Mahindra & Mahindra on Saturday said it's unit Mahindra Defence Systems will acquire BAE Systems' 26 percent stake in their joint venture company Defence Land Systems India, citing changes in the business environment and customer procurement frameworks among other reasons.
"Since the establishment in 2009 of the M&M (74 percent) and BAE Systems (26 percent) joint venture, DLSI, there has been significant evolution in the Indian Land Systems market. Developments in both the industry environment and in customer procurement frameworks and acquisition strategies have led the shareholders to conduct a strategic review of the DLSI business," the automobile to technology major said.
At the time of signing the JV agreement, the two companies had said that the parent companies would initially invest USD 21.25 million over a period of three years.
The decision to end the venture will enable both the companies to consider each opportunity on a case by case basis, including continuing to explore opportunities for co-operating on specific defence projects, it added.
"This is a strategic decision and will enable both the companies to approach opportunities individually and to offer customised solutions to meet the needs of the Indian defence land systems domain. We have had a fruitful association with BAE Systems and look forward to working with them in the future on a case by case basis," said Brigadier (Retd.) Khutub Hai, CMD, Mahindra Defence Systems.
M&M had also planned another defence JV with Israel's Rafael, which was rejected by the government in December.
This is not the first time the Mahindra Group has formed joint ventures and then ended up buying the partner's stake for various reasons.
In December 2012, M&M and its US partner Navistar had decided to part ways in their commercial vehicle and engines joint ventures, amid sluggish growth in the Indian medium and heavy truck industry.
M&M had said it would acquire Navistar International Corp's 49 percent stake in Mahindra Navistar Automotives and Mahindra Navistar Engines for about Rs 175 crore.
The two companies had entered into a truck and bus manufacturing JV in 2005, while the engines JV was formed in 2007. Navistar had said that that given its 2013 priorities, the capital and focus needed to be allocated to other business opportunities in the near term.
Earlier, M&M had ended a joint venture with French car maker Renault in 2010. That JV had been formed to launch the entry-level sedan Logan in India, but dwindling sales after initial success and difference over the future of the JV led to the two parting ways.
While Renault has since set up its own Indian arm and sells various models like the Duster SUV and Scala sedan, M&M has rebadged the Logan and now sells it as Mahindra Verito.
M&M shares closed down 1.3 percent at Rs 884.60 on NSE on Friday.
Also Read: Strong UV sales drive M&M Q3 net profit up 26% at Rs 836cr
Nachiket Kelkar
nachiket.kelkar@network18online.com
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