Bajaj Auto Limited (BAJAJAUTO) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Q1 FY '25 Results Conference Call of Bajaj Auto Limited. My name is Sagar, and I will be your coordinator. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Newar, Head of Investor Relations from Bajaj Auto Limited. Thank you, and over to you, sir.

Thanks, Sagar. Good evening, everyone, and welcome to Bajaj Auto's Q1 FY '25 Earnings Conference Call. On today's call, we have with us Mr. Rakesh Sharma, Executive Director; and Mr. Dinesh Thapar, Chief Financial Officer. We will begin our call with opening remarks from Rakesh for the business and operational performance for the quarter, and Dinesh will take you through the financial highlights. We will then open the forum for the Q&A. Over to you, sir.

Thank you, Anand. Good evening, ladies and gentlemen, and welcome to the Q1 earnings call of FY '25. I thank you all very much for joining in. We hope to make it worth your time. I must begin by saying that it has been an outstanding quarter. And I think we beat the street estimates yet again, though by a small margin. Revenue from operations grew by 16% to finish just under INR 12,000 crores. Top line growth was evenly driven by both domestic and export sales and record-setting spare sales too. Spares now constitute 11% of our revenues. EBITDA at 20.2% cross INR 2,400 crores, delivering a 24% growth. This is the third successive quarter of 20% plus EBITDA and that, too, with a growing EV portfolio, 2-wheelers and 3-wheelers, which now stands at 14% of our overall revenue. In our previous call, while we acknowledge the complexities and challenges in the environment, particularly in some overseas markets, we've also emphasized that despite all challenges, we see good opportunities for growth. Hence, our focus remains to drive top line growth while maintaining best-in-class profitability. The results of this quarter are an outcome of the strategy. Going forward, we will continue on the same path and create more platforms for growth, platforms, which connect us with opportunities in the market and can be scaled up. The alliance with Triumph to attack the middle-weight segment in India and overseas, and the e-auto or the e-3-wheeler development to attract the restricted 3-wheeler markets are examples of new platform created last year. In recent months, we have brought to life 3 more such platforms. The CNG bike, the sub-1 lakh electric Chetak and the new plant in Manaus, Brazil. These will give us access to new business, and we will be talking about them later while covering the SBUs. Export business unit. Overall, there is a small but steady revival in the overseas market and the number of countries which remain in stress conditions is also slowly reducing. Largely, it is Africa, which continues to underperform across almost all major markets, led by Nigeria. Though we are seeing currency stabilization for the last few weeks in Nigeria, the substantial devaluation-led inflation has seriously dented demand. Our benchmark motorcycle sales in Nigeria of 50,000 per month has dropped down to under 5,000 in April, but has now recovered to 15,000 levels, still a far cry from the 50,000 benchmark. Compared to Q1 of previous year, we are down by about 40% in Africa, but up by 20% in Middle East and North Africa, up by 70% in Asia, led by Philippines and Nepal, and LATAM has delivered an outstanding performance with a 26% growth and reaching or crossing the benchmark of FY '23 levels. While in stressed markets, we continue to grow with the market, which is largely Africa. But in the recovering and growing market, we are significantly outperforming the industry and gaining share. The new plant in Brazil commenced production in June, it has a single shift capacity of 20,000 units per annum, but that is scalable to 50,000 units per annum, which will make a quantum change to our capability to introduce new models and widen distribution. Traction for our Dominar brand has been excellent and in the medium term, we expect Brazil to be amongst our top 3 international markets. Exports of Q2 Egypt commenced in Q1 with shipments of 500 vehicles, which will soon be on their road opening up yet again a new segment for us. On this basis, we expect Q2 to be better than Q1, and we continue -- and will continue to be on a growth path in the exports business unit. Domestic motorcycles business unit, let me explain our performance in the 2 halves of the industry, the 125cc plus and the 100cc segment. The business maintained its strong position in the 125cc plus segment, which in the quarter became 51% of overall industry. Our growing market share of 25% in this top half is just a bit -- is just about 2% short of leadership. With 75% of our sales coming from the top half, the impact on both top line and bottom line has been significant. The major contribution in the top half comes from the top half of the top half, which is the 150cc plus segment, where market shares advanced to a solid 40% driven by the substantial makeover of the Pulsar portfolio over last year. Capping it all with the launch of the biggest Pulsar NS400Z, which has been received very well as reflected in the bookings of almost 2,400 units. Deliveries have commenced. And I think last month, we have delivered about 1,000 units. Beginning last financial year, we introduced the N series targeting the sporty commuter, with a modern, easy-to-ride bike and then went on to strengthen the high-performance NS series. Together, the newly launched and renovated N and NS series and the higher-end Pulsars account for 70% of our portfolio. This Pulsar portfolio gives us a great springboard for growth through increasing market share as well as by expanding the sports segment itself. Coming to the 100cc segment, which is the bottom half. You may have witnessed the game-changing initiative of Freedom 125, the world's first CNG bike launched to an absolutely breathtaking reception, not only is the proposition of 50% savings of the fuel bill very impactful, Freedom 125 styling, dual fuel capability, the range, ergonomics of the long seat and the comfortable ride due to the linked monosuspension have all been highly appreciated. We are targeting the mileage conscious customer in the 100cc to 125cc segment. Of the approximately 1 million motorcycles sold per month in India, almost 75% are in this segment, the 100cc to 125cc segment. And about 60% of the demand of these customers has access to CNG pumping station. Hence, our addressable market is about 450,000 to 500,000 customers per month. We are targeting all these customers with the proposition of fuel economy, standout time, comfort and assurance. Our market share in the 100cc to 125cc segment is just 15%. So we naturally see a good room for new business. We are doing a phased launch commencing with Maharashtra and Gujarat and then going on to Delhi and Kerala within quarter 2. A key enabling factor for the success of Freedom 125 will be the ease of CNG availability, and we are hoping that the CNG distribution companies will also take this opportunity to expand their business and facilitate the migration from petrol to CNG. This will be most helpful in upping the rate of adoption of Freedom 125. We are starting with a capacity of 10,000 tonnes -- units a month in quarter 2, but we'll take this -- we have planned to take this capacity up to 40,000 per month by quarter 4. Obviously, with a bit of lead time, these capacities can be revived based on market response. It is early days, but I can tell you that the savings proposition, the style, the right feel and the comfort have all been very well received, and there is good reason to entertain the thought that Freedom could redefine the motorcycle industry. Coming to commercial vehicles. The 3-wheeler business unit makes it -- maintains its rock-solid performance with an overall market share of 78% in Q1. In E-autos too, our market share increased to 26%, up 9% from previous quarter. From presence in 70 locations, we have expanded to over 140 in quarter 1, which should set us up for over 50% growth quarter-on-quarter on the -- in the E segment. We're advancing CNG infrastructure, a solid presence in it, combined with the scale-up in EVs, particularly in markets not available to us thus far, will continue to drive solid top line and bottom line performance in our 3-wheeler SBU and consistently reached the 100,000 mark per quarter. Chetak business unit: Chetak is now solidly in the #3 position, though in billing terms, we were at the #2 spot in June, which was largely powered by the new Chetak 2901, launched at the price range of INR 96,000 to INR 1 lakh. This will enable 2 things. It helps us to attack the sub-1 lakh segment, which is almost 50% of the E 2-wheeler industry and will help us widen distribution. We were in 250 stores in June should be in 500 by end July and almost 1,000 by September. While our overall market share in Q1 was 12%, it should be noted that we were at 20% plus in the above 1 lakh segment and obviously almost nil in the sub-1 lakh segment. Hence, play in the new segment, which is a sub 1 lakh segment. And in new geographies, should combine and lift the Chetak business significantly. This will again add new business to Bajaj Auto. Continuing work at R&D and supply chain is ensuring that the cost profile has been constantly driven down month-on-month, and our growth plans take into account with an acceptable level of cost is being reached. Pro-Biking, this BU houses 2 brands, KTM and Triumph, each with a dedicated network of sales and service. KTM contributes with its steady performance. The recently launched new Husqvarna have appealed to the [indiscernible] and are getting very good reviews. In Q2, the BU will commence promotion of the big bike from KTM and sales will commence from October, which should really strengthen the high-end, high-performance DNA of the KTM brand, casting a halo effect invested portfolio. An example is the recently concluded second KTM Cup, the largest make rate. It reached an audience of 55 million with 900 KTM owners from 114 towns participating in it. In the Triumph business, as you know, we have 3 initiatives: scale up the domestic network to 150 stores in H1, develop the brand and offer a top class differentiated experience as well as support Triumph U.K. to successfully expand business in overseas markets. We are on track on all these. Triumph is now present in 100 locations, which allows us to undertake mass-level gun building initiatives for the brand. This is a very important initiative because as we expand, we are very conscious that sales will rise only once the trial brand gets to be better known and better experienced by the potential customers. Curated experiences like bike nights and market growths are steadily exposing the world of clients to bikers. This month, we actually completed a year of Triumph sales during which over 60,000 bikes have been sold in over 57 countries, bringing a revenue of INR 1,200 crores to Bajaj Auto. The reception in both India and most overseas markets continues to be very promising and with several opportunities for expanding the range and going for a larger play of the middle-weight sector. Finally, a word on our captive finance company, BACL, which continues its rollout steadily with almost flawless execution. About 50% of the Bajaj Auto markets and stores have now been covered by BACL. We are on track to reach 100% by March '25. In conclusion, all the BUs have momentum and building on last year's work, which created 2 new platforms for growth. This year, already, we have 3 more new platforms. So we are looking at a good 5 to 6 new growth platforms. We are positive and optimistic on this basis about the forthcoming quarters. Thank you for your attention. And with this, I hand over to Dinesh.

Thank you, Rakesh. Good evening, everyone, and as always, thank you for joining us for this call. Let me say at the outset that we are rather pleased with our performance. We've delivered double-digit growth in all accounts across our domestic business as well as the exports business and on all dimensions of revenue, EBITDA and PAT. In fact, we've come very close to the all-time highs that we achieved in quarter 3 of the last financial year we could recall. So that is a large quarter for the industry as indeed ourselves is the best of quarters. And so therefore -- while that was aided by the typical seasonal upswing, we're quite reassured by this current quarter where we've delivered nearly the same numbers in a quarter that does not have any of that advantage. And that's clearly best testament to the sustained momentum that the business is going through. Now you've heard from Rakesh on the markets and the businesses from going to avoid duplicating that we get it straight away into dimensions that we've not covered. So let me start with giving you a sense on what's happened on commodities. So on commodities, we saw a slight uptick on a few lines this time around. Aluminum, copper, rubber and noble metals like rhodium and platinum, were up. However, there was some relief as well, most notably from steel, but as much from nickel, lead and palladium. This, along with the continued effort on cost reduction that we've been speaking about for some time right now. You recall we'd emphasize this and we spoke to you the last time around, and it's held through this time as well. The cost reduction on the electric portfolio along with the balance of the commodity basket meant that we were able to hold the material cost impact in overall terms to be neutral for this quarter. Yes, so neutral on cost -- on material cost impact. Equally on pricing, it turned out to be a flat quarter in overall terms as some price increases that we were taking judiciously on the ICE portfolio offset the price reduction that we took on the electric portfolio to drive its competitive growth performance. The investment was made particularly to sustain the momentum and our plans for expansion in a situation where the subsidy can come to the customer was reduced in the transition from same to [indiscernible]. As for currency, it was steady and largely range bound with dollar realization at $83.4 this quarter compared to $83 in the previous one and $82.1 same time last year. And so if we bring all this together in terms of what you've heard on the various businesses as well as this context, the quarter closed with revenues of INR 11,928 crores. We delivered 16% growth year-on-year on the back of robust vehicle sales and a record high space revenue, which Rakesh just spoke about, the latter having crossed INR 1,300 crores mark yet again. This robust growth of 16% year-on-year is largely contributed half a piece between volume-led expansion and favorable mix with a very marginal contribution coming in from realization. The rising proportion of sales of the higher-priced Chetak, electric 3-wheelers, Triumph in the domestic market and a richer sports-led mix in Latin American markets on exports are really the key drivers behind this mix improvement. With the overall revenue performance, the domestic -- within the overall revenue performance in domestic business registered its 9th successive quarter of double-digit growth, a reflection of its continued momentum and resilience whereas exports at about $460 million for the quarter. We reported double-digit growth yet again. You recall we had reported double-digit growth in exports the last time around on a softer comparative. This time we registered double-digit growth of about 16% on the exports portfolio as well. Underlying these numbers have a particular note is our shockable progress on the electric portfolio. In FY '23, the annual revenue from our electric portfolio, which was essentially only Chetak back then was all of INR 500 crores. In FY '24 with the scale up in volume of the Chetak and the launch of the electric 3-wheelers towards the middle of the year, we ended the year with 4x revenue of the previous one. So essentially, FY '24 was 4x that of FY '23 on the electric portfolio. As it stands now, that run rate has stepped up even further as we expand both Chetak and the electric 3-wheelers and you will notice in the press release that we setout earlier today, we've shared with you a new data point. In this quarter, a sizable 14% of the domestic revenue has been contributed by the electric portfolio comprising both electric 3-wheelers and electric 2-wheelers. And many would say that we are just about getting started. Indeed, we are strongly committed to playing and investing for competitive growth in the space and expanding this business in multiples in the times ahead. EBITDA came in at over INR 2,400 crores, up a strong 24% year-on-year, while quarter PAT at INR 1,988 crores was a striking distance on the INR 2,000 crore milestone. Enterprise margin was maintained at the 20% levels yet again. And you will see in this a strong reflection of how we are managing the business dynamically for volume, competitive volume growth and market share expansion, whilst delivering profit improvement in tandem. At 20.2%, the margin improvement of 130 basis points year-on-year was largely led by better realization and cost reduction. So it had elements of better realization and cost reduction that went into growth, which really more than offset the drag from the growing E-2-wheeler business, which continues to improve on its economics, but it's still some time away from adding to the bottom line. Sequentially, the margin has expanded by about 20 bps quarter-on-quarter, largely coming through from an uptick in dollar realization, while other pluses and minuses actually net out. A quick quarter in cash. The business continues to remain on the trajectory of converting profits into cash and building substantial surplus funds to fuel future growth investments. A quick look cash stood at about INR 16,700 crores at the end of June, having added over INR 1,750 crores of free cash in the first quarter. From the free cash flow generation, apart from discharging the buyback tax that we did at the start of this quarter, we also infused capital of INR 505 crores into our capital wholly-owned NBFC subsidiary, Bajaj Auto credit, where, as you heard from Rakesh, we're making very good and steady progress on expanding its presence across the country with nearly half of the business already covered and the balance half planned to be done before the end of this financial year. Our consolidated PAT, consolidated now referred to, was at INR 1,942 crores compared to INR 1,644 crores same time last year. The difference was the stand-alone results, which, of course, apart from making intercompany profit eliminations as per standard accounting policy is on account of making early investments ahead of the growth and buildup of scale on both BACL as well as for commissioning our manufacturing facility at the end of June in Manaus, Brazil. And that really helps potentially unlock supply constraints for us to leverage a large attractive market opportunity. We have increased the prospects of both these businesses both BACL and Brazil. and expect them to add to our financial results in the near term as scale builds. Highly as we look ahead to the next quarter, a few of our key priorities entail sustaining the momentum on our domestic business, which essentially is about driving competitive growth and winning in the upcoming festive season, staying the course on recovering our exports volume and gradually inching them up. Expanding our capacity capabilities and network for our new businesses and launches that we just heard Rakesh talk about. Freedom, NS400, electric 2-wheelers, electric 3-wheelers are up. Building and developing strategic growth enablers through our wholly owned subsidiaries, which is on Bajaj Auto Credit and on Brazil. And lastly, of course, sustaining margins and managing the P&L dynamically given the context of rising commodity costs and potential investments that we will look to make behind building our new businesses and brands. The current output for commodities suggests that we could be looking at inflation in costs across a number of lines in this current quarter. Although most pronounced within each of them is on aluminum and copper. And to partly mitigate the probable cost impact that is looking to be anywhere in the range of 50 to 70 bps, we've taken around the pricing at the beginning of this quarter, which covers about half of the estimated increase in commodity prices. Of course, it's still very early days in the quarter, and this could change. And therefore, we are watching the space closely given the many moving parts, and we'll decide the future course of action as the cost situation evolves. With this, let me hand the session back to Anand to open it up for Q&A.

Thank you. With this, we can open it for Q&A.

[Operator Instructions] The first question is from the line of Kapil Singh from Nomura.

Am I audible?

Yes, sir. We can hear you. Please go ahead.

Good evening and congratulations to the management for continued strong performance. I first had a question on electric 2-wheelers. I noticed that Chetak volumes have been ramping up quite fast. And one could say that pricing has become more affordable and that has helped, but competitors have also reduced pricing and some of them actually selling lower than your pricing. And yet, Chetak has been gaining share. So if you could help us understand what has been going right? And do you think there is potential to further rise up in the leaderboard to potentially #2 position sometime this year with the new affordable model or any volume aspirations by the end of the year that you would like to share?

Okay. Thanks, Kapil. The rise in Chetak market shares and volume, which we are seeing, which over the last 12 months has been pretty impressive, is a combination of the fact that you also mentioned that we trimmed the prices, and we have also expanded the network. We started with 40, 50 stores only, and we are hobbled on the supply chain insight because -- and this I'm talking about the closing quarters of the previous financial year, which is financial year '23. Once supply chain assurance was there when we started to improve distribution, then we started to also invest a little bit behind communication, and all that sort of went into the rise of market share. I think what the premium customers are appreciating is the build quality, the reliability and the styling of Chetak. And also the fact that it is the only one which has got a metal body and an onboard charger. These are some of the differentiating factors which Chetak has, which is setting us up for growth there. But -- and like you have rightly pointed out, a lot of action was initiated at the sub-1 lakh pricing level between INR 75,000 to INR 1 lakh. This also has marked up business from some of the smaller players, which had entered earlier, which accounted to 45%, 50% of the business, which has now shrunk to only 15% or so. But what it has done is I mean we are very vehemently clear that there are the above INR 1 lakh and the below INR 1 lakh segment. And we of course not participating in the below INR 1 lakh segment, which I said because we didn't have a product. And now with the arrival of the 2901, it has put us in a very -- because it is essentially the same robustness, reliability and styling, which is slightly defeatured for the saving in costs and putting -- attacking that segment. So with that, we get a very good geographic play and a segmental play. And certainly, our next stop is the #2 position. And after that, we will see how to move towards leadership.

Sure, sir. And if you could also comment on the profitability of electric vehicles to both 2-wheelers and I think 3-wheelers they've already talked about, but more 2-wheelers because we have seen significant pricing change and maybe costs have also changed. And if you could also talk about if we are -- how much PLI we are accruing here. So this is 1 part. The other part is we have also launched CNG technology here. So do you think that in certain cases, CNG may be more viable, for example, in motorcycles than the electric vehicles or maybe you think CNG is viable in scooters as well. What is the product pipeline on CNG? Could you gauge performance and then look at more products or there are already more products in the pipeline?

So our analysis was that the CNG would appeal to the longer distance rider, which when I'm saying longer distance it is, people will ride 30 kilometers plus per day. If you see, there has been a little bit of stagnation in the growth of the electric 2-wheeler segment because it is largely being -- it is largely sort of addressing the short distance commuter. The longer distance commuter is shying away from it, the inter-town travel and all that. And therefore, we see CNG as a better fit in the motorcycle format, which allows the customer to -- allows the rider to ride very long distances. And the electric, we are still range anxiety, charging, et cetera, remain issues and barriers to growth. That fits in better in the scooter format, which is generally multiuse, convenient use and smaller -- shorter distance riding. So these are the format. But I must tell you that from the early indications, we got there are some scooter customers also who have considered the CNG bike. We -- when we have put out these 3 models, obviously, we have designed them on the basis of our platform. And this platform can storm on both sides on the higher-end side and the lower-end side, newer variants beyond these 3. And we will, of course, see which is the right time to introduce those. So yes, Freedom is actually a portfolio brand. It's not just a product brand.

Okay. Kapil to your question on profitability, not very different in terms of position from what we outlined in the last quarter. So let me get the electric 3-wheelers out of the way, no different from what we've told you in the past. It continues to be profitable at a margin level parity with 3 wheelers after considering the PLI benefit. And so to that extent, very profitable. I'll comment on PLI accruals in just a bit. On the electric 2-wheelers, of course, it continues to be a drag, as you would expect. But I think what is now working for us is that the cost reduction efforts that had been mounted and the program that had been mounted for some time now has started to deliver. And so in many ways, the expansion of Chetak that is now happening is not coming in at an incremental drag. The drag that has been there in the base continues to stay. And so a lot of the cost reduction effort is going behind funding for lower pricing and for potentially lower price mix, right? So no additional drag coming in from Chetak expansion nor from the price drop that we may have taken to remain competitive in the market. But the larger drag and the fact that it is not yet profitable and will still take some time. It's no different from what we may have outlined the last time around. In terms of PLI, yes, we have accrued PLI for this quarter. We are accruing for it. You know that the cash cycle might play out much later. The SOP and claims submission is still in the works. And so therefore, claims have not been submitted yet. We will get to know that as the authorities book that out in the future, but recognizing that we now have a certified vehicle by the testing agency, which is what I had mentioned the last time around from the 5 vehicles that we have in the electric portfolio, 2 of which are Chetak and electric 3-wheelers. We now have certified DBS that are certified and signed off by testing agency, which essentially makes us eligible for PLI. And so therefore, to that extent, we have accrued for PLI in our financials for the quarter, right? At the moment, the new introduction of the Chetak, which is the 2901, which Rakesh just spoke about, the DBS certification with the testing agency is currently underway, and we expect that to come up anytime soon.

So sir, possible to quantify the PLI amount you have accrued?

Well, Kapil, as I mentioned to you, it is [ 13% ] of the sales as per the PLI feasibility. So that's really the level at which we recognize it.

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

Thanks for the comprehensive remarks and all the business is pretty useful. I just wanted to touch base on the 2 new opportunities or platform for growth that you spoke about, particularly on 3-wheelers. Now is it possible to get a sense of what percentage of your domestic 3-wheeler volumes are now electric. And also, when you talk about this 30% market share, what is the magnitude of market coverage that we have already in place so far with the distribution network? And then extending a little bit further, just the business expansion on the electric 3-wheeler side. The initial thought process is to target the markets where there are license restrictions and then go to market where CNG is not an option. But is there something that we're looking to tap into the e-rickshaw market as well because that continues to become very sizable portion of the 3-wheeler market in itself?

Well, thanks Gunjan. So we are -- we sell about 30,000, 33,000 3-wheelers, out of which about 3,000 from the latest month is about -- are the electric 3-wheelers, so that is about 9%, 10% of our portfolio as well. We -- like I mentioned, we are in now about 140 towns. And this is giving us almost a 70% coverage of the e-auto market. Our priority was to go into markets where we could not have gone with the CNG 3-wheeler or any other 3-wheeler due to permits. And these were largely in the North Uttar Pradesh and to some extent in the East. So we prioritized our action over there. But we are very clear that it is an all India play. And we certainly don't want to lose -- be a late entrant in any market just because we are selling a CNG 3-wheeler there. So there is no thinking like that. When we had a supply chain buildup, we said that let's first attack the virgin markets and then come to the all-India play. But we are very clear that there is no reason for us to not put in an electric 3-wheeler where CNG 3-wheelers already planned. And one of the things which emboldens us, which is what I mentioned a couple of quarters back that we are margin agnostic. So if there is any cannibalization, it is not really detrimental to the company. Having said that, I must also point out that the case for electric 3-wheeler opposite the CNG 3-wheeler is not so strong. And whereas people migrate very fast from diesel 3-wheeler to CNG 3-wheeler. People are actually migrating from e-rick, which is far cheaper -- from an e-rick to an e-auto. That phenomena also we have noticed. And these e-ricks are largely there, as you know, in North and East. And as we have grown our share in some places in the North, we are reaching 60%, 70% shares already. That share is of the total market, and it includes a lot of e-ricks, particularly end of light e-ricks within, let's say, 2 to 3 years, 3 years. So if there is an e-rick owner who has been applying the lead acid e-rick for about 2 or 3 years is absolutely a hot target for us to convert all the way up into e-auto because they know the patterns of traffic that is a source of income. We just want to move on from e-rick to a more substantive format. So that is why I'm saying that the e-auto, even if we place it all India, actually gives us far better traction in those markets where change is not allowed and where e-rick is already flagged.

Okay. But we don't see a case to have a product which is at a lower price point to accelerate this upgrade from e-rick to 3-wheeler auto maybe a limited range product because the range that we offer right now is quite good for a electric 3-wheeler auto, but maybe the e-rick category doesn't need that sort of range and allows us to bring down the price point. So is that something that, from a product expansion perspective can be explored?

Very much so. Actually, the strategic shift, which we have made for some time now is to now look at the market side through the length of 3-wheeler mobility. Earlier we used to be saying that we are in the auto business when we have 80% market share. But actually, we don't have an 80% market share because 43% of the market today is e-rick. So we are actually 80% of 50% or 60%. So we are very conscious of that. And this 40% we see grossly speaking is something which has just been allowed to mature. It is a substandard product. It is -- today, even to apply a PLI kind of a rigor to it. It will not pass DBS because a lot of it is imported. And we are conscious that -- but we are conscious that it is a certain needs of larger passenger carrying capacity over shorter distances. And development is very much on the card. So we know that we will have to extend our E-3-wheeler portfolio to address the needs of that segment also. And therefore, in conclusion, I would just say we want to be a full range player in the full 3-wheel market. All fuels, all 3-wheels.

Okay. My second question is on Triumph. Now both in domestic and export market, the volumes sort of are in the range of 2,500 to 3,000 for the last 2, 3 months, I think 6,000 is where we are averaging for the month. Now how should we think about the ramp-up here? Maybe if you can share a little bit color on how the acceptance of the product has been in export markets because this is sort of a white space in export markets. How does that scale up over time both domestic as well as export total Triumph volume contribution that we can -- we are expecting going ahead?

Yes. So the first phase in the exports market, which is, of course, mostly -- almost entirely managed by Triumph U.K., was done with the objective of pipelining. There was very long pipeline with product being placed in 57 countries and at each having its own homologation and specific requirements, so the whole thing was to just place the product and fill the pipeline. That phase is over. And of course, retail has commenced in most of these places. And the reports which we have got from Triumph U.K., is that it is met with a very good reception and a much better reception in geographies like U.K. Continent Europe add a decent reception in places like North America and ASEAN. But clearly, they are now -- they are pausing and looking at the flow of the retail level and keeping the next phase just adequately stocked up. The retail chains are adequately stocked up. Once the retail flows are better understood, I think we will see, again, an uptick in exports, but this is a phase where retail patterns are being observed, which hopefully in a couple of months' time should get to be quite known. In domestic, we are at about 2,000 unit level per month, as you know, over the last 2, 3 months, there has been a substantial expansion of stores, which is taking place, which has taken our stores from 40 to 100 in the last couple of months. In these new markets, the challenge and the task before us is to really build local awareness. And the kind of awareness, which is there for Triumph in, let's say, metro like Bangalore or Pune, Hyderabad, these kind of places, is vastly different from what it is there in a, let's say, a Coimbatore or in a Dehradun kind of a place. And therefore, the -- now the challenge is shifted to building local awareness of -- what is Triumph heritage? What are the products, the modern classics as we are calling them, and what it means to be part of the Triumph world in terms of the ride experiences, et cetera. And this now we have embarked upon in all these places. And hopefully, over the next 3 to 6 months, I think we will come to some decent levels of fairness, which will then allow the sales through these newer stores and geography to rise up and start to become significant.

Okay. I join back the queue, just 1 request, if you can also share the market -- your contribution for the various export markets like you usually do for us to have a sense how big Nigeria is, the salience of Nigeria and what is Brazil as of now, will allow us to think about growth across various markets then?

Okay. Yes. Gunjan will take it up after the call.

Okay. All right.

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

Could you share how do you account for PLI, like is it in revenue? Is it in cost? Is it in EBITDA?

So Binay, it's accrued for in revenue and by virtue of a clean shot in revenue, it shows and through all the way into EBITDA as well.

And this is the first quarter that you are accounting for PLI incentive?

Yes. Yes. Because if you recall, the last time I had mentioned that was when we had just about received the certification from the testing agency for DBS, so this is really the first quarter of...

If we just add up the information that you shared that of [indiscernible] big news are electric, and we understand fast 3-wheel models and 2-wheeler set the PLI. And then broadly, it sort of leads to almost a 70, 80 basis points of margin support coming from PLI incentive in this quarter. Is that a fair assessment versus last...

No. It would be under 50 bps of contribution thereof.

And I think another thing to be from your 10% [indiscernible] number points out that almost 60% of your domestic EV revenues will actually be 3-wheeler. So I think this is one like differentiation, which is why EV is not becoming a drag so much to you versus your peers. Will that be a fair statement?

Sorry, the line was slightly garbled, Binay, but if your question saying that the presence of electric 3-wheelers will contain the drag on our results.

Yes. Yes. Yes.

Yes. Absolutely. Sorry, go ahead.

Because they are the extent of your domestic EV revenues, right? With the numbers that you shared that 9%, 10% of domestic 2-wheelers are electric, which means that almost 60%, 65% of your domestic EV revenues will probably be 3-wheelers.

Okay. Binay, I'm not getting the construct because I think it's also because the line is slightly harsh, but you can pick that up with Anand, but let me just reiterate as I mentioned. I mentioned that 14% of the domestic revenues in this quarter have been contributed by the electric portfolio with e-2-wheelers and 3-wheelers put together.

Right, right. No, no, I'll connect with Anand. And lastly, just any comment about industry volume growth. And we've also seen Bajaj Auto losing some market shares. Any comments on how you see industry volume growth shaping up and your market share within that? That's it from my side.

So the industry outlook, as we said, we think it should be 6% to 8%. And the top half, the 125cc plus segment will grow much faster. And I think we will grow faster than that -- than the industry in the top half. The bottom half, as you can see over the next 6 months, largely, the big move over there is the Freedom 125, which definitely will add to the market share, which has been maintained. Your comment on there is no loss of market share. Your comment on market share. The blip you may be seeing is when you compare Q1, Q1 of this year, Q1 of last year was a bit of an unnatural thing because one of the major players had faced issues in transitioning to the OBD 2, and there was a big supply introduction in that quarter. And that has led to a very unnatural increase in market share for all the other players, including us. But if you look at it, normalized -- I mean, that was a one-off thing. Those market shares got corrected in quarter 2 of last year. And since quarter 2 of last year, quarter 3, quarter 4 and now quarter 1, we've been chipping away at the top half, and market share has actually been increasing. There is a slight loss of market share in the bottom half. Therefore -- which was something, which was expected. We have not participated in the sort of red ocean game, which has been played in the mini season in the first -- in the North in the first quarter, particularly in April, May. And that has led to erosion of market share at the very bottom end at the entry-level product, which we have, as you know, is CT100 and Platina 100. So therefore, when you put these 2 together, a steady market share in the top half, but a slight erosion in the bottom half, you see some decimal points of market share being sought. But in the top half itself, sequentially, there is a market share improvement. This is based on VAHAN retail, I might just clarify. We don't talk about billing market share. All my comments were based on data from [indiscernible].

Overall, very good performance.

Binay, I just want to be sure, my colleagues over here tell me that I think what we gather about your question was what is the contribution of the 2 electrics in the overall 14%, 60% of which comes from electric 2-wheelers 40% in the quarter come from electric 3-wheelers. The 2 put together, therefore, add up to the 14%. If that was your question, I just wanted to be sure everyone gets it. But if it wasn't, then Anand will be happy to engage with you offline.

No. That's very clear now.

The next question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead.

Sir, firstly, can you share the CapEx guidance for FY '25 and which areas of spend would be there, sir?

So Mumuksh your question on CapEx guidance, we forecast not very different from what I said in the past, it should be in the range between INR 700 crores to INR 800 crores. A large part of that will primarily go towards the commissioning of our new electric 3-wheeler facility in Bharuch and other capabilities that we are building essentially for electric. That's the chunk of it, but assume that it should be in the range of between INR 700 crores to INR 800 crores for the year.

Got it, sir. And this quarter, we've seen other expenses have grown strongly. Can you explain what could be the result for the increase?

Yes. So there are 3 or 4 contributors to the other expenses. It is at par with what you would have seen last year. But it is fundamentally on account of -- so therefore, we are seeing a step-up between same time last year and now, and that step-up is essentially driven by about 3 or 4 factors. The first is the heightened level of CSR spend this year compared to last year, which one has to keep providing for in the quarterly results. The other is the step-up arising from variable costs and packing to reflect a step-up in the volume and activity levels that we have. The third is some costs that we are incurring now for extended warranty on our electric portfolio as that is now growing over same time last year. Those costs sit within the other expenses line.

Sir, lastly, how are you seeing the partnership with Europe. Currently, volumes around 1,000 units per month. How do you see the potential rights from this segment in the EV.

Yes. So I think the partnership you're aware that we have an equity ownership of a little under 19% with Europe. Clearly, they're looking now to expand volume. So what you've seen in this current quarter was essentially a little bit of destock adjustment that they were doing to really rebalance numbers across the cities that they are operating in. We expect those numbers to step up in the current quarter from the early indications of plans they have given us. So very much committed to that business. And you're aware that the vehicles that we supply to them are essentially custom build the platforms being built by us for that.

Got it, sir.

The next question is from the line of Raghunandhan from Nuvama Wealth Management.

Congratulations on strong results and on the CNG launch, wishing all the best there. Firstly, on the CNG side, you indicated 60% coverage in the addressable market. Can you talk a little more on how well the coverage is or how deep the coverage is in rural and semi-urban areas. Also, when we do channel checks with dealers versus a small set of dealers, and they indicate that bookings have started coming in from customers and dealers are quoting 1 to 2 months kind of waiting period. If you can provide some color on initial bookings, what is the customer mix? And finally, on CNG again, when should we expect the variance that is 100cc motorcycle 110cc, how do you take it forward?

So CNG is available at 335 towns out of the 500 top towns and these 335 towns account for 70% of the market. When we took 60%, we have bottom sliced some of the towns where the density is very, very low. But the density numbers are really, very varying depending on the town. It's very difficult for me to give you 1 number, which will help you appreciate what is the debt we are talking about. At one end, you have a city like Delhi, which has 550 petrol stations. But it has 250 only CNG stations. And another 400 or so shared with petrol. So you can see that Delhi city has actually got a safe dedication as petrol, gasoline, diesel station. And then there are others where there is only one CNG station for the entire town. So very difficult to give you -- there are intermediate solutions also with the gas distribution companies deploy like sending tankers, CNG tankers on regular intervals, which then goes in fills the tanks at remote locations and all that. So it's a very, very complex thing. The only thing I can tell you is that our initial meetings that the gas distribution companies have been very good, and they are very enthused that there is a new segment developing for them because it helps them push more throughput, through their infrastructure and their whole performance depends on how much they can sweat their infrastructure because there's a big CapEx involved in putting up that infrastructure. So the stance we are expecting -- as we speak, we are having these local level meetings and we are optimistic that our customers will be given dedicated filling points even in gas stations, which are shared with petrol. And there was something else...

Color on the bookings and customer mix?

So the bookings right now about 4,200, I mean this is yesterday's figure. 90% of this has come from Maharashtra and Gujarat because you've opened up all India bookings to just a couple of days back. So almost 80%, 90% of these bookings are Maharashtra and Gujarat. Most of these bookings are actually for the top end, which was the 110,000 LED at Lab disk overwhelmingly for the top end. The deliveries -- the dispatches are just about commenced. So we -- I think dispatched just about 100 vehicles or so and the retail -- and the first retail happened a couple of days back. The type of customers who are -- we are still mining their data that for whatever we have early analysis, which we've done, it is very difficult to establish a pattern because people from very different work of life whether it is demographics or whether it is geography -- I mean when I say geography within Maharashtra, rural and urban, we have got a very broad spectrum of people who have cut. So it's very difficult to see the pattern, but in a way, it is very good. It is showing that the appeal for the bike is cutting across several demographic and sociographic segments.

And when should we expect 100cc motorcycles, sir, with CNG?

Yes. Sorry, I was just saying that I already talked about that this is a platform and is extendable on both directions. But exactly when we are going to introduce, wait and see. We will see -- we will watch it. It's not a ground-up work, which will be required. It's a platform. And very quickly, we can respond if there is requirement emerging in the marketplace.

So Dinesh, sir. Sir, If you can share on the E-2-Wheeler, how would be the gross margin currently, including the PLI considering the battery cost reduction and other cost reduction efforts you spoke about, would it have come to double digits now, 10% to 15% gross margin?

So, at this point of time, obviously, for competitive reasons, we're not going to be able to share with you the margin profile of the electric 2-wheelers. But let me reiterate what I just said. I said that Chetak is expanding. There is an inherent drag that it is loss-making at this point of time, right? Clearly, performing prices has only had an even bigger challenge on the economics. But I think what has come to our rescue is the fact that the cost reduction work stream that have been put in place has now started to deliver in the last 2 quarters, whatever price drops we've had to take on whatever volume that we have expanded, the incremental impact of that has been utilized by the cost reduction. So there is a drag because the overall proposition itself does not make margin compared to the enterprise margin at 20%. But typically, with an expanding volume, that strain on the enterprise margin should start to show up, we've been able to contain that on the expansion volumes by virtue of the cost reduction, right? As far as the specifics of the margin profile, I won't be able to give you a specific count on that at the moment, but to say that profitability is still a while away on the electric 2-wheeler.

Got it, sir. Just lastly, some housekeeping. If you can share the electric 3-wheeler volume for the quarter, spares number in crores and the financing ratio.

Yes. Raghu, we'll take these questions offline.

Sure.

The next question is from the line of Jinesh Gandhi from AMBIT Capital.

A quick question on Freedom 125. Are you indicated that the addressable market is about 400,000 to 500,000 units per month. In that context, the capacity which we are looking at by year-end of 40,000, is that quite low? Or this can be scaled on a very short notice?

Yes. So obviously, before we ask different types of vendors and all that to put in the CapEx, it is very important to get a good fix on the adoption rate. And the first step has gone off extremely well. We were confident of the proposition. But what we are very heartened about is also that the styling, the ergonomics and the comfort and all those things, the bi-fuel capability have been also extremely well appreciated. Now we will see how the pattern unfold in Maharashtra and Gujarat. And we will start to take some view on future capacity. I guess if we have that kind of a runway of about 6 months or so, we will be able to substantially expand the capacity. The key factor over there really is the CNG...

Got it. Got it. And secondly on plan, if we look at the demand in the domestic market, especially in markets where our product has been launched, I mean, since launch, the product has been available -- are you seeing any trends in terms of how demand is shaping up, higher-end credits have been doing in the markets where products have been available since day 1?

Yes. In the markets, in the metros and mini metro, we are finding very good traction and very good post sales satisfaction, et cetera, because these people come with an understanding of the lineage of clients. And that has been very, very helpful. So however, when we step out of the mini metro areas, the understanding of the brand and where this is coming from is rather limited, and that is the point I was making that -- it's almost like 2 very different worlds. And the challenge now or not the challenge, but let's say the start now before the marketing team through various devices, whether it is rides or digital or local activation to bring the brand to life. But in metros and mini metros, yes, particularly in the city centers, et cetera, is very good. Now even in a metro if you -- let's say, if you take Bombay, Bombay is a very good brand awareness, but if you go to Thane or if you go to on the other side to Virar, Borivali, the real suburbs, the brand awareness -- that awareness is there, but the detailed understanding of the brand that has to be brought to life.

Got it. Got it. And Dinesh, on the staff cost side, we have seen a good increase on Y-o-Y and Q-o-Q basis. Any one-offs there which will normalize or this is a normal variable increases, which have happened.

Sorry, you'll have to repeat that because...

The staff costs are seeing a good increase on Y-o-Y and Q-o-Q basis. Any one-offs to call out there or this is normally increases which are there?

No, I think the staff cost you will see is not very different quarter-on-quarter. So the year-on-year is a reflection of fundamentally increments and additional staffing for capabilities that we are building within the business. So nothing of one-offs that we need to call out.

Okay. Copy that. And lastly, what are the export revenues in the quarter?

460 million orders.

460, okay, fine.

Sorry, just before we take the next question, I know Raghu had had asked the question on those 3. I just want to be sure that these data points are accessible to everyone. So Raghu, once we won't get you back on to the queue, but the 3 data points that you asked for, is the electric 3-wheeler volumes in this quarter are fundamentally about 9,350 odd. The spares revenue at the moment, is about INR 1,350 crores, and the financing penetration for motorcycles was 75% and for 3-wheelers was 19%. Yes, we can get back to the question queue.

We'll take the last question from the line of Pramod Kumar from UBS.

And Dinesh, first, on the Freedom 125. Just wanted to understand the thinking here as to what will be the watch level [indiscernible] ramp-up is done, which would kind of satisfy on the kind of success what you were looking for because it's indeed a big differentiator. I don't think any OEM is finding anything like this anytime soon. So you really have a pretty good edge. And as I said, CNG makes a lot of sense for most of the consumers, if not all. So what kind of volumes, given the kind of innovation what you have put on the table would be sort of -- will be like -- which -- or if you don't get that number, that will be something, which will not very satisfactory. If you can just help us ascertain, I'm not looking for near-term volumes once let's give it a year or so. Where do you think the demand will settle up?

Like I said, our market share in the bottom half is 15% odd. And we would definitely be looking at a very respectable market share. The market share in the top half is 25%. And if we are getting to that kind of level even in the bottom half. And when I'm saying bottom half, it could either be through upgrading them into the 125cc segment or just to be noted. But if we can take that kind of a slight out of the bottom half and linking up into the top half and therefore, climb to a market share of 40% to 50%, indicates strong leadership of expanded top half. We would be very happy with that.

And second question is on the premium category. Rakesh, the VFC and, of course, Triumph and even [indiscernible] launched kind of not do as great as what anyone thought how their management thought? Even Royal Enfield volumes have not been that great in retail funds. So for the last few months, it looks like the premium category is not doing as good as what one that has seen in terms of broader trends of premiumization across most of the other automobile categories and even outside of autos. So if you can just -- is there anything, which you're noticing there that despite the multiple launches from industry participants the category is not exactly kind of really benefiting from the premiumization trend, which is broadly seen across many parts of the economy? Any thoughts there?

Yes. I think that piece has to be -- your observation is very correct. But we are finding that the premium category or, let's say, the middle weight 250cc to 500cc has been a bit lackluster in performance. I would say that -- and this is despite some of the launches by us and a couple of a few other people. So there's been a lot of action, but I must say that the action as -- a lot of it has been in the performance end of it. And I always find that the development of our category to a large extent, is dependent on a player who has got an overwhelming presence on it is that. So we found that to be happening if you see in the 150 to 250cc category where Pulsar was ruling. And there was a time 2, 3 years back when there was -- the pipeline was dry. And we were seeing a shrinkage of the category. But now suddenly, you see that the [indiscernible] commuter 150 to 250 suddenly started to pick up. For third quarter, we sold -- we couldn't sell 250cc. But last month, our new N250 sold more than 1,000 -- retailed more than 1,000 units. So we are seeing some clear traction over there. I guess there is a little bit of fatigue probably because of lack of action on the classic side. But hopefully it will correct itself.

And Rakesh there's a play off like the pricing also playing its part? Like what are you seeing 150 kind of lose out to 125 to an extent also, of course, people have upgraded from 100, but similarly, are we seeing that some of the potential 350 customers, the 250-plus customers are now kind of settling for a more attractive package or product in the 150 to 250 category? Are we seeing that bit of down trading to an extent because of the affordability or the price escalation what you've seen?

No, I won't say that. I don't think within a brand, if there has been a lower-priced variant, which is almost very similar to the higher-price variant, you might be seeing a certain migration. But for a migration to go from, let's say, 350 or 400cc down to 160cc is a little bit difficult to imagine. It happens a little bit, but I don't think in a significant manner.

No, no. That's very good to hear, Rakesh. I wish you all the best.

One thing if I may add, the NS400, which was just launched, that has clocked almost 2,400 inquiries. So it is probably the most successful initial launch at least. The Pulsar NS400, which you recently got launched. It is done extremely well. We have to see how long the trend persists.

Ladies and gentlemen, we will take that as our last question. I would now like to hand the conference over to Mr. Anand Newar, Head of Investor Relations, for closing comments.

Thank you, Sagar. Thank you, everyone, for joining the call. I'm open to taking questions 15 minutes from now. Thank you.

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