M&M takes U-turn: Sells stake in Engines Engineering

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M&M takes U-turn: Sells stake in Engines Engineering

Mahindra & Mahindra (M&M) is exiting its Italian buyout - auto design company, Engines Engineering by selling entire stake back to the original promoter, reports CNBC-TV18's Swati Khandelwal Jain.

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Mahindra & Mahindra (M&M) is exiting its Italian buyout - auto design company, Engines Engineering by selling entire stake back to the original promoter, reports CNBC-TV18's Swati Khandelwal Jain.

What went wrong for M&M to pull the brakes?

It is the end of the road for M&M's association with Italian Design Company Engines Engineering. In 2008, M&M had acquired EE, which came with an impressive customer base including the likes of Honda, Yamaha and Ducati and could help M&M strengthen its R&D capability in the 2 wheeler space. 

But three and a half years after M&M had bought a 70% stake in the design company, it has now sold the entire stake back to EE's promoter Alberto Strazzari, who now regains his former 100% stake.

Sources say that M&M has managed a premium in the process, but the big question is why did M&M exit?

It is learnt that some of EE's major customers were not too happy with M&M's proximity and control on the design company as M&M itself is an auto major. The clients were apprehensive about issues such as possibility of IPR infringement. But on its part, M&M has said the fears were baseless.

"Some of the customers in developing markets were not comfortable with the close association of EE with MES and Mahindra Two Wheelers. Given the fact that the large majority of MES revenue derived from the services it provides to non M&M customers and protects their intellectual property by adequate firewalls, this discomfort appeared more emotional than rational," the company.

With 75-80% revenues coming from non-Mahindra clients, EE promoter Alberto Strazzari is not taking chances and initiated the buyback remaining as an independent advisor and consultant to M&M.

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