M&M in talks to buy US tractor parts firm

May not bid for Serbian tractor major IMT.

Mahindra USA, the tractor subsidiary of Mahindra & Mahindra, has initiated talks to buy a tractor parts company in North America, said A Choudhari, president, farm equipment sector, M&M. He expects the deal to be finalised by middle of 2006. He added that M&M "was not likely" to bid for Serbian tractor company IMT.

"We have looked at it and as of today, we are not likely to bid for it (IMT), as it does not fit into, what we would consider worthwhile," he said.

On the proposed North American acquisition, Choudhari said it would enable M&M to save costs.

"More than 90 per cent of the tractors sold in the US are sold with attachments. The proposal to buy an implements and aggregates company is a part of our plan to integrate backwards, which will result in cost savings," Choudhari said.

Mahindra USA sold 3,645 units during April-December, and 4,444 units during the whole of 2004-05.

Choudhari said Mahindra & Mahindra was open to acquiring local tractor companies to consolidate its market leader position in this business.

"If any acquisition in India were to be available, we would be happy to look at it very closely," he said.

Currently, M&M's share in the domestic tractor market is 29 per cent. Its nearest competitor, TAFE, post acquisition of Eicher's tractor business, has a market share of 23 per cent, Punjab Tractors 12 per cent, Sonalika 11 per cent and Escorts per cent.

Commenting on domestic capacity expansion plans, Choudhari said M&M plans to raise capacity in three of its four tractor plants in Nagpur, Rudrapur and Jaipur between 10 and 20 per cent over next two years. He declined to mention the amount involved for raising capacity.

Currently, the company's domestic tractor division has a capacity of around 1,35,500 units a year, analysts said.

During April-December, the company sold 77,702 tractors, including exports, up 31 per cent from the same period last year.

Mahindra & Mahindra expects Jiangling Tractor Company, its 80:20 joint venture with Jiangling Motor Co in China, to reach the full capacity of 12,000 units this calendar year, Choudhari said.

The once-dormant Chinese plant reached 50 per cent of the capacity this January.