Please note that this conference is being recorded. I now hand the conference over to Mr. Joseph George from IIFL Securities Limited. Thank you, and over to you, sir.
Thank you, Michelle. Good afternoon, everyone. On behalf of IIFL Securities, I welcome you all to the fourth quarter FY2024 results conference call of Hero MotoCorp. I also welcome the senior management of Hero MotoCorp to this call. Now I hand over the call to Mr. Umang Khurana, Head of Investor Relations and Risk, to take the call forward. Over to you, Umang.
Thank you, Joseph. Thanks so much for hosting us. Thanks, Michelle. Hello everyone, and welcome to the quarter four and full year 2024 call for Hero MotoCorp. We have on the call with us today our CEO, Niranjan Gupta. We have our CFO Vivek Anand. We have our CFO, Vivek Anand. We have our head of India business unit, Ranjivjit Singh, and we have Swadesh, who is our head of EMBU as well. As usual, we'll start the call with opening comments from Niranjan. Niranjan, over to you.
Thanks, Umang, and thanks everyone. Good afternoon, good evening, good morning, depending on where you're joining from, and welcome to our earnings call. These are exciting times. We know India is in the middle of the biggest exercise in democracy, with elections halfway through. The GST, as we just saw for the April month, has crossed INR 200,000 crore mark, indicating that the consumption is back. And of course, the forecast for monsoon appears to be normal as of now. And coming to our sector, April month just saw 30% growth in two-wheeler sector. Very exciting time, even globally. Rates have peaked, inflation is tapering. So a lot of positives to take for the coming year and years moving forward. These are exciting times at Hero MotoCorp as well. They are reflected in the results that we declared just a while back.
The year has been the year of maximum number of launches while making big strides in the premium segment. On the customer experience, as you already know, we've ramped up to more than 400 Hero 2.0 stores at the speed of more than one store per day. This is going to completely revamp the customer experience, not just for us, but for the industry as a whole. Our Parts, Accessories, and M erchandise business continues to roar and grew double digits. In the last three-four years, we've actually doubled the whole revenue size of the PAM business. Our global business came back in the quarter four, where we got to a market share of 7.2% with a 230 basis point improvement. Our EV, where we continue to build the infrastructure, which is 180+ dealers, we've expanded to, and 120+ cities that we have expanded to.
And our margin shape continues to be healthy. In fact, in quarter four, it improved to 14.3% with 130 basis points up, which actually allows now disproportionately more investment behind the new launches, the brands, and the growth priorities. All of this resulted in the highest ever revenue and the PAT for our company. As we move forward, the excitement will continue. There are more launches in the offering, as you would have read. We're going to launch Xoom 125, Xoom 160, the scooter launches in the first half. You will see some more forays into premium segment as well. And we can confidently say that we are poised for accelerated growth moving forward for the fiscal year 2025 and beyond. At this point, let me hand over to our CFO, Mr.
Vivek Anand, to introduce himself as well as to talk a bit about the numbers and the margins and whatever you want to, Vivek. Over to you.
Yeah. Thank you, Niranjan. Good afternoon, good morning, good evening, depending on which part of the world you're joining from. I hope your families and colleagues are staying healthy and doing well. A bit about myself, as Niranjan said, I joined Hero MotoCorp on 1st of March. That is just two months back, and going through my 90-day induction as we speak. I'm privileged to participate in this call as CFO of Hero MotoCorp, and I look forward to working closely with you and connecting with all of you in the coming year. I'm pleased to report strong financial results for Hero MotoCorp for the period quarter four and financial year 2024.
Starting with quarter four, financial year 2024 results, we clocked revenue of INR 9,519 crore, reflecting growth of 15%, EBITDA margin at 14.3% improved by 130 basis points over the same period last year, and PAT at INR 1,016 crore, which is 18% growth over last year. I'll move on to the full year, financial year 2024 results. We reported our highest ever revenue and PAT. The revenue amounted to INR 37,456 crore, reflecting growth of 11%, EBITDA margin at 14% improved by 220 basis points over the last year, and PAT of INR 3,968 crore, which is 36% growth over last year. PAT before exceptional item is INR 4,089 crore, a growth of 40% over last year. The ICE margin improved to 15.3%. This improvement was driven by operating leverage, mixed improvements, cost savings, and pricing actions. We continue to invest behind brand building and new products and segments.
This quarter, the impact of spend on EV business on our margin was 130 basis point, thereby taking the overall EBITDA margin down to 14%. Going forward, we will consistently grow volumes, thereby improving operating leverage, aggressively grow our premium portfolio, continue to grow PAM business in double digits, intensify cost saving initiatives across the value chain. While we do all this, we will continue to invest behind new products and segments, including EV and premium, going digital to enhance customer buying experience, and new product development. With this, I'll move to the dividend. Earlier today, the board recommended final dividend of INR 40 per share. Therefore, total dividend for the year includes special dividend amounting to INR 140 per share, which reflects strong payout ratio of approximately 70% of profit. On that note, let's open the floor for Q&A. Over to you, Umang. Thank you.
Michelle, let's now take questions, please.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touch-tone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only the handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amyn Pirani from JP Morgan. Please go ahead.
Yes. Hi. Thanks for the opportunity, and congrats on a good set of margin performance in a seasonally weak quarter. My first question is on how do you see Hero's market share segmentally as well as on an overall basis moving in fiscal year 2025? Because fiscal year 2024, as you rightly mentioned, was the year of a lot of launches, many more than what we have seen Hero do in a single year. So how should we think of market share on an overall basis and segmentally? Because while overall growth and margins have been strong, I think market share is still something where I think even you would expect a better print.
So I mean, thanks for the question. Let's start off, and then I'll hand it over to Ranjivjit to talk about. Clearly, the two segments where we can see an increase in the market share in a good quantum and I would not lay out the number, Amyn, but one is premium. Because we've launched three big brands: Harley-Davidson X440, Mavrick 440, and before that, Karizma. We just launched them in the last year. This year, as you heard us, that we're going to put investment behind scaling them up and brand building. So that's one. Of course, there are other things going on in the premium segment. Talk about premium store, the 2.0 upgrade, the digital journey, the customer experience. So it's a full 360-degree approach to winning in premium. So that's a segment.
The other segment where everybody would see and we will see an increase in market share is 125cc, where the Xtreme 125cc, which has been launched very recently, has been received extremely well. I mean, Xtreme 125 received extremely well. On that note, let me just pass on. So there are two things while we continue to fortify our core and continue to build our global business. But Ranjivjit talking about more elaboration on these two.
Namaskar, everyone. This is Ranjivjit here. Yes, absolutely, Niranjan, I agree. What you've already covered extremely well is the premium. We've launched products. Now it's about building them into power brands. We're also, as Niranjan said, opening up new distribution. So there's premium stores that have come up already. About nine opened up by end of March, and already we have another three, four, and we're going to be at about 100, 150 by the end of the year. So it's pretty good in terms of the whole customer experience that we'll be able to provide for premium. In addition to that, the 125cc segment will see market share improvement from us, not only from Xtreme 125, which of course is very well received, but also Super Splendor, which we've strengthened the value proposition for that.
And Glamour, the classic one, which we call the Glamour XTEC, is doing very well in the south, in AP Telangana, also in the east. So overall, the 125cc motorcycle segment will also do well. Scooters also, we have a couple of nice things planned in terms of the launches, which you've seen in EICMA. You've seen for Xoom 125 and a couple of refreshes that will come through. So there, again, we'll see improvement. And of course, we'll keep the moat around our deluxe and 100 and entry to make sure that the customers continue to shower their love on these brands and these segments. So overall, we're well positioned for FY25.
Thanks for that. Just to follow up, could you also mention what percentage of your existing traditional stores have moved on to Hero 2.0? And if there are any early trends after you've had this new kind of a lineup and the Hero 2.0 stores have grown, any kind of change that you're seeing in the kind of customers who are walking in and the kind of interest which is generating, if you have done any study on that?
We broadly operate with around 1,000 primary stores, and then there are, of course, secondary networks. We've got almost 6,000 touchpoints. But your main dealer network consists of around 1,000 touchpoints stores that we're talking about. Probably 400+. By the end of the year, we would be covering 60%-70% of those. And then probably we'll look at upgrading some part of the secondary network. The early read of all of these, the scores that you talk about, clearly, there are a couple of metrics that we measure. Ranjivjit, you'll talk about that. But clearly, those measures are showing that they are much better in the new stores as compared to the earlier stores. And Ranjivjit, why don't you also talk about what's special about the new store just in a couple of minutes?
Yeah. So when you enter the store now, I mean, it gives a very premium, a very differentiated look. It's totally uncluttered. The products, really, that are on display, you get invited to them. And we're not only talking about the hardware here. We're talking about the skill set of the people who are attending to it, and they've gone through a lot of capability building in terms of training. All of this, really, results into a better conversion rate. And also, we measure the happiness and customer satisfaction and the overall experience. And in the industry, we also track the NPS. And these have significantly improved from the previous version of stores. So the clientele is also we're seeing a whole lot of premiumization going on because the whole experience is so much better.
And with the XTEC versions that we do have, they become very compelling in that kind of an environment. So it's very positive in terms of the way the customers are taking to these new formats, over 400 already done, and well on the way for even covering many, many more.
Thanks for that. I'll come back in the queue for more questions. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.
Yeah. Hi. Thanks for taking my questions. Two questions from my side. Firstly, on the market, April, like you flagged, it seemed like a very strong month for the industry as well as Hero. So any change in market sentiment that you've observed with a little bit of festivity, marriage season on the rural or the bottom of the pyramid, so to say, anything that you can share around the market at the lower end of the segment or entry segment?
I think what we've seen, Gunjan, is definitely a heightened, a much better consumer sentiment overall. That drives positivity. Also, there were good marriage dates in April. There were festivals in April. All of this drove the whole industry up. We did quite well. We did better as well. Then coming into May, May and June also, although the marriage dates are not as much as they were previously, but there is a sentiment definitely in particular, I would say, across even rural and urban, spread across both. So when we see the impact of that on our portfolio, it's very well balanced, very well spread in terms of how it goes. So it seems like a positive time with the consumer sentiment being quite positive.
If you were to hazard a guess, let's say, for the industry, would you think a double-digit volume growth is still feasible this year given that we still got more to do from a cycle recovery perspective? Sentiment is positive. Do you see that a possibility in fiscal 2025, double-digit volume growth?
Gunjan, we won't go as far as to call out the numbers on the volume guidance. We are fairly confident about our double-digit revenue growth. Now, what shape and mix of volume and price and mix and all that happens, that one we'll see how the industry navigates through.
Okay. Got it. The second question is on the new launches: Harley, Karizma, Mavrick. All three of these put together, we had a certain volume expectation. I think roughly 10,000 is what we were earlier talking about between Karizma and Harley. So with Mavrick coming through, how do we see that shaping up? Because at least the recent month numbers have been a little bit lower than expectations. So anything that you can call out from demand, order book, capacity that gives us comfort on the scale-up of these models?
So Gunjan, I'll start off, and I'll ask Ravi to elaborate on the Harley-Davidson X440 and Ranjivjit on the Mavrick and Karizma. We did say that we want to increase the capacity to 10,000 per month of these three, which is a 440 platform and Karizma put together. So that capacity increase work has happened. So we are at that. I mean, another one or two months down the line, we will have the 10,000 per month capacity from a supply point of view. Individually, as we know, Karizma started Ranjivjit will talk about it. It's a good response. It's building up. Mavrick sales have just started. I'm sure you would have seen the ad that we are running in the IPL and hope you like it. And the Harley-Davidson X440 is actually moving up as we are expanding to more stores.
More on the HD X440, how it is doing. Ravi, a couple of words from you.
Gunjan, we've established Harley-Davidson at about 10% market share in the markets in which we are present. Customers have reacted very positively to the motorcycle. The look, sound, feel of the motorcycle is very much in line with what customers expect.
Absolutely. And Ranjivjit, on Maverick and Karizma?
The biggest thing that's happening right now on Mavrick is people are really very, very keen to test ride, to understand more, to experience about it, engage with it. That's currently what's happening. We're also making it available in more and more of our premium dealerships. Talked about some of the new dealerships that we have and how we are placing it there, just inviting people to come and try it. That's what's building out. It's something which is working quite well for us, this entire process. As Niranjan said, we're also quite visible on IPL. Karizma is living up to its nostalgia, the legend, the very loved brand that it is. The sports aficionados are taking to it, and we're seeing that kind of momentum building up.
Even the Xtreme 160R 4V, which we had launched last year in the previous quarter, that's also coming in a strong way because it's really the fastest in its segment. It's very, very maneuverable, and it's something that people are liking. So we've got the portfolio. We are doing the right things. Customers are coming into our new-look showrooms, and they are being greeted by people who've been trained on these products and are able to provide them the kind of experience that is expected of them. So I think we're on the right track here.
These are all only on the 400 stores which are Hero 2.0, right? Just to be clear. So reach will also increase for these models.
It will, yes. Absolutely. So we will keep increasing the reach, and obviously, that will have a much bigger impact as you go along through the year.
And Gunjan, not just the reach, as you heard me and Vivek also talking earlier in the call, that we are going to invest behind building these brands because we have launched now the brand awareness, the building of the brand, investments, that also will happen. So across the board, you can see that acceleration in the action. Very confident about our premium journey now.
All right. Thank you so much. I'll join back with you.
Thank you. We'll take the next question from the line of Kapil Singh from Nomura. Please go ahead.
Yeah. Good afternoon, sir. Congratulations on a great performance. Just wanted to confirm the reach for Harley, Karizma, and Mavrick. What is it currently in terms of number of stores and where will it get to?
Harley is present, Ravi, in approximately 200 stores.
205 stores to be precise.
205 stores to be precise.
205, recently.
Very recently. Absolutely. Actually, it was only around 100 stores. Recently, we've added another 100 stores. So that will, again, start helping in terms of as we build and scale up. Mavrick sales have just started and 2.0 stores, which is currently ramped up to 400 stores, which will then go up further. And remember, as you put in these stores, as the stores are also picking up, then the number of units that you place in per store, the test ride per store, that also keeps ramping up. And therefore, all that helps.
So Karizma and Mavrick are being sold through Hero 2.0, and Harley is being sold through premium and exclusive Harley dealerships. Is that correct?
Plus Select 2.0. So Harley-Davidson X440 is not sold through all 2.0. What happens is within the 2.0, that we then shortlist and we select a few where only HD X440 is placed. Yeah?
Understood. Understood. Now the supply constraints are resolved, so we should start to get into the ramp of sales.
The supply constraints are resolved.
Okay. Understood. Just one question, sir, on the financial as well. We saw a good improvement in gross margins this quarter. If you could just call out both movement in terms of commodity cost, price increases in Q4 and thereafter, and also sales revenue for the quarter?
So Kapil, as you know, that we don't give the detailed waterfall of the margins. But broadly speaking, Vivek has talked about it earlier, the key drivers of those. And if you can touch upon the parts revenue for the quarter previous.
Yeah. Building on what Niranjan said, I think very clearly, margins are driven by improvement in mix and price. Of course, the correction in commodity certainly helped us both in the quarter and also on a full-year basis.
On the parts revenue, the quarter revenues were.
1397.
crore. INR 1,397 crore, and the full year was INR 5,087 crore.
5,087.
Yes. That's right. The corresponding quarter last year was INR 1,271 crores. That's again a double-digit growth. Yeah. That's right.
Sure. So can we at least give the price increases we have taken on average in Q4 and in Q1?
Price increases overall for the full year that we can talk about, those numbers are around INR 1,300-INR 1,400 per vehicle, which were taken up for the full year. Then offline, you can pick it up with Umang if you need any more details on that.
Thanks, sir. Best wishes.
Thank you. The next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Hi. Good evening, and thank you for taking my questions. My first question is on the electric two-wheeler business. Just trying to understand when we expect to be qualified on our products in the market for the PLI scheme.
Suresh?
Yeah. So thanks, Chandramouli, for that question. We are really on our way to be so, as an entity, we already have the certificate for PLI. Now, the upcoming products, which we mentioned last time, we'll be launching very soon in the H1 of this year. You will see those getting the PLI benefits very soon.
Got it. Just to clarify, our VIDA product is already eligible for PLI scheme incentives. Is that the correct understanding?
No. So there are two parts to it. One is as an entity, we qualify all the other criteria to be qualified for PLI, where there are the criteria around localization and BOM and other pieces. On that, the current products which are being sold in the market is not PLI-ready. But the ones which will be coming very soon, as I mentioned, the new launches, they will be.
So in some substance, because even the current product will undergo a metamorphosis in terms of new products, and the entire lineup that will be changed in the first half. Therefore, quarter two, you can assume that we'll be PLI-compliant on the products in the market.
Got it. Got it. That's helpful. My second question is on the ICE scooter business. I think we've had Xoom 110 in the market for more than a year now. Was off to a pretty good start. Post the festive season seems to be normalizing a little bit in terms of run rate. Just trying to understand, is there any sort of supply-related issue there, or is this something conscious that we're doing ahead of the Xoom 125 and the 160 launches?
Sure. So Xoom 110 actually is pacing itself very well compared to the market. In fact, the 110cc in that segment has declined a little bit. And this is a brand Xoom 110 is a brand that has grown and gained market share, probably the only one to do so. I think people love its ergonomic design, its corner-bending lights, the zippiness of the entire way it is built out, and the ride that it provides. So it's doing well. And as I mentioned also, that soon enough, we'll have an accompaniment for Xoom 110, which will be the Xoom 125. And that will also play its own role in picking up the market share overall in the scooter market. So we're coming with that. We're bringing in a refresh also for a color option in Xoom 110.
Also in 125cc, we will have a refresh there as well. Pretty good in terms of the overall lineup and the performance and the customer appreciation. Can't help but mentioning that just in its inaugural year, Xoom 110 got six Scooter of the Year awards. That was really fantastic.
These are the products from the brand that actually built up. That was just the first year. As it will have the full lineup of Xoom 125, Xoom 160, the whole marketing investment, the leverage of that, the building of that, the word-of-mouth, so it's been a good start and will keep building up. A few months here and there, sometimes it'll be up, sometimes it'll be a bit soft, but that doesn't matter. Underlying, the brand has been received very well.
Got it. That's helpful. And just lastly, housekeeping question, if you can share the export revenues for the full-year piece?
I'll come back on that, Chandramouli.
Sure. Thank you so much, and all the best.
Thanks, Chandramouli.
Thank you. The next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead.
Yeah. Hi. My question is, how are the growth prints you're seeing? I mean, you talked about very positive consumer sentiment in March, April now, and expectations for May and June as well. Is it very broad-based now, unlike in the past, with rural also doing equally well as urban, or that is not yet the case?
So yeah, we've seen March was definitely positive. April was positive. The momentum is somewhat uneven now. In April, we're also seeing positive momentum. And in May, like I mentioned, the marriage dates are not there. But I think there is a bit of a jump in the first-time buyers. There is something happening in terms of consumer sentiment that people are prioritizing their personal mobility. And I think overall, therefore, we see it as a positive momentum. And it's quite broad-based across regions that we are seeing this.
Okay.
So you're seeing some signs of comeback of first-time buyers, particularly in the 100cc motorcycle segment as well?
Yes. For sure, we're seeing that. We're seeing it in the entry level. We're seeing it in the 110cc. And people are also prioritizing. You know what? The other thing that's happened, Jinesh, is financing is playing a big role in this entire thing. And we've seen a penetration increase. And so people are taking the leap also towards maybe a better configuration of the motorcycle, of the two-wheeler. And they're choosing to take a long-term investment. They've been holding off for some time.
Those who are holding off are now probably saying, "I might as well, now that I'm getting into it, get a better brand, get a better configuration so that I'm good for the future." So obviously, that combined with the retail experience when they come into our dealerships, all of this is working well. So we are definitely seeing a positive consumer sentiment.
Yeah. That's good to know. Our second question is on our product portfolio. So we have seen a substantial addition in the last 12 months and in first half after launch of Xoom 125 and 160. Would it be fair to say that we'll be broadly covering 100% of the ICE two-wheeler market in the upcoming two scooter launches?
Sorry. What's the question? Can you repeat?
In terms of the product launches or the white spaces in our product portfolio today and post the Xoom 125 and 160 launch, we'll be largely plugging all the gaps, or you see more gaps and more opportunity to launch on the ICE two-wheeler side?
Yeah. Largely, yes. You are right. I mean, in terms of the broad spectrum, largely, the big white spaces would have been covered. There would be a couple of more that will come in, which will come in probably in the fiscal year 2025 itself. So if you ask me this question, let's say in the end of March 2025, I would be completely covered. Which of those launches I'll not talk about will be there? But largely covered, you're right.
Sure. Lastly, on the rental penetration, so what it is now for Hero and what will be contribution from Hero FinCorp? That's my last question. Thank you.
3%.
Yeah. Overall, finance penetration will be close to 60%. The second part of HFCL is around 30%.
Yeah. That's it. Thanks.
Thank you. The next question is from the line of Raghunandan NL from Nuvama Research. Please go ahead.
Thank you, sir, for the opportunity. Xtreme 125R has seen very good reviews and acceptance. Currently, the monthly volume is around 10,000-12,000 per month. How do you see the production sales ramp up? By when do you expect volumes to increase to 20,000 or higher?
Just allow me a minute. Michelle, you can hear us well?
Yes, sir. I can hear you now.
Okay. I saw a message. Okay. Go on.
Yeah. Ranjivjit here. So it's just an observation. When I visited the dealerships during the Dhanteras time, during Diwali, you at that time observe how customers are flocking around the trucks when the vehicles arrive, and they literally throw their hankies and stuff on the vehicle, saying, "Yeah, mera wala vehicle. This is my vehicle. This is my color. This is" they try and book that. We're seeing a very similar kind of a thing with Xtreme 125R. People are very excited about making sure that they get their delivery as soon as possible. That's something that's very heartening. You absolutely hit the nail on the head that currently, the demand is outstripping our supply. We're absolutely working on this, and we are increasing our supply.
So while we're doing this, just to broaden this conversation in the 125cc, and just to be clear, it's not just about the Xtreme 125R. There's also Super Splendor, where we have sharpened the value proposition. We tried out something last year. It worked well. We're extending it to more markets. We are actually working on a campaign also because Super Splendor has a phenomenal key buying factor advantage, which is its mileage. It's 69 km per liter, and people are loving that. Glamour is also doing well. It's really all these three that will contribute to the earlier question that was asked in terms of increasing the market share. Overall, we're seeing a very good momentum.
Also, when there's demand for Xtreme 125, it's also then the whole power brand thing starts playing out, where Xtreme 160 also gets the pull for people wanting to try it out and discover that that's something that maybe they can stretch themselves to and enjoy a much different kind of an experience. Overall, this strategy is working well for us.
I think the capacity we are ramping up, you spoke about 2,000 per day by almost June, July, so in the next two or three months. What you talked about, 10,000 per month, we're selling right now. Capacity will get ramped to 1,000 per day, which will almost be like 20,000-25,000 per month capacity on Xtreme 125R. Yep.
Thank you, sir. That's very helpful. Sir, second question on VIDA. So given that H1 is likely to see more launches, and especially in the affordable and midsize category, and you're also expanding the presence in number of cities, can you talk about expectations of how you would see the two-wheeler electric volume production sales ramp up FY25, 26? How do you see the industry acceptance and ramp-up market share for your company?
Hi, Raghunandan. Yeah. So you're absolutely right. We are expanding our portfolio in the first half of this year. Very soon, you'll hear about it into the mid and the mass segment as well. And as last year was really our year to build the foundation of going to cities and dealers and setting up the charging infrastructure, our own, and also interoperability with Ather through which we are present in 200 cities and 2,500 charging points. This year, with these product additions, we are going to really be able to play in each of the three segments of premium, mid, and mass, right? With this, we are looking at a significant growth within this year. And we are also, as I mentioned earlier, we'll also be improving our cost structures.
On the basis of these two, we definitely see that this year and the next year is going to be our huge year of growth. You'll see more launches coming up. I'm not sharing any expectation on the market share as such. I can tell you that we're looking at a steep growth this year and next year based on the portfolio and the geographical expansion.
Thank you, sir. Just one last question. Exports have seen a good improvement in the recent months. Any thoughts on how do you see the outlook for FY25?
Yeah. As far as exports is concerned, the Q4 has been a good comeback of the sort. We have changed distributors in a couple of markets, like you saw in Nepal. We expect Mexico to move up. Recently, there was a change in the distribution in Nigeria as well. So all of this augur well for the fiscal year 2025. However, I refrain from giving any guidance on year volume. In fact, there are more market entries you would have seen from some of the announcements today, which is that we've approved forming a subsidiary in Brazil. We already talked about earlier on Philippines. So there will be some of these bigger markets that we are getting into, some big markets where we are changing the distributors, which we have changed.
Even on the product portfolio part of it, there is a bit of change that's happening in terms of putting these in the market. I think moving forward, the quarters and the years, our international business will be building up.
Thank you, sir. Best wishes.
Thank you. The next question is from the line of Arvind Sharma from Citigroup. Please go ahead.
Yeah. Hello, Good Afternoon Sir, Thank you for taking my question. First question would be on the margins part. You made a comment on the impact of EV margins. So given the 14.3% dented margin, it's a 130 basis points impact. So ICE margin was 15.6%. Is that understanding correct?
That's right.
That's right. Yeah.
Okay. Great. Thanks, sir. Sir, secondly staying on the margins, given that you've got quite a few EV launches and working on the cost consideration, what blended margins would be sustainable? I know you don't give forward guidance, but should EVs start being at least neutral, if not massively negative, on the margins front going forward with the new products coming in?
The answer was there in your question itself. So we don't give any guidance on the margin number. The long-term timeline remains at 14%-16%. And you can very well see over the past few years, we navigate our path around that. That allows us to deploy investment behind priorities as we deem fit from year to year. As far as EV is concerned, look, the whole thing is about getting the BOM cost down. And the industry is working on it. We are also working on it in terms of getting it down faster. But the margins on EV are dependent not just on the BOM cost. It's also dependent on regulatory, on the same subsidy, on the pricing scenario in the market, on how different players feel about that. So this is a field where I would say that the game has started.
Let's watch out how this progresses. More importantly, therefore, instead of margin, the focus is on getting the right cost structure and reduce the cost. Second is have a portfolio, which is a mix of premium, mid, and affordable. And third is actually to have all the infrastructure, including the dealers, the cities, and the charging point, make it accessible. So that's the plank on which we work on. And obviously, we would not shy away from making investments, whether it's in the OPEX or CAPEX, as may deem fit for scaling up our EV business.
Thank you so much, sir. Just one more thing. If possible, can you please share the bookings for Xtreme 125R? Is it possible to share the unit bookings?
Xtreme 125R is not operating on a booking model because this operates on a traditional model where the sales are happening. Of course, there are lots of inquiries which are in the pipeline. But as we talked about, we started selling more than 10,000. The capacity will be ramped up to 1,000 per day, which is almost 25,000 per month. So that's the journey on that Xtreme 125R.
Sure. Thank you so much for taking my question, sir. That's all from my side. Thank you again.
Thank you. The next question is from the line of Pramod Amthe from InCred Capital. Please go ahead.
Yeah. Thanks for the opportunity. First thing is with regard to the EV launches. When you are planning to launch two new products, how are you looking at the subsidy arena? Do you think you need to do you feel the lower subsidies in the norm of the day, and hence you have to launch a much lower battery size to fit into that cost, or do you feel product expectations are still high on the customer level and hesitance will be there?
Hi, Pramod. Yeah. This is Suresh. Yeah. As you have already seen, with the EMPS coming in, the subsidies are lower. And phase III, we will see what it really shapes up. But we are prepared. We are prepared on the reduced subsidy as well. And obviously, as the EV venture, we are aggressively working on our cost reduction roadmap. So we will become even more stronger and independent. But at the same time, these subsidies are helping the industry. And even in the current shape and form, it is helpful for the industry. As you already see in the market, people are launching products with the smaller battery. And obviously, in our portfolio, that also exists and will come out in the due course of time.
At the same time, it is important for us as a serious player to make sure that we are providing products which are going to be desirable by the customer, the value proposition is right for that use case, and as we will not compromise on the competitiveness of the product while we obviously continue to navigate the category with the right cost reduction and pricing.
And as we do that, I feel and we feel that, look, EV is not a category which is matured by any stretch of imagination. And of course, the government has been helping through PLI and through FAME. And we believe that subsidies will be required for a bit of longer period of time to support the industry. And once it scales up to a certain level and a level which is more margin viable and cost-effective when it takes off, and actually then it invites investment from the players as well, then those can be tapered down in gradual course.
Sure. The second question is with regard to the consolidation which is happening within the EV space. Considering your experience in Ather investment, do you see any opportunity in terms of doing the investments in these startups still, especially to get any of the product technologies, or you feel it's more of a supply chain game, and hence for incumbent like you, there is no more scope of participating in M&A? Just a thought on that.
I think the scope for M&A is always there. So our balance sheet is strong. We are always open for acquisitions for M&As where it makes strategic sense. And obviously, in EV, there may be players. There may be parts of the ecochain, whether it's a technology or a capability, that is up for grabs or up there which can accelerate our own journey. We are always open for that. There are teams which keep exploring, keep evaluating. But as you know, we always ensure that whatever we strike the deal, it has to be also at the right price which delivers return to our stakeholders and not at any cost. But yes, open to M&As. And that's what the team keeps working towards while continuing to build organically as well.
Sure. Thanks a lot.
Thank you. The next question is from the line of Pramod Kumar from UBS. Please go ahead.
Yeah. Thanks a lot for the opportunity. And sir, this is related to the Xtreme 125R launch because given the traction what you're seeing on the product and all of the new launches, ideally, we should have seen some market share gains reflecting in the VAHAN database. But what we're seeing is that we continue to see market share erosion on a YOY basis, even on a sequential basis. So I'm just trying to understand while the products are really good and there's a big change from what we've done in the past, but are we losing out a lot because of cannibalization within the portfolio, or what is happening which explains the market share erosion? And the related question to that is in terms of marketing spend because at least me personally, I haven't seen much of ad campaigns from Hero on the new products except for the Mavrick.
So what is the game plan on the marketing investment side going forward?
Let me start, and then I'll ask Ranjivjit to add. Of course, your question should not lead Ranjivjit to raise now a fresh proposal for increasing marketing investment to Vivek. But Pramod, the Xtreme 125R has just been launched, yeah? So I don't think we should start measuring market share movements from the first month of launch. The product has been received great across the board, which has led to us actually looking at increasing the capacity, yeah, because brands are not built overnight. But here you see an overnight exuberance on Xtreme 125R. But broadly speaking, Ranjivjit, why don't you again touch upon you had explained how do we plan to increase the 125cc market share and obviously the way we are going to build the brands through marketing as well in the coming year?
Let me break this up into two areas, Pramod. One is the market share part, and the other then is the marketing part. The way the market share is building out already in April, and you will see it as it goes along, there's a significant improvement that we are seeing thanks to all the efforts. And I have said this before also. It's about all three brands. It's the portfolio that is working, not only the Xtreme 125R. So Xtreme 125R just launched, taken up very well, and Super Splendor and Glamour also contributing to the growth. You will definitely see the results as we go along. As far as the marketing is concerned, it really just shows that we have targeted right. And I just wanted to say this about the Xtreme 125R.
The whole approach, even when we launched it, we had tie-ups with the gamers, BGMI and others. And they have been really into it in terms of the younger cohort of customers because that's the lifestyle that we wanted to tap into. That's the opportunity that we wanted to unlock. We did not want to convert our existing customers into Xtreme 125R. We wanted to invite a new set of customers, a younger set. And it's been very, very successful in that. In fact, the level of brand KPIs of Xtreme 125R from an awareness, consideration, preference has really shot up thanks to the marketing initiatives that were done. So not the traditional stuff, not television ads, not too much of out-of-home, not too much of print ads. So if you haven't seen it, I'm just saying that that's on strategy.
And therefore, the younger set are the ones that travels much, much more in terms of word of mouth. Of course, when it gets into much larger volumes and later on in its state of adoption, then the more traditional ways of communicating may be employed. But for now, it's truly become a pull brand in that sense. On the other hand, Super Splendor is really working on its key buying factor of mileage. And that wherever you go in the markets, whether it's out-of-home or print or at retail, point of sale, you will see the 69 km per liter as a very strong message. And the magnetic attraction of Glamour is unmistakable and unmissable in East India and as well as in South. So it's a very clear strategy that we've got. And I'll just request your patience a little bit.
You will see the results in the market share as they come out. We have a really good opportunity of doing focused marketing, not carpet bombing.
And just to add on what Ranjivjit to your point, so Pramod, what we also do is see, some of these would not be on the national media because there's no point. It's good to invest in marketing but not waste in marketing. So I think you will see some of these brands where we do localized media, where we do state-based, where we do regional marketing, and some which we feel is national, they're which are national, some which will go overweight on digital. So it's a combination of the overall marketing mix modeling that it follows our scientific tools, rest assured.
Thanks, Niranjan. Niranjan, spare parts' contribution, how should we look at it next year? Should the proportion be stable at around 14.5 or thereabouts? Or do you expect there's more runway in terms of the penetration, in terms of overall revenue itself going higher for FY25?
Pramod, good question. There is a bigger runway is what I believe in. In fact, if you remember a few years back, 3, 4 years back, it used to be around 10%-11% of the revenue. And we had talked about that there is a runway, and therefore, we went into microdistribution, the HGPDs that we call it. So a lot of stuff done out of it in a granular way which actually led to this one. But there is a scope in even expanding this further, which is what the teams are working on, accessories, and merchandise building up. Ranjivjit, do you want to expand a couple of minutes on this? But this is a business that in fact, we have approved the GPC2 expansion as well. So I want to talk about this business and the potential moving forward, yeah.
So thank you, Niranjan, for approving the GPC investments as well because the parts business is actually showing double-digit growth. We're supplementing that in terms of the oil business that's also growing quite well. We've also introduced new products in tires and bike care products that's also contributing and also growing the kitty. And then, like Niranjan said, the focus on accessories and designing accessories at the point of conceptualizing the bikes at that time and then bringing them in, as you will see in Mavrick, whenever it's displayed in the dealership, it'll be with the accessories. And that changes the way the customer really looks at how their own the pride of ownership goes up so much. And when you look at the merchandise, again, there's been a complete reimagining of what that merchandise can look like and the spread of that.
Overall, you hit the nail on the head. There is a runway for growth, and we're on that runway.
Absolutely. And it is a profitable business as we know. And as we are launching more premium brands, as we are putting a portfolio, the whole scope in the merchandise, more premium parts of it, yes, this business is up there, set up for even more growth in future.
And then the final one on CapEx, cash position, and investment plans for FY25. Sorry if I missed it earlier, but if you can just refresh us on that.
So the CapEx, the cash position you know, I mean, from the Ranjivjit point of view, it continues to be strong. From the CapEx, our guidance remains at between INR 1,000-1,500 crore for the upcoming year, which includes, of course, the GPC2 expansion that we have approved, which will be spent over the next two years.
Investments?
Yes. Need to manage, by the way. Just to add, the team continues to manage the working capital extremely well. So not only there are cash from operations that are coming through profits, but our working capital management has led to reduction in our receivable days and inventory days, which has resulted also in increasing cash flow through the negative working capital. So very tight working capital management, which is actually allowing the cash position to be even stronger.
Thank you, sir. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead.
Yes. Hi. Thanks for the opportunity again. I just wanted to ask about this announcement of Brazil capacity that you have talked about. It's quite interesting because I think the mix in Brazil is very different from the traditional export markets for Indian two-wheelers, is what we understand. The mix is more premium. And so should we expect more export-driven launches on the premium side for you, or you will be using the existing portfolio to try and capture volumes in the Brazil market?
So in some countries, export-driven product launches as well. We know about Nigeria. We're doing something for Philippines. Now, what we are saying is that as a strategy pivot, we are saying that 80% of our resources is going to be focused on the top 10 big markets. And for those markets, if it requires a product specifically to be launched, then we will actually develop those products and launch in those markets. As far as Brazil is concerned, we have tested our current product range through consumer clinics there with a statistically valid sample. And actually, a lot of products are coming out with very positive response on research. So right now, we'll be going in with those. And as you know, we'll be going in with E27, which is through this ethanol fuel route. But we have the products ready from our current portfolio.
Eventually, after that, if there's some modification required, some new development required, we'll take that on because Brazil is a big market. So as I said, for the big markets, as the customer may require new products which specifically develop, we would do so.
Great. Thanks for that.
Thank you. Ladies and gentlemen, I now hand the conference over to Mr. Umang Khurana for closing comments. Over to you, sir.
Thank you, everyone, for coming on the call. It's always a pleasure. Please feel free to get in touch one-on-one, and we'll speak to you soon. Bye-bye.
Thank you.
Thank you.
Thank you, sir.
Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect.