M&M's Canada-based associate firm files for winding up; stock drops 3%

Shares of Mahindra and Mahindra (M&M) dropped over 3% in intraday trade on Thursday after the diversified business group informed exchanges that its Canada-based associate firm Resson Aerospace Corporation has filed for a voluntary winding-up. The Mumbai-headquartered firm holds an 11.18% stake in Resson Aerospace, a bioinformatics and data analytics company.

“We would like to inform you that Resson Aerospace Corporation, Canada, which is an associate of the company wherein the company holds an 11.18% stake (on a fully diluted basis) through Class C preferred Shares, had filed for a voluntary winding-up,” M&M says in a BSE filing today.

In May 2018, Mahindra signed a share subscription agreement to acquire up to 10% share capital of Canada's IT firm Resson Aerospace Corporation for up to Canadian dollars 6.63 million paid in cash.

Reacting to the news, Mahindra and Mahindra shares declined as much as 3.3% to hit an intraday low of ₹1,580, while the market capitalisation dipped to ₹1.96 lakh crore. Early today, the index heavyweight opened a tad higher at ₹1,635.05 against the previous closing price of ₹1,634.05 on the BSE.

M&M shares have witnessed a strong rally in the last six months with the largecap stock touching its 52-week high of ₹1,670 on September 18, 2023. The stock surged over 48% from its 52-week low of ₹1,124 hit on March 28, 2023. In the last year, the shares of auto significant stock delivered more than 21% returns, while it added nearly 26% in the calendar year 2023. The counter rose 3% in a month and 2.5% in a week.

In a filing to exchanges, M&M says that Resson Aerospace has ceased to exist and has also ceased to be an associate of the company under the Indian Accounting Standards (IndAS) with effect from September 20, 2023. Resson received a certificate of dissolution from Corporations Canada on September 20, 2023.

“Upon liquidation of Resson, the company is entitled to receive approximately 4.7 million Canadian Dollars (equivalent to ₹28.7 crore) as distribution of proceeds towards Class C preferred shares held by the company.

As of March 31, 2023, the net worth of Resson was at ₹54 crore. The IT firm, which follows the calendar year as its financial year, contributed 0.01% of the consolidated net worth of M&M, excluding non-controlling interest. The revenue from operations of Resson for the year ended March 31, 2023, was nil.

Established in 1945 as an assembly unit, M&M is the flagship company of the Mahindra Group in which promoters hold 19.6% stake. The business of the company is diversified across farm equipment, auto and automotive components, real estate, hospitality, defence and aerospace, technology services, and financial services sectors.

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