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.

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