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M&M acquires Gujarat Tractors ...finally - Views on News from Equitymaster
 
 
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  • Oct 18, 1999

    M&M acquires Gujarat Tractors ...finally

    News reports in a leading financial daily reveal that Mahindra & Mahindra (M&M) has finalised the deal to acquire Gujarat Tractors at a price of Rs 20 per share.

    M&M is the leader in the utility vehicle segment (61% market share in August 1999) and the tractor segment (28% market share). It is also engaged in the manufacture of light commercial vehicles (LCV). In addition to the automobile segment, the M&M group also has interests in information technology (IT) and realty.

    Gujarat Tractors has a manufacturing facility (at Baroda) with production capacity of 2,000 units p.a. in the 20-80 HP range. M&M's acquisition (of Gujarat Tractors) will enhance its product range. It will also give the company a foothold in the Gujarat market. Another factor that could have influenced M&M's decision to acquire the company is the fact that the latter is a cost-efficient manufacturing unit with scope for capacity expansion.

    Post-acquisition, M&M will be looking to enhance market share in tractors. It will command a presence even in the higher range. But the competition will be thick in that particular segment with Escorts and MNC majors John Deere and New Holland fighting for a slice of the pie. But M&M with a superior distribution network will have an edge over the MNCs, but only in the beginning.

    M&M plans to dominate the local market, as well as the global market (in volumes). It will look to expand by way of acquisitions, as this will save the company the trouble of setting up a fresh plant.

    Market view:
    Marginal rise in tractor sales in September combined with an 8% decline in UV sales have disappointed analysts who have flagged a 'SELL' on the stock.

     

     

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