On The Right Track

Take us through your financials for the December quarter of 2013. 

TVS Srichakra Ltd, a leading manufacturer of two & three wheeler tyres and off road tyres, announced its unaudited financial results for the 3rd Quarter, ended 31 December 2013, with the following highlights:

• Revenue for Q3 in this year, increased to Rs 416 crore as compared to Rs 363 crore, when compared to Q3 of last year.
• The Profit Before Tax increased to Rs 12.37 crore in Q3 of 13-14, as compared to Rs -4.16 crore during corresponding period of last year.
• Earning per share rose up to Rs 13.71 per share.

The company had a good quarter with increase in OEM sales, consistent increase in aftermarket sales and exports also registering a good growth both in off road tyres and two-wheeler tyres. This was due to an increase in two-wheeler production compared to the corresponding period of last year. The company launched a couple of new sizes in the last six months and also unveiled the Tractor Radial “Tigertrac” in the Automechanika show.

Both plants of the company, in Madurai and Rudrapur, have also been growing in volumes, with thrust always given for operational excellence. 

What have been the principle challenges and opportunities that have come your way during the December quarter?

The challenges were:

• The headwinds that the economy is facing, which resulted in a tepid growth for the category.
• The rises in fuel costs have impacted our margins as the cost of operation has gone up.
• Demand-supply issues in some raw materials resulted in procurement at higher costs, thereby increasing costs.

The opportunity has been to leverage our brand preference in the OE segment & enhance share here. The increasing demand of tubeless two-wheeler tyres is an opportunity we are trying to leverage by launching new sizes.

How do you see the demand scenario shaping up for the sector that you are operating in?

With the two/three-wheeler category expecting to grow by 9-10 per cent in 2014-15, we expect the demand to keep our capacity utilisation to the optimum.

What factors are likely to affect your margins going forward?

Our business is dependent on two-wheeler vehicle growth. The two-wheeler industry demand is affected by interest rates and fuel cost. Both are not favouring the demand very much. These will have an impact on the business.

What is your take on higher interest rates and its impact on your business?

Higher interest rate regime is definitely a concern for the Industry. Increasing interest rates will definitely have a marginal impact on our margins. We manage cost through deployment of cost effective capital in order to protect the margin.

Can you share with us your Capex plans for the coming fiscal?

We expect to de-bottleneck some of our operations, which may involve some capital expenditure.

Do you see the same rate going forward?

We expect the requirement to be at the same level as in the last quarter.

What is your take on the present macro-economic scenario of the country?

We are seeing positive impact on our order book position. We hope to see a significant growth in Industrial output in the short and long-term.