Automaker Mahindra & Mahindra is in talks to sell 29% stake in its speciality steel joint venture (JV) back to its two existing partners, Japan’s Sanyo Special Steel Co and Mitsui Corp, as it looks to exit from non-core businesses. M&M will sell its stake in Mahindra Sanyo Special Steel (MSSSPL) in one shot or in multiple tranches, and is aiming to raise Rs 250-300 crore, multiple sources with knowledge of the matter told ET.
M&M said it will not like to comment on speculations. Sanyo and Mitsui did not respond to mails sent on Tuesday seeking comments.
Shares of M&M gained 5.92% to close at Rs 406.15 on the Bombay Stock Exchange on Wednesday, as the Sensex gained 622.44 points or 2.06%. Its shares have surged 37.7% from March 23, when Indian equity markets tanked to a record and Sensex gained 18.62%.
M&M had 51% in the JV and Sanyo 29%, while the remaining 20% was held by Mitsui. However, in 2018, Sanyo bought around 22% in Mahindra Sanyo, increasing its holding to 51%. Consequently, MSSSPL ceased to be a subsidiary of M&M. MSSSPL had revenues of around Rs 118 crore in FY19. “Ebitda is likely to have declined to Rs 170-180 million in FY19 (Rs 17-18 crore from Rs 28.7 crore in FY18),” said an India Ratings note on May 16, 2019.
“We think during distress, auto sector volumes may continue to disappoint in the short term,” Nomura analysts Kapil Singh and Siddhartha Bera said in a note on April 20. “We believe more action is likely to be taken to reduce capex and investments, which will be taken positively by the market. However, we think lockdowns may be lifted earlier in the rural areas, which should benefit M&M.”
Source: Economic Times