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M&M forays into two-wheeler market, acquires Kinetic Motors

Utility vehicles leader Mahindra & Mahindra announced its entry into the two-wheeler segment on Wednesday by acquiring 80 per cent stake in Honda's former Indian partner Kinetic Motor Company Ltd.

M&M will form a new company -- Mahindra Kinetic Scooters & Motorcycles Ltd -- to execute the acquisition of Kinetic by purchasing 'all operating assets of the company', M&M's Chief Financial Officer Bharat Doshi told reporters in Mumbai.

After this deal, Kinetic would hold 20 per cent stake in the new company. The consideration of the acquisition is a sum of Rs 110 crore plus and this money would be paid to pay off the kinetic debts. In the new company M&M will hold the balance 80 per cent stake in the company.

Mahindra's entry into the fast-growing Indian two wheeler market is expected to intensify the prevailing competition in the segment among leading players such as TVS, Hero Honda and Bajaj.

The two-wheeler market in the country is still largely under-penetrated. This acquisition will provide greater opportunities to M&M into another orbit. Kinetic, which has a large customer base especially women, will continue as a 'long-term strategic partner' in the new company.

Kinetic's Managing Director Ms. Sulajja Firodia Motwani, who will serve as a non-Executive Director in the new venture. Mr Anoop Mathur from Mahindra & Mahindra will spearhead the new company. He is the President designate as of now for the Mahindra & Mahindra two-wheeler business.

Despite recent market turbulence and decline in volume due to tight credit conditions, fundamental demand drivers for two-wheelers in the country remain strong. With a growing economy, higher disposable household incomes and increased discretionary expenditure on personal transportation, outlook for the two-wheeler business in India remains positive, it added. Also, penetration at 25% is still low and augurs well for increased consumption.

The company would work towards operationalising the branding plans over the next two months after concluding all the details of the transaction.

The Kinetic brand for two-wheelers would be licensed to the new company. The Kinetic brand for all other segments such as auto components, elevators and infrastructure areas would continue to belong to Kinetic.

M&M has announced its first quarter numbers. Its standalone net profit went down at Rs 159.3 crore from Rs 191.2 crore YoY.

Net sales went up at Rs 3,293.5 crore from Rs 2,612.8 crore. Operating profit margin declined at 7.49% versus 10.6%.


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