Tube Investments draws up renewed plans for bicycle business

Murugappa Group company Tube Investments of India (TII) has undertaken a restructuring of its bicycle business that includes exit from a business and expansion of presence across segments.

The bicycle business, which comes under TI Cycles, has been implementing a recrafted business strategy to accelerate growth through exports and expanding its presence in the spares, accessories and fitness segments.

“It has been a full-scale turnaround in the bicycle business, with improvements in operational efficiency, significant work on the ground in terms of improving the sales infrastructure, and better relationships with distribution channels, among others,” Vellayan Subbiah, Managing Director of TII told analysts during a recent conference call.

For the near term, TI Cycles, which has about one-fourth of the share in the organised bicycle market, has devised a two-pronged approach.

“We will continue to focus on the economy range as we foresee value-seekers will grow in this segment. In the higher value category, our plan is to broaden the alloy bike offerings and bring new products in the e-bike segment,” KK Paul, President, TI Cycles, told BusinessLine .

It expanded the economy range portfolio with six new models in the kids category. The company is also looking at garnering more business from three emerging segments.

Health & fitness conscious consumers are opting for cycling as their access to gyms and other such options are not available now. Also, consumers doing short-distance rides are opting for performance bikes as a healthier alternative to two-wheelers. People who were earlier ride-sharing are looking for their own vehicles in the interest of social distancing, particularly in the economy category.

TI Cycles has made a strategic exit from the working capital-intensive institutional segment amid a drop in volumes and revenue during FY20.

“In cycles, as we sharpened the focus on ROCE (return on capital employed) and margins, we exited the institutional segment to manage our cash-to-cash cycle better. In the institutional segment, the time from manufacturing the cycle to receiving payment was long ― from about six months to even one year. We were able to report better numbers on PBT and ROCE because of our exit,” said Paul.

Revenue from bicycles fell to ₹781 crore in FY20 from ₹1,238 crore in FY19. But PBIT increased to ₹26 crore (₹11 crore), while ROCE improved to 17 per cent (6 per cent in FY19).

The company’s volumes declined by 16 per cent at 19.8 lakh units in FY20 on the back of 17 per cent fall in overall bicycle volumes during the year.

Premium cycles reported a significant drop due to the economic slowdown, while geared products faced tough competition from the low-priced unorganised players. The commuting segment also showed a decline in sales.

During FY20, it launched 70 new models and 53 older models were refreshed. About 38 per cent of the trade sales volume came from new products.

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