TVS Motor Company’s largest overseas investment, the acquisition of the iconic British bike brand Norton Motorcycle Company four years ago, has yet to yield significant results.
In FY24, Norton continued to incur significant losses, with its net loss increasing by 74% year-on-year to Rs 394 crore. Compared to FY22, the losses have more than tripled. By the end of FY24, the company had negative reserves of Rs 847 crore, an 83% increase from FY23.
After the initial investment of Rs 153 crore, TVS Motor Company committed to investing more than six times that amount, bringing the total investment to Rs 1,200 crore to date. These losses are attributed to the investments made to ramp up operations at Norton.
TVS’s senior management has stated that the losses should be viewed not as operational failures but as investments in the company’s future. The company has committed to investing in Norton for eight consecutive quarters.
Speaking to FE, Gopala Desikan, CFO, TVS Motor Company, said: “We acquired just the brand Norton for GBP 16 million in 2020. These are not operating losses but investments for the future. All these expenses incurred now are for a range of new products. These are investments in engineering and capability.”
When asked to provide guidance on profitability at Norton, Desikan said “Once the product line-up becomes available and the top-line grows, there will be considerable improvement in profitability. I don’t want to give guidelines.”
Norton’s first new products are expected to debut in FY25, with a new product lineup set to follow from FY26 onwards. In total, six new products are planned over the next three years. TVS has committed to launching one new Norton model every 1-2 quarters starting in FY26. In addition, the brand is preparing for international expansion, initially focusing on the US, Germany, France, Italy, and India, Desikan added.
The Chennai-headquartered company is betting on introducing step-down models (in terms of pricing) from Norton for both the Indian and global markets to generate higher volumes. The Indian two-wheeler market is price-sensitive, with the largest volume in the mid-premium segment (350-500cc) coming from the Rs 2-3 lakh price range, a segment currently dominated by Royal Enfield.
Analysts tracking the company have raised concerns about TVS’s continued investments in Norton without clear guidance on profitability. Currently, Norton sells three models, with only one launched under TVS ownership.
While its operational performance over the years has been among the best, a major investor concern has been the company’s continued investments in associates and subsidiaries. These investments dilute standalone performance and impact returns, according to a report by Motilal Oswal.
“Even in FY25, it has earmarked investments of Rs 1000-1100 crore in associates and subsidiaries. The fact that TVS has been investing in both Norton and e-bike businesses in Europe for over three years (without any returns in sight), has been a major cause of investor concern in the stock,” the Motilal Oswal report further added.
