Mahindra & Mahindra, the market leader in the utility vehicle and tractors, on Wednesday, said that it will buy 60 percent stake in Classic Legends (CLPL), a company engaged in manufacturing and marketing two-wheelers, for Rs 6 crore.
CLPL is a Mumbai-based, unlisted company, belonging to the automobile industry, which is yet to start commercial operations. It was incorporated in June last year and is not a related party of Mahindra & Mahindra.
The deal, executed on Tuesday, was an all-cash deal. Mahindra agreed to subscribe to and has been allotted 6 million equity shares at a consideration of Rs 10 per share.
While a mail sent to M&M seeking rationale behind the acquisition of CLPL remained unanswered a statement sent to the Bombay Stock Exchange said, “The objects and effects of the acquisition are to enable CLPL directly or indirectly, manufacture, market, sell, distribute two-wheelers globally by directly or indirectly acquiring/obtaining licence of brands”.
This is a second major change done by M&M with regards to its two-wheeler business in recent times. Last month, it acquired in full the equity shares of Mahindra Two Wheelers Europe Holdings S.a.r.l (MTWL Europe) from Mahindra Two Wheelers, which is a subsidiary company.
MTWL Europe holds an investment in two-wheeler company in Europe which is Peugeot Motorcycles S.A.S. The acquisition would result in MTWL Europe becoming a direct subsidiary of the company and would facilitate better focus on downstream two-wheeler business.
Earlier in the year over 200 employees of MTWL were given the option of voluntary retirement even as attempts are made by the company at repositioning itself. Moving forward the company will focus on premium offerings in the motorcycles and scooter segment that offer higher margins.
The Mahindra Mojo, for instance, is a 300cc motorcycle priced at Rs 171,800. It competes against bikes from Bajaj KTM, Honda, Kawasaki among others. The overhaul is a result of a failure of the company to turn profitable with its traditional products in the budget category.
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