M&M, British Int’l Investment to build portfolio of five e-SUVs by 2027



Mahindra and Mahindra (M&M) and EV Co, backed by British International Investment (BII), will jointly develop a portfolio of five electric SUVs through the former’s wholly owned subsidiary, in which the two companies will invest approximately Rs 10,000 crore over the next four years, their leaders announced on Friday.

The deal will help M&M reduce its planned automotive investment in FY22-26 to Rs 9,975 crore from Rs 11,900 crore.

BII and M&M have entered into a binding agreement to co-invest Rs 3,850 crore (Rs 1,925 crore each) at a valuation of Rs 70,070 crore ($9.1 billion) in the yet to be named, M&M said in a notification to Exchanges Thursday evening. The Indian company would invest Rs 1,925 crore in two tranches – Rs 1,200 crore by June 2023 and Rs 725 crore on certain predetermined milestones of the business.

The deal marks one of the major investments in the e-mobility space. Mahindra is the latest among the legacy auto companies to tap into the green fund. The company pulled a leaf from the Tata Motors playbook. In October 2021, Tata Group’s flagship sought a $1 billion (then Rs 7,500 crore) investment from TPG Rise Climate for its EV branch, Tata Passenger Electric Mobility (TPEM), at a valuation of 9.1 billions of dollars.

“We are very confident that we will take leadership in this (EV) space,” Anish Shah, MD and CEO, Mahindra and Mahindra, said at an investor-analyst meeting on Friday. “It’s not just an investment. It’s also the starting point.”

Mahindra would work jointly with BII to bring other investors into the electric vehicle company to meet funding needs in a phased manner, Shah said.

The allegedly high valuation of an entity that is currently on paper – with no products and only investments in the BII – did not thrill the street. M&M stock opened 5% higher at Rs 1,180.25 but gave up gains at the end of the trading session, closing at Rs 1,132.65, down 0.06%. “They (M&M) get a small amount of $250 million and extrapolate that to come up with a valuation of $9.1 billion,” a brokerage analyst said.

This is in contrast to Tata Motors.

When Tata Motors entered into the deal with TPG, it had products and a 75% share of the electric passenger vehicle market. “Therefore, investors view the whole (M&M-BII) deal with skepticism…Perhaps after the brand reveal on August 15, investors will have more confidence,” added the analyst.

The aforementioned e-SUV portfolio will include the electrified version of the XUV3OO (to be called XUV4OO) – which will be unveiled in September 2022 and available for sale in January 2023 – and four “born” or purely electric SUV platforms.

By 2026-27, M&M expects its e-SUV share to represent 20-30% of its overall SUV portfolio. This would translate to a volume of 200,000 units per year, said Rajesh Jejurikar, executive director, agricultural and automotive sectors, Mahindra and Mahindra.

Industry body Society of Indian Automobile Manufacturers (Siam) expects M&Ms’ share as a percentage of the total passenger vehicle market to increase to 54% from 50% in 2022, Jejurikar said in his presentation.

The company will unveil its ‘born electric’ strategy at its recently opened design studio in Oxfordshire, UK, which was instrumental in shaping these concepts. Mahindra is also considering a partnership with German Volkswagen to source components for electric vehicles, it announced in May.

The electric vehicle company will use Mahindra’s product development facilities in Detroit, Bengaluru and Chennai. Apart from manufacturing, Mahindra would also engage in the supply of non-electrical parts.

“For BII, this is a long-term engagement with Mahindra,” said Samir Abhyankar, MD and Head of Direct Private Equity at BII. The UK government-backed fund does not plan to invest in any rival company at this time.

Structure of the agreement for the proposed EV subsidiary

  • BII will invest up to Rs 1,925 cr in two tranches (Rs.1,200 cr & Rs 725 cr)
  • M&M to co-invest Rs 1,925 crore
  • Property of BII: 2.75% to 4.76%
  • EV Co valuation – Rs70,070 crore ($9.1 billion)
  • EV Co to invest approx. Rs 8,000 cr between F24-F27

EV Co Nuts and Bolts

  • The new entity that will be asset light
  • M&M’s ED (farm & auto biz) will take on the dual responsibility of running the EV Co and reporting to the board
  • M&M will provide design, product development, technology and sourcing services
  • M&M and BII will work together to bring other investors into the EV Co
  • EV Co will host all brands of EVs, IP for 4-wheel e-PVs
  • ICE-specific marks such as “XUV” will be permitted
  • By F27 SUV portfolio likely to have volumes of 200,000 units/year

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