Mahindra & Mahindra and JSW Group are reportedly in talks to acquire a stake in Skoda Auto Volkswagen India.

What Happened: If a deal is reached, one of these Indian conglomerates could secure a 15-20% stake, with the option to increase it over time, Moneycontrol reported, citing sources.

Given that Skoda Auto Volkswagen India reported a profit of ₹309 crore, its highest in five years, the deal could reportedly value the company at about 20-24 times the one-year forward price-to-earnings ratio.

This potential sale is part of Skoda Volkswagen Group’s strategy to leverage local partnerships. Klaus Zellmer, global CEO of Skoda Auto, had recently said the group is in talks with an Indian manufacturing partner to gain access to engineering, sales, and procurement expertise.

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Rough Ride: Skoda Volkswagen has struggled with market share growth and local manufacturing. Aligning with Mahindra or JSW could address these issues, potentially increasing profitability and sustainability.

Currently, Skoda Volkswagen holds about a 2% market share in India, with monthly vehicle sales of around 2,500 units. A local partnership could also help Skoda manufacture electric vehicles.

For Mahindra, partnering with Skoda offers access to German technology and an entry into the sedan market, while expanding its local manufacturing capabilities.

For JSW, which already collaborates with China’s MG Motor, a joint venture with Skoda could operate alongside its existing ventures. JSW has focused strongly on electric vehicles in recent times while Skoda mostly manufactures fossil fuel-powered vehicles.

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