TVS Motor jumps 7% post-acquisition of Norton Motorcycles; pares gain later

The company has acquired Britain''s most iconic sporting motorcycle brand Norton in an all-cash deal for Rs 153 crore.

Shares of TVS Motor Company (TVSL) soared as much as 7.16 per cent to Rs 323 apiece on the BSE on Monday after the leading two-wheeler and three-wheeler manufacturer on Friday acquired Britain's Norton Motorcycles for GBP 16 million (Rs 153.12 crore).

The company has acquired Britain''s most iconic sporting motorcycle brand Norton in an all-cash deal for a consideration of GBP 16 million by acquiring certain assets of Norton Motorcycles (UK) through one of its overseas subsidiaries, TVS Motor Company said in a statement.

Founded by James Lansdowne Norton in Birmingham in 1898, Norton Motorcycles is among the most popular British motorcycle brands of all time. 

“This is a momentous time for us at TVS Motor Company. Norton is an iconic British brand celebrated across the world and presents us with an immense opportunity to scale globally. This transaction is in line with our effort to cater to the aspirations of discerning motorcycle customers. We will extend our full support for Norton to regain its full glory in the international motorcycle landscape," said Sudarshan Venu, Joint Managing Director at the company. 

Analysts at Prabhudas Lilladher, however, said that the acquisition does not complement TVSL’s existing business as both companies operate under different segments and markets. Hence, no near to medium-term synergies are expected. 

"TVSL announced the acquisition of a struggling UK-based Norton Motorcycles for all-cash consideration of GBP16m (~Rs1.53b), valuing a deal at 2.4x sales of FY19 at GBP6.4m. While TVSL has tested success in the domestic premium motorcycle segment through Apache, its effort in scaling exports via BMW tie-up has failed to date as volume dropped by ~29% in FY20 to just 15.5k units." 

Adding, "We believe, TVSL will first have to turn around Norton, however, volumes falling sub 1k units in 2019 looks likely challenging due to its non-expertise in the segment. At the same time, Norton’s niche presence in superbike (+1000cc) does not seem to provide meaningful volumes in the mid-capacity segment (350-750cc) too."

The brokerage has a "Hold" rating on the stock with the target price of Rs 318. 

At 09:55 am, the stock was trading nearly 3 per cent higher at Rs 310 apiece on the BSE. In comparison, the S&P BSE Sensex was trading 83 points or 0.26 per cent higher at 31,672 levels.