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M&M goes for value unlocking through equity raise in electric–passenger vehicle arm

ICICIdirect Research 19 Jul 2022 DISCLAIMER

What's Buzzing

Mahindra & Mahindra (M&M) has announced formation of a new subsidiary for undertaking business activity in the domain of electric passenger vehicle segment. It also announced fresh investment by itself and British International Investments (BII, an UK government entity) to the turn of Rs 1,925 crore each (spread over two tranches). Investment by BII would be in form on compulsory convertible preference shares.


BII will hold 2.75-4.76% stake in the new entity post its investment with M&M retaining the rest, thereby valuing new EV entity at ~Rs 40,400-70,070 crore depending upon the stake held by BII. The total capital requirement for the EV entity is envisaged to be ~Rs 8,000 crore (US$1 billion) in FY24-27 for the planned product portfolio.

Our Perspective

We believe the present equity raise for electric PV arm is a step in the right direction and would enable the new entity to focus specifically on EVs and be self-sustainable in its capex needs. It is envisaged to significantly leverage the broader manufacturing capabilities along with the ecosystem of suppliers, dealers and financiers of M&M. The funds raised in the new EV company will be utilised primarily to create and market a world-class electric SUV portfolio with advanced technologies. M&M expects 20-30% of its SUVs being electric by 2027. It expects to reach an annual run-rate of ~2 lakh electric PV sales volume by FY27, aided by four newly developed BEVs’ (born electric) & XUV 400. Key monitorables, going forward, would be the event on August 15,2022 wherein M&M would be sharing its vision that includes product, technology and platform strategy on the born electric domain, followed by a reveal of the electric XUV 400 in September 2022. The present equity raise in the EV arm has a potential to add value for shareholders of M&M in the range of Rs 225-400/share in our opinion.

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