M&M Raises $250 Million for New Electric Vehicle Subsidiary
British International Investment (BII) in the UK will invest up to $250 million in a new subsidiary of Mahindra and Mahindra (M&M) that would specialise in four-wheel passenger electric vehicles.
Mahindra and Mahindra (M&M) shares rose more than 5% in early trade on Friday, extending gains for the third consecutive session, as the homegrown car major collected Rs. 1,925 crore ($250 million) for its proposed new subsidiary. The index heavyweight has risen 6.5 per cent in the last three days and about 10% in the last month, outpacing the BSE auto sector and the S&P BSE Sensex.
In a late-night filing on Thursday, M&M said that the United Kingdom's development financing agency, British International Investment (BII), had agreed to invest Rs. 1,925 crore (or $250 million) in a new M&M company focused on four-wheel passenger electric vehicles. The automaker has raised the money at a valuation of up to 70,070 crore (or $9.1 billion) to invest more than $1 billion in the EV sector. Both companies have agreed to invest in the new organisation known as "EV Co."
According to the statement, BII will invest up to Rs. 1,925 crore in compulsory convertible instruments, resulting in a 2.75 per cent to 4.76 per cent stake in the EV Co.
The Mumbai-based company also announced that its board of directors approved the formation of a wholly-owned subsidiary, EV Co, to handle the company's four-wheel passenger electric vehicle business.
“The company and British International Investment Plc (‘BII’) have today entered into a securities subscription agreement and shareholders’ agreement, whereby the company and BII have agreed to invest up to ₹1,925 crore each in EV Co, in two tranches subject to certain terms and conditions,” M&M says.
The first tranche of investment by the company and BII would be worth up to Rs. 1,200 crore each. The companies' second tranche of investment would be up to 725 crore each, subject to the achievement of specific goals to be agreed upon by the company, EV Co, and BII.
EV Co will use the capital to accelerate the growth of its four-wheel passenger electric vehicle business, as well as to construct and market a world-class Electric SUV portfolio with sophisticated technology.
According to the company, the assets of M&M's four-wheel passenger electric vehicle business will be transferred to a new EV entity that will be an integral component of the company's entire operation. As an investor, BII will also assist the company in capitalising on its emphasis and experience in ESG and climate change.
BII (previously CDC Group plc) is the UK government's development financing organisation, investing between £1.5 and £2 billion each year to assist the government's clean green drive and to promote productive, sustainable, and inclusive economies. BII, based in London, plans to invest at least 30% of its total new commitments in climate finance over the next five years.
Source: Fortune India