IFC to invest ₹600 cr in Mahindra’s mobility biz; share rises 2%

Shares of Mahindra & Mahindra (M&M) climbed nearly 2% in intraday trade on Wednesday after World Bank Group arm International Finance Corporation (IFC) proposed to invest ₹600 crore in a new last mile mobility (LMM) company, a wholly owned subsidiary of Mahindra Group, in one or more tranches. IFC will invest in LMM which will be incorporated as a wholly owned subsidiary of the company (NewCo), the Mumbai-based auto major said in a release.  

This would be IFC’s first investment in an electric vehicle (EV) manufacturer in the country and the first in electric three-wheelers globally. The move is being seen as part of IFC’s strategy to scale up affordable electric three-wheelers and small commercial vehicles.

The investment by IFC will be in the form of compulsory convertible instruments at a valuation of up to ₹6,020 crore. Post infusion of capital, IFC will have a shareholding in NewCo in the range of 9.97% to 13.64% of the paid-up share capital of NewCo, on a fully diluted basis.

As part of the deal, IFC would have a right to appoint one nominee director on the Board of NewCo. Until the conversion of CCPS, the company would have a right to give voting instructions to the company upto 11.8 % of the paid-up capital of NewCo in tranches. Besides, it would also get certain rights such as pre-emptive rights to participate in future funding rounds; affirmative voting and minority protection rights; transfer related rights; exit rights, etc.

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,” M&M said in a release.

“Electric vehicles enable vibration and noise free operations, generate higher earnings for drivers and enable microentrepreneurship. The business will further generate employment for women, driving equality and inclusion while bolstering India’s climate action agenda,” it added.

The partnership with IFC will enable NewCo to solidify leadership position in last mile mobility segment by induction of a reputed and long-term investor with significant focus on sustainability and development, the release highlighted.

Anish Shah, MD & CEO, Mahindra & Mahindra, said, “Decarbonising 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.”

“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,” said Hector Gomez Ang, IFC’s Regional Director for South Asia.

Khaitan & Co. are legal advisors to Mahindra & Mahindra and Cyril Amarchand Mangaldas are legal advisors to IFC for the transaction.

IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. It works in more than 100 countries, using 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.

Meanwhile, M&M shares closed 0.42% higher at ₹1,165 apiece on the BSE. During the session, the stock rose as much as 1.7% to ₹1,180.30.