Mitsubishi Heavy Industries Ltd (MHI) of Tokyo, and Mahindra & Mahindra Ltd. (M&M) have entered into a strategic partnership today in the agricultural machinery field.

Under the definitive agreement signed today, Mahindra will invest US$ 25 million (approx Rs 160 crore) for acquiring 33.33% voting stake in MHI subsidiary, Mitsubishi Agricultural Machinery Co. Ltd. (MAM) through fresh issue of common shares and Class A (non-voting) shares of MAM.

The deal is expected to close by October 1, 2015, with the new funding to be used to increase MAM’s capital base.

The announcement was made in Mumbai by Dr Pawan Goenka, Executive Director, Mahindra & Mahindra Ltd and Harish Chavan, COO of Mahindra Farming. The agreement was signed by Kazuaki Kimura, President and CEO, MHI Machinery, Equipment & Infrastructure, Katsumi Tottori, President, MAM and Rajesh Jejurikar, President & Chief Executive (Farm Equipment & Two Wheeler), Mahindra & Mahindra Ltd.

Speaking on the alliance, Pawan Goenka mentioned, “We have had a decade long association with Mitsubishi in USA where their products have played a significant role in Mahindra USA’s success. We are now excited about our participation through an equity route in Mitsubishi Agri-Machinery, Japan. With this alliance we will focus on making aggressive investments in marketing and product development and becoming a significant player in the global agri-machinery industry.”

Mitsubishi Agricultural Machinery is a full range agri-machinery company producing and selling tractors, combine harvesters, rice transplanters, high horsepower crawler tractors and other agri-machinery. It had revenues of approximately US$ 408 million in 2014-15. It is Japan’s no.4 agricultural machinery manufacturer.

Dr Goenka further gave details about the agreement, “The primary purpose of this acquisition is not the Indian market, it is the global market, which would create more opportunities for us in China, USA and other Asean countries. However, in India, we would be focusing on paddy farming, which would include rice transplanters. Mitsubishi has a good record in rice transplanters, tractors and other agricultural equipments as well.

“Our Prime Minister, Narendra Modi, has quoted that ‘Act East rather than Look East’. Mahindra is now spread in China, we are strong in Korea and also in Japan. So we are just following the directives of our PM by Acting East," Dr Goenka added.

The new partnership will help both companies to jointly develop products to address global opportunities in the tractor and agri-machinery space. In addition, the partnership will enable MAM and Mahindra to improve cost competitiveness though joint procurement and optimize the supply chain.

Commenting on the partnership, Kazuaki Kimura, President and CEO, MHI Machinery, Equipment & Infrastructure said, “It is an honor for us at Mitsubishi to welcome Mahindra, who are the largest tractor manufacturer globally by volumes as a partner to Mitsubishi Agricultural Machinery. Today’s signing will only build upon the wonderful relationship which both companies have shared for over a decade. I am sure that the commitment and expertise of both of the companies will open a new horizon to the business globally.”

MAM has been supplying OEM tractors to Mahindra USA (subsidiary of M&M in the US) as well as providing technical license to Mahindra for walk-behind rice planters and new tractor in India.

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