Chinese connection: This auto maker's stock has jumped 610% in 17 months

BSE-listed Goldstone has seen its stock price surging from Rs 25 a share in November 2016, when BYD partnership was announced, to Rs 182 now, giving it a market cap of Rs 9 bn

Goldstone Infratech, an obscure automobile player, has delivered 610 per cent returns to shareholders in 17 months. The trigger: Goldstone partnered China’s electric vehicle maker BYD and bagged large orders for electric buses, edging out Ashok Leyland and M&M.

Goldstone-BYD recently won orders for 290 electric buses from state transport undertakings against Tata Motors’ 190 and Ashok Leyland’s 40 buses. The BSE-listed Goldstone’s stock price has surged from Rs 25 in November 2016, when BYD partnership was announced, to Rs 177 now, taking its market cap to Rs 8.6 billion. The company had no prior experience in automobiles. In the year ended March 31, 2017, 99 per cent of the Rs 1.04 billion sales revenue came from insulators manufactured for clients such as ABB, PowerGrid, and L&T. The profit stood at Rs 60 million. One may wonder what made Warren Buffett-backed BYD, said to be world’s biggest electric bus maker, partner Goldstone.

N K Rawal, managing director, says the company has a “strategic partnership” with BYD which supports them in manufacturing of buses and after-sales maintenance. “BYD was exploring the Indian market and they experimented with a few firms, including us. And in a year they realised that we are bringing a lot more on the table as far as understanding of the Indian market is concerned,” said Rawal.

Goldstone maintains that BYD did not want an Indian partner with financial muscle. “They are not looking for money. They have enough to invest,” said Rawal. Goldstone imports batteries and other critical components from BYD. Goldstone’s peers are wary of the China connection and doubt the ability of Goldstone to execute the orders. “These contracts, if not delivered as promised, tend to skew the perception about the entire market. In addition, there are contracts where Indian taxpayer funds are being used to subsidise already subsidised products from other countries,” said Karthick Athmanathan, head (EV and eMobility Solutions) at country’s biggest bus maker Ashok Leyland. But Goldstone has delivered 31 buses to Himachal Pradesh Transport Corporation and Mumbai’s BEST last year. 

Rawal defends the China angle. “BYD has investors from all over the globe... it is widely held outside China,” he said, adding all worries were unfounded. Goldstone, which currently has an assembly facility for buses outside Hyderabad, is spending Rs 5 billion to set up a new manufacturing unit in Bengaluru. The unit, capable of producing 1,500 buses a year, is expected to be operational this year. 

Goldstone-BYD claimed all e-bus orders from Bengaluru, Hyderabad, and Mumbai under the gross cost contract (GCC) model. Based on the 35 per cent localisation clause, it will get a 60 per cent government subsidy or Rs 10 million (whichever is lower), spread over a three-year period and linked to actual performance.

Rawal claims his company has won in GCC model since its buses are capable of a ‘significantly’ higher performance. “We were not able to match prices of competition (read Tata Motors) in case of outright purchase tenders since our buses are quite expensive. The cost over life cycle, however, is lower,” he claimed.  

Rawal said the 12-metre electric bus can run for 300 kilometres with air conditioning upon one charge while those of rivals cannot even do half. “Our buses are not meant to be a showpiece,” said Rawal.

Some industry peers are also wary about the 35 per cent localisation claimed by Goldstone and insist that the company mostly assembles the buses after importing parts from BYD.