Mahindra & Mahindra has expressed an interest in buying car designer Pininfarina but no deal has been reached yet, the Italian company confirmed on Thursday.

Sources with knowledge of the matter told Reuters on Wednesday Mahindra & Mahindra was in talks to buy a majority stake in Pininfarina, famous for its design of Ferraris and many other luxury cars.

A takeover of the now heavily indebted firm would be the latest sale of an iconic Italian brand to an Asian investor, following on from China National Chemical Corp's 7.3 billion-euro deal announced this week to buy into tyre-maker Pirelli.

Reports of the talks sent shares in Milan-listed Pininfarina up 26 per cent on Wednesday to 5.15 euros, valuing the company at 140 million euros ($155 million).

The shares were trading down 7 per cent on Thursday at 4.77 euros.

Pininfarina said in its statement that any deal would need the backing of its controlling shareholder Pincar — which has a 76 per cent stake in the group — and of its 13 creditor banks.

It said Pincar's stake has been put up as collateral for the banks' financing, and a 2008 debt restructuring agreement with creditors envisages the possible sale of the company.

Mahindra, which is already one of Pininfarina's most important customers, said in a separate statement that reports about the talks were speculative and that the company had not entered into any arrangements.

Sources with knowledge of the matter had said on Wednesday that the two companies were far from signing an agreement. Pininfarina was not a "must have" for Mahindra, one of the sources said.

The company has been loss-making for years and has a bank debt that is almost equal to its market value. It has been struggling as car companies have moved to hire more in-house stylists at the expense of independent design firms.

The group, which has expanded its design work to buildings, interiors, furniture and electronics reported a 2014 net loss of 1.3 million euros. Its net debt stood at 45 million euros at the end of 2014 and is expected to rise this year.

Mahindra has earned a reputation for buying distressed, undervalued companies. In 2010, it bought troubled South Korean automaker Ssangyong Motor and last year it acquired a majority stake in France-based Peugeot's loss-making scooter business. ($1 = 0.9063 euros)

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