Landmark Cars Limited (LANDMARK) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Landmark Cars Q4 FY '23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Basudeb Banerjee ICICI Securities. Thank you and over to you.

Thanks, Lizan. Good morning, all participants. Thanks to Landmark Cars management for giving us the opportunity to host the call. We have with us the senior management of Landmark Cars presented by Mr. Sanjay Thakker, Promoter and Executive Chair Mr. Aryaman Thakker, Executive Director; and Mr. Surendra Agarwal, Chief Financial Officer. So without wasting any time over to Mr. Sanjay Thakker for his initial comments, followed by Q&A. Over to Sanjay.

Yes. Thanks, Basu. And it gives me immense pleasure to be with all of you again. This is the second call that I'm having with you. It's a new journey for us. We got listed just under 6 months back. And it's a good time to be listed, I guess. So India, as you know, has become the third largest market for passenger cars, which is where Landmark operates. And we believe that there is immense amount of headroom here still for growth. And I'll give you a few statistics to kind of emphasize on this point. In India, only 4% of the dollar millionaires by luxury cars. The global average is 60%. Stepping back, let's understand this happened in the passenger car segment of India. Over the last few years, there has been a shift towards premiumization. And when I say premiumization, more than 40% cars, and this statistic is around 3, 4 months old, and it may have improved even further. 40% of the vehicles sold are now about INR 10 lakhs. 45% of the vehicles which are sold are SUV or equivalent, and I was reading The Economist a few months back, and there was a specific issue on the future of automotive in the world. And interestingly, Economists came to a conclusion and the article went on to say that India would be the only large market, which will be growing in the years to come. It seems that globally, the automotive sales has peaked out. And this India is the large market where there is a significant amount of headroom. And I believe that this is not a hidden fact, and that is why there has been a significant focus all the global OEs who see this as possibly the only market which will show growth, which will be a sustained growth for a length of time. And that is why they are investing in India, big time. Only in January, Mercedes Global CEO, Ola Källenius came to India, I had the fortune of meeting him, spending some time with him. There was some discussion about what will Honda do in India. They have announced that for its 2028, they will be launching a new car every year. BYD, which is the largest company for SUVs and electric cars has given extremely bullish ambitions for Indian market where they are talking about nearly half of all electric cars sold in India, they want to be selling by 2030. Now this is what is the brew, which has been cooking. We are at Landmark, we believe that we are at the right place kind of right time. We are the largest partners, as you know, for Mercedes Benz, for Honda or BYD, for Jeep, for Volkswagen. And I'm happy to kind of announced that only yesterday, we got the LOI for MG Motors for Madhya Pradesh, some parts of Madhya Pradesh. And so we have added one more brand, which focused on SUVs and EV. That is what we are looking at and, of course, the premium cars. I would also well upon a little on how the dealership model operates. What is it that we really do for a living. And before I go there, I would also like to say that there is -- we are seeing a revival in the commercial vehicle sales also, we have been invested in dealership of Ashok Leyland, and which is showing a good amount of traction, which is what it did last year, and we believe that will continue even this year. So Landmark, which was established 25 years back, today has 4,000 employees. We are in 8 states, 105 outlets and we are the largest partners for all the guys, all the OEs that we spoke about. The dealership model is very easy to understand. Most of you would have kind of experienced this by being a consumer. But from the back-end, let me give you a perspective of what we really do. So we sell cars, and we make money by way of commission, when we sell cars. We make money when people buy insurance and take finance for the cars that they buy. 75% of the people in India who buy cars buy -- take finance to buy the cars. This is, I think, much higher than the global average. 90% of people who buy the car, buy insurance from the dealerships, and this is a long-tail business. Landmark has been focusing on this for a long time. Apart from this, when people buy cars, they also buy accessories. And Landmark has been amongst the pioneers in kind of white labeling. I don't think of any other dealership group which has white-labeled accessories on display. We also have tied up with global car care products from Australia and America, where we are the exclusive distributors in India to market high value, high-margin products, Perma Guard and Motor 1. So this is one part of what we do. The second, which is the annuity type of business that we do, it is the business of aftersales or service. And this is the business which has been growing at 20% CAGR for the last 9 years. I'm happy to state that for the year ended '23. This has grown at 25%, which has been a slight improvement over our compounded growth that we have seen. I have told this to some of you separately that 1 in 3 cars that you see on the road meets with an accident every single year. So not only do we do regular servicing of vehicles, we also do accident repair. Now this is something which just keeps on happening. Also, as a new foray, what Landmark has done is that last year, we have gone into our own white label extended warranties. In the models where we know that there are not too many claims. This allows us to sit on the money. The customer stickiness happens, the customers come back to our own workshops, and we make another revenue stream that gets opened up. So this is a new initiative of Landmark, and you will see a lot of profits coming in from there in the years to come. What else do dealerships do? Dealerships have been globally doing a great job in pre-owned cars, buying and selling of pre-owned cars. The Indian dealership have not been very good at it. And I must say that until now, Landmark was also very average player in this space. And the reason is simple to understand. There was the ecosystem consisted of well-funded people who were burning money while buying and selling used cars. And I don't need to get into the details. You all know who we are referring to. And since the funds have dried up, they have all or most of them have withdrawn from the business. So this is where we believe Landmark, which is a strong franchise and the customers know of it. We are well poised to enter this space and make it our own. Globally, 30% of the pre-owned cars sold are by the new car dealers. In India, this number is just under 4%. And this change when Landmark entered this space, in which we have entered this year. What are we talking about? We are talking about customer -- the same customers, the same brand, the same infrastructure. That is what we are talking about. The problem with the industry was that there is not enough on the table. If you set up a new outlet, if you employ new people, you do repair cost, you do marketing, then there is not much on the table because the average selling price of a used car is much lower than the new car. What Landmark has thought of, and I believe that this is a kind of a winning thought. And that thought is that we will be using the same showrooms, the same manpower the same set of customers who are inquiring with us to buy those pre-owned cars, to buy the new cars possibly or the pre-owned cars and sell it to them. And we are internally looking at doing. We have an internal target of 10% of all our showrooms will have to sell pre-owned cars of the same brand from the same storeroom. Now this is a journey which has begun, and we are internally very hopeful we are setting our systems right. And I'm happy to state that the investments that we had made for evaluation of the used cars through artificial intelligence and all is now coming into play. And this will be something that will keep on happening in a good way in the times to come. So pre-owned cars is going to be focus, extended warranty for us is going to be a focus. We will be also adding 2 new brands. MG has also been -- already been announced. Some discussions are on for inorganic growth, we will kind of let you know as and when that also happens. The focus of the company clearly is profitable growth and high ROCE. So this is something we will continue to be focusing on -- and the results are with you. I believe you will -- you would have gone through it. We have declared a dividend of 45% also once if it is approved by the general body. And I think I will take your questions later on after Surendra kind of completes. But all in all, thanks for being on the call. Happy to be here.

Thank you, Sanjay, and good morning, everyone, and a very warm welcome to one and all, attending our earning conference call. I would like to highlight some operational metrics for you, all to better appreciate the performance over the quarter and the year, which is a consequence of our strong moats we have built over the years. We are the highest contributor in terms of volume for multiple OEMs that we partner with and us over time. This translates into meaningful volume in terms of vehicle service and the sales. In the last financial year, we have sold 21,310 cars across all our OEM partners. We service 3,17,954 cars in FY '23 and expect this to continue to growth, plus 20% year-on-year, as highlighted by Sanjay. This is the extremely predictable business with repeat customers. We also find ourselves at the inflection point in certain OEM, post which we expect to be on course to be tremendous growth. A major trend being observed in the steady but sustainable rise in the average selling price. The average selling price of cars has gone from INR 14.15 lakh to INR 17.71 lakhs in FY '23, showcasing a growth of 25% year-on-year. On the back of higher production of top-end variant being sold and all-round price escalation. As highlighted in the previous earnings call and our results document, we mentioned that there is a change in the Mercedes sales model and thereby, for a like-for-like comparison, we have continued reporting the pro forma revenue and the reported revenue in this quarter as well. Our pro forma revenue for the quarter stands at INR 1,213 crores as compared to INR 970 crores in Q4 last year in FY '22. This symbolized a growth of 24% year-on-year. Sequentially, this has remained flat with the previous quarter as INR 1,203 crores reported. Reported revenue for the quarter stands at INR 854 crores as compared to INR 727 crores in the similar quarter of the previous year, a healthy growth of 17.5% year-on-year. Sequentially, this is slightly drop in the previous quarter it was INR 874 crores. Moving to the profitability metrics. Our gross profit for the quarter stood at INR 161 crores as compared to INR 141 crores in the similar quarter of the previous year, and compared to previous quarter is INR 159 crores. So it's higher than the previous quarter and very high over the same quarter in the previous year. Our EBITDA for quarter stood at INR 64 crores as compared to INR 56 crores in Q4 last year and INR 70 crores in the previous quarter. On the margin front, EBITDA margin clocked at 7.5%. The same stood at 7.6%, but that is mainly because of the sales mix. We have the higher volume revenue in the sales. Lastly, the PAT for the quarter stands at INR 24 crores plus, and this was previous year at INR 19 crores. Now moving to the full year performance. Our full year pro forma revenue stand at INR 4,595 crores as compared to INR 3,369 crores in the previous year. This growth is around 36% year-on-year. Similarly, reported revenue for the year is INR 3,382 crores as compared to INR 2,977 crores in the previous year, which also shown as 13.6% growth. Moving to the profitability of the year. Our gross profit stood INR 613 crores as compared to INR 477 crores in FY '22. Our EBITDA FY '23 stood at INR 250 crores as compared to INR 187 crores in the previous year. On the margin front, EBITDA margin clocked at 7.36% as compared to previous year 6.27%. Lastly, the PAT stand at INR 85 crores, this in the previous year stood at INR 66 crores for the same period. Lastly, speaking about the return metrics, the return on equity for the year is 23.75% and ROCE for the year is 20.5%. Thank you. Now we can open up -- yes. Now I'm handing over to Sanjay to speak some words.

Yes. Before we go to Q&A, I'm reminded of the book I read outliers some years back. And it talks about right place, right time in history. So we believe that we are at an inflection point. And just as the book says, it's good to be having established the network in the difficult times. We are here to kind of do the operating leverage, sweat the assets more, not only focus on opening new outlets, but do profitable business. And we believe that the increase in the average selling price of the vehicle, which Surendra spoke about, the increase in the revenue per vehicle service that we have done, which has also grown over last year, will have a good growth opportunity for us in the years to come, and we are there, right place, right time. Yes. Thank you. I think, Basu, I hand it over to you or Lisa, whoever for the Q&A.

[Operator Instructions] First question is from the line of Rahul Dani from Monarch Networth Capital.

Sir, just a couple of questions from my end. If you could just highlight the potential of the new dealership we've opened with MG. What kind of sales they've been doing? And how many showrooms will we be opening for that?

Yes, sure. So let's look at MG Motors, which has been a decent SUV and electric car manufacturer in the world. There have been reports in the media, which are yet to be confirmed of their getting the investment from an Indian partner, which will make them grow and set up a new factory, which has been a constraining thing for them. So this is the backdrop. The new models are to be introduced and the ambitions of the company are very high. We will be -- we have got the LOI for the cities of Indore and Bhopal from them. And this is something which will be set up very quickly. We are looking at doing this in the next 3 months that we will be -- we are looking at being up and running. And Madhya Pradesh as a market is between 1% and 2% of, say, close to 2% of the all India sales for most brands. So this is how it will be because there is a decent amount of car parks already over there. My feeling is that we will also be having our service operations being profitable immediately as we start.

Sure, sir. Sir, any indication how many stores you would like to open to start with?

As of now, 2.

Two stores. And also, sir, just if you could highlight how the performance of BYD has been maybe on a small base, but how is the acceptance of consumers, especially in markets of Delhi, Bombay and UP, where we are present? And what kind of numbers are they clocking? If you could give us some kind of indication?

Yes, sure. So BYD, as we know, is the largest TV manufacturer in the world, and they have given kind of a big ambition for themselves to do. Right now, I believe that the ATTO 3, which is what we are selling apart from the E6 has gone in for the homologation with the ARAI. And once the homologation approval comes in, that's where the numbers will go up. And I will take this opportunity to kind of tell about something else which I missed in my opening remarks. And that is that the -- we believe that the second half of the year for us is going to be much better than the first half. And the reason why I'm saying this is that the Honda's new SUV Elevate, which we have all been waiting for, and it is showing tremendous traction. It is to be global launches next Tuesday, 6th of June. The supplies of that will start only around August, September. One, the GLC of Mercedes-Benz, which is amongst their largest selling product is right now not available. Everything is sold out in this quarter. And the new GLC is getting launched again in the next few months. And typically -- and all the SUVs of Mercedes-Benz are in a waiting period. And we believe that the supply situation will only improve 1, 2 months down the line. So this is one thing. Even the BYD, the cars will be loaded in the second half. That is what we believe is happening. The numbers right now, Rahul, are restricted because of the non-homologation of the vehicles, which will -- and what it means is that there will be a cap of 2,500 vehicles that a company can sell in India without homologation. So that number -- that constraint goes away as soon as the homologation happens.

Okay. Sure, sir. And just a final question from my end, sir. You alluded about the preowned vehicles. And when you look at the likes of AutoNation, preowned vehicles is a significant portion of revenue for them. But our margins also similar for preowned vehicles on EBITDA and gross level?

Yes. So people have been talking about higher margins for preowned vehicles than typically the new vehicles. What they have been missing is that -- and this was quite well articulated with one of the companies that exited this business. And what they explained and which is what has been the landmark view for a very long time and which he kind of -- that company echoed finally, saying that the average selling price is lower, the margins are higher. Typically, 8%, 9% is the gross margin in used cars. It can go to 10% also. But you need to be conscious of the cost that you incur after that. The gross margins are all good. But if you have a kind of a showroom to pay rent for, if you have manpower to kind of separately to sell it, if you have evaluators, if you have a repair and refurbishment thing, which is on top, you have a marketing budget and all that and customer acquisition, which is a big one. All that makes it unviable. So what we have thought of is that we have an inbound traffic of customers who are wanting to buy the vehicles that we are selling. And that conversion right now for 100 inquiries that we get for new cars in a typical showroom, only 10 get converted to final sales, 90 don't. Many of these people are not able to buy the vehicle because of the price quotient, because they find the price a little bit out of their budget. But they clearly want that brand. That's how they have inquired with us. So we believe that there is -- this kind of a traffic that is natural to us. Aryaman who worked in AutoNation. And since you spoke about AutoNation, I'm taking this chance to elaborate. They had one of the stores where 30% of their sales happened in that store by way of an upgrade from, say, a C-class to a E-class, where people who came in for service, they were given an offer to upgrade for the one level high or a two-level high product. Now these are the things which we will be doing. We will be -- since we have invested a lot in technology, our Chief Technology Officer and Aryaman's landmark transformation team of 35 people who are working with data analysts and data scientists and the CTO who has joined us from Mahindra & Mahindra. We are working and doing some good quality work to kind of give this technologically enabled answers and solving this pre-owned car puzzle. We are hopeful that we will be able to solve this and crack this, which has not been cracked by anybody else.

The next question is from the line of Pritesh from Lucky Investments.

My question is with respect to the ASP rise that we have seen in the year gone by, which has moved from, let's say, about INR 14 lakhs per car to about INR 18 lakhs per car. Just wanted your comments in terms of what was the volume growth of Mercedes? And how has the share of Mercedes in your revenue increased? And what is the outlook on this ASP per car as you would have budgeted for the coming year in terms of whatever the new models of Honda or new models of Mercedes. It would be very helpful for us then to understand what can be your revenue growth for the same?

Yes. This is a very pertinent question, Pritesh. You are absolutely right. What has happened is that there has been a like-to-like 15% growth, I believe, increase in the Mercedes ASP. The same model, the prices were increased by approximately 15%, if I'm not wrong, in the last year. What is happening is that talking about Mercedes-Benz right now since you touched upon it. 25% of the vehicles sold of Mercedes now or slightly more than that are above INR 1 crore, which I'm talking about is with GST. It's gone up 25%, above INR 1 crore. Now this number was never happening. Today, there has been a shift towards the higher-end vehicles of every brand. There has been a focus by Mercedes-Benz clearly to sell cars, which are the Maybachs, the AMGs, the S-Class and all, what we call internally the TEV top-end vehicles. And the focus is going to be even more on that. On 1st of April, Mercedes-Benz increased the prices again, which hasn't been seen in the last year results. The supplies of the top-end vehicles right now, which is -- which was also a constraint will also hopefully ease out. So this is something which is going to happen. We are going to be seeing not only in Mercedes-Benz, Honda also the ASP will increase because also understand, Pritesh, that we are -- we have been working with, in the last quarter, a constrained supply situation and which I had touched upon in my previous call, where because of the emission norms, which came into play, real-time drive emission, which came into play from 1st April, some of the models of the manufacturers were discontinued completely. For example, the Honda Jazz, the Honda WRV, Jeep, the Petrol Compass. So this is something which was and to some extent, still in the first quarter of this year is a constraint for us to sell vehicles. This is all going to change in the second half, not necessarily in the second half as time goes by, some next month, some after 2 months, but everything in the second half clearly. But we will kind of -- it's just an estimate what we will kind of do. And we are also going to be seeing a mix where we will be seeing a good amount of BYD vehicles where the ASP is going to be higher. We have also discontinued our Renault stores with a lower ASP. So I believe that it's difficult to put a number right now, but the ASP is going to be much higher than what we had last year. So we will have the ASP higher. We will have a volume growth in each of the brands that we are operating. And we will have a service revenue, which has been kind of growing at 20% CAGR. So it's a healthy mix of growth that you will see in our case and the new OEs that we will be adding.

Is it possible then to share what was the Mercedes ASP growth in FY '23 and the volume growth or volume numbers in FY '23? Out of this 21,000 number that we have?

We are, as of now, not giving brand-wise breakup of things.

Or the other way, is it possible then to share how much of this volume of yours is mass market volume? So you have mentioned that you have mentioned in your presentation, INR 10 lakh and below is largely mass market. So in this 21,000 number, at least you can share what is the mass market volume number here?

Sure. I will work it out and Pritesh send it to you. I may not have it handy immediately, but I'll be happy to share it with you.

No problem. My second question is on the repairs and maintenance business, where you mentioned that 1 out of 3 cars do usually come because of repair. So in this R&M business, how much portion of that business is actually maintenance business, which is the normal servicing business, which happens, which car comes to your workshop?

Yes. So around 40% to 45% of the business is what we call the body and paint, what you are calling R&M. Repair and -- it's called body and paint or accident repair. So around 40% to 45% of our revenue comes from accident repairs. And this, we are focusing on increasing in this year. So the monies are paid for by the insurance company. The customer really is not impacted financially adversely. So -- but currently, this is the number. We believe that it will increase over a period of time.

And my last question is on the used car business, which you have started this year, what is the volume that you expect to do from used car? And considering all the dealership put together, what is the expected revenue growth that you're looking from the car dealership?

Yes. So I'll touch upon the used car thing, and we want to kind of maybe going ahead, report it separately also if we are able to, where we are going to be focusing on the used car business. Right now, it is clubbed in the new car sales as one of the parts. We may bring it out. It will not be a very meaningful contributor, but we are internally looking at approximately let's just put a number of around INR 150 crores of pre-owned cars, looking at the average selling price being much lower. So INR 150 crores to INR 200 crores of cars is what we will want to sell -- buy and sell. Now this, mind you, is over and above the exchange that the company does. 25% of the vehicles that we sell, there is a back-to-back. There is a kind of -- we sell it immediately to the broker because those cars that we get in exchange are different brands of cars. So that we will not be wanting to buy on our books. We will -- we have no wherewithal of selling those after buying it. A lot of people are doing it, but we don't think that, that is something that can be done. So we will be giving it back to back. Only our branded cars is what we will proactively buy from the market. And in case of exchange, if it comes, we will be doing it. So as I said, in number terms, we will -- we are focusing right now of reaching 10%. Say, a showroom is selling 100 vehicles. The target for that showroom is going to be 10 vehicles of the same brand, which are pre-owned to buy and sell. It's a long journey we are embarking upon, and we need to get it right. Nobody in India has been able to do it the way we are wanting to do it now.

And overall revenue growth, sir, in the car dealership?

So see, the point -- as I answered this, it is a very difficult question because the new car launches are sometimes going 1 or 2 months here and there, which we have seen in the past also. Supply is also an issue sometimes. So -- and we are adding new brands. So to basically put a number with only 2024 as the goalpost is difficult. But what I can say is that we will be significantly outpacing the industry. And that outpacing maybe 4x, 5x at least of the industry growth because of the ASP growing, the volume growth that we will see, the new brands that we are adding, the acquisitions that we will make and the aftersales business, which you have seen is the most predictable business and the annuity type of a business that we are talking about.

The next question is from the line of Gaurav from MaxPro Investments. As there's no response from the current participant, we'll move on to the next. That is from the line of Krishna Kukreja from Lucky Investments.

I just had a couple of questions. First, I just wanted to ask about the progress in the RD models for Jeep. You had spoken about the effect that it had on the Compass, et cetera. So how that has progressed? And when do we expect to have those models back? And secondly, you spoke about the used car business. Just wanted to understand when we're doing the used car business, whether these cars will sit in our books as inventory or not? So if you can just give a clarification on that.

Yes. Sure, Krishna. So the Jeep Petrol, what has happened is that we had stocked up on the Jeep petrol vehicles, compass that have gone out of production. Right now, we believe that it is not going to be available at least for the next 6 months. That is the visibility that we have. The company assures us that they are working on this situation and are trying to solve this issue. And we -- but there has been a big amount of focus on the diesel, the marketing and the payout that they are giving us. They are trying to support us by way of financial help while this model is not available. So difficult for me to put a date for that. As far as the preowned car stock is concerned, we are mindful of the fact that not too much of our capital should get sunk in into this. We believe that we will be investing approximately INR 20 crores on a rotating basis for this business. And because this is a big game that we are playing, and we should get it right. We will be holding stock of not more than 1 month for any of these brands. So it's a very detailed budget that we have worked on, and we believe that this will be a good outcome finally.

Also, sir, if you could touch on Volkswagen and Honda, et cetera, in terms of the RDE norms? And when do you expect to see a pickup there? And what kind of quantum we can look at in terms of out-performance?

So as far as Volkswagen is concerned, there has been absolutely no -- nothing that impacted their sales as far as the -- because of these norms. So the business is as usual. In fact, the government norms have been that the cars manufactured before 31st March could be sold. So this is something which is giving a fillip wherever we have some stock in the factory of these cars, they are at a slightly cheaper price than the normal -- the upgraded one. So that is also helping sales. As far as Honda is concerned, they have forever discontinued the Jazz and the WRV and are now going to be focusing on the Elevate, which is the new SUV where as I said, there is a tremendous amount of buzz around. We have got so many inquiries before the car has got launched that I have very, very little doubt that this will be a big success. So the pillars of Honda will be three: the Amaze, which sells very well in our markets of Gujarat and Madhya Pradesh, the Honda City, which is an evergreen product and the Elevate, which is going to be launched in the next week, but the supplies and the deliveries will start only end August. That's the information we have.

We'll take the next question from the line of Rajesh [indiscernible] from ITI Limited.

Sir, my first question is looking out maybe up to next 3- to 5-year period, like I said, we are at the cusp of sort of a different regime, which could open up a few of the initiatives or a few of the opportunities which you mentioned already. What are our growth plans in terms of regional expansion in terms of how much of that will be driven by more number of dealerships? And what exactly do we look at when we set it up because obviously, it will be a top-down thing, we have metros and Class A cities and then because there are certain sort of -- so what are your thoughts on our expansion over the next 5 years?

Yes. So Rajesh, what we have been -- and this is coming with around 25 years of wisdom. We have also kind of failed in some of the things that we have done 5, 7 years back, and we are now wiser. So it is very easy to set up an outlet and to show that my number of outlets have from 100 become 200. It is the easiest thing in the world to do. There are manufacturers who are like commodity players. And this is something which if we go to them, they'll be happy to give us 10, 20 outlets and all that. But that is not what we will be focusing on. Our growth will come from OEs that we believe are deeply committed to the products that we are wanting to sell and what are those products that we want to sell. We want to sell ASP of INR 10 lakhs and above. That's -- we are putting some kind of a benchmark because that's where we believe India is going. That is where we believe we are good at. We are premium and luxury players. We can't be going into mass market. So we will refrain from doing that as far as possible. What we have also done is that we have gone deep in a geography. The recent MG example also kind of demonstrates that. What does it mean? It means that, say, in Madhya Pradesh, we are already dealers for Mercedes-Benz and Honda. Now with MG, our costs will get apportioned. We will have operating leverage happening with senior management bandwidth, which will also kick in over there. But having said that, we are wanting to go to certain geographies which are growing. We have gradually gone to 8 states. We will go to clearly more states. Some of the high-growing southern states are also our focus. So this is something we will do, but we are not putting any number saying that it is 100 outlets should become 200 or 300. The thing that we are wanting is a profitable sustained growth. We don't want to go buzzark in growth instead of, say, for example, we grew 40% last year. Would we have grown 100%, 200%, Clearly, but then the profitability would have taken a beating. So we believe that we are in for a structural kind of a change in India. And this is something which we -- if we walk our normal pace, which is acquiring dealerships when they are available, looking at build versus buy. We will be significantly outpacing the industry and keeping the profitability and ROCE high, which is like 20% plus. And that is something which is satisfying us, and I'm sure it will satisfy everybody who walks this journey.

Sir, just a question to this, what kind of growth you think would be possible or feasible, let's say, 20%, 25% kind of number is possible? Or will it always be like dependent on how much the end market grows?

See, we are in a product which is also dependent on the economy. It is dependent on how the auto industry grows, supply chain demand. But it is -- for me, as I said in the earlier question by our colleague from Lucky Investment. My target will be to outperform the industry by 4x or 5x in the years to come. Now that is our internal thought process. Now it may come by way of average selling price going up. It may come by way of new outlets that we will open. It may come by way of the volume expansion that will happen with the same OEs. It will be a mix of all that. But this is something which we believe will be possible for a long length of time.

Okay. And sir, I have another question on the pre-owned business, which we are planning -- just wanted your thoughts. There are already some start-ups also there in the game then some of them have a marketplace kind of a business model, whereas some have inventory-carry and obviously, we have a higher turnaround [indiscernible] kind of a target. But generally, what's the observation? I mean, let's say, we have -- we won't hold the stock for more than a month and are these kind of targets really feasible? And where is the average industry in this business currently at?

So Rajesh, the issue is that the start-ups that you are referring to have failed in the aspect of generating profits for themselves. So whatever they are doing clearly hasn't worked. So I have seen franchise models. I have seen marketplace. I have seen stores. I have seen a lot of stuff which has not worked. So there is really no point in going that way. It is -- a lot of good money has been thrown at this problem. So we are coming up with an innovative model, which will not show any exponential top line thing, but it will be a sustained business. It will be one more pillar in our new car showrooms and our workshops, where we have natural traffic of those vehicles coming in. Today, at Landmark, we have close to 1,000 vehicles which visit us every day for service. Are we going to be able to pick and choose some good cars from there and sell it through our showroom? To me, logically and to our team, the answer seems a resounding yes. Now will this be a profitable business? We will only be continuing with it if it is generating profits. So we are not after any kind of GMV. We will look at a sustained business model because we have the supply. The problem with all these start-ups that you have been talking about is that they do not have a quality supply of used cars. In our case, we have those quality supplies coming to us every single day, of the same brand. You understand I don't need to spend a single rupee in marketing. Can we give offers through our workshops? Yes, the answer is yes. Now this is what is -- it's a unique business model. And if we were able to crack it, everybody will be happy.

We'll move on to the next question that is from the line of Namit Arora from [indiscernible] Capital.

Sanjay, my question was around the trend you are seeing because globally also luxury sales in general across categories have been very strong. Now given your experience and given where you think India is in terms of the affluent cycle and sort of moving to the next level. Would you say that structurally, the next 5 to 10 years could be extremely strong for you, given what you've seen in global markets as well?

Yes. I completely agree, [indiscernible]. There is -- I've never been more convinced about this. There is a structural change. And what are we talking about? Mercedes-Benz in India sold 15,800 units or thereabouts last year, which is 2% of what was sold in China around the same time. The total luxury market in India has not crossed 40,000 units so far, which is 1% of the total overall passenger car market. Now this is amongst the lowest in the world. In China, this number is 7%. Forget China countries like Korea, Taiwan sell more luxury cars than what we do. Now with the structural change happening, the newer generation coming, the S-class average age of S-class buyer today is 38 years old. Now 5 years back, it may be maybe 7, 8 years older. So India, the aspiration levels are increasing. There is really now no shame in kind of showing your wealth. We had a kind of a social thing that was making a constraining thing. And through my experience, I'm telling you a car which was INR 1 crore and above people thought was like an overkill. Now today, they are routinely sold. So for me, I'm seeing this as a structural change. The Mercedes-Benz factory has 40,000 plant capacity, which is not even full 50% today. So everybody thought that India will be at a much bigger -- in a much higher sales zone than what it is today. But maybe our time has come now. And for the next 10 years, I believe the journey is up. We may have some supply issue here or there. So I'm looking at the next 5, 10 years, not necessarily the next month or the next quarter.

Got it. Very helpful, Sanjay. Just one more question. Now given that you have a very strong and old relationship with Mercedes and other brands as well, but the number of outlets that you have today is probably not proportionate to the kind of relationship and the potential of Mercedes, as you mentioned. Now about 26% of your outlets have been strategic acquisitions. So post the IPO and otherwise, are you seeing more people gravitating towards you as potential sellers? And even Mercedes at a strategic level engaging with you to do something strategic in terms of just deepening and broadening the relationship? And so as you mentioned earlier in the call, buy versus build. But do you think that the 26% that you have, that buy strategy might be more accelerated given that you have a strong balance sheet and you may be a natural port of call both from sellers as well as the Mercedes as a company might also prefer that?

Yes. So let me kind of give you a slightly longer answer. The point is that the number of outlets, we are looking at adding an outlet only and only if it is necessary because it's a cost center. If it is helping me, financially, we will be happy to do it. Globally and in India also, Mercedes India is shrinking its size of the showrooms, because the cost of sales is an important factor that they are looking at. And I really salute them for being this kind of far-sighted thing. I was in Tokyo less than a month back where there was a meeting of the large dealers of Asia and Australia and some from Africa. And what came out was that some of the Asian countries, the largest dealer-partner for them had a market share of 40%, 50% and thereabouts. And this is something which I believe will happen. The companies globally -- the global players really want to deal with fewer entities. This is a top-down kind of approach that they have, and they want to deal with financially strong people who are able to give good experience, people who are consistent in their approach. So I have confidence that going ahead, our market share with everybody that we are partnering with, it has been increasing gradually as you will -- you have seen. And over a 5-, 10-year horizon, the number, I'm sure, will be pretty much more than what you are seeing by a distance.

We'll move on to the next question. That is from the line of Deepak Lalwani from Unified Capital.

Sir, my question was on your input of the H1 being lower than H2. So if you can possibly take us through what sort of an impact that you see in H1? And the set of announcements that you made and the possible outlook for H2, if you can possibly elaborate on this aspect, which you mentioned. And does this also mean that the first half will be weaker on a Y-o-Y basis as well?

See, let's look at it from where I came from. The thing is that the supply is something that we are dependent on the OE. And this is something which we do not have absolute clarity. Over the last several years, our H1, H2 mix has been, say, 40-60. That has been a kind of a historic distribution. The auto industry works this way. The second quarter is better than the first. The third is better than the second and the fourth is better than the third in most cases, in a normal year. Now we believe that the Mercedes supplies will hopefully normalize from quarter 2. We are facing and the new models will be introduced. We are also looking at the BYD getting the homologation location done. The Honda Elevate is only going to be available from August, September. So it is -- and -- but it will be also offset by some MGs that we will be starting. So it's an evolving kind of a thing. I would not like to break up this because we ourselves are not very sure because we are dependent on the supplies which happen. But I'm giving a broad kind of a guidance that the second half is going to be much better than the first half because of the things that we know.