TVS Motor to invest Rs 500 cr in FY18

TVS plans to launch a new motorcycle and a scooter by second half the year, says S G Murali

TVS Motor, maker of two-wheelers and three-wheelers, plans to invest Rs 450-500 crore this financial year, mostly on new products.

Despite the impact created by demonetisation, the goods and services tax and higher emission norms, TVS says it is confident of a double-digit operating earnings margin.

K N Radhakrishnan, chief executive, said till last October (the financial year starts in April), the industry was growing at 12 per cent, while TVS' was 18.6 per cent. After which, industry growth came down to 5.3 per cent, while TVS growth dropped to 11.3 per cent. He expects TVS to increase its market share by 1.5 percentage points this year.

He said he expected the industry to come back to the earlier growth trajectory and for TVS growth to be higher. During the first quarter of 2017-18, the industry grew 8.6 per cent, while TVS grew at 12 per cent, he said in an analyst call.

S G Murali, the company's finance head, said by the second half of the year, the plan was to launch a new motorcycle and a scooter. For the festival season, there would be upgrades of existing vehicles.

He added they would achieve a market share of around 18 per cent over the next two years, And, a 10 per cent margin in earnings before interest, taxes, depreciation and amortisation by next year. The current market share is 14-14.5 per cent.

Radhakrishnan said there was a better product mix and average realisation was growing. The company is planning one more round of price increase, of perhaps half a per cent, mainly to offset the higher emission norm expense. The price increase will be Rs 500-1,000 a vehicle.

TVS also hopes its Indonesian subsidiary would break-even this year. The management has told shareholders the annual loss of the subsidiary dropped to $3.1 million, from $6.4 mn. Sales improved to 26,000 units, from 17,000 units.