The return on capital employed (RoCE) is projected to reach 15 percent in the coming years, compared to TVS Electronics’ current RoCE of just 0.94 percent.
TVS Electronics is set to scale up its electronics manufacturing services (EMS) division to match the revenue contribution of its product and solutions division. According to senior executives in an interaction with Mint, this expansion strategy aligns with the company’s goal to diversify and balance its revenue streams.
Currently, the product and solutions division accounts for approximately 70 percent of the firm’s total revenue. By enhancing its EMS capabilities, the Tumakuru, Karnataka-based company aims to capitalize on the growing demand for contract manufacturing services in the electronics sector, positioning itself for sustainable growth in the highly competitive market.
EMS is part of the company’s customer support services division, which also includes IT infrastructure management and solar plant operations. The focus will be on developing products. CFO A.K. Vadivelu explained that the strategy aims at mid-volume, high-complexity products with high margins, targeting sectors such as automotive manufacturing, industrial engineering, telecommunications, pharmaceuticals, and green energy.
Vadivelu noted that this decision is expected to boost the company’s earnings before interest and tax (EBIT) to 4-6 percent, up from the current 2-3 percent. Additionally, the return on capital employed (RoCE) is projected to reach 15 percent in the coming years, compared to TVS Electronics’ current RoCE of just 0.94 percent as of March 2024.
To elevate the EMS business significantly, the company is set to broaden its service offerings beyond the TVS group, aiming to attract a diverse range of clients. This strategy targets both domestic and global markets, particularly focusing on new opportunities in Southeast Asia. To spearhead this growth, the company is prepared to invest Rs 50-75 crore to expand its single surface mount technology (SMT) line from one to four to six lines, anticipating an impressive annual growth rate of 30-40 percent. This SMT line plays a crucial role in the assembly of printed circuit boards (PCBA), positioning the company for remarkable success in the EMS sector.
The company has pledged to invest 2-4 percent of its revenue in long-term initiatives, primarily funded through internal accruals. TVS Electronics provides services such as repair and maintenance of consumer electronics and e-waste management. Its product offerings include printers, keyboards, barcode scanners, and more.
