On Tuesday, Mahindra and Mahindra revealed that it has engaged in an agreement to transfer assets between itself and its wholly-owned subsidiary, the electric vehicle (EV) subsidiary. The assets to be transferred consist of specific, identified assets that pertain to the development of four-wheeler passenger electric vehicles, specifically assets related to capital work in progress.
This agreement highlights a move by Mahindra and Mahindra towards further investment in the electric vehicle sector and is expected to streamline operations and enhance efficiency within the company’s EV subsidiary. By transferring these identified assets, the parent company is effectively consolidating its operations in the electric vehicle market under the umbrella of its wholly-owned subsidiary, which is solely focused on the development and production of electric vehicles.
The asset transfer agreement is an important strategic move for Mahindra and Mahindra, as it allows the company to better allocate resources and optimize its business operations in the electric vehicle sector. This move underscores the company’s commitment to the growing market for electric vehicles, and positions Mahindra and Mahindra as a key player in the development and production of electric vehicles in India and globally.
In October 2022, Mahindra Electric Ltd. established a wholly-owned subsidiary called Mahindra Electric Automobile Ltd. (MEAL), to which the remaining assets will be transferred by June 2026. The assets are currently classified as “capital work in progress” for the financial year 2022 and represent an investment of approximately ₹230 crore, equivalent to 0.6 percent of the company’s net worth.
According to Mahindra and Mahindra’s filing, the company has invested around Rs. 230 crores in assets that are categorized as capital work in progress in the audited Financial Statements for the year ended on March 31st, 2022. This investment represents approximately 0.6% of the company’s total net worth as of March 31st, 2022
In July of the previous year, Mahindra & Mahindra disclosed its plans to transfer assets pertaining to its four-wheel passenger electric vehicle business to a new entity, which would be established as a wholly-owned subsidiary, named MEAL. The company has entered into a share purchase agreement with British International Investment Plc to secure investments worth ₹1,925 crore for MEAL.
As per the investment plan, the total investment of ₹1,925 crore in MEAL was supposed to be made in two tranches. The first tranche, amounting to ₹1,200 crore, was initially scheduled to be invested by June 2023, but now it has been extended to March 31, 2024. The second tranche, which is ₹725 crore, will be completed by July 1, 2024, subject to the achievement of milestones. Previously, the company had only specified that the second tranche would be completed in financial year 2024, without specifying the exact date.
According to the filing, the investment in MEAL by both Mahindra & Mahindra and BII will be made in two or more tranches, with an investment of up to ₹1,200 crores expected to be completed by March 31, 2024, subject to the fulfillment of conditions precedent. The remaining investment of up to ₹725 crores will depend on the achievement of milestones and is expected to be completed by July 1, 2024. As of the time of the filing, the company’s stock was trading 0.44% lower at ₹1,345.85 on the BSE.