Bosch Limited (500530) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bosch Limited 1Q FY 2026-'27 Post Results Conference Call hosted by 361 Capital Market Research. From Bosch management, we have with us today Mr. Guruprasad Mudlapur, Managing Director; Mr. Tillmann Olsen, Chief Financial Officer; Mr. Tillmann [indiscernible], this will be the first investor call and welcome. Over to you, sir.

Good afternoon, everyone, and welcome to our Q1 FY '27 earnings conference call. We'll begin with an overview of the current macroeconomic landscape and our outlook. The domestic economy remained resilient in the first quarter of fiscal 2027. This stability was driven by robust private consumption and stable monetary policy from the Reserve Bank of India, which held the benchmark policy repo rate steady at 5.25% under a neutral stance at its August 2026 meeting. While food and energy volatility pushed June headline inflation to 4.38%, reaching the RBI's 4% medium-term target for the first time in 17 months. It remains comfortably within the Central Bank's 2% to 6% flexible inflation targeting framework. This policy flexibility is critical for India's macro stability in FY '27, allowing the RBI to manage price stability amidst external volatility while prioritizing steady economic growth to avoid policy-induced slowdowns. Given this context, our outlook for the remainder of fiscal 2027 is anchored in strategic reliance, resilience. We are highly encouraged by RBI's decision to raise its real GDP forecast growth forecast for FY '26, '27 to 6.7%, up from its previous estimate of 6.6%, backed by strong capital expenditure momentum outlined in the budget, keeping India positioned as the fastest-growing major economy. Our strategy is built to thrive amidst external market dynamics. Our key priorities will remain focused on strengthening our operational resilience in the face of ongoing external uncertainties, enhancing supply chain agility through diversified sourcing and managing commodity and currency risk proactively. Next slide, please. The Indian automotive industry concluded Q1 FY '27 on a resilient note despite geopolitical disruptions in West Asia, supported by strong domestic demand, lower GST rates and a favorable base effect compared to Q1 FY '26. The master vehicle demand remained strong during quarter under review despite geopolitical tensions in West Asia elevated inflation within the [ RBI's ] target bank and heat waves across select regions. Demand was supported by sustained preference for SUVs and healthy consumer sentiment. The [indiscernible] segment maintained the healthy demand despite the INR 7.5 per liter increased initial price. The [indiscernible] segment maintained its momentum, supported by a combination of stable freight activity, steady replacement demand and sustained spending in construction and infrastructure. Continued momentum in key sectors, specifically steel and cement provided a strong foundation for further growth. LCV demand remained robust driven by healthy last mile logistics, sustained e-commerce and FMCG demand and a low base effect that supported growth momentum. The 3-wheeler sales maintained strong growth momentum, supported by steady passenger mobility demand and increasing last mile connectivity. The EV segment continued to expand its market share driven by attractive operating economics and lower running costs. The tractor demand remained resilient despite concerns over an uneven monsoon, across parts of the country, supported by healthy farm cash flows from a strong [ Rabi ] harvest and pre-tariff farm activities. The 2-wheeler market recorded robust growth supported by low base effect and resilient rural demand. Next quarter, we expect a resilient 8% growth, driven by festive demand, stronger rural cash flows and ongoing infrastructure activity. However, monsoon variability, potential El Nino effect and geopolitical tensions remain key downside risks. Next slide, please. Quarter-on-quarter, the mobility business has grown 25.7% in April, June '26 as compared to April, June '25, driven mainly from the Power Solutions business, which grew by 29%, mainly on account of growth in passenger cars and off-highway segments. The mobility aftermarket recorded a growth of 9.6%, driven by strategic price positioning and a lot of new schemes for key product categories, including lubricants and [indiscernible]. The 2-wheeler business grew by 41.4% mainly on account of growth in value-added EMS products increased sales to premium motorcycle platforms and steady demand from major domestic OEMs. The consumer boards business grew by 20.9% driven by strong demand for tools supported by marketing campaigns. Sequentially, the mobility business has grown 7.5% in April, June '26, as compared to Jan, March '26, driven mainly from the Power Solutions business, which grew by 5.8%, mainly on account of growth in passenger cars and off-highway segments. The mobility aftermarket business, which grew by 8.7% in mainly on account of strong growth in lubricants, wiper systems and sparkplugs. The 2-wheeler business has grown significantly by 20.5%, mainly on account of higher production volumes from 2-wheeler OEMs supported by channel inventory replenishment. The consumer hoods business declined by 15.7% due to seasonal factors. Next slide, please. Quarter-on-quarter, revenue from operations in April, June '26, stood at INR 58,419 million which grew by 22% over April, June '25. The growth was driven mainly by higher sales in Power Solutions and 2-wheeler power sport segments as seen in the previous slide. Likewise, the revenue for the period April June 26, grew by 5% over April -- Jan, March '26 from INR 55,657 million to INR 58,419 million. This growth was driven by strong performance in Power Solutions and mobility aftermarket segments. The EBITDA for April, June '26 was INR 8,180 million, which grew by 28% over the same quarter of previous year. The improvement in EBITDA margin was primarily driven on account of growth in revenue and optimization of expenses. EBITDA for period April, June '26 was INR 8, 180 million as compared to INR 7,816 million in Jan, March '26, which grew by 4.7%. The increase in EBITDA was due to revenue growth. The profit after tax for April, June '26 declined by 37.1% over the same quarter of previous year. April, June '25 had an exceptional item of profit on sale of video solutions, access and intrusion and communication systems under the Building Technologies segment. The profit after tax without this exceptional item in April, June '25 quarter has grown by 9.9%. The profit after tax for 3 months ending June '26, stood at INR 7,018 million, which is a growth of 23.4% over sequential quarter. The growth impact is mainly due to revenue growth and higher mutual fund gains, which are taxed at a lesser rate. Next slide, please. I now will walk you through the key highlights from our business divisions for the first quarter of the fiscal year '26, '27. From our Power Solutions division, it achieved strong growth significantly outperforming the broader automotive market. This performance was driven by robust demand across all our key segments, including passenger cars, commercial vehicles subtractor. Our focus continues on navigating the evolving regulatory landscape. We are actively engaged with our partners to address upcoming regulations like [ Cafe 3 ] Phase III -- Cafe Phase III and the implementation of [ ADAS ] in commercial vehicles. Our commitment to quality and innovation continues to be recognized across the industry. This quarter, multiple OEMs honored us for our performance. We received a delivery excellence award from a leading commercial vehicle manufacturer and a prominent tractor and utility vehicle like awarded us for best quality performance, best in technology and innovation and named as their business partner of the year. Moving to our 2-wheeler and Power Sports division. The business successfully met a search in [indiscernible], ensuring 0 production disruptions for our customers. despite ongoing geopolitical and supply chain complexities. Bosch's advanced safety systems were recently introduced integrated into the first electric water cycle from a leading 2-wheeler manufacturer for its commercial march. We also showcased our latest innovations across powertrain, safety and electrification at the [ Atma ] Mobility Foundation Technology show. Furthermore, we were honored by a leading global 2-wheeler manufacturer for providing exceptional development speed and engineering support for one of them flagship scooter platforms, a testament to our strong collaborative partnership. In our mobility aftermarket division, the independent aftermarket business was a standout performer achieving its highest ever monthly sales in June. The original equipment segment also delivered robust count. This performance was driven by strong contributions from our core product categories, including lubricants, batteries, spark plugs and braking systems. Strategically, we are accelerating our workshop programs and expanding our portfolio with new product launches, such as tooling LED range of advanced lighting solutions between a high duty -- heavy-duty commercial vehicle battery, PC cutters and suspension, which will further strengthen our market position. In our Power Tools division, we saw strong sequential growth and accelerated demand in the construction and automotive sectors with our online sales channels continuing to expand its share of total sales. Our strategic focus remains centered on driving cordless conversion, extending our product portfolio and expanding our market reach to key customers, key users and small to medium enterprises. Next slide, please. Yes. Thank you all for your contribution and listening patiently through the call. We will now address your queries. Thank you, and we are open for questions.

[Operator Instructions]. First question is from Pramod Amthe.

Congrats for a good set of numbers. So the first question is the aftermarket segment seems to have come back into a high single-digit growth after languishing in the low single digit. Wanted to get your comments, how sustainable is this momentum, what you have done differently from now onwards because it is a large legacy business to be addressed?

Yes. Thank you, Pramod. Yes, I mean, we've had some low growth period last year with our -- with the after market and we recognize that I've made quite some corrections in our strategy and our approach to market. So specifically, to address your question, the independent aftermarket business did very, very robust growth. A lot of contribution from lubricants, batteries, spark plugs, braking systems and [indiscernible] machines. We've also sort of continued our expansion of the workshop program, which we are expanding at a very, very rapid pace now. We've also introduced quite some new product launches, [indiscernible], the LED lights. Then for the heavy commercial vehicle HCV batteries, we've brought in new products like the PC Glucan suspension systems. So overall, the aftermarket portfolio is much, much stronger now -- and our approach to market, which is even more significant, has started to produce results. So we believe that this is a sustainable math over the coming period. So we should see sustained growth going forward.

Sir, the second question is regard to margins. Compared to post-core EBITDA margin range of 12%, 13%. Last 2 quarters, you have successfully delivered 14% margin. And even in the annual report, you talked about holding on to the margins. So in that context, I wanted to know how sticky these margins or are there any one-offs which have helped you? And going forward, how confident you are to maintaining these type of margins?

So I'll my perspective and maybe Tillmann can add on this. So I think we've done quite a few things over the last several years, maybe at least 2 years or so consistently which has led to a sustained improvement in our margins. The first thing is continuous improvement in our operational excellence, so that has led to a sustained change. We've had a continued increase in our localization content, so that's contributed quite a bit. The volume growth has been favorable which is also a very good one. We've had improvements in productivity overall that has been also a major contributor and the product mix has also been quite favorable going forward. So that's also a good addition to our margin base. So overall, I would say, we are on an upward trend, and we would say that we will sustain this. Tillmann, if you want to add anything, please feel free to comment. I would also like to say that Tillmann is not feeling very well. That's why he's on the call from home. So only when required, you can join and otherwise, I'll chip in for it.

I'm here Guru. Just maybe one addition. I think we also profit from the worldwide purchasing organization. As you are all aware, the sourcing market is quite a terminal -- I think we are blessed with a worldwide purchasing organization, which helps us to maneuver this very volatile situation and maintain best as possible our margin in the situation via also our sourcing activities. That's the only thing I would add.

Sure. So if I can ask one more question based on the renal report. You have successfully delivered in terms of reducing the broader purchase goods as a percentage of sales. over the last 2, 3 years by reducing it from what, 40% plus by around 200 basis points. But if I had to look at the mix of it, the sourcing from parent continues to go up. It's now almost like in that basket, 53% is a mix, which is, I think, a decadal high versus the local subsidiaries proportion has come down. So what -- how should we look at -- is there a directionally the imports from parent will come down or the technology, new technology still demand this proportion to remain high?

There has been a certain surge in volumes, which have also led to this effect. But all I can state is that our localization plans are well on track and consistently increasing localization content. And we will continue to go in this path and continue to increase our localization contract. So as you go by in the coming quarters, we will continue to share our localization updates and this on a very good path as far as I can.

Mr. [ Ravi Gupta ], you can unmute and ask your question. He's not able to. I will ask [ Mutul ], you can unmute and ask you're question.

Congratulations on the wonderful numbers. This is [indiscernible]. Everybody is focusing on SDV, electronics and everything else. But India's share of CNG vehicles and alternative fuels is growing like or growing much faster. Five years from today, if I wanted to understand in terms of incremental revenue, would Bosch want to have that increased share from the technologies that have to do something with the engine or not with the engine? In other words, would you also be working for the way India is growing? Would you also be working to make ICE engine more cleaner and better for the future, also from a revenue standpoint?

Okay. Mukul, I think -- the answer is pretty straightforward for us. We are a technology company, and we will support and continue to support whatever technology that the market demands. So you listed a few more TVs, electrification, CNG and link the others, [ ADAs ] and everything else. Every one of this is in our portfolio, and we continue to offer that to our OEMs. That said, there is also a momentum which will carry the combustion technologies forward. And including maybe some rent fuels. This progression will continue in the next many years to come. So this is something that's not stopping. We see this including volume growth in combustion technologies continuing to happen. There is possibly also upgraded legislation in combustion technologies as we move forward and we are certainly leading that way, but we will continue to support. So overall, as a technology company for us, these are all base technologies, which we support based on whatever the OEMs demand or whatever the registration demands or market demands.

Just one more follow-up question on this. A lot of OEMs now increasingly want to own software and electronics architecture themselves. This trend is only picking up right? Does -- do you see a risk of losing some of the value Bosch traditionally captured as -- or do you actually see Bosch content per vehicle only increasing from here?

Yes. I mean today, it's an earnings call, we'll be happy to engage with you on this kind of a conization separate [indiscernible]. Good answer to this is No, we don't see this as a negative phenomenon at all. We are happy to engage with OEMs on different models, and we already do.

Perfect. And once again, congratulations on the wonderful numbers.

If you would like to engage specifically on these topics, feel free to let us down, we can have a conversation.

[Operator Instructions] in the meantime, Mr. Ronak Mehta, you can -- please unmute and ask the question.

Congratulations on strong growth and resilient margin performance. My first question is on the Power Solutions business. Can you help us understand was there any content increase or new program execution that would have drove this outperformance? And how sustainable is this?

You're referring specifically to Power Solutions.

Yes.

Okay. So in the Power Solutions business, we've sort of outperformed the growth across all our segments right from passenger cars to off-highway and tractors. We've -- I think it's -- the effect is largely volume effect. And there may be also some new introductions that we did over the last 2 quarters, so -- which have helped us I think what we look forward to moving forward are the upcoming legislations on Cafe Phase III, which will come up in April, which should be and even better boost. We also have the CV ADAS coming up in October of next year. So a lot of preparation going on towards that. That's another area where we look forward to sustaining this already good growth path. So overall, I think powerful vision is on a very, very good part.

Perfect, sir. And my second question is on the 2-wheeler segment. So you indicated that you started supplying to plenum 2-wheeler platforms starting this quarter. Does this mean that -- does that mean that you have gained market share? Or it is more to do with the mix of content?

We've gained market share Yes. There are some new products introduced to new OEMs. So we have gained market share again.

Perfect, sir. And also just a clarification. So when you talked about upcoming regulations specifically cafe norms from next year, what is the content opportunity for Bosch? Any color on that segment-wise content opportunity?

We can share that separately. I don't have the exact number right now, and I don't want to speculate on value. So I can -- we can share that.

[Operator Instructions]. But in the meantime, some person on the chat box are some housekeeping questions, like the [indiscernible] implied cost, even in absolute year-on-year, there is no big change. Is there any one-off in the employee expenses, sir?

No. Yes. To answer that, no, there are no one-o

Okay. Okay. And on the other expenses, any one-off, sir?

No, no. We don't have any one-offs.

Okay. Okay. somebody has come in the queue. Mr. [indiscernible], you can unmute ask your question.

Yes, I had a couple of questions on the Bosch [indiscernible] acquisition. So first is, is there any goodwill or amortization expense for the same acquisition

No, there is nothing.

Okay. And the watch asset will be operated as a [indiscernible] subsidiary. So how are the synergy on cost and revenue going to play out if we don't really [indiscernible] it with our business. Can you just give a sense from the [indiscernible] point of view for the next 2 years?