At Board meetings held today at Pune, Board of Directors of Kinetic Engineering Limited (KEL) and Kinetic Motor Company Limited (KMCL), both companies belonging to the Firodia Group of Industries, approved a scheme of merger for the merger of KMCL with KEL.
The amalgamation is intended to be a key strategic move on part of the Kinetic Group that will enable achievement of the potential of Automotive Business including participation of investors, strategic partners, lenders and other stakeholders in such Business.
The merger also marks the culmination of restructuring taken up by the Kinetic group in recent years where the Group’s manufacturing and engineering entity Kinetic Engineering was restructured and positioned to become a focused player in the Automotive Systems and components business with a focus on Powertrain; while the two wheeler business in Kinetic Motor Company was hived off to a new alliance company with the formidable Mahindra and Mahindra Group. KMCL transferred its operating assets relating to two wheeler business from KMCL to Mahindra Two Wheeler (MTWL) Limited in November 2008, for cash and for a 20% strategic stake in MTWL. It is expected that this strategic stake shall create significant value in the future, as Mahindra group should be able to leverage its rural penetration to create a successful motorcycle business for MTWL.
Expressing his enthusiasm on the strategic announcements, Mr. Arun Firodia, Chairman of KEL said, “We are confident that amalgamation of Kinetic Motor Company Limited with Kinetic Engineering Limited would enhance the shareholders value and allow focused course of action for the group. Kinetic Engineering has made good progress over the last 2-3 years in establishing itself as a strong player in the automotive systems industry with a key specialization in Powertrain. We have an enviable order book from strong players like Tata, Mahindra & Mahindra, Piaggo, MNAL, among others. This business itself will create good value for the shareholders of KEL. By consolidating the strategic stake of the group in Mahindra Two Wheelers limited directly in KEL, as a result of this merger, we aim at creating even more value for the shareholders of KEL as well as KMCL; through diversification of value and value addition through manufacturing business as well as investment into MTWL. It will also bring about enhanced financial strength and flexibility to the Group and enable us to expand our businesses. We intend to build KEL’s current automotive systems business to a size of Rs. 500 cr per year in the next 3 years and also aim at creating further value through the strategic tie ups such as the stake in MTWL.”