TVS Motor Company wants shareholders ‘to remain patient’ with the investment bets it has placed on Norton which it had purchased in early 2020 even as though profit remains elusive on the British motorcycle brand.
After the initial Rs 153 crore, the Chennai-based scooter and motorcycle maker, followed up with a commitment to pump in more than six times that investment pushing the total to Rs 1153 crore. Norton is the largest overseas investment by TVS till date.
In FY24, TVS has invested Rs 180 crore in Norton Motorcycles. Investments would continue to flow for the next two years, said a senior company executive in a post earnings call.
KN Radhakrishnan, director and CEO, said, “We have a clear product plan with Norton and such a super premium brand requires a series of products and this needs investment in design, development and that is what is going on and that is what is needed for the next 8 quarters.”
Analysts tracking the company have been raising questions on the continued investments in Norton by TVS without a clear guidance on profitability. Norton presently sells three models, only one of which was launched under TVS ownership.
Recent sales volume performance of Norton is not available publicly though their 2019 total stood at 128 out of which 98 were in the UK. Priced at £17,000-42,000, Norton competes against the range of BMW, Harley-Davidson, Ducati and others.
“You give me a few more quarters and Norton will start delivering very good results for the company,” Radhakrishnan added after citing the example of PT TVS (Indonesian subsidiary) which after years of being in the red, started to deliver profits.
As TVS shareholders wait for a turnaround at Norton, losses may stay with it for some time. At the close of FY23, losses at Norton more than doubled to Rs 277.28 crore from Rs 119.43 crore reported in FY22, according to information shared in the annual reports of TVS.
Though Europe is reeling under a wave of low growth (Germany recorded a fall in GDP for the third quarter) with the inflation across the zone dropping to a two-year low, the new investments into Norton are made for new products, including an electric motorcycle, that is slated to debut in 2024-25.
“We are trying to completely redefine. Using Norton and TVS teams we will come up with a very prudent product plan for the super-premium category. Work has already started. We will share relevant information closer to the launch date,” Radhakrishnan added.
TVS has committed Rs 1000 crore in capital expenditure and Rs 800-900 crore towards investments for FY24.
