M&M hikes stake in South African joint venture to 91 per cent

18 March 2009

Utilility vehicle manufacturer Mahindra and Mahindra has invested around $3 million (30 million South African rand) to increase stake in its South African joint venture from 51 per cent to 91 per cent.

Mahindra & Mahindra raised its stake in Mahindra South Africa, a subsidiary that imports fully built vehicles from India, over the past few months and proposes to acquire the remaining stake at an appropriate time, reports said.

The cash infusion was necessitated by the weak rand, rising costs and declining sales, Pawan Goenka, president of the vehicle unit and board member at Mahindra & Mahindra, said at the launch of the new multipurpose vehicle, the Mahindra Xylo.

Mahindra South Africa, a subsidiary of the $6.7-billion Mahindra Group, on Monday launched its new multipurpose vehicle the Xylo.

Mahindra SA, a joint venture with African Automotive Investments Corporation, was under financial pressure as the sales volumes dropped at the time when fixed costs were rising, hurting profitability.

Goenka said the volatile rand had hit Mahindra SA, since the dollar cost of imports have risen with the rand slumping from R6.50 against the dollar when the company entered the South African market in 2004 to about R10 currently. Vehicle prices have not gone up proportionately, he added.