Greaves Cotton Limited (501455) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to Greaves Cotton Limited Q4 FY '21 Earnings Conference Call. From the management, we have with us today Mr. Nagesh Basavanhalli, group CEO and MD; Mr. Ajit Venkataraman, Executive Director, Greaves Cotton Limited and CEO, Automotive; Mr. Arun Srivastava, Head Strategy and New Ventures; and Mr. Dalpat Jain, group CFO. [Operator Instructions] I now hand the conference over to Mr. Nagesh Basavanhalli, group CEO and MD of Greaves Cotton Limited. Thank you, and over to you, sir.

Everybody is keeping well and staying safe in these difficult times. I take the pleasure and welcome you all to Greaves Cotton Q4 earnings call. To begin with, I'll just give a brief overview. The detailed deck was passed out. Hopefully, you have that. During most of fiscal year '21, our resilience was tested due to the pandemic and earlier slowdown of the economic activity. The team has shown enormous resurgence backed by a very strong strategy of diversification, right. This was mainly due to some of the business decisions and operational strength that the company focused on the things we control, building efficiencies and bringing new avenues of growth in the future. Some key highlights include, but not limited to, non-auto, e-mobility and retail. Some of our newer areas of business as part of our strategic pivot a couple of years ago in terms of diversification have now contributed to 30% of the overall revenue. So 30% of the revenue in a quarter when shared mobility on our core auto engines is down significantly. The new businesses have contributed 30%. Again, that trend continues quarter-on-quarter. Company continues to maintain a strong net cash position. And as always, with the Greaves Cotton scheme of things, CapEx and R&D and other stuff are funded through internal accruals and robust cash management. We definitely believe that the slowdown in one segment in our shared mobility has been overcome by the growth momentum in several other areas. And our focus will continue in some of these other areas. For example, in non-auto, the Auxiliary Power segment, the Genset division, had a good market share increase and a good growth, partly because of the opening of the economy, but also because of new product offerings, i.e., the Genius genset or the smart genset. Aftermarket segment has returned to pre-COVID levels. Our e-mobility segment continues on its robust growth trajectory, almost doubling its top line. As a token of our commitment and our transition to forward-looking future businesses, Greaves has committed in setting up a state of the art EV manufacturing facility at Ranipet. You will get to see a glimpse of how that plant will look, and we are working furiously on getting that started and getting incremental capacity. So we have also transitioned to digital, multi-brand retail outlets. Even in the middle of pandemic, we continue to add that. Ampere today boasts of 328 outlets. There is 1 caveat: although there are a lot of green shoots when I look at Q4, the second wave of COVID and ongoing lockdowns obviously will have an impact on Q1. With that, I hand it over to my colleague, Mr. Jain, who will walk us through the financials. Thank you.

Good, thank you, Nagesh. Good morning, everyone. As Nagesh mentioned, FY '21 has been a story of 2 halves. First half, where the entire economy and business were severely impacted by the COVID; and the second half, where we saw business recovery and financial performance coming and moving back towards pre-OVID levels. I'm happy to mention in quarter 4, company reported a 35% growth over last year's quarter 4, and we had a total revenue of INR 520 crores. Company EBITDA was INR 42 crores at consolidated level, and it had a PAT of INR 14 crores compared to INR 1 crore in quarter 4 of last year. In the second half, which is more comparable, company reported a revenue of INR 1,015 crores, which was a growth of 12% and EBITDA of INR 91 crores. During the pandemic time, what company has been able to manage its working capital cycle, so overall working capital for the company came down to 11 days, and that helped company generate operating cash flow of INR 169 crores in financial year '21. We ended the year with INR 273 crores of cash and cash equivalents, which will help company and continue to be able to fund with expansion opportunity. Overall growth in e-mobility, the revenues almost doubled. From INR 34 crores last year, we reported INR 69 crores in quarter 4 of FY '21. Company will continue to focus on its robust cash management and efficient conversion cycle as we move in FY '22. There are headwinds from wave 2 of COVID, which shall impact the company's financial performance, maybe in the first quarter of FY '22. But as we move forward, the profitability trend will continue to remain in the positive trajectory. With this, I'll open the floor for question and answers, and we'll be happy to take the questions from all of you. Thank you. Stay safe.

[Operator Instructions] The first question is from the line of Alok Nath, an individual investor.

Yes, my question to the team is, like Ampere electric vehicle was already into the market almost like 5 years back itself. So now like after Greaves Cotton has acquired the company, now like what are the steps you have taken in terms of the competition from the other peer set? Like 2 years back itself, other major 2-wheeler manufacturers like Tata, Bajaj, or Hero, all this also like started entering into 2-wheeler electric segment also. So the competition in this segment is like increasing. So like coming to the price perspective or other innovations kind of specific, what are the plans from the Greaves Cotton team to take, like, neck to neck and increase their market share. That's my question.

Arun here, I will take this question. So we -- so one fact correction. Ampere has been in the market for almost 12 years now, so it's one of the pioneers in the electric 2-wheeler space in the country. And we acquired Ampere in 2018. And when we acquired Ampere at that time, the business was around INR 18 crores in value and which we have steadily grown over the past 2 to 3 years. And in terms of our strategic approach, Ampere has been targeting the mass market segment, which is the middle of the pyramid, where bulk of the people mobility happens in the country. Towards this end, in the past few years, what we have done is we have expanded the product range. When we acquired Ampere, Ampere had only slow speed lead asset-based products. Today, Ampere has increased its portfolio to a much wider portfolio, which covers not just the slow speed segment, but also higher speed segment and also increased its presence in the lithium ion space. And today, when we look at the market, the Ampere portfolio, a bulk of the products are the lithium ion high technology products. So that is one change. The second change in Ampere when we acquired was primarily a south based company with -- and had around 70-odd dealerships in -- primarily in Tamil Nadu area. Today, Ampere has over 358 dealerships, exclusive dealerships, plus also sales through some of the Greaves retail dealerships, so in all Ampere is selling through 500-plus dealerships today. And this is over around 260 plus cities all across the country. There is a very strong demand from the market, both in terms of product, as well in terms of dealership inquiries. We have added 130-plus dealerships since the unlock process began last year. And the third thing, which I would say is Ampere today has a facility at Coimbatore. We have -- anticipating this significant increase in market demand, we have, in the last few months, announced an EV mega site coming up at Ranipet. That will be a large volume mega site, which will help Ampere transition significantly in terms of a very high-volume manufacturer. The fourth part is control over supply chain. When we acquired Ampere, a lot of components were coming from being imported. And since then, we have been working on a very active localization, and today most of our high-speed product portfolio has significant amount of localization and with very good quality vendors in India. It's an ongoing journey. We continue to strengthen that. And we have also actively taken up strengthening of the localization of the slow speed segment. The fifth part is we have built up the financing ecosystem throughout the country, which is helping accelerate Ampere sales. So these are the 5 key actions which we have taken, and on the customer side, both B2C and B2B, we are focusing on. And we have over 50 partners on the B2B side, and that segment is also growing fairly well for us. So these are the 5 critical areas on the 2 wheelers side. And in addition, we have also expanded the Ampere portfolio to the 3-wheeler side. Last year, we acquired a company which sells e-rickshaws under the ELE brand. And that, again, is becoming a good growth driver for Ampere businesses. So I hope that answers your question.

Yes, sir. Sir, anything regarding R&D also, I just wanted to know, since there are like too many participants for the 2-wheeler segment currently. Anything you are going like out of the box, like what do I say for that, like mileage, like for EV, and that is something which is very concerning. Currently, like most of the companies are just giving like 100-kilometer range for the bike, like average I'm speaking. So anything in terms of R&D, you're working on, sir, something unique like patentable thing, which is only with our company, something like that?

So we are definitely working on technology and vendor first phase, as we have also mentioned in the previous -- some of the previous investor calls that a lot of focus has been in terms of improving the product capability and reliability. And some of this work is being done in house. Some of the work we are working with strategic partners in each of these areas. And it is a constant endeavor to improve the product technology. Like last year, I gave an example before also that for our Magnus Pro, which is our flagship product, we introduced certain products, which are -- came from customer feedback, like, limp-to-home feature wherein, in the last 10% charge, the vehicle goes on to a power save mode, so that the vehicle can be delivered 10 kilometers additional range. So that the driver is not stranded in the middle of the road anywhere or we introduced a software controller based latest features where if the vehicle is in a traffic jam on a flyover, it doesn't go back or move forward. Similarly, every year, we are improving the product capability. Our first-generation Zeal to second-generation Zeal, which was launched last year, there was a 10% improvement in range using the similar powertrain. So there is -- it's a continuous evolution, and we are working actively and investing behind technology to improve the experience of our electric vehicle.

[Operator Instructions] The next question is from the line of Vimal Gohil from Union Asset Management.

Yes, sir. Sir, my question was again on -- in relation to the previous participant's question on the competition that is coming up in 2 wheelers. So basically, just an extension of that. I mean, there is going to be an onslaught in terms of the kind of capital the competition has, be it new players or be it the legacy players. I think everyone has very strong balance sheet. So if at all, there is a scenario where there is factor of competition in terms of price, how do we plan to counter that? Have you thought about this? I have 2 more questions after that.

Sure. So in terms of capital, we have maintained that capital will not be a constraint for the growth for Ampere. Greaves itself has a strong balance sheet, and we have the ability to bring in capital. And if required, we are also open to bringing in external capital to fund Ampere's growth. So capital will not be a constraint of -- to growth. Like you rightly said, the competition is intensifying and we expect more people to come in into the market. So what we have done is, a, we have been ticking off the boxes in terms of the basics. We have brought in a fairly strong leadership team at Ampere, which can drive the future growth for the business. Also what we are kind of looking at is, in terms of greater control over certain technologies, we have mentioned in the past that some of the software and the controller based technologies, which are the electric 2-wheeler, those are some areas where we will have greater control because it defines the experience of a electric 2-wheeler. Another important thing that I think we should all appreciate is that the 2-wheeler market, which is less than close to 150,000 units, is expected to grow to anywhere between 3 million to 5 million over the next 5 years. That is a fairly exponential piece of growth. And I would say that it offers space for multiple people to be in the market and grow. And I'm sure that if we are looking at this market in FY '26, there will be some new age companies, there will be some traditional companies who would be there. And our intent is and our plan is to be there as a new age competitor in the market, maybe until FY '26 with a strong positioning.

So the question was actually motor, while your insights are well taken. Sir, if at all, the competition is sort of aggressive on pricing, will Greaves also look to be as competitive in terms of price? Or will you maintain our premium sort of whatever -- if at all we are at a premium to competition, we'll sort of continue to maintain that and focus on profitability or better quality growth. What would be our approach there?

Yes. Arun, I will take that. I will take that.

Sure, sure.

Just to answer the question, this is Nagesh. So clearly, Ampere backed by Greaves ecosystem, right? When I'm talking about gives ecosystem in addition to the technology, the people, the dealership that we also have 10,000 plus mechanics, 7,000 plus retail stores that can provide uninterrupted journey, right? So when you -- and plus we have Greaves Finance to back some of the financing needs. So when you look at the overall ecosystem or a solution is what the Ampere Greaves solution is offering, point number one. Point number two, we continue to strengthen the team, continue to invest in technology. We play in the heart of the market. We have 75,000 customers, and we've been in the market for 10-plus years, which means we understand the duty cycle requirement, right? So I'm not going to answer a hypothetical, but enough to say that our value proposition will remain strong. Our product differentiation will continue to evolve. And our customer connect, especially our HOLA, H-O-L-A, Happy Owners League of Ampere, that will continue. That community connect will continue. That customer connect will continue. So I am not -- we believe we offer a value proposition and that value proposition, as you've seen through the last 4 quarters have increased from being a slow speed to high speed, lead asset, low lithium, pan India, over 260 cities available, right, B2B plus B2C. So I think our value proposition will continue, and that's kind of where I'll leave that.

Fair enough, sir. Sir, just on the financials of Ampere, if I observe this time around, our contribution margins from Ampere has sort of improved. But we are still not close to where the peak gross margins were in Ampere. So what is the outlook there? What is the sort of sustainable contribution margins that we are looking at for Ampere? For example, in this particular quarter, we have reported 20% sort of gross margin, which is a significant improvement from the last quarter. But I observe that we have done somewhere near 28%, 24% as well. So should we expect an improvement going forward, given the change in mix to high-speed scooters going forward?

Yes, so in terms of margins, margins are a factor of 2 things, one is volume, and second is the supply base. So in the past few quarters, what you've done, like I said, we have accelerated our localization journey. We have started partnering with local suppliers and local vendors, which has exerted some sort of upward pressure on the costs because like you know that Indian supply base is still emerging. So I would say that it's a journey. We are hopeful that the margins will improve, but right now the thrust is on ensuring good quality suppliers and good quality components going into our products. Dalpat, you may want to add on that.

Yes, so Arun, I think you're well covered. But coming back to the question, yes, in long term, the margins will go back to where it was. In fact, it can go higher than that because this localization in short-term will have some impact. But in long term, it will give more benefit than where we were earlier.

[Operator Instructions] The next question is from the line of Ashutosh Tiwari from Equirus.

Congrats on decent numbers. I think leaving aside that 3-wheeler diesel engineering across the segment, we've done very well in terms of [indiscernible]. The first question is on Ampere. What would have been the mix of high-speed in this quarter?

So roughly, high speed is close to 40% of our portfolio now.

And Ampere losses, look at -- if I look at electric mobility, EBIT loss in this quarter versus last quarter despite the fact that sales have improved, our losses have gone up many, but the reason behind that. So I think the EBIT loss was INR 11.2 crores in the quarter versus INR 7.9 crores in the previous quarter.

Yes, so Ashutosh, there is a INR 4.2 crore of onetime accounting impact pursuant to India's adjustment. So that's a onetime component. The operating losses have reduced compared to the previous quarter. It has come down to below INR 7 crores.

And lastly, as we are doing quite well in this non-auto engines as well. I think quarter-on-quarter we are seeing good growth for us. So just to understand the potential of this market, what is the size of market and what is the overall market share and where we are looking forward -- where this volume can go to and not -- I don't want the exact numbers and all, but directionally where we are in terms of market share and what is the volume sight for us.

Sure, so Ashutosh, this is one of the diversification areas, which we have been very actively working upon on the nonautomotive engine side. And now it has started to grow rapidly. In terms of the market, et cetera, this is a market which is steadily evolving. And like I did mention in the previous calls that one of the major drivers for this market expansion is moving -- shift away from manual labor to mechanized labor in various segments, be it like agricultural, light construction or sanitation works or various industrial applications. So the engine's going to 100-plus applications. So market is from manual to mechanized and second shift which is happening is earlier, a lot of lower cost Chinese engines were coming in, which are getting gradually replaced by better quality Indian engines as the markets have started maturing. So that is where I would leave the overall market size and is still not very well determined because it's a fairly large shift which is happening and still the unorganized play is fairly large in this. But in the organized players, better quality products, we have started taking leadership position in this segment. But it's a growth story. It will continue to grow and expand as mechanization picks up in the country.

[Operator Instructions] The Next question is from the line of Amar Kant Gaur from PhillipCapital.

My question is on localization. So what are your localization levels currently and what are the components that you have to -- you are sort of importing? And what will be your priority in terms of localizing the components that you're importing right now?

So in terms of localization levels for the high-speed scooters, we are following the guidelines. And the scooters are in very advanced stages of localization. And most of the critical components are from domestic partners now. So the major component, which comes from get imported is the lithium ion battery cells. Now as you know, that India still doesn't have lithium-ion cell manufacturing, so cells are getting imported, the packs and the BMSs localized. So that is on the high-speed side. On the slow speed side, where there are no regulations on localization there. As part of our strategy, we have initiated the localization journey. That may take slightly longer, but we are well on our path to localizing that as well.

Okay. And the other is on the -- is a little longer-term question. So we see a lot of new players coming in into the electric 2 wheeler space. So how do you see the industry shaping up in the next 4 to 5 years, say?

The industry is expected to get into a hyper-growth mode as we go ahead into the next few years. So I would expect more competition to come in. But the way we are considering ourselves is that we recognize that there will be certain asymmetric competition into this market. There will be some of the traditional players who will also expand their pay on the electric side. So we are kind of focusing on the basics, what is required to be successful into the market and also create a differentiation in the market through a stronger customer connect, through digital channels, through unique financing things. And ultimately, it is the product and technology, which needs to perform. So we have right now positioned Ampere in the 4 customer segments, which we say one is on the slow speed side, which is the housewives, the school children, the retired people who want cost, convenience, safety as a parameter. And then there is the office goer segment, and there's the B2B segment, and then there is a segment, which requires higher speed scooters especially in the urban markets. And we are filling those product gaps. We have consciously stayed away from top of the pyramid, which is more of a niche segment with products which are back 1,25,000 plus. have consciously stayed away from that segment, focusing on the mass market, which drives mobility in the country today. So that's how we are approaching the market.

The next question is from the line of Basudeb Banerjee from AMBIT Capital Private Limited.

Just wanted to understand a few aspects. One, as the previous question, as you highlighted, that still the value addition is still the imported part and these are all localized. So are your products now eligible in the same 2 subsidies?

Yes, so our product, Ampere high-speed products, if you recall, we were eligible for FAME II subsidy amounts. The first companies who became eligible for FAME II subsidies. So absolutely our product, high-speed products, which are covered under FAME II all are eligible.

So just from a long-term perspective, I was trying to understand that with alkalization coming up and FAME II for a few players being there, if, say, by next 5 to 6 years with petrol scooter normal inflation, cost inflation going up, and the deflation of e-2-wheelers, so there's a convergence of the capital cost, say, after 5, 6 years. Do you see extra demand elasticity for the industry? So say, high-speed 2-wheeler market size would have been X. And because e-2-wheelers are also coming in rather than just mere substitution, the market size itself will expand because capital cost being same, TCO will be substantially lower, improving the affordability. So as per your study, if you can highlight from that aspect, sir.

Sure, so very good point. So our expectation is twofold. One is if you look at mobility in the country, mobility is still unserved, unaddressed need in the country even today. So 2-wheeler segment barring last 2 years, which because of the NBFC crisis and then COVID have been slightly exceptional, the 2-wheeler segment has been growing in India over a longer-term horizon as well. So that growth will continue. I would say there will be 2 parts. In the higher speed, the product capability will keep on going up and the value proposition will keep on expanding. So the pricing levels may remain the same, but the value prop will go up. The second part to this is the slow speed segment play in an area where virtually no engine based books are there. And that is a segment where people are shifting from walking and cycling towards entry-level scooter. So that will continue to grow in, especially in the Tier 3, Tier 4 towns and cities. Other 2 points in this is, one is this entire B2B segment, which is e-commerce deliveries, food deliveries as well as the concierge services and ride share. This the entirely new segment, which is opening up and 2-wheeler is very well-positioned to serve this market, and this will also drive growth in the industry. So I would say that 2-wheeler will continue to remain play an important role in mobility in India and is likely to expand as we go ahead. So the industry is fairly attractive.

But if I see, sir, the lead acid 2-wheeler segment, in 2-wheeler segment, despite being in the market for almost a decade and the leader being there for a decade selling near 50,000 per annum volume, and the market size is hardly 1.5 lakh after being for so many years. So in the longer run, how to look at the lead acid low-speed scooter serve that is this not accepted by the market at all and is just a mere presence sales kind of stuff, the moment normal high speed, much affordable e-scooters are available, that would be the right product for the market to scale up rather than the low-speed stuff at all?

See, low-speed scooters serve a particular niche market segment, especially in Tier 3, Tier 4, where these products are available at INR 30,000, INR 35,000. So they have their own market. But what will start happening as the lithium ion costs start coming down, even those some of those products will start gradually transitioning to better technology, lithium-ion based batteries. So that shift will happen, but India will continue to have a play in both the slow speed scooters and high-speed scooters. But high-speed scooters will grow much more rapidly as we go ahead in future. Because they kind of close the gap between the engine-based scooters and electric scooters.

And last question, sir, when do you see proper localization of cell manufacturing also? Because if some new player is commenting on 10 million capacity, obviously such scale is only possible through local manufacturing down the line. It can't be at the imported course. So how do you see building capability of local still manufacturing...

So local manufacturing of lithium-ion cells will start in India. It's a high investment game, and there are some players who have already started announcing their plans. The government has also given incentives through PLI scheme. So there will be local manufacturing as we go ahead over the next few years. So I don't want to comment on a time line on anybody else's behalf. But as part of our stated strategy since the lithium-ion cell chemistry is also evolving fairly rapidly, we have stated in the past as well that we would like to remain cell agnostic. We won't get into lithium cell manufacturing. It's the pack in BMS, where we are looking at taking greater control going ahead in future. So whatever chemistry is suitable for the products, we will take the requisite sales from the market. Today, it is imported. Tomorrow, it will be domestic partners.

The next question is from the line of Naitik Mody from Ohm Portfolio.

Sir, you said there are some the 60-odd dealers, right? Is that correct?

Yes, so Ampere has around 328 exclusive dealers, plus there are Greaves retail outlet as well which sell Ampere. So overall, it is 500-plus retail points.

Right, so out of the exclusive dealer, how many of them are actually active? And how do you define active internally?

So most of our dealers are active. So they may be at various stages of evolution, like I mentioned, that 1 -- almost 130 out of that have been added in the -- since unlock process began in H2 last year. So -- but most of the dealerships are active today. And active is defined by their regular purchases.

And typically, what is the profile of the business? Are these existing dealers of auto within the automotive segment? Or...

It is a mix. It is mix. There are...

Even viability is a issue, right?

So there are 2 parts. One is the dealerships have configured in a way that the initial capital requirement is on the lower side. Also because unlike an engine-based 2-wheeler, electric 2-wheeler, the service requirements also can be lower. So they are not built on life cycle value extraction. So we have consciously factored that in and kept initial investments low. The second part is most of the dealers who are also coming in, recognize that this industry is at a cusp of significant expansion going ahead in the next few years. So there are also people who are willing to stay with us and stay invested over a longer term. But the very fact that we don't see much dealer attrition also shows that dealers are meeting their viability and are going to stay invested with us. So we have a very strong dealer demand.

Okay. And as you said that traditionally, Ampere as a brand was more of a South based brand. So please, sir, give us the revenue split for region-wise for 2 wheelers?

So I would say that -- so see we don't give reason why split. I would say that from Tamil Nadu now it has expanded to entire Southern market. The west has picked up. North and east are the areas where we are now focusing on expanding our market penetration.

So it is fair to say that most of the revenue is primarily from south and west?

Yes.

And that's also true with the 2-wheeler electric auto market as well, right?

So the 3-wheeler market is much stronger in the north and east. Because that is where the bulk of the e-rickshaw market is there, right.

Okay. Okay. And what is the revenue split between 2-wheeler and 3-heeler for us for 2021.

So typically, revenue split, we don't give but the volume split we have given in the presentation.

Yes. So the 3-wheeler company is a part of Ampere. Is that correct?

It is a subsidiary of Ampere. Yes, Ampere owns 74% in the 3-wheeler company.

So in the Ampere balance sheet, it is consolidated.

Yes.

The next question is from the line of Amitabh Chakraborty from Kitara Capital.

See what we are seeing is the diesel engine, there is a slowdown, right? I mean in your segmental thing. So is there any plan to go for electrical 3 wheelers? Because I believe that as a strategy, I think is there any strategy towards that? Because you have been into like Ampere, it is 2-wheeler and e-rickshaw now. So now so what is the strategy on the electrical 3-wheeler space, passenger electrical 3-wheeler space?

Sure. So like you said that the 3-wheeler auto engines have gone down this year because of various pandemic-related shared mobility concerns. And our strategy till now has been -- we have looked at 2-wheelers, we have looked at e-rickshaws and as the market starts moving towards -- our philosophy is that as things start getting ready into a commercialization ready stage, we will look at that. So 3-wheelers, right, electric autorickshaws is something as part of the future and at the right time, we may discuss that as well. But right now, our trust is more towards electric 2-wheeler and electric rickshaws, which are expanding rapidly and are larger parts of the market today.

The next question is from the line of Bhargav from Emkay Global Financial Services.

Yes, so I wanted to know about the CapEx plans for the next 2 to 3 years, if you can give any guidance on that. And I wanted to know how much of the percentage would be more on the e-mobility part. And the second would be, how many of your Ampere vehicles are financed as in a percentage of sales?

So Bhargav, let me take the first part. In terms of the company's CapEx plan, as you know in the GCL stand-alone, we have spent around INR 40 crores in FY '21. And CapEx around that should continue as we move forward, around INR 40 crores to INR 50 crores of annual CapEx, depending on the market conditions. About e-mobility, we had announced INR 700 crores of total investment in capital and working capital over a period of 10 years. So that will be more or less proportionate as we go forward in next 3 to 5 years' time. Yes. Arun, you may want to answer the second part about the financing of vehicles?

Yes, so on the financing side, the financing penetration is gradually growing for the past 2 or 3 years when Ampere had a much more dominant slow speed segment, there the financing levels are fairly low because the low-speed vehicles are not registered. So that is where the financing penetration is low. But on the high-speed side, as it is gradually picking up, we don't want to give the exact numbers, but it is starting to become an important constituent on the B2C side. So but the industry, I think, is -- numbers are almost 30% to 40% are the financing levels on the electric 2-wheelers, high speed.

The next question is from the line of Jayashankar Nair from IIFL Asset Management.

My question was in terms of segment. I mean, stand-alone control segments, the region is currently 48%. [indiscernible] with regard to auto and non auto and how the absolute number has actually changed. I mean if you can give some sense because what we are observing is that the auto engines size should be coming down and non auto engine size should be going up in terms of your volumes what you could raise. If you can give a broad sense as to how much.

Dalpat, do you want to take that?

Yes, so the change in the auto composition is linked with the temporary COVID situation, and as we know, shared mobility has come down significantly. And within the auto, overall 3-wheelers, passenger vehicles contributed a significant part. Overall, from last year, it has come down from 54% to 48% in terms of overall engines business revenue. And within that composition of, non-auto has increased this financial year. Next financial year, we expect with the recovery, it should move back to where it was, though non-auto applications will continue to grow faster because we have increased offerings out there with smart IoT-based engines and all. But overall, auto engines will continue to have dominant share in the overall engines as we move forward.

So that is one part. And also, if you look at a longer time horizon, engines business as a portfolio used to be 75% plus for us, if you go back a few years in the past. So we have steadily been derisking this. But like Dalpat said that as auto engines come back in the later part of the year, this will go back slightly up. And within this segment, there will be a diversification between auto and non-auto. And I think some of those are visible in the numbers, the volume numbers.

Yes, but would it be correct to say that of the total INR 520 crores in the quarter, 10% to 12% would be non auto.

Yes. Those volumes are there in the presentation, and you're right, that's the kind of share which is there.

And my second question was with regard to the -- on the cost and even the standalone 3 wheelers, post the [indiscernible], your costs have actually come down in terms of fixed cost base and we are seeing it actually going. So is it a more sustainable number what you are seeing in the current quarter or is it fair way to...

So overall, overheads have come down by 16% in FY '21. Out of that, I would say, as we had mentioned in the previous earnings calls also, there will be minimum 10% of reduction in the fixed cost base. And that is something which is sustainable. Some part of the 16% reduction will come back because those are related to travel and other COVID-linked reductions.

Yes. And one last question with regard to, the tax rate was unusually high. Any particular reason for that in the current quarter?

So there are -- because of PBT being smaller, there are few items like [indiscernible] or CSR, right, which continued at the same amount. Now they as a percentage of PBT, taxable PBT became a higher percentage. So nothing in terms of structural change. It was more based becoming a smaller one this year.

[Operator Instructions] The next question is from the line of Aditya Makharia from HDFC Securities.

I just wanted to understand what is the new capacity which we are setting up. And what is the CapEx and the timeline for the same?

Yes. So I think your question was for the electric vehicles part. So in terms of the capacity, what we've announced is that this plant can go up to 1 million units, and there is a potential to go up even further as we go in the future. And we will do it in phases. The initial part will be slightly lower, but it will be ramped up. And like Dalpat mentioned earlier, that we have kind of committed around INR 700 crores of total capital and working capital investment over a 10-year horizon for this business.

So by investing INR 700 crores, you can reach 1 million units. Is it basically what you're mentioning. So the CapEx will be staggered?

No. So CapEx will be staggered. And for reaching 1 million, you don't need CapEx of that. It's a combination of CapEx, working capital investments overall. We are not giving specific breakup, as you know there are sensitivities around that number. But overall, CapEx is going to be a smaller portion of that INR 700 crores.

Okay, and you've mentioned that you're localizing by only the cell is what you will import and the BMS and everything else you will make in-house. So does this factor all this localization also? Are these your bank vendors?

So one correction. Not everything will be in-house. We have developed strategic vendors and as the volumes pick up in future, we will look at selective make versus buy. But right now, we are working through strategic vendors.

Okay, which includes for the BMS as well, right? That's why you have a strategic vendor.

Yes, today, we are working through partners.

So it's a fairly asset-light business. I mean, that's just what I was trying to get at if you're going to be reaching 1 million.

As of now, it is. As of now it is, but as we go ahead into the future, certain key technologies we will take some control in-house. And we will announce that at the right time.

The next question is from the line of Chetan Vora from Abakkus Investments.

I wanted to understand your view on 2, 3 pointers. First of all, on the engine business, which is roughly 50% of the overall volumes in FY '20, I would like to understand your view how that will be shaping up going ahead. And the other 2 things were the quarterly thing wherein we saw the employee cost and other expenses on a Q-o-Q basis have increased quite sharply. The other expenses have increased by INR 12 crores from INR 44 crores to INR 54 crores. Just wanted to understand whether there are any one-off and even though if there are also the employee cost has also increased from INR 29 crores to INR 35 crores.

Yes, so Kunal, it's a natural classification under our published results. So total increase is INR 16 crores between both these ends. Out of INR 16 crores, INR 5 crores is linked with the revenue growth. There are INR 7 crores of expenses, which are onetime nature. So gratuity because of discount rate coming down, overall actuarial provisions going up and those kind of things. INR 3 crore is the recurring cost increase in this INR 16 crores.

And on the engine business?

Yes. So Ajit, do you want to take up for the automotive part?

So Chetan, we did see some green shoots towards the end of 2020. But the second wave has -- and the ensuing lockdowns will likely hamper the growth in the short term. And we expect that the first quarter may be impacted because the lockdowns have started since 15th of April. And it is a little bit of a prediction, tough to predict what will happen in the first quarter. Second quarter, we expect it to be better. And with the demand resurging, hopefully, once the lockdowns are taken off and the vaccinations intake.

And whether that would be applicable for both the things, the auto thing and non auto as well?

Non auto is less impacted -- impacted to a lesser extent with the lockdowns and personal mobility. The 3-wheeler segment is far more impacted because of the social distancing norm and the restrictions. The goods carrier part of the 3-wheeler is a little bit more robust in terms of taking on the COVID restrictions. Whereas in the non-auto segment, yes, it is getting impacted but not to the extent of the premium.

And for the non-auto segment, if you look at the volume summary, that segment has been growing fairly rapidly. So like Ajit said, it's a slightly lower impact. But higher impact is on the passenger 3-wheeler side, where because of the social distancing and the pandemic-related concerns, it has -- the entire industry has nosedived.

Then lastly, are we seeing any structural challenges on the auto thing because what portfolio was more of on the diesel side, and that segment has been able to grow wherein in the passenger, which is largely a petrol and less CNG. So how do we cope up with that?

So Chetan, we are looking at expanding the range of operating. In terms of the diesel itself, we have LOI -- we've signed up an LOI with a new 3-wheeler OEM. We have also got a 4-wheeler micro car segment, international business, international OE, who has signed up MOU with us. In addition to that, we are also looking at expanding with the new opportunities and entering new segments as well. Our CNG portfolio is also quite strong, and we will be launching around the [indiscernible] this quarter.

That was the last question for today. [Operator Instructions] I would now like to hand the conference over to Mr. Nagesh Basavanhalli for closing remarks.

Yes, thank you. Thank you all for joining us on the call. Please feel free to reach out to us if you have any further questions. In summary, we believe that some of the actions in terms of capability and addition in terms of the product portfolio and focusing on the clean mobility at the bottom of the pyramid and doing some of the things that we control even in these tough times will augur well for the future. So we remain committed to this journey. And we thank you all for joining today. Thank you all. Have a good day. Stay safe. Thanks.

Thank you.

Thank you. On behalf of Greaves Cotton Limited, we thank you once again. Stay safe. With this, we conclude this call. Thank you for joining us.