Ladies and gentlemen, good day and welcome to TVS Motor Company Ltd Q1 FY26 Post-Result Earnings Conference Call hosted by Batlivala & Karani Securities India Pvt Ltd. 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. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from B&K Securities India Pvt Ltd. Thank you, and over to you, sir.
Thanks, Palak. Welcome to TVS Motor Company's 1Q FY26 Post-Result Conference Call. From TVS Motor Company management, we have with us today Mr. K N Radhakrishnan, Director and Chief Executive Officer, and Mr. K. Gopala Desikan, Chief Financial Officer. We will start with the opening remarks by Mr. K N Radhakrishnan to be followed up with the question-and-answer session. Over to you, sir.
Good afternoon. Good afternoon, everyone, and thanks for joining today. TVS Motor Company posted its highest-ever revenue, surpassing the new milestone of INR 10,000 crores in a quarter. It sustained growth above the industry. During the quarter, company sales volume grew by 17%, revenue grew by 20%, operating EBITDA grew by 32%, and profit grew by 35%. This was possible through our consistent customer-centricity approach, very strong brand across all segments, and sustained cost reduction initiatives taken up by the company. We sincerely thank our customers for this significant milestone. Let me now get into more details about the first quarter of this financial year. On the sales side, during this quarter, company's operating revenue grew by 20%. It is at INR 10,081 crores as against last year's INR 8,376 crores in the first quarter of last year. Two-wheeler domestic sales grew by 8% compared to last year's quarter one.
We saw some decline in the industry corresponding to last year. The two-wheeler international market company sales grew by 40% over last year against an industry growth of 23%. Total two-wheeler sales grew by 16% compared to Q1 of last year. Industry decline was about -3% in the same quarter. EV two-wheeler sales grew by 35%, now it's at 70,000 units as against last year's 52,000. Total sales of three-wheelers grew by 46%, 45,000 units as against last year's 31,000 units. On profits, during the quarter, company's operating EBITDA grew by 32%. It is at INR 1,263 crores as against last year's INR 960 crores. The company's operating EBITDA margin improved by 100 basis points. It is at 12.5% as against last year's 11.5%.
If you include last year, if you remember the PLI benefits, this quarter is 12.5%, and the apportioned PLI during the last year's first quarter, it was at 12%. Effectively, the quarterly last year to this year, 12% EBITDA has gone to 12.5%. The company registered PBT of INR 1,053 crores, recording a growth of 35% during this quarter as against INR 783 crores. If you adjust the proportionate PLI, the Q4 profit PBT was INR 1,112 crores. Adjusted proportionate, this one was INR 953 crores after PLI. Profit after tax grew by 35%, INR 779 crores as against INR 577 crores. Just to summarize, if you recollect last year, last quarter, we put all the PLI benefits. Corresponding to Q4, we were at 12.5% EBITDA, including PLI. This is just for a reference for all of you. Corresponding number for last year's Q4, Q1 was 12% EBITDA.
As against that, we have done 12.5% EBITDA this quarter. The comparison, I hope, is very clear to all of you. On TVS Credit, this quarter, we saw 30% growth in PBT, INR 243 crores as against INR 187 crores during last year's first quarter. The book size is at INR 26,900 crores, almost INR 26,900 crores. In Q1, TVS Credit achieved significant growth in consumer financing while maintaining its focus on risk-calibrated growth across product categories. TVS Credit is working to build a diversified book by expanding product offering, distribution, enhancing customer experience, and operational efficiency. During this period, TVS Credit disbursed loans over 16 lakh new customers, bringing its total customer base over 2 crores .
TVS Credit will continue to focus on steady growth by increasing market share, expanding product offerings, expanding distribution, driving digital transformation, enhancing customer experience, and operational efficiency, continue to grow the book size and PBT. On Norton, all of you know that end of this financial year, we'll be launching product, multiple new product, and they will be available in the first quarter next year to many markets in Europe. This is as per plan. Norton will unveil its first new-generatio n superbike this year and in the first quarter next year. Last quarter of this year, you will see more models to be unveiled. The upcoming range of Norton motorcycles will be significantly more accessible. We are looking at the super premium positioning, and this is a very clear strategy which we have been highlighting to all of you. We are also coming up, building our retail strategy.
We are also planning to launch these products in India. More details we will present closer to the launch time. Coming to the domestic ICE business outlook, first quarter, we saw moderate growth of 4% over the first quarter of last year. Rural growth was slightly lower than the urban growth this quarter. We feel that this year, the positive thing is that the monsoon arrival was a little early, and the sowing has started. We are confident that Q2, you will see, while there are some challenges in the month of July, we should all remember that this year's season is going to be middle of September and half of October. We are expecting a moderate growth in July, August, September. The reduction in the benchmark report rate, 50 basis points in June. After that, totally we have got about 100 basis points in the last six months.
This should definitely translate into better retail financing to consumers. This is likely to help the two-wheelers to get better support in the growth this year. Now, the monsoon is slightly above normal this year, and this is definitely going to build up better sentiment and support the rural economy. Like I said, we are positive about the season. We should see growth in the season this year. The last few years, we have continuously witnessed increasing trends towards scooterization. We are confident that scooterization will continue, equally premiumization in the motorcycles. TVS has got strong brands both in scooters and in premium products that will help us to continue to grow ahead of the industry. On EV, during this quarter, during the first quarter, we have seen a growth of 34%. EV penetration of two-wheeler industry is at 6.3%.
TVS iQube has done pretty well, and it has surpassed 6 lakh units sales, continuing its market leadership in India so far. We have launched new variants of TVS iQube with 3.1 kW battery that offers a very good range, and it has got hill-hold dual-tone design. With this, TVS iQube portfolio now offers an array of six variants, making this one of the widest and most compelling portfolios in this segment. All of us know that there are certain challenges in the availability of rare earth magnets. We are trying to mitigate it. There are challenges in the short term, but we are also working along with that certain long-term action. Our recently launched EV three-wheeler, TVS King EV Max, is doing extremely well. Customers are definitely liking it, and the response is very positive. We'll be scaling it further.
Like I said, we will have a prominent space in the EV three-wheeler category. There are products which we promised which will be ready in the next quarter for launch, which includes a three-wheeler and a two-wheeler EV. On international business, TVS has posted highest-ever quarterly sales of 3.52 lakhs of exports, driven by strong growth in the major markets. In Africa, like I said, the demand is becoming stable. There are countries which are doing very well. We are very positive that this growth will continue to sustain, and there is a good opportunity for TVS to gain further. We have launched TVS XLX in 150 5G. This new version introduces various advanced features. It continues to be powered by 150cc EcoThrust engine with integrated oil cooling technology, a combination that ensures efficient and smooth power delivery, reliability, engine longevity, and low fuel and maintenance costs.
Most importantly, for this set of customers, what is most important is reliability, durability, coupled with lesser TCO. LATAM region continuously growing, and we are also growing ahead of the industry. There is a good opportunity in this market because our market share, our share in this category in LATAM is much, much lower. Our focus is going to be in LATAM market to build it to a much higher level. With our product range, we are confident that in LATAM, we will continue to grow ahead of the industry this year. In Asia, the major markets are doing well. As you know, Sri Lanka and Nepal are growing in numbers. The economic recovery is seen in Sri Lanka, and we have seen a gradual rebound in the demand. We expect Sri Lanka to do better in Q2. Nepal is also doing well.
While there are some challenges in Bangladesh, I'm very sure that over the lead of time, that will also start to improve. Overall, both in domestic and international markets, we are able to, with the range of products what we have, we are able to do well, and we will continue to do better than the industry. We set a robust base in Q1. Q2 is poised for a strong growth led by fiscal season, both in domestic and international markets, ICE and EV segments. While there are some challenges in EV, I'm very sure the season is likely to be very positive with the kind of range of products what TVS has. Our unwavering focus on consumers, quality, new products, and with attractive quality with technology, with features, we are confident about outperforming the industry both in domestic and international markets.
Overall, as you know, the company has been growing in the top line consistently, and we have been growing in our EBITDA. With the scale as well as better product mix and our effort on sustained cost reduction, I'm very sure that we will continuously improve our EBITDA, and we will continuously grow ahead of the industry. Thank you.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchscreen 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 Binay Singh from Morgan Stanley. Please go ahead.
Thanks, team, for the opportunity.
Congrats on good set of numbers. I'm just trying to understand your commentary and the data. If I look at quarter one, we are saying that rural is doing better. At the same time, we've seen Mopeds are down, YoY. Motorcycle also, except Apache, is down. Does it mean that scooterization is rising in rural? That explains this commentary. Is that a fair understanding? That's the first question.
In the ICE, if you look at it, this quarter, the rural growth was only Q1, the rural growth was only 3.3%, while the average is 4%. One of the reasons could be that this year we have seen the monsoon a little bit early, as well as the start of sowing, which is early. This is definitely likely to do better for Q2 onwards. We have seen currently the water levels in the reservoirs are 70% higher than last 10-year average.
These are all positive sentiments. I am expecting the agriculture to do well, rural to do well. What is a little bit of concern is we cannot have on the other side a little bit overrain and flood. We are positive, and rural should come back for the season.
Sir, how is scooterization in rural area?
Scooterization is progressing pretty well even in the rural. The proportion of scooters are also becoming better. See, what is most important is the infrastructure. Development, the roads, even in the rural areas are becoming better and better. That is definitely supporting the proportion of scooters. Proportion increase in the rural as well.
Sir, secondly, on electric vehicles, in the annual report, we are talking about an electric motorcycle and a bicycle launch this year. The bicycle launch will be sold out of our existing dealerships only, just to clarify.
Secondly, in light of the rare earth magnet restrictions, is our motorcycle launch on track? How would you see fully electric two-wheelers? Any comments on that? Thanks.
To the cycle, closer to the launch, I'll be able to give you more details. We are still working out all the details on that. On magnets, as you said, there are some challenges, but we are looking at various alternatives at this point of time.
Sir, any timeline, by when we can probably go back to the number run rates that we had? Is it a two, three-month issue, or do you think this could percolate through the remaining year also?
At this point of time, I will not be able to give you exact projection because practically we are running, managing daily production.
What is most important is we are working out alternates, and we are also looking at that everything has got a lead time.
Great, great. Thanks, sir. I'll come back in the queue.
Thank you, sir. The next question is from the line of Pramod Kumar from UBS Securities. Please go ahead. Yes.
Thanks a lot for the opportunity. And sir, congratulations. I think the 30%+ EBITDA growth in this kind of environment is definitely something which we are not seeing otherwise. Good job on that.
Sir, linked to that only, as you continue to kind of maintain in your commentary that you aspire to grow out of the industry and also continue to expand margins at the same time, if you can just help us understand what are the kind of market share aspirations you have because we're already kind of ramping up closer to 19%- 20% band as we speak, and margins are ramped up to 12.5% on a steady-state basis. If you can just help us understand what's the kind of runway you are looking on both these parameters as to where you think your full market share is in the next two years and where the margins could be in the next two years. Any broad thoughts? If you don't want to quantify, even if you want to say qualitative color, that would be very helpful.
See, we always look at customer first. What is most important is focus on the customer, delight the customer, give them the best products and technology, and I'm extremely happy that the product range what we have is doing extremely well. For example, the Jupiter 110, what we launched, is doing extremely well. Jupiter 125, the recent one, whatever we have put with dual-tone, is also doing well. Overall, scooters are doing well. If you look at Apache, it's doing well. If you look at Ronin, that is also doing well. Ronin started slow, but now it's clocking pretty well. Our objective and riders is doing well. Overall, what is most important is you have to leverage your product range. That is happening. That is primarily because the customers are delighted about the product range.
On the other side, international market, like I said, last year we had a big problem in Africa because Africa went through some tough times in the industry. Now that bottoming is over, we are able to see Africa coming back. You remember Sri Lanka was closed and Sri Lanka is open now. Nepal is doing well. Bangladesh is going through some tough time, but I am very confident that over a period of time, the consuming class on the two-wheelers are there. For us, we have started a little late in LATAM , but LATAM also we are growing ahead of them. What is most important for us is the customer and the product range which delights the customer. Both TVS has always invested in. I am pretty confident that going forward, we will be going ahead of the industry. When the top line happens, every line happens.
That is always our focus, because when the top line happens, you get better product mix, better geography mix, and always we can look at what else we can do on the cost reduction. We always give value without compromising on quality. We look at what all things we can do on the cost, and the scale benefits also help us in amortizing the other kickstart. I think these are the broad strategies. We are consistent on our approach.
You believe there are enough customers left who are yet to be kind of serviced and delighted by TVS. Is that a fair assessment, sir?
More and more customers we are able to delight every quarter. That is the way I will put it.
Fair enough. The second point is on the investment because we kind of built our company around auto.
We had the brand, but we had to build everything else around that, right? From manufacturing to product development, everything, right? Where do you think we are in the journey as we approach the product launch? Will it be again investment-heavy, the next two-year period compared to the period of last three, four years? How should we look at it as investors? Because it's taken quite a lot of resources. Of course, the product launch is getting closer. How should investors kind of think about the kind of investment work you've done and the kind of work you've done and what should be expected as the brand grows? Whether you will see some stabilization in investment and then the businesses start generating cash flow on its own now. How should one look at the investment going into that particular business?
I'm very happy you're using the word investment.
We are very prudent. I think Norton will have the products Q3 and Q4 of this year. I'm very sure next year summer, you will see these products in Europe. Country-wise, we are preparing the strategy of how to launch it. We have to have network. We are working out various scenarios. On the product side, we are pretty confident it's getting ready. Once the products are ready, then we have to put the marketing. As you know, Norton brand is very well known. We have to make it stronger. A lot of initiatives on the marketing side will be worked out. It will definitely be available in India. India, Norton is going to be a key strategy market for Norton. Overall, we are pretty confident that Q3, Q4 onwards this financial year, many actions will happen.
On the investment side on Norton, please understand the final stages of the product preparation is happening. You need to have more products. Please understand, the success of any company is based on not just one product. At this point of time, we are looking at three products and some variants of that. Totally, there will be some six products out of that. Then it has to be marketed. There will be investment behind marketing. There will be focused country-wise approach. In my opinion, the investment, whatever you have seen, the same trend will continue in Norton. This is a very good brand, and we have to now put all the effort in making this brand globally very fully active.
Fair enough, sir. Any update on the EV three-wheeler business, sir?
Because of micro market, we are doing well. Yeah.
The EV-three-wheeler, we are doing extremely well.
I think this month, we are already crossing 2,000 lakhs. The market is also doing well. It is growing very fast. Like I said, if you look at EV three-wheeler and Q1, this year, we did almost 5,260 numbers. I am pretty confident that we will reach a prominent place in this EV three-wheeler this year.
Fair enough, sir. Thanks a lot. I'll fall back into you, sir. Thank you. Thank you.
Thank you, sir. The next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Hi. Good afternoon. Thank you for taking my questions. Good afternoon.
The line for the current participant is disconnected. The next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.
Hi. Good evening. Thank you for taking my question. My first question was a clarification. You have planned to raise funds through NCD.
What's the reason behind that? Is there any specific investment that you are raising this funding for?
NCD funding, if you know, SEBI has mandated that 25% based on the previous year's borrowing has to be only in the form of capital market funding. Therefore, the current year's requirement is being funded through this raise of NCD. It's an enabling resolution. The actual amount will depend upon the market conditions and the requirements.
If you can share some performance of how TVS e-bike company is doing. I understand that you have renamed and put all your reservoir-land-based entity under that. How has that entity been doing recently, in the recent time, and most specifically in this quarter?
Overall, the e-bikes is a bit slow, primarily because of the economy in Europe. We have very clearly looked at the positives of this product. The products are extremely good.
When the economy is going through and the industry is going through some tough times, sometimes we have to be a little bit patient. That is exactly what we are now doing. On a medium-term basis, we are very confident that it will start breakeven and start making profit.
Got it. Thank you. Just one final clarification to this. Some investment you have done in TVS supply chain as well in the quarter. Any color on that would be really helpful. Thanks.
There is nothing special about it. Okay.
It's part of trail-free activity, I assume. Yes, yes, yes. Yeah. Okay. Got it. Thank you.
Thank you, sir. The next question is from the line of Gunjan from Bank of America. Please go ahead.
Yeah. Hi. Thanks for taking my questions. Just a couple of clarifications on the P&L.
If you can share the EV revenues for the quarter and the absolute PLI amount which was accrued. A little bit of color also on the staff spend which saw a jump in this quarter.
PLI, I told you about 0.5% overall. We did about 70,000 EV this quarter.
Can you share revenue on the EV?
Let me give you some time. Around INR 1,000 crore.
Okay. Got it. Staff cost, anything one-off to call out, or is it just the normal trendline that we should work with?
This is a normal trendline. What normally happens is we have the performance appraisal. Everything happened in the quarter one. Increments are also given at this time. As you know, we are also looking at specific areas where we want to improve the competency. We are also adding a few people. Additionally, it's not significant, okay?
But based on whatever is required for our future plans and strategy, we are investing in certain areas, certain types of people. That will continue as a company.
Okay. Can I just—15 years? Just wanted to hear your thoughts on something that you lay out in the annual report that we're looking at rolling out a separate premium distribution. What is the thought process around it? Is it primarily to do with Norton launch, or is it that we're actually expecting a big lineup of products on the premium side? I mean, some color on what's the thought process behind having a separate distribution for premium products?
See, we will have a differentiated retail strategy in India covering Norton and possibly some of the premium TVS buy. The work is going on. Okay? Once we are much more clear about the strategy, I can share more details about that. Okay.
And lastly, any thoughts on ABS norms? I mean, what are the conversations? Are we seeing that coming through from January onwards? Any updates that you can share around it? And what does it mean in terms of cost or—as a—
I can't talk about because in the two-wheeler category, in SIAM, we are all together. We are discussing with the government. Okay? I think we will—as of now, the discussions are going on. Appropriate decision, once it's done, I'll be able to share with you more details. Please understand, rider safety is the most important. We all give highest respect for the safety of the riders and others. This is the highest priority.
Okay. Okay. Got it. Thank you so much. I'll join back the queue.
Thank you, ma'am. The next question is from the line of Kapil Singh from Nomura. Please go ahead. Thank you, sir.
Thanks for the opportunity. Congrats on a good set of numbers. Just one small follow-up on the PLI. Currently, I believe the full EV revenue is not eligible for PLI, right? By when do you see the other products in the portfolio becoming eligible for PLI? Should we expect that by the end of the year, that should be possible?
See, there are certain criteria. Okay? The timeline will depend upon when we meet those criteria. We are already working on it. Okay? Progressively, it will cover all the products. Okay.
Do you have a roadmap? Like by when you—
We have a roadmap. We have a roadmap, but I'll share more details once the implementation is done fully.
Okay, sir. Sir, second question was just to understand the profile of electric vehicle customers for iQube or maybe generally for the industry as well.
Are these existing scooter customers who are moving on to electric vehicles? Are there motorcycle customers also who are looking at electric vehicles as an option? How is the rural-urban split for EVs versus, say, a typical iScooter?
Initially, when we started the iQube journey, we saw people who really love innovation, who want to try something new. That set of customers. Now, most of the customers are wanting—they are otherwise an iQube customer who wants to look at TVS as an alternatives. They are also seeing progressive improvement in the TCO. They feel that iQube is also like an ICE product. They are able to use it. I always believe that customers are agnostic to technology. They want to use it like a normal scooter that two people can travel comfortably, good roads, bad roads, rainy time.
They are able to see all the benefits in iQube . That is the reason iQube is one of the prominent players in the EV category. Predominantly, this was in urban. Slowly, now it is getting into rural. That is pretty good news. I am of the view that in the last few years, it is more and more urban. Slowly, now it will start getting into rural, semi-urban, and rural.
May I know what is the—for your overall portfolio, what is the rural and urban mix?
Today, it is predominantly urban. There may be some people who may be buying from the cities, and they may be taking it to the rural. Predominantly, today—we are currently present in about almost 900 dealers. When I say 900 dealers, they are more on urban and semi-urban. I will put it that way.
The semi-urban guy also buys it and takes it to village. Possibilities are there. For TVS Motor Company, when I look at ICE plus electric, what is the rural mix right now?
I think we are in line with the industry. We are in line with the industry. Today, for example—I do not want to say EV, because EV, I already told you, rural is slowly getting up. If I look at the total two-wheelers, this year may be around 50, 50. Almost, I can say 49, 51 or 51, 49. That is the rate. Urban may be slightly higher, rural. I can say broadly, it is close to 50 50. We are also almost similar to that. Thank you so much. Best wishes. Both areas, we are ahead of the industry. Both in urban, both in rural, we are ahead of the industry.
When it comes to EV, predominantly, it is urban and semi-urban. Rural, possibly it will take another one and a half years, two years to pick up. Understood.
Very helpful. Thank you so much.
Thank you, sir. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead.
Yes. Hi, sir. Thanks for the opportunity. My first question was on commodity. Are we seeing any signs of any headwinds in the overall commodity basket, especially steel, where there was a safeguard duty imposed? Any thoughts on how should we think about the commodity basket in the coming quarter and the next quarter?
See, commodity, I think there is an increase in Q2. Some of the, like you said, areas like steel. My expectation is about 0.5%. 0.5% could be the increase. Steel is the predominant one in that, and other commodities are small increases are there.
We have also taken up small price increases in Q2 beginning.
Understood. Basically, you're saying it should help to offset the upcoming pressures?
Yeah. There will be some challenges, but I am of the view that it's not a huge challenge. We will always look at some price increases, product mix, cost reduction. We will use a combination to mitigate the same.
Understood, sir. Secondly, on the three-wheeler EV, two-part question. A. Are we getting any PLI on the three-wheeler EV, and is there a roadmap for that? Secondly, compared to the two-wheeler EV, is there a difference in the profitability of the three-wheeler EVs and any path to EBITDA breakeven there?
See, three-wheeler EV PLI, we will be getting from June onwards. We are end of July, so PLI will come. Like two-wheeler EV, we are also gross margin positive in three-wheeler EV as well.
We should always remember that when a new technology comes, it is an investment. Like I always believe in, once the customer starts loving, which is practically happening in the scale of switch, our three-wheeler EV is growing in the market. It's amazing. We are very, very happy. Once the customer loves it, the top line goes up. I'm sure every line will come.
Okay, sir. Thanks for this, sir. I'll come back in the queue.
Thank you, sir. The next question is from the line of Raghunandhan from Nuvama Research.
Thank you, sir, for the opportunity. Congratulations on a great set of numbers. Sir, firstly, on the Non-Current Investment, the TVS Singapore investment is at INR 5,100 crore as of March 2025. Can you please indicate an approximate breakup into major entities like Norton and other entities?
Predominantly, it is Norton.
Out of that, almost 40% of that is Norton. Okay?
Got it, sir. E-bike companies?
E-bike companies is the next. After that, e-bike company is the next. Other than that, these are all other strategic investments like TVS Digital, Hellerete. There are some investments in Kilwatt, Sapata, ION Mobility. I think these are all small, small investments. Put together, the key ones are, and also, yeah, ION Mobility. Also, the PT TVS Motor Indonesia investments are also from past investments, also from Singapore.
Got it, sir. Investment for FY2026 will again be in the range of INR 2,000 crore?
Similar. Almost similar. Like I explained, Norton, the products are coming now. The investments behind some more products will be there, plus marketing, brand-building activities. We are getting into many countries now. All that will continue.
Got it, sir. CapEx will be around INR 1,000 crore?
CapEx will be about INR 1,600- INR 1,700 crore. In that range, INR 1,600- INR 1,650 crore. Because there are many investments behind new products.
Got it, sir. Got it. As per the government website, for electric three-wheelers, there seems to be some approval on PLI on May 19 or so. Just trying to understand, would this mean that we have started approving PLI for three-wheelers, or would it start from next quarter?
Next quarter. Next quarter.
Within employee cost, how much was the e-shop cost? That item should not continue in the coming quarters, right?
E-shop is very small.
Got it. Lastly, can you share the exports and shares for the quarter?
Just a minute. E-shop, you should take it as a part of appraisal and reward and recognition. That is something which we want to look at in the future.
On spare parts, we have done about INR 987 crore in the quarter. What else you wanted?
Exports, sir.
Exports, about INR 2,487 crore.
Got it, sir. E-shop is part of the business, I understand, but it will be more lumpy in nature, right? It will not be there in every quarter, and possibly, it was there in Q1.
Which one? On the e-shop cost? That spreads over. E-shop, you should assume that it is a part of the appraisal cost, reward and recognition. I think total employee cost is what you should focus on. Got it, sir.
That's a sustainable number, what we saw in Q1. Yeah, yeah, yeah.
These are employee costs where whatever we are investing, it is going to definitely translate into products and technology and further top-line growth.
Got it, sir. Thank you, sir. Thank you very much. This is very helpful. Thank you, sir.
The next question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead.
Yeah, sir. Thank you so much for the opportunity. Sir, firstly, I want to understand how we are placed in terms of distribution for the electric three-wheeler market in India. Any sense, what kind of dealer network we have in India to take benefit of this demand space?
We are expanding our three-wheeler network. I don't have the exact number, but I can tell you 70% of the market is covered today with our three-wheeler network. As we grow our three-wheeler business, we will add more network. For the TVS brand, without all the equity, there is no problem in getting good dealers. Okay? We always look at dealer viability, dealer profitability, very, very important as a key parameter.
Depending upon the volume, productivity, profitability, it's a very clear planned activity of expanding the network.
Sir, will you also be available with the required capacity to meet the e-three-wheeler demand, sir?
Capacity in today's context is not a problem. The supply chain is also very fast, and we are able to also— Maximum, maximum, I have seen in my experience, 12 weeks is more than enough for any capacity expansion.
Got it, sir. For this year, can you share any outlook for the export growth for TVS for this year, sir? How is the Africa market doing, sir?
Africa market has started doing well. Like I said, last year, we saw the numbers going down primarily because of many geopolitical challenges, inflation, and currency challenges. Now, things are becoming a bit stable. Because it has gone to so bottom, now we see only upward trends.
We are confident that we will do much better because our customer retails in these markets are doing well. We will continue to grow ahead of the industry.
Got it, sir. Thank you so much for the opportunity. Thank you.
Thank you, sir. The next question is from the line of Viraj from SiMPL. Please go ahead.
Hello? Hello? Please go ahead. Yeah. Hi. Am I audible?
Yeah. You are audible. You are audible.
Just a couple of questions. First is on the investment. What we talked about is an annual run rate of around INR 2,000 crore. Now, if you look at our plans with Norton, where we're starting out with the first set of three products, we would, over a period of time, look to further expand the portfolio.
Similarly, in the annual report, we talked about turning around the e-bike ventures with new product plans there as well. Would it be right to think that the run rate of around INR 2,000-INR 2,200 crore will sustain for the next three to five years? If you can just give some more breakup, a big picture breakup in terms of how that's allocated towards various business segments, because we also have digital initiatives as well. That is one. Second is, if you can also give some more color on how we plan to turn around the e-bike entities, both SMEG and EGO and a few others. Right now, I think the investment is largely going towards just sustaining the operating losses we have in those entities. Correct me on that. That's second. Third is, any thoughts, any update you can give?
We had earlier plans to monetize or at least bring to IPO TVS Credit, but we don't talk about it anymore. Any thoughts? Last is on TVS Supply Chain. If you look at the last two to three years, we have grown straight from the 1 or 2% to now almost 5.5%. With this investment, we will go 6- 7% holding in that entity. How does it relate to the core business, which we do? What are your thoughts on this, sir?
See, on Norton, products require investment, and whatever we have invested is now likely to yield results with the products which are getting ready by Q3 and Q4. Like I said, we will have products which will be ready, and next summer, you will see them selling both in India, as well as India maybe much earlier, and in the European market.
We are putting a very clear strategy of coming up with a region-wide strategy on Norton. That kind of investment is likely to continue because we need some more products. In terms of the e-bikes, we are also coming up with some innovation on the product side. I'm very sure the market will recover, and once the top line slowly starts recovering, the rest of the lines will start improving. Last year, we have consolidated all the e-bike companies to one, and we have looked at the organization also to combine into one so that there is overall productivity improvement. Also, the synergy in terms of the fixed cost. Overall, EV bikes. Going forward, we are pretty confident that as we see recovery in the top line, you will see the breakeven and the profits. Okay? The TVS CS. The second, you want to highlight? Yeah.
TVS Credit Services, I think the book size is around INR 27,000 crore now, INR 26,898 crore, to be very precise. As far as the question is all about IPO, not yet even discussed at the board level. As and when we decide, then definitely, we will let you know, please.
This is an investment which is doing extremely well, and it is also well-run. Rota is steadily going up. We are pretty confident about TVS CS shaping up to a great company financially.
That annual investment of INR 2,000-INR 2,200 crore, that includes support to TVS Credit Services?
We are not able to give you three to five years time because as the top line grows, as we present in many of the markets, there may be a requirement for additional investments. I can tell you, INR 2,000 crore for this year, it will be there.
Next year, possibly during the next quarter or quarter after that, because if we look at the next year plans, that is the time we decide what kind of investments are required, what technology, what products, which country we want to enter. Like that, we will be preparing the plan. As of now, this year, it will be INR 2,000 crore on the investment side.
On TVS Supply Chain, sir?
TVS supply chain, I already answered. Yeah. Sorry, I misheard. If I can repeat. It's not a strategic investment. It's an investment we are making, like any other investment.
Okay, fine. Thank you very much. Good luck.
Thank you, sir. The next question is from the line of Abhinav Ganeshan from SBI Pension Fund. Please go ahead.
Thank you, sir, for the opportunity and congratulations on a great set of numbers despite the challenges on the EV front.
Only one question from my side is, how are we seeing the supply chain for us on the rare earth magnets? If you can give some more color. Do you see that our EV numbers will come back? Because month on month, last month, we had a dramatic fall. If you can give some more color on that, thank you.
Short term, we are managing with the stock we have. We also resize some higher size magnets which are locally available. We are also exploring some alternate strategies in the short term. Okay? Like I said, currently, we are managing the daily production. We are just able to manage like that. If you look at on a medium and a long-term basis, we are working on HRA-free, ferrite-based, magnet-free. We are also looking at alternate countries. Definitely we will be also working partnering with some of them in India.
This is going to be a—we have to build forward a more resilient company and a country on magnet.
Thank you, sir. I appreciate that conversation. Thank you.
Thank you, sir. The next question is from the line of Rahul Kumar from Vaikarya. Please go ahead.
Yeah. Sir, just on EV again, at what stage are we in terms of diversifying our supply chain for EV powertrain components?
I just now answered. In terms of the developments are going on. I may not be able to tell you exact timing. We are managing on a daily basis the production with some local purchasers, local stocks what we have. We are also coming up with some alternate strategies. Medium term and long term, definitely, we will have solutions on HRA-free magnets and ferrite-based magnets. We are also looking at magnet-free. We will look at many countries also for sourcing.
It's a combination of many actions which are going on.
Okay. And I think you mentioned, just on e-bikes also, what are your plans? When do you plan to launch the bikes in India for the more of mass and different categories?
They will come back to you. We are working out the strategy, including the positioning, what type of network, product. What is the strategy for introducing in India? Once we are closer to overall implementation plan, I'll let you know more details.
Okay. Do we expect just fiscal or, let's say, sometime next fiscal for the launch?
Come back to you. I'll come back to you. Definitely, I'll come back to you just before the launch. Okay. Thank you. Thank you, sir. Can we take the last question, please?
Okay, sir. The last question is from the line of Pramod Kumar from UBS Securities. Please go ahead. Yeah.
Thanks a lot for the opportunity. Sir, my question was on the EV's profitability. I know you've kind of—the question has been asked before. You had shared last year that you are targeting to achieve breakeven in the next two years. Given the way the battery prices have moved and the pricing has moved for the industry and the competition industry, just want to understand your thoughts. Are we still on track on achieving the breakeven there?
Pramod, first, one clarification. I have not spoken anything about breakeven. I already said we are positive on gross margin. In any business, when you start, first thing to make sure that the gross margin is positive. Both in two-wheeler and three-wheeler, we are positive, number one. Number two, we are extremely happy. The customers are delighted about our products, and the top line is growing.
We have some short-term setbacks in terms of magnet availability. I am very sure we will become more resilient with many other alternatives going forward, number two. Number three, whatever investments we are making in, whether it is software, whether it is electronics, whether it is digital, while we are making all these investments in electric, I'm very sure these are all applicable for the super premium, premium, and even scooters. Going forward, the digitization is going to be the key because customers will look for many of the elements, whatever we are investing in software and digital. The people-related cost, what is invested behind electric and electric technology, it is going to help the entire product range of 30 years. It's going to be overall, going forward, this is going to help.
That is exactly the reason I always look at the total overall, whether the top line is growing faster than the industry, whether EBITDA is growing as a business, total business, are we going ahead, and which, according to me, we have done extremely well. INR 10,000 crores, INR 10,081 crores for this quarter, and operating EBITDA consistently growing quarter- after- quarter, while we invest behind new technologies in two-wheeler EV, three-wheeler EV. Overall, that is the way we look at it.
Fair enough. Sir, I understand. I'm just looking at the fact that if we kind of reduce the, and the recovery is there, then the overall profitability of the company will start looking much better. That was the whole idea. Sir, on the scooter side, we have seen that, what do you say, the Maxi Scooter segment is taking off in a very nice way.
Currently, it's kind of catered to by practically one player. Any thoughts on that further subsegmentation of the scooter market within a particularly narrow CC Band? What are your thoughts there? Given your experience in other markets, is there opportunity there for you to tap into these subsegments within the scooter segment, sir?
See, we always look at the customers. I appreciate. We also look at competition. Please understand, we have a very structured program on our product plan. We look at which are the product plans, which are the products, at what quarter, where we need to launch. We have a very systematic process in the company. We want to continue to focus on the customer. I look at always with lots of deep respect with every competitor because each competitor has their own strategy. We have to respect them because that is why the customer gets the best.
We look at it totally. We look at what are the phases, and based on the product plan strategy, we come up with the model. Okay?
I hear you. Thanks a lot, sir, and wish you all the best. Thank you.
Thank you. Thank you. Before I close, I just wanted to thank everyone. We are extremely happy that we have started this financial year with a great quarter. Thanks to our customers. Thanks to everyone. Okay? We have done INR 10,081 crore of operating revenue. Our unwavering focus on customer quality, we are very confident that we will continue to grow ahead of the industry, both in domestic, IV, ICE, and EV, including three-wheeler. Company will continue to leverage scale benefits with focus on premiumization, sustained material cost reduction. We have been consistently growing on our EBITDA, and that journey will continue.
We have excellent product, excellent product range, and we will leverage its growth, better product mix. I am very confident that we will get into the season with a very good number. Thank you. Thank you for your time and continue to trust on the company. Goodbye. Thank you.
Thank you, sir. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.