Kinetic motors to form a joint venture with Mahindra & Mahindra for manufacturing two wheelers. Kinetic motors have been going under losses for quite a few years now. This quarter they incurred a net loss of INR 18 crore which is marginally less than the last quadrant of the previous year which is INR 19.75 crore.
The Mumbai based auto major has been in talks with kinetic motors for quite a while now. The Kinetic motor and Mahindra & Mahindra motor had a joint board meeting today and decided on this issue.
Kinetic motor promoters, the Firodia family owned 54.83% in the company earlier. The firm needed funds to revamp their operations and to fund that it was looking for raising anything between USD 100-125 million. Now M&M would have 80% stake in the new firm and would be named as Mahindra Kinetic Ltd, with Kinetic holding the rest of the stakes. This has costed them around INR 110 crore.
For Mahindra & Mahindra coming up with a new project would be much more expensive and time consuming than acquiring a firm like Kinetic Motor which has been in the field for more than 3 decade now. Besides this kinetic also has full product range from mopeds to scooters to motorcycles.
As we all know Mahindra & Mahindra are making good business Utility making vehicles and tractors. The main challenge for them would how they shape up this drowning company. And these kind of situations is not new for them as in they have already had such similar situations in their own firm. Few reasons to worry for Mahindra’s is what will happen if they get huge losses in the new venture. Will it have any effect on their cars and tractor section? It is highly skeptical to say at this moment. We will have sit and analyse for quite some time.