Mahindra & Mahindra Ltd’s share price up, considers making a 685-million-dollar investment to build a new car factory in India

The largest sport-utility vehicle manufacturer by sales in India – Mahindra & Mahindra Ltd announced that it plans to invest 40 billion rupees (685 million dollars) to build a new plant. According to the companys statement, the new factory would have a production capacity of 400 000 vehicles on an annual basis. It also became clear that Mahindra & Mahindra intends to make an investment in an expansion of the same size of its already existing factory in Pune.

The president of the automotive unit of Mahindra – Mr. Pawan Goenka said in a statement, which was cited by the Financial Times: “The discussions were put on hold because of the elections, but we are now hoping to close in quickly on a decision in the next few weeks and announce it. We know we need to invest now to get capacity ready for two years’ time.” Mr. Goenka reported that the company took part in talks with several state governments and discussed an eventual location of the new factory.

Mahindra & Mahindra Ltd is the only one of the companies that are seeking to consolidate their positions on the automobile market in India. On the other hand, the market itself has been struggling to emerge from the crisis and strengthen in order to become the third-biggest market in the world, after the U.S. and China over the next six years.

Despite that the customer demand has declined over the last few years, the automobile companies keep their faith that the large middle class in the country and especially its increasing incomes would be able to give a push to the development of this business segment.

Now the building of the new Indian plant is considered a move that emphasizes on the trend of industrial spending revival. As reported by the Wall Street Journal, Mr. Geonka commented: “If the overall economic situation improves, interest rates fall and stalled infrastructure and mining projects start opening up. I dont see any reason why the Indian automobile industry cant grow by 8% to 10% this fiscal year.”

Mahindra and Mahindra Ltd was 1.91% up to close at 1 159.3 Indian rupee per share yesterday, marking a one-year change of +19.88%. According to the information published on the Financial Times, the 47 analysts offering 12-month price targets for Mahindra and Mahindra Ltd have a median target of 1,100, with a high estimate of 1,350 and a low estimate of 865.00. The median estimate represents a 0.04% increase from the last price of 1,099.6.