TVS Motor Co launches $300-350 million fund raise process for EV arm; Citi tapped as advisor

With an eye to unlocking value and doubling down on the burgeoning EV (electric vehicle) segment, South-based two-wheeler major TVS Motor Company has kick-started a process to raise around $300 million to $350 million for its electric mobility business, multiple industry sources with knowledge of the development told Moneycontrol.

Moneycontrol was the first to report the firm’s capital mop-up plans for its carved-out electric mobility business on November 9, 2021. If plans fructify, TVS Motor Company would become the third listed company to raise funds for an electric vehicle subsidiary, post Tata Motors and Greaves Cotton.

“The fund raise process was launched last week and feelers have been sent to top private equity funds as well as sovereign wealth funds and pension funds. The funds with a sustainability pool may be particularly interested,” said one of the persons cited above.

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 and in December, TVS Electric Mobility was incorporated as a subsidiary with an investment plan of Rs 1,000 crore.

A second person told Moneycontrol that investment bank Citi had the sell-side mandate for the proposed transaction. “The TVS Group is betting big in this space and has aggressive capacity expansion plans along with a series of new launches in the pipeline. A fund raise will help to scale up and expand the vertical,” he added.

Both the persons cited above spoke to Moneycontrol on condition of anonymity. When contacted, TVS Motor Company and Citi declined to comment.

The battery-powered scooter iQube with a range of 75 km, launched in January 2020, is the solo all-electric product in the market from TVS.

JP Morgan which expects a recovery in domestic 2W volumes and expects TVS to outperform growth shared the following details in an update dated May 6, 2022 – “TVS will be launching 2W and 3W EVs with battery pack sizes of 5-25kWh over the next eight quarters. Current production levels for the iQube are 1.7K/month and there is an order book of 12K units. TVS is currently selling its EVs across 33 cities and plans to raise monthly production to 10K/unit by end of 1QFY23.”

According to a note dated June 7, 2022 by Systematix Institutional Equities on the firm, “Its existing e-scooter offering, iQube, had an order backlog of around 12,000 units as at end Mar’22. It has entered into many strategic partnerships (with TATA Power, JIO BP, BESCOM) to develop adequate charging infrastructure,” the note added.

Over and above the incorporation of the electric mobility subsidiary, the following are some of the other investments by TVS Motor Company in the fast-growing segment:

- It acquired a majority stake in GO AG, Switzerland, and its subsidiary, EGO Movement. EGO Movement is a Swiss technology company, with a strong presence across Europe and a portfolio of e-bikes, e-cargo bikes and e-scooters.

- It acquired a majority stake in Swiss E-Mobility Group (SEMG), a market-leading e-mobility solutions provider in Europe, and the largest pure-play e-bike manufacturer in Switzerland with around 20 percent market share. The company envisages potential revenue of $100 million from SEMG in FY23E (vs. $70 million YoY). This acquisition builds on TVS’ acquisition of EGO Movement to expand presence in the European e-bike market through a portfolio of premium brands.

- Via its Singapore subsidiary, the firm has picked up a 1) 70 percent stake in EBCO UK, a British e-bike manufacturer, and 2) 100 percent stake in Alexand'Ro Edouard'O Passion Vélo Sàrl which is engaged in the sale of e-bikes and its accessories.

- It has also increased its stake in Ultraviolette Automotive Private Ltd (UV) to 34 percent in FY22. UV is a start-up engaged in developing electric 2W (mainly motorcycles) for the domestic market.

In October, Tata Motors had set the ball rolling in the segment when it announced a $1 billion fund infusion in its electric vehicle (EV) business by a consortium of TPG Rise Climate and Abu Dhabi’s ADQ.

Recently Greaves Cotton announced a total strategic investment of $220 million for Greaves Electric Mobility by Abdul Latif Jameel, an independent, family-owned, Saudi Arabian player. The company claimed that it is one of the largest single tranche growth capital investments in the Indian E2W/E3W sector. The initial investment will be $150 million for a 35.8 percent stake on a fully diluted basis in Greaves Electric Mobility. Post money equity value for the EV subsidiary will be $419 million, the announcement added.

Back In May, electric scooter maker Ather Energy said it had raised $128 million led by National Investment and Infrastructure Fund (NIIF), the Indian government’s sovereign wealth fund, and existing investor Hero MotoCorp. Hero MotoCorp had announced an investment of Rs 420 crore (about $54 million) in Ather in January.

On December 4, Moneycontrol had reported that Hero Electric was looking to tap private equity funds and raise capital.

ESG (environmental, social and governance) bets are currently a hot favourite with global investors. The move by domestic players 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.