Samvardhana Motherson Ltd. has announced the acquisition of an 11% stake on a fully diluted basis and a 19% stake on a non-diluted basis in Israel-headquartered REE Automotive Ltd. The company will invest a total of $15 million for this acquisition.

The automotive component manufacturer in an exchange filing on Sunday said that it will subscribe up to 36.39 lakh Class A Ordinary shares of REE Automotive Ltd. at a price of $4.122 per share. The transaction will be done through Samvardhana Motherson’s wholly-owned subsidiary MSSL Consolidated Inc., or its affiliates.

REE Automotive is listed on the Nasdaq and is engaged in the design, development and integration of various vehicle components into a module and complete modular platform for commercial Electric Vehicles with applications in last mile delivery. The company has a portfolio of 175 patents registered and pending globally, which integrate essential vehicle systems like steering, brakes, suspension and powertrain control into a single, compact module.

The target company had reported a turnover of $1.6 million in calendar year 2023.

Samvardhana Motherson will also enter into a supply chain management agreement with REE Automotive to accelerate its industralisation in a mutually beneficial commercial construct.

Post this agreement, Samvardhana Motherson will be the exclusive partner to manage the entire supply chain, including sourcing, managing, and integrating modules for REE.

REE Automotive currently has an order book of nearly 600 trucks for execution by 2025.

The cash transaction is likely to be completed within the next 30 days, subject to satisfactory completion of all conditions precedent.

REE Automotive currently has manufacturing facilities in Coventry in the UK and in Austin, Texas.

Shares of US-listed REE Automotive fell 15% in regular trading on Friday to $2.96, but surged 6.2% in extended trading. The stock has declined 40% so far in 2024.

On the flip side, brokerage firm Citi opened a 90-day Negative Catalyst Watch on shares of Samvardhana Motherson on Friday with a “sell” rating and a price target of ₹105. It said that further debt could stress the company’s balance sheet, which already has a net debt of ₹16,000 crore and fund raising through the equity route could lead to dilution in its Earnings Per Share (EPS).

Citi also said that Samvardhana Motherson’s current valuations provide little comfort and appear to price in potential growth in the non-automotive business as well. However, the stock ended 1% higher on Friday at ₹190, having already risen 80% so far in 2024.