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

We are happy to share that the 2 new products launched by the company, TVS Jupiter and TVS Raider, excellent feedback from the market. Thanks to all the customers. Let me now take very quickly the Q3 overall performance. During this quarter, company's operating revenue grew by 6%, INR 5,706 crores, as against INR 5,391 crores last year third quarter. Domestic market, company sold 5.81 lakh units of 2-wheelers against 7.26 lakhs. Our sales declined by 20% as against the industry decline of 25%. International market, company sold 2.53 lakhs of 2-wheeler units, growth of 12% as against the industry -- industry growth of 3%. Total two-wheeler sales 8.35 lakhs as against last year's [ 9.51 ] lakhs. The mix of products premium, Apache, NTORQ, Jupiter Classic, Grande, overall is 30%. Total sales of 3-wheelers are at 0.44 lakhs as against last year 0.38 lakhs, a growth 17%. In terms of EBITDA, this is the highest EBITDA, INR 568 crores, grew by 11%, as against last year's INR 511 crores. We registered the operating EBITDA margin of 10% as against 9.5% during last year's same quarter. Despite continuous increase in the commodity prices, with a focus on product mix premiumization, sustained cost reduction initiatives and price increases, the company could manage the material cost, as a percentage of sales to 76.3% as compared to 76.1% of last year. Company registered highest ever PBT of INR 391 crores, grew by 8%, as against last year's INR 362 crores. Profit after tax grew by 9% to INR 288 crores as against INR 266 crores. Year-to-date, I think the overall PBT, after exception items, is INR 871 crores as against INR 439 crores. Of course, the exceptional item is the INR 30 crores towards the COVID-19 in the first quarter. 9 months company's [ priorities ] picked up INR 619 crores as against last year's INR 323 crores. PT TVS has sold 19,000 units as against 15,700 units for last year. 3-wheelers, we sold about 2,200 as against 1,800 units last year. We are -- operating PBT is USD 0.5 million as against USD 0.3 million of last year, Q3. Year-to-date, our PT TVS posted an operating profit of USD 1.8 million as against a loss of USD 1.5 million during the first 9 months of last year. TVS Credit during this quarter posted a PBT of INR 75 crores as against INR 58 crores during Q3 of last year. Book size of the company, 31st December 2021 is INR 12,805 crores. We are confident of continuing the good performance in the next financial year -- Q4 and the next financial year. We are looking for outside capital and partners for value unlocking and future growth in TVS. With respect to new product launches, all of us know that TVS Raider and Jupiter 125, which were launched for the season, extremely good feedback, continues to have very good demand. We also had the RP series in TVS Racing, high-performance race machines, lineage, backed by 4 decades of rich racing heritage, TVS Racing, India's first factory racing team. The Race performance series will be introduced in TV Apache series of motorcycles. RTR 165 RP is the first product to be launched under the Race Performance with limited numbers. It has got the best ps 19.2 at 10,000 rpm. This is -- this motorcycle has equipped with features that include race tuned slipper clutch, adjustable clutch, and brake levers, and all new TVS Racing decals, red alloy wheels and new seat pattern. Along with that, you would have seen TV Apache RTR 4V series of motor vehicles that were launched with the new headlamp assembly, new design, signature [ day lamp ] daytime running lamp, 3 ride modes Urban, Sport and Rain. And it is -- the top variant is also equipped with SmartXonnect. Excellent feedback from the market. TVS NTORQ comes with Marvel Super Hero Spiderman power and torque. These are 2 popular Marvel characters you will all recollect last year, we had the same superhero series. We have very good feedback from the Gen Z. We are optimistic that our customers will continue to play smart with this launch, play tic. The new scooter SuperSquad edition inspired by Marvel heroes have got Ironman, Black Panther and Captain America launched last year. This is a -- you remember all of this. In the SmartXonnect and also TVS NTORQ 125 Race XP. So really, NTORQ is supported with all these variants and technology demonstrators, which are extremely good in the market, and we are getting very positive feedback. On EV, excellent positive response continues for TVS iQube. iQube continues to draw very good interest from EV intenders, and we have more than 6,000 booking as of now. The biggest challenge continues to be electronic part supply chain. However, we are able to -- thanks to the support from all of them, month after month, we are able to improve our production and the sales. We are continuously in discussion with major suppliers for a long-term arrangement, which is definitely giving us a lot of good positive improvement. Company, as announced earlier, we are -- we are already there in 33 cities. We will be reaching across the country by end of this financial year, and we will be starting in the international markets. We are also progressing our investments are INR 1,000 crores, building portfolio, next level of capacities and market development. We have entered into MoU with Tamil Nadu government to invest INR 1,200 crores for our future technologies and EV. We have created the capacity of 10,000 first, which we will be planning to deliver very soon by first quarter definitely, because of the challenges, what I highlighted in terms of the semiconductor. This will further scale up from Q2 onwards, and we have put some aggressive capacity plans, are being worked out for next financial year '22-'23. We are also committed to lead the technology development in EV and green fuels. Our product portfolio is in plan for catering to various segments in 2-wheelers and 3-wheelers. With our vision of electrification, we are envisaging a wide and reliable charging infrastructure for our EV customers across India. Our partnerships with widespread and reliable charging network like -- partners like Tata Power, CESL will substantially enhance the customer convenience. Company also is in the process of entering into partnership with other major charging infrastructure partners. CESL company is shortlisted for supplying over 2,000 electric 3-wheelers. We will start supply of these products soon. As announced last quarter, with BMW Motor ads, we will be developing a common platform by mutually tapping the emerging technologies in the future mobility space with special focus on EV. Keeping in mind the global requirement for customer segments in various markets, exclusive products for both companies will be developed on these common platforms and the companies will retail their products globally. What is the most important highlight is this [indiscernible] is completely designed, developed and manufactured, and including the Indian supply chain capabilities to provide best-in-class quality and economic advantage. We have entered into a strategic partnership with Swiggy. All of you know, they are the leading on-demand delivery platform. This is going to give us huge advantage and we will test the implementation of TVS Motor EV for food delivery and other on-demand services of Swiggy. This is in line with our commitment to expanding the presence in EV across all major cities by the end of this financial year. And as I highlighted, the newly formed subsidiary will give us -- the EV subsidiary will give us better flexibility, focus to create scale in the EV area globally. The company is actively progressing on this, and we'll update you soon. Recent investments, all of you would have seen, the Swiss E-Mobility Group. Just wanted to once again highlight that. This was acquired -- we acquired the majority stake through this subsidiary. This reaffirms TVS Motors commitment to expansion in Europe, the largest market outside of China, through a portfolio of premium and technology-leading brands, including EGO Movement. SEMG is the market-leading provider of e-mobility solutions within the DACH region, operating the largest pure-play e-bike retail chain, M-way and [indiscernible]. By company its extensive physical network and e-commerce platforms and 2 online platforms and 31 physical stores strategically located across Switzerland. As highlighted earlier, they have a strong omnichannel distribution and aspirational brands. TVSM is very much excited to enhance the product range further and scale the company in this region and beyond. SEMG is #1 in Swiss with a market share of 20%. During last year, the reported revenue was USD 74 million and a PAT of USD 6.4 million. And this year, the expected revenue will be $100 million. SEMG is going to be very strategic and this is going to give us an opportunity to grow in the personal mobility business, including e-scooter, e-cargo bikes and which are emerging trends in global markets. What is most important is the current penetration of approximately 15% of the total bicycle population in Europe and growing at a CAGR of almost 18%, the market for e-bicycles called significant growth potential in the global industry, is likely to touch $25 billion in 5 years. So this is going to be a profitable acquisition with a growing platform with an opportunity to drive further value, which will augur the TVS vision and long-term plans. Coming to Q4. The monsoon is going to be normal. And this COVID, I think all of us know that it's -- while it is spreading fast, the severity is much, much lesser. Practically, there is no hospitalization and people are recovering very fast, which is a very, very positive news. And most of the areas now, there are no lockdowns, even Sundays are open. With our new 2 products, 125cc Raider and Jupiter 125 and the excitement in our products in NTORQ, Apache 4V, the BTO in RR 310, we are very confident that we will grow ahead of the industry. Export of 3-wheelers and 2-wheelers are likely to grow in the coming quarters, because of the stable economic and political situations in all the TVS operating geographies. The crude oil prices and the positive impact of the dependent economies is also going to help us, especially in Africa, Central America. And Sri Lanka, we are seeing some signs of relaxing its restrictions on import of vehicles. All these are going to help us and the current portfolio, what we have on the product side. Also, the container availability issues are becoming better now. It is available. And the COVID-related issues are also becoming slightly better. So overall, both in 2-wheelers and 3-wheelers, we will continue to grow ahead of the market. We are definitely continuing the trend -- we are seeing the continued trend of the premiumization in all markets. So we are confident that Apache, Raider, NTORQ, Jupiter ZX, Jupiter Grande Series and Jupiter 125 will continue to do well, both in domestic and international market. And the kind of countermeasures we have put to improve the premium product production. There are some challenges on semiconductor availability, especially for some of the premium products. But we have built a very strong relationship, which will help us definitely going forward. We are optimistic that these things will improve month after month. The month of January, the company has taken up prices partially to mitigate further commodity cost pressures, whatever we have seen. And this will be our constant endeavor to look at wherever there are opportunities to increase prices with a strong brand, we will look at it. We are very confident that we will grow ahead of the industry with the kind of product portfolio, both in domestic and the international market. Products like -- brands like Apache, Jupiter, NTORQ, Star Range, HLX, Radeon, TVS King. I think -- and recently launched Raider and Jupiter 125. Robust revenue growth, increased premiumization, continued cost reduction initiatives on material costs and other fixed costs, will definitely lead to sustained EBITDA improvements. As I said, despite various headwinds we were able to achieve EBITDA of 10% during the last quarter. Company is confident of continuing this EBITDA growth journey, and company is also confident of scaling the EV faster and better. Thank you.

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

Congratulations on a very good set of results. I have 2 questions. Firstly, I wanted to check on average selling prices. We've seen a pretty sharp improvement on a quarter-on-quarter basis. Could you call out any specific factors which have caused this? And should we expect these kind of average selling prices to sustain? And also if you could share the spare parts revenue and export revenue?

The price increases we have taken over last year, Q3, is almost 5% in the last quarter.

Okay. We've taken a 5% price increase. Because in the last call, I think you mentioned you've taken a 1% price increase?

I'm saying Q3 and Q3 -- last year Q3 to this year, Q3 is 4.9%. And if I look at Q2 to Q3, it's almost 1.5%.

But the average selling prices are up almost like 6%.

1.1%. No, no, Q2 to Q3. This year, Q2 to Q3 is 1.1%. Last year, Q3 to Q3 is almost 4.5% -- almost 5%.

Yes. But I'm saying that, if I look at Q2 to Q3, the average selling price that we calculate dividing the revenues by volume, then it is up almost like 6%. So anything to call out over there?

Last quarter to this quarter, the price increase is only 1.1%. Maybe the variants and other new products, whatever we have launched that has definitely helped. Because we have 2 launches in the 125 series. And the same way, we have also increased prices in the exports. So only those are the overall -- that is the only reason.

Okay. And the revenues for spare parts and exports?

Spare parts, just give me a minute. Overall spare parts, you are asking, right?

Yes, sir.

Overall spare parts is about -- for the quarter is about INR 659 crores.

And exports?

Export revenue?

Yes, sir.

Export revenue is INR 1,878 crores.

Okay. The second question was related to this consolidated result, if I see. I'm referring to segmental results. And what we see, consolidated profit has actually gone down on a Y-o-Y basis. And even the -- if I look at 2 Part A, which is automotive vehicles and spare parts, that has also gone down on a Y-o-Y basis. So the gap between stand-alone PBT and the segmental PBT is pretty large for this particular quarter. So anything which is different in this quarter?

No. If I look at the TVS Motor, you have seen the standalone. You have seen the TVS credit, okay. Other all subsidiaries are invested, and we are very confident that all of them will start yielding very good results. PT TVS is also making profit.

Sir, if I see, the PBT that we have last year is INR 393 crores, given -- I'm referring to consolidated segment information for the quarter. And this year, it is INR 359 crores. It's actually gone down by 9%. And within that, actually, the major gap, which is there is in the automotive vehicles and parts, which has gone down from INR 368 crores to INR 346 crores on a Y-o-Y basis.

Yes, that is primarily because of the TVS Norton and the other subsidiaries share losses, like we highlighted last time. They are the investments for future.

Sure, sir. So could you call out like.

Yes. There, the investments, whatever we have done, I think this is the time where we have to support them, building the product portfolio and also really support even the TVS digital. So these are the areas we are investing and they are the losses, but we are pretty confident that they are going to give us very good returns going forward.

So the losses have increased on a quarter-on-quarter basis over there?

So these are investments. I don't look at these as losses. I'm pretty confident that these we will definitely start yielding results in the going forward quarters. And for example, Norton may take time, but the Digital whatever we are investing are going to definitely help us for the future.

Got it. And sir, last question the automotive parts component also.

Just a minute, please remember what I used to talk about PT TVS and TVS ES. Because we invested, today they are giving very good returns to the company.

And sir, this auto component also, we've seen a loss increasing this quarter compared to last year as well as last quarter. So could you also just throw some light as to how we see that progress?

I think the business has started, and we are pretty confident that next year, this will also start becoming positive.

The next question is from the line of Binay Singh from Morgan Stanley.

Congratulations for a good set of numbers. My first question is on the e-bike side. You've made 2 investments relating to that, both in Europe. What is the long-term strategy over there? What kind of investment do you plan to make over there? And is this predominantly going to be focused on the Europe side? Or will you take the products to other geographies also?

I think what is most important is SEMG is the lead player in the market. You are seeing, it's a profitable company. They have got excellent range of products. They have got omnichannel distribution. They have got a retail chain. And all these products can definitely be leveraged for many markets. At this point of time, we want to grow it in the European market. Then we are putting a proper strategy, how do we leverage. I think there is a very strong product portfolio from the Indian side. There is a very strong product portfolio coming from both EGO Movement and SEMG. I think it will be a great benefit as a company to look at the global market, how do we leverage, which brands, where. I think that is the strategy we are working on at this point of time.

So will this need a lot of investment in the initial year? Any number you would call out, anything around that?

I think these are very futuristic investments, and we are very, very confident that these strategic investments will definitely yield results.

Right. And sir, secondly, when I look at the EV order book. As you know, all the start-ups are also giving a number on their EV order book. You called out 6,000 units or so. So how do you look at that? Because most of the start-ups are somewhere between 25,000 to 70,000, 80,000 units of order book on the electric side. So how would you look at your order book on that? And linked to that, is there any market share target that you would aspire in the electric space also a year down the line or so, when most of the supply chain issues are behind us?

See, this is exactly what I highlighted last time also. First of all, I'm extremely happy that iQube is -- has got excellent response from the market and all the customers are delighted about it, okay? So the first objective is to come up with products, which delight the customer. Second objective is there are various segments in the market. So we are focusing on a range of product portfolio, which to be launched into the market in the next few quarters and also enter into the 3-wheeler. Once the customers are delighted and you have an order book and there is a very good top line, I think all other strategies will follow, because we have very good partnership with suppliers. Like I said, one of the most important thing is any of this product, you need at least once they are all in line with Atmanirbhar Bharat, that's completely designed and developed in-house by TVS and we have partnership with our supply chain. And with them, we are trying to completely develop and deliver. And you will see some of the launches soon. Okay. So at this point of time, firstly, to delight the customer, delight with the range, delight with the technology, delight with the demonstrator on the attractive quality [indiscernible] quality, grow the top line. In the process, build relationship with the suppliers and customers, and that is going to help us in building the entire ecosystem. And as much as possible, we want to develop this ecosystem within India, and we can leverage all these products globally. For example, once we launch iQube in India, then we will be taking it to many global markets. So there is a very clear strategy, okay? And we are also -- as I highlighted, we are also developing a common platform. This time, the entire design and development of the platform or even BMW and TVS on the EV side is by us. And this is going to be available for the global market. So it's a very clear strategic vision of looking at as though the EV has come, as though the EV has arrived, we are moving in that direction.

Right. Right. And then sir, lastly, just on exports. We've obviously had a very strong year on the export side. but lately, both for you and your peers, we've started to see that on that higher base volumes are starting to decline. How would you look at export run rate from current levels, were there any one-offs in the last 2, 3 months, because of which volumes are suppressed? Or is it high base now, because of which we are seeing growth declining?

There is nothing one-offs, first. Second, all of us need to appreciate that export markets are doing well, okay? And the industry will continue to do well, okay? But please understand there are also pricing issues are there, container costs have gone up. Ultimately, all this goes to the customer. So for the customer to digest, it may take time. But very good thing is many of these markets, the penetration levels are so low. And the good thing is, like India has got the wave 3, most of these markets, the wave 3 is also going to be exactly like what we have seen in India. And what is most important is the political situation and the economic situations are stable. Crude oil prices are holding on. And I'm pretty confident the kind of range, and I told you about Sri Lanka, we have started getting the orders for import of vehicles, okay? So many markets are now slowly opening up, okay? We are pretty confident that Myanmar will also start slowly opening up. So overall, industry will grow, definitely grow in the international market, okay? And we will grow ahead of the market primarily because of the product portfolio and the customer delight what we offer in the export market, both in 2-wheeler and 3-wheeler.

[Operator Instructions] The next question is from the line of Sonal Gupta from L&T Mutual Fund.

Just first thing, I just wanted to get, what is the other operating income for this quarter?

Just give me a minute.

And sir, in the meantime, I mean, like -- I mean, like you mentioned in your opening comments, you're looking to have outside invest partners and investors in which entity? I mean, you're looking at the EV subsidiary.

TVS Credit.

TVS Credit.

Desikan, you want to highlight?

No, TVS Credit again, as informed by Kenan, the book size is INR 12,805 crores as of 31st December. And the year-end likely to be between INR 14,000 crores to INR 15,000 crores. And the very good part in the last 4 months, we have not made any provision towards the NPA. Our collections are extremely good there. And the gross NPA, it stands as of 31st December was 3.9% as against 4.4% or 4.3% of September '21. And the net NPA is around 2.2% as against 2.75% as of September '21. And a very healthy capital adequacy ratio of 18.8%. And overall collections, as I said, was around INR 2,700 crores when compared to the comparable quarter of around INR 2,200 crores. The disbursements again was close to INR 4,000 crores in this quarter as against INR 2,800 crores. So overall, the performance has been extremely good. What we are looking for is the outside capital and the partners for one, value unlocking and for future growth. This is what we are looking at exploring various options on that.

Got it, sir. And sir, just I wanted to understand, are you -- any thoughts on like raising external capital in EV subsidiary?

We will come back with the clear proposal.

No, no. It is in the discussion stage. I think once we firm up the overall strategy, we will share with the status.

Sure. sir, would you have the other operating income number?

Other operating, there is nothing new. I think these are all normal. There is no one-off in that.

But absolute number would be around INR 60 crores odd?

Yes.

The next question is from the line of Amyn Pirani from JPMorgan Chase.

So my first question is on the EV side. As you mentioned something about electric 3-wheelers and 2,000 to be supplied. Can you clarify on that? Because you still not launched the product. So what's the time line of that?

This is to the government agency, which is CESL. CESL is the Convergence Energy Services Limited, so there, we participated and we have about an order book of 2,000 that we will be starting. Closer to launch, I'll give you more details.

Okay. And is there like a time line in the order as to, it has to happen over like a 1-year period or something like that?

Yes, yes. Some time line is that. I don't have -- I don't remember that exactly, but they will be -- closer to launch, we will give more details on this.

And would it be fair to assume that you will also be launching it on retail.

It will be available for normal market as well.

Okay. Okay. And on that, can you help us understand, obviously, on the ICE 3-wheeler side, you have a very strong export market, but on the domestic side, your market share has been on the lower side. So with this EV 3-wheeler, I mean, is there a chance of changing that? And what could be different with the EV 3-wheelers when you're launching it on the domestic market?

I think domestic market, we are very, very sure that the EV will do well, okay? Domestic market, otherwise, there were permits and there were many, many challenges. So I don't want to delve into that -- beyond that and definitely, EV 3-wheelers will have a great opportunity both in the domestic and international.

Okay. And sir, lastly, you mentioned the 10,000 EV 2-wheeler capacity by first quarter of next financial year. So this is per month capacity that you intend to deliver by 1Q?

Absolutely. We have capacity today. But the challenge is we have -- like I said, we are working very closely with the semiconductor suppliers. And they are also supporting. They are also supporting. It is not that they're not supporting. Month after month, you are able to see. For example, January, you have seen the number. Month after month, you will see the improvement. So we are still trying for March, but a lot of challenges are there. So definitely, we are confident that Q1 next financial year will definitely be going 10,000. And beyond that, we have greater aspirations and plans with the product portfolio of launches. We want to take it to next level.

Okay. And then lastly, if I may, so with the partnership with Swiggy. Can you help us understand, I mean, will it be with the iQube product? Or is there a new product plan for that category? And what could be the time line for that?

You have seen whatever we have shared, and I'm very sure there are many products. We have a portfolio of products. The strength of TVS is definitely designing and developing products like you have seen ICE, our products, retail products. So you can be very positive that our products will do -- delight the customer, and it will be applicable for even delivery kind of purposes.

Sure, sir. So looking forward to more information on that.

[Operator Instructions] The next question is from the line of Nitin Arora from Axis Mutual Fund.

So sorry for drilling more on the ASP side. Your exports, ASP looks up 10% to 12% on a quarter-on-quarter basis based on the numbers which you have given. Can you help us understand what led to such increase in quarter-on-quarter increase of the price hike in the export market? And in the export market, is it largely done? The cost has been covered now or you think further price hikes would be taken there? That's my.

The exports also the same, whatever the cost increases in raw material and the recent cost increases on, again, aluminum. So same thing is available in the international market also, because we practically make all our vehicles in India only, and it is exported. So that is what we are trying to do. There is still -- always there is a lag, there is still uncovered portion. But that, we will look at it on a time-based scale and we look at the market in terms of opportunity. So this is something, which we will closely monitor and look at. What is most important is the product portfolio what we have and the healthy demand. And as I highlight, we never keep more than 30 days of stock, okay. In the international market, we also look at the time for delivery from India to various markets. So very clear. We want our customers, distributors also to have very healthy working capital management, both in domestic market and international markets. So we look at the VAHAN share, we look at the very clear what is the stock level. Exactly like what we do in India, we do it in the capacity market, so.

So Kenan, just to add, the mix also improved in exports led by premium motorcycles. That's also one other possibility.

Absolutely. Yes. That definitely the premiumization as a focus area has helped both in domestic and international.

Got it. Sir, my second question is the way you told us the kind of bookings you have in electric part. When we look at today, there are about 15, 20 players in the system, having a double or triple times of bookings of what the number you stated. Everyone has a different capacity. They're having almost a 15,000 bookings, some have 20,000 booking. Given going forward, once you start selling the numbers, which you said in the last con call as well and assuming the bookings keep increasing for the industry players, how do you define your market share in [indiscernible], because 20, 22 players having everyone are running with a very strong order backlog. And everyone's execution will come together, once the supply chain solve for everyone together. So that time, the base business you think in the domestic side would take some more time, more challenges would come? Or you think electric and petrol will go together itself? So if you can throw some light on that.

Electrification definitely is our strategy and focus. Now your question has got 2 elements. According to me, you will see electrification moving much faster in many cities in India. There are -- when you look at urban and semi-urban and rural, there are -- its own challenges, okay? So electrification, the proportion will go up, okay? And our hypothesis is you will see more electrification coming in the scooter category, because it has got a lot of convenience. And our hypothesis is scooter as a category, the proportion will expand. The category share will expand. This is number one. Number two, overall, as an industry, 2-wheeler has got huge opportunity to grow, because the public transport issues are there. India is young. You have seen the kind of investments this budget has announced on infrastructure. All these are going to increase the mobility needs in India. So there was a period about 3 years back where we have seen the CAGR of 10%, 12% in 2-wheelers, it is going to come. Definitely, it's going to come, number one. Number two, you will see the affordability of the people also going up. Because in the last 36 months, I have repeatedly said this, a combination of many initiatives, which are in the right direction. But the costs, including the BS VI, including the safety, including the AHO, including the third-party insurance. So all put together, what has happened is the cost has gone up to almost 40%. During this period, in the last 8 quarters, you had the pandemic challenges, a lot of close downs, and the entry level, especially the entry-level people not able to -- the budget customers not able to come to the market. Premium is only going up. Even in the premium, we have seen some challenges. So overall, the industry has not been positive and growing. But I'm very confident that going forward, we are already seeing in the COVID this time. So I'm very confident that there will be mobility needs. India is done, the penetration will go up. EV will go up, urbanization will happen. So it is going to see leveraging TVS capability on investment behind EV is going to give us huge advantage, okay? And the kind of ICE. ICE vehicles are green. With the BS VI and the future norms, whatever you are going to be. So you are going to see the future mobility in terms of both EV and the renewed green 2-wheelers, it is likely to happen. Now I'm very confident that we -- as a company, we are working very clearly that EV is the future. And EV gives us a great opportunity, not only within India, but globally.

The next question is from the line of Pramod Kumar from UBS Securities.

Congratulations on a good set of numbers, especially your EBITDA journey. Because if I look at the financial performance of the past on similar volumes in Q3 FY '20, your EBITDA was INR 382 crores. On the similar volumes, now EBITDA has expanded to INR 567 crores with EBITDA per vehicle nearly getting closer to the market leader. So I think congratulations on that. I think, an incredible speed given the macro of the industry. And starting with a follow-up question, before I get to my main question. On the Norton side, is it right to assume that given the product launches around the corner with the new plants and new product portfolio, the expenses levels there are elevated with not much of volume from the model lineup? And that extends, the [ losses ] kind of increasing at a subsidiary level. Is the understanding right?

So far, we have not launched any product from Norton. I think we always look at the right product at the right quality and respect to the brand. You will see the product launches from Norton. But what is most important is getting the overall progress in terms of building the plant, making sure that the supply chain is in place. So it's a very important strategic investment, whatever we have done. And I always believe that first you have to make sure that the product is really delighting -- going to delight the customer. So that work is going on. I think when the product is ready, we will come back to you. There is a strategy. There is a very clear investment we have made. It is a great brand, okay? So it is definitely going to help us going forward and it is going to really support the overall portfolio of TVS Motors.

Then the main question 1 on ICE and 1 on EV. On Raider and Jupiter, the feedback generally from dealers is that you've seen some exceptional demand. Customer response to both are [ high ]. But the problem remains in is supply chain in volumes kind of struggling to go beyond 10,000, 12,000 units per month. So I just want to understand, is it again semi supply chain issues that you're facing on these 2 brands? And then given the response what you have seen with dealers and customers, is there a number which you can share where these 2 brands will kind of settle in terms of contribution to the domestic portfolio? And also, what are the plans for exports on these 2 brands?

Please stay connected on the line. Ladies and gentlemen, please stay connected, while we reconnect the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected.

Sorry, I'll repeat the question again. Basically, it's on Raider and Jupiter. The general feedback from dealers is that the customer response is quite strong and there are multi-month waiting period for both the brands. So I just want to understand what is holding back the production lever for this particular -- these 2 brands? Because I understand model-wise data suggests not more than 12,000 kind of a production. So what is the hurdle there? And where do you see these 2 brands kind of settling once your production constraints kind of get eased?

I think today, when we look at both the brands, the feedback from the market is very positive. And we are also investing in terms of the capacities for the future, okay. So I'm pretty confident that you will see, going forward, numbers going up.

Any particular number, because I think -- can it be more than 10% of the overall domestic volume portfolio, both these brands together?

Both will grow. Always I look at can we grow in terms of overall market share for the company. First, any new product, can we grow overall market share for the company? That is the first objective and which is happening. I think which is happening, and we are very pleased with that. So we will consistently -- we don't want any customer to wait. We want to at least satisfy 95%, 96% of the requirement from the market, and we will do that. Definitely, we'll do that.

Last question on the EV side. You did talk about the upgraded version of iQube from the management in various media articles, interviews as well. So if you can just -- and also talked about the 3-wheeler now. So if you can just help us understand, if not getting to specific, at least quantify the number of EV launches or major updates, what you will do over the next 2 years and the categories which you're trying to address? So if you can just throw some more color, so that we get kind of color of the product pipeline, what you kind of have on -- in terms of which is kind of reaching pre-production levels or near commercial launch level. If you can just help us understand what kind of portfolio [ fees ] would have say, 2 years down the line on the EV ecosystem? I understand there is plans for even cargo 3-wheelers as well, which are a category, which we have never done in the past. If you could just throw some more color on the EV thing, which will help us understand your medium term plan on this particular category?

We have an excellent team. We have investments on people, and we have put it on the product portfolio. Next 8 quarters, we will delight you. I promise you that. What and which product at what time, I will announce closer to the launch.

The next question is from the Prateek Poddar from Nippon India Mutual Fund.

Congratulations on a great set of numbers. So just 1 question on this strategy, and especially in Europe, if you can just help us understand, why have we gone up in this segment? How big is this and then deployed a considerable amount of capital behind this segment. So the synergy which we get out of that would be really helpful?

We very clearly highlighted that in Europe, this is 1 segment which is growing very fast. The CAGR has been 18%, and e-bicycles also significant growth potential. Can you hear me?

Yes, I can hear you, sir.

I think this is -- very clearly highlighted that the current penetration of the e-cycles market in Europe is growing very fast. There is a huge potential in this area, this is number one. And with the omnichannel distribution and the aspirational brands, there are many brands under the SEMG, which is going to give a huge benefit. And we can also leverage all the products of TVS whatever we are designing, developing in India. So it's going to be a synergy, okay? And that is the main reason. And the returns are also pretty good here. This is 1 company which has really made good profit after tax, good revenue growth. So we have looked at all aspects and we have invested behind this.

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

Just to follow up on the previous question. So do we plan to launch our electric 2-wheelers also through this e-bike network or that will be separate in the European market?

We -- as I told you, we are working on the strategy. Closer to a complete finalization of the strategy, we will definitely share with you. But at this point of time, we understand there's a lot of synergy between the EV, whatever products we are doing, whatever products we are doing with BMW, the e-cycles, okay? If you put it together, you will understand these are for various segments, global markets. I think overall, it is going to definitely meet the future vision of EV and future mobility.

Okay. Okay. Got it. Secondly, with respect to CapEx and investment for FY '22 and '23. Can you throw some light on what will be the CapEx for FY '22 and '23 and investment numbers separately?

Next year, we are in the workout. I think I'll be able to share with you soon.

Sure. For FY '22?

This year, That is '21, '22 will be around INR 750 crores, including EV.

And investment?

Investments -- overall investment you have seen. Recently, whatever we have announced.

INR [indiscernible] crores, close to INR 750 crores.

Basically, we want to say, I think most of the investments are done.

Yes. I think the investments in TVS DS, we will be investing another INR 50 crores, to INR 100 crores going forward. And the other acquisition investment earlier we reported. And again SEMG, as what Kenan has indicated, it's a profit making company. And the next year investments, we will come back to you once we finalize. We are [ working ] on it.

Got it. Got it. And a follow-up question on TVS credit. It seems we haven't seen any material impact of new RBI guidelines on NK recognition. Can you confirm that? The change in RBI guidelines, we haven't seen any impact in third quarter.

I mean, there is an impact. Not that there is no impact. All the companies -- all the Indian companies will have an impact. Unfortunately, TVS Credit Services has always been very consolidated in making provisions and therefore, that's helping us, and will not impact the P&L. That's what I want to say. We've always been making higher provisions, and that's clearly helping us, despite the circular which was issued, and was impacting Indian companies.

Okay. KNR sir said that we did not -- we had not made any provisioning in the last 4 months. So, I was just.

Because the reason is the collections are extremely good now. As I said, the collections for this quarter is close to INR 2,700 crores, otherwise in a normal quarter around INR 2,200 crores. The old provisions that we have made earlier, we are able to collect it now. That's the reason why the gross NPA is at 3.9% as against normally around 4.3% to 4.4%. [indiscernible] the business. The collections are good, there will be -- therefore and again we have provided in the past, on the consolidated basis, they are all helping us.

Got it. And sir, can you share your USD INR realization for the quarter.

INR 75.

The next question is from the line of Gunjan Prithyani from Bank of America.

Most of my questions have been answered. Just 2 clarifications on this CapEx and investments. I'm not sure, if I got this right. CapEx is INR 750 crores for F '22. And on the investments, when I see, you've already invested about INR 750 crores. And you are yet to -- the spend for this recent acquisition is yet to happen. And you've also called that you will be taking an incremental more stake in SEMG. So could you just give us parity beyond INR 750 crores, how much more has to go towards investments?

See, this year's CapEx is almost done and the investment also, most of the things are done. The next year's investments and the CapEx is under workout. So that's what me and Desikan said. See, this year, the CapEx is INR 750 crores. And the investments are also around INR 750 crores. Maybe some investments could come in TVS Credit. That's what Desikan highlighted.

There's no further investment we have contemplating. Whatever SEMG we have already reported and probably another INR 100 crores, if investment in [indiscernible] sales is going to be required.

Okay. So SEMG is already reflected in the INR 750 crores?

Yes. The INR 750 crores can go maybe another INR 50 crores, INR 60 crores, what Desikan is saying.

So sir, just clarifying. SEMG investment is already reflected in the number for 9 months.

Correct.

Okay. Got it. And the second question is on EVs. Of course, there's been a lot of discussion already. But just broadly trying to get sense on this whole fixed versus swapping. I mean, what is the thought process there given the government is now trying to look at something.

Sorry. To clarify here, the INR 100 crores or whatever investment in SEMG has happened only during this quarter only in January. So that will definitely reflected only in this quarter. I just wanted to clarify that one. Sorry, I interrupted in between.

The INR 750 crores belongs to Q3. The INR 600 crores happened in this quarter.

I just wanted to clarify things. Sorry about that. Please continue your question.

So then INR 750 crores done in 9 months, and we will have incremental, almost INR 600 crores in quarter 4, which will be towards SEMG as well as a little bit of investment in TVS Credit.

That's correct. Maybe you can put another INR 100 crores in TVS, so put together maybe another INR 700 crores in Q4. Correct, Desikan?

Absolutely. So INR 750 crores already done in January and another INR 100 crores may be possible before March. You are absolutely right.

Okay. So INR 1,400 crores for this year and next year, you will call out later. That's clear now. The second 1 was on fixed versus swapping. Given the regulation is being work towards looking at swapping as an option, and you guys have also -- have a tie-up with Swiggy, probably is a segment where swapping could work better. So maybe just broadly share your thoughts on fixed versus swapping. How we are approaching it when you're looking at the product portfolio rollout?

This is too early to comment on. So we are also internally discussing. So we will come back to you on this.

The next question is from the line of Pramod Amthe from Incred Capital.

Considering your aggressive stance on the M&A, could you give us some color what wide spaces do you think to be covered up through the M&A process in the next 1 to 2 years, considering you have impressive ramp-up plan for EV?

See, we have a very clear road map on the EV, okay? We have seen there is a very strong investment in design, development on the EV portfolio in India. We are also looking at the spaces where we can also look at invest, which are likely to grow disproportionately in the future. And we are also looking at very clearly leveraging our association with BMW and all are -- both developing markets and developed markets.

Like it has been difficult to even look through for us at the e-bikes. So similarly, you feel are the wide gaps when you plan for your next 2 years, which you need to cover through M&A. Anything you want to highlight?

Quarter after quarter, we will update you. But that is a very clear enough strategy behind EV.

Okay. And second 1 question related to the same. Considering that, do you guys feel at the Board level, there is too much on the plate and how will you spend time for so many acquisitions and run them successfully, considering that the Indonesia 1 acquisition itself took a pretty long time. You have been successful there, but it took a long time to turn around. So in that background, isn't it too much on the plate?

I think what is most important is we have to look at the opportunities and seize the opportunity. And the strength of TVS is we have a very strong team, okay? And that team is able to manage pretty well.

One last question is with regard to Auto PLI. Have you applied for PLI?

Yes.

And in that sense, what's the medium term, how it's going to come through, in which segments you plan to invest? And what will help you to make benefit of those incentives? And how do you see -- if it's for EVs, do you see for you, it will give an advantage versus some of the smaller players who have not been able to invest?

I think the strength of TVS is definitely we have -- you have seen iQube. Yes -- you will see many new products and the platforms, which are going to be in the next 8 quarters, you will see that. I think the strength is the design development, a real, real spirit of Atmanirbhar and they are using it for the global market. This is exactly what the PLI stands for. I think PLI stands for design, development and completely manufacturing and making it global, making India brand global. So I think we are really reflecting the true spirit of PLI.

But in the product segment, sir, what will come under that PLI for you?

Closer to launch, I'll definitely tell you.

Thank you very much.

Can we take the last question, please?

Yes. Can we have this as the last question, please?

We'll take the last question from the line of Shyam Sundar Sriram from Sundaram Mutual Fund.

A very operational performance in a very tough quarter per se. Congratulations on that. Sir, my question is, if you do a product geography map for TVS Motors. So in Europe, for example, we want to be premium motorcycle via Norton. EV electric bicycle. In India, we want to be in ICE, 2-wheeler, 3-wheeler, EV 2-wheeler, 3-wheeler and lastly, growing export pie as well. For each of these segments need management bandwidth as well as growth capital as well. So in this product geography matrix, which are top 3 priorities for you in the next 3 years, is the first part of the question? Secondly, from a management bandwidth perspective, how are we preparing the organization to focus on these newer opportunities? If you can give some perspective on the management development as well.

We have -- what is most important is ability to delight the customer in terms of the product and design and development capability. And we have got very good partnership with our supply chain. I think that will continue. I think even if you look at the last 5 years of ICE, that is exactly what we have demonstrated, whether it is India, whether it's Indonesia, whether it is the relationship with BMW. I think the same way of work, maybe when it comes to EV, we are also looking at very clearly how do we invest between more on software, more on the new technology areas that work is going on. And TVS has got a great brand value. Today, we can attract, retain very good talent. And we are a responsible company. So -- and we have grown in international market, thanks to getting good distributors. So it is end-to-end supply chain from supply -- good suppliers, good distributor, good dealers, end-to-end, we have to look at in totality. And we have excellent partnerships that certain things we design, but it is completely developed and manufactured by some of our suppliers, who have worked, long-term relationship. So there is a very clear action planning in resourcing as well, both in HR, partnerships and also working with global institutes. As you know, we had -- in the past, we have worked with many international universities, many Indian universities. It's a combination of really working with and partnering with some of the best-in-class people, best-in-class talent, nurturing and growing internal talent, helping suppliers as well as dealers in the front end. So this is something TVS is good at. And we are pretty confident that the same is going to help us going forward in the EV area.

Right, sir. And just from the top 3 priorities focused segments or focused segment geography map, what would be our top 3 segments that we want to focus?

Seize the opportunity. Many things are going to unfold, seize the opportunity.

Thank you very much. I now hand the conference over to the management for closing comments.

I think since there are a lot of questions on EV, we will delight all of you with the product portfolio from TVS, okay? And we are very confident that we will be able to ramp up. And all the new investments in the Swift e-mobility, also the EGO, all are going to give a huge advantage. The relationship with BMW and designing and developing the common platform is going to make a global impact. And as you know, in ICE, we have got an excellent product range. We will grow ahead of the industry, both in domestic and international with the kind of product portfolio that we have. We will make sure that the revenue grows and there is the increased premiumization, better mix and a significant focus on the cost reduction what we have started about a couple of years back. We are very confident that we will lead to sustain our EBITDA improvement quarter after quarter. Thank you. Stay safe, and thank you.

Thank you very much. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.