Kinetic sells 7% stake in Mahindra Two Wheelers to Samena Capital for $29M

Kinetic Engineering Ltd (KEL) has exited from its two-wheeler JV by selling its remaining stake in Mahindra Two Wheelers Ltd (MTWL) to Samena Capital for Rs 182.1 crore ($29.4 million), as per a stock market disclosure.

After certain committed payments towards NCD repayments and meeting cost of financing, etc, KEL expects to receive net amount of around Rs 109 crore ($17.6 million) from the stake sale. It will use the money to meet various obligations of its business, including working capital and substantially towards FCCB/debt repayment obligations to strengthen its balance sheet.

VCCircle was the first to report that Firodias-promoted Kinetic Motor Co Ltd is looking to exit the JV by selling its entire holding of 11.5 per cent in MTWL to PE firms.

In 2008, M&M entered the two-wheeler segment by acquiring 80 per cent in the business assets of Kinetic Motor. Kinetic Motor retained 20 per cent in the business of the new joint venture. During FY12, there was fresh capitalisation of Mahindra Two Wheelers which saw M&M’s stake move up to 88.5 per cent.

Kinetic Motor merged with KEL and M&M invested Rs 340 crore to raise its stake in MTWL to 93 per cent from 88.5 per cent through a rights issue in which KEL did not participate.

MTWL faces stiff competition from bigger players like Hero MotoCorp, Bajaj Auto, Honda Motorcycle & Scooter and TVS. It clocked a net loss of Rs 264 crore on revenues of Rs 386 crore, down from sales of Rs 442 crore and net loss of Rs 238 crore in FY12. This was the second straight year when its revenues shrank. It sold 1,11,185 units of motorcycles and scooters last fiscal or less than 1 per cent of total industry sales.

Samena Capital, which is an alternative assets manager focused on South Asia and MENA market, has so far invested small sums in around a dozen firms in India, including Jubilant Industries Ltd, Dynamatic Technologies Ltd and Voltamp Transformers Ltd. Last year, it was leading a consortium to invest in Reliance Globalcom.

(Edited by Joby Puthuparampil Johnson)

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