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

Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call of TVS Motors Limited hosted by B&K Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from B&K Securities India Private Limited. Thank you, and over to you, sir.

Thank you. Welcome to TVS Motors 4Q FY '21 post-results conference call. We have with us today Mr. K. N. Radhakrishnan, Director and Chief Executive Officer; and Mr. K. Gopala Desikan, Chief Financial Officer. I'll now hand over the call to Mr. K. N. Radhakrishnan for his opening remarks, to be followed by question-and-answer session. Over to you, sir.

Good evening. Good evening, everyone, and trust all of you and your family members are safe. We are confident that the country will come out of the second phase of COVID-19 quickly. We'll definitely extend all help to our supply chain partners, employees, society at large to come out of the second stage -- second phase. 2021 was a very challenging year due to COVID-19. The shutdowns in the first quarter and its lingering impact, the two-wheeler industry declined by 38% in the first half. But the second half recovery in the industry and the industry grew by 20%. Consequently, for the full year, industry registered a decline of 12%. However, TVS Motor, based on its strong portfolio and focused exports, the two-wheeler sales declined only by 5%, resulting in market share gain. Consequently, despite the loss recorded in the first quarter due to COVID-19-related shutdown, the PBT and PAT grew ahead of previous year. The transition from BS IV to BS VI compliant products in the market was very well accepted, and it was smooth. The focus on cost reduction and working capital helped the company to improve its profitability and free cash flow. We are glad to present the Q4 numbers. This quarter, the company recorded the highest ever profit. EBITDA 10.1%, INR 536 crores, growth of 119%. Profit before tax, INR 387 crores. Last year same period was INR 90 crores. Profit after tax INR 289 crores. Last year was INR 74 crores. During Q4, the two-wheeler sales in the domestic market have grown 41%, and the international markets by 74%, ahead of the industry. Industry growth was 24% in domestic and 33% in exports, international business. Month of March 2021, for the first time, we crossed 1 lakh units milestone for two wheelers in international markets. All our brands have done well, and we hope to maintain the momentum in '21/'22. We have grown ahead of the industry, both in domestic and international markets. Demand in international market continues to be robust. During the year, focused working capital management, improved operating performance helped the company to generate a free cash flow of INR 1,887 crores. These proceeds are used to reduce the debt, and company has become debt free, net of cash. Lean stock with the dealers also helped to unleash the blocked working capital across the supply chain. Now let me get into this quarter. Q4, the revenue from operations grew by 53%, INR 5,322 crores vis-à-vis last year INR 3,481 crores. Two-wheeler domestic sales grew by 41% compared to Q4 of last year against industry growth of 24%. Exports grew by 74% compared to Q4 last year against the industry growth of 33%. Total two-wheeler sales grew by 50% compared to Q4 of last year. The mix of premium products, Apache, NTORQ, Jupiter Classic and above, continued to grow. Total sales of three-wheeler during this quarter is 0.41 lakhs. We registered the highest ever EBITDA of INR 536 crores, grew by 119%, 10.1% EBITDA compared to 7% of Q4 last year and 9.5% was Q3 2021. PBT for the quarter is INR 387 crores. Last year was INR 90 crores. Profit after tax is INR 289 crores. Last year was INR 74 crores. PT TVS Indonesia, our two-wheeler sales registered a growth of 73%. We did about 22,298 compared to last year, 12,902, in the Q4. We also sold three-wheeler, 2,298 numbers compared to last year, 2,335 numbers. PBT for this quarter in Indonesia is USD 1.6 million against last year loss of $3 million in Q4. Overall, for the year, the revenue from operations grew by 2%, INR 16,423 crores last year to this year, INR 15,751 crores. Export sales of two-wheeler during the year grew by 13% over last year. Domestic two-wheeler numbers declined by 10%. Three-wheeler sales during the year declined by 29%. Operating EBITDA for the year is at 8.5% compared to 8.2% last year, despite the Q1 lockdown due to COVID-19. PBT grew by 10% to INR 826 crores as against INR 754 crores during last year. May be noted that the current year PBT of INR 826 crores for the year is despite loss of INR 190 crores during the Q1 of 2021 due to COVID-related lockdown. Profit after tax for the year grew by 3%, INR 592 crores as against last year -- INR 592 crores to INR 612 crores this year, despite loss of INR 139 crores during Q1. This is possible due to significant revival in the sales in -- from Q2, premiumization, higher sales in international market, material cost reduction and other fixed cost reduction. Now coming to PT TVS. For the first time, PT TVS recorded profit for the full financial year. PT TVS two-wheeler sales grew by 10%, 58,901 compared to last year's 53,641. Q1, even in PT TVS, we had COVID-related lockdown. PT TVS sold 5,863 three wheelers compared to 8,132 last year. PT TVS reported a PBT of USD 3.1 million compared to PBT loss of USD 5.8 million in the last year. Dividend, the Board at its meeting held during January 2021 declared a first-time interim dividend of INR 2.1 per share, 210%. Board at its meeting held in March declared the second interim dividend of INR 1.4. So total dividend put together is 350%. In the quarter, we have seen TVS Jupiter ZX Disc IntelliGo, which was launched in February, first 110 CC scooter with idle stop-start. Now TVS Jupiter ZX, this IntelliGo further enhances the Zyada philosophy by reinstating Zyada convenience, Zyada mileage and also enhancing technologically advanced imageries. XL 100 crossed the new milestone of 4 million, thanks to all the customers, we respect them. TVS Apache RTR 200 4V dual-channel ABS, three ride modes, namely sport, urban and rain, for an adaptable ride experience first in this segment. And 200 4V comes with adjustable front and rear suspension, adjustable brake and clutch lever and a refined brake system. Coming to '21/'22, again, the two-wheeler domestic India, this is the second wave of COVID. Two-wheeler industry last year, we know that after the first wave, it recovered in the second half. We expected the momentum to continue, okay? The second wave resulting in increased COVID-19 cases has forced the authorities to resort to localized shutdown. This will lead to lower economic growth in short term and can impact customer sentiment. This can dampen the Q1 sale little bit. However, the announcement by the Government of India for vaccination to all above 18 years effective from 1st May is likely to help faster recovery in the economy. We expect like last year, Q2, Q3, this year also the two-wheeler industry to bounce back post vaccination. '21/'22, we have seen -- '20/'21, we have seen good rural recovery. This year, thanks to the last year's good monsoon and we are also expecting a normal monsoon this year, all reservoirs are full. Agriculture sector is expected to grow this year also. So this will definitely help the rural market. We believe that the adverse impact on the economy will be short term and minimal. We expect the economy to bounce back faster. While the second wave of COVID-19 is likely to impact Q1, we expect measures taken by the government will lead to stabilization of Q2 '21/'22 and growth from the second half. Social distancing requirements will continue. Wearing marks will continue. Personal hygiene will continue. This will -- surely, the social distancing will result in growing consumer preferences towards personal mobility. Demand for the two-wheeler industry will be better. The company is cognizant of the change in consumer behavior, and we are well poised to utilize this opportunity with its superior product offering. Export of two-wheeler likely to see a growth during the next financial year, fueled by consumption growth, stable economic and political situation in all TVS -- in all the key TVSM operating geography. Stable crude oil prices will have positive impact on the oil-dependent economies of Africa, South and Central America and definitely can boost exports of these two-wheelers from this country. We are witnessing a trend of more premiumization in all markets. Therefore, we are confident that our premium products, such as Apache, NTORQ, Jupiter ZX, Grande Series will continue to do well, both in domestic and international markets. We will continue to invest in new products, and we are planning a series of product launches during '21/'22. Raw material prices have gone up in the last 6 months, and the company has taken judicious price increases. We expect the firm commodity scenario to continue for some more time. In the first week of April also, company has taken up prices, both in domestic and international markets. On the EV front, we are happy to state that TVS iQube is doing very well. The customer response is excellent in Bangalore. We have launched it in New Delhi also now. During this year, the iQube footprint will expand to more than 20 cities. The portfolio will be expanded with newer launches. Company is substantially investing in EV and other emerging technologies. TVS Motor has a strong portfolio with brands like Apache, Jupiter, NTORQ, Star Range, HLX, Radeon, TVS King. And consequently, we expect TVSM to grow ahead of the industry, both in domestic and international markets. Higher penetration of retail financing will be a key enabler. Robust revenue growth, increased premiumization, continued cost reduction initiatives, both in material cost and fixed cost, will lead to sustained EBITDA improvement in the medium term. We are cautious about Q1 due to COVID second wave. The increased vaccination coverage and initiative taken by the government will definitely help the industry to grow from Q2. As demonstrated in the previous year, post-COVID-19 second wave, the company is confident of continuing the EBITDA growth journey. Thank you, ladies and gentlemen.

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

Congratulations on a great set of numbers. Firstly, on the cost side, can you talk about how much was the raw material cost increase during the quarter? And how much was the benefit from pricing and how much from mix? Or -- and secondly, also, when you look ahead, do you see further margin expansion because of the improved mix?

See, the material -- raw material cost increased almost 1.5%. I'm talking about last year Q3 to this year -- Q3 to Q4, sorry. And we have taken price increases almost 1%. And unfortunately, Q1 COVID second wave, that may give little challenges, and the cost reduction was almost 1%. So overall, I think we have managed well in terms of the price increases mitigating the cost increases.

Okay. So are you expecting trend to continue?

What was your second question? I didn't hear.

No, no. So on [indiscernible] second that do you expect this trend to continue going forward because you started taking more price increases, right? So do they offset the cost increase?

Yes, the focus from company on the premium -- premiumization and focusing on the premium products like Apache, NTORQ, Jupiter ZX version and above and also international market growth, these are all on the revenue side. So definitely, that will continue. And on the cost reduction side, very systematic focus is happening on the material cost reduction. We are also increasing the localization. So on one side, we have alternate materials, alternate sourcing, weight reduction that is very systematically happening. On the other side, localization is also significantly going up. So overall, the material cost reduction efforts will continue. And the fixed cost reduction, that will also continue. So overall, we are confident of the EBITDA growth journey going forward.

Okay. And then secondly on exports, so you talk about very strong numbers, 1 lakh plus numbers. So those kind of numbers can we attain going ahead because you've said that demand environment is pretty strong. And do you expect 1 lakh plus kind of numbers to continue?

See, we always look at keeping the minimum stock, lean stock, whether it be domestic or international. So we are pretty confident that the overall portfolio, the range whatever we have in the international market has done extremely well. The demand is extremely good for all the models. Maybe a few markets, we may have some challenges because of the COVID. But the range, the customer pull from this market and our lean stocking policy will definitely help us going forward. So we are very confident about maintaining the demand and the situation whatever we have seen in international markets.

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

Sir, first question was again on the exports front. I mean, where you highlighted the demand momentum remains strong. Could you highlight how the inventory position moved over the last 6 months? I think earlier, retail sales were ahead of wholesales. How has that situation kind of? Is the inventory in the channel normalized?

No, no. Inventory in the international market, similar to India. Only thing is we add whatever is the logistics time. Depending upon that, country wise, we look at what is the lean inventory. We don't -- we won't increase inventory in any country nor in domestic. Domestic, we always look at the 30-day, okay, 27 days to 30 days kind of inventory. Of course, if during Diwali season and things like that, maybe it will go by another 2, 3 days. Otherwise, we have been having this policy of keeping the right inventory with the dealers and sub-dealers. That has definitely helped.

Sure. Sure. And the second question was on the electric vehicles in the domestic segment, both for two wheelers and three wheelers. So how has been the response to iQube? What's the pipeline like? And again, on three wheelers, do we have a product under development? Are we thinking of launching one? What are the challenges on the three wheelers side? I think two wheelers, lot has been talked about in the last few months. Wanted your thoughts on three-wheeler segment as well?

Two wheelers, iQube is doing extremely well. Bangalore feedbacks are very positive, and we have got a very good booking now. We are ramping up. The capacities are being worked out, and the ramp-up is going on. Now we have also started in Delhi. And this year, we are looking at over 20 more cities in India. So I think overall -- and we are also strengthening the portfolio of the electric two wheelers. So that will definitely help us going forward. Three-wheeler, we are also planning to launch a vehicle. So as I said, this is one area we are investing heavily. Most of our investments will be behind EV and other emerging technologies, and that is the focus of the company.

Right. Right. So when we say strengthening the portfolio, I mean, so what kind of products can you see over the next...

We're about to launch. I'll let you know more details.

Sure. Sure. And the final question was on the -- if I look at the consol profitability, it's still almost like a INR 75 crore to INR 80 crore loss which continues while you said TVS PT has turned profitable. So what's the -- which entities are now contributing to this loss?

I think these are strategic investments, okay? I think we invested in PT TVS. Now once it starts making profits, now we can always scale it up. The demand even in Indonesia is good. Like that, we have invested in new entities. They are 1 to 2 years now. I'm very, very sure that they are going to give us very good returns in the future.

Sure. But is this coming from any specific entity or this is distributed over many...

No, no. One is TVS Credit Services where because of the provisioning-related stringent norms followed by the company. There is -- last year, the reported profit was 100 -- one second, one sec, I'm not able to see the numbers. Yes, last year...

Last year TVS CS is INR 106 crores.

This is for current year and last year was INR 210 crores. So it's half. Last year was INR 211 crores. And this year, it's around 107 crores.

This is primarily because of the challenges we underwent in Q1.

Yes. Exactly.

Absolutely [indiscernible] Q1. Yes, that Q1 also, the focus on many challenges even in Q2 because of the retail financing industry itself had a problem because of the COVID wave 1.

In fact Q4, we have...

Give that scenario, the performance of TVS has been commendable, given the kind of challenges we went through in the Q1 and practically Q2, I think the last 2 quarters have been extremely good.

Q4 has been close to INR 63 crores better than the last Q3 as well as comparable Q4.

Okay. So the [indiscernible] is the profit after negating first half losses, right?

This is overall profit for the year. Yes, yes.

For the year, yes. Okay.

Yes. Yes. Yes.

Okay. Perfect. All the best.

So this year, the challenges of the quarter 1, I think, like I said, for TVS Motor, the first quarter was INR 190 crores loss.

No, no. I understand.

Yes, TVS CS also a huge loss. From there, year as a whole, INR 106 crores is coming that way.

The next question is from the line of Pramod Kumar from Goldman Sachs.

Congratulations on a standout performance. Sir, I think this question has been asked you a couple of times on this call and even for the last few calls now, given the margin performance. But the way you've responded is by categorization right that you continue to aim for margin expansion even with the headwinds of commodity and local lockdown even in the near to medium term. Is that understanding right, sir?

Surely, we will focus on EBITDA growth. See -- like I said, we have very strong portfolio of range of products. We have robust revenue growth. Only thing is, the caution of Q1 second wave, we cannot ignore that, but government has taken many initiatives, especially the vaccination coverage for 18 and above. We are pretty confident that, that will help the India to settle down. And if you look at many countries, what is giving us the confidence today, for example, U.K. is almost stable. I think they went through the vaccination drive. And if you look at the curve, I think -- and the discipline of wearing the mask and social distancing and personal hygiene, if we can at regional level or certain level if partial lockdown and some discipline, I think all put together, I think Q1, the second wave can be, with the vaccination, I think it will help India to recover faster, okay? And I am very confident that, like last year, all these are going to help the [indiscernible] demand in Q2, Q3 to help the two-wheeler industry in India. Rural will continue to do well, thanks to very good monsoons and production of agricultural products. And this year also monsoon is likely to be good. So sentiments are positive. The caution is more for the wave 2, which is in the urban area, but even urban will start responding by Q2. And with the kind of products what we have and the revenue growth of good growth and also premiumization with the better mix and continued cost reduction initiatives and excellent international business will lead to sustained EBITDA improvement in the medium term.

And sir, before I move to the second question, I just wanted to clarify, you talked about different riding modes on the Apache 200, which is a software thing. I just want to -- just curious, have you kind of done this in-house? Or are you kind of buying it from one of these large component suppliers because it's a fairly unique technology for 200 cc motorcycle? So just wanted to understand is that something which you've done in-house or it's external vendor supply, sir?

See, we invest -- our strength is a very strong design and development team. That has been our strength. I don't want to exactly tell you what we have designed, what we have co-created with the supplier. I think our strength is a very, very strong team, design, development. And our quality, all of you know that we have been #1 in JD Power. So that focus and investment in technology, in new technology, in EV space will continue.

Fair enough, sir. And sir, this question is more for Desikan and for you, for me. Can you just talk a bit more about the balance sheet side of the performance, sir? In 4Q, particularly, how was the cash flow? And how was the -- I see your filing says that you become virtually net cash -- net debt free, but I think that includes some sales tax. So if you can just talk a bit more about the cash flow generation during the quarter and the year? And how is the debt situation and the liquidity situation? And also some specific color on the 4Q financial performance of TVS Credit. That would be great.

Sure. The -- during Q4, the company generated the free cash flow of around INR 338 crores, net of cash flows. The whole year, we have generated a free cash flow of INR 1,887 crores. And [indiscernible] the borrowings, we're almost net debt today, including the cash balance that we have, except the long-term government-related borrowings, which are very, very interest wise absolutely 0.001%. Except that, most of our borrowings are repaid or in the process of doing repaid. Coming back to the cash situation, this is today a cash-rich company today. And that is going to help us, even if there are any liquidity-related issues, which we don't foresee in Q1, that can be managed. Coming back to TVS-related performance, the book size of the company is INR 11,202 crores. And the gross NPA as of 31st March '21, it's close to 4.9% as against last year's 3.9%, more by a percentage. On the capital adequacy, we are at 18.5%. And the [ registration ] continues to be at the same level. The collections for Q4 is much more than when compared to the comparable quarter. And the disbursement is around INR 2,400 crores as against last quarter INR 1,800 crores. The retail finance penetration for TVS CS share is around 42.5% in Q4 of FY '21. That's all on the -- and the debt equity is around 6.4x as against 6.2x last time.

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

My question pertains to the kind of price increases which we have taken in 1Q -- sorry, in fourth quarter, you indicated we have taken about 1% price increase. April would be similar, 1%, or it could be higher?

See, this year, first quarter, I spoke about Q4. In addition to that, April 21, we have taken another 1.6% price increases, okay? And we have been taking price increases in international as well. So we are looking at the opportunities. Whenever we are able to increase prices, we are also passing on to the customer. So that will continue because when the -- see, it is a combination of, like I said, on one side, premiumization; on one side, product mix, international business; on one side, cost reduction. But when the kind of commodity increases grow significantly higher, I think we are able to pass on a good proportion of that. And that focus will continue.

Okay. Okay. And so far, I mean, if you look at third quarter and fourth quarter combined, our total commodity cost inflation would not be more than 2%, 2.5% of what we have seen so far. Any sense how much more is yet to be reflected in our P&L? What the magnitude you expect in first half FY '22, given further inflation in commodity cost?

I think most of that has reflected, and that is the reason we have taken another 1.6%. This year, for example, Q1 is likely to be around 1.9%. And already, we have taken a price of 1.6%.

Okay. Okay.

So I think the remaining -- that 0.3% will be covered through various cost savings initiatives and all the product mix and international focus. So it is a journey we have to look at.

Sure. Sure. And can you also share about what is your budget for CapEx and investment in FY '22?

This year, the CapEx will be between INR 500 crores and INR 600 crores. We will closely monitor the Q1 situation and then take a call. But all these investments will be predominantly in EV and other emerging technologies and, of course, new products.

Right. Right. Right And investments?

I said about CapEx. I think investments, maybe TVS Credit Services maybe about INR 150 crores. And other some -- all other futuristic areas maybe another INR 100 crores or INR 150 crores, Desikan?

Yes.

Okay. And roughly...

See, all these investments, whether digital or the future projects, are going to help the company. I'm very confident. I'm very, very confident.

Sure, sure. And lastly, can you share export revenues for the quarter and spares revenues for fourth quarter and full year FY '21?

Just give a minute. Export revenue for this quarter is about -- you're are asking Q4, right?

Right.

INR 1,732 crores is exports.

Okay. And spares for fourth quarter and for year?

Spares, just a minute. Spares parts is about INR 532 crores.

And this is including exports, right?

All put together. They are all put together.

And for the full year?

For the full year, it is about INR 1,677 crores.

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

Wonderful performance, sir. Once again, excellent operational performance and cash flow generation. Many congratulations on that. Sir, my first question is, on the -- in the domestic front, if you see in the fourth quarter, we did see some increase in the consumer offers and schemes from some brands per se. But commodity inflation also inching up. Do you expect any major price war as the market slows down because of the COVID impact? Or do you see some pricing discipline being maintained in the market going forward? What is your read there, sir?

I think almost the industry has been talking on the price increase reasonably. I think the belief is that, that will continue going forward also, okay? As far as the other question, we don't participate in discounting of any of our brands. We have a very strong portfolio, and we want to continue in terms of a very good range. And as you know, even BS IV to BS VI, we had ETFi and RTFi technology, which gives huge benefits to the customers. And even in the international market, the HLX series, Apache, NTORQ, TVS King, all are doing extremely well. So I think each company will have their own strategy, okay? And I'm of the view that the material cost will be more or less depending upon the -- maybe the Q1 may not be the right time because of the COVID second wave. But once the demand starts picking up in Q2, I think the price increases might come in. But please understand, I think the products are -- as far as we are concerned, we have come up with certain technologies as first-in-class. I explained to you, including...

Yes sir. No, no, I'm not [indiscernible] et cetera. I was just worried from an overall market perspective, if there was -- if there are any...

See, market perspective, we have the focus. I'm pretty confident on our range and the customer satisfaction and the feedback what we're getting. And I think the area which is helping us is TVS CS. Again COVID wave 2 will have some challenges because, again, the collection or the focus on drive. But from Q2, it will again come back. So wave 2, that way, it can -- for a short term, it can affect, but it will not be like the wave 1 because of vaccination and the drive from the government. So this time, I think and -- maybe partial lockdown might be there. But overall, I think you will see a better Q2 and Q3 -- Q2 onwards, you will see a better -- the demand coming back.

Sure, sir. So my second question is on the -- in the export market, similar to what we are seeing in terms of electrification trends in India, is there any threat in any of the export geographies, let's say? The reason I'm asking is some of the African geographies are all taxi markets, majorly from the -- from a motorcycle perspective, which like it is called very well to an electrification mode per se. So is there any incrementally banned domestic market? Are you seeing higher threat of electrification in the export geographies? Or are these export geographies more insulated from the trend that may happen faster in India? So what are your thoughts on that?

See, I don't see electrification as a threat. I think it is going to be a new opportunity. I think in any international market, there is taxi market and then the commuter segment will come. I think the road infrastructure is basically better, premiumization. I think these are all cycles you will see country by country. In our experience, we have seen that. And as you know, we are committed in investing in green technologies and remain committed. So [ this is ] IC engines as well as CV and EV is also going to be the future technology, and we have seen these changes happening. So I am pretty positive about TVS Motor investing in the right technologies. And these markets, I don't see it as a threat. I think it is a great opportunity, which we have to embrace -- these changes we have to embrace and move on.

Sure. Sure, sir. Sure. Sir, on the cash flows, I see you had invested in the subsidiaries close to INR 406 crores for the full of FY '21. Out of that, how much would be in TVS Credit for the full year in terms of investments? And if you can also share some plans on the Norton investment we made? Any strategic thoughts that you can share that would helpful, sir? And one more, just added to that, on the balance sheet, I'm seeing the payables have started to increase at the end of the year. Is there any change in trade terms? If you can highlight that, that will also be helpful.

So the capital infusion in TVS Credit Service last year was INR 100 crores. And we also invested in digital-related investments last year. That's around close to INR 20 million, close to INR 17 million, INR 18 million. And ultra violet also, we had invested last year in one of the EV companies where we had invested close to INR 40 crores. On the payment side -- on the payable side, absolutely, there is no delay on the payable to any of our suppliers. They are all paid on time.

Okay. Okay. Understood, sir. And from Norton perspective, any specific thoughts that you would like to share, sir?

I think the strategy is getting worked out. Now we have moved into a proper location for manufacturing. I think the team is an excellent team there, and we are setting up all the facilities, and we are working out now with the entire team. I think the focus is first to make sure that we start producing there and then a very clear strategy is getting developed -- on product development, first strengthening the organization, supply chain network. So it's overall marketing strategy. So this -- as I said, this is a great brand. It is a unique brand. It is a global brand. It is going to help us going forward.

Best wishes. And once again, many congratulations on your continuing strong operational performance.

Thank you. Thank you. Thank you.

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

Can you hear me?

We can hear you. We can definitely hear you.

Yes. So as I was mentioning that exports have actually grown on a Y-o-Y basis. So can you help us understand how much of it was market share gains and how much is it driven by you entering new markets for new categories? Because it seems that you are definitely doing better than your peers in the export segment.

We are -- see, we have grown in Q4 about 74%. Industry grew by 33%. I think most of the market, we have entered in practically less than 1 year or more than 1 year. So it's only existing markets and existing product range. We would have given some variance, not really new products. For example, HLX series, we already have 100, 125, 150. Maybe 1 or 2 variants, we would have put it in certain markets, okay? And products like NTORQ, we have a phase wise implementation. So that would have come. So otherwise, it is all existing model and the range what is helping us. I think, overall, the feedback from the market is customers like our products. Customers like our -- they are delighted with the kind of quality level. I think that is the reason why it is growing very well. And these markets, like I said, most of the market, stable oil prices, politically stable now. Their COVID impact was there for a short time in Q1. But after that, the recovery has been much faster. So I think overall, availability of ForEx essential growth. So overall, I think it was a pretty good year for the industry as such.

Okay, okay. And just going back to your EV plan, so like you said, the iQube is ramping up quite well in from 1 city to 2 cities now. So I mean can you share any kind of monthly run rate that you would like to achieve over a 12 to 18 month period? Or what is the kind of capacity that you can do, if the demand really picked up for EVs in general?

See, we have to steady market by market. For example, currently, we are doing in Bangalore about 250 to 300. And I think there is a good pipeline of orders. So another 60 now we have gone. So it's very early stages to put a number to it, but feedback is very, very positive and encouraging because when we are going to be over 20 cities, I think we will see a good number -- monthly number.

Yes, yes, yes. So let me ask it slightly differently. In Bangalore, if you're doing 200 to 250 and say you enter 20 cities and all of them show good potential, which would mean that over the next 12- to 15-month period, you may have to do something like 5,000 to 6,001. So is that something that you can easily do? Or -- I mean, just trying to get a sense on that.

Yes. Capacities are not a big challenge. The challenges, you have to plan it in advance and the supply chain, everything. And today, supply chain is also responding very fast except for some challenges in the semiconductor industry, we had challenges. One was the semiconductor. And last year, sometime we had the container issue. So otherwise today, our supply chain in India is robust. Internationally, it is robust. Very quickly ramp up. So that's not an issue. The challenge is the acceptance from the customer. That, according to me, we are getting a very, very positive feedback from all the customers.

The next question is from the line of Hitesh Goel from Kotak Securities.

Very good set of results. Given the circumstances of increase in commodity costs, so can you shed some light on this? Q-on-Q, you said, cost reduction has been around 1%. Is this clear view?

See, the cost reduction has got -- all elements -- lever, commercial lever. So VAVE is one of them improving [Technical Difficulty]

Sorry to interrupt. The line of the management got disconnected. Please stay connected while we reconnected. [Technical Difficulty] Ladies and gentlemen, thank you for patiently holding the line. We have the management line connected back. Thank you, and over to you, sir.

So see, the material cost reduction will continue. The strategies include VAVE. It is process improvements and also reproduction, alternate sourcing, localization. So -- and also scale benefit. So it's a combination of many strategies put together, and it will continue.

And sir, my second question is on -- if you see the Vahan data in terms of retail numbers, the many months, we have seen that auto retail volumes in two-wheeler is negative, right? And this is a feedback we are getting from dealers as well. So what is your view on the demand side this year? What do you see industry growing at in FY '22 because of lockdown last year? So what do you think...

See, our estimate is, the Q1, there may be challenges, but it may not be as bad as last year Q1. Thanks to the vaccination drive from the government and all the initiatives. There may be partial lockdowns in many places because of the intensity. I think the vaccination is going to definitely help the urban cities. And the rural side, I think the reservoirs are full and the agri production is going to continue to be good this year. And this year also expecting a normal monsoon. So I think what is most important from all of us is to drive the 3 principles of wearing masks, social distancing and personal hygiene. If these are adhered, I think wave 2 also, we will get over. And definitely, from Q1, already April is going to be over in a couple of days. So Q2 -- May and June, I think, it will not be as bad as last year. Q2 onwards, we will see things definitely picking up. And you will see the -- there will be good opportunity. And the international market, definitely, market is continuing to do well, okay, because of the oil -- stability in oil prices and many other points, what I highlighted, ForEx availability, the stability of the foreign exchanges. So overall, I think this year should do well, okay? What percentage we have to closely study and quarter-by-quarter we have to look at it. Again, we don't have any problems on capacities. We don't have any issues on the ramp up. There may be some short-term challenges during Q1 because of this one, but every supplier has been supporting us, okay, in terms of supplying the parts. There are some challenges in semiconductor industry, as you know. But I think that also, I think those companies are making effort to support. So we'll have to see how it pans out.

Ladies and gentlemen, due to time constraints, this will be the last question, which is from the line of Nishit Jalan from Axis Capital.

We're audible to hear you. Hello?

Mr. Nishit Jalan has left the Queue. So we'll move to the next question, which is from the line of Vijay Sarthy from Anand Rathi.

Yes, sir, good set of numbers. Just wanted to understand one thing. Is it fair to assume that the average -- the other expenses that we incur every quarter, they're close to INR 505 crores to INR 510 crores. Is that a sustainable number to look irrespective of the revenue that you will generate in Q2, Q3? Have you got the miscellaneous and advertising and other publicity expenses completely controlled because that has been the driver, if I look at the full year numbers of your vis-à-vis while you've done really well in your gross level, but can we assume that, and therefore, your double-digit margin will sustain? Is that the way one should think about?

See, the cost reduction initiatives will continue. And definitely, the marketing expenses, we have started online and digital, that drive will continue. So overall, the focus on the company is on leveraging the revenue growth, premiumization, cost reduction initiatives, which include fixed cost and looking at digital way in marketing. So I think this is definitely going to make -- help us in sustained EBITDA improvement going forward. Thank you. Thank you, everyone. Stay safe, okay? And it was nice interacting with all of you. Like I said, I think let us -- the Q1, while there are challenges, thanks to the government initiatives of 18-plus getting vaccinated from 1st of May. I think that is going to definitely help us. It may not be as bad as what we have seen last year Q1. Strictly, we have to adhere to the 3 principles of wearing mask and social distancing and personal hygiene. That will definitely help in significantly reducing the number of cases. And with respect to Q2, we expect the markets to bounce back. In international market, we are seeing very good demand, thanks to our product range. So with a very strong portfolio of all the products, we are very confident that we will grow ahead of the industry, both in domestic and international markets. Like I said, overall operating leverage, better mix, lower material costs and fixed costs will help us to grow EBITDA sustainably going forward. Thank you. Thank you very much.

Thank you. On behalf of B&K Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.