Ladies and gentlemen, good day and welcome to the Q4 FY 2022 earnings conference call of Bosch Limited, hosted by Batlivala & Karani Securities India Pvt. Ltd. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities. Thank you, and over to you, sir.
Thank you, Steven. Welcome to Bosch Limited Q4 and FY 2022 post results conference call. From Bosch Limited management, we have with us today Mr. Soumitra Bhattacharya, Managing Director, and Mr. Guruprasad Mudlapur, Joint Managing Director. To start with, Mr. Soumitra Bhattacharya will be making a presentation and will be followed by a question and answer session. To view the presentation, please click the team meeting link given in the conference call invite. Over to you, sir.
Thank you very much, Mr. Annamalai Jayaraj, and a very warm good afternoon to all the colleagues attending this conference call. I do hope all of you are keeping well and are keeping safe and healthy. I'd like to start with a brief on the macroeconomic policy, followed by the automotive market and then walk you through our financials. Finally, I'd like to end with the highlights for the quarter which affects our business. The Indian economy has been doing relatively well. Of course, I must say under very difficult circumstances, with both services and manufacturing PMI showing strong growth. As I said, the rest of the world, India too, is actually experiencing a very high inflation. This has resulted in the RBI revising the GDP forecast for FY 2022-2023 lower than 7.2%.
There's been a hike in the policy rate by 40 basis points and CRR by 50 basis points. Overall, the automotive market production in the current quarter declined by 3%, excluding of course two-wheelers, mainly due to the semiconductor shortage globally and also due to the high base effect. While recovery remains strong in CVs and PC segment, two-wheeler, three-wheeler and the tractor segment remained a laggard. Going forward, the elevated fuel prices and the higher commodity prices continue to be a major concern for the automotive industry. Colleagues, as you know, recently we saw that the WPI climbed further to more than 15%. Heavy commercial vehicle segment grew by 10% year-on-year. The growth in the segment was primarily due to the opening of the economy, revival in the freight movement, higher fleet utilization level, and pick up also in the construction activities.
The recovery is expected to continue in the coming months as well. The passenger car segment, this includes of course, utility vehicles, showed a marginal growth of 2% year-on-year, primarily due to the shortage of semiconductor. Demand has remained intact with strong order book coupled with low inventory. In fact, inventory here is down to 18-20 days at the dealer end, which is far below the normal. Production declined by 35% year-on-year due to the high base, which happened in the peaks of 2021. Stabilizing now to the normals of 2018, 2019. As per the IMD first stage forecast for the monsoon is projected at, 99% LPA. This of course has implications with a ±5%. Basically, monsoons predicted to be normal and this will be very, very important.
This implies that a normal monsoon will of course support further demand and actually, this can be linked to also a bumper rabi harvest. The LCV segment volume, which improved by 17% year-on-year basis, which benefited from the rise in e-commerce and the increasing need for last mile delivery. Two-wheeler segment degrew by 21% year-on-year. Domestic demand for entry-level segment remained weak and failed to pick up. However, premium two-wheelers and exports are performing better relatively. Among the other markets, three-wheeler segment declined 3%. Pandemic receding, we are expecting that the consumers returning to shared mobility services might get aided through the demand going ahead. Let's have a look at how your company has performed. Next slide, please. Under the tractor and passenger vehicle segment, the company has done better than the market.
However, the company has marginally underperformed in the heavy commercial and light commercial segments. This is primarily driven by the fuel mix change. We believe the company will grow better than the market once the semiconductor crisis reduces and recedes with our opportunity primarily in LCV and passenger car segment. Let's have a look at how the company has performed in January-March 2022 quarter compared to the January-March 2021 with all the above-mentioned factors. Next slide, please. The overall revenue from operations for January-March 2022 stood at INR 3,311 crore, which was an increase of 2.9% as compared to the corresponding period of the previous year. Here automotive sales have degrown by about 1%, largely driven by powertrain systems, while non-automotive sales have increased by nearly 31%, largely led by power tools.
Overall product sales have increased by 3.5%. Income from services mainly comprise of R&D services provided to OEM and of course, Bosch Germany. January-March 2021 had a higher revenue as the CRS project for Isuzu Motors was completed in that quarter, and the revenue was recognized based on the SOP date. Other operating income mainly includes income from lease rentals, miscellaneous income and export incentives. January-March 2021 had reclassification of reversals of provisions, warranty and doubtful debts, and some other operating income to other expenses. Hence, other operating income for the same quarter of the previous year is lower. Our material cost as a percentage of total revenue from operations has increased from 61.4% in January-March 2021 to 64.6% in January-March 2022.
The increase for this reason is mainly on account of three areas. Raw material price increases, lower cost of traded goods in January-March 2021, which was adjusted in subsequent quarters, which resulted in material costs being lower in the same quarter of the previous year. Of course, we know the impact due to the supply chain. I would like to add here that your company is deeply focused on focusing on recovery of raw material prices, electronics cost increases including, in relation to the logistics cost increases. Our employee costs for January-March 2021 include certain provisions which were no longer required and hence were written back. Hence, the employee cost for the same quarter the previous year is on the lower side on a like-for-like basis.
Personnel costs for the current quarter compared to the previous quarter without considering the write back of the provisions, has decreased from 9.8% to 7.7% of the total revenue in the quarter. Other expenses stood at INR 480 crore, which amounts to 14.5% of total revenue in January-March 2022, as compared to INR 489 crore, which is 15.2% of total revenue in January-March 2021. Decreases on account of reduction in spending of administrative expenses. Depreciation for the quarter is at 2.7% of the total revenue, as compared to 2.9% of the total revenue of January-March 2021. Operating profit, EBIT, stood at INR 346 crore in January-March 2022, as compared to INR 527 crore in January-March 2021.
A decrease of 34%, mainly due to a one-time credit that we had of approximately INR 181 crore. This is 5.6% of the revenue from operations in personnel cost. The other income primarily comprises of interest on fixed deposits and mark-to-market on debt mutual funds. The other income in January, March 2021 had a credit due to the reversal of the provisions no longer required. For the quarter ended March 2022, your company posted a profit before tax of INR 432 crore as compared to INR 640 crore in January, March 2021. This was before exceptional items. As a percentage of the total revenue from operations, profit before tax stood at 13% of revenue in the current quarter.
Profit after tax for the quarter ended March 2022 stood at INR 351 crores, which is 10.6% of the total revenue from operations. Profit after tax in January-March 2021 was INR 482 crores. The tax expense for January-March 2022 is INR 81 crores, which is the tax rate expected for the full year. If we remove the one-time impacts from the financials on a like-to-like basis, January-March 2021, the EBIT will be 10% as compared to the January-March 2022 EBIT at 10.3%. The one-time credits in the prior year mainly pertain to provisions no longer written back in personnel costs, wage settlement and accruals for retirement benefits. Modern India is a fast adopter of technology and legislation.
India has successfully implemented the BS VI Stage 1 norms for on-road vehicles in April 2020 and is gearing up for implementation of BS VI Stage 2 emission norms, which will be effective with effect from April 2023. Bosch is fully prepared with technology of BS VI Stage 2 and is already working with customers for series project execution. BS VI norms have reduced the gap with EU norms significantly, and we are catching up to the global standards in a quick way. Example being the introduction of real drive emissions and in-service conformity in BS VI Stage 2 that capture the emission performance of vehicles in real drive conditions, which is a big step forward. Europe is currently discussing targets for EU legislation, Euro 7 legislation, and India is yet to start discussions on the next legislation, which is BS VII.
Nevertheless, Bosch has created internal scenarios for the next legislative targets and has defined the technology roadmap for the same. The technology roadmap for these future legislation scenarios is accessible to Bosch worldwide region, and hence Bosch India is well equipped to bring these technologies to India as well. Overall, legislation will be an opportunity for Bosch to once again bring world-class products to India, and I would say not just world-class products, but innovative products and also at an affordable price. As we understand, the government of India has agreed to delay the implementation of TREM Stage IV regulation for tractors to six months. Implementation from October 2022, with the agreement that there will be no changes in dates from TREM V, Stage V implementation date that is April 2024. Both TREM Stage IV and TREM V will see tractor applications moving from conventional to Common Rail System.
Bosch is fully prepared with both components, tailor-made common rail systems offered for the implementation of the new norm. Overall, Bosch will transform and transition from conventional products to common rail products in tractor segment with a positive impact in introducing advanced products and solutions into the market. I would like to talk to you about the topic of sustainability at Bosch India. In 2020, Bosch India achieved carbon neutrality under Scope 1 and 2 at its 37 locations across India. We support the ESG, which stands by the way for environment for E, social for S, and governance for G. Disclosures required by SEBI around BRR and BRSR for FY 2022-2023. More importantly, starting this financial year we'll be adding an ESG section to our annual report for better and voluntary disclosures.
Our board has the responsibility of the oversight on ESG, and I as the MD am responsible for the implementation at Limited. Our target ESG vision is aligned with the vision of Bosch Group worldwide. I would finally like to mention especially that Bosch Limited's Vashi plant won the CO2 and energy efficiency award, and our Nashik plant won the first place in sustainability culture worldwide across the Bosch Group. 176 teams from Bosch locations across the world competed for the sustainability and the EHS Awards 2021. The directors have recommended a dividend of INR 110 per share for this 12-month period. In addition, to commemorate the centenary celebration of Bosch India, a special dividend of INR 100 per share has further been proposed.
The overall dividend payout for 2021-2022 is now proposed at INR 210 per share. I would like to thank you, each and every one of you, for your contribution, for your support to Bosch Limited, and for always listening patiently through this call. We would hope and like to meet you this year in person at our annual investor conference and call in August 2022. We will now like to address your queries and thank you and look forward to your questions please. I have on the call with me, along with me as Mr. Annamalai Jayaraj mentioned, my colleague, Mr. Guruprasad Mudlapur, the CTO and JMD of the company.
I'm happy to announce our CFO who's been inducted into our board, Mrs. Karin Gilges, who is with us, but will participate in the call from the next meeting onwards. I'm sure you also warmly welcome her along with me into Bosch Limited board. Mrs. Gilges, welcome to the Bosch Limited board.
Thank you very much.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets 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 Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Hi, sir. Thanks for taking my question. A few questions from my side. First is, on the localization for BS VI components. Based on the volume growth visibility which we had, particularly for CVs and two-wheelers, do you expect to reach optimum level of localization, in this financial year, FY 2023?
Thank you, Jinesh, for the question. As you know, Jinesh, we are systematically and continuously localizing, and also we have a very clear plan on certain areas where we will not localize. The strategy for localization is based on which components will we make and which components we will trade. If you remember, Jinesh, last time I had mentioned that our products and solutions, generally we localize, and we are doing that. There could be certain components, example in EGT, which worldwide people, you know, like, those who are solution providers like Bosch, if the whole system integrates the system to our solutions but don't manufacture each of them. That we will continue. In summary, we have localized quite a bit.
We will continue because there are different products and solutions also which come into place, Jinesh, as the emission norm changes. There are some areas, and I gave you a small example on the exhaust gas treatment components, which we'll continue to outsource.
Got it. Second question is on the PLI incentive, given that Bosch has been one of the beneficiaries. Two-part question here. One is with respect to the listed entity, what all do we plan to manufacture under PLI scheme? Second is, given that, Bosch Limited is umbrella entity which has got the PLI incentive, would we be routing other components to the concerned, to the listed entity? And if yes, how would, I mean, what kind of margins will be recognized in the listed entity?
Very, very good question, Jinesh. I will try to answer both. As you are aware, three of our Bosch companies, led by the flagship company which is Bosch Limited, have applied and also been included in the PLI. Bosch Limited actually has quite a lot of inflow from these two other sister companies also coming in. A, in summary, we have applied, and we will work towards getting the PLI through other value addition as well as localization both at Bosch Limited but also at the other two sister companies that we have applied. There will be, especially for our electronics company, a significant flow also through Bosch Limited. Well, Jinesh, we are in discussion with the government, and this is not about Bosch.
You see, in the Indian context for electronics value addition, currently the threshold level at 50% is a big challenge for industry. We have taken it up with the government. As always, in an agnostic and nothing to do with the company, electronics value addition on 50% will need a relook, and the government has been positive to say that we, based on the facts and figures, we are going to look at those areas. Final statement, our work with the government has been how do we get into advanced technology? How do we incentivize only for advanced technologies to take India forward? How do we give appropriate levels of value addition for participation of industry in the schemes to make it a reality?
Got it. Thanks, sir. I'll fall back in queue for other questions.
Thank you.
Thank you.
The next question is from the line of Pramod Amthe from InCred Capital. Please go ahead.
Yeah. Hi, sir. Continuation of the same, on the PLI. Would you be able to guide us what will be the CapEx for FY 2023 and 2024 and with taking into account this new PLI scheme, and how this has changed compared to your earlier plan?
Pramod, I think you heard on second and third, we had our global CEO doing a virtual India tour, and I will quote him. Bosch India has spent more than INR 9,000 crores in the last ten years. You can safely take about anywhere between 55%-60% of this CapEx in the last ten years has gone out through the listed company. Second, we have a pretty good CapEx layout also for FY 2022-2023. We are looking to the upwards of anywhere between INR 550-600 crores. We will continue in that range. I've always told you anywhere between a minimum of INR 400-600 crores is what we spend normally.
Of course, with that, when, if and where necessary, we will look at intensifying also our CapEx spend. In summary, we have applied. We have always been spending CapEx rightly. I'm giving you example of 2022-2023 of INR 550-600 crores further. We will also, wherever required further, we will not have a challenge. Our company is reasonably cash rich in terms of cash flow. We generate, you know, every year, INR 1,000, 1,200, 1,500 crores of cash. We have a healthy balance sheet with cash flow right now of about INR 7,000 crores.
Even after giving a healthy dividend, we will still have enough and more for CapEx and other organic and inorganic, including PLI spends.
Sure. Second question is to the CTO. Considering you guys play an active role in the EV ecosystem, how do you see the current fire incidents in the industry? And also considering that you have a robust product and systems, are you already seeing more inquiries from your customers for Bosch systems? And then you expect the Bosch EV system penetration to go up drastically in the coming years?
Okay. A very relevant question at this point of time. It's very early days, so please expect some of these things to happen. The market is still immature and things are developing the way it is today. This has happened all over the world, and things have also stabilized to a large extent all over the world. We will see that in the coming months and a year or so in India as well. Bosch does the designs of battery systems and manufacturing of battery systems, all with high levels of safety built in. We take care of this all over the world and in India too.
There are several things you need to do at design, at verifications after design, manufacturing and when it's actually deployed in the field to ensure that the batteries do not overheat or catch fire or any of the untoward incidents to happen. We do take care quite a lot about this. We've also been consulting the government on what are the norms they could bring in to make batteries much more safer than what they are today in terms of tightening the Battery Management Systems or the way they are designed or the way they are manufactured today, or the thermal protection systems that are in. We've done quite some consulting to the government and several other industry players currently.
We will see over the coming months an increasing awareness in the OEM community on what it means to have a safe battery. I believe some of the OEMs already have a lot of this awareness. We will generally see increased awareness and thereby we should start to see more inquiries coming to companies like ours, which do high quality design and manufacturing of battery systems.
Sure. Thanks a lot.
Thank you.
Thank you. Before we take the next question, a reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Senthil from ithought Financial Consulting. Please go ahead.
Hi. Good afternoon. Thanks for taking my question. My question is with your broader strategy in nature over a three to five y ears period. How do you see the peak value of electric vehicle business going up? Like you can give some numbers, what is the current peak value and how it will evolve over the next three to five years?
We have mentioned this before, Senthil, that from hardly 1%-2% now, and here we are talking only now passenger cars because segments like two-wheelers and three-wheelers will be different. We expect in the e-mobility case for India in a, I would say, realistic cum optimistic manner, that by 2030, India could possibly have up to 30% of its passenger car and utility vehicle being produced under this mobility. It could also be 25%. That's one. We also mentioned that ICE still will remain dominant. We also mentioned that diesel will play still a very strong role in the SUV segment.
Of course, all of you know that with BS VI Stage 1 and then Stage 2 and later BS VI, BS VII, diesel has also a very competitive edge in terms of both emissions as well as, fuel efficiency, etc. Gasoline, diesel will play the majority role, minimum 70%. 30% on a very low base is likely to catch up. Of course, we also said India has this very big challenge of putting up the whole infrastructure base across the country, and which we believe that public-private partnership will make it happen. This is how we look at them. The view has not changed since then.
Okay, sir. How do you see Bosch Limited progressing in this landscape? Any overview about what percentage of revenue or profitability from the electric vehicle side?
Senthil, we don't give guidance, you know that well, because you've been attending for a long time here.
Yeah.
I would not like to give a guidance. This question is not about Bosch Limited. This question is, I think, for the industry that you're talking. A, let's be honest, in India, we are at a pretty nascent stage. When you look at U.S., when you look at Europe, you know, specifically in USA, could be very aggressive EV in California, which is different from some other states. Today, Scandinavian countries, very aggressive electrification even today. For example, within Europe, Germany has. We cannot make a comparison amongst us, including China. Secondly, we believe that electrification is there to stay. It will become a big player, but you are going to see the movement mainly in big volumes between 2027-2030.
The period between 2022-2025, there will be, as you see some of the companies getting into it. Yet when you look at the overview of the total volume of cars, and Sanchit, you must remember, right now we are talking of 3.6 million cars and utility vehicles sold in fiscal year 2021-2022. We have to look at that picture. This 4 million by that time will go to 6 million, and by 2025, let's say. The volume and the percentage will be climbing but on a very low base. I think, Arati, if you had last time mentioned, Bosch has got a parent and acquisition value of EUR 20 billion. Not million, EUR 20 billion.
Has invested more than EUR 5 billion on electrification and has all the components, products and things. We have used our parent in a very big way, maybe initially create and then also later localize. As and when our customers launch our systems, we'll let you know.
Thank you. The next question is from the line of Shripal Shah from Kotak. Please go ahead. Sir, your line is-
I can't hear you. Sorry.
Hello. Yes. My question is, are your biggest competitor, NGK, making some new plug?
Sir, sorry to interrupt. There's a lot of background noise that we can hear from your line. If you can move to-
Okay, sorry.
a better place.
Yes. My question is, are your biggest competitor, NGK, making some new plug like you?
Mr. Shah?
Yes, sir.
Sir, still there's a lot of background noise that we can hear from your line, sir.
My question is, your biggest competitor, NGK, making some BoosterPlug for BS VI engines, what is your strategy to compete with NGK?
Your voice was still not very clear, but I heard strategic pricing on BS VI.
No, no.
Is that it?
Yes, yes. Actually, I'm asking for that. NGK are your biggest competitor making some new plug called BoosterPlug. That's why I'm asking. What's the strategy to compete with NGK in plug segment?
Shah, none of us are able to understand your question here.
Mr. Shah, may we request you to rejoin the queue, sir, once again, and move to a better place.
Okay. Okay.
Thank you. The next question is from the line of Ravi Purohit from Securities Investment Management. Please go ahead.
Yeah. Hi, thanks for taking my question, and congratulations on a decent set of numbers in a tough environment. So I have two questions. You know, one on more strategic and long-term view and, you know, maybe our new CFO could, if she can also kind of add her thoughts from Bosch AG's point of view. In terms of, you know, there was a time Bosch was amongst the top decile auto component companies in India in terms of growth performance-wise, ROE, ROC profile, margin performance. Whereas if we look at it today, we are currently in the middle of the, you know, ranking in terms of performances on growth, margin, ROE, ROC.
In that sense, you know, how do we kind of rate our own performance vis-à-vis our peers, vis-à-vis, you know, where we were five years back and where we are today and where we want to be over the next five years? If you could kind of, you know, give some strategic direction as to, you know, where Bosch India is really headed. When I mean Bosch India, I mean Bosch Limited, the listed entity, right? You know. That will be kind of, you know, very helpful from our understanding point of view. Second question was on, I think in our press release also we had mentioned today about fuel cells and hydrogen cells.
If you could kind of kindly confirm whether all of those will be routed through the listed entity, and we are actually thinking of, you know, bringing in all of those technology and production products through the listed entity itself. You know, that will be kind of, you know, helpful for us to kind of understand.
Thank you. Was it Pramod who asked this question?
Ravi Purohit, sir.
Okay. Ravi. Hi. Hi, Ravi. So, let me answer the second question first. Affirmative. Hydrogen electrification will all run through the listed company. I hope that gives you a clear answer.
Yeah.
Yeah. Now in relation to. You talked about profitability and long term. Ravi, I think you know that we don't give guidance, but I would like to say two, three things which are different from the past. I always mention to you and the other colleagues that we are setting ourselves to make ourselves fitter for the future, and we are not looking at quarter-to-quarter results. I'll give you some examples. You remember the fiscal year 2020-2021 and 2021-2022, we took you know, a hit in the P&L of INR 1,500 crores for our Transformation Program. Now, we did that by design, and today our personnel costs from earlier 14%-16% is down to 9%. But more importantly, our productivity has improved.
We've done it in a very fair Bosch way, and we are doing major reskilling, et cetera. All this will come, including competency development. All this will come to benefit us in the future. That's one. Second, in the new world, we do have a higher content of trading, but we have a very focused approach on localization, keeping in mind that we would like to localize what makes sense. I gave some example earlier on the exhaust gas. Third, the diesel share in India had climbed to 48%. You know, today it's down to 22%. There was a strong mix in Bosch Limited also for diesel, while we very strongly came back on gasoline, and as we will do as electrification and hydrogen grows.
Fourth, we have put in substantial amounts of money, initially starting with INR 100 crore, now INR 200 crore-INR 250 crore, and we move on even higher to invest for businesses of the future. We take this hit in the P&L by design, again, to prepare for the future. Whether it's competency building, whether it is, having projects, working with our customers, and rather than just only trying to get acquisitions. In summary, I would say, getting an EBIT of 10%+ on a very challenging year, where semiconductor has actually hit, not only the OEM's turnover, but also ours, naturally which affects the contribution. Also where the world is undergoing a very high, you know, challenge in terms of supply chain, raw material price increases.
We do see that. It is our profitability, our investment for the future, which will give us mid- and long-term benefits and results are in the right place. Now, I've given you an idea of the way forward of how the company is indexed for the future, including for its people. By the way, we have been declared as one of the best places to work in the top quadrant of the top companies in India to work for. We are investing for the future, and I strongly believe that our quest to attain double-digit profitability and further improve on it over the years after having invested in businesses will continue.
Okay. Just one, you know, brief question. If I look at, let's say 10-year numbers, right? You know, if you look at revenue point of view, we are probably 50% higher than what we were 10 years back. Whereas the profits are probably same as what it was 10 years back, right? 10 years is a fairly long period to assess, you know, performance.
In that context, would you say that there have been kind of misses that we've had to endure over the last three, four years in terms of transformation or, you know, transitioning between, let's say BS IV to BS VI or BS II to BS IV, and we've kind of lost market shares, we've lost clients? Or is there anything that you could kind of pinpoint, analyze, and you know, do, you know, what we call it, like self-assessment of where, you know? Because if I look at our peers, right? A lot of peers have kind of over the last 10 years, their turnovers are probably, you know, 2x of what it was 10 year back, or 3x or 4x of what it was 10 years back.
Profits are probably 1x, 2x, 3x of what it was. 10 years is a fairly long rope in that sense, which kind of also shareholder returns. Almost seven-eight years, the shareholder returns are zero to negative. In that sense, you know, there are a lot of these things, you know.
Any self-assessment that we've done, anything that we kind of did wrong in the past or missed in the past and now we are kind of course correcting and which kind of gives us confidence that the future will be better than what it was in the last five years, or the performance will be better than you know what it was in the last five to 10 years, I would say, you know.
I think it's a fair question, it's a good question, and I'll try to answer part of it because part of your question is also a guidance question. I've told you before, Ravi, that we do not give guidance. You should not attempt a guidance question. Now, having said that, I'll give you an answer in a very fair way. Seven years ago, we were about 12,000 people in Bosch Limited. Today, we are about 5,500 in permanent headcount and 2,000 on temporary. We've reduced dramatically on headcount, number one. Number two, seven years ago, if I look also, the market was largely and mainly diesel. Today, the market, especially on gas, oil, and utilities, has greatly changed.
You know that Ravi and all the colleagues in the concall know that we came compared to diesel later into gasoline. However, though we came later, we have got a sizable portion of the market in that space. Number three, any company which goes through transitioning and transformation has to take a call for a certain period of time to invest money to change the company. We've decided and done that, and that's why I told you that three to four years will be a period for the 3R program on reskill, redevelop, redeploy, and restructure. That is greatly behind us. Now, we are investing money for the future in relation to new businesses which will be in the listed company, and I gave you examples of hydrogen electrification.
This will pay off in the long run, but it will not be in the short run. If you ask me, it will be mid to long and definitely not in the short. In relation to efficiencies and other things, of course, we continue to focus on. In relation to people, we continue to focus on. In relation to our campuses, we are about to open in the Adugodi main, which belongs to about 75 acres in the heart of the city, one of the smartest campuses we are inaugurating on thirtieth of June for Bosch in India one hundred years. We have not been shy in investing for the future. We have reduced our headcount massively in all our plants and become more efficient.
We are investing monies for the new businesses, and we've also done a lot of restructuring, redeployment, reskilling. We believe, like our parent, by the way, it's not AG. Robert Bosch GmbH or the largest private limited company, not to look at quarter-to-quarter results, but to secure ourselves for the future. That's what we've done.
Okay, wonderful. Is it possible that I can squeeze in the last small question?
Sorry, Chandram, but for any follow-up, maybe.
Sure thing, Ravi. One small question.
Okay. So just, you know, we've been hearing about a lot of these biofuels and ethanol blending and, you know, CNG, we have presence, do we make kind of, you know, engines which are like ethanol compliant or overnight if the government changes the, you know, ethanol content, you know, would we have like ready-to-use, supply systems, which can accommodate those changes? Or if you could just share, you know, something that is happening on the CNG and, you know, ethanol side. If what kind of market share do we have and what kind of strength do we have on technology side or systems and processes side? Thank you.
Yeah, I'll take this, Ravi. We have solutions for Flex Fuel. We have solutions for CNG, and we also have solutions when fuel blends happen. Right now we are offering all those to the OEM, and CNG we have been doing it for years now, and Flex Fuel as well, we are already doing it. As things progress and move towards higher blend levels, we will also have to bring in technology as relevant to the market in India, and we will continue to do that. What I can tell you is that Bosch has a complete portfolio of Flex Fuel solutions deployed somewhere in the world and or also in India.
We continue to develop Indian applications and solutions as they may be necessary.
Okay. Thank you so much. I really appreciate, you know, your answering all the questions. Thank you so much.
Thank you.
Thank you.
The next question is from the line of Basudeb Banerjee from ICICI Securities. Please go ahead.
Thanks. A couple of questions. One, on similar lines of last couple of questions, if I look at fiscal 2016 to 2019, average RM as a % of TC used to be from 53%, which because of the reasons mentioned, you know, supply chain, limited scope of localization, raw commodity cost and diesel mix coming down combinedly, taking it up to almost 64% now. Though we guess it's commendable that staff costs you have taken down considerably, but this almost 10 percentage point change in decline in gross margin is huge in overall scheme of things. I'm not asking for any guidance, but how to look at how much of that can be recoverable when commodities or supply chain issues normalize, and how much of it will be structural in nature.
Thank you, Basudeb. You've asked the question as well as answered. I will say, yes, part of it is structural and part of it will further change on material content and definitely not go up, but will stay constant and go down, based on our localization plan. There are also some one-time impacts. Actually 64% should be looked at more towards that 61% or so. Two things in relation to recovery. We will do a fair recovery. Bosch is one of the few companies who has a very tight and a good process of contracting beforehand with most of our OEMs on Forex and raw materials. We will see that recovery flow through. We will also be fair towards the OEM by being fair towards us, which is what we've always stood by.
We are adding a certain element also on electronics increases worldwide as well as now the very turbulent stage of the supply chain. Today the world doesn't talk more about supply chain efficiency or effectivity. The world talks about supply chain resilience. We will look at the logistics cost increase and also create a scheme for recovery in a very transparent manner. In summary, inflation means cost increases happen, and that also means the optimal amount the whole chain has to give into and up to the end consumer with the ability of the end consumer to then finally buy the goods themselves. Bosch will participate in that in an ethical and fair manner, and we will see that we are working closely with the OEMs and our other our direct and indirect suppliers and do the necessary.
The answer is, we will also protect our balance sheet and P&L.
Sure. Second question, sir. If you comment on the working capital movements for fiscal 2022 as a whole, and how much of it is temporary nature and how much of it can be reversed. If any major line items you want to highlight. Because it seems it has taken away a big part of your cash flow position.
Basudeb, honestly, our company's cash flow situation is pretty good compared to the market.
Good.
We have a pretty robust way of our collections. Because you shouldn't look at just one quarter, you should look at over the year, yeah.
No, no, for the cash flow for the year, sir.
Yeah. Even for the year, if I look at, in reality, our cash equivalent and bank while it may have.
Only working capital aspects, sir. I'm asking.
Yeah. Working capital again. You know, sometimes you increase your inventory by design. You know? You have to be intelligent to have the right inventory in place, so that you don't land up not being able to supply.
Sure.
Does that give you an answer?
Other than inventory, any major changes in other current liability also?
Again, I repeat, the company doesn't have issues on bad debt, number one. Number two, we don't have any major write-offs on inventories. Number three, wherever we increase inventory selectively, it's with a very calculated choice.
Sure.
Does that answer your question?
Yes.
Very reluctant, yeah, Basudeb.
Thank you.
Thank you. The next question is from the line of Jinal Sheth from Orega Capital Advisors. Please go ahead.
Good afternoon, team. I just wanted to get a feel about the export strategy. Sometime in the past that you guys had mentioned that you would want to grow export in the coming years. Any thoughts on that?
Okay. Thanks a lot, Sheth, for the question. Our FY 2021/2022 exports as a percentage of sales is about 9% as compared to last year of about 10%. We've been hovering at around 10%. Answer is yes. In the midterm, we want to go towards anywhere between 12% and 15%. That is our intention. Positive news is our exports to our SAARC countries. You'll be happy to know that we also have good sales to our neighboring countries. Besides doing a majority of our exports of course go to our parent in Germany, but we also have started exports to Bangladesh and Sri Lanka, but we also do in many other ASEAN countries. Short point. A global Bosch policy is local for local.
We see an opportunity for Bosch to further penetrate on an increase, and we have a very ambitious plan in Bangladesh, Sri Lanka and Nepal. Of course, our export connections will remain with Germany on need basis. Our objective is anywhere between in the mid-run, between 12 up to 15%. Right now we are in the region of 10%.
Thank you for that, and hoping that this entire transformation phase leads us to better times in the coming years. Good luck.
Thank you.
Thank you. The next question is from the line of Naveen Mata from Mahindra Manulife. Please go ahead.
Yeah, thanks for the opportunity. I just had a follow-up question to your previous response. I think you mentioned that one should look at raw material to sales being at 61% and not at 64%. I just wanted to understand. I didn't quite understand your comments on that, please.
No, sometimes there are some one-time impacts, you know. So again I said, A, you have to look at the full year's results rather than quarter to quarter. That is one. You have to look at material cost as a % of sales. You also have to take out the one-time impacts. On the matter, which is affecting raw material, the material cost on the steel, aluminum and plastic costs, I already gave an answer that we would recover a very good portion of it through a systematic approach, including electronic logistics.
Okay. I also noticed that in your presentation you've again called out some transfer pricing adjustment also impacting this line item. Could you kind of quantify how much would that be on a year-on-year basis?
Transfer pricing matter is always a timing effect.
Okay.
We do have a transfer pricing, and we also have an agreed percentage on transfer prices between us and our parents, which is at arm's length and which has been, you know, checked out in all possible ways, including by auditors. In case of January to March 2022, we have an INR 400 million impact.
INR 400 million adverse impact?
Yeah.
Okay. That should ideally get smoothened out as we go into the next quarters.
Yes, please.
Yeah, okay. That's it from my side. Thank you so much.
Thank you. The next question is from the line of Priya Ranjan from HDFC Mutual Fund. Please go ahead.
Okay. Thank you, sir. Just one thing on in your presentation you have mentioned about there is some, because of the fuel mix and the MHCV side and LCV side, there has been some reduction in, top line, this year. Can you just bit elaborate on that? And is it because of CNG, you know?
Sir, Ranjan, there are two parts to it. First of all, in our conventional business we have a pretty good order book. I just announced today in the press conference, just to give you a data point, that we have for Bosch Limited approximately INR 50 billion of you know acquisitions in. So that's quite substantial. That's number one. So our order book and acquisition is pretty good on the mobility side, yeah. Of course, in Power Tools and, as I said, on Powertrain and two-wheelers we have an order book of more than 50 billion for the next five years. Yeah. Second, in relation to what was the other part of the question?
Yeah, the fuel mix change is impacting our top line too.
Yeah. A fuel mix change has impacted. I mean, look, worldwide, you must understand, Ranjan, what diesel was 10 years ago, you know, whether in Germany, whether in Europe, whether in, I won't take America because America's always been a gasoline. Everywhere, it has had a hit.
Mm-hmm.
It has had a hit on passenger car and utility vehicle. Will diesel still be relevant? Answer is yes. Starting with three-wheelers where diesel composition to diesel, gasoline and of course, electrification. Tractors, totally diesel. Take heavy commercial vehicles will run on diesel for a very long time and we will remain dominant. Our CTO mentioned when hydrogen comes in, so it'll slowly come in. Take light commercial vehicles will run on diesel for a long time and then electrification can also come in. It's a fact diesel which had climbed to 50% market share which is the highest point has come down. This impacts across all industries and everyone and of course our company too. We have tried to make up in other ways. Our turnover over the years has increased.
Of course, you can ask, you can always have a question, could it have increased further? I also announced to the press a minimum 15% growth over last year fiscal in 2022, 2023.
Just one thing, I mean, I was more inclined towards the MHCV and LCV side because I mean, passenger car we already know. In MHCV and LCV, the phenomena towards sales, the CNG, et cetera, is very recent, so.
There, yes, there is a certain percentage of CNG coming in. You're right. Diesel is still by far the most dominant. That's also right. Bosch, as the HCV and MCV grows, Bosch has a pretty good content on those areas, including LCV. Last time I told you, in rupees per, you know, at the euro content or rupees per car content, our content value has gone up. I think I shared some data with you last time. Content per vehicle. I think I shared content per vehicle.
I don't think so. I mean, I will check back again. Okay. I mean, we'll see.
In the next conference call, we can give you an indication about how we've moved on our content per vehicle.
Sure. Just lastly on the employee cost and the increase in the other expenses, I mean, that is certainly extra or one-time impact last year. Do you think this is a sustainable number, like say 7%-8% of your top line as employee cost which has come down this quarter? Is it a sustainable number or?
Yeah, 9% is a sustainable number. Look, that 4% is an incorrect number. You know, sometimes you get one-time credits. I mentioned to all of you that it would be unfair to compare January-March quarter. By the way, January-March quarter 2021, I mentioned this to all of you, that this was an unusual quarter on a surge in top line and multiple one-time credits which came in, including reversal. So the 16% profitability of the quarter in January-March 2021 is actually not representative, and I told you that it is more like 10%. The other part which I told you that earlier, Ranjan, you have to always look at the trend of the past four years.
The earlier trend of 14%-16% on personnel cost will come down and stabilize around 10%.
Okay. Understood, sir. Thank you. Thank you, sir.
Thank you.
The next question.
Operator, this is so we would like to close the call at 5:00 P.M., so just be mindful of the questions that you take.
Noted, sir.
Mindful of the time.
The next question is from the line of Viraj from Securities Investment Management. Please go ahead.
Yeah. Hi. Thanks for the opportunity. I just have two broad questions. They're largely on the new business initiatives which we have been investing for. You know, if you look at the parent commentary also on electrification, you know, they're looking at positive operating margin around 2024, 2025. We also have in the past talked about it will take time for these businesses to mature. If we one way to kind of just understand the investments which we have been making in the P&L, what will be the level of investment, say, on annual basis we'll be making towards these initiatives?
To get a perspective because, you know, the traditional, conventional, powertrain business is also in a recovery pool, and what you see on a blended basis doesn't really give a true picture on the performance of that business. So, any perspective you can share, you know, on that?
Yeah, thanks. I think it's a very intelligent question. I mentioned that, but I'll repeat it. We have in the past few years, and now we have upped it, and we are going to allow anywhere between 1% up to 2% of our turnover, and therefore our profits to be kept aside minimum for new businesses. We are rather willing to have a slight, you know, shock to mid-term EBIT hit and still, deliver a decent EBIT and good cash flows, so that we secure our future by investing in new business areas.
In relation to where the parent is looking into the profit, positive profit margin contribution, for us, where are we in that journey? I mean, is it still quite early days, given the kind of adoption which you are seeing in India vis-a-vis the global penetration for EV? I mean, any perspective on that? Second question is, you know, we've been hearing, Bajaj Auto, TVS, they are completely localized sourcing of motors, hub drive systems, in the e-powertrain for
If you can provide any update as to where are we in that globalization? I mean, are they still our customers? You know, are we still the single source supplier to those models? Thank you.
I'll give an answer and then request also my colleague to come in. First, I want to say that our parent is dealing in a very mature market. Our parent has invested over the last 10-12 years, and when they started at that time, electrification was not the big thing in even Europe and America. Every year between EUR 400 million and EUR 500 million. When I said EUR 5 billion in the last 10 years, that's a lot of money that also our parent invested. Second, our parent has the highest ever acquisition of EUR 20 billion. Obviously, our parent has a very strong portfolio globally. Otherwise, we can't get a value of EUR 20 billion.
Our parent obviously has taken a very conscious decision, which I believe is the right decision, which India would be willing to take at the appropriate time, not to look at quarter-to-quarter profits, but future-proofing for the long run. For these businesses, you need to put in, and we don't borrow money because we have got our own money, so there's no interest. Lastly, based on a very good portfolio and an excellent relationship between our parent with very competitive royalty and technology fees, we will invest and localize at the appropriate time where volumes are optimal for localization and be a relevant player as we have been earlier in different technologies. We are willing to take some quarters hit for the mid and long run, because it's far better to prepare yourself for the future.
Luckily, we have a parent who is the lead in this business, including in electrification. Guru, any comments?
No, I just want to add that we leverage quite a lot on what our parent does in terms of product portfolio. If we have to start from zero and develop any axle for the Indian market, it's an overall R&D investment of maybe over $100 million, including quite some investment in manufacturing, which can also run into $several million. It's quite a lot of money. If that kind of a money cannot be recovered with the volumes we currently have, it's a no-go for purely local product development. Understanding this and also understanding what our MD just said that the parent has invested over $5 billion over the last 10 years and developed a huge portfolio of products.
We definitely leverage on that, and we do the variant developments in India and offer that to customers. Most Indian customers and most customers worldwide are doing the same, that we take a base platform, and then we make customer variant and offer it to the market. That's how it is. If we do invest in R&D locally, you should see that as a component which is on top of what has been globally invested. It cannot be measured as something. If we invest just INR 1 million, that's not what it truly is. It's an overall amount of platform investment plus what's developed for a car.
I think we have to close, Guru. To complement you, I would like to say a couple of last sentences to help you to connect the red dots, because I find a lot of questions that you're repeating on are perhaps missing a few red dots. I'd just like to give you a summary of the red dots. By design, we have upped our R&D expenditure in Bosch Limited. Today, we spend anywhere up to INR 600+ crores on R&D. Bosch India has the biggest R&D center in the world for India and the world outside Germany. Second, we will invest in new businesses even if it hits our P&L by 1.5 and up to 2% to ensure that we are secured for the future.
Third, we have reduced our headcount significantly up to nearly between 4,000 and 5,000 people to have currently a permanent headcount of only 5,500 as against what we had of 12,000. Fourth, we will do localization as and when we deem right in optimal manner. Of course, I mentioned to you where our material costs will more or less hover. Fifth, diesel, which was 50% approximately, will not go back to that level. This implies for the whole market, the business, but also for Bosch. Lastly, I have given for the first time, not a guidance, but an indication of around, and I hope that will be more than that, 50% growth with a healthy EBIT for the fiscal year 2022-2023. I hope that helps you to connect some of the red dots in a very turbulent year.
Of course, I forgot to mention that we will recover our RM increases in electronics and logistics to a great extent in dialogue and discussion with our OEs. Kripa, thank you very much. Over to Mr. Annamalai.
Yeah. We thank all the participants. We thank management for taking time out for the call. Have a good day.
Thank you. Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.