Background of the Company M&M

7/29/2019 Background of the Company M&M

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Background of the Company

Mahindra & Mahindra Limited (BSE: 500520) is part of the Indian Industrial ConglomerateMahindra Group based in Mumbai.

The company was set up in 1945 in Ludhiana as Mahindra & Mohammed by brothers K.C.Mahindra and J.C. Mahindra along with Malik Ghulam Mohammed.

After India gained independence and Pakistan was formed; Malik Ghulam Mohammed moved toPakistan where he became the nation's first finance minister.

Now, with the Mahindra brothers as the whole sole of the company, its name was changed toMahindra & Mahindra in 1948.

Initially set up to manufacture general-purpose utility vehicles, Mahindra & Mahindra (M&M)was first known for assembly under license of the iconic Willys Jeep in India.

M&M introduced Jeeps to India and in no time they established themselves as the Jeepmanufacturers of India.

The company later branched out into the manufacture of light commercial vehicles (LCVs) andagricultural tractors, rapidly growing from being a manufacturer of army vehicles and tractors to

an automobile major with a growing global market presence.

At present, M&M is the leader in the utility vehicle segment in India with its flagship UV Scorpio. It offers over 20 models including new generation multi-utility vehicles like the Scorpio and the

Bolero.

It formerly had a joint venture with Ford called Ford India Private Limited to build passengercars.

In recent times the company is engaged in spreading its reach beyond its traditional markets. They entered into the two-wheeler segment by taking over the Kinetic Motors in India. M&M also has controlling stake in REVA Electric Car Company. M&M has also been selected as the preferred bidder for the acquisition of South Korea's

SsangYong Motor Company.

Mahindra & Mahindra grew from being a maker of army vehicles to a major automobile andtractor manufacturer.

It has acquired plants in China and the United Kingdom, and has three assembly plants in theUSA. M&M has partnerships with international companies like Renault SA, France and


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International Truck and Engine Corporation, USA. M&M has a global presence and its products

are exported to several countries.

Its global subsidiaries include Mahindra Europe Srl. based in Italy, Mahindra USA Inc., MahindraSouth Africa and Mahindra (China) Tractor Co. Ltd.

M&M is one of the leading tractor brands in the world. It is also the largest manufacturer oftractors in India with sustained market leadership of over 25 years.

It designs, develops, manufactures and markets tractors as well as farm implements. Mahindra Tractors(China) Co. Ltd. manufactures tractors for the growing Chinese market and is

a hub for tractor exports to the USA and other nations.

M&M has a 100% subsidiary, Mahindra USA, which assembles products for the Americanmarket.

VISION: To create a fully collaborative environment in which suppliers can deliver exactly what

the company needs, when it needs it, and at a competitive cost.

We dont have a group-wide mission statement. Our core purpose is what makes all of us wantto get up and come to work in the morning-Anand Mahindra

MISSION: To create India's largest automobile and automobile-related products distributionnetwork by providing dealers and customers with the largest choice of unique world-class

products and services.

Financial Statements

Possible reasons of the spin-off and business synergies

Spin offs

Equity FinancingThe company indicates that a spin-off will allow the parent or a subsidiary to trade at a

higher valuation than the current stock price. Again, the IRS is unlikely to accept thatsimply increasing the stock price enhances the business per se, unless a stock offering to

raise capital to be used in the business will follow. Consequently, the IRS will request aletter from an investment banker stating the case for the spin-off as a technique of

effecting a more successful stock offering. The IRS will demand a representation that anoffering will take place within a year after the spin-off.


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Regulatory ReliefAn example of a business purpose based on regulatory rules is a divestiture required by a

governmental agency. The spin-off may follow an acquisition whose approval by theFederal Trade Commission or Department of Justice may be contingent on divestiture of

a certain businesses. Regulatory relief can be among the more difficult situations todocument to the satisfaction of the IRS. Many times, a government agency has notmandated a spin-off take place. Usually, private counsel has advised the acquiring

company that a spin-off could help avoid certain regulatory restraints. If the divestiturehas not been mandated by regulators, a legal opinion may be required to convince the IRS

that the spin-off will lead to that desired outcome.

Debt FinancingThis business purpose establishes that the companys ability to borrow will be enhanced as aresult of the separation of the parent and the subsidiary. The focus would likely be oncircumstances affecting the companys credit rating.

Fit and FocusThis purpose often involves a business identified by management as non-core. Many

spin-offs have received IRS approval based on the parents ability to show that th e needsof one business for management direction and access to capital markets would be greatlyimproved through separation from one or more other businesses.

UndiversificationDivest non-core businesses and sharpen strategic focus when direct sale to a strategic or financial

buyer is either not compelling or not possible

Motivating managementImprove performance by better aligning management incentives with SpinCo's performance

(using SpinCo, rather than ParentCo, stock-based awards), creating direct accountability topublic shareholders, and increasing transparency into management performance

Eliminating dissynergiesReduce bureaucracy and give SpinCo management complete autonomy

Corporate defenseDivest "crown jewel" assets to make a hostile takeover of ParentCo less attractive

Financial statements (Balance Sheet, Profit and Loss A/C) of the proposed companies

Valuation of both the companies and their swap ratio


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To go about the proposed spin-off, proposed financing pattern keeping in mind the financial of the

parent company

Documents

Background of the Company M&M