Stock outlook: TVS Motors

Stock outlook: TVS Motors

The Supreme Court permitted TVS Motor Company to manufacture and sell its 125-cc Flame model motorcycles that allegedly uses the so-called ‘twin-spark plugs’ technology for which Bajaj Auto claims to hold patent rights.

For two years now, TVS Motor and Bajaj Auto have been involved in a legal wrangle, after Bajaj locked horns with the South India-based automaker, citing patent infringement over use of twin-spark plug technology.

A Division Bench of the Madras High Court had earlier allowed TVS to deploy the twin-spark plugs technology for combustion in its motorbikes. Bajaj had appealed against this order before the apex court.

Meanwhile, reports suggest that the Supreme Court has asked the Madras High Court to re-study the matter by 30 November, which indicates that it has not accepted the high court’s recommendation.

Also, the directive that a court receiver should keep track of any twin spark plug Flames that TVS sells will be the basis on which the court will decide compensation for Bajaj should they win the case.

Considering the poor track record of TVS Motor in Motorbike segment in last two years and stock trading at its fair valuation of around 13.4x FY2011E, we maintain NEUTRAL rating on TVS Motor.