Mahindra & Mahindra Ltd (M&M), India’s largest utility vehicle maker, picked up a 55 per cent stake in REVA Electric Car Company (RECC), the Bangalore-based manufacturer of electric cars, for an undisclosed sum.
This marks M&M’s foray into the alternative fuels technology space.
M&M picked up the stake from the Maini family through a combination of equity purchase and fresh capital infusion of Rs 45 crore.
After today’s development, M&M will hold a 55.2 per cent stake, the co-founder Maini family will hold 31 per cent and 11 per cent will be held by REVA’s co-promoter, Longbell. The balance 2.8 per cent will be distributed to the employees of RECC in the form of stock options.
The authorised capital of REVA would be Rs 135 crore and paid-up capital Rs 20 crore in the new entity.
The buyout makes the Mahindra Group a strong global player in the small but growing electric vehicle segment. Till now, REVA is the single-largest seller of electric vehicles worldwide.
RECC will hence be known as Mahindra REVA Electric Car Company Ltd (RECC) and it will function as a subsidiary of the $6.3-billion Mahindra Group.
RECC Deputy Chairman and Chief Technology Officer Chetan Maini will now become the chief of technology and strategy. His brother, Sandeep, who was chairman till now, will remain as a director on the company’s board.
“It’s the right decision for us to part with the company...the strong brand image and the distribution network of Mahindra will help us to expand the market of REVA. We will leverage their strengths in sourcing parts as well to bring down the cost of the product for the end customer,” said Chetan Maini.
The development has raised speculation that General Motors (GM), which had signed an agreement with RECC last September to jointly develop and manufacture electric vehicles, may consider pulling out of the project.
“We have no problem with GM continuing its association with REVA. It is up to GM to decide on its deal with REVA,” said Pawan Goenka, president (automotive and farm equipment) M&M.
Earlier this year, RECC had bought back stake from both the private equity players, Global Environment Fund and Draper Fisher Jurvetson, who had invested in the company in 2006.
“We are not in a position to disclose the value of shares bought from REVA. This is a strategic acquisition for us in our march towards sustainable mobility solutions. We will benefit from REVA’s electric vehicle (EV) technology for our own products as well. Presently, REVA is the best technology available in the EV space,” Goenka said.
Post the buyout, the board of Mahindra REVA has been reconstituted under the chairmanship of Goenka. The new board includes five nominees from M&M, two from the Maini family — Chetan and Sandeep — and one from California-based AEV LLC, the other co-founder of REVA.
An independent director will be added to the board later.
Rajesh Jejurikar, chief executive (automotive division) and member of the group executive board, M&M, said the company was yet to work out a new brand name for the new entity and logo for the cars that would be sold. However, the names of Mahindra and REVA would appear on the new brand name, he added.
The vehicles will be sold through the vast sales network of the Mahindra Group across the country and overseas markets like Chile, Brazil, Italy, Spain, France and South Africa.
To start with, Mahindra aims to sell REVA models at its select outlets in major metros. The company will expand its sales once the production is ramped up. At present, Mahindra has 170 dealers that sell its SUVs and MUVs range of vehicles.
Over the next five to 10 years, worldwide sales of electric vehicles is expected to touch 1.5 million to 2 million units. By 2020, the country’s electric vehicle market is expected to see a sales of around 80,000-100,000 units per annum and about 50,000 units would come from the Mahindra stable alone, Goenka said.
M&M has been working on developing vehicles using greener fuels and has an electric variant of its three-wheeler commercial vehicle ‘Bijlee’. It is also working on rolling out the electric version of its mini-truck.
REVA, which has a production capacity of 6,000 units per annum, has so far sold over 3,500 vehicles in 24 countries. It is in the process of setting up its second manufacturing unit with an annual capacity of 30,000 units.