MAHINDRA & MAHINDRA LTD. | Integrated Annual Report 2022-23

MAHINDRA & MAHINDRA LIMITED 27 5c. Mahindra Last Mile Mobility Limited (“MLMML”): 5d. Mahindra Susten Private Limited (“MSPL”): Mahindra Last Mile Mobility (LMM) has ended Financial Year 2022-23 as the No.1 electric 3-wheeler manufacturer. LMM recently, did the ground-breaking for a new manufacturing unit at its existing plant in Zaheerabad, Telangana. Electric 3-wheelers are one of the leading contributors in automobile electrification in the country with their unmatched Total Cost of Ownership, excellent savings, noiseless and pollution- free drive. These EVs will help accelerate India's emission goals of going carbon neutral by 2070. Being the market leaders in this segment, the Company through MLMML has an opportunity to drive higher EV penetration in this segment and provide a more sustainable as well as profitable option to micro-entrepreneurs. In view of the above, the Company had entered into a Subscription Agreement and Shareholders Agreement with International Finance Corporation (‘IFC’), whereby IFC, in a bid to scale up electric three-wheelers and small commercial vehicles (SCVs) that are more affordable, has agreed to invest upto Rs. 600 Crores in the new company being incorporated as a wholly owned subsidiary of the Company under the name of Mahindra Last Mile Mobility Limited (‘MLMML’), in one or more tranches in accordance with the terms and conditions as stipulated in the aforesaid Agreements, valuing the MLMML at upto Rs. 6,020 crores. MLMML will house the Last Mile Mobility Business of the Company. The Company will also sell/transfer assets and/or Business pertaining to the Last Mile Mobility Business of the Company to MLMML. MLMML will house the LMM division, including three wheelers (Alfa, Treo, Zor) and four- wheeler SCV (Jeeto). The above transactions and IFC’s financing will help scale up electric mobility in last mile connectivity - passenger and cargo segments - while enabling the development and manufacturing of new generation products in this space. Electric Vehicles enable vibration and noise free operations, generate higher earnings for drivers and enable micro-entrepreneurship. The business will further generate employment for women, driving equality and inclusion while bolstering India’s climate action agenda. The Company will be benefitted by using its manufacturing facility at Zaheerabad and Haridwar plant for three wheelers and SCVs. MLMML will be able to utilise the expertise of the Company for manufacturing, sourcing, etc. This in turn will contribute towards Mahindra Group synergy. Transactions with MLMML are expected to grow in future. Keeping in mind the potential quantum of transactions with MLMML over the next few years, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with MLMML as per the limits stated in point 1c. above. MSPL is Mahindra Group's renewable energy platform, which includes one of the leading renewable engineering, procurement and construction ("EPC") businesses (capacity constructed of over 4.3 GWp over its tenure of 11+years), an independent power producer ("IPP") business with around 1.54 GWp of operational solar plants spread across several states in India, and plan to have a significant solar development pipeline. The IPP solar portfolio is spread across 5 key states in India and is backed by long-term power purchase agreements — Over 95% of assets are backed by central government or equivalent entities and the remaining with distribution companies backed by state governments. As part of the strategic plan to growth, the IPP business in future MSPL (along with its shareholders) has created a business plan to add over 5.5 GWP of Renewable Energy Assets over the next 5 years. The strategic direction would also be to sell such built assets after holding them for about 1 or 2 years post execution to an InvIT being created under MSPL and its shareholders sponsorship. During this phase of building Renewable assets, MSPL would need funding as part of its equity contribution towards these projects and also manage interim funding before an external funding is tied up for these projects. Transactions with MSPL are expected to grow in future. Keeping in mind the potential quantum of transactions with MSPL over the next few years, it is proposed to seek approval of the Members for Related Party Transactions entered/to be entered into with MSPL as per the limits stated in point 1d. above. 5e. Sustainable Energy Infra Trust (“SEIT”): Setting up of the InvIT is part of the larger partnership between Mahindra Group and Ontario Teachers’ in the renewables energy sector. The partnership will enable the Company, to unlock value in the Renewable Energy Business, significantly scale up the platform by continuing to invest along with Ontario Teachers' and achieve the twin objectives of accelerated growth and leadership in ESG. The InvIT also enables additional value unlocking by creating the InvIT platform for monetization to a wider set of like-minded investors. Further, the InvIT aids in deleveraging by reducing the consolidated debt of the Company. Besides the specific company-wise justification stated above in point 5a to 5e, the Company benefits through operational synergies, cost optimisation, assurance of product/ service quality, utilising the expertise within the group for manufacturing, sourcing, etc. thereby bringing efficiencies in the businesses, providing enhanced level of user experience to the consumers of the Company to enable achieve growth objectives, access to and utilisation of strong R&D and design capabilities. Financial assistance would drive growth in subsidiary's/associate's business and will enable them to innovate, scale up and pursue growth opportunities in a more focused manner. 6. If the transaction relates to any loans, inter-corporate deposits, advances or investments made or given by the listed entity or its subsidiary: i) details of the source of funds in connection with the proposed transaction; The financial assistance / investment would be from own funds / internal accruals of the Company. The Company would not be incurring indebtedness solely for the purpose of providing financial assistance / making investment. ii) where any financial indebtedness is incurred to make or give loans, inter- corporate deposits, advances or investments, • nature of indebtedness; • cost of funds; and • tenure Not applicable, since the Company would not be incurring financial indebtedness specially for giving financial assistance or making investments. iii) Applicable terms, including covenants, tenure, interest rate and repayment schedule, whether secured or unsecured; if secured, the nature of security Investments by way of subscription, purchase or otherwise in securities / debt instruments and / or providing of loans, advances, and guarantees in relation to above mentioned subsidiaries / SEIT would be in accordance with the provisions of the Companies Act, 2013. The interest charged will be in compliance with the provisions of section 186 of the Companies Act, 2013. The financial assistance in the form of loan / inter-corporate deposit, if any provided, will be on an arm’s length basis considering the following:- i) The nature and tenor of loan/ICD, ii) The opportunity cost for the Company from investment in alternative options, and iii) The cost of availing funds for the Company and for the related party iv) The purpose for which the funds will be utilised by the ultimate beneficiary of such funds pursuant to the related party transaction The funds shall be used for operational activities and other business requirements of the company/SEIT to whom funds are provided and/or for making investment(s) in and/ or providing financial assistance to any of its subsidiaries / associates / joint ventures.