Electric vehicle premiums to ride high in India

The electric vehicle race in India – the world’s third largest car market – is only in the qualifying stage but global investors are paying up for a good seat.

Singapore’s Temasek handed Anand Mahindra’s EV business a punchy valuation of up to $9.8 billion this month. The $23 billion Mumbai-listed Mahindra & Mahindra generates most of its top line from its sprawling autos business churning out everything from commercial vehicles to three wheelers.

Sport utility vehicles account for half the units it sold in India in the year to March and are the focus of M&M’s passenger EV business which is welcoming the new investor.

So far in the financial year to March 2024, it has sold 1,651 electric passenger vehicles, nearly four times what it sold in the previous period, BNP Paribas analyst Kumar Rakesh said.

It is the second big endorsement for Mahindra which has steered one of the best-performing stocks in the Nifty 50 over the past 20-odd years.

Temasek will take up to 3% stake for a $145 million outlay. It follows the sale of up to 4.8% to British International Investments, the UK’s development finance institution, at a $9.1 billion valuation in July last year.

M&M will leverage its investors’ expertise, especially on issues relating to ESG, without diluting its existing shareholders too much.

The valuations though remain well above the market’s comfort level. Temasek’s valuation of the EV business depends on the latter hitting undisclosed milestones.

The scarcity of opportunities to ride the boom means India is likely to throw up more hot deals. Electric vehicles made up less than 2% of cars sold in the country in 2022 compared to about 25% in China where Tesla and BYD dominate.

India also has fewer startups. Tata Motors has over 70% market share in EVs, followed by China’s MG Motors’ 12% and M&M’s 7%.

Published in The Express Tribune, August 15^th, 2023.

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