British International Investment and Mahindra will each invest up to $250 million in the automaker's new electric vehicle unit, as Mahindra aims to lead sales of electric SUVs in the country.
BII will have a 4.8 percent ownership in the business, which will focus on electric passenger vehicles.
The unit, with a $9.1 billion valuation, will be wholly owned by Mahindra, the company said in a statement late on Thursday.
The new EV unit will use the funds to build electric SUVs by leveraging Mahindra's broader manufacturing setup as well as its supply chain, dealers and financiers, the automaker said.
"We would expect between 20 percent to 30 percent of Mahindra SUVs being electric by 2027," said Rajesh Jejurikar, executive director for Mahindra's auto and farm sectors.
At 30 percent it expects volumes of about 200,000 electric SUVs a year, Jejurikar said.
Jejurikar said the company would share details on its product, technology and platform strategy for EVs in August, and will reveal its first electric SUV in September, with sales likely to start in the first quarter of 2023, and four more models by March 2026.
The total capital infusion for the new unit is expected to be about 80 billion rupees ($1.01 billion) spread out between 2024 and 2027, Mahindra said.
Mahindra said it would work jointly with the British development finance institution to bring other investors in the EV company to match the funding requirement in a phased manner.
On Friday, Mahindra CEO Anish Shah, said the automaker aims to lead sales of electric SUVs in the country.
The company sells some of India's most popular combustion-engine SUVs, including the Scorpio and Thar, and now plans to dominate the EV sector with similar models.
"We are very confident we will take leadership in this space," Shah said during a press briefing.
"This is not just one investment. This is also the starting point. We will bring in more investors at higher valuations as we go forward," he said.
Mahindra is the latest Indian automaker to tap global green funds by hiving off its clean mobility business into a separate unit, taking a page from its rival Tata Motors' playbook which last year raised $1 billion from TPG's Rise Climate Fund at a valuation of about $9.1 billion.
The move also comes as companies seek to capitalize on billions of dollars’ worth of incentives being offered by Prime Minister Narendra Modi's government to build EVs, as India looks to meet its climate change and carbon reduction goals.
India's EV market, dominated by Tata Motors, represents only 1 percent of the country's annual sales of about 3 million vehicles. The government wants this to grow to 30 percent by 2030.
Mahindra, which is building a ground-up EV platform called "Born Electric", said in May it is exploring a partnership with Volkswagen Group source EV components for its vehicles.
Shah told Reuters in the same month that the company is exploring more such partnerships to boost its EV business.
