The problem with TVS Suzuki is not its growth rates. Total volume sales are up 25 per cent month-on-month for the last quarter, with the sales in its main motorcycles business increasing by 36 per cent, while the increase in sales of Scooty was up 30 per cent. Motorcycle production was up by 33 per cent. But despite the growth in these two segments, quarterly results showed just a 10 per cent growth in the bottomline.

The trouble with TVS Suzuki's performance is its scooters business. In the nine months that its new scooters plant has been active, TVS has managed to sell just 8,000-9,000 vehicles. "The inability to fullyabsorb the high fixed cost of its new scooters plant has pulled down the growth in profits," says Manish Ray Chaudhari, automobile analyst with ICICI Securities.

Keeping this problem in mind, the management's decision to utilise the idle capacity at the Mysore scooter plant to manufacture Scooty will be a beneficial one, and should improve profitability. "For the full year, the bottomline growth should improve to 15 per cent, but in the next financial year, the bottomline growth should accelerate to 40-45 per cent," feels Ray Chaudhari.

As far as the scooters sales are concerned, the expectation is that the current monthly output of 2,500 scooters is expected to continue. The problems faced by TVS are the same for all the scooter manufacturers such as Bajaj Auto (Q1 scooter volumes down 20 per cent) and LML (volumes down by 14 per cent). But the TVS Suzuki stock has begun to reflect the renewed positive sentiment, appreciating by 23 per cent after the July figures were announced.

KineticMotors

The surprise element in the scooters segment was the Q1 performance from Kinetic Motors Limited(KML). While the scooter industry as a whole reported a fall in volumes, Kinetic reported a volume jump of 52 per cent and a topline growth of 41 per cent. In addition, KML has been able to report a net profit of Rs 1.23 crore against a loss of Rs 6 crore in the corresponding quarter last year. In the previous year's first quarter, it reported an operating loss, against an operating profit margin of 6 per cent currently.

KML has been able to report such a performance after grabbing market share from the other players notably Bajaj and LML. Reasons being put forward for the sudden spurt in volumes are two-fold. One, the company has been focussed on introducing new and revamped models, something they have been slow to do in the past, and second, there has been a concerted effort at expanding the marketing base.

Around 80 new dealers have been recently added to the company's distribution network. KMLis also preparing to launch two new models, one, a 73 cc scooterette and second, a 4-stroke scooter model in the current year.