SKY’S NO LIMIT FOR MAHINDRAS
The Economic Times – December 16, 2009
M&M Buys Two Australian Aeronautics Cos, To Set Up Plant In Bangalore To Manufacture 2-20 Seater Planes
Our Bureau MUMBAI
MAHINDRA & Mahindra on Tuesday said it has acquired 75.1% stake in two Australian companies to cash in on a growing demand for economical air transport and to also diversify operations for better earnings stability.
The acquisition in Aerostaff Australia and Gippsland Aeronautics was done jointly with Kotak Private Equity for Rs 175 crore and would give the Mumbai-based M&M entry into the global aerospace components and the general aviation markets.
“M&M’s move into the aerospace segment is deliberate, bold and timely and is supported by the demand for economical transportation,” said vice-chairman Anand Mahindra. “Our investment in component capability will address the need of both civil and defence markets.” M&M’s new plant in Bangalore will make only two-to-twenty seater range aircraft. The 2-20-seater market (turbo prop market), is amongst the fastest growing segments in general aviation. Turbo props provide operational adaptability in environments with relatively poor infrastructure and can serve the market at the lowest cost per passenger seat km.
Mahindra Aerospace, part of the Mahindra group, plans to manufacture 475 aircraft and expects a peak turnover of Rs 650 crore from the segment in the next 4-5 years. A majority of the Rs 175 crore will be invested to create new facilities and stock options will be given to the founders of Aerostaff Australia and Gippsland Aeronautics.
M&M will retain the existing management and use the services of the founders who developed this technology, the utility maker said in a statement. A plant is being set up in Bangalore for $10 million to provide dual shoring and benefits to customers.
M&M intends to start sale of aircraft by the middle of next year. Prototypes are ready and the certification will take a year. The aircraft will be competitively priced compared to the Cessna, Beechcraft and Piper, said Hemant Luthra, president of Systech Sector. For an 18-seater, it will be priced around $2.7 million and a NM 5 seater will be around $400,000. M&M has held talks with Boeing Co. and Airbus SAS seeking orders, said Mr Luthra. The acquisition of Aerostaff Australia, component manufacturer of high precision aircraft components will catapult M&M into the burgeoning defence offset and commercial aviation market. M&M share closed at Rs 1,017, down 1.91% on BSE.