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Mahindra, CIE Automotive reap dividends of partnership forged 5 years ago - Report

Auto News - Published on Fri, 15 Jun 2018

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Business Standard reported that 5 years since Mahindra and Mahindra and CIE Automotive stitched a deal to create a large auto component firm with a global footprint, the strategy has paid off for both the companies in terms of operational and financial performance and market capitalisation. Having successfully integrated the businesses across the geographies, Mahindra CIE is now scouting for acquisition of auto component firms in India in a bid to plug some gaps in its product and customer portfolio said Mr Hemant Luthra, non-executive chairman, Mahindra CIE.

While share prices of Mahindra CIE have risen 489 per cent, CIE Automotive has gained 515 per cent since Jun 2013. “We are enjoying the best of both worlds,” said Luthra. The biggest satisfaction for him he pointed out, is that CIE has made money by investing in Mahindra CIE and Mahindra made money investing in CIE and Mahindra CIE.

When Mahindra invested in CIE, the share price of the Spanish company was 6 Euros, it has climbed up to 32 Euros. Mahindra has seen its profit on this transaction soar and CIE's market value has gone up substantially, too – while some of it is related to the business here, some outside, said Luthra who has earned the moniker of an ace dealmaker both within and outside the Mahindra Group.

Mr Luthra said that "Some of the gambles we took have been paying off," adding that the turnaround has involved some tough decisions including plat closures and lay-offs to arrive at a uniform cost structure across Mahindra and CIE's plants.

With most of the restructuring done, Mahindra CIE is now bracing up for acquisitions in growth markets like India. The idea behind these acquisitions said Luthra would be to serve the changing needs of auto companies. With most of them working towards light-weighting to meet the stricter fuel emissions and fuel efficiency norms and electric vehicles becoming a reality sooner than later, MCIE is looking to buyout a company that specialises in aluminium parts and composites. Also on the radar is a firm, that can make aggregates for electric vehicles. "We have a philosophy of inviting like-minded partners with similar values and business synergies to participate in our growth. Unlike auctions , which we do not do , this process takes time and its difficult to impose deadlines on the wooing process," said Luthra.

In a significant departure from its previous mergers and acquisitions (M&A) strategy, in June 2013, Mahindra forged a global alliance with Spanish auto components maker CIE. The multi-layered deal involved a share swap as part of which M&M ceded control of its domestic components business to the Spanish company to ensure Mahindra’s component businesses gain global scale. Giving up control of a unit to another entity was rare for M&M, which had made 35 acquisitions in the past decade.

As part of the transaction, Mahindra merged all its auto components businesses which was then grouped under Mahindra Systech, into its listed entity Mahindra Forgings. The new company was renamed Mahindra CIE Automotive. CIE holds 51% of Mahindra CIE and Mahindra about 20 per cent, with the remaining owned by institutional and public shareholders. Mahindra also bought 12.5 per cent in the Spanish company becoming its second-largest shareholder.

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Posted By : Nanda Koijam on Fri, 15 Jun 2018
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