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TVS Motor’s profit skids 64% on higher rates, competition

TVS Motor’s profit skids 64% on higher rates, competition
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First Published: Sat, Jul 28 2007. 12 22 AM IST
Updated: Sat, Jul 28 2007. 12 22 AM IST
New Delhi: TVS Motor Co. Ltd, India’s third biggest motorcycle maker, said profit slumped for a sixth straight quarter as higher interest rates deterred potential buyers. Most two-wheeler purchases in India are made through credit.
Net income fell 64% in the three months ended 30 June to Rs7.5 crore, from Rs21.3 crore a year earlier, the Chennai-based company said in a statement on Friday.
That was more than the Rs5.7 crore median estimate in a Bloomberg survey of 11 analysts. Sales fell 15% to Rs783 crore from Rs922 crore.
Eight-year high interest rates in India have dented demand for TVS in the world’s second biggest motorcycle market. Growing competition with bigger rivals Hero Honda Motors Ltd and Bajaj Auto Ltd, who have also reported declining profits, means TVS can’t increase prices and pass on the higher costs of purchasing steel and aluminium.
“TVS Motor’s volumes have been negatively impacted by the aggressive strategies adopted by the Top 2 two-wheeler companies,” said Amit Kasat, an analyst at Motilal Oswal Securities Ltd. The company’s “operating performance remains a concern”. He rates the stock “neutral”.
The Reserve Bank of India has raised benchmark interest rates to control inflation in the world’s second fastest growing major economy.
State Bank of India Ltd and ICICI Bank Ltd, India’s two largest lenders, have raised rates in the past two years .
Competition is increasing in India as Hero Honda, the biggest motorcycle maker, and Bajaj, the second biggest, introduce new models.
TVS had cut motorcycle production by as much as 5,000 units a month from June as higher lending rates damped sales. Its sales of motorcycles and scooters fell to 320,178 units in the first quarter from 376,297 a year earlier.
The company expects sales to improve starting in the third quarter of the current fiscal when it starts selling new models, chairman Venu Srinivasan had said on 19 July.
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First Published: Sat, Jul 28 2007. 12 22 AM IST