Mahindra & Mahindra Limited (MM) Earnings Call Transcript & Summary

Good morning, everyone. It's my pleasure to welcome you all to this press conference to announce the partnership between Mahindra & Mahindra and British International Investment. Thank you all for making the time to come and attend this event at a short notice. Let me begin by welcoming our honorable guests. I would like to start by welcoming Honorable Alan Gemmell. Her Majesty's Trade Commissioner of South Asia and the Deputy High Commissioner for Western India. Welcome. We also have Srini Nagarajan, MD and Head of Asia, British International Investment. Joining from U.K., we have Samir Abhyankar, MD and Head of Direct Private Equity, British International Investment. We have Dr. Anish Shah, MD and CEO, Mahindra Group. We have Rajesh Jejurikar, Executive Director, Automotive and Farm Sectors, Mahindra & Mahindra. We have our colleague Manoj Bhat, who is the Group CFO, Mahindra Group; and we have Puneet Renjhen, EVP, Partnerships and Alliances, Mahindra Group. Let me not take more time, and let me invite Dr. Anish Shah for his opening address. Anish, over to you.

Good morning, everyone. It's great to have all of you with us. You've seen us over the last 12 to 18 months roll out 1 blockbuster launch after the other in the auto space. We have 5 blockbuster launches now, the most recent one being the Scorpio-N. And there have been a number of questions along the way on what's happening on the electric vehicle front. And we had promised answers to them. This is the start of the answers, which is we're starting with spinning off EV into a new company, a company that will have a valuation of up to $9.1 billion with one of the most reputed private equity investors in the world, partnering with us in this venture. It is a venture that holds a lot of excitement. We will share more about the products that have been lined up on August 15. But for today, the discussion will focus on this partnership and the path that we are forging ahead. With that, I'm going to invite Rajesh Jejurikar to take us through some of the details of this after which Puneet Renjhen who's been leading the deal, will come and talk about the specific deal details. Rajesh?

Good morning, all of you, and welcome, and thanks for coming in at short notice. We really appreciate you all being able to do that on a wet rainy day in Mumbai for those of you who are here and for the others who've also logged in, in the hybrid model, we appreciate you joining in on this conference call. I'm going to give you a little bit of a context, Anish started talking about our SUV business portfolio. So I'm going to start from there and talk about how our portfolio is looking at the moment. And as you can see out here, we've had very, very strong booking momentum and a very strong new launch, which has not yet started bookings but is expected to continue the same booking momentum. You'd wonder why we are talking about this right now? We are because this is a very important part of what we bring to the table, when we think about an electric vehicle driven- or electric SUV-driven future. The fact that we are doing very well today is kind of represented in this chart. So on the right side, you see revenue market share for quarter 4 second half of the year, the numbers here are the second half of the year, F '22, where we have demonstrated an ability to be in the top of the pack and that was with supply constraints and also without the Scorpio-N numbers yet coming in. On the left side, we've segmented the market. And what you see is that we don't play in one part of the segment, which is the micro SUV segment. That in the second half of the year was an industry size of 14,000 units per month. Then what you see is the less than 4-meter compact SUV segment. And there, the industry size is 51,000, and you can see the brands we have; and the full-size SUV, which is 63,000 per month. We're very strong now in the compact SUV with the Thar launch, the 300 launch, the Bolero Neo and the Bolero. With Scorpio-N coming in, we would expect the greater than 4-meter SUVs to become stronger by way of market share. We've just put for reference below the number of brands -- competing brands in each of these segments. And what you see in the last row is the success rate of other new launches. It's for the same period. So launches in the last 2 years, sales in H2 of F '22 comparable period. Average sales of new launches, 3,400 per month, 1,700 per month. And compare that with the kind of bookings that we are getting and the kind of sales that we are getting. Again, reinforcing that we really are now a very strong and formidable player in the SUV segment. The SUV segment itself is now a significant part of the passenger vehicle market. As you can see from SIAM projections and even where we are today, the SUVs as a percentage of total passenger vehicles in the region of 50%. So we don't play in a niche segment. We play in a very significant segment, which is the SUV segment. And in that segment, we are the #1 player by way of revenue market share with a very, very strong portfolio. There are several reasons why SUVs are doing well. Clearly, consumers want stylized presence. They want that feeling of being in seating height control, newer tech, safety, greater performance. We believe the SUV's electric segment is at an inflection point. These are very early days yet, but there are several pieces of data, which gives confidence that electric SUV penetration will go up significantly over the next 3 years. And you see some data out there by way of what NITI Aayog has projected as the penetration and also market research, which indicates that 85% of Indians indicated a desire to move to electric, and that percentage is amongst the highest in the world. There are several enablers to that. There is the new launches that are coming up. There are -- there's enhanced charging infrastructure. There's multicar households, government subsidies, better financing. And of course, one challenge is going to be how fast charging infrastructure actually does come up. We don't think it will affect our category as much because a lot of our consumers are actually multi-vehicle owners, and they will use flexibility on where they want to use their electric and where they don't want to use their electric when they need a very high range in case charging infrastructure doesn't come up. The critical thing is we're projecting for ourselves that by F '27, we would get a penetration of between 20% and 30% of our portfolio -- of our SUV portfolio as electric. At the higher end, that means assuming 30% penetration of our SUV portfolio, we would expect to be selling 200,000 electric SUVs in the year F '27. Now 200,000 may sound like a lot, but that's only 17,000 a month and 17,000 a month coming out of -- a large portfolio, which we will have by then, we believe, is a very, very doable number. So really, what has gone into the way we think about our electric strategy. At a fundamental level, we believe that we've now established with the new launches and the recent launches in SUV, a very strong technology capability. We've also established a very strong market position. So strong brands, strong technology capability, no reason why we shouldn't be very successful as we move into electric SUVs. So there is every reason to believe that we will be able to get to a very good penetration in a segment which is very large, where we already are #1. I'm sure you have lots of questions on our right to win because we are not yet today talking about our brands, our platforms and our technology when it comes to electric. But that day is not too far away. It's on 15th August, when we are going to reveal our entire Born Electric strategy. And you'll have all the details you need to around why we have so much confidence that we will get to SUV volumes in the region of 20% to 30% of our total portfolio by F '27. But we have an immediate launch, which will come up. And in September of 2022, we'll reveal the XUV400, which will then soon after that go into production, and we'll start deliveries of that product in the period Jan to March of the calendar 2023. So that will be the first offer. We have worked a lot on this product, and we believe it is going to be a very strong offer in the market, very competitive and it looks good as well. So that broadly is the setup for why we think we will be very successful in the electric SUV market. And I now request Puneet to come in and talk a little bit more about what went behind the deal and how the deal is structured. So Puneet, please.

Good morning, and thank you for coming to on this momentous occasion for us. I'll talk a little bit about the deal structure and the process we followed to get this investment from British International Investments. So I think first and foremost, what is most heartening for us is actually to get an investor like British International Investment to partner with us in our electric journey. If you look back when we thought about getting a potential investor, I can say with a lot of strong confidence that we couldn't have actually got a better partner than British International Investments, not only because they are one of the leaders in private equity, like Anish mentioned, but also because of their impact -- global impact investing as well as the traditional private equity mindset through which they did a very rigorous diligence process on our EV strategy, our EV ambitions, which Rajesh mentioned, we will be speaking more on 15th August onwards. I think the second is, if we see British International Investments, various investments, including in India, they're one of the largest investors in the whole climate space with multiple investments in renewables. And I think third and the most important and heartening for us is this is one of their largest investments and commitments to the climate, and I'm sure we will see a lot more from them and my colleagues from BII will talk about it. On the diligence process undertaken by BII, so over the last few months, we've had various extensive discussions with them on our EV strategy, our EV portfolio, the business plan which we've put together, which we'll be sharing in a few weeks from now. I think the second is they engaged Roland Berger which all of you know is a global leader in consulting, especially focused on the whole automotive and the clean energy space. Roland Berger actually worked with them to identify what is the EV market potential comparing M&M's electric products with other product offerings in the market, the competitive positioning, the CapEx plans, which we put together and basis that extensive diligence done by BII and Roland Berger on behalf of them, this investment proposal was put through. And I'm pleased to note that BII had got its investment committee approval to go ahead with this transaction a few weeks back. So talking more about the deal. Like Anish mentioned, the valuation, which we have fixed for this is INR 70,070 crores, which at current exchange rate translates to roughly $9.1 billion. The investment is going to be bathed into a newly incorporated EV Co., which we will be incorporating over the next few months. The EV Co. will house essentially -- it will basically be relying on the parent, which is M&M for contract manufacturing, but it will have its own product development, manufacturing and selling of 4-wheeler electric cars. The existing ICE brands, some of which we might be using for the EV products as well, will be licensed to the EV Co. and all the EV specific brands will be housed in the EV Co. British International Investment has committed, like I mentioned, a total of INR 1,925 crores. This INR 1,925 crores will be invested in 2 tranches. The first tranche will be INR 1,200 crores which we hope to get as soon as we complete the regulatory approvals and certain conditions precedent over the next few months, but no later than June 2023. And then the balance, INR 725 crores will be disbursed sometime in FY '24 basis of certain other milestones, which the business is supposed to achieve. M&M also has its strong commitment, has also committed additional INR 1,925 crores to match BII's contribution into the EV Co. The valuation of INR 70,070 crores and BII's investment of INR 1,925 crores will entitle them to a stake of around 2.75% to 4.76%. They're investing in compulsory convertible preference shares, which will get converted sometime in FY -- post FY '27. And that is the percentage ownership they will have in the company. The transaction structure, like I mentioned, M&M will invest INR 1,925 crores, BII will invest INR 1,925 crores in the EV. The total CapEx plan, which we have envisaged between FY '24 to FY '27 for the first platform, which we will talk about more later on 15th August, is approximately INR 8,000 crores, and this INR 3,850 crores of total investment will be going towards funding that CapEx plan. The setup of the EV Co. is going to be as follows. Like I said, all the EV specific brands will be owned by the EV Co. The EV Co. will have access to the Mahindra brand on a license basis on an arm's length basis as well as the ICE-specific brands. M&M, which is the parent entity will continue to support the EV Co. in various areas, for instance, on contract manufacturing, the whole product development, product design, strategic sourcing from our suppliers as well as certain other shared services. The total investment, like I mentioned, is around approximately INR 8,000 crores. And the funding will be a combination of this investment, M&M and BII will work together to get other third-party investors who are also very focused on climate, and we are very confident of getting that. They will come in future, maybe to get -- be a part of our journey as well as we can have other sources of flexibility on other sources of capital to fund the balance amount. The leadership and management of the EV Co. will be as follows. The EV Co. will be led by a leadership team. The leadership team will comprise of the current Automotive and Farm Sector Head, which is currently Rajesh. And he will be assisted in that with through a management council. The management council will comprise of a few senior leaders of our current Automotive business as well as there will be a specific CEO for the EV Co. And the organization, like I mentioned, will have the customary functions of sales and marketing, brand, customer service and other shared services. With that I hand it over to Anish.

The question that everyone often has is how are we spending the cash we generate? And therefore, we put the slide here that we had shown in the last analyst meet. They talked about the CapEx plans for auto as well as cash spent for other businesses. The one change that we have here now is with BII's investment, we will be spending INR 1,925 crores less. We had already outlined a plan where we had all the funding for EV laid out. And it was important for us to bring in a very strong partner to help establish the valuation of this business and help it grow going forward. Also a partner who is very strong from a climate change standpoint, who we can work with closely to address climate change, which is one of our big priorities. And that is the reason we've decided to go ahead and take this step. But in terms of our cash flow, here are the details, we can address any questions that we have as we start the Q&A. But the more important part before we do that is I would like to invite Srini Nagarajan who is the MD and Head of Asia for British International Investments to address us. Srini.

Thank you. I don't have the capability to talk extempore like Anish, so I'll open my iPad. Thank you Honorable Deputy High Commissioner, Alan, Anish, Rajesh and the entire team for putting this wonderful show together. It's an honor to be here, and it's absolutely fascinating that we are now partnering with M&M. British International Investment till 4th August before that -- sorry, 4th April before that, we used to be called CDC, CDC Group plc. We changed our name and -- as you can see, the Union Jack is our logo now. We have -- India is a very important market for us, which is around 30% of our total balance sheet. We have invested around $2.1 billion in India. We continue to invest, and it's the most important destination for us. We've been here for 30 years-plus. And it's a most important single market investment for us. Anish talked about climate finance. Yes. We have signed up to the Paris Accord, which means 3 things: net zero by 2050 or 2070. We are targeting 2050. We -- and it involves just transition, which we are talking about, which we are talking to the government about because in South Africa, there is a program called Just Energy Transition Program, which we are working closely with the government and in India as well. The third one is adaptation and resilience, which means a lot of jobs, and it largely involves climate tech and reskilling people, which is an important component of. Just want to say that we are a development financial institution where we strike a balance between being developmental and commercial. It's always a fine balance. But we always put our developmental goals ahead of our commercial goals to make sure that we will make this world a better place. As you know, we are 100% owned by the U.K. government, and we are completely funded by British taxpayers' money. So our commitment to climate is around $3 billion globally. And you might have seen in the press that we have committed around $1 billion for India between our strategy period -- current strategy period, which is 2022-'26. And EV is a very important component of that particular adoption as well as our climate strategy is concerned. This investment is in line with our commitment to UN sustainability goals and aligned with our Paris agreement, which I talked about. As far as the transaction is concerned, first of all, I must say we are very proud to partner with M&M, who have got very high standards on corporate governance, EN standards, Anish has announced its plans of going carbon neutral by 2040, which is extremely -- which is the kind of partner we really want to work with given our commitment to climate change. And BII shares a long-term relationship with Mahindra Group. We remember selling Punjab Tractors to M&M in 2007 and which -- and then we actually had a longer-term relationship with them, and this further cements our relationship. The new company will contribute towards 2.1 million tonnes of CO2 equivalent emission avoidance and lead to 8,000 skilled jobs and -- of which 1/4 of which will be women. So there are 3 main development impact themes, which we are trying to focus on. One is our -- we will build on the further excellence with Anish and team have built on the E&S side of it. We will focus on new jobs. We will focus on gender where Mahindras are really showing a lot more excellence there. And finally, we will also help M&M Group to mobilize further capital on the back of this because mobilization is a very important part of our entire development impact team. By promoting local manufacturing and thereby local suppliers, I think we are in a position to be also create jobs through that and, of course, reduce prices over a period of time. So generally at BII, we don't make passive investments. We do -- we play an active role and be much more complementary to where M&M has got skill sets. We're not going to tell M&M how to make EVs and neither do we know. The areas where we have skill sets are E&S, gender, mobilization. And those are the complementary areas, which we will work with Anish and team significantly over a period of time. So in substance, this is -- EV is a very important part of our global strategy. And climate finance is something we will continue to invest. And thanks to our shareholders FCDO for providing us the very, very continuous support in this and to, of course, people like Alan and the team. Thank you so much. And lastly, I'm extremely proud about this opportunity. We at BII are looking at a longer-term association with M&M on this. Thank you.

Thank you so much. We're going to open the house for Q&A. [Operator Instructions] Thank you. Do we have a first question?

Congratulations, gentlemen, on this investment. Dr. Shah, my question is to you. Is this investment that's made only for the passenger vehicle/electric vehicle business? So does this mean that investments in other segments like EV 3-wheelers will be through a different entity?

That's right, [ Sonya ]. This is only for passenger 4-wheelers, and there will be a story in future for 3-wheelers.

Okay. Just a couple of more questions before I part from the mic. You did mention that BII will initially invest INR 1,200 crores and the balance, INR 725 crores on the EV company achieving certain milestones. Are there any kind of targets or covenants for this investment to go through completely from BII's end?

There are no targets from a business standpoint, but there are certain things that we will discuss more before closing, and that may include like bringing other investors in, et cetera. So those are things that we will look at, nothing that concerns us. It's very much on the path that we want to head down.

And will it only be restricted to a 5%, under 5% stake? Or at some point in time, would they look to up their stake as well?

So for that, let me bring Samir into the discussion. Samir is the Head of Equity globally for British International Investment, Samir?

Sure, can you hear me okay?

Yes, we can.

For now, it is, as noted, sub-5. That's what we have initial approval for. Let's see how the EV Co. develops, and we can always look at this again.

We have a question here, and then we have 2 in the back. We'll go there after that and...

Sajeet here from BQ Prime. Just a couple of questions here, one for Anish and one for Samir. Anish, what is the kind of asset transfer that will happen to the EV Co.? Is it the EV Co. will remain asset light in terms of you have a contractual agreement with Mahindra to produce or manufacture the vehicles? Or is it going to be asset-heavy in that sense? Because I think you've invested only INR 400-odd crores in this business. So in that sense, what is the kind of transfer that happens? And Samir, how did you value the EV Co. at $9.1 billion?

Okay. For the first one, Samir, if I may just take that first, let me actually hand it over to Rajesh for more details. It is asset light, but Rajesh will explain some of the details.

Yes. So the way this is being set up is to fully leverage the synergies that already -- and the assets that Mahindra has. So there will be a set of multiple actually set of related party transactions. The way this has been conceptualized is manufacturing will completely stay in M&M and will be a related party transaction. The sourcing, which is at least the non-EV part component sourcing and price negotiation will also be done by M&M. The product development and technology teams, which is what are housed in a combination of 3 locations today. So Mahindra Research Valley in Chennai, we have an office in Detroit, we've a set of team in Bangalore, will all be service providers to the new co. So that would be another related party transaction. So the business would be very asset-light. It would draw on the whole ecosystem of Mahindra, which is used Mahindra dealers. They could -- of course, the new co. could appoint additional dealers specific to electric business, but it will leverage the Mahindra system of dealers, the Mahindra system of suppliers, Mahindra system of financiers. So it fully leverages the current asset base that M&M has and that's where really the cost efficiencies come in, that keeps the overall cost and investments under control because we are not recreating any assets, and we'll be fully leveraging everything that M&M has.

Samir?

Sure. So the valuation was based on certain business milestones that the EV Co. expects to hit in the future. As part of our diligence, we got comfortable -- sorry, you can still hear me?

Yes. Go ahead.

Yes. Sure. Sorry. Yes, so as I was saying, the valuation was based on certain milestones that the business is due to hit in the future. We, on our side, did a very extensive diligence to get comfortable with this valuation, which involved, as you can imagine, dozens of meetings with the management team as well as work with our -- with all of our advisers, including Roland Berger. So we got comfortable with that valuation. And that's how the valuation was come up with.

Anything on the milestones which you're talking about? Because currently, the portfolio is very thin for Mahindra and it's going to scale up over the next 3 to 4 years. So it's a future valuation which you're looking at. So what is the kind of expectation that you have from the EV Co. in terms of revenues or in terms of cash flows or product which will be launched?

Yes. I don't think at this point, we're sharing the details. I think a lot of that will come through in August when the group does the full reveal, but it is based on future milestones, correct.

I'll just add on the volumes that I put out there were part of what's going into the business plan. So the business plan and the valuation input, not the only criteria is the volume number that we projected, which is penetration of our SUV portfolio in the lower end at 20% and the upper end at 30%. Upper end of 30% translates to a volume of 200,000 per year.

And -- what would be the size of the portfolio that will be -- which you're looking at? How many variants or how many products?

Yes. So 4 Born Electric, we had that up on the slide and the XUV400. So 5 -- a portfolio of 5 products by F '26, which would give us a volume of around 200,000 per annum in F '27.

Let's go to [ Srishti ] first, and then we'll go to the back. [ Srishti ], go ahead.

Very congratulations on this deal. My question is on pricing because going forward, like Rajesh pointed out, that 85% people are showing the willingness to get into the EV segment and you guys have a good plan. So is pricing something that you guys will be focusing on because even Scorpio had a very competitive pricing. So from the current market price at EVs are found to be a bit more costlier, you are trying to get it more cheap? And are you -- like that's something in your focus area?

Rajesh?

Yes, [ Srishti ], a critical part of how we will create successes we'll be getting the right price points. Our assumption on what is the right price point is what has gone into the business plan, which has gone through due diligence, as Samir just explained by the BII team and the consulting from Roland Berger. So it is a set of assumptions. Of course, the market will evolve. We are talking longer term, but the idea will be to hit that penetration range of 20% to 30% of our portfolio by F '27, and we will enable that through appropriately priced offerings, which enables conversions.

Okay. And in the presentation also, you highlighted that Mahindra has focused on certain SUV segments till now and the 8 product launches that you are having. So is that an indication that going forward, the launches and the focus will be on those areas and you will not be trying to shift on the others?

Well, at least the primary -- we'll actually share the product portfolio that is going to be in the first flash on 15th August. So just wait out for that. But they will be -- the first lot of product portfolio is in the less than 4 and greater than 4 as there are 2 pillars where we already have presence.

So just to add to that, [ Srishti ], yes, we will stay in the segments that we are very strong in. We are not venturing out incidents or in the micro SUVs. And as you've seen from the recent launches, our approach has to -- has been to deliver a very high-quality product at a price that the consumer loves and that's exactly what we will do as we think about the EV range as well.

We have a few questions in the back, please.

This is Kapil. Anish, my first question is to you. If you could just give some context as to what this investment does for M&M? Because INR 2,000 crores is something which is at your disposal as well, right? So if you could give us some context.

So Kapil, let's go back to the genesis of this. And as we start the EV journey, there have been a lot of questions on will M&M take leadership in this space. And in all the work that we've done, we are very confident that we will take leadership in this space. We've got a very good EV platform. We'll share a lot more details on August 15. And as part of that, as we interacted with BII on a few other areas. They said, look, can we take a look at EV, we have the same mindset that we share around climate change and we can be good long-term partners, and we really love the idea of that partnership. And for us to be able to set a benchmark to say that, yes, we have an external endorsement of someone who is very highly reputed around the world has looked at our EV plans in a thorough amount of detail, which obviously they would for an investment of this magnitude and endorses it. So that is really the reason for that. This is also the starting point. This is not just one investment, but at the same time, we did not want to give away a lot of the company at the start because we have a lot of confidence in this. So we will bring in more investors at higher valuations as we go forward.

Okay. And second question is regarding this investment itself. So firstly, we have already made INR 400 crores investment and we will be making more in FY '23. So will that be counted towards M&M's share? And for BII, for Samir, the question is that when you made this investment, is there some kind of exit clause? Is it for initial 3, 4 years? Or are you looking to be a long-term partner and you will participate in future rounds as well?

So on the first part, the assets that will be transferred in will effectively be the assets that have been built from what M&M has spent in F '22 and '23. Because if -- we don't have an exact date for the start as yet, but let's assume it's the start of F '24. Before that, whatever is spent will get transferred into the EV. On the second part of the question, Samir, over to you.

Sure. I think as people may know, BII invests from a balance sheet. We're not a private equity fund. And therefore, our horizons are very different. We see ourselves as long-term partners to Mahindra.

Okay. So you will continue to fund future investments as well?

As I said earlier, the initial investment that we've gotten approval for is the one that's being announced today. I think like all shareholders, as and when there's further funding needs, we take a look at it at that time.

Thanks, Kapil. Go ahead, and then after that, we'll go to a few online questions. Go ahead, please.

This is Binay from Morgan Stanley. Congratulations on the deal. I'll save my EV questions for 15th August. We keenly await that day. But just going back to the deal, you mentioned that BII and Mahindra will jointly look for more investors -- for like-minded investors. So what kind of a role will BII play in bringing investors? What's the target segment? Could we expect more U.K.-based government funds that go into the company? Any sort of a feedback on that based on past experience? And what timeline do you expect for that?

Srini?

So as I said earlier, mobilization is a very important theme for us. I think it's very important that we get long-term investors over a long-term vision about this business. As Anish rightly said, this is still evolving. Given the fact that -- we work with a number of investors globally, both from a sovereign wealth fund perspective, DFIs like-minded investors. And I think what is important is perhaps to get much more patient capital so that the company -- it helps the company grow over a period of time.

Let's go to a few online questions, [ Pramosh ].

Yes. We have a question from Cyrus. He's saying, will the cars be batched Mahindra using the new SUV twin peaks logo or will there be a different brand altogether like Volvo or Mercedes?

The company would have flexibility to use current Mahindra assets, brand assets, for example, XUV or if we were to do an electric Thar in the future or an electric Scorpio, the electric versions of the iconic Mahindra brands would be available to the EV Co. The EV Co. can independently decide to create its own new brands, and those new brands would then be owned completely by the new co. So both, but certainly a starting point is the use of the twin peak logo with the carryover or the electric versions of the iconic brands.

Right. We have another question from Venugopal from Bernstein. He's asking how does an EV subsidiary structure help apart from funding? What are the benefits on the tax front? As you have created a valuation benchmark through this there will be a breakeven long-term margin and revenue scale target that would have been established. Can you please share these numbers?

Puneet?

Yes, I'll answer part of it and then hand it over to Manoj. So we are not disclosing in terms of what the revenues and margins, et cetera, will be at this stage. I think it does definitely establish a benchmark for our EV Co. for future investments as well as through the extensive diligence process, which Anish and Samir went through about. And in terms of cash deployment, I request Manoj.

So from a cash deployment perspective, as Anish mentioned also, I think we continue to invest in EVs today also and some of those assets will move into the EV Co. after we form it. And I think there was a question around tax. From a taxation perspective, I think it's more a vehicle to focus on 4-wheeler EVs. I think that's the way to look at it. From a tax perspective, there's no distinct advantage. And all the benefits we are getting under PLI, et cetera, that will continue into the new structure. So I hope that answers the question.

I think we could take coupled from the audience here.

This is Jinesh from Motilal Oswal. My question pertains regarding non-SUV electric products. So why are we not including in this, especially eLCVs and e-3-wheelers also would have a similar impact on -- particularly from a climate perspective. So why BII did not look at that? Why M&M not look at that? And second question pertains to CCPS. So any time lines for conversion of that into equity and any comments on that?

Rajesh, for the first one?

Yes, Jinesh. So on the first one, it's something we've thought about as we understand this business better, including the decision to recently a year back, make last mile mobility a distinct vertical. We realize that the nature of costs and cost management in different business verticals is very different. The level of technology evolution that is needed to do a SUV high end is very different. I'm not saying which is better, but is different. You need a different offering for a customer who's looking for a 3-wheeler or a small 4-wheeler last mile from somebody who's looking at a mainstream pickup from somebody who's looking at a personal usage, lifestyle SUV. The thinking, the channel, the way you market, the way you said is very different. And the only area of potential synergy is in the carryover usage of cells and cell maybe battery packs in some cases, depending on the size of the platform. That synergy we will enable anyway, irrespective of in which company the business sits. So really, when we got into this, the thinking was, let's stay focused. Each of these business verticals has a purpose. We've been in earlier meetings talking about the purpose of the SUV business. It is about creating authentic adventure capable vehicles. And we want everybody who works in that business to think along the lines of delivering that for customers and not confuse that with then creating a product which is really about enabling prosperity for a customer, which is what the last mile mobility business is. So we really see this as very different business offerings, and we don't see value in merging it and defocusing an organization and people capability.

On your question on the CCPS conversion. The way we've currently structured the transaction is the CCPS are proposed to be converted after FY '27. But we have built in the flexibility in case of certain milestones are achieved ahead of time, the CCPS can convert into equity earlier as well.

Yes. Samir, anything you want to add to that?

Maybe just to say that from our perspective, the other really important developmental aspect behind this transaction is to capitalize the market. As we talk about the automotive sector, the automotive sectors and ecosystem made up of multiple different actors, and it really takes the OEMs to who are the cornerstones of the ecosystem to capitalize the entire chain from auto components to battery charging to the kit manufacturers who at some point, battery manufacturing as well. So for us, it's really, really exciting to partner with Mahindra in an OEM because it will then lead to the development of this huge ecosystem benefits with all of the attendant job benefits, which would all be sort of future proof jobs. That was a really important priority for us.

Yes. [ Ketan ] here from Economic Times. Just wanted to understand what part of value chain will Mahindra Group be participating in as we just heard about right from battery manufacturing, cell localization, how vertically integrated will Mahindra be as you look towards a 2 lakh kind of volumes in the next 5 years? Because costs are -- cost is still a big challenge when it comes to vehicle acquisition. So how vertically integrated you're going to be? And are you going to be investing in cell localization in batteries? And what all part of the value chain that you'd be getting to charging infrastructure? And what's the plan on vertical integration?

No, [ Ketan ] and we -- let's try and respond by eliminating some. No plans to invest in battery charging infrastructure. Enough people, at least at this point of time, who're going to do that. And we believe that there will be a strong charging infrastructure ecosystem that will get created in the next 2 to 3 years. And we don't see at this point of time value in diverting ourselves there. The rest of the decisions become the typical make versus buy decisions that any automotive company goes through. And that methodology doesn't change dramatically just because it's an electric vehicle, right? So should you make your own diesel engine or should you outsource it? That's a commercial decision that you're going to make from time to time. And that this is how it will be for cell manufacturing and so on. We have already announced that we are in conversation with an initial agreement with Volkswagen and maybe a few others. And we'll see how that plays out by way of plans to localize, et cetera. But clearly, the partnership is the -- will be the mantra there and certainly not something we're going to do on our own.

This is Sumantra Barooah from ET Auto. One question each for BII and M&M. And first of all, congratulations on the development. The question for BII is as the electric mobility megatrend progresses in India and also that and outside of it also, there is a strong increasing focus on going carbon neutral, do you see more opportunities for investments in the auto stroke mobility space? Or will this -- especially in the EV space or will this investment -- will the investment in the EV space will be exclusively limited to M&M? And the question for M&M is Anish, if I followed your comment correctly, the EV Co. will remain focused exclusively on SUVs as M&M? And in terms of your overall share of EVs in your whole portfolio will be in the tune of about 30% or so by F '27?

Yes. Samir?

Sure. So as I said, I think the EV value chain from end to end is going to need a lot more capital over the next 5, 10 years. So we will continue to look at other places -- other spaces within the EV value chain as well, whether it's auto components or battery recycling or things that we think can support the development of the overall sector.

And Sumantra to answer your question, yes, we will focus on SUVs, which is our strength. And our estimation of penetration of electric as part of our total SUV portfolio is 20% to 30% by 2027. There are obviously going to be a number of external factors that will influence that as well, which will include the setting up of infrastructure. And therefore, you see the range in valuation as well, which is dependent on the penetration of electric into the total portfolio. At a 30% penetration, the valuation is $9.1 billion, and that could be lower at a 20% penetration.

We'll take 1 or 2 questions from the online attendance. There's a question from Sanjay C of Emkay Global. What are the typical equity IRR or hurdle rates the company has for such projects? Does EV business plan assume debt financing as well in addition to INR 80 billion of equity infusions over the next 5 years?

Samir, may I transfer the IRR hurdle question to you, and then we'll talk about the debt versus equity financing?

Sure. Yes. I guess I would just say that the equity IRR that's we would be expecting would be in line with other private equity investments.

Thank you, Samir. And with regard to the debt versus equity, what we have put out as we put in the capital slide as well, is we have talked about F '22 to F '24 requiring INR 4,000 crores for EV. This is what we had put out a couple of months ago as well. Nothing has changed on that front. What we have now for F '25 to F '27 is an additional INR 6,000 crore. And let me get all the numbers sorted out. So F '24 itself is INR 2,000 crore. Why don't we put that slide up again, if we can? Or if that's difficult, I'll explain through that. So F '22 to '24 is INR 4,000 crore, of which F '24 itself is INR 2,000 crore. That INR 2,000 crore plus the INR 6,000 crore for F '25 to '27 gives us INR 8,000 crore. In total, it's INR 10,000 crores. So that's how the numbers work out. And -- we may look at taking debt from an M&M standpoint. Typically, we have not really been a company that's taken a lot of debt. But at this point in time, our cash generation as [ Kapil ] outlined as well, is very sufficient to meet all the needs that are required for EV. And as we bring in future investors as well that will only add to it.

Thank you. There's a question from Mukul of Mobility Outlook. How much revenue we'll be expecting from India and how much from exports in terms of EVs? Right, should I repeat the question? Mukul from Mobility Outlook. How much revenue will you be expecting from India? And how much will come from exports in terms of EVs?

The business plan that we've worked on is primarily on domestic volumes. The exports are upsides on top of that.

Okay. Can we have a question? Yes...

Can you hear me? Hello? Yes. Could you just throw some light on the last-mile mobility division as well because that's a big focus area from Mahindra's perspective? And that was kind of merged back into M&M Limited or that's the plan. How are you going to ensure 2 different businesses? And do you see any synergies there they're going to be operate differently and some prospects on the last mine mobility business?

The last-mile mobility business is primarily the electric 3-wheeler business. It also has ICE 3-wheeler in the division definition. The business is doing extremely well. In the electric 3-wheeler space, we have a market share of over 70%. Last month, we did as high as 2,600 numbers in 1 month of electric 3-wheelers. We see a very strong traction in that segment, and we would expect the volumes to keep going up rapidly. So as Anish said, we'll wait and play that story out another day. Today is about what we are doing in the SUV electric space. But just to give you reassurance, we have a very strong story there as well.

So just a clarity, when we say 4-wheel, there's mini truck space as well, which is garnering a lot of interest from a lot of last mine mobility providers, one of our arrivals, did get a massive order of almost 40,000 mini trucks EV. Is that a focus area for the future? And will that be then part of the last-mile mobility business? Or do you see that as a separate or probably getting merged into the 4-wheeler company, as you see?

Sorry, I didn't get you completely, but are you talking about the smaller cargo 4-wheeler kind of products?

Yes, mini trucks, mini trucks EVs?

Yes. So let's say, a Jeeto kind of product or an electric Jeeto kind of product with time will -- could be part of the last-mile mobility business, depending on how the application user evolves. Right now, the way last-mile mobility is defined as purely 3-wheelers. But as customer usage changes, we may move some small 4-wheelers into that segment.

This is Hitesh from Kotak. Just one -- sorry, from CLSA. My question is on tax arbitrage. So we are seeing that tax incentives are going away in EVs and especially SUVs, right, which is catering to a rich audience in India, right? So if the tax normalizes from 5% GST to 28%, is that built in your business model? When you're talking about 20%, 30% of shift happening in SUVs or it is built on the current tax structure?

Yes. So to build on that, we've got to see why electric is a significant growth story from the Indian government context. We believe that energy security is a key priority. There is a huge economic benefit to the country by way of reducing crude consumption apart from all the commitments around climate. We strongly believe that the government will be very focused on driving EV penetration for all the above reasons. And if they were to hence stay focused on that, they would have to create an enabling environment till EV penetration reaches a certain critical mass. So yes, we are assuming that the tax benefits and the funding support will stay. PLI, we are assuming based on realistic assumption for the time and the period the PLI will be available. We also believe that with time, cost of electric scaling up will come down as in the next 2, 3 years, technologies reach a more mature and stable level and the cost of technology and hence, the offering will come down. which will anyway make EVs more affordable from a customer standpoint. There's a huge customer value proposition, which is total cost of ownership because of having to not spend on the fuel that they use and the customer will, once they get used to buying EVs, start building that into the calculation as well. So we overall think the EV story is very strong from a customer standpoint going forward.

Just one follow-up question. Samir, this questions to you. This is -- this transaction is slightly unique in the sense that you are investing before the launch of the product compared to some of the other transactions which have taken place. So what I wanted to know is what are the top 2 or 3 things that gave you confidence to go ahead with this investment because we have not really seen the product?

I guess I would start by saying that we have spent a lot more time and the team has been very gracious in giving us their time over the last few months very intensively. So what we see is very different from what you see. Therefore, while there is no product on the market, I think we got very comfortable with the development and the work that the team has put in to ensure that they will have a product on the market very soon and then the plans thereafter.

I just want to add one thing here. So look, we're not backing an upstart company here. This is an established organization for a long period of time and a market leader. So that gave us a lot of confidence.

Kapil, just to build on what Samir said, they have had visibility to what a lot of you are going to see on 15th August. So they have seen the product portfolio and what's going behind the platform. So through the NDA process, we have enabled that. So and that's why somebody saying that what he's seen you haven't seen yet.

Okay. I look forward to that.

And I would also add that the other factor in this also is success of our current product portfolio and the launches we've had because for any investor, that gives a lot of confidence as well saying that yes, you've been able to do 5 blockbuster launches. Some of those may have certain forms in electric in future as well, and therefore, that success can carry forward because electric is a powertrain. At some point in time, that's going to be similar across everyone. As you go from petrol to diesel, yes, at some point, you had the question around the diesel engine and what was it engine like, et cetera. Beyond the point, it was what's the car like. So that gives a lot of confidence as well.

Yes, [indiscernible]

Yes, I just wanted to understand, [ Shale ] from Business Standard. I just wanted to get a sense whether EV Co. will only focus on the personal segment? Or at some point, it will look at catering to the commercial segment as well. If that's the case, will it limit the kind of volumes the entity will look at?

Only personal segment.

And the next question is for Samir. I wanted to understand if BII can have -- make similar investments in other auto firms or is it exclusive kind of an agreement? I mean you did talk about making investments in the value chain in the entire EV space, but something similar, are you open to doing that?

Yes, we're not looking at anything else. This is a very meaningful investment for us. This is one of our -- it's going to be one of our largest investments. So I think the goal for everybody is to make sure this is a success, which we have no doubt it will be.

Yes, please. Go ahead.

Can I go ahead? This is Lalatendu from the Hindu. I just want to know the first range of funds will come by June next year. So what is the road map for the new EV company until then?

Maybe I'll answer the first part. The first tranche of funds, the latest time which they will come is before June, but it could come much sooner than as soon as we complete certain approvals in certain conditions resident, which are standard in the nature of this transaction. Maybe you want to talk about the road map, Rajesh?

Yes, it's just the formation of the company transferring the assets, getting the related party documents in place. All of those things just need to get done. And our senses will be much earlier than June. It's not going to wait till June.

Have you thought about a name of the company, new company?

No.

Any suggestions are welcomed.

This is [ Swaraj ] here from the Hindu Business Line. Just keen on knowing whether Pininfarina will be part of this deal?

No. Pininfarina is not a part of the deal.

Okay. And secondly, with the road map of the new EV company, is listing a part of that road map?

I think our first goal is to get to a 20% to 30% penetration. The rest of the story will come after that.

Go ahead.

Yes. This is Nishit from Axis Capital. Two-part question. Firstly, you have talked about INR 8,000 crores investment over FY '24 to '27, will this suffice for all the 5 model launches and developments, including the 4 BEV models that you have talked about? Or do you think that 4 new platforms and all will require much more investment? That's one. Secondly, did you ever consider of raising a higher quantum of money given a higher need of investments? Or do you just think that probably at a later stage, you will get more valuations as the success comes through? Because in the overall context, INR 2,000 crores is not that big a number compared to given the kind of need of investment that you will need in the EV business?

So first, the capital required has been outlined. And our assessment at this point in time is that, no, we will not need more capital for the 1 plus 4 models that are going to be launched. The benefit in EV is you can do a lot with 1 platform as well, and more details will be shared and that will give more clarity on why that is the case. So from a capital standpoint, don't require more. To the next part of your question, it's based today on the fact of why should we dilute more today? We feel there's a much greater story here. We feel there's a much greater valuation here in the future. And we are very comfortable with the capital position. We have a very strong partner like BII, who's coming with us already. So we don't have the necessity to dilute today. We will look at that in the next 6 to 18 months in the time frame where we can show a little more progress. We may look at higher valuations. And we will look at other partners coming in, but we want to do that gradually. We don't have a need to do it right now.

Saurabh this side from Ambit Capital. So first of all, congratulations team on this deal. So I just had one question for Samir. So I wanted to know if you guys have any investments in your fund, in the auto ancillary or other auto space, which could be probably be leveraged by Mahindra & Mahindra in its venture?

No, as of today, we don't have any other direct investments in auto components. But to the extent that we do make any then, clearly, we look to see how we can support M&M in this venture as well.

Are there any other questions? We have covered most of the questions from the online as well. So if there are no other questions, then we can close the session. Yes. I'd like to invite my colleague, Sriram for the vote of thanks.

Thank you, [ Pramosh ]. Thank you all friends from media, investors and analysts for taking your time and being here. I know it's a very short notice and you have to juggle your calendar and be here. Thank you. Also, a lot of you have been asking questions about our EV journey. And I'm sure you would have got more clarity. And going forward, on August 15, we will talk more about it. A big thank you for all those who joined through the web link. I'd also like to thank Honorable Deputy Commissioner Alan for being here. It's a great honor for us to -- for you to participate here. We also would like to thank Srini and Samir who are providing the BII perspective without which the event would not be complete. Thank you. And special thank you for Samir. Probably we made you start your business day very early. Thank you. Thank you for being here. Last, but not the least, like to thank Anish, Rajesh, Puneet and Manoj for good presentations and Q&A sessions. Thank you, everyone, and we also like you to join us for the lunch, which is just outside this hall. Thank you. Thanks.