Ebitda margin will be in double digits in next two years: S G Murali


S G Murali, CFO, TVS Motor

S G Murali, CFO, TVS Motor


  TVS Motor has reported a 21.1% growth in net profit in the quarter ended June 30, 2016 to Rs 121.3 crore, compared to Rs 100.1 crore in the same quarter last year. While the market said it was short of Street estimates, company believes the numbers are satisfactory.


TVS Motor's Chief Financial Officer S G Murali speaks to T E Narasimhan about the factors that helped TVS, as well as its plans including increasing market share to 18 per cent and proposed Rs 400 crore investment in FY17.

Market is saying that Q1 numbers are short of Street estimates. What is your view?

I don't want to comment on the Street estimates. It is not our policy to comment on the external expectations and manage their expectations. But as I mentioned in the past, as an organisation we are running a marathon race, it is not T20 match or 100-metre race. We don't want to mortgage our future. We are building the organisation for long, long time.

We are building brand, investing behind research & development (R&D) and consistent in our approach. This was reflected in the growth of Jupiter, Victor, Apache. We will continue to invest in brand and R&D will come up with good products, based on customer needs.

Our profit after tax practically doubled in the last two years, Ebitda (earnings before interest, taxes, depreciation and amortisation) will also improve. We have a strategy in place and we are going with it.

All I can tell you is we are certainly going in line with the strategy, which we have put in place.

TVS earlier said that it will report double digit Ebitda and 18 per cent market share, but despite new launches and operational leverage margin is at seven per cent only. Why is it so?

It will certainly improve, we are committed for double digit Ebitda margin. 

Even in the current quarter it could have been better if the exports would have been better. The issue was availability of Dollar in the African market, which impacted the local economy due to crude oil price.

Despite pressure in exports, we could grow the Ebitda margin from 6.5per cent last year to seven per cent year.

As the top lines grows, fixed cost of percentage to sales will come down and it will improve our Ebitda. In two years we will achieve double-digit Ebitda.

We have committed that we will achieve a market share of 18 per cent. Today we have come half way to it with 13.7 per cent and in the next two years we will achieve the 18 per cent market share.

Victor will give big gain in the market share.

What are the challenges you foresee?

Raw material cost is benign as of now, and whatever minor increase in the cost, we should be able to pass on through pricing. That should not be an issue.

Monsoon so far good and if continues to progress well that will lead to the growth in the economy and for our industry.

The only challenge is in the exports market, especially Africa, due to local economy taking a beating, thanks to the crude oil price drop. Dollar is not available, so they are not able to import the product. Hopefully in the next six months things will come back to normal. 

What will be your capex plan for FY17?

For FY17, around Rs 400 crore for capacity expansion across all the three factories. Post expansion company can produce four million vehicles from 3.5 million currently.

We will certainly grow ahead of market. Will consolidate gains of Victor, Apache and Jupiter. We are hoping to gain market share and increase profitability from the second half of the year.