Chennai: TVS Motor Co. Ltd’s net profit improved 31% in the fourth quarter despite sluggish sales as the two-wheeler maker benefited from other income, earned from non-business items such as interest gains. Profit rose to Rs 57.23 crore in the January-March quarter from Rs 43.68 crore a year ago, in line with the Rs 56.11 crore average forecast of analysts polled by Bloomberg.
Sales disappointed, coming in at Rs 1,602.90 crore, down 9% from a year ago and less than the analysts’ estimate of Rs 1,742.9 crore, because of tough competition and rising interest rates for vehicle loans that hurt demand.
“Net profit was up 31% in Q4 largely due to other income of Rs 8 crore, which was not present for the same quarter the previous year,” said Umesh Karne, auto analyst with Brics Securities.
Honda Motorcycle and Scooter India displaced TVS Motor as the third largest two-wheeler maker in the country, selling 1.9 million motorcycles and scooters last year and capturing 14.9% of the market share, according to the Society of Indian Automobile Manufacturers and Crisil Research. TVS sold 1.8 million two-wheelers last year.
Growth hurdle: A file photo of a TVS Motor showroom in Bangalore. Sales of the firm declined 9% to Rs 1,602.90 crore from a year ago.
Two-wheeler sales in India grew 14.1% in volume terms during fiscal 2012, slower than the over 25% growth in fiscal years 2010 and 2011.
This was primarily a result of tighter liquidity and a deterioration in consumer sentiment in the cities, which account for at least 55% of the demand for two-wheelers in India, said Ajay Srinivasan, director, Crisil Research. In the villages, buoyant farm incomes continued to boost sales, he said.
For fiscal 2012, TVS Motor’s net profit rose 28% to Rs 249.07 crore, falling just short of analysts’ expectation of Rs 252.4 crore. Annual sales at Rs 6,993.97 crore missed estimates by 4.6%.
“Only the full-year results reflect the right picture as net profits were up by 28% and net sales was up 13%, which takes into account the overall income tax assessment; our margins have improved by 1% as well as cost controls,” said S.G. Murali, vice-president-finance and chief financial officer at TVS Motor.
Pre-tax profit margin for the two-wheeler industry is expected to have declined by 80-100 basis points in fiscal 2012 because of rising input costs and higher technology and marketing expenses, said Srinivasan.
One basis point is one-hundredth of a percentage point.