Mumbai: TVS Motor, India’s third largest two-wheeler maker, 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, three people aware of the matter said.
In the second half of October, TVS had carved out a subsidiary for electric vehicles, reasoning that it will give it “scale and flexibility” to expand the EV business.
TVS is seeking to raise the funds from pure financial investors and has no plans to onboard strategic investors, one of the people told ET.
The Chennai-based company didn’t respond to an email seeking comment till press time Monday.
Another homegrown automaker, Tata Motors, had raised $1 billion from TPG Capital in October at a valuation of $9.1 billion for its EV business. TVS’ rival, Bajaj Auto, in July had announced a plan to set up a dedicated electric vehicle subsidiary, which will primarily cater to manufacturing and selling of two-, three- and four-wheelers.
TVS is said to have roped in an investment banker to advise it. The exact amount of investment and the valuation is yet to be firmed up, the people close to the development said, declining to be named, as they are not authorised to speak on the matter.
“These (talks) are early and exploratory in nature. It may take six to 12 months for the investor to come on board,” one of them said.
Sudarshan Venu, a scion of the TVS family, now leads the EV strategy for the company. Former Jaguar Land Rover CEO Ralf Speth, who was recently appointed chairman of TVS Motor, and Kuok Meng Xiong, an investor in leading global ecommerce firms ByteDance, Palantir and Airbnb, are mentoring Venu on the EV business.
The fund proposed to be raised will be primarily used to develop a product pipeline to cater to the global and local market. The core aim of this fundraising is to be a serious global player, led by recently acquired British bike maker Norton and Switzerland-based group company Ego Movement.
Apart from tapping into Norton and Ego Movement’s expertise in the European and American markets, TVS may also tap into its Indonesian subsidiary to cater to the large Asean market.
The move will also help the company further unlock value and capitalise on the electrification shift.
The company said on its post-earnings conference call that initially, growth is a priority for the company in the EV space than profitability. The creation of the EV subsidiary and focus on growth may help the company to monetise its EV segment, mirroring what has recently been done by Tata Motors.
TVS has already announced an investment of Rs 1,000 crore on the EV business. It is readying a portfolio of two- and three-wheelers in the range of 5-25kW, all of which will be in the market within the next two years.
The company envisages presence across electric vehicles segments such as the delivery market, commuter space, premium scooters, high-performance sporty motorcycles, and electric three-wheelers. The EV range will be parallel to its current petrol-powered portfolio of products.
In a recent interview to ET, Venu had said that he was working on a plan that envisaged TVS transforming into a digital-age company, and the commitment of Rs 1,000 crore was in that direction.
While startup Ola has already raised $200 million for its electric scooter unit at a valuation of $5 billion, TVS, with its R&D and manufacturing capabilities, and well-oiled supply chain should be able to draw a similar valuation if not better, an analyst said.
TVS’ first EV offering, iQube, currently sold in Bengaluru, Chennai, Coimbatore, Delhi and Pune, will be available across 1,000 dealerships in major towns and cities by the end of the ongoing fiscal 2022. Around the same time, the company will also launch its scooter based on the Creon concept – which TVS claims will be the most advanced electric two-wheeler in India.
While the iQube has received encouraging responses from customers, its production ramp has been affected due to the semiconductor shortage. But production is expected to improve now with easing of the supply disruption.
TVS will be having a monthly EV manufacturing capacity of 10,000 units from January 2022, from the 650 per month currently, and it could be expanded further subsequently.
According to Vahaan data, TVS had a market share of 4.4% in the second quarter of FY22 in the electric two-wheeler space.
The transaction involves an internal restructuring within the TVS group pursuant to the execution of a memorandum of family arrangement, the composite scheme of amalgamation, and arrangement in January between the parties and board resolutions dated 30 January 2021, as per a combination notice filed with the regulator.
The two companies have agreed to drive the implementation of Electric Vehicle Charging Infrastructure (EVCI) across India and deploy solar power technologies at TVS Motor locations.
