Mahindra Group and Ontario Teachers’ Ink Deal as the Pension Buys a 30% Stake in Mahindra Susten

Posted on 09/19/2022

Mahindra Group and Ontario Teachers’ Pension Plan Board (Ontario Teachers’) formed a strategic partnership to capitalize on the growing renewables opportunity in India. The parties have signed binding agreements pursuant to which Ontario Teachers’ will acquire a 30% equity stake in Mahindra Susten Private Limited (Mahindra Susten) at an equity value of INR 2,371 crore (approximately US$ 300 million).

The proposed 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 GWp. As part of the proposed transaction, shareholder loans of INR 575 crore (around US$ 73 million) advanced by Mahindra Group to Mahindra Susten will be repaid.

As a result of this transaction, Mahindra Group will receive an inflow of approximately INR 1,300 crore (around US$ 165 million). Mahindra Group and Ontario Teachers’ will jointly explore the sale of an additional 9.99% stake in Mahindra Susten by May 31, 2023. Mahindra Group will deploy these funds, plus an incremental amount of up to INR 1,750 crore (around 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 INR 3,550 crore (around US$ 450 million) into the business and the InvIT.

It is expected that Ontario Teachers’ acquisition of a 30% shareholding in Mahindra Susten, which is subject to closing conditions including regulatory approvals, will complete over the next few months. The InvIT is also expected to be formed during FY 2024 subject to requisite approvals.

Avendus Capital acted as financial advisor and Khaitan & Co. acted as legal advisor to the Mahindra Group for the transaction. Ambit acted as financial advisor and Cyril Amarchand Mangaldas acted as legal advisor to Ontario Teachers’ for the transaction.

Keywords: Ontario Teachers Pension Plan.

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