Mahindra Renault, the joint venture between the Mahindra group and French car maker Renault,

RELATED ARTICLES M&M launchs AC version of jeep Thar M&M April sales up 27% M&M gears up to launch XUV500 in Italy, Australia, Chile

has sunk deeper into the red, as its lone car platform the Mahindra Logan struggled to attract customers in the midst of a slew of new car launches by competitors.

With losses mounting, the joint venture partners are infusing fresh capital, say senior company officials.

From a loss of Rs 42.64 crore in the financial year 2007-08, Mahindra Renault saw its loss rise more than ten fold to Rs 490.21 crore. As a result of the spectacular rise in losses, the company saw its reserves and surplus go from a positive figure of Rs 12.08 crore as of end March 2008 to a negative Rs 478.13 crore as of end of March.

Companies with a negative reserves and surplus position are normally referred to the Board of Industrial and Financial Reconstruction (BIFR).

“Both the joint venture partners will infuse fresh equity in the company in the proportion of their shareholding in the venture. We will not allow the company to become a BIFR case,” said Pawan Goenka, president (automotive sector) and member of the group management board of Mahindra & Mahindra.

Goenka said the predominant portion of the loss was on account of an accounting adjustment as regards the fixed assets of the company. “We had a one-time write-off / impairment of assets in the books of account due to the continuing losses of the company. Around Rs 300 crore of assets were fully depreciated in the books of account,” he said.

Mahindra Renault’s falling fortunes are illustrated from its total revenues that have almost halved, from Rs 1,252.48 crore to Rs 741.17 crore in the year ending 2008-09. In terms of unit sales volumes, the company reported a 48 per cent decline in sales during 2008-09, selling just 13,423 units of the Logan sedan. Sales continue to fall in the present financial year year as well with the company selling 1,476 units during the April-June 2009 quarter, as compared to 4,595 units sold during April-June 2008. According to Mahindra Renault’s annual report, the company’s market share in this segment dropped to 5.5 per cent, down from 11.8 per cent in the year-ago period.