Analyzing...
For Eicher Motors Limited
Atul Sharma Company Secretary
As above
ATUL SHARMA 2024.11.19 18:13:42 +05'30'
“Eicher Motors Limited Q2 FY-25 Earnings Conference Call” MANAGEMENT: MR. SIDDHARTHALAL– MANAGINGDIRECTOR& CHIEF EXECUTIVEOFFICER, EICHERMOTORSLIMITED. MR. B GOVINDARAJAN– CHIEFEXECUTIVEOFFICER, ROYALENFIELD. MS. VIDHYASRINIVASAN– CHIEFFINANCIALOFFICER, EICHERMOTORSLIMITED. MR. VINODAGGRAWAL– MANAGINGDIRECTOR& CHIEF EXECUTIVEOFFICER, VE COMMERCIALVEHICLESLTD. MODERATOR: MR. MUKESHSARAF– AVENDUSSPARK Page1of22
Ladies and gentlemen, good day and welcome to the Eicher Motors Limited Q2 FY2025 Earnings Conference Call hosted by Avendus Spark. This conference call may contain forward-looking statements aboutthecompanywhichare basedonthebeliefs,opinionsandexpectationsofthecompanyasondateofthiscall.These statementsarenotguaranteesoffutureperformanceandinvolverisksanduncertaintiesthatare difficult to predict. As a reminder, all participants' lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentationconcludes.Shouldyouneedany assistance during this conference, please signal foranoperatorbypressing“*”followedby “0” on your touchtone telephones. Please note that this conference call is being recorded. I now hand the conference over to Mr. MukeshSaraffromAvendusSpark.Thankyouand over to you sir. MukeshSaraf: Thankyou,Farah.Goodeveningeveryone.Welcometothis2QFY25PostResultsConference Call of Eicher Motors Limited. From the management team we have with us, Mr. Vinod Aggarwal–MDandCEOofVE Commercial Vehicles; Mr. B. Govindarajan – CEO of Royal Enfield; and Ms. Vidhya Srinivasan – CFO, Eicher Motors Limited. Iwillnowhandoverthecallfor“OpeningRemarks”fromMr.VinodAggarwalfirstandthen Mr. Govindarajan. Over to you sir. Helloeveryone,andwelcometotheEicherMotorsLimitedearningscallforthe2ndQuarter ended September 30, 2024.Beforegettingintotheupdatesforthequarter,wewouldliketo thank our shareholders for the strong support towards the resolutions presented during the AGM that was held in August. DuringQ2wehaveseencontinuedmomentumbothatRoyalEnfieldaswellasatVECV,and wewilltalkyouthroughthatinawhile.Iwillfirstbeginwithabroadsummaryoftheoverall financials. ComingtoEicherMotorsconsolidatedfinancialsfor2ndQuarterFinancialYear2024-25,our revenue,EicherMotorsclockeditsbesteverquartertworevenuesatRs.4,263crores,marking agrowthof3.6%overRs.4,115croresfromQ2oflastyear.EBITDAmarginsRs.1,088crores versusRs.1,087croresinQ2oflastyear.EBITDAmarginpercentageforthequarterstoodat 25.5%asagainst26.4%lastyear.ProfitaftertaxRs.1,100crores,whichincludes114crores, as Eicher Motors’ share of profits from VECV up 8.3% from1,016crores,whichincludes Rs.102 crores as EML’s share of profits from VECV in quarter two of last year. Page2of22
I will now hand over to Govindarajan to take us through thebusinesshighlightsforRoyal Enfield. Over to you Govind. Thankyou,Vinod.Helloeveryone.AtRoyalEnfieldwehadaverybusyandanexcitingQ2 with several significant launches and announcements. During the quarter, we sold almost 225,000 motorcycles, as against 229,496 motorcyclesinQ2FY24.Outofthis,inIndia,we soldalmost206,199units.Intheinternationalmarkets,ourvolumesstoodat19,118units.In the backdrop of the uncertain macroeconomic scenario, our retail volumes maintained the growth momentumintheinternationalmarkets,12%retailgrowthoverthelastyear.Thisis the strong legwork that we put in Q2 of this year. We were able to achieveaveryspecial milestoneforRoyalEnfieldintermsofourfestivesalesperformancethisyear,lastmonth,that isinthemonthofOctober,werecordedourbesteversalesperformanceinamonthwithmore than about 100,000 plus 1 lakh units. This is a testament that our existing and the new motorcycles continued to perform very well. We had a very busy quarter with a slew ofproductlaunchesacrossmultipleplatforms.We launchedtheGuerrilla450RoadsterontheSherpa450platform.It'sanamazingmotorcycle, andwebelieveit'sthebestinthecategory.Wehavereceivedgreatreceptionfromtheriding enthusiasts across the world. Earlier in August, we launched the 2024 Classic 350 in new colorways,andwithupgradedfeatures.Theresponsehasbeenoverwhelming,really,andthe new Classic is doing very well across India. With this, we also announced a very unique factory custom program, which is a bespoke, first of its kind motorcycle personalization program done at our factory in Thiruvottriyur. Recently,youallwouldhaveseenatEICMA2024,welaunchedtwonewmotorcyclesonour globallyrenowned650CCtwinplatform,theBear650andtheClassic650.TheBear650is our new Scrambler, a motorcycle that perfectly combines authentic scrambler styling with versatility and agility. It is based on our Interceptor650platformandhasbeenlaunchedin AmericaandIndiaandEuropeasofnow.WealsolaunchedthenewClassic650ournewest additionintheclassicfamilyoffersridersapowerfulnewblendofoldschoolaestheticsand effortlesspowerdelivery.WehavelaunchedthemotorcycleintheUKandEurope.Retailsin India will commence in January 2025. EICMAthisyearsawaveryspecialpresentationfromRoyalEnfieldasweshowcasedourall newelectricmotorcyclebrand,theFlyingFleaandourfirstelectricmotorcycle,theFFC6.We are approaching EV with the same singularity, focus and unconventionality withwhichwe havegrowntheglobalmid-sizemarketintheICEworld.Wehavemadehugeinvestmentsin growing our capabilities and capacities in the EV world. We have almost 200+ strong, competent EV team, dedicatedly working fordesign,engineeringanddedicatedcommercial teams.Wehavealreadyfiledalmost28patentsintheEVworld.FlyingFleabyRoyalEnfield is our new brand that will house our electric mobility ideas and is ablendofheritageand Page3of22
moderntech,whichmakesurbanmobilityeffortless,excitingandfun.Underthiswecurrently have two models, the Classic Styled FF C6 and the Scrambler style FF S6 which will be coming later. We are gearing up for the launch in early 2026. Strengtheningourglobalfootprint,anewCKDinBangladeshandBrazilhasbeenestablished. WeexpandedourinternationalpresenceandstrengthenedSAARCcommitmentsbylaunching ourfirstmanufacturingandflagshipshowroominBangladesh.Thereisanincredibleresponse from the riding community in Bangladesh and that has surpassed our expectations,infact. With a growing interest in the brand, and as a reiteration of a resilient commitmenttothe market, we are happy to announce the establishment of our second CKD facility in Brazil startingJanuary2025.Wecontinuetobringengagingridesandeventsforourcommunity.We concludedthe13theditionofoneride,whichhaswitnessedrecordparticipationofmorethan 41,000ridersfrom66countries.AndaswearegearingupforthenexteditionofMotoverse laterthismonth,onthe22thto24thofNovember,Iamveryhappytosharewithyouallthat wehavelotsofexcitingupdatesforthemotorcyclingcommunity.Wealsohaveaveryspecial motorcyclelaunchplannedduringthisMotoversetime.Itakethisopportunitytoinviteyouall to join us at Motoverse in Goa. To conclude, we are halfway through the tremendously exciting year full ofnewlaunches. Startedwiththe Guerrilla450launch,wearenowexcitedaboutthecustomerresponsetoour diverseportfolio,andwearefocusedonsustainingandfurthergrowingthismomentum.Now I will hand over to Mr. Aggarwal to talk you through an update on the VE commercial vehicles. Over to you, Vinod. Thankyou,Govind.IamveryhappytosharethatatVECV,werecordedourhighestever2nd Quartersalesof20,774units,exceedingourpreviousrecordof19,551unitsinQ2of2023-24 with a growth of 6.2%.Thiswasevenmorecommendablegiventhecontextoftherelevant commercialvehiclemarketthatshrunkby10.8%.So,asagainsttheCVindustrydroppingby 10.8%wegrewby6.2%inquartertwo.Attheoveralllevel,theIndianeconomyhasremained resilient throughthisperiodofgeopoliticalturmoilanddelaysinprojectsandtendersduring the elections and uneven monsoons. With the pro-growthbudgetprioritizinginvestmentsin infrastructure, we expect commercial vehicle demand to rebound in the second halfofthis fiscalyear.Werecordedseveralbestever2ndQuartermilestonesacrosssegments.Weareat numberonepositionnowinlightandmediumdutytrucks,whichis5tonto18tonsegment withthesaleof9,565unitsinQ2andamarketshareof36.5%inthesegment.Ourheavy-duty sales grew 8% in quarter two versus the same quarter last year. Our market share in this segmentnowisat10.2%.Wemadesalesof3,984unitsinourbusdivisionandagainst3,214 units in the same quarter last year. Inourpartsbusiness,bothEicherandVolvocombined,werecordedarobustgrowthof27% over Q2 of 2024. Exports in Q2 were 1,130 units up 12.2% over Q2 of 23-24 despite Page4of22
disruptions intraditionalmarkets.Marginsremainunderpressureinacompetitivemarketas we successfully continued to invest in growing our heavy-duty truck presence. Duringthis quarter, we also entered into an MOU with Baidyanath LNG Private Limited for the deploymentof500Eicherpro6355LNGtrucks.So,thisisalternatefuelwithLNGasafuel, whichwehaveintroducedinthemarket.Deliverieshavealreadystarted,andwewillrampup duringthecomingquarters.TheMOUaimstofacilitatethedevelopmentoftheLNGstation network across various locations, to fast track the development of the overall supply side ecosystem, thereby aiding the long haul transport segment to switch to cleaner fuel. ComingtoVECVfinancialperformance,forthe2ndQuartertherevenuesforquartertwoare 5,538crores,against5,126croresinlastyearofquartertwowith8%growth.EBITDAforQ2 are395croresasagainst402croreslastyear,withmarginsat7.1%inQ2asagainst7.8%last year.ProfitaftertaxforQ2is209croresasagainst187croreslastyear.So,thankyouallfor being with us onthiscalltoday.Wecannowmovetothequestion-answers.So,backtothe anchors. Thank youverymuchsir.Wewillnowbeginwiththequestion-and-answersession.Anyone whowishestoaskaquestionmayenter“*”followedby“1”ontheirtouchtonetelephones.If youwishtoremoveyourselffromthequeue,youmayenter“*”followedby“2”.Participants are requested to use only handsets while asking aquestion.LadiesandGentlemen,wewill wait for a moment while the queue assembles. The first question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead. Hi Good eveningandthankyoufortakingmyquestion.Myfirstquestionisjustaroundthe averagesellingpriceontheRoyalEnfieldsidethisquarter.We'vehadarelativelystablemix in terms of domestic versus export quarter-on-quarter also,relativelystablemixintermsof 350ccquarter-on-quarter.450hasimprovedslightlyquarter-on-quarter,butthereseemstobe moderationinASPquarter-on-quarter.So,justtryingtounderstandwhatwerethefactorsthat might have driven it? So, ASP as you know, we haven't taken any price increases from last year to this year. However,ourproductmixandsomeshareinthehigherthan350cchascomein,allofthatis reflecting as far as ASP is concerned. So, largely it's all connected to product mix. Gotit,that’shelpful.Secondquestionisjustaroundsomeofthelaunchrelatedcoststhatwe might have had around the Guerrilla during this quarter, just want tounderstand,therehas beenavisiblepickupinotherexpensesquarter-on-quarter.NextquarterwehaveMotoverseas well. So, how shouldwethinkaboutsortoftherunrateontheotherexpenseslineitemfor Royal Enfield heading into the back half of the year? Page5of22
Youareright.WehavehadnewproductlauncheswhereinGuerrillacamein,wehadthenew classic350.So,someofthoseexpensesarebookedinthisquarter.Andnextquarter,wewould be having some amount of festive season spending as well. Having saidthat,wehavehad about12crores,whichisoneoffexpensesrelatedtowarehousingcostswhichwebuiltupas we move towards the festive quarter. Gotit,that'shelpful.Andmylastquestionisjustaroundthemonthlytrajectory.Ithinkfora longtime,RoyalEnfieldhasbeenbetweenthat70to85,000unitspermonthsortoftrajectory. Festive season thisyear,wewereabletoexceed,sortofthe100,000monthlytrajectory.So, justwanttounderstandthefactorsinvolvedthere,wastheresometailwindfromtheabilityto stockupaheadofthefestiveseasononsomeofthenewlaunches,andgoingforwardintothe back half of the year, how we think about channel inventory and potential monthly run rates? Toomanythingswhichwereallybundleduptogotothemarket.First,letmetalkaboutthe product. We broughtthenewClassicwiththefantasticnewcolorways,withfeaturesgetting added into that, like USB chargers,LEDlampsandallthosethings,whichhasaverygood responsefromtheconsumer.SecondintheheartlandoftheBulletmarket,especiallyPunjab, Chandigarh,UP,Haryanaareas,theBulletsalewasslightlycomingdownwhenwelaunched the Bullet with the Jplatformengine.Andwiththemarketfeedbackwhichwegot,wealso broughtonemoreproductwhichisBattalionBlack.So,thatalsohelped,sothereareproduct interventions we broughtin,andasVidhyawasmentioning,webuiltupinventory,wehired extraspace,andwereallythoughtthatthereisgoingtobealotoftractionthisyear.Inthelast callalsoIwasmentioningthatwewillampupthemarketinginitiativesinthecomingmonths. So, we actually went ahead with full blown marketactivationwhichwecalleditasa“360 degreemarketactivation”now,thathashelped.Wealsoworkedoninventoryfundingforthe dealers,thefloorfundingwasalsotakenup.So,allthesethingshavereallyhelpedinbringing in an excitement into the market. The Classic has started having very good response. The Bullet has actually surpassedsomemodels,andthat'salsohavingaverygoodresponse.So, thenewproductandmarketingactivations,floorfunding,allthosethingscametogether,and that's why the excitement got rekindled in the market. Chandramouli Muthiah: Got it, that's helpful. Thankyou very much and all the best. Thank you. The next question is from theline of Kumar Rakesh from BNP. Please go ahead. Hi, Good evening and thank you for taking my question. My first question was on your international business, has there been any inventory built up during the quarter because changes in inventory have gone up in your P&L? Changesintheinventoryispredominantlyonthedomesticside,wehavebeenalwayslooking atnottobuildinventoryintheinternationalmarkets,weareverycautiousaboutit.Wearenot Page6of22
thatsortofacompany.Whichwewillalwaysstandupandsay,wewon'tbuildinventory.You willseethewholesaleretaildifferencealso,eveninthedomesticmarketwehavethelowest inventory built in the entire system. We never do that. In the internationalmarket,retailis pickingup,andourgrowthalsohasbeeninthehighsingledigit.Wearenotbuildinguptoo muchofaninventory.Imustalsotellyouwhywearealsogoingverycautiousaboutit,isthat there is a OBD2Btransitionwhichisgoingtocomeinfrom1stofJanuaryof2025.So,we alsohavetokeepthatinmindwhenwearebuildingthatinventory.So,it'snottoomuchofan inventory on the international side. Yes, it’s just a little bit of launch inventory. Understood,gotit.Mysecondquestionwasonyouraccessories,merchandiseandsparepart business. I understandthatyoudon'tgivespecificnumbers,butdirectionallycanyougivea sense that, has the mix changed from last quarter to this quarter for the better or worse? It’s more or less steady. Yes,it'sasteadybusiness,weshouldunderstandonething,Ihaveexplainedearlieralso.Our motorcycleaccessoriesisdirectlyproportionaltothemotorcyclesales,becausemostof-98% oftheconversiontakesplaceonlywhenthemotorcyclesarebeingbought.Itisnotduringthe life cycle. So, that goes along with that, when moreSKUsaregettingadded,probablynon motorcycles will keep going. Spare parts we work on afundamentalprincipleisthat,parts availability even if it is a washer in the remotest corner, it should be available when it is required.So,customersatisfactionisthedrivingpointforusinthesparepartsbusiness.But incidentally,thebusinessisalsoinaverystablerun,sobothsparesandGMAsareinagood run.Intheapparelbusiness,wetookonemorestrategicreviewofthewholebusiness,andwe seethegrowthwhichisbouncingbackeveninthis.Infact,someofyouwouldhaveseenwe also opened up an exclusive apparel store in Pune. As a pilot, we wanted to seetheretail outlet, because people do want the brand to be experienced. So, we are also lookingatan apparelretailstrategy.Howdowereachouttotheconsumer?Theyactuallygetusabusiness also but first is,howwillwemakeourpeopletobethebrandcarriersofRoyalEnfieldand enjoythebrandmotorcycling.That'swhatisthethought,soinanutshell,allthebusinessare stable, and it is growing. Great. Thanks a lot for the detailed answer, just one clarification so you spoke about the one-off costofabout12croreforwarehousing.Canyoujustexplainwhatthatcostwasand what's the strategy behind that? Page7of22
So,basically,thecostisonaccountofadditionalwarehousespace.Obviously,whilewemight needitforamonthortwo,theywillobviouslygiveacontractforthreemonthsorfourmonths. So, it's basically an account of that. And this is for Northern India, for the festival period? Wherever required, it's spread across India. Thewarehousescannotbebuiltforapeakcapacity.So,itisnormallydonethroughtheentire C&F area sign off. AsVidhyawasexplainingwhereveritisrequired,wherethereisapeak demandwhichwillcomeup.So,youhavetokeepitonavariablebasis.So,that'swhatshe mentionedthatwewillactuallyhavewherethelocationsare,andweadditforthreemonths time.. Understood and the units being kepthere would be the dealer inventory, is that right? Management: What, sorry, we didn’t get that? So,youwouldbekeepingthevehicleshere.Thatwouldbeonthedealer’sbook,orourbooks for whatever period this would be? So,thiswouldbe,thewaywedothisiswemovefromourwarehousetodepotanddepotto dealer.So,typicallythiswouldbesomeportionofitwherewearejustwaitingfordispatchto dealer locations and we mix a bit, but largely our inventory. Understood, Got it. Thanks a lot forthat. Thank you. The next question is from theline of Pramod Kumar from UBS. Please go ahead. Thanksalotfortheopportunity.Vidhya,beforeIstartwithmyquestions,justaclarification onthiswarehousingcost.Itshouldbeanannualphenomenoninthatsense,becauseyouwill havetoanywayhavetopayit,say,everyyearorthistimeitwasverydifferentbecauseyou are calling it a one off. So, just wanted to understand? Pramodmaybe,Vidhyayouwouldliketoclarify,thenmaybeIcanevenadd,probablyitisan every year phenomena. So, what we normally do is, we look at inventory overall and we alwayslookthatinventoryshouldnotbebuilt.So,warehousesizing,wewouldlookat,how do we reduce. Every year when we are picking up the market momentum, the size of the variablewarehousewhichwearetalkingaboutasanaddonforthefestiveseasonormarriage season,wesizeitslightlydifferentlyeveryyeardependinguponthemarketpool.So,thisyear, wereallywantedtobuildmoreinventory,sowehavegoneinforslightlyhigherspaceinterms of warehousing. Page8of22
Okay.So,ideallywouldweexpectthiswillcontinuenextseasonaswellor?Iamjusttryingto understand? Ideally,sorryPramodyouareasking?Pramod,thehighestsalesseason,“season-season”sale is one this, that's what is the Diwali, Dhanteras. Diwali, Dussehra, Ganesh. Andwenormallydo.Wealsomarkthemarriageseasonandthegoodtimesseasonacrossall thelocationsandwhereveritisrequiredwedothat.Forexample,ifIhavetotellyouatOnam, ifincasewehavetohaveawarehousingextracapacityrequiredaroundtheKeralaareawedo that.So,it'saroundtheyearphenomena,butwheneveritisrequired,wewilldothat,wedon't take it and then keep it idle. Yes,fairenough.Andgoingbacktothedemandquestions,basicallythedemandthatcamein for Royal Enfield wasactuallyvery,verysurprisingandwecouldseethemarketingefforts, what you had with the full page ads and all. But I amjusttryingtounderstandhowisthe momentumafterthat,becauseisitlikejusttheywerecustomersonthesidelineswhoandwith yourmarketinginput,theycameandmadethatpurchase,andnowwegobacktothenormal run rate or are you seeing the demand trajectory changing, or intermsofthewalk-ins,the inquiries and conversion rates picking upevenaftertheseasonandwillyoukindofsustain thismarketingefforts,giventhefactthatonceinventoryrebuilds.Becausewhatweunderstand fromdealersis,manyofthedealerlocationshadtotalstockoutsofvehiclesandIbelievewe haveaverystrongorderbacklogevenforthemarriageseasonintheupnorthmarket.So,Ijust want to understand how big was the marketing impulse on its own, and whether you will sustain it,andalsoonthefinancingschemeswhichareofferedbythebanks.Doyouexpect someofthesetokindofcontinueasstandardpracticegoingforward,becauseIbelieveeven that was a kind of a demand catalyst for the season. Yes. So, Pramod, I will go one-by-one. Question number one whichyouasked,howisthe demandevennow,wasitonlyafestivetime.Verycertainly,fromfestivetopostfestive,there willbeachange,butifwehavetocompareprefestivetopostfestive,howisthedemand,pre festivetopostfestivenow,thedemandhasgoneup.So,themarketinginterventionsandthe productinterventionhasreallyworked,anditissustaining.Obviously,ifyouarelookingat, willitbethesameasthefestivetime,willnotbe.ButprefestivetimewiththeoldClassic,old Bulletandnothavingenoughstockintherespectiveareas.Floorfundingnotfullysignedup, andthemarketingactivityisnotthere.WithallthoseactivitiesIamseeingnow,inthemonth of November, in the last 10 days, the traction isverygood,inquirieshavebeenverygood, walk-insarealsoverygood.So,that'saverypositivesignwhichweareseeing,that'sonthe demand side. Second, you talked about the funding. Page9of22
Bank offers and the bank schemes, Pramod as you knowalotofourfinancingisbasically through the retail financing options, not so much the bank financing option. So, we really didn't have anything specific which is bank offers or something like that for the festive season. And the third Pramod, you are asking about the sustenance program of the marketing initiatives. Even in the firstquartercall,whichIwasmentioning,wewillbedoing“mother brand”levelmarketingcampaignanda“product”level.Duringfestive,youwouldhaveseen thefirsttimewecamewiththerangeadvertisement,becausewewantedtheconsumerstosee thefullrangeofmotorcyclesof350ccand450ccplatform,thishasreallyworked.Andwe also have the cadence which is done up now forthisquarterandcomingquarteronallthe products which we have launched already, and some of the productswhicharejustgetting launched,oralmostlaunchedaboutaweekback,forallthosethingsthemarketingandmarket activation will continue in time to come. Okay, and Govindjustwanttoelaborateabitmoreonthedemandresponse,becauseitwas surprising toseethatinacitylikeMumbaiorBangaloreorPune,whicharematuremarket, prettymaturemarket,dealershadthebesteverDiwaliintermsofthekindofrunratetheyhad, thekindoforderbookstheyhad.So,Iamjusttryingtounderstand,whatisthereadfromyou guys in terms of whatever analysis you didorfeedbackyougotfromdealers,astowhatis drivingthiskindofcomeback,andisitlikeandthecertaintyorsustenanceofthis,becausethis issomethingwhichisnotexpectedbyevenmanyRoyalEnfielddealers,theolderdealers.So, I am just trying to understand what has worked, just themarketingonitsownorIamjust trying to understand, because we understand this better we have better visibility on future demands. So, please. Pramod, during this time, the middle weightsegmenthadalotofactivitiesandactionsand noise.So,lasttimealsoIwasmentioningthatanyamountofmarketingeffortwhichwewould have done would have been an over emphasis on the same point,itwouldhavegoneinto, saturated place. So, we held back market activationsandallthosethings,butwewantedto enterintopropermarketactivationactivitiesaroundSeptembertimeonwards.Wealsoclubbed itbecausewehadtogotothemarketwiththegoodnews.That'swhywelaunchedourClassic, withallthenewfreshcolors,withtheadditionalfeaturesaddedintothemotorcycleinClassic, welaunchedtheBulletinthemarketwherewewerelosingmarketsharebecauseoftheBullet dominant areas. Floor funding wasnotavailableatsomeplaces,andthemarketactivations, includingwhatwehavenotdone,likeradiosandprintadsandwhatnot,allthosethingshave rekindled the interest in the brand Royal Enfield, which predominantly for us the proxyis Classic. So, the Classic interest has brought back the consumer more and more into the showroom, and that has helped us to the conversion. It is supported by the funding and supported by the finance available, all those things. We also came out with an incentive program of theretailforourfrontendstaff,notRoyalEnfield,throughthedealerprincipals and thatalsohasworked.So,wepackagedeverythingandwereallythoughtthatlet'sgoall Page10of22
outandseehowtheinterestcanbekindledandthedesireisbroughtback.Thedemandisonly anoutcome.So,thedesireisback,thereisaninterestwhichIamjustseeingonceagainwitha lot of positivism, and that's why the brand is actually now vibrant once again. Justtoaddtothat,ifyourememberPramod,letmejustadd,lastcallBGRhaspointedoutthat whileretailmaynotnecessarilybeshowingit,buttheinquirieshavebeenup,andtheyhave beenconsistentlyup,sothereisalwayscuriositybutthere'salittlebitofwaitandwatchtype situation that was happening as we believeasfarasconsumerswereconcerned,andallthe launchescameinandwearelookingatalltheoptionsavailable.Butduringthefestiveseason, whentheyhaveto,essentiallyor,wanttobuy,atthatpointintime,therewasenoughcallto action which came together and which kind of, culminated in the numbers. And Vidhya relatedtothat,howdoyouseethemarginoutlookgiventhevolumesareback, hopefullywewillcontinue,there'sabitofshippingmix,butexportswillcomebackaswell, andthere'smarketingeffort.So,asablendofallofthat,howdoyouseethemargintrajectory fromhereonbecausethisquarter,therehasbeenabitofawaiveron,therehasbeenaflavor of margin,butnotabigone,butifyoucanjusthelpusunderstandhowshouldonelookat, think about the volume versus profitability? Therearetwo,threeparameterstomargin.Ofcourse,Ihaveheardplentyfromallofyouon howyouknowabsolutemarginiswhatweshouldlookat,andthat'swhatwearelookingat, but the two, three parameters to that is, from a product mix standpoint we are seeing the international mix doing quite well, which would be helpful as far as margin is concerned, commodityprices,wearenotseeinganymajorpressures,whatwearedoingisthat,wherever wearedoingspecificinterventionsataproductlevel,wearenotnecessarilyreflectingthatin themargin.Wearejustmakingsurethatwearepassingonbenefitstocustomerswherewecan andthatisalsokindofshowingupinsomeofthetractionthatwearegettingwithcustomers. So, frankly, I am not chasing positive margin, but absolute margin. We are happy,andthe trajectory is quite okay. Thekeytakeaway,whichhastobeasVidhyawasmentioning,isgrowthisthefocusandwhat we are lookingatasshewasmentioningis,addvaluebacktotheproduct,totheconsumer, andgetthevaluepropositionbettermoreandmore,andusealltheleverswhichareavailable for gettingthegrowthiswhatwearelookingat,scale,valueengineering,anythingwhichis requiredwewillcontinuetodothat,asthecommodityisnotattheheadwidth,whichisalso helping us in keeping it in margin also. Thank you. The next question is from the lineofAmynPirani,fromJPMorgan.Pleasego Page11of22
AmynPirani: Hi,Thanksfortheopportunity.Actually,myfirstquestionisonVECV,wehaveseenastrong marketsharegrowthinthebusiness,butmarginshaveremainedabitunderpressureespecially in this quarter. It's down both Y-o-Yandquarter-on-quarterwhereasmostofyourpeersare actuallyshowing,improvingmargin.Now,obviouslyeverycompanyhasadifferentstrategy, buthowshouldwethinkaboutmarginsgoingforwardinthisbusinessandwhatcostlineitems are impacting the margins here, is it gross margin which is impactingit,oraretheresome fixedcostsorotherexpenses,whichweareinvestingin,whichareleadingtothisdeclinein margin despite the revenue growth? No, we are gearing up for a larger growth. Ifyoulookatfirstsixmonths,theindustryhas dropped in 3.5 ton and above industry,Ithaddroppedbyaround2%,eventhoughwehave grownby3.5%andquartertwoofcourse,ourgrowthismuchbetterthantheindustrydropped by almost 10.2% or 10.3% and we grew by 6.2%. So, we are doing much better than the industry,butstillthereismoreleveragingthatwearelookingforwardtoandweareverysure thattheindustryhasmorepotentialtogrow,becausethefirsthalfhasnotbeensogoodforthe industry because of government's over spending on CAPEX and uneven monsoonandfew otherfactors,butthesecondhalfweareveryconfidentthattheindustryshoulddobetter.So, therefore,thereisnoconcernasfarasthegrossmarginsareconcerned,buttheexpenditures wehavetoleveragemore,andIamsureweshouldbeabletodobetter,andweshouldalsosee thatwearemoreofconsistentperformersonthemarginevenwhentheindustryhadnotbeen doing so well in past, during COVID period or otherwise,weweretheonlyonewhowere making it. So, therefore the sight that the competition has improved margins in a better manner. But of course, we should also have better impact in the future period with more leverage. That's what it should be. AminPirani: That'shelpful,sir.And,ifIcan,maybeaskafollowup.Isthereabroadtargetformarginsthat youcansharewithus,areyoulookingat8%asalevel,areyoulookingatdoubledigitmaybe going into next year any broad idea targets would be helpful. No,wedon'tgiveanytargetsonthemargins.Butofcourse,fundamentallythemarginshaveto be better, so there's no doubt on that. AminPirani: Okay,understood.AndjustgoingbackontheRoyalEnfieldbit,Iamjustwantingtogetback to that pricing and margin question. So,ifIlookatthemix,quarter-on-quarter,itislargely stabletoslightlyimproving.TheHimalayanmixisdefinitelyimproving.So,asyouthinkof margins going forward, I know you are now focusing on growth and on the per vehicle EBITDA.Isthereakindofamixthatweareseeing,withintheClassiclowervariantsorare we,howshouldwethinkaboutthevariantswithinHimalayanandClassic,whicharedriving thegrowthatleastrightnowandwhatistheinitialresponsetotheBearandtheShotgunand the Classic 650 as well? Page12of22
I’llgofromthereverse,Bear650ccI’msureallofyouwouldhaveread,whatisthat,itisa 1960 inspiration from Eddie Mulder race at California that's an inspiration on a 500 ccof RoyalEnfield.Andthat'saninspirationsowethoughtthatweshouldgetthatmomentumback intothemotorcyclingworld.So,welaunchedBear650.Justlaunched,soIdon'tevenknow how many days now, from EICMA to now, maybe aboutaweek'stime.It'sanoutstanding product,sopeoplewhowanttohavehisownpath,andhewantstorideinhisownspace,and thereisalotofsocialmediabuzzaroundthatproduct.Classic650isanotherthing,itisinhigh demand, which has been there for quite some time, from all the consumers, even from internationalmarkets,thatweneedaClassic650.So,boththeproductshavecomeinandare answeringthatcall.Asfarasthemodelmixwhichyouaretalkingabout,ineveryproductwe havevarianting,soourvariantingstrategyisalwaysdependingupontheCTG,dependingupon thefeatureswhicharethere.Andwehavealwaysseenourhighervariantssellbetter.So,when itisnotthatwearesayingthelowervariantisbadorsomethinglikethat,butalwayswehave foundinallthemodels,thehighervariantssellbetter.So,tothatextent,themarginwedosee a betterment because of the higher variant selling. Amin Pirani: Okay, Thanks for that. Thank you. The next question is from theline of Kapil Singh from Nomura. Please go ahead. KapilSingh: Good evening sir, congrats on a strong festiveperformance.Myquestionwason,whenwe lookatdemand,youdosensethatindustrydemandisalsogoodorshowingsignsofrevival,or mostoftheimprovementismoreattributabletotheactionsyouhavetaken,andalsobetween rural and urban whatwouldbeyourruralandurbanmixcurrentlyandareyounoticingany different trends over there? So,twoquestionswhichyouhaveasked,amIseeingthemarketgrowth,ifIhavetotellyou aboutthemarketgrowth,themarkethasgrownforduringthisfestivetime,maybeabout6%, 7%that'sthemarketgrowthintheICEduringthefestivetime,andourretailhasbeenalmost 26%growth.So,that'sthekindoftractionwhichwehadinourretail.Thesecond,whichyou askedus,onurbanandrural.Rural,thedemandsaregoingupandyouallknow,letalonethe twowheeleroroverallalso,theurbangrowthrateisslightlylowerthatweareseeingitevenin all includingourmotorcycles.Butnow,therearesomeproductswhichareurbancentrictoo likesay,Guerrilla450,nowwearepickingupthoseareaswhereithasahighertraction,and wearegoingtoworkonitduringthesetwoquartersonthatproduct,becauseitisbeinganew brand, new product.Wehavetoworkonthatproduct,andweareseeingit,especiallyinan urbancontext.Ithasahighertractionandahigherinterest,andthat'swhereourfocusisalso going to be there, on the market activations. Kapil Singh: And may I know your mix also, how much is the rural and urban mix? Page13of22
It’s very difficult to comment specifically, I would say that about, one third I would say is. It's a rural one. And also it varies from product-to-product. Geography-to-geography, because for example we have got pretty good traction in the East. For example, Himalayan might be havingahighertractionintheurbanmarket,andBullets and Classic has some good traction in the rural market. Hunterusedtobeveryhighinthe urbanmarket,nowIamseeingthereisatractionwhichiscomingupintheruralmarket.So, product-to-product it varies. Some of our top 10 cities are continuing to do quite stable. Bangalore, Pune and all that. Wedon'tcutitasanurbanruralandthenseehowitisworking.Rather,wewillstartlookingat whichproducthaswhatsortofatractionontheinterestinwhicharea,dependinguponthat, what is that the market activation tobedoneis,whatisthefocuswhichwearebringingin from September onwards. KapilSingh: Okay,greattohearthat.Justasmallone,ifyoucouldjustsharewhatisthecurrentinventory level that you have? It'saboutthreeweeksmax,thatwouldbetwoandhalftothreeweeksasaninventory.Ithas actually,someofyouhaveraisednow,thereissomestockoutsituationwhichhashappened. So,nowweareactuallygoingbacktobuildingsomeinventoryinlocations.So,becauseour retail during the festive season has been very, very good, we arepositivelysurprisedtobe honest, and that has really made us to do an MRP run and at faster pace,whichwedidit slightly ahead during this time, and seeingthemomentumofretail,whichwastakingplace now, the production is getting amped up an inventory build willtakeplaceatafasterpace whereitisrequired.Havingsaidthat,wearenotacompany,wewillbuildexcessinventory, wehavewhatiscalledasareplenishmentmodel,whatistakenouthastobereplenished.So, nowwhereveritisbelowthereplenishmentnormlevel,that'swherethefocusis,theretobuild back that norm quantity. Kapil Singh: Okay, great. Thank you very much andbest wishes. Thank you. The next question is from theline of Binay from Morgan Stanley. Please go ahead. Page14of22
Hiteam,Thanksfortheopportunity.Myfirstquestionis,afewthingsthatwetalkedabouton theRoyalEnfieldside,ourmarketintervention,somesupportforretailstaff.Arethesecosts already reflected in Q2 or will they come more in Q3 becauseQ3isthemoreretailheavy quarter? It is mostly flooded into Q2, some amount will flow intoQ3too,becausesomeofthe,for example,theincentivepayouthastobecalculatedonlyaftertheincentiveiscompletelythere, theretailissquaredoff,andthereconciliationisdone.So,probablysomepaymentwillgoin this,andsomeareaswhichwehaveclosedtheentirebillingonthe30thorsomethinglikethat, few areas which we have already closed, so some amount may flow into the Q3. Right.Andthesecondismoreanobservation,itdoesseemthatthecompany’sandit'saright strategyitispivotingalittlebitawayfrommargintogrowth,becausewhenwelookatsome ofthemargindriverswhichisincreasingexport,rising350ccshareonaY-o-Ybasis,wehave seenthemmoveupquitesharply,butyettheEBITDAperunitisflat.So,isitfairthatnow you guys are in a way focusing more on absolute volume growth, and that's why these initiatives have come in, then just targeting something on margins? Bang on, we are an absolute growth and absolute EBITDA value, not on the percentages. No, I think that's the right strategy to sort of make the brand more affordable, accessible. Thanks team. Our best wishes for the future. Thankyou.ThenextquestionisfromthelineofJineshGandhifromAmbitCapital.Pleasego Hi.Myquestionpertainstothismarketingstepupwhichwehavedoneduringthe2ndQuarter and beyond, anysenseonwhatcouldbetheimpactofthatinour2ndQuarterperformance, and how should we see sustenance of that? So, marketingactivationsaretwo,oneisthetotallaunch.Duringalaunch,whathappensis, youcreateaninterest,sotherewillalwaysbeaspikeonthegeneralinquiries.Thesecondis about sustenance. So, what do I sustain overtheperiodoftimetherebythecalltoactionis becoming better. So, the funnel is becoming better, the conversion is becoming better. Septemberwasastepuptime.That'swhat,eveninthelastquarter,Iwasjusttelling,thatwe willstepupthemarketingactivitiesinthenextquarter,andwebundledeverythingduringthe festive, which has really worked. What does it mean, anydesirabilityiscreated,It'snotan overnightphenomenon.So,theactualtoptoboxoftheirbrandrecallisbecomingbetter,and the consideration is becoming better. And now I am going to actually support it with the sustenance activity, more product level. That's how Iamseeingeveninthefirst10daysof November,pre-festivetimetonow,Iamseeingagoodgrowth.So,that'sthepositivismIam Page15of22
seeing for the kind of an activity which we have done, and it will be supported with the sustenance activities to time to come. Okay.Andthissustenanceofgrowthpostfestive,woulditbealsoattributabletothemarriage season, which is expectedtobefairlylargeinNovemberthistime,ismarriageseasonabig catalyst for growth, retail demand for Royal Enfield as well. We know it's a very large contributortothecommutingsegment,butforRoyalEnfieldisthatverylarge,doesitleadtoa spike in demand? Yes, motorcyclists also get married, isn’t it?. So, it's not that we are married to only motorcycles. Yes,fairpoint.Andlastly,withrespectto,thereisstabilityinmix–bothindomesticproduct mixandexportcontributionaswell,butwehaveseendeclineinASPsandgrossmargins.So, what are we missing there, why is this divergence in terms of mix and gross margin, commodities also should have been stable on Q-on-Q basis. What are we missing over here? Vidhya explained that our ASPisactuallycontrolledbytwothings.Oneisaboutthemodel mixandthehighershareof350ccintheQ2.That'spredominantlytheASPdrivers,thereis somewhereitisanincrease,somewhereitisadecrease.Betterproductmix,morethan350has increased something and international market has, it’s predominantly a model mix. Okay, got it. And on exports are we seeing you mentioned 12% retail growth in broader exports is what we have indicated in 2Q? Jinesh Gandhi: And any market share? The retailintheinternationalmarkethasbeenbetter,whichisalmostaboutretailisactually growing, which is higherthanthewholesalebyabout12%,inventorystockingisnottaking place too much. But as I mentioned, for everybodythemarketinternationally,especiallyin Europe, isgoingtobeverydifferentbecauseoftheOBD2Bsituation.Therewillbealotof pre-bookings and pre-registrations, all those things which will take place. So, we are very cautiousaboutthoseinventorybuildup,becausethat'swhathashappenedinoneyear.Wedon't want to repeat that, so there should be no inventory, it should be a pull. The way we are lookingatamarketactivationinIndia,evenintheinternationalmarket,marketlevel,product level,themixwhichwearetryingtodo,andthenseewhatsortofamarketinginitiativewhich hastohappen.Andwearepickinguponebyone.EICMAisastartingpoint,everyyearwhich takes place. Now we have some areas where there won't be any riding season, so wewill slightly lower it. Some areas where there are a lot of internationaltradeshows,whichwill Page16of22
continuethere,wearegoingtohaveoursetupinabiggerway.Forexample,inEICMAthis year,wehaveactuallytakenalmostabout7,500squarefeetofareabecausewereallyfeltthat it'sanimportantmarketingactivityforusasabrand,andithasgotacceptedverywell.Inthe month of November, wehaveabigThailandshowwhichiscomingup.That'sanimportant thingforus.So,likethat,countrywisewearepickingupandthenstartworkingonthemarket activations, even for the international markets. Jinesh Gandhi: Got it. Great. Thanks and all the best. Thank you. The next question is from theline of Arvind Sharma from Citi. Please go ahead. ArvindSharma: Hi, Good evening sir and thank you for taking my question. Just one clarification in the inventory part, where you did saythecurrentinventory,isitpossibletosharetheinventory going into the festive season. Say September end versus where we are now? You want the exact number, I can tell you. Obviously,webuiltupbeforethefestiveseason,andnowwearedowntotwo,threeweeksfor those dealer inventory. So, we have liquidated quite a bit. Wehavetoacceptthat,ifIrememberrightPramodwasraising,thereisastockoutsituationin some of the dealer points which we are filling the inventory back. That's an inventory situation. We have drastically reduced inventory. Buthavingsaidthat,evenwhenwewentuptothefestiveseason,wedidn'tdotoomuchofan inventorybuild-up,atmaxourwholesaletoretailinventorywasverylimited.So,wedidwhat was right, and we kind of maxed out our inventory completely. Ifthequestionistofigureout,iftheinventoryissolow,willthewholesalebelikethat,and howisthatandall,Icantellyouverystraight,becauseDecemberiscoming,becauseOBD2B isgoingtocome,sowehavetobeverycautiousaboutinventory.Wewillnotactuallybuild inventoryanticipatinganything.Andnowthatoursystem,whichweexplainedtoyouevenin the third quarter last year,aboutthereplenishmentmodel,thereplenishmentmodelhasalso taken routes, and now it will be actually on areplenishmentbasis,sothatwewillholdthe inventoryandthedealerwillpulltheinventorywheneveritisrequired,withinalmostabout48 to72hours.That'saSLAwhichwearesigningwithallofthem.So,48iswhatwearedriving for more and more. ArvindSharma: Gotit,sir.Thankyousomuchforthis.Andthisthinghasbeenreferredtointhepreviouspart ofdiscussionaswell.Butifyouseetheotherexpensesonaquarter-on-quarterbasis,theyhave goneup.Yousaid,partofitisforwarehousing,butgoingforward,takingintoconsideration Page17of22
the various programs this quarter including the Motoverse, how muchofthisincreaseona quarter-on-quarter basis is something that will sustain? Inthesecondquarter,maybeVidhyacanaddmore,2ndQuarterobviouslywehadlaunches, andthereareexpensesaroundthat,andsomeamountofEICMAexpenseswhichwerebooked onthat.Quarterthreeonceagain,asImentionedwewillcontinuetohavesustenanceexpenses forthemarketing,maynotbeveryhighlikethelaunchexpenses,buttherewillbemarketing expenses more and more. Somebody asked a question about the calculation and payout, whetherithasbeendonefortheentireincentivescheme,whichwillhappeninthisquarter.So, it may not be spiking like what has happened in the previous quarters, but there will be expensesonthemarketingrelatedthingcontinue,becausewewanttocontinuethesustenance ofmarketactivationsfortheproductandthebrandintimetocome.Butifthat'swhatwesay- growth. Arvind Sharma: Got it, sir. That’s all from my side.Thank you for taking my question. Thankyou.ThenextquestionisfromthelineofRaghunandanNLfromNuvama.Pleasego Thankyousirandcongratulationsonthestrongfestiveseason.MyquestionisontheBullet model.BullethadadeclineinH1butinthefestiveperiodtherewasagrowth,dealersindicate Punjab, Haryana, UP, Rajasthan, the launch of battalion black, which highlights vintage design,supportedsales.So,canyoutalkabouttheimportanceoflaunchingthisproductanddo you see the pent-up demand which was coming back? Twothings,firstisasanorganization,wewerequicktoacceptthefactthatmaybetheproduct interventionisrequired.Normally,ourproductinterventiontakesalongerperiodoftime.But theBulletdependencyonafewmarketswasveryhigh.Oneistotheconsumersecondistothe dealer viability. When thedealerspoketome,infactweallsentateamtheretounderstand morewhatisittheywant,thenwehaveunderstoodthat,therearesomethingsontheBullet, fewfeatureswhichtheyreallyfeltiswhattheycanrelatetoasaBullet,likeabenchseatanda rearshroudedtaillampholder,thesetwoarethemajorthingsforthem.Intheabsenceofitis notreflectinglikeaBullet.Iamnotbuying.Inthoseareasdidwelosethemarketshare,may notbe,didwelosethebusiness,Yes,westartedlosingbusinessbecausetheconsumerswere not taking a decision to buy. So, the dealers were also having a huge pressure on their profitability.Whenwelaunchedinthosemarkets,andtheBullet350gotaverygoodresponse from all of them, which you are also mentioning, was there a pent-up demand which has helped us during the festive season? Yes, undoubtedly, yes it has helped because, as I mentioned we have not lost the market share, the people are not taking a decision. Those people took a decision during their festive season and the availability of Bullet, but inthe monthofNovember,whichishardlyaboutsayabout8,10daysinthistimealso,theinquiry Page18of22
of the Bullet in those markets continued to be positive. So, it does mean the product got accepted, the peak would have been because of the pent up but now earlier to the Bullet decline,nowthedeclinewillnotbetherethedeclineisarrestedletmeputitlikethat,withthe introduction of the battalion black. Anddealersindicatetheyhardlyhaveoneweekofinventoryhere.So,isitfairtoassumethat going forward with the battalion black plus low inventory, the outlook seems to be good. Yes, that's why Isaid.WeruntheMRPnormally,wedoitaroundthe25thto26th.So,this time around the 20th and 21stwefoundthatthetractionhadbeenverygood,sowestarted running it. So, we also started working with the vendor base, and our plan to build up productionnumbershigherandtheteamisworkingonittobuildtheminimumnormquantity of the inventory in all the locations, and we are on top of it. Thankyou,sir.Mysecondquestionwasonthefinancingratio,hastherebeenanyincreasein thatandfinancingschemeslike5.99%interestrate,wouldthecostoftheschemebeborneby the financiers? Finance penetration is somewhere around 61.5% to 62%, around 62% is the finance penetration. Whatisthesecondquestionyouareaskingwhetherwewillbear,wedon'tbear any costs. Raghunandan NL: Yes, that was the clarification. So, it is borne by the financiers? Yes, we don't subvent, we don't do all those things, we don't bear any expenses. Raghunandan NL: Got it sir, thank you very much and wishing you all the best. Thankyou.ThenextquestionisfromthelineofPriyaRanjanfromHDFCAMC.Pleasego PriyaRanjan: Just a couple of questions. One is on the international side, soweareseeingsomekindof pickup. And some of the geographies we have been doing exceptionally well, particularly Latin America, et cetera and youhaveentered,probablyTurkey,lastyearsometime,earlier thisyearprobablyandMexico,thesetwoareverylargetwo-wheelermarkets.So,ifyoucan throw some light on the ramp up potential in these markets, and these are, since, large two-wheelermarkets.So,canweseethenewpeakintheexportmarketveryquickly,oritwill take some time, itwillgrowatitsownpace.Andsecondly,onthedividendpolicy,nowwe haveasubstantialchunkofthecashpileupandeveryyearweareprobablythrowingupmore than say (+5000) crore, in terms of broadly in free cash flow, etcetera.So,canweexpect better dividend policy going forward? Page19of22
So,maybeyoucangofromtherear,dividendpolicyVidhyacanadd,thenIwillcometothe wholesale India market. Ourboardhasbeenveryreceptivetowhateverinvestorsarelookingat,etceteraandwehave kindofrevisitedourdividedpolicy,andIamsuretheboardwillcontinuetokeeplookingatit and seeing wherever steps need to be taken and now to the next question. So,ontheinternationalmarket,ifIhavetotellyou,wehavealmostretailedaround59,000, 59,500motorcyclesinthisyearcomparedtolastyear,itisalmostabout12%growth,whichis alsothere,infact20%growth.Whatishappening,market-by-marketonceagain,becauseifI paintthepictureforalltheinternationalmarketsthereisaproblem,firstletusgowithLatin America, Argentina, Colombia you all know, stilltherearesomeweaknessesinthemarket, becausethereareissueswhicharegoingaroundinthatarea.Wearealsoconsciouslylooking atit.WehaveourCKDplant,ourteamisthere,productsarethere,localdevelopmentshave doneup.Butthemarketisnotsopositive,orIdon'tseeitasaveryjubilantmarket.So,ithas tostabilize.So,whenitstabilizes,wearetherewiththefullthing.Thailand,youallknowthe banksareslightlytighteningsomoreandmore.So,wehavestartedworkingwithabank,in factwearegoingtheretotalktothemandfigureoutwhatisthatwehavetodoandall.You talked about Brazil, Brazil to overcome the quotaissue,wehavecomeoutwiththesecond CKD plant also, which is required for us to get a higherquota.Becausethequotawasnot available,Ihaveactuallyaskedtheteamnottogoforafurtherretailoutletincrease.Nowthat ourCKDplantiscomingintooperationbyDecembertimeframe.Weareopeninguptheretail outlet also. So,that'sgoingtogivegrowth,becauseasacompanyweareverytouchyabout ourecosystem’sprofitabilityforthelongterm.So,now,wewillgoforexpansionoftheretail outletsintheBrazilmarket.So,that'sgoingtobeagrowthwhichisgoingtocome.Andthe productsarealsoverywellaccepted.Himalayan,justgotlaunched,andit'sgettingaccepted,it isamarketforthosesortsofproducts.Intheoutsidemarket,NewZealandandothermarkets arenotveryhigh,butAustraliaisaverygoodmarketforus.Australiahadalltheinteresting issues and all those things now, I am seeing the green shoot. So, the acceptance and the product,thereisabitofavelocitywhichistakingplaceinthemarketwhichisagoodsign,in the SAARC our focus had been, how do we enter into the market. How do we grow the market, we entered Nepal, which has been stabilized now and this quarter, we went into Bangladesh, and all theseunrestissuesandallthosethings,Icanhappilysaythatthereisa hugebookingbacklogatBangladesh,whichisaverygoodsituation,whichitisverypositive surpriseforus,alsothatintermsofnumberofbookingsofmotorcyclesoutofBangladeshfor RoyalEnfield.Europe,stillithasabitofanissue.Butnowwhatishappeningis,becausethe inventorycorrectionsaredoneinallthoseareasnow,theirvehiclesaregettingfilled,thereisa retail momentum which is taking place. So, time to come. I don't see a major jerk in the internationalmarket,butthegrowthwillbegraduallygoingup.Itwon'tbethattherewillbea blip in one few quarters to say, wow it has doubled, that's not the case. Butwillithavea Page20of22
positivetrend,Yesitwillhaveapositivetrendintimetocome,becausealltheactivitiesare actually aligned to that, and the market is also showing like that. And just specific on Mexico and Turkey, because these are twolargetwo-wheelermarkets wherethepotentialisthere,youhavealsoentered.Sodoyouthinkthosemarketscanbecome much bigger than probably Brazil itself is right now? Possible,youareabsolutelyright.Mexico,wehavebeenmanagingitfromourNorthAmerica subsidiary.Andnowwhatwearelookingatis,lookingatthegrowthpatterninMexicoandthe potential which is there in Mexico. Now wearemovingateamexclusivelytofocusonthe Mexicomarket.It'sjustafewmonthsbackactivityinthatparticularmarket.Youwillseethe results which are coming out of it in time to come. Sure.AndjustontheGuerrilla,itlookslikemoreofaninternationalproductalso,apartfrom theupmarkthebiggercityproductinIndia.So,nowwehaveanumberofthenameplatesin variousmotorcyclesegments,andtheendcustomerisvery,verydifferent,theclassiccustomer is very different. The classic customer is very different than the Bullet customer and the Guerrillacustomerwillbeverydifferent.SimilarlytheHimalayancustomerwillbevery,very different. So, how do we try to tackle the marketing because, now we have a plethora of productsthemomentanybodyentersyourshowroom,youhavearound10to12nameplates, ormaybenineto10atthispointoftime,buteventuallyitwillkeepgrowing.So,howdoyou want to tackle the marketing of different segments, different sub segments, of consumers? It’s alengthierpointtobehonest,maybewecanhaveachatwhenwemeetupalso,butfor everybody's understanding, because you asked specifically about Guerrilla. Guerrilla is a roadsterona450ccSherpaEngineplatform,andthisiswesaid,arealroadsterwithoutany flashyfrillsandnotveryplasticanditshouldlooklikeagoodbiketoride,andthosewhowant amotorcyclewithabitmorepower,bitmorespeedandadifferentkindofanauthoritytoride this. So, we brought in this, and the consumerswhoareactuallylookingatthisarenotthe Classic consumers, Classic and Bullet consumers are very differentconsumerset.Theyare looking ataparticularformfactorandparticularridingstance.Andthoseconsumersarenot consideringGuerrilla.Guerrillaisbeingconsideredbyyoungguyswhohaveathoughtprocess ofcomparingitwiththerestofthemotorcycleswhicharealsoavailableinthemarket,where Guerrillastandsupasthebestmotorcycle.So,whensomebodywalksintotheshowroom,first andforemostis,onadigitallevelwealsoareonacustomer360platform.So,someonewho comes in and then gives his phone number, we actually know what ishisinterest,andour conversation starts from his interest, from the cookies which he left with us at different locations andwherehehasvisited,whathehasactuallyworkedandtalkedtouson,andall thosethings,withallthosethingsonlyweareactuallytalkingtothemandthenmakingthem totakepurchasedecisions.So,it'saverydifferentproduct,everyproductIcanexplaintoyou, that will be a huge discussion point. Maybe we can pick that up whenever we meet. Page21of22
Sure, great and thank you all the best.Justlastly,justtotrytosqueezeoneso,nowweare probablyclosetoamillionoddsalesandannuallyourannualcapacityis1.2sowhencanwe see the next review of the annual capacity? Every year during the budgetcycle,IamsureVidhyawillbeaskinghowmuchmoneyyou guys want to enhance capacity, which she will also say, don't put too much money into productivity.So,that'sacontinuousdiscussion,whichhappensinthecompany.Inthecoming yearalso,itwillhappen.ButasImentioned,itisabout1.2buildcapacityinmostoftheareas. Insomeareas,wehavegoneupto1.4also.So,itispossibleforustoenhancethatcapacity with a short notice, with an investment. Priya Ranjahan: Sure, Thank you and all the best. Thank you very much. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Over to you Vinod. Thankyouverymuchforverygoodparticipation.Andofcourse,welookforwardtoQ3now. Thank you very much. We sign off with that. Thank you all. Thankyoueveryone.OnbehalfofEicherMotorsLimitedandAvendusSparkthatconcludes this conference call. Thank you all for joining us and you may nowdisconnectyourlines. Thank you. Page22of22