M&M to consolidate component biz in one holding co

Auto major Mahindra and Mahindra (M&M) is working on a plan to consolidate its component business under one holding company. M&M is also in talks with strategic investors and private equity firms to part a minority stake in the consolidated component business. CNBC-TV18’s Ronojoy Banerjee reports qouting sources.

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Mahindra has been working on this consolidation drive for its component companies for sometime but it is only now that the contours of that are becoming increasingly clear.

According to sources there are two options that the company is currently reviewing. One is to create a holding company that will retain the name of Mahindra Systech under which there will be various subsidiaries. The big advantage of this is that each of the subsidiaries will retain their own legal identity.

The other option is to create one single company with various businesses being arms of that company. The company seems to be seriously veering towards the first option of creating a holding company with subsidiaries below it.

The other big thing is that the company is in talks with private equity players and strategic investors. In this case the company may even part stake in the consolidated business and form a joint venture with one of these companies.

This really has to be viewed in the context of some of the company’s clients, for instance Mahindra Forging caters to companies like Volvo, Bharat Benz who are entering newer markets and they want their vendors to move with them for which the company needs capital. So, this has to be seen in that context.

Sources have also indicated that Mahindra component companies Mahindra Systech will also enter countries like China, Thailand and Indonesia something that they are very closely reviewing at this point.

Hemant Luthra, President of Mahindra Systech told CNBC-TV18 that the company was holding talks with strategic investors. However, he did not divulge details in terms of what form this collaboration will be; whether it will be a mere a technical collaboration or will this also have equity participation.