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Samvardhana Motherson will invest $15 million for an 11% stake in REE Automotive. The deal includes supply chain management to support REE’s commercial EV platform development.
Samvardhana Motherson Ltd. announced its plans to invest $15 million for an 11% equity stake in REE Automotive Ltd., a Nasdaq-listed company specialising in modular platforms for electric vehicles (EVs). This acquisition represents a fully diluted basis, while a 19% stake is secured on a non-diluted basis.
The transaction will take place through Samvardhana Motherson’s subsidiary, MSSL Consolidated Inc., or its affiliates, marking a significant expansion into the electric vehicle industry. As part of this deal, Samvardhana Motherson will subscribe to over 36 lakh Class A Ordinary shares of REE Automotive at a price of $4.122 per share.
REE Automotive, headquartered in Israel, designs and integrates vehicle components into modular platforms tailored for commercial electric vehicles, particularly in last-mile delivery solutions. The company’s unique technology consolidates vital vehicle systems—steering, brakes, suspension, and powertrain control—into a compact module. This innovation is protected by a portfolio of 175 registered and pending patents globally.
REE Automotive reported a modest turnover of $1.6 million in 2023, though it has ambitious growth plans, with an order book for 600 trucks to be executed by 2025. The company operates manufacturing facilities in Coventry, UK, and Austin, Texas, positioning itself as a key player in the commercial EV market.
As part of the investment, Samvardhana Motherson and REE Automotive have entered into a supply chain management agreement. This partnership aims to accelerate the industrialisation of REE’s modular EV platform, with Samvardhana Motherson managing the entire supply chain. This includes sourcing, integration, and module management, giving Samvardhana Motherson exclusive control over REE’s supply chain operations.
The cash transaction is expected to close within 30 days, contingent upon fulfilling all necessary conditions. The move into the electric vehicle sector aligns with Samvardhana Motherson’s broader diversification strategy, but concerns have been raised regarding its financial stability. Citi, a brokerage firm, has issued a negative catalyst watch, citing potential pressure on the company’s balance sheet due to additional debt.
With a net debt of ₹16,000 crore and possible equity fundraising leading to earnings per share (EPS) dilution, market analysts have expressed caution. Nonetheless, Samvardhana Motherson's share price has seen an 80% rise in 2024, despite closing 1% higher on Friday at ₹190.
Samvardhana Motherson’s strategic investment in REE Automotive is a calculated move to bolster its presence in the EV market, particularly in the last-mile delivery segment. The company’s involvement in managing REE’s supply chain could provide a competitive advantage as the EV industry continues to expand globally.
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This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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