TVS Motor soars 11%, nears record high on fund raise buzz for EV subsidiary

Shares of TVS Motor Company hit an over two-year high of Rs 793.45, surging 11 per cent on the BSE in Tuesday's intra-day trade, on reports that the company is in talks to raise funds for its electric vehicle (EV) subsidiary. The stock of the company, engaged in automotive vehicles and parts business, was trading close to its record high level of Rs 795 touched on January 2, 2018.

The company's board on October 21, 2021 had approved the incorporation of a subsidiary to undertake the electric mobility business. It will invest Rs 1,000 crore on product development and capacity expansion. Electric Vehicle (EV) launches are targeted at segments such as premium scooters, high-performance sporty motorcycles, commuter space, delivery market and 3Ws.

According to a Moneycontrol report, the South-based two-wheeler maker is evaluating the possibility of a fund raising exercise. Menawhile, according to a The Economic Times report, TVS Motor is in talks with a clutch of global private equity investors to raise $300-500 million (Rs 2,220-3,700 crore) for its electric vehicle subsidiary at a valuation of $3.5-4 billion.

In the past one month, the stock of TVS Motor has outperformed the market by surging 40 per cent, as compared to less than 1 per cent gain in the S&P BSE Sensex. TVS iQube has a healthy order book, is already available in 33 cities, while the management plans to expand it pan-India by FY22-end. It plans to expand monthly capacity to 10,000 units by January 2022.

For July-September quarter (Q2FY22), the company had reported highest-ever revenue, and earnings before interest, tax, depreciation and amortization (Ebitda). In Q2, the company reported 22 per cent year on year (YoY) growth in revenue at Rs 5,619 crore, above analyst's estimates of around Rs 5,400 crore, mainly due to a 39 per cent YoY jump in spare-part sales. Ebitda margin also expanded by 70bps YoY to 10 per cent, aided by the restoration of export incentives, higher spare-part sales and a one-time benefit relating to export incentives of the last two quarters.

"The domestic 2W volume outlook is positive, and premium motorcycles/scooters could outperform ahead. In addition, the export outlook is encouraging, owing to healthy demand in Africa and Latin America regions," analysts at Emkay Global Financial Services said in a result update report. The stock is trading close to the brokerage's target price of Rs 800 per share.