Good evening, ladies and gentlemen, and welcome to Bajaj Auto's conference call to discuss the Q1 fiscal year 2022 financial results. We have with us today Mr. Akhil Sharma, Executive Director With the summary of the Sohmeen Rai, Chief Financial Officer Mr. Sanjeev Gharth, Vice President, Finance and Mr. Anand Nivas, Divisional Manager, Investor Relations.
My name is Aisha, and I will be your coordinator. At this time, the participants are in a listen only mode. We will wait for a minute till the question queue assembles and we'll start the reopening remarks from the management.
Good afternoon, ladies and gentlemen. This is Rakesh Sharma here. Thank you very much for joining the call. Unexpectedly, Q1 turned out to be a cumulative quarter, which was Not really expected when we were doing some forward looking in Jan, Feb and even early March. But thankfully, the pandemic peaked and started to recede though it still remains a concern.
Most of the country is now open with some restrictions on operating hours as you know. But since offices, educational institutes and public places remain only partially open, traffic is low and the restoration of Normal retails is therefore high in motorcycles and lower in 3 dealers. We are hoping this improvement trend will continue, particularly as the vaccination program advances. Even through the peak pandemic, which is very intense and stressed the country, particularly the North, Supply chain demonstrated remarkable resilience based on the lessons from the first wave And coordination with local authorities was also much better. Everyone has got now a playbook.
And this has allowed for continuity of operations while observing safety protocols. Hence, the supply side is generally ready to service higher demand levels. Some issues persist like container shortages and poor visibility of semiconductor supplies. Internationally, most countries which we operate in, in Africa, Latin and Middle East, have returned to near normalcy. So the situation in ASEAN and South Asia, Nepal and Sri Lanka, a little bit in Bangladesh is still difficult.
As you know, Philippines, in ASEAN, Cambodia, these are big markets for us, and they still remain closed. I hope you have had some time to study our Q1 results. I'll divide my opening comments into 2 parts. First is the highlights of Q1. It's difficult to compare this quarter with either the previous year or the previous quarter.
So I'll stay with just pointing out performance highlights compared to our strategic approach. And the second part is the near term outlook. As you know, we have been driving the business on two fronts, ensuring that we have the agility to recover in key segments and overseas markets as the markets return to normalcy. And second is to Grow share and margin by driving upgrading or premiumization within segments and across segments, both in domestic and international. So coming to the highlights of Q1.
First, the Domestic Motorcycles Business Unit. Here, I would like to point out that our Share in 125 cc plus segment of the top half, almost top half, which is 45% of the demand pyramid, increased from 22% to 25% in Q1, a clear number 2 position in this very, very important segment. Now this segment, the 125cc plus segment accounts for almost 60% of our sales, while in the industry it only accounts for 45%. Now this growth has been driven by Pulsar 125, where we have launched yet another variant in May, which is the Pulsar 125 NS, the most stylish, Powerful and the most expensive 125 cc in the market. It is met with a good reception and along with the other 125 cousins, It has driven our 125 cc market share to an all time high of 28%.
It is 125 NS has also contributed significantly in lifting the EBITDA margins in that class. In the bottom half of the demand pyramid, which is the 55% of the industry, we continue to upgrade the customer Through different ways, always conscious that the customer here is more price sensitive. So from KS, which is kick start to electric start, from 100 cc to 110 cc, from gum breaking systems to disc breaking systems, offering the customer very accessible and small step upgrade upgrade opportunities. Here too we launched new models, the CT 110X With a very bold style, met with a good reception and platinum electric start, which is making electric start accessible to large number of entry level commuters. Both these have contributed in driving our growth and share at the bottom half of the pyramid.
At an overall level, market share in domestic business increased by 1.5 percentage points. And I would say that the quality of market share because of the Share of the differentiated products, I would say the quality of market share has also improved and both are in line with our strategy. In the domestic TV business, the 3 wheelers returned to normalcy, which has commenced From October last year and scheduling, we were adding 1,000 units per month to the sale Was interrupted in April May because of the severity of the second wave. However, the retail outcome of June is heartening. It is much lower than our previous FY 2020 benchmarks, but it was much better than expected by us even in June, And we hope the trend will continue into quarter 3, and we'll see a slightly faster recovery than we experienced before in last year.
However, even though the volumes were lower, but there is an outstanding achievement here secured by the business unit. And that is that not only are we an industry leader by a big margin and we have always been leaders, but the margin The competitive ratio is now quite strong. Now we have achieved leadership in every single segment, the Small passengers, a big passenger, cargo, diesel, petrol, CNG, whichever way you cut the 3 wheeler market, Bajaj Auto is a clear market leader. Now this puts us in a very good competitive position to take a disproportionate share of the recovery as it unfolds. On the export business, the exports is now Continuously breaching the 200,000 per month level mark and it continues to perform robustly despite drop in sales in ASEAN, Where Philippines, it's a very big market for us.
We have the number one position in Philippines. Cambodia, which is a huge 2 seater market for us Uganda, which is we've got a 19% share over there. It's a big market for us in Eastern Africa. These are high volume markets, But we suffered a lockdowns and a huge drop in retail. But despite that, Exports has come in with a 200,000 plus levels.
Quarter 1 was our 2nd highest quarter ever in our history of exports. Our global market share is therefore estimated to have increased sequentially by 2 percentage point in motorcycles and by 6 percentage points in 3 dealers. Year 2, the share of premium motorcycles, which is Kulsar and Dominar brands, moved up from 19% in Q4 to 21% in Q1, The Babanar 250 making its appearance in many high end markets like Turkey, Argentina, Colombia, etcetera, and Mexico and getting a very, very good reception. We now get over 85% of our revenues from markets where we are number 1 or number 2. This is an important metric as I've been pointing out, we monitor it continuously as it indicates pricing power and our ability to manage competitive threats.
Indeed, it is because of this position that our pricing action to recover costs has been ahead of all the other Indian and Chinese competitors, Quite ahead of. So the recovery of PAS has been pretty good in these markets. Our exports to KTM continue to grow at a significant pace, 48% sequentially, followed by demand in the developed markets of North America, Europe and Australia. Some other highlights, we faced strong headwinds Of cost increases, which was known, about 3.7% of this, we could only recover About 1.5% keeping demand sensitivities in mind, the backdrop is really of economic hardship and a fragile recovery. So the price, the cost increase recovery needs to be calibrated with this in mind.
And of course, we have to keep close watch on competition. But we believe our price increases both in India and overseas where ahead of competition. Margins were further hurt by the loss of operating leverage due to lower volumes by about 1.6 percentage points. This was a little bit of a surprise because when we were entering quarter 1, We did not realize that the 2nd wave would be so severe, particularly the loss which was experienced. This generally has a mini season because of marriages.
And that cost us about 1.6 percentage points of EBITDA. However, Slightly better ForEx realization and better product mix mitigated these losses by about 1.5 1.3 percent And this explains the difference between Q4 and Q1 EBITDA of 2.5%. Other highlights was Cheetah bookings that opened in Pune and Bangalore.
However, we had
to close them in 48 hours as there was a very strong response, and we felt we may not be able to satisfy the complete demand. Supply chain visibility on some of the imported components has improved, but Still, we are not getting longer term import certainty, though we see a strike rate of up to 1,000 units per month, hence further expansion is being planned but cautiously planned. We have announced entry into 4 mid tier towns, Nagpur, Aurangabad, Mysore and Magalom. Now coming to the near term outlook in domestic motorcycles. With near normalcy approaching in most geographies, we expect better retails compared to last year and last quarter.
However, this may not translate entirely into billing because as compared to the same time last year, stock levels are higher this year. Last year, stock level in the channel were lower due to the transition from BS IV to BS VI. And when the pent up demand released itself in Q2, billing was not only servicing the higher demand that was filling up the stock in the channel, so billing was higher than retail. This quarter This year, in quarter 2, we expect billing to trail per retail. Hence, we expect a flattish Q2 compared to last year.
For us, performance will continue to be driven by the 125cc portfolio as well as some of the newer models in the commuter segment, which where we are offering little upgrades. We have repriced the Dominar 250 As a strategic investment to expand the quarter meter class and we will be introducing We have 3 new models in the store segment as well as the commuter segment, which hopefully will inspire the customer to upgrade, which is in line with our strategy of taking the 100 kick start customer to electric start, the drum customer to disc brake systems, The 100 cc customer to the 110 cc, the 110 cc customer to 125 cc, the 150 cc customer to 250 cc. We thought that it was important to make the 250, which you know is going to play small, but it's our investment to expand sub segment. Domestic 3 dealers, we expect a steady improvement. We should be in the tens of thousands, and Q2 should be substantially better than Q1 and also Q2 last year.
We anticipate the need for some close listening with financiers to ensure that the recovery is supported by the availability of retail finance, and this is a critical success factor in ensuring that there is recovery in this segment. Internationally, we will continue our momentum and expect to hold the current performance level steady. If the COVID situation improves in ASEAN and the few other countries which I've pointed out, then this would be a bonus. But it may occur even if it improves in August by the time we see shipments that may occur in September or October. On the cost front, there continues to be material led cost increase of over 3% point new Pricing announced in early July both in domestic and overseas markets recovered about 2 thirds of this increase, but there is still some work to do.
We will evaluate the further scope as the quarter progresses, and we understand how demand is rolling in. However, a better operating leverage, we certainly expect Q2 to be better than Q1. Continued currency support and an improving product mix is expected to mitigate the cost increase situation that gets left over from the price increases which we have taken. With this, we can now open the floor to Q and A. Thank you.
Thank you very much. Please go ahead and open the question and answer start in June. Participants are requested to use handsets while asking your questions. The first question is from the line of Yogesh Agarwal from HSBC. Please go ahead.
Hi, thanks. Hope you guys are doing well. Just I have Rakesh, couple of questions. Actually, on your second press release on EV, the spend on mobility, While it's heartening to see spend going up there, in absolute terms, it's still quite small. So firstly, can you talk about the plans where this investment is for R and D or is it for manufacturing?
Is it to develop the supplier base? That was one. And secondly, you talked about JTECH. Is JTAC eligible for same benefits now? Because it was a bit surprising that most of the other EVs are eligible and Chetak wasn't earlier, so what's the update there?
Thanks.
So this is about the new EV conference.
Yes. So I do not entirely grasp your question, but I think you're asking about the announcement regarding the formation of the 100% subsidiary for EV. I think at this stage, you should read it as a strong signal by the company in this announcement of ensuring that we have continued we are a successful company in 2 wheeler and 3 wheeler mobility. We want to continue to be so irrespective of whether it is ICE or whether it is EV. We recognize There is a need for agility.
There is a need to hire better talent, deploy it in a different manner and to be possessed of a single-minded focus, which sometimes as a division and a large company can get diffused. We want to therefore create the corporate space to pursue aggressively our ambitions in EV. The exact playbook is being worked out, but it will have both substantive operations. I mean, all the operations Relating to EV will be part of this company. And as and when the playbook is Clearer and we have baked the whole story, we will be happy to share it.
Now when it comes to Chetak, We, JTEP's application for FEAM is certainly been is with the appropriate authorities, and we expect that to be cleared anytime now. The reason for Chikat not having the same benefit thing now was because we preferred to Be with a certain localization configuration, which while it took more time, but it allowed us to Move to that configuration in one step instead of trying to do 2, 3 steps. And we just felt that from an operating point of view, It would be smoother. And therefore, we did not have we did not go in for the same benefit. However, we decided consciously to not let the customer suffer in this and the company sort of stepped in and provided and filled that gap, which obviously when we start getting the same benefit, we will withdraw and the same benefit will go directly to the customer.
So it's very much on the cards now.
And just to add to what Rakesh said, Soumen here. Ravich, we have started this company with authorized share capital of INR 100 crores and a paid up share capital of INR 5 crores because you need some money to do the formalities. How much will be the investment? What we will do? That we will share as and when, as Latesh said, the playbook Matures and we decide what all to do and what to do and it is a situation to be communicated to you.
But suffice to say, we really do not open a company, we will use high flows and run the electric vehicle business. So on this page, just let's wait and watch. We'll come back to you when we will have Sushun to share more details.
Very well. Thank you so much. Thank you.
Thank you. The next question is from the line of Vinay Singh from Morgan Stanley. Please go ahead.
Thanks team for the opportunity. Just a follow-up from the comments that Soumy made. By when do we expect more details on that? Because when we look at competition, they've announced buy ups or they've already announced their CapEx target. By when do we expect Bajan to make these announcements?
So I really do not know me just telling you a number of Either INR 200 crores or INR 2,000 crores, how does it make a difference? Because unlike some of the other people, we don't need to raise money. We are sitting on INR 15,000 crores of cash. So setting up a factory, we don't need to go to people to ask for either debt or equity. So as I said, we are preparing plans.
We will decide how things happen and we'll inform. What I don't want you to miss out the fact [SPEAKER SRINIVASAN VENKATAKRISHNAN:] But an organization which did not have any domestic subsidiary has chosen to focus on EV and start 100% domestic subsidiary. That is the first step. So let's wait and watch this space. We will certainly understand the interest And obviously, a company of our size and stature has not just gone in with its eyes closed, just generally to see what happens.
P. Vijay Kumar:] Maybe what? There is a reason why we are not sharing so much. We'll share as and when things cook up, they are cooked well and they are mature, which is worth sharing.
Right, right. No, no, the reason we ask is that CapEx tends to lead product development, which tends to lead model launches. So just hoping that the company is aggressive enough on this segment. Yes. So that yes, Bijan, that kind of effort is already underway.
And we have a huge R and D apparatus. And we are collaborating with KPN, we are collaborating with vendors. We are studying the market in micro mobility segment with we have made an investment in Duro and we are looking at their vehicles. We are looking at high performance electric motorcycles and everything in the middle. And there is a substantive R and D effort already underway.
See, we feel that this Whole manufacturing investments, which in the past people have been talking about and which has been stoking some kind of an excitement, frankly speaking, Passes us by because we don't get too excited about it because we set up these plants very, very simply and easily. We announced some INR 600 crore investment just for KTM triumph and other high end bikes of Bajaj a little while ago. So it's not a very, very big issue in our minds. We have the resources. We have the engineering capabilities.
We don't think that is something which is important to stand up and really start talking about. Yes, I agree with you that what is more important is what will be the product portfolio, how we will engage with that customer. And on that, we are writing the script. And when we can share, we will definitely Share our plan. But right now, suffice it to say that there is a huge amount of focus internally in this area, and We are getting into a position so that we can move very nimbly
here. Just to add to what Rakesh mentioned, what is not visible because we are a INR 30,000 crores company. So whatever INR 300 INR 400 INR 500 INR 500 INR we spend on R and D is not feasible because R and D is a lot of manpower cost, people cost. We have a 1400, 1500 headcount R and D. So a lot of so when people say I am putting CapEx on R and D, Some of these expenditures are revenue expenditure for us.
It is already baked into my P and L. It doesn't become so obviously visible. So essentially what we need to spend is on putting up a factory. On R and D, we do not need to spend like $50,000,000 or $100,000,000
Right, right. No, I take the point. It's very encouraging to hear always. As you are aware, there is a lot of investor discussion on this, that one and coming out to the gasoline segment, which Later on became very competitive and became very difficult for companies to enter and establish themselves. In fact, Jazin Bajan often talked about that new to strategy doesn't work.
So the only fair is that if some company is very late in launching electric vehicles, then that segment will also get a little commoditized. So it may be difficult for latecomers to establish But nonetheless, we'll watch for updates from your side. My second question is on the gross margin side. How do we see gross margins moving from here on? Because It's most likely that the domestic share will increase in the overall mix.
Its growth will go down. And in that sense, Where do we see, but at the same time, we will have 3 wheelers driving? How does the management look at gross margins moving from here on?
So I'll give you two answers, Vinay. I think and this is a question which will be there in the minds of lot of people, so I'll take a couple of minutes. So there are some headwinds and some tailwinds. I'll first tell you, Jim, and then Gila will show what do I see as a net of that.
The first tailwind that we
will have is hopefully this quarter, The operating leverage will come back. I will not be a INR7000 crores per quarter company, I will become a INR9000 crores per quarter company. So clearly that leverage comes up with improved EBITDA, not gross margin. On gross margin, We have, as I mentioned as we have mentioned in the press release, we have an under recovery between cost and profits. In Q2 also, we will have an under recovery.
So the cumulative under recovery will increase From Q1 to Q2. Having said that, the only good thing that can happen is if there is some ForEx, If the rupee depreciates further, we will get some more money. The mix will tend to get adverse, you're absolutely right. But As Latesh mentioned in his opening remarks, let's wait and watch how much because as of now the pent up demand coming back has not been as fast It was last year. So we have a reason how the mix played out.
But directionally, will the margins Possibly be a little softer. I really do not know, but we have to bet between better or softer and possibly best around being softer.
Great. Thanks a lot, Swamin. That's really helpful. I'll come back in the queue.
And I mean just to end the conversation, just then the question would be will the industry now come down to this 15% range of EBITDA? The answer is no because clearly at these levels of steel prices the near term steel demand will not get impacted but the longer term steel demand We'll get impacted. For example, there have been articles around that builders are taking up prices of their flat by 10% for new bookings. So water will find its own level and steel prices will unwind. But from the temporary period, yes, we have a problem.
Certainly, in industrial where steel and such molecules are the last part of the product. Thank you. We'll move to the next question.
Thanks, Manav.
Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead.
Yes. Hi, sir. Thanks for the opportunity. And Rakesh, sir, thanks for the opening comments. They answered part of the question.
On EV side, I just wanted to understand from you what is your thinking on how Electrification will evolve in scooters, motorcycles and also 3 wheelers. How fast Do you think it's going to be? Do you think that the recent government actions in terms of subsidies which are coming to could accelerate the shift towards EVs in all these segments.
Yes. So relationally, I think it's very clear that the industry is headed towards more and more of electrification. But in spite of the heat and dust which is being churned up Over here, the transition will not occur suddenly All immediately. India is a complex country. India is a large country with a lot of diversity.
Even if you take developed countries for the 4 wheeler category, whether it is the U. S, it's Europe, Australia or Japan, You have to just see the progression or the penetration of EV. Yes, of course, direction EV is the world is headed that way, but it is going to be a gradual transition. Therefore, somebody commented on 1st mover advantage. I don't think the jury louts in whether there
is a first Mover advantage or a
disadvantage because the consumer is going to evolve, the technology is going to evolve and you have to harness All right. So I believe that if I take the consensus of consensus, it's about 3 to 5 years where we'll start to see It is becoming a significant portion of the 2 wheeler, 3 wheeler space. A lot of it rests. The government has shown its hand by backing it up. But Still, the acquisition cost, there is a gap between a substantial gap still between the ICE scooter and the electric vehicle scooter.
Now government is plugging up part of it, but still there is a substantial gap. Yes. Some people will have the ability to plug this gap further by using Private equity money and all that, that's fine. It will help towards evangelizing the category. But it will take time for it to resolve because there is a second issue, which is a second issue in my mind, but nevertheless, it is there.
It is about the range anxiety and the anxiety of adopting a new category. One point which I want to emphasize, which has been a very, very important point in our structuring of our planning is that you don't want to give a bad experience to a customer Who's standing in the front of the queue to convert from ICE to electric, he or she should not feel that they'll be made a sucker out of by having operating problem. So the ability to give a friction free Smooth operation to the customer, the ability to ensure it is very well supported, The customer is very well supported. Every customer is not digitally savvy and cannot work out the touch screens, etcetera. At that time, The company has to be there, present through its service network, service people and engagement with the customer with systems and processes so that the customer is not singed and you get positive word-of-mouth, not just for your brand, but for the electric category.
I mean, if I We don't want this to get stuck because we have faced this, for example, in developing the 3 miller category in many Parts of Africa because we couldn't supply the spare parts. We damaged the category for a long time upon telling you their names of the country, but we have gone through that experience. So I see that this is a very, very important. It's not just about giving the cheap price and throwing some 2 wheelers And the world is just waiting to convert. They may buy it, but there may be a problem later on.
So I think that all these things when you roll in, What kind of experience the customer will get? How does costs and prices will move? Petrol prices are moving up? I definitely see a 3 to 5 year period when the transition will occur. And this is the period where we want to make sure that we have a strong customer connect, we have strong customer understanding so that we can segment the market off of proper products back up with proper service.
We feel ultimately the game will be back to style, design, performance, price and all of this packaged under a trustworthy brand.
Thank you, sir. Very detailed answer. Secondly, on exports, could you just comment, we've seen COVID cases rising in some of the nearby countries and also some countries in Africa. So is the demand outlook Still similar or is there any significant change from that 2 lakhs per month kind of number? Also you've talked about container shortages of late.
So Is that still continuing or has that resolved?
So the like I said in the opening remarks, our current estimates Based on how the markets which are open right now. And like I said, the COVID is a big problem Still in ASEAN, retail is very badly impacted in Philippines, Malaysia, Thailand, Cambodia, Myanmar. Out of this, in the ASEAN countries, Philippines is a very important market for us, both for 2 wheelers and 3 wheelers, Cambodia for 3 wheelers. And this is dampening the performance to some extent. Also, 1 or 2 countries in Africa, mainly Uganda and I think a country odd in Latin America is there.
We are still facing these problems. So but the performance that's why is quite exemplary because it is despite these two markets holding us back. So hopefully, the pandemic recedes in these places, we'll be able to strengthen our export performance further. Container shortage is now way of life and I mean it is at this point of time, Yes. There are always slippages, but it is affecting us in terms of taking up a lot of management time.
And secondly, increasing the cost because the container goes up from $2,000 to $10,000 to Cambodia to Colombia and you're shipping 100 and 50 vehicles. You can see per vehicle There were big incidents, of course. We use 33,000 containers as a year, so it's a big exercise for us. But now it's the way of life, we are just learning to manage with it.
Okay, sir. Thank you so much.
Session from the line of Rakunandan ML from MK Global. Please go ahead.
Thank you, sir, for the opportunity. A couple of questions. Firstly, on the electric side, 3 wheeler operator seems to be sticking to CNG vehicles instead of EVs, possibly considering range or charging anxiety. What Factors do you think would be necessary to trigger a shift towards electric? Also any time line for the 3 wheeler launch?
Yes. So that is a very good observation, and we have been struggling to establish a business Yes, for electric vehicle opposite the CNG. The CNG footprint in the country is increasing at a very good pace. Our market share in CNG Our between 85% to 90%. One of the big drivers for even this little growth which we have seen between April, May, June and now what we are experiencing It is driven either by the conversion of diesel vehicles into CNG or by cargo vehicles.
And this drive of the government To build the network of CNG, we have a very significant drive. They are wanting to open 9,000 pumps By 2025, today there are 1500. Every addition of every 100 pumps pump stations, I mean, Creates a market of 10,000 3 wheelers for the industry, all of which 90% comes to Bajaj Auto. That's the Recently, so it's a move we are completely backing. It's a very clean fill.
There is a Sliver of advantage for electric 3 wheelers, if at all, depends on the electricity price in the state. But and customers, if the pump is running good pressure, etcetera, when the drivers actually prefer CNG. So it's not going to be easy to change CNG powered vehicles, which are going to only increase into 3 wheeler. In respect to that, we are going to put in a similar end, which is under testing like I've been saying. It's running many parts of the country.
And hopefully, we should be able to launch it by end of the year early end of the calendar year.
Thank you, sir. My second question to Somin. A couple of things actually. They're helping media reports Getting possible increase in outlay for ROT DEP scheme, any thoughts on when these export incentives could recommence because that can be a margin trigger? And secondly, employee cost was on higher side at 3,600,000,000 compared to average of 3,200,000,000 last 4 quarters.
Any one offs and what could be the sustainable rate ahead? Thank you. I'll answer the second part first.
So if you see last year, you would see that in Q3 and Q4, Our NPI costs have come down. So we have changed certain terms of reference for retirement benefits, which has led to certain reversals. So the 3.06 crores of March of Q4 of last year is more like a 3.30 kind of a number, 3.25, 3.30 kind of a number. Now that We obviously last year there wasn't increments which were given. This year we have announced our increments and it is effective for 1st April.
Also what has happened is during the pandemic, obviously, the number of deaths have increased compared to what it was earlier. And we have a few insurance policies which covers employees on the time of their untimely debt. The premiums of those policies is really short through the root and I'm sure you will keep on hearing this more and more in every analyst call irrespective of industry. So these are primarily the reasons. You can take the current rate as a steady state rate Yes, given increment, I mean the reinsurance will not be there, something else will be there.
So you can consider, I don't think you would want to bother for
the last 4, 5 close. This is a
steady state rate that we can issue. On the first question, if you know, you tell me. I'm looking at Rajesh and asking him if it can be given. We can only say yes, it will be additive. Yes, there is a cumulative benefit which is waiting from 1st of Jan because that is what the announcement was.
However, I am next to date last year's NEIS and so on and so forth. But I don't know Well, so I don't have an update.
Thank you, sir. Thank you so much and let's hope for the best.
Thank you.
Thank you. Our next question is from the line of Jirak Shah I'm EV Wise. Please go ahead.
Yes. Thanks for the opportunity. So many first one housekeeping questions. If you can check the book revenue and the revenue realization public quarter. We know that, so we have kept it
Well, the export total revenue was about INR 4,500 crores. And in dollar terms, what we sold selling dollar, it was about INR 580,000,000
Thanks, Parekh. So, Amit, there is a follow-up on the USB realization. Sequentially, there should have been benefit for us, right, in the quarter Rob, at least 40, 50 bps on account of better rates has materialized And how do we look at it going ahead? What is the broad range forward that we have?
So Chiyal, I cannot give you the numbers of what is the rainfall that we have. But if you look at the press release that we have given, We have mentioned that we have benefited because of the ForEx rate. So we have benefited closer to a percentage point, 1 pp Because of ForEx.
Okay. So and if you look at the last quarter in general, the view of
And this is one, this is Vis a vis Q4 of last year.
Yes. Sequentially, yes. Sequentially. Similarly, if you look at the Q4 of last year sequentially, we are hoping that worst of the commodity pressure you would play out in Q1. But if I understood correctly, you are further indicating the 3 percentage points raw material cost pressures happening in Q2 also.
Is it the right address, Sandy?
So I do not know the percentage because things are still fluid because conversations and negotiations are going on. But will we see a further pricing material cost increase in Q2? The answer is amlty vocal, yes. This is not something only with Bajaj Auto. The entire industry will see it and that is why you see there is a price increase which has happened in almost All the players, so effective from beginning of July.
So everybody in the 2 years or industry and also if I remember correctly, teams are industry We have taken up prices at 81st July, which is because the cost increase impact was not entirely felt. So last time when we spoke, there was a hope that Q2 will be muted. The reality has not turned out so. Q2 is as strong and
as aggressive as Q1 was,
incremental.
If things are normal, it seems stabilized where they are. Probably this is the last quarter where there is huge under recovery and from year on, in Shivamalik?
I just mentioned that in the previous call. So I have now dropped from a INR9000 crores quarterly top line company to INR7000 300 crores. Once I go up to at least everything goes normally, which is what the view is sitting today. I should get back to INR 9,000 crores a quarter On an average.
I was referring to this commodity pressure and the past 3 slides. Okay.
So commodity pressure, Q1 there is under recovery, Q2 there is under recovery. So cumulatively there will be an under recovery. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Now will steel prices go up further? Frankly, I have no idea. In 9 months, Steel prices have gone up by more than 50%.
I don't think I've ever seen in my 23 years I have never seen The commodities grew up by more than 50% in 9 months, other than oil. So I really cannot comment with the Q3 how it will be because today Q3 we have 0 visibility. That's
Yes. And one question for Rakesh. Can you update anything on new models that you intend to Maybe a big platform upgrade in many of the brands because there were expectations that next 12, 15 months, A lot of action is likely to happen from Bajaj Auto's table on the platform change or maybe even there is a buzz of a new brand launch in 125cc category. So if you could share some more light, it would be helpful. Well, You will see, what, now September onwards, substantive A new platform and some substantive upgrades Right till in the next 12 months, there is a calendar where you will continuously see this, both in the Sports and the Commuter segments.
In the next 9 to 12 months, we don't anticipate putting in a new brand. These are the house within the same brands, which of our existing portfolio of brands.
The next question is from the line of Jimesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Hi, Arjun, can you share your U. S. P INR rate for the quarter which we realized?
About 74 in a quarter. 70 4 in a quarter.
Okay. Second question, talking to this new subsidy, would we be shifting this new Capacity which you are putting of INR650 crores into this or this will be purely only? INR650 crores?
The Chatham facility is dedicated to high end sports bike.
Yes, catering to KTM Husky
and whenever we start manufacture of Triumph, Triumph. That facility has got nothing to do with electric vehicle as of now.
Okay. Okay. And last question pertains to cleanly as well. So coming to Rakesh, We are indicating some bit of positive traction in the cruiser side. However, Bajaj Finance on their call a couple of days back indicated That's stress on the fuel life front, I mean almost 19% G and P and in fuel life fuel life portfolio largely driven by fuel life.
So how do you see The financing side impacting fuel recovery.
Yes. So A lot of
the impact is from the old book. What I'm really encouraged about is the progression which is taking place before the 2nd wave and then off late in June, etcetera, where with the new financing norm Still, we are seeing for example, I told you, we were expecting 5,000 retails in June, but we ended up with 7,000. In middle of June, we were thinking we'll hit 5,000, but it's a and these are retail. This has got nothing to do with stock. And we have slightly upped Our forecast to the plant for the month of July and which till now is tracking pretty well.
Now these retails are occurring with different financing norms. A lot of the hit to the financial changes from the period of before the first Murat and What happened? What was it? Aftermarket, the Murat, etcetera, which, of course, the financing companies are to now factor in, And we have to work very closely with them through our dealer network also in attacking the live segments, in Helping them with all the information which they would want to assess risk much better. And it can be done because there are buyers which are coming back.
The financing companies themselves Are very keen to improve the denominator also. So I think they are a critical success factor, but we will have to work closely with them in managing and supporting this recovery. So you don't expect financing as a stumbling block for recovery in seniors? No. I don't think that financing will withdraw Because there is including Bajaj Finance, there are a lot of financing companies which are there, out there in the free.
And but yes, the way we get financed, there may be bottom slicing of the more risky ones. There are You know, distribution partners for financing, those might get hit and stuff like that. But financing probably after this will become more mature and more robust, But it will be in play, and we'll have to work closely with that. Now there are critical success factors, but it's not a 0 one situation. Sure, sure.
That's interesting. And just one clarification, you've talked about the CNG ramp up. So for every 100 pumps, you said there'll be 1,000 For every 100 pump stations, there will be 10,000 Amit, this is a thumb rule. Somewhere it can be more, somewhere it can be less depending on the Size of the pump and a lot of there is an issue about how much pressure there is and all that. But yes, it is So what happens is that when the pump comes and the CNG is a clear INR 1.25 per kilometer better than diesel.
So what happens is if I'm owning a diesel vehicle more from, let's say, a competitive brand because their competition is You should be slightly better in diesel, and it is fine for about 3, 4 years. And I see another guy who's I mean much more or saving much more because we got on to PNG. There might be an acceleration. I might not keep the old diesel vehicle For 5 to 7 years, I might just change from the diesel vehicle into the CNG vehicle. And these vehicles then get collected And they are resold in markets where there is no CNG as secondhand vehicles.
We are seeing this kind of a pattern. And then they come to us. So it's a so wherever the TNG pump comes, it creates a very good opportunity for us. It's on an annualized basis, which I said.
Thank you. We would request the current participant to please come back in the question queue. The next question is from the line of Agitam Akaria from H. C. Bank.
Please go ahead.
Yes. Hi. Just wanted an update on the Triumph JV, where are we in terms of time lines for the launch? So let me just correct you. It is not a joint venture.
It's just it's an alliance. We have it's a Strategic alliance without equity participation. So this partnership As actually got pretty hit by COVID because travel was not possible. And we are in this age of Having made prototypes and it requires physical presence to collect the prototypes, the clay models, then the prototypes, this whole process is taking time. We expect by the probably towards the end of FY 2022, 'twenty three to present the products In the market.
So there'll be a delay of about 6 to 9 months based on what you're saying?
Yes, yes.
Based on what we had indicated earlier. Yes. Okay. Just a second question, sadly, broader one, you have mentioned that the recovery in 2 wheelers is more K shaped with the bottom of the pyramid customer being impacted. Do you expect this to continue?
Or do you think now with COVID unlock happening, things will change? See, in the immediate term, I see that in the rush of the pent up The appetite relieving itself, we will not be able to separate the noise in the system. But once it settles down, I see that the bottom section of the society has got considerably weakened economically Because the self employed people, the tradesmen, the people working in restaurants, bars, etcetera, they have The savings and all have got quite diluted, and we are seeing that there is a lot of business of purchasing power over there. The salary class and slightly better offer come out almost unscathed from the pandemic Because there was earlier a lot
of fear that people will
be laid off, salaries will be reduced. So there is not so economically, They are a bit they were not as singed. And secondly, the security or fear of job losses sort of disappeared. So because of these reasons, I feel that the upper half of the demand pyramid or the upper three quarters of demand pyramid We'll probably continue to do better in the, let's say, next 12 months. Forget the next 3 months, that will be a lot of pent up demand.
And the bottom quarter or bottom third is going to drag the recovery of the industry a bit. Got it. Thanks so much.
Thank you. The next question is from the line of CRM Jain from HDFC Mutual Fund, please go ahead.
Yes, thanks. So my question is
on your new subsidiary. So When this new subsidiary gets created, then the entire R and D structure of your, I mean, electric mobility, which is sitting in the Bajaj Auto. Will that get transferred to this entity? Or I mean, it's still not clear?
So, Pravin, as we have
said, we have said whatever we could in the press release. It's a very evolving space. We are adapting to changing scenarios. We will come back to the investor fraternity and media at large about when we are in a situation to share what we will exactly do in the new subsidy. I understand that the need of waiting details, But I'm humbly submitting that at this point in time, we would not like to share.
Sure. Okay. And just on the project development cycle. So if I say from, say, design to the launch, if the Ice engine motorcycle or ice engine scooter was typically taking, say, 1.5 year or 2 year. So what will be the commensurate launch and in the sunset design to launch period for, say, electric scooter from your point of view?
Pravin, this is a question which I don't think can be answered because there are multiple things.
One way to look at it
is, if that battery technology that we are using in 1 is immediately Retrophitable in the new model when it comes down. However, if you are looking at different performance measure from the newer vehicle, then a new battery has to be configured. But I would like to believe that at this point in time, it would be [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Directionally longer than I'll take. But if the battery interoperability is P. Vijay Kumar:] Established between 2 innovation models, then the time can be cut down.
Can I give you a 3.5 year or a 1.5 year? The answer is no.
Okay. And in terms of your I mean, you said there is around 1500 employees in R and D side. So is the R and D team joint? Or is it I mean both the teams are different? And is there any hiring different hiring policy for
Just to quickly, R and D is 1 consolidated R and D. It has got horizontals and verticals. It's organized on the basis of technologies, and it's organized on the basis of product segments. So as and when a project gets underway, a matrix team is formed and it pursues of that project. Sure.
Okay. And lastly from Barclays is on the export front. So we have seen some kind of market share loss, say, probably within West Africa. So I mean, what are the steps we are taking to address that, if We can answer that. So
I would say that, yes, there is a I mean, if you take the largest market, Nigeria, where Invest Africa, Where we now have a 50% plus market share. And yes, it has moved down by C4 percentage points. And a lot of that is to the Chinese where we have seen particularly in the last 12 months, Let me just think. Yes, since March 2020, when we were building under COVID In this April onwards period, the Chinese companies, the port, etcetera, had bounced back, and they had sort of fees the initiative and they have combined. They continue to operate, as do some Indian exporters on the basis of price.
We don't want to go down that crack. And Our whole objective, let's say, if I just keep to the illustration of Nigeria, is that there is no shortcut to it except to deliver an outstanding customer experience, And we have invested heavily, heavily in service network, in engaging with the customer, in product quality And having constant engagements with the customer and attending to quality complaints or any issues that the customer P. Vijay Kumar:] Today, thanks to digitization, if there is a complaint experienced by the customer and it comes to the dealership, Within a few hours, it is known. If our CTO wants sitting and our coo wants to look at the complaint, he can look at it. But certainly, under end, there are teams which can immediately swoop down on this issue.
I think that it is things like this, the product quality and customer experience, which will create a bot for us and which will allow us to convert this business at a respectable margin. It is impossible today to run the business sustainably for a period of time And drive scaliness at prices which are similar to Chinese prices. And therefore, we have not gone down that track. It gives some kind of a momentary relief. And this is things like working with wholesalers, throwing money and discount with wholesalers and securing some kind of volume.
That is the way the Chinese operate. Some Indian companies also operate like that, but we have invested in our own network to deliver a customer experience.
It's a bit of a rocky road, but
I think it's more sustainable.
Thank you. As for the last question, on behalf of Bajaj Auto Limited does conclude this conference. Thank you, everyone, for joining us, and you may now disconnect your lines.