India’s Mahindra to assemble vehicles in JV with Ideal Group

Wednesday, 28 March 2018 00:00 - - {{hitsCtrl.values.hits}}

(IIFL) India’s leading automaker Mahindra and Mahindra Ltd. (M&M) has announced the establishment of a Joint Venture (JV) with Sri Lanka-based Ideal Motors Ltd. (Ideal) for assembling its vehicles in the neighboring island country.

M&M will subscribe up to 35% equity stake in the JV with the remaining stake held by Ideal and its affiliates. The acquisition is expected to be completed by April 2018. M&M’s investment in the JV would amount to LKR 25 cr (Rs. 10.41 cr, assuming the rate of Rs 0.42/LKR). M&M has already had a presence in Sri Lanka for nearly a decade. Since November 2009, Ideal Motors has been the sole authorised distributor for Mahindra Motor Vehicles and Motor Cycles.

It has sold more than 50,000 M&M vehicles in Sri Lanka to date.

The JV will further establish M&M’s position as a leading automaker in the island nation. M&M already enjoys 50% market share in the ‘above-1 ton’ category and 35% market share in the ‘below-1 ton’ category.

The combined entity (standalone M&M + subsidiary MVML) derives revenue (Q3FY18) from farm equipment (35%), automotive segment (61%) and others (4%). It is the market leader in tractors with 44% market share (Q3FY18).

On account of new launches and the normal monsoon, the management expects the tractor industry to grow at 15-18% in FY18E and 8% in FY19E. In the automotive business, M&M expects the UV segment to perform well on the back of three launches (MPV, compact SUV & Ssangyong Rexton) in FY19.

M&M plans to launch an affordable range of tractors in India (Trakstar). Tractor growth rate is expected to slow down to 8% in FY19E on the high base of FY18.

UV/LCV growth will be led by new launches, while MHCV business will break-even in FY19E, as the level of discounting reduces with increasing volumes. M&M has been at the forefront in EV space, recently committing Rs. 600 cr towards EVs and EV components and plans an additional Rs.900 cr investment by CY20.

Mahindra & Mahindra ended the day at Rs. 745, down Rs. 2.8, or 0.37%, from its previous close of Rs. 747.80 on the BSE.

The scrip opened at Rs. 746 and touched a high and low of Rs. 754 and Rs. 742 respectively. So far 32,32,172 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs. 92,965.94cr.