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Business News/ Industry / Manufacturing/  TVS Motor’s Indonesian arm to break-even this year
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TVS Motor’s Indonesian arm to break-even this year

The company is betting on the success of its newly launched scooter Skubeck in Indonesia

TVS Motor’s Indonesian subsidiary reported an accumulated loss of Rs416.75 crore in 2013-2014. Photo: Hemant Mishra/MintPremium
TVS Motor’s Indonesian subsidiary reported an accumulated loss of Rs416.75 crore in 2013-2014. Photo: Hemant Mishra/Mint

Chennai: Chennai-based TVS Motor Co. Ltd. expects its loss-making Indonesian subsidiary PT TVS Motor Co. to achieve break-even in the current financial year, chairman and managing director Venu Srinivasan said at the company’s 22nd annual general meeting on Monday.

This confidence comes from the success of its newly launched scooter Skubeck in Indonesia, where the two-wheeler market is skewed towards scooters, which make up about 65% of the market, according to K.N. Radhakrishnan, president and chief executive officer (CEO) of the company.

“The Indonesian venture is a long-term investment. Yes, it has been making losses but the turnaround in TVS Motor (India) was possible from the learnings of the competitive Indonesia two-wheeler market as the trends, style and technology (there) are three years ahead of India," Srinivasan said.

TVS Motor reported strong results for the fourth quarter of 2013-14, compared to a loss a year ago, led by continued momentum from exports, strong growth in scooter sales, especially from the recently launched Jupiter, and a favourable product mix, said Angel Broking in its report released in April. Sales volume benefited from the launch of Jupiter, which led to 38% year-on-year growth in scooter volumes. Operating margins improved by 115 basis points to 6.4%, driven by a superior product mix, operating leverage benefits and cost reduction initiatives, the report said.

The Indonesian arm is becoming an export hub. Close to 65% of the products manufactured in Indonesia are exported to Southeast Asian and Latin American countries, Radhakrishnan said.

According to Abdul Majeed, auto practice leader at consulting firm PricewaterhouseCoopers India, to be true global firm, companies need to step out of India. Indonesia is a competitive market where multinational two-wheeler companies have been present for over four decades. Therefore, customer expectation and technology for two-wheelers is benchmarked with global standards.

India’s fourth largest two-wheeler maker set up PT TVS Motor in 2007 and had anticipated it would reduce losses in 2011-12 and post profits from the next year onwards. However, TVS found it tough to crack the Indonesian market which is dominated by Japanese two-wheeler makers such as Honda Motor Co. Ltd. and Yamaha Motor Co. Ltd.

The Indonesian subsidiary reported an accumulated loss of Rs416.75 crore in 2013-2014.

Meanwhile, back in India, Jupiter has led to an increase in TVS’s market share to 12.6 % from 12.2%, Radhakrishnan said.

The two-wheeler industry is expected to grow 11% during the current financial year compared with a 7.4 % growth last year, said Srinivasan. A deficient monsoon remains a concern as it could affect incomes of rural households, key buyers of two-wheelers.

“We are positive we will grow better than the industry and hopeful to improve market share to 14% this year with the new launches," said Radhakrishnan.

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Published: 14 Jul 2014, 07:51 PM IST
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