TVS Motor: Margins disappoint yet again

TVS will achieve 18% market share in less than 3 years: S G Murali TVS Motor, country's third largest two-wheeler maker has reported a 24 per cent growth in profit at Rs 432 crore in 2015-16. Total revenue rose 12% growing to Rs 11,244 crore in the year ended March 2016. The company is bullish that it will report double digit growth on the back drop of expectation of good monsoon, picking up of infrastructure projects.

TVS Motor's CFO 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 next fiscal. Edited excerpts:

What helped TVS Motor during the March quarter and FY16? What is your outlook?
A comprehensive product portfolio with good market acceptance of new products and steady growth in sales has enabled TVS Motor to post good sales numbers.

TVS has been going behind quality profitable growth. We have set three targets two years back including increasing market share from 11.5 per cent to 18 per cent in the next 2-2.5 years. The growth will be portfolio driven. TVS is the only company which is present in all the three segments of the two-wheelers. We will leverage this.

The company was missing in the executive segment, which is filled now with the launch of new Victor. The market share has now increased to 14 per cent and the company will achieve the 18 per cent market share, profit in the last three years almost doubled, EBITDA margin is now closer to 7 per cent.

The company launched Moped, Victor, Apache and now has a complete portfolio. We should build on what we have done in 2015-16 and grow from strength to strength.

Why did the company lose its third position to Bajaj?
We don't speak about competition. TVS continues to be third largest in the domestic market.

How will you achieve EBITDA target?
Double digit EBITDA will be achieved in two years time. With topline growing, we will be able to bring down the fixed cost of the percentage of sale and also leverage the complete portfolio and it will go up. Total overhead as percentage of sales will come down.

What are your capex plans?
Around Rs 400 crore for 2016-17 for capacity expansion and products. Capacity will be increased to 4.5 million units from 3.5 million units across all the three plants (Tamil Nadu, Karnataka and Himachal). These include physical infrastructure, hardware, product development and R&D.

Does this include Rs 300 crore in Mysore?
This is not for one year, it will be for three years, mainly to meet the demand for Apache.

What is your outlook for 2016-17?
Everything depends on the monsoon, which is expected to be good. Industry is expected to do well and with all the direct benefit transfer scheme, finance commission and other things, focus on infrastructure will bring the economy growth back. We hope industry will come back strongly and TVS will grow by double digit.

We have to grow ahead of other players to achieve our two per cent market share increase every year.

Any new products? When is your tie up with BMW expected to come out with its product?
There will be some upgrades in the pipeline. I cannot comment on the BMW tie up.

What can you say about the company exports?
Exports are a key focus area for the company. Currently, to over 45 countries TVS products are being exported. Currently, 23 per cent of revenue comes from exports.