Ontario Teachers to buy 30% stake in Mahindra Susten for ₹2,371 cr

Ontario Teachers' Pension Plan Board will acquire a 30% stake in Mahindra Group's renewable energy arm, Mahindra Susten, for an equity value of ₹2,371 crore.

The deal also envisages the setting up of an Infrastructure Investment Trust (InvIT) in compliance with applicable regulations of the Securities and Exchange Board of India (SEBI).

The InvIT is initially proposed to comprise renewable power assets seeded by Mahindra Susten with operational capacity of around 1.54 GWp. As part of the proposed deal, shareholder loans of ₹575 crore ($73 million) advanced by Mahindra Group to Mahindra Susten will be repaid.

As a result of the transaction, Mahindra Group will receive an inflow of approximately ₹1,300 crore ($165 million). Mahindra Group and Ontario Teachers' will jointly explore the sale of an additional 9.99% stake in Mahindra Susten by May 31, 2023. Mahindra Group will deploy these funds, plus an incremental amount of up to ₹1,750 crore, into the business & InvIT over the next seven years.

Over the same period, Ontario Teachers' has committed to deploy an additional amount of up to ₹3,550 crore into the business and the InvIT over the next seven years.

This transaction is expected to enable Mahindra Susten to build a strong renewable energy business focused on solar energy, hybrid energy, integrated energy storage and round-the-clock green energy plants.

"The partnership with Ontario Teachers' will enable the Mahindra Group to unlock value in the renewable energy sector with continued joint investments towards accelerated growth. The Mahindra Group aims to be Planet Positive by 2040 and the continued inflow of patient, long-term capital in our climate positive businesses is validation of our commitment to be a global ESG leader," says Puneet Renjhen, member of Group Executive Board and executive vice-president, Partnerships & Alliances at the Mahindra Group.

As per the updated Nationally Determined Contributions of the United Nations Framework Convention on Climate Change (UNFCCC), India now stands committed to reducing the emissions intensity of its GDP by 45% by 2030 from its 2005 levels, and achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. These are concrete steps towards achieving India's long-term goal of reaching net-zero by 2070. As a result, the Indian renewable industry is expected to continue to grow significantly in the long term.

It is expected that Ontario Teachers' acquisition of a 30% shareholding in Mahindra Susten, which is subject to closing conditions including regulatory approvals, will complete over the next few months.

The InvIT is also expected to be formed during FY 2024 subject to requisite approvals.

"This partnership with Ontario Teachers' syncs with Mahindra Susten's plan to substantially grow our green energy portfolio across solar PV, wind, and energy storage," says Deepak Thakur, managing director and chief executive officer, Mahindra Susten.