Kinetic Motors, in which the $1.1-billion SYM Motors, a Taiwanese two-wheeler major, holds 11.1

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per cent stake, is on the block.

Strategic investors and private equity funds from India and overseas have evinced interest in picking up the promoters' 54.83 per cent stake, said people familiar with the development.

Leading the race for the buyout of the ailing two-wheeler manufacturer is Sanyang Industry Company, popularly known as SYM. It already has a comprehensive technical collaboration and trademark license agreement with Kinetic for the co-branded Kinetic SYM Flyte range of scooters, which have revived Kinetic's flagging sales, say people close to the Firodias, promoters of the Kinetic group. Bollywood belle Bipasha Basu is the brand ambassador for this range of gearless scooters.

It is learnt that the promoters of the company expect a valuation of between Rs 200-300 crore keeping in view the value of the Kinetic brand in India, the plant and machinery and prime parcels of real estate in Pune in western India. In a statement to the Bombay Stock Exchange (BSE), Kinetic Motors said, "Company is exploring various alternatives to raise funds for its two wheeler business. But, no definitive agreement has been entered with any investor or Mahindra & Mahindra Ltd."

M&M, the $6-billion group, is understood to be among the leading Indian strategic investors in the fray for the promoters' pie that is on the block. The Firodias are learnt, have now decided to focus their energies on their core auto components business in Kinetic Engineering. Recently, Kinetic Engineering raised almost Rs 100 crore from investors such as AIG, an issue of convertible bonds overseas and a preferential issue to promoters.

Kinetic Engineering holds a 48.21 per cent stake in Kinetic Motors as per the latest shareholding pattern available - as of March-end. A spokesperson for M&M, when contacted by the Financial Chronicle, said, “Mahindra & Mahindra Ltd has clarified to the BSE that it examines and pursues various opportunities in different areas, from time to time on a continuing basis and it is not practical to comment upon every opportunity at every stage.” PE funds such as ICICI Venture and Actis, etc are understood to have been approached for the deal, but ICICI Venture is now out of the race, say those familiar with the development.

"Strategic investors are best suited for the company as the critical factor is the availability of a distribution network to sell the two wheelers. Reducing overheads and costs is the only way to ensure the business returns to profitability," say investment bankers familiar with the Kinetic group.

M&M is understood to be interested in selling two-wheelers to its rural clients in order to gain a larger share of their wallet. The company is among the top three tractor manufacturers in the world and its jeeps are widely used for transporting goods and passengers along the countryside. Two-wheelers find a ready market as gifts during festive occasions and marriages especially in non-urban locations. M&M therefore believes it can cross sell the Kinetic two-wheelers through its established dealer network generating incremental sales at low marginal cost, say experts.

Two-wheeler sales in India have been slowing down in a big way, thanks to lesser availability of loans to buy the vehicles on an equated monthly installment basis. This has put pressure on leading two wheeler manufacturers such as Bajaj Auto that has almost stopped manufacturing scooters and also motorcycle leader Hero Honda.

yassirapitalwalla@mydigitalfc.com