TVS Motor is planning to raise funds to expand the group’s newly formed electric mobility arm, said a Mint report.
"TVS Motor is in advanced talks to raise ₹4,000-5,000 crore from private equity firms to fund the expansion plan of the group’s newly formed electric mobility arm," Mint reported quoting two people saying so.
“TVS wants to consolidate its position as a leader in the EV segment through relevant product offerings and increase its network presence across the country," one of the two people said.
“Around $500-650 million could be raised by TVS Motor, which could be used for organic and brownfield expansion in the EV space. TVS wants to increase the share of revenues from its EV business, capitalizing on the increasing demand for electric vehicles globally. EV is clearly the future of mobility, and TVS aspires to have a leadership position in this space," Mint quoted the first person saying so.
TVS Motor beat peers Bajaj Auto Ltd and Hero MotoCorp Ltd on revenue growth and Ebitda margins in the March quarter (Q4FY22). Ebitda is earnings before interest, tax, depreciation and amortization.
TVS saw 4 percent year-on-year (YoY) growth in standalone revenue to Rs5,530 crore. Net realization improved by 12.5 percent YoY led by price hikes and a favourable mix, though this was partly offset by an 8 percent YoY drop in volumes. This is in sharp contrast to the 8 percent and 14.6 percent drop in Bajaj Auto’s and Hero MotoCorp’s Q4 revenue, respectively. While the former’s volumes were heavily impacted by the semiconductor shortage, the latter was affected by a slowdown in the entry segment.
Brokerage firm Motilal Oswal Financial Services has a 'neutral' call on the stock of TVS Motor with a target price of ₹650. "Valuations at 24.2 times/19.7 times FY23E/FY24E EPS largely reflect its strong earnings growth as well as increasing risk of EVs," said the brokerage firm.
Motilal Oswal expects TVS Motor's volume growth may be driven by new products (Raider and Jupiter 125) in the domestic market as well as a ramp-up in exports.
"It is reaping the benefits of economies of scale and operating leverage, resulting in the sustaining of EBITDA margin at double-digit levels. TVSL earns nearly 40 percent of its overall EBITDA from the domestic Scooter business, making it vulnerable to an EV disruption in the listed two-wheeler space," said Motilal Oswal.
Disclaimer: The views and recommendations made above are those of the broking firm and not of MintGenie.