With FAME subsidies on hold, EV companies consider selling stake

Thirteen electric vehicle companies have had their subsidy disbursements suspended for alleged misappropriation and flouting of localisation criteria. At least 13 companies are being investigated after the Department of Heavy Industries received complaints about violation of eligibility criteria under FAME. CNBC-TV18 has learnt that a majority of these companies are now looking for investors to divest a minority stake. Industry sources say the move has been driven by a need to support working capital requirements.

The Department of Heavy Industries has suspended FAME subsidies for Hero Electric and Okinawa for allegedly misappropriating FAME subsidies. At least 11 other companies including Benling India Energy and Technology, Okaya EV, Jitendra New EV Tech, Greaves Electric Mobility, Revolt Intellicorp, Kinetic Green Energy & Power Solutions, Avon Cycles, Lohia Auto Industries, Thukral Electric Bikes and Victory Electric Vehicles International are also under investigation and their subsidies have been on hold for over six months now.

According to the Society of Manufacturers of Electric Vehicles, subsidies to the tune of Rs 1,400-1,500 crores have been held up for 13 companies for 15 months.

CNBC-TV18 reached out to the affected companies and consulting firms and has learnt that companies are now looking for investors and OEMs to divest a stake so as to raise funds for their working capital requirements.

"Manufacturing operations and working capital requirements of EV players have been hit. The FAME probe and withholding of subsidies has  imapcted credit worthiness of companies. Banks are holding back working capital loans for companies under probe. Credit rating agencies have lowered ratings for such companies," said a source requesting anonymity.

According to reports, Okinawa is among the companies looking to sell a stake. However, the company in its response to CNBC-TV18 has denied the possibility of selling a majority stake.

In response to a query on whether the company is looking to dilute stake, the company said, "We are looking for investors to support our expansion plans."

The Okinawa spokesperson also said that two-wheeler EV players and government are in constant dialogue to resolve issues and hope to have a resolution soon.

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Sohinder Gill, CEO of Hero Electric and the Director General of Society of Manufacturers of Electric Vehicles, appealed to the government to allow affected companies to have a fresh start.

"We need rationality and practicality in government's decision making. Government should realise that in 2019, there was no supply chain (issues) and industry volumes were approximately 25,000 units for the whole year. Companies were working under stressed circumstances and the COVID-19 impacted supply chains. This is the reason why companies had to keep on importing whatever was not manufactured in India. We hope all stakeholders come together and a solution can be reached so that electric mobility is back on track," Gill told CNBC-TV18.

Industry experts predict that due to the ongoing probe and withholding of subsidies the electric vehicle market in India could see some consolidation in the near future.