domestic tractor and utility vehicle (UV) manufactuer,
Mahindra and Mahindra (M&M) is lining up over Rs 5
billion investment over the next two years.
investment is for product development, sprucing up capacity
for Scorpio, and maintenance. M&M has cash flow of
about Rs 13 billion over the next two years, in addition
to foreign currency convertible bonds (FCCB) raised by
the company. With this kind of cash flow sitution, the
company could pursue inorganic growth in the international
market. Also it is estimated that M&M will save nearly
Rs 700 million in interest expenses over F2005-06.
raised $100 million in April 04 by way of foreign currency
convertible bond (FCCB) issue at conversion price of Rs
647 per share. The bonds with 0% coupon (YTM of 3.75%)
and a five-year maturity would result in a 6% equity dilution.
M&M posted 51% growth in automotive exports, but tractor
export sales declined by 17% (after strong growth in the
prior two years). In the automotive business, M&M
launched its UVs in Italy in ''04. It is targeting to double
its UV exports in during this year, by launching in South
Africa, Middle East and Mercosur (South Eastern South
feared that M&M may lose market share in UV segment,
as competitive pressure is intensifying. Recently GM launched
a new UV, the Tavera, with a starting price of Rs 540,000.
Besides, Tata Motors is likely to launch a new UV next
year. Toyota also has plans to launch variants of the
Qualis. Honda (CRV), Hyundai (Terracan), Suzuki (Grand
Vitara), Ford (Explorer), which have all launched premium
SUVs in the price range Rs 1.4-2 mn, may also launch lower
priced variants if the market expands.
the last year, M&M posted 25% growth in UV sales driven
by the success of the Scorpio, which has contributed to
nearly 70% of the growth. With the rural economy doing
well in F2004, M&M''s traditional products Marshall,
MAXX and Commander also did reasonably well.
M&M lost market share in the LCV segment, but increased
its share in the large three-wheeler segment from 22%
to 31%. According to analysts with JM Morgan Stanley,
M&M has been the market leader in tractors for early
two decades, but competitive pressures have intensified
with newer entrants like International Tractors, L&T-John
Deere, and New Holland gaining market share.
is likely to further intensify with the entry of the likes
tractors and Brahma Steyr tractors. Also other players
like Escorts, Eicher, TAFE and Punjab Tractors are aggressively
trying to defend market share by launching new products