Ministry of Heavy Industries demands repayment of Rs 124 crore in claimed incentives due to alleged violations
Greaves Cotton has reportedly experienced a significant drop in its stock prices as its electric vehicle arm, Greaves Electric Mobility (GEMPL), faced challenges from the government.
According to reports, on Tuesday, shares of Greaves Cotton plummeted by 10% to Rs 133.70 on the Bombay Stock Exchange (BSE) following the government’s proposal to de-register GEMPL from the FAME-II subsidy scheme.
Additionally, the government directed the company to return approximately Rs 124 crore of incentives that it had previously claimed under the scheme.
The Ministry of Heavy Industries (MHI) stated that GEMPL had failed to adhere to the guidelines of the Phased Manufacturing Programme (PMP), leading to the decision to de-register the company from the FAME-II scheme and the requirement to repay the subsidy amount along with interest.
According to ICICI Securities this development has negative implications for Greaves Cotton.
Greaves Cotton’s E-Mobility segment had shown promising growth in the fiscal year 2023, with revenues of Rs 1,124.3 crore, representing a year-on-year increase of 115.3%.
The segment also reported an EBIT (earnings before interest and taxes) of Rs 78 lakh, in contrast to an EBIT loss of Rs 34.45 crore in the previous fiscal year. However, the company is yet to receive approximately Rs 350 crore from the FAME-II subsidy.
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The brokerage firm explained that the government provides incentives ranging from Rs 17,000 to Rs 66,000 per electric two-wheeler, capped at 40% of the total vehicle cost, if the specified localization criteria are met.
Starting from June 1, 2023, the government has reduced the subsidy for electric two-wheelers to Rs 10,000 per kilowatt-hour (kWh), while also decreasing the maximum subsidy cap to 15%.
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The FAME India scheme was initiated on April 1, 2019, for a duration of three years, and later extended for an additional two years until March 31, 2024. GEMPL, a vital subsidiary of Greaves Cotton, offers electric two-wheeler models such as Primus, MagnusEX, and ReoPlus under the Ampere brand.
In response to the government’s notice, Greaves Cotton stated that the Board of Directors of GEMPL will review and analyze the alleged violations and engage with the government to gain a better understanding of the situation. The company intends to take appropriate action in accordance with the law to address the issues raised.
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