‘Other Income’ Only Positive In TVS Srichakra’s Q4 Numbers

TVS Srichakra announced its Q4FY13 results post market hours on May 22, 2013. The numbers spoke of a humongous jump in profitability. However, this was only on account of its Other Income. Otherwise, the result was disappointing.

The revenues of TVS Srichakra were at Rs 377.5 crore in Q4FY13, growing 6.87% from that in Q4FY12. In FY13, the company garnered Rs 1683.45 crore, registering an increase of 15.39% as compared to FY12. In terms of segments, it gained 90% of its revenues from the ‘Manufacturing’ segment and 10% from ‘Trading’.

Although the revenues seen in Q4FY13 seemed strong, with an almost 7% YoY growth, the company’s margins were impacted. Its EBIT declined by 28.40% to Rs 18.81 crore in Q4FY13, which marks a 246 basis points decline in its EBIT margin.

In the elapsed quarter, TVS Srichakra saw its net profit growing by 240.85% to Rs 33.54 crore. However, it is important to note that this was on account of ‘Other Income’ to the tune of Rs 38.95 crore. If this is adjusted for, the net profit would see a decline of 59.73% from that in Q4FY12 and would stand at a mere Rs 3.96 crore.

Currently in the tyre industry, while OEM (Original Equipment Manufacturer) sales have been low due to subdued sales of automobile, the replacement market has been keeping the market buoyant. Moreover, rubber prices have declined drastically and are seen stabilising at the present levels. This has significantly improved the margins of tyre companies, since rubber amounts to 50% of their total production cost.

However, this company has not managed to show any signs of improvement, making its performance sub-par despite favourable market conditions. We thus maintain a negative outlook on the performance of TVS Srichakra.