The new electric vehicle (EV) businesses of Mahindra and Mahindra (M&M) could be value accretive, brokerage firm Nomura said on March 23.
“MM’s core business is trading at ~1x FY23F EV/Sales. We estimate the ‘NewCo’ valuation could be ~2.5x FY23F EV/sales; hence, we think the fundraising should be value accretive,” the brokerage said in a report a day after M&M announced the incorporation of a new wholly owned subsidiary NewCo for last-mile mobility (LMM).
The auto major also announced the raising of around Rs 600 crore from the International Finance Corporation (IFC) for the business. After the infusion, IFC will own 9.97 percent to 13.64 percent stake in the subsidiary.
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IFC’s financing would help scale up the business faster while enabling the launch of new-generation products, the brokerage firm said.
“The company’s last-mile mobility (LMM) business is well suited for electrification, due to: 1) its closed loop operation within a smaller radius; 2) lower load requirements; and 3) ability to reduce emissions in high-population-density areas. Hence, we believe it has the potential to see strong government support in the form of incentives or regulations," the analysts wrote.
"M&M has been focussing diligently on this segment for the past few years. In the past one year, it has seen traction with its e-3W business’ average monthly volumes rising from ~2k units in 4QFY22 to ~4.5k units in 4QFY23.”
The new businesses—EVCo and NewCo—have been valued between $5.8-9.8 billion said the analysts, versus the value of the company’s core business’s market-assigned value of $11 billion. These estimates value NewCo between $536 million and 734 million and EVCo between $5.25 billion and $9.09 billion.
EVCo was incorporated in July 2022 in collaboration with British International Invest (BII), a UK-based development finance institution. M&M’s four-wheeler EV segment was to be transferred to the new subsidiary and BII was to own between 2.75 percent and 4.76 percent.
The stock, which opened flat, was trading at Rs 1,163.75 at 1.30 pm on March 23.
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