Weeks after Tata Motors announced a $1 billion fund infusion in its electric vehicle (EV) business by a consortium of TPG Rise Climate and Abu Dhabi’s ADQ, south-based two-wheeler maker TVS Motor Company is also evaluating the possibility of a similar fund raising exercise, industry sources with knowledge of the matter told Moneycontrol.
Importantly, on October 21, 2021, the board of TVS Motor Company had given the nod for the creation of a new arm to house its electric mobility business.
“Post the creation of a new subsidiary for its electric mobility business, in a bid to unlock value, scale up and expand the vertical, TVS Motor Company has initiated preliminary discussions with investment banks for a potential fund raise,” said one of the persons cited above.
A second person added, “ These are very early days and the discussions are at an exploratory stage. No final call has been taken on the quantum or timing of the deal. As of now, they are open to inducting a suitable private equity fund as a partner and may look to raise between $500 million to $1 billion.”
A third person also confirmed that going ahead, a fund raise was on the cards for the EV business, but emphasised that the plans were preliminary in nature. He added that it as of now, it was unclear if the exercise would be carried out “over the next 6 months or 12 months.”
All the three persons cited above spoke to Moneycontrol on condition of anonymity.
Moneycontrol is awaiting an email response from TVS Motor Company and has sent reminders. This article will be updated as soon as we hear from the firm.
TVS MOTOR COMPANY: THE BIG-BANG EV BET
ESG (environmental, social and governance) bets are currently a hot favourite with global investors. The move by TVS Motor Company to create a separate arm for the EV operations comes on the back of the government’s plans to decarbonise the domestic transport sector. The government intends to have EV sales penetration of 30 percent for private cars , 70 percent for commercial vehicles and 80 percent for two and three wheelers by 2030.
In an earlier intimation to the stock exchanges dated October 21, TVS Motor Company had said, "The board also approved the incorporation of a wholly owned subsidiary to undertake its electric mobility business. We will provide necessary information to the stock exchanges once the company is incorporated, pursuant to regulation 30 of Listing Regulations.”
In a recent earnings call, the firm outlined its EV strategy.
KN Radhakrishnan, Director and Chief Executive Officer, TVS Motor Company, said, “We are investing more than Rs 1,000 crore to create a portfolio. This will be in addition to the iQube. Very shortly we will see new EV products coming in. This subsidiary will give us the flexibility and freedom to scale up the business. We will look at global markets – developed and developing – under this strategy.”
Currently, iQube, launched in January 2020, is the only all-electric product in the market from TVS. The battery-powered scooter with a range of 75 km is available in New Delhi, Chennai, Pune, Coimbatore, Kochi and Bengaluru which are part of the 33 cities roll out.
In September, TVS Motor Company picked up 80 percent stake in a Swiss company EGO Movement for $17.9 million. EGO Movement is a Swiss technology company providing a wide range of mobility solutions through a portfolio of e-bikes, e-cargo bikes, and e-scooters.
TVS EV STRATEGY: WHAT DO THE MARKETS THINK?
"The company plans to have a monthly capacity for 10k units for EVs by 4QFY22 and indicated aggressive capacity expansion plans in FY23. We see these steps to be in the right direction which could potentially lead to further value unlock and capitalization on the electrification shift. This should be further supported by a series of new launches to expand the overall electric portfolio in the coming quarters," said brokerage firm Nirmal Bang in a note.
“It (TVS Motor Company) is also developing an integrated vehicle architecture with a critical backend manufacturing of batteries and other critical parts managed in-house. It is eyeing partnerships to create an ecosystem of public charging infrastructure,” Emkay Global said in an earlier report.
Incidentally, TVS Motor Company reported highest ever revenue of Rs 5,619 crore in the second quarter of 2021-22 as against Rs 4,605 crore in the second quarter of 2020-21 registering a growth of 22 percent. It also posted highest ever EBITDA of Rs. 562 crore as against Rs 430 crore during the quarter ended September 2020, in a scenario of rising commodity costs, scarcity of containers for international business and shortage in semiconductors through significant cost reduction initiatives and growth in revenue.
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