Chennai: TVS Motor Co. Ltd, India’s fourth-largest two-wheeler maker, posted a 9% drop in third-quarter net profit due to an increase in investments across brands.
This is the third consecutive quarter in which profits have dropped.
“A combination of several factors, including delayed monsoons, high interest rates and overall subdued sentiment affected sales of the two-wheeler industry,” said the company in a statement.
Net profit at the flagship company of the TVS Group fell to Rs.52 crore from Rs.57 crore a year ago. Third-quarter revenue rose 1% to Rs.1,799 crore from Rs.1,775 crore.
Bloomberg analysts had estimated a net profit of Rs.52.45 crore on revenue of Rs.1,780 crore.
The company attributed the profit drop to the reduction in export incentives from 5.5% to 2% and investment in brands. The company launched its 125 cc Phoenix bike in the quarter.
The company also saw a 15% rise in expenses towards employee benefits to Rs.104 crore. Other expenses rose 5% to Rs.292 crore
“The company’s margins are at 5.9%, which is lower than our expectation of 6.5%,” said Yaresh Kothari, an analyst at Angel Broking Ltd. Kothari was estimating a profit of Rs.59 crore for the quarter.
Total two-wheeler sales for the quarter under review fell 3% to 5.03 lakh units.
The Society of Indian Automobile Manufacturers (Siam) industry lobby cut its outlook for the third time this fiscal due to the continuous slowdown in demand. Siam expects two-wheeler sales to grow 3-5%, compared with the earlier forecast of 11-13%.
In January, the largest motorcycle maker Hero MotoCorp Ltd saw profit drop 20.4% to Rs.487.89 crore from the year earlier due to higher material costs and marketing expenses. Bajaj Auto Ltd bucked the trend and posted a 2.8% increase in profit helped by robust three-wheeler sales and the higher contribution of more costly motorcycles in its product mix.
“TVS Motor may find even the next quarter challenging as, even though interest rates have been cut, it will take time for it to translate into sales. A recovery for the company may happen only in the second half of FY14,” Kothari said.
While the BSE Auto index gained 15.58%, while the Sensex gained 14.26% in the last one year, TVS Motor lost 18.82% of its value.
On Friday, TVS Motor’s stock fell 2.52% to end trading at Rs.42.60 on BSE Ltd.