Greaves Cotton Limited (501455) Earnings Call Transcript & Summary

Good evening, everyone, and thank you for joining us on Greaves Cotton Q1 FY '26 Earnings Conference Call. We have with us today, Mr. Karan Thapar, Chairman of the Board, Greaves Cotton; Mr. Parag Satpute, as Managing Director and Group CEO; Ms. Akhila Balachandar, CFO, GCL; Mr. Vikas Singh, Managing Director, GEML. We would like to begin the call with brief opening remarks from the management, following which we will have the forum open for an interactive question-and-answer session. [Operator Instructions] Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. Further, as you are aware, Greaves Electric Mobility Limited has filed a Draft Red Herring Prospectus with the capital markets regulator, SEBI, to raise funds through an IPO. All discussion in this call with regards to this entity may be read in conjunction with and be limited to said DRHP. I will now hand the conference over to Ms. Akhila Balachandar. Thank you, and over to you, ma'am.

Good evening, everyone. It's a pleasure to have you all with us today. We will walk you through our financial performance, strategic priorities and key developments for the quarter. Before we dwell into the details of [indiscernible] I'd like to take a [ moment to turn over to ] Mr. Karan Thapar, our Chairman, I now invite our Chairman, Mr. Thapar, to take over.

Thank you, Akhila. I presume I'm audible?

Yes, sir.

Good. Before we commence discussion on our financial and operating performance, I'd like to introduce and extend a very warm welcome to Vikas Singh, who joins us as the new Managing Director of Greaves Electric Mobility Limited. Vikas will lead the company's next phase of growth with the current management team reporting to him. With over 3 decades of leadership across diverse consumer-driven sectors, Vikas brings a wealth of experience in driving large-scale transformation, digital innovation and business growth in complex and regulated environments. He has held key leadership positions and roles in both Indian and international organizations and has consistently delivered results with resilience and agility. His appointment reaffirms Greaves' commitment to doing the best for GEML, as well its strong belief in the electric mobility space. Under Vikas' leadership, I am confident that GEML and its subsidiaries will get back on the fast growth track once again. Over to you, Vikas.

Thank you, Mr. Thapar, for the warm welcome. I'm honored to take on this role at such an exciting time for Greaves Electric Mobility. I look forward to working with the team to build on the strong foundation you helped create and to drive our vision of accessible and sustainable mobility for all. Thank you again. Over to you, Parag.

Thank you, Vikas. So I am going to start off to give you a business update on Greaves Cotton Limited. So good evening to all of you, ladies and gentlemen. I will cover the key developments and performance of our core businesses, which includes Greaves Engineering, Greaves Retail and Excel for this just ended first quarter of FY '26. During this quarter, we saw a solid momentum across our core businesses. Each of these businesses play a very important role in advancing our mission, which is to provide sustainable, efficient and inclusive engineering and energy solutions across India. We are very happy with the performance of our largest business, Greaves Engineering, which has delivered another quarter of strong growth. This has been driven by a very healthy domestic as well as strong international sales. In Q1 FY '26, exports made up 14% of our revenue. This was on the back of very strong demand for our Euro 5+ auto engines and our CPCB4+ [ gensets ]. We believe this underscores our reputation for reliability and for quality. The automotive segment saw a solid 46% year-on-year growth, largely driven by this international business. Also very encouraging is the growing traction for our engines in the non-auto applications, like firefighting, marine, construction and agriculture. The non-auto segment grew by 19% year-on-year. And within that, the genset saw a very strong 30% growth. Within the gensets area, we have held our market share at 4%. We remain sharply focused on delivering customer-first solutions. Moving on to Greaves Retail. This business delivered a 5% year-on-year growth. In this, the non-auto aftermarket segment saw a good growth of 40%, while the auto segment remained flat, mainly due to subdued demand in the markets. Within the non-auto segments, we see a healthy momentum. The railway business is of particular interest and it is progressing well, gaining strong traction. We have also started to get deeper into the electric 3-wheeler ecosystem, in the L3 space, and we have now onboarded more than 10 e-rickshaw manufacturers for our products. And our efforts in connecting mechanics is also growing strong, with participation from over 21,000 mechanics, who have scanned more than 170 million reward points through our unique mechanic loyalty program. To further strengthen this connect throughout the value chain, we have started to pilot also [indiscernible] loyalty program. That was on Greaves Retail. Now moving on to Excel. Excel continues to focus on increasing business with OEMs, which is their core customer group. This has resulted in new wins for both the mechanical and electronic control systems in automotive and construction industry. With the technological advancement in motion control systems, Excel has also launched a hydraulic marine steering system for outboard boats and has received global orders from Europe and the Middle East. Further leveraging its in-house development capabilities, Excel has won orders in the rubber business with OEMs in the agriculture and the construction equipment industry. Overall, aside from these operational initiatives across the businesses, we also continue our efforts to broad-base our presence in more markets globally. We are also driving operational excellence across the businesses through digitized inventory, through integrating our supply chains and training our partners and dealers to become more customer focused. On the ESG front, we have made good progress on waste reduction and expanded our upskilling initiatives within the mechanic communities. That was on the business update. I'm also aware many of you are keen to understand our road map to our Financial Year '30 Vision. Let me tell you that we are in the midst of finalizing our strategy and recalibrating our approach where it is necessary. I would request your patience. Our plan is to share with you more color on our growth plans over our next call post the H1 FY '26 results. To conclude, let me reconfirm our core businesses remain solid and growing profitably and are very well aligned with Greaves' broader transformation journey. While we continue to invest in future ready areas like electric mobility, our core is strong and building on the trust and scale of a wide distribution network. This gives us the stability and resources to drive sustainable growth across the group. With this, I'd like to hand over to Akhila to take us through the financial performance. Over to you.

Thank you, Parag. And once again, good evening to everyone. I'm happy to share that we have commenced the financial year FY '26 on a very positive note with strong operational and financial performance, delivering steady performance across all our key segments of business. This reflects the successful execution of our transformation strategy, diversification of our portfolio and the disciplined approach to financial management. It also validates our continued focus on sustainable growth, operational excellence and capital efficiency. For Q1 FY '26, we reported a consolidated revenue of INR 745 crores, with stand-alone revenues growing 22% year-on-year to INR 541 crores. Stand-alone EBITDA came in at INR 76 crores, making a 51% increase year-on-year, and EBITDA margins expanded by 270 basis points, driven by improved product mix, operating leverage and disciplined cost management. Our engineering businesses recorded revenue of INR 385 crores in Q1, supported by a continued demand from infrastructure, institutional and industrial customers. Despite raw material cost fluctuations, we maintain margin stability through operational efficiencies and smart procurement. The business continues to focus on reliability, delivery and technology-led process optimization. Excel Controlinkage, our strategic acquisition, delivered another quarter of growth with revenues of INR 60 crores. Both the core and acquired businesses contributed meaningfully to our consolidated top line. Greaves Retail business grew to INR 155 crores in Q1, backed by expansion into Tier 2 and Tier 3 markets and improved store-level economics. Customer experience initiatives, analytics led merchandising and integration of the supply chain have driven stronger conversions and better customer lifetime value. We are seeing increased traction from both B2C and B2B customers, validating our efforts to build a resilient space network. Greaves Electric Mobility continues to scale with Q1 revenues of INR 137 crores. This business has turned -- we are continuing to invest in new platforms, digital-first experience and ecosystem partnership to strengthen our leadership in the EV space. Our captive NBF, our finance arm, Greaves Finance, which focuses on EV financing, has grown its AUM to INR 300-plus crores, including co-lending, reflecting a year-on-year scale up. We have achieved this by and underpinned by strong portfolio quality, prudent risk controls and tech-enabled origination and underwriting. We are focused on deepening our partnerships with OEMs and dealers to broaden financial access, especially for EV customers in underserved markets. We continue to operate with a strong balance sheet. Our consolidated cash results stand at INR 400 crores plus net of debt and with a tight control on working capital. Our return on capital employed continues to be healthy, reflecting our disciplined approach to capital deployment. Looking ahead, we remain cautiously optimistic. While we are mindful of external macro and regulatory headwinds, our diversified portfolio and customer-centric approach position us well to navigate the environment and capture emerging opportunities. With this, I invite... [Technical Difficulty]

Ladies and gentlemen, thank you for joining us today. Let me -- I hope you can all hear me. We are audible? Just a quick sound check at our end.

Yes, sir, we can hear you.

Let me begin with a quick look at the electric 2-wheeler industry, added approximately 300,000 units in quarter 1, full year '26, reflecting a 34% year-on-year growth. While slightly down in terms of 2% quarter-on-quarter, the industry is steady and maintaining high concentration in the top 5 states: Maharashtra, Karnataka, Tamil Nadu, Uttar Pradesh and Madhya Pradesh, contributing to over 56% of the volumes. At Greaves Electric Mobility, our E2W, business, electric 2-wheeler business, continues to strengthen its position. I'm happy to state we have an 84% year-on-year retail sales growth. Our flagship product, Magnus Neo -- give me a second. [Technical Difficulty] Our flagship product, the Magnus Neo, remains a preferred choice in the mid-speed segment, backed by comfort, practicality and strong aftersales support. The refreshed [ Rio ], which brings in the entry segment, saw a 30% quarter-on-quarter growth, reaffirming relevance in rural and emerging markets. Market share last time -- last year same time was 3.4%. And this year, it stands at 4.2% with leadership in Bihar at 15.3% and Tamil Nadu at 13.9%. I'm happy to state we offer an inclusive portfolio, spanning products in the price range from INR 50,000 to almost about 1.5 lakhs. And this covers the slow speed, the mid-speed and the high-speed segments, thereby catering to a wide range of customers. With this, I move to the 3-wheeler segment. The L5 category clocked approximately 167,000 units in quarter 1, which is a 12% year-on-year growth. EV penetration in this category has surged upwards to 31%, up from 17% same time last year, driven by better availability and, to a certain extent, pricing. [Technical Difficulty] Apologies for this, everyone. There seems to be some issue in connectivity at our end. Reconfirming again that you can hear me?

Yes, sir, we can hear you.

All right. So I'm repeating again the last few lines. We offer an inclusive portfolio, spanning a portfolio from approximately INR 50,000 to about INR 1.5 lakhs across the slow speed, mid-speed and high-speed segments, thereby catering to a wide range of customers. With this, I move to the 3-wheeler segment. The L5 category clocked 167,000 units, which is a 12% year-on-year growth. Happy to state that the EV penetration in L5 has surged to 31%, up from 17% last year, driven by better availability and, to a certain extent, pricing. The L3 market also grew 11% year-on-year, led by UP, Bihar, Assam and Delhi. Overall our 3-wheeler business is steadily gaining ground. Our [ OBD 2D ] compliant L5 diesel variant is gaining traction with a 4% market share. We have expanded into CNG options, thereby creating a fuel-agnostic portfolio, which makes varied commercial users. Notably, June saw much better retail sales, driven by a refreshed portfolio, better dealer alignment and focused market interventions. We are also proud to share that our newly-launched Eltra City Extra, which is the EV 3-wheeler in the L5 space, achieved a national record, traveling 300-plus kilometers on a single charge from Bangalore to [ Ranipet ]. This feat reinforces our engineering excellence and our endurance credentials. We are also investing in long-term customer satisfaction. We have expanded our service network to 400-plus touch points. We have ensured a 98% plus service part availability, and we are driving digital transformation via sales force, aiming to elevate customer service and engagement. On the operations side, we made meaningful progress with margin improvement through cost optimization, improved channel efficiency and tighter execution discipline. While we continue to monitor industry headwinds including the rare earth metal availability, our proactive supply chain planning and localized sourcing gives us confidence in ensuring product availability and, very importantly, [indiscernible] preparedness. Finally, we are backed by 2 very strong and committed investors, Greaves Cotton and the ALJ Group, who believe in our vision and our long-term potential. We are truly grateful for their continued support. With that, we'd like to open the floor for any questions you may have. Thank you.

[Operator Instructions] The first question is from the line of [ Raman Kayli ] from Sequence Investments.

Sir, can you hear me?

Yes, loud and clear.

Yes. Sir, my first question is with respect to the engine segment. Sir, there has been a margin -- good margin expansion Y-o-Y as well as quarter-on-quarter, as well as a 30% sales growth. So I just want to understand what led to this margin expansion? And is this margin sustainable?

So let me take that. So if I just make sure I understood your question, you said in the engines business, you were happy with the Y-o-Y and quarter-on-quarter margin expansion, and what was the reason for it. So within the engine business, like I mentioned in my opening remarks, the auto segment has done well for us this year. And especially if you look within the auto segment, we have started a good export business. for our Euro 5+ engines and that obviously has helped us improve our margins.

And sir, my second part of the question was whether this margin is sustainable.

Let me take that. If you go back to our results over the last 8 to 12 quarters, we have been consistently improving our margins. And we are working towards maintaining it in the range of 13 to 14 percentage. That has been our constant endeavor and that is what we will keep aiming to keep on working towards.

Okay. And my second and last question is with respect to the volumes. Can you give me the volume figure for engines with respect to auto and non-auto segments, as well as electric mobility?

So we've not given a disclosure on the volumes in this quarter, but they are significantly higher than the quarter 1 of last year. And on electric mobility, I will have Vikas to respond to the question.

Thank you, Akhila. I did cover this in my opening remarks. In quarter 1, we have maintained an 84% year-on-year retail sales growth, which is a very healthy delivery. And we are making all efforts to ensure that we maintain this rate of growth in the quarters ahead.

The 84% growth is with respect to the volumes, right?

Retail volumes, yes. This is not the invoice volumes; the retail volumes.

The next question is from the line of Krisha Kansara from Molecule Ventures.

Congratulations on a very good set of figures. I have [indiscernible] set of questions. First being on the engineering side. So as we are aware that the Greaves Engines division has grown by 30% in this quarter, which is a very impressive growth. And you have mentioned in your presentation that this was led by predominantly by 2 things, one being the genset division and the other is the auto engine? So could you help us understand that exactly which end user industry contributed to like the auto engine division? And then which sectors drove the genset division growth? Like the growth has been very good, but if you can just pinpoint on the end users which drove the growth.

Indeed. I will be happy to answer that question. Like you rightly picked out the 2 industries where we have seen our growth. In the auto engine, as you know, we are a very strong player in the 3-wheeler market. So obviously, we are seeing good traction there. And along with that, we have also seen our export business grow. Within the genset business, we have seen our distribution expansion across the country. And to name specific sectors, in the residential and infra construction sectors have given us good growth in this quarter.

Got.it. But sir, will it not be possible for you to give a volume picture on the auto engine segment?

I think Akhila already mentioned the volume growth that we are ready to disclose. So we don't have any more information on that.

Okay. Sure. And sir, my second question is on our EV business. So while I'm aware that we have filed the DRHP and you might not be able to disclose some very sensitive information. But I would request the management to throw some light on the time line of the IPO. I wanted to understand, is there demand in the market for us to successfully launch this IPO? Because as investors of Greaves Cotton, it is also very crucial for us that markets are seeing and valuing both our businesses separately. And more so now because I feel that our engineering business seems to have begun a good growth trajectory given what numbers we have [indiscernible] in Q1, which are very much comparable to Q4. So that has grown very well. So if you can throw some light on the time line of the IPO and some details.

So thank you for your question regarding the IPO of GEML. As you are aware, the company has filed its DRHP with SEBI, and SEBI has issued its final observations. This marks a key milestone in the regulatory process for us. While the IPO process is underway, we remain focused on delivering strong business performance. The actual IPO launch, however, will be subject to prevailing market conditions, internal preparedness and other strategic [ considerations ]. We would like to reiterate that we remain committed to creating long-term value for everyone and we'll keep the markets informed in compliance with all regulatory requirements. I hope that addresses your question.

Okay. Sir, just one related question to this, sir. In yesterday's...

Sorry to interrupt, ma'am.

It's just a one related question to the previous question I asked, and then I'll join back the queue. In yesterday's AGM, the Chairman, sir, mentioned that Abdul-Jamil wants to reduce the stake down to 20%, which is currently 36%. So I wanted to understand our perspective as well on the IPO. So how are we looking at our investment in the EV business? I'm aware that we will still be the promoters of the EV company, but what is your take on the ownership aspect post the fresh issue and the [ OFS ]?

So thanks for that question and...

Let me take that question because [indiscernible]. But I think the -- I don't understand the implications of the question, I'm afraid. The DRHP was very clear on both Greaves Cotton's position regarding its shareholding as well as ALJ. I think I said in my speech that ALJ did not want to be a promoter post a public listing. So not being a promoter, they are forced to dilute to a certain level, which is what is represented in the DRHP. I don't know if that answers your question.

The next question is from the line of [ Shivan Jain ] from [ Enmi ] Alpha Fund.

I had a couple of questions regarding the engine business. Following up on the previous participant's question. I think this is the first time where our exports contribution has gone up to 14% as a percentage of the engineering sort of engines business. Just wanted to understand what's working for us in the exports business? And is this now like an inflection point for us to start growing? Because over the last 2 years, you've gone from a INR 50 crores to INR 70 crores run rate to almost INR 200 crore run rate in exports in the last couple of years. I just wanted to understand a little more what sectors or like what units are doing well for us.

Thank you for your question. So within the exports, especially for this quarter, we have seen 2 areas which have done well for us, and I mentioned those already in my opening statement. One is the automotive sector, where our Euro 5+ engines which were under development with a partner have now been commercialized. So that's why we saw some good invoicing number this quarter. And secondly, also our CPCB4+ genset, which we have been exporting, saw some good numbers in this quarter.

Sir, just a follow-up on this. Is there a -- because of the Euro sort of transmission, change of emission norms, the transition from, say, Euro 4 to Euro 5 or 6, right? Is that why we're seeing like a surge? Or this is more structural in terms of us gaining market share in exports? How should one look at it from an export perspective?

So most of the auto businesses that we are in, as I'm sure you are aware, are strong partnerships that we have with our customers. We work together to develop the technology to make sure our engines fit their vehicles. So obviously, these are strategic businesses that we start.

Sorry, yes, please go ahead.

No. My point was that you mentioned the upgrade of the emission norms. And in this case, Greaves was proactive and we were able to work with our customers to develop Euro 5+ engines, which is where we are seeing the success.

Got it. So is it fair to assume that, given this transition, we'll be able to gain more market share in the next generation of norms? And this starts to become the base for us to grow from going forward?

What I can say on this is we will continue to make the efforts to work closely with our customers as we have done in the recent past.

Understood. My second question was on the genset piece of the business. In the last couple of years, we've seen our market share go up from 2.7% to 4%. And we seem to be growing in this space even though the industry doesn't grow at the same pace. What's helping us gain this market share and grow at this base? How big can this business become for us? Is it more distribution led? Is that product more differentiated? What's helping us gain this market share? If you could help us understand that a little bit [indiscernible].

Sure. Sure. I can comment on what has helped us achieve the market share that you have seen. So it's not any one thing. We have been working on multiple fronts. First and foremost, we have been working to ensure our product quality is upgraded and continues to develop. Secondly, we have also worked hard to improve our customer service. As you know, this is a product which depends on aftersales service. So we have put concerted efforts to improve our response to our customers. And thirdly, we have also broadened our distribution network and coverage. So all these 3 things have been very important to help us steadily improve our market share in this segment.

Got it. And if you could help us understand how big, given our current distribution, this business can be for us?

It remains a focus for us as it has in the last few quarters. So we will continue to put this emphasis that you have seen so far.

The next question is from the line of Jyoti Singh from Arihant Capital Markets.

Congratulations on the good execution side. So basically, sir, I wanted to understand on the inventory side, how much we are maintaining currently. And a follow-up on the earlier response on the increasing market share, the product quality and increasing distribution. So just wanted to highlight more deeper, like how many dealerships we have increased for the EV side? And on the -- another question on the EV side, that how the market share is evolving in the key states like Tamil Nadu and Bihar area, and also in the western north India. Then I will ask a few questions.

Yes. Thank you for the question. I would just like to state that the team is completely focused on building fundamentals, both in terms of network expansion and also in terms of product portfolio and our general efficiencies as a business. The results are coming in well. We would continue to build on them, in line -- in a manner which is productive and impactful, without spreading ourselves too thin. As regards market share, I did mention this in my opening comments, we've had an improvement in market share with the same time last year. [indiscernible] most of our markets. And our attempts will remain to build on the success of ours in the quarters ahead. I hope this addresses your questions.

Yes. And also, can you quantify the contribution from export and the EBITDA differential versus domestic business? And last question, on the [indiscernible] restructuring and change on the management side, so just wanted your comment.

On this export, I presume you're talking about our engineering business.

Yes, sir.

Could you please repeat your question on export, please?

So just wanted to understand on the EBITDA differential and versus the domestic business.

So obviously, we have seen our export business grow, and it has helped our margins. The actual difference in EBITDA is not an information that we would like to discuss in this forum.