M&M's Kinetic Motors buyout yet to reap benefits 3years on

Three years and nearly three hundred crore rupees later, Mahindra & Mahindra, the country’s largest utility vehicles maker, is struggling to secure the two-wheeler beachhead it won by buying Kinetic Motors. The purchase of 80% in Kinetic had made the group India’s only automaker serving the full menu of two-wheelers, cars, electric vehicles, SUVs, tractors and trucks.

Times were better in mid-2008 and the two-wheeler market was booming, but the decision still seemed fraught with risks: Any newcomer would run into fierce competition from the frugal engineering capabilities and vast network of Hero MotoCorp (then Hero Honda), Bajaj Auto and TVS Motor. The business logic, according to the company, was that a large chunk of the market was still ‘under-penetrated’.

Did the logic work?

Over a year after chairman Anand Mahindra called its upcoming bikes Stallio and the Mojo the “potent blend of global technology and innovation taking the category to the...

next level,” both seem to have sputtered.

Earlier this year, Mahindra Two Wheelers was forced to recall the 110 cc Stallio, the lone horse in its motorcycle stable, after gearbox complaints surfaced. There are no Stallios available in the market today. Dealers say the company is planning a relaunch, and that the Stallio will be available next month. This could not be independently verified. There is no sign yet of the much-hyped 300-cc Mojo either. At present, the company has four scooter models – Duro, Kine, Flyte and Rodeo.

According to the Society of Indian Automobile Manufacturers, the company's October production fell 28.85% to 12,843 units while in the April-October period, it declined 5.4% to 93,376 units. In the seven-month period since the beginning of the fiscal, sales inched up 3.4% to 92,168 units. In October, its sales stood at 17,933 units, down 2.69%.

According to available data, losses quadrupled from Rs 22.40crore in 2008-09 to Rs 96.9 crore in 2009-10. Industry sources said M&M, which paid Rs 110 crore to purchase Kinetic, had to follow it up with Rs 180 crore more to wipe out losses. The funds were infused in two tranches: on June 28 and July 1. Kinetic, which still holds 20% stake in the company brought Rs 30 crore, taking the total investment post-acquisition to nearly Rs 210 crore.

Confirming the development, a company spokesperson said the move brought out the “commitment of Mahindra Group to the two-wheeler business”. The spokesperson said that since acquisition, Mahindra Two Wheeler (MTWL) has invested its funds in significantly upgrading its R&D facilities and adding new manufacturing capacity. “MTWL made a capital call on its shareholders to fund its ambitious growth plans. The shareholders have provided adequate funding to grow the business. We will continue to invest in our growth and the success