British impact investor BII to invest ₹ 1,925 crore in new EV Co of M&M

In a major boost for Electric Vehicles (EV) manufacturing in India, British International Investment (BII), the UK’s Development Finance Institution and impact investor has entered into a binding agreement with Mahindra & Mahindra Ltd (M&M) to invest up to ₹ 1,925 crore into a wholly-owned subsidiary of M&M that will be newly incorporated (EV Co).

M&M will also invest ₹ 1,925 crore in this new venture.

BII’s investment will come in the form of compulsory convertible instruments at a valuation of up to ₹ 70,070 crore, resulting in 2.75% to 4.76% ownership for BII in the EV Co. which will focus on four-wheel (4W) passenger electric vehicles.

Tata Motors in this race

In early October 2021, Tata Motors Ltd (TML) announced that TPG Rise Climate along with its co-investor ADQ would invest ₹ 7,500 crore [$1 billion] in a new subsidiary – to soon be incorporated – to focus exclusively on electric vehicles (EVs) at a then valuation of up to $ 9.1 billion. TML has already announced a $ 2 billion investment plan for its EV subsidiary.

M&M said in a late-night statement said that the total capital infusion for the EV Co. is likely to be around ₹ 8,000 crore / $ 1 billion between FY 24 and FY 27 for the planned product portfolio,

Mahindra which was the pioneer of EV manufacturing in the country following its acquisition of Reva, the first EV company in India, had in recent years lost out in the race to Tata Motors which has achieved significant market share in the EV passenger segment.

Mahindra now wants to catch up with this investment.

“M&M and BII will work jointly to bring other like-minded investors in the EV Co. to match the funding requirement in a phased manner, ”the statement added.

“BII’s investment is designed to significantly accelerate the availability and adoption of electric vehicles in India and other markets served by M&M,” the statement said.

Anish Shah, MD & CEO, Mahindra & Mahindra Ltd. said: “In BII, we have found a like-minded long-term partner who is committed to combating the climate emergency.”

“Mahindra has been a pioneer in the electric vehicles space, and we are confident we will be the leaders in the electric SUV market in the future,” he added.

Nick O’Donohoe, CEO, of British International Investment, said, “BII’s anchor investment will be key to attracting additional sources of private capital into this exciting venture with the Mahindra Group.”

“The acceleration of EV development in India will be critical to supporting the country in reaching its emission targets as well as improving air quality in many urban areas. Mahindra will play a central role in the decarbonisation of the automotive industry in India and elsewhere, ”he said.

Rajesh Jejurikar, Executive Director – Auto & Farm Sectors, M&M said “Mahindra has very exciting plans to be a leader in the electric SUV space.”

He said the company will share its vision of the comprehensive product, technology, and platform strategy at the UK event on 15 August 2022, followed by a reveal of the electric XUV 400 in September 2022.

“We would expect between 20% to 30% of Mahindra SUVs being electric by 2027,” he added.

Samir Abhyankar, Managing Director and Head of Direct Private Equity, British International Investment, said: “The investment into Mahindra’s EV business is in line with our decarbonization strategy and focus on supporting sustainable business models that create new jobs, particularly for women.”

The EV Co. will significantly leverage the broader manufacturing capabilities, product development, and design organizations along with the ecosystem of suppliers, dealers, and financiers of M&M.

The funds will be utilized primarily to create and market a world-class electric SUV portfolio with advanced technologies.

The first round of BII’s capital investment is expected to be completed before June 2023 on fulfillment of precedent conditions and the balance post completion of certain milestones in FY24, M&M said.

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