The acquisition of Erkunt Traktor Sanayii AS will provide Mahindra access to Turkish agricultural machinery market, the fourth largest globally
Mumbai: Mahindra and Mahindra Ltd on Wednesday said it has acquired Erkunt Traktor Sanayii AS, a Turkish tractor maker and its foundry business for Rs800 crore through Mahindra Overseas Investment Co.(Mauritius) Ltd.
The buyout will provide the company access to Turkish agricultural machinery market, the fourth largest globally, and help the Mumbai-based firm enhance its product portfolio. The transaction, subject to regulatory approval, is expected to be completed by 30 November.
“Turkey is a very strategic market for us; therefore through Hisarlar Makina Sanayi ve Ticaret Anonim Şirketi (Hisarlar) acquisition, which specializes in implements and the one we have announced today, we are putting a firm foot in the Turkish tractor market, a market which is two-third the size of India," said Pawan Goenka, managing director at Mahindra and Mahindra.
Mahindra had acquired 75.1% in Hisarlar, a Turkish farm equipment company on 21 January.
The latest buyout, he pointed out, is part of a larger strategy that has globalization and diversifying product portfolio beyond tractors, as two important pillars of growth strategy for the farm equipment business.
While the Turkish firm will gain from Mahindra’s expansive reach, it would help the tractor market leader in India to add to its product portfolio, he said.
After this acquisition, Mahindra will be focusing on consolidating its presence in the overseas markets it has recently entered. These include Brazil, Turkey, Japan and Algeria. “It will be more about penetrating deeply in the regions we have entered into instead of getting to newer ones," he said.
As part of the agreement, Mahindra will acquire 100% of the share capital of Erkunt Traktor and at least 80% of Erkunt Sanayii A.S, which is held by Erkunt Traktor. The tractor-making entity markets tractors under ArmaTrac brand.
Established in 2003, Erkunt Traktor manufactures and markets tractors under Erkunt brand in Turkey. It also exports tractors to various global markets under the ArmaTrac brand. Last year, the company sold a total of 4,700 tractors while posting revenues of 314 million Turkish Lira.
The company rolls out 23 tractor models ranging between 50 HP to 110 HP.
The Hisarlar deal would help in growing the farm equipment business in Turkey and Europe, Mahindra had said.
Mahindra has no plans to change the management of the acquired entity, said Goenka. It also will not change the name of the company, he said.
Nitesh Sharma, an analyst at PhilipCapital said the move is in line with company's plans of drawing 20% revenue from outside India. It also helps in tiding over the cylical nature of the tractor businesss. However, Sharma is concerned about the capital allocation policy of the company. "Their two-wheeler and truck business continues to make losses and they are spending on acquisitions," he said.
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