The lower profits are mainly on account of an exchange loss of Rs. 77.90 crore (Rs. 58.20 crore net of tax) suffered by the company due to rupee depreciation. Excluding the impact of the exchange loss, the profit after tax during the quarter grew by 11 per cent.

The profits were also affected by the sharp increase in input costs leading to pressure on operating margins, as well as an increase in depreciation and finance costs.

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