M & M To Bring Non-Core Units Under Holding Co

The Rs 3,500 crore Mahindra & Mahindra group has decided to convert wholly-owned subsidiary Mahindra Holdings & Finance Ltd into a holding company for the entire group. However, Mahindra Holdings will not hold any stake in automobiles and tractors major Mahindra & Mahindra (M&M) Ltd, the groups flagship.

The move, a part of the groups restructuring, will see M&M transfer its holdings in various group companies to Mahindra Holdings. The holdings of various group companies in businesses like software, infrastructure and foreign subsidiaries will also be transferred to Mahindra Holdings. Once the stakes are transferred, the group also proposes to raise its stake in its companies.

The Mahindras also plan to dilute their stake in various non-core businesses, including Otis Elevators (in which the group holds 30 per cent), Vickers (24 per cent) and a venture with a Dutch firm, East Asiatic Com-pany (in which the group holds 40 per cent).

The group initiated its move to focus on core areas some time back by selling its stake in International Instruments. The group plans to concentrate on auto components, telecom, infrastructure and finance, besides its core areas of tractors and automobiles. The funds for picking up stakes in other group companies will be raised from strategic disinvestments in non-core businesses.

The groups plan to have a holding company for its non-core businesses and restructure old investments is expected to sharpen the focus and boost its core business. Mahindra & Mahindra, which has defied depressed market conditions to increase sales, expects to improve its performance further once its restructuring is completed.

We are very bullish about M&M because it is one company which has steadfastly maintained its focus on its strength, which has been predominantly the rural market, and thereby been able to increase sales even when other companies have found it difficult to cope with the recession, auto analysts pointed out.

In the first half of 1997-98, the companys net sales increased 11.4 per cent to Rs 1,580.6 crore (Rs 1,418.6 crore). This was achieved mainly due to higher tractor sales, which helped the company buck the downtrend in the automobiles sector. M&Ms net profit rose 21.6 per cent to Rs 112.4 crore (Rs 92.4 crore) during the period.

M&M plans to invest Rs 1,000 crore in the next three years in new product development and improvement of existing models.