Tatas & Trust Go Together. Here's the Other 100-Year Old Rightful Claimant...

Back in 1982, it would have been difficult not to consider Hindustan Motors Ltd (HML) as an investment proposition.

The auto industry was just taking off, with companies reporting the highest sales volumes year after another. Given its early mover advantage and being the market leader, HML was in a unique position. Yet, today, the company barely exists with operations suspended in 2014.

And it's not just Hindustan Motors. The tribulations of iconic companies such as Nokia, Anil Ambani Group, and Blackberry, remind us that companies can and do disappear.

A study by McKinsey found that the average lifespan of companies listed in the Standard & Poor's 500 index was 61 years in 1958. Today, it is less than 18 years.

But there are a few business groups that have managed to escape this mass destruction.

And not only have they survived, but they have also thrived, growing from just one business to become multinational conglomerates.

Reaching the age of 100 years is an achievement for a human, but apparently an even bigger accomplishment for a business group!

No wonder, century old companies are few and far between throughout history.

When we think about large, reputed business groups that have survived a century, the first name that comes to mind is Tata or Birla or perhaps ITC or even Godrej.

After all, these groups have emerged as consistent wealth creators for millions of investors over the last century.

These groups are constantly in the limelight either for their foray into new industries, acquisitions, massive capital expenditures or perhaps even controversies!

On the other hand, there is a group that has, over 110 years, grown consistently, staying busy, and doing things that don't demand headlines.

But it has grown... and flourished.

From its humble beginnings in 1911 as a small rural bus service, this group has added over two dozen companies in the past two decades alone, scaled up businesses, launched new products, and acquired factories.

In the process, the group's turnover, which was seen at US$ 1.2 bn at the time of liberalisation in 1992-93 has grown exponentially into a US$ 8.5 bn conglomerate with over 50 companies under its umbrella.

We are talking about the TVS group!

The TVS Group - Trust, Value, Service

The TVS Group traces its origins to a rural transport service, founded in 1911 in Tamil Nadu by T V Sundaram Iyengar.

Although the company is named after the founder, the letters TVS have always stood for Trust, Value, and Service within the company.

The group has always been under the radar, stealthily increasing its presence across multiple businesses over the last century without any unnecessary attention.

Here is an interesting story about the company's silent approach to business.

In the early 1930s, selling cars was not easy in South India. The rich still preferred horse-drawn carriages.

TVS & Sons, which had a General Motors dealership, came up with a novel offer that just couldn't be refused!

A car with a chauffeur, would be sent to a prospective client's house requesting it be used for a week.

At the end of the week, the client would often end up buying the car, having grown accustomed to the comfort and status the car gave him and his family!

Following the sale of the vehicle, the company kept track of its performance, regularly connected with clients, and made sure that complaints were resolved within 24 hours.

It even introduced a mobile service facility to visit customers' homes in the 1940s.

Even today, customer satisfaction continues to be the cornerstone of the group, which is now run by the fourth generation of the T.V.S. family.

Today, the TVS group operates in diverse fields that range from two-wheelers, three-wheelers, automotive component manufacturing, computer peripherals, automotive dealerships, aerospace components, logistics, finance, electronics and providing enterprise resource management solutions to varied industries.Regardless of the field they work in, TVS companies are known for their unwavering commitment to quality.

Not surprisingly, the first four companies in India to have ever won the coveted Deming Prize are from the TVS Group in recognition of its achievement in total quality management practices.

Industry considers the Deming award as equivalent to the Nobel prize in the field of quality.

The TVS group is now one of India's largest automobile component manufacturers, India's third-largest two-wheeler manufacturer, and the second-largest two-wheeler

exporter, with exports to over 60 Countries and has over 60,000 employees.

The group consisting of around 50 companies is being run by the third and fourth generation members of the family.

In late 2020, the group announced that the various streams of the family are formally splitting the group businesses.

On 4 February 2022, the group received final approval for a family resettlement from the National Company Law Tribunal (NCLT).

And in keeping with its century old legacy and class, the arrangement was sorted out quietly without any fuss or controversy.

It is noteworthy because unlike many other corporate settlements this one was sorted out amicably and without any open conflicts.

The split is seen as a move to facilitate a smooth succession for the next generation, ensuring that each family group will get complete ownership of the businesses they manage.

The new structure is unlikely to affect the business continuation and its stakeholders.

On the contrary, this restructuring means easier decision-making, especially when it comes to strategies for the future. The reorganisation would give each family group the professional freedom to operate.

This could be a huge positive for shareholders as such a structure could propel the respective businesses to new heights.

A case in point is the Bajaj family division that has unlocked massive value in the group companies for its stakeholders.

In 2006, Rahul Bajaj carved out two distinct businesses from a monolith called Bajaj Auto and handed operational control of one apiece to the brothers.

Sixteen years on, the move has proven to be smart from multiple standpoints - succession planning, business growth and shareholder wealth creation.

This makes a telling statement: Division can be good, especially for shareholders.

In 2006, before the Bajaj group was split up, the total marketcap was at Rs 200 bn. Sixteen years later, the combined market valuation is nearing Rs 8,930 bn.

The TVS group like Bajaj has a strong pedigree and the group has a strong legacy of accountability, integrity, and transparency having proven itself time and again over a century.

Hence, there could be a huge potential opportunity for long term investors to capitalise on by looking at TVS group companies over the coming years.

Here are the top 3 TVS group companies that you could add to your watchlist.

#1 TVS Motor Company Ltd

TVS Motor Company, the flagship company of TVS Group is the third largest two-wheeler manufacturer in India.

It has an annual sale of more than 3 million units and an annual capacity of over 4.95 million vehicles. TVS Motor is also the 2nd largest exporter in India with exports to over 60 countries.

The company manufactures the largest range of 2-wheelers, starting from mopeds, to scooters, commuter motorcycles to racing inspired bikes. More than 44 million + customers have bought a TVS product to date.

TVS Motor has four manufacturing plants, three located in India in Tamil Nadu, Karnataka, and Himachal Pradesh, and one in Indonesia.

Improved investments in road infrastructure, economic environment with the current mass transit systems is expected to drive the demand.

This demand is best served by the two-wheeler segment making it fundamentally very attractive in light of a resurgent India. The company's strong portfolio of products will enable it to grow ahead of the industry.

TVS Motor has plans for a 'product offensive' strategy and expects a strong growth story on the export front this year, fuelled by growing demand for products as also due to operations in diverse geographies.

In FY22, the company achieved one million annual exports for the first time.

The electric two-wheeler industry is slated to grow rapidly and TVS has robust plans for this segment. The company will be launching a series of new products focusing on different customer segments.

The company expects the association with BMW to grow multi-fold in the coming years. TVS and BMW are also working on electric two-wheelers in the sub-15kW platform.

The recent acquisition of Norton carries tremendous value and legacy. Norton has started production and will soon be available to customers. Norton is also in the process of developing an electric superbike.

TVS Motor has rallied since the beginning of the year gaining close to 77% till date.

The company's revenues jumped 24% from Rs 167.5 bn in 2021 to Rs 207.9 bn in the financial year ended 31 March 2022.

Profit after tax was up 46% from Rs 6.1 bn to Rs 8.9 bn for the same period.

The company has had a robust start to the financial year 2023 and reported a standalone net profit of Rs 3.2 bn in Q1 FY23 as against a net profit of Rs 0.5 bn in Q1 FY22.

Operating revenue was Rs 60.09 bn in the quarter ended June 2022 as against Rs 39.34 bn reported in the quarter ended June 2021, up 52.7% YoY.

#2 Sundram Fasteners Ltd

Established in 1966, Sundram Fasteners is the supplier of choice to leading customers in the automotive and industrial segment across the globe.

Being an indispensable part of several industries worldwide, the company has grown into a global leader, manufacturing critical, high-precision components for the automotive, infrastructure, windmill, and aviation sectors.

The company caters to the original equipment manufacturing (OEM) and aftermarket consumers in India as well as highly competitive markets such as Germany, USA, Italy, UK, China, France, and Brazil.

The government's initiatives to support the auto sector is expected to facilitate growth in the industry which in turn will reflect on the auto component sector.

Sundram Fasteners is proposing to invest Rs 7.5 bn, including investments under the PLI scheme, over the next 2-5 years to create capacity for the defence and wind energy parts businesses as well as developing components in emerging technology segments.

Launched in March 2020, the product linked incentive (PLI) scheme is aimed at scaling up domestic manufacturing capability along with generating employment and reducing dependence on China.

The government had announced the PLI scheme for automobiles and components in September last year.

The company has gradually been shifting away from being a fastener company to an engineering company with the introduction of new products.

The management has indicated that going forward the company would focus on a diversified product range from EVs to non-autos, including aerospace, defence, wind, solar, etc, given growing business opportunities in these non-auto parts.

Exports contribute to about 35% to the overall revenue enhancing the top line of the company.

During the financial year 2021-2022, revenues increased 36% to Rs 41.7 bn from Rs 30.6 bn in the preceding year. Net profit was higher at Rs 4.1 bn compared to Rs 3.2 bn, a jump of 24% YoY.

The stock has outperformed the BSE Sensex over a 3-year period with a CAGR of 25.4% against the benchmark's CAGR of 14.8%.

Since the beginning of the year, the stock of Sundram Fasteners has been flat gaining just 5% till date. The stock closed at Rs 948.1 on BSE on 3 November 2022.

#3 Sundaram Finance Ltd

Sundaram Finance was established in 1954 with the primary objective of financing the purchase of commercial vehicles. Today, the company has grown into one of the most trusted financial services groups in India.

It has a nation-wide presence of nearly 620 branches, over two lakh depositors and three lakh commercial vehicle and car finance customers.

Sundaram Finance Limited has a diversified presence in Mutual Funds, Housing Finance, General Insurance, IT, Business Process Outsourcing, and Retail Distribution of a wide array of financial services and products.

As on 31 March 2022, the group had a total AUM (assets under management) of Rs 295.3 bn and an employee count of 4,263.

Although Sundaram Finance is also part of TVS Group, it operates independently.

The company was relatively unaffected by the troubles that had beset non-banking financial companies in recent times.

This is due to its conservative approach, superior credit standards, strong customer relationships and systematic collection efforts which have ensured best-in-class performance on asset quality.

The company has an excellent track record of profitability over the last two decades.

For the financial year ended 31 March 2022, profit after tax grew to Rs 9 bn as against Rs 8.1 bn in the preceding year, up 12% YoY.

Revenue on the other hand dipped slightly by 3% to Rs 38.9 bn from 40.1 bn in FY 2021.

The stock has underperformed the BSE Sensex over a 3-year period with a CAGR of 13.7% against the benchmark's CAGR of 14.8%.

The year 2022 hasn't been any better with the stock down 3% till date compared to the Sensex which has gained 4.4%.

The other prominent listed companies of the TVS group are:

1. TVS Srichakra Ltd is one of the largest manufacturers of motorcycle, scooter, and moped tyres.
2. India Nippon Electricals Ltd is a manufacturer of components used in automobiles, motorcycles, mopeds, and scooters.
3. Sundaram Brake Linings Ltd manufactures automotive, non-automotive, railways and industrial friction materials which are extensively used in commercial vehicles, passenger cars, tractors, railways, and two wheelers.
4. Sundaram-Clayton Ltd is one of the largest auto components manufacturing and distribution companies in India.
5. Wheels India Ltd is one of the largest steel wheel manufacturers in the world.
6. TVS Electronics Ltd is one of the premier IT peripherals companies in India.
7. India Motor Parts & Accessories Limited (IMPAL) is engaged in the distribution of automobile spare parts and accessories representing over 50 manufacturers.

Despite the upstarts who emerge every now and again out of nowhere, it is never easy to displace the old guard.

New groups may rise into prominence, but it has not been enough for them to break into the big league of India's biggest business groups, where the oldest business houses like TVS continue to rule the roost.

They're out of the spot-light, conservative, perhaps even reticent. But no one can deny that the TVS Group is one of India's oldest & most trusted business groups.

With the rejig of ownership complete, we can look forward to exciting times ahead for the group companies.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...