Shares of Mahindra & Mahindra (M&M) dropped about 7 per cent during the trading session on Friday after the company board of the homegrown auto major approved Rs 4,500 crore investment in its subsidiaries through rights issues. The company informed about the same through exchange filings on Thursday.

In its filing with the bourses on Thursday, M&M said that it will invest in its two listed subsidiaries- Mahindra & Mahindra Financial Services Ltd (M&M Finance) and Mahindra Lifespace Developers Ltd via a rights issue. The auto company’s board approved to invest up to Rs 3,000 crore in M&M Finance and Rs 1,500 crore in Mahindra Lifespace Developers via rights issue.

The company board of the Indian automaker was approved to subscribe to the equity shares of both the subsidiaries to the full extent of the company’s rights entitlement and additional shares as well as to any unsubscribed portion of the rights issue(s) upto the total issue size, the filing added.

Giving a thumbs down to the potential cash outflows, shares of Mahindra & Mahindra Ltd dropped 6.6 per cent to Rs 2,653.25 on Thursday, commanding a total market capitalization of Rs 3.33 lakh crore. The stock has corrected nearly 20 per cent from its 52-week high at Rs 3,276.30 hit about 10 days ago, despite some positive inflows for the homegrown car maker.

Recently, M&M has announced its partnership with an American technology player, Anduril Industries, aimed at co-developing and co-producing state-of-the-art Autonomous Maritime Systems, advanced AI-enabled Counter Unmanned Aerial System (CUAS) technologies and innovative Command and Control (C2) software.

Prior to that, the automobile player said that its Electric Origin SUVs—the XEV 9e and BE 6—have collectively registered booking value of Rs 8472 crore (at ex-showroom price) on the first day of opening. The eSUVs have secured 30,179 bookings. This is noteworthy considering that the total electric passenger vehicle sales in India were about 1 Lakh units for the calendar year 2024.

M&M reported 19 per cent YoY rise in net profit at Rs 2,964 crore for the quarter ended December 31, 2024, driven by strong demand for its sport utility vehicles and tractors. It clocked a revenue from operations at Rs 30,538 crore, up 20 per cent YoY during the reported quarter.

Its overall volume increased 17 per cent to Rs 2.45 lakh units in the quarter, while the tractors’ volume rose 20 per cent to 1.2 lakh units, aiding to boost the operating margin to 15.5 per cent for the reported quarter. On the other hand, SUV volumes grew 20 per cent in the quarter.

PL Capital has increased its target price to Rs 3,664 with a ‘buy’ tag on M&M citing its strong margin expansion across divisions Motilal Oswal has a ‘buy’ rating on M&M with a target price of Rs 3,675. However, InCred Equities said that rich P/E and P/BV valuations are a cause of concern and undermine EV/ hybrid risk for the car industry. It has a ‘hold’ rating on the stock with a target price of Rs 3,205.