BII to invest $250 million in Mahindra's new EV company

8 Jul 2022 , 12:18 PM

Mahindra & Mahindra raised Rs1,925 crores (USD 250 million) on Thursday from British International Investment for a new 4 Wheel Passenger Electric Car Co. that will be established by Mahindra & Mahindra Ltd. with a goal of investing over $1 billion in electric vehicle ambition.

Mahindra & Mahindra (M&M) and British International Investment (BII), the UK’s Development Finance Institution and impact investor, signed a legally binding agreement to invest up to Rs1,925 crores each into a newly created fully owned subsidiary of M&M called “EV Co.”

At a value of up to Rs70,070 crores, BII will invest up to Rs1,925 crores in the form of mandatory convertible instruments, giving it a 2.75% to 4.76% stake in the EV Co. It is anticipated that the first wave of BII’s capital investment will be finished by June 2023, subject to the fulfillment of prerequisite requirements, and the balance after the accomplishment of specific milestones in FY24.

Interestingly, Mahindra & Mahindra is raising money in its EV business at roughly a comparable valuation as the manufacturer of Nexon and Harrier, while behind Tata Motors in the race for electric vehicle market share. TPG spent Rs7500 crore for Rs70000 crore or 11—15% of the value of Tata Motors.

The EV Co. will concentrate on electric passenger cars with four wheels (4W). Mahindra & Mahindra announced to the Bombay Stock Exchange late Thursday night that the total capital infusion for the EV Co. is anticipated to be roughly Rs8,000 crores / USD 1 billion between FY 24 and FY 27 for the projected product portfolio.

The commitment made by BII that at least 30% of its overall investments will be in climate financing is supported by the investment made in the new EV company in partnership with M&M. M&M and BII will collaborate to find more like-minded investors for the EV Co. in order to gradually meet the finance requirement.

The investment from BII is intended to hasten the availability and uptake of electric vehicles in India and other regions that M&M serves. The EV Co. will heavily leverage M&M’s ecosystem of suppliers, dealers, and financiers as well as its larger manufacturing skills, product development, and design divisions.

The money will be used largely to develop and market a line of premium electric SUVs equipped with cutting-edge technologies.
A recent survey by Roland Berger, a renowned international automotive consulting firm, found that Indian customers are twice as likely to consider buying an EV than their counterparts in the UK and the US.

Mahindra receives legal counsel from Khaitan & Co. BII has legal counsel from Cleary Gottlieb and Cyril Amarchand Mangaldas for the deal.