TVS Motor
It has been a sluggish quarter for the entire two wheeler sector due to high interest rates and the overall subdued sentiments for the sector. In Q3 itself one could witness the pressure and this came to the fore in Q4. The company had flat sales for motor cycles, and exports. Scooter sales were down 14% (YoY) and the only segment to report growth was three wheelers, which rose 89%. Apart from these lackluster sales for the quarter, the company had an exceptional loss of Rs 91.63 crore against provision for diminution in value of investment in Europe plant. Together, the company was pushed into the red and it ended the quarter with a net loss at Rs.33 crore compared to a net profit of Rs.42 crore in Q4FY12 and Rs.52 crore in Q3FY13. Net sales had gone up 7% (YoY) at Rs.1748 crore but in the face of a loss, this topline growth holds no significance. The company ended FY13 with a consolidated net profit at Rs.198 crore, up 50%.
The scenario at the moment looks challenging and all hinges on a good monsoon. If RBI reduces interest rates on 3rd May and if the banks pass on the rate cut to the consumer, we might see some spike up in demand. But monsoon remains the most critical factor. As such, things are getting hot for the two-wheeler sector with competition heating up and market shares are dwindling. Unlike Bajaj and Hero, the company has few launches. It launched the Phoenix in Q4 and has stated that in FY14, will launch a new scooter and a new bike. In addition, the company has planned upgrades across the product portfolio, and will also launch a diesel three wheeler during the year. Surely, this will increase the ad spend which in turn could impact margins if not supported by good sales. The shape of the agreement with BMW will be widely watched and a bounce back in Q2 will be crucial.