Indian Oil and Sun Mobility Ink JV for Battery Swapping Business

Indian Oil and Sun Mobility Ink JV for Battery Swapping Business

Indian Oil Corporation Ltd (IOCL) and Sun Mobility Pte Ltd, a Singapore-based entity, have signed a joint venture agreement to establish a battery swapping business in India. According to the exchange filing by IOCL, this new venture will be structured as a private limited company with a 50:50 collaboration between the two entities.

Battery Swapping Business Model

Battery swapping is an innovative alternative to traditional electric vehicle (EV) charging methods, involving the exchange of depleted batteries for fully charged ones. The joint venture aims to implement and operate a Battery-as-a-Service (BAAS) solution for two-wheelers, three-wheelers, and four-wheelers with a gross vehicle weight of less than two tonnes, referred to as Small Format Electric Vehicles (SFEVs).

The business model includes retrofitting vehicles to convert them to SFEVs, utilizing docks and batteries that enable their functionality within the BAAS network. This network will incorporate various swap points, including those at Indian Oil's retail outlets.

Financial and Operational Details

The initial paid-up share capital for the joint venture is set at Rs 2 lakh, consisting of 20,000 equity shares valued at Rs 10 each, equally contributed by both partners. The joint venture will focus on the deployment and operation of battery-swapping services specifically designed for SFEVs in India.

Related Party Transactions and Promoter Interests

The exchange filing clarifies that this joint venture agreement does not fall within the category of related party transactions, and the promoter or promoter group, as well as group companies, have no vested interest in the entity being acquired.

Financial Performance

For the financial year 2023-24, the consolidated revenue of Indian Oil Corporation stands at Rs 881,235 crore, while Sun Mobility Pte Ltd, Singapore, reported a revenue of USD 11.524 million.

Rationale Behind the Joint Venture

The rationale for forming this joint venture is rooted in the anticipated prominence of battery swapping technology within the EV ecosystem. Battery swapping is expected to become a leading energy dispensing technology, offering a convenient and efficient solution for EV users.

Market Impact

Following the announcement, Indian Oil Corporation's shares closed at Rs 159.25 on Wednesday, marking a 3.07 per cent increase.

Relevant Laws and Regulations

Several laws and regulations are pertinent to this joint venture:

1. Companies Act, 2013: Governs the formation and operation of joint ventures and private limited companies in India.

2. Foreign Exchange Management Act (FEMA), 1999: Regulates foreign investments and collaborations in India.

3. Automotive Industry Standards (AIS): Sets the guidelines for retrofitting and safety standards for electric vehicles and components.

4. Goods and Services Tax (GST) Act, 2017: Applies to the sale and services related to battery swapping and retrofitting.