British International Investment (BII), the UK’s Development Finance Institution, and impact investor Mahindra & Mahindra (M&M) are collaborating to invest up to Rs. 1,925 crores each into a wholly-owned subsidiary of M&M that will be newly incorporated (“EV Co.”).
BII will invest up to Rs 1,925 crores in the form of compulsory convertible instruments at a valuation of up to Rs. 70,070 crores, 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.
The total capital infusion for the EV Co. is envisaged to be approximately Rs. 8,000 crores / USD 1 billion between FY 24 and FY 27 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.
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 company said.
According to a recent survey by Roland Berger, a leading global automotive consulting company, Indian consumers are twice as likely as their counterparts in the UK and the US to consider the purchase of an EV.
The investment alongside M&M in the new EV company supports BII’s undertaking that at least 30 per cent of its total investments will be in climate finance.
EV Co to leverage broader manufacturing capabilities
The EV Co. will significantly leverage the broader manufacturing capabilities, product development, and design organisations along with the ecosystem of suppliers, dealers, and financiers of M&M. The funds will be utilised primarily to create and market a world-class electric SUV portfolio with advanced technologies.
“We are extremely delighted to have BII as a partner in our SUV electric journey. In BII, we have found a like-minded long-term partner who is committed to combating the climate emergency. The Mahindra Group aims to be Planet Positive by 2040. 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,” said Dr. Anish Shah, MD & CEO, Mahindra & Mahindra Ltd.
“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,” said Nick O’Donohoe, CEO, British International Investment.
“Mahindra has very exciting plans to be a leader in the electric SUV space. We would share our vision that includes our 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 per cent to 30 per cent of Mahindra SUVs being electric by 2027,” said Rajesh Jejurikar, Executive Director – Auto & Farm Sectors, Mahindra & Mahindra.
“Climate change is one of the biggest challenges of our time. The investment into Mahindra’s EV business is in line with our decarbonisation strategy and focus on supporting sustainable business models that create new jobs, particularly for women. We are delighted to be backing Mahindra to execute on their compelling EV strategy and ambition and crowd in other like-minded investors in the future,” said Samir Abhyankar, Managing Director and Head of Direct Private Equity, British International Investment.
It is expected that the first round of BII’s capital investment will be completed no later than June 2023 on fulfillment of conditions precedent and the balance post completion of certain milestones in FY24.
Khaitan & Co. are legal advisors to Mahindra. Cyril Amarchand Mangaldas and Cleary Gottlieb are legal advisors to BII for the transaction.