Mahindra and Mahindra Ltd (M&M) has recently announced that it will sell 100 per cent stakes of its pre-owned cars and aftermarket service brand- Mahindra First Choice Services Ltd, to TVS Automobile Solutions Pvt Ltd. Moreover, as a part of this deal, Mahindra will also acquire a 2.76 percent stake in the TVS Motor group firm TASL. But there’s a lot more to the deal than one can think. TASL will also be able to acquire the entire stake of Mahindra Holdings Ltd, which is actually a wholly-owned subsidiary of Mahindra in Mahindra First Choice Services Ltd (MFCS) and its subsidiary Auto Digitech Pvt Ltd (ADPL).
According to Mahindra, “As a part of the transaction, the company will secure a minority stake in TASL and in turn, MFCS and ADPL will become subsidiaries of TASL”. According to some reports, the value of investment from Mahindra is close to Rs 35 crore for acquiring the shares in TASL, which will also be backed by a similar amount, that TASL will pay to acquire shares of MFCS and ADPL.
Mahindra has also confirmed that they have signed a share subscription agreement for subscribing Series IV Compulsorily Convertible Preference Shares (Series IV CCPS), resulting in acquiring 2.76 percent of the share capital of TASL on a fully diluted basis. R Dinesh, Director, TVS ASPL said “India’s USD 10 billion aftermarket segment is fragmented and needs strong support for relevance and growth amid the changing technology landscape in the automotive sector. We are taking this opportunity to bring thousands of entrepreneurs on to a digital platform through which they can benefit from technologies across marketing, diagnostics, customer experience, quality parts, access to training, and digital payments. I am sure this partnership will be a win-win proposition for all stakeholders.”
V S Parthasarathy, President, Mobility Services Sector, Mahindra Group said, “MFCSL has developed a large, trusted, multi-brand car service franchise and distribution network over the years. Our focus on quality and customer satisfaction has ensured that we continue to deliver superior value to our customers and channel partners.”
G Srinivasa Raghavan, Managing Director, TVS ASL added, “myTVS has created a digital platform and ecosystem for over 2,500 garages especially across South India. With MFCSL, we will have an opportunity to create a pan India digital footprint.” He said that the company will continue to invest and expand its network to over 10,000 garages in the next 18-24 months.
“It is imperative that we take this positioning to help organize the fragmented garage ecosystem so that we can continue to provide superior customer experience to the growing automotive population and help these garages by making them future-ready,” Raghavan asserted.
Mahindra also claims that the subscription of Series V CCPS will have an earn-out right to increase the stake of the company in TASL. The number of equity shares upon conversion would depend upon the milestones to be achieved up to March 31, 2024. While the carmaker expects the transaction to be completed by February 28, 2021.
Speaking about the brief history of both the companies, the TASL retains its footprint in the business of distribution of automobile spare parts, and multi-brand vehicle service in Europe, the US, South Africa, China, and Turkey through its subsidiaries. On the other hand, the MFCS has a pan-India network with over 475 franchise partners and more than 100 distributors present in over 350 towns across 25 states and 2 union territories.