Is Mahindra buying a stake in Volkswagen India?
What's the story
Mahindra & Mahindra (M&M) has expressed its intention to broaden its collaboration with Volkswagen Group in India. This announcement comes amid speculation about a potential stake acquisition by M&M in Skoda Auto Volkswagen India. In a statement to stock exchanges, M&M clarified that both companies are "continuing to explore multiple opportunities to expand the collaboration potential."
Market reaction
Market response and stake acquisition rumors
Following the announcement, M&M's shares have experienced a nearly 10% increase over the past five trading sessions. This market response coincides with reports suggesting that M&M is on the verge of finalizing a deal that could lead to a stake purchase in Skoda Auto Volkswagen India. Autocar Professional reported that M&M was interested in acquiring a 50% stake in Skoda Auto India, valued between $800 million and $1 billion.
Deal discussions
Skoda Auto's board in India to finalize agreement
The board of directors of Skoda Auto is currently in India to finalize the terms of the potential agreement. This development was reported by Autocar Professional, which also suggested that an official announcement might be imminent. In July, Moneycontrol had reported that M&M and JSW Group were negotiating for a significant stake in Skoda Auto Volkswagen India.
Financials
Skoda Auto Volkswagen India's financial performance and future plans
Skoda Auto Volkswagen India reported a profit of ₹309 crore in FY23, marking its highest in five years. In 2022, M&M had signed a supply agreement with Volkswagen for electric components. Since then, both companies have been exploring further potential opportunities for collaboration in India's e-mobility sector. A spokesperson from Skoda Auto Volkswagen India told Moneycontrol in July that the company is "always considering new business opportunities and evaluating various options to ensure best possible solution to implement our strategy."
Strategic alliances
M&M's stance on alliance opportunities and future partnerships
During a June earnings call, Rajesh Jejurikar stated that the company is open to alliance opportunities. He emphasized the need to explore every potential alliance for a win-win situation, while also highlighting M&M's strong market presence with its new products. Anish Shah, Managing Director of M&M, told Moneycontrol in July that "if there is a solid reason to do a partnership that benefits us, that is something we would look at and that is where we are right now."