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UK’s development finance institution British International Investment (BII) will invest Rs 1,925 crore into a new dedicated, four-wheeler electric passenger vehicle arm which Mahindra and Mahindra (M&M) will incorporate, the company said in a late night notification. M&M and BII will invest $250 million each into the new entity called EV Co. at a valuation of Rs 70,070 crore ($9 billion). The two companies have signed a binding agreement for the same.

M&M joins Tata Motors and a host of other companies including Ashok Leyland and TVS Motor Co that have either got external investors for a dedicated EV arm at an attractive valuation or are in the process of concluding such deals. A clutch of other legacy automobile firms are set to take a similar funding route as they brace to make a transition from the conventional-fuel based vehicles to electric vehicles.

The announcement comes ahead of M&M's planned EV strategy it would announce next month. Last month, M&M said the company's first "born-electric" concept will break cover on August 15, 2022. This will be one among the several such models M&M would bring starting 2025 as it seeks to enter the race for pure battery propelled vehicles. The event will take place at its newly opened design studio in Oxfordshire, United Kingdom, which has been instrumental in designing these concepts. This will be followed by a reveal of the electric XUV 400 in September 2022. M&M envisages 20 per cent to 30 per cent of Mahindra SUVs to be electric by 2027. The EV Co "will significantly leverage the broader manufacturing capabilities, product development, design organizations along with the ecosystem of suppliers, dealers, and financiers of M&M," the statement said. The funds will be utilised primarily to create and market a world-class electric SUV portfolio with advanced technologies.

BII will make the aforesaid investment in the form of compulsory convertible instruments at a valuation of up to Rs 70,070 crore, resulting in 2.75 per cent to 4.76 per cent ownership for BII in the EV Co. The EV Co. will focus on four-wheel (4W) passenger electric vehicles.

The total capital infusion for the EV Co. is envisaged to be approximately Rs 8,000 crore/$1 billion between FY24 and FY27 for the planned product portfolio.

“In BII, we have found a like-minded long-term partner who is committed to combating the climate emergency. The Mahindra Group aims to be Planet Positive by 2040. Mahindra has been a pioneer in the electric vehicles space, and we are confident we will be the leaders in the electric SUV market in the future," Anish Shah, MD & CEO, M&M said in the statement.

M&M and BII will work jointly to bring other like-minded investors in the EV Co. to match the funding requirement in a phased manner, the statement said. BII’s investment is designed to significantly accelerate the availability and adoption of electric vehicles in India and other markets served by M&M, the company said.

The investment alongside M&M in the new EV company supports BII’s undertaking that at least 30 per cent of its total investments will be in climate finance.