TVS Motor Company Limited (532343) Earnings Call Transcript & Summary

Welcome to TVS Motor 3Q FY '21 post-results conference call. From TVS Motor's management, we have with us today, Mr. K. N. Radhakrishnan, Director and Chief Executive Officer; and Mr. K. Gopala Desikan, Chief Financial Officer. Mr. K. N. Radhakrishnan will make opening remarks on the 3Q performance and the outlook for the company, to be followed by the question-and-answer session. Over to you, sir.

Good evening. Good evening, everyone. Let me take this opportunity to wish you all of you, your team members, your family a very happy new year. Trust, all members of your family are safe, God bless with great health, lots of happiness, peace and prosperity. We are extremely glad to present the Q3 numbers of TVS Motor. This quarter, company recorded the highest ever revenue and profits, INR 5,404 crores revenue with a growth of 31%, EBITDA of INR 511 crores, growth of 41%, PBT INR 362 crores, PAT INR 266 crores. During the first 9 months period, focused working capital management and improved operating performance helped the company to generate free cash flow of INR 1,616 crores. These proceeds are used to reduce the debt. Lean stock with the dealers also helped to unleash the blocked working capital across the supply chain. During Q3, two-wheeler sales in domestic markets have grown by 21% and international markets by 31% ahead of the industry growth of 13% and 20%, respectively. The total export of the company grew from 2.17 lakhs last year Q3 to 2.61 lakhs during this quarter, a growth of 20% despite scarcity and availability of containers. The demand in export market continues to be robust. Availability of containers continues to be a challenge even in the month of January. All brands have done well, and we hope to maintain this momentum in Q4 and in the next year. We have grown ahead of the industry, both in domestic and international market. And this direction and the growth will continue. Now coming back to Q3, highest ever revenue of INR 5,404 crores during this quarter with a growth of 31% compared to INR 4,126 crores last year third quarter. Domestic sales grew by 21% compared to the industry growth of 13%. Two-wheeler exports grew by 31% compared to the industry growth of 20%. Total two-wheeler grew by 23% compared to last year's same quarter, 9.52 lakhs numbers vis-a-vis last year 7.73 lakhs. Our sales of premium brands like Apache, NTORQ and Jupiter Classic and Grande have grown, both in international market and domestic markets. The mix is also becoming richer, 34% to 37%. Three-wheelers for this quarter is 0.38 lakhs. Registered highest ever EBITDA of INR 511 crores, grew by 41% over last year third quarter. Robust growth of revenue, coupled with continued focus on cost reduction initiatives helped the company to improve EBITDA for the quarter 9.5% compared to 8.8% during Q3 of last year '19-'20. PBT before exceptional items for this quarter is INR 362 crores. Last year, INR 222 crores. It grew by 63%. Last year third quarter, company had reported a onetime exceptional reversal of INR 76 crores in PBT. The PAT for the quarter is INR 266 crores, last year was INR 121 crores. At the Board meeting today, we have declared an interim dividend of INR 2.1 per share, 210% absorbing a sum of INR 99.77 crores. PT TVS has sold 15,699 two-wheelers compared to 12,877. We have also sold three-wheelers 1,797. The PBT for PT TVS is 0.3 million. In terms of products in Q3, Apache RTR 4V dual-channel ABS motorcycle with 3 ride modes, Sport, Urban and Rain for adaptable ride experience. This is the first in the segment, and TVS Apache RTR 200 4V comes with adjustable front and rear suspension, adjustable break and clutch lever and refined brake system. We also launched TVS NTORQ 125 Super Squad Edition inspired by Marvel Avengers. Company has associated with the Disney India's consumer product business to introduce a special Super Squad edition. The response for this product are extremely good. And as you know, TVS NTORQ 125 is India's first Bluetooth-connected scooter with our RTFi technology. We have also put a glossy yellow and a black variant in TVS NTORQ for the season. And Apache RTR 200 4V single-channel ABS variant is also launched with TVS SmartXonnect and Glide Through Technology, GTT. When we look at Q4, I think the monsoon has been very good this year. And the reservoir levels are pretty good comparing the last few years. The excellent kharif crop and higher sowing in rabi season, we are confident that rural demand will go up. We hope that during the union budget, government will introduce various measures to spur the demand. We also hope that GST rate will be considered for a reduction of 28% to 18% because it is important to note that including all the cost increases and lifestyle costs, all put together, there is a significant increase in the last 3 years to the end consumer, almost 50%. So a review of the GST will definitely favor improvement in the demand. Good news is most of the urban markets are now open, and we are witnessing pre-COVID-19 levels of customer retail. Government of India started vaccination program and gradually most parts of the country will be covered in the following months. This will also help in improving customer confidence and lead to growth in the economy. Two-wheeler sales during Q4, the industry will witness higher growth level mainly due to the base effect of last year, and we are confident that TVS will do -- grow much ahead of the industry during Q4. We continue to maintain a very healthy stock of closer to 4 weeks or slightly less than 4 weeks with the dealers. International markets are witnessing very good growth due to stable oil prices, availability of foreign currency and stability in exchange rates. We are witnessing more premiumization in all markets. We are confident that our premium products like Apache, NTORQ, Jupiter ZX and Grande Series will continue to have a very good demand, both in domestic and international markets. We will continue to invest in new product development and in digital technology space. We are planning a series of product launches during the first half of forthcoming financial year. On the EV front, as you know, we have TVS iQube receiving excellent response in Bangalore. We will be launching in many other cities. And the feedback is very, very positive. We are also investing in a series of new products in EV and will be launched in appropriate time. We have a very strong portfolio of mega brands like Apache, Jupiter, NTORQ, Star Range, HLX, Radeon, TVS King. And we expect TVSM to grow ahead of the industry, both domestic, international market. Retail financing will definitely help, and it will be a key enabler going forward. Robust revenue growth, increased premiumization and continued focus on cost reduction initiatives will lead to sustained EBITDA improvement in the short term and in the medium term. Thank you.

This is the operator. Sir, should we start questions and answer?

Sure.

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

Congratulations on a good operational performance. Sir, I had a few questions related to your P&L and then on balance sheet. First question is on the employee expense side, sir. We understand you have reinstated the salaries for employees to the pre-COVID level. But this quarter, you're seeing that your employee expenses have kind of jumped to INR 269 crore kind of a number, which is much higher than what it used to be earlier. So I just want to understand, is there a bit of a one-off? Or have you provided for 2 quarters of salary reinstatement? Or is there some retirement benefit which is clubbed there?

No. We -- first, we reversed the salaries, and we've also given increases on salaries. That is 1 reason. That is the main reason. That is the main reason. And because of this commodity availability, COVID and very good demand, some increase in over time, all these have been there. This is primarily to make sure that the production doesn't suffer. Then once the situation becomes better, I think that will come down.

So would you expect the employee level, the staff expense to kind of normalize down to again INR 230 crores, INR 240 crores kind of a handle quarterly what -- where you used to operate earlier? Or would you expect it to be more like INR 250 crores, INR 260 crores kind of a number?

Here, what we have to look at is, you remember, we had a salary cut and it was revised. So salary will not be substantially higher going forward. However, increases will be there in terms of the minimum increases and the performance incentive bonuses, those things will be there.

And sir, on the raw material side, how should one look at it because that's been flagged as a big concern for the industry, right? And so how much of the commodity inflation is already kind of reflected in the third quarter results? And how do you hope to factor this because you did lay emphasis on that you'd continue to see EBITDA kind of getting better and better. So just -- if you can just help us understand, given this substantial headwind, what are the things which you are doing in terms of pricing actions and also the cost reduction efforts? And how much of this already kind of already accounted for in the third quarter results, sir?

See the material costs are going up not necessarily because of huge increase in demand. I think it is primarily going up because of the global reasons and overall issues. With respect to our cost increases, we are also taking up prices, okay? There is a -- for example, we have taken up prices from 1st of January or 2nd of January almost to the tune of 2%. The material cost maybe uncover maybe 0.7%, 0.8% may be there. But that we will manage in terms of product mix and the overall volume and cost reduction.

Okay. And sir, on the international market and more on the demand side, you did talk about a sustained container shortage, and we understand that export demand is much, much more stronger than the domestic demand. So is it fair to assume that exports will continue to see sequential ramp-up for the foreseeable future at your end?

See, we have grown both in international market and domestic market. See, if you look at Q3, in domestic market, we have grown 21% ahead of the industry. And in international market 31%, okay? So growth is there in both the markets. International market, we could have grown a little higher if the timely availability of containers were there and that we are feeling some pressure because of the nonavailability and timely availability of the containers. That is still continuing in January also.

Okay. Sir, last question on the balance sheet side. Your interest plus other income has kind of narrowed down materially. And you did talk about INR 1,600 crores kind of cash generation. I believe a lot of that would be because of your receivables number coming down because you have moved to a 0 credit policy to dealers. But how sustainable is this? And also, if you can provide us update as to whether by end of 3Q or as we speak today, what is the state of the balance sheet in terms of your net debt position, sir? And sustainability of the same directionally?

See, this cash generation has been the focus. And like I said, we have the lean stock with the dealers. And we have definitely looked at overall supply chain costs, supply chain working capital. So that has definitely helped us to bring down all the debt. So INR 1,616 crores we have generated during this year in the first 9 months, only purely focusing on the working capital and improved operating performance. So this performance will continue. This will continue. This focus and drive on cash will continue.

So are we a net cash company now -- as we speak now, or practically net cash because you're already down to 0.15 debt to equity last quarter -- first half balance sheet. So I just wanted an update on that, given that you've generated another INR 600 crores of cash this quarter as well.

In terms of cash, we can say that we are debt free. We have a long-term sales tax-related deferral loan, which is an interest rate of 0.05%, which is the only loan which cannot be repaid. Otherwise, we are debt free today, net of cash.

The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund.

Yes. Sir, firstly, on the demand side, in the domestic market, from a scooter perspective, how are we seeing the scooter demand improving? Of course, Q3 did see, I mean, very good improvement sequentially. Going forward, are we seeing further improvement on the scooter side in the domestic market? And similarly, on the export side, sir, we are seeing good -- very good numbers. On an average, in Q3, it was around 87,000 per month kind of a number. Now is there any pent-up demand in the export market? And if you can give any perspective on which geographies are faring better than the others on the export side?

On scooter industry, the urban markets have started opening up. Initially, if you look at the COVID-19, most of the urban markets, it was partially closed. Now as the urban markets start opening up and also people started moving, many offices are open and now slowly the income levels are going up. So slowly, I think we are able to see domestic scooter industry growing. And this -- definitely, we expect it to continue. I'm hoping that the wave 2 will not be there in India, hopefully thanks to the government initiative of the vaccination also starting. So I think if the same trend continues with respect to COVID-19, you will see scooters definitely growing in Q4 and going forward. And in terms of international market, I think the demand is very good in all the markets for the reasons of stable oil prices and availability of foreign currency and stable currency. So overall, there is an improvement in the demand. The pent-up demand, according to me, is slowly coming down because first quarter after that when the reopening started, there were some pent-up demand. But according to me now, the core demand for Indian brands are seen, very visibly seen. And this trend will continue.

Understood, sir. Understood. On the -- you did talk about that we have successfully offset most of the cost increases with the price hikes that we have taken so far and maybe another 0.7% left to be taken. My question is on the margin, so 2 parts, sir. One is the MEIS incentive has now been swapped from September. So because of that, are we -- have we seen any impact? Or -- and on the new RoDTEP regime, are we aware of the rates that will come through? To compensate further, is there any price increases we have taken in the export market? And generally, what is the blended price increase you've taken in the export market? That is the first part on the MEIS, sir. Secondly, on the other expenses, we continue to see very good control of other expenses. Was there any impact of the higher container price rates that we had to incur? and how do we look at marketing and ad expenses going into next year as well?

I think MEIS, there was an impact in the -- from the 1st of September. We have increased prices towards that. And RoDTEP, we are expecting the government will compensate sometime from 1st of January 2021. The scheme is announced, but the details of the scheme is yet to be announced. So we are waiting for that. Now coming back to price increases, even in international market, we have taken the prices. On marketing, I think we have significantly moved to digital marketing. That is definitely helping us, and that will continue. Even post-COVID situation also, digital marketing will be our focus. Significant proportion will move towards digital marketing. So some of these costs are sustainable, definitely sustainable.

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

Congratulations on a great set of results. Firstly, what I wanted to check was on GST cut, we have talked about many times, but when we interact with the government, sometimes, they say that industry has been seeing good growth. We've seen 15%-plus growth. We are also seeing record high margins. So how do we hope to convince the government for a GST cut in that kind of a scenario?

I think it's the overall buying power. And if you look at a two-wheeler, it is used by the common man. So that is the key thing, for a common man for a normal use or a self-employed person, 28% is really huge, okay? So we are expecting -- government has taken many initiatives from whatever we have seen, and that has supported. Definitely rural it has supported. So we are also hoping that they will be looking at what all things can be done to really improve the demand in the industry. This opening up of the urban itself, we are able to see some more improvement. Vaccination will help. So government during the budget also, they will be considering many new measures to boost up the demand.

Okay. And sir, secondly, on the other expenses side, some of your competitors have said that other expenses will largely come back to a normal kind of level. So if you see a -- is there a risk here that other expenses, if competition raises it, TVS may also have to respond?

I don't comment about competition, okay? As far as we are concerned, salaries, we have revised our salaries back to normal, and we have also given the increases this quarter, okay? That is one of the reasons the salary costs have gone up. And I think that is an annual appraisal and performance incentives will continue, okay? And we will invest in the new technology areas, new domain areas. There we will have addition of people, okay? And those costs will be there. If you look at marketing and other expenses, definitely digital the new way of working, okay? Post pandemic also, we will look at all the other expenses, and we will look at, for example, just work-from-home as a concept, okay? And looking at overall effectiveness. We find that this is very effective. So there are certain new learnings, whatever we are getting those all will continue.

Got it. Sir, some housekeeping numbers like spare parts revenue, how it has grown on a Y-o-Y basis? And also on the financing side, if you could share some of the numbers, like what is the financing proportion and the financing book?

On the financing side about TVS Credit Services, the book size has grown and it is INR 10,790 crores today. The new book is performing very well. The collections are improving. The TVS -- retail penetration for TVS Motor Company is at 46% when compared to 49% last year. The reason for a little lower penetration during this quarter is mainly because the income-impacted people are reticent to borrow now. The consumers are also very cautious and hesitant to take new loans. But one good thing is with the urban markets really opening up, things are coming back to normalcy and retail finance penetration is going up. That's what they [indiscernible] now. The other factor was in last quarter, most of the retail finance companies were disproportionately deploying their resources on the collections. That is the reason why the collection costs have also a little bit gone up on the collection side. As far as credit services, our [indiscernible] is concerned, the performance for the quarter is -- Q3 performance for TVS Credit Services -- yes. This for the quarter is in retail INR 59 crores as against last year's INR 48 crores and the PAT is at INR 43 crores as against last year's INR 41 crores. As far as collections are concerned, it is better than the last quarter and the new business disbursed funding in the current quarter has also gone up to INR 2,900 crores as against the corresponding previous quarter of around INR 2,200 crores.

So we are almost coming back to the pre-COVID level in terms of retail financing from TVSCS.

The next question is from the line of Basudeb Banerjee from AMBIT Capital.

Yes. Congrats for the excellent set of numbers. Just wanted to understand, in the initial remarks, you said there's a 2% price hike effective 1st Jan. And with the raw mat inflation, we will be missing out by 70, 80 bps, and you will try to cover it through cost management. Am I right, sir?

Yes, yes, yes. We will -- we always look at what are the opportunities for price increases. And other than that, there is a serious cost reduction exercise going on, product mix maximization. Already, I told you that the combination of Apache, NTORQ and Jupiter higher versions, the proportion is quarter after quarter going up. And we will constantly look at it to cover it.

Sure. So just trying to understand, this 2% plus uncovered 0.8%, even if one takes approximately 3%. So what is the time line till which you are benchmarking this 3% raw mat hike because there's always a contract? So you -- this kind of price hike required must be based on certain date of contract, where the renewed contract might happen on an inflated price because steel, copper, aluminum, rubber, crude, everything has moved up like 30-odd percentage plus in the last 3 to 4 months?

I didn't say anything about 3% carryover. I said 0.8%.

Yes. No I'm saying 3% is already price hike taken, plus 0.8%. So combined, even if we take 3% overall, so do you mean that even...

That we have to see. The price hike is for the industry. It is not only for TVS. It is in line with the industry, we are looking at the prices. In addition, there is a huge drive on, like I said very clearly that there is revenue growth. There is increased premiumization and huge focus or continued focus on cost reduction...

Is it, sir -- premiumization in exports, premiumization in domestic cost cuts, everything, I'm just trying to understand from a worst-case scenario, like say steel prices or copper, aluminum, whatever inflation at spot price level today, what one can see, you mean that total cost escalation -- the price hike required would have been 3% to remain gross margin neutral from a total basis. That's what the inference is, sir?

No, no, no. You look at Q3 and Q4, we have the highest increases, and we have the best EBITDA. Q3 was one of the best EBITDA. This is the highest EBITDA what we have done.

So that's what I'm trying to understand, sir. Are those costs based on contracts, so where the renewed contracts will come in from April where cost hike will be required much higher? Or you are saying on the prices, inflated prices as of today?

I don't -- I didn't get your question. See, Q3, there was a cost increase, there was price increase. Q4, there is cost increase, there is a price increase. Whatever little bit uncovered, we have a combination of revenue growth, premiumization, continued cost reduction initiative. We are confident about that.

Sure. So you don't see any major damage to gross margin just because of raw mat inflation...

Q3 and Q4 is the best example. What is the damage? Q3, we have seen the highest cost increases. Q4, we are seeing yet another -- Q3, you have seen our results, Q2, you have seen our results. Cost increases are there in the industry, material cost increases are there. There is also price increase. There is also cost reduction. There are many other initiatives the company is looking at. We are also looking at, like I explained, on digital marketing costs and other costs. There are scale benefits available. So operating leverage plus better mix plus lower material cost and fixed cost, all this will lead to very strong EBITDA going forward.

That is so nice to see you cross INR 5,000 EBITDA per unit this quarter. So that's great. And second thing, sir, with such good free cash flow generation. And as Gopala sir said, almost net cash other than that 0.05% cost of debt stuff. What is the outlook on investments in your subsidiary businesses as of now full -- going ahead and consolidated CapEx for the year and next year, sir?

See, we will -- like I said, we will continue to invest in new product development, digital technology space and -- because that is going to be the key focus of the company. And TVS Credit Services, as my colleague said, they are almost now INR 10,700 crores and almost pre-COVID levels, and they will continue to grow both in top line as well as in bottom line. So all these areas, we will continue to invest because that is what is going to be the future.

Sir, if you can quantify the total amount of CapEx plus investment consolidated this fiscal and next year?

CapEx will be similar to this year. CapEx will be similar to this year, around INR 500 crores.

Yes. And investment in the arms like...

Investment will be almost similar to this year in terms of all these areas. Whether it is TVSCS or digital technology space, it will continue. It will continue the same way. Because these are all future -- for the future technology, future space is very, very critical for growing the revenue. New products are really the heart line of the company.

The next question is from the line of Gunjan Prithyani from JPMorgan.

Just a couple of follow-ups on the TVS Credit Services. Can you just share about the asset quality, if you can share the gross NPA number? And also, you said there will be continuous investments in the TVS Credit. If you can just clarify this is essentially for growth and not -- we aren't really seeing any asset quality stress out there?

Yes. Absolutely. This is only for growth-related investments and definitely not for the asset quality or capital adequacy-related issues. This is number one. As I said earlier, the new book is performing very well. Coming back to the gross NPA which you have specifically asked, it is at 4.3% as against last year's 3.9%. The cost of collections have gone up a bit more. As I said, the effort is more for collecting from your customers. And 85% of the morat customers have become regular now. The balance 13% or 14% had opted for restructuring. And the book size has grown, the profitability is healthy and whatever -- if any customers are coming back, what else you want, the collections are improving, better than the last quarter, better than the pre-COVID levels...

And all the investments are for future growth of TVSCS.

No, no. These numbers are helpful on the morat and the restructuring. Just if I can get the equity number of the -- on TVS Credit, where is it right now?

I did not understand your question.

Equity.

So on equity, what we have invested till now is around -- this year is around INR 50 crores. As I said, we've invested -- last year also, we have invested around INR 100 crores, the same level of investment will be there this year also, nothing more than that.

Okay. So eventually about INR 100 crore investment will continue in this business?

Overall, the performance is very good. The collections are encouraging, better than pre-COVID level and the new book is performing very well. The morat customers are also coming back.

Okay. Got it. No, that gives very good color. The second question, sir, I had was on the demand outlook on the domestic front. Now we continue to see the trends on the registration pretty weakish still on the two-wheeler side. Now there could be -- of course, you are doing well because some of your products are really gaining share. So if you can really touch upon what is the retail trends that you're seeing for the last couple of months in the domestic market? And if there is any divergence that you're seeing narrowing between the scooters and the bikes because scooters were lagging, have you seen that gap narrow now?

I think scooters have just started because the -- due to COVID, most of the urban centers were partially closed, even just before Diwali season. So practically, post Diwali and Diwali season is what we have seen the urban centers opening up. With the urban centers opening up, we are seeing the demand for scooters going up. And I'm confident that COVID second wave will not happen in India, thanks to the vaccination initiatives. If these things are put in place, I'm very sure that you will see scooters slowly coming back in a steady way, okay? On overall retail, we are seeing uptake, definitely. Like I said, last year Q4 industry was very low. There were 2 challenges. One is everybody was moving from BS IV to BS VI, plus middle of March the closure. So I think this year, you will see better. And also the rural market, thanks to good monsoon and good reserve oil levels and good agricultural produce and support from the government, we are witnessing a good demand from the rural. So overall, I think next financial year should be a good year.

Okay. Got it. Just 1 question. I mean just on the similar lines, I mean, you did point out that the cost of acquisition or cost of the product has seen such a meaningful increase in the last couple of years. And given this all commodity headwinds, we are continuing to see -- take price increases and not just you, everybody else in the industry. I mean how is industry approaching this? Because clearly, there is a big affordability hit that any two-wheeler buyer has seen. Isn't there a case that if we continue to take these kind of increases, it could have a bearing on the demand looking ahead? Because, I mean, 25%, 30% increase in last 15 months, if I look at BS VI plus the increments that we've been taking for the last 3 quarters.

That is the reason I'm saying there are -- there will be some initiatives. We are expecting some initiatives from the government also to boost this demand. In terms of products, if you look at it, really, Indian products are world-class now with BS VI EFI, electronic fuel injection technology. As far as we are concerned, our products are very much liked by the customers. We have given enough features along with BS VI, which are really, really first in -- best-in-class. And with a 15% improvement in fuel efficiency because the EFI technology and the cost has gone up, it has given huge benefit to the customer in terms of right quality, right -- the smoothness and also the fuel efficiency. So overall, BS VI, there is customer advantage. And if you look at safety, whether it is ABS, that is also improving the overall -- so overall safety of the vehicle. So overall, if you look at India, that way, we have taken many initiatives which are good. Only thing is pandemic and suddenly the ability of people to increase their income that is suffering. But over a period of time, and what my colleague said on the retail finance also, people were a little apprehensive even for taking retail finance because of income. Now as the COVID situation eases out, as the vaccination improves, I think people will start slowly moving and the self-employed people will start getting their income. So once the income cycle starts, I think people will definitely leverage retail finance as a key arm even if there are some price increases because products are becoming high-quality, best-in-class for the type of technology what we have done. So I'm pretty confident that -- because the mobility needs are there. The penetration levels are low. And premiumization, definitely, if you look at whether it's NTORQ or Apache or the upper end of Jupiter, customers want it. So only thing is these cost increases have happened in the short time and the pandemic also hit. And overall, the time line for people to absorb this has been very short.

Yes. And financing not being fully done.

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

First, a few booking questions. One is, can you share USD-INR realization, export revenues and spares?

Export revenue? Just a minute. Export revenue for this quarter was INR 1,303 crores.

Okay. And spares revenue?

Spare parts, all put together, I think, about INR 522 crores.

INR 522 crores?

Yes.

Okay. And what it was for second quarter?

Which one second quarter?

Spares, spares for second quarter?

Spares, second quarter, I have to check.

Okay. No problem. And USD-INR...

Off-line, we can give you the data.

Sure, sir. Sure. And USD-INR realization?

Which one you're asking?

Dollar realization? USD-INR?

74.2.

- 74.2. Okay. Coming to the staff cost, just to clarify, you said the salary cut reversal of first half has been accounted in the third quarter. Is that understanding right?

No, no, first quarter, we had the salary cut, but we reversed it from October, and there was also increase in salaries. So 2 things we did in Q3. So we reinstated the salaries, and we also gave increase in salaries.

Right, right. So effectively, the third quarter is, some portion of first half salary reflecting in third quarter. Is that the right way to look at it?

No, no, no. I said we reversed.

It just reversed back. Okay.

We reinstated the salary cut, number one, then we also increased the salaries. Normal increments were given.

Okay, okay. Got it. And last question pertains to -- if I look at the moped, your wholesale volumes versus the data of registration from Vahan. There is a substantial gap. So even if I adjust for the 3 states which are not covered by Vahan, there is still a huge gap of almost 80,000, 85,000 units. Any reason why such a gap should be there, particularly considering that moped will not be big in one of -- I mean, at least in 2 of the 3 states, which are not covered by Vahan?

No, no, I'm not able to get your question.

So if I look at the retail registration data of mopeds from Vahan and compare it with wholesale data -- wholesale sales, which we report, there is a huge gap between the both numbers. Why that -- such a high gap should be there?

I have to check. But normally, see, we keep very lean stocks of all products in all dealerships, maximum 4 weeks. And registration data is based on the retail -- only thing is the registration, it varies from state to state. And 3, 4 states are not covered in this. That's all. Otherwise, according to me, there is no anomaly.

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

My first question is actually on the mopeds. So this year, we've seen a very strong recovery in moped. Obviously, the base of last year was very weak. But going forward, given that after BS VI, moped prices have also increased substantially, what is the kind of use case for this product? Do you see -- what kind of growth do you see for this product vis-à-vis the industry growth going forward?

I think all product prices have gone up, not only moped product prices, right?

I'm assuming the buyer there is slightly more price sensitive. That's my assumption. I could be wrong.

No, no, buyer also knows that whether it is a moped or a scooter or a motorcycle, everything has become BS VI and the relative prices have gone up. You cannot have only moped prices remaining same and EFI technology put on that. So it is pricing to be relative to the industry, okay? And every product has gone up, it has also gone up. Number one. Moped, I think when the rural starts doing well, we have seen because most of the customers look at rural and also the kind of technology, whatever we have put, the customers are getting the benefit of better mileage, good pickup, a good load carrying capacity. I think -- and we also got the moped comfort, which is also used by a set of people who are using also for commuting. So overall, moped is doing a reasonable job.

Okay. And sir, my second question is actually on the investment. So this quarter, you have disclosed an investment of around INR 108 crores in TVS Motor Singapore. Is this related to Norton or something else? If you can help us understand what this is related to.

This is partly for Norton and partly for digital-related investments.

Okay. Okay. Okay. And lastly, on the production-linked incentive side, obviously, the details are not available as of now. But as a company, where do you think whatever -- based on whatever discussions you would have had with the government, what are the areas where it could benefit you? And what is the kind of medium-term benefit that we could see from such a scheme for you?

I think it's too early to comment about it, but whatever information we have, we will be eligible for that incentive. What is the quantum, how it is going to come, those things we'll have to wait for more details to comment, please.

The next question is from the line of Ronak Sarda from Systematix.

Sir, going back to the question on the domestic industry, could you highlight how has the retail sales been post festive season? So let's say, for December and current month, how things been? And any geographical flavor which you can add, which regions are doing better than the rest?

I think overall season was okay for us. And I think for the industry also, it was okay. And this quarter, as I said, in Q4 last year, the industry was going through the transition from BS IV to BS VI. And suddenly, middle of March, we had the closure. So I'm expecting Q4 to do well. And overall, if you look at the economy, the rural is continuing to do well. And urban, once we start fully operational and if the COVID second wave, as of now, I think it is very positive. There is no COVID second wave in India, vaccination, I think overall, you will see that positivity coming. Definitely, that is going to help the industry, and we will continue to do better than the industry, both in -- definitely in India with the kind of brands that we have.

Sure. Sure. And you touched upon the new product launches, will it be possible to highlight something more, which categories we are -- we will be seeing new launches, some more details?

We will continue to invest in new product development because that is, like I said, heart line of the company, and this is most important because we always look at the white spaces, and we keep focusing on that. Closer to launch, I'll give you more information.

Sure, sir. But you highlighted we'll be launching few products in the first quarter of '22, right?

No, no, no, not first quarter, first half of next year.

First half next year. Okay. Sure. And the last question is, I mean, if I look at your volumes in the current quarter, they are almost similar to Q3 of FY '19, around 9,90,000 units. And your other expenses are almost lower by 200 basis points. So I mean, if you can just touch upon what -- where has been those cost benefits come from, which areas have we targeted on the other expense side? And which are the low-hanging fruits right now? As we see volume recovery over the next, let's say, 12 to 18 months, which are the low-hanging fruits where some more cost benefit can come from?

I think there is always opportunity for looking at the cost. Like I said, we are first focusing on the robust revenue growth, growing ahead of the industry in domestic and international. That will give a lot of scale benefits. Then increased premiumization that will give better mix, okay? And there is a serious cost reduction initiative on the material cost side. And fixed cost, like I said, there are many elements like digital, in marketing and the -- during the pandemic, we have learned a lot in terms of definitely looking at IT connectivity, work-from-home. I think there is a combination of things we have learnt post COVID also, whatever is effective, what is going to add benefit to the company, benefit to the bottom line, all those initiatives will continue definitely. So with all this effective, I'm very confident about the EBITDA going forward will grow.

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

Most of my questions are already discussed. Just wanted to understand, get some discussion around the international market, which you talked about, has been doing very well and supply -- the container shortage essentially is impacting. Can you help us understand that where this demand is coming from and what is driving the strong demand in those markets?

I think if you look at African markets, firstly, most important thing is the stability of most of this market post COVID. Most of the market got opened. And if you look at African market, it is the most self-employed or taxi market. Those markets are definitely because the demand there is definitely being helped by the oil prices, foreign currency and stability of exchange rates. Second, same way the ASEAN markets and Latam markets. So overall, every market we are seeing two-wheeler has a good demand. That is one thing which is positive. Second is we have a very good range, starting from HLX series and Radeon and NTORQ in certain markets and Apache in many markets. So overall, I think the range is also helping. So put together, I think the demand is very, very positive.

Okay. My next question was around -- so in the premium segment, the general trend which we have been noticing that it has been doing much stronger than the rest of the two-wheeler segment. And you had earlier bought the Norton brand as well. So are we planning to start using that and start expanding in that segment using this brand in the near term?

I think the strategy of Norton and what our plans are at full discussion. And once we are closer to announcing our next steps, we will definitely share with you.

The last question will be from the line of Raghunandhan from Emkay Global.

Just following up on the other expenses side. So like despite a strong volume performance compared to last year, other expenses are on the lower side. So just wanted to understand whether there would be any part of other expenses which are lower temporarily and can increase to pre-COVID levels as we go to further quarters? Or would this be a sustainable level?

See, the marketing expenses or the other expenses on many areas, marketing expense is the biggest, that is the reason I'm highlighting that, that will continue because we are more and more becoming digital, and we are investing in digital in a big way. So that will -- that is sustainable, okay? And we are able to reach to the customer. Maybe there may be slight increases in the conveyance and travel because of the opening up, but we are also seeing this COVID has started, quite a lot of things we are able to do through Teams. So it's not that for everything and everything you have to travel. But if for market visit and customer inside work or anything, you have to travel, we will travel. So according to me, many initiatives whatever we have started, I think we will continue post the COVID situation. Marginal increases may be there in conveyance and travel. But see, when the revenue significantly grows, the percentages will keep coming down. The scale benefit that is exactly I said on the operating leverage, that will help us significantly.

Just 1 last question. On the new product side, would the focus be more on variants of existing brands? Or any new -- all new models are expected?

Both will be there. We will continue to delight with the variants of the current models and new products. If you look at even this season, we have given the NTORQ, the Squad version, Super Squad edition. So I think you have to constantly delight the customer and TVS will continue to invest in that, plus new products. So once again, thanks to everyone. Happy new year. Stay safe. That 2021 bring very good prosperity to everyone. And let this COVID completely be contained and let this vaccination also completely eradicate this. That is our sincere wish and with the kind of -- with the portfolio of mega brands what we have, starting from Apache, Jupiter, NTORQ, Star Range, HLX, Radeon, King, I think we will grow ahead of the industry, both in international and domestic. The revenue growth, robust revenue growth and a better product mix through premiumization and aggressive cost reduction, both in material costs and fixed costs, we are pretty confident that we will continue our EBITDA sustained improvement in the short term and the medium term. Thank you. Thank you for your call.

Thank you very much.

Thank you. Ladies and gentlemen [Audio Gap]