TVS Motor signs a long term co-operation agreement with BMW Motorrad ... - Equity Bulls

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	TVS Motor (TVSL) has entered into a long term co-operation agreement with BMW's motorcycle division, BMW Motorrad to develop and produce new series of motorcycles that will cater to the sub 500cc segment. As per the agreement, both the companies will offer their own vehicle derivatives which will be sold through their own distribution channels in India and across the globe. As a part of the deal, TVSL will invest EUR20mn in the collaboration; BMW, however, declined to provide the details of its investments. Further, the firms did not disclose any formal arrangement wherein BMW may acquire a stake in TVSL and it also refrained from mentioning about the exact nature of the alliance. According to the TVSL management, the new product from the collaboration is expected to be launched in 2015. While the exact nature of the partnership is not yet disclosed, we see this as a positive development for TVSL in the long-run given that the co-operation agreement with BMW will provide technological access to the company. The tie-up is expected to help TVSL expand its presence in the premium motorcycle space, where it currently offers the Apache (160cc and 180cc) series. In the near term though, we believe that this agreement is unlikely to alter the current positioning of the company in the domestic motorcycle industry. At Rs. 40, the stock is trading at 6.9x FY2015E earnings. The stock has run-up by more than 25% over the last five trading sessions in the anticipation of an agreement with BMW. We recommend a Neutral rating on the stock.
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