TVS Motor confident of growing faster than industry, says CEO Radhakrishnan
TVS Motor has said that it will maintain a capex of around Rs 500 crore in 2021-22 towards developing new products and technology. The company also said that it will continue to focus on premiumisation, better product mix, cost reduction initiatives to maintain EBITDA growth. The management is also confident that the company will grow faster than industry in both domestic production and exports.
During the third quarter ended December 31, 2020, TVS reported the highest ever profit of Rs 266 crore as compared to Rs 121.07 crore reported last year, driven by healthy operating performance. Revenue rose 31 per cent to Rs. 5,404 crore as against Rs. 4,126 crore in the third quarter of 2019-20.
K N Radhakrishnan, director and chief executive officer, TVS Motor said that the performance was driven by a favourable product mix, lower other expenses. good volume recovery, price hikes, and a continued focus on cost management would support profitability.
“We will continue to focus on premiumisation, better product mix, cost management to improve our EBITDA further,” said Radhakrishnan during a post earnings call.
The company’s gross margins expanded 40bp QoQ (-390bp YoY) to 23.9 per cent as raw material cost inflation was offset by price hikes and an improved mix. TVS reported an EBITDA margin of 9.5 per cent (v/s est 9 per cent; expansion of +70bp YoY and +20bp QoQ), supported by higher gross margins and lower other expenses, partially offset by high employee cost, according to Motilal Oswal.
TVS has taken a 2 per cent price hike to partially offset the impact of raw material cost, leaving 80–90bps of uncovered raw material cost. It expects to offset the remaining raw material cost inflation through a better product mix and continued cost reduction efforts.
On the outlook, he said, the company will invest around Rs 500 crore in Fiscal 2022 in product development, technology, marketing, international expansion among others.
Radhakrishnan said urban retail sales are returning to pre-Covid levels, supported by the gradual uptick in the scooter segment. Rural demand is buoyant with the highest rabi sowing, government initiatives and others. To increase the demand further, he hopes the government will reduce GST on two-wheelers in the upcoming budget.
On exports, he said, stability in the major export regions is driving demand, supported by stable oil prices and currency availability. Core demand for Indian brands is increasing in the international markets including Africa, Latin America and ASEASN markets. However, container-related issues continue to affect exports.
“Our exports grew by around 20 per cent, the growth but container shortage was an issue. The shortage still continues,” said Radhakrishan.
The company’s total export grew from 217,000 units in the quarter ended December 2019 to 261,000 units during the quarter ended December 2020 recording a growth of 20 per cent despite scarcity in the availability of containers.
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