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M&M eyes another 9% stake in GTL - Views on News from Equitymaster
 
 
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  • Nov 22, 1999

    M&M eyes another 9% stake in GTL

    Tractor major, Mahindra & Mahindra (M&M) plans to buy out another 9% equity stake in the state-owned Gujarat Tractors Ltd. (GTL) to muster a majority on its board. This was reported by a leading financial newspaper.

    M&M is the leader in the utility vehicle (UV) segment (61% market share in September 1999) and the tractor segment (29% market share). It is also engaged in the manufacture of light commercial vehicles (LCVs). 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 had earlier purchased 51% equity stake in GTL. With this they would have got an equal share of seats on the board along with the state government. With an additional 9% acquisition (at Rs 40 m) M&M will have more seats vis--vis the state government. M&M's 51% acquisition is awaiting clearance by the Union Government, as per the provisions of Section 108 of the Companies Act.

    By acquiring more seats on the GTL board, M&M will be able to impress its influence in the company's functioning. Decision-making and execution of plans will be a lot faster, and M&M will not be at the mercy of the fancies of the Gujarat state government.

    Market view:
    Notwithstanding M&M's 26% YoY growth in tractor sales in July 1999, analysts have flagged a 'SELL' on M&M as they are concerned about its high tractor inventory.

     

     

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