TVS Motors looks to monetize its Electrical Vehicles unit

The news was first out in November 2021 but it was only in December 2021 that TVS Electric Mobility was incorporated as a subsidiary. Now the funding plans are being reported. As per latest reports, TVS Motors may look to raise up to $350 million by unlocking value of its EV or electrical vehicles unit.

That is hardly surprising considering the burgeoning valuations that these EV units are getting. If TVS is successful, then it becomes only the third company after Tata Motors and Greaves Cotton to monetize its EV unit.

Citi is the advisor for this fund raising exercise and the process has just about begun, but the reports are that the demand for the EV space is quite robust at this point of time.

The company is in the process of trying to tap most of the top private equity funds as well as sovereign wealth funds and pension funds to look at the EV unit as a long term investment.

Today, most of these funds are keenly interested in investing money in such sustainable ideas and also have separate allocations. That surely fits into their plan like a T.

It needs no reiteration that the TVS Group is betting big in this space and has aggressive capacity expansion plans. In addition, it is also looking to enrich and enhance its portfolio of offerings with a series of new launches in the pipeline.
 

Raising funds at this juncture will help them to bankroll their scaling up plans. Its portfolio also has the battery-powered scooter, iQube, which has a range of 75 km. This product was launched in January 2020 and TVS expects most of the recovery in growth and valuation creation from this segment.

TVS has a very robust line up ready. For instance, it plans to launch 2W and 3W EVs with battery pack sizes of 5-25kWh. All these launches are scheduled over the next 8 quarters. Current production levels for the iQube are pretty low at 1,700 per month while the pending order book stands at 12,000 units.

That means a huge waiting period for these scooters. It plans to raise the monthly production to 10,000 units by June 2022 end and also plans to expand beyond the 33 cities where it currently sells the EVs.

One missing link in the entire story is the charging infrastructure. However, TVS has already made some steady progress on this front. For instance, TVS Motors has already entered into strategic partnerships with TATA Power, JIO BP and BESCOM to develop adequate charging infrastructure across the length and breadth of India so the product can really take off in a big way. TVS has also made a series of inorganic acquisitions in this field across the world to enhance its product portfolio and plug the gaps in the offerings.

The real story here is that a lot of M&A action is catching up in the EV space. For instance, Tata Motors made a start when it announced a $1 billion fund infusion in its electric vehicle (EV) business by a consortium consisting of TPG Private Equity Fund and Abu Dhabi’s ADQ.

More recently, Abdul Latif Jameel, a Saudi Arabia based family office announced a strategic investment of $220 million in its unit, Greaves Electric Mobility. This values the EV subsidiary of Greaves Cotton at around $419 million.

Hero MotoCorp had also announced an investment of Rs.420 crore in Ather Energy. For now, Hero Moto may have put off the launch of its EV scooter, Vida, but it is more about when than whether.

Hopefully, once the microchip supply chain constraints are resolved, we should see smoother flow of production. Clearly, the world is gravitating towards ESG (environmental, social and governance) investing and these products fit that bill. Domestic EVs are just making hay while the sun is shining.