MAHINDRA 51% STAKE IN CHINESE COMPANY

Mahindra buys 51% in Chinese tractor co

mumbai, Aug. 18 Tractor and utility vehicle maker Mahindra & Mahindra has agreed to pick up majority equity in a joint venture it will form with China’s third largest tractor company, Yancheng Tractor.

The new venture will hold the divested tractor business of the state-owned Chinese company. The deal will strengthen M&M’s tractor company, Mahindra Farm Equipment Sector, the third largest tractor maker in the world, and gets it closer to its aim of becoming number one.

M&M will hold 51 per cent equity in the joint venture, through its Mauritius-based subsidiary, Mahindra Overseas Investment company. It will pay $26 million ( Rs 112 crore) for the stake.The net assets of the Chinese company that will be transferred to the new venture are valued at $ 50 million, said Mr Bharat Doshi, M&M’s Chief Financial Officer.

This is Mahindra’s second tractor venture in China after Mahindra China Tractor Company Ltd, the 80:20 joint venture between Mahindra and Jiangling Motors Company.

M&M makes tractors in the 24-80 HP range and Yangcheng in the 16-125 HP range. Yangcheng exports tractors to the US, South America, Europe, Russia and Africa.

Mr Anand Mahindra, M&M’s Vice-Chairman and Managing Director, hoped the new venture would help the company realise its aspiration of being the number one tractor company in the world.

Mr Doshi said the farm equipment sector sold 1.14 lakh units in 2007 and the figure would be 1.44 lakh if the sales of Punjab Tractors, which M&M bought last year, were added. Yangcheng sold 26,000 units last year.

“If we put together all these numbers, it surpasses that of the world’s largest tractor maker,” said Mr Doshi, suggesting that Mahindra had the potential to become the world’s number 1 in volume terms.

“Yancheng’s Huanghai Jinma brand is strong in domestic China market and the company is one of the biggest exporters,” said Mr Anjanikumar Choudhari, M&M’s President, Farm Equipment Sector. Yancheng Tractor, located in Jiangsu Province, had total revenue last year of about Rs 500 crore.

Investment plan


“We have an investment plan for the growth of the company. Over a period of time we will invest $ 20 million,” said Mr Dhoshi. He said that Yancheng targets 30 – 35,000 unit sales in the current year.

Giving his perspective on the collaborative venture, Mr Anand Mahindra said “World speaks that India and China are competitors. We are showing that India and China can collaborate to create a new competitive force.”

M&M plans to enhance its research and development capabilities in China. “The Chinese have a fair degree of cost-competitiveness. We will certainly leverage that. China could be a base for exports,” said Mr Gautam Nagwekar, Chief Operating Officer, Mahindra Farm Equipment Sector.

( sOURCE: Businessline)