Mumbai: Mahindra's Farm Equipment Sector, one of the world's top tractor brands and the market leader in India, today signed a joint venture agreement with Jiangsu Yueda Yancheng Tractor Manufacturing Co Ltd, the third largest tractor manufacturer in China.

Mahindra will hold 51 per cent (worth around $26 million) in the joint venture through its subsidiary, Mahindra Overseas Investment Company (Mauritius) Ltd.

Under the agreement, Yancheng Tractors will transfer all tractor related assets and its current liabilities to the joint venture. The joint venture will have net assets of about $50 billion. The transaction is subject to receipt of necessary approvals.

Mahindra has another tractor venture in China, namely, Mahindra China Tractor Company Ltd. (MCTCL).

Yancheng Tractor's Huanghai Jinma brand was the No 3 tractor brand in China in terms of volumes in 2007.

''I have always believed that India and China have unique and complementary strengths, which, when pooled together, can take on the world. We already have a successful joint venture with Jiangling Tractor Company. The JV between M&M and Yancheng Tractor will further combine Indian entrepreneurial and managerial skills with Chinese competitiveness and efficiency. I am sure this formidable combination will contribute substantially towards realising our ambition to be the leading tractor manufacturer in the global market,'' Anand Mahindra, vice chairman and managing director, Mahindra Group, said.

''We are delighted to partner with Mahindra and look forward to a successful joint venture. The JV stands to gain by the operational excellence,   international sales and distribution network and R&D capabilities of Mahindra and will eventually lead to the creation of China's leading tractor company,'' Shao Yong, president of Yueda Group, said.

''The formation of this joint venture with Yancheng Tractor Company is a significant step in our plans for the China market. The Huanghai Jinma brand is extremely strong in the domestic China market and the company is also one of the biggest exporters of tractors. Along with our current operation at Nanchang, we will have a much larger scale on which we plan to build up our business in China,'' Anjanikumar Choudhari, president, Farm Equipment Sector, Mahindra & Mahindra Ltd, added.

The joint venture, with a large manufacturing base, will manufacture low-cost tractors in the range up to 125HP, both for domestic use and for exports.

The tractor industry in China (including exports) has grown at a combined annual growth rate of 40 per cent - from about 56,000 tractors in 2003 to 2,20,000 tractors in 2007.

The new agriculture policy introduced by the Chinese government in 2004 has removed the tax on agriculture and introduced a subsidy for tractor purchase to support farmers and enhance per capita income of peasants.

Tractor sales have increased since the introduction of the new agricultural policy which saw a continuous rise in the income level of farmers.

State-owned Yancheng Tractor, based in Yancheng city, Jiangsu province, sells tractors under the brand name of Huanghai Jinma. The company manufacturers tractors ranging from 16 HP to 125 HP and has a strong distribution network covering over 25 provinces in China.
 
The company is also a leading exporter of tractors from China, with a footprint in more than 60 countries, including the US, South America, Russia, Europe and Africa.

Yueda Group is one of the top 100 business groups in the People's Republic of China. The group has a turnover of $5.8 billion and has a presence in various sectors of the Chinese economy, including automobiles and tractors, coal and mining, infrastructure and real estate, textiles and garments, hotels and supermarkets.

Over the last 28 years Yueda has established itself as an international group with partnerships and joint ventures with reputed international companies like Kia Motors from Korea, French supermarket major Carrefour, Triumph from Germany, and Fuji, a heavy construction machinery giant from Japan. The group employs more than 20,000 people.

Mahindra's Farm Equipment Sector is one of the world's top tractor brands and has been the undisputed market leader in India for 25 years. It is also the only tractor company to win the Deming Application Prize and the Japan Quality Medal, two of the highest quality accolades that can be won by any organisation.

Mahindra (China) Tractor Co. Ltd. manufactures tractors for the growing Chinese market and exports tractors to the US and other western nations. M&M has a 100 per cent subsidiary, Mahindra USA, with three assembly plants catering to the American market. Today, the `Mahindra' tractor has come to be recognised as a powerful symbol of productivity and performance.

In 2006, the Sector achieved a new milestone with the launch of the Shaan, India's first multi-utility tractor. In 2007, the company won the AE50 Outstanding Innovation Award 2007 from the American Society for Engineering in Agricultural, Food, and Biological Systems, for the Shaan. In 2008, Mahindra USA was rated highest in overall satisfaction amongst tractor manufacturers in a survey conducted by the North American Equipment Dealers Association (NAEDA) – the apex dealer association in the USA.

Mahindra Tractors also recently featured in the top 10 list of most innovative Indian companies compiled by the Wall Street Journal as part of its survey to determine Asia's 200 most-admired and innovative companies.

Kotak Investment Banking, Mumbai was the financial advisor to Mahindra in the transaction, while King & Wood, Shanghai was the legal advisor.