S G Murali, CFO, TVS Motor
At a time when the automobile industry is facing pressure due to demonetisation and increasing commodity prices, TVS Motor has managed to post around 10.4 per cent growth in profit at Rs 132.67 crore during the third quarter that ended on December. The company had registered profits worth Rs 120.21 crore in the corresponding period in 2015. Total revenue increased to Rs 3,239.55 in the December quarter crore as against Rs 3,151.12 crore in the preceding year.
TVS Motor's Chief Financial Officer (CFO) S G Murali speaks to T E Narasimhan about the factors that have helped TVS and its future plans that include increasing the company's market share to 18 per cent and the proposed Rs 350 crore investment in the upcoming financial year.
What are the factors that have helped TVS in Q3, especially at a time when the impact of demonetisation was experienced across sectors including the automobile industry?
Demonetisation happened sometime in early November, but the net profit after tax (PAT) grew well; we had good sales during the festive season and the pipeline was reasonable. Billing continued till November. We were careful when it came to spending in marketing activities and all brands have done well.
In the first six months, we grew by 20 per cent and this was maintained even during the festive season, keeping us ahead of the market. We were able to record a good growth up to November and therefore our Q3 performance was also good.
The impact of demonetisation was felt only in the second half, which was six weeks after the festive sales had begun. The first two weeks of January w subdued. There were signs of growth after Pongal and Sankaranti festivals but these were still early days. As the cash supply gradually increases and rabi crop plantation also improves, sentiments will change for the better. By February or March growth will come back. The Budget may also help growth depending on the measures taken by the government.
Given its great performance, what target have you set for the company in FY17 as far as market share is concerned?
At the beginning of the year, we had said we will achieve 18 per cent market share in less than 3 years and set a target of around 15 per cent for FY17. In the December quarter itself, the company has achieved a market share of 15.5 per cent.
In Q4 stability will come slowly. The industry is expected to stabilise itself by January or early February. The results will be reflected by February-end or early March.
We have done well in some portfolios, especially Apache, Jupiter and Victor. We need to grow our brand of scooters now.
Are there any new products on the cards? What about the BMW venture?
We will be launching a host of new products in the scooter as well as motorcycle segments during 2017-18.
As far as the BMW venture is concerned, the project is progressing well and there will be no delay in launching vehicles. They are expected to be out in 2017.
What will be your capital expenditure?
Around Rs 300-350 crore for 2017-18 (in 2016-17 it was around Rs 400 crore) towards enhancing capacity from the current four million units across all three plants that will be utilised in the following year's requirements. Besides, capacity expansion, the company will also invest in several new products.