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

Hello, Sir, good morning. Pleased to meet you. Raj from Taiyo Pacific Partners.

You are based out of?

Seattle.

Okay. Sure.

All right. Thank you so much.

[indiscernible] Mr. KNR, he is the CEO and Director of TVS Motor Company. Right now, based out of factory at Hosur.

Perfect. Right. Pleased to meet you and thank you for your time again. So I'll probably give a brief introduction about myself and the firm that I represent, and then we can get started. So myself, Raj from Taiyo Pacific Partners. So Taiyo is a hedge fund, based out of Seattle. The firm was started in the year 2001 by 3 founding partners: Brian, Michael and John. The basic thought process was to identify potential investment opportunities in Japan. And we are not just passive investors in any company that we invest in, we also want to engage with the company and try to increase the shareholder value, and that's been the ideology on which the -- it's more like activist fund. There are like more than 5 or 6 Japanese companies where we have more than 5% shareholder. So our founder Brian sits on the Boards of more than 5 or 6 -- more than 4 public listed companies in Japan. So the India Fund took off in the year 2011 with the same thought process, and we wanted to invest in small and mid-cap needs. So as we speak, the total AUM for the company is around $3.5 billion. A major portion of it is in the Japanese companies. India fund is relatively small. It's around $160 million or $170 million. Right now, we are invested in about 20 public listed companies. We are kind of sector agnostic. It's -- the investments is spread across, but there are sectors which we avoid. Sorry, is it okay if I...

No, that's fine.

Okay. Okay. Sorry -- sorry about that. Yes. So we are in general sector-agnostic PR invested across. Sectors which we avoid are PSUs of real estate, where there's less transparency of commodities, metals, utilities and stuff like that. But otherwise, I think we are spread across. As far as our auto exposure is concerned, I mean, we had exposure to ancillaries, not OEMs per se. We were invested in the top wiring harness manufacturer, and we were -- I mean, we are invested in one of the leading off-highway tire manufacturer. I think it's pretty easy to guess the name, but I am not suppose to give the name, anyway.

[indiscernible].

So -- Correct. That's right. And the off-highway tire I'm talking about is probably a Mumbai-based one, 5% global market share, and I think that's easy as well. So right now, I mean, we are looking to increase our auto exposure as well. And two-wheelers, I mean, it's been in a period of lull. Last 2 years had double-digit decline. And so, I mean, -- so we thought of engaging with 2-wheeler companies and try to see what the future prospects are because rural demand has been sluggish for a long time because of COVID and many other reasons, supply chain constraints, the chip shortage and compounded by the Russia-Ukraine geopolitical tensions and all that. So briefly about myself, I mean, I've been with this firm for 4 years. I started my career with TCS, during much of time involved with the National Stock Exchange, doing development and maintenance of the trading platform. That was in Bombay for about 1.5 years. Post which, somehow I got excited in the financial market, so I went to U.K. to do my Masters in Finance, came back, interned with the wealth management firm based out of Bangalore. The firm was started by Mrunmay Das, who was ex-CIO of Azim Prem. So he left the firm, he started his own wealth management. I interned there for about 6 months, and after that, I worked with Murugappa Company for about 3 years as a sell-side research analyst covering auto and IT. So back then -- this was long back, sir, this was 2011. '10, '11.

You are Chennai based?

Yes, I am a Chennai boy, as my name implies. So back then, I think S. G. Murali was your CFO during those -- 10 years back, maybe. So I was -- I mean, your stock was around INR 100 or something like that. I don't exactly remember how or what it was. But I used to cover TVS Motors as well 10 years back, so I know about the company. So it's been a long time. I mean -- I mean, it's been a long time since I've been tracking. But the point is I was with Chola for 3 years, and after that, I went on to work as a senior research analyst for CRISIL. I was offshore research associate for Deutsche Bank, post which I got an offer from Deutsche to join their research team, and that's when I decided to go to the U.S. for my MBA. So I did my MBA in University of Notre Dame. It's not just an MBA, it's a dual degree masters, MBA and Masters in Business Analytics. Somewhere during the entire journey, I also completed the CFA and as a part of the internship, I joined Taiyo, then I went out to work as a contractor during the second year of my MBA program, got a full-time role. So in the last 3 years, I mean, I've been working as a full time and for 1 year maybe as an intern and a [ contractor ]. So my journey with this firm has been for 4 years. A good thing about the firm is that they give you a lot of freedom to do due diligence checks. I mean, before when I was a sell-side research analyst, the only thing I got to do was meet the company maybe 2 times or 3 times in a year, build detailed financial models and come up with the target prices and all that. But here, I mean, our company says, go talk to the customers, distributors, suppliers, go visit their manufacturing facilities, get a feel of what the product is, and they give you a complete freedom. And for all our portfolio companies, we make it a point to talk to the companies at least once in a quarter. So we directly interact with the promoters. I mean, our founding partners think what's really important, I mean, they got burnt with a few investments in India. I don't want to name them. But -- so their thought process is, we should know who we are dealing with. And so our due diligence process is a little detailed. I mean, they want to talk to the promoters, understand the company, what the story is, what the competitive advantage is and everything has to fall together. So due diligence takes about 3 or 4 months before even we decide to invest in the company because we -- right now, if I talk [indiscernible] TVS is a good idea and we get on a Zoom call with CEO, CFO. And after they are convinced, I come down again, visit your Hosur plant or like, I mean, talk to customers or do some due diligence checks, and then the process gets -- the ball gets rolling. The initial -- I mean, the ticket size for us would be $5 million to $20 million as we speak. I mean, our largest position is about -- slightly above $20 million, so that's the sweet spot for our investing. I think I've been talking a lot. I mean, without further ado, I would like to...

No, no, we've gained a clear picture about your company, your association with the company or your intent of this visit. Since you said you know about TVS, do you want us to give a brief about the TVS or straight away go to the questions? Or do you have any specific question?

I don't want a detailed history of the company, sir, but something on the latest business updates? Like right now, in the last 2 years, like I mentioned, the 2-wheeler industry was the hardest hit among all the other product categories. And I believe 50% of it is because of the chip shortage, more than anything...

I think I know the right person to take you through.

And I just wanted to understand your thought process on that because when I was reading your annual report, I was just looking at the MD&A part, and even you are of the same thought process that rural demand is going to come back strongly this year. And just 3 days back, I had a meeting with the auto ancillary company in Mumbai. And they were of the opinion that -- they were also of the opinion that Diwali is when the 2-wheeler market will be back to pre-COVID volumes. And they're also of the opinion that the chip shortage issues that's been haunting the industry for so long, that will be gone even before the end of this year. So, I mean, I'm just trying to connect all the dots, and I wanted to hear from you what the future prospects are and why that optimism that rural demand is going to come back strongly.

Yes. First of all, we should all know that last 12 quarters is not normal. It is abnormal. So if I just forget about those 12 quarters and if you look at on a macro basis, why 2-wheelers in this country will grow? Three reasons. Number one, India has got the right demography, more young people, and there is a need for mobility. Number two, India public transport system is, you know, I don't have to explain. There's practically no public transport system here. If at all something is there, it is there in the urban area, okay? But that is also not sufficient. India always lags behind creating any capacity. You go to the airports, now, it is overflowing. Always, we think that, oh, we should have another 100 [ aerobridges ] or possibly another big area to keep the flights. All -- so India, the population is our strength, and the young people are our strengths. However, the capacity creation has been very, very low in terms of public transport. So the only right option and a flexible option is a 2-wheeler. Now coming to the employment. If I look at both rural and urban put together, more than 50% of the population are self-employed. When I say self-employed, starting from somebody like using the agriculture products or milk distribution or newspaper distribution or vegetable distribution, so on and so forth, plumber, mechanic, maintenance guy, electrician because they use the 2-wheeler to attend multiple customers. The more they attend, the more money they will make on a daily basis. So there's a backdrop. So given this -- and the only, according to me, that what the government has done brilliant is creating very good infrastructures. We have compared 5 years back and today, there are number of highways, connecting many parts of India is amazing, okay? There was a period where we have to depend upon train or buses. But today, I can tell you, even for me, from here to Chennai, faster to come through the highway than to come through the flight, including all the processes of security, checking, waiting in the airport, okay? I get in here, 4 hours, I am in Chennai. Okay. So that kind of infrastructure is definitely helping the people, okay? And pre-COVID situation, if you look at it, India, the CAGR used to be 10% to 12% on the 2-wheeler side. I'm of the opinion that, that is the real steady state demand you will see here. Now what has happened pre-COVID also we should know that. Today, very important is homologation, safety standards, the emission norms, Indian [indiscernible], not the European. India is ahead of those countries. We may all wonder is it required? Because the kind of infrastructure what we have, the roads what we have, the city traffic what we have, and other reasons for pollution we have, should we be BS-VI? Should we be ahead of Euro 5? All these questions we can ask. Or do we need to have ABS in 125 cc and above? Because ABS is required when you drive 100 kilometers, 120 kilometers, 150 kilometers, okay? If you look at urban or a semi-urban area, maximum, maximum speed you can get is 40 kilometers. However, I think starting to me these are the right things. So if I put it just before COVID, we have demonetization. I'm taking you a little before this. Demonetization, why it's important is, 50% of our customers buy with cash. So practically, for 12 months, cash was not available, okay. What was available was used for running the family, running the education of the children. So that affected the industry. Then came the GST, okay? Surprising over all the decision makers, majority of the 2-wheelers used to buy the bottom of the pyramid or middle of the pyramid were self-employed, [indiscernible] 28%, whereas smartphone in India is 18%.

The GST [indiscernible]...

Yes. So these are some -- all of you should know about it because this day, 10% more is much higher, much higher. Then came the BS III to BS IV, then came BS -- all the safety norms. Then came the BS IV to BS VI. It's like a hot step and jump, BS IV to -- BS V is not there, BS IV to BS VI. In the meantime, insurance companies thought that 2-wheelers's third-party insurance should be better than car. In India, car third-party insurance is for 3 years, but 2-wheelers is 5 years. Again, one increase was there about 3 years back. Last month also, there is another increase, okay. All put together -- and of course, all the raw material increases, there are increases. So all put together, what you have seen in the last, let's say, 12 to 18 quarters is something like 50% increase in the cost. 50%, okay? Unfortunately, the income level of these people have not gone up by that. The same thing in the earlier years used to be done over a period of, let us say, 10 years. So people had some ability to absorb this energy and then their income levels will also help. And this COVID in the last 8 quarters, especially the Wave 1 and Wave 2 was severe. Wave 3 is okay. Now, people are pretty confident. Most of the people, even if they have cold, they don't report. They take their own medicine 3 days and then after that, they are -- just like a normal flu, thanks to the vaccination drive in India, whatever we have seen. Now coming to the rural area, this anxiety of hospitalization, this COVID wave, I think we are very, very optimistic that, that is not there. So which means they are able to sell, they are able to travel, they are able to distribute, they are able to see the momentum, right? But we [indiscernible] right. Unfortunately, when we went to BS VI, everything was electronic fuel injection. All 2-wheelers are electronic fuel injection. So the content of semiconductors is substantially more, okay? And because the content of has gone up, that is seriously affecting, okay? We have some problems in ABS. We have problems in semiconductors for some of the vehicles. Particularly, we had 2 important products, Apache and Raider. Seriously, it got affected. April was practically 0 production, May was 0 production. This month is a little better. So this is something which is definitely -- and this is the period after 2 years. There are 2 seasons, not only Diwali season. April, May, June is the marriage season in India. And we don't like [ dowry ] system, but unfortunately, people buy 2-wheelers and give it to them. So this is one perspective. Another perspective is definitely, India is becoming much more aspirational. Young people want premium products, okay. Of course, their father, mother or whoever, they will say, no, no, I'll get you a simple scooter. But they want only the premium scooter. They want only the premium motorcycle, okay? And those people who are just employed, they will always buy a premium product. So the premiumization has been moving in a big way, okay? If you travel on a Saturday or Sunday in this highway, okay, if possible, you try, what you see in Europe, what you see in U.S., what you see in many parts of the developed world, you will see here. Clubs of people, 200, 300 people riding together, pleasure. You know they ride for about 200 kilometers together. They enjoy breakfast, lunch. The primary thing is that because the infrastructure is there, they want to have to get together. They want to use the bike or a scooter, premium scooter as a device. There are a lot of racing clubs in India. For example, Apache Racing Club is one of the prominent clubs in India. These are all -- these are all, in my opinion, the transformation journey we have seen as a country looking forward to more modern, more stylish, more aspirational products. Now coming to TVS. I hope I have given you a broad -- what is the logic, why it will come to 10% to 12%, okay? Now one more important thing I'll tell you, scooters in the urban, okay? Currently, the category share of scooters is about -- in the 2-wheeler industry, it's about 32%, 33%. I am of a personal view that it will go substantially up because, again, multiple use in the urban, father can use, mother can use, daughter, son, anybody. And given the traffic, no, no, it is variable type of product, you don't have a [ gear ], there's no pain for your hands or the [ spines ], very convenient, okay? And typically, for the Indian women for their attire or whatever they wear, saris or this one, a scooter is a far, far comfortable platform, okay? So that is the reason it has come to 32% to 33%. Now, coming to TVS, I think we are very strong in premium Apache is #1 now in the -- as a brand in the market share in India. In scooters, we are a strong #2, because Honda is #1. But as a portfolio, we are starting from the old traditional Scooty, Scooty Zest and Jupiter, Jupiter 110 and Jupiter 125, then the premium, NTORQ, outstanding range of products, okay? And if you look at, we have an excellent response from the market, okay? Then coming to the commuter motorcycles and moped. We have excellent products, but that is the place which is affected by the rural. But now, we are confident that slowly it will pick up, okay? Then on the motorcycles, after Apache, it is the 125 cc Raider, very modern. Those young people who cannot afford an Apache, okay, they will settle with the Raider, okay. It's a compromised decision between the father and the son, okay. But after some time, he will jump into Apache. Apache is really aspirational. It is very young d model. Strength of the -- this is on the domestic market. If I look at the international market, the strength of TVS is outstanding range, from moped to scooters to motorcycles, up to RR310. RR310 is a product that we have a common platform with BMW. They have products out of that. We have products out of that, okay? And it has got every element of the 1,200 cc in that, okay. So now, coming to international market. Currently, we are -- of course, through BMW, we are there in every market. We have sold more than 100,000 bikes through BMW, okay? But if I look at otherwise predominantly our exports is more on developing markets, like Africa, Latin America, ASEAN, Asia, okay? So practically, every market. And all of you know that we have a manufacturing complete business in Indonesia. So the products there are different [indiscernible]. If you look at the profile of the people, they are shorter, they are thinner. There are more women use these products, so that is why we have designed and developed. The core, the -- give you a little bit of CAGR, I think last 5 years, international market, the CAGR was about [ 8% ]. We have done 18%, okay. Domestic markets, same way there CAGR was about 3%, and we have done 8%. So we have continued to outgrow vis-a-vis the industry, thanks to the kind of product range what we have, and we focus on customer satisfaction. We are JD Power #1 in all types of quality, also APEAL quality. APEAL quality is very, very important because that is the aspiration. That is based on the features, the kind of technology that you give. For example, a simple scooter has got connective features, okay? It has got complete connectivity with Bluetooth. Now, we have voice assist. The latest scooter whatever we have put into the market has got voice. The important thing is, aspirationally, the proportion of people buying may be initially low, but I have seen over a period of time, 50% of the portfolio will be this kind of products because customers are very much impressed, okay? And the most important thing, even for African market, we design and develop for the local market. We don't make something -- for example, India, if I look at even colors are -- choices are different. If you go to east, it is all about the red. If you go to some part of Kerala, it is all about black, okay? And the posture, the kind of features they like, they are completely different. So Africa, for example, it is a [ taxi ] market predominantly. We have [indiscernible]. So market by market, we understand the customer. We spend a lot of time. Whatever we make, we want to be best-in-class quality, best-in-class customer satisfaction. And we continue to delight the customers through the features and the benefits working. The other important thing is on service because the first service, when somebody buys the bike, it comes after exactly 2 to 3 weeks. So we have very clearly, very well-defined service outlets with genuine spare parts. So the customer care post that is very, very critical. And as you know, JD Power, again, we are #1 for the last 5 years in customer service vis-a-vis any competition. And so the priority, strategy one is customer satisfaction. Number 2, with excellent product range and customer service satisfaction, we want to grow ahead of the industry. Why is this second priority? Because with our top line, there is no line, okay? So -- and this is applicable not only for us, for the distributors, dealers, suppliers. They want volume and their supply chain wants volume. So our objective number 2, our priority number 2 is always grow ahead of the industry. And objective 3, of course, in the last couple of years, we have started with both #1 and 2. I think that is the right time we have to improve the profit share in the industry. So you would have seen, despite many challenges, many challenges, I can probably say that we are the only company who have done better and better on the EBITDA, okay? Maybe they are higher in terms of absolute value, but if you look year after year, we are doing better and better on the EBITDA, primarily because of, number 1, volume; number 2, premiumization; number [indiscernible] international market; number 3, presence in the 3-wheeler segment; number 4, the cost reduction, material cost reduction. And material cost reduction is part many elements on commonality, looking at the overall modularity of the design, looking at the rate, looking at parts formalization. Whenever the volume is higher, you can also open second supplier, okay, because we don't -- normally, we don't have multiple suppliers. But when the volume starts growing, we are able to get second supplier. We were importing almost 20%, 22% before COVID. Now, we have brought it down to 7%, okay? So there are many initiatives including looking at every aspect of value analysis and value engineering without reducing any customer satisfaction or affecting any quality. So this has helped in improving our material cost and then in turn improve over profitability. Equally, I think marketing, we used to spend heavily. Now we have gone maximum through digital. That has substantially cut down the marketing cost. Really, really, it has helped. Now coming to the EV side. We actually started our EV journey about 10 years back. We knew that the EV is going to be one of the important future mobility it is going to come, and that is the genesis of iQube, okay? As I speak, we have more than 20,000 bookings. Unfortunately, the semiconductor industry has been a challenge, but they are also now understanding and we are supporting. So you will see we moving to 10,000 very soon per month and then moving to 25,000 exit this year. The best thing is iQube has got a huge customer base and customer delight, that is pulling in the market, okay. What is our -- what is our product without its competition, if I look at it. We set -- like you said, our customers doesn't know technology. They're agnostic. What they want is convenience. If somebody uses -- the entire family in India, typically, you go in the road, you will see that husband, wife, 2 children plus lot of bags, everything will be there on the bike, okay. Is it safe? I don't know. But that is the way, because the -- you should correlate the first point whatever I said. The flexibility, the public transport system not being there. So mobility -- if somebody has to be mobile from A to B, their's only way is to 2-wheeler. So I think that's the same thing. The only thing is it's an EV, it's not IC, that's all. So that's why it's successful, okay? I think I have given a broad coverage of...

[indiscernible] questions you can ask.

No, that was quite detailed. Thank you so much for that, sir. I mean -- so just on the electric vehicle, I mean, you started this journey 10 years back and so last year, I mean, if I remember correctly, the number that you mentioned in the annual report is you sold 10,000 vehicles, and you have some 20% market share in the electric vehicle segment, right? And this year, you're talking about -- you said like you have 20,000 bookings, and you are targeting...

10,000 -- per month we want to move down 10,000, maybe July, August, you will see 10,000. And exit, we want to go to something like 25,000 per month.

Okay. Okay. So it will be 25,000, okay. And -- okay. And so the chip shortage will be gone by then, that's why you're confident you'll be able to get...

Chip shortage also, I want to give you a little brief. Unfortunately, the Wave 1 and Wave 2, everybody stopped, nobody knew what is happening, including the chip companies also stopped. So that is one discontinued. Second, if you look at it, unfortunately for the semiconductor industry, 3 mishaps; 1, Renaissance in Japan had a fire accident. I think [ TI ] had a flood in U.S. So 3 big companies had another stoppage of 45 days to 60 days. okay? These 2. Number three, during this period, the COVID period, suddenly the consumer durables multiplier effect we saw. I know that we never use to use this kind of a meeting. We were physical, face-to-face. Suddenly, Teams, Zoom, I don't know, I think everybody said, work from home, okay. There are a lot of new kind of way of work also came out. So the semiconductor industry and other industry, we are not able to even manage [indiscernible]. On one side, they had a stoppage. On one side, some companies had disaster, okay? Then when the -- and the regulations in India. Earlier, BS IV doesn't require so much of semiconductor. BS-VI is maximum is semiconductor, okay? So all put together, suddenly, we are able to say now EV. Everybody is focusing on EV. EV has got -- you have controllers, you have [ VCUs ], you have motors, you have battery management system. So if you look at it, everywhere there is a [ BCB ], there is chips, there are [ MOSFETs ]. So it is -- the kind of multiplayer, I don't think anybody has seen, anybody has predicted. And suddenly, the manufacturing [ lead times ] are now 52 weeks, okay? So it takes a combined effort, and I'm very sure, very sure that we will be able to come out of it, we will be able to come out of it. Because today, reasonably, people have got a predictability saying that these are the likely kind of volumes, which we are likely to do, and we have also given 52 weeks of volume projections and practically what is likely to have in the next 2 years, 3 years. So I think there is a change we are all expecting.

Understood. And how is the electric vehicle penetration in scooters catching up? I mean, what I hear is, I mean, a lot of different companies, right, [ Okinawa ], Ola, all that. So your -- how is your product superior to the peers, and like, how do you expect to gain on market share in the electric vehicle segment going forward?

[indiscernible] customer satisfaction and quality. I think if you are in India, you can speak to some of our customers, some of our dealers, some of the -- Ola. Ola, for example, now it is off the shelf available is what I'm hearing, okay?

Because of the fire accidents, right?

I don't know, I don't know. I think people don't look at fire alone. People look at overall what is the value they are getting out of a product, okay? And if you look at Okinawa or Ampere, or some of other companies like Hero, I think I don't want to comment on them. What is so specific about TVS is, whenever you're able to come here, I can show you, we design. We design, develop, we manufacture. For example, iQube, the entire controllers are ours, the BMS system is ours, okay? The entire motor design is ours, and we have partnered with suppliers to deliver that, okay. It's not just buying some subassembly from some part of the world and then assembling and giving it. You may get some advantage by doing that, but you will not have a sustained advantage. And you will see, for example, you would have seen in the last 1 months, iQube -- 2 versions, one base version and S version, and you will see now an ST version with [ Western class ] range, okay, and features. Features what people have not seen. Possibly in the next 6 months, you will see a premium product from India -- from TVS. And as you know, we are designing and developing for a global 2-wheeler cool vehicle for BMW and for us. We are designing, completely designing and developing. So what is more critical, according to me, as a sustainable model is that element of design and development, not just assembly and do something and give it to the people because you -- see, I can't give you my product plan, but I can tell you, the strength of TVS is I have a Jupiter base version, a ZX version, a Grande version, a classic version, and a Jupiter 125 version, NTORQ. And even in NTORQ, you have [ 80 ], XP. I think you can go through the leaflet. Each one is targeted on specific customer segments, okay? If you look at Apache, 160, 160 2V, 160 4V, 4V is different, 2V is different. It's 4-valve technology and 2 valve technology, okay? Then you get into 180, then you get into 200, then you get into 310. So I think the core of the -- you understand the customer, you understand the space and then design and develop based on that. That is what is going to give you the cutting edge. And of course, never compromise quality. Never compromise quality. Even if it takes a couple of months, nothing, nothing to worry.

Understood. And a question on the margins. The way you have actually gone from single-digit margins to double digits. I mean, back then, if I understand correctly, you were investing in product development, marketing and all that. And now it's -- you're probably reaping results, I mean, on that because of premiumization, higher than market industry volumes and [ exports ] 3-wheelers and all that, all the reasons that you mentioned. So going forward, I mean, the margin trajectory will be double digits on a sustainable basis. Is that a fair assumption?

Certainly right. Absolutely right. See, the key investments, what you said is absolutely right. You have to invest behind product and technology. And that will give you better and better products and better and better variants because consumers today, thanks to the smartphone, they want new, new revisions, new, new features in their product. I am of the view that maybe the premium kind of an EV vehicle, they will have big screens with all the attachments. They will also use it for mobility.

Right, right. Understood. Understood. So just on the industry, I mean, going back to the top line without which there is no line. So I mean, on that -- so the steady-state CAGR is like 10% to 12% for the industry. But in the last 5 years, I mean, starting with demon, there have been multiple reasons that plagued the industry and for which the cost has gone up by as much as 50%, like you mentioned and all that. Now it's -- if I understand correctly, it's on the cusp of upcycle, bottom of an upcycle. Things have gradually improved. Now we are looking at kind of a favorable monsoon for this year. Chip shortage problems will subside. Rural demand will come back. And you -- your plan is to grow higher than the industry, so maybe higher than 12% is what you are probably internally working with. So 15% on the top line.

See, I don't want to give you a guidance because industry will do well this year, okay? What percentage? We have to very closely look at it because the constraints when -- when this will get completely eradicated on the semiconductor, we have to closely monitor. We have closely monitored, okay? And overall, I'm of the view that we have a very, very good opportunity to grow with other new products plus existing products, okay? You would have seen our VAHAN share. We have gained more than 3%. So 3% in 3 months, 4 months time when we had all the headwinds of semiconductor. Assume once semiconductors starts coming in for Raider and Jupiter 125, both in domestic markets, there's a huge opportunity to take the growth trajectory of this company to a much, much higher level.

Understood. Understood. And what percentage of your sales is currently exports? And what was it like 5 years back, 5, 6 years back?

Yes. 30%. 30% is [indiscernible].

30% [indiscernible].

I forgot to mention -- one important thing I forgot to mention is that we have a very strong in-house financing firm, TVS Credit Services. And Desikan can give you a quick update of the book size and the profit.

It's a very healthy company. We are a good book size now, around close to INR 16,000 crores. And the quality of the book is also very, very sound. There are no NPAs in the last 6 months now continuously. We don't make any provision. Collections are extremely robust comparable or better than the pre-COVID days today. And we are extremely prudent in the provisioning norms. Whatever the RBI is talking about, it is just going to be prospective. We have already implemented that. To that extent, it's a very sound company, well run professionally. We have been really cautious in the business growth because of the COVID, and we were careful, otherwise you would have even cross [indiscernible].

Right. So if all the customers who buy vehicles from you, how many of them take finance from TVS?

As far as the 2-wheeler industry is concerned, the penetration, retail finance penetration is close to 50%, 52% today. Now, over the 50%, 50% is serviced by TVS Credit, and the rest are by other financials.

So 50% by TVS Credit. So you are the largest player?

For -- no, I'm not talking about the industry. I'm talking about TVS Motor company.

Okay, okay. Got it, got it.

We don't do for others. TVS as finance company does not finance other 2-wheeler. It's only for TVS. The portfolio has got other financing products, like for used trucks, tractors, cross-sell, MSME funding, all these things are there. It constitutes really 20% 2-wheeler. The rest, 80% -- 20%, 25%. The rest 75% comes from other products.

Understood. Understood. Fair enough. Just a question on your BMW collaboration, right? 2013 or '14 is when you entered into a steady collaboration. And since then, I think we have seen, what, 2 or 3 product launches, 300 cc or 350 cc from them. So I just wanted to understand your thought process on how that collaboration is panning out? And what percentage of your revenues is coming through those BMW products as we speak? Any thoughts on that?

I think I can see, it's more than the percentage, it's a brand rub off because we -- see, if you look at the BMW themselves, they will be selling about 130,000, 140,000 bikes. Of that, 25,000 bikes is from TVS Motor. They are all high priced, and they are 1,200 cc up to 1,800 cc, and some of the prices are even higher than cars. So what is most important is the brand rub between these 2 companies. That is what we need to look at it. And on the future relationship, I already told you that jointly we are designing and developing -- I can't give the specs, but it's going to be a cool 2-wheeler for the global market. And for BMW, they will have their branding and design, we will have our branding. But the platform will be former. So...

Okay. So India will be used as a export hub then for that product, whatever that you're going to come up with?

Yes. Absolutely. Total market, we are designing the product for them, not only manufacturing. Designing, developing, manufacturing and the global supply for entire BMW. Same platform we will be using for our own 2-wheeler globally [indiscernible] 2-wheeler.

So question on your product mix. I mean, earlier, you mentioned that 33% of the industries are dominated by scooters, right? And that will only grow faster than the motorcycles itself because of the product versatility and all that. So are you gearing -- more of your new product launches are towards scooters. I mean, electric -- I mean, it's probably all scooters, I would say. So the share of scooters will go up higher than the motorcycles, right, going forward? So just trying to understand -- Yes. So just to complete my question. Just to -- I'm trying to understand the realizations between -- the margins between scooters and motorcycles, which is higher, and can you give any ballpark estimate of?

First of all, we don't give that product level guidance. I think what is most important is every product has to make healthy margin. So every product, every product has to make healthy margin. If you have to grow now above 10% EBITDA, you can't [indiscernible] any brand. So we are very [indiscernible] about that. And what I have seen is, for example, I can give you one simple example. When we started Jupiter, we only had a base version. Base version was priced, let's say, INR 50,000. Then we came up with variants of ZX, Classic, okay? They're even higher than our competitor. Our competitor, the best competitor is Honda. But they have features, they have elements of certain connect with the customer, which are far, far superior. If this base version is INR 50,000, these versions are INR 55,000, INR 60,000, INR 65,000, okay? And today, I can give you more than 50% of the customers buy the variants with the far, far higher aspiration and price.

Understood. So just a question on -- I mean, goes back to something earlier that you mentioned. Before demon, 50% of your customers used to buy motorcycles with cash, right?

The cash means they are all legal cash. See, in the rural part of the country, see, cash is something which is -- it is a legitimate cash...

Understood, understood. And how that has changed to now...

Now, everything is -- demon because of demon people are...

So everything is -- okay.

There's no cash transactions.

Right, right.

You have to stop [indiscernible] the questions. We have one meeting at 11 for both of us.

All right. I think I've covered most of the questions. So just -- I mean, on the broader level, if I understand, I mean, you want to grow higher than the industry, 10% to 12%. I mean, that will be achieved this year.

10% to 12%, you are saying. We are not commenting on the industry projected growth this year. What's going to happen for industry growth...

I said -- 10% to 12% is a CAGR whatever we have seen in the industry. That I am expecting to...

Yes, yes. So just to clarify, not for this year per se. For the next 2 to 3 years, I mean, the industry is probably looking at 10% to 12% now that the things have stabilized and all the macro issues are gone. And you will be doing better than that. Market share gains will continue. On the margins, I mean, you are at double digits. With the operating leverage benefits, everything kicking in because the volumes are better than the industry and the premiumization, 3-wheeler mix and all that, that will only slightly improve going forward. Directionally, it will be on upward trajectory. I don't want a number per se on that. And so, I mean, if I have to factor things in my mind, I mean like, okay, I mean, greater than 12% of the top line and bottom line, because of the margin improvement and all that, it should be around 20% or so, CAGR terms, I mean, not for FY '23 going forward. Is that a [indiscernible] assumption?

No guidance. I think you are intelligent. You can...

No, no, I understand, sir. I don't want any numbers. I mean, I just -- because my team will ask me like what...

You can do the math. We have -- otherwise, what we have summarized it correctly. Our aim is to grow ahead in the industry. Our aim is we have demonstrated in the last 4, 5 quarters about our EBITDA journey, and that will grow because they are all sustainable actions taken. It's not a [indiscernible] or a quarter. And therefore, we feel that directionally, we will grow. That's all we can say, I can't comment anything.

No, I completely understand.

And last point, I wanted to also highlight to you. Whatever we are doing inside the company, we are doing with the distributors also. We have the leanest stocks into our distributors. They pay cash and carry and take the material, both in domestic...

There's no credit [indiscernible].

There is no credit. There is no credit from the company. It is...

You can't push. Whatever sold is retailed.

Understood. Got it. Sir, just one more question. I'm sorry...

These are a unique model, not seen in the industry.

Understood. Understood. Sorry, if I can just squeeze in one more question. Recently, I mean, we noticed that management changed, right? Venu Srinivasan and...

No, no management changed because of the regulatory recommendations that the relative cannot be the Chairman and the Managing Director cannot be relatives. Sudarshan is the Managing Director. Sudarshan was the earlier Chairman. So the law recommended, though it is not mandatory today, Chairman and the Managing Directors should not be related. The Executive Chairman and the Executive Managing Director should not be related. That was a recommendation. It is not a mandatory one. So we have postponed it now. But we wanted to implement, our Chairman implement. Therefore, Mr. Ralf is now the Chairman. He's a Non-Executive Chairman of the company. And Venu Srinivasan is the Chairman Emeritus and the Managing Director, and Sudarshan Venu is the Managing Director. So the law permits 2 Managing Directors, therefore, they continue to be the 2 Managing Directors. There's no change overall. There's absolutely no change in the all -- there's no change.

All right. I'll sum it up then. I mean, thank you so much for your time. I mean, can I, I mean give you a card or something, I mean, because the next time I don't want to use a broker to set up the meeting, I can directly reach out to you.

You have [indiscernible] number, my secretary, who met you now.

I can take down. Okay, I'll take down...

Yes. Yes, I'll just [indiscernible] come out. I'll give my card also, but you can reach out to him. He will coordinate and organize.

Understood. Understood. Perfect.

Any time -- next time when you are coming, make sure that you can spend a day in the factory, you can see. Seeing is believing.

I believe that's important.

Sure, sure. I'd love to. I mean, I would come in. 10 years back was when I went to your Hosur Plant. I mean, now I think it's...

Now it's a different plant now...

Okay. It's a different -- all right. Thank you so much for that invitation.

Thank you.

Thank you.

Thank you for your time. All the best. Wish you all the very best, I mean.

Thank you for your time.