With this latest acquisition, Mahindra & Mahindra becomes the world's fourth largest tractor manufacturer.
20 Sep 2017 | 11390 Views | By Nilesh Wadhwa
Mahindra & Mahindra, which yesterday unveiled India's first autonomous tractor, has announced the 100 percent equity acquisition of Turkish tractor manufacturer – Erkunt Traktor Sanayii A.S, and 80 percent stake in Erkunt Sanayi A.S.
This latest acquisition gives M&M a strategic advantage in Turkey – known as the gateway ...
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Mahindra & Mahindra, which yesterday unveiled India's first autonomous tractor, has announced the 100 percent equity acquisition of Turkish tractor manufacturer – Erkunt Traktor Sanayii A.S, and 80 percent stake in Erkunt Sanayi A.S.
This latest acquisition gives M&M a strategic advantage in Turkey – known as the gateway to Europe – where it now owns two tractor manufacturers. M&M first forayed into Turkey in January 2017 when it bought a 75 percent stake in Hisarlar Makina Sanayi ve Ticaret Anonim Sirketi.
With this latest buyout, M&M has further expanded its reach and becomes the fourth largest tractor manufacturer globally. Erkunt Sanayi Traktor sold 4,700 tractors for the year ended December, 2016, and recorded revenue of approximately 314 million Turkish Lira (Rs 579 crore).
Commenting on the development, Dr Pawan Goenka, Managing Director, Mahindra & Mahindra, said, "At Mahindra’s Farm Equipment Sector, our strategy is to globalise aggressively and also expand our portfolio to include various new categories of tractors and farm machinery. Turkey is a very important market in our globalisation journey and we wish to participate in its entire agri mechanization landscape. The acquisition of Erkunt will enable Mahindra to expand its footprint in the world’s fourth largest tractor market."
Rajesh Jejurikar, president, Farm Equipment Sector, M&M, said: ““Erkunt is a strong local Turkish brand that has grown very rapidly over the last decade, by expanding its product range. We look forward to collaborate with the Erkunt leadership team to bring synergy and expand our footprint in Turkey."
Mahindra will also acquire a foundry unit, Erkunt Sanayi A.S., which is a full service provider, from castings to machining. The Foundry Unit focuses on engine blocks, cylinder heads and transmission cases and has a strong customer portfolio including JCB, MAN, Ford and Deutz. The foundry unit had a revenue of USD 47 million during 2016.
How the Turkish tractor market stacks up
The $1.7 billion (Rs 10,738 crore) Turkish tractor market grew at an estimated 10.9 percent CAGR between 2013-2016. The total Turkish tractor parc of 1,726,939 units is estimated to have the bulk of tractors to be over 30 years old, which makes a strong case for a huge replacement market.
The domestic market sees the bulk of the demand being dominated by local players that account for almost 70 percent of total sales. The country is also witnessing regulations that favour local products against imported products in form of prohibitive duty structures, stringent emission norms for imports, among others.
The Erkunt Sanayi Traktor buyout gives M&M access to a broad product portfolio and access to the fourth largest Turkish tractor brand. The acquisition, slated to be completed by November 30, 2017, will be done by Mahindra Overseas Investment Company (Mauritius), a wholly owned subsidiary of the company (MOICML) that would see the company spend 260 million Turkish Lira (Rs 478 crore).
Erkunt Traktor was incorporated in September 2003 and is primarily engaged in manufacturing tractors for the Turkish and export markets. The company produces tractors in the range of 50-110hp. In 2016, it had a 6 percent share of the domestic market. Currently, Erkunt has a dealership network of 95 dealers, along with 326 authorised service points. It is foraying into the Middle East, CIS countries (Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan) and North Africa.
Dr. Pawan Goenka, while answering media queries on the acquisition mentioned that Hisarlar Makina Sanayi ve Ticaret Anonim Sirketi brings in a lot of expertise that is lacking for M&M, in the segment and it is currently working on developing a equipment specifically suited for India. He added that Erkunt tractors which makes cabin-based tractors that are not yet seen in India, and even the ones that M&M exports. Mahindra will look at introducing the cabin-tractors in India.
Speaking to Autocar Professional, on plans to introduce driverless technology in the European market through this acquisition, Dr. Pawan Goenka replied, “This acquisition has no direct bearing on the driverless technology (DTT) that we have developed in India working along with global and Indian consultants. Whether we export the DTT to Turkey is too early to say, and our first target market for this technology is Japan and the USA. We will evaluate during the right course of time, if we will introduce DTT in Turkey during the first phase or the second.”
M&M globally ranks fifth in revenue terms in terms of its agri-equipment sector, while it leads and aces the global rankings in tractor volume terms. The farm equipment segment contributes 20 percent or $3.5 billion (Rs 22,109 crore) to the total $18-19 billion (Rs 113,076-120,023 crore) of the Mahindra Group revenues.
With this latest buyout, M&M has further expanded its reach and becomes the fourth largest tractor manufacturer globally. Erkunt Sanayi Traktor sold 4,700 tractors for the year ended December, 2016, and recorded revenue of approximately 314 million Turkish Lira (Rs 579 crore). The $1.7 billion (Rs 10,738 crore) Turkish tractor market grew at an estimated 10.9 percent CAGR between 2013-2016, with total tractor park of 1,726,939 with a bulk of tractors estimated to be 30 plus years old, giving a strong case for a huge replacement market.
The international domestic market sees majority demand being dominated by local players that account for almost 70 percent of the total sales. The country is also witnessing regulations that favour local products against imported products in form of prohibitive duty structures, stringent emission norms for imports, among others.
The Erkunt Sanayi Traktor buyout gives M&M access to a broad product portfolio and access to the fourth largest Turkish tractor brand. The acquisition slated to be completed by November 30, 2017, will be done by Mahindra Overseas Investment Company (Mauritius), a wholly owned subsidiary of the company (MOICML) that would see the company spend 260 million Turkish Lira (Rs 478 crore).
Erkunt Traktor was incorporated in September 2003 and is primarily engaged in manufacturing tractors for the Turkish and export markets. The company produces tractors in the range of 50-110hp, with a product portfolio consisting of models. In 2016, it had a 6 percent share of the domestic market. Currently, Erkunt has a dealership network of 95 dealers, along with 326 authorised service points, and is beheading its foray into Middle East, CIS countries (Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan) and North Africa.
Dr. Pawan Goenka, MD, Mahindra & Mahindra, answering queries on the acquisition, he mentioned that Hisarlar Makina Sanayi ve Ticaret Anonim Sirketi brought in a lot of expertise in the companies that was lacking for M&M, in the segment and it was currently working on developing a equipment specifically suited for India. He further mentioned, that Erkunt tractors which produced cabin based tractors that are not yet seen in India, and even the ones M&M produces are exported to other countries. Mahindra will look at introducing the cabin-tractors in India.
Speaking to Autocar Professional, on plans to introduce driverless technology in the European market through this acquisition, Dr. Pawan Goenka replied, “This acquisition has no direct bearing on the driverless technology (DTT) that we have developed in India working along with global and Indian consultants. Whether we export the DTT to Turkey is too early to say, and our first target market for this technology is Japan and USA. We will evaluate during the right course of time, if we will introduce DTT in Turkey during the first phase or the second.”
M&M Globally ranks fifth in revenue terms in terms of its agri-equipment sector, while it leads and aces the global rankings in tractor volume terms. The farm equipment segment contributes 20 percent or $3.5 billion (Rs 22,109 crore) to the total $18-19 billion (Rs 113,076-120,023 crore) of the Mahindra Group revenues.