I have been seeing a very strong misinformation/smear campaign on here around the latest binding offtake agreement, and while I generally stay away from the war of words (my ignore list is very much active), the deal with Omega Seiki is important for Magnis shareholders and I can understand how The Australian article combined with some new forum members' crusade against Magnis can cause some concern for investors new to MNS since their radical pivot towards EV Batteries.
So I decided to share my own due diligence research into Omega Seiki and related entities in India to provide actual facts and to counter comments/doubt cast by certain people using uneducated/myopic judgements that probably stemmed from a 5 second Google search + personal insecurities, which by the way, if that's the limit of your research skills and stock picking approach, I strongly advise you don't start putting money into any investments. Stick with savings accounts and established index funds liks S&P 500 or XJO. It takes days to do proper due diligence for buying directly into a single public company; don't ever take shortcuts. Do the hard mile! (This is also why it has taken me a few days to write this post and miss all the 'fun' in the other threads)
Firstly, on India's PLI scheme for EVs, batteries and renewable energy:First thing you should be aware of about the Indian market is that the Indian government has in 2020 announced the Production Linked Incentive (PLI) scheme, committing over >50,000 Crores INR (equivalent to $9.3 billion AUD) in their 2021 budget towards support for the manufacturing industry to build and utilise renewable energy (there is specific 4500 Crore/$61 billion AUD allocation for this). Autos specifically get around 26000 crores (~$4.8 billion AUD). Even more relevant to C4V is an allocation for Advanced Chemistry Cell Battery (18000 Crores INR, ~$3.3 Billion AUD). This is not huge on the grand scheme but keep this in mind: the first to market have network effect advantage when it comes to receiving government incentives like these given the social nature of the Indian economy. C4V + Omega Seiki is first of its kind collaboration that is eligible for PLI.
Official Indian Government website on the PLI: https://www.investindia.gov.in/production-linked-incentives-schemes-india
Related news articles: https://timesofindia.indiatimes.com/auto/news/govt-announces-rs-26000-crore-pli-scheme-for-auto-sector-all-you-need-to-know/articleshow/86227898.cms
(Note: From here I am going to auto-convert any dollar amounts I find to Australian Dollars even if the original articles/documents use Indian currency units such as lakhs or crores. You can easily verify the dollar amount conversion yourself using a number of currency calculators online.)
Who is Omega Seiki Mobility? What is their track record?The primary entity that is mentioned on the Binding Agreement is Omega Seiki, not Sukh Energy.
The wording of the agreement stipulates that The private (unlisted) entity that C4V and IM3 have actually signed an agreement with is Omega Seiki Mobility, which is a subsidiary of Omega Seiki, which itself is a part of the Anglian Omega Group, a coalition of businesses, collaborative ventures, partnerships, and seeded companies. I've drawn up an entity structure below, but don't read into the numbers they're my own estimates (they're my own personal estimations and aren't based on any concrete financial reports/writeups).
OSM Website: https://osmobility.in/
OSM on Wikipedia: https://en.wikipedia.org/wiki/Omega_Seiki_Mobility
Parent Entity: http://anglianomega.net/
As these are private entities locating their financials and full asset valuation is difficult, but based on these articles and filings, we can assume their annual turnover is at least $186 million. Their premiere vehicle is the Rage+ triwheeler which has a reported battery capacity of Some key facts about Omega Seiki Mobility:
* They already have two working triwheel EV models called Rage and Rage+ (https://osmobility.in/vehicles/rage-plus/) made at scale, the latter of which has a battery capacity of 7.5kwh
* They are focussing on last mile delivery and have demonstrated their utility to form ad hoc delivery networks during the COVID outbreak in India: https://www.youtube.com/watch?v=p4TAqdz208c. This is a bigger industry than passenger vehicles due to the poor infrastructure that exists in most outer metropolitan cities.
* OSM has an active youtube channel which shows some of their recent activities: https://www.youtube.com/channel/UCtFokZWVsgXMEz2WYxFVbGA. Go watch and see their triwheels in action on the streets and not just some powerpoint slides or photos.
From the OSM wikipedia article and subsequent link deep dive (last updated 9th August, predates current announcement), it is clear they already have a facility in Faridabad that is producing ~12,000 vehicles annually as part of their Phase 1 and is months away from a 2nd factory in Bangladesh. Multiplying this by the 7.5kwh batter capacity per vehicle needed, adding 20% buffer for end-production QA and consumer replacements, and current market price of $120 USD/kwh for EV-grade l-ion batteries, this would represent ~$13 million p.a. of battery needs from C4V/IM3, then multiply this by 5 years, would be ~$65 million USD. And once you factor their short term growth plans to build many more factories, it adds up perfectly to their $180m order if they are trying to future-proof supply for their ambitions.
By the way THIS is the building that Omega Seiki is headquartered in using the address on their website:
It's actually nicer than the Endicott factory offices IM3NY currently have to work out of!
Now onto Sukh energyHopefully we are at least comfortable with Omega Seiki Mobility, the instructing entity for Sukh Energy that IM3 and C4V are engaging with, is 100% legitimate and have the near-GWh EV production scale and turnover, established growth plans, and financial means to pay the $180 USD contract over 5 years.
To the credit of Rajiv, my findings regarding Sukh Energy definitely confirms that it by itself isn't an operational business in the sense of having anything on their books, any manufacturing capability or and seemed to have only really come into existence in 2020.
However this is because Sukh Energy is what is called an intermediary shell corporation. It exists to provide a vehicle for transactions without having to utilise an International Banking entity which could charge a lot of processing/broker fees, and can have tax benefits for both the purchaser and seller.
All large companies create and often do major international transactions using these companies that may have been set up years ago in preparation for such a scenario. I will provide an example of this by using
Apple Ltd's UK incorporation filings (yes, THE Apple corporation) as a way to debunk various facts as being proof of Sukh being a sham.
Here is Sukh Energy's incorporation filing in UK:
linkHere is Apple's incorporation filing in UK:
linkNow onto the fact checking from a lot of accusations about Sukh Energy.
Claim #1:
Sukh was initially incorporated in a residential address within London.Fact Check: true but irrelevant.
* Sukh's first incorporation address is indeed a residential adderss in Isleworth, UK.
* HOWEVER, initial incorporation address of Apple UK was also a mixed residential/commercial area and nowhere near where Apple's UK headquarters ended up. I've included a Google street view lookup of where Apple UK's incorporation address looks like TODAY.
* What we can take way from this: a humble incorporation address does not mean a company is a sham.
Claim #2:
Sukh only has $100 in working capital.Fact Check:
* again this is
true but irrelevant. ALL new incorporations in UK for intenrational shell corporations are generally very little because they are transitory entities not the actual business.
* Apple's equivalent incorporation filing slated them to only have a share capital of 1000 pounds (Apple Computers must be a penny stock!). I have shared screenshots from both filings for side by side comparison in case people are too lazy to click two links.
So how exactly will Sukh Energy be a part of MNS/IM3/C4V's battery delivery in the offtake agreement?This is now speculation on my end. Please take this with a grain of salt.
As there actually isn't a lot more inforamtion available about the details of the agreement, but given that Sukh Energy is named as a participant in the fulfillment of the IM3/C4V order, I imagine it is simply part of a legal process to legitimise some means of Omega Seiki paying IM3/C4V for the order to minimise costs.
For one, Customs Duty for importing Batteries to India is extremely high, something like 40% (Source: https://www.exportgenius.in/india-import-duty/battery)
And given the profit margin of EVs are probably fairly thin already, importing IM3's C4V patented battery directly from USA would not render their entire business unprofitable, since batteries make up at least 60% of the EV cost.
Why go through UK?India-UK are close to finalising a Free Trade Agreement which would remove tariffs on the import/export of many goods and services, with $200m GBP of tariff/duty removal committed towards supporting low carbon growth, which C4V batteries clearly would be able to benefit from.
Source 1: https://www.financialexpress.com/economy/india-uk-eye-interim-trade-agreement-by-march-2022/2330321/
Source 2: https://www.gov.uk/government/news/prime-minister-announces-1-billion-of-new-uk-india-trade
In order to benefit this US->UK->India transaction that could save them 40% in import customs duty, is probably why Sukh Energy Ltd had to be directly named for accounting standards/regulatory compliance and legality reasons, even if they're not the company that will receive or use our batteries.
Additionally, I'd like to note that
IM3NY is in fact currently hiring a Financial Controller (Source: http://www.im3ny.com/jobs/financial-controller/), with FASB compliance being a key responsibility. So above-board accounting is definitely on the forefront of IM3's Chief Financila Officer!
ConclusionNow we understand who and what Sukh Energy really is, and also established the parent company, Omega Seiki Mobility, as a legitimate, market leader in short range EVs that suits the Indian market perfectly with 8-9 figure turnover that is not just on paper, but literally on Indian roads for over a year now.
Hopefully this research I've shared will instil more confidence that this agreemnent isn't with some sort of Indian scammer as a couple of downrampers seem adament to paint Omega Seiki, which is quite insulting to India who has to fight against more resistence than most to be able to turn its nation green, and we should be celebrating their commitment and willingness to take climate action even before they've solved other local/social issues. I'm happy that Magnis/IM3/C4V, for all their past management issues, did find a great Indian customer in expanding their international exposure.
I know this post won't sway any of the negative nancy downrampers here (whose motives are pretty clear to seasoned forum members), but I want to instil a culture of data-driven counterarguments rather than simply hitting ignore or dismissing allegations/concerns about the company/news without evidence (even if the allegations themselves are also without proof, merit or logic). Personally I don't hold a 6-figure position in a not-yet-in-production EV battery company without having spent months deeply understanding the cell chemistry, the value analysis and researching its people (IM3 and C4V mostly, Magnis itself not so much). And while I don't expect the road to a billion dollar valuation be smooth for the rest of this year, I think the triwheel of IM3, C4V and Magnis is robust enough to get us there in one piece.
GLTAH and hope y'all have a good week ahead!
(20min delay)