Mumbai: TVS Motor Co has more than doubled its capital expenditure for 2010-11 over the previous fiscal to add capacity and upgrade products as demand for two wheelers increase in a reviving economy.
India’s third largest two wheeler maker will spend about Rs175 crore in 2010-11 on capacity expansion compared with Rs650-700 million in FY10, S G Murali, executive vice president finance, told Reuters over the telephone.
“The capex includes investment behind R&D, new products as well as capacity expansion,” he said.
“With a positive free cash flow we will be in a position to fund our requirements internally,” he said, adding there were no plans to raise funds via equity or debt at the moment.
The company is planning to raise its annual capacity to 2.8 to 3 million units from about 2.3 million units now, he said.
The firm is in the process of rolling out a new brand in the executive scooter segment and will launch at least one more motorcycle model in the year, he said.
Murali said the higher capacity and new products would help its revenues grow 25% on year for 2010-11.
For FY10, the Chennai-based firm had reported revenues of Rs4,356 crore.
TVS, along with larger peers Hero Honda and Bajaj Auto have benefited from various stimulus packages introduced by the government over the past year, helping monthly sales rise steadily.
However inflation and rising raw material costs, particularly steel and aluminium, led Hero Honda, the country’s top two wheeler maker to say that margins would not be sustainable at current levels.
TVS Motor is looking to protect operating margins by keeping fixed costs under control and increase revenues, he said.
It had taken a price rise of Rs200-250 in February to counter the rising costs and Murali said the firm had not yet decided on a further hike.
“We had taken up prices marginally sometime in February. And we are watching the position there seems to be a slight upward bias in material costs”.
“We are not looking at runaway escalation, but there could definitely be a mild inflation. We will assess the situation and take a call,” he added.
TVS Motor had earlier on Wednesday reported a 38.8% rise in January-March net profit to Rs202.9 million on sales driven by new launches.”
Shares of TVS Motor valued at $458.4 million closed up 1.51% at Rs87.6 in a Mumbai market that closed up 0.07%.