The auto major on Wednesday announced that the International Finance Corporation (IFC) plans to invest Rs 600 crore in a new unit of the company, which is being incorporated to scale up the last-mile electric mobility business.
In a regulatory filing, Mahindra & Mahindra (M&M) said that IFC is investing Rs 600 crore in a new last mile mobility (LMM) company, a wholly owned subsidiary of Mahindra & Mahindra that will be newly incorporated (NewCo). This investment by IFC will help the company to scale up electric three-wheelers and small commercial vehicles (SCVs) that are more affordable.
IFC is a member of the World Bank Group and it is the largest Global Development Institution focused on the private sector in emerging markets. They work in more than 100 countries, using their capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2022, IFC committed a record $32.8 billion to private companies and financial institutions in developing countries.
The company will sell/transfer assets and/or business pertaining to the last mile mobility business of the company to NewCo. The details of the asset/ business transfer would be decided by the company and NewCo post its incorporation and will be disclosed thereafter.
M&M said that this is IFC's first investment in an EV manufacturer in the country and the first in electric three-wheelers globally will be in the form of compulsory convertible instruments at a valuation of up to Rs 6,020 crore. The Rs 600 crore investment will result in an ownership of between 9.97% to 13.64% for IFC in NewCo.
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NewCo will house the last mile mobility division, including three wheelers (Alfa, Treo, Zor) and four-wheeler SCV (Jeeto). IFC's financing will help scale up electric mobility in last mile connectivity - passenger and cargo segments, while enabling the development and manufacturing of new generation products in this space.
Upon subscription to compulsorily convertible preference shares (CCPS), IFC would get certain rights such as the right to appoint one nominee director on the board of NewCo, the right to give voting instructions to the company upto 11.8% of the paid-up capital of NewCo in tranches until conversion of CCPS, pre-emptive rights to participate in future funding rounds; affirmative voting and minority protection rights, transfer related rights, exit options, etc.
Anish Shah, MD & CEO, Mahindra & Mahindra, said, We are delighted to have IFC as a partner in our last mile mobility journey. Decarbonizing the transport sector is crucial to achieving the climate goals that India has set for herself. IFC, with its focus on sustainability and boosting prosperity, is an ideal partner for us. With the electrification of the last mile mobility business at scale, we will move a step further in our commitment to be 'Planet Positive' by 2040. This also presents a tremendous opportunity for growth for micro and women entrepreneurs.
Hector Gomez Ang, IFC's Regional Director for South Asia, said, With transport being the fastest-growing contributor to climate change, it is no longer a question of whether electric vehicles should be adopted at scale, but rather how quickly. India is the largest three-wheeler market globally, and this investment marks a significant step towards scaled domestic production of electric vehicles catering to this segment, as well as small commercial vehicles.
India has committed to reducing its emissions profile by 45% by 2030, and simultaneously aims to achieve 80% EV penetration for two-and three-wheelers, 70% for commercial vehicles, and 30% for private cars, the company stated.
Rajesh Jejurikar, executive director and CEO (Auto & Farm Sector), Mahindra & Mahindra, said, "The last mile mobility business presents a tremendous opportunity, both in terms of electrification and growth. Being the market leaders in this segment, we have an opportunity to drive higher EV penetration in this segment and provide a more sustainable as well as profitable option to microentrepreneurs. We are excited about leveraging the World Bank Group's expertise in the EV sector to create a viable ecosystem with robust environmental and social practices, as well as build knowledge, innovation, and capacity.
While growing e-commerce activity and urbanization in India are driving a significant increase in last mile transportation, electric two- and three-wheelers can potentially lead the transport sector's clean energy transition. This investment should send a signal of confidence regarding the prospect of such vehicles in India, enabling improved connectivity and logistics for passengers and goods, creating green jobs and driving the Indian economy.
M&M Group enjoys a leadership position in farm equipment, utility vehicles, information technology and financial services in India. It is the world's largest tractor company by volume. It has a strong presence in renewable energy, agriculture, logistics, hospitality and real estate.
The company's standalone net profit rose 14% to Rs 1,528.06 crore on 41% jump in revenue from operations to Rs 21,653.74 crore in Q3 FY23 over Q3 FY22.
Shares of Mahindra & Mahindra were up 0.24% to Rs 1,162.90 on the BSE.
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