No plan for demerger of auto and tractor businesses, says Mahindra

Mahindra & Mahindra denied reports of a possible demerger, stating that it has no plans to separate its auto and tractor divisions

Mahindra Group on Thursday clarified that there is no plan for a demerger of the company's auto and tractor businesses, responding to media reports suggesting that the group is considering separating its key businesses into independent entities

 

"The company has clarified this in the past and maintains that it sees much greater value from synergies by keeping these businesses within the M&M entity," Mahindra & Mahindra said.

  Media reports had indicated that Mahindra Group is considering separating its key businesses like tractors, passenger vehicles (including electric vehicles), and trucks into independent entities. 

These are reportedly early-stage internal discussions, with preliminary reviews already underway to evaluate the feasibility of such a move and its possible implications. At present, these businesses operate as divisions under the group’s flagship, Mahindra & Mahindra (M&M). Over the past five years, both the automotive and farm equipment sector (FES) divisions have reported robust growth.

 

 

Auto growth drives strategic shift

 

This performance has reinforced Mahindra’s leadership in sport utility vehicles (SUVs) and tractors. The company’s strategic focus has increasingly shifted towards its automotive business. The broader intent is to maintain a well-diversified portfolio.

 

A senior executive was quoted as saying that the emphasis was on preparing for the future and enabling all businesses to operate independently. This will unlock the business potential and ramp up scale, he added.

 

Analysts see potential for sharper valuation

 

The performance gap among Mahindra’s divisions has strengthened the case for such a separation. Analysts estimate the automotive segment alone accounts for nearly two-thirds of M&M’s current stock price of over ₹3,400. They said a demerger could sharpen capital allocation and allow each business to pursue independent strategies.

 

Standalone tractor and auto units likely

 

If implemented, the tractor division, where Mahindra has held market leadership since acquiring Punjab Tractors in 2007, could become a standalone company. It held a 43.3 per cent market share in the financial year 2024-25 (FY25), up from 38.2 per cent in FY21.

 

The passenger vehicle arm, which includes successful models such as the Scorpio, Thar, and XUV range, along with the Born Electric platform, could form another independent entity. The truck and commercial vehicle segment, which is still relatively small, is expected to be carved out as a focused vertical.

 

There is also speculation that SML Isuzu, recently acquired by Mahindra, could serve as the nucleus for this business, the report stated.

 

Move comes after Tata Motors’ restructuring

 

The discussions come months after Tata Motors completed the separation of its passenger and commercial vehicle businesses into two listed entities. This is not Mahindra’s first attempt at a demerger; previous plans were shelved amid concerns over losing synergies in sourcing and supply chains.

 

In September, Mahindra & Mahindra announced the sale of its Finnish combine harvester and forestry machinery arm, Sampo Rosenlew Oy, to TERA for ₹52 crore. The company signed a share purchase agreement (SPA) with Tera Yatirim Teknoloji Holding Anonim Sirketi (TERA) to sell its entire stake in Sampo Rosenlew Oy, a wholly owned subsidiary.