Greaves Cotton Limited (501455) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Greaves Cotton Limited Q2 FY '24 Earnings Conference Call. From the management, we have with us Mr. Nagesh Basavanhalli, Non-Executive Vice Chairman, GCL; Dr. Arup Basu, Managing Director, GCL; Mr. Akhila Balachandar, Group CFO, GCL; Mr. Sanjay Behl, CEO and ED, GEMPL; Mr. Narasimha Jayakumar, CEO, Greaves Retail; Mr. Chandrasekar Thyagarajan, CFO, GEMPL. [Operator Instructions] I now hand the conference over to Mr. Nagesh Basavanhalli, Non-Executive Vice Chairman of Greaves Cotton Limited.

[Audio Gap] FY 2024 earnings call for Greaves Cotton Limited. I trust you're all in... [Audio Gap] And I'll hand it over to the respective business CEOs and the CFO for a more detailed review and discussion. At a very high level, over the years, we are committed to innovation, growth and I'm pleased to report that our journey continues. Greaves Cotton delivered a robust performance in the Q2 and the H1, reflecting the resilience and the diverse portfolio of our various business segments. Our strategic journey of being a key player in the full stacked last mile mobility ecosystem continues with our businesses, whether they are Greaves Engineering, Electric, Mobility and Retail. Our mission and purpose of empowering millions of lives and livelihoods through sustainable mobility solutions continues. So now with that, let me hand it over to Dr. Arup Basu, who will discuss Greaves Engineering. Thank you.

Good morning, ladies and gentlemen. This morning, my commentary is on the performance of the B2B products portfolio that is Engines and Excel Controlinkage. Accelerator, brake, clutch, steering wheel, gearshift and park brake are the 6 components used to control any vehicle, either physically using rods or cables or electronically using sensors. Excel Controlinkage custom designs, develops and manufactures this entire product range of controls and, therefore, represents a natural fit to our portfolio. We are making good progress on our ongoing program to build a future-ready, fuel-agnostic product portfolio to gradually wean us from a dependence on demand for diesel engines. The Engine and Genset portfolio are being augmented with greener, fuel-agnostic variants that can use CNG, biodiesel and ethanol blended fuels. In addition, our Genset portfolio is fully CPCB IV+ compliant. Simultaneously, we are expanding our international business footprint, which currently constitutes just over 10% of our revenues. In addition, we are also expanding the industry segments we serve. For example, industrial tools and passenger cars. Simultaneously, to enable this transformation, we are augmenting our prevailing domain depth in mechanical engineering with mechatronics and electronics. The latter will help accelerate the growth of electronic sensor-based controls from Excel Controlinkage. In Q2 FY '24, the Engines business plus Excel Controlinkage delivered revenues of INR 381 crores. That was 58% higher year-on-year and 28% higher quarter-on-quarter. The Engines business delivered revenues of INR 313 crores, that was 30% higher year-on-year and 22% higher quarter-on-quarter. EBITDA improved to 10.5% in Q2 FY '24 from 3.5% in Q2 FY '23. Overall, the diversity of our customer segments, platform technologies and application areas, combined with our brand Greaves that has stood the test of time for over 1.5 century, allows us to be optimistic about the future. Thank you. Sanjay?

Okay. I'll take over from Arup. Thank you, Arup. I'm Sanjay Behl. I'm going to give you the commentary on Greaves Electric Mobility's performance in quarter 2 of financial year 2024. Quarter 2 was the first quarter of electric 2-wheeler industry, which represented quarter-on-quarter decline after many quarters of steady growth. The industry recorded 181,000 registrations of electric scooters in July -- between July to September as compared to 217,000 in April to June, which is quarter 1 of the current financial year. It is a decline Q-on-Q of about 17%. This was led partly by the reduction in FAME II subsidy incentive on electric scooters effected from 1st June of 2023, and partly by an adverse end consumer price impact owing to the AIS Phase 2 regulations, which were implemented from 1st of April of 2023. However, amidst the slowdown in electric 2-wheelers, Ampere continues to be amongst the top 5 electric scooters in India in terms of retail sales. Furthermore, Ampere has strengthened its retail reach by launch on multiple new e-commerce platforms, business to government engagements, industry-first introduction of electric scooter, even electronic good store like Croma and with pan-India financing partners tie-ups like Muthoot Finance. In fact, in addition to Muthoot Finance, Ampere has many new participating financial institutes with Bajaj Finserv, Hero FinCorp, Jana Small Financial Bank, HDB and so on and so forth. Also, Ampere has partnered with many leasing firms like Revfin, Alt mobility, TWU for vehicle leasing to fleet customers. The 3-wheeler market witnessed a very high 23% quarter-on-quarter growth in quarter 2, with both L3 and L5 formats growing in strong double digits. Notably, Greaves Electric Mobility achieved a significant milestone by recording its highest ever quarterly sales in the 3-wheeler business with 75% increase from first quarter and 100% increase Y-on-Y basis. During quarter 2, we also unveiled our new electric cargo vehicle Greaves Eltra in 3 variants, flatbed, pickup and delivery van. Currently, this vehicle is under trial with many B2B customers and should be commercially available soon. Now I want to cover the aspects of FAME II subsidy matter. As of 30th September 2023, the company had an outstanding amount of INR 361.78 crores towards the subsidy receivables from Ministry of Heavy Industries of Government of India. This is under the FAME scheme. The amount includes INR 80.68 crores towards the claim spending to be filed with Ministry of Heavy Industries. During the 6-month period ended 30th September 2023, the company received a notice from MHI dated 21st May 2022 proposing 3 things: first, recover the amount of subsidy paid to GEMPL, Greaves Electric Mobility, since inception of the scheme amounting to INR 124.91 crores, along with the interest thereon; second, cancel the claims pending with the MHI for payment; and third, deregistering GEMPL from the above scheme. The company submitted its response to the aforesaid notice within the prescribed time lines. Management believes that the company has complied with the scheme duly considering and supported by the legal advice obtained. However, keeping in mind the interest of our consumers and without accepting any of the allegations, contentions or statements in the notice and without prejudice, the company on 27th October 2023 offered to amicably resolve and put a quieter to the matter, and has refunded an amount of INR 139.98 crores towards subsidy reimbursed by MHI to date, which, as I mentioned, was INR 124.91 crores and the interest thereon of INR 15.07 crores. The company awaits confirmation from the MHI for taking the necessary steps to resolve the matter. The amount refunded and the subsidy receivable of INR 337.34 crores is the net of provisions has already been provided saw as an exceptional item in the statement during the current quarter and 6 months, which ended on 30th September 2023. Can I just hand over to Narasimha, who can take you through the brief retail performance, please?

Good morning, ladies and gentlemen. This is Narasimha Jayakumar. I'm the CEO of Greaves Retail. Very excited to be here. Greaves Retail, as some of you are aware, is a leading multi-fuel spares and services business that spans the entire asset life cycle of -- which is basically a 3-wheeler, electric 3-wheeler or small commercial vehicle. The core proposition continues to be high vehicle uptime and driving asset productivity. So very pleased to say that Greaves Retail had a solid quarter on quarter 2. Revenues were up 9% Y-on-Y at INR 146 crores. On a YTD basis, we touched INR 284.5 crores, up 12%. Profitability continues to be strong, with EBITDA margins of 20% plus. And the business continues to expand both domestically and exports for spare parts and services. Exports of our multi-brand spare parts has expanded to newer markets like Sri Lanka, Bangladesh and Africa and we had witnessed very strong robust growth for our multi-brand 3-wheeler spare parts, covering various fuel types. We are seeing very healthy growth there. On the domestic front, we expanded our mechanic loyalty program for Greaves Spares for North and Eastern India during the quarter. Our new Greaves Uphar app, which is a mechanic loyalty rewards program has now over 20,000 registered mechanics covering 3-wheelers, small commercial vehicles and electric 3 dealers. Last quarter, we launched our own range of batteries under the brand name of Greaves Power Raja for the L3 aftermarket covering electric 3-wheelers, both in the northern and eastern part of the country. We expanded our services footprint to add 44 more outlets for Greaves Care. So overall, the business continues to be doing well, and we are remaining -- we remain committed to offering very strong vehicle uptime, which is a core proposition of the business. Thank you.

Thanks, Narasimha, and good morning, everyone. This is Akhila Balachandar, CFO of Greaves Cotton. I'm happy to report our consolidated revenue of INR 727 crores for Q2 FY '24 and INR 1,295 crores for H1 FY '24. On a stand-alone basis for Q2 FY '24. On a stand-alone basis for Q2 FY '24, Greaves Cotton has reported a revenue of INR 459 crores. Excel, our new acquisition, reported a revenue of INR 68 crores. And Electric Mobility reported a revenue of INR 207 crores. Greece Engines and Greaves Retail both have delivered robust growth, both quarter-on-quarter and on a year-on-year basis. For H1 FY '24, Greaves Cotton reported a revenue of INR 855 crore, up by 14% compared to last year. And on a consolidated basis, H1 revenue was INR 1,295 crore. The good news is that the acquisition and integration of Excel into the Greaves fold, the revenues from the GCL plus Excel segment for H1 FY '24 stats at INR 962 crores. This gives us a strong base to diversify our -- and enrich our core product portfolio. On the margins, GCL stand-alone EBITDA margins are now formally in the double digits, 13.9%. And if I were to look at the GCL plus Excel combined, the margin stand at a healthy 16.3%. This puts us on track for a historical trend of 13-plus percentage margins of pre-COVID levels. Stand-alone operating PBT is at INR 62 crores and H1 FY '24, the stand-alone business ROC is at 38%. The cash conversion ratio of the company is more than 90%, and that all goes very well in terms of working capital management and also shows the strength that we are seeing in our legacy business today. In terms of balance sheet strength, the company has almost 0 debt and a consolidated net cash of INR 848 crores, which can be further used for expansion as we go forward. One area where we had seen a lot of pressure in the early part of last year was the overall commodity cycle, and that led to increase in the raw material costs for some of our product segments. I'm happy to note the commodity cycle softening. It has a positive impact. And as we go forward, and we are expecting raw material prices and raw materials cost as a percentage of revenue to remain stable in the coming quarters. However, we are closely monitoring and evaluating the current geopolitical situation and its impact on a continuous basis. About Greaves Mobility, Electric Mobility given the regulatory challenges, reported subdued revenues of INR 207 crores and an EBITDA of negative INR 37 crores. The current -- as shared by Sanjay earlier, the current Electric Mobility results are without the impact of any subsidy starting April 1 this year. The amount refunded and the subsidiary receivables have now been fully provided for as exceptional items in these results. With this, our consolidated EBITDA was INR 46 crores, and the consolidated operating PBT was INR 40 crores. Overall, we saw strong and robust financial performance, and that reflects the strength of the strategy that the company has initiated over the last couple of years. Thank you. I would request Nagesh to add the concluding remarks, and then we can open the floor to Q&A.

No, no, let's open it up to the Q&A, right? We'll open it up for the questions.

We'll now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Aashin from Equirus.

Congratulations for a decent set of numbers. Sir, my first question is regarding the stand-alone business. So within the Engine side, we have seen very good growth during the quarter from the Engine business. And also the profitability in the Engine business has improved significantly over the last few quarters. So could you please give us -- give us more color on to that? And how do we see this business going forward?

Yes. The Engine business grew at about 22%. I'll ask Dr. Arup Basu to give a little more commentary on that.

So thank you. Essentially, we've been pursuing this fuel-agnostic approach and expansion of the product portfolio to include multiple applications. So the combination of these 2 is allowing us to expand our application segments from automobile or mobility solutions to other engineering applications where you have engines. The second leg is our increasing focus on international business, as I mentioned, and exports. The third is around the control on costs, which is embedded in our system. So there is a continuous focus on making sure we utilize our assets as tightly as possible and maintain cost control. And the supply chain focus to make sure that our raw material costs, et cetera, there is a significant focus on that. So 2 operational focus elements on productivity and costs, and the other is expanding the product portfolio to use multiple applications and exports. Thank you.

Okay. Sir, my next question is on the e-mobility side. So given the fact that now E 3-wheeler is increasing as a percentage of our total e-mobility volumes, so could you give us color on how is the profitability there? And within the E 3-wheeler side, if you could help us also to give us a split in the e-rickshaw -- e-auto that would be helpful.

Yes. So in fact, we registered a growth in both L3 and L5 segment. L3 being the electric rickshaw segment and L5, the auto segment there. Both of them grew very, very strongly over the last -- the total sales, the volume we listed was 4,706 between both the formats there, which is a 127% growth Y-on-Y and about 75% growth, which is Q-on-Q. Of this, close to about 3,000 numbers were electric rickshaw and the balance was L5. Both had registered a pretty strong growth there. Coming to your profitability question, our 3-wheeler business is very close to operating margin breakeven now. And going forward with some growth on this number, we should be having a profitable kind of a margin on this business there. Coming to electric 2-wheelers, as I think Akhila also mentioned, there was some challenges in terms of subsidy, but that chapter is behind us. We have closed the entire -- through the provisioning that we have done, we've closed the entire amount, which has been provided on the balance sheet. Going forward with subsidy getting restored, we will -- we have been declaring EBITDA positive quarter. If you see quarter 4 of last financial year, we were a positive operating business in electric 2-wheelers. So with subsidy getting restored, we are very hopeful that we will get back to our operating margins. I can take any other question you have.

Yes. And sir, lastly, on the Excel Controlinkage side, so this business is growing pretty strongly. So can you help us understand, is there any synergy of this business with our existing business and how do we see this business going ahead?

So this is Arup Basu. As I mentioned in my opening comments, the product portfolio that they make are used for controlling the vehicles. Now they can be construction vehicles or they can be trucks or whatever it is. And that's the synergy, because we work on the engine side and the engines need to be then controlled through levers, sensors, whatever it is. So the control part is an intrinsic aspect of any prime mover, whether that is IC engine based or that is electric based. So that's intrinsic and natural adjacency to our product portfolio.

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

Yes. First of all, a clarification on the subsidy issue. So you have paid the government around INR 140 crores, like you mentioned. The INR 360 crores, which you mentioned is pending for -- as of the first half of this year. Are you still trying to claim that? Or you have given up that claim also with the government?

Let me clarify. This is Sanjay Behl here. As I had actually mentioned in my commentary that we have submitted the money without accepting any allegations and actually without prejudice. So we do reserve our legal rights at this point of time. The decision, whether we want to go for it or not, I think will be prospective and I don't want to really take on that at this stage.

Okay. Okay. And the vehicles that you're selling now starting 3Q, are you still continuing to build that you will receive the same subsidy or right now is selling without any FAME subsidy?

We actually -- as I again mentioned there in my commentary, but we are awaiting information from ministry for taking the necessary steps now to get back to portal now. So I think as and when that happens, then we'll start actually billing it. Till then, I think we are continuing as we have continued in the first half of the year.

Okay. So the customers are getting the FAME subsidy for now in their price?

Not yet. As I told you that this can only happen once we have withdrawal of the show cause notice and portal activation, which is yet to be confirmed. The date of that is yet to be confirmed to us. The moment it happens, then the customers can avail subsidy. Till then, we're not passing any subsidy.

Okay, okay. And anyway the subsidies have come down and going forward, you have the newer launches. So as we look into next year, say, assuming a post-subsidy world, how should we think about the profitability with the overall portfolio that you intend to have on the electric 2-wheeler side?

Yes. So overall -- first, I want to just clarify that, look, we're neither getting subsidy, neither we are charging any customer for the subsidy at this stage. So it's been at the pricing, excluding any subsidy incentive to the company. Going forward, as we get the subsidy, as you know, it now has been brought down from INR 15,000 a kilowatt hour to INR 10,000. Now if you see our largest selling vehicle Magnus EX, it's got a 2.3 kilowatt battery. So if you look at these 2 conditions that they have, one is INR 10,000 kilowatt per hour battery and the 15% of the ex-factory price, whichever is lower, is going to be subsidy. This then qualifies Magnus EX, our largest selling product to INR 16,000 subsidy per vehicle -- about INR 16,000 approximately. So that INR 16,000 is then going to go in -- partly into margin and partly -- probably we'll pass it on to the customer to make ourselves even more competitive and get back to some mobilizing our momentum and getting back to the double-digit share that we used to enjoy free -- stopping of the portal. So that's I think is yet to unfold there. But you can understand that at about the volume that we are doing, you can multiply by INR 16,000 per vehicle, that's just a -- and then we have high-speed vehicles where we can enjoy up to INR 20,000 to INR 22,000 incentive per vehicle. So an average of that would be a very good indication of how much of additional margin can accrue. And then we will use that partly to become even more competitive and mobilize our scale and partly, of course, it will be margin accretive incentive that we'll get.

Understood. I appreciate that. But I was more thinking from the point of view of, say, assuming that the FAME is anyways ending. I mean there is talk of FAME III, we don't know yet, but assuming that FAME is anyways ending by March '24, given the newer high-speed vehicles that you have anyways unveiled and you have mentioned in the presentation also, how should we think of profitability? And if you can just add, where do you stand on the PLI? I mean are any of your vehicles are you trying to get them certified for PLI and what that benefit could be next year?

Yes. So coming to FAME III, you're right. Currently, there is no notification that we have on FAME III. And the current time line stipulated for FAME II to get over is 31st March 2024. So we have about what -- about 4.5 months ahead of us, a little over 4.5 months ahead of us for the subsidy to end. Now the announcement of city and high-speed scooters that you talked about. There are high-speed scooters, we have Primus and we already have mentioned in our Investor Day. There's one more that we are planning to launch before the end of this financial year. And if you take into that, the subsidy FAME to get over, it gets on for everybody. So it is still a level playing field and the overall -- the level of the water is going to go up. And then we'll have to see as to how much of electric industry is able to absorb. But given the product competitiveness, we are reasonably confident to get a fair share of the high-speed market, even without subsidy. Because this is going to be level playing field versus other players. So we should be hoping for getting the rightful share of the high-speed segment of the market. We believe that if subsidy goes away, FAME III, city speed will become a little more prominent given the price factor, as you understand and high-speed will probably shrink a little bit of a segment. But within that, I think we will be extremely competitive. So that's what we believe. The second part about PLI, we are not part of the PLI at this point of time. There are 2 kinds of PLIs as you know. One of the PLIs as and when it kicks in, one is the cell -- advanced cell chemistry PLI and one is a component PLI. As and when it kicks in, there is stipulation as per PLI policy that part of the benefit has to be passed on to OEMs, and we will qualify for that. So we will take as and when that benefit really starts coming.

Okay, okay. But your own vehicles, you're saying you're not trying to get them certified for PLI, like you are as an OEM yourself of the vehicles?

No. The PLI is actually an eligibility where you have to apply to the government policy to get that. So we are not part of that kind of a policy.

The next question is from the line of Pramod Amthe from Incred.

So my first question is with regard to the 3-wheelers. When you say operating margin, is it EBITDA margins? Or just to clarify, profitable?

When you talk about Greaves Electric Mobility, if you're referring to...

Yes, for the 3-wheelers, yes.

From 3-wheelers, I'm talking about operating margin to start with, and then, of course, there will be PBT, which will be breakeven.

The operating margin as per your definition is EBITDA or gross margin? Just to clarify.

Operating margin. I'm talking about EBITDA margin.

Okay. So the second question related to the same is, if you look at 3-wheeler and 2-wheeler, you are one of the few guys who operate in both the spaces. Wanted to understand, considering the position where you are, will you be able to make operating margins much faster in 3-wheelers? Can you tell us something about the competitive intensity and technology? Is it better there in 3-wheelers and hence it is relatively faster and possible to accretive on the margin side as compared to 2-wheelers? And also, second one is, are there any synergies you have been able to draw from 2-wheelers to 3-wheelers, and hence that cost optimization has also played out for you to early achieve those breakeven points on a lower volume?

Yes. So let me first come to your first question in terms of 3-wheelers. 3-wheeler intrinsically has been the strength of Greaves as a group. In fact, legacy of the entire engineering excellence actually comes from the 3-wheeler products that the group has demonstrated. Arup did talk about this whole entire powertrain and how it comes to really mobilize any kind of a 3-wheeler on the road. So coming from there, our 3-wheeler intrinsically has got a stronger profit margin, because we have a portfolio of diesel, we have a portfolio of CNG and we have a portfolio now emerging of electric. So we have an intrinsically stronger margin in ICE 3-wheelers that we are currently marketing through MLR Auto, that's the subsidiary of Greaves Electric Mobility. I'll come to electric rickshaw a little later. The second part of electric technology, you talked about of electric autos, electric L5. We just unveiled the electric cargo vehicle called Greaves Eltra, which on electric powertrain technology is superior to any other competitor that is on the -- currently on the Indian roads there. It has a range of over 100 to -- range of over 100 kilometers to a single charge. It's got an ability for full payload of over 500 kgs to do a 12 gradient -- 12 degrees gradient kind of a slope. It's a fully IoT-connected vehicle -- the first fully IoT-connected cargo electric 3-wheeler vehicle on the road. So on technology, we are benefiting especially from that. Coming to the second part of the question about synergies between 2- and 3-wheelers. There is a tremendous synergy that we get, both in terms of back end and also in terms of front end. In terms of back end, there is a dramatic synergy in engineering, design and the supply chain sourcing, which really starts coming in. It's not just the parts commonality of platform commonality. It is purely in terms of the resource and the skill base we have in our human talent. I think, it's a great synergy we get. Yes, there are some other design synergies, data, for example, HMI clusters, factories, some of these are other synergies that we have started already getting some early benefits from as we start launching our 3-wheeler business. Coming to electric rickshaw business, which is the other part of our business there. There, again, we are operatively strong in terms of our ability to run -- in terms of our margins, and I'm talking about EBITDA, not gross margins, EBITDA margins there. And there also, we are working towards making sure that our electric rickshaw is one of the most reliable, trust-worthy and safe electric rickshaws on the Indian roads. And that's the kind of a journey we are on. And there too, as the same synergies from our 2- and 3-wheeler, the other L5 business do spillover dramatically. But I can take any specific point if you want to have.

Sure. Sir, as a follow-up, the reason to ask the synergy is the largest cost component, which is battery. Seems to be of different nature, NMC versus LFP. So how do you derive that by sourcing from a same vendor or actually what does it move at the back end?

Yes. Okay. So I think, look, there are 2 things in the battery. One is the cell and second is really the assembled battery. So we are looking at convergence as we go forward. As we are building scale and we're building more products in our portfolio. Till about last year, we had just about Magnus EX and Zeal EX. These are 2 products. Now we have Primus added on. We have just launched about Greaves Eltra cargo vehicle. We are about to introduce passenger as we go forward there. Clearly, the point you made, both in terms of cells, procurement and in terms of batteries, and it's not too different, actually. It's just a matter of basically modularity of a battery moving from 2 kilowatts to probably a 10-kilowatt for a 3-wheeler kind of a dry powertrain that it needs. So yes, we are going to be converging and you will see in the next few quarters of conversion happening both in terms of cell and the battery assembly going forward over the next 1 to 2 years. You'll see that happening.

So one thing which we can address which you missed out was the competitive intensity in 2-wheeler versus 3-wheeler.

Yes. I'll just answer that, and then I think maybe you can go back to the queue there. With the competitive intensity in either of the markets, it's fairly well established. It's like both personal and shared mobility have been in India for a very long time, and both of them have fairly strong players. And India's position, even in the global road map, has been fairly strong, both in 2- and 3-wheelers there. It just happens that in 2-wheelers, if you just start counting the number of players, both domestic and international, and the EV journey to that extent has been a little more pronounced than in 3-wheeler at this point of time, and 2-wheelers in terms of its electric journey started about 3 to 4 years a little ahead of the 3-wheeler market. So that may be the only difference. But at this point of time, just to give you one data point, we will probably have close to about 0.75 million electric 3-wheelers coming on to Indian growth, which is not very different than a 2-wheeler number. So in terms of the growth gradient right now, electric 3-wheelers is actually accelerating even faster. And I did give you the numbers of quarter-on-quarter, 23% growth that the industry got. In fact, electric L5 had 56% quarter-on-quarter growth, which is quarter 2 over quarter 1. So overall, in terms of competitive intensity, while on the paper, it looks 2-wheeler is a little high. But I would say that both are equally competitively intense. And I think that's a very welcoming thing because overall, the industry moves faster, the ecosystem develops faster. The supply chain comes very, very quickly there. And I think this is a very good healthy competition which benefits customers at the end of the day. So I think it's very welcoming in both the industries.

[Operator Instructions] The next question is from the line of Siddhant Sanjay Shah from KBS.

I just wanted to sort of circle back on the exciting announcement that you all have sort of released to the rest of the shareholders about Abdul Latif Jameel and their investment into Greaves Electric Mobility. And since their sort of investment, it's been around 1.5 years. And I think not a lot of information regarding the potential synergies going forward. So for the benefit of Greaves shareholders, can you spend some time throwing some light on the last 1 year. Since the investment was made, how have we evolved as a company by having them not only as a financial partner, but also as a strategic partner on board?

Yes, I'll take that, as you alluded to, ALJ came in as a strategic investor more than about 15 months ago, June of last year, to be precise, right? They are a global distributor around in 30-plus countries, bringing international depth, have worked with other EV companies like Rivian, which went through some start-up phase, et cetera, et cetera. So clearly, they are on the Board. There are valuable members of the Board and help our management from time to time. So they are a minority investor. They are valuable addition to our extended team. And I think as Sanjay and the team go international, I think they are going to be even more valuable, given their international experience.

Got it. So the distribution capabilities are well understood and appreciated. And hopefully, the management would be kind enough to sort of lay out a road map for expanding our export sort of mix. But I was reading an interview given by Hassan Jameel and he sort of mentioned about how their mobility strategy has 3 core pillars. And out of that, their first pillar sort of evolved around design, and it seems like over the last 1 year or 1.5 years, we have been sort of making that or forgive my lack of ignorance on the time line. But it seems like our key priority also revolves more around product, and tech and sort of having them on board, have we seen any advancements on the same? Or can you spend some light as to just explaining a little bit about what advancements have been made on the tech and product side on the Electric Mobility piece of business?

Yes. So I think that's a good point. If -- some of you were at our auto export stall where we unveiled a series of products designed in India and engineered and designed by our stylists, right? So we have an in-house design styling team and in-house infotainment across the team. So a lot of the design elements, the product development collectively, but entire think tank led by the management team and supported by the Board, right? I think it's well on its way. I will also request Mr. Behl to add.

Just to get into the specific question you asked on design, as Nagesh mentioned, in Auto Expo, we had unveiled the core design team and the philosophy for both our 2- and 3-wheelers embedded into arctic tern inspiration. This is a Norwegian bird we talked about, and that was to really slow into our design ethos for all our products there. That is, as you rightly said, some of the investor inputs have already been taken in and from the ALJ team there, and both of us have co-developed it in the in-house Greaves, what do we call design -- Greaves design studio. Now that product, the first real implementation of that is coming up actually part of investor deck is going to be on the NX platform that you see as part of our presentation. So that will be the full embodiment of the design ethos that have started now taking shape of all the Greaves Electric Mobility products. And going forward, there is going to be a lot more platform convergence that you will start seeing, not just within the different segments of 2-wheelers from low-speed, city speed and high speed, but also within the 2- and 3-wheeler businesses there. And as and when, I think those are ready, I think we'll share the road map with you.

The next question is from the line of Sonal from Prescient Investment Management.

Sir, this is with regard to the 2-wheeler market. Just wanted to understand, at this point in time, maybe October, November, and maybe take a reference point of our 2-wheeler as Primus, it was the 450 model for them and OLA S1. Just wanted to understand that what is the difference in, let's say, the ex-showroom price or net on-road price between us and them. Is it largely the subsidy? That's the first question. And this is linked to the numbers on the ground what we're seeing on the VAHAN dashboard. Our numbers have come down significantly, while the numbers for the others are reasonably up. So just wanted to understand like is this just pricing, is this product specification? And as somebody else on the call was asking earlier, that maybe when the next round of FAME subsidies come, is this gap going to diminish over time? How do you see this market playing out? Because otherwise, the product doesn't seem to be viable at the operating level given how the margins we're talking about. So just wanted to understand where are we actually in the market right now as we speak, in terms of some...

So we are amongst the top 5 electric 2-wheelers in the country at this stage, and I'll take all parts of the question pretty quickly. So we are at about a 6.3% market share of electric 2-wheelers in quarter 2. Now you rightly said that compared to last year, which was about 12%, this has come down, but there has been also an explanation to that in the last 6 months where we have not accounted for any subsidy. We've not avail any subsidy from the government as we have not really been able to pass it down to the customer. So that has created an asymmetrical competition versus some of the other players who have had higher kilowatt batteries like [ OLA ]. You talked about or some of our competitors with 3-kilowatt 4-kilowatt batteries, we've enjoyed a little higher subsidy and with an asymmetrical competition where we were not availing it and they were availing it. The difference only went up. So this is a momentary kind of a blip is what I would like to believe that we've seen in the first half, and this should start recovering as we get normalized do the subsidy, whether it's FAME II or whether everything goes away and it becomes a level playing field or if FAME III has to come then of course, if Greaves is part of it. So that is a temporary blip, and I think that, that's the way you should also look at it. Coming to the overall segmental thing versus one of the sources of growth. There are 2 sources of growth for electric scooters. So electric 2-wheelers, if you include motorcycles or mopeds also. One source of growth is that if a customer is wanting a second vehicle in the home or an existing ICE customer who is already a hot prospect. The second is the first-time mobility user. So it's the first vehicle which gets into the home. These are the 2 large sources of growth. For the person who's taking a second vehicle has already got an ICE alternative TCO and value probably becomes a little more kind of an important thing. And hence, we are finding a lot more electric 2-wheelers getting into those homes. For a first-time user who's coming into this category, it is important that same subsidy was able to provide that entry price kind of competitiveness to EVs versus ICE options there. And with that subsidy reducing, we're already seeing some impact on the market. And you're rightly there that if your customers want to walk in, if he's looking at any alternative of 2 seats, he's getting at INR 80,000, why will he pay an INR 100,000 or INR 110,000 for an entry-level similar spec electric 2-wheelers. And hence, that's the difference that has come down -- come up, and that's led to some slowdown in the market. Going forward, we believe that with the electric -- electronic prices really, which is largely part of RMC coming down, we believe that these prices, along with some subsidy incentive continues, we'll continue to get equated with ICE alternatives and we will even have the second source of growth. We can dip into that. So this is where the overall market is, and this is where our position is. Do you have any other questions, then I can answer that.

Sir, just a short on this, let's say, just on the mathematical side of it. If there is no subsidy, the price of all these products should be basically comparable in the market. This is what I presume, is it should be? That is how it is?

No, no, what I said -- amongst the EVs, yes, it will become parity. There is no FAME III. All the electric 2-wheelers did not get FAME III. But versus ICE, there is going to be a delta of about 20% to 25% entry price level. So at the TCO level, it is different. Total cost of ownership is a very different concept altogether. In total cost of ownership, even without subsidy, an electric 2-wheeler is far better. It's close to about INR 2.70 per kilometer versus INR 3.30 to INR 3.40 per ICE. That's the kind of equation there. So it's still about 20%, 30% more comparable.

The next question is from the line of Sundar from Spark Capital.

So the question I had was more related to how is the partnership with Abdul Latif [indiscernible] and what strategy that you're charting out for the partnership?

Can you repeat that? We couldn't hear you. Partnership with whom?

With Abdul Latif.

I think this was addressed before in the previous question. I think we touched upon that in terms of the areas, international distribution, some of the other areas.

[Operator Instructions] Next question is from Rishikesh from RoboCapital.

Sir, my first question is with regard to the EBITDA margins for E-Mobility business. So if you could comment, how do you see this in the coming quarters? And what is the broad trajectory for the next 1 or 2 years?

Overall EBITDA margins. If you look at the quarter 4 of last financial year, we were profitable in 2-wheelers and we had a marginal negative in our 3-wheeler business. Going forward, at this point of time, I don't want to speculate there, but we are coming very close to operating margin breakeven in our 3-wheeler business, and 2-wheeler continues to be impacted by subsidy. As and when the subsidy gets regularized and if it gets regularized, we will be coming to unit economics positive for even 2-wheelers business.

Okay. And regarding our GCLs plus Excel, the other part of the business, the margins that we are doing currently, fair to say they are sustainable?

Akhila, do you want to take that?

Yes. Thanks for this. So basically, what I would like to state here is that over the last 8 quarters, we have been on this transformation journey. A few things that we've really focused on is the product portfolio enrichment like Arup has mentioned earlier, focusing a bit more on exports and this is something we are working on. Cost reduction and, obviously, the benefit of the commodity pricing is coming to us. So given all these and the continued focus on this, we would hope that all this helps us to sustain these margins at these levels. I hope that answers your question.

Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Nagesh Basavanhalli for closing comments. Thank you, and over to you, sir.

Thank you all for attending. As just giving a quick summary here. Our journey that we started -- when during the COVID era, we took out costs and the cost journey continues, like Dr. Basu was talking about, and the operating margin improvements are visible. Our journey on a fuel-agnostic path, which was an end-to-end, diesel plus, CNG plus electric continues. Our journey on being a fuel-agnostic player in addition and also looking at forward-looking skill sets, i.e., mechanical to mechatronics, to electronics and sensor continues. So thank you all for your attention. And happy to take questions offline. Our management team will be ready and able to answer questions if you have additional questions since we had a paucity of time. Thank you again. Have a great day. Thank you very much.

Thank you very much. Ladies and gentlemen, on behalf of Greaves Cotton Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.