Mahindra buys 55% stake in electric car co Reva

(From left) Mr Chetan Maini, Chief of Technology and Strategy, of Mahindra REVA; Dr Pawan Goenka, President (Automotive and Farm Equipmnet Sector) Mahindra and Mahindra; Mr Sandeep Maini, Director, Mahindra-REVA; at a press conference in Bangalore on Wednesday. – G. R N Somashekar

source :BLBureau:Bangalore, May 26,2010

Country's largest utility vehicle maker Mahindra & Mahindra on Wednesday said it has bought a majority, 55.2 per cent, stake in Maini Group's Reva Electric Car Company as it expects alternative technology to drive a large part of global vehicle growth in the future.

But post this development, Reva's tie-up with General Motors to produce Spark electric vehicles has turned shaky. General Motors had earlier said that it will launch its electric car in association with Reva towards the end of this year.

But an official with Reva said that the company will have no problems if GM continues the association.

New beginnings

Announcing the new joint venture with Reva to presspersons, Mr Pawan Goenka, President of Automotive and Farm Equipment sector, Mahindra & Mahindra, the foray into electric vehicles may not lead to immediate benefits or profits but the company is betting big on hybrid as well as electric technology.

Mr Goenka said M&M will own 55.2 per cent in the joint venture, which has been named Mahindra Reva Electric Vehicle Company, through a combination of equity purchase from the promoters and a fresh equity infusion of over Rs 45 crore into the new company. He did not disclose the amount of money paid to buy the stake in Reva.

The board has also been reconstituted with Mr Goenka as the chairman of the new company.

The board will have five directors from Mahindra & Mahindra, two from the Maini Group, one from the US-based AEV, an existing equity partner, and one independent director.

Reva's history

Before the acquisition of stake by Mahindra & Mahindra, the Maini Group bought over stakes from two private equity funds, Global Environment Fund as well as Draper Fisher Jurvetson in Reva increasing its stake in the company to over 80 per cent from about 30 per cent. After the acquisition of the stake by M&M, the Maini Group has a 31 per cent stake in the company while AEV has 11 per cent and the rest is with the employees.

Both the PE Funds invested a total of about $20 million in the company in 2006.

The authorised capital of the new company is Rs 135 crore and the paid-up capital Rs 20 crore.

Future plans

Explaining the reason behind Reva's decision to sell its stake to Mahindra & Mahindra, Mr Chetan Maini (who founded Reva), its chief of technology and strategy, said the EV market was poised to grow significantly and “we concluded that in order to seize the opportunity, we needed the resources and experience of a major automotive manufacturer.”

Mr Goenka said that with this acquisition, M&M will get a lead of three-four years in the electric vehicle space. He said the company expects to sell about 50,000 electric vehicles from the Reva stable in about seven years.

Before the new joint venture, Reva sold a total of about 3,500 cars since 2001. Mr Goenka said Reva's technology will be used for the manufacture of its three-wheeler Bijlee vehicle as well as its mini-truck Maxximo.

An analyst with Angel Broking, Ms Vaishali Jajoo, said that the acquisition of the stake in Reva was part of a long-term strategy for M&M to become a global player, as vehicle manufacturers in the US as well as in the UK are readying to launch more hybrid as well as electric cars.