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M&M plans to strike with the 'Bijlee' - Views on News from Equitymaster
 
 
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  • Nov 29, 1999

    M&M plans to strike with the 'Bijlee'

    Newspaper reports reveal that Mahindra & Mahindra (M&M) is mulling a joint venture (JV) with Chloride Egypt SAE to manufacture and market its battery-powered three-wheeler, 'Bijlee' in Egypt and West Asia.

    M&M is the leader in the utility vehicle 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 (LCV). In addition to the automobile segment, the M&M group also has interests in information technology (IT) and realty.

    M&M plans to establish an assembly line in Egypt to manufacture the three-wheeler. The venture has some synergies for both the parties- M&M and Chloride Egypt. While M&M has the expertise in manufacturing automobiles, Chloride Egypt has been working on the concept of electric-powered vehicles over the past three years. Transfer of technology between the two partners is also a possibility.

    Chloride Egypt wants to enter into an agreement with M&M to become its trading agent for marketing the three-wheeler in Egypt and West Asia.

    The battery-powered three-wheeler is a relatively new concept, and its impact cannot be ascertained with accuracy. In the absence of any information, it is uncertain how long the JV will take to reach break-even point.

    If the three-wheeler does well in Egypt and West Asia the JV will reap the benefits of the first-mover advantage. It can then expand operations across other countries. But it will be a matter of time before others start eyeing this segment.

    However, if the three-wheeler fails, it will reflect in M&M's bottomline and will put additional pressure on margins.

    Market view:
    M&M's 26% net profit growth in 2QFY2000 has enthused analysts who have flagged a 'BUY' on the company. Moreover, the company's IT venture (Mahindra-BT) has tremendous growth potential and will boost M&M's valuations when it finally goes public

     

     

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