Warranty Group raises stake in TVS JV

U.S.-based firm eyes expansion into warranties in appliances, technology areas

PUDUKOTTAI,19/02/2010: Jose Manuel Orcasitas (left), R.Seshasayee, R.Dinesh, Directors of Irizar-TVS in front of the iT09 Super Luxury Coach at the inauguration function of factory and coach at Viralimalai, in Pudukottai district on February 19, 2010. Photo: M.Moorthy

U.S.-based The Warranty Group (TWG) has raised its stake in TVS TWG Warranty Solutions Ltd., a joint venture with TVS Automobile Solutions Ltd. (TASL), to 90%, from 49%, for an undisclosed sum.

TWG, a warranty solutions provider, views India as a key component of its global growth strategy and hence increased its stake in the JV.

Adding value

“The TVS-TWG partnership focused on the auto sector and achieved market leadership position in the warranty space in India,” said R. Dinesh, director, TASL. “With TWG taking over the management and operations of the company, it will facilitate the faster growth of the entity to meet its vision. TVS will continue to work together with TWG and add value in the auto segment,” he added.

Since the attachment ratio was low, the growth potential was enormous in India, Manfred Schmoelz, executive vice-president (Asia-Pacific) of TWG, said in an interaction with

The Hindu here on Monday. Simply put, the attachment ratio is the percentage of product sales transactions that include a service contract at the point of sale.

The low level of attachment ratio in countries such as India and even in China offered TWG enormous business opportunities, he said. Though small, the warranty business was a niche area, he said. Within three years of forging a JV in India, the group had 5 lakh cars under its warranty service, he added.

The stake increase comes close on the heels of TWG acquiring the warranty business of IAG (formerly known as Lumley Retail Warranty), making it one of the largest retail warranty insurers in Australia.

Non-auto space

With the U.S. firm looking for a larger play in India by getting into non-auto space such as appliances and technology (providing warranty for fridge, mobile phone and the like), the TVS arm had chosen to focus on its core business and let TWG run the JV with higher stake. Following the financial re-organisation, the four-member board of TVS TWG Warranty Solutions would have one representative from the TVS arm in Mr. Dinesh.

TVS-TWG was formed in February 2014 with TASL holding 51% and the balance owned by TWG. The JV was formed with an initial equity capital of $ 4 million.

Mr. Schmoelz pointed to two factors that augured well for the warranty business. For one, financing had increasingly become the regular mode of vehicle purchase. Two, the limitation faced by OEMs (original equipment manufacturers) in showing warranty as liability in their balance sheet. To a question on warranty for pre-owned cars, he said this posed enormous challenge. “It goes to the level of trust,’’ he added. It required a system of certification and an ecosystem to sustain, he added. “We are not yet there in that space (pre-owned cars),’’ he added.