Making an entry into the aerospace business, auto major Mahindra & Mahindra (M&M) on Tuesday said it had picked up 75.1 per cent stake each in two Australian aerospace firms for Rs. 175-crore and planned to make aircraft and allied components to service the global market.

In a joint acquisition with Kotak Private Equity, Mahindra Aerospace Pvt. Ltd. (a unit of M&M) bought majority stake in component-maker Aerostaff Australia and general aircraft manufacturer Gippsland Aeronautics.

“Over five-years, we believe that we could build as many as 475 aircraft in the 2-20-seater range and expect a peak revenue of about Rs. 650-crore,” Mahindra Systech Sector and Member of the Group Management Board, M&M, Hemant Luthra told reporters here.

The company is setting up a plant in Bangalore to complement these acquisitions and provide dual sharing and benefits to customers.

“We now have an opportunity to play in the defence offsets space. We can provide offset components in the commercial aircraft business and we can provide components for the general aviation business,” Mr. Luthra said.

The 2-20-seater market (turbo prop market) is among the fastest growing segments in general aviation. Turbo props provide operational adaptability in environments with relatively poor infrastructure and can serve the market at the lowest cost per passenger seat kilometre.

Mahindra will retain the existing managements of Gippsland Aeronautics and Aerostaff Australia, securing the services of the founders who developed this technology. The two Victoria-based companies, on the other hand, will hold 20-25 per cent equity in MAPL.

“The deal has been structured in such a manner that there is no large amount of payout upfront. These companies, which are selling a majority of their stakes to us, will have stock options in MAPL,” Mr. Luthra said.

Aerostaff Australia and Gippsland Aeronautics are relatively smaller companies with a total turnover of about Rs. 80-100-crore with orders to deliver 18 aircraft by June.

Mr. Luthra said the company would initially manufacture sheet metal aero-structures and over a period would invest more to make components, sub-assemblies and eventually aircraft in India and Australia.

More In: Companies | Business