Electric bus maker PMI looking to sell stake to strategic investor/PE fund

PMI Electro Mobility Solutions, one of the largest electric bus makers in the country, is looking for a strategic investor/private equity fund to pick up a stake in the company. An independent financial advisor has valued the company at Rs 2,000-2500 crore, the company said.

Confirming the move, Manvi Jain, Head-Corporate Affairs, PMI Electro Mobility Solutions, said: “We are looking at equity dilution and talking to funds for a stake in PMI, as we see volumes going up year on year. We have approached a financial consultancy, which has valued us at Rs 2,000-2500 crore based on our revenue projections.”

Jain said the company achieved its FY22 target of Rs 350 crore and is profitable. It has a projected revenue of Rs 850-900 crore in FY23, which is well under control, as the firm has already hit Rs 700 crore so far this financial year.  

Jain added the model for dilution wouldn't necessarily involve giving upfront equity but that firm could also offer convertible debentures or preference shares or any other model that gives it comfort. The extent of dilution would depend on whether the investor is only bringing in money or also adding value to the company’s business.  

The company needs the money for financing the cost of producing the new buses on order, which is about Rs 1.2 crore a piece, including associated infrastructure. It is also planning to get into the inter-city electric bus market--which is expected to open up for the private sector--and eventually entry into light and medium commercial vehicles too.          

PMI, which has delivered over 900 electric buses across the country till date to state transport undertakings, has been locking horns with big players such as Tata Motors and the Olectra-BYD combine. Currently, the total number of electric busses is about 4,000 across the country and there are six main players in the game. PMI  recently participated in the country’s biggest electric bus tender, floated by CESL for 6,450 vehicles. It has bid for two contracts of the Delhi government, for about 2,900 electric buses.

Jain, however, says that companies such as PMI, which only make electric buses, face challenges in getting finance compared to ICE auto companies which have deep pockets and even group financial support.

However, a bevy of climate and impact funds, as well as those specialized in renewables or currently funding highway projects, have begun putting in some money into EVs. One such is Eversource Capital, which had floated a dedicated Rs 750 crore fund. It provided them with Rs 500 crore by being part of the SPV to supply 700 electric buses. The fund provided advances to the company based on an assured internal rate of return and a return on equity target. Some banks like State Bank of India are also offering loans to finance electric buses.

The company has also achieved the government’s target under the phased manufacturing programme, which is pegged to disbursements under the FAME 2 subsidy scheme, and has achieved localisation of about 50 per cent. The subsidy in buses is substantial, ranging from Rs 45-55 lakh depending on the length.

But Jain says that the latest CESL tender does not have any FAME 2 subsidy incorporated in the deal and companies have to find ways to reduce their cost of production through further localisation.

Has delivered 916 electric buses across the country, out of 3,500-odd on roads

Will expand into inter-city buses and light and medium commercial vehicles

Has participated for Delhi in the recently-concluded largest electric bus tender floated by CESL

Expects to hit revenues of Rs 900 crore by FY 23--well on track

Has achieved localisation of 50% under the PMP scheme

Has had talks with potential cell manufacturers--to take a minority stake