Q2 21/22

Oct 21, 2021

Quarterly report

Ladies and gentlemen, good day and welcome to the Q2 FY 'twenty two Earnings Conference Call of TBS Motors Limited hosted by Batliwal and Karani Securities India Private Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. I now hand the conference over to Mr. Annamalai Jayaraj from Bataliwal and Karani Securities India Private Limited. Thank you and over to you, sir. Thank you, Stephen. Welcome to TDS Motor Company 2 ks FY 'twenty two processor conference call from TDS Motor Management. Here with us today Mr. K N Radhakrishnan, Director and Chief Executive Officer and Mr. K Gopal Desikan, Chief Financial Officer. I'll now hand over the call to Mr. K N Radhakrishnan for the opening remarks to be followed by a question and answer session. Over to you, sir. Good evening. Good evening, everyone, and thanks for joining us today. First, let me take this opportunity to wish you all a very happy Navratri advanced wishes for Diwali. Trust all of you, your family members are safe. I request each one of you to continue to be careful, maintain the COVID appropriate behavior of masking, sanitization, social distancing. I'm very sure everyone would have completed the second vaccination as well. My God all bless all of you with great help, lots of happiness, peace and prosperity. During this quarter, company posted highest ever revenue of INR 5,619 crores and highest ever EBITDA of INR 562 crores despite various challenges in terms of increasing commodity costs, scarcity of containers for international business and shortage of semiconductor. Achievement of these results were aided through significant cost reduction initiatives and growth in revenue. We are happy to inform that the company's premium scooter brand, EVS Ntorq 125 achieved new milestone by crossing 1,000,000 mark. Thanks to all the customers of TVS Ntorq 125. And BMW 310 series motorcycle crossed 1 lakh mark in less than 5 years. I think again thanks to all the customers globally BMW G3, E10R and 310 GS. Okay, this is now available in 120 countries. During the last 3 months, we launched 2 new products, 125 cc segment TVS Rider and TVS Jupiter 125. Excellent feedback received from the market for both TVS Rider and TVS Jupiter 125. TVS Rider is a naked street design motorcycle globally for the Gen Z, equipped with best in class acceleration, 1st in segment ride modes, reverse LCD cluster and outstanding MyLead through powerful advanced 3V engine, TVS Intelligo and ETFi Technologies. And upcoming TVS SmartConnect variant will offer TFT cluster, Bluetooth connectivity and voice assist. We launched TVS Jupyter 125 this month, packed with Zayadha Fabi, Zayadha Industry 1st in class features, new 125cc engine with ETFI, TVS Indeligo, Western segment acceleration and mileage, industry best 33 liter under seat storage which stores 2 full face headlamps for the customers, longest seats, UNI's progressive styling, LED headlamp, front external fuel filling and so on and Metal Max body and again I can keep elaborating the attractive features in this product. Now coming to sales during Q2, company operating revenue grew by 22% clocking INR 5,619 crores, which is the highest, With a list, the last year same quarter of INR 4,605 crores. Domestic market, we sold 5.99 lakh units of 2 wheelers as against last year's 6.5 lakh units, better than the industry growth. International market company sold 2.7 lakh 2 wheelers unit with a growth of 46% as against 1.85 lakhs last year during the same quarter. Again, here we have grown ahead of the industry. Total 2 wheeler sales for the quarter is 8.7 lakhs unit against last year's 8.34. Again, total also we are better than the industry growth. The mix of premium products Apache, Ntorq, Jupyter Classic, Grandin overall grew to almost 34%. We lost Apache because of semiconductor availability almost 25,000 during this quarter. Else, the premium product proportion would have been much higher. Total sales of 3 wheelers is at 0.47 lakh units against the 0.33 lakh during last year same quarter. Profit during EBITDA during the quarter is 5.62, again it is the highest. Last year similar period EBITDA is 4.30 crores. Company registered an EBITDA of 10% as against last year's 9.3%. This includes 0.4% benefit of RODTP relating to the earlier 2 quarters. As I said, during the same quarter semiconductor availability, we lost more than 25,000 of Apache, where we had an extremely good demand. During the quarter, company faced significant headwinds due to commodity price increases, with the focus on product mix, premiumization, sustained cost reduction initiatives and price increases, we could manage the material cost vis a vis last quarter last year. PBT for the quarter is INR377 crores as against INR 267 crores. Profit after tax is INR 278 crores as against last year's INR196 crores. During the quarter, focused working capital management helped in improving the operating and improved operating performance helped the company to generate a cash flow, free cash flow of INR10.90 crores. For the first half, PBT before the exceptional item is INR479 crores. We incurred about INR 30 crores towards the COVID-nineteen expenses during H1. The profit after tax is INR331 crores as against last year's INR57 crores. On Indonesia PGTVS, we sold 28,500 units of 2 wheelers against last year's 14,700 units. Despite a huge challenge of Wave 2 in Indonesia, PTT has registered 3 wheeler sales of 2,400 assets last year's 1250. PTT posted an operating PBT of US0.9 million dollars as against US0.05 million dollars last year. H1, PGTBS posted a PBT of US1.3 million dollars as against a loss of US1.3 million dollars during last year's first half. I already highlighted the 2 product launches of TVS Raider and JUPITER 1 hundred and twenty five, excellent feedback from the market. Thanks to every customer who have received it well. In addition, we have also launched for the season advanced range of TVS Apache RTR-1 hundred and sixty 4 V Series With new headlamp assembly, signature, daytime running lamp, 3 ride boards, advanced sport range, top variant will be equipped with the TVS Smart Connect. We also launched TVS Jupyter now equipped with various additional features which includes engine kill switch, mobile charger, lockable valve box, etcetera. TVS Radeon now comes with black and red and black and blue dual tone color options. We have introduced the coral silk colors and satin matte finish TVS XL. TVS Ntorq 125 Race XC, new era of connectivity, power and style. It has got smart connect and ride modes and this is the only scooter in the 125 cc segment to have more than 10 3 years power. We also launched build to order platform in RR310, making its foray into factory customization and personalization. The TVS Apache RR310 customers can now select preset kits, graphic options, rim color options, personalized race numbers. There are dynamic race offer an array of features that further accentuate performance and styling as per customer usage and needs. This platform will be introduced across other product portfolios from a stable of TVS Motor Company in a phased banner. During last quarter, we acquired majority stake in the European ebike EVO movement through subsidiary in TVS Singapore to build an aspirational product portfolio while nurturing sustainable and scalable brands. This is part of our overall strategy to expand global presence in developed markets commencing with Europe. It's a Swiss technology company providing innovative mobility solution through portfolio of e bikes, e cargo bikes, e scooters. In terms of EV, excellent positive response again from TVS iQube Electric. It continues to draw very good interest from the EV intenders and very healthy pipeline booking. Biggest challenge we are facing here is the EBOM material availability on time that is affecting our production. ICube currently launched in 33 cities. We are planning to reach across the country by end of the financial year. The company is progressing as per plan to invest INR 1,000 crores in building the portfolio, next level of capacities and market development and product portfolio. We are creating a capacity of 10,000 per month in last quarter of this year. We are also planning for aggressive capacity plans where we worked out for 2022, 2023 financial years. We are committed to lead the technology development in EV and green fuel towards electrification of our product portfolio is in plan for catering to segments in 2 wheelers and 3 wheelers. We entered into a strategic partnership with Tata Power to set up electric vehicle charging infrastructure across the country. In our vision of electrification, we envisage a wide and reliable charging infrastructure for EV customers across India. Our partnerships with widespread and reliable charging network partners like Tarabao or CESL will substantially enhance the customer convenience. During the meeting held today, the Board approved for establishing a separate subsidiary under TVS Motor to operate its EV business. This subsidiary will give us freedom, better focus and flexibility to create scale in the EV business globally. When we look at H2, the government vaccination drive and the COVID appropriate behavior adherence seems to be helping in reduced the positivity ratio and severity of COVID-nineteen. Normal Bonsul is definitely helping agriculture a bit, worried that little bit of flooding especially in the rural area during this Navaratri season. Hopefully for Zantaras, we are expecting this should come down. Navaratri festival season was a bit subdued this year because there was no pent up demand compared to last year. However, during this Navaratri season, we have gained almost 2% market share in Wuhan with the monsoon settling down and Gurural market likely to do better for the Diwali season, we are expecting to do very well. New products of 123 segment, TVS radar, TVS Jupiter 125 and all other product refreshes and upgrades whatever we have delivered in Excel or Radeon, Jupiter and Ntor, Apache 4V, 164V, BTO, all are definitely going to excite the customers and we are confident of growing much better than the industry during the season going forward. Exports continue to do well, 2 wheelers and 3 wheelers. This is likely to be fueled by the stable economic and political situation in all the TVSM operating geographies. Crude oil prices are stable and it is positive. The Bangladesh where we had COVID challenges is opening out. Restrictions related to the Sri Lanka is also relaxing its restrictions on the import of vehicles. All this will help improve our sales in international markets. The container availability continues to be a challenge. Some of the Southeast Asian markets are yet to come out from COVID related pandemic. We are confident that our thanks to our customers and the product range what we have, we will do extremely well, better than the industry surely. 3 wheeler demand is robust and we will continue to grow ahead of the industry. We are continuing to witness the trend of premiumization in all markets. So we are confident that our premium products such as the Apache now, Raider and Enter, Jupiter Citrix and above will continue to do well in the domestic and international market. With no progress countermeasures, we were able to improve the premium product production from September along with long term relationship with semiconductor suppliers and tying up with additional sources, we are able to now minimize the shortages in semiconductors. The company has taken up prices in October, about 1.1%. There is a commodity cost pressure because of the aluminum increases. I think we will going forward mitigate this with cost increases with product mix maximization, sustained cost reduction initiatives and the growth better than the industry growth in both the domestic and industry will help us on the EBITDA growth trajectory. In terms of our product portfolio, we have very strong portfolio of brands like Apache, Jupiter, Enter, Star Range, HLX, Radeon, TVS King, along with our new products like Raider and Jupiter 125. I'm very confident that the revenue growth, increased premiumization, continued cost reduction initiatives, we will lead to have sustained EBITDA improvement. I'm very sure despite various headwinds in Q2, 2021, 2022, with Q2 we were able to achieve EBITDA of 10% and the best both revenue and EBITDA absolute values with expected demand improvement in Diwali season, good response for the new products and the entire product range and the cost reduction we are continuing we are very confident we will go ahead of the industry and we will continue our EBITDA growth journey. Thank you. So can we open for Q and A? Yes. Thank you very much. We will now begin the question and answer session. The first question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead. Hi, sir. Congrats on good performance. First of all, can you share data on export revenues, revenues, pet revenues and dollar realization? Export revenue for the quarter, just give me a minute, It's about INR 1,834 crores. Okay. Spares and USD realization? If you can USD just a minute. Sure. It's around 74.40, 74.40. Right. And spares revenues? Spares revenues, INR 984,000,000. INR 84,000,000 crores. Okay. So secondly, clarification on this rotator benefit in this quarter. You said 40 basis points benefit is there for previous quarters. And what would be it for current quarter? Current quarter is about so your question is not clear. What is your question, please? What's the benefit of RODTP scheme for 2nd quarter? No, I see on money terms, it's around INR 15 crores for this quarter. Okay, okay. Got it. And so lastly, on when we look at your expectations for industry on the festive season sales, I believe Novakral has been down in double digits for the industry. Do you expect overall festive season to be flattish or what are your expectations for the industry as a whole? So far it was a little bit subdued. Industry as a whole? So far it was a little bit subdued, but I told you there are two reasons. One is the pent up for like last year is not there. Plus this time the rural unusual rains has a little bit affected definitely the harvesting. So now the rains are little bit settling down. So I'm hoping that the Diwali system should be good. Okay. You expect some catch up to happen during this one? Before that, there is one correction I think on the spares what we have indicated, 984 is for the first half, but what is for Q2 is not 984, it is 6.40. 6.40, sorry, sorry. Got it, got it. Okay, okay. And lastly on this, we have you talked about some stability in semiconductor challenge semiconductor supply. So we expect 3Q onwards some normalcy to restore particularly for Apache volumes? Apache, we were able to take some internal countermeasures that has helped. But in the area of 5Q, we are still having some challenges. We are having some very good discussions with some other suppliers and I'm very sure they will also try to support us. Okay, got it. Thanks. I'll come back in queue. A few more questions. Thank you. The next question is from the line of Ramoth Kumar from UBS. Please go ahead. Thanks a lot for the opportunity. A couple of questions. First one is on the EV plan. I see that you have mentioned that it's EV mobility business globally. So just wanted to understand what all will it help in addition to the India EV business and eco movement? Is there something else which will do in terms of your investments in a lot of these Internet startups or IoT companies? So what all will this EV, e mobility subsidiary house in itself? As of now, it's a part of our strategy, Travolt. So we are on the first of all, we are investing, as I told you, more than INR 1,000 crores to create a product portfolio of TV products from the company in addition to IQ, which you will see very shortly. Some of the products will be coming in the forthcoming quarter. In addition, you have seen the Ego as a very good English trend because in the European market, this is the trend we have seen. So this subsidiary will definitely give us, as I said, freedom, better focus and flexibility to create the scale in this area. And we are looking at, like I said last time itself, this product portfolio you can look at global markets as an opportunity, both the developing and developed markets. Fair enough, sir. And on the India easy ramp up, understanding the near term headwinds on the semiconductor side, but if you can help us understand where is the demand for you, say, for example, in this 30 or cities? What is that? Because I understand, even in all these cities, you won't have the product available with all the dealers. There will be only a handful of dealers who will have the product in those cities as well. So if you can just help us understand what would demand look like if capacity was not a constraint? And by when do you expect to cross say a certain milestone like the 5,000 or 10,000 which then it starts becoming a more reasonable volume number. Currently at around 700 units, it kind of doesn't kind of fully reflect the demand on the ground. So it can help us understand where the demand could be. The iCube is very well appreciated by the customers as a real good quality exactly like an IC scooter. It has got all the features of EV and it has got all the benefits of the normal scooter. At this point of time, we are targeting 10,000 per month from January, okay. We have created internal capacities, what is going on. I wish we are able to get a little bit better on the Ego, the Ebomb material. There are genuine challenges in terms of COVID wave 2 affecting any parts of Malaysia, Taiwan, especially this part of the world affecting that has definitely affected in the last one and a half, two months. But we are in discussion with many of our partners and they will definitely support us. And so just a clarification, you said 10,000 per month, that's the assembly capacity, but the semi capacity is what will decide throughput. So just want to understand what could be like? We have at this point of time work on the overall capacity and drive and every supplier will align. It is not a question of because everybody wants to sell more. Okay. Fair enough. The last question for me on the container shortage side, because I have received that export numbers have been kind of stable at a particular level for the last few months. Just want to understand how much is the bottleneck currently you're facing on the container side? And what could be the kind of order backlog which you have in exports and which could result in step up in export numbers from the current level once this container issue sort itself out? It is a daily challenge. According to me, we have been struggling with this for the last few months, both availability and also the time taken for delivering. The retails are extremely good in most of the markets. So quantification is going to be really challenging. So we are now looking at how do we further enhance and work with many of the freight forwarders and how do we deliver that, that's what we are working out. And it is a continued challenge, but we are pretty confident that we will see some improvement possibly in this quarter and going forward. Fair, Andaras. Thanks a lot, Andaras. Thank you. The next question is from the line of Kapil Singh from Nomura. Congrats on a great set of results. Firstly, I wanted to check on the industry. We have not been seeing positive growth for last few months. So do you expect industry to end on a positive note this year in FY 2022? Here as a whole, it is too early to commit because the COVID-three wave, I think, thanks to the vaccination drive and the appropriate behavior, I think the feeling is the positivity ratio is reduced, severity seems to be settling down. So that is a good news. Another good news is the agricultural sector should do well even though this Navratra season we have heavy rains and some issues related to harvesting. So we should look at it. The challenge is the price increases what every manufacturer has taken in the market. That is the ability of the customers to buy is continuing to be a little bit of challenge, but I'm pretty confident that once the fear of this COVID settles down, you will see definitely 2 wheelers started picking up because I always believe that today the demand what you're seeing is because of the last maybe 12 quarters or 15 quarters of lot of changes from demonetization to BS3 to BS4 to BS6 and all safety all got bunched up and the 30%, 40%, almost 40% increase in the cost and the price in a very short span is what we are seeing. Otherwise, if you look at in terms of the GDP penetration, the mobility, the kind of infrastructure, what the government has created, there is a huge demand for 2 wheelers. It should come back. It's a question of time that once the fear goes away and the kind of income generation starts coming into the industry, I think it should come back. So we have to be cautiously watchful in terms of wave 3, but I'm getting a bit positive on the COVID wave 3 situation and should look some improvement in the market going forward. Okay. Good to hear that. I cannot be able to say what will be cumulatively because whatever Q1 and Q2 numbers we know, okay. And Q1 and Q2 are not comparable also because it is on last year, it is COVID and this year partial COVID, COVID we have to and practically Q2 was okay, this year was okay. And Q3 last year we had pent up demand and a good growth, primarily which belong to Q1 and Q2 according to me last year. So that is the way we have to look at it because many a times we have a tendency to look at Q3 over Q3, but what has gone before last year Q1 was completely washed out and Q2 was a lot of anxiety, all of that got into the benefit of Q3. So that way looking at Golini may not be the right approach is my feeling. Understood. And sir, on the spare side, we see that there is a big ramp up that we have seen this quarter. So should it be looked on a half yearly basis or is there something more to call out here? I think the Fagan corrected it. Sorry for that. $984,000,000 is for the quarter for the half first half. No, no, I got that. But still, I mean, when I see the numbers, they are much higher than the run rate that we have been doing. So I just wanted to understand Similar numbers we are doing. We were doing similar numbers even in the past. Okay. Because what I have is a run rate of more in the range of INR 500 crores odd and this quarter we have done INR 600 crores plus. So, it looks like almost if I am correct, it's 40% dollars? No. Average, we have done similar range. As a total revenue, if you look at FarePass, this has been the range. So average, you mean we should look at H1 numbers basically? Yes, yes. Got it. And lastly on electric vehicles, we have formed a subsidiary and also on the CapEx plan, if you can talk about because we have seen INR 250 crores of CapEx and also some INR 300 crores of investments. So what is the full year plan and what are the areas in which those investments or CapEx can go? And does CVS also need to look at external funding or do you think there is no such requirement that you see at this stage? I think CapEx for the year, I think last time also I indicated with the EV coming in, it will be about INR 750 crores. About this new subsidiary that gives us a lot of flexibility, we will come back to you with more details. Okay. And on the investment plan, for the full year what should we look at? Investments, I think EVF will be about INR 200 crores for the year. Yes, it will be around INR 200 crores for the year. And see overall the first half we have invested around INR 500 crores, probably another INR 250 crores to INR 300 crores will be the second half related investments, which includes this previous year related. Okay. Thank you, sir. Thank you and all the best. Thank you. The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Yes. Hi. Thanks for taking my question. I just had this follow-up on the CapEx, Soni. If you can give some color on what has this INR 500 crore investment gone towards in the first half? In bulk of this, I see INR 3.30 crores in this quarter. So if you can just give us some more information on what this investment is for? EV and products? So EGO is we are already included in this. The investment is predominantly EGO, right? No, EGO is around INR140 crores we have invested. Indian credit services is another INR 100 crores gone there. We had also invested in Northland in the beginning of the year, close to INR 120 crores, that's what it is overall. Okay, got it. And when you talk about this 1,000 crore EV investment, I'm guessing the EGO and some of the global investments that you're making are not part of this 1,000 crore CapEx plan? CapEx plan, this 1,000 crores, it is on investment. We are not saying this is a part of this is basically for building the portfolio, next levels of capacities and market development. And yes, product portfolio, we have a very, very structured program on the product portfolio in addition to IQ, which you will see in the forthcoming quarter, both the 2 wheeler and the 3 wheeler. Okay. Got it. And sir, can you just give us directionally some sense on how we should think about the commodity inflation because you mentioned that there are incremental cost pressures as well. So does the October price kind of cover up the incremental inflation we are seeing? See, we have taken a price almost 1.1. Still there may be an uncovered portion of about 0.5, 0.6. That we are looking at in terms of both product mix, premiumization, cost reduction, overall revenue growth. I think we have to constantly look at it and keep moving. Okay, got it. And last question on this subsidiary, I know this is very early stages given you've just announced the formation for this structure. But doesn't does it in any way given is there an openness to look at, let's say, alliances or look at other partnerships given we are trying to put this business separate from the parent business? I mean, I'm just trying to get the thought process because we had called out this INR 1,000 crore investment last quarter itself. So the subsidiary is a follow on decision, but just the thought process behind it. This subsidiary, as I told you, gives us a lot of freedom, better focus, flexibility and it will help us create a huge scale in the EV area globally. Okay. Any partnerships we are open to or we are comfortable with this 1,000 crore funding that we've called out? Again, it gives us freedom, better focus and flexibility. Got it. All right. I'll join back. Thank you. Thank you. The next question is from the line of Nishit Jalal from Axis Capital. Please go ahead. Sir, thank you for the opportunity and congratulations on very good set of numbers. Sir, I have two questions. Firstly, on the export side, can you give some more regional color as to how demand is shaping up across different regions? And the context why I'm asking this is we have recently seen that Myra has depreciated quite significantly against the US dollar and parallel markets, contour as I was 5.50 to 5.70 against the official rate of 400. So are you seeing any major deflation because of this and any impact on demand? And second question is on, sir, you have invested about 1.30 crores in a company called EBS Supply Chain. So just wanted to understand, is this a new subsidiary? What kind of stake you have? And where are these investments going on? Thank you so much. In terms of the international market, like I said, we service what kind of instability or kind of currency fluctuations we have seen in the past in comparison to that now it is much, much better. And again, the reasonably stable economic and political situation in most of the countries, crude oil prices are stable. So these are all positive, whether it is Africa, South and Central America, all these countries can definitely boost the exports. And Central America, all these countries can definitely boost the exports. And fortunately, the COVID situation is far better. And Bangladesh is also easing out. So overall, if I look at it, our growth opportunity and the demand is robust in international market and we are pretty confident that both in 2 wheelers and 3 wheelers, we will grow ahead of the industry. Industry will do well and we will go ahead of the industry. So as for my answer, I was asking more specific on Nigeria because from 400 to 550 naira movement against dollar, that is in sharp movement. So have you seen any impact or this impact will come with a lag? Even the Nigerian Central Government is looking to, I think, devalue the currency to kind of bring it in more relationship with the parallel rate. So basically, you are indicating so far, you have not seen any negative impact and you don't foresee anything as well in the market? We have seen similar instances in some of these countries in the past also. So I think what we need to look at is the consumer sentiment, the demand, the requirement and the need for the customers using it. As you know, the demand in these markets, it's like taxi segment in a big way and this is a key employment opportunity for them. So I don't think it will have a serious impact at this point of time. Got it, sir. Thank you. And so second question on TVS Supply Chain. TVS Supply Chain is a strategic investment. And the 1st I think is just 2%, it's a very small stake, 2% to 3%. So basically you're saying you have taken 2% to 3% stake in CVS Supply Chain for INR130 crores. Is that correct? Yes. Hello? Yes, yes, yes. Okay. So because then it puts the valuation of TVS Supply Chain at a very big number, right? Almost a $1,000,000,000 kind of a number. That's why I said it's a strategic investment. Okay, sir. Thank you so much. Thank you. Thank you. The next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead. Hi, sir. Thanks for taking my question. Sid, just a question on the metric. You said that the focus is to start selling 10,000 a month. In such situation, because we are seeing the penetration eventually going up for the electric, how would you try to tackle the challenges of your base business? Because there will everyone is launching, whether it's the people funded by private equity, whether it's you guys, but somebody don't have a base business, so he doesn't need to be for him, it's a fresh market. Does that become so easy that whatever the EV will come out will actually come out from the ICE part only. So will that be easy to continue and start taking price hike because it's the way you are taking price hike, it looks like the EV pricing and your ICE pricing will converge Monday. So can you throw some light what's the strategy here to really to minimize the impact on the ICE part? One correction, the raw material is applicable even for EV. There is a frame, there is a chassis, there is a seat, there are many parts, only engine is not there. Okay. So the price increase is applicable whether it's steel, plastic or whatever material. Okay. So that is one correction on your query. And if I look at it, these are technologies which are likely to happen. We started the EV technology and designing our own product and sub assembly subsystems 4, 5 years back and this investment has gone in terms of today what you are seeing IQ is that rigorous investment in R and D and that is the strength of TVS and that is why we are also coming up with a product portfolio. Now coming to scooter category, we are now scooter in India used to be 70%, 75% at some point of time. When EV becomes more and more in the scooters, the category will expand. So it's not that so there is a great opportunity, there is a great opportunity, seize this opportunity, this is 1. Number 2, you know the numbers and the product range what we have in the international market. So IC will coexist and also EV. In EV, we have a great opportunity to go to both the developed markets as well as developing markets. So, IC, it is a great opportunity and we have to concurrently run And the strength of TVS is very strong R and D, design and development and the most important. Request all the participants please stay connected while we reconnect the management. Ladies and gentlemen, we have the line for the management reconnected. Thank you. Sorry, the line got cut and see, what is most important, the strength of TVS is ability to design, develop and create the local supply chain. So this is really Asmanirbhar Bharat. It is not just producing something. It is designing and developing in India with Indian engineers and capable global partnerships. That is the capacity of TVS. Okay. You're right, sir. The cost of raw material is going up for the EV, but we are not seeing the EV prices going up. Maybe the battery prices must be falling. So the question was more from that side. So that's see, these are all technologies which are very, very early stages. Okay. So you have to wait for the most importantly, why we are very happy is today every customer, we have almost now 5,000 customers, I think they're delighted. And we have a huge order book. Okay. So I think I wish I'm able to get EBOM better supplies. What you need to get is the customer delight and that we have got it in IQ. Got it. Thank you. Thank you very much. Thank you. The next question is from the line of Satyam Thakur from Credit Suisse. Please go ahead. Hi, good evening sir. Thank you for the opportunity. So first question on EV again, I mean EV market has seen the launch by certain startups who seemingly have products with good specs and lower price point than us as well. So in that context, in that environment, how do you see the TVS strategy evolving here? I mean, would we also have to match that level of competitive intensity and especially now when our volumes are going up from January onwards? Or do you think we will maintain the current level of margin profile that we have on this? Can you a little bit louder because I was not able to clearly hear you? Sorry. So I'll just repeat. So, the EV market has seen launches by certain startups who seem to have products with better specs than us probably at least on paper and lower price points as well. So how will TGS strategy evolve in response to this? Do you see TGS also having to match that level of competitive intensity? Or do you think we are okay with the current level of productivity that we have and even with higher volumes from Henry onwards? We are focused as a company, we are focused on the customer. Okay. For me, competition is a reverence and I always respect all the competitors. Okay. And we have a very clear strategic plan of coming up with product portfolio very clearly for the customer product, we treat this as an investment. Once the customer is delighted, then sky is the limit. You can always take it and then sky is the limit. You can always take it and in the case of VeeVee, global market is available for you. Okay. So that is going to be our strategy, very clear strategy. And just a follow-up, so currently our margin on the IPO, would that be, I mean, in the negative at the EBITDA level or are we breaking even already? See, EBITDA margins all will hit that rate when you are able to meet up the demand. I think once the volume comes, we will get better partnership with the supply chain. We will be able to reduce the cost of sales. I think it's a journey. I think first you have to invest in customers. Once they get delighted, it's a question of another 4 quarters, 6 quarters where we will work with the suppliers and our own design ability and also partnership with cell manufacturers, how do we cut down the cost. But what is most important you have to get right. A big tick is the customer liking your product and they once they get it right, then scale benefits will flow in. That is exactly what we have done even in TVS Motor strategy. 1st, we focused on JD Power number 1. Once we got all the JD Power number 1 for 4 years, 5 years, both in product as well as in customer satisfaction, we started putting the right products and we started gaining market share. Then concurrently, we have started now EBITDA journey. Now we are always double digit margin. So it's a concurrent journey. We have to take it up very systematically. Okay. Look at our Indonesia journey. 1st, we got the product right, we started now. Now it is almost now 10,000 per month. So once you get the revenue up, it is beneficial for everybody, the entire supply chain. Without top line, there is no line. So first you get the top line right. Concurrently you work on first you get your customer delight first, top line right, grow ahead of the industry, then you can get every other cost right and you will be profitable. Thank you for that. And the second question, again on margins on the but on the other side, either side of the portfolio, we have had great discipline on passing through the cost increases in the last few quarters. But like in the first decision also one gathered that the price increases is one of the key factors why demand seems to be soft. So how do you see that shaping up from here? And especially if commodity starts going down, do you think do you see this as net pricing kind of going down given the competitive intensity in ice? Or if not, then how long does it would it take in your view for this to be absorbed, the price increase impact? See, India has got great opportunity in 2 wheelers. I always believe that we have seen 10% plus CAGR in 2 wheelers. That will come back. I think what 12 to 15 quarters of continuous we are best in class. We are the best 2 wheelers globally now in terms of all the technology safety and emission. But all this has happened in the last few years. And the GST at 28%, smartphone is at 18%. So there are many things you have to look at when we look at. And government has invested in infrastructure, the public transport is not so great in India. There is a huge opportunity. People allow the 2 wheelers and that is the biggest mobility need. So you will see the 10% coming back, okay? Then the technology portion, how much will be IC, how much will be what you call the EV. So the penetration and I'm pretty confident that it's a question of time. I think the last 24 months or 18 months or 19 months this COVID has created a huge uncertainty. If COVID wave 3, it is going to be mitigated, that will bring a lot of confidence and rural is likely to do well going forward. So with all that, I'm pretty confident. If you ask me medium to long term about 2 wheeler, it will do very well in terms of even CAGR. Thank you, sir. I know the rest. Thank you. The next question is from the line of Pratik Poddar from Nippon India. Please go ahead. Yes. Hi, Suraj. Congrats on a great set of numbers. Just your thoughts on this PLI team, which has been announced, would you look to apply for it because you have a very aggressive plan of 1,000 crores of CapEx? So that's question number 1. Second question was just on TVS iQube, if you can I mean, obviously, as you say, your customers are getting delighted? Just what is the customer profile of iCubes who is buying? Is it a new category of customers for us? Or is it someone who is buying a distributor who has gone on to buy an iCube? And last question is, I'm still not clear on the semiconductor issue. Are you seeing mean reversion or the issues getting ironed out in the next 2 months? And by Q4, can we expect a normalized production? Is that what you're trying to guide for? Semiconductor, I'll start from the last. Semiconductor is a combination of excess deep freeze plus fire accident in the renaissance, Japan and COVID happening in the last 3 months plus consumer durables doing extremely well and relay shipment. 4 or 5 factors all coming together. Suddenly, you are seeing this challenge of chips not available, semiconductor not available, okay. So I think we have to we have the little bit and when you have little bit of arrears, it takes time. So you have to engage with the suppliers and with the manufacturers and I think everyone wants to succeed. The last thing anybody wants to meet is the sale opportunity. I am that is the reason I'm saying whether it is the deep freeze or the fire accident or COVID situation in Malaysia, where predominantly all these semiconductors are made and sudden in the COVID situation, 1st 3 months lockout and then again pickup, then consumer durables doing similar, it's a sudden hike in many things and some stoppages of capacities, all put together this has created a huge issue on the supply. I think now like I'm saying COVID wave 3 little bit vaccination settling down. See, this settling down of this COVID anxiety itself globally will start creating some kind of production capacity availability all there, okay? So that is the point. And we have to constantly engage with every supplier in this category so that we are able to ramp up. Then one, PLA scheme we are eligible. I think Yes, yes. Yes, PLA scheme is we are eligible both with regard to the overall turnover criteria and also the fixed asset base. So being in the electric vehicles, we will be entitled to only the pin conditions to be satisfied, both will be satisfied with regard to the investment fresh to be made and also the turnover minimum criteria to be met. The percentage ranges, whatever it has been now prescribed up to INR 2,000 and above INR 4,000 crores. So, it depends on how much we do it. Therefore, on the premise I see to answer, yes, we are entitled to, we are fulfilling the criteria. And customer profile, previous L2? Customer profile, see any customer profile when we started Bangalore, initially we got mostly the innovators. I call them in any product, I have always seen the innovators first coming. Got it. Got it. Okay. So the innovators, but now we are getting people, the more and more they see, there are many Assurance customers coming and say, oh, this is a good scooter, so I would like to have it. What is most important is the usage, okay? The difference between in a scooter, typical usage in India is the entire family, 2 plus 2. They should be able to carry whatever bags or whatever. They should be able to go in any road condition. It should go in any flyover. So these conditions, once you meet and which all and in addition, it will take all the connectivity, digital, every element of technology in IQ. Correct. So sir, when you say assurance customer, I didn't understand. Is it somewhat I'm assuming that the product is reliable and you've got that right with whatever reviews I've seen. That is a test of customers who will give you volume going forward. And when we talk about I told you about product portfolio, I can give you for example, we have a Scuti, we have ZEFT, then we have Jupiter basic, then we have a FedEx version, then there is a classic version, there is a Granite version, then Entar, Even in Entor, we have a race version. So you imagine the profile of the customer segment, okay? And sorry, if I may ask this the other way, does this cannibalize Jupiter sales in the cities which you have launched? Are you seeing a cannibalization or it is not? See the more and more EV start, I think again I answered you, you will see a scooter category expanding. Got it. So this will build on to top of their base business vis a vis this will not cannibalize, right? Absolutely, absolutely. Nice wishes in the future. Thanks. Can you have this as the last question, please? Thank you. We'll take the last question from the line of Amin Pirani from JPMorgan. Please go ahead. Hi, sir. Thanks for the opportunity and congratulations on a good set of numbers. Most of my questions have been answered. Just a few clarification. You said that you are already in 33 cities for the IQ? Yes, yes, yes. Okay, okay. And in terms of the new launches that you're talking about, so is it I mean, will we see new scooters or 3 dealers, say, in the next 1 to 2 quarters? Or is it more like in the next like 4 to 5 quarters, if it's broad timeline to get a business? Close to the launch, I'll reveal more details. We're excited with now Raider and enjoy with Jupiter 125. Okay. And of course, the BTO and Apache RTR-1 hundred and sixty 4V with Urban, 40 and Rain modes and SmartConnect. I think we have done a lot of for each of the customer segment, we have special fees for Diwali. Sure. Thank you. Thanks. So before I close, once again, One update, Kedar, on the performance of previous credit service. I just want to add that the company's book size have grown, we are at INR 11,420 crores today and the profit for the quarter PBT is INR 35.10 crores as against last year's INR 14.3 crores and the network stands at INR 1658 crores. All other norms of capital adequacy all are fully met, very comfortably placed. Liquidity is not an issue. Business wise completely tied up funds as well as for the debt related obligations. Just want to give a heads up about the good performance of previous credit service where the collections have been extremely good for the Q2 is around INR 2,400 crores against the comparable quarter of INR 1,800 crores. Just want to give an update on this. Before we close, I just wanted to once again highlight even though we got a 0.4% RODTP benefit in Q2, what we lost due to a partial loss of 25,000 is huge. Okay? Despite all these headwinds and increase in cost, we achieved 10% in Q2 EBITDA. And wish all of you at Diwali, Happy Diwali. I am pretty confident that the kind of product range what we have and whether it is Apache, Jupiter, Enter, Star Range, HLXR, Radeon, TVS King and the new Rider and Jupiter 125, we will grow ahead of the industry. Our robust revenue growth, increased premiumization, better mix and continued cost reduction initiatives will definitely help us to have sustained EBITDA trajectory growth going forward. Thank you. Thank you. Ladies and gentlemen, on behalf of Batliwal and Karani Securities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.