M&M to merge truck and bus business with itself

Capital infusion of over Rs 300 crore will be used to start exploratory work on new product lines in due course

The loss-making trucks and bus division of Mahindra Trucks and Buses (erstwhile Mahindra Navistar Autmotive) would be de-merged from the company and merged with Mahindra & Mahindra (M&M). The move is aimed at providing the division more flexibility and better access to funds.

Along with the re-branding of its heavy commercial vehicle range, M&M has committed an investment of Rs 200 crore to strengthen its product line-up. An additional infusion of about Rs 300 crore would be used to start exploratory work on new product lines.

Pawan Goenka, president (automotive and farm equipment sectors), said, “We are fully committed to our commercial vehicles business and intend to focus on running the LCV (light commercial vehicles), truck and bus business as a separate division post the proposed de-merger with the objective of growing our presence in the Indian commercial vehicle industry.”

At the end of the last financial year, the truck- and bus-making subsidiary’s accumulated losses stood at Rs 920 crore. In case the merger was completed this financial year, the losses would help M&M secure a tax write-off, Goenka said. The subsidiary’s assets of Rs 250 crore (worth of plant, machinery, etc) would be transferred to M&M.

In December 2012, M&M had bought the 49 per cent stake of its partner Navistar International in the joint venture company for Rs 175 crore. Subsequently, the management at the troubled unit was given a three year deadline by the M&M management to turn the entity profitable.

Though the heavy commercial vehicle segment posted a drop of 45-50 per cent in the last two years, Goenka is confident demand for heavy trucks would improve in the coming quarters. “The economy cannot be down for such a long period. Demand will improve and three years is enough time to make the business profitable,” he said.

Through the re-branding exercise, M&M has renamed all its heavy trucks; now, the names of each of the models end with the letter ‘O’, in line with the names of other models from the M&M group across passenger vehicles and two-wheelers. Multi-axel trucks would now be called Mahindra Truxo 25 and Truxo 31, trailers Traco 35 and Traco 40 and tippers Torro 25 and Torro 31.

While M&M hasn’t entered the heavy bus segment, a decision on this would be taken in the next two-three months.