Mahindra MD Anand Mahindra with Kinetic Motor director Sulajja Firodia Motwani in Mumbai on Wednesday. (Fotocorp)

Mumbai, July 30: Mahindra and Mahindra, the Rs 13,000-crore automobile and tractor maker, is entering the two-wheeler business.

M&M today announced plans to acquire the business assets of ailing two-wheeler maker Kinetic Motors Company Ltd (KMCL) for Rs 110 crore. It also unveiled plans to merge Punjab Tractors — a 63 per cent subsidiary — with itself to pare costs and exploit synergies.

The acquisition of the assets of KMCL, which largely comprises its two-wheeler business, will be done through a new company called Mahindra Kinetic Scooters & Motorcycles Ltd.

M&M will have an 80 per cent stake in the new company, while KMCL will hold the remaining 20 per cent.

The company plans to design and market a range of scooters, value-engineered motorcycles and high-end motorcycles for the Indian and global markets.

M&M currently makes utility vehicles, heavy commercial vehicles, tractors, sedans and three-wheelers.

“The acquisition of the business assets of KMCL is a defining moment in the history of Mahindra & Mahindra as it will give us an opportunity to emerge as a full range player with a presence in almost every segment of the automobile industry. KMCL is a strategic fit with our overall two-wheeler strategy,” Anand Mahindra, vice-chairman and managing director of the Mahindra group, said.

Mahindra said scooters would form M&M’s entry point.

Sulajja Firodia Motwani, director of KMCL, will be a non-executive director in the new company.

Motwani, who was present at the meeting today, said KMCL had the option to sell its 20 per cent stake in the new company after a period of seven years.

The money raised from the sale of Kinetic’s assets to M&M will be used to retire KMCL’s liabilities.

In a separate development, the board of directors of M&M and Punjab Tractors Ltd (PTL) today approved a scheme of amalgamation.

The Mahindras had acquired a 63.33 per cent stake in PTL in July last year. Another subsidiary of M&M currently holds 1.31 per cent of PTL, and is also in the process of being merged into M&M.

The swap ratio has been fixed at one M&M share for every three PTL shares.

Lower profit

M&M has reported a lower net profit at Rs 159.3 crore for the first quarter ended June 30 against Rs 191.2 crore last year. The lower profit was mainly on account of a foreign exchange loss of Rs 77.9 crore suffered by the company because of the rupee depreciation.