M&M hives off another business. Raises money from IFC.

Mahindra & Mahindra (M&M) is currently undergoing an extensive reorganisation exercise.

It recently,

Now it has announced separating out the Last Mile Mobility Business and is also raising external funding in it from IFC.

Last mile mobility business primarily comprises of 3-wheelers and light commercial vehicles.

With Rs 1,287 cr of revenues, it had contributed 2.24% to M&M’s total revenues in FY 22.

The reorganisation of this business is happening in two stages; both targeted to be achieved by September 30, 2023
- 1st stage – the said business will get demerged into a new 100% subsidiary of M&M (NewCo)
- 2nd stage – Rs 600 will be invested by IFC in NewCo in the form of CCPS that will allow IFC an equity stake between 9.97% to 13.64% in the NewCo. Implied valuation of the NewCo therefore ranges between Rs 4,399 cr to Rs 6,018 cr.

The rationale of the transaction is mentioned to be a dedicated focus towards development of Electric 3-wheeler and Light Commercial Vehicle business in partnership with an institution like IFC, which is focused towards sustainability.

Is it exciting?

I have no idea, how to factor in this development in my analysis. Afterall, currently at about 2%, it is a small business in M&M’s overall scale. How it will unfold in future – only the time will tell.

M&M seems to be trying to make the most (like Tata Motors) towards the current excitement around the EVs.

Merger and demergers – they can anyways be argued/ defended either ways.