Electric vehicle premiums to ride high in India
BENGALERU: The race for electric vehicles in India – the world’s third-largest car market – is still in its early stages, but global investors are paying for the good spots.
Singapore’s Temasek this month valued Anand Mahindra’s electric car business at $9.8 billion. Mumbai-listed Mahindra & Mahindra, listed at $23 billion, derives most of its revenue from its sprawling automotive business, which includes everything from utility vehicles to three-wheelers.
Sport utility vehicles accounted for half of units sold in India in the year ending March and are the focus of M&M’s EV business, which welcomes the new investor. n It has so far sold 1,651 electric cars in the fiscal year ending March 2024, almost four times the number sold in the previous period, said Kumar Rakesh, an analyst at BNP Paribas.
This is the second major accolade for Mahindra, which has been one of the best performing stocks on the Nifty 50 for the past 20 years. Temasek will take a stake of up to 3% with an investment of $145 million. It follows the sale of 4.8% to British International Investments, a British development finance institution, last July for $9.1 billion.
M&M will draw on its expertise as an investor, particularly on ESG issues, without unduly diluting existing shareholders. However, valuations remain well above market comfort levels. Temasek’s assessment of EV activity hinges on whether it reaches undisclosed milestones.
The scarcity of upside opportunities means India is likely to land more good deals. Electric vehicles will represent less than 2% of cars sold in the country in 2022, compared to around 25% in China, where Tesla and BYD dominate. There are also fewer start-ups in India.
Published in EDP BLOGS on August 15, 2023.
