Temasek’s investment in Mahindra’s EV unit align to its investment strategy with up to 200% estimated return in the next five years

SINGAPORE – Temasek’s investment in Mahindra Electric Automobile has a good chance of producing a 100% to 200% return in the next five years as the company is well positioned to be a dominant four-wheel electric vehicle (EV) manufacturer.

According to former investment banker and high-net-worth private investor Ian Yoong Kah Yin, the Singapore investment firm’s investment in Mahindra is a big vote of confidence for the EV manufacturer in one of the fastest-growing and largest automotive markets in the world.

He said Temasek recently indicated its plans to allocate more funds to private equity. It is one of the largest sovereign wealth funds in the world with an ethos of corporate governance.

“Temasek recently announced that it has shifted from 80% public equities to about 47%. According to Temasek, the private markets are where institutional funds get the biggest returns,” he told Gutzy Asia.

He said India’s EV market is small but growing.

“Mahindra is aggressively trying to lift the share of its electric SUVs in a market that is dominated by larger rival Tata Motor.

“Mahindra Electric Automobile enjoys significant benefits by leveraging on its parent’s significant presence in the automotive market in India.

“Temasek’s investment should prove to be prescient as India’s economy is expected to experience strong growth over the next decade,” he said.

India’s forecast GDP growth is 6% from 2023 to 2028. The growth in India’s EV market will be astronomical over the next few years, Yoong added.

“In addition, Mahindra & Mahindra is the market leader in the highly fragmented electric three-wheeler market that grew 115 per cent in volume year-on-year,” he said.

Temasek will take up to a 3% stake in Mahindra and Mahindra’s EV unit at a valuation of up to US$9.8 billion, the Indian automaker said on last Thursday (3 Aug).

Temasek will invest 12 billion rupees (US$144.9 million) as compulsorily convertible preference shares, giving the investor a 1.49% to 2.97% stake in Mahindra Electric Automobile, the automaker said in a regulatory filing.

With Temasek, the automaker has brought onboard a “marquee investor” with strong governance. It will also help Mahindra Group strengthen its global strategic partnerships, according to Reuters.

Mahindra had been in talks with global investors, including green funds and private equity players for nearly a year to raise between US$250 million and US$500 million to accelerate its EV plans.

Mahindra raised the first round of money for its EV business from British International Investment, which has committed to investing in tranches of up to US$250 million at a valuation of US$9.1 billion.