Greaves Cotton rallies 6% on heavy volumes; stock nears 52-week high

Greaves Cotton shares rallied 6 per cent to Rs 152.40 on the BSE in intra-day trade on Monday on the back of heavy volumes after the Central government increased the subsidy on electric two-wheelers by 50 per cent, under the second phase of the FAME India scheme, making them more affordable.

In the past one week, the stock of Greaves Cotton has soared 18 per cent, as compared to 0.41 per cent rise in the S&P BSE Sensex. It was trading close to its 52-week high price of Rs 158, touched on March 9, 2021. The trading volumes on the counter more than doubled with a combined 8.3 million shares changing hands on the NSE and BSE.

Greaves Cotton is a diversified engineering company and a leading manufacturer of Cleantech Powertrain Solutions (CNG, Petrol and Diesel Engines), Generator sets, Farm equipment, E-Mobility, Aftermarket spares, and services. Greaves Cotton augmented its clean technology portfolio in the last mile affordable 2W personal Mobility segment with Ampere Vehicles in 2018.

The government had made a partial modification of the scheme for faster adoption and manufacturing of electric vehicles in India Phase II (FAME India Phase II), including increasing the demand incentive for electric two-wheelers to Rs 15,000 per KWh from the earlier uniform subsidy of Rs 10,000 per KWh for all EVs, including plug-in hybrids and strong hybrids, except buses.

The revision in the FAME (II) policy, increasing the subsidy by 50 per cent per KWh, is likely to accelerate electric two-wheelers sales for Ampere Vehicles , a subsidiary of Greaves Cotton. Ampere has more than half a dozen electric two-wheelers in its portfolio and with product for every customer price point in the affordable mobility and could further gain market share with new launches at varied price points. Electric mobility and new initiatives business of Greaves Cotton may provide much need growth uptick in long term amid languishing auto engine volumes, ICICI Securities said in a note.

For the January-March quarter (Q1FY21), Greaves Cotton reported profit after tax of Rs 14 crore against Rs 1 crore in Q1FY20. Revenue grew 35 per cent at Rs 520 crore from Rs 386 crore.  EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins improved 186 basis points (bps) to 8.07 per cent from 6.22 per cent in the year-ago quarter.

The company’s new business (e-mobility and non-auto business) continues to grow and contributes 30 per cent to the overall business of the company. Greaves Emobility segment has seen higher growth momentum, with Ampere gaining popularity due to rise in demand for its electric two-wheelers (electric scooters) and electric three-wheelers (electric rickshaws). The non-auto business segment has also seen a significant growth and expected to do well in the coming quarter especially agriculture equipment due to the favorable monsoon ahead, the company's management said.