M&M in talks to buy Peugeot's scooter business: Report

The deal will provide M&M Peugeot's ready technology, as well as reach in western markets

Mahindra & Mahindra (M&M), the market leader in India's tractors and utility vehicles segments, is in advanced talks to buy PSA Peugeot Citroen's scooter business, according to a Bloomberg report.

"An announcement may be made soon," the agency quoted two people as saying. The sources declined to be identified, as the discussions were private.

The deal will provide M&M Peugeot's ready technology, as well as reach in western markets. Though M&M has been making scooters since 2008, its presence in this segment is negligible.

A notice by the company to BSE said, "The company wishes to clarify it examines/pursues various opportunities in different areas from time to time on a continuous basis; it is not practicable to comment upon every opportunity at every stage. It is not in a position to confirm or deny the veracity of the news, given its policy of not commenting on speculative news/reports emanating from such activity."

Jean-Baptiste Thomas, a spokesman for Paris-based Peugeot, didn't respond to a query by Bloomberg.

After it shut an engine plant two years ago, Peugeot's scooter business had become a "drag and burden on the group", according to chief executive Carlos Tavares, who took charge of the company in March. Since the past few months, Peugeot has been exploring various options to address this issue.

M&M, meanwhile, successfully acquired and turned around operations at Korea-based sports utility vehicle maker Ssangyong Motor Company and has been eying various buy-out opportunities abroad. Earlier, a senior M&M executive had said the group was approached for nearly every automotive deal across the globe, adding it evaluated such offers.

M&M has seen some success with economy motorcycle Centuro, launched last year. After starting with technology borrowed from the now defunct Kinetic Motors, M&M has been tapping technology used in its sports utility vehicles for its two-wheelers.

However, the two-wheeler business has been a drag on the group, posting a loss of Rs 459 crore last financial year and an accumulated loss of Rs 1,250 crore, according to disclosures in the company's annual report. After six product launches and investment of about Rs 500 crore, the two-wheeler business was declared "potentially sick". This followed its accumulated losses peaking to Rs 790 crore at the end of March 2013.

In 2013-14, the company's two-wheeler sales rose 93 per cent to 202,759 units; the Centuro accounted for 73 per cent of these sales. Mahindra Two Wheelers retails five scooter models and two motorcycles. It plans to launch a new scooter in a few weeks.

Peugeot's scooter business, which has posted losses through a decade, sold 79,000 vehicles last year, a rise of 8.2 per cent. The unit employs about 500 people in France and 300 at a joint venture in China.

In 2013-14, scooter sales in India surged 23 per cent to 3.6 million units, against 2.92 million units in 2012-13. Honda Motorcycle & Scooter India, India's largest manufacturer of scooters, controls more than half the market.

RACING WEST

• Rs 459 cr Loss incurred by M&M's two-wheeler business in FY14
   
• 79,000 Number of scooters sold last year by Peugeot, a gain of 8.2%
   
• 800 Total number of people employed by Peugeot's scooter unit in France and its joint venture in China
   
• 6:1 India's two-wheelers to car sales ratio
   
• 23% Surge in scooter sales in India in FY14