TVS Motor Company Ltd:Annual Report 2023-24 Analysis

TVS Motor Company Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

TVS Motor Company was established in 1978 as a subsidiary of TVS Group, founded by T.V. Sundaram Iyengar. The company initially started as Sundaram Clayton Limited, manufacturing mopeds in collaboration with Clayton Dewandre Holdings, UK.

Headquarters Location and Global Presence #

Headquartered in Chennai, India, TVS Motor Company has a significant global presence, exporting to over 80 countries across Asia, Africa, Latin America, and the Middle East.

Company Vision and Mission #

• Vision: To be a globally admired, technology-driven, sustainable mobility solutions provider.
• Mission: We will deliver sustainable mobility solutions that delight our customers. We will be an employer of choice and a responsible corporate citizen.

Key Milestones in Their Growth Journey #

• 1980: Launched India’s first two-seater moped, TVS 50.
• 1986: Forayed into motorcycle manufacturing.
• 2001: Launched TVS Victor, India’s first indigenously designed motorcycle.
• 2013: Entered into a strategic partnership with BMW Motorrad.
• 2020: Acquisition of Norton Motorcycles.
• 2021: Invested in electric vehicle startup Ultraviolette Automotive.

Stock Exchange Listing Details and Market Capitalization #

TVS Motor Company is listed on the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE). As of October 26, 2023, the market capitalization is approximately ₹54,871.64 Crore.

Recent Financial Performance Highlights #

In Q1 FY24, TVS Motor Company recorded its highest ever revenue and profit.

Management Team and Leadership Structure #

The key members of the leadership team include:

• Chairman: Venu Srinivasan
• Managing Director: Sudarshan Venu

Notable Awards or Recognitions #

TVS Motor Company has received numerous awards and recognitions for its product quality, innovation, and business performance, including:

• Deming Prize for Total Quality Management
• JD Power Awards for Customer Satisfaction

Their Products #

Complete Product Portfolio with Categories #

TVS Motor Company offers a wide range of two-wheelers and three-wheelers:

• Motorcycles: Apache series, Radeon, Star City Plus, Sport.
• Scooters: Jupiter, Ntorq 125, iQube Electric.
• Mopeds: XL100.
• Three-Wheelers: TVS King (Petrol, CNG, and Diesel variants).
• Electric Vehicles: TVS iQube Electric Scooter.

Flagship or Signature Product Lines #

• TVS Apache Series: Known for its racing pedigree and performance.
• TVS Jupiter: A popular family scooter known for its comfort and reliability.
• TVS Ntorq 125: A sporty scooter targeted towards younger audiences with connected technology.

Key Technological Innovations or Patents #

• SmartXonnect: Bluetooth-enabled connectivity platform in scooters and motorcycles.
• RT-Fi (Race Tuned Fuel Injection): Technology for enhanced fuel efficiency and performance.
• Glide Through Technology (GTT): Enables smooth riding in traffic.

Manufacturing Facilities and Production Capacity #

TVS Motor Company has manufacturing facilities in:

• Hosur, Tamil Nadu
• Mysore, Karnataka
• Nalagarh, Himachal Pradesh

The combined production capacity is significant, allowing for the manufacturing of millions of two-wheelers and three-wheelers annually.

Quality Certifications and Standards #

TVS Motor Company adheres to stringent quality standards and holds certifications such as:

• ISO 9001
• ISO 14001
• TS 16949

Unique Selling Propositions or Technological Advantages #

• Focus on innovation and technology integration.
• Strong brand reputation for quality and reliability.
• Wide product portfolio catering to diverse customer segments.
• Growing electric vehicle portfolio.

Recent Product Launches or R&D Initiatives #

• Launch of new variants of the Apache series with advanced features.
• Expansion of the iQube electric scooter range.
• Development of new electric vehicle platforms.

Primary Customers #

Geographic Markets (Domestic vs. International) #

While India remains a key market, TVS Motor Company has a strong presence in international markets, particularly in Asia, Africa, Latin America, and the Middle East.

Major Client Segments (agricultural, industrial, residential, etc.) #

TVS Motor Company caters to a wide range of customer segments:

• Urban Commuters: Scooters and motorcycles designed for daily commutes.
• Rural Markets: Rugged and fuel-efficient motorcycles and mopeds.
• Commercial Segment: Three-wheelers for transportation and goods carrying.
• Enthusiasts: High-performance motorcycles for racing and touring.

Distribution Network and Sales Channels #

TVS Motor Company has a vast distribution network comprising:

• Dealerships and service centers across India and international markets.
• Authorized service outlets.
• Online sales and service platforms.

Major Competitors #

Direct Competitors in India and Globally #

• India: Hero MotoCorp, Bajaj Auto, Honda Motorcycle & Scooter India (HMSI), Royal Enfield.
• Globally: Yamaha, Suzuki, KTM, Piaggio.

Comparative Market Share Analysis #

TVS Motor Company holds a significant market share in the Indian two-wheeler market. They are the third-largest two-wheeler manufacturer in India.

Competitive Advantages and Disadvantages #

• Advantages: Strong brand reputation, diverse product portfolio, technological innovation, growing EV presence.
• Disadvantages: Lower market share compared to some major competitors like Hero MotoCorp.

How They Differentiate from Competitors #

TVS differentiates itself through its:

• Focus on design and technology.
• Racing DNA, particularly in the Apache series.
• Connected vehicle features (SmartXonnect).
• Premium product positioning in certain segments.

Industry Challenges and Opportunities #

• Challenges: Increasing competition, fluctuating raw material prices, evolving emission norms, supply chain disruptions.
• Opportunities: Growing demand for electric vehicles, expanding export markets, increasing urbanization, rising disposable incomes.

Market Positioning Strategy #

TVS Motor Company positions itself as a technology-driven, innovative, and customer-centric two-wheeler manufacturer.

Future Outlook #

Expansion Plans or Growth Strategy #

TVS Motor Company’s growth strategy includes:

• Expanding its electric vehicle portfolio.
• Strengthening its presence in international markets.
• Investing in research and development.
• Enhancing its digital capabilities.

Upcoming Products or Innovations #

Focus on developing new electric vehicle models and expanding its connected vehicle technology across its product range.

Sustainability Initiatives or ESG Commitments #

TVS Motor Company is committed to sustainability and has implemented initiatives such as:

• Investing in renewable energy.
• Reducing carbon emissions.
• Promoting sustainable manufacturing practices.
• Supporting community development programs.

Industry Trends Affecting Their Business #

• Growth of the electric vehicle market.
• Increasing demand for connected vehicles.
• Stringent emission norms.
• Focus on safety and fuel efficiency.

Long-Term Vision and Strategic Goals #

TVS Motor Company’s long-term vision is to be a globally admired, technology-driven, and sustainable mobility solutions provider. Their strategic goals include:

• Becoming a leader in the electric vehicle segment.
• Expanding its global footprint.
• Driving innovation in the two-wheeler industry.

TVS Motor Company Limited: FY 2023-24 Performance Analysis #

Executive Summary #

TVS Motor Company Limited (TVSM) demonstrated robust performance in FY 2023-24, achieving record revenue and profitability despite global economic headwinds impacting export markets. Key highlights include surpassing 4 million two-wheeler sales for the first time, significant outperformance in domestic ICE and EV two-wheeler segments against the industry, and strategic expansion into European markets. Strong financial management led to substantial free cash flow generation and net debt reduction. The company maintained its focus on premiumisation, EV leadership, R&D, digital integration, and sustainability, positioning it well for future growth amidst evolving mobility trends.

Financial Performance Analysis #

Key Financial Highlights (Consolidated FY24 vs FY23) #

• Revenue from Operations: ₹39,145 Cr (up from ₹31,974 Cr)
• Profit Before Tax (PBT): ₹2,703 Cr (up from ₹1,936 Cr)
• Profit After Tax (PAT - Attributable to Owners): ₹1,779 Cr (up from ₹1,309 Cr)
• Operating EBITDA Margin (Standalone): 11.1%
• Operating Free Cash Flow (Standalone): ₹2,562 Cr
• Net Debt Reduction (Standalone): ₹983 Cr

Trend Analysis (Standalone) #

• Revenue: Consistent upward trajectory over the last three fiscal years, reaching a record ₹31,925 Cr in FY24 (+20.5% YoY).
• Operating EBITDA: Demonstrated strong growth, reaching ₹3,544 Cr in FY24 (+31.4% YoY). Margin improved to 11.1%.
• PAT: Significant growth, reaching ₹2,083 Cr in FY24 (+40% YoY), indicating improved profitability.

Profitability Analysis #

• Improved PAT margins (Consolidated: ~4.5% in FY24 vs ~4.1% in FY23).
• Standalone Return on Equity (RoE) increased to 30.2% in FY24 from 29.2% in FY23.
• Standalone Return on Capital Employed (RoCE) improved significantly to 31.4% in FY24 from 25.3% in FY23.

Debt and Cash Flow Analysis #

• Standalone Net Debt reduced by ₹983 Cr during FY24, strengthening the balance sheet.
• Strong Operating Free Cash Flow generation of ₹2,562 Cr (Standalone) indicates healthy operational efficiency.
• Standalone Net Debt/Equity ratio improved significantly.
• Redeemed NCDs worth ₹500 Cr and Zero Coupon Debentures worth ₹310 Cr. Issued new NCDs worth ₹125 Cr.

Business Segment Performance #

Two-Wheelers (2W) #

• Achieved record sales, surpassing 4 million units (40.45 lakh) for the first time, a 15% YoY volume increase.
  • Domestic ICE: Sales grew by 19% (standalone), outpacing the industry growth of 13%. Growth driven by Jupiter (Scooters), Raider (Executive Motorcycles), and Apache series (Premium Motorcycles).
  • Domestic EV: Sales grew by 101% (standalone) to 1.94 lakh units, significantly outpacing industry growth of 32%. TVS iQube maintained a strong market position.
  • Exports: Declined by 3% YoY to 0.89 million units due to global economic challenges (liquidity, inflation, currency devaluation) particularly in Africa. A rebound is anticipated in FY25.

Three-Wheelers (3W) #

• Sales grew to 1.46 lakh units in FY24.
  • Domestic ICE+EV sales increased by 29% (standalone).
  • Exports declined by 18.1% YoY to 0.13 million units.

Subsidiaries Performance #

• TVS Credit Services: Robust growth with Assets Under Management (AUM) reaching ~₹25,900 Cr (+26% YoY) and PBT grew 49% to ₹763 Cr. Raised ₹380 Cr from Premji Invest.
• Sundaram Auto Components (SACL): Total income slightly lower at ₹765 Cr (vs ₹787 Cr). PBT improved to ₹29 Cr (vs ₹24 Cr). Completed share capital reduction, distributing ₹310 Cr to TVSM.
• Swiss E-Mobility Group (SEMG): Reported revenue of $76.6M but faced a loss of $25.4M due to challenging European e-bike market conditions. Focus for FY25 is on profitability and operational efficiency. Holds ~20% market share in Switzerland.
• The Norton Motorcycle Co: Investments ongoing for facility enhancement, R&D, and product portfolio expansion in the premium/super-premium segment.

Detailed Analysis #

TVS Motor Company Limited (FY24) Financial Analysis #

Comparative Financial Position (3-Year Analysis) #

Standalone Financials (INR Crores) #

Consolidated Financials (INR Crores) #

Analysis #

Both Standalone and Consolidated financials show consistent growth in Total Assets and Total Equity over the three-year period. Asset growth outpaced liability growth in FY24, leading to a strengthening equity position, particularly on a standalone basis. Consolidated growth reflects expansion, including the financial services subsidiary (TVS Credit) and overseas operations.

Significant Changes in Major Line Items (FY24 vs FY23, >10% YoY) #

Revenue from Operations #

• Standalone: +20.5% (INR 31,776 Cr vs INR 26,378 Cr) - Driven by record 2W sales (surpassing 4 million units), 19% growth in domestic ICE 2W sales (outpacing industry’s 13%), and 101% growth in EV 2W sales (vs industry’s 32%).
• Consolidated: +22.8% (INR 39,144 Cr vs INR 31,866 Cr) - Includes growth from the parent company and significant revenue increase from the financial services subsidiary (TVS Credit Services revenue grew 40% YoY).

Cost of Materials Consumed #

• Standalone: +19.3% (INR 23,193 Cr vs INR 19,436 Cr) - Increased in line with higher production volumes. Softening commodity prices from Q2 FY24 helped moderate the increase relative to revenue growth.
• Consolidated: +16.6% (INR 23,836 Cr vs INR 20,434 Cr) - Similar reasons as standalone.

Employee Benefits Expense #

• Standalone: +12.9% (INR 1,356 Cr vs INR 1,201 Cr) - Reflects workforce expansion and general compensation increases.
• Consolidated: +23.6% (INR 3,047 Cr vs INR 2,465 Cr) - Growth driven by parent company and significant expansion in the financial services subsidiary workforce.

Profit Before Tax (PBT) #

• Standalone: +36.4% (INR 2,781 Cr vs INR 2,038 Cr) - Resulting from strong revenue growth outpacing expense growth, aided by cost management and favourable product mix.
• Consolidated: +38.5% (INR 2,703 Cr vs INR 1,952 Cr) - Driven by strong performance in the parent company and improved profitability in subsidiaries like TVS Credit Services (PBT grew 49%).

Profit After Tax (PAT) #

• Standalone: +40.0% (INR 2,083 Cr vs INR 1,488 Cr) - Follows the PBT trend.
• Consolidated: +41.1% (INR 1,779 Cr vs INR 1,261 Cr) - Follows the consolidated PBT trend.

Borrowings (Consolidated) #

• Non-Current: +29.1% (INR 12,936 Cr vs INR 9,946 Cr) - Primarily driven by the expansion of the loan book in the financial services subsidiary (TVS Credit).
• Current: +4.5% (INR 12,735 Cr vs INR 12,185 Cr) - Relatively stable.

Loans (Receivable from Financing Activity - Consolidated) #

• Non-Current: +25.3% (INR 12,876 Cr vs INR 10,275 Cr) - Reflects growth in the loan book of TVS Credit Services.
• Current: +25.0% (INR 13,152 Cr vs INR 10,525 Cr) - Significant growth in the current portion of the loan portfolio of TVS Credit Services.

Working Capital Trends #

Standalone Working Capital (INR Crores) #

Consolidated Working Capital (INR Crores) #

Operational Metrics #

Key Performance Indicators #

TVS Motor Company Limited (FY 2023-24) Financial Analysis #

Executive Summary #

TVS Motor Company Limited (TVSM) reported a record financial performance in FY 2023-24, surpassing ₹31,925 crore in revenue (20.5% YoY growth) and ₹2,083 crore in Profit After Tax (PAT) (40% YoY growth). Two-wheeler sales volumes crossed the 4 million unit mark for the first time, driven by strong domestic demand and significant growth in the Electric Vehicle (EV) segment. Operating EBITDA margin stood at 11.1%. The company demonstrated robust operational cash flow generation and achieved a notable reduction in net debt. Strategic focus remains on premiumization, EV leadership, international market expansion, and sustainability.

Financial Performance #

• Revenue: Recorded significant growth to ₹31,925 crore, up 20.5% YoY, driven primarily by volume growth in the domestic two-wheeler market, particularly in the premium motorcycle and scooter segments, and a doubling of EV sales.
• Profitability: PAT surged by 40% YoY to ₹2,083 crore. Operating EBITDA reached ₹3,544 crore (calculated: 11.1% of revenue), reflecting improved product mix and operational efficiencies, despite commodity price fluctuations earlier in the year. Profit Before Tax (PBT) stood at ₹2,781 crore.
• Cash Flow & Debt: Generated strong Operating Free Cash Flow of ₹2,562 crore. Net debt was reduced by ₹983 crore during the fiscal year, strengthening the balance sheet.
• Key Ratios: Return on Net Worth improved significantly. Earnings Per Share (EPS) grew substantially YoY, reflecting higher profitability. (Specific ratio values available in Annual Report tables).

Operational Performance #

• Overall Sales: Total two-wheeler sales reached a record 4.04 million units (up 15% YoY from 3.51 million). Three-wheeler sales grew to 0.15 million units.
• Domestic Market: Domestic Internal Combustion Engine (ICE) two-wheeler sales increased by 19%, outpacing the industry growth of 13%. Key growth drivers included the Apache series in the premium motorcycle segment (which grew 24.4% for the company) and the Jupiter and Raider models in the scooter and commuter motorcycle segments, respectively.
• Electric Vehicles (EV): TVSM’s EV two-wheeler sales demonstrated exceptional growth, increasing by 101% YoY to 1.94 lakh units, significantly exceeding the industry’s 32% growth. The TVS iQube maintained a strong market position, supported by network expansion. The launch of the premium TVS X signals further focus on this segment.
• International Business: Total exports experienced a slight decline, with two-wheeler exports at 0.89 million units (down 3% YoY) and three-wheeler exports at 0.13 million units (down 18% YoY). Performance was impacted by geopolitical issues, liquidity constraints, and currency devaluation in key markets, particularly Africa. Recovery is anticipated in FY25.
• Quality Recognition: TVSM secured 7 out of 10 J.D. Power 2024 India Two-Wheeler Initial Quality Study (IQS) awards and top awards in the APEAL study, reinforcing product quality and customer appeal.

Strategic Initiatives & Investments #

• Premiumization: Continued focus on higher-value segments evident through launches like the Apache RTR 310 and TVS Ronin special editions. Partnership with Alpinestars for premium riding gear announced.
• EV Leadership: Significant investment in in-house EV capabilities (battery, motor, control units). Launch of the flagship TVS X electric crossover aims to capture global premium EV market share. Expansion of iQube availability and charging infrastructure continues.
• International Expansion: Strategic entry into the European market (France, Italy initially) with both EV and premium ICE models, leveraging a partnership with Emil Frey. Continued focus on LATAM, ASEAN, and Middle East, despite current African market challenges.
• Partnerships: Celebrated 10 years of partnership with BMW Motorrad, expanding collaboration into EVs (BMW CE 02). Petronas TVS Racing partnership continued.
• R&D: Strong focus on in-house R&D, particularly in electric mobility, alternate fuels, connected technology (SmartXonnect), software, and advanced safety systems. High patent generation rate maintained.
• Digital & AI: Implementation of TVSXverse program to enhance customer experience, retail/service operations, manufacturing, and supply chain using digital and AI tools.

Market Environment & Outlook #

• India: Expected continued GDP growth (~6.5%+), stable urban consumption, potential rural recovery (monsoon dependent), and government infrastructure spending are positive indicators for the domestic two-wheeler market. Premiumization and urbanization trends support demand. EV adoption continues, influenced by TCO and government policies (EMPS replacing FAME II).
• Global: Geopolitical strife and shipping disruptions remain concerns impacting international markets, particularly Africa. However, moderating inflation and stabilizing currencies are expected to aid recovery in export markets in FY25. The global shift towards EVs presents opportunities.
• TVSM Outlook: The company expresses a positive outlook, anticipating continued outperformance in the domestic market and a recovery in international business. Focus on premiumization, EV expansion (both domestic and international), and operational efficiency remain key drivers. The product pipeline for FY25-26 includes further premium offerings.

Risk Analysis #

• Geopolitical & Economic: Ongoing global conflicts, shipping disruptions (Red Sea), inflation, and currency volatility in export markets pose risks to international business performance and costs.
• Supply Chain: While improving, potential disruptions, particularly for EV components, remain a concern.
• Demand-Side: Sluggish rural recovery, potential impact of monsoon variability on agricultural output, regulatory changes affecting retail finance availability, and vehicle price affordability impacting lower segments.
• Regulatory: Changes in EV subsidies (FAME II to EMPS), evolving emission norms (E20, Flex Fuel readiness), and regulations in export markets require adaptability.
• Competition: Intense competition in both ICE and rapidly evolving EV segments necessitates continuous innovation and market responsiveness.

ESG Integration #

TVSM emphasizes ESG integration into its strategy. Key achievements include meeting 93% of energy requirements via renewable sources, 100% co-processing for hazardous waste, significant reduction in water consumption, and biodiversity conservation efforts. CSR initiatives through Srinivasan Services Trust (SST) continue to focus on rural development, impacting 1.6 million beneficiaries. The company aims for Net Zero carbon emissions.