TVS looks at sales growth in double digits

TVS looks at sales growth in double digits
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First Published: Mon, Aug 17 2009. 09 57 PM IST

Future in focus: TVS Motor Co. chairman Venu Srinivasan. Ramesh Pathania / Mint
Future in focus: TVS Motor Co. chairman Venu Srinivasan. Ramesh Pathania / Mint
Updated: Mon, Aug 17 2009. 09 57 PM IST
Chennai: India’s third largest two-wheeler maker TVS Motor Co. Ltd is eyeing double-digit revenue growth this year as it invests in TVS Motor Services Pvt. Ltd to provide two-wheeler financing for buyers currently holding back for lack of credit and who may continue do to so because of the poor monsoon.
Until about a year ago, 50% of the two-wheelers sold in India were financed, but that percentage is now down to 15-20%, TVS Motor CEO K.N. Radhakrishnan said.
Future in focus: TVS Motor Co. chairman Venu Srinivasan. Ramesh Pathania / Mint
Since the second half of 2008, banks have gone slow on credit to two-wheeler buyers in the wake of the financial crunch and the economic downturn.
TVS Motor’s 2008-09 annual report showed an investment of Rs60 crore in TVS Motor Services.
“We are investing in TVS Motor Services because we need a finance company as credit has dried up from banks for motorcycle sales,” said chairman Venu Srinivasan at the Chennai-based company’s annual general meeting.
Srinivasan later told Mint that this investment was part of the company’s restructuring efforts related to TVS Finance and Services Ltd, the loss-making non-banking financial company (NBFC). TVS Motor Services is the new name of TVS Finance and Services.
Bajaj Auto Ltd, the No. 2 two-wheeler company in the country, already finances its two-wheelers through its NBFC wing Bajaj Auto Finance.
“Everybody is setting up financing arms to stymie sales declines,” said Vaishali Jajoo, an auto analyst with Angel Broking Ltd. “But in the two-wheeler market, it is more important to develop brand equity to fuel sales growth.”
July sales in the domestic market for TVS Motor went up 5%. Still, that number was far lower than the growth of 30% registered by industry leader Hero Honda Motors Ltd, which sells two-thirds of the two-wheelers in India.
Further, the poor monsoon—rainfall was 29% below normal as of 12 August, according to government data —is likely to hurt the industry’s rural two-wheeler sales by 10-15% this year, Radhakrishnan told reporters on the sidelines of the conference.
“If output of agricultural products (is) affected, they (rural consumers) will certainly postpone their purchases,” he said.
The TVS financing arm that has been revived very recently will help fuel the expected double-digit revenue growth for fiscal 2010, Radhakrishnan said.
But some shareholders are unhappy that TVS Motor, maker of the Apache, Victor and Flame motorcycles, has not disclosed details about the management of the two-wheeler financing company that it is investing in.
“We don’t know who will be running the finance company and that is my worry,” said 66-year-old S. Padmanabhan, a retired Reserve Bank of India manager, who owns 700 shares of TVS Motor.
“The company is ignoring the fact that capital is scarce,” he added.
For the year ended March, TVS Motor posted a 2% drop in earnings at Rs31.08 crore on an 8% rise in sales to Rs4,008 crore.
On the Bombay Stock Exchange, the stock closed nearly 6% lower at Rs47.60 in Monday trading.
The exchange’s benchmark Sensex index too closed 4.1% down at 14,784.92.
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First Published: Mon, Aug 17 2009. 09 57 PM IST