The Hindu Business Line : TVS Motor net up 12 pc — 2-stroke bikes drag on profit; 4-stroke sales up

DRIVING HIGHER NET: Mr Venu Srinivasan, Chairman and Managing Director, TVS Motor Company Ltd, and Mr C. P. Raman, President, at a press conference in Chennai on Monday. — Shaju John

Chennai , June 28

TVS Motor Company has reported a net profit of Rs 41.93 crore for the last quarter of 2003-04, up about 12 per cent from Rs 37.54 crore it achieved in the same period of last year.

For the full year 2003-04, the company's net profit was Rs 138.49 crore, 8 per cent higher than Rs 127.95 crore in the previous year. Turnover for the full year was up at Rs 2,856.42 crore compared to Rs 2,725.40 crore (including other income).

At a press conference here on Monday, TVS Motor's Chairman and Managing Director, Mr Venu Srinivasan, said the over-40-per-cent drop in the sales of its two-stroke motorcycles was the reason for the profits increasing only marginally. The company sold about 1.7 lakh two-stroke motorcycles, compared to about 3 lakh in the previous year. As a result, the company's sales of motorcycles decreased by about 1.7 per cent.

Four-stroke vehicles, however, sold well, Mr Srinivasan said. Sales of four-stroke vehicles increased by 28 per cent. Centra, launched in January, was a big help here, selling about 35,000 in the financial year 2003-04.

In the year 2002-03, TVS Motor had to write off a sum of Rs 30 crore, the amount representing the investments in dies and tools in the development of the scooter, Spectra, whose production the company stopped later. Also, in 2003-04, the company had the benefit of the merger of the engine components division of Lakshmi Auto Components. Mr Srinivasan said the merger could have contributed about Rs 15 crore to the bottomline of TVS Motor.

Thus, two factors influenced the year's results positively: It did not have the burden of the Spectra-related write-off and also had the benefit of the merger of the LAC division.

But it was pointed out that there were other write-offs in 2003-04 too, of the order of about Rs 12 crore. "Write-offs are routine, happen every year," Mr Srinivasan said.

The company's President, Mr C.P. Raman, said 2003-04 brought one major negative: the sharp increase in steel prices, which the company did not have to face in the previous year. The increase in steel prices cost the company an additional Rs 35 crore.

The effect of the hike in steel prices was one of the reasons why the operating profit grew only by 4 per cent (Rs 296 crore against Rs 284 crore), while the net profit grew by a higher 8 per cent, because of the smaller write-off requirement and the LAC division merger.

Answering a question, Mr Raman said the company produced about 7.2 lakh motorcycles last year, missing the 1-million (10 lakh) target. In 2002-03, the company produced 7.19 lakh motorcycles. TVS Motor sold 1.14 million (11.4 lakh) two-wheelers last year.

Saves Rs 80 crore

TVS Motor Company was able to cut about Rs 80 crore in costs by "a combination of things." Internet-based buying and sourcing components from abroad were among them.

However, the cost reduction is less than the achievement in 2002-03 as well as the target for 2003-04.

In 2002-03, the company saved Rs 100 crore; the target for the following year was Rs 110 crore.

The company's Chairman and Managing Director, Mr Venu Srinivasan, did not wish to name either the vendor companies or the components bought from them, that being competitive information.

He said that in the current year, the company would purchase Rs 100 crore worth of parts from abroad, mostly from China and ASEAN countries. He said the company planned for about Rs 200 crore of capital investments, to be spent mainly on new product development.

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