Mahindra 2 Wheelers mulls IPO for growth

The privately held M&M subsidiary is looking to raise up to Rs 700 crore to fund capital investments

Mahindra 2 Wheelers, a subsidiary of Mahindra & Mahindra, is eying the initial public offering (IPO) route to raise funds.

“Mahindra 2 Wheelers is privately-held, and it is looking at raising money to fund its growth plans. Apart from new models, the company also plans to invest significantly in research and development activities. An IPO is a likely option,” said a source privy to the development. He, however, didn’t say when the IPO was expected.

The company plans to raise Rs 600-700 crore to fund capital investments. It plans to invest about Rs 500 crore in research and development (R&D) facilities through the next five years and launch at least three variants of scooters and one of a motorcycle (the 300 cc Mojo) this year. It has already invested Rs 100 crore in its two-wheeler R&D centre in Pune.

LOOKING TO RIDE ON TWO-WHEELER FORTUNE

• Mahindra 2 Wheelers plans to invest close to Rs 500 crore in research & development facilities over the next five years
   
• It is launching at least three variants of scooters and one new variant of motorcycle (the 300 cc Mojo) this year
   
• The company has already invested Rs 100 crore in research and development at its two-wheeler specific R&D centre in Pune
   
• Over a seven-year horizon, Mahindra & Mahindra’s two-wheeler business aims to be as big as the tractor and utility vehicles business
   
• The company has a production capacity of one million scooters and motorcycles at its Pithampur plant in Madhya Pradesh
   
• It plans to export its newly-launched motorcycle variants, Pantero and Centuro, to Bangladesh and Sri Lanka and countries in central Asia, Africa, Latin America and Southeast Asia

In 2008, Mahindra had forayed into the two-wheeler segment, after its board of directors had approved the acquisition of Pune-based Kinetic Motor Company’s business assets. The acquisition was carried out through a new company, which was later named Mahindra 2 Wheelers.

Mahindra & Mahindra holds 83 per cent stake, while Kinetic Motor holds the remaining equity in Mahindra 2 Wheelers.

Sources indicated the IPO could also be a route to offer an exit to Kinetic.

In seven years, the company aims to be as big as Mahindra’s tractors and utility vehicles business. The production capacity of its Pithampur plant in Madhya Pradesh is one million scooters and bikes.

Mahindra plans to export its newly-launched motorcycle variants Pantero and Centuro to Bangladesh and Sri Lanka and countries in central Asia, Africa, Latin America and Southeast Asia.

Anoop Mathur, president, two-wheeler sector, Mahindra & Mahindra, said, “The capacity at Pithampur plant can be raised 50-70 per cent without much capital investment.”

Currently, the company’s market share in the two-wheeler space stands at five per cent, Mathur said. “The two-wheeler segment is likely to end this financial year with growth of three to five per cent. Till November, it had grown four per cent. In the next financial year, the segment is expected to record growth of 10-13 per cent,” he added.