Price hike to boost TVS Motors'' margins: S G Murali
26 Jul 2006
S G Murali, senior VP of finance, TVS Motors, who was interviewed by CNBC after the company announced its results, says that the company has had a price increase in the June quarter. He adds that price hikes will boost margins, and that future price hikes would be based on raw material prices. He further adds that the two-wheeler market share is currently at 18.2 per cent and they company hopes to grow ahead of the industry. CNBC-TV18 shares with domain-b excerpts of its exclusive interview with Murali.
Your operating margins have gone down quite significantly, could you tell us why? Is it because of higher marketing spends?
It is a bit of both, the raw material cost has also gone up during the quarter and we also have been spending behind the brand. You will find that spends under product development does produce results. Growth during the quarter is ahead of the industry.
Do you expect margins to remain compressed for the remaining part of the year? We have taken price increase of the products at the end of the June quarter and the raw material cost went up by almost 1.6 per cent. A kind of a similar price increase has taken place towards the end of the June quarter. So I think a price correction has taken place.
How do you plan to combat it in the next few quarters? Are you looking at price increases for your products?
We have already taken over the price. We have taken over the price by the end of the June quarter.
You will not look at any further price increases in the next few quarters?
It depends entirely on the raw material front. If the raw material costs go up and it requires a price correction, then we will need to hike price also.
Could you give us an update on how the new launches and the new products are doing at TVS Motor?
All the new brands are doing well now. The Star has been consistently crossing 60,000 per month. Apache has received an excellent response in all the towns that we have launched it in.
Any targets that TVS has set out in terms of market share because it clearly seems to be a tussle amongst the top two?
The overall two-wheeler market share compared to last year Q1 of 2005-06 was 17.7 per cent; we have already gone up to 18.2 per cent. We have grown ahead of the industry during the first quarter. With industry growth around 18-19 per cent, we have grown 22 per cent. We hope to grow ahead of the market in the remaining nine months as well. So we will definitely hope to improve market share.
