Street can't keep calm as Mahindra spells out EV roadmap

Mahindra & Mahindra's shares gained more than 2 percent in early trade on Monday after brokerage house CLSA maintained a 'buy' rating on the stock and raised the target price as the automaker unveiled its electric vehicle (EV) plans, aiming to lead the sport-utility vehicle (SUVs) segment.

The stock was trading 2.68 percent higher at Rs 1,163 on the BSE at the time of writing.

CLSA raised its target price from Rs 1,356 per share to Rs 1,486, an upside of 31 percent from the current market price.

ICICI Securities in its report on Friday also suggested buying the stock for a target price of Rs 1,500 per share, a 33 percent upside.

The bullish outlook by brokerages comes after the automaker tied up with British International Investment to set up a new wholly-owned subsidiary for its EV business. M&M on Friday announced that with British International Investment investing up to Rs 1,925 crore, the valuation of the company could be up to $9.1 billion.

"The transaction unlocks the EV business potential and is testimony to M&M’s strong commitment on the EV front," said ICICI Securities.

M&M plans to launch eight new electric SUVs by 2027. The first of these will be the XUV400, which will be unveiled in September, the management announced.

The company said British International Investment would initially invest Rs 1,200 crore and the rest on the new EV company achieving certain milestones. It is expected that the first round of the capital investment will be completed not later than June 2023 on fulfilment of conditions precedent and the balance post completion of certain milestones in FY24.

The company is already a leader in the three-wheeler electric vehicle segment and the tie-up is a push at their four-wheeler EV plans. In the three-wheeler segment M&M has a 73.4 percent market share.

British International Investment will invest up to Rs 1,925 crore in the form of compulsory convertible instruments. This will result in 2.75-4.76 percent ownership for British International Investment in the new EV company.

The current EV business, Mahindra Electric Mobility, has been growing at a fast pace. In FY22, it sold 17,006 electric vehicles as compared with 5,418 EVs a year ago. Mahindra electric vehicle sales skyrocketed 213 percent year-on-year in FY22.

M&M and British International Investment will work jointly to bring other like-minded investors into the new EV company to match the funding requirement in a phased manner.

Rajesh Jejurikar, executive director, auto & farm sectors, Mahindra & Mahindra, said, "Mahindra has very exciting plans to be a leader in the electric SUV space. We would share our vision that includes our comprehensive product, technology, and platform strategy at the UK event on 15 August 2022, followed by a reveal of the electric XUV 400 in September 2022. We would expect between 20 to 30 percent of Mahindra SUVs to be electric by 2027."