As sales of motorcycles and scooters remained subdued in the second half of the last fiscal year, TVS Motor Company--one of the country’s largest two- and three-wheelers manufacturers--on Tuesday reported a 19.2% year-on-year decrease in net profit to ₹133.8 crore for the quarter ending March 31. In the corresponding period, the company reported a net profit of ₹165.6 crore.
Retail sales of two-wheelers came under severe pressure in the second half of fiscal year 2019 (FY19) due to factors like increase in third party insurance cost, lack of credit finance and falling income in the agriculture sector due to decreasing commodity prices and inadequate rainfall in certain parts of the country.
Consequently, the total vehicles sales increased by just 2% y-o-y to 9.07 lakh units, with motorcycles sales up by 8.4% while sales of scooters declined 3.2% during the quarter.
The revenue during the period increased by 9.2% to ₹4,387.6 crore when compared ₹4,016.8 crore.
As result of the higher discounts offered and the increased operating expenses, the operating profit of the company increased by just 4.4% y-o-y to ₹308.1 crore. The operating margin for the quarter stood at 7%.
According to Bharat Gianani, research analyst, ShareKhan, TVS Motor missed consensus for the period as the company posted lower than expected margins. While the revenue grew in double digits led by better product mix and price hikes, operating margins dropped 40 bps on y-o-y basis.
“Higher commodity cost, increased discounting due to intense competition and regulatory cost increases (ABS/CBS norms) exerted margin pressure. Going ahead subdued industry volume growth in FY20 due to weak consumer sentiment, higher inventory levels and regulatory cot increases, we do not see significant margin improvement for TVS from current levels," added Gianani.
For full year FY19, TVS Motor reported a 19.3% increase in revenue to ₹18,217.5 crore while the net profit increased by just 1.1% to ₹670 crore.