M&M’s expanding presence in EVs takes the stock to a new high
Premium- Based on BII’s investment of $250 million, EVCo’s valuation is around $5.9-9.1 billion, according to analysts at Motilal Oswal Financial Services.
Shares of Mahindra & Mahindra Ltd (M&M) rose by 5.4% in the morning trade on Friday on NSE taking the stock to a new 52-week high of Rs1194.90 apiece. This comes on the back of the company’s announcement of executing an agreement with British International Investment (BII), UK’s development finance institution, to invest up to Rs1,925 crore or $250 million each into a wholly owned subsidiary of M&M, EVCo, which will be newly incorporated.
Post the capital infusion in EVCo, BII would hold a 2.75%-4.76% stake in the subsidiary.
Based on BII’s investment of $250 million, EVCo’s valuation is around $5.9-9.1 billion, according to analysts at Motilal Oswal Financial Services. “It implies a gross value for M&M shareholders at Rs360-569/share," said Motilal Oswal analysts in a report on 7 July.
Note that this transaction does not include electric vehicle segments such as three-wheelers and light commercial vehicles. EVCo would focus on electric passenger vehicles in the four-wheeler (4W) segment. The assets of M&M’s 4W passenger vehicle electric business would be transferred to EVCo.
Over FY24-27, the total capital infusion is expected to be around Rs8000 crore or $1 billion. The utilization of the funds will be directed towards creating an electric SUV portfolio with advanced technologies, said the company.
As such, M&M expects the proportion of electric sports utility vehicles (SUV) in its SUV portfolio to reach 20%-30% by 2027. It is likely to reveal the electric XUV 400 in September.
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“Net value accretion to M&M shareholders will depend on its ability to leverage the electrification trend and expand its market share in the SUV segment. Currently, we are not valuing the EV business separately as it doesn’t have any material presence in the electric PV segment," added the Motilal Oswal report.