Switch Mobility:
the electric vehicle arm of India’s second-largest truck maker Ashok Leyland, is in the final stages of raising $200 million dollars at a valuation of over $1.4 to $1.8 billion to fund its capex plans. The deal announcement is expected within 8-12 weeks.Nearly 70 investors from the US, Europe and the Middle East, including the likes of Blackrock, Macquarie, Oman Investment Fund, Canadian Pension Fund and several green funds were approached, according to several people in the know.
The fundraise will meet the investment requirement of over $500 million in the next 3-5 years for Hinduja Group EV endeavours. The money will be used to create plant capacity and new products and for market entry worldwide for both Ashok Leyland and Switch Mobility.
Dheeraj Hinduja, chairman of Ashok Leyland, in an exclusive interview with ET, confirmed that Switch Mobility is finalizing the fundraise and it is likely to be concluded within the next few months. Hinduja, however, declined to share the names of the investors or the valuation the company is seeking.
An email sent to Blackrock, Macquarie and Oman Investment Fund did not elicit any response till the press time. The spokesperson for Canada Pension Plan Investment Board declined to comment.
To be sure, the group has been on a fund-raising trail for over the last 12-18 months, but in the recent past the excitement around the electric commercial vehicle space has significantly corrected. The three global biggies like Nikola, Rivian and Arrival have seen their valuation crash by 35-70% and hence Switch has not been able to secure right valuations.
At the start of its journey, Hinduja Group was hoping to raise $200 million at a valuation of $2 billion. The company was valued at $1.6 billion after a small strategic stake sale to auto components maker Dana in July this year. Hinduja expects the upcoming fundraise to bump the valuation of the UK-based company “much higher” than that.
The funds will be utilised to develop a range of electric bus and vans for both India and the West over the next 24 months. Switch Mobility would need over $400 million in the coming 3-5 years, whereas Ashok Leyland is investing close to Rs 500 crore to develop a range of alternative fuel technologies such as LNG, CNG and hydrogen fuel cell.
“Our unique proposition is that we are not addressing just one market,” Hinduja said. Affordable EVs for India will be manufactured near Chennai while those for Europe will be made in the UK and Spain.
The electric version of Dost is likely to hit the roads by Q4 of 2022 and Switch Mobility has already started working on the LCV version for Europe and US. The company has been able to secure orders for electric buses in India; it has got several enquiries from last- mile mobility providers – both at home and away.
The company is participating in tenders for EVs – both in Europe and India. It plans to launch its electric van here this year and has gotten interest from multiple e-commerce firms for their last mile delivery fleets, Hinduja claimed. “The demand is far outstripping what we’ll even be able to supply in 2022,” he said.
The company was not looking at investing funds for a new plant in India. Instead, parent Ashok Leyland’s facilities will be used to manufacture Switch vehicles at an arm’s length.
Switch has also participated in the government’s Rs 26,000-crore production-linked incentives scheme for the automotive sector, he said.
Meanwhile in Europe, manufacturing will be handled from the existing UK-plant that can churn out about 500 buses a year and the new facility at Castilla y León, Spain. The latter will start manufacturing from later this year and will also serve as a base for other markets like South America. The company plans to enter the US market by 2025.
While the company was happy to collaborate with other automakers, it would stop short of selling them an equity stake and raise funds only from financial investors, he said.
The fundraise also comes at a time when parent Ashok Leyland finds itself in choppy waters. The Hinduja Group flagship company has been ceding market share to rivals and finds itself without a CEO for the second time in the last three years.
Dheeraj Hinduja has resumed the reins of the company after Vipin Sondhi stepped down from the top job.
“I have been very closely involved,” Hinduja said, brushing aside questions about a vacuum in the top management even as the company is scouting for the next person to fill the corner office.
“I’ve always ensured that my involvement allows me to continue the direction and the strategies that we’re doing and to ensure that the implementation is never slowed down,” he said.
However, Hinduja doesn’t intend to hold on to an executive role for long.
“It’s a family policy. We believe that we should have the best person for this job,” he said. Plus, looking after just one company takes away from stepping back and looking at the $18-billion Hinduja Group “from a holistic perspective.”
While Ashok Leyland is busy head hunting, Switch finds itself steady under CEO Andy Palmer, the former Aston Martin boss and the person behind the Nissan Leaf EV. Closer home in India, the operations will be looked after by COO Mahesh Babu, who formerly led Mahindra Electric.
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The new facility will extend Switch’s footprint as part of its global plans, the company said.
The Chennai-based truck maker has clear plans to launch trucks in the intermediate commercial vehicle segments powered by compressed natural gas (CNG) for the domestic market in the fourth quarter of fiscal 2021-22. The company is also continuing its works on hydrogen-powered commercial vehicles, and is open to bringing in private equity players to invest in EV business, top officials of the company said during a post-earnings media call on Tuesday.
