Mahindra and Mahindra

Cost reduction at Mahindra & Mahindra’s auto parts business, Systech over the past one year is expected to reduce Systech’s breakeven level and help it to take advantage of any rebound in European commercial vehicle production. Systech’s management indicates signs of a rebound in order intake and with production levels increasing by 20 per cent from current levels. Systech has cut its workforce by more than a third, leading to a 45 per cent reduction in personnel expenses. Systech’s domestic operations are also seeing a strong rebound with current production levels twice as much as those of the March quarter.

Besides domestic volumes, European markets are expected to show sequential improvements within this month. Systech should be a key beneficiary of the growing trend of component sourcing from lower-cost countries, given its existing relationships with global OEMs. Systech management has set a target of 80-90 million in Ebidta, with 60 million coming from Europe. Separately, advanced talks are on with a private equity investor and a strategic investor, both of which are interested in taking a stake at Systech.