Mumbai: Mahindras Thursday acquired 33 percent stake in farm machinery arm of Mitsubishi Heavy Industries for USD 25 million and would look at jointly developing products for global markets in the tractor and agri-equipment space.
While cementing its decade-long marketing and sales association in the US with Mitsubishi, Mahindra and Mahindra (M&M) is also looking to improve cost efficiencies and develop new products through this deal.
M&M will invest 3 billion yen or USD 25 million (about Rs 158 crore) to buy 33 percent stake in Mitsubishi Agricultural Machinery, an arm of Tokyo-headquartered Mitsubishi Heavy Industries, with voting rights.
The deal will be completed through fresh issue of common shares and class A (non-voting) shares and is expected to be completed by October, while the new funding will be used to increase capital base of the Japanese company, M&M executive director Pawan Goenka told reporters here.
"This alliance will also help us jointly develop products to address global opportunities in tractor and agri-machinery space. This will also enable both of us to improve cost competitiveness through joint procurement and optimise supply chain," he added.
Goenka noted that the equity participation is in fact an extension of M&M's decade-long association with Mitsubishi in the US where their products have played a significant role in Mahindra USA's success.
Mitsubishi Agri has been supplying OEM tractors to M&M in the US as well as providing technical licence to M&M for walk-behind rice planters and new tractor in the country.
"We are now excited about our participation through an equity route in Mitsubishi Agri Machinery," Goenka said.
He further said that the agreement was signed in Japan today by Kazuaki Kimura, president and chief executive, Mitsubishi Heavy Industries and Katsumi Tottori, president of Mitsubishi Agri, and Rajesh Jejurikar of the Mahindra group.
"We see big global opportunity in the farm equipment sector as 1.7 million tractors were sold in 2014 globally, of which 70 percent were in China, India and North America, Goenka said, but ruled out hiking stake in the Japanese firm.
The investment will be used to focus on making aggressive investments in marketing and product development and becoming a significant player in the global agri-machinery industry, which is estimated at USD 126 billion, Goenka said.
Mitsubishi Agricultural Machinery is a full range farm equipment firm which produces and sells tractors, combine harvesters, rice transplanters and other agri-machineries.
Its revenue stood at around 50 billion yen or USD 408 million in 2014-15.
M&M is the world's largest tractor manufacturer by volume and fifth in value with a very strong leadership position in the country. Its 90 percent revenue comes from domestic business.
