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Thursday, Feb 21, 2002

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Corporate - Restructuring

Positive signs seen in M&M revamp move

Our Bureau

MUMBAI, Feb. 20

RATING agency, Crisil, informed today that it sees the proposed restructuring at Mahindra & Mahindra Ltd (M&M) with three of its subsidiaries being amalgamated with itself as a "positive development.''

However, the amalgamation, which is effective from March 31, does not alter the outstanding ratings for M&M's debt instruments; its NCDs totalling Rs 1,020 crore are rated `AA' and its commercial paper programme aggregating Rs 100 crore rated `P1+'.

The candidates for amalgamation are e-Mahindra Solutions, (a 100-per cent subsidiary of Mahindra Information Technology, in turn wholly-owned by M&M. e-Mahindra, engaged in incubating new IT ventures, inter alia, holds a 31.9 per cent stake in Mahindra British Telecom (MBT)), Mahindra Auto Specialities Ltd and Mahindra Alternative Technologies Ltd.

Crisil says the increased transparency regarding the valuation of M&M's numerous investments which follows these amalgamations, is a welcome feature.

"Further, the surplus arising from the restatement of the value of investments held by the amalgamated companies would be transferred into an investment fluctuation reserve.

Diminution in the value of any other investments carried in M&M's books would be adjusted against this reserve."

"The surplus arises mainly on account of the large retained earnings of MBT. Based on the audited financials as at March 31 last year, this surplus is estimated to be around Rs 72.6 crore as at that date,''

risil's statement says, pointing out that the actual surplus for amalgamation would include the earnings of the subsidiaries for 2001-2002 as well.

The amalgamation, in line with M&M's long-term objective of "de-layering" the ownership structure of various group businesses, will also result in a more tax- efficient ownership structure for them as any outflows on account of dividend tax would be eliminated, Crisil says.

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