Canada-based Ontario Teachers’ Pension Plan Board (OTPP) will buy a 30% stake in Mahindra Group’s renewable energy platform – Mahindra Susten – for `711 crore.
The parties have signed binding agreements pursuant to which Ontario Teachers’ will buy the Mahindra Susten stake at an equity value of Rs 2,371 crore.
Regulatory filings show that Mahindra Susten and OTPP’s arm 2452991 Ontario (2OL) have inked share purchase agreement and shareholders’ agreement under the strategic partnership.
The platform – Mahindra Susten – includes renewable engineering, procurement and construction businesses with capacity constructed of over 4 GWp and an independent power producer business with about 1.54 GWp of operational solar plants. OTPP is a global investor with net assets of C$242.5 billion.
The companies will also set up an Infrastructure Investment Trust (InvIT), including renewable power assets seeded by MSPL with operational capacities of about 1.54 GWp, by FY24, Mahindra said in a regulatory update.
“This transaction will enable Mahindra Susten to build a strong renewable energy business focused on solar energy, hybrid energy, integrated energy storage and round-the-clock green energy plants,” it said.
Consequent to the stake sale, Mahindra Susten would cease to be a wholly-owned subsidiary of Mahindra Holdings. However, with the latter holding more than 50% of equity share capital, the platform would continue to be a subsidiary.
As part of the transaction, shareholder loans of Rs 575 crore advanced by Mahindra Group to the platform would also be repaid. Following the deal, Mahindra Group will receive about Rs 1,300 crore (sale of 30% stake and repayment of loans).
Mahindra will deploy Rs 3,050 crore (Rs 1,300 crore from the stake sale and an additional Rs 1,750 crore) into the business and InvIT over the next seven years. On its part, Ontario Teachers will infuse an additional amount of up to Rs 3,550 crore during the same period.
Mahindra will also sell an additional 9.99% stake in Mahindra Susten to any investor, or 2OL, by May 31, 2023, based on mutually agreed considerations, the statement added.
“The partnership with Ontario Teachers’ will enable the Mahindra Group to unlock value in the renewable energy sector with continued joint investments towards accelerated growth. Mahindra Group aims to be Planet Positive by 2040 and the continued inflow of patient, long-term capital in our climate positive businesses is validation of our commitment to be a global Environmental, Social and Governance leader,” Puneet Renjhen, member of Group Executive Board and executive vice president, EVP, Partnerships & Alliances at the Mahindra Group, said.
Avendus Capital was the financial advisor and Khaitan & Co the legal advisor to the Mahindra Group, while Ambit was the financial advisor and Cyril Amarchand Mangaldas the legal advisor to Ontario Teachers’ for the transaction.
“As part of our climate change strategy, we have committed to continue growing our portfolio of green assets around the globe with investments like Mahindra Susten. This strategic partnership marks the beginning of what we hope will be a long-term and mutually beneficial relationship with the Mahindra Group,” Bruce Crane, senior managing director, Asia Pacific, Infrastructure & Natural Resources at Ontario Teachers, said.
As per the updated Nationally Determined Contributions of the United Nations Framework Convention on Climate Change, India has committed to reduce emissions intensity of its GDP by 45% by 2030 from its 2005 levels, and achieve about 50% cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030. These are steps towards achieving India’s long-term goal of reaching net-zero by 2070, which will give a fillip to the renewable industry in the country.