M&M rallies 5% as UK’s BII to invest up to Rs 1,925 crore in new EV arm

Shares of Mahindra & Mahindra (M&M) hit a new high of Rs 1,191.90 after they rallied 5 per cent on the BSE in Friday’s intra-day trade. The move comes after the company said the UK’s development finance institution, British International Investment (BII), will invest Rs 1,925 crore in a new four-wheeler electric passenger vehicle company to be set up by the company.

“BII and have executed a binding agreement to invest up to Rs 1,925 crore each into a wholly owned subsidiary of that will be newly incorporated. BII will invest up to Rs 1,925 crore in the form of compulsory convertible instruments at a valuation of up to Rs 70,070 crore, resulting in 2.75 per cent to 4.76 per cent ownership for BII in the EV Co. The EV Co. will focus on four-wheel (4W) passenger electric vehicles,” said in a late night notification on Thursday. READ HERE

The total capital infusion for the EV Co. is envisaged to be approximately Rs 8,000 crores / $1 billion between FY24 and FY27 for the planned product portfolio. 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 funds will be utilized primarily to create and market a world-class electric SUV portfolio with advanced technologies, the company said.

At 09:19 AM, M&M was trading 4 per cent higher at Rs 1,177.45, as compared to 0.48 per cent rise in the S&P BSE Sensex. Since April, the stock has zoomed 48 per cent on the BSE.

At standalone level, M&M is India’s largest tractor manufacturer (~40 per cent FY22 market share) and second largest commercial vehicle (CV), and fourth largest passenger vehicle (PV) maker. With a pipeline of interesting launches in the electric PV as well as LCV front, the company is steadily transforming amid change in technology landscape in the auto space. It plans to unveil its born electric strategy on August 15, 2022.

Analysts at ICICI Securities retain their positive views on M&M amid healthy demand prospects across its product profile, focus towards capital efficiency & EV proactiveness. The brokerage maintains ‘BUY’ rating on M&M with a target price of Rs 1,315 on an SoTP basis (10x FY24E standalone EV/EBITDA).

“M&M is expected to report a healthy performance in Q1FY23 and outperform its peers in the OEM pack. Total tractor sales volumes for the quarter were at 1.19 lakh units, up 62.6 per cent QoQ (seasonality impact) while automotive volumes were nearly flat QoQ at 1.53 lakh units,” it said.

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