‘CAUTIOUSLY OPTIMISTIC’ ABOUT DEMAND REVIVAL: TVS MOTOR CEO

The management of TVS Motor has said it is cautiously optimistic about demand revival in the second half of the year, especially with the rural market improving. The company expects its growth to be better than that of the industry in the domestic and export markets. For 2020-21, the company ’s capex would be around ~300 crore against ~719 core in 2019-20.

For the quarter ended March 31, the two -wheeler industry continued to see decline in sales because of lower economic growth and lack of visibility as well as the Covid-19 pandemic, said K N Radhakrishnan, T VS Motor ’s president, chief executive officer (CEO) and additional whole-time director.

T VS Motor ’s t wo -wheeler sales declined 13.8 per cent because of consequent planned rationalisation of BS-IV stocks. “With initial BS-VI ramp up, we had some challenges because of Covid in January and February,” he said.

The company’s capacity utilisation, as of now, is low, while in the same period last year, it was around 60-62 per cent for twowheelers.

About 70 per cent of the dealers and consumers have opened up. While they are not fully operational now, in June they will be, he added.

On BS-VI migration, he said nearly 85 per cent of the domestic sales in Q4 are from BS-VI vehicles.

Dealers have retailed more than 100,000 BS-VI vehicles in January, February and March.

“We have consistently maintained, re-stocked the trade, and this has helped us retail the BSVI stocks. Going forward, it will definitely help us,” said Radhakrishnan during an investor call.

There was a small volume of BS-IV stock, which needed special support to retail outlets and an amount of ~22 crore was given as additional incentive.

This has been reduced from the revenue.

In the international market, Radhakrishnan said, the company has grown more than the industry, both in two-wheelers and three-wheelers.

Exports of two-wheelers, during the quarter, grew by 3.6 per cent. Three-wheeler business, in the international market, grew 2.6 per cent.

The company ’s Indonesian arm P T TVS achieved positive operating profit. In the year as a whole, there was positive $0.5 million earnings before interest, taxes, depreciation and amortisation (Ebitda) compared to last year ’s Ebitda loss of $3 million.

The company expects the decline in sales to get partially alleviated in the second quarter with normal monsoon.

Also, there is some improvement in the rural economy, said Radhakrishnan, adding that domestic markets are opening up. “We feel that more and more two-wheelers will have an opportunity because self ownership is likely to gain momentum now. I cannot quantify data at this point of time. We have to constantly monitor this,” he told analysts.

Given the social distancing norms, two-wheelers and threewheelers are likely to witness growth. Higher penetration of retail financing is likely to help. The series of relief measures taken by the Union government will also help in liquidity and have a positive effect in the mediumand long-term.

“We are hoping that the government will also consider GST (goods and services tax) reduction,” said Radhakrishnan.

TVS expects to grow ahead of the industry, both in domestic and international markets.

Overall, Radhakrishnan feels that in the September quarter, the company will see consolidation. It expects premium products (Apache and Ntorq ) to do better than other segments.

Analysts at Emkay Global Financial Services reduced the FY21 volume estimates for the company by 18 per cent to 2.4 million units, led by the lockdown and expectation of gradual pick-up in demand. However, it has broadly retained the FY22 volume forecast at 3.3 million units.

It is expecting recovery from the second half of the current financial year, led by low base, pent-up demand and better rural sentiment.

Many global markets are slowly opening up. Currently, oil prices are around $32 and are slowly going up. Once it touches around $40, Nigeria kind of markets do not expect any adverse impact. In the next one or two months, there will be slow and steady i ncrease i n exports, he said.

For the quarter ended March 31, the two-wheeler industry continued to see decline in sales because of lower economic growth and lack of visibility as well as the Covid-19 pandemic

“WE FEEL THAT MORE AND MORE TWO-WHEELERS WILL HAVE AN OPPORTUNITY BECAUSE SELF OWNERSHIP IS LIKELY TO GAIN MOMENTUM NOW. I CANNOT QUANTIFY DATA AT THIS POINT OF TIME. WE HAVE TO CONSTANTLY MONITOR THIS”

K N RADHAKRISHNAN, President and CEO, TVS Motor