Good evening, ladies and gentlemen, and welcome to Bajaj Auto's conference call to discuss the Q4 and fiscal year 2021 financial results. We have with us Mr. Rakesh Sharma, Executive Director Mr. Saumen Ray, Chief Financial Officer Mr. Sanjeev Garg, Vice President, Finance and Mr.
Anand Nivar, Division Manager, Investor Relations. My name is Nirav, and I'll be your coordinator. At this time, the participants are in listen only mode. Please note that this conference is being recorded. We will wait for a minute till the question queue assembles, And we will start with the opening remarks from the management.
Thank you. And over to you, sir.
Good afternoon, ladies and gentlemen. This is Rakesh Sharmaika. Thank you very much for joining the call. And now as we have moved from quarter 4 into the new financial year, the pandemic too has undergone a dramatic change. Many of our near and dear ones have been afflicted and I wish them a swift recovery and I hope everyone keeps safe.
We will answer the Q4 fiscal 2021 financial results today. I hope you have had the opportunity to have a look. But I'm pleased to inform you that our Board of Directors has recommended a dividend of INR 1.40 per share, which translates into a yield dividend yield of 3.6% and a payout ratio of 90%, which If you will recall, is in line with the dividend distribution policy that we had announced just last month. I will divide my opening comment into 2 parts. First, some highlights of our quarter 4 performance Beyond what has been released and since we have had regular interactions, I'm refraining from going into a commentary of the full year preferring to remain with the recent most events.
And the second thing as growth is near term outlook. Before I call out the highlights, it is useful to revisit the 2 pronged approach the company has been executing Since the beginning of FY 2021, which was number 1, to capture the recovery in demand, particularly in overseas markets where it was expected to be quicker through strong supply chain management and very focused engagement with the market. 2nd, to continue to drive premiumization within the segments and across the segments to ensure That in an uncertain demand environment, we are protecting more than protecting our financial performance. Coming to the first part, which is the highlights of quarter 4 business. Let me make A few quick comments on our domestic motor practice business first.
The most noteworthy aspect of This BU's performance is our share of the 125 cc plus segment. If I divide the Demand per minute of the country into 2 parts, the top half being 125cc plus portfolio. This contribution of this part in our total business continued to rise from 46% in FY 'twenty To 60% in Q4. So now 60% of our motorcycle business volume Come from 125cc plus bikes. Of course, this has been driven by The outstanding success of CULSAR-one hundred and twenty five, where in the space of 12 months, our market share has improved, Soft from 7% in FY 2020 to 19% in quarter 4.
Indeed, we think we have strongly contributed Shifting the industry architecture itself as the 125cc segment has expanded by 4 percentage points over the year for the whole industry. In the top half, another noteworthy progression, though small in terms of Volume, but big implications from a future development point of view is the performance of the Dominar 250. It has made a very confident start and we are surely and steadily trying to build the quarter liter class segment. We in the bottom half of the demand pyramid, we continue to play out our strategy of introducing upgraded products I'm making better products more accessible to the customers there and 3 upgraded variants The platinum plants were launched with the electric start and with one time CCE. So as you recall, we had said we want to convert, People are using kick start to electric start, people are using drum brakes to disc brakes and people are using 150 bikes to 11060 bikes.
This segment required slow short evolutionary step rather than Big leap and that is what we have been attempting. Of course, overall, the market share remains steady because of our ceding ground at the very entry level, but this was by design as we want to drive up our market share by upgrading the customer within the segment and across the segment. Coming to the domestic commercial vehicles business, the 3 wheeler business started to make a promising Return towards normalcy every month climbing by 11,000 units sale and we could see that it was The traffic has gone back to almost 85% level by middle of March. But of course, April, again, we have seen a halt on that. So it took a little bit longer, but it was a hard thing to see that the 3 wheeler business has started to make a return.
But Even though the volumes are much lower in the quarter and across the year, there have been some very significant leadership changes. There are 3 segments in this market, the largest being the small passenger, which is a small architecture which is Same. The second one being the large passenger, which is generally used in smaller towns and Suburban areas and the third is the cargo segment. We have always enjoyed a very high level of market share In the small passenger segment, 85% level and that is more or less intact. But in the last 3 wheeler segment, also now we have established a sizable leadership share of 48 We believe this is 12 percentage points ahead of the next competitor in quarter 4.
So we are now very, very clear leader In the small passenger and the large passenger segment, in the cargo segment, We gained 6 percentage points of market share and we are a very strong number 2 now with a 34% market share in striking distance Of leadership. Why I'm making these points is that when the business returned, this Improvement in competitive position is surely going to give us a lot of benefit. Coming to the export business, Export business continues to perform robustly with a 200,000 volume performance Every month, quarter 4 was our finest ever quarter 4 in our history And it actually came on the back of a very high quarter 3, as you know. Within the quarter 4 in January, we had a highest ever sale month in January. As a result, we have been able to reach the 2,000,000 vehicles export milestone despite Our market share in top markets is stuck in motorcycles and moved up quite significantly in CVLAS.
In exports also, our share of premium motorcycles, which is the Pulsar and Domino's brand, It has moved up from 13% in FY 'twenty to over 16% in FY 'twenty one, further, strengthening The financial performance. We continue to get over 80% of our revenue from markets where we are number 1 or number 2. In fact, 77% of our revenues now come from markets that we are clear number 1. This is an important metric, which we've been monitoring continuously For the last 5 years or so, as it indicates pricing power and our ability to manage competitive threat and actually shape the market itself. Our exports to KTM have grown at a significant pace of 60% plus, powered by a surge in demand in the developed markets of North America, Europe and Australia.
Some other highlights, We faced strong headwinds or cost increases of up to 4%, of which we could recover only about 1.5%, keeping demand Sensitivity is in mind. Though I must add that we believe our price increases Both in India and particularly overseas are mostly ahead of what competition has done. Supply chain demonstrated resilience in responding to various disruptions. Those shipping issues, which is the frequency of shipping Availability still causes an almost 10% to 15% spillover of the export order book. Finance penetration, particularly from Abhijaz Auto Finance has improved in motorcycles and a very supportive growth driver as well as an enabler in the 3 wheeler space for us.
And going forward, we will be leveraging this aspect even more. Now coming to the second part, which is our immediate term outlook. As we all know, the surge in the pandemic has again gone upon us. We thought of uncertainty, the demand situation in domestic has become under good and it will jump symptomatically with the progression of the pandemic. While certainly we are not facing the mill scenario of last time, but we must wait for some more time to understand the full impact of the current surge on the immediate retail environment of motorcycles and CDs in India.
Having said this, the supply chain disruptions, the vendor side of it, our plant Much better manageable this year than the previous year. A better local level dialogue with the administration, Learning from the past and better preparedness of the vendors and our own teams are helping us deal with this much more confidently and we don't see This kind of I mean, introductions on the supply chain impairing our ability to service the market. Additionally, going by the experience of the last time, we remain sort of optimistic The demand should return swiftly as and when the pandemic is got under control and the vaccination program advances confidently. We monitor the situation very closely and respond to it. We think that the time Might come around July, but again, it's legal.
A lot of this is based on assumptions on how the pandemic Moh, but irrespective, we will continue now again with our approach of driving the premium end of our portfolio, which is the 5cc Plus and even within the bottom half of the pyramid going continuously expanding To upgraded products. We have refreshed and launched a new color range of cultures in April. A new personal 125 As we put out into the market as we speak, our credit versions of the CT-one hundred and ten and Platina, Our top end flattener already being dispatched to the market to the dealers in April. These, I believe it should hold us in good stead as demand recovers. We have planned these to actually be in position for the mini marriage season of the North, But that seems to be a little bit impaired now, but as and when demand recovers, we feel that we can really Make a very strong proposition to the customers.
Internationally, we will continue our momentum and expect to hold the current performance level steady. Though we have encountered some new COVID related demand issues In Bangladesh, but hopefully we will be over them and presuming we don't have any more black swan events or there is no Major surges of the pandemic, we think FY 2022 will be our finest ever year for exports. On the cost front, there is an increase in raw materials. As you know, commodity materials in the coming quarter, we see about 3% And should be able to recover at least 2% through price increases and that has already been done. We will continue to work on cost optimization measures and calibrate further price increases based on response of demand over the next Few months quarters.
Well, this, Piyal, I hope the Government of India will make some Announcements around gross debt and the outstanding NEIS split, this will significantly help the Jazz Auto because of the large share of exports in our business. Finally, as you may have gathered, we have reopened our Bookings for the electric scooter, Chase up, and we have received a resounding reception yet again. So we had to close bookings yet again within 48 hours because we got a tremendous amount of interest. Our international partners, vendor partners have told us that they should be able to give us Some very clear visibility of availability of components by May June, Based on which, we hope that we will be able to maximize the potential opportunity for Cheetah and widen our footprint to many, many more cities in this financial year. With these comments, We can now open the floor to the queue to Greg.
Thank you very much. We will now begin the question and answer session. The first question is from the line of Hitesh Wail from Kotak Securities. Please go ahead.
Yes. Thank you for taking my question. So my question is on this, the Commodity cost pressures that you are seeing, right? I think you talked about a 1.5% price increase that you have taken in the domestic Sport Markets, where the commodity cost increase has been around 4%, right, if I include the Q3 Q4. And it's going to increase in Q1.
So can you comment on that? Plus also the if you can comment on the Q on Q relation increase of 7%, how much is because of mix, how much price increase and if you can give the export revenues for the quarter?
Shokit, Pravin here. That's a lot.
So for cost, as we have
mentioned And as Rakesh mentioned, we have seen sequential cost increase of between 6% 7% between Q4 and Q1. I'm trying to make it simpler, 3 followed by 3 or 4 followed by 3. The price increase that we have taken In Q4, blended was in the range of about 2%. We've taken another about 1.5%, 2% in Q1. So That is the kind of price increase that we have taken blended between domestic exports and the like.
So I hope that answers your first part of the question, Which is your price increase and cost increase. As far as export revenue is concerned, this quarter, we did A shade below INR 4,000 crores. So it was INR 3,991.
Great, sir. And if you can I can put in one more question? Can you get us some sense on the export volume outlook for next year? I mean, because you are pending orders as well. So how should we look at the export volume growth FY 2022 versus 2021?
Any guidance would be very helpful.
I think if you would have heard Rakesh mention, Rakesh, while he's speaking, he mentioned that we expect This year, to be one of the best years, is not the best year of exports. So he had already mentioned it in his commentary.
Yes, I mean best years in the sense it will be any guidance on the volume growth, I mean, in terms of Absolute increase or range if you can give so that we can understand that?
We really believe that sitting in April, I can actually give you a Range of volume increase that will happen in the next year. We are saying that it will most likely beat the highest ever that we have done. But beyond that, I don't think in the 1st month of fiscal, I can really predict the numbers.
Okay, sir. Great. All the best, sir. Thank you.
Thank you. The next question is from the line of Raghunandan Enel from MK Global. Please go ahead. Thank you, sir, for the opportunity. Congratulations on good numbers.
Sir, firstly, within models, there has been premiumization, the share of top end vehicles has been increasing. What is your assessment on how the customers are looking at that? What is making the customer shift towards higher variance?
Okay. What is actually, if I could separate it out, economic context And first, your understanding of that. Now what has happened Yes, putting the pieces together even from other categories, is this last year has seen Considerable weakening of the bottom parts of the demand The result of consumer sentiment there of purchasing power, etcetera. There is a certain dichotomy which is developing in the Industry, not just for our category, for many categories, but we are seeing that the top half Of the demand of the consumer, they actually have come out largely unscathed from the pandemic. The job losses have not occurred.
There has been certain savings because the opportunity to spend was not there. And A little bit of feeling of well-being based on stock market and savings going up has caused actually people to feel much better and that's also Resulting in these partly the long waiting period for cars, etcetera. And we are seeing that In fact, in some of our bikes, which are more than 2 lakhs, particularly the KTM varieties, When we are fighting to supply demand, but So our strategy actually fell in place quite nicely because we started to focus on the 125cc Plus segments and particularly the 125cc segment because we did see that after ABS, The 150cc plus has become a bit more expensive, so there may be a little bit of a drop down. And we wanted to uptake The better sort of a better off consumer in the 100, 110 cc. Now this strategic approach got I mean, coincided very well, If I can say that, though it's a bit unfortunate that one part of the economy has taken a big knock, but we were there with the product.
So if you see that Pulsar, 125 is the most expensive 125cc, but still it does outstandingly well. I mean, is market share gone from 7% to 19% and it is if you see the later month And newer and newer variants are being introduced. We expect this to definitely go into the 20s. So the customer in that segment was not as badly impaired as the one just below that segment And has given a big vote of confidence. So that is the most That's the most sort of significant explanation.
Even on the bottom end of the pyramid where it has been a little bit of a struggle because the bottom has really fallen The cheapest products, whether it is us or competition, are having a severe beating, I'm getting a severe beating in the last 6 months or so and particularly now. And in that, our whole approach has been To give better products at similar or slightly higher price. Now we could have taken the approach of Giving the same product at a lower price and attract, but we've not got tempted by that Direction. So we have introduced some better products, whether it is more comfortable, more safe, Even for the 100 cc buyers and trying to attempt to upgrade them, some of them may not want to go all the way to 125 cc, but at least to 110 At least to a more comfortable bike, at least to a more safe bike and start that journey. It's a more difficult play, but and We are encouraged by the results, but we have to wait a little bit more to see how it actually plays out.
So I would say that would be the So 4th of our the progression in our portfolio.
Thanks for the detailed answer. And my second question was on ROTDP. What kind of benefits are expected? How does it compare with MEIS scheme?
Well, This one is really you have to ask the Finance Minister because we keep hearing news Anything I'd say would be speculation. What we are hearing directly and also through SIAM Is that it is very much there and its announcement is imminent, But whether it will be completely offsetting MEI, which I personally don't think it would be. But to what extent it would Offset is something which we have to wait for the announcement. But we have been hearing that it is imminent for a while now. But nobody in the ministries or anywhere, Shyam tells us, has said that this is not happening.
The Pillai Committee has submitted its recommendations there with the cabinet. As soon as it gets cleared, I think we'll hear about
Thank you. Thank you, sir. Thank you. I request all the participants, due to time constraint, please restrict to one question per participant. The next question is from the line of Bina Singh from Morgan Stanley.
Please go ahead.
Hi, team. Thanks for the opportunity. My first question is that when we look at other expenses as a percentage of sales for Bajar, in fact, we even saw it for TVS, the number has come off in the last 3, 4 quarters. So because of COVID in FY 2021, were there some expenses for you which were lower than what normalized would have been Either on the sales promotion side or on the advertising side and linked to that, do you expect them to sort of creep back in As the environment normalizes or you think this is the new sort of normal for other expenses as a percentage of sales? Thanks.
So yes, other expenses have Times have come down as percentage of sales for the full year and which is essentially cost control measures. But at the same time, I must admit that Bajaj Auto, finally, is a very frugal organization. So there wasn't flat to be cut. So there are projects which have been deferred and all that. So in all probability, they will come back to the previous levels.
Then anything on the sales promotion spending in particular or the advertising spending because Is that like when I look at the March quarter, is that now back to like normal level? Because I understand in December quarter that spending was quite lean for companies.
Ashwin, so there are 2 parts of that spend. One part which you don't get to see because It is netted off against top line, which is if you are giving a scheme for the customer. So it's a little lopsided and frankly, You will not be able to make it out from the results because as per accounting standard, if you are giving a scheme which is an offer to the customer, It has to be netted off from income. So that is why the UU will happen. Coming to your question whether Q4 is the right base to take, I would say no, because Q3 would always be the highest because not only do we have festive in India, But also some of our global markets, we have tested because of Christmas and all that.
So no Q4 is not The pace which will be there for the next 4 quarters.
So in summary, you mean that It
will go up from Q4 level because Q4 is higher than Q4.
On average it will go up Because as I mentioned, my highest is Q3. So yes, it will go up from the Q4 levels.
And just linked to that, do you expect the industry also to be a little more aggressive on the spending? As you know, after wave 1 also, we saw tubular was 1 Category which did not really recover that sharply, unlike cars also. So now with Wave 2, do you foresee higher Pending by the industry on these line items in the coming quarters?
You are this is in the realm of absolute speculation about what the industry will do. But I will try to answer this question since it has come up by logic. Various companies have got various kinds of cost increase numbers, but everybody is saying that they are not being able to recover everything. So in a scenario where the companies are not being able to recover their material cost increases, it will be very unlikely for anybody
This is very helpful. Appreciate the response. Thanks, Omid.
Thank you.
Thank you. The next question is from the line of Janesh Gandhi from OTLO Sol Financial Service. Please go ahead.
Hi. This question pertains to margin trajectory. So we have seen benefit of our 2 pronged strategy On product side, so I mean excluding this impact of R and M cost, how do you see margin trajectory playing out over medium term over next 2 to 3 years' time?
See, the margin trajectory can only go up and I will give you the reasons why. I think commercial vehicles will certainly recover from where it was in Q4. So that will be an upside To margin because I make more margin in commercial vehicle than the blended amount. The other upside should be Our depreciating rupee, we have already seen rupee depreciate a bit in Q1. The third upside, as was discussed in the previous question, The ROTH debt will finally come.
Now whether it will recover all 2% of MEIs or it will do less, but there is something that will certainly come. So these are the reasons why we believe that margins will go up. The only headwind of margins is Motorcycle as a part of the mix was lower this year. So if it was to recover back to growth of double digits, Then to that extent, mix can worsen. But if I keep commodity cost aside, because as you likely mentioned, Jigal, that This commodity cost is a story of 1 or 2 quarters.
It is not as if that every quarter commodity cost is going to increase by 4%, 5%, then we might as well start a new company. That will plateau out over the medium term.
But directionally, I should see benefits
coming subject to competitive pressures.
Right, right. And what's the spare revenues in USDIMR for the quarter?
Yes. The sales revenue for this quarter was INR10.89 crores, INR10.89.
Right. And USD INR?
Pardon?
Currency realization, USD INR.
So realization in USD INR from INR. So this period in Q4, we earned about 72.9. Okay. Q4 blended average is 72.9.
Sure. Thanks, sir. I'll come back in queue with the question.
Thank you.
Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead.
Yes. Hi, sir. Just one follow-up on the sales. I see that So, Andre, for last few quarters has been pretty strong. So, could you give some color that are we doing something different Over there that's helping us grow much faster.
See, the pandemic does not impact the amount of Spares that are required. And anyway, as you know, of the total possible sales of original spares, The actual sales of original spares is nowhere close to even 70%, 80%. So there's a lot of headroom. Plus there was a backlog when we did not supply, but The industry, there was a depletion of stocks at the dealer distributor level. So it's just a catch up of that.
As a matter of fact, if you look at the full year numbers, I have marginally declined. Last year, I did about INR 3,100 crores.
Kind of number or you would have a sense of what kind of growth will be there?
No, I think whatever we have done This year, you can take that as a normalized rate and then divide by 4 and consider. Okay. That's helpful. Yes.
And secondly, could you also talk about KPN's performance
Yes. The KTM exports to KTM markets has been doing very well as I've mentioned. It's now running at an 8,000 units per month level, up from some 3,700 of last year. And we are not being able to service the full demand because of the semiconductor shortage and the large Usage of electronics in these bikes, I would say we are falling short by 10%, 15 At least about 15%, I would say. We expect this level of performance to continue.
Okay. So I was questioning regarding the profitability as well. So that should also continue Around the same level?
So you asked about KTM or profitability, which one?
The profit contribution from associate, This is about 2 minutes. Yes,
mostly I would like to believe that This is a steady state profit that they are doing. If you look at the full year numbers, they have dropped in Q1, but they have recovered very well. So Q1, they have actually declared a loss. But for a full year, they are almost back to what they did in FY 2020 with their work on calendar year. So, yes, I would like to believe that it is reasonably steady state.
Okay. And sir, lastly,
could you also comment on the EV because
I'm sorry, there are a lot of people on the queue. We can't take it.
Sure, sure. I'll come back in the queue. Thank
you.
Thank you. I request all the participants please restrict to one question per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from the line of Chirag Shah from Edelweiss. Please go ahead.
Yes, sir.
Yes. My first question is for Mr. Rakesh. Sir, My question is for domestic motorcycle demand. If you look at last 4 years, the domestic industry in the sense Has been in a declining mode, we did around RMB12 1,000,000, RMB12.6 million in 2018, which went to RMB13.5 million in 2019 and after that We are getting around RMB10.5 million to RMB11 million range.
So how should we look at this demand? Can we scale that to the F 2019 peak Sumer or that was a slight abnormality and the normalized growth over last so many years that we are seeing Should we look at the current date? How should one look at because premiumization seems to be picking up, but the volumes are not going to be picking up The general expectation happened?
Well, I must say the audio was not Fully clear, but as I understood, you're asking about how we should look at how demand for motorcycles unfolds in India when And in the last 4 years, it has been continuously declining track. I agree with you that the last 4 years have not been good for the industry Because it has got hit by many things, if you recall. First, there was the PS4 transition and then there was the Costs of additional costs of insurance and then the BS VI transition And then of course, COVID has caused disruption, which means that we have Really back to 4 or 5 years ago as an industry. Basic fundamentally, The near term outlook is not going to suddenly swing things dramatically. We would be happy if we are back at Even FY 2020 levels.
But if you dive a bit deeper, I think the fundamental drivers of demand are still very much present. Some of these Huddles and roadblocks, the industry actually, the industry needs a little bit of a smooth A little bit of breathing space, a little bit of stability without either regulatory particularly Like ABS came under, CBS came under, many things have been happening in the industry. So because of the fundamental demand drivers, whether it is the Youthful population, whether it's the penetration of road All Aadhaar Card led penetration of retail financing, now I would say certainly There is a need for independent mobility. All these things when you put together, we definitely think over a period of 3 years, Demand should rise, but it will be a snake in the tunnel thing. It's not going to be a linear movement.
As we have seen, last 2, 3 years have been very, very disruptive. And hopefully, Some kind of environmental stability comes at today and that will allow the industry to breathe easier And achieve its potential, which I think is not yet fulfilled.
Yes. Thank you very much. So just a follow-up on this. On the new product or major upgrade, assuming this COVID scenario normalizes, Can you shed some light, how should we look at new launches or media upgrades or media platform change over next And are there any white spaces that you are targeting in domestic market?
Now we are thinking that this is not a one off thing. The pandemic situation is In maybe in a more muted form, but it's going to remain this way of life is going to continue. And we are accelerating our product program so that it recovers some of the lost ground of last year. And we are going to continue with our strategy of putting out products irrespective. Yes.
There was a thought in our mind that April May is not proceeding as well. Should we put out some new products? But then it's very difficult to time this now because there's so much of uncertainty. So we are going to be churning out. We've got a full Pipeline, I told described to you that there are 3 introductions which we have made.
Couple of There are absolutely new products like the CT-110X and NS-one hundred and twenty five, which expands our 125 footprint. You will see by in another, let's say, 6 months And within 6 months, we will be putting out newer platforms and newer variants, not just variants, but new platform. And this is going to be a very significant thrust for FY 2022.
And so 120 Need more expansion because Pulsar can do limited profiling. We need a different type of profiling in 125 cc to further take your market share 19%, say I have checked it by 40%. Is there a thought internally on those lines?
Yes, of course, because we are very, very encouraged by the response of the customer in expanding this segment. And you are absolutely right that one brand cannot achieve everything and particularly because as you know this brand is being drawn from The sports segment, so we don't want to obviously stretch it too much to cover all types of sub segments Within the 125 cc segment. So yes, we are very encouraged that there seems to be a very big potential For driving this growth in this segment, and we are going to be looking at Other pockets within the 125cc segment. We are also looking at building the 250cc segment Because we feel that it's the quarter liter class is something which the 150cc customer is ready to move to. It will take time, but Slowly and steadily, we are attacking that.
Thank you. Chirag, sorry to interrupt you. I'll request you to come back in the question queue for a follow-up question. Parasapans are requested to ask one question per Parasapans. The next question is from the line of Amin Hirani from CLS India.
Please go ahead.
Yes, hi. Good afternoon. Thank you for the opportunity. My question was actually on the Chetak. So it was just want to understand, you mentioned that the new orders were so high that you had to stop taking the orders.
So just want to get a sense in the cities that you are present today, which are as I understand 2, what is the kind of demand that you're seeing and what is the kind of capacity that you have In case over the next 12 to 18 months as we go into newer cities and as demand goes up, what is the kind of capacity that you have from your end to Supply to this demand if the EV scooter market really takes care?
Well, taking the capacity points, Our capacity is really determined by the ability of the vendors, which is really the international vendors to supply some components. A lot of these are on the electronic side. So We are not capacity limited in our immediate system, but it is from outside the system, But we are outside the country that we are facing issues. And more than issues is the uncertainty. We can get more.
We can get we are not getting the guarantees of continued supply, which is what is the reason why we are not Opening the bookings full throttle. On the demand side, It's 48 hours we have to prove it because we can't supply enough. So we feel that And this is at a higher level of price. You see, we hardly faced any cancellations in the last 12 months. So I guess the precise answer will be really known When we go full throttle with supply and exhaust what is in the pipeline and Make all efforts to seek more and more bookings, which will start to happen from July, August, September, I hope.
That's the time when we will see what the limits are. Right now, we are not facing any issues. We are wanting to Pick up our dispatches to 4 figure numbers very quickly in May, June.
Monthly 4 figure digit Okay, okay, okay. That's great. Secondly, just a question on the domestic motorcycle pricing in general. So even before the commodity prices increased, we had seen a significant price inflation because of BSO to BS VI. And At least initially last year, it seemed that the market was able to absorb it on an incremental basis and almost all manufacturers passed on the pricing in a very judicious manner.
Sure, it passed on the pricing in a very judicious manner. I mean, leaving the lockdown aside, Is there any sense that you're getting from the ground in terms of how much of a price hike the customers are able to take? And I mean is there a limit in your mind as to where does it become difficult going forward?
Well, I must say that we have one of the features of the despite COVID, the features of the FY 2021 outcome Is that the S6 related price increases have been digested. Before COVID and before we entered FY 2021, There was a concern regarding the thing, but and as I said in my previous comments, we have not seen a wholesale Down trading. The chief is that. In fact, I'm not just for Bajaj, but For the industry also, you can see these numbers in the CIAM report, etcetera. The cheapest variant are The ones which are facing the biggest decline and that is because that section of the customer has got Very badly, hey, whereas the customer above that in the top half of the demand pyramid Seems to be responding much better and is taking the price increases.
Otherwise, we there is The most expensive 125 cc which is there, why should that be the fastest growing? Of course, the proposition is strong, But it's coming with a price tag and the customer has understood it. I feel that the customer is going to Seek substantive value. They're not going to pay money for some paint and sticker job, but they want a substantive value. If the value is there, They will pay the price for it.
Is the takeout for us last year.
Thank you. Sorry to interrupt you, Mr. Amin. I'll request you to come back in the question queue. The next question is from the line of Kumar Rakesh from BNP Paribas.
Go ahead.
Hi, thank you for taking my question.
My question was more around 3 wheelers and especially in the electric 3 wheelers. So Where are we right now on building our homes product for that? And what is going to be our strategy in building out the fuselage? Will it be there a way we have done it for 2 years restricted to fuse city or we go across the countries and start cannibalizing our own product mix? So what is going to be our commercial strategy when we eventually start launching our new product?
Well, As I said last time also, the electric tubular is under development. The prototypes are being tested and we will put these out in the market. We feel that the business case like for like It's not very supportive of a movement from ICE to electric. If there is regulatory support Or if there is a subsidy support, then the matter is different. But like for like, If I was a 3,000,000 driver, I would not take the electric at this point of time.
But having said that, we don't think that we think that this equation will change Because it depends a lot on how the battery costs move and whether there is some outside support from the government, Whether in terms of regulation or creating a protected space for electric. So we are going to calibrate the expansion of our business with how the industry unfolds. Our primary objective is to be in the forefront, absolute forefront of building capability for this business. But our objective is not to go out there and sell an electric 3 wheeler at any cost. Do you want to be the most capable electric 3 wheeler and electric 2 wheeler manufacturer?
And if that requires us to do a certain level of business because this cannot be just here, because we will do it. But we don't see any reason right now, Primarily because of the business case, underlying business case, we don't see any reason right now To move the needle artificially from LA, ICE to electric. For example, we see the business case in moving the needle from 100 cc to 125 cc because we feel that it's Something superior for the customer and there is some better margin for us. And we will do all in our power to move the needle in that manner. But in Inertix's case, we will calibrate the response to how the market unfolds whilst investing heavily into building capability and being ahead of competition in that respect.
So Rakesh, just
for a clarification. So given that some of the unorganized players Smaller players have already created a large electric tubular market. We don't intend to compete with them in that market and also we don't expect a disruption by those players Detailing into the market in which we currently are?
So the market that they have created is in the lead acid Based battery powered 3 wheelers, This is an area after due thought. We have felt that it is not really worth competing in because it's a substandard Solution. This solution mushroomed more in response to 2 things And less driven by technology. And those two things were that there were artificial restriction placed on IC 3 wheelers In terms of permit, so people will not and second thing is the need for intra city mobility was exploding. And in this time, this ramshackle contraptions imported from China based on very, very poor battery Technologies have made an appearance and they are ferrying people around.
This really is not the kind of solution because We are not creating good assets, therefore, the drivers and the users. We evaluated that and we said that our strategy will be We'll be built around the proven and the better lithium ion type of technologies Rather than the cheaper lead acid ones, we have to just look at what has happened in China to the entire lead acid based Mobility industry and what kind of problems that has created for the country. We don't want to participate In making that happen, we're out here.
Thank you. Sorry to interrupt you, Mr. Rakesh. I'll request you to come The next question is from the line of Sonal Gupta from UBS. Please go ahead.
Yes, hi. Thanks for taking my question. Good evening, everyone. So just Rakesh to follow-up on Chetak, actually just wanted to understand in terms of the pricing Strategy, like you mentioned, you've taken a significant increase. I think there was a 15,000 increase and then there was supposedly, I mean, from what I on Ottawa Karat, there was a 28,000 increase.
So I mean like we seem to have had a very attractive price at 1 lakh rupees that has Sensually changed and also in light of like we are seeing some of the newer startups which are looking to come in the market with an aggressive sort of pricing. I mean like I just want to understand your strategy in terms of the space because also on the other side like while you've announced a new Plant for advanced manufacturing including bikes, I mean, we're not putting in a dedicated facility for EVs. So, Just putting all that in context, wanted to get your sense on how do you approach this pricing for EVs? I understand the volumes are currently very low. And therefore, obviously, it's not profitable, maybe it's not profitable even at the current price that you're charging.
But shouldn't we take a longer term view and see that potentially this market be $500,000 or $1,000,000 in 5 years and base pricing on that basis, I mean, how do you think about
Yes, sure. In fact, that is exactly what we should be doing. We should zoom out And we should take a longer term view and not just take a very short term view. If I today start selling the motorcycles at bicycle prices, The motorcycle market is going to explode. There is no doubt nobody will buy a cycle, people will buy a motorcycle, right?
But we are not doing that. I think it is we are not the complete player To decide the destiny of this nascent industry, I don't think anyone is. The key thing is that the battery technology, the battery cost, the cell cost are what is controlling The advancement of this industry. We are wanting to write that. Now to artificially Board ourselves onto something which is not in our control and try to do things just to expand the industry is not what we are going to do.
We feel that yes, over a period of time, the battery cost will come down and the industry will expand And we want to write that way, but those costs are not in that is going to be the Singular and fundamental driver of this industry, it is not range anxiety, it is not charging ecosystem. If the battery costs come down, Because acquisition costs come down, there are enough entrepreneurs in the country and elsewhere to set up charging systems And offer and rate to get consumers rid of this range anxiety. That will happen. We've seen it in PCU, Mobile unit charging, we've seen it in e rickshaw charging on roadside mechanics. That will suck up.
And the better thing is How the battery cost move? And we want to wait for that. We want to write that And we know that we can't wait for that to occur and then start our business. So therefore, I said we're going to be very aggressive In terms of capability building, but I'm not going to we're not going to take it on our shoulders as a missionary To go in the industry irrespective, let the battery manufacturers and the battery technologies do it.
Right. So just on that, I mean given that the government is giving a INR 10,000 per kilowatt hour subsidy, isn't that Substantially reducing the burden of the battery costs?
It is. But despite that, the cost the architecture is such But despite that, the initial acquisition cost is very high. And it's the same arithmetic for everyone. At our level of players is a very, very marginal difference, So little difference between what people are experiencing in terms of cost. That's what the comment I'm making to you is after factoring in the subsidy and let's also be clear about one thing That, the subsidies may not remain forever.
We all know the pressure the government is under And the subsidies may not remain forever. So the industry has to be able to deal over a period of time With the removal of subsidies and its impact on cost, price and therefore consumer demand.
Okay, sure. Thanks a lot, Rakesh. Thank you so much.
Thank you. The next question is from the line of Aditya Jhavan From Investec Capital, please go ahead.
Yes, good evening. Thanks for the opportunity. Just some clarification. Swamin, on the OpEx side, if you see on a sequential basis, there has been an increase, While the volume has come down on a sequential basis and typically discounting as you also alluded is relatively lower in Q4 versus Q3?
So, Aditya, in Q3, I earned INR 73.6 to a dollar, We just come down to INR 72.9 to a dollar. So sequentially, the realization has come down.
Okay. Okay. Fair enough. Now just the final question. Some clarification, in the comments of our strategy of the economy segment, you mentioned that we are pushing the customer up the value curve.
But what we have seen in the last year is that since we discontinued some SKUs in the economy segment, we lost some market share. And you also Alluded to the fact that the bottom of the pyramid is impacted because of the pandemic. So is there a thought process that Thus, the continued SKUs will come back and that will give us more power to get back to market share in the economy segment?
Well, we are going to continue to attack the economy segment based on upgraded products because This strategy of offering a similar product at a lower price, it doesn't work for us and it doesn't leverage The innate capability which we believe which we possess, which is around our R and D and our ability to turn out Innovative or let's say differentiated products, which can bring some kind of a proposition to even the economy segment, whether it is in terms of Dialing, whether it's in terms of comfort, whether it's in terms of safety, etcetera. So Even if when demand comes back, our attempt will be only to offer Better product at similar prices.
We have crossed 5 pm. So we will take the last two questions and then we will wind up.
Thank you. Sir, should we move to the next participant?
Yes. Two more questions And then we will wind up.
Thank you. The next question is from the line of Aditya from HDFC Securities. Please go ahead.
Yes. Hi. The steady set
of results in this quarter, I just had
a question that we are hearing of a slowdown in tractor sales And this segment is obviously very linked to rural. So how do you see the recovery in 2 wheelers this year in light of rural last year was a growth driver in that
Actually, rural was a growth driver Only in the period at least that was our from our prism, we could see that it was only, I would say, End of June, July, that period which is traditionally when it occurs. Otherwise, the recovery or the rebound which occurred, Apart from the metro, it very much was right across the country. I would concede that, yes, Delhi and Mumbai, the supermetro, This have a continued run of depressed demand. But otherwise, more or less, In fact, it did well. Towards the end, in fact, I would say that the really agrarian rural, rural towns We're not performing well.
It was the market down, the Mandis and those areas of rural, which were doing well. So even there, there are nuances. I think given the fact that there is a better monsoon, I mean, there is a reasonable monsoon expected. And on the back of hopefully better procurement prices, etcetera, We will see a repeat of the last year. It should be quite evenly spread out.
Okay. Thank you. Just another question on EVs. We've seen the GACER 450X, which is really, if I mean, what it could be The pulsar of the EVs, like you guys came in as a pulsar way back in 2002, pretty early and that's how our motorcycle story really began. In that sense, the 450X today is the fastest scooter around compared to in ICE and EVN.
It's really created a certain halo around it. So do you think we may lose mind share? I understand volumes are not there, but in terms of mind share right now it's all going to a startup. So how do you see that playing out?
Well, as the industry is very nascent right now for us to start Sub segmenting it and launching products for sub segments. But we deliberately took an opposite point of view. We felt that there were enough customers out there Who would be attracted to elegance, style And robustness, that's why an all steel body and very classic design scooter because we felt that was Closer home to what the consumer was experiencing, but as the industry unfolds and the Electric side becomes larger. There is nothing to say that we will not address Emerging sub segments, as you know that we, on one end, are collaborating very closely with KTM, to look at powerful to look at high performance motorcycles, it can easily be Platformed into the scooter space as well. That project is going on.
In fact, they're going to take the elements of The Chetan can try to see what they can do with it in Europe. So there is a very good collaboration going on, which addresses one end of the spectrum. You know that we have an alliance, we have an engagement with Yulu, which is into micro mobility, which is into these Sub 25 kilometers per hour, be it very, very light, short distance, 2 wheelers, that's absolutely the other end of the spectrum. So from a we are collaborating with them to see how we can manufacture design codes and introduce stuff at that time. So if you see from that end of the spectrum to the most powerful electric bike end of the spectrum, we are trying to Have a very broad interface and as and when it becomes makes business sense and becomes meaningful, we will sub segment the market and we will launch products.
Thank you. Ladies and gentlemen, we'll take the last question from the line of Ramod Kumar from Goldman Sachs. Please go ahead.
Yes. Thanks a lot for the opportunity and congrats on good set of numbers, Rakesh and Sawan. My question is on the same lines
on I think you've too
many questions on EV. But, Vakesh, just wanted to understand, there is a bit of concern in the investor community and even analysts that startups like Ola could Really end up disrupting the market of traditional volumes in terms of and the fact that the traditional mainstream OEMs could be lagging behind, Especially given the big announcements what they're making on charging
infrastructure or
capacities. So just want to understand your perspective because you're already dealing in you're Good response to change, like you have global presence. So you're doing both the things at the same time. So I wanted to understand How worried one should be from these kind of start ups? What's happening to this other space?
And whether the mainstream companies are Going to be kind of a handicap like what happened in the luxury car market globally on the EV side? Or do you see things differently?
Well, Pramod, I don't think That the 2 wheeler industry, which is us and if I may say so, my colleagues in other companies Are going to face a Kodak moment. I think all of us have been Educated quite well by the events of the disruptive changes, what's the consequence of disruptive changes and Having a myopic view of markets. We have to also thank Mr. Elon Musk and what he has achieved with Tesla opposite The 4 wheeler industry and those case studies are all staring us in our face. I don't think it will be out of For Myopia, that the existing industry will be caught in its tanks down.
I don't think that is going to occur. Yes. I'm sure our competitors also, I mean, our established OEs Certainly, we are very serious about the advent of the electric Business and the way it will transform, whether it is in manufacturing, it is at the dealership, spare parts, service, How to engage with the customer, what customers will value, all those aspects we are very, very alert to and sensitive to. We have an existing business. I mean, there are people who don't have any business.
So that's why they have to make dramatic announcements. They have to invest. I mean, we don't have to invest because we have the capacities, we have the people, we have the R and D. I mean, we started investing in the R and D 5 years back on electric, we can't churn out the Cheetah in 2020 Within a few months, we've been working on it 3 years prior to that. We've been assembling teams, Talking to vendor, so I don't think people will be caught unaware.
Everyone has moved past. Of course, some of the start ups are following a different business model And we will have to wait and see. I would like to say here that we will not cover that business model, which is private B. Balaji:] driven and etcetera, etcetera. But I would like to zoom out and I would like to say that the fate of this whole thing is not going to get decided in quarter, 2 quarters or 3 quarters.
This is a change which will occur over a period of time and that will be fought. It is the same thing like in scooter to motorcycles. So we are getting prepared for that. If there is a disruption, if there is a sudden Exposure, if somebody wants to see some eyeballs and all in a frantic manner, We will deal with that situation, but we will deal we would like to deal with it in a way which is more sustainable. And in the end, we win.
In the end, we aspire for leadership. So that is our viewpoint. We are quite aware that There may be a position in the marketplace of 2 different business models, ours and the private equity driven. But there are other factors also which will decide success and failure and this will have to be viewed over a period of time. But one thing I can tell you that certainly at Bajaj Auto, we are very clear and keen That we have to have top end capability.
And Rakesh, just last one. According to you, given the customer's preparedness and the cost curve the way it's expected to fall, what will be the Period where you think we'll see an inflection point on EVs, right? Is it like FY 2024, 2025? Where do you think is likely Inflection point for EVs in India?
It's a very difficult one to answer because a lot of it depends on battery cost. A lot of the battery costs coming down depends on how much of supply is coming on stream. Right now what is happening is not only current demand It's outstripping supply, but people are also placing future contracts, large contracts, and I'm talking about 4 miller manufacturers also were pleased to and they are slightly ahead on the curve in terms of the industry development of In that case, so that is driving the demand side, overall demand side now. Supply, It cannot increase linearly as you know, it happens in steps. And it has been a bit slow in expanding
Because there
are competing technologies, these things require huge investments and the big technology, packaging technology, cell technology guys Don't want to make don't want to be caught getting caught on the wrong side. Then there are things like hybrids and Fuel sales, etcetera, which are alternate technologies, which is sort of impeding supply coming on stream. Now this matching of demand and supply has to occur before the costs come down. Ma'am, if I take a poll of 4 as to what the consultants are saying, what different stakeholders are saying, It does appear that it may take about 3 years for a point of inflection to be truly reached where this thing will Acquire a very definitive momentum of its own. Till this, it will be more of feel and push and Somebody will just try to do something artificially and push the agenda along.
But generally, it is felt between 3 to 5 years Is when this is not Bajaj Auto view. Like I said, this is a poll of calls kind of a thing. But generally, people feel that in the motorcycle space or the 2 wheeler space, it may take about 3 years for the point of infection to be reached.
Great, Rakesh. Thanks a ton for the exhaustive response and wish you all the best, sir, and take care. Thank you. Thank you.
Thank you very much. Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to Mr. Soumyn Ray for closing comments.
Thank you. Soumyn here. Thanks a lot everybody for dialing in. As I say at the end of every call, Anand and myself, we are available and Sapanjeet, We are available for any questions that you may have. But I'd like to sign off with 3, 4 things that I would like to leave you with.
First, I think What holds Bajaj Auto in great step is our ability to mitigate our risk through diversification. As you can see, exports is coming To the party, in spite of all this pressure with domestic, we are still rock solid because of our mix of almost half Coming from exports and cattle across multiple countries. I mean, in a year like that, like what has gone by, in Latin America, we actually sold More to Wheeler than we did in the previous year. So that I think is a very important message. The next message I would like to reiterate is the dividend.
We came up with a policy of 90% if we have up to 90% if we have more than INR 15,000 crores. We had about INR 17,500 crores. We've announced almost 90% dividend at INR 140 a share. So that is how we would like to reward our shareholders. And this has been a concern a question which we have often faced and now we have replied it.
The last bit is around margin and I would like you to consider the facts. There is a raw tip which as Rakesh explained It's going to come. When and in what shape or form, we do not know, but that will be a clear bolt on. ForEx rupee is a depreciating asset. We have baked in the costs, but obviously the ForEx Depreciation will help us deliver.
Just to give you a sense, last year to this year, ForEx alone has added about INR 450 crores to the kitty Between FY 2021 FY 2020. So that's a big plate. Commercial results would improve and that mix will improve, which will give us further Headwind. So with this, we do have a tailwind. We do have a headwind, which is around the cost Increase in Q1 continues, which will be a dampener in Q1.
But in near future, I see our margins stabilize. I mean, all of this, one must remember that it is very difficult when you are sitting at 18% to manage headwinds. It's much easier to manage Edwin, 2021 is a lower number. So we have really stretched all our leverages, Procurement, our cost optimization, and that is how in spite of lower volumes, we have delivered a margin which is higher than last year. We continue to focus on margin, but yes, in the near term, there could be some headwinds.
But as I have said, between ForEx, Rock debt and CV volumes increasing, we should be directionally moving our margin upwards. With that, I wish all of you to be safe and thanks a lot for dialing the call.
Thank you very much. On behalf of Bajaj Auto Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.