The Mahindra Group has initiated a restructuring to trifurcate which contributes 55% to the group revenue. The exercise will involve separating the electric vehicles (EV), tractors, and passage vehicles (PV) business into three independent companies via a demerger process, according to the people who know the plan. Currently, these belong to Mahindra & Mahindra as separate divisions.
The electronic vehicle (EV), along with its manufacturing units in Pune, will be clubbed with Italian design house Automobili Pininfarina to build a company. On the other hand, the farm equipment and tractor division are likely to become another standalone equity. After Mahindra acquired Punjab tractors in 2017, the tractor division became the largest tractor maker in India, with a 43% market share. The tractor division is also the most profitable within Mahindra’s automobile business. The PV business, with brands like Scorpio, XUV, and Thar, is likely to become the third standalone firm.
With this, M&M wants to unlock the potential in each business and look forward to increasing the value of the business.
Now, with this new project, Mahindra can create a new set of investors instead of putting the burden on existing ones to generate better value for the shareholders, said the head of the Mumbai-based broker. “Mahindra clearly wants to raise the upcoming EVwave and is taking that path”, he added.
According to the people who know about this matter said ━ two global consulting and investment banking firms were engaged with the strategic plans.
In early 2020, Mahindra Vehicle Manufacture Ltd (MVML) was merged with its parents, Mahindra & Mahindra, as a part of the plan to rationalize the group holding structure by reducing the number of entities. MVML was previously operating the wholly-owned subsidiary of M&M.
M&M has a presence in more than 100 countries in 20 industries. While the company has lost the market leadership in the UV space that it held for years, it has been strengthening its global presence and product portfolio through strategic partnerships with Mitsubishi Agriculture Machinery of Japan and Sampo Rosenlew from Finland.
Talking about the financials of the Mahindra Group, in the FY22, out of the combined operating profit of the Rs. 5,025, Rs. 4,192, or about 83%, came from the farm equipment division. In the first nine months of this FY, the farm business contributed more than 80% to the operating system.
The auto system is gradually improving the new launches, but competition is relatively high in the segment. Let’s see how far this trifurcate will go!