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Remember, we are playing this ‘what if’ game based on a key assumption, i.e., Tesla India is as successful as Tesla Inc. — not a penny more, not an EV less.
But then, what about Elon Musk?
Allow me to do a minor throwback before I continue gaming. Do recall that Elon Musk had invested $30 million in Tesla India via an FIPB approval in the noughties. In true American tradition, he had bargained hard with Martin and Marc to invest in deep value. But hell, he forgot that in India, equity cannot be bought and sold in a commercial negotiation. It’s not a simple question of what the buyer and seller are willing to settle at. Instead, Elon needed to get a ‘fair valuation’ done by a certified chartered accountant, who would discount utterly uncertain and unknown future cash flows to come up with a number that would make sense to nobody but would satisfy India’s tax sleuths.
Now even if he had known about this, Elon would have just tweeted ‘how ridiculous’, and ignored the silly rule. But who can escape the long arm of Indian law? A few months down, he received a notice under Section 56(2)(x) of the Indian Income Tax Act 1961, accusing him of undervaluing the company, and slapping a tax and penalty of $60 million for the “transgression”. In true Musk style, he simply tossed the paper at his accountant saying “handle this nonsense, will ya?”.
Now back to our game. The year is circa 2010, and Tesla India is ready for its IPO. It files a red herring prospectus with SEBI to sell 13 million shares to the public. There is much buzz around this whiz of a company, and the IPO sails through, raising $226 million at a market cap of $1.5 billion, listing at a 40% premium. Elon, with his holding of 28 million shares, is worth half a billion dollars, or Rs 4,000 crore in today’s money.
Tesla India was now cruising, and its board was pleased as punch. In 2012, it came up with a spectacular stock award for Elon Musk, who had vowed that he wouldn’t take a cent in cash salary, but would be a glutton for performance-based stock options. So the board crafted an aggressive plan. Elon would get about 26-27 million stock options at a little over six dollars apiece, vesting in 10 tranches tied to stiff targets. These options would fully vest only if “Tesla achieved a sustained market capitalisation increase from $3.2 billion to $43.2 billion, and all 10 operational milestones were achieved”. Starting with the Model X Alpha Prototype to hitting an aggregate vehicle production of 300,000 units. Elon delivered on all targets …and then some more. By 2018, Tesla India was at $55 billion in market cap.
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