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Govt decision to limit export incentives under MEIS to hurt TVS Motor most

Profits of Bharat Forge, Bajaj Auto and Balkrishna Industries will also be hit

TVS Motor | MEIS | Two-wheeler exports

Ram Prasad Sahu 

TVS, TVS group, tvs motors
MEIS benefits will be restricted to Rs 2 crore per exporter from September 1 to December 31 this year and benefits may be discontinued from January 1, 2021.

For a sector struggling to overcome the sharp drop in demand both in India and overseas markets, reports that the government will limit export incentives under the Merchandise Exports from India Scheme (MEIS) is expected to impact two wheeler exporters and the most.

benefits will be restricted to Rs 2 crore per exporter from September 1 to December 31 this year and benefits may be discontinued from January 1, 2021. incentives for exports to less developed countries are higher, but on average they are about 2 per cent of export revenues.

Analysts at Nomura Research believe among with high export revenues, will get impacted the most as FY20 export incentives accounted for 14 per cent of its operating profit and nearly a quarter of its profit before taxes. For the impact was 13-19 per cent on operating and pre-tax profits.

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While Bajaj Auto’s exports at over Rs 12,000 crore are by far the largest among listed auto players, its impact on operating profit and pre-tax profit is much lower at high single digits given higher base and other income.

Balkrishna Industries, which gets about 81 per cent of its revenues from exports, is another player which will be impacted by the proposed changes with the impact at 6-8 per cent. While the government is looking at introducing an alternate scheme, the timing and the proportion of incentives is unclear.

What could impact the struggling with underutilised capacities is a sharp rise in commodity costs which are up 150 basis points since the June quarter. The impact due to the delayed pass through could hit the auto majors from December quarter onwards.

FY20 figures in Rs crore TVS Motor Balkrishna Industries Bharat Forge
Export revenues 12,216 4,552 3,872 2,650
Export incentives 459 187 94 132
% of Ebidta 9 14 7 13
% of PBT 7 25 8 19
MEIS: Merchandise Exports from India Scheme
Ebidta: earnings before interest, depreciation, tax and amortisation
Source: Nomura Research

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First Published: Tue, September 08 2020. 17:23 IST