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With Aston Martin, M&M can go the Tata Motors way

Tuesday, 27 November 2012 - 9:00am IST | Place: Mumbai | Agency: dna

If it is interested in or is bidding for the marquee brand, that is.

Is Mahindra & Mahindra buying iconic British car maker Aston Martin? Or is it?

The company hasn’t uttered a word on this yet, with Pawan Goenka, president, automotive and farm equipment sectors, saying on Monday there’s no comment on offer.

The lack of clarity, and fears that this could be a wrong move strategically, saw the M&M share being cropped 3.37% to Rs 922, a new low in the last couple of weeks.

“The luxury and sports car market is getting into a phase of low growth across the world,” Jitendra Panda, head of institutional sales at Future Capital Holdings Ltd in Mumbai, told Bloomberg.

“There’s concern Mahindra’s money may get stuck in a high-debt venture where returns are expected after a few years.”

While that may be the case abroad, the company is certainly doing well locally, with volumes growing in double digits even as rivals huff and puff – primarily due to its niche in utility vehicles. It is also going strong in the tractor segment.

And experts said M&M’s balance sheet has never looked better.

To be sure, valuations for a 50% controlling stake in Aston Martin are expected to be high, but M&M is in a good position to strike a deal with Investment Dar, the Kuwaiti owner of Aston Martin.

“It does make sense for M&M as it is a niche player and Aston Martin will add yet another niche to its portfolio. They have had successful acquisitions in the past, so there is a confidence,” said Mohit Arora, executive director JD Power Asia Pacific.

Some see the story unfolding just the way Jaguar Land Rover did for Tata Motors.

“M&M probably wants to go the Tata way. Tata Motors has done well with Jaguar Land Rover. One can see a similar story this time with M&M — if it happens. Aston Martin makes a good proposition for M&M as Mahindra is present in every automotive segment and will also help in increasing its global presence,” said V G Ramakrishnan, director of Frost & Sullivan.  

Despite a lot of speculation, a section of the market believes that M&M never bid for Aston Martin, saying it is too expensive.

An analyst on the condition of anonymity said, “M&M may have shown interest, but pulled out. “Despite putting money, it may not have got operational control, which is a position that doesn’t suit M&M.”

The next few days will tell which way things are headed.

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