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Tata Motors split sparks buzz around rival Mahindra and Mahindra demerger

Analysts at HSBC said in a report that if M&M demerged its farm equipment and auto businesses, it could unlock significant value for its investors

Our Special Correspondent Mumbai Published 12.03.24, 10:40 AM
What’s next?

What’s next? Sourced by the Telegraph

The demerger plan of Tata Motors has ignited speculation in the market that automotive rival Mahindra and Mahindra may adopt a similar value-unlocking strategy.

Analysts at HSBC said in a report that if M&M demerged its farm equipment and auto businesses, it could unlock significant value for its investors.

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The foreign brokerage said M&M continues to fare well operationally because of its SUV and tractor businesses.

But there could be a 40 per cent upside to the stock if the company demerges its auto and tractor businesses.

However, ``it would be a lot tougher’’ for M&M to follow a restructuring exercise similar to Tata Motors.

One big difference is the company will have to demerge into three firms: the auto, farm equipment and the holding company, the brokerage said.

HSBC which has a buy rating on the stock has increased the target price to Rs 2,300 per share from Rs 1,900.

The shares of M&M on Monday ended 0.30 per cent lower at Rs 1,890.65 on the BSE.

M&M chief executive officer and managing director Anish Shah said there are no such demerger plans. ``That's not something we're looking at right now. See, for us, it is essential to create value in all our businesses. We see a much greater value from synergies across our businesses," a Moneycontrol report quoting Shah said.

Last week, the board of Tata Motors decided to spinoff its passenger vehicle and commercial vehicles businesses into two separate listed entities.

The demerger will see the PV businesses including EV, Jaguar Land Rover and its related investments coming under one firm. In contrast, the CV business and its related investments will be housed in another entity.

Bengal drive

Mahindra & Mahindra Ltd inaugurated two dealerships and a workshop in Howrah taking the company's footprint in West Bengal to 36 touchpoints. The company sells 1,200 passenger vehicles and 600 units of commercial vehicles, monthly, in West Bengal.

West Bengal contributes about 3 per cent to the company's national sales, said Baneswar Banerjee, vice-president and national sales head, of Mahindra & Mahindra Ltd.

The new dealerships are on Foreshore Road and Dhulagarh with a workshop on Kona Expressway with Landmark Cars.

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