Hyundai Motor India Limited ($HYUNDAI)

Ladies and gentlemen, good day, and welcome to Q4 and FY '26 Earnings Conference Call of Hyundai Motor India Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Jain from [indiscernible] Financial Services. Thank you, and over to you.

Thank you. Good afternoon, and we welcome you all to the Q4 and FY '26 Earnings Conference Call of Hyundai Motor India Limited. Today, we have with us Mr. Tarun Garg, Managing Director and Chief Executive Officer; Mr. Wangdo Hur, Chief Financial Officer; Mr. Gopalakrishnan, CES, Chief Manufacturing Officer; Mr. Saravanan T., function Head Finance; and Mr. K.S Hariharan, Head of Investor Relations from Hyundai Motor India Limited. [indiscernible] that the call has been recorded. I would now like to invite Mr. K.S Hariharan, Head of Investor Relations from Hyundai Motor India Limited. Over to you, Hari.

Thank you, Chirag. Good evening, everyone. Welcome to the Q4 and Financial Year 2026 Earnings Conference Call. Before we begin, I want to remind you of the safe harbor. We may be making some forward-looking statements that have to be understood in conjunction with the uncertainties and the risks that the company faces. The conference call will begin with our MD and remarks on the overall business in financial year 2016, an outlook for financial year '27, followed by a brief presentation by me on Q4 and financial year '26 performance. After which, we will be happy to receive your questions. Now I hand over to our MD and CEO, Mr. Tarun Garg. Over to you, sir.

Thank you, Hari, and good evening, everyone. As we complete our 30th year of operations in India, it feels like a moment to pause and reflect on the journey, one that has been shared by resilience, adaptability and a relentless pursuit of opportunities. Over the years, we have consistently embraced evolving market dynamics and transform challenges into avenues for growth. For us, this 30-year milestone is not just a corporate achievement. It is a shared story of trust, pride and progress. 30 year strong, and the bond between Hyundai and its customers is only getting deeper. In fiscal '26, we have further strengthened this legacy by laying a solid foundation for our next phase of progression underpinned by the commencement of our third manufacturing facility and pipeline of robust product launches. Together, the strategic initiatives position us strongly to usher in the next era of Hyundai's growth in India. As you know, fiscal '26 marked a year of 2 distinct phases for the Indian auto oil industry, driven by a shift in policy and demand dynamics. The first half remained largely underwhelming, primarily due to muted customer sentiments. However, the land share shifted meaningfully in the second half following the GST rate rationalization in September which acted as a strong catalyst for recovery. This shift coincided well with the commissioning of our new plant and product launch cycle kicking in. Together, the created strong leverage and allowed us to respond to the improving demand environment supporting a steady acceleration in growth in the latter half of the year. Further, the sustained momentum culminated in a strong quarter 4 fiscal '26 with our domestic volume witnessing a growth of 8.5% on a year-on-year basis, marking our highest ever quarterly domestic sales since inception. This growth was complemented by agile product intervention across segments. The refresh launch of [ Extra and Verna ] are poised to further accelerate volume momentum in the coming quarters. The all new venue continues to be a strong growth driver, receiving an overwhelming customer response while consistently scaling our volumes since its launch. This has further reinforced our strong position in the compact SUV segment. Also we're extremely proud that the all-new revenue has secured 5-star safety rating under [indiscernible] testing. We believe this shall strongly support the positive momentum going ahead. Our business performance was also boosted by impactful marketing initiatives. In this context, Hyundai's point partnership with ICC among a significant step which enhance customer centricity by driving deeper engagement, leading to greater visibility. On the regulatory front, we have fully met CAFE requirements for fiscal 2016. For CAFE 3, based on the recent draft, we have calculated the requirements, and we remain fully confident of meeting the compliance backed by our strong powertrain strategy. Beyond regulatory compliance, our focus extends to building sustainable and responsible business. ESG principles are embedded across our operations, supported by robust frameworks. As a key milestone in this journey, during the fiscal year, we have achieved RE100 across facilities, reinforcing our commitment to clean energy adoption. On exports, despite the ongoing geopolitical headwinds, our volumes grew by 9.4% year-on-year in quarter 4. For full year, our export performance witnessed strong volume growth driven by robust demand for our products across emerging markets and our continued focus on expanding into new geographies. This enabled us to register a growth of 16.4% significantly outperforming initial guidance of 7% to 8%. Our overall volumes during the year registered a growth of 1.7% with a healthy balance between domestic and exports. Moving on to financial performance. We delivered a top line growth of 5% on both year-on-year and quarter-on-quarter basis. In quarter 4 fiscal '26, led by better volumes and prudent pricing actions. On the profitability front, the ongoing commodity pressures, along with seasonality and exports business have impacted the margins on a sequential basis. That said, we were able to partly offset these through calibrated price increases along with continued focus on cost control efforts. In line with our margin guidance of 11% to 14%, we concluded fiscal with a strong EBITDA margin of 12.2%, reflecting solid execution despite costs associated with capacity addition and commodity price pressures. This resilient performance was supported by robust volume growth in exports, calibrated pricing strategy in domestic market and our proactive cost reduction efforts. Moving on to fiscal '27. We have begun the new financial year with a solid performance in April with domestic volumes registering growth of 17% year-on-year. As we move forward, we are well positioned to capitalize on the supportive demand environment while strategically unlocking the incremental opportunities arising from upcoming product launches. We feel very excited to inform you that during the financial year, we shall be introducing two completely new name players which have been keenly awaited by all of you. Both these launches are expected to meaningfully boost our volumes and act as powerful catalyst for our next phase of growth. Of these two new launches, One will mark the debut of our new localized dedicated EV in the compact SUV space, accelerating our transition towards electrification and strengthening our future ready portfolio. The other one will further expand our presence in the IC SUV segment. Notably, both these launches are positioned in high-demand segments aimed at broadening our portfolio and deepening our presence. The upcoming EV will mark our entry into a new segment, while the IC SUV will further reinforce our position in the mid-SUV category. When I say mid SUV, I mean more than 4 meters. Backed by these product actions and other initiatives, we remain confident of delivering domestic volume growth of 8% to 10% in fiscal '27. Having said that, our enhanced plant capacity and flexible operations position us to strictly respond to any further growth opportunities even beyond 8% to 10% should they arise during the year. On exports, while the current macro environment is uncertain, the demand for our products remains intact across key markets, providing us confidence to recover export volumes as the market conditions improve. Even in an extremely uncertain environment, we are determined to go the extra mile and deliver volume growth of 8% to 10% in exports as well in fiscal '27. We will be continuously strengthening our export resilience through market diversification and product launch actions. In quarter 4 fiscal '26, we commenced exports of new venue, and we will continue to expand into newer geographies, further solidifying our presence. At MIL will, in fact, serve as the global manufacturer for the new venue for HMC. We will be launching Verna and Extra in the export markets as well. Further, the volumes will be strengthened by introduction of extra LHD in the LSD markets. Also, the 2 new name players which we indicated are not only planned for the domestic market, but will be considered for export markets as well in due course. Our growth ambition plans will be fueled by aggressive investments of approximately INR 7,500 crores in fiscal '27, marking the highest ever CapEx in recent years. On margin front, despite the near-term headwinds, including the inflationary pressures and geopolitical uncertainties, our endeavor would be to deliver margins within the guided range. We will be taking calibrated actions to support margins going forward. As the upcoming 2 new models will be manufactured at our Chennai plant, it will bring back utilization to healthy levels in Chennai. And of course, we are continuously evaluating ways to increase production of venue in Pune. It goes without saying that we'll continue to focus on proactive cost optimization measures including localization and value engineering efforts. In many ways, we see fiscal '27 as a year of building strong momentum as we are gearing up with a lot of intent and energy. As we complete 30 years of operations in India and enter the next phase of growth, we do so with strong conviction and a well-defined growth agenda committed to capturing the opportunities ahead. As you know, we already announced our capacity expansion plans of reaching 250,000 units in Pune by calendar '28. Now I'm pleased to announce that following the completion of Phase 2 expansion in calendar 2018, we will further undertake further capacity expansion of 70,000 units at the Pune plant to support our future growth aspirations. This will take our total capacity in Pune to about 320,000 units and overall capacity to more than 1.1 million units by 2030. In order to be future-ready, we are also leveraging AI across our operations, and we have a clear AI road map in place aimed at unlocking opportunities across manufacturing efficiency, quality enhancement, supply chain optimization and enhanced customer experience, among others. Finally, we feel confident that Hyundai will continue to be part of for the next 30 years and beyond embracing a future that is greener, smarter and more inspiring. I'm happy to share that the Board of Directors have recommended a dividend of INR 21 per share for fiscal which translates to a payout ratio of 31.4% on the consolidated profit. Thank you for your patient listening. And now I hand it back to Hari.

Thank you, sir. Starting with the highlights. This quarter clearly reflects how we are steering HMIL into the next phase of growth while simultaneously scaling our reach and deepening market presence. During the quarter, we have enhanced our existing models, [indiscernible] by renting the design, technology, safety and comfort which resonates well with today's young Indians. The new win continues to garner new milestones and recognitions. Recently, it has been on the compact SUV of the year by [indiscernible]. All these demonstrate our consistent focus on agile product execution, which aligns well with the evolving market needs. Our efforts to scale reach while growing deeper or yielding tangible results. We achieved an all-time high rural penetration, underpinned by strong product offerings and on-ground efforts to strategically enhance our network reach. Our CNG penetration, which was 13% in Q4 financial year '25 has been steadily growing, now reaching 18% in Q4 financial year '26. [indiscernible] recorded its highest ever quarterly sales in Q4 financial year '20 Notably, the sales of this model were the highest on full year as well. [indiscernible] continues its rain as a segment leader, led by strategic product enhancements in line with evolving consumer needs. Moving on to our sales performance during the quarter. We achieved total sales of 275 vehicles in Q4 financial year 26 compared to 11,650 vehicles in the corresponding quarter reporting a healthy 8.7% year-on-year growth. In the domestic market, we sold [indiscernible] vehicles compared to [indiscernible] vehicles in the same quarter last year, a growth of 8.5%. On exports, we had an incredible year with a strong performance across all quarters. Though Q4 was impacted by geopolitical disruptions, we were still able to deliver a growth of 9.4% for this quarter on a year-on-year basis. This performance reflects our export resilience, supported by diversified market presence and operational flexibility. On a full year basis, our overall volumes grew by 1.7%, majorly supported by strong export growth of 16.4% for the year, and rebound in domestic volumes in H2. With respect to domestic segment mix, SUVs continue to be the major contributor to our volumes. Notably, hatches and Sadanshowed growth during the quarter, aided by GST benefits and our product actions. Talking about the fuel mix, the clear shift is visible away from traditional fuel options towards more eco-friendly power trains and our multi-powertrain strategy positions us well to capture diverse needs of the market. Now coming to financial performance for the quarter. Our revenue from operations stood at INR 1,89,162 million in Q4 financial year '26 as against INR 1,79,403 million in the corresponding quarter. Revenue grew by 5.4% year-on-year due to better volumes and prudent pricing actions. EBITDA stood at INR 19,660 million as compared to INR 25, 327 million in Q4 financial year '25 EBITDA margin stood at 10.4% as compared to 14.1% in Q4 financial year '25. EBIT stood at INR 1,824 million for the quarter as against INR 2,023 million in Q4 financial year '25. EBIT margin stood at 7.3%. I PAT for the quarter was INR 12,556 million as against INR 16,143 million in the corresponding quarter. We delivered a PAT margin of 6.5%. Let me now explain the reasons for the margin movement. On a year-on-year comparison, if you see, PBT for Q4 financial year 2016 reflects elevated commodity prices costs associated with capacity addition and unfavorable product mix. Though volumes were better, the cost pressures outweighed the benefits, leading to a decline in margins on a year-on-year basis. On a sequential basis, better volumes, calibrated pricing actions and higher government incentives helped partially offset the impact of commodities and unfavorable sales mix during the quarter. On a full year basis, revenue from operations stood at INR 7, 7,633 million in financial year '26 as against 1,929 million in the corresponding period. EBITDA stood at INR 85,985 million as compared to INR 89,538 million in financial year in EBITDA margin was at 12.2%, well within the guided range. EBIT stood at INR 645 million for financial year as against INR 68, 485 million in financial year '25. The EBIT margin was at 9% as compared to 9.9% in financial year PAT for financial year '20 was INR 54,315 million as against INR 56,402 million in the corresponding period. We delivered a PAT margin of 7.6% as against 8.1% in financial year '25. While H1 was very strong for us, the margin softened in H2 due to a combination of factors such as costs associated with capacity addition and elevated commodity prices. Coming to the outlook. As highlighted by our MD and CEO, we are entering financial year '27 with a strong conviction and clear strategic direction to translate the momentum into sustainable and measurable growth. We believe we are well positioned to strengthen scale, enhance competitiveness and drive the next phase of growth. This concludes my presentation. Thank you all for your time and attention. Now we open the floor for Q&A. Thank you.

[Operator Instructions]. We take the first question from the line of Kapil Singh from Nomura.

Good evening, sir, and thank you so much for your opening remarks, which are very helpful. Good to hear such energetic commentary given the tough conditions. Sir, my question is just a follow-up on the guidance we have given. So firstly, on the margin side, if you can articulate, we are currently at about 10.5% margins, and we are guiding for a range of 11% to 14%. There seems to be further commodity pressure. So what are the margin levers we are thinking of from here? That's -- and also in the current quarter, how much commodity pressure did we face? And when we look at next quarter, what is the commodity pressure and how much is the pricing action that we have taken.

[indiscernible]. There's some background disturbance on your line.

Should I repeat the question?

No, no. It's fine. I got the question. Kapil, if you see, first of all, on commodity, as you asked, last quarter, the impact on margins was roughly 120 basis points if you compare on a sequential basis. And I would say that out of this 120 basis points, roughly 50 to 60 points would be kind of a one-off, which might not recur in the upcoming quarters. And in terms of price increase, again, as you know that already, we did a price increase in January to the tune of 60 basis points, followed by a selective price increase for venue in the month of March, and we will be doing one more price increase in May as well, right? In terms of the overall margin outlook, see, if you understand the Q4 profitability, of course, we had some headwinds. We clearly explained in our presentation as well. The commodity prices were at an elevated level. And we also had a few one-off impact in terms of labor code cost impact hitting our employee cost and other factors as well. So near term, the commodity headwinds are expected to continue. I think we need to admit that. At the same time, we also have some positive levers for us to drive the margins in the positive direction, even in financial year '27. I would like to just give a little bit more details on this. Number one is the volume growth is See, we have already guided 8% to 10% of growth, both in domestic as well as export markets. Number two, the price increases, multiple price increases, which we have done and that should also support our margins to some extent. And third important point is the utilization level of our Chennai plant See, as you know, Chennai plant utilization has come down a bit after we shifted our revenue to the Pune plant. But now that the 2 upcoming 2 products, both will be coming from the Chennai plant that should help to increase the overall output and improve the capacity utilization of Chennai plant. And obviously, that should support my margins as well. Number four, there are a few one-offs as I indicated in terms of commodity and labor code impact. So that should not ideally repeat in the upcoming quarters. And last but not the least, if you see the cost optimization measures, whatever we have been doing in terms of localization enhancement and value engineering efforts. These efforts should continue even in the upcoming future as well. So if you consider all these factors, that is clearly giving us the confidence that we can still deliver margins within the range of 11% to 14% in the upcoming year. I hope I've answered your question, Kapil.

Yes, very helpful and detailed answer. Sir, second question is on -- just on the growth for both domestic and exports, particularly in exports, I noticed that our exposure to Middle East is quite high. But we have still guided for 10% growth and our volumes have been fairly resilient. So just some color there would be helpful. And similarly, for domestic as well, 7% to 10% growth. Do you think you will gain market share this year given that you are having new launches. So some color on the domestic demand side as well? That's all from my side.

Yes, Kapil, First of all, on the export front, correct, after the war started, we have been impacted by the vol situation. Our exposed to Middle East have taken a hit. But we have been taking some countermeasures to protect our export volumes. Number one, we have been aggressively focusing on other markets, right? Even in the last quarter, we kind of increased our shipments to some of the markets like Latin America, Mexico, that has really helped us to some extent. Number two, we are also continuously strengthening our product offerings for the overseas markets as well. right? The new venue, a lot of opportunities for us in the days to come. [indiscernible], even the LHD version of extra, that should also support our volumes to some extent. Plus even the two new nameplates, which will come this year, not just for domestic market, I think it will be considered for export also in a due course of time, right? And one more important point is if you see the demand as such, it has been pretty strong for us, quite healthy across markets, even in Middle East also, we are having a healthy back order with us. So, that is giving us the confidence that once a whole macro and geopolitical condition starts improving. The volumes should come back very strongly for us. And so is the reason we were able to give a guidance of 8% to 10% growth even in fiscal year '27 in a totally uncertain environment. We hope that we can definitely achieve our targets whatever we have promised now. The second question on domestic. If you see Kapil, [indiscernible], the forecast is 3% to 5% or 4% to 6% very difficult to see in this kind of situation. So we believe 8% to 10% with the -- like we said -- like I said in my opening remarks, that we will be looking to -- in case any port opportunity comes, we have the capacity. And of course, we have the new model. So we will we will be very quick, very agile to grab that. So we are fairly confident that we will be able to outpace the industry in this fiscal and gain market share.

Next question is from the line of Binay Singh from Morgan Stanley.

Clearly, the company will have a very busy year. I can't recall the last time you had two heavily localized nameplate launches in 1 year. Just on that, in the presentation that we did in October, we talked about two launches over FY '27, FY '28. So is this -- are these the two? So in a way, we'll be done for 2 years with this? Is that the correct understanding?

So you remember, you have a sharp memory. So we are exactly sticking to whatever we have said. At this point of time, if you see, by now, we would have launched One full model change, which was a venue, one derivative, which was a venue in line, two facelifts, which were [indiscernible]. So last fiscal exactly as per that. And of course, for the next 2 years, we had given, I think, 3 full model changes, 2 new models. So Ben, we are going exactly as per that, whatever we had guided. I think beyond this, of course, if more opportunities come, we will look at it. But as now, you can say that we stand heavily committed to whatever we had told you.

Right, right. And just secondly, linked to that, any guidance on what timing do we expect during the year? The reason I ask is because when I look at your March volumes on the domestic side and if I just annualize that, not the right way to do given March is usually a big quarter, but that itself will imply a healthy 10% plus domestic growth for us in financial year. So is it fair to assume that you are basically not building much volumes from these models into your 8%, 10% guidance for now? Or any time line you could say that towards the end of the year or so I think we have given enough guidance on this. I can only say that, of course, April volumes were already -- like I said, the geopolitic situation is very fluid. We still don't know about what will happen in the Iran war and all. So what we are saying is we are very agile and very flexible. And we will see how the opportunities come and the volume from these two models is going to be substantial. So it's not going to be like a very small, it's going to be substantial, even in this fiscal.

We'll take our next question from the line of Raghunandhan N. L. from Nuvama Research.

[indiscernible] to see the positive outlook for FY '27. I -- with regards to the CapEx of INR 7,500 crores, can you please indicate the areas and indicate about breakdown, if possible?

Raghu, Hari here.Our CapEx plan, yes, out of this INR 7,500 crores, a major part, roughly around 45% to 50% would go into the upcoming new products. That is number one. Number two, roughly around 30% of the whole CapEx will also go into plant-related investments. When I say that, that means some portion will go for the Phase II expansion in Pune, and there will be some investments for [indiscernible] of the Chennai plant as well. So that is a broader plan as far as CapEx is concerned.

Very helpful. And also with reference to the one-offs that you mentioned, can you quantify them because on a Q-o-Q basis, employee cost, which is up 34%, what should the sustainable number 1 should look at there? And also that 50, 60 basis points within the commodity cost, which is not likely to recur. What does that relate to?

Okay. First of all, on employee cost, if you see on a sequential basis, we have seen we can understand roughly INR 100 crores increase, which is reflected. A large part of this relates to the impact of labor court provisions. And there is some accounting impact relating to the actuarial provisions also, some assumptions we have revisited. So that is also reflected there. We can understand that a major part of this is kind of a one-off should not ideally repeat in the upcoming quarter. And on commodity, the one-off impact refers to basically, we paid some vendor compensation during the quarter. for the past period. So that is the reason I mentioned that it is a kind of one-off for us. I hope it is clear.

That is very helpful. Just the last one. Almost 90 sales outlets have been added this year. And how has been the focus on the rural side. And going forward, how do you target the increase in network? That's all from my end.

So Raghu, we are going very strong on the network overall also and like I mentioned in my last call as well, almost 7 out of 10 outlets are coming in the rural areas. The good part, Raghu, is one, of course, rural penetration continues to increase. Quarter 1 was 22.6%, it moved to 23.6% in the next quarter than quarter 3, 24.1%, and quarter 4 was at historic high 24.7%. But the best part is down now the urban has also started growing. So first 2 quarters, urban was negative. Then quarter 3, it became plus 1% and now quarter 4 plus 7%. So we believe that going forward, especially with GST, the opportunities in rural are also very strong, supported by our network and of course, our marketing activities, our 30 year celebration. So we believe that our focus will continue at least for the next couple of years in this ratio of broadly, 7 outlets in urban -- or sorry, in rural versus 3 outlets in urban. I think that pretty much takes care of our plan going forward.

Next question is from the line of Chandramouli Muthiah from Goldman Sachs.

My first question is just kind of a clarification on the product launch disclosures. Thank you for [indiscernible] you did mention in the prepared remarks that you expect a substantial volume accretion this year from these 2 new product launches. So I just want to understand, are they likely to be sort of in timing terms, 3 festive seasons. And just also related to the product launch point, now that there will be 2 launches this year, is it fair to assume that the NPV and the off-roaders may actually be more in the FY '29, FY '30 the launch cycle.

I'm not commenting. You are not luring me into any further disclosures. So sorry, I think, like I said, two new nameplates in this fiscal is what we are sticking to. This -- both will be SUVs. One will be in the IC, 1 will be in the EV. The IS will be in the mid-SUV. EV will be in the compact SUV and it will be a dedicated EV and both will have substantial volumes. So I think -- I'm sorry, but I'm only repeating. I don't have anything further to add. And we are sticking strongly to the Investor Day commitment, which we made in terms of launch plan.

The second question is just related to margins. So some of the 2-wheeler makers who recorded and made commentary on commodity costs have indicated that commodity inflation could be anywhere between 300 to 400 basis points headwind in the upcoming quarters. So just similar to the margin bridge that you've given. I just want to understand, thinking about the factors heading into sort of first half of next fiscal. Is that sort of a similar range for the car industry as well to keep in mind that sort of a gross headwind on the commodity front in terms of gross margin for the company.

Hari here. Of course, very difficult to give a guidance on how much the commodity will increase because it is highly volatile, right? But near term, there is expected to be some pressure should be there. But as I mentioned earlier also, how we are managing this whole situation. Number one is through the cost reduction efforts with localization and other activities. Number two, we have been taking some calibrated price increases also, right? Already, as you know that whatever price increase, which we did last quarter, and there is one more to come in the month of May as well. So I think broadly, they should take care of the whole profitability as such. Our strategy is we want to take a proper balance between volumes and the profitability. So the price increase also is something we need to look at the overall market condition. Accordingly, we'll take a calibrated call on this aspect.

Got it. Got it. And last quick follow-up is just on Cafe 3. 3 quarters back, you did make a disclosure that you had done close to 130 grams per kilometer to in 1Q this year. Just want to understand how you ended FY '26 in terms of CAFE 3 and what your targets might be target ranges might be for FY '29?

Just a correction, fiscal '25 is CAFE 2, not CAFE 3. So CAFE 2, the target was 117.5%. Yes, yes. So our target was INR 17.55. We ended with INR 114.9 million. This is minus 3.095%. So we are much better because we are much better than the target. This is as per our internal calculation. And like I said, we are very confident about the CAFE 3 as well. Of course, only draft has come so far. But based on that draft and based on our powertrain plan, we are very confident where we are going to meet CAFE as well. Hope that answers your question.

We'll take our next question from the line of Gunjan Prithyani from Bank of America.

Follow-up on the margin, can you talk about the discounts for this quarter and also where we are on the new plant related cost, I mean there was supposed to be some 30, 40 basis point of impact to come in this quarter fully reflected or something else that we need to bear in mind.

First of all, on the discounts. This quarter, quarter 4, we have reduced our discount substantially. In third quarter, the discount was 2.6% on ASP. Now in quarter 4, the number reduced to 1.9%, right? And number two, in terms of the Pune cost, we already indicated earlier also, there are elements in terms of the overhead cost and depreciation, those things generally have an impact on the margins. What happens is, as we do more ramp-up of operations, obviously, there might be increase in some cost elements. But at the same time, we are also increasing our volumes as well. If you see venue, which is what we are producing from Pune plant, already, we are seeing a strong traction in the domestic market. We are continuously trying to increase the overall production and sales volumes. And even export also, there are a lot of opportunities we are looking at for the new venue. So if you see collectively, the increased volumes should be able to help us to absorb all these fixed costs as early as possible, and that should improve the margins as well. Hope I'm clear, Gunjan?

I'm just checking from a depreciation perspective, is that fully reflected in this quarter? Or there could be more increase that we were expecting to show up in this quarter?

Of course, see, last quarter, the major impact was already reflected in third quarter. Again, as I mentioned that whenever we do some ramp up, obviously, that will lead to some increase in the cost element. So -- but again, the volume should take care of all these increased costs.

Okay. Got it. And second question on cash amount. Any -- you can share a little bit more about the new EV model that is due for launch this year. You did mention a compact SUV model. But is this a model that sort of comfortably put us in the case compliance. Anything that you can talk us through in terms of what is the share within the folio that's needed over a 3-year or a 5-year horizon to be compliant with the casinos? And is this the model that sort of can be the volume model for further [indiscernible], we have given many disclosures today.

Like we said, it's a first mass market dedicated EV from Hyundai. It has been designed and made keeping India in mind. It is going to come in this fiscal much before the cafe 3 norms kick in, and we are expecting it to be in a high-volume segment. That is point of one. Point number two, of course, they will -- it will be a big booster for us for CAFE. But CAFE's not only about one model and one EV. I think we have a very robust plan of a comprehensive plan for CAFE. And I think we are very clearly making a disclosure that we are very confident about meeting the CAFE 3. I think at this point, beyond this, it will be very difficult for me to say anything. But as we go along during the year, you can see we talking more and more about these new launches. I think which will -- but we don't want to sell everything today because we have to build the excitement, keep the excited running as well.

Yes. Sure. I understand. Can I just follow up on the profitability, this 11% to 14% range. But as this MCV volume model comes through does that have any bearing on the margin in the near term or anything? I mean this is not going to be as profitable as the rest of the portfolio. So how do we think about the ramp-up of this model in context of the overall portfolio margin.

look, when the range of 11% to 14% has been given, it takes into account all the new models in all the segments, whether it is EV or petrol or hybrid or diesel or SUV or small cars. So trust us, I mean we have done our calculations. And -- but beyond this, to get into, okay, this model, how much profit, it will be very, very difficult for us to give more details. But like I said, it is well documented, and we have been very responsible in our margin guidance. And that is why you see the broad 11% to 14% guidance.

Next question is from the line of Amyn Pirani from JPMorgan.

Thanks for the detailed disclosure on the outlook. My first question is on -- just wanted to check, is this also the product in which you would be embarking on the cell localization project also in which Hyundai Group as a group has tied up with a local player for cell localization as well. So just wanted to check on that.

So like I said, for today, the disclosures have already been made. I think please wait going forward about announcements on this.

Sure. Sure. Fair enough. Secondly, just on your point that both these products will be coming in the Chennai plant. So I just wanted to understand, given that the Pune plant still has a lot of capacity ramp-up to happen. And given that as of now, we only know about the revenue, if both of these are going to Chennai, how does the overall utilization and fixed cost absorption work? Because we thought that maybe these will come in tons just for my understanding, how does the overall level work on fixed cost absorption and utilize it.

It works beautifully because, frankly speaking, in 2 shifts, Pune plant cannot do much more than the current level of 104%. Of course, we are trying to do best, like I said, we started with INR 8,000 per month. We want to move to 12,000 per month. But like we said, Puna plant on a 3 shift is 170,000. So there is -- unless we had a shift to the Pune plant, how much more you can do. So Chennai plant provides us with a great opportunity because if you see a very good reason for our strong profitability all these years has been the 90%, 95% capacity utilization in the Chennai plant. But because when you were shifted, we had this temporary drop in the capacity utilization. And now with these 2 models going to Chennai, we will be very good in Chennai. Anyway, we are very good in Pune, especially in a Tutopation. And like Hari mentioned, we will look at the third shift also in case we feel that the volumes are enough to support a 3-shift operation.

Thank you. Okay. And just a last question on the PBT bridge. Harry, if you can -- so if I look at the quarter-on-quarter, Q4 over Q3, you mentioned that volume and mix was a slight positive. Now given that actually your mix this quarter was significantly adverse because exports were lower as well as I think the SUV mix was lower relatively. Are we to understand that volume was high enough to offset the mix impact and volume is a bigger driver than mix? Just wanted to understand that.

Yes. I mean that's a broader understanding. So we had better volumes, especially in the domestic market. So that has really helped us on a sequential basis. At the same time, like I said, like we said, two new SUVs in the next year will ensure that we start. We grow in very well in the SUV segment, and this is an added advantage that all the segments have started growing. So we are not complaining at all. And like we said, because it is helping -- really helping the Chennai capacity utilization even before the new models are kicking in.

We'll take our next question from the line of Arvind Sharma from Citi.

First, for the export guidance at almost 8% to 10% growth. Previously, capacity would have been a constraint, but now that your capacity has increased in this country. what's the underlying basis for 8% to 10% growth? Are you pricing in the current adverse geopolitics or is 8% to 10% with an intended growth on the export part, whether that's the overall growth as well.

Arvind, see, again, if you look at the overall situation, so quite dynamic in nature. Our Middle East volumes have been impacted even in the last quarter, especially in March, right? So near term, we are looking at some challenges, especially for Middle East. Of course, we are also looking at some alternate options in terms of, can we take some alternate shipping route. So these are all some of the things we are also evaluating. But as I mentioned earlier also, there are a lot of other options we have in terms of other markets and the product strategy as well. So if you take collectively all these things, that should help us to achieve this 8% to 10% growth? What will be upgraded?

Thank you. And on this 70,000 incremental capacity expansion in 1 post Phase II. What's the time line for this? Was it FY '30 and the current capacity itself is fairly high. So again, what is the driving factor behind the significant capacity expansion beyond Phase 2?

So very simple, 170,000 Phase 1 already done. 80,000 in 2028 will bring it to 250 million. And then the balance, 70,000 will come between 28 and 30 to bring it to 320. And the driving force, of course, the addition of more models. So today is only one model, then the second model and I mean beyond that, so normal disclosures for today.

Ladies and gentlemen, we'll take that as the last question for today. I now hand over the conference to the management team for closing comments. Over to you.

Thank you. Yes, yes. So thanks, everyone, for joining the call. We will wind up this meeting now. Thank you so much for your participation.

Thank you. On behalf of Hyundai Motor India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.