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M&M needs more than just EV fundraising to get investor attention

Last week, Mahindra & Mahindra Limited (M&M) announced that it would be raising money for its EV business. Even though the company’s EV strategy appears promising, it has not yet succeeded in reversing the stock’s subdued performance.

In February, 1,397 shares of the stock fell 17.6% from its 52-week high. In addition, M&M has experienced more correction thus far this calendar year than the standard Nifty Auto index. The possibility that 2023 will be an El Nio year is a major factor that affects investor sentiment. This phenomenon results in a hot summer and a weak monsoon, primarily affecting M&M’s tractor business and other rural-oriented industries. In the nine months that ended in December, the vertical accounted for approximately 53% of the automaker’s Ebit, or earnings before interest and taxes.

Graphic: Mint

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Graphic: o2help

The course of the El Nio risk remains to be seen. However, based solely on EV-related developments, analysts do not anticipate a significant improvement in the stock’s performance in the near future. Newco, M&M’s Last Mile Mobility (LMM) company, received funding from the International Finance Corporation (IFC) on March 22. Small commercial vehicles and electric three-wheelers will be housed in this M&M subsidiary. NewCo will receive 600 crores of IFC funds. IFC’s stake would rise to 9.97-13.64% following the infusion, valuing the company at up to 6,020 crores.

According to Antique Stock Broking analyst Varun Baxi, “values are broadly in line with what M&M’s LMM business is already allocated to, which is part of the core automotive portfolio.” any business partnership. “M&M’s fundraising doesn’t change the game,” he said. In the end, a lot will depend on how quickly the LMM company grows its sales volume. M&M’s total sales of electric three-wheelers during the December quarter totaled 11,800, making it the company’s highest ever. About 7% of the total volume was automotive.

Utility vehicles may see some volume reductions as a result of lower demand and price increases as a result of regulatory changes, in addition to the risk posed by El Nino for the tractor segment. The majority of M&M models’ waiting times are rapidly decreasing, according to Channel Check by Kotak Institutional Equities. Even though this suggests that production levels are recovering, it also suggests that demand momentum is decreasing. “Due to lower volumes and Ebitda margin estimates, we have reduced FY2023-25 per share estimates by 2-3%,” analysts at Kotak stated in a March 22 report. As a result, M&M stock appears to have few near-term catalysts. and few in number.

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