Mahindra Group and Ontario Teachers’ Pension Plan Board have announced a strategic partnership to capitalize on the growing renewables opportunity in India.
Under the proposed deal, the Toronto, Canada-based pension fund will acquire a 30% equity stake in Mahindra Susten Private Limited for 2,371 crore (US$300 million). The transaction also envisages the setting up of an infrastructure investment trust (InvIT) in compliance with applicable regulations of the Securities and Exchange Board of India.
The InvIT is initially proposed to comprise renewable power assets seeded by Mahindra Susten with operational capacity of around 1.54 gigawatts peak. Shareholder loans of 575 crore advanced by Mahindra Group to Mahindra Susten will be repaid.
Mahindra Group will deploy the funds, plus an incremental amount of up to US$220 million, into the business and InvIT over the next seven years. Over the same period, Ontario Teachers‘ has committed to deploy an additional amount of up to US$450 million into the business and InvIT.
Avendus Capital acted as financial adviser and Khaitan & Co acted as legal adviser to Mahindra Group for the transaction. Ambit acted as financial adviser and Cyril Amarchand Mangaldas acted as legal adviser to Ontario Teachers'.
Mahindra Group and Ontario Teachers' will jointly explore the sale of an additional 9.99% stake in Mahindra Susten by May 31 2023.
According to the two companies, the 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.
As per the updated Nationally Determined Contributions (NDCs) of the United Nations Framework Convention on Climate Change (UNFCCC), India is committed to reducing the emissions intensity of its gross domestic product 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. India’s long-term goal is to reach net zero by 2070.
Mahindra Group has a domestic leadership position in farm equipment, utility vehicles, information technology and financial services, the world’s largest tractor company by volume. It has a strong presence in renewable energy, agriculture, logistics, hospitality and real estate.
Mahindra Susten is Mahindra Group’s renewable energy platform, which includes one of the leading renewable engineering, procurement and construction (EPC) businesses with constructed capacity of over 4GWp, an independent power producer (IPP) business with around 1.54GWp of operational solar plants spread across several states in India, and plans to have a significant solar development pipeline.
The IPP solar portfolio is spread across five key states in India and is backed by long-term power purchase agreements – approximately 75% of assets are backed by central government entities and the remaining with distribution companies backed by state governments.
Ontario Teachers' is a global investor with net assets of C$242.5 billion (US$182 billion) as at June 30 2022. It invests in more than 50 countries in a broad array of assets including public and private equities, fixed income, credit, commodities, natural resources, infrastructure, real estate and venture growth.