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Otis: Lifting off into a global fold

Jul 23, 1999

As part of the restructuring exercise, the Mahindra Group is selling its 23.89% stake in Otis Elevator Company (India) to Otis Elevator, USA. After the transfer, Otis Elevator, USA, will own 69% of Indian company, thus making it a subsidiary. Otis Elevator Company (India) Ltd. is a joint venture company promoted by United Technologies (USA) and the Mahindra Group. United Technologies (USA) is the parent company of Otis Elevators, USA. The company is a market leader in the domestic elevator industry.

The increasing competition in the domestic elevator industry and the economic slowdown has led to a 19% decline in the production of lifts to 1,928 nos. With the company having become a subsidiary, it will be integrated into the international operations of Otis, USA. This would facilitate sales of equipment and materials to the global operations of the parent company. Moreover, the company could benefit from technological and financial injections from it parent.

The Mahindra Group on the other hand has taken another step in focusing its operations in areas where it has competencies. The stake, currently valued at Rs 1.4 bn, can be expected to inject sufficient liquidity in the group.

Market View:
Some analysts consider the stock as fully valued and have rated the stock as a 'HOLD'. However, in view of the acquisition of the stake by Otis Elevators, USA, and the improving economic scenario, some analysts are now rating the stock as a 'BUY'.

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