Hero MotoCorp Limited (500182) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Hero MotoCorp Limited Q4 FY '21 Earnings Conference Call, hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vivek Kumar from JM Financial. Thank you. And over to you, Mr. Kumar.

Thank you, Nirav. Good afternoon, everyone. Thank you for joining in. We thank Hero MotoCorp's management for giving us the opportunity to host the call today. We have with us the senior management team from the company. I will now hand over the call to Umang Khurana, Head Investor Relations and Business Support. Thank you. And over to you, Umang.

Thank you, Vivek. Thank you for hosting us. Good day, everyone. I trust everyone is keeping well and safe. We are delighted to have all of you on the call today for our quarter 4 and full year results. We have with us today Naveen Chauhan, who is our Head of Sales and After Sales; and Niranjan Gupta, who is the Chief Financial Officer. We'll begin the call with Niranjan's opening comments, and then open the house for questions. Back to you, Nirav. Or let's begin with Niranjan's comments first. Niranjan?

All right. Thank you, Umang. Umang, the customary question first. Am I audible and clear?

Yes, sir.

All right. Welcome, everyone, to Hero quarter 4 investor call. Good morning, good afternoon and good evening, depending on which part of the globe you are joining from, or simply [Foreign Language] to everyone. That takes away the complication of morning, afternoon and evening. We hope and we pray that all of you, your friends, your families, continue to stay safe and continue to ensure that we come out of this crisis which is prevailing today in India and some part of the world as winners on the other side. And there are no doubts, and we are confident, that together, we can and we will. Coming to quarter 4 results, which we declared yesterday. Let me just talk about some of the key highlight. The first one, of course, as you would have seen, is the market share gain, which is 140 basis point in terms of overall full year gain. And that gain has come after many years for us in Hero and it's a substantial gain. It's been powered by scooters, which is, again, a very delightful thing for us, where we've gained almost 270 basis point, and we are back to around 10% market share. This is powered by Pleasure Platinum and our 125cc win in some of the key market. Of course, the road is long, but we are very confident that we can take big strides now in the space of scooter. Similarly, the other highlight within market share is Premium, which has moved close to 4%. Remember that we were hardly present in Premium segment. And now on the back of XPulse and Xtreme 160r, the market share has started moving up. And we are sure as we build portfolio, as we have already outlined as part of our strategy, the market shares in Premium will keep moving up and will be a big growth driver for us moving forward in the medium term. The third big highlight on the market share is the global business, which, as we said, we have restrategized on focusing on few markets. And as we have learned, we are putting the right products which are needed for the customers in those markets. You would have seen in FY '21, we have grown at 8% versus industry decline of 6%. Of course, it's on a smaller base. But if you look at quarter 4 run rate, that is closer to 300,000 annually, which is almost 40%, 50% higher than our erstwhile run rates, which are closer to 200,000. We are sure and confident that, again, global business will prove to be a big growth driver for us in the next 3 to 5 years. The fourth highlight on the top line is the parts business. As we had said earlier, the business is doing very well, led by our micro marketing strategy, our coverage -- expansion of coverage on distribution part. And this is the second successive quarter when we have crossed INR 1,000 crores. And in fact, it is inching now closer to 10% to 12% of revenue on a steady basis, and we are sure that this can be grown further. There are plans to this extent. Our overall financials, of course, you have seen the margin in quarter 4. Despite all the commodity headwinds and commodities having a steep rise, the margins on quarter 4 are close to 14%, which has been driven by a combination of the LEAP-II savings program, which has delivered almost 300 basis point in the quarter and actually full year 200 basis point, plus, of course, judicious price increases that we have taken. And that has helped us deliver the margins that we are talking about. Just overall, these financials, as we have delivered in FY '21, are after factoring in all the support that we've been providing to dealers, to vendors, to entire ecosystem, to employees, because this was a pandemic year, and therefore, we needed to be supportive of all the stakeholders, protecting payroll, everything, so not cutting corners, but obviously, saving where there were opportunity to be had, and that's reflected in the results, and also, our focus on creating value while ensuring that all stakeholders are also taken care of. And finally, to cap it up, the cash flow, which is very, very important. As they say that top line is vanity and profit is sanity, but cash is reality. That's an old saying. And you can see the cash flow that we have delivered is upwards of INR 4,000 crores in the year, which will augur us well when creating the liquidity buffer. We declared a dividend overall of INR 105 per share, which comprised of INR 90 normal and INR 15 special dividend. And that should be, again, something which should be delightful for our shareholders. So that's the brief summation of our quarter 4 highlights. Let me now move to Q1. These are difficult. These are challenging times. The surge in COVID 2.0 wasn't anticipated, wasn't predicted by anyone. It is impacting life. And quarter 1 is not the quarter to count volumes or count money, but it is a quarter to help each other, to save lives and to serve society. Profits and money will come later. But in this quarter, our focus is fully completely on that. And towards that, as you saw, we took proactive shutdowns of our factories to ensure that there is a breaking a chain that we can help with. There are multiple actions that we have taken in terms of whether it's medical facilities, whether it's the vaccination drive or multiple CSR activities on -- around oxygen cylinders, around helping out ambulances. So all our teams, which are not only us, but along with dealers and vendors, in this time of crisis are doing their best to help out, not only the employees that are associated with us, but also the community that are around us. We do expect that, with medical facilities getting ramped up in the country and with vaccination drive, all of us should be past this entire tsunami very soon. There are predictions of middle of May being the peak, and therefore, end of May subsiding down and June could be a period of kind of coming back to stream on business. And therefore, that's how we see quarter 1. So therefore, quarter 2 is the quarter that we see that sanity to come back. And beyond that, the outlook remains positive as far as we are concerned, given that the underlying demand factors still exist completely, where it's monsoon, crops [indiscernible] or need for mobility. The GDP projections for quarter 2 onwards are bullish, should be double-digit or 10%-plus, as RBI governor has said. Of course, costs will continue to be headwinded for a couple of quarters. But as you've seen from our results, we've been able to manage that, and therefore, we'll continue to navigate on that space. Within our own portfolio, our outlook is positive beyond a medium and long term and also for the rest of the year, starting from quarter 2. Our core brands have done well. As you saw, scooters are making big strides. Premium, we are building portfolio. Global business has started scaling up. We made big strides on EV as well, which will augur well for medium and long term. And you've heard all the partnership that we have announced. And therefore, we should see all the growth drivers that we had outlined taking more and more shape and contributing more and more to our top line and bottom line. And therefore, we remain positive about our own market share and portfolio trajectory moving forward. So with that, let me now hand it back to Umang. Umang, back to you for opening the floor for question.

Thank you, Niranjan. Thank you for your quick update on the quarter and the year gone by. Could we now take questions, please, Vivek?

[Operator Instructions] The first question is from the line of Pramod Kumar from Goldman Sachs.

The Hero ecosystem is holding up well during these tough times. Niranjan, my first question pertains to the commodity headwind. If you can just help us understand how much of the commodity headwind have we kind of absorbed and passed on to the customer. And as you look forward to FY '22, how should one look at the cost implications from further hikes and display on profitability? So if you can just help us understand this. And of course, I'm not talking about 1Q here, but broadly for the year as a whole. If you can help us understand that, sir.

Right, Pramod. Pramod, again, I hope you and family and friends are all staying safe and staying strong to battle the current crisis that's happening on COVID. Coming to your question, Pramod. The commodity, short answer is that the inflation, if I take the full year, on inflation account, it would probably be close to around 6% to 7% that would have impacted the year. We've taken pricing over the year -- full year around 4%. And the balance 3% has been made up through the LEAP savings program. So that's the overall -- if I look at the totality of the program. So if you were to say that around 6% to 7% of inflation has been absorbed in these results. Moving forward, if you were to look at, yes, commodities continue to be at a high, but at some time, the supply should come in and cool off. Of course, it's very difficult to forecast commodities. And maybe I can look forward to some of your reports coming out from Goldman Sachs to look at what the commodity forecasts are. But what we have done is that, of course, the last year FY '21 was a tough year, with so much of inflation. Some bit of inflation would still come in into FY '22. But again, we'll continue to navigate with a combination of judicious price changes in line with industry and maintaining our product positioning as well as the LEAP-II savings program, which, again, full year basis, it gave us more than 200 basis point and should continue to work for FY '22 as well. So I think we should continue to navigate that part of it. And maybe -- probably if there's an inflation around maybe 3% to 4% for the coming year, then couple of percentage can be made up from LEAP savings and other couple of percentage could be from the prices. So that time, again, I'm saying, Pramod, not just the quarter but a full year outlook that we have.

Fair enough, Niranjan. That's actually very comforting to hear on the margin side and the cost reduction side. So second and final question is on the Gogoro side. I think it's a pretty interesting move and approach what you've taken. So if you can just help us understand, by when - what will be the likely timeline for you to go commercial here? Because technology readiness is pretty much there with Gogoro. So your time to market may not be that long. And how does it fit into your -- with your existing own EV plans in Germany, what you're running from the German unit? So is there any read thing there? And finally, as it's current environment, there's a lot of hype about or a lot of talk about -- or worries from the startup ecosystem, given especially some of them have made some big bang among us. So how do you see them from your vantage point? And how would you expect this to kind of play out between the well-established incumbents and versus the startups who are making -- who are trying to break first ground in this industry.

Right. Right, Pramod. Pramod, on EV, as you rightly said, our own centers in Germany along with our Jaipur R&D centers have been working on our own program. That program is primarily based on fixed charging system. And that's not on a swap-based system, while the Gogoro partnership will be on a swapping system. So therefore, and as you understand, that -- which of these 2 systems will become dominant? Our view is probably both will work in parallel to each other given the entire appetite and the infrastructure that exists. So in that sense, it is complementary that our own program works on a fixed charging. And then with Gogoro then, we've announced that, we will work on swapping and that allows us to play in both the spaces. You're also right that -- so therefore, it doesn't have any adverse impact. If at all, it's a favorable impact, because some parts of the Gogoro learnings and the products which are there are some components we could actually build in into our own fixed charging program as well from a product side of it. From a swapping system, of course, like you said, Gogoro has got ready technology. They've got proven technology. They know how it works. And there's a lot of learning that has gone into it in Taiwan. So that helps us taking off ground very, very quickly. In terms of timeline, the timeline for both is next year. I would not say which part of the next year. Obviously, we are trying to accelerate as much as we can. But right now, I would say that next calendar year, you can hope to see a lot of action on EV front from our side as far as hitting the market is concerned.

And on the start-up scene or the challenge from the new start-ups, Niranjan, any thoughts there?

Right. Pramod. So I wouldn't comment on any specific announcement. However, what our experiences -- and you also know that any new category which is evolving, initially, there will be many players who will come in. And that's some way good for category as well because it allows the category to expand and explore. And in a sense, everyone brings to table some capability or the other. But eventually, then it leads to consolidation, because this is not a play which is about an aggregation play or a software play or maybe an app play. This is a hardcore serving the customer on the vehicle, on servicing, on aftersales operationally. And it's not easy. And you would have heard even Tesla or Elon Musk saying recently that it's very easy to build prototypes and do a bit of stuff. But operationally, it's not that easy, and [indiscernible]. And therefore, this is a hard thing that we'll go in. So at some stage, obviously, consolidation will happen. So we are not concerned about that. I think we're focused on what the customer's needs are and then how do we fulfill them, and that's how we are going about this.

The next question is from the line of Raghunandhan N. L. from Emkay Global.

Congratulations on good set of numbers given the circumstances. Sir, my first question was on the commodity part. You alluded to it and the wonderful performance there in managing commodity inflation. But approximately, can you give us an indication how much was the impact of commodity inflation in Q4 and approximately how much do you expect in Q1? My second question was on the market share. On a full year basis, company has done well and gained market share. But in the recent quarter, in 125 segment, there is some pressure on volume and market share. Is it due to inventory adjustment? Or are you seeing higher competition intensity in that space? And just a third one, if I can squeeze, on Harley-Davidson tie-up. If you can give some details on plans of joint product development and any timeline. Also, if you can provide details on margins for the distribution business.

You are testing my memory or my RAM space in my head anyway. Anyway, no, no, no. I'll try to , I'll try to. So on materials, since you are focused on quarter 4, you would have seen that our quarter 4 material cost on a per vehicle basis has gone up by around 4%, 4.5%. You've seen from the results. And out of that, you can say that parts have contributed because parts percentage has gone up. That's around 2%. And on 2-wheeler, if you isolate, then it would be around net 2.5%. Now this net 2%, 2.5% is after factoring a LEAP saving of 300 basis point in the quarter. So effectively, the quarter 4 absorbs almost 500 basis point or 5% increase growth in the material cost. That's a better way to put it. And therefore, that is what gets absorbed in the results that you see. In terms of market share, let me address the Harley-Davidson first, and then I'll give the market share question to Naveen to answer. On the Harley-Davidson tie-up, as we have said, the distribution business has already started. So we are the exclusive distributors for Harley. And that business has started, around 14, 15 dealers have been appointed, all from their existing systems, and the business is off to a start. Of course, the key part of the Harley-Davidson tie-up is the license to build the mini [indiscernible] segment, which is the segment which is a very profitable segment, as you know. And the lead player has the market share of around 90%. So there, this whole thing of developing the bike and putting out in the market, both under Harley name and Hero name, that is something which is the key part of the HD tie-up. And the teams have already started working and progressing on that. Naveen, can you take up the question on the market share? Where the question was that the full year we have gained, but in the recent times or recent months or quarters, we would have seen some softening from our side. So what are we doing about it? And is that fundamental or otherwise? Naveen, over to you.

Yes. Thank you, and [Foreign Language] to everyone. Hope everyone is keeping safe and sound. Now regarding the question, while, Niranjan, in your initial address, you had talked about the market share gains in different markets overall. I'll do a double-click there, and maybe that will have an answer to the question that has been asked. So while you've talked about gains in scooters, premium, on the overall market share, if we -- if I take a breakup of urban and rural, it gained in urban. We have hold on to our market share. We looked at the top markets, it gained in the top market. Now what -- on the question -- coming to the question specific. See, at no point of time, you will see quarter v quarter, the market share would be running at a uniform level. They are a mix or outcome of multiple factors playing in, which segments are doing better, both in terms of profit segment or geographical. And also, how are the various occasion. India, there are a lot of occasion buying that happens, right? And hence, how is the occasion fitting into various segments? So Q4 is an aberration. Q1 is what we are looking at. But you -- unfortunately, there is an impact of COVID which has come in. But that's something that will manifest as the time comes. So for me, Q4 is an aberration. But there was a specific question that was asked about 125cc also. 125cc, there is a sequential gain. Now 125cc, you got 2 strong products in terms of Super Splendor and Glamour. We've seen some hit on the Glamour in its core market, but the -- when we conceptualized the product in the BS VI [indiscernible], it was to attract a new segment of consumers which are emerging in a growing segment. We have gained in India, except its core markets. There is a feedback that we've received from the consumers in the core market. We're working on that. We've been agile in past. We are agile now. And quickly, you will see some action which is coming in this segment. Thank you.

That was very helpful. Just a small clarification. For Q1, what kind of commodity impact you are looking at?

Right. Let me take that up. So for -- as I said, it's very difficult to forecast quarter-by-quarter commodity impact. And I did respond to Pramod on this question. That may be looking at what is going around, that year, the full year may see an impact of around 4% inflation on the commodity because large part of the commodity inflation has come in, in FY '21 and towards quarter 4. And obviously, we plan to then make it up so that the impact on margins is minimized. So therefore, partly through price increase and partly through savings program, And a combination of all these things so that the balance between margin, market share and impact on customers is maintained.

[Operator Instructions] The next question is from the line of Nishit Jalan from Axis Capital.

And congratulations on a very good set of numbers. Sir, my question is on the cost reduction side. Hero has been in this 2-wheeler industry for quite long and a very, very well oiled [indiscernible] on the cost sided. Very surprised to see positively, to see this kind of 200, 300 bps kind of a cost reduction benefits coming in just one year. So wanted to understand and get more color as to what is driving this cost increase. It's a very steep increase coming on a -- in an organization which is already very cost efficient in just one year time frame. So some more details on this would be very, very helpful.

Right. Nishit, thanks for the question. See, what happens is that whenever a cost base gets restated, which is what happens when we move from BS IV to BS VI. And you know in BS VI regime, the cost actually went up by between, I would say, 12% to 14% or 15% because of BS VI. So whenever a rebasing of cost happens, it again presents an opportunity to save on that. So that is why you see that -- if it was just BS IV, probably it would not have been feasible to deliver this kind of saving. But as the costs have got rebased, then the opportunities emerge, because, initially, it was all toward ensuring that the products are robust, and they are delivered in the market and they perform in the market. And now after that, just alongside R&D and sourcing, and the entire system has started working on what we can save on top of that. So therefore, that's the program. And out of that, one of the major program is the precious metals, which is the catcon, and unloading reduction, a combination. As you know, there are 3 metals, which is rhodium, platinum and palladium. You can work with different combinations of those. You can reduce loading by adding something else. So those are the programs that have given bulk, I would say, 60%, 70% of these savings. And other savings have come from different areas. But obviously, as you go through a more squeeze on margins or cost, then obviously, you start looking at every angle once again, and that is what we've been doing.

So sir, what I understand is a bulk of the cost savings have come from fuel injection impact costs that we have started to put in after BS VI, right? And sir, these costs, these are kind of bought-out parts that we are getting for suppliers, right? So if suppliers are doing these kind of cost reductions, should these benefits not flow through the entire sector or all the OEMs present? Or is it something really specific which Hero is doing at their end, which means that the benefit is only for Hero and not for other players?

No. This is not the FI system. This is the catcon loading that happens in the product, which is combined of these 3 materials. So it is not a bought-out part. So essentially, you consume less of these metals, which is platinum, palladium and rhodium. And the combination of those depends on your R&D, how you are able to size it up. So in a sense, I would call it flex formulation, where you can use a different combination of these to achieve the same results and same BS VI output in terms of emission norms. So it won't be the same standard across for each of the companies or players. Different players will have different solutions. Even between FI and carb, there will be different flexibilities existing.

Okay. Sir, sorry to harp on this a little bit more. Sir, if I understand correctly, 200 to 300 bps cost savings, in the case, almost INR 1,000 to INR 1,500 savings on a per vehicle basis. Sir, what would be the content of precious metals typically in a bike? My understanding was it was around INR 1,500 to INR 2,000 originally. Was it much higher originally? And you have bought it down significantly to get these kind of cost savings per bike, or there is something else that had to it as well?

So I wouldn't now give out my entire BOM costs in details to you, because, obviously, that's confidential and competitively sensitive information. But just to give you a hint that all the precious metals, their prices have gone up by 100%, 150%, 200%. So therefore, whatever the cost was -- base was there itself has gone up. And then obviously, through a combination of flex formulation like I said, then -- and that's an intense R&D program, by the way. So it's not just bought-out parts negotiation that happened. Off-line, of course, you can talk to [indiscernible] more later. But obviously, beyond the point, we will not give out sensitive details of that.

Got your point, sir. Got your point. And sir, my second question is on the spare side, because it's the second consecutive quarter now where we have seen a significant growth on that front. So firstly, if you can share our numbers of this quarter. And secondly, what are structural factors or drivers which you are taking to bring this spare revenue higher? Or it's just a factor that in the 1Q and 2Q spare revenues were lower, and that is the reason why we have seen much higher spare revenues in the second half? I'm just trying to assess what is more sustainable and what is more transient in nature on the spare side of the business.

So let me take this first, and then I'll ask Naveen to supplement, which is, as you would have seen, so if it was just one quarter phenomenon, you could have said that it is transient. Even at that time, we said that it is based on underlying drivers, which Naveen will spell out. But it is a successive quarter of INR 1,000 crore plus, and we are now moving from what we used to have 7%, 8% of the revenue comfortably to 10% of the revenue and potentially to 12% of the revenue moving forward. But let me not steal the thunder from Naveen. And Naveen, you can outline this entire story of how our parts growth is being driven and how sustainable it is and what are our plans. Over to you, Naveen.

Yes. Thank you. Maybe I'll try and explain it in a simplistic fashion. The 2 areas were in the consumption case. One is our own captive market, which are our dealerships and authorized workshop. And then the second part is which is aftermarket beyond our dealerships. For 2 years now, we've been running a program called NPS 60, which is to enhance our consumer satisfaction level and take our Net Promoter Score level from 12, which was current -- I mean, 2.5 years back to 60. So fundamentally, making our processes and systems very, very robust, very strong at our own [indiscernible] and hence, retain the consumer, cementing our spare revenue and other consumables. So that's one piece. And this is going on. And fundamentally, it is on the right space. Also, in terms of retaining and getting our lost customers back, we are reaching out. So there is a micro distribution of service. That's also a concept that we're working on. We've tested that in some certain select markets, and it's giving results. So there is, fundamentally, the business grows in our outside segments and its contribution is going to go up. The second piece is which is aftermarket. Now aftermarket, around 3 years ago, we had a certain level of distribution system wherein we had simple stockiest kind of distributor. We've gone micro there as well. And hence, this customer intimacy, which is core to our approach in sales and after sales, is being played out in the aftermarket spare parts domain as well. So we've got closer to our customers. We've got 100,000 technicians on board with us. The number of technicians who deal with us has doubled in the last one year, getting in contact with us. Number of retail points, that's micro distribution further to the third tier level, that has also gone up fundamentally, right? So fundamentals are in place. Now distribution footprint is in place. And I would say we have done that 70% of the market as yet. We are yet to do [indiscernible] things. Because of the pandemic last year, we could not complete the full, so 30% still remains, but 70% is the kind of growth that you're seeing right now. So hence, there is an upside available in times to come. So broadly, that's on distribution. And yes, there is a lot of work, which is starting getting into play. Thank you.

Thanks, Naveen. Thanks a lot. Just to add on. Our teams are also working on expanding the accessories and merchandising, which is a very small business today, but a huge potential exists in terms of not only revenue, but also creating a branding through that.

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

Congrats on a great set of results. And also, pretty heartening to see the kind of effort that entire management is putting in these tough times to take care of the community. So wish you all the best for that. Firstly, my question is on the export side. Niranjan, you alluded to the fact that export run rate is touching almost 300,000 numbers. So just some thoughts on that. Would that be right kind of level to look at for next year? Or would you look at even better numbers because there, whether there are launches due for some of the key markets like Nigeria. So just some update on the timeline of new launches and the run rates that you expect.

Thanks, Kapil, for the question. Yes. What I highlighted was just extrapolating the Q4. And therefore, our run rate -- because we don't want to take a month and extrapolate, but I think there was a quarter which you can extrapolate, and that's where it is. But yes, we would like it to be higher than this for sure. And there are -- as you rightly said, there are multiple launches which are planned, whether it's Nigeria, et cetera. As you know, we've opened up Mexico. The orders have started coming in. Mexico is a big market. Colombia, where we were stuck at around 4% market share for quite some time, in the last 3 quarters have moved to 6% market share. And Colombia is again a 0.5 million market. So therefore, there's a big potential there as well. Bangladesh, the strategy has been reworked to increase market share. So there are -- honestly, there are multiple actions And would the internal team be happy with even this run rate? My answer will be no. But then, of course, you've got to build it. And obviously, we would like to come out with better numbers than these and then delight you.

Okay. That's great. Secondly, I also wanted to check on this Gogoro tie-up and the JV. Could you talk about what are the revenue streams that you can expect here? What is the kind of investment that we can expect because battery swapping probably will be a much more capital-intensive model as well, right? So what kind of investments have you earmarked for this?

So Kapil, the business case and the investment, and in fact, the business model itself is being worked out, yes? And therefore, once we do the business model, then one can work out which way it will be done. I mean whether it will be entire capital intensive, whether it will be a franchise, whether -- how does it dovetail with [indiscernible], so et cetera, et cetera. And if you look at our strategy, and again, to just reiterate, the primary own thing was our teams are working on fixed charging. That also will have, which is our own product, which we are doing in Germany in combination with our own jet R&D as well, that will start at fixed charging, but gradually, it will also have a swapping option. And now you have the Gogoro, which is a ready swapping option, yes? So without waiting for a swap option to get developed on our own product. So you have a great option with Gogoro as a swapping option. So I think all of these business models will get worked out And essentially, once it gets worked out and fine-tuned, then we can come back to you in terms of what exactly the investments would be and the revenue streams would be.

Sure. And sir, could you give us sales number for the quarter? I think you didn't give the number of ...

Sorry?

The sales number for the quarter?

Yes, yes. Sales number for the quarter was INR 1,050 crores for quarter 4 FY '21. The Q4 FY '20 was INR 751 crores. And just the previous quarter, which is Q3 FY '21, was INR 1,034 crores. On a full year basis, FY '21 was INR 3,178 crore and full year '20 was INR 2,896 crores, just to complete the picture.

The next question is from the line of Mukesh Saraf from Spark Capital.

First question is on the EVs again. I mean if you look at the Gogoro tie-up plus your own vehicle, plus you're also going to be participating via [indiscernible]. So could you give some sense on how are we -- what are the positioning do you see your products? Would one be -- could the price points -- can you give some sense on the price points? At least directionally would Gogoro be right at the bottom and then probably your own product and then or some sense on how you're looking at these that you're approaching this market.

I think you will have to wait for the products to be launched for the pricing and the positioning to be revealed. And as I said, the launch is next year, and next year is a calendar year. Of course, we are targeting, as you would have heard, our CEO also say, targeting fiscal year '22 launch itself. But yes, you will see multiple actions from us in 2022.

Right. But I mean, very qualitatively, if you could give some sense? Because I mean, obviously, you will be finalizing the modalities, et cetera. But given that you've already entered these 3 way and you looked at entering [indiscernible] can you give us some sense?

Nothing right now. So let the suspense be there for some period of time.

Sure, sure, sure. Okay. And the second question is, again, I mean, related to this, if you look at the last year or so, you've had 2 global tie-ups, one with HD and one with Gogoro. But when I look back, say, 10 years post the split with Honda, we not really have too many of these changes while competition has been tying up with some of these MNCs. Is there some change in thought process there? Have you kind of earmarked some investments towards JV to address some of these areas that we've been lacking in the past.

So Mukesh, we've already been tying up. So as you've seen, of course, you are right when you say last maybe few years, 3, 4 years or whatever. But if you see, we are seeing where would a JV or a tie-up makes sense, what is our own M&A strategy, and then we are going after that. So if you look at it, that's now in the premium segment, We tied up with Harley-Davidson, and that's something that obviously augments the entire premium strategy very well. We have tied up with Goro in EV. So you already see 2 big tie-ups that we have done in very recent past. So honestly, we are doing what is actually required as a strategy for the business.

Right. So it's not like a change in thought process because you've not been doing these tie-ups all these years. So it's not like there's been like change in strategy internally and like we set aside some bit of investments that we want to do towards some of these [indiscernible].

Well, tie-ups always also depend on 2 parties coming together. And also, the strategic direction. And third is that both parties should come to a commercial understanding, which has been in relationship. So many times, you keep working on those and then the fusion happens at certain point in time. So it's not that we have started working on these 6 months back and now it has happened. So it's not a change in a big change in thinking, however, if you see our new vision and mission, which is be the future of mobility ambition being create, collaborate inspire, clearly, collaboration acquires a big space in our strategy moving forward.

The next question is from the line of Binay Singh from Morgan Stanley.

Congratulations for a very good quarter amid challenging times. Most of my questions have been answered. 2, 3 follow-up from previous question. One is, could you remind us what are the price hikes that you have taken this year? And secondly, could you talk a little bit about any update on the Harley-Davidson side? We've talked about product development with them. Like you said, the Gogoro model be available in financial year '23. When do we start seeing some sort of a product traction along with Harley-Davidson? Which year would you sensor that? Any CapEx that you have allocated towards that? That's it.

So Binay, price increase, I think I already outlined. But just to repeat. Over the year, we took price increase to the tune of around 4%, combined all the quarters. If you look at HD, we won't be able to give out any timing right now. But obviously, both the teams have already started working on in terms of the product to be launched. And third is on EV, as I said, not '23. I said that 2022, which is the next calendar year, and we are trying to launch in fiscal year '22 one of the EV products. And you will see multiple action, whether it is our own product or a swap product or with Gogoro, all of those actions that you will see in the next calendar year.

The next question is from the line of Rakesh Kumar from BNP Paribas.

My first question was more of clarification. So have we started booking revenue for Harley-Davidson distribution network, which has got entangled with us?

Yes, we have.

So can you please quantify what would be for this quarter?

That would be a small portion because, overall, in term of the context of the sales, that happens, and the revenue that happens, it will not be a significant portion. But off-line, Umang can actually give you more detail.

Sure. My next question was more on the realization part. So from pre BS VI level to now, our realization has increased by 20%. What do you see its implication on the demand side? Because a large part of it is driven through the price increases and not much on the mix side. So how do you see its implication on demand? Does that make our demand or growth much more volatile in times of weakness underlying? And as a market leader, what are we doing to mitigate that?

So let me take it first, and then I'll ask Naveen to supplement. So firstly, I think it's not right to combine all the price increases, because what happens is that, A, what is the price increase for, and how it is communicated, what are the other industry players doing? And that's how we set the expectation. So if you look at BS IV to BS VI, which is the bigger one, which is around 15%, obviously, the product BS VI is not same as BS IV. It was the FI system, new technology, better mileage, a lot of features. So in a sense that you are giving value to the customer and not just a regulatory change, and that's how it was also communicated as well. Of course, after that, the 4%, 5% that has happened is on account of inflation. And it's got certain elasticity and demand impact. But then finally, it comes down to fundamental demand drivers of the -- and the need for mobility solution. And what we are doing is that while we are trying to push in the pricing impact, we are also trying to put affordable solutions. And let me now hand it over to Naveen to talk further about this. Naveen?

Yes. So Niranjan, you captured it very, very well. And we've been successfully been able to communicate the value story to the consumers. And right at the entry segment, if you look at Splendor and [indiscernible], there is increase in market share that we have, and it's primarily because in these segments, we have given the value of the new technology to the consumers. So that has played well. And I think at this point of time, how do we meet the affordable solutions for the consumers, they're in the - hold the key for the industry growth? We've launched [indiscernible] solutions recently. wherein the EMI comes down by 30%. We are testing it in certain select markets. We're going to grow horizontal deployment to rest of the markets. Two-wheeler industry still operates slightly on the higher side as well as the financing cost is concerned, that's 1 space to add to. So I think the solution for growing the segment and industry lies in the adjacent space, and we're working on these.

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

Congratulations on a good set of numbers. My first question was more on the here and now because, obviously, in the last 1, 1.5 months, we've seen different states going into this lockdown phase in different times. So can you give us a sense of your most recent reading of how things were on the ground, both in terms of demand as well as inventory levels? And what we were seeing in terms of rural and urban? Because while we are at the same place like we were last year, same month, I think this time around, the dynamics of rural and urban are different? At least that's what we understand. So any sense on that will be very.

So Amyn, look, we are, like you said, we are facing not just similar times as last year. But actually, much more challenging times, as we can see from the numbers, the infections and the consequences that are happening. And of course, more and more states are also going -- gone under lockdown. In fact, most of the states, I think, have announced already. So this would not be the time again to read any kind of underlying demand or inventory levels or rural, urban. I think this quarter is about everyone coming together to help each other and get over this humanitarian crisis. And then thereafter, from quarter 2 onwards, as I said, the fundamental drivers of the demand would return. We don't see any underlying issue with any of the key factors that drive demand in 2-wheelers, whether it is monsoon, announced normal crop levels or fundamental rural income or need for mobility. I think all of those factors should come back. So I think that would really be the time, the quarter 2 time is that when you start looking at these factors again, Amyn.

Okay. Okay. And secondly, just going back to the EV question. So now, obviously, you have a kind of a 3-pronged approach to this. You have Ather. You have your own products. You have Gogoro. And almost every other legacy OEM also has some products or the other out in the market. And then we have the start-ups, one particular one who has made a big announcement. So according to you, when is the inflection point for EV 2-wheelers? Is it 6 months down the line, 2 years down the line, in your best guess? And how prepared are you in terms of all 3 things coming together for you? And is there a kind of volume that you are thinking from your side that you want to be prepared for if things really take off in the segment?

So Amyn, look, right now, to do a crystal ball gazing is very difficult because it's a category that's evolving. There will be an inflection point, beyond which, it can start growing much faster. And as you know, a lot of factors have to come in together on this. And therefore, as a player, what we are doing is to accelerate our EV program, and which is what you see, where our own R&D is working on our own product, which will come under growth options, which is fast charging, charging and swap in a gradual manner, tied up with Gogoro, which gives us faster on-the-road swapping solution, and of course, invested in Ather. So I think this is a category which is where we have to put actions on ground, which we have done. And therefore, I would say that we are well geared and moving towards that. Of course, as you launch products, as different people will experience, the customers and the customer habits and the learnings, this category will go through a lot of evolution. So before it reaches any kind of saturation for it to -- or maturity level for it to then start growing on a steady basis. So I think it will be, I would say, wait and watch, and we are getting fully geared up, as you can see from the acceleration in the actions that we have taken.

The next question is from the line of Sonal Gupta from UBS.

Just one was, could you sort of give the other operating income for the quarter? And then what is the CapEx that you expect for FY -- what was the CapEx in FY '21? And what are you expecting for FY '22?

Yes. So the other operating revenue, as you can see because we've given out the parts revenue and you have the overall, for the quarter was INR 206 crores for Q4 and the quarter 3 was INR 192 crores. And obviously, the previous, which is the Q4 of FY '20, was INR 137 crores, which was a truncated quarter. So that's the -- that was the operating revenue. Sorry. What was your next question?

Sir, sorry. Sorry about the background noise. But I was asking about the FY '21 CapEx number. And what is the forecast for '22?

Right. So as far as FY '21 is concerned, I think we spent around INR 600 crores of CapEx. But offline, Umang can give you more fine-tune number. It's there in the cash flow statement. As far as next year is concerned, we are not outlining any numbers as of now. As you know, as far as quarter 1 is concerned, all of us are going through a very different level of crisis and challenges, and then we'll recalibrate our CapEx and the cash plan.

Sorry. And just a follow-up on that. I mean like how do you think about -- like while you are taking these multipronged approaches on the EV side, in terms of, I mean, setting up any dedicated EV capacity? Or do you think one of our existing plants will be sort of repurposed to be a dedicated facility? How are you thinking about that?

So again, this is something that our teams we have, as we have announced long back, EMBU, which is emerging mobility business unit. And that business unit is looking at all aspects: manufacturing, sourcing, even selling and marketing. So a lot of work is happening on that, other than the product work that I already talked about.

The next question is from the line of Chirag Shah from Edelweiss.

Congratulations on the numbers. Sir, I have a question on the premium motorcycle category. Sometimes, as you have articulated, we are looking to have a bouquet of 5, 7, 8 products. And that's how you are looking like the premium category. Where are we in that journey? And that could include Harley as a part of that strategy? We have seen 2 launches. More launches likely to happen? And a follow-up question. Because of this uncertainty around COVID, are your product launch timings or schedules getting altered or postponed?

Thanks, Chirag. As you rightly said, we have -- we had embarked on this premium strategy in terms of filling the portfolio right across all the CC and right across all the segment. You've already seen us coming out with Xtreme 160R, you've seen us coming out with XPulse. And you will see more and more products coming out every year. So that's where I would stop. In terms of launches, are we delaying launches? No, we are not. As of now, all our launch plans and pipeline plans, which are there for the next 3 to 5 years. They remain exactly up what they were.

The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Service.

My question, first, a clarification. The cost inflation numbers that you talked about, savings numbers which you talked on, they're on Y-o-Y basis or quarter-on-quarter?

Year-on-year basis, the 200 basis point LEAP saving program, which I talked about, which we used to have 60 to 70 basis point, which is what we have been saying earlier.

Sure, sure. Any sense on RM cost and commodity inflation on Q3 basis, how it could be?

Very difficult, Jinesh, to forecast. Everyone who's forecasted commodity, whether it's on up or down, has been proven wrong. I think it's best to focus on ...

Actual inflation in fourth quarter on Q-o-Q basis?

Yes. Actually, we talked about the material cost increase, which has happened. As you can see from the published results, it is 4.5% increase in material costs. Of which the 2-wheeler is 2.5%. And if you really gross it up for the LEAP savings for the quarter, it would amount to inflation of close to around 5% on material in Q4.

Okay. Okay. Got it. Second question pertains to the Harley-Davidson distribution income accounting. So we just booked the distribution margins in our revenues, or how it works?

No, it's a full revenue, no? It's a full P&L. As a distributor, we buy from Harley, and then we sell it onwards to our -- to the dealers. So it's a full revenue that comes.

Right. And lastly, with respect to financing, can you give some flavor of how was financing in fourth quarter, finance penetration? And how did Hero FinCorp perform for [indiscernible]?

Yes. So our financing in fourth quarter, Jinesh, was at 48% around, which went into financing, and the FinCorp share was 40%.

Okay. And any sense on HFCL's financial performance?

Nope, that's not a listed entity. But all I can say is that they are back in terms of their business and growing. And they are maintaining good capital adequacy and all the relevant ratios.

Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to Mr. Umang Khurana for closing comments.

Thank you, everyone, for coming in. It's been a pleasure discussing our numbers with you. Please keep safe, everyone. Please take care of yourselves. And hopefully, when we meet after the quarter 1 results, we'll all be smiling even more. Keep safe. Talk soon. Bye-bye.

Just an intervention, Umang. We have to keep smiling even now to win over this battle. And I'm confident, not hopeful, that when we have the next quarterly call, we wouldn't be discussing COVID anymore.

God willing. God willing. Thank you so much for that, Niranjan. Thanks. Thanks, Vivek, GMF for hosting us. It's been a pleasure. Thank you.

Thank you. Thanks for joining the call.

Thank you.

Thank you very much. On behalf of JM Financial Institutional Securities Limited, that concludes this conference call. Thank you for joining us. You may now disconnect. Thank you.