Rating agencies put Hero Electric, Okinawa on watch

The heavy industries ministry has launched a probe into alleged violation of localisation norms mandated under the Faster Adoption and Manufacturing of Electric and hybrid vehicles (FAME) scheme by EV makers. While multiple companies have come under the scanner, subsidies for Hero Electric and Okinawa show “expired” status on the FAME website. “The exclusion of the company’s products from FAME eligibility and/or any prolonged delay in the receipt of subsidy claims might have an unfavourable impact on its credit profile,” Care Ratings said about Hero Electric in a recent report, putting the company’s debt ratings on watch with negative implications.

“The FAME subsidy constitutes 25-30% of the overall price of the company’s (electric two-wheelers) and removal of the same would adversely impact the price competitiveness of its products and/or profitability,” said Care Ratings. The subsidies of the two companies have been paused for several months now, even though the status was changed to “expired” only in September. Further delay in subsidies would impact the already stretched liquidity profile of Hero Electric, said the ratings agency. ICRA made similar observations on Okinawa Autotech, putting its ratings on watch with negative implications. The development could delay the fundraising plans of Hero Electric, further impacting its cash flows and liquidity profile, said Care Ratings.

Hero Electric has been in talks with investors to raise funds for its expansion plans, including setting up two more assembly plants.

Hero Electric and Okinawa Autotech have informed the rating agencies that they are compliant with the FAME scheme rules and that they have completed all procedural formalities to get their subsidies resumed.

In response to ET’s emailed queries, Jeetender Sharma, the managing director of Okinawa Autotech, said the company has been following all the government guidelines. “We have shared all the documentation with the testing agencies to their satisfaction” he said, adding that the company is continuing subsidies for its dealers and customers. “At Okinawa, we ensure that the highest quality standards are met in all our products and processes.” ET’s queries to Hero Electric did not elicit a response till the time of going to press. The FAME scheme comes with a caveat of manufacturers locally sourcing key components for their EVs, like motors and controllers to help create a local ecosystem in India and not subsidise cheap imports from China with taxpayer money.