Why Mahindra bought the car designing company Pininfarina
August 13th, 2023
The design of a car has been very crucial when it comes to the car buying procedure. In fact, the stands tall on top of every aspect of a car, when the reason for buying is a ‘want’. When the reason is ‘need’, design will not bother the buyer's perspective towards a car. And 85% of automobiles are bought based on the ‘want’ reason. So ultimately, Design is the most important part of an automobile. Well, we think that is what Tech Mahindra saw in 2015 before buying the famous Italian Car Designing company, Pininfarina.
So, what do you think is this the only reason why one of the Indian IT giants bought the Creative Italian, let’s study this interesting case!
We shall proceed by first knowing about the Product ( Pininfarina ) and the Buyer ( Mahindra ).
About Tech Mahindra
Tech Mahindra is a subsidiary of the Indian Automotive giant - Mahindra & Mahindra. It was founded back in 1986 by the Mahindra Group under a joint venture with British Telecom. Primarily the deal stated the ownership ratio of 70:30, where 70% shares will be held by Mahindra Group and the rest 30% of shares will be owned by British Telecom.
Though till 2012, Tech Mahindra ownership was completely handed over to the Mahindra Group, as British Telecom gradually sold its 30% shares. The Chronological order of the share’s selling -
In December 2010, 5.5% of shares worth ₹451 Cr → In August 2012, 14.1% shares worth ₹1,395 Cr → In December 2012, 9.1% shares worth ₹1,011.4 Cr.
The first transaction of 5.5% shares were made to the Mahindra Group itself and rest were made to Institutional Investors. Thus, this concludes that at the end of 2012 Mahindra Group was the owner of the firm Tech Mahindra with the most amount of shares, precisely 75.5% shares in the hands of the Mahindra Group.
About Pininfarina
Battista ‘Pinin’ Farina founded the company Pininfarina after he walked out of his brother’s coachbuilding business - Stabilimenti Farina. In 1928, Battista Farina commenced the business of Pininfarina by hiring 18 employees and building 50 automobile bodies, the commencement of the business was possible by the fundings put forward by Battista’s wife’s family and Vincenzo Lancia ( Race driver ). On 22 May, 1930 Battista filed papers to convert his business into a Corporation.
Till the 1930’s, Pininfarina’s work got decently popular which attracted a lot of car makers towards Farina’s business. Therefore, the business got orders from the brands like Lancia, Alfa Romeo, Isotta Fraschini, Hispano-suiza, Fiat, Cadillac and Rolls Royce. But, if you think that this was their jackpot, then no! Their biggest score was yet to be made.
In 1951, due to a meeting between Battista Farina and Enzo Ferrari, the biggest score was made. Pininfarina then received the mega job of handling the Designing, Engineering, Technological, Construction and every other process involved in building a Ferrari. This deal really made both the families come in a close relationship. But unfortunately, after 61 years, this relationship was broken, as then Ferrari decided to fire Pininfarina from this whole process and hire Centro Stile Ferrari as their new designing head.
The last Ferrari car which was designed by Pininfarina was the Ferrari F12 Berlinetta.
Well, this was a short summary of both - the Product and the Buyer. Now let’s know the details about this deal made between both the companies.
Details about this Deal
From 2005 to 2014, Pininfarina was facing heavy losses due to a downfall in their business. The losses were rising at a pace every single year and till the year 2014, the accumulated debt was $57 million on the firm. Which then brought a simple solution in front of them which was selling themselves.
In 2015, Tech Mahindra became the company to acquire the Italian car designing company, Pininfarina. The whole deal was sealed at $157 million, which, when converted to INR becomes ₹1,240 Cr. But, this deal was made under a joint between Tech Mahindra and Mahindra & Mahindra ( who was already an established Indian Automotive player back then ). The deal stated an acquisition of 76.06% of Pininfarina, where in, Tech Mahindra owned 60% shares of the 76.06% of ownership and the rest 40% of the 76.06% of ownership was owned by Mahindra & Mahindra.
Post the deal, Mr. Paolo Pininfarina ( Battista Farina’s Grandson’s brother ) was hired as the continuing CEO of the Pininfarina firm.
So, all this information tells us enough history about the Pininfarina brand, Tech Mahindra’s reason for acquisition and the details of the Deal. So, now the real question which stands in front of us is, Why did Mahindra buy the Italian car designing company Pininfarina?
Well, according to me, there is a reason for each and every ‘happening’ in this world, hence, there is also a reason behind Mahindra buying Pininfarina and these four points will explain to you the characteristics of this transaction.
The Long and Rich history of the brand
Based on the information, Pininfarina is about to be a 100 year old brand. And in these 93 years of working, the firm grabbed a lot of big achievements like orders from Ferrari, Rolls Royce, Mesarti, Cadillac, etc. Though these brands weren’t as big as they are today, still we should admire the fact that Pininfarina grabbed them in a very short period of their business career. And this definitely helps Tech Mahindra and the rest of the Mahindra group gain respect and be a beneficiary of the rich experience the firm, Pininfarina carries with it.
The history of the brand carries a royalness, thanks to what it has achieved till now. Mahindra has surely looked forward to using it and growing themselves in the market.
The 'Legendary' brand status
As we talked about the royal nature of the brand, this nature will help Mahindra to add value in their subsidiary firm Tech Mahindra. It will bring in a growth in their portfolio and enhance the positivity and betterment of it.
The Legendary quotient in the Pininfarina firm, as said, brings in a lot of trust and experience with it. Mahindra till now has and further will surely use it to get themselves upmarket than the competition. It opens doors for a lot of scope for Mahindra to not only grow financially, but also psychologically, as it will help Mahindra to understand and learn the historical business insights which the firm, Pininfarina has with it for years now.
In fact, the chairman of the Mahindra Group - Anand Mahindra himself stated to the press that, “( PininFarina’s ) legendary brand status” ( will allow Mahindra ) “powerful access to relationships the iconic designer has nurtured with the best in the world over its 85-year history.”
The joint venture was purposely structured in two aspects - Engineering and Automotive
The joint venture between the parent company and its subsidiary was in fact made purposely. As this will not only help Mahindra to grow and learn in the Automotive sector, but also will help Mahindra to nurture its long, old and experienced engineering technology.
The Automotive sector of Mahindra will get matured lessons from what Pininfarina has learnt throughout its 93 year old history. This deep and sure footed amount of experience will get the brand known to make various important business decisions in the market. Though the technology they used at their time is now old, but, as said, it has matured and has minimal flaws in it. So, using it to improve Mahindra’s primary or upcoming technology will help them reduce the use of overall Manpower.
Talking about the Engineering sector , Mahindra is a growing automotive brand and so is Tech Mahindra. Engineering aspects of Pininfarina involve a lot of variance in their processes and techniques of executing one project. Let’s say the construction of a car, it could become easy and would have a strong base as the roots itself are healthy and known. So will the advancements in the Information Technology services provided by Tech Mahindra.Will enhance the presence of the Italian company Pininfarina, as Tech Mahindra holds a strong Global stand
Tech Mahindra is a $6 billion dollar valued firm and holds a majorly respected tag in India’s top five Information Technology firms. The stance which Tech Mahindra has today in the global business world will help in the enhancement of the presence of the Italian company, Pininfarina.
Though Pininfarina is almost a century old firm, still we should not forget that it was seeing a downfall ahead of its acquisition made by Tech Mahindra. And to repair the current image of the brand and also its stand in the global market, the technological advancements which Mahindra has achieved till now will surely bring in a strong ray of hope towards Pininfarina.