Bajaj Auto Limited (BAJAJAUTO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Bajaj Auto's conference call to discuss the fourth quarter and fiscal year 2022 financial results. We have with us Mr. Rakesh Sharma, Executive Director. Mr. Dinesh Thapar, Chief Financial Officer; and Mr. Anand Newar, Divisional Manager, Investor Relations. My name is Rutuja, and I will be your coordinator. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to management for their opening remarks. Thank you, and over to you.

Good morning, ladies and gentlemen. This is Rakesh Sharma here. Thank you for taking the time to join us for the call today. We announced our Q4 and annual results last evening. I'm sure by now you would have gone through the details and may have questions. After brief opening remarks, we can move to the Q&A. But foremost, let me introduce our Chief Financial Officer, is Dinesh Thapar, many of you may already know of him or know him. Dinesh has joined us from Reliance Retail, where he was the Group CFO. Prior to that, Dinesh spent a couple of decades with Hindustan Unilever Limited, where he held a range of leadership roles across corporate finance, business finance, investor relations, supply chain and even in managing gyms. We are really delighted that Dinesh has come on board, Bajaj Auto's top team, and I'm sure you all will enjoy your engagement with Dinesh.

Thank you, Rakesh. Good morning, everyone, and it's an absolute pleasure to be here on the first earnings call. I've been into the business now for about 6 weeks and really coming on board, and I look forward to engaging with you off-line in the months ahead. Thanks, we absolutely look forward. Thanks, Rakesh, back to you.

Okay. Great. So let me begin with the highlights of quarter 4 performance. Since we have regular interactions every quarter, I'm refraining from going into a commentary of the full year and preferring to remain the most -- with recent most events. Overall, performance in Q4 was a reasonably strong one. Given the backdrop of weaker domestic demand, rising costs and supply chain dislocations. Amidst this, we reported our second highest quarterly as well as annual profit. Fundamentally, I would like to attribute this to the inherently robust business structure of Bajaj Auto, which is a business spread across segments like entry-level commuters, 3-wheelers, CNG 3-wheelers, KTM, high-end bikes, and across geographies, India and, of course, overseas, in all the emerging regions of the world. So this structure in itself is risk-mitigating. It ensures resilience and supports us to ride out volatility. Now let me talk about each of the business units. Exports. Exports remained strong and steady, almost each month of FY '22, the volume performance was over 200,000 units, delivering an all-time annual record of 2.5 million units exports as well as the revenue of just over USD 2 billion. I would like to call out a few other highlights, which are leading indicators of continued performance at this level. We grew our market share by about 2 percentage points in the whole year in all the regions: LATAM, Africa, South Asia and Middle East and ASEAN, all witnessed a 2-percentage point improvement in market share. Over 80%, in fact, close to 85% of our revenue continues to come from markets where we are holding #1 or #2 positions. This is a very important point because it gives -- it's a leading indicator about how we will be able to continue to harvest the return -- post-pandemic return in each of these markets. The share of our sports brand, also Pulsar and Dominar has continued to increase quarter-on-quarter and is at its highest now. We have a large order book from Dominars from LATAM, Europe and Asia. And with Dominar, we are securing leadership positions in the [ 20-liter ] class in many countries. This is instrumental in strengthening the prestige of the Bajaj corporate brand and bodes very well for our channel partners. I must add here the supply chain issues in quarter 4 compromise the performance even in exports, otherwise, it should have been better by at least 5% or so. In Motorcycle business, in domestic, the overall demand situation remained weak. As per VAHAN, the estimated decline in registrations of motorcycles was 12% for the industry over quarter 4 of last year. And this decline was visible across all segments. In fact, FY '22 has been the lowest year for the 2-wheeler industry in a decade. And for sure, this is signaling 2 things. The 2-wheelers customers representing the relatively weaker section of the society has not recovered from the economic hardships. And the cost increases on account of inputs and other regulatory requirements continue to retard the demand recovery. Bajaj Auto, however, fared slightly better than industry and declined less than the industry decline, resulting in gain in retail market shares from 18% in FY '21 to about 20% in FY '22, and these numbers I'm quoting are from VAHAN registrations. We can confirm that our product -- new product introductions, which I've been talking about in the previous quarters, they've been very well accepted. The Pulsar 250 Twins, the N and F have had an outstanding reception, enabling us to gain share in this subsegment and indeed in expanding the segment itself. With the CT 110, we made a play for the -- for improving the quality of our portfolio in the entry commuter segment, and it is showing very good resilience despite tight price increases. It has forged a unique position based on its style and design. This has bolstered our profitability in that segment. In the middle segment, the NS125, which is the most expensive 125cc in its segment, almost 22% more expensive than the average 125cc bike, it is doing extremely well. It is today 45% of our 125cc portfolio with a big thumbs up from the youthful buyer. Almost 60% of its buyers are below 25 years of age. I would also like to call out in the motorcycle business unit, the completion of a 2-year project at our dealerships, which has put in place a robust system, of measuring customer experience and using dynamic feedback to improve it in the moment as well as structurally. Over 1,000 dealerships of motorcycles and KTM have been covered by the NPS system, and these have done a lot to improve the customer experience at our showrooms and service centers. We will be building on this initiative in the months to come to redefine our processes and indeed, to lift our culture in the showrooms and service centers and make it more customer friendly. For the CV business, the domestic 3-wheeler business continued to see improvement as economic activities returned to normalcy. In retail terms, we've sold over 52,000 units in the quarter, an improvement of 15% over quarter 4 FY '21. This brings our retail market share close to 70%, which is our highest ever. Given overall leadership, we are now leaders in every segment, in passenger and cargo, large format and small format, CNG and otherwise. The current cost economics of CNG versus diesel, the government's focus on increasing the CNG penetration and that being a highly preferred choice for CNG leads us to expect to outperform the industry through this natural transition. Our market share in the CNG segment, inclusive of passenger and cargo is now 77%. The CNG segment itself has moved from 24% of the industry in FY '21 to 62% in quarter 4 FY '22. So it just tells you which way the 3-wheeler industry is moving. Unchanging support of auto finance has been a key enabler for the outperformance of this business unit. EVs, on electric 2-wheelers, we have sold over 3,300 units during the quarter and have an order book of over 15,000 units. We've also added another 12 cities during the quarter, including cities like Delhi, Mumbai, Surat and thus bringing the overall count to 20 cities. But I just want to take a moment and reemphasize our near-term plans and the emphasis of these plans. For EVs, we prioritize certainty and safety over speed. EV is a nascent segment, and we are keen to see the responsible development of this category. It's a great opportunity for Bajaj Auto at a global level, and we are very optimistic about its growth. However, we believe we are in the build phase which precedes the scale phase. And in this build phase, we have 3 objectives, foremost, build a dependable brand on the basis of product performance and customer experience, inclusive of high-quality service support; build deep capabilities in R&D, manufacturing, supply chain and customer experience; and finally, build a portfolio of products across personal and business, low speed and high speed, 2-wheelers and 3-wheelers, fixed batteries and swappable battery systems. So we expect that in the next 18 months or so, we will be guided by building capability, which hopefully will keep us in good stead to scale up and aspire for leadership, not just in India, but globally. We will be launching our electric 3-wheelers in a limited way by the end of this quarter, probably in June. So a word about our financial performance. It was a good quarter, we delivered an EBITDA of 17.5%. This is our calculations. The underlying I must call out was 16.8%, net of onetime accruals like Maharashtra government incentive. Even this is 120 basis points higher than the EBITDA in quarter 3. There were multiple factors that drove this improvement. Foremost was the mix of the business unit in favor of export. The exports constituted 60% of our volumes in quarter 4 compared to 55% in quarter 3. And as you know, exports, we enjoy relatively better profitability, and that is what has impacted the margins. Secondly, superior performance of better margin products in the export portfolio as well as domestic and a net positive impact of price increases, which was slightly ahead of the material cost increase. As you would have noticed, this has driven up ASPs by about 7% from between quarter 3 and quarter 4. The ASPs in exports business -- motorcycle business actually increased by 11%. And this ties in with the earlier point I made about the increasing contribution of Pulsar and Dominar in the exports portfolio. We had accounted towards the accrual of incentive receivables from state government of Maharashtra under the package scheme of incentive amounting to about INR 31 crores as part of income for the year and INR 315 crores as an exceptional gain for income pertaining to previous years. Here some words on the outlook for coming quarters. While in the immediate term, driven by the marriage season in the North, we think that it will add luster to the retail demand in April and May, but we would like to watch the months of June, July and August, to fundamentally understand whether there is a genuine and structural turnaround of the 2-wheeler industry in play or not. We expect a shortfall of about 15% to 20% of our requirements on account of semiconductors. This will impact mostly the domestic business units and, to a smaller extent, the sports brands in international markets too. This is the result of the -- enforced by some established vendors on whom we have single source dependencies. Our R&D teams have been developing out alternative sources. However, the testing and validation actions requires time. Therefore this will lead to a temporary loss of market share, we think, in quarter 1, which we should hopefully recover rapidly in quarter 2, by which time, our countermeasures on broad basing the supply chain are expected to be in full play. On the cost side, we definitely see some headwinds. We think we may [ see it too ] about 3.5% increase on cost, basically because of metals. As the demand environment remains fragile, we will be observing it very carefully and we will be observing competition before we decide our move about recovery of the cost increases. However, on 1st of April, we have already taken a price increase covering about 1.5% to 2% of this cost increase. And the balance, like I said, we'll watch demand and competition before deciding on it. Finally, the Board yesterday recommended a dividend of INR 140 per share, which amounts to about a payout of INR 4,051 crores and a payout ratio of over 80%, in line with our dividend policy of distributing up to 90% of the surplus. Thank you very much for listening in. And now we can open the floor for Q&A.

[Operator Instructions] The first question is from the line of from Pramod Kumar from UBS.

Congratulations on our excellent offering. And also welcome Dinesh to auto space. So I look forward to interacting with you. Rakesh, my first question is on the export outlook because it's been kind of more stable in terms of the volume trajectory of late, though you've been talking about handling market and they've also observed much price increases also the domestic consumers. So given that context and the growth what you had this fiscal, how would you export as a phase for FY '23 at the industry level vis–à–vis domestic demand? And also if you can provide some guidance on whether it can do a double-digit growth again in FY '23 as a segment for the industry?

You meant a double-digit growth for the exports business unit? Is that what your question was about?

Yes, yes.

Okay. So the outlook for export is quite steady. We have been talking over 200,000 units, as you know, and we expect to continue this thing. Now like I mentioned in the opening remarks, our competitive position in all our markets is fairly strong. Out of the 70 markets or so, I would say, at least in 60, at least, we have very, very leading position. We have dealerships, service centers, people, manufacturing, all that is very well in position. And most of the markets, we are doing pretty all right. All the regions are in the growth phase. There is a little bit of uncertainty about local currency movement vis–à–vis the dollar. And until now, it is not very alarming at an overall level. There are result of hits and misses here and there. But apart from that, we have seen the steady business environment overseas, and we feel that we should be able to get a disproportionate share of the market growth, which will mean that we continue to increase our market share. And like I said, the best thing is the performance of the Pulsars and Dominars. As the year goes on, the new Pulsar will start to hit Latin America. And we can already see, I mean, our order book for Dominar, for example, is -- I mean, we have already got an order book which we can't service in the next couple of months. It is showing that the customer is really responding very well to upgrading to the 250 class. I'm getting a bit of a déjà vu over here because a few years ago, when we launched the Pulsar 200 NS, we were worried whether people will upgrade from 150 to 200 or not, but we had an outstanding reception in Latin America, which sort of changed our fortunes in Latin America even for the corporate. I am seeing a same play with Dominar, and subsequently, hopefully with the Pulsar 250. And that bodes very well for our bottom line in the business unit also. The only issue, which has to be really managed is the shortfall arising out of Egypt. As you know, that Egypt banned the 3-wheeler import, and we, through our distribution partners have been in touch with the government and supporting them. The government is trying to work out a solution, which sort of takes care of the congestion issue, which they have, the registration issue which they have, but still solves the problem of short distance mobility in interior villages. We are in very, very close and very good discussions, but these things take time. So that used to be a big market. So in the immediate, we are facing a gap over there. But I think in 3 months or so or 3 to 6 months, we will see a solution emerging on that ban, so that business also returning. So apart from that, it is big -- that piece, everything else seems to be in good mix in exports, and we expect to deliver a double-digit growth. Our 5-year objective around counting 5 years from 2 years back is to double the international business on the basis of largely deepening of our share in existing markets, and to some extent, entering new markets like Brazil and Europe and a little bit in ASEAN.

Yes. Second question is on the profitability because we -- at one end in 4Q, we had one of the best ever, right, because international and domestic business doing better at the expense of lower-margin category, 100cc domestic. So with the marriage season going good and demand coming back to an extent for that category, you should ideally see some bit of normalization of your mix, right? And then there's a commodity headwind. And in that context, I just want to understand, how do you see the domestic mix evolving with 3-wheelers coming back, but the intent is electric 3-wheelers which are taking more and more share and you are launching the EV -- electric which could have implications for your margin mix in that category. And then there is the commodity overlay, right, which you kind of hinted to. So given this, directionally, how should one look at margins for the -- I'm not wanting to compare it to last quarter, which is a pretty offbeat number. So on a Y-o-Y basis, how should one look at margins stake for '23 versus '22, Rakesh?

So in your manner of asking your question, you answered it partly already because you're very right. The margin is a blended margin for the Bajaj Auto. And so the positive -- let's look at the positives first. I think a continued story of growth in the exports business unit and the improvement in the portfolio within the export business, which I talked about. So that's a positive thing. You rightly said the return of the 3-wheeler business. It is growing from [ 10:00 to 10:00 ] because traffic is coming back, and it is now almost a novelty at 92% to 95%, and it will be over 100% in few quarters. And again, here, what's happening is that the mix is changing in favor of better margin products for us. So that's a very big thing. The arrival of the electric 3-wheelers would not have much of a play because our objective in FY '23 is a cautious introduction. The 3-wheeler is a commercial vehicle, and we need to make sure that the customer and future customers are completely reassured about the vehicle as well as the support system surrounding the vehicles. So we're not going to be making a big play. We're going to be launching the 3-wheeler in June in a couple of cities only and then observe for 3 months and then expand to 10, 15 in that manner, pretty much similar to the playbook which we deployed in Chetak, but that, of course, got interrupted because of COVID. So the -- from a volumetric point of view, the E 3-wheelers are not going to compromise the profitability of the 3-wheeler business because it's pretty small. The third pick which I would like to say is that our price increases, in exports business and to some extent, in 3-wheelers and the sports brand. I've been ahead of competition. And I've been digesting it pretty well. You've got to keep testing the Optima between share growth and profitability. And I think one of the good gains from quarter 4 was we tested it. We were ahead of the cost increases into our price increases, but we did not compromise market share overall, basically. As you see, 3-wheeler market share has increased, if you see export market share has increased, and we will continue in that direction. Now some of the downside, I agree with you that arithmetically speaking, the rise of the motorcycle business and that weight increase will have a downward pressure on the overall blended margin. Secondly, definitely, at least in the next few months, we can see that the cost increases are there. They're very real. And like I said, we have only recovered, let's say, 1/3 of it so that will certainly be an issue to watch out for. I cannot tell you what are [ these ] going to be on that, because if indeed this sparkle of April, May in term of demand continues and we see the trend that demand is recovering nicely in June, July, it is bold and big industry to pass on the cost increases and increased time. If it does not, then one is a little bit more circumspect about price increases. So -- but then, of course, for us, there is that soft devaluation, which is in place every quarter, 75 goes to 75.5 and 75.5 is now going to 76.2 kind of a realization. So that is addressing the mitigating this cost increase. So I would say that we'll take it quarter-by-quarter. There are positives but there are downward pressures. And if, by the end of the year, we are able to hold on to this, it would -- I think we have a very, very good performance, but it will be challenging, unfortunately, cannot issue even a [ bank ] at this point of time.

The next question is from the line of Binay Singh from Morgan Stanley.

Congratulations for good earnings in this environment. Two, three questions. Firstly, Rakesh, could you share a little bit more about your hedging strategy? What kind of realizations on rupee-dollar did you get in the March quarter? And how will the currency impact during the coming year? Secondly, among your export markets, we've seen challenging environment in countries like Sri Lanka and Nepal. Could you share what percentage of the 200,000 monthly run rate is coming from these countries? That's it for now.

Okay. Let me take your second question first. See Sri Lanka, it's got into the news recently because of the protest, et cetera, spilling over on to the streets, but it has been facing a foreign exchange crisis for some time now. And Sri Lankan government in response to that had banned the imports of auto products as well as some other categories. So actually, in FY '22, our exports to Sri Lanka were very small. There was one tender for 3-wheelers for the police and then there was -- we had commenced the export of CT 100, which is very popular product in Sri Lanka on the basis of localization. And this would be less than 1% of the overall. So FY '23 does not really get affected because of Sri Lanka compared to FY '22. Secondly, the second country, which you asked was about Nepal. Nepal we do again about 5,000, 5,500 units, including 3 wheelers per month. We have got the #1 position over there. So you can calculate in the overall scheme of things. It is not very big. So I think that the Nepal issue will probably be over sooner than later. And really, their season comes up around Dussehra time, so about a month or 2 before that, I definitely see the country opening up. On your foreign exchange bit, may I just -- I think Dinesh will answer that.

So I think you had a question on foreign exchange. So just -- Rakesh mentioned this in his prior comments. So our realization for exports in quarter 4 was at 75.5. Clearly, better off from what was in quarter 3, which was just about a tad over 75. But the way rupee depreciation is happening, we expect that the next quarter could land anywhere between 75.5 and 76, that's the current outlook that we have.

That's very helpful, Dinesh. And lastly, could you comment a little bit about KTM? How was KTM profitability in this quarter?

See we don't get into segmented brand-wise profitability, as you know. But KTM in India and overseas enjoyed better-than-average profitability.

And Dinesh, just if I may interrupt over here. I think that with the change in structure now we are holding shares into PMAC, which is a listed entity. So the numbers are publicly available, and they can be directly sourced from there.

Sorry, my comment was really on the KTM business within Bajaj Auto. I was not commenting on KTM AG, and KTM business within Bajaj Auto, which is exports as well as domestic under the KTM and Husqvarna brand, where overall profitability is superior, but we don't get into the details at that level.

Next question is from the line of Raghunandhan N. L. from Emkay Global.

And congratulations on good set of numbers and welcoming Dinesh, sir. Sir, firstly, on the Q4 results, the press release had mentioned deferral of raw material cost increase. Can you quantify what was the positive impact in Q4 margin because of this deferral?

Okay. So I'm not going to quantify the number, but let's give you a directional sense of what we had said. We had anticipated that we are going to be getting some amount of cost inflation, what the team was able to do, was on the negotiated part of the cost portfolio able to push that out into quarter one. So a lot of that inflation is what we're going to be seeing in quarter one, as Rakesh had just mentioned. We think material inflation in quarter one, as things currently stand could be in the range of between 3.5% to 4%, but that is now with metals. The metals portfolio continue to inflate. You'd be aware that on just some of the key raw materials that we have, which is, let's say, steel and alloys. That's currently seeing inflation of anywhere close to 10%, 15% already. We don't know where the quarter will end, but 3.5%, 4% is what the impact looks like currently. At this point of time, they're trending to try and recover about anywhere between 1/3 to 1/2 of that in the pricing that we've taken in, but we'll wait and watch how the quarter plays out. But to give you a sense, the last quarter did benefit from that. I think the pricing impact what saw a benefit in quarter one was just about 1%.

That was helpful. Rakesh, sir, can you talk about the expectation of a recovery in the student demand in FY '23? Would it be fair to say that student demand, pre-COVID, used to be as high as 10% to 15% of volume which had substantially reduced in the last 2 years and this year, given the complete reopening of educational institution, this demand can come back strongly?

Yes, I think it is a fair expectation that on the basis of colleges are opening up and all the segments opening up, work from office starts to become a little bit more popular in the IT companies. On the back of that, certainly, there could be a positive play on that subsegment.

The next question is from the line of Kapil Singh from Nomura.

Could you talk about what was the spare parts and export revenue for the quarter? And also, we've seen a dip in the employee cost on a Q-o-Q as well as Y-o-Y basis. So some color and outlook for next year for the same.

So did you say employee costs? Or -- okay. Let me just -- yes, let me just, you wanted to know about the spares revenue. In fact, we have had very good performance by our domestic spare parts business unit. And the penetrating percentage is now increasing quite smartly. Two years back it used to be 14%. Now it is about 18%, and the spare part profitability, again, is very high. And we expect that this 18% will probably be moving into the 20% zone. I think that this is fairly ahead of our competitors.

Let me take the question on the employee benefit expenses. So just to put the numbers up, we were at INR 305 crores this quarter. Last quarter was INR 339 crores. You've seen us mention in the press note that we've got a benefit of about INR 30 crores. You'll be aware that as a process one has to undertake actuarial valuation of the employee benefits to the end of every financial year through an independent actuary, and that's what we've done as per extent practice. In doing that, we've got a benefit that's come out for valuation. You'd be aware that when you do that valuation, there are 2 factors which essentially drives the sensitivity of that liability calculation. One is the inflation rates that are taken and the others or the escalation and the other is the interest rates. And clearly, that's been one of the factors which has led to the INR 30 crore reduction relative to what we might have recognized in the preceding 3 quarters of financial year. So essentially, what we've done is to true up that impact in quarter 4 as we've gone ahead and done the exercise independently. So that's the INR 30 crore reduction that you're seeing in just the quarter to true up for what we may have accrued in the previous quarters. And because it's coming in this quarter for the year, we've adjusted it in the current quarter's financials. But on a year-on-year basis, I thought I heard you mention that employee benefits, you're seeing down. I'm actually seeing numbers of close to INR 1,358 crores relative to INR 1,285 crores in the previous financial year. So on a full year basis, employee cost are still up.

Okay. I also asked for the export revenue, please, if you can share that as well. And the spare part revenue number, if you can share if it's available, otherwise, I can...

Kapil, I think separately send -- share that with you.

Sure. All right. Sir, one question is on the mix that we see for the quarter. There is a significant drop in volumes for CT and Platina. So is this conscious choice of allocation that you are doing because of the chip shortage? And directionally, when you look forward for next 1 or 2 years, will this segment be a focus segment for you because you've been very successful in premiumization as a strategy globally? So I just wanted to know your thoughts on that.

Yes. The first part of your question, the answer is yes. Absolutely, we have prioritized the use of the chip towards higher profitability products, higher profitability geographies. So we take a corporate look, all SKUs and all countries and India and then we prioritize for profitability. So in that respect, yes, Platina and CT have suffered a little bit more. Though I must point out here that the chips are like -- there are different types of chips for different product classes. So it's not all very fungible. But that will be going into too much of detail. Now our approach is really to participate in all the segments, as you know, but to try and move up the customer to a higher-level products where we enjoy a better margin and then we have some scope for differentiation. So therefore, when it comes to the absolute entry level, you would have seen that we have almost vacated the Kick Start segment. And our whole effort, which is very successful, has been to take up the Kick Start customer into Platina electric start. Then you would have noticed that we have launched the CT 110X which is we're trying to differentiate on the basis of style and on basis of durability. And again, if you see the pricing, if you compare the CT 100 pricing with the CT 110X pricing, you would see a bigger difference. And again, here, a point is to upgrade the customer. Then in the 125cc, you would have seen with the NS 125, even were in the 125cc segment, we are trying to move the customers towards a higher end of the 125. But at the same time, we do see an opportunity at the entry point of 125cc to upgrade the 100cc customer there. And over this period of time, you will see a play coming from Bajaj Auto. I cannot say precisely what it is and the timing of it, but certainly, the upgrade strategy of taking 100cc customer into 125 will be continuing to be played out. And similarly, you are seeing the same action taking place in the export segment, where the latest move is to take the customer up to the 250cc class. So that would be our approach, cover all segments. But within the segment, move the customers to a higher price variant and move the lower segment into the higher segment. Those are the twin forces, so our R&D is working on those twin vectors.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.

A couple of questions from my side. One is with respect to the INR 31 crore incentive which you mentioned, how much of that is pertaining to previous 9 months of FY '22 and how much is for fourth quarter? And second question on the price hikes, which has taken in the fourth quarter?

Okay. To your question on the incentives, let me just take a minute and actually explain this for the benefit of everyone. So this is the package team of incentives that was announced by the government of Maharashtra in 2007 to provide certain benefits to eligible entities who are making a certain investment. And Bajaj Auto had made an investment in the Waluj plant, a little off Aurangabad. So we've now received the eligibility certificate after March to and fro that happened with the authorities. This benefit is for vehicles that are manufactured in our Waluj plant and sold and registered within the state of Maharashtra, right? So with the eligibility certificate now having common, we've accrued for this, we've done it in 2 parts. This benefit is available from 2015. It runs for 9 years to 2024. So it's going to be available until 31st of March 2024. The accounting entry that we've passed this quarter will appear in 2 lines. There is INR 3 crores that will sit under other operating income. This is for the current year-end question to which your question Jinesh is how was that face up across the year. Of the INR 30 crores, INR 8 crores pertains to quarter 4 and INR 22 crores for the 9 months preceding it. So that's INR 30 crores which appears in the other operating income, which pertains to the current year-end in question. And there's INR 315 crores that we have accrued for prior periods, which is for periods ranging from 2015 to FY '21, INR 315 crores of it, which sits in exceptional items. Like I mentioned, this incentive will be available for 2 more years up to 31st of March 2024.

Just some clarification. So the balance, INR 22 crores for 9 months was also accounted in fourth quarter, right? or it was accounted in the previous quarter?

Because we've now had visibility to the eligibility of it, we've accounted for full year's accrual in quarter 4. The INR 30 crores, of which pertains to the quarter in question and INR 22 crores for the 9 months prior to it.

Got it. Got it. And on the price increases taken in fourth quarter?

On the price increases taken in the?

Fourth quarter.

Fourth quarter, the quarter went by, which ends in March.

Okay. So I just did mention, Jinesh, that the price increases that were taken in the fourth quarter is in the range of close to about 1%.

The next question is from the line of Amyn Pirani from JPMorgan.

My question is actually on the domestic 3-wheelers. Rakesh, you mentioned that the 3-wheeler EV that you'll be launching in June, it will be a limited launch initially. So my question is, as we look into the next 2 to 3 years, would it be fair to say that both CNG and EV could be eating into the share of diesel instead of really competing with each other? Or are there use cases in your view where EV could actually be more beneficial than CNG as well?

I didn't get the last bit. Use cases where?

Where EV is more beneficial than CNG itself.

Of course. Yes, initially, CNG has obviously eaten into diesel and I gave you those numbers, which show you the tremendous turnaround of the CNG-based 3-wheelers, their component increasing in last year, particularly in quarter 4. Now at this point of time, given where the CNG prices are, and given the electricity cost and the cost of the EV 3-wheelers, we feel on total of ownership, there is almost parity. However both -- we are expecting a major price increase in CNG in the coming months. And at the same time, this reduction in cell cost which was being assumed by the industry over the last 5 years or so of a consistent decline in cell cost, has not been experienced this year. In fact, costs going back to almost 2019 levels. And therefore, we don't see the electric vehicle becoming cheaper from that point of view. But -- and therefore, right now, the cost of ownership is almost at parity, assuming that both CNG and electric 3-wheeler prices rise. The penetration will now depend on how well we are able to reassure the commercial driver of range, resale value and robustness of the product. And that is what I am saying is that we want to take our time about it and go in a systematic way with this engagement. Now if I take a long, short view of things, and we see that supply comes on stream for cell cost and the reduction in cell cost resume its downward journey, then over a period of 3 to 5 years, I certainly think that electric 3-wheelers will start to replace -- will start to cannibalize CNG as well at some point of time. In terms of use cases, new use cases, which till now is not in operation, it's a very mature category. So I do not see a lot of use cases coming back. But I do see, from our point of view, the eclipsing of the e-rick. The e-rick, which is actually a substantial subsegment in the values, almost like 40% to 50% is already this ramshackle lead acid based 3-wheelers, which is very, very widely prevalent in -- particularly in North India and East India. Definitely, I see as and when these autos, based on lithium-ion and with much better customer -- with much better sort of features and owners rideability and all that, they will start to exit the e-ricks because e-ricks has in "very jugaad" solution, and will not be able to withstand a superior product. So I actually see a big new segment opening up for the 3-wheeler. So it's not a new use case, but it certainly is a new catchment area of an existing use case. And we just start to see what is happening unfolding in China, where, in fact, in many places, Chinese government has mandated that lead acid must move to lithium-ion and therefore, this whole sort of era of very tactical and very fixed products based on lead acid and very fragile frames and unsteady vehicles, you may have seen a lot of videos of these vehicles toppling over and all that. I see that drawing to a close at due course of time, all that moving up to standard e-auto.

The next question is from the line of Gunjan Prithyani from Bank of America.

Just two follow-ups from my side. Firstly, on the supply shortages that you all spoke about. Can you give some more color on which model is this for? Because my understanding was it is mostly for ABS models, right, above 125cc. And just a related point, if you can give us some sense of where is the channel inventory level now? Is it you like losing out on the retail demand in the market because of shortages?

So Gunjan this is affecting all models. This is not about ABS. That period of shortages on the ABS side, we have faced and we have overcome by developing -- by broadening our supplier base. So we are not having that issue, but this is around injection systems, carburetors. So there are multiple chips, and we are facing shortages across the -- in entry-level, in sports brands and even in RE, I mean, CNG 3-wheelers. The channel starts at this point of time are dwindling as we speak. I don't see an issue in the motorcycle business in April. But I definitely see an issue in the retail level operation in the motorcycle business in June. And hopefully, by July -- sorry, in May and June. But towards the end of June and July, we should be able to resume supplies based on development of other suppliers. In the 3-wheeler business, we have a very, very strong position. And what happens is that the lack of stock translates into an order book. And it's just that there will be some irate customers who will now instead of getting the product off the shelf, will be getting it in 30 days' time or so. This is what the case is also in Chetak, in the electric 2-wheeler segment. So certainly, April, we should tie it over, May, we see some issues, in some of the more undifferentiated brands in motorcycle business in India.

Okay. Got it. The second follow-up I had was on the exports. Now I do understand there is a little bit of seasonality or, let's say, impact that we see in March quarter where volumes tend to be lower. But even if I look at versus last year, there's clearly been decline. I'm just trying to understand how should I read this? Is this only supply-related challenge? And if you can just refresh us on the region-wise mix, which you used to give around Africa and LATAM, given these are the only 2 markets which are growing in -- I think Middle East and Southeast has not been growing yet. So some color on that?

So the way I would like you to read this is, see, there is a lot of base effect. And I agree with you when you look at the surface, it does seem like that. Because last year, and this for a good 6 months, there was the release of the pent-up demand in the -- and you see the other thing which was happening was that the transit time were increasing. As a result of which, there was a big increase in uptake by the distributable stock levels, that should be rebuilt and pent-up demand was coming up and all that. The way we look at it and what gives us confidence is the retail level, so -- which, obviously, doesn't get reported. But our retail performance across the board is at its highest ever. So if you had asked me the same question last year, our shipments were way ahead of retail last year because the stock has to be built up, transit times were increasing, and that gave it a higher base. And that is why you are seeing the -- some negatives or small positives. But if I compare retail to retail, which I do internally for all the -- we are having a very good movement book. So this product will get ironed out, I think, in few months' time. So for a few months you might see -- I think you might see this in about August. You might see this, either it will be slightly negative or slightly positive. But at the retail level, it is a double-digit growth. In fact, if I'm not wrong, I think Jan, Feb, March was our highest ever retail globally. So it's running at that level. And this comment is mostly on motorcycles. I've already talked about the issue of a gap in 3-wheelers from Egypt because we used to do almost 6,000 units per month in Egypt and that's now 0. So apart from that, one is seeing very good retail. In terms of the spread, about 50% -- 50% to 55% is Africa. About 20% is Latin America, [ PAT ] under 20% and balance, 25%, 22% to 25% is Asia, Middle East, Asia and ASEAN. In ASEAN, the recovery -- most countries, let's say, our top 20 countries and the regions, all of them are now back to their pre-pandemic levels, places like Africa, they have charged back even better. So they're doing much better than the pandemic level. LATAM is also doing. I think only Philippines, Malaysia are still not reached the pandemic -- pre-pandemic levels. And of course, Nepal, Sri Lanka for other reasons. So I would say Nepal, Sri Lanka and Philippines still trading behind from pre-pandemic level. Other than that, almost all the countries and regions are back to the pre-pandemic level.

The question is from the line of Chirag Shah from Edelweiss.

Congrats on good set of numbers. So my first question is a follow-up -- on just sort in your commentary that you would be able to procure 15%, 20% lesser than what you intend to. Now if I look at last whole year, how should we look at the volume buildup for this year? Because last year itself we were having supply challenges either ABS or chips or both combined at some point of time. So our base is already suppressed. We can expect a growth over last year, at least that kind of supplies hit for you, or you able double-digit growth over last year or even that is under a question given the shortages that you have indicated?

Yes. So let me summarize that for you by just commenting on each of the business unit. Exports, I already told you, I think Pramod asked this question right in the beginning, and Gunjan also asked this question just now. On the back of our competitive position, improvement in retail performance, we definitely -- and entry into some new markets, we will continue to drive for a double-digit growth in the export business unit. And export business is about 50% -- 50% to 60% depending on how the others. So that half of the business very firmly on a double-digit growth track. Well, the 3-wheeler business, more certainly on a growth track and largely because, again, not just -- that the market is coming back, but the market share is at an all-time high. And as the market returns, we are going to get 75% of that disproportionate share of that return because we're sitting on a 70% market share. And I told you about most of the return of the market is in CNG, where our market share is 77%. So very, very firmly on a good growth track. Domestic motorcycle business, some of the -- they actually for themselves, suffered a little bit more because we have prioritized this chip allocation towards the more profitable segments. As a result of which they have suffered more. But I think after quarter 1, we should be over -- we should improve this broadly of chip shortage because some actions have been ongoing for the last 6 months to broad-base our supply base. Having single-source dependency was a strategic choice. It held us in very good stead because it allowed us to develop innovative and proprietary solutions to things, but the downside in a situation like this became that if there was a default when we suffered disproportionately, and that is what has happened. But we have, over the last 6 months, broad base the supply, and July onwards, we should be coming back to it. Now given the fact that we have got some really solid play in the sports segment and in the 125cc segment, already out there in the market, because the Pulsar 250, et cetera, have been accepted very well and you've got stream of products waiting for supply chain to stabilize. There is stream of products, of course in pipeline, which is waiting for its launch. And of course, the 125cc continues to do well. A couple of launches here in there in the 125cc segment will also take place. And I think we will definitely see a strong growth in the domestic motorcycle business as well. So apart from quarter 1 hiccup in domestic side, I see all this falling in place very nicely. Someone had asked a spare parts question. And this year, we have grown by 25% in domestic spare parts. We are going to further accelerate this. We have shifted our strategy in spare parts from being more distributor engage to retailer engaged. There is a few of digital initiatives, which allowed us to engage with 25,000 retailers, of course, through distributors, that gives us a much better thrust into expanding the spare parts penetration. And we have sensed an opportunity here. Because of COVID, some of the smaller manufacturers of spare parts in Northern India have gone weaker. And this has opened up a nice opportunity in a very, very profitable business segment. So that as well, we're going to look at very, very high growth in this year. So when I put it all together, the growth agenda is very much on with what this cost increase and inflation a bit carefully and make sure that the semiconductor bit is history by July.

And just a follow-up, on the EV front also, the 2-wheeler, on the Chetak side, we are doing around 800,000 units a month broadly. How should we see that part of ramp-up? Are there any specific challenges on supply chain in that specific part of business, which is hindering our volume ramp-up?

The -- I'll tell you we are not pursuing -- what is hindering us in the semiconductor shortage. And the problem with this is that you can calculate yourself, that there is a 6- to 9-month waiting period. I think that is too much. And the customers are -- I'm very worried about annoying the customer. Now here, we are trying to win the customer, make Chetak a brand which people, we want people to fall in love with Chetak yet again. And there, we are in the first step itself annoying the customer because we're not able to -- they simply wait sir, please tell us the date when we will give. And I feel very bad. I feel very bad that we can't promise the customer. But she's saying that, okay, tell me a date, which you will give me in 2 months' time, and they're not able to do that. I don't want our business and our brands to be in that position. So we have no [ question ] volume but I can tell you one thing, by end of this year, our objective is to be the most preferred brand in 100 cities, in 3-wheelers -- sorry, in electric scooters. Chetak must be one of the most preferred brand. No people that are buying because it is the most expensive. But when they set out to buy, it must be in the consideration set. This is our objective. And this is going to be achieved on the basis of carefully getting into these 100 cities and delivering a very good customer experience, which is backed up by solid service. In this segment, to not have service, when people are not very clear about what this product is, it's not the right thing. We are putting in service network even before we are entering the town. So I want to be led by that aspiration rather than by a volumetric aspiration because on that, I've not got any control. If we get the supply chain, we're going to max it. There is no hedging about it. We will max it. But I can't give you a number because I don't know the number. But we're now going to spread the butter a little bit all over the country and make sure that we achieve that status in 100 cities.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference to Mr. Anand Newar for closing comments.

Hi. Thank you everyone, for joining the call. I see quite a few messages. I'll be taking calls after 0.5 hour from now. On certain numbers that I've not asked on the messages, I just quickly run through them. The spare revenues is about INR 980 crores. Again, split is 80-20 between domestic and exports. Our exports revenue is about $500 million, translates into somewhere around INR 4,000 crores. And on the financing base, it is close to the same number that we had last time, which is about 55% of our 2-wheelers are financed. And most of it, about 75% of it is financed through Bajaj Finance. And just one more information. There is -- our recording of this call will be put on our website, either by today or max by tomorrow first half. So you can probably get access to it. And if you miss certain parts of the call, you can really get an access to it tomorrow. That's all from my end. Thank you. Thank you once again for joining.

Thank you all.

Thank you all.

On behalf of Bajaj Auto Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.