Reality Check. How Norton acquisition impacts TVS Motor

In tune with the market meltdown, the TVS Motor stock nearly halved from February 20 to touch its one-year low of ₹240 on April 7. However, the stock has bounced back by almost 25 per cent since then.

Among the drivers for the stock is the announcement of the company acquiring UK-based Norton Motorcycles through one of TVS’ overseas subsidiaries, on April 17. Norton Motorcycles was under administration, and TVS Motor could wrap up the all-cash deal for £16 million, or about ₹153 crore.

With models such as the Dominator, V4 and Commando, Norton Motorcycles operates in the premium biking segment globally. TVS Motor’s portfolio range has mopeds, scooters and bikes with an engine capacity of up to 200 cc. Its highest offering, the Apache series bikes, have a market share of 47 per cent as of 2019-20 in the 150-200 cc segment.

Beyond this, TVS has a presence in the 250-350 cc segment through its tie-up with BMW Motorrad. TVS collaborated with BMW Motorrad in 2013 to share platforms, technology and manufacturing facility. Both companies entered into an agreement to manufacture sub-500 cc bikes for global markets. The Apache RR 310 is a result of this collaboration. In 2019-20, the company sold 2,299 units of the Apache RR 310 in India. Royal Enfield dominates the 250-350 cc segment with a 99 per cent market share.

The Norton acquisition expands TVS’ product offering further, by adding bikes with much higher engine capacities to its portfolio. Norton’s offerings include bikes with an engine capacity of over 1,000 cc. The buyout gives TVS access to Norton’s technology as well a gateway to the European markets. Norton is also expected to benefit from TVS’ global reach as well as its supply-chain capabilities.

While it is not clear now if there will be local manufacturing of Norton bikes, over the long term, TVS could bring Norton bikes to India, where the market for premium bikes is expanding. Bikes over 250 cc constitute 6 per cent of the total motorcycle sales in India today, compared with less than one per cent of the total until 2011-12. Sensing the growing interest, Royal Enfield had brought in the 650 cc Continental GT and Interceptor models.

Triumph Motorcycles and Harley-Davidson are the other global players in the Indian market in the superbikes space. The former is in an alliance with Bajaj Auto to produce 200-800 cc motorcycles in India, of which the first bike is expected to hit the roads by 2022.