Mahindra said it is committed to the bus and truck business and will demerge it from MTBL into M&M. It will be run as a seperate division post the demerger.
Mahindra & Mahindra plans to invest Rs 500 crore in its trucks and bus subsidiary Mahindra Trucks and Buses Ltd (formerly Mahindra Navistar Automotive) and also explore new product lines in the LCV (light commercial vehicle), ICV (intermediate commercial vehicle) and MCV (medium commercial vehicle) range.
It will also strengthen its current product lineup of trucks and buses, including refurbishing existing LCVs, the India's largest utility vehicle maker said on Wednesday.
"We plan to invest significant resources over the next few years which will help us strengthen our existing product range and refurbish the current LCV range. Exploratory work has also begun for the introduction of new products that will help address the ICV and MCV segments in the 7.5 to 16 ton GVW (gross vehicle weight) category," said, Pawan Goenka, president - automotive & farm equipment sector.
Further, subject to regulatory approvals, Mahindra plans to demerge the truck and bus operations from MTBL and into M&M.
"We are fully committed to our commercial vehicles business and intend to focus on running the LCV, truck and bus business as a separate division post the proposed demerger, with the objective of growing our presence in the Indian commercial vehicle industry," Goenka added.
M&M said it has over 1 lakh LCVs and 8,000 heavy trucks on the road so far, with a service network of more than 1,591 touch points, which includes 57 3S dealerships, 271 authorized service points drawn from other dealers within M&M's automotive and farm equipment sector and nearly 1,263 roadside assistance points on important trucking routes. The company plans to further leverage Mahindra group network to strengthen that, it added.
M&M had said post the fourth quarter earnings in May that it will invest Rs 10,000 crore, which will include a capex of Rs 7,500 crore for capacity expansion and new product launches and Rs 2,500 crore as investment in group firms like Mahindra Retail, Mahindra Reva, Mahindra two-wheelers and Ssangyong.
On Tuesday, the company reported a better-than-expected 29 percent year-on-year rise in first quarter net profit at Rs 938 crore, helped by strong growth in the tractor business.
Goenka expects the tractor industry to grow in double-digits this year, much higher than the earlier forecast of 5-6 percent growth.
M&M shares closed at Rs 873.45 on NSE, marginally lower than its Tuesday's close.
M&M stock price
On July 24, 2014, Mahindra and Mahindra closed at Rs 1200.65, up Rs 7.70, or 0.65 percent. The 52-week high of the share was Rs 1268.75 and the 52-week low was Rs 741.50.
The company's trailing 12-month (TTM) EPS was at Rs 61.02 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 19.68. The latest book value of the company is Rs 272.84 per share. At current value, the price-to-book value of the company is 4.40.
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