M&M to buy out Navistar in joint ventures for Rs 175 cr

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The Mahindra Navistar plant at Chakan, near Pune. — Shashi Ashiwal
The Mahindra Navistar plant at Chakan, near Pune. — Shashi Ashiwal

Thirty months since the first Mahindra Navistar truck rolled out of the joint venture facility at Chakan, Mahindra and Mahindra (M&M) has said it intends to purchase Navistar International Corp’s stake in Mahindra Navistar Automotives Ltd (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL) for about Rs 175 crore.

Following the buy, the joint venture firms will become Mahindra and Mahindra’s (M&M) wholly-owned subsidiaries, the company said in a statement.

M&M holds a 51 per cent stake in both the companies, with the US-based Navistar holding the remaining 49 per cent stake.

“While the Indian market has not expanded as we had originally expected and industry challenges there continue in the near term, we still see promise in India,” said Troy Clarke, President and Chief Operating Officer, Navistar.

The deal is subject to the conclusion of definitive agreements, and is expected to be completed by early next year.

In late 2005, the companies had jointly set up MNAL to manufacture trucks and buses in India, source components and provide engineering services for Navistar’s vehicles. MNEPL was formed in 2007 and began producing engines in 2010.

M&M would take ownership of operations and continue to sell MNEPL and MNAL products. Navistar would continue to source components from India, while Mahindra would continue to provide engineering services to Navistar.

“MNAL has set up a world class dealer and service network for trucks, which coupled with synergies with Mahindra’s dealer network gives us a significant opportunity to grow our presence in the truck market. In addition, the product has been well accepted as is evident from our high-ranking in a customer satisfaction survey,” said M&M President (Automotive and Farm Equipment Sectors) Pawan Goenka.

Built with an investment of Rs 1,000 crore excluding land cost, MNAL’s truck facility has an installed capacity of 50,000 units a year and is outfitted with a fully automatic Schuler press line. The engine plant has an investment of Rs 350 crore and can build 45,000 engines a year.

M&M’s Rs 5 shares were up marginally on the BSE to close at Rs 964.30.

(This article was published on December 18, 2012)
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