DEBUG: PAGE=domain, TITLE=NelsonHall Blog,ID=1469,TEMPLATE=blog
toggle expanded view
  • NelsonHall Blog

    We publish lots of information and analyst insights on our blogs. Here you can find the aggregated posts across all NelsonHall program blogs and much more.

  • Events & Webinars

    Keep up to date regarding some of the many upcoming events that NelsonHall participates in and also runs.

    Take the opportunity to join/attend in order to meet and discover live what makes NelsonHall a leading analyst firm in the industry.


Subscribe to blogs & alerts:

manage email alerts using the form below, in order to be notified via email whenever we publish new content:

Search research content:

Access our analyst expertise:

Only NelsonHall clients who are logged in have access to our analysts and advisors for their expert advice and opinion.

To find out more about how NelsonHall's analysts and sourcing advisors can assist you with your strategy and engagements, please contact our sales department here.

Tech Mahindra Explains its Pininfarina Majority Stake Acquisition

NelsonHall recently had a discussion with the head of the Integrated Engineering Services (IES) unit of Tech Mahindra regarding its 2016 acquisition of Pininfarina (along with parent company Mahindra & Mahindra). Turin-based Pininfarina is an icon in the world of automotive design, having serviced the likes of Ferrari for 80 years. It is a company of relatively limited size (€87m in 2015 revenues and a headcount of 650).

The acquisition gave Pininfarina an enterprise value of €92m (including €50m in net debt). So why did Tech Mahindra wanted to expand into design and styling services? What are the synergies between style and design services and IES? Why did Tech Mahindra pay such a high price? And how will it turn around Pininfarina? From our conversations with Tech Mahindra, we gathered the following.

  1. This acquisition is about gaining further scale in automotive and strengthening relationships with automotive OEMs in Europe. Tech Mahindra had been looking for three years to make an acquisition in the key market of Germany. The acquisition is about being able to cross-sell IES to the client base of Pininfarina
  2. Automotive is a strategic sector for Tech Mahindra: manufacturing is its second largest vertical after telecom and it has 25 automotive clients. It derives one third of its manufacturing sector revenues from IES, with automotive accounting for a third of its IES revenues
  3. Pininfarina is likely to return to profitability: its lack of profitability in the past eight years is partly a reflection of its small series vehicle manufacturing, now discontinued and the resulting spare parts business (predicted to end by 2020). In addition, Tech Mahindra wants to grow Pininfarina by taking it into new geographies, China being a priority, also India and eventually Russia and Brazil. Tech Mahindra will also help drive the client base expansion that Pininfarina had initiated to the train equipment and luxury boats industries (currently involving 100 personnel)
  4. Pininfarina provides more than style and design services. The company already derives ~60% of its service revenues from IES, servicing German clients (30% of service revenue) and, to a lower extent, Italian automotive OEMs (20%)
  5. Pininfarina’s style and design capabilities will remain local and onshore but are a niche area: Tech Mahindra estimates that spending on style and design services account for 15% of spending in services related to new vehicle programs and 5% of existing program refreshes. IES accounts for the remaining 85% and 95% spending (respectively for new and existing programs). Tech Mahindra will maintain local onshore teams but believes there is vast room for expansion for Indian delivery
  6. Within IES, Pininfarina brings in capabilities around vehicle body and power train, as well as interior design. This complements the capabilities of Tech Mahindra to the automotive sector, which include:
  • Vehicle Engineering and Vehicle Electronics
  • Connected Vehicle solutions and services around ADAS, Infotainment, etc.
  • Software engineering, embedded systems including infotainment
  • New IT-based offerings such as IT systems for car sharing schemes, and IoT (e.g. electric cars services, identifying parking spaces available).

Overall, Tech Mahindra was reassuring on the Pininfarina acquisition. Several question marks remain (pricing and structure of the deal with a double governance from Tech Mahindra and Mahindra & Mahindra). Yet, the deal highlights Tech Mahindra’s continued expansion in the key automotive sector for its IES activities, for its design and styling services to engineering capabilities, and a more comprehensive delivery model now expanded to Italy and Germany.

No comments yet.

Post a comment to this article: