Humdrum Business, Eye Popping Performance

TVS Group companies are the darlings of India's stock markets

Venu Srinivasan, managing director of a joint venture between India's TVS Group and Japan's Suzuki Motor Corp., insists on honesty in business. That's fitting for a man who once sold Bibles door-to-door in the U.S., where he got his MBA from Purdue University in the 1970s. Now, Srinivasan is a top executive at $1.2 billion TVS Group, India's largest auto parts maker and auto financier, which has long ranked among the most respected names in Indian business. "TVS stands for trust, value, service," says the 42-year-old Srinivasan, who was raised on Gandhian values and who now runs the TVS-Suzuki motorbike business in the sun-baked south Indian city of Madras.

Trust, value, and service seem to be paying off. In a period when many investors worry about the strength of India's companies, TVS is a standout performer. Its salt-of-the-earth products, such as radiator caps and fasteners, may not be sexy. But TVS Group has been able to concentrate its 30-plus companies into niches of the country's auto industry and achieve annual growth of 25% to 30%.

ASIAN AMBITIONS. This is even more surprising when you consider that TVS companies are run autonomously by a loose affiliation of 15 cousins, all of them third-generation descendants of founder T.V. Sundram Iyengar. TVS's Sundram Fasteners Ltd. even supplies such giants as General Motors Co., which uses TVS radiator caps in its North American production. Suresh Krishna, Sundram Fasteners' chairman, plans to expand throughout Asia and the Middle East in the next five years.

TVS's solid products and management have made its companies stock market darlings. Sales at Sundram Fasteners, for example, have been tripling every five years since 1975, and last year net income rose 35%, to reach $8.6 million. An investor who put $8,750 into 2,000 shares of Sundram Fasteners in 1982 would have seen the investment grow to $100,000 today, far better than the Bombay stock average in the same period. Of the dozen TVS Group companies that are publicly traded, most have been to the capital market just once. "Once a company is up and flying, you don't go back for more money," explains Krishna. To maintain the family's control, the parent company has a 25%-to-50% holding in each of the companies.

While auto parts are the mainstay, TVS companies also are helping Indians purchase vehicles. Sundaram Finance, started by group elder T.S. Santhanam, 84, and now controlled by his son S. Viji, has almost 100% recovery rates on the loans it makes to India's small truck owners. "Their access to finance is limited, so they have an incentive to be honest," says Santhanam. Personal service helps: Sundaram Finance staff visit borrowers in their villages every 10 days and even attend such gatherings as family weddings. The finance company gets its capital partly from bank credit, but also from collecting deposits from some 500,000 members of the public. Despite paying just 15% interest, three percentage points lower than average, Sundaram Finance has a 90% deposit renewal rate. It even had to refuse new deposits this year; it simply had too much cash. Profits at Sundaram Finance climbed 35%, to $18.5 million, last year.

Although essentially conservative, Sundaram Finance is taking its first risky step: In late January, it planned to launch a local mutual fund, Sundaram Newton, a joint venture with British fund manager Newton Investment Management. Shreekant Panday, a Newton director, says the fact that plans are going ahead even though India's mutual-fund industry is in the dumps proves the value of the TVS name. "Their asset is trust," says Panday.

BUMPY PATCHES. TVS, which started as a cycle repair shop in 1912, has hit only a few bumpy patches. Five years ago, TVS-Suzuki, which makes mopeds and motorcycles in Bangalore, almost went bankrupt when its lone 100cc motorcycle proved less popular than Yamaha's and Honda's models. But then, Srinivasan introduced five new motorcycles, mopeds, and scooters, and marketed them rigorously. Now, with an 18% market share and profit of $10 million last year, TVS-Suzuki is growing twice as fast as the rest of the country's two-wheeler industry.

TVS also pins its success on good worker-management relations. At its factories in Madras and Bangalore, employee morale is high and labor troubles rare. Workers get free meals and free medical care--including open-heart surgery. And some companies offer free education for employees' children. By tradition, family members behave modestly, wearing the same uniforms as workers. And, rare among Indian executives, they even drive themselves to work.

Unlike other Indian conglomerates, TVS has resisted the temptation to diversify too far into unrelated fields, and its focus is serving it well. Ravi Mehrotra, chief investment officer of the $130 million Kothari Pioneer Mutual Fund, which has $1.5 million invested in TVS companies, likes that focus. "They don't get into hare-brained diversifications," he says. "With TVS, you don't get ugly surprises." That's the kind of reliability such auto makers as Ford, Hyundai, and Daewoo are counting on. As they build new auto facilities in the Madras area, quickly making the region India's Motown, they will need reliable supplies nearby. And rock-solid TVS is ready for them.

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