M&M Shares Open Flat After Buying Aerospace Subsidiary

M&M needs more than an EV fundraising to get investors' attention.

Shares of Mahindra & Mahindra (M&M) opened flat on March 27 after the company increased its stake in its subsidiary Mahindra Aerospace Private Limited (MAPL) from 91.6% to 100%. The cash consideration for purchasing 7.68 crore shares in MAPL is approximately Rs 31.5 crore.

M&M opened at Rs 1,140, ​​nearly 1% lower than its previous close. At 10:20 am, it was trading at about the same price.

According to exchange filings, MAPL, through its subsidiaries, is directly engaged in the research, design, manufacture, operation, assembly and maintenance of various aircraft components and structures. Its FY22 turnover was Rs 98.21 crore.

BofA Securities has downgraded the stock to “neutral” with a target price of Rs 1,320. Brokerages said the stock could be in for a pullback period, with no meaningful catalysts for a big upside.

However, Motilal Oswal Financial Services expects the stock to rise by more than 33%, giving it a target price of Rs 1,525 in its latest report.

M&M has been raising investments to further its electrification goals. It recently raised around Rs 600 crore from the International Finance Corporation (IFC) for NewCo, the company’s last-mile mobility subsidiary. NewCo will help drive the electrification of affordable small commercial vehicles.

M&M has secured an investment commitment of Rs 1,925 crore from UK-based International Investment Corporation in 2022 for its electric vehicle company EVCo. M&M will transfer its electric four-wheeler assets to EVCo, which will be done in stages.

According to analysts, M&M is also exiting its non-core business to invest in its core business. It recently reduced its stake in Mahindra CIE from 9.25% to 3.19% at Rs 357.39, or close to a 10% discount to the prevailing market price.

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