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Nearly half of M&M subsidiaries make losses

Mahindra Two Wheelers, Punjab Tractors, Mahindra Reva are amongst a bunch of 54 companies controlled by sports utility vehicle market leader Mahindra & Mahindra that were in the red last financial, according to latest disclosures.

The Mumbai-based company, which has amongst the highest number of subsidiaries in India and abroad, had 117 subsidiaries as of the end of last financial year, 46% of which made losses in the same year.

The loss-making subsidiaries remained a drag on the consolidated finances of the company. Most of the money losing business are those companies which were acquired by M&M in the last several years.

Besides the long struggling two-wheeler and electric vehicle business the list also includes companies that makes small private planes and those that make components for automobiles. Korean SUV maker Ssangyong Motor Company, which it bought nearly four years ago, is yet to turn profitable.

With a loss of Rs 459 crore recorded last year Mahindra Two-Wheelers accumulated loss swell to Rs 1,250 crore. The company was formed after M&M purchased the two-wheeler assets of now defunct Kinetic Motor Company in 2008.

“The accumulated losses of your company as at 31st March, 2013 have resulted in erosion of more than 50 per cent of its peak net worth during the immediately preceding four financial years. This position continues for the financial year ended 31st March, 2014 and hence, your company has remained potentially sick within the meaning of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985. Your company is also taking necessary measures to revive its business”, stated a note by M&M to its shareholders.

Similarly, Mahindra Punjab Tractors, which the company bought in 2007 returned with a loss of Rs 314 crore last year even as commercial operations at the plants owned by the subsidiary were yet to commence, as of end of last financial year. Accumulated losses at this unit jumped to 31 per cent to Rs 1,326 crore.

The Group’s foray into ‘future mobility’ of electric vehicles has also dragged its finances even as the government did not provide any subsidies to such vehicles as envisaged. By the end of last financial year losses at Mahindra Reva Electric Vehicles more than doubled to Rs 80.50 crore on a revenue which stood at just Rs 38 crore. In the year previous to last year the company posted a loss of Rs 31.85 crore.

However, M&M is taking strides to resurrect its weak businesses. For instance, Mahindra Two Wheelers saw a growth of 93 per cent in domestic sales of little over 200,000 units last year as demand for its last launch Centuro, a entry motorcycle, zoomed up. In 2012-13 its sales tumbled 21 per cent to 105,000 units.

Similarly, losses were trimmed at SsangYong Motor Company (SYMC) to just Rs 22 crore last year as against Rs 623 crore the year before. Revenues increased to Rs 20,418 crore as compared to Rs 16,826 crore posted a year before, an increase of 21 per cent.

The Korean company which makes SUVs, pick up, MUV and luxury sedans has been able to cut down on costs and launch new models which has led to growth in revenue.

“The company achieved profits in two consecutive quarters during 2013. However, due to the unfavorable exchange rate in the fourth quarter and the provisions made due to a Supreme Court guideline on the definition of ordinary wages, the company could not realize profits for the full year”, added M&M in a report.

SYMC set up the next cycle of Promise 2016 and Aspiration 2016 targets and renewed its mid – long term strategies. To achieve ‘Promise 2016’, SYMC will accomplish global sales target of 150,500 units in 2014, continue intensively the path of turn around and will prepare for new model launches scheduled in 2015. It will also complete the development of its strategic model X100 in this year which will prove to be the base model for future products.

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