Project Number: 55075-001 March 2021

Administration of Equity Investment Euler Motors Private Limited (India)

This is an abbreviated version of the document, which excludes information that is subject to exceptions to disclosure set forth in ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS (as of 8 March 2021)

Currency unit – Indian rupee/s (₹)

ABBREVIATIONS

ADB COVID-19 EMPL e-SCV

– – – –

Asian Development Bank coronavirus disease Euler Motors Private Limited electric small commercial vehicle

ICE MaaS

– –

internal combustion engine mobility-as-a-service

OEM SCV TCO

– – –

original equipment manufacturer small commercial vehicle total cost of ownership

GLOSSARY

Business-to-business – A business whose customer is another business instead of an individual consumer.

Cost of mobility – The total cost incurred by a company to deliver its goods to the customer. This includes vehicle amortization, repair and maintenance costs, labor overheads, the cost of fuel, and other costs related to fleet operations.

Light commercial vehicle

– A commercial vehicle with less than 7.5 tons of gross vehicle weight.

Mobility-as-a-service – A business model whereby customers pay for the use of a vehicle on a per delivery, per kilometer, or per day basis without having to make any up-front capital investment. This usually takes the form of a subscription.

Small commercial vehicle

– A light commercial vehicle with less than 3.5 tons of gross vehicle weight, often used for last mile transport.

Three-wheeler – A vehicle with three wheels used for passenger and goods transport.

Total cost of ownership

– The total cost of owning a vehicle, including the up-front cost of buying, maintaining, and operating it.

₹1.00 = $0.0136 $1.00 = ₹73.30

NOTES

(i) The fiscal year (FY) of Euler Motors Private Limited ends on 31 March. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2020 ends on 31 March 2020.

(ii) In this report, “$” refers to United States dollars.

Vice-President Ashok Lavasa, Private Sector Operations and Public–Private Partnerships

Director General Suzanne Gaboury, Private Sector Operations Department (PSOD) Deputy Director General

Christopher Thieme, Office of the Director General (OPSD), PSOD

Team leader Dominic Mellor, Principal Investment Specialist, OPSD, PSODa Project advisors James Leather, Chief of Transport Sector Group, Sector Advisory

Service Cluster-Transport Sector Group (SDSC-TRA), Sustainable Development and Climate Change Department (SDCC)

Sherwin Pu, Principal Investment Specialist, OPSD, PSOD Team members Munish Aggarwal, Young Professional, Private Sector Financial

Institutions Division, PSOD Elizabeth Fiona Alpe, Senior Transaction Support Specialist

(Integrity), Private Sector Transaction Support Division (PSTS), PSOD

Krisila Benson, Gender Equality & Private Sector Specialist (Consultant), Transaction Support Division, PSOD

Howard Brooke, Lead Counsel (Consultant) (Nonsovereign Legal Operations), Office of the General Counsel (OGC)

Anne Valko Celestino, Social Development Specialist (Gender and Development), PSTS, PSOD

Jiahe Chiang, Senior Transport Specialist, SDSC-TRA, SDCC Daniel Hersson, Senior Investment Specialist (Consultant), OPSD,

PSOD Nike Johnson, Counsel, OGC Manfred Kiefer, Senior Economist, PSTS, PSOD Kyla Matias, Safeguards Specialist (Consultant) (Environment),

PSTS, PSOD Jocelyn Erlinda Munsayac, Principal Safeguards Specialist, PSTS,

PSOD Melissa Navarra, Safeguards Specialist (Consultant) (Social), PSTS,

PSOD Charles Navarro, Investment Specialist (Consultant), OPSD, PSOD Noel Peters, Principal Safeguards Specialist, PSTS, PSOD Blendy Rom, Senior Operations Assistant, OPSD, PSOD Amanda Satterly, Senior Social Development Specialist (Gender

and Development), PSTS, PSOD Kunal Upadhyay, Senior Investment Specialist (Consultant), OPSD,

PSOD a. Outposted to Thailand Resident Mission

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

PROJECT AT A GLANCE

INTRODUCTION 1

THE INVESTMENT 1

Project Identification and Description 1 Ownership and Management 2 Financial Performance 2

THE ADB ASSISTANCE 3

The Assistance 3 Implementation Arrangements 3 Value Added by ADB Assistance 3 Risks 4

DEVELOPMENT IMPACT AND STRATEGIC ALIGNMENT 4

Development Impact, Outcome, and Outputs 4 Alignment with ADB Strategy and Operations 4

POLICY COMPLIANCE 5

Safeguards and Social Dimensions 5 Anticorruption Policy 5 Assurances 5

THE PRESIDENT’S DECISION 6

APPENDIXES 1. Design and Monitoring Framework 7 2. List of Linked Documents 11

PROJECT AT A GLANCE

INTRODUCTION 1. The transaction involves the administration by the Asian Development Bank (ADB) of an equity investment of up to the Indian rupee equivalent of $4,000,000, with an initial investment of up to ₹110,000,000, in Euler Motors Private Limited (EMPL) in India, to be provided by the ADB Ventures Investment Fund 1 1 under the ADB Ventures Financing Partnership Facility. The balance of the approved equity amount may be invested in subsequent fundraising rounds that EMPL is expected to undertake by March 2024. Consistent with the establishment arrangements of the fund, ADB will not invest its own capital alongside the fund.2 2. EMPL is an India-based designer, manufacturer, and fleet operator of electric small commercial vehicles (e-SCVs) designed for last mile cargo delivery. It has developed a vertically integrated electric vehicle platform that combines cost-competitive e-SCVs, fleet management software, and a network of charging and service station infrastructure to offer the lowest total cost of ownership (TCO) and total cost of mobility to its customers. EMPL offers its three-wheeler e-SCVs under a retail model or a mobility-as-a-service (MaaS) model to business-to-business clients in the e-commerce and e-grocery segments. The investment will improve the uptake of electric vehicles in India and minimize the use of diesel vehicles for intra-city cargo deliveries. EMPL’s vision to promote energy-efficient electric vehicles and reduce greenhouse gas emissions aligns with ADB’s operational priorities of tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability in Asia and the Pacific.3

THE INVESTMENT

Project Identification and Description 3. Indian automotive segment. India is the world’s fourth largest automotive market. Its auto and ancillary market constitutes 9% of India’s gross domestic product. Domestic automobile production increased by 2.36% per year during 2016–2020, with 26.36 million vehicles manufactured in FY2020. Domestic automobile sales increased at a 1.29% Compound Annual Growth Rate between FY2016–FY2020, with 21.55 million vehicles sold in FY2020. India’s auto market was dominated by two-wheelers (80.8%) and passenger vehicles (12.8%) in FY2020. Its automotive exports exceeded 4.77 million in FY2020, of which 73.9% were two-wheelers, 14.2% were passenger cars, and more than 11.8% were three-wheelers and SCVs. India is expected to displace Japan and become the third largest auto market by 2023.4 4. Electric vehicle industry overview. India imported $112 billion worth of crude oil in FY2019—equivalent to 4% of its gross domestic product. Some 99% of gasoline and 67% of diesel demand was from the automobile segment. Fourteen of the 20 most polluted cities in the world are in India.5 These factors make the shift of Indian transportation to electric vehicles imminent and urgent. Electric three-wheelers for passenger transport, or e-rickshaws, have penetrated the Indian market significantly, with more than 700,000 sold every year. Two- and

1 Financing partner: Clean Technology Fund, Nordic Development Fund, and the governments of Finland and the

Republic of Korea. As provided in para. 52 of ADB. 2015. Enhancing Operational Efficiency of the Asian Development Bank. Manila, the President is “authorized to approve the establishment of trust funds and FPFs [financing partnership facility], or participation in GFIs [global funding initiative]; acceptance of contributions from any financing partner; and administration of cofinancing for any operation.”

2 ADB. 2020. Establishment of the ADB Ventures Financing Partnership Facility. Manila. 3 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.

Manila. 4 India Brand Equity Foundation. Automobile Industry in India. 5 Avendus. 2020. Electric Vehicles - Charging towards a bright future.

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three-wheelers are likely to lead the next wave of electric vehicle adoption in India. Commercial use of electric vehicles shows that they are on a par with internal combustion engine (ICE) vehicles in terms of TCO. Electric vehicle sales are projected to reach 3 million in India by 2025. The Government of India is catalyzing electric vehicle adoption through demand incentives such as subsidies and procurement. The Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles Scheme (FAME-I and FAME-II) is creating momentum and developing an ecosystem for electric vehicles in India, and the segment is likely to see disruptive growth from 2022 onwards.6 The government also aims to set up more than 2,700 charging stations across metro cities as part of FAME-II.7 In addition, several state governments in India have announced electric vehicle policies for electric vehicle adoption and charging infrastructure creation. Public efforts to catalyze growth in the segment are increasing the interest of original equipment manufacturers (OEMs) to roll out electric vehicles. 5. Small commercial vehicle segment. Commercial vehicles account for about 4% of India’s domestic production volume, with more than 1 million commercial vehicles sold (FY2019). Light commercial vehicles (excluding three-wheelers) used for goods transport account for almost 56% of total commercial vehicle volumes, and more than 90% of them (i.e., more than 500,000) are in the SCV category (i.e., vehicles with capacity of less than 3.5 tons). SCVs are used primarily in last mile delivery and logistics. The adoption of Goods and Services Tax in India, a strong e-commerce and e-grocery boom, and improved infrastructure have provided a strong boost to the SCV segment. Established OEMs such as Tata and Mahindra have captured a share of more than 60% of the SCV market. SCVs also compete with traditional three-wheeler cargo vehicles. The combined SCV and three-wheeler market presents a strong case for electric vehicle adoption in India. 6. Women’s participation in the industry. The automotive industry is a nontraditional area for women because of the stereotypical view of manufacturing as men’s domain. 8 Women comprise 30% of India’s combined professional and technical workers.9 Indian firms have been introducing models to attract and retain women in the tech industry.10 While the value of women’s formal engagement in clean energy is being recognized, creating permanent and stable sources of income for trained women remains unaddressed.11 Confidential Information Deleted

Ownership and Management Confidential Information Deleted

Financial Performance Confidential Information Deleted

6 FAME-I was launched in 2015, and FAME-II was launched in 2019. 7 Government of India. 2019. FAME-II Policy Document. New Delhi. 8 ADB. 2018. India Gender Equality Results Case Study: Enhancing Energy-Based Livelihoods for Women Micro-

Entrepreneurs. Manila. 9 World Economic Forum. 2020. Global Gender Gap Report 2020. Geneva. 10 S. Rathor et al. 2020. Why Indian Women May Dominate the Tech World of Tomorrow. Times of India. 19 March. 11 B. Baruah. 2015. Creating Opportunities for Women in the Renewable Energy Sector: Findings from India. Feminist

Economics. 21 (2). pp. 53–76.

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THE ADB ASSISTANCE

The Assistance 7. ADB will administer the provision of assistance by the fund of up to the Indian rupee equivalent of $4 million, with an initial investment of up to ₹110 million, through an equity investment in EMPL. Confidential Information Deleted

8. In line with the ADB Ventures Financing Partnership Facility, the share purchase price will be based on a valuation approved by the fund investment committee and will be the same as the price per share to be paid by the other coinvestors in the same equity round. These coinvestors potentially include Inventus Capital, Blume Ventures, and Jetty Ventures.

Implementation Arrangements Confidential Information Deleted 9. Reporting arrangements. ADB will monitor the investment. Investment reporting will be subject to information disclosure requirements, in addition to compliance with Indian legal and regulatory requirements. EMPL will provide ADB with financial reports at predetermined regular intervals and on request, including (i) a report on using the subscription proceeds, (ii) quarterly and annual financial statements for the past period, and (iii) annual budget and business plans for the following fiscal year. 10. Use of proceeds. EMPL will use the investment proceeds to finance its business growth by expanding both the team and geographic footprint while continuing its research and development of new electric vehicle models.

Confidential Information Deleted

Value Added by ADB Assistance 11. Development of India’s electric vehicle industry. ICE vehicles are one of the largest polluters and consumers of gasoline and diesel. The role of ADB in reducing transport-related greenhouse gas emissions and making cities livable—by catalyzing electric vehicles—is more crucial than ever. ADB funding will support the evolving electric vehicle industry, which is critical in reducing India’s carbon footprint and addressing climate change. Confidential information deleted. 12. Resource mobilization. ADB’s shareholding is anticipated to have a significant signaling effect and is likely to increase the market’s confidence in EMPL achieving its business goals. This will help EMPL in critical areas, such as launching new products, and attracting future debt and equity.

13. Progress to market-leading standards. As the first and only development finance institution shareholder, ADB will help develop and support EMPL’s adherence to high corporate governance and integrity standards, as well as its adoption of market-leading social and environmental standards, with potential demonstration effects in the Indian transportation sector. ADB will also add value to EMPL by assisting it to (i) establish a more balanced board, including

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the creation a financial management committee and an audit committee; and (ii) incorporate gender-inclusive workplace policies. 14. Gender equality. This investment will help EMPL implement gender actions to promote women’s economic empowerment by enhancing gender responsiveness in its workplace and its business activities. It will also contribute to increasing women’s skills and work opportunities in the clean technology and automobile segments, thus addressing the gender gap in both industries. Through ADB support, EMPL will increase women’s participation in top management and technical roles, and require its employees to attend anti-sexual harassment training.

Risks

Confidential Information Deleted

DEVELOPMENT IMPACT AND STRATEGIC ALIGNMENT

Development Impact, Outcome, and Outputs 15. The investment is aligned with the Government of India’s mission12 to achieve Sustainable Development Goal 13 on climate action. 13 The investment’s expected outcome is reduced greenhouse gas emissions by commercial vehicles in India. 14 The expected outputs of the investment are EMPL’s increased revenue from the sale of electric vehicles, enhanced gender equality in decision making, enhanced gender equality in staffing, and enhanced gender equality in the workplace.

Alignment with ADB Strategy and Operations 16. Consistency with ADB strategy and country strategy. The investment is compliant with the fund’s objectives, as set out in the relevant contractual documents.15 In addition, the investment will contribute to the following Strategy 2030 operational priorities and their operational plans: (i) tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability (OP3); and (ii) accelerating progress in gender equality (OP2), and (iii) addressing remaining poverty and reducing inequalities (OP1).16 The investment is also aligned with the objective of the India country partnership strategy of addressing climate change and increasing climate resilience.17 17. Lessons from previous operations. ADB will leverage its knowledge and networks in the sustainable transport segment to support EMPL in achieving its growth targets. ADB’s

12 Government of India. 2015. India’s Intended Nationally Determined Contribution: Working Towards Climate Justice.

Delhi. p. 29. 13 United Nations. Transforming our World: The 2030 Agenda for Sustainable Development. 14 The ADB Ventures Investment Fund 1 has a 17-year fund life (up to 2037) and will make 15–36 investments. ADB

expects some investments to result in full or partial loss, consistent with the market dynamics of early-stage companies. ADB is therefore taking a portfolio approach, by investing in high-risk investments that can generate significant development outcomes. The outcome indicators of each investment are meant to be ambitious to be consistent with the portfolio strategy and fund-level outcome targets.

15 All ADB Ventures Investment Fund 1 participants agreed to participate in the fund in accordance with the provisions set out in the Fund Common Terms and the Participation Agreement signed with each participant.

16 ADB. Strategy 2030: Operational Plans. 17 ADB. 2017. Country Partnership Strategy: India, 2018–2022—Accelerating Inclusive Economic Transformation.

Manila.

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experience in developing leasing programs for clean transport,18 loan packages for renewable energy-based electric vehicle charging stations,19 and its relationships with banks and nonbank finance companies may enable EMPL to access institutional debt for its working capital and infrastructure requirements as it expands its operations.

POLICY COMPLIANCE

Safeguards and Social Dimensions 18. ADB has categorized the investment in compliance with ADB’s Safeguard Policy Statement (2009) as follows: environment (category C), involuntary resettlement (category C), and indigenous peoples (category C).20 19. ADB has undertaken due diligence and reviewed the potential environmental and social impacts of the investment. EMPL’s business operations and plan for using ADB proceeds will not cause any significant adverse effects to the environment and will not trigger involuntary resettlement or indigenous people safeguards. 20. EMPL has demonstrated compliance with the applicable national laws, regulations, and standards covering environmental management, labor, and social protection requirements. Confidential information deleted.

21. Effective gender mainstreaming. Following ADB’s Policy on Gender and Development (1998), EMPL has incorporated measures to promote gender equality and women’s empowerment in its business activities. Key features of the gender action plan are as follows: adding a woman board member, enhancing gender equality at the company level through the implementation of an internship program focused on female students or graduates in technical fields, and requiring employees to attend mandatory anti-sexual harassment training.21 EMPL will submit periodic reports on implementation of gender measures to ADB.

Anticorruption Policy 22. EMPL was advised of ADB’s policy of implementing best international practice relating to combating corruption, money laundering, and the financing of terrorism. ADB will ensure that the investment documentation includes appropriate provisions prohibiting corruption, money laundering, and the financing of terrorism; and remedies for ADB in the event of noncompliance.

Assurances 23. Consistent with the Agreement Establishing the Asian Development Bank (the Charter),22 ADB will proceed with the assistance upon establishing that the Government of India has no objection to the assistance to EMPL. ADB will enter into suitable investment documentation, in form and substance satisfactory to ADB.

18 ADB. People’s Republic of China: Loan Program for Clean Bus Leasing (Far East Horizon Limited). 19 ADB. Thailand: Green Loan for Renewable Energy and Electric Vehicle Charging Network (Energy Absolute Public

Company Limited). 20 ADB. Safeguard Categories. 21 See Gender Assessment and Action Plan (available from the list of linked documents in Appendix 2). 22 ADB. 1966. Agreement Establishing the Asian Development Bank. Manila.

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THE PRESIDENT’S DECISION 24. The President, acting under the authority delegated by the Board, has approved the administration of an equity investment of up to the Indian rupee equivalent of $4,000,000, with an initial investment of up to ₹110,000,000, in Euler Motors Private Limited in India, to be provided by the ADB Ventures Investment Fund 1 under the ADB Ventures Financing Partnership Facility, and hereby reports this action to the Board.

7 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Impact the Project is Aligned with

The Government of India achieved its commitment to SDG 13 relating to climate action (Intended Nationally Determined Contribution)a

Results Chain Performance Indicators Data Sources and

Reporting Mechanisms Risks and Critical

Assumptions

Outcome Greenhouse gas emissions by commercial vehicles reduced in India

By 2025 and 2037b a. At least 50,000 fossil fuel-

based LCVs replaced with electric vehicles by 2025 and 900,000 by 2037 (2020 baseline: 0)

b. At least 160,000 tons of

CO2 equivalent avoided by 2025 and 9.6 million by 2037c (2020 baseline: 0) (OP 3.1) (SDG 13)

c. At least $25 million of

additional equity and/or debt mobilized by 2025 and $100 million by 2037 (2020 baseline: $0)

d. At least 20 additional

management or technical jobs created (of which 4 are for women) by 2025, and 100 (of which 20 are for women) by 2037 (2020 baseline: 0)

(OP 1.2, OP 2.1)

a.–d. Annual report to ADB Ventures by EMPL, including progress toward DMF outcome and output indicators

R: Slow economic growth and business expansion because of slower than expected offtake by EMPL’s clients

Outputs By 2025 and 2037

1. Revenue generated from the sale of electric vehicles

1. Confidential information deleted.

1.–4. Annual report to ADB Ventures by EMPL, including progress toward DMF outcome and output indicators

R: COVID-19 related delays in decision-making by customers

8 Appendix 1

Results Chain Performance Indicators Data Sources and

Reporting Mechanisms Risks and Critical

Assumptions

2. Gender equality in decision-making enhanced

3. Gender equality

in staffing enhanced

4. Gender equality

in the workplace enhanced

2. Number of female board members increased by at least 1 by 2023 (2020 baseline: 0)

3a. A recruiting strategy that

seeks to increase hiring of women developed and implemented by 2022 (2020 baseline: not applicable)

3b. At least 4 women

commence an internship in a technical role by 2023 (2020 baseline: not applicable) (OP 2.1.1.)

4. At least 80% of staff are

trained on the company’s anti-sexual harassment provisions by 2022 (2020 baseline: 0%)

R: Intermittent involvement of external partners to develop gender-focused human resources materials and facilitate the trainings

Key Activities with Milestones 1. Revenue generated from the sale of electric vehicles 1.1. Sell and/or lease more than 3,000 electric vehicles in India and other South Asian countries by 2022 2. Gender equality in decision-making enhanced 2.1 Designate at least 1 female board member by 2023 3. Gender equality in staffing enhanced 3.1 Implement a recruiting strategy that seeks to increase hiring of women by 2022 3.2 Engage at least 4 women interns in technical roles by 2023 4. Gender equality in the workplace enhanced 4.1 Conduct sexual harassment training for 80% of the staff by 2022

Inputs ADB: $4 million (equity)

ADB = Asian Development Bank; ADB Ventures = ADB Ventures Financing Partnership Facility; CO2 = carbon dioxide; COVID-19 = coronavirus disease; DMF = design and monitoring framework; EMPL = Euler Motors Private Limited; LCV = Light Commercial Vehicle; MWh = megawatt-hour; OP = operational priority; R = risk; SDG = Sustainable

Development Goal; STEM = science, technology, engineering, and math; tCO2e = tons of carbon dioxide equivalent. a Government of India. 2015. India’s Intended Nationally Determined Contribution: Working Towards Climate Justice.

Delhi. p. 29. b The ADB Ventures Investment Fund 1 has a 17-year fund life (up to 2037) and will make 15–36 investments. ADB

expects some investments to result in full or partial loss, consistent with the market dynamics of early-stage companies. ADB is therefore taking a portfolio approach by investing in high-risk investments that can generate significant development outcomes. The outcome indicators of each investment are meant to be ambitious to be consistent with the portfolio strategy and fund-level outcome targets.

c It is assumed that each Euler electric vehicle will displace 1.79 Bajaj Maximas (a leading three-wheeler vehicle for last mile cargo transportation), based on actual utilization and payload capacity. This is equivalent to a baseline emission factor of 4.63 tCO2e per year. The entire baseline value is not mitigated because each Euler electric vehicle still consumes 3.65 MWh of electricity per year from the Indian electricity grid, which still uses fossil fuels. If the

Appendix 1 9

transmission and distribution loss is 20.66% and the emission factor is 0.673 tCO2e/MWh, then the adjusted emission factor is 0.812 tCO2e/MWh for the Indian electricity grid. Applying this to the electricity consumption of a Euler electric vehicle, each vehicle generates 2.96 tCO2e per year. Deducting the emissions generated from grid-based charging from the reduced emissions caused by the displacement of the Bajaj Maximas, each Euler electric vehicle will mitigate a net value of 1.66 tCO2e per year. Applying a 10-year life cycle to each Euler electric vehicle, the targeted 900,000 vehicles sold from 2021 to 2037 would mitigate 9.6 million tCO2e for this period.

Source: Asian Development Bank.

Appendix 2 11

LIST OF LINKED DOCUMENTS Confidential Information Deleted.