Mahindra and Mahindra to raise $1.3 billion for expanding its electric vehicle unit

Indian automaker Mahindra and Mahindra Ltd is reportedly in advanced talks with global investors to raise between $1 billion and $1.3 billion to accelerate the expansion of its electric vehicle (EV) unit. According to a report from Mint, the company plans to raise capital by selling shares in its unit, currently valued at over $9.1 billion, in multiple tranches over the next two fiscal years.

Mahindra is known for its sports utility vehicles (SUVs) and jeeps, but it has been stepping up its investments to bolster its EV capacity as the Indian government aims to increase the share of EVs to 30% of total annual car sales by 2030, from the current 1%. In December 2021, the company unveiled plans to invest 100 billion rupees ($1.21 billion) to set up an EV manufacturing plant near the western city of Pune, taking on rival Tata Motors, which currently dominates India’s EV market.

Mahindra’s move to raise capital for its EV unit comes as the global auto industry undergoes a major shift toward electric vehicles. Many countries, including India, have set ambitious targets to phase out the sale of traditional petrol and diesel vehicles in the coming years. India is also offering incentives to encourage the production and purchase of EVs, including tax breaks, subsidies and reduced registration fees.

The Mumbai-headquartered conglomerate is reportedly looking to raise as much as $800 million to $1 billion in the first tranche as early as the first half of financial year 2024. Shares of Mahindra rose as much as 1.7% on Wednesday following the report, although they are still down over 6% so far this year, compared to a 7% rise in rival Tata Motors.

Tata Motors is also in talks with sovereign wealth funds and private equity investors to raise up to $1 billion via a stake sale in its EV business, according to a report in the Economic Times in February. The company is also investing in its EV manufacturing capabilities, with plans to launch more than 10 EV models by 2025.

In conclusion, Mahindra’s move to raise capital for its EV unit highlights the growing importance of the EV market in India and the need for automakers to invest in this area to remain competitive. As more countries adopt policies to encourage the adoption of EVs, it is likely that we will see further investment in this sector from both established automakers and new entrants.