Eicher Motors Limited (505200) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call of Eicher Motors Limited, hosted by PhillipCapital India. [Operator Instructions] I now hand the conference over to Mr. Amit Hiranandani from PhillipCapital India. Thank you, and over to you, Mr. Hiranandani.

Thanks, Fazal. Good evening, everyone. On behalf of PhillipCapital India I welcome you all to Eicher Motors Q1 FY '27 Earnings Conference Call. I take this opportunity to welcome the management team from Eicher Motors Limited. Today, we have with us Mr. B. Govindarajan Managing Director, EML; and CEO of Royal Enfield, and Mr. B. Srinivas, MD and CEO of VECV and Ms. Vidhya Srinivasan, Chief Financial Officer. Now I hand it over to the management for their opening remarks. Thank you, and over to you, sir.

Thank you. Hello, everyone. Good evening. Thank you for joining Eicher Motors Limited earnings call for the first quarter of FY '27. After a record shipping performance in FY '26, about which you all would have read in the recently released annual report, we have kicked off the new financial aid on an equally promising note. It has been an exceptional quarter across both the businesses. Royal Enfield registered its highest ever quarterly sales, VECV also registered its highest share Q1 sales. With both the businesses consolidating the market dominance, we are geared for a growth-led FY '27. Now I'll begin with a broad summary of the overall financials. At EML consolidated financials for first quarter FY '26-'27. Our revenue EML dropped its best ever Q1 revenue of INR 6,632 crores, marking a growth of 52% over INR 5,042 crores from Q1 of last year. Our EBITDA, highest ever EBITDA of INR 1,591 crores versus INR 1,203 crores in Q1 last year. PAT is INR 1,463 crores, up 21% from INR 1,205 crores in Q1 last year, which includes INR 168 crores of EML share of profits from VECV in the corresponding quarter. And Royal Enfield, and I'll just touch upon on key updates on Royal Enfield. We had a very fantastic quarter, continuing to consolidate our leadership in the [indiscernible] motorcycle segment. The first quarter of the new financial year was marked with a key milestones, including the launch of our first electric motorcycle, the Flying Flea C6, the launch of the iconic bullet on our 650 CC platform and our expansion plans for the manufacturing readiness. We also continued to strengthen our global brand and community ecosystem within 25 years emissions of our marquee rights and events. During the quarter, we registered our highest ever quarter sales at 3,32,940 motorcycles, as against 2,61,326 in Q1 of FY '26. Out of this, in India, we sold 3,01,174 motorcycles. In the global market, our volume stood at [ 31,166 ] motorcycles. Despite the dynamic macroeconomic and geopolitical environment, we continue to see encouraging traction across all key markets. On the product front, we started the year with the launch of Flying Flea C6, as I mentioned, the first electric motorcycles under our City+ electric mobility brand, Flying Flea. Alongside the launch, we also opened a brand first store in [indiscernible]. Customer deliveries of the electric motorcycles of Flying Flea C6 has commenced this quarter, which is a historic milestone for us. We have received a very positive customer response and to meet the growing interest. Now we have decided to expand our footprints in Bangalore, first 5 touch points, followed by another 5. As we have said in the past, we are looking at a city expansion strategy by Flying Flea. We also strengthened our internal combustion engine portfolio with the launch of our Bullet 650, the motorcycle [indiscernible] the British lineage and Indian soul that brings the essence of iconic bullet [indiscernible] platform. Our hugely popular Roadster, the Hunter 350 got an expanded lineup the new base premium variant and exciting color wise. Introduced at [indiscernible] in Lucknow, our street culture festival, the Hunter continues to bring in a wave of new and young riders into the community. I'm glad to share that both our 450 CC and 650 CC motorcycles are back at the pre-GST level, and we continue to invest in them to drive growth and expand this segment from now on. Another highly gratifying development was to see the Himalayan 450 becoming the mis-selling adventure motorcycle in its class in various regions across the world, India and Brazil, especially. On the manufacturing front, as we gear up for the next phase of growth and [indiscernible], we announced a plan for a strategic expansion of our manufacturing capacity to a new greenfield facility in [indiscernible]. This expansion is aimed at strengthening our manufacturing capacity beyond our existing facilities in Tamil Nadu and to meet the future demands. Today, the Board has approved an investment of INR 1,225 crores for the Phase 1 of the greenfield expansion at [indiscernible], which at full utilization can produce an additional 4.5 lakh motorcycles per year. The above capacity engine is expected to be completed during financial year '39-'40. It will be happening in modules. Globally, we continue to broaden our portfolio [indiscernible]. We marked 125 years of Royal Enfield unveiling of [indiscernible] page at [indiscernible], the birthplace of our brand, with 5 generations of our motorcycles lying and field road for that billing. And over to our global brand, Royal Enfield was ranked as the world's third strongest automobile brand, bigger brand finance, reflecting our growing strength across international markets. We expanded our portfolio in Nepal and Malaysia with the launch of the 2026 Goan Classic 350. In Australia and New Zealand, we introduced the Guerrilla 450 FX variant. Our motorcycles such as Goan Classic 350, Guerrilla 450 and Super Meteor, earn top industry awards at Major Automotive shows in Thailand and in Malaysia. Celebrating 125 years of Royal Enfield, we flagged off the biggest ever addition of the Himalayan Odyssey, bringing together riders from across 8 countries. We also opened the registrations for the 2026 [indiscernible], introducing the GTR750 for the professional category and expanding the championship to 8 cities in India. Throughout the quarter. We continue to bring our community together to immersive experiences and rights during the inaugural addition of Himalayan Base camp [indiscernible] condition. Himalayan Sprit in Kochi, [indiscernible] in Chennai and our [indiscernible] nights in Bangalore. These are all Royal Enfield updates, which I have given. Now I will hand it over to B. Srinivas, to take us through the business highlights for VECV. Over to you, Srinivas.

Thank you, Vidhya, and good evening all. For the quarter, VECV sales stood at 24,815 units, a growth of 14.8%. And I'm very happy to inform that we continue to lead in light- and medium-duty trucks. Q1, VECV recorded several best-ever quarter milestones across segments. We delivered a record 24,815 units this quarter, growing almost 14.8% over last year. Importantly, this performance was broad-based and reflected the increasing strength of our business across all verticals, delivered 5,275 units of Eicher heavy-duty trucks during registering 15.2% growth with market share at 8.8%. In light and medium duty trucks, we strengthened our leadership position, delivering 9,903 units. Our entry into the small commercial vehicle segment has been well with 1,041 [indiscernible] trucks delivered, including 172 electric vehicles. This product rain opens an important new revenue for future growth in the large and growing VECV segment. Eicher buses also delivered 6,126 units. Volvo trucks and buses delivered a record sale of 598 units during this period. Our exports grew very strongly by 14.7% to 1,450 units, despite a challenging external environment. Our spare sales grew 15.3% to [indiscernible]. Now coming to VECV's financial performance, first quarter FY '26-'27. Our revenue for Q1 FY '27 INR 6,610 crores against INR 5,671 crores of last year. EBITDA for Q1 FY '27 INR 541 crores against INR 511 crores of last year. The EBITDA margin in Q1, 8.4% against 9.2% of last year. PAT for Q1, INR 300 crores against INR 288 crores of last year. The highlight of the quarter was the launch of Volvo FMX Edge, engineered to transform mining productivity by combining optimized payload capability with superior safety, uptime and life cycle value. In keeping with our focus on uptime, we have also added 3 new touch points in the quarter further enhancing our ability to service customers across the country, including Northeast. An important aspect of that last quarter, we signed an MOU for the Fleet Moderation Scheme, PARIVARTAN, announced by the Ministry of Road Transport and Highways for NCR. The scheme targets over 2 lakh vehicles, while implementation is being finalized, VECV is well positioned to address the opportunity with our comprehensive portfolio, spanning CNG, LNG, electric and BS-VI diesel solutions. Thank you.

Thank you, Srinivas. I'm glad to report that we have added the new financial year, the record performances from oil infill and which has put Eicher Motors on a very strong growth trajectory. As we navigate global headwinds, our fundamentals remain very strong. we are well on track to maintain our growth momentum, especially as we build inventory for the upcoming fiscal period. That's all [indiscernible] on this earnings call. Now thank you very much for all of you for joining. Now we can move on to Q&A.

[Operator Instructions] Your first question comes from the line of Gunjan Prithyani with Bank of America.

Two questions. Firstly, so can you give an update on where we are on the brownfield or module expansion that we spoke about in the last couple of calls, you just trying to get a handle at what is the production now given that we did face some labor-related issues over the last couple of months. Also where does the channel stock line now, especially given we get into the [indiscernible] period over the next quarter?

Yes. So just a second, I'll just note down. Yes. We'll talk about the first is about the capacity. We announced -- first is in the quarter 1, what else has happened is, we had LPG shortage issues, and we managed it by actually converting that to CNG. [indiscernible] has done a very good job. And we had manpower shortage issues, and we have recruited additional manpower. We also extended our support to our contractors. And there are also issues on availability of key commodities, which we managed. In June, we started hitting the production rate of almost about 4,500 per day. And we, in fact, produced about 1.16 lakh motorcycles in the month of June. Both [indiscernible] since April, we have been running in shape. And the current capacity, which we are talking about with the first module, which we have been talking about at [indiscernible], middle capacity has come to almost about 1.5 million motorcycles per year. So that's this capacity, which we wanted to come to a first level. Currently, how are we producing? We have already started delivering because the first module has kicked in, as I mentioned, at July last week, it has picked in correct in time, and we have almost come to about 5,000 plus per day asset delivery in our plants. On the [indiscernible], which is what is the brownfield, which we have announced almost INR 958 crores in February '26 to enhance capacity. So the first module, which will come in and that takes an annual production capacity, then subsequently, the next phase, which will come in, which will take us to 2 million capacity. So the entire brownfield capacity, which will all come by financial year '27-'28. That is what we said with the [indiscernible], our production capacity will go to 2 million. Currently, where we are almost about 1.5 million. That's in the equivalent, which we outcome. And we will eventually go to 2 million capacity at the brownfield. Going forward, other than this, that's what today the board has cleared about INR 1,225 crores, and that will take us to the overall capacity of 2.45 million, but that will happen by 2029-'30. So we are taking it in phases because the growth momentum is continuing. And we do see, going forward, we have to be prepared for the capacity, and that's why the investments are being done. So that gives the clarity about the capacity, 1.5, 1.55 lakh million -- million. From there, we are taking it to 2 million with the brownfield. And then the 2.45 million with the greenfield. So now we are on the path to take our total capacity by 2.45 million by '29-'30. That's on the capacity. Second is about the inventory. Gunjan, asked about the actual inventory. Am I right, Gunjan? That's what you are taking...

I mean just trying to get a sense of where are we on channel stores, especially the module has just begun and we have the festive next quarter. So just trying to get some comfort on how ready we are in terms of fulfilling the festive move.

So two things in our current inventory with the stock, which we are talking about, about 10 to 12 days. We get that. It's lean because our quarter 1 has been very good. Retail has been very good. And both of these are initial module, which we said, it should kick in by July. That is what has been in time. And that's why I mentioned about -- we have reached about 5,000 plus per day in delivery. What we are intending to do currently, we have our distribution model is on to deposit opposed to the secondary transit. Looking at our inventory situation, what we have done is, we have been contemplating and trying out various methods of direct billing to our dealers. So it's not new, but for us, it is new because we have been doing it only about 1%, 1.5% on the overall volume to the directly dealing. In the last year, we have been trying, it has gone up almost about 4.5, 4.7x, I can say, the [indiscernible]. So what we are looking at is can we cut the inefficiency, which will be there in the second breed translate in before management because of the inventory situation. and increase the direct billing, there may be save at least another 4, 5 days' time. So that's the work which is happening. But equally, we are building up the daily production rate, which is already in the higher run rate than we were expecting.

Got it. That's clear. And my second question, just on the margins, I mean, many moving parts here. It does look like the gross margin -- the commodity impact has been pretty steep divide some of the price hikes that we took. So if you can give us some color on the moving parts on the gross margin price hike, what is the commodity is taken. And there's also really no other expenses line when I look at the last couple of quarters significant decline in this quarter. Is there something that is not reflecting [indiscernible] it goes back to the normalized trend next quarter? Some color on other expenses being lower and the gross margin drivers.

Okay. So I think as far as I was to follow on the gross margin piece, as you know, we are seeing substantial inflation in cost. So key commodities, aluminum crude oil, steel [indiscernible] metals, everything has gone up. In addition, we've also obviously had some disruption in supply chain, in logistics. So far, we've mitigated the challenges, so that's continuing. In the quarter, we've had a net impact of about 4% to 4.5% on account of increase in [indiscernible] cost commodity as well as some of the processes involved. We've also had some value engineering and benefits, which have come in about 0.4%, and we continue to look at advancing the value engineering programs as well as cost reduction programs. So that's panning out as well. We've also conducted an advanced purchase program as far as critical part of raw materials are concerned. So that is also kind of kicking in, and we'll hope we'll take it further. The thing is we've also to partly mitigate the impact. We've increased the prices of majority of our 350 CC motorcycles by 1.7% in April '26. So overall, that has had a benefit of about 1.2% against the overall commodity piece. So that's the main thing. And then other point is on account of essentially mix and things like that? Yes. On as far as other expenses are concerned, so I think totally other expenses are lower by about 7%. So roughly, it's a combination of mandible things. One is, in last year in Q4, we've had marketing ad campaigns, which are around the Cricket World Cup in Q4, which is about INR 20 crores, it didn't happen this quarter. We also had a INR 10 crore benefit on account of 2 launches which happened in Q4, which did not happen now. So that's total INR 30 crores. The remaining INR 22 crores with controlled expenditure as far as marketing activities are concerned, given the current situation. So that's essentially the benefit which is coming because of that.

How much of hidden reverse, if you can tell us that? And how much spending commodity rate is there for quarter 2? That's the last question.

I think the situation continues to be quite volatile. So I don't think I can give you a forward-looking guidance as far as commodity is concerned.

Good thing is Gunjan, what is happening is there is a softening, which is taking place. So it's a mix of inventory. At what point of time we bought, what's in inventory, which we are holding, whether it is flowing through. So we are taking stock of it. But the extent in the Q1 as a headwind, we see slightly softening.

[Operator Instructions] The next question comes from the line of Kapil Singh with Nomura.

Congratulations. Just first question on demand, what kind of inquiry growth are you experiencing currently? And some color on line initial launch that you have done, what kind of customers are coming in there, if you could share the profile of demographics? Are there Royal Enfield customers? Any observations that you may have from that data? And also international market is where, if any update.

Yes, Kapil. So I'll address one by one. This is about the demand which you asked. In India, so far, we are continuing strong growth momentum. Our volumes are tracking over about 52% growth over the last year in this quarter. Even our other funnel indicators such as overall looking walk-ins, telephonic inquiry, et cetera, continue to maintain a very stronger growth. which is slightly higher than our volume growth. Within the products, if I had to talk about our 350 CC model, Class A Bullet Hunter and Meteor that continued to grow and almost about 54% compared to last year quarter 1, which is actually outperforming the industry. We launched a new variant and colors of Hunter 350, 3 color base, [ AmagBlack ], [indiscernible] and Moonshot White. This new variants have received exceptional response from the customers and continue to drive growth for Hunter 350, which is now almost about 50% share in the first time buyers in Hunter. And other 350 CC models, as I mentioned, Classic Bullet and Meteor also has continued to deliver very strong growth across all the markets. One good thing which is happening is on the higher CC side, we have started seeing green shoots. The segment is also growing for us in India, Guerrilla 450 and [indiscernible], as I mentioned. The good news which we are seeing is that these 2 has come back to the most pre-GST level. So the first reset which we wanted is that it has to come to pre-GST level because of the [indiscernible] which got added into the product, which is slightly away from the accessibility. That has [indiscernible]. Now it has come from the pre-GST level. From here on, we will actually start working on how do we build the market. And that's why we have launched the new OpEx variant in [indiscernible], Guerrilla 450, with upgraded tires and more agnostic stands and the fresh busing elements. That is also tripling growth. The new models are received very well. In fact, Guerrilla 450, to tell you, we have come to almost about 2,500 per month. And the twins also, we have come to almost about 4,000 to 2,200 per month. So that's the pre-GST numbers which you are talking about. We continue to invest behind using this category and our motorcycles and we'll gain traction with the customers. That's the overall demand. So if I have to tell you the inquiries continue to grow, the [indiscernible] is growing. As I mentioned, [indiscernible] is growing, Watkin is growing. So there is a positive momentum on the growth, which has continued, which is a good sign. The second one, which you asked is about the Flying Flea. Flying Flea, we launched -- we could get an approach of a city-by-city because it's a new category and it has to be built over the period of time. We are not in a caring rush to make it available across. So that's why we chose Bangalore first, only 1 store, which we have picked up, which is a [indiscernible] it's our store. And in 2 months' time, we have delivered about 100-plus electric vehicles, Flying Flea C6. If I had to tell you about the cumulative total kilometers, which is running, almost about 29,000 kilometers within the short span of time. Our customers are running. Does mean the motorcycle is really well received and it is behaving the way we wanted. The first set of consumers are very, very happy. And it's a groundbreaking chapter for us. It's a rebirth of iconic Flying Flea as an EV brand from Royal Enfield the first-ever electric mole from the house of Royal Enfield. It has to be nurtured well. That's why we are going slow. We are going to extend our retail outlet in Magalu first. We have identified 5 locations, then subsequently 5 locations. So we have a got about 10 locations in which we have to increase in the next 2 months' time window. We are taking a phased city-by-city approach for this. Once Bangalore is mature with the 10 markets, then we will open up to many markets on one. We have identified about 6 markets. In those markets, we will go one by one. You are asking about the customer profile initial adopters. It is true too early for us to talk about any detailed profiles, but I can tell you the average age group of people who are actually looking at somewhere around 25 to 30. That's a window. All of them are looking at this motorcycles, all of them are taking test rides. There's also equally a good interest shown by the Royal Enfield owners who are owning our motorcycles of more than about 5, 6 years. But it is too, too, too early for us to conclude on any profiling at this stage. We are watching it. The job in hand is to make this category growing, and we will continue to spend our energy in growing this.

Sir, update on the international market as well, please? What is the outlook?

So international market. We have been growing, if I have to tell you, our international business has increased by 2x over the last 2 years that you all have seen. In Q1, in fact, our revenue has crossed first time about INR 1,000 crores, highest ever in the international business, and now it is accounting for almost about 15% of our overall revenue. Especially the markets have been in to some rough patches over the past few quarters because of the macro uncertainties and as well as the industry-specific factors. And if I have to give you a overview of key markets, Brazil is our biggest market outside India and releasing this growth as of now. We have grown our retail volume by over about 3x over in the last 3 years. But this has come on the years of efforts in developing the brand, building the riding community and events. As now we established Royal Enfield as the #2 position in the middleweight in Brazil. That's a good news for us because it's a big market. The product is very well accepted. Every motorcycle, which you are exporting by Royal Enfield is shipped to Brazil now. That's the focus which we are seeing. And we see a strong growth in Brazil, and that's why we are setting up our own CKD facility. In the rest of the Lat Am, there's a strong demand momentum is continuing in Lat Am. Let make Colombia. We are #2 in Argentina in the middleweight. And currently, Mexico is also growing as the 1 market we are [indiscernible] that market. USA, which has been very slow. The market is showing some green shoots of growth in the Q1 with the new trade deal cutting tariffs on the motorcycles. So that is really helping slightly, we have to wait and see. While the industry is transitioning in [indiscernible], I said, it's a market adjustment phase. Because in Europe, a lot of dealers, distributors, there are too much of business pressure on them. There are a lot of things, which is not so good in investors establishment. We have established our own distributorship and subsidiary, which is doing very well. We also opened [indiscernible] our rides club, which we talked about. The total numbers that we exceeded 42,000. So we are building the blocks for future for the Europe. Once the market opens up, it will be good for us. The other one key market is APAC, and because of the uncertainties, once again, the market was not doing well. But in Q1, once again, if I have to tell you that it is slightly showing some green shoots, we are seeing a growth, which is taking place in retail and in wholesale. Last year, in [indiscernible], we've seen a very robust growth of 60%, especially Nepal and Bangladesh. It has a very good brand awareness. Having said all these things, as I mentioned, our position continues to remain strong in even these markets. Our products have been received very well. We are hopeful that the normalizing the energy situation in a few of the markets and the tariff situation normalizes. These all mark will come back very strongly and Royal Enfield with the work which we have done over the last few years is going to help us to actually get the market share and the growth which will be continuing. So we are cautiously bullish even in the international market.

The next question comes from the line of Chandramouli Muthiah with Goldman Sachs.

My first question is just around -- so this is a year for the automotive industry of 2 halves. First half, I think a lot of the GST benefit is most of the OEMs in terms of demand and volume. And we're seeing that with your brand as well. But starting September, October for a period of 12 months, the base might be pretty high for the industry. So I just want to understand, I think of most of the 2-wheeler brands, Royal Enfield has seen the maximum amount of [indiscernible] in domestic demand, after Gas-related price cuts. So I just want to understand how you are looking at the back half and possibly the sort of 12-month period where the base might be high starting October as you plan your product launches and market activation [indiscernible] for that year?

So Chandramouli, yes, it is always to have a story line that we normally watch because of the steel non-festive times. And in the last 5 years, we have been watching how we are doing that. And even in the first quarter, as I mentioned, we are tracking over about 30% growth in the retail with higher growth in other funnel indicators such as overall booking work in telephone inquiries, et cetera. For the remaining quarters, you can see it is tied up to the inventory situation even in the [indiscernible] channel. Currently, we are at a very lower inventory. What does it mean with an inquiry going up in the funnel and the booking going up in the funnel and the walk-in the telephonic inquiries have continued to grow. It only shows that there is a huge demand. And what's the focus, which is there is how do we fulfill the demand. Premiumization is the 2-wheeler industry that is continuing. I can tell you in the last 3 years what has happened, if not for more than 3 years, 3 years, actually, the so-called middle wide, which is PST, which we are talking about. In India, it grew from a 70,000 units a month to 1.2 lakh, with over 20-plus launches which have taken place in this middle weight. During this time, what has happened for Royal Enfield, if I do tell you, when the base for the middleweight was 70,000 per month, Royal Enfield was about 61,000 per month. Now the base is almost about 1.2 lakh per month. The base is almost about 1.1 lakh per month, that for Royal Enfield. So we are growing. And we are also focusing on our product launches, you will see launches which are coming up. We have done on Hunter, we have done on our 450 CC Guerrilla with an FX variant. We launched 650 CC Bullet. We launched the GT top series. And you will see some more CPGs updates, which will take place in time to come. So we will continue our launches. Second is our ramp-up on the brand awareness, which we did last year in the Q1 because of, once again, the situation of supply demand, we scaled it slightly down. Now we will once again ramp up the brand awareness and the marketing activations. And our new business initiatives like or reowned assured buyback, which are also gaining traction. So these are all the playbooks, which we have been trying in the last 2, 3 years is all showing traction for us. It's all there with us as a lever. Even if the base is higher, we can continue to grow even in the higher base of the last year. That's the confidence, not from anything else, as I mentioned, the inquiries are bookings, the entire funnel is so healthy. And once you start ramping up, you will actually start supplying to the market is going to continue because we will ramp up our marketing initiatives.

Got it. That's helpful. Second question is just, I think, over the past 10 years, there specifically around the period of pay commission, again, Royal Enfield has benefited from the pickup in premiumization of 2-wheelers during those period and over the next 2 to 3 years, there might be another pay commission initiatives by the government of India. So I just want to understand the updated demographic profile. If you could share what percentage of demand for you will be from government employee-related demand also maybe the rural-urban split, updated rural-urban split on your domestic volumes? And also, if you could give us some color around the first time payers versus the upgraders as of the last quarter.

So it will be -- Chandramouli, it will be very detailed analysis, which I have to talk about, if I give you at an FX level. Royal Enfield professional profile-wise as business owners, we control stolen, government employees and other professionals, I mean generally categorizing. But we have the details of what the government employees and is it the central government, state government, all those facts which are there. And any pay commission which is coming up are the income tax benefit, which was coming in. We always look at it, okay, which packet will you get benefited? And where is that which product will actually work in that particular area. And we tweak our marketing activations around that. That's how we actually handle. Anything free cash which comes in the hands of the customers, it helps -- and we'll also take our positioning according to that.

Got it. Just if you could share the rural-urban split and the first time versus update...

That I can tell you, [indiscernible], because our -- in the Royal Enfield currently, the number of -- the percentage of people who are actually buying as an existing Royal Enfield field customers, as an upgrade from the Royal Enfield to Royal Enfield is about 5%, 6%. And 70% plus are mainly the upgraders. So another about 25% are the first-time buyers. And Hunter with new launches and all those things, this first time buyers are also going up. That's how it is actually helping us to get more volumes. But the overall cuts in terms of the first-time buyers and [indiscernible] buyers.

The next question comes from the line of Pramod Kumar with UBS Securities.

Govind, my first question is on the inventory situation, which you alluded to, but given that testis typically very big for us, you're already running 3 ship production. So how do you plan to kind of pack up before the season and even post the season, because even for the last 2 years, we've been having completely dry inventory at the dealers after the festive. So is it working throughout the month in part of the plan? And is the vendor ecosystem in when you talk about 5,000 capacity per day? Is it entirely supported by vendors. So not only the capacity, but also that all your entire value chain or the supply chain is kind of in line for that?

Yes. Pramod, the first is I had to -- I would say, as I mentioned, the inventory level is about 10, 12 days. In the last few days, as I mentioned, that was a plan, that with July last week, our first module of 500 should kick in, better kicked in and the ramp-up was also faster. That is taking us to almost about 5 days on the 5,000 units per day. The next month was also going to kick in by October 1st week. During this time, what we also have done is we have done our supplier conference. We added a detailed discussion with them about the inventory situation and what is that they have to do. And we are planning. And so as even our vendors are planning on 24/7 in [indiscernible] basis. So all those things are being bold out, whereby we can build some inventory. Also added up, as I mentioned, will gain by another about 4, 5 days by the secondary transit putting off and directly doing a direct billing. So the entire logistics team is also aligned to do the direct billing to our -- some of the dealers, which is also going to help. It's a tight situation, but we are confident because the way we planned out for the ramp-up of the capacity kicking in, has kicked in at the right time and the ramp-up is faster. So that extend to the next module, which is to [indiscernible] in [indiscernible]. Also, we are trying to prepone and then see how that will also support us into this. Here on top of it, alone we as a company, in fact, we are taking our ecosystem suppliers also along with that, to do, as I mentioned, 24/7 pre-shift operations, continuing incentivizing in all those activities which are there to maximize the production.

And when you talk about -- just clarification, talk about the inventory of 12 days, that's including deep inventory, transit inventory and dealer inventory?

It's dealer inventory, which I mentioned.

Okay. So it doesn't include the transit inventory and the depot inventory. But -- is there quite a lot...