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M&M to acquire 10% stake in Canadian company to strengthen crop monitoring technology

The move to acquire stake in Canadian Resson Aerospace Corporation is to strengthen imagery analysis for crop monitoring
One of India’s largest automaker, Mahindra and Mahindra Limited (M&M), announced that it would acquire 10% stake in Canadian company Resson Aerospace Corporation (Resson). The move is aimed at strengthening M&M’s farm division. Resson specializes in technology for imagery analysis for monitoring crop health. As per M&M’s press release, it will subscribe to 8,00,402 Class C preferred shares of Resson, thereby holding 10% stake in Resson on a fully diluted basis. The consideration will be paid in cash worth Canadian Dollars 6.63mn (approximately Rs34.5cr) and the acquisition will be completed by May 10, 2018.

Stable volume growth expectation for tractors and farm equipment bodes well for M&M (40% of volumes, 30% of standalone revenues). New launches in UVs/LCVs and EBITDA breakeven in MHCVs will also steer growth. M&M plans to launch an affordable range of tractors in India (Trakstar). UV/LCV growth will be led by new launches, while MHCV business will breakeven in FY19E, as level of discounting reduces with increasing volumes. M&M has been at the forefront in EV space, recently committing Rs600cr towards EVs and EV components and plans an additional Rs900cr investment by CY20. Mahindra & Mahindra (M&M) is an automotive company with presence across farm equipment (FE), PVs, CVs UVs. The combined entity (standalone M&M + subsidiary MVML) derives revenue (Q3FY18) from farm equipment (35%), automotive segment (61%) and others (4%). It is market leader in tractors in India with a 43% market share as on March 31, 2018.

Mahindra & Mahindra Ltd ended at Rs872.65 up by Rs11.2 or 1.3% from its previous closing of Rs861.45 on the BSE.

The scrip opened at Rs862.70 and touched a high and low of Rs878.40 and Rs862.70 respectively. A total of 1,05,161 (NSE+BSE) shares were traded on the counter. The current market cap of the company is Rs1,08,487.20cr.

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