Mahindra & Mahindra (M&M), leading tractor and SUV vehicle manufacturers in the country have entered into a contract with Mitsubishi Agricultural Machinery Company (MAM). As per terms of agreement, M&M will purchase 33% stake in MAM for $25 million (INR 160 crores). This will allow M&M to receive common shares in the company along with Class A shares and 4 board positions.
Final negotiations are underway and expected to be closed by October 1, 2015. M&M and MAM will enjoy joint development of products while the two companies will share engines and transmissions along with common sourcing of parts while cross badging is also being mulled. Funds from M&M infused into MAM will go into expansion of capital base while it will also work to the advantage of M&M as the company will be able to expand deeper into the US markets and allow the company to expand even more efficiently into markets of China, South East Asia and Eastern Europe.
M&M’s association with MAM is not new. MAM have been supplying tractors to M&M’s US subsidiary for the past 12 years, while the two also share technical license for walk behind rice transplanters and a tractor. With the investments by M&M into MAM, the company which had revenues of $408 million in 2014-15 will be mostly debt free while increased presence in overseas markets will also be possible. M&M is also planning launch of a light tractor in 2016 along with MAM directed at orchards with targets of 20,000 units per annum.