M&M’s electric, SUV focus driving gains for the stock on Dalal Street

The M&M stock kicked off trade on a strong note and has maintained a steady pace in intra-day trade on July 8 as the market responded to the British International Investment’s strategic investment. BII will invest up to Rs 1,925 crore in the form of compulsory convertible instruments at a valuation of up to Rs 70,070 crore.

The OEM is hiving off its electric four-wheeler passenger vehicle business into a wholly owned subsidiary (EVCo), in sync with how we saw some other Indian OEMs approach the electrification plan. The TPG Rise-backed Tata Passenger Electric Mobility will be investing $2 billion in EVs over the next few years with the objective to be a global player.

BII’s investment will lead to a stake in M&M’s new EV arm ranging between 2.75 - 4.76 percent. ownership for BII. M&M’s current market capitalisation around Rs 135000 crore ($ 17.7 billion) and the total capital infusion in the new arm is envisaged to be approximately Rs 8000 crore ($1 billion) between FY24 and FY27.

Needless to mention that this augurs well with the other key positives driving the stock’s upward trend. There has been a sharp improvement in its auto business EBIT driven by gains in market share, especially in SUVs and a cyclical recovery in LCVs. The volume and pricing recovery in tractors and the series of capital allocation decisions also enhanced the Return on Equity for the M&M stock.

M&M finished FY22 with a market share close to 40 percent in the in the large SUV segment (just behind Toyota) and its share so far, this fiscal-FY23 is at 48 percent making it the leader in the segment. The company shared that the current orderbook is robust on the back of over 143000 bookings for all of M&M's blockbuster launches including the XUV700, Scorpio-N.

Coupled with this, Rajesh Jejurikar - Executive Director, Auto & Farm Sectors, M&M also said that, “The EV SUV segment is at a inflection point and the penetration will go up in the next three years; By FY27, M&M targets selling 200,000 EVs at 17,000 per month.” This will also help in driving up the growth in market share and maintain the steady trajectory of the stock. 

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