The deal involves a combination of equity purchase from REVA's promoters and a fresh infusion of over Rs45 crore into the company
Tractor and sports utility vehicle (SUV) major Mahindra & Mahindra (M&M) today announced that it will acquire 55.2% stake in electric carmaker REVA, marking its entry into the alternative fuel-based passenger vehicle space, reports PTI.
The two companies today signed an agreement, under which M&M will acquire 55.2% stake in REVA Electric Car Company by a combination of equity purchase from REVA's promoters and a fresh infusion of over Rs45 crore into the company, the home-grown auto major said.
Post the buyout, the Bangalore-based company will be renamed as Mahindra REVA Electric Vehicle Co Ltd with M&M's president for the Automotive business Pawan Goenka as its chairman.
REVA's deputy chairman and chief technology officer (CTO) Chetan Maini will play the role of chief of technology and strategy in Mahindra REVA.
"This is a key strategic acquisition for Mahindra in its march towards sustainable mobility. Mahindra and REVA bring together complementary strengths," Goenka said.
With M&M's global distribution network, REVA's vehicles have a potential to significantly gain in market penetration, he added.
Under the agreement, the new board of Mahindra REVA will have five nominees from M&M, two from REVA’s founder the Maini family and one from California-based AEV LLC, REVA's co-founder.
"The electric vehicle (EV) market is poised to grow significantly and we conclude that in order to seize the opportunity, we needed the resources and experience of a major automotive manufacturer," Maini said.
As a result of M&M's investment, Mahindra REVA will be able to "scale, innovate and accelerate" and will be able to deliver better products to more customers in more places, he added.
After they rallied with the herd during the recent run-up in the stock markets, reality has hit stocks
Each time a bull-run occurs, the stock markets take along most of the market constituents on the joyride, regardless of company fundamentals and outlook. During the rally that began in March last year, many such companies found their stocks reaching sky-high prices, despite poor valuations. But now, the markets have taken a U-turn and reality has hit hard.
The Sensex began its downward slide on 7 April 2010 when it closed at a high of 17,970. On 24 May 2010, the Sensex closed at 16,470, down 8%. This bearish phase has taken the wind out of the sails of many stocks that were cruising along just about a month ago.
Among the worst hit in the Moneylife database of 1,334 companies is Syncom Healthcare, which was trading at a price of Rs95 before the markets caught a cold. Now, it finds itself down by 59%, at around Rs39.
Texmo Pipes and Products, which made its public listing on 10th March this year, has also lost its footing. It is now trading at Rs42, down 53% from its price on 7th April. Panoramic Universal and Amrutanjan Health Care have taken a massive beating. While Panoramic has crashed 50%, Amrutanjan has suffered a 48% erosion in market valuation.
Aban Offshore and BAG Films & Media have recorded a 44% and 43% fall, respectively, in their stock prices. Aban Offshore is now trading at Rs701 from its high of Rs1,251. The company is deep in debt and is paying the price of overexpansion of the previous run-up of oil prices in 2008. BAG Films has dropped from Rs26 to Rs15 during this period. The fact that it is controlled by Anuradha Prasad, wife of Rajeev Shukla, a former journalist and a Congress MP, has not prevented it from crashing.
KM Sugar Mills also finds its stock price trading 40% lower at Rs5. Investors are selling sugar stocks because of excess sugar supply. Educomp Solutions, which was flying high at Rs748 just over a month ago and was a ‘must-have’ concept stock for institutional investors, is now trading at Rs485, down a sharp 35%.
Interestingly, among the losers are two software stocks that had witnessed phenomenal growth during the record market rally. Mastek has lost 35% of its market valuation over this period while Crane Software International, which claims to be in high-end software, has suffered a 33% drop.