Greaves Cotton sinks 10% as govt seeks to remove EV arm from FAME-2 scheme

The govt said that Greaves Electric Mobility failed to adhere to Phased Manufacturing Programme guidelines, hence it will need to return the subsidy of about Rs 124 cr claimed under the FAME-II scheme

Shares of Greaves Cotton plunged 10 per cent to Rs 133.70 on the BSE in Tuesday’s intra-day trade after the government proposed to de-register the company's electric vehicle arm Greaves Electric Mobility (GEMPL) from the FAME-II subsidy scheme and directed the firm to deposit around Rs 124 crore of incentive that it previously claimed under the scheme. 

The ministry of Heavy Industries (MHI) said that GEMPL failed to adhere to Phased Manufacturing Programme (PMP) guidelines, hence it will need to return the subsidy amount claimed under the FAME-II scheme, along with interest. 

According to ICICI Securities, this will negatively impact Greaves Cotton. In FY23, Greaves Cotton’s E-Mobility segment reported revenues of Rs 1,124.3 crore, which grew by 115.3 per cent on a YoY basis. And EBIT of Rs 78 lakh vs EBIT loss of Rs 34.45 crore. Also the company is yet to receive around Rs 350 crore from the FAME II subsidy.

"The government provides an incentive of around Rs 15,000 per kWh on electric two-wheeler capped at 40 per cent of the total vehicle cost, provided they meet specified localization criteria. The subsidy for EV makers ranges between Rs 17,000-66,000 per electric two-wheeler. However, from June 1, 2023, the Centre has slashed the subsidy for electric two-wheelers to Rs 10,000 perKwh. The existing maximum subsidy cap has also been brought down to 15 per cent", the brokerage said in a note.

The FAME India scheme had commenced on April 1, 2019, for a period of three years, and was further extended for a period of two years upto March 31, 2024. GEMPL, which is a key subsidiary of Greaves Cotton, has electric two-wheeler models Primus, MagnusEX, and ReoPlus under the Ampere brand umbrella.

Greaves Cotton said the Board of Directors of GEMPL will be reviewing and analysing the facts regarding the purported govt notice and the alleged violations for taking appropriate course of action. This will include engaging with the government to better understand the alleged violations and for a resolution, in accordance with law.