TVS Motor Company, India’s third largest two-wheeler manufacturer, is betting on its loss-making subsidiaries bought in recent years by investing more than previously envisaged, to ensure a faster turnaround.
For example, it continues to invest in UK cult bike brand Norton despite losses rising by 100% to Rs 265 in FY23. After announcing the infusion of Rs 1,000 crore into Norton in 2022, senior management of TVS had guided that investments into Norton were complete.
Similarly, it has also hiked stake in Swiss e-mobility Group (SEMG), a Switzerland-based bicycle-making company, to 100% by buying the 25% stake for Rs 186 crore. While SEMG is a market leader in the e-bicycle space in Switzerland, it clocked a loss of Rs 92 crore in FY23. In early 2022, TVS bought a controlling stake in SEMG for Rs 752 crore with an aim to capture the electric bicycle market of Europe.
In a post earnings conference call, KN Radhakrishnan, director and CEO, TVS Motor Company explained, “For a couple of years there will be challenges because everything needs to be structured and investments in product development have to be made. Geopolitical challenges are beyond our control. Norton requires a series of products and for that you need investments in design, development and we have to be a little patient there.”
He also added that these investments will yield very good returns going forward. Europe is going through some tough times. In terms of numbers we are able to see slight pick-up now and we are confident that going forward the numbers will come up. “The overall losses in the e-cycle business are coming down quarter after quarter,” Radhakrishnan added.
The Chennai-based company’s other investments during the quarter include TVS Digital, a Singapore based digital technology start-up and Rs 200 crore in TVS Credit, a non-banking finance company, during the quarter.
Overall, it made investments of Rs 400 crore in the June quarter this year. In FY23, the company announced Rs 400 crore in investments which were made in various subsidiaries.
It has also increased its investment guidance for the year by up to 30% to Rs 900 crore from Rs 700 crore announced in May this year. The investments are in addition to the capital expenditure (capex) which remains unchanged at Rs 1,000 crore for FY24.
