TVS Motor slumps; BMW deal unlikely to give near-term boost

Moneycontrol Bureau

TVS Motor Co shares reversed Monday's gains and slumped over 7 percent on Tuesday morning as the euphoria generated by the BMW pact cooled and analysts said the deal was unlikely to alter the two-wheeler maker's fortunes in the near-term.

TVS Motor has inked a long term co-operation agreement with German auto giant BMW's motorcycle division BMW Motorrad to develop and produce a new series of motorcycles in sub-500cc segment.

The cooperation agreement involves the two companies each offering their own vehicle derivatives, which will be sold through their own distribution channels in India and across the globe.

Chennai-based TVS Motor, once India's third largest two-wheeler maker, has hit the slow lane off-late and Honda Motorcycle & Scooter India has raced ahead of it.

It earlier had a partnership with Japan's Suzuki, but the two parted ways in 2001. Both TVS and Suzuki have operated independently in India since and have struggled to keep pace with the top two motorcycle makers Hero MotoCorp and Bajaj Auto in last few years.

This deal with BMW is certainly a positive development for TVS Motor in the long-term perspective as it will get access to latest technology from a company, which is one of the world's leading manufacturers of premium motorcycles and scooters. BMW, which operates in 600-1,600cc space, is the market leader in 13 countries with USA, Germany, France, Italy and Brazil among its key markets.

"The tie-up is expected to help TVS expand its presence in the premium motorcycle space, where it currently offers the Apache (160cc and 180cc) series," says an analyst at Angel Broking.

In the near term though, "this agreement is unlikely to alter the current positioning of the company in the domestic motorcycle industry," the analyst adds.

Furthermore, the firms did not disclose any formal arrangement wherein BMW may acquire a stake in TVS and it also refrained from mentioning about the exact nature of the alliance, he says, maintaining a "neutral" rating on the stock.

Other analysts too voice similar sentiments.

Binay Singh of Morgan Stanley also sees long-term positives from the TVS Motor-BMW deal, but says, "as the first bike rolls out in 2015 and that too in 500cc segment, (low volumes), we don't see any earnings impact over FY14."

Morgan Stanley has an "equal-weight" rating on TVS Motor.

At 9:55hrs, TVS Motor shares were down 8.1 percent at Rs 36.55 on NSE.

Nachiket Kelkar
nachiket.kelkar@network18online.com