Share of revenue from luxury brands in automotive division rose from less than 20 per cent five years ago to 30% in FY23
VST Group, which handles the dealership of several popular sports car brands in India, has seen a significant rise in sales of premium cars in the last few years. Group's Managing Director Arun Surendra said that the firm recorded a year on year growth of over 20 per cent in the first nine months of FY24 in the sales of brands such as Mercedes, Ducati and Jaguar, among others.
In an interview with Outlook Business, Surendra said that the firm's revenue from such brands in automotive division has nearly doubled in the last few years. "From 15-20 per cent share five years back, the share of revenue in automotive division of luxury brands has seen a significant rise to 30 per cent. If you look at any metrics in India, the rich are getting richer. And the willingness to spend is a lot more visible now," he added.
While the willingness to spend has increased, Surendra said that the manufacturers have also started to bring entire range of products which is helping them meet the rising demand. "Moreover, what is also interesting is the increasing depth in tier 2 markets. From less than 5 per cent, our depth has increased to more than 20 per cent in the luxury market," he said.
The Indian automotive industry has seen a wave of premiumisation in the last few years. From 87.5 per cent share in FY19, the share of less than Rs 10 lakh cars dwindled to 54 per cent in FY23.
The healthy demand for luxury brands and other businesses will ensure a 15-18 per cent growth in revenue in this financial year, as per Surendra. "The automotive, manufacturing and the NBFC businesses are doing well which is a positive thing for us. Our profitability will grow in the range of 9-11 per cent," he said.
The company manufactures tillers and tractors. In the former, the market share is over 65 per cent and the business continues to see good growth. "Our aspiration is that in the next 5 years, the export oriented manufacturing should rise to over 30 per cent. It is currently less than 10 per cent."
Over 67 per cent revenue of the group comes from its automotive division where it handles dealership of 11 brands, five in luxury space, five in mass market segment and 1 in commercial space. Rest of the revenue is coming from the manufacturing and NBFC business.
In the manufacturing business, the company is looking to expand into electric tractors. He said, "We have investment in a US-based company for building electric tractors for the US market. It's still early days, but if you take a five year tenure landscape, it's another vertical that can grow substantially."
The group has invested around Rs 250 crore in capital expenditure this year. The automotive business is looking to add couple of more brands in the near future. He said, "But the low hanging fruit for me is the NBFC business. NBFC division has a lot of potential to grow. We are very conservative on that, intentionally. That is something that we're going to look at to have a higher growth in next five years. Big regulations are changing, so, opportunity to grow is available"