M&M acquired 35 per cent in Finnish Arm to enter into combine harvester biz.

Mahindra and Mahindra (M&M) a part of USD 16.9 billion Mahindra group informed stock exchanges on Thursday that it entered into a strategic partnership with Sampo Rosenlew (SRW), a combine harvester company based in Pori, Finland to foray into the global combine harvester business.

Under the transaction, Mahindra will acquire a 35 per cent equity stake into the SRW. The two companies will work in tandem to grow their combine harvester business globally. Mahindra and SRW will jointly focus on the combine harvester business in Asia, Africa and Eurasian Economic Union countries.

SRW is a European combine harvester company, renowned world-wide for midsized combine harvesters. A cash positive, profitable company with a turnover of Euro 93 million, SRW is poised for further growth in the global markets. Together with its existing strategy in the core markets, SRW will also develop a new range of combine harvesters for developing markets and for specialty crops.

On the financial front, M&M's total revenue from operations increased by 14.88 per cent year on year (YoY) to Rs 11008 crores in Q3FY16 from Rs 9583 crores in Q3FY15. EBITDA stood at Rs 1242 crores compared to Rs 994 crores in Q3FY15, an increase of 25 per cent YoY. EBITDA margin stood at 11.29 per cent in Q3FY16 compared to 10.38 per cent same period last year. The good EBITDA numbers are on back of slow increase in raw material consumption by 0.02 per cent to Rs 4701 crores from Rs 4700 crores in Q3FY15. The net profit stood at Rs 808 crores this quarter compared to Rs 942 crores in Q3FY15, a decrease of 14.24 per cent YoY. The substantial decrease in net profit is on back of decrease is exceptional items income of company by 79 per cent YoY and increase in tax expenses by 58 per cent YoY.

In FY2014-15 SRW had a stand-alone revenue of Euro 93 million. The company is also a joint venture partner in a combine harvester company in Algeria which had revenues of Euro 45 million in FY2014-15. The company's main products are combine harvesters and forest harvesters with combine harvesters accounting for nearly 70% of net sales. It currently sells its machines to over 50 countries and exports approximately 90% of its products. Further, it has built a significant business in its core markets of Europe, Eurasian countries and North Africa.

On valuation front, the stock of M&M is trading at trailing twelve months P/E of 23.63 compared to industry P/E of 26.66. The stock of company is trading at Rs 1191 a decrease of 1.58 per cent from the previous close.