Chennai , 25 Jan 2007

QUARTER THREE, 2006 FINANCIAL RESULTS

TVS MOTOR REPORTS TURNOVER OF Rs. 952.98 CRORES, Growth of 8% Exports up 20 per cent

TVS Motor Company recorded a growth of 8% and reported a turnover of Rs. 952.98 crore for the third quarter ended December 2006 compared to Rs. 883.38 crore recorded for the corresponding quarter of the previous year. The turnover in the 9-month period ended December 2006 was Rs. 2981.35 crores compared to Rs. 2445.34 crores, recording a growth of 22%.

During the 9-month period ended December 2006, motorcycles sales registered an impressive growth of 21% at 7,12,112 units compared to 5,87,089 units over the previous period. This growth rate was higher than the industry growth rate of 17.9%. During the same period, the overall two-wheeler growth of 16.9% by TVS Motor Company was higher than the industry growth of 14.3%.

Profit before tax during the 9-month period ended December'06 stood at Rs. 80.50 crore as against Rs. 127.41 crore recorded in the corresponding period last year. Profit after tax stood at Rs. 57.55 crore as against Rs. 87.91 crore recorded last year.

The company recorded profit before tax of Rs14.11 crore in Q3 compared to Rs. 45.03 crore recorded in the corresponding previous quarter. The profit after tax stood at Rs. 11.46 crore compared to Rs. 31.06 crore achieved during the same period last year.

The high material costs especially steel, aluminum, rubber, copper etc continued to impact the margins of the company substantially. The cost of raw materials during the quarter was 73.1% of sales rising from 69.9% of sales recorded in the corresponding period last year.


During the quarter under reference, the company invested heavily in the brands as a part of strategic brand building exercise. To avoid erosion in the value of the brands, the company refrained from the industry practice of offering discounts on products, especially in the festival season. Consequently, due to intense competition during the quarter, the company's two wheeler sales recorded a slow growth. However the retail sales were far more robust and stock of motorcycles with the trade has been reduced by 10 days.

During the quarter, the company undertook several cost saving measures like value engineering and global sourcing. This is being intensified in quarter 4 for reducing the material cost.

Further the company has been able to control the fixed cost during the quarter compared to previous quarter and going forward with increased top line growth, the profitability is expected improve substantially. "All other factors remaining constant, the increased emphasis on productivity improvement, waste elimination using total productive maintenance would boost the fourth quarter performance, " said Mr Radhakrishnan, President, TVS Motor Company.

In Q4, the company expects to outperform the industry growth rate. In order to achieve this, the company has committed to capitalise on the following:
• The company has received favourable response on the recently launched StaR City ES. This motorcycle with its attractive pricing coupled with the fact that it is India's first and only electric start motorcycle in the 100 CC segment brings great value to motorcycle customers across the country.
• The 2-stroke variant of TVS Scooty, 'Teenz' was well received in the markets it has been launched.
• The company has intensified several sales activation programmes across key markets and will certainly yield good results.

EXPORTS

Total exports during the quarter recorded 21,938 units compared to 18,205 units recording a growth of 20%. The total export of 79,439 units, at a growth rate of 30%, during the 9-month period was the highest ever achieved by the company in a 9-month period.

FUTURE OUTLOOK
The proposed three new projects namely the Three Wheeler, Himachal Pradesh and Indonesian ventures are progressing as per the schedule.

In line with the overall business plan of 2007-08, the company expects to grow around 20%. The Himachal Pradesh Plant, with an annual capacity of 300,000 units, is nearing completion and will be ready for commercial production by April 07. The annual capacity can be increased to 500,000 units with nominal additional expenditure. This will help the company to improve their delivery time to the vast dealer network already established in North India and help the company increase sales. The investment in this plant is estimated at Rs. 120 crores.

The three-wheeler plant will have a capacity of 100,000 units per annum and will roll out state of the art three wheelers early next financial year. The investment plan for this project is Rs. 115 crores.

The Indonesian Plant will commence production with the roll out of 'Bebek' form of two-wheelers, which constitute 80% of the total two wheelers sold in Indonesia. In phase I, the plant will have a capacity of 3,00,000 units and in phase II, this will be extended to 5,00,000 units. The investment planned in phase 1 is US$ 45 Million.

CUSTOMER SATISFACTION AND QUALITY
The continued improvement in quality of its products has resulted in the company winning several quality awards for its products. Last year, TVS Apache, which was awarded 'Bike of the Year 2006' by several leading auto magazines, was chosen as the number 1 motorcycle brand in its class, in an all India customer satisfaction survey conducted by TNS Automotive. Recently, TVS Apache won the 'NDTV Car & Bike - AAA viewers choice Bike of the Year 2007' award, thus reinforcing customer's preference.

During the quarter, TVS M offered a unique 5-year warranty scheme for its discerning TVS StaR customers.

PRODUCT LAUNCHES
Several products are in the pipeline across key segments of motorcycles and scooters. All these projects are currently on schedule.