M&M to raise up to $1.3 bn for EV unit

Published On 22 Mar 2023 11:20 AM

Mahindra & Mahindra Ltd is in advanced talks with global investors to raise $1-1.3 billion by selling shares in its electric vehicles (EV) unit, people familiar with the development said, adding the move is aimed at accelerating the expansion plans of its newly formed subsidiary, EV Co.

Carmakers are locked in a price war as they battle for dominance in India’s electric sport utility vehicle market.

Mahindra is likely to raise capital in multiple tranches over the next two fiscal years, primarily through stake sales in the EV subsidiary, which is currently valued at over $9.1 billion, the people said, requesting anonymity.

Mahindra is preparing for a future dominated by sustainable transportation by establishing a new EV factory near Pune and developing platforms for its upcoming electric sport utility vehicles (SUVs). The conglomerate has estimated an investment requirement of at least ₹10,000 crore for its EV business over the next 2-3 years.

In July, Mahindra and British International Investment (BII), the UK’s development finance institution, signed a binding agreement to invest as much as $250 million each into Mahindra’s EV subsidiary.

Responding to a Mint query on the fundraising plan, Rajesh Jejurikar, executive director and chief executive of (the auto and farm sector) of M&M, said, “We are open to raising funds for our electric SUV business from like-minded investors, who espouse similar values and share our vision of bringing authentic and world-class vehicles to our consumers globally."

“We will bring in external investment only if we find like-minded investors. We have not engaged any investment bankers at this stage," Jejurikar said.

The two people cited earlier said that the company may raise as much as $800 million to $1 billion in the first tranche of fundraising as early as the first half of FY2024.

“As you are aware, we already have marquee investors, including British International Investment (BII), and have announced investments of ₹10,000 crores for EVs in Maharashtra. We are progressing very well on our stated plans, which include launching five new e-SUVs under the iconic brand - XUV ...and the all-new electric-only brand called ‘BE," Jejurikar said. BII will not participate in the fresh fundraise rounds, he said.

“First of these e-SUVs will be launched towards the end of 2024. The Born EVs will be based on our in-house developed state-of-the-art INGLO EV Platform. We have also recently launched our first electric SUV—XUV400, which registered 15,000 bookings in 13 days, becoming the fastest booked electric SUV in India", Jejurikar said.

The funds being planned to be raised will likely be deployed into the EV business over the next three to five years, according to the two people cited above.

“For raising the capital, Mahindra group has engaged in discussions with large global private equity firms, sovereign funds, ESG-focused funds and entities which own and allocate funds on green and renewable energy businesses across the globe," said one of the two people, adding the group prefers long-term investors who can assist in shaping the conglomerate’s EV business and compete with Tata Motors.

 

 

Tata Motors, which currently has an over 85% share of the country’s EV space, is also scouting for investors for its passenger EV business, at a valuation of over $10 billion.

The carmakers are locked in a price war as they battle for dominance in India’s electric sport utility vehicle (e-SUV) market.

Mahindra’s recent launch of the electric XUV400 will mean more competition for Tata Motors. Tata Motors bought a manufacturing plant from exiting US-based automaker Ford Motor in Gujarat.

As companies become more climate-friendly, EVs are rapidly emerging as a promising investment space for large investors. Despite accounting for only 1% of India’s total passenger vehicle sales, the government aims to raise the figure to 30% by 2030. Last year, US-based private equity firm TPG invested in Tata Motors’ EV division, valuing the company at $9 billion. Earlier last year, Mahindra signed a pact with Germany’s Volkswagen Group to procure electric parts for its EV business.