Mahindra & Mahindra (M&M) shares hit a new high of Rs 1,191.90 after they rallied 5 per cent on the BSE in Friday’s intra-day trade. This comes after the company announced the incorporation of a wholly-owned subsidiary to undertake its four-wheel passenger electric vehicles business.
“British International Investment (BII), the UK’s Development Finance Institution and impact investor and Mahindra & Mahindra (M&M) have executed a binding agreement 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.,” M&M said in a stock exchange filing.
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.
Stock Price History
Following the announcement, the stock jumped over 5 per cent to a hit a 52-week high of Rs 1191.90 on BSE. However, a profit booking at high pushed the stock a bit lower. Since April, the stock has zoomed 48 per cent on the BSE.
“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,” said Anish Shah, MD & CEO, Mahindra & Mahindra. “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.”
It is expected that the first round of BII’s capital investment will be completed not later than June 2023 on fulfilment of conditions precedent and the balance post completion of certain milestones in FY24.
What do Analysts Say?
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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