We're careful about marketing spends after demonetisation: TVS Motor CFO

Interview with S G Murali, chief financial officer, TVS Motor

Despite speed bumps for the auto sector, such as demonetisation and prices of commodities going up, TVS Motor has managed to post a 10 per cent growth in profit, to Rs 132.67 crore, in the quarter ended December 2016. For the corresponding quarter in the previous year, the firm’s profit was Rs 120.21 crore. TVS Motor’s total revenue for the quarter has increased to Rs 3,239.55 crore, compared to Rs 3,151.12 crore in Q3 FY16. TVS Motor chief financial officer S G Murali tells T E Narasimhan about how it managed to stay in profits, its plans to increase market share to 18 per cent, and a proposed investment of Rs 300-350 crore in the next financial year (2017-18).

What factors helped TVS in Q3, especially when the effects of cash crunch were felt across the automobile sector?

Demonetisation happened in November, but PAT (profit after tax) grew well. We had a good festival season and continued with billing in November. We were careful in marketing spends after demonetisation, and all the brands have done well. 

For the first six months of FY17 (April to September), we grew 20 per cent; in the festive season also we grew 20 per cent. As a result, Q3 performance was good. The first six weeks of the festive season was good; impact of demonetisation was felt on the second half. We are hopeful about continued performance in Q4 (January to March). 

Though the first two weeks of January were subdued, increase in cash supply and a good rabi crop will help improve sentiment. The sales should pick up by February and March. If there are any good measures for the sector in the Budget, that will also help growth.

You have set a target of around 18 per cent market share…

At the beginning of the year, we said we would achieve 18 per cent market share in less than three years and set ourselves a target of achieving 15 per cent market share end of this financial year (March). By the last quarter (October-December, 2016), we achieved a market share of 15.5 per cent.

Stability is returning. The sector should be stable by late January or early February. It will reflect in the Q4 FY17 results. Our portfolio — especially Apache, Jupiter and Victor — has done well. We need to grow our scooty brand.

Are any new products on the cards? What is the status of the vehicle from the BMW venture? Will you launch any scooters or motorcycles in 2017-18?

As far as BMW concerned, the project is progressing well. There is no delay in launching vehicles; we will come out with the product in 2017. Besides, we will also launch new products in scooter and motorcycle segments.

What will be your capex?

Around Rs 300-350 crore for 2017-18 (In 2016-17, it was around Rs 400 crore). We’ll focus on enhancing capacity from the current four million units, across all three plants, and this will cater to the following year’s requirements. How much the exact increase is will be announced by the end of the next quarter. Besides, capacity expansion, the company will invest on new products.