M&M Closes Little Changed After Hitting Record On EV Arm Deal

Shares of Mahindra & Mahindra Ltd. jumped to a record high after the automaker executed a binding pact to sell stake in its new electric vehicle arm to British International Investment Plc. The stock, however, pared all gains to close flat.

M&M incorporated a wholly owned subsidiary and will transfer the EV assets to the new company, it said in an exchange filing Thursday night. The new firm will see a capital infusion of Rs 3,850 crore, equally split between M&M and British International.

British International will invest Rs 1,925 crore in form of compulsory convertible instruments, resulting in a 2.75-4.76% ownership in the EV company.

“The EVCo valuation is dependent of EV penetration as part of our total SUV portfolio,” Anish Shah, managing director at M&M, said during a press meet. “At 20% of its (SUV) portfolio, the stake will be 4.76% and at 30% of EV portfolio, the stake will be 2.75%, the valuation being $9.1 billion (about Rs 71,000 crore).”

M&M expects electric vehicles to be 20-30% of its overall SUV portfolio and estimates to sell 2 lakh units per annum. The company does not plan to invest in battery charging and infrastructure.

Shares of M&M rose more than 5%, most in nearly six weeks since May 30, to a record Rs 1,144 apiece, before erasing all the gains.

• Trading volume was twice the 30-day average, when markets closed.

• Of the 46 analysts tracking the company, 41 maintain a ‘buy’, three suggest a ‘hold’ and two recommend a ‘sell’, according to Bloomberg data.

• The 12-month consensus price target implies a upside of 4%.