An alliance between Mahindra’s parts making operation and Spanish components maker plans to use JVs and takeovers to access major auto markets.
Mahindra CIE, which brings together Mahindra Systech and CIE Automotive, is in talks with an auto components and a trading firm from Japan to stitch together a tripartite venture, Hemant Luthra, chairman of Mahindra CIE, told livemint.com. He declined to name the Japanese firms or elaborate on the deal structure as the agreement is still being negotiated.
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The firm is also in talks with three Indian firms that specialise in machining, composites and casting components for a buyout. Both the deals – the tripartite venture and buyouts – are likely to be concluded in fiscal 2015.
“As part of Mahindra CIE’s grand strategy, which includes drawing one-third of revenue each from Latin America, South East Asia and Europe, together we are starting to explore mergers and acquisitions in South East Asia,” said Luthra.
The report noted that Systech, the unlisted component-making arm of the Mahindra group, entered into a share swap deal with CIE Automotive in June 2013. Mahindra and Mahindra received a 13.5% stake in CIE, making it the second largest shareholder in the listed Spanish company. CIE, in turn, acquired a 51% stake in the combined entity called Mahindra CIE Automotive, which housed all the listed and unlisted auto component businesses of Mahindra, along with CIE’s forging businesses. Mahindra has a 20% stake in the new entity.
Luthra told livemint the new entity would be based in either Thailand or Malaysia and will receive equity infusion from all the three firms – Mahindra CIE and the two Japanese companies. It will help Mahindra CIE get a foothold in southeast Asia and win contracts in a market which currently is a stronghold of Japanese automakers. It would also help the firm increase supply contracts from Japanese car makers in India, Luthra said.
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