The Indian car company Mahindra & Mahindra is on the verge of merging its two engine units into one in a bid to enhance revenue. The unlisted Powerol and the liste Swaraj are the two subsidiaries of M&M engaged in manufacturing engines. The new enterprise will be headed by the MD of Swaraj Motors and the revenue is expected to be Rs1000 crore per year. Mahindra has a share of 35% in Swaraj engines and its style of business is fragmenting into various companies with diverse fields. This merger too will be a boon to Mahindra and the net result will see the further growth of tractor business overtaking the US concern John Deere. Mahindra gets engines from Powerol while Swaraj delivers for the brand status, in spite of both the companies having different business-real estate, finance, leisure and software- in different name styles.
There are two options arriving out of this merger- M&M may merge Powerol with Swaraj to stake higher claims in terms of profit , or Swaraj may just supply its engines to Mahindra and pay the dividends to the shareholders including Kirloskar Oil Engines(owning 17% in Swaraj).the outcome of the discussion will be on the basis of profit available accounting the sales tax. As of now no word from Kirloskar Oil Engines has come. In all Swaraj Engines procured a sale of Rs208 crore by March 2009 with the net profit of Rs21.2 crore. With this the share price of Swaraj Engines saw the upward index of 12% with an aggregate 18% in September. The stock price has been Rs351.10 on the last day of September 2009.