TVS Motor Company Ltd invests in its UK-based subsidiary Norton continues to focus on analysts who expect the company to stay away from generating meaningful revenue.
India’s third-largest two-round seller managers stressed in a Q4 earnings call for Monday’s Q4 results that the company will focus on developing a new product line for Norton, which is expected to hit the market at the end of the current fiscal year.
At least two brokerage firms stressed that investment in subsidiaries is weighing the overall performance of TV, while a third analyst noted Norton’s meaningful revenue will only be in the second half of 2027.
“Capital allocation remains a problem. TV has invested in foreign subsidiaries. Over the past five years, these investments have grown at a CAGR of about 25%,” analysts at Nirmal Bang wrote in the April 29 note.
“On the cumulative basis, these subsidiaries have been causing losses in most of the losses scheduled by Norton and SEMG.”
Obtained in 2020
Norton ₹1.53 million. TV investments have exceeded ₹10 million companies. In 2021, it opened a new factory in Solihuli, England, producing about 8,000 motorcycles a year.
Through these investments, TV hopes to create products for the global market through the Norton brand. However, losses pile up. Losses of subsidiary EBIT (income and income before taxation) including Norton, but not TV credit ₹4QFY25 and 1.4 million ₹According to the April 29 note released by Kotak Institutional Equities, 4QFY24’s 4QFY24.
No response from the TV MintQuery sent by email.
Analysts at Kotak Institutional Stock also noted that the company’s free cash flow generation or cash generated by its business fell sharply by 83%. ₹Due to capital expenditure and investment, 2.3 billion ₹40 million for fiscal year 2025.
“The loss of the subsidiary (excluding the TV credit),” said Kotak’s Rishi Vora. “The company continues to cause losses to Norton Motorcycle subsidiary as it continues to bear the cost of the development of TV cars.”
To be sure, this is not the first time the company has faced a tough problem with the viability of its UK business. The company’s management put forward a brave face in the face of analysts’ ongoing questions during the October 2023 earnings call.
TVS CEO KN Radhakrishnan expressed confidence in Norton’s ability to generate profits ahead of time. “You give me some dormitories and Norton will start to bring good results to the company,” Radhakrishnan said in October 2023.
Focus on product development
Norton’s substantial investment share in product development. The first new product to be developed is expected to be available at the end of the financial year.
But some people think the company hasn’t generated meaningful revenue yet.
Analysts at Axis Securities wrote in an April 29 note that the increased investment has softened the company’s free cash flow.
“We estimate that Norton’s business will be able to earn meaningful revenue in H2FY27,” Shridhar Kallani of Axis Securities wrote in the notes.
TVS reported its earnings on Monday and estimated it in it. The company’s net profit increased by 76% between January and March ₹8.52 million, from ₹4.85 billion in the same period last year.
Total revenue increased by 17% during the period ₹95.65 million, from ₹81.4 million a year ago.
Over the whole year, its profits have increased by more than 30%. ₹Rs 27.1 crore while revenues rose 14% ₹363.09 million. During the year, it also recorded the highest sales of 4.7 million two-wheelers in the country ever.
However, the company performed better than expected. TVS stock fell 3.4% on Tuesday, while Nifty Auto fell 0.24%.
