Thursday, February 23, 2023
By Kamal Swami
M & M To Transfer Its Certain Assets To MEAL
Indian automaker Mahindra & Mahindra (M&M) has entered into an agreement to transfer certain assets of its subsidiary, Mahindra Electric Automobile Limited (MEAL), to its parent company. The remaining assets will be transferred by June 30, 2026. The transfer is part of M&M's efforts to streamline its electric vehicle (EV) business and strengthen its position in the growing EV market in India.
In July 2022, British International Investment (BII), an investment partner to businesses, announced its plans to invest INR 1,925 crore (about $260 million) in a new four-wheeler passenger EV company to be set up by M&M. The investment will take place in two or more tranches. Up to INR 1,200 crore will be invested once certain conditions are met by March 31, 2024, and the remaining INR 725 crore will be invested based on milestones achieved by July 1, 2024. The investment is in the form of compulsory convertible instruments at a valuation of up to INR 70,070 crore (about $9.5 billion), resulting in a 2.75-4.76 per cent ownership of BII in the EV company.
In a filing filed by M&M it is said, “The total Investment of the company in the said assets classified as capital work in progress as per the audited Financial Statements for the year ended 31st March, 2022 is approximately Rs 230 crore, which constitutes 0.6 per cent of the total net worth of the Company as of 31st March, 2022. Considering that the identified assets are still capital work in progress, the revenue generated by such assets for the financial year ended 31st March, 2022 is Nil".
The new EV company will be a wholly-owned subsidiary of M&M, and will focus on four-wheeler electric vehicles. The total capital infusion for the company is expected to be around INR 8,000 crore (about $1.1 billion) between fiscal years 2024 and 2027. The companies plan to bring in like-minded investors in the EV company to match the funding requirement in a phased manner. The investment by BII is in line with the Indian government's aim to accelerate the availability and adoption of electric vehicles in the country.
The new EV company, which has been named EVCo, will leverage M&M's manufacturing capabilities, product development, design organizations, and ecosystem of suppliers, dealers, and financiers to create a world-class electric SUV portfolio with advanced technologies. The funds will be used to develop a range of electric vehicles, including SUVs, with a focus on affordability, performance, and innovation. EVCo aims to be a leader in the Indian EV market, which is expected to grow rapidly in the coming years.
India is one of the world's largest automobile markets, and the country is pushing for greater adoption of EVs to reduce its dependence on fossil fuels and tackle air pollution. The Indian government has set a target of having 30 per cent of all vehicles sold in the country be electric by 2030. The government has also implemented a number of incentives and subsidies to encourage the adoption of EVs, including tax breaks, subsidies for EV buyers, and investments in charging infrastructure.
M&M has been a pioneer in the Indian EV market, and has been working on developing and launching electric vehicles for several years. The company has a strong presence in the Indian automotive market, and has a wide range of products, including SUVs, pickups, and commercial vehicles. M&M is well-positioned to take advantage of the growing EV market in India, and the new investment from BII will help the company accelerate its efforts to develop and launch a range of affordable, high-performance electric vehicles.
