Wednesday, August 22, 2012

An electric shock or a safe recharge?

Despite promises, Reva has been struggling over the past decade to strike gold when it comes to sales. But with M&M acquiring a controlling stake in the electric carmaker, much is expected to change in the near future. So has Anand Mahindra placed an electrifyingly winning bet? by Pawan Chabra

He was all of six when he surprised many by winning an award for having designed a remote-controlled toy car during one such competition at school. Chetan Maini’s love for machines had just started bearing its first fruit. Much water has flown under the bridge since then, but what has remained unchanged in the past 34 long years has been Maini’s (today the Chief of Technology & Strategy at Mahindra Reva Electric Vehicle Company) love for machines. He started Reva in 2001 and nine years later, has witnessed the change in ownership at the electric car manufaturing company. And just like every other journey, there have been times of thirst for Maini too. This mechanical engineer (from Stanford University) turned entrepreneur’s has been time and again running after banks to finance his business plan. He finally seems to have found solace in Anand Mahindra’s cash-loaded arms. On May 26, 2010, Mahindra & Mahindra (M&M) bought a majority stake (55%) in Reva. [Post-sale to M&M, Maini’s family will hold just 31% in the new Reva. It’s now called Mahindra Reva Electric Vehicle Company. The other large shareholder will be Lon Bell, the other co-founder, who holds 11%.] So, the question bothering many a well-wishing heart is – Is this really the end of problems for Maini? Seemingly, yes. But chances are, the Oracles might just be proven wrong this time.

Interestingly, for the lesser informed, Reva had joined hands with GM India in December 2009, for developing an electric version of Spark for the Indian roads. The final product was to hit the market in December 2010, and was to be sold via GM’s sales & distribution network. GM however called off the deal (most likely for information security purpose) once M&M entered the scene. So, while many are grieving over GM’s loss in the process, the more pertinent issue to mull over would be to question what the transaction brings to the table for both Reva & M&M.

“The deal between M&M and Reva is beneficial for both the parties in their own ways. While Reva will benefit financially, Mahindra can add Reva’s technology to complement its vast existing portfolio,” says Pankaj Karna, MD, Maple Capital Advisors. So for now, Maini’s footsoles can take some rest from rambling about in search of fresh fund infusion, as the stake purchase by M&M brings-in close to Rs.450 million for the electric carmaker. For M&M of course, the case is stronger. It gives it the much needed hybrid edge, something which it would have been eyeing for long now. Maini’s brainchild would further strengthen M&M’s electric vehicle portfolio, that as of now consisted of only a three-wheel vehicle called Bijlee apart from a yet to be launched ‘Maxximo’, an electric-powered mini-truck.


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