Popular Vehicles and Services Limited (PVSL) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Popular Vehicles and Services Limited Q3 and 9 Months FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. Before we begin, a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of the future performance, and it may involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Naveen Philip, MD and Promoter from Popular Vehicles and Services Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us today. Over the past few quarters, PVSL has navigated a challenging yet evolving operating environment with discipline and clear long-term strategic focus. I'm pleased to share that the Q3 FY '26 has emerged as our strongest performing quarter after nearly 1.5 years of muted performance. The quarter marks a clear inflection point for the business, supported by a meaningful improvement in customer sentiment and a broad-based recovery in demand across key segments. Customer sentiment improved significantly during the quarter, particularly following the recent GST reforms, which acted as a strong catalyst for demand revival. This was most evident in the entry-level passenger vehicle segment, where volumes rebounded sharply after a prolonged period of inventory overhang. Post GST rationalization, entry-level passenger vehicles volumes grew by over 35% year-on-year in Q3 FY '26, reversing the weakness witnessed over the past 5, 6 quarters. This recovery was complemented by continued strength in the premium vehicle segment, which delivered volume growth of 30% Y-o-Y, reflecting resilient discretionary demand and improved product offerings from the OEMs. Encouragingly, the commercial vehicle segment also showed early signs of a turnaround with volumes growing by over 52% Y-o-Y in Q3 FY '26. With the Indian economy continuing to grow at a healthy pace and the union budget's strong emphasis on infrastructure development, we remain optimistic about a sustained recovery in CV demand over the medium term. In the EV 2-wheeler segment, penetration levels continued to rise. Ather gained further market share during the quarter, translating into a strong growth in both volumes and revenues for us, reinforcing our positioning in this fast-growing segment. That said, luxury car volumes, that's namely JLR, were temporarily impacted due to cyber attack at one of our OEM partners, which disrupted operations during the quarter. I'm happy to share that the issue has now been fully resolved. Operations have normalized, and we expect a pickup in Q4 and the coming quarters. Service business witnessed some softness during the quarter, largely reflecting the lag effect of lower new vehicle sales in the earlier periods as vehicles typically enter the service cycle after 1 or 2 years. However, our continued focus on higher-margin services such as collision repair helped partially offset the impact of lower volumes. As a result, service top line increased marginally by 1% Y-o-Y. With the recent recovery in vehicle sales, we expect service volumes to improve steadily over the coming few years. Operational performance. From an operational standpoint, inventory utilization and execution efficiency improved sequentially. This was supported by the GST reform-led demand recovery, particularly in entry-level vehicles, the exit of 2 OEM relationships that freed up management bandwidth and sustained cost rationalization initiatives. Our continued emphasis on operational excellence and a balanced mix of value and volume-led growth resulted in meaningful reduction in inventory levels. The rolling 3-month average inventory currently stands at 22 days and the new vehicle inventory is at 19 days, reflecting improved supply-demand alignment and disciplined working capital management. Importantly, our balance sheet remains robust, providing flexibility to fund growth initiatives, manage cyclicality and pursue selective expansion opportunities without compromising financial prudence. Strategically, PVSL remains committed to diversification across customers, geographies and product applications. We continue to deepen relationships with our existing OEM partners while investing in technology, automation and process improvements to position the business for sustained growth. During the period, we strengthened our luxury portfolio with the addition of Audi dealership, acquiring an existing Audi dealership covering Telangana and Andhra Pradesh. This marks the beginning of a new dealer relationship -- new OEM relationship with one of the world's leading premium automobile manufacturers. We believe that the luxury and ultra-luxury segments in India remains significantly underpenetrated and as they progress towards becoming the world's third largest economy, pricing income levels and improving purchasing power present a compelling long-term opportunity. In addition, we entered into an agreement to become the authorized distributor for Balkrishna Industries Limited, BKT in Kerala and Karnataka, covering the 2-wheeler and passenger car radial segments, which they are just entering into. This represents an important expansion of our spare parts business and provides an additional growth avenue beyond vehicle retailing. We also established ZPAREX Digisolutions Private Limited, an e-commerce platform for spare parts and accessories as a step-down subsidiary under our wholly-owned subsidiary, Popular Mega Motors. This initiative further strengthens our omnichannel presence and spare parts ecosystem. All these initiatives align with our strategy of segment, geographic and revenue diversification while participating in India's long-term structural growth story. We believe that the expansion undertaken over the last 8 to 10 months positions us well to drive strong momentum -- growth momentum ahead. Our focus will now shift towards consolidating and stabilizing the recently acquired businesses and fully integrating them with our existing operations. We will continue to pursue organic growth opportunities wherever there's potential to expand our offerings for customers while adopting a measured approach to further acquisitions rather than pursuing them aggressively. With this strategy, we expect to deliver a healthy and sustainable growth going forward. Financial performance. Financially 9 months FY '26 was characterized by steady operational execution amid external headwinds. Demand softness across key markets and sustained pricing pressures impacted revenue growth during the period April to mid-August. Despite these challenges, we remain firmly focused on cost control, working capital discipline and balance sheet strength. This disciplined approach allowed us to place the business on a stronger footing, enabling us to effectively leverage the improving external environment following GST reforms. New vehicle volume performance, 16,023 units sold in Q3 FY '26 vis-a-vis 11,151 in Q3 FY '25, a 44% increase Y-o-Y and a 23% increase quarter-on-quarter from 13,012 units in Q2 FY '26. For 9 months FY '26, we sold 38,567 units, an increase of 14% from 33,717 units in 9 months FY '25. The growth in volumes during the latter part of the quarter and across Q3 FY '26 helps us preserve margins despite taking provisions towards cess due to prevailing uncertainties. As a prudent measure, we have absorbed the impact in the current and the previous period. Excluding this provision, EBITDA margins would have been approximately higher by 20 basis points. Further, the acquisitions completed during 9 months FY '26, along with ongoing organic network expansion will have a near-term impact on our cost structure during the current financial year and may exert some pressure on margins. The full revenue benefits from these initiatives are expected to accrue from FY '27 onwards. Accordingly, we expect EBITDA margins to normalize towards 5% range in FY '27 as scale begins to kick in. At the PBT level, the overall Ind AS effect impact amounts to INR 4 crores from acquisitions and around INR 3.5 crores arising from compensation scheme from Q3. In addition, there's an impact of -- an additional impact of INR 1.6 crores due to the new labor code. For 9 months FY '26, after adjusting the divestment gain, cess provision and the impact of new labor code and acquisition-linked depreciation, Ind AS adjustments and initial transitional operating losses, PBT would be approximately INR 3.4 crores. Outlook, FY '26 outlook. Looking ahead, while the worst appears to be behind us, recent GST reforms, implementation of the revised pay commission and income tax cuts announced last year have supported a gradual recovery in consumer sentiment and improved traction in entry-level vehicles, a segment that had been a drag over the past 2 years. This, coupled with easing inventory levels and lower discounting is supportive of margin recovery. We expect Q4 FY '26 to outperform Q3 FY '26, enabling FY '26 to close with mid-teens growth vis-a-vis FY '25 compared to our initial expectation of a single-digit growth. FY '27 outlook. Demand indicators are turning decisively positive with customer inquiries and footfalls showing strong momentum. Our organic and inorganic initiatives executed over the last past 12 quarters are expected to further strengthen the business model. The service business is expected to rebound driven by expansion into newer geographies and recent acquisitions. Services remained structurally resilient with organized players gaining market share. While revenue remained relatively stable due to higher-value services, we expect double-digit service volume growth from FY '27. Additionally, our focus on scaling other high-margin verticals, particularly the spare parts business alongside services, should contribute meaningfully to both revenue and profitability. With continued emphasis on internal efficiency improvements, we expect these initiatives to translate into a high double-digit top line growth in FY '27 with an EBITDA margin target of 5% and PAT approaching FY '24 level. To conclude, PVSL is confident in its strategy prepared for the up cycle and committed to emerging stronger and more resilient in the years ahead. The underlying demand environment is clearly improving. With healthier inventory levels, lower discounting, continued network expansion and several new model launches lined up by OEMs, we believe the company is well positioned to sustain volume growth momentum and deliver improved financial performance in the coming quarters. Our focus remains clear, driving profitable growth, enhancing return ratios and creating long-term value for stakeholders. Thank you. That's all from my side. I will now hand over to Abraham for further financial updates. Over to you.

Thank you, Naveen, and good afternoon, everyone. I will take you all through the company's operational and financial performance for Q3 and 9 months ending FY '26. Before I start, please note that Honda and Piaggio volume and revenue was till August 2025 only. Q3 FY '26, key highlights in passenger vehicles. New vehicle volumes stood at 10,428 units, up 38% year-on-year from 7,571 units in Q3 FY '25. Total income from the segment stood at INR 749 crores, up 31% from INR 573 crores in Q3 FY '25. Service volume stood at 1,72,495 units, down 19% year-on-year from 2,11,665 in quarter 3 FY '25. Total income from the segment stood at INR 151 crores, down 2% from INR 154 crores in Q3 FY '25. Commercial vehicles. New vehicle volumes stood at 3,555 units, up 52% year-on-year from 2,340 units in Q3 FY '25. Total income from the segment stood at INR 604 crores, up 66% from INR 363 crores in Q3 FY '25. Service volume stood at 53,949 units, up 17% year-on-year from 45,962 units in Q3 of FY '25. Total income from the segment stood at INR 94 crores, up 8% from INR 87 crores in Q3 FY '25. EV, new vehicle volumes stood at 2,040 units, up 65% year-on-year from 1,240 units Q3 FY '25. Total income from the segment stood at INR 34 crores, up 50% from INR 23 crores in Q3 FY '25. Service volume stood at 10,200 units, up 80% year-on-year from 5,660 in Q3 of FY '25. Total income from the segment stood at approximately INR 2 crores in Q3 of FY '26. Moving to the financial performance. Our total income for the quarter stood at INR 1,791.8 crores, up 30.9% year-on-year from INR 1,368.6 crores in Q3 FY '25 and up 16.8% quarter-on-quarter from INR 1,534.6 crores in Q2 of FY '26. The impairment losses reduced to INR 0.2 crores from INR 1.7 crores in quarter 2 of FY '26, driven by lower debtor provisions resulting from improved collections. The employee cost during this period increased in the quarter, primarily due to the integration of the Telangana and Punjab operations. EBITDA stood at INR 58.2 crores, up 68.5% year-on from INR 34.6 crores in quarter 3 FY '25 and up 17.8% quarter-on- from INR 49.4 crores in quarter 2 FY '26. EBITDA margin stood at 3.3% for quarter 3 FY '26. Other expenses includes the cess provision of INR 3.5 crores in quarter 3 FY '26 and INR 3.6 crores from quarter 2 FY '26. Adjusted EBITDA comes at INR 61.7 crores in quarter 3 FY '26, up 78.6% year-on-year and up 16.4% quarter-on-quarter. Adjusted EBITDA margin stands at 3.4% from quarter 3 FY '26. We recorded an impact of INR 1.6 crores as an exceptional item due to the new labor code in quarter 3 FY '26. There was a PAT of INR 0.7 crores versus loss of INR 9.8 crores in quarter 3 FY '25 and PAT of INR 0.6 crores in quarter 2 of FY '26. 9 months ending December FY '26 financial performance. Our total income stood at INR 4,642.3 crores, up 10.9% year-on-year from INR 4,185.4 crores in 9 months FY '25. EBITDA was at INR 145.9 crores vis-a-vis INR 145.7 crores in 9 months FY '25, an increase of 0.2% year-on-year. EBITDA margin stands at 3.1% for 9 months FY '26. Adjusted EBITDA comes at INR 153 crores in 9 months FY '26, up 5% year-on-year. Adjusted margin stands at 3.3% from 9 months FY '26. There was a loss of INR 7.5 crores versus PAT of INR 3.3 crores in 9 months FY '25. As Naveen also mentioned, for 9 months FY '26, after adjusting for the divestment gain, cess provisions, the impact of the new labor code, acquisition-linked depreciation, Ind AS adjustments and initial transition operation losses, the profit before tax would be INR 3.4 crores. The other updates, credit rating update. India Ratings and Research Private Limited has affirmed the ratings of the bank loan facilities for Popular Auto Dealers Private Limited, a wholly owned subsidiary at A-/Stable. Awards and recognition, Popular Mega Motors (India) Private Ltd, company's wholly owned subsidiary received multiple accolades from Tata Motors for the South India region for quarter 3 FY '26. They were the highest volume growth, Magic and Winger, winner, Customer Support winner, Customer Success Center winner, CPSC - SCV PU winner. Popular Auto Dealers Private Limited, company's wholly owned subsidiary has been recognized and inducted into the prestigious MSGA Club for outstanding performance and also received multiple accolades from MGP Parts Distributor Meet 2025 of the OEM: Product Champion in Accessories, MSGA - AC Gas, All India Highest MSGA Retail Award, Independent Workshop Retail Growth Award and All India Highest Parts Retail Growth Award. The state-wise revenue breakup for quarter 3 FY '26 is: Kerala at 55%; Tamil Nadu, 26%; Karnataka, 11%; Maharashtra, 5%; Punjab, 2%; and Telangana at 1%. That is it from my side. Now I would like to open the floor for Q&A.

The first question is from the line of Preet Pitani from InCred AMC.

Sir, I would like to ask about the debt currently which we have. Like, September, we have reported around INR 1,100 crores of debt. What would be the debt as on December '25? And do we expect it to further rise or will it stay at the same levels? And also if you can mention something about inventory days across products?

Okay. So to start on the debt position that we're looking at, the approximate debt that we have in the balance sheet at this point in time is close to around -- total borrowings being around INR 655 crores. The expectation is that -- the reason for this increase in the debt that we have is primarily in account of the acquisitions that we have taken during this year. We have close to around INR 80-odd crores in terms of the term loans that we have taken for the Telangana and the Globe acquisitions, both in terms of the term loans that we have taken. From the inventory position that you actually mentioned, the inventory levels have significantly reduced when we look at it from a 9 months period at the end of December 2025. And we are expecting these levels to come down significantly. The levels that we are really looking at is close to around 21 days in terms of the inventory, and that is the total inventory across the organization, while the new vehicles inventories have come down to close to around 18 to 19 days. Now the forward position in terms of the exit for the inventory that we are looking at is to maintain the same level as the inventory that we had as on the exit of 31st March 2025. We will have an inventory of close to around INR 550-odd crores, while we are expecting a top line growth at the exit for the current financial year to go up from INR 5,500 crores exit for 2025 to move to INR 6,500 crores, INR 6,600 crores, 20% growth. And with the acquisitions, we will still keep the inventory at the same INR 550-odd crores.

Sir, on the debt position, you mentioned that we have a long-term loan of INR 655 crores, right?

It's a mix of long term and short term. The major borrowings that we have on our balance sheet is on account of the vehicle loans that we have. That's the inventory funding that we have. We have term loans that we have taken for the acquisitions that we've actually made. The term loans that we have in our balance is close to around INR 80 crores.

Term loan, INR 80 crores and total debt of INR 655 crores, excluding that term loan?

No, that's including the term loan.

Including. And do we expect it to further rise because we have to make some payment for the subsidiary, or it will be done by cash flow from operations?

No, we don't expect the borrowings to go up. As Naveen mentioned, we are more in a consolidation phase in terms of what we have been doing. The inventory levels are expected to come down. And so the borrowings also will not go up.

Yes. No, I think the -- we've shown only INR 47 crores in term loan of INR 50 crores. The remaining is lying in...

Yes. So the remaining is -- so there is the borrowings that we really need to pay out. So that's the reason it is actually sitting in the current.

Okay. So we expect to close March '26 around INR 650 crores, same level of this debt?

Same level of -- yes, INR 550 crores.

INR 550 crores in terms of working capital debt which is the same as FY '25. So I mean the rough [indiscernible] would be in terms of INR 6,600 crores. We would -- if you look at 12 months as 1-month inventory is about INR 500 crores. But we would be close to that. In fact, it will be slightly lower in terms of inventory on that, closing inventory.

Got it, sir. Sir, my next question would be on the line of Audi business, which we have acquired. What kind of margin do we expect from that business in gross margin as well as EBITDA margin in both the business, service as well as sales?

Yes. So it will be quite similar to Jaguar Land Rover business. Only thing is it will take a little more time for that business to kick off. This quarter, it would be probably negative in terms of -- because we have just kicked off that business in January. February onwards, we'll probably start selling vehicles. And Audi as such, the volumes are quite low right now. So we -- the first 6 months, I think the margins in sales would be slightly lower. In terms of service margins, we expect the same service margins as Jaguar Land Rover business..

The next question is from the line of Nilesh Doshi from Prospero Tree AMC.

Am I audible, sir?

Yes, sir.

Yes. Yes, Nilesh. You are.

Sir, I am the investor since IPO. So my question may be more than the quarter 3 only. Sir, Popular Vehicles is a dealer for the leading OEM. The revenue of the said OEM is growing, its profit is growing. But the dealer, Popular, the profit is continuously falling because the employee cost is always increasing. It is always higher than the EBITDA margin -- EBITDA, not the margin, EBITDA. So in such circumstances -- and even our revenue is growing, our profit is not growing. Our GP margin is -- even in the quarter 2 -- quarter 3 also, it is -- from 14% to 12%. Last quarter, there was a less demand and the company is required to offer the higher discount. The quarter 3 is different because there was a GST cut as well as the demand was higher. OEM itself is growing. The Maruti particularly has -- retail sale has grown by 43%. In such circumstances, when the Popular will report the profit number, which it used to report at least pre-IPO or after at least in 1 or 2 quarter post IPO?

Yes, which is why I think we have given the guidance. Nilesh, I can understand the pain in that. In terms of the profit margins and the profit, we've given a guidance that FY '27, we should close at least as much as FY '24, which is about INR 76 crores PAT. So that is what we are looking.

And is there any plan to control the -- because we -- company cannot generate the higher demand, but at least can control the operating cost. See, employee cost is ever increasing every quarter-on-quarter and employee cost is higher than -- currently, in the last 5 quarters, the employee cost is higher than the EBITDA. It is more than the INR 100 crores of the employee cost, okay? And our EBITDA is around INR 50 crores to INR 60 crores. Even in this quarter also, it is around INR 60 crores. So how the -- when the shareholder will be rewarded because you are generous, you are offering the higher salary, everything to the employee? But what about the shareholder? Because really, we feel the pain because in the last 5 quarters, we were not rewarded and the stock price has come down. No -- we understand that stock price is not in the control of the company. But at least the operating cost can be controlled, sir.

Yes. And that's why we're giving the guidance for FY '27 that we will be back in terms of FY '24 numbers, both in terms of profitability and in terms of EBITDA margins.

That's good. If it happens, we will be happy because -- another question is related to the aftersales service because the aftersales service is a business which contributes the less number in revenue, but very high profitable margin -- higher profitable margin as well as high profit generating business. And in this quarter, the volume has degrown from -- particularly in the PV segment. So what has happened? Because -- no doubt the Honda dealership, we have exited from the Honda dealership, but I think we are selling the -- higher number of Maruti cars. So that number should not be suffered that much. What happened and how the aftersales service business will grow?

Yes. So in terms of the aftersales business, we have expected 2% in terms of the organic growth and about 5% to 6% in terms of acquisitions. Unfortunately, the organic growth has not happened. Q4, we would look at -- by end of FY '26, we would look at a flat over FY '25. But FY '27, we should have an increase of about 10% to 12%, including whatever the acquisitions that have already been done, which is in Telangana and Punjab. So that -- we should be back on track, which is why we're giving the guidance in terms of the profitability also. In terms of service value -- just to add, in terms of service value, though the numbers have dropped in terms of service value, we are about -- higher by about 1%, but we expect that service value numbers would grow further because the ASP has gone up by about 11% to 12%. So combine that with about 8% to 9%, I mean, total growth next year, we'll see a much higher in terms of service revenues.

In such circumstances, if the volume will also grow, then there will be much more higher profitability because...

Yes, absolutely.

Okay, sir. Sir, is there any specific reason for the degrowth in the GP margin from quarter 2 to quarter 3 on a quarter-on-quarter basis, though the revenue has grown? Are we still offering the higher discount to clear the inventory? Or is there anything revenue mix or anything, particularly any change happened in the quarter 3?

So Nilesh Ji, just to answer your question, yes, there has been a drop in terms of the gross margin. And from the previous conversations that we had at Naveen's presentation, there has been a change in the revenue mix that has happened both for the Maruti -- as the GST cuts happened, it encouraged the smaller car sales. So the volume in the smaller cars has actually increased, which comes at a lower margin. That is for the Maruti stand-alone. When we look at the second part, we also spoke about the commercial vehicle business and the Ather businesses have actually outgrown in terms of the total number. So when we look at the total mix on the INR 4,400-odd crores that we have done and even for this quarter, the total mix on the commercial businesses and the other businesses that we have has gone more than what the total is because of which the margin percentages have actually reduced. But having said that, those all have added to the bottom line. There has been quite a number of corrections that have been taken care in the current quarters. Inventory levels have actually dropped significantly. Lower inventory levels means lower discount into the next year. It also means lower in terms of the interest cost. Yes, we should be actually seeing a turnaround in terms of the profits that we are expecting to see. And more importantly, the services business also will actually have the upside coming in with the sales that has taken place in the current year and the last quarters. We will see positives coming out of that. Yes, there is a little bit of erosion on margins in terms of the acquisitions that we have done. But having said that, these things -- all of this will be taken care of with the kind of growth that we are seeing in the other businesses, Nilesh Ji.

And last question, sir. Is the Maruti -- there is a -- GP margin is different model-wise or it's a flat margin, Maruti -- in Maruti GP margin? Or second, the CV GP margin is less than PV?

Yes. So the margins in each of these Maruti are different from vehicle to vehicle. It is lower at the Arena scale and as the vehicle price goes up, the values actually increase. Similarly, when we do a comparison between the mix of vehicles, passenger vehicles to commercial vehicles, the commercial vehicle percentages are lower and Ather also is significantly lower because of the value that we have. So as the mix actually changes, the gross margin percentage also is subject to a little bit of change.

[Operator Instructions] The next question is from the line of Preet Pitani from InCred AMC.

Sir, you mentioned 1 or 2 quarters back that there is some restructuring program going on at the Popular and it will help to increase the margin and reduce the cost. If you could brief about what programs you were talking about and why we are not seeing -- it has been 1 or 2 quarters, and we mentioned that it will be happening from second half of FY '26. So why we are not seeing that what is the probable reason or if we are seeing and -- what is the outlook on that particular thing?

One that we talked about earlier was in terms of centralizing our entire back office. Today, we have back office in each of our showrooms. We wanted to centralize it, which will bring in -- I mean, the intent is more in terms of bringing efficiencies and reduce wastages while it does have an impact on the cost also. So that we actually wanted to kickstart it in end of Q3 and then end it up by Q4. That was -- complete it by Q4. That was what was the plan. But that's getting deferred by 1 quarter. Unfortunately, post September, I mean a lot of things that we did not think of happened. And suddenly, there was a surge of demand, we had to manage that also because with the delivery increasing, there was some bit of strain on our predelivery inspection and all. So that being said, we have started that now in Feb, should be able to close it by about April or May. So early Q1, we should be able to kickstart that. There was also another conversation in terms of centralizing our entire service marketing piece also. So this entire thing will come in across the next 2 months so that Q1, we should be able to show proof on that.

Other than that, if you look at the ASP on the service side, that has been consciously being built up in terms of increasing the ASP value. So that's why I said we have been having a 11% increase for the full year. But if you look at just Q3 to Q3, we have had closer to about 17%, 18% increase on the ASP, which will continuously take it forward. So these are the initiatives that we are trying, which is why I said for the full year of FY '27, we should have an ASP increase of about 8% to 10% increase in terms of service and increase the volume also by about 7% to 8%.

Got it. And how much benefit it could be done in the absolute terms from that restructuring program, which you are talking, that back office centralization?

On an annualized basis, it should be about closer to INR 1.5 crores. But more than that, it will improve the -- that's the sales part, but it should improve our inquiry to retail conversion percentage by a good margin and also enhance the customer satisfaction, which will flow through into further additional business in the coming year.

Got it. Sir, second question would be on the line of Maruti. We saw that Jan wholesale numbers were not that good. The company told -- domestic wholesale, I'm talking -- company told that the reason for the same is capacity concern. So is that the same problem we are also facing or we are seeing a good growth in Maruti for this month?

Can you repeat that question once more, please?

What was the concern that you had mentioned?

They told that there is a capacity concern and that's why wholesale volumes were lower as compared to industry.

No, it is not a capacity concern.

No. So for Maruti side, it could be because we -- in terms of the vehicles that we've asked for, we have still not got in terms of Jan. In fact, we had a loss of sales in Jan because of nonavailability of vehicles, which is continuing in Feb also. The overall numbers are higher than the previous year.

Okay. But we are seeing a dip in the Jan month in Maruti numbers.

So we didn't dip, but the expected growth did not happen because primarily the -- some of the smaller parts like [indiscernible] were not at all selling in the last 2 years. But from October onwards, there's been a huge demand, and we are not getting back to the supply. Similarly, post the GST, even the entry-level hatch -- so, not entry -- premium hatch, Baleno and all and entry-level SUV FRONX has also been doing good. So there, while we had a lot of stock pressure earlier, now the demand is slightly higher than what they can supply. So -- but that should get evened out by about March, April is what they're saying.

Got it. And sir, on our stand-alone number, we can see that by -- in consolidated, we have been breakeven by quarter -- we are breakeven by quarter 3, but our stand-alone number shows INR 12 crores of loss. What kind of loss we expect in quarter 4 on stand-alone as well as consolidated numbers?

So the loss that we actually see in the stand-alone for PVSL is more coming because of the acquisition that we did in Telangana. The Telangana at a PBT level, we have a huge impact that is coming in for the acquisition in terms of the Ind AS and the depreciation, that's close to around INR 8 crores that has impacted us. If we take that out of the equation in terms of the calculation, PVSL would have actually been profitable. So that's the reason you actually see that. Having said that, from an operational profitability perspective for Telangana, we're expecting that to turn around, become operational by second quarter -- H2 of 2027 -- 2026, we should actually see that breaking even and getting profitable. But the Ind AS impact and the depreciation impact will continue because of the leases that we have, and that would continue for another couple of years.

And what do we expect in quarter 4 of this financial year in both stand-alone as well as consol numbers? You can [Audio Gap] EBITDA as well.

EBITDA would be -- in standalone, we are around 3.4%. In terms of acquisition and consolidated, we will still be around probably about 3.25%, 3.3%. But we are hoping that this should go up by about 0.1%. We had earlier given a guidance of 4%, but we are not able to achieve that. We'll probably be ending up FY '26 with about 3.5% in terms of EBITDA numbers, so 3.5%. In terms of overall profitability for Q4, we intend to be profitable in Q4 overall and have FY '26 at a positive note, including the Ind AS effect, the cess impact and all that.

So we are expecting FY '26 overall EBITDA margin to be 3.5% and FY '27 to be 5% and quarter 4 would be -- quarter 4 and FY '27, both would be PAT positive for the company as a whole.

The next question is from the line of Gautham Madhavan form [ Fedex Securities Private Limited ].

Depreciation, the increase of INR 8 crores, if I heard you right, is that because of the new acquisitions?

Yes, Gautham.

[indiscernible]

This is because of the acquisition in terms of the depreciation for the Telangana that we've done, the depreciation cost has gone up by close to around INR 4 crores. In terms of the Globe also, we have an additional depreciation of around INR 40 lakhs to INR 50 lakhs for the quarter.

Got it. And just when we think of depreciation for FY '27, this would be the number that we kind of run with?

This is the number in terms of the additional acquisitions that we have done, the balance remains the same.

Got it. And also just on finance cost, if we can understand the increase in finance costs from Q2 to Q3, the inventories have sort of come down. What would be -- what is sort of giving that INR 2-odd crores increase in finance cost?

The reason, the inventory levels came down towards the end of the quarter, the exit that we have has come down. Our stock levels have come to [indiscernible]. But on average for the quarter, we still had inventory. So that is the reason the interest expense that you see for the quarter is more or less flat. And of course, there is also the interest on term loans that we have taken during that period. But having said that, the impact of the interest cost benefits that we will see, we will start to see it in Q4 of 2026 and onwards.

Got you. And sorry, when you were talking about the debt numbers, there was a little bit of disturbance. If you can just touch upon the debt numbers. What was the term loan that you mentioned, what was the balance debt?

So the debt that we're talking -- the numbers that we're talking is close to around INR 550 crores in terms of the debt, short and long. And the term loan that we have taken is close to around INR 80 crores that we have. So the short-term funding in terms of inventory will be INR 550 crores and the term loans that we have will be close to around INR 80 crores.

Got it. Just last question -- sorry.

No, no. I was just going to add that INR 550 crores was FY '25 March number. We'll remain at the same number for working capital in FY '26 March, though the top line has gone up by about 20%.

Absolutely. Got it. Just appreciate the guidance on service. Naveen, if we can just get a little more of an understanding of why would volumes degrow so much? And I understand your point on the sales and even what you mentioned in the presentation. Our understanding, at least from the previous calls, was that as sales increase, there's obviously a backlog [Audio Gap].

Mr. Gautham, sorry to interrupt. Your voice is breaking.

Gautham, your voice broke. I couldn't hear you.

Sorry, is this better?

Yes, sir. Please go ahead.

Yes.

Sorry. So I was just saying, Naveen, that we appreciate the guidance that you mentioned on service and some of the reasons for the degrowth in service. It will be really helpful to understand why would we see a volume degrowth, which is so sharp and understand sales have been soft for the last couple of years and there might be some tailwind. But theoretically, there should still be some marginal growth in service volumes at least, right, irrespective of the market environment maybe in the past couple of years?

Yes. So there are 2 aspects to it. One is in terms of the volume degrowth. Earlier, we used to do these campaigns with the service thing in terms of getting campaign numbers, monsoon campaigns and various other -- winter or whatever -- we used to drive campaigns to -- summer campaigns to have AC checkup to have white wet checkup, et cetera. This year, we have said that wherever the job card numbers are lower than about INR 500 or INR 1,000 in terms of job card billing, just didn't make sense occupying our manpower into that. So we actually reduced these campaigns. So that's one of the reasons why you see the volume dip, whereas the ASP going up by a much larger number.

Got you. And just Naveen, so going forward, so then should we sort of assume that this rightsizing of the mix in terms of service is done and now what we'll see will be growth from next quarter onwards?

Yes. That's why we're saying that we'll show -- we'll have at least about 7% to 8% growth in terms of service, both in terms of the organic growth and whatever the acquisitions that we've done. Both put together, we should see about 8%. The ASP growth will still continue to be about 8% to 10%.

The next question is from the line of Shirish Pardeshi from Motilal Oswal.

Just a quick question. Because of this acquisition, what kind of volume buildup will happen in FY '27? I mean, just ballpark.

Yes. So I will give you -- so if you look at our Maruti acquisition in Telangana, we should be -- we are averaging about 380, 400 numbers right now. So just -- though we took over in October, our first billing happened only by November end in terms of retail. So December and Jan, we would have done an average of about 380 to 400 numbers. We expect this number to be around 500 for the whole year FY '27. So about 6,000 numbers will come in from there. Bangalore, which we started off last year, April, that is FY '25 beginning April -- I mean, April FY '26, we will see an average of about 200, 250 numbers from Bangalore happening, which is in the region of about 50, 60 whole of last year. So these 2 put together, we should see about -- close to about 750 numbers being added per month, which is about 9,000 numbers for the annualized basis. In terms of -- so this is only for Maruti. Jaguar Land Rover will be kicking off in Nagpur this month. So we'll see about 5 to 7 numbers being added for the first 5, 6 months and then add on and then going on to about 10 numbers from second half onwards. Similarly, Audi, we should see about 5, 6 numbers in terms of the first 3, 4 months and then going to about 10 to 12 numbers in terms of the Audi numbers. But these would be -- in terms of turnover would be far higher, average ticket size being INR 55 lakhs plus.

Okay. That's helpful. My second question in terms of discounting. If discounting is at one level in October, November, December, is that level of discounting has come down in Jan, Feb? Or do you think it has remained steady or it has gone up?

No, it's come down in Jan. So I think one of the points that both Raj and Abraham mentioned is if you look at our exit numbers in terms of inventory in FY '25 December -- I mean, so December '24, I think we had carried about 3,600 numbers in terms of Maruti volume, stock. And FY -- I mean, FY '25, December, we were at around [indiscernible] numbers.

Including Telangana.

Including Telangana, which was -- but if you keep aside Telangana, we were at around 1,400 numbers.

Out of which we are currently having only 700.

Yes. So usually, what happens is the discounting that continues into Jan, Feb, March is because of the inventory that we carry in December. We are not carrying that inventory in December '25. So the discounting levels for this quarter has come down.

This quarter also...

And for future quarters, April, May, June also.

That's really helpful. Just last question. You mentioned that there is a supply shortage in Jan, Feb. So can you give a little more color which model or which segment? Or what is the level of inquiries and order booking which you are having at hand now?

So if you look at the lowest categories like S-Presso, we have -- our bookings in hand is about 150 to 200 bookings in hand just in Kerala. If you take Andhra, Telangana, Bangalore and Chennai put together, will be closer to about 250, 300 bookings. We would probably get -- end up getting probably about 50 cars of S-Presso. That's at the lower end. So if you take segment-wise Tour S model, Swift and each of these segments, we are at a much lower number in terms of wholesale than our current demand. There are some vehicles which are slow moving, which is less. So overall, which is why the inventory levels -- new car inventory levels in Maruti, if you look at the 3 months that is Jan, Feb, March quarter and look at December end numbers in terms of stock or Jan opening stock, we would be probably at around 21, 22 days of inventory.

So the reason why I was asking, Naveen, see, this GST cut has really benefited the automotive sector in a big way. But do you think this normalization of demand will happen by quarter 1? Or you think there will be some backlog will still continue in quarter 2 also next year?

I think for the whole year, it will continue. The reason is not just because of the automotive cut of 10%. So there's an accrual because your road tax is on top of these numbers, et cetera. So the savings are much higher. That is one aspect of it. But more importantly, if you look at for a common -- I mean, if you look at people buying the S-Presso, the Alto, the Wagon R in terms of the EMI and the savings they are getting in other aspects, so if you're just looking at -- we did a study with one of the banking in terms of just medical supply of an average household, the average savings in terms of GST savings is closer to -- coming to closer to about [indiscernible]. So all this is adding to discretionary income of the bank. So I don't think that the demand would just be for Q1 and Q2. I think it will be a sustained demand for the year and coming back on, I think, 7 to 8 quarters of absolutely no growth in these segments.

So technically, you're saying that if the OEM ramp up their production, there is a high likely possibility that next year, we will exceed the number what we are projecting now.

Yes.

The next question is from the line of [ Vibhav Bhayani ], a retail investor.

Am I audible?

Yes, sir. Go ahead.

Yes.

So my question is related to gross profit margin. It has come down to 12.7%. And I was seeing your like past results, it has always been 15%, 14.5%. Can we expect it to move it further like again from 12.7% to 14%, 15% in quarter 4, quarter 1 of next year?

Vibhav, we probably spoke to this earlier. The primary reasons for this gross margin percentage actually dropping is because of the shift that has happened post GST towards the smaller vehicles. The margins that come from the smaller vehicles are lower than what you get on the higher vehicles [indiscernible]. Second is there has been a growth in the commercial vehicle space. The commercial vehicle space has got a 52% growth. The average gross margin in the total mix of commercial vehicle and the Ather is lower when compared to the Maruti business that we have, which could be close to around 15%, 16%. That has contributed to it. Thirdly, the services pie has also dropped in the total mix that we have, right? And this is expected to go on. So having said that, we are expecting things to go get better. Indicatively, yes, we should get in excess of 13% going forward and then get back to the normal levels that we had at the IPO levels at 14%, 15% probably in quarter 1, quarter 2.

Okay. So in Q4, we can expect around 13%, 13.5%?

Yes. So because we would then start seeing the benefits coming in of the Jaguar investment, the JLR that Nagpur will start kicking in, the average gross margin values are much higher. Audi should start giving us more additional numbers coming in there. So in the total pie, that will actually add up. And the benefit of the sales that we are doing currently will also add to the service volumes that we are having. So it's a combination of a number of things actually tying up to get back to those normal levels.

Right. I think that's the issue, right? Because I think employee costs and other expenses, you guys have maintained it very well. But I think the issue here is GP margin, it has gone down.

There's definitely a scope to get that better. And the moment we get our gross margins better by 1% or 2%, you will actually start seeing that into your bottom line on your EBITDA and your PAT. And as we spoke earlier, inventory levels reducing has an upside for us because your discounts will come down. Discounts coming down means better gross margin for you. Then your inventory being lower means lower interest cost for us. So all of that would actually tie back to give us a better percentage at our bottom line.

Right. Yes. I think you guys should work towards improving your GP margin. I think that's the key.

Sure.

The next question is from the line of Preet Pitani from InCred AMC.

Sir, my last question would be on the line of you mentioned that the service growth would be around 15%, 16% for us. I just want to know 2 things. One, are we planning any other acquisition going forward apart from the acquisition which we have done? And second, on the spare parts, which we have started e-commerce platform, if you could give some brief about how -- if it has started, how it is doing right now? And how are the margins different from what we get from the [indiscernible]?

Sure. As we said in terms of guidance, we have -- I think in terms of acquisitions, we have done most of the acquisitions that we were targeting in terms of the states that we wanted to expand to. We will be going slow on acquisitions unless some very great opportunity comes up. We will be consolidating our business. In terms of service, what we said is that we'll have about 8% in terms of volume growth and about 8% in terms of ASP. So that is the guidance that we've given for the service growth. In terms of ZPAREX, the e-commerce platform, we are just testing out the platform itself. We have taken the help of Accenture in terms of setting it up. We have not yet started business. We would probably kick off business in Q1 of FY '27.

Got it. And what kind of growth do we expect in the sales of new vehicles and also sales of used vehicles on the base of FY '26?

On the FY '27?

Yes. On the base of FY '26, what kind of growth we expect in FY '27?

So overall, as I said, just from the acquisitions that we've done, we should be close to about 9,000 vehicles -- 9,000-odd vehicles in terms of growth. This year, we would close at around 45,000 vehicles. So that would be a 20% growth in terms of just the acquisitions turning out. We would see a normal growth of about at least 7% to 8% in terms of the -- what we -- our existing stores are. So we are looking at close to about 11,000 to 12,000-odd vehicles being added from the base of 45,000. So closer to about 20% growth is what we are targeting.

We are targeting 45,000 vehicles for FY '26 and then 20% growth -- 9,000 new vehicles from the acquisition -- 9,000 vehicles from acquisition...

[indiscernible]

Plus 7% to 8% growth for the base business, right?

Yes.

The next question is from the line of Nilesh Doshi from Prospero Tree AMC.

Sir, just informed that there is a GP margin difference on the model-wise as well as the CV margin is less than the PV margin, particularly the GP is concerned. So is it similar for the aftersales service business also there is a -- CV is less remunerative than the PV and the luxury is more remunerative than the other model and in particularly Maruti, there are cars of INR 5 lakhs to around INR 25 lakhs to INR 30 lakhs? So it is the price-wise, GP margin -- the EBITDA or GP margin in the aftersales also?

So in terms of commercial vehicle, yes, the GP margins are lower than the passenger vehicle in terms of service. Similarly for 2-wheelers. But if you look at the Maruti or the JLR portfolio, in terms of EBITDA margins across the platform it is quite similar. But if you look at NEXA vehicles vis-a-vis Arena vehicles in Maruti, there's a higher in terms of per job card value in terms of about 5% to 7% because of the value of the vehicle. Gross margin percentages for most of the vehicles are similar, but absolute margins are different.

Okay. So margin -- the percentage-wise, it is similar, but the absolute number can be different because of the ASP of particular model. Is it right?

Yes.

Okay. Sir, the second is, particularly in the quarter 3, we have sold around 10,400 vehicles in the PV. Can we assume number will increase in the quarter 4 for the aftersales business, at least by 10,000 aftersales business must grow because every OEM is offering a certain number of free services. And generally, the buyer of the car will go to the particular service center, particularly from which -- the dealer from which they have bought. So can we assume that by 10,000 number, the service business must grow particularly in the PV it is mentioned in the quarter 3 that 10,000 number of vehicles were sold?

Yes. So in terms of free services, that number will show up. So the number in terms of total numbers, 10,000 numbers would come in for free services. But if you look at quarter 3 of last year, we sold about 7,000-odd numbers. So the increase from -- in terms of free services would be about 3,000.

So the net-net, it will not increase -- you want to say that suppose 1,72,000 numbers were serviced in PV segment for the quarter 3 and we assume that by end of quarter 4, it must be reported at least 1,80,000 plus number, so is it not correct understanding?

No, no. That 1,80,000 will happen. But what Naveen was talking about is compared to Q4 of last year. Because last year also, we would have sold about closer to 6,800, 7,000 cars. The incremental volume compared to last year Q4 will be only 3,000.

That's in terms of free services since you pointed out in terms of free services of 10,000 cars. But overall numbers, yes, what you have said is correct.

Okay. And sir, we generally track the -- because we can't pass the dealer to what number of cars they have sold, but we generally track the VAHAN portal where every OEM is registered and the number of cars sold, retail sales are registered. So the VAHAN portal shows that the December quarter, Maruti has 43% -- there is a growth of 43%. Can we -- any time we compare our sales with the OEM sales, are we performing better in terms of the OEM sales growth or in line with the OEM sales growth? What is our standing as on today? Because quarter 3 -- particularly quarter 3, Maruti has reported 43% number -- 43% vehicle -- more vehicles sold in quarter 3 compared to quarter 2. So what is our status, sir?

So we have also grown at 43%. So in terms of whatever has been the Maruti growth, we have also grown at the same level, say, plus 1% or 2%.

The next question is from the line of [ Rohan Dadia ], an individual investor.

I had 2 questions. Sir, first question was in the last call, we had said that our interest cost would come down by half, but that did not happen in this quarter. So sir, could you explain like where our guidance went a little off?

So the reason the interest cost did not come down is primarily 2 reasons here. One is the GST. The GST announcement came around the 15th of August, then there was a slowdown in terms of the sales. By the time the pickup actually happened, we had already were sitting on those stocks and then there was fresh stocks that Maluti had actually supplied to us, which added up to us because they were also piling up the stocks. And the benefit of that did not flow through and the sale happened in October, November, December, and our stock levels have reduced in the exit. So the average stock that we've been holding opening during the month has been on the higher side, while the month-end numbers have reduced significantly. Secondly, in your interest cost that you actually see there's also a part of the term loans that we've taken, there's an interest cost associated to that, that's getting paid. So those have contributed to those costs. But having said that, inventory reduction will reduce my interest cost, but the term loan part of it will continue to be there in the books. But there will be a significant reduction in that.

So we were holding an average of -- Q2 mid and end of Q2, we were holding an inventory of about 80 or some days on 90 days also. That is what has come down to 24 days. So there is a significant reduction in the interest cost.

Got it, sir. And sir, my last question is, sir, there was an announcement from the company in December '25 that one of the directors from Banyan Tree had resigned. So could you share some context around this?

So Banyan Tree is a private equity investor. So he was a nominee Director from Banyan Tree. So Banyan Tree has been on our Board from 2018 onwards. So when we did the IPO in 2024, at that point of time, they wanted to exit the Board, but we wanted their guidance over the next few years. So they said they will remain on Board. They have a lot of investments that are going into an IPO stage. So Rakesh excused himself because he said the last -- I think in terms of Board meeting, we missed out 2 Board meetings. We said this year would be tough for him to attend Board meeting. So he stepped off the Board, but we are in constant touch in terms of whatever guidance that they want to give us. They still continue to hold 10% of the company.

The next question is from the line of [ Jerrad James ], an individual investor.

Am I audible?

[indiscernible]

My question is this, currently, PVSL is [indiscernible] since they rely on the service of internal combustion engine mainly for revenue generation, right? So if the market is moving to electric vehicles, how PVSL is planning to manage the transition? Is there any road map for the transition or any stand-alone employee upskilling for servicing electric vehicles like e Vitara?

So I'll take the second question first. In terms of training of all our people in terms of the e Vitara service, that's already being done. Even in Jaguar Land Rover, when they launched the I-PACE, which was an electric vehicle, that was also done in terms of the entire Jaguar Land Rover service team. So that training continuously goes on. In terms of preparedness of road map, if you look at -- and we sell diesel vehicles, which is fully EVs, and we are servicing close to about 4,000 vehicles a month in terms of [indiscernible]. So that in terms of experience that is being done. In terms of the road map, if you look at it, the EV penetration in 4-wheelers even today is quite low. On the Southern states and Maharashtra have a much higher EV penetration of closer to about 8%, 10%. But if you look at overall India, the penetration is still below 5%. And the growth -- the guideline that is given by the government is about 30% by 2030. So the transition in terms of vehicles, that's new vehicle sales. But if you look at the car park, it will still be skewed towards 80%, 85% or closer to 90% in terms of ICE vehicles, ICE and which includes hybrid also.

And just to add on a point in terms of our readiness, all our service centers are currently ready with the charging infrastructure. And I think barring one showroom, all our showrooms are also ready with the charging infrastructure.

As there are no further questions from the participants, I now hand the conference over to Mr. Naveen Philip for closing comments. Thank you, and over to you, sir.

Thank you, everybody, for participating in our earnings call. Looking forward to Q4 and meeting up with you all. Thank you.

Thank you, sir. On behalf of Popular Vehicles and Services Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.