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Ashok Leyland Ltd
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Good morning, ladies and gentlemen. Welcome to the Ashok Leyland Q3 FY '19 Results Conference Call, hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Ashish Nigam from Axis Capital. Thank you, and over to you, sir.
Thank you. Good morning, everyone. Welcome to the Q3 FY '19 Results Conference Call of Ashok Leyland. From the management team, we have with us Mr. Gopal Mahadevan, President Customer Solutions Business and CFO; and Mr. K.M. Balaji, Vice President, Finance.I'll now hand over the call to Gopal for his opening remarks, post which we can have Q&A. Over to you, Gopal.
Yes, thank you, Ashish. Good morning to all of you. Thank you very much for coming on to the conference call of Ashok Leyland and for your interest in the company. I'll first give the overall top-level numbers and then I can possibly take the Q&A. I'm going to also answer some of the concerns that I have heard investors talk to me about. I think at the beginning, I may say so rather humbly is that we did possibly managed to beat the analysts' expectations in terms of EBITDA, which was in single digits, and a lot of our friends called up and said that they were pleasantly surprised by the 10.3% EBITDA that we posted for the quarter.I think there are concerns on the TIV, which has marginally de-grown by about 7%. So the total M&HCV volume for Q3 FY '19 was 87,476 as opposed to 94,156. But I think one thing I would want to say, because at the beginning of the year, I had mentioned that we're expecting that the TIV for the full year would grow at about 10% to 15%, maybe bordering on 15% than 10%. At the moment, the total industry volume still has grown 25% over the same period last year. We must remember that.The second thing is, in this quarter, and I'm not trying to reason out the performance of the TIV, obviously, it has de-grown, but we must remember that in the same quarter last year, there was a huge base effect. The industry had grown at 42%. So actually what is happening this year is, you're actually seeing an inverse where the first 2 quarters have been pretty good in terms of growth and you're seeing that the third quarter has seen a marginal decline.What is going to happen in the fourth quarter, we'll have to see, but January has not been a de-growth. January has been flattish. I will touch upon January performance also a little bit because I wanted to set a perspective of what we see happening from the company side. And I know what investors and analysts have been seeing from their side.Ashok Leyland volume, just moving back to the company, has been 11% lower. Our market share has marginally dipped from by about 1.5% to 31.9%. But on a cumulative basis, if you were to see, we are just about 1% lower. There has been a reason, again, and this is not to explain away -- reduce market share, but we had deliberately stayed away from the market in first quarter because we didn't want to get into very deep discounting, which didn't make sense.We must understand that, for us, it's important to grow and it is also important to be profitable. It is not that we don't want to grow. We have our aspiration for growth in market share. This is not there just for the current year, but it is also there for the future years also. I'll share some bits on what the company is looking at.So if we look at our volumes for the 3 months, it is 27,943 as opposed to 31,437. Our overall revenues were at 6,325, and our EBITDA was INR 650 crores at 10.3%. We also had the successful merger of the LCV companies with Ashok Leyland, and that has yielded benefits in terms of both cost, in terms of operating synergies, in terms of greater flexibility in decision-making. And it makes it a lot easier to manage a division than to manage 3 subsidiaries. And you must remember, this is exactly what happened in HFL also, when there were doubts in the investors' mind as to whether this company -- whether this division will actually make profits at all, today, they are on almost double-digit EBITDA.Now coming back to the LCV merger, there has been -- there has also been a tax benefit that is coming, which is not insignificant, which is -- which will add -- which has added to the EPS as well.Overall, for the 9 months, we have had the industry growing at 25%, as I had mentioned to you. Our volumes were at 90,417, which is a 20% growth. Our market share is at about 32.5%. 9 months revenue stood at INR 20,209 crores and our EBITDA for the 9 months is 10.6%. We continue to be on double-digit EBITDA, which we have shared with all of you. And we are, I think, double-digit EBITDA for 15 of the last 16 sequential quarters.The only quarter that we missed was the Q1 of FY '18 when we had seen the industry de-growth, if my memory serves me right, by nearly 42%. So that was when we actually missed it. Very clearly, from a company's perspective, I wanted to share the following 2, 3 things. One is, I think there has been -- and I know without anyone asking this I thought I should put what are the concerns that some of you may have instead of waiting to be asked because this is an opportunity for us to share the perspective of the company as well. One is, on the CEO transition, I think there is absolutely 0 concern that we have as a management team, as a leadership team and things are business as usual. We are getting into our planning cycle, and there is no discontinuity, there is no uncertainty in decision-making because, first of all, the leadership in Leyland is very, very experienced. So right from the various vertical heads to the manufacturing, to quality, to finance, to supply chain, everyone, we are working as business as usual. We are not really kind of looking up to decisions, except at strategic level where aside of Vinod, we have Dheeraj playing a very active role, and he is, for all practical purposes, full time. So if there are any strategic decisions to be made, which -- anyway he used to make in the past as Chairman of the Board. And so that I wanted to give clarity that there is absolutely 0 impact on the CEO transitionship. I wouldn't be saying it if I was not sure that there was no impact. So this is one thing that I wanted to allay the fears of or doubts that some of you may have. You will have to trust me on this, but it is very much business as usual.The second thing is on Ashok Leyland's aspiration for growth and that it is a pure play CV manufacturers so how are we going to manage. Let me tell you that I can't give you numbers. We are aspiring for growth in market share. I'm not saying that this will happen quarter-on-quarter. It can never happen quarter-on-quarter. But we are very clear that we're not going to cede market share and look at only profitability, and we are not going to only look at profit -- going to cede profitability and look at market share. Well, the best -- I mean, the full credit for a good management team is when we are able to walk a tightrope without any effort on managing both growth and profitability, and that's exactly what we're doing.As I'm speaking to you, we are looking -- we have been good at this, but I think we should get better at this is to look at our operating cost once more. We're putting in a lot of efforts, again renewed. I'm personally working on it, is to look at -- do we look at what are the desirable spends that we're having in the company and kind of do away with some of this, which will actually help us to shore up our bottom line.At the same time, we are investing quite heavily into the network. We are ensuring that we are kind of defragging the network a little bit more to understand what are the opportunities that are there. And the huge amount of analytics that's going on in terms of understanding the network, which we call as hub application segment. So we are looking at what are the products we should be pushing in particular sectors and also the cruciality of financing.One thing I missed to mention in the last quarter, which is important for the industry as a whole is, last quarter had been quite challenging. One was, you had the NBFC crisis. And that kind of sucked out money from the system. And you know this whole industry depends on and only on financing. It doesn't work without financing, this is one. The second one was uncertainty of axle load norms had been there and that continued into this quarter. We are seeing that the axle load norms are actually putting in higher tonnage on to vehicles. But frankly, we are not to -- we are not trying to brush away the concern, but I think that the core demand would continue as long as the GDP continues to grow. As we move into the New Year, we will see a little bit of political uncertainty and possibly, Q1 could be a little waffling. But after that, I believe that whichever government comes in, would be having growth in the agenda. I don't think any government is going to have saying that we will cease to grow. So I think there would be, again, a revival of demand. And we are quite positive about the prebuy that's going to happen in '19, '20. We'll have to wait and watch. But at the moment, we are ready ourselves. Please understand there is a lot of manufacturing planning that we'll have to do internally. We can't just keep waiting for what's going to happen in the market. So I'm giving you a flavor of what's exactly happening in the market. So one was the continuity of leadership. Second one is our aspiration for growth as well as profitability. When we are drawing up our plans, we are very clear that we need to grow in the domestic market.Where we have not done so well has been in the export markets. We realized that, but that is actually, again, being not because of efforts from our side, but there has again been a little bit of confluence of, I would say, bad news coming in, for example, in Middle East, which is our staid market. We have seen that we've had a lot of uncertainty beginning with oil prices and Saudi and et cetera. Similarly, in Sri Lanka, the volumes had become a little damp because of the geopolitical uncertainty. But I think that if oil prices continue to stabilize at this level and if there is a certainty, the feeling that we're getting is that we would see the Middle East demand reviving. Sri Lanka should also kind of settle down over the next possibly 1 or 2 quarters, but our CEO there mentions that he should expect a little better fourth quarter as things move on.So as far as our BS VI initiatives are concerned, very much on track. In fact, we've also mentioned it we have the entire product range ready on our test bed and it is -- we have achieved emission norms. In fact, what we are trying to do is to get a little better than the standardized emission norms because on the road, when the vehicles ply, we want to ensure that these norms are met. Today, the norms, I believe, are on test bed results, where we want to ensure that maybe 3 years later what happens is the norms have to be met on road. But we are very clear that the product that we're going to offer is superior to what is available in the market. And we have been very, very good at combustion. You know that as well. We were the first to offer an online -- inline BS III engine. We were the first to offer iEGR, which I think competition has followed. In fact, some of the STUs have insisted on iEGR, which you may not know, because they found that the total cost of ownership as well as the maintainability of the vehicles was far, far lesser than if an SCR solution is there. But as all of you are aware, we have IEGR solution, we have SCR solution, we have a dosing company. So we are very well prepared for the BS VI rollout. And of course, we are also doing modularity as we work on it and that is going to achieve, we would say, improvements in cost because there is a lot of back-end rationale that we're doing -- rationalization that we're doing. That will help because a number of SKUs at the back end will come down. Huge amount of effort is, actually, going on in the company, which is possibly not -- which we can't -- as a standard, I can't tell you what is the exact cost reduction that will happen. But our estimates are, it's going to be more than 150 basis points minimum. Okay, now it could be even far superior to that, but I am not going to share numbers. But I want to give you some direction as to what could the cost savings be.So I think what I would do at the moment is, I just wanted to add a couple of more things. LCV has been doing wonderfully well. Very happy about the acquisition. Things have settled down well. Must compliment the LCV team that they've been able to take the market share in Q3 to 18%. And in the month of January, it has actually been 19%.I also wanted to share with you the January performance, which all of you must have seen, the industry was flat. As I mentioned earlier, it has not de-grown, but we have actually grown. And we had a record market share in the history of the company of Balaji about 36.6% for MHCV and record market share for truck as well. So I think some of the efforts that my colleagues are putting in is actually happening, and we are actually seeing the benefits of all of those efforts coming in. And you must remember one more thing before I hand it over to Ashish is that all of this was done with a 2% price increase in the month of January.So thank you, Ashish. I'm now going to hand it back to you for the questions.
[Operator Instructions] The first question is from the line of Pramod Kumar from Goldman Sachs.
Gopal, my first question is on the LCV business. We've been talking about how big this opportunity could be, especially, with the merger of the subsidies. If you can just help us understand how much of the LCV addressable market is kind of covered by you right now as we speak on FY '19? And where do you see this kind of ramping up by FY '21 in the post-BS VI environment? And also how would your approach to the LCV business post-BS VI would be different than competition because it's also primarily diesel fuel -- diesel-powered industry with small engines, so where the price disruption could be sharper. So how does exactly LCV kind of help us in a post-BS VI business environment? If you can share some color on that.
Yes, as far as BS VI is concerned, I don't -- I think it's going to be neutral on -- I mean, it's going to be as neutral to LCV as it is to MHCV. I mean, the sense -- I mean, between MHCV and LCV, there is not going to be significant impact on BS VI because business has to go on. And LCV is a completely different segment where it is hub-and-spoke arrangement, it's actually more intracity and the last mile. From our perspective, the coverage is roughly about 40%, 45%. That is where the opportunity is because we're not still in the full range. We have worked under a joint venture, and we had to let the business grow. So our main product has been Dost. But what we did over the last 2 years, actually, was to introduce Dost and then aside of Dost, we also had Dost Strong and Dost+. And that is actually the trifurcation that has happened in the -- the offering actually has helped us to gain share. The second one, of course, we have been putting in a lot of efforts in terms of both Partner and MiTR. They've average about 500 vehicles a month at the moment. But there is -- we are very, very confident that these 2 vehicles are going to do very well, simply because they've got a state-of-the-art engine, the cabin of partner is, again, extremely state-of-the-art. I would say, it's rating best with some of the vehicles in the world. And both these vehicles are going to be super crucial for us on the export strategy. As I'm talking to you, we are carving out an export strategy. We are getting ready for an LHD, and we are also having another project called Phoenix where we would see a completely different vehicle added to the portfolio, possibly in the next 1, 1.5 years. I mean, I have just seen the mock myself yesterday. I'm pretty excited because now I'm half an automobile engineer myself, and I'm excited by the vehicle that we have. So to answer your question, where we will not be there is only on the sub-1 tonne at the moment. So we would want to add slots into it. And when we start adding slots to it, what is going to happen is, I will move to the 4-tonne, then we also will look at the 7-tonne. And now, as I am talking to you, Anuj Kathuria will be launching, in Bombay today, the GURU 10-tonne. So what we're doing is from the 12-tonne, I'm actually moving down and from my 1.25, 1.5-tonne, I'm actually moving up. So we are actually going to start covering the whole LCV portfolio and the ICV portfolio with a lot more current and newer products and that is going to be a huge distinct advantage. See that why Dost is doing well is because it's a completely differentiated product, okay? The warranty costs are extremely low. The cost of maintenance is very low. The operating cost is very low. The driver comfortability is -- comfort is very high. And what products that we're looking at to launch is, again, going to be completely different. So we -- see, for us, this is an opportunity. And now we are completely at liberty to run the business ourselves. The second thing is, for us, exports is going to be strategically important because I know I have shared it with you -- with all of you is that, for us, the initial strategy would be to show an LCV because the short-range product, graduate to an ICV and then move to an MHCV. I -- like I mentioned to you, we are redrawing our export strategy. There's a lot of -- because if there are changes in the market, well, it does set you back by possibly a year, but I'm not too concerned about it, but we would be -- we're completely looking at how to do possibly a slightly faster cluster bombing on the export side.
Yes. So Gopal, just one number. In FY '21, do you see LCVs still delivering growth for you because you will be ramping up your portfolio and significantly increasing your offering in the marketplace?
I believe so, in terms of revenue, while I can't immediately share a breakdown. Let me tell you, LCV is now ranking almost with bus, okay? So it's no longer a small business. Of course, truck is like a 500-pound gorilla in the room. But what we are trying to do and which we will continue to do is to devolatilize the company. So the LCV business is going to be very important. We are making investments in the business. So the project that I talked about the new vehicle has got investments. We are also augmenting production capacity in Hosur, paint capacity in Hosur. And I must also compliment our manufacturing guys who are doing some wonderful things, innovative ways of actually augmenting capacity. You know, for example, what would have taken a new paint booth, which would have cost about INR 300 crores, the guys have actually done a double dip and improved the capacity almost twice over with just about INR 30 crores, INR 35 crores. And we're looking at innovating further because we -- though there's a whole bunch of activity going on in the production side also to improve productivity. Why I'm taking this as an added information for you is, LCV requires a ramp-up. Our capacity possibly would be about 70,000, 75,000. We need to ramp it up, and we are on the process of ramping it up also.
And second question on Hinduja Leyland Finance, Gopal. Last quarter was tough for the NBFC space, especially vehicle-lending companies. So if you can just flag some or highlight some numbers in terms of Hinduja Leyland Finance in terms of operational performance and also the financial performance? And if any color on the NPAs during the quarter.
No, no, there was absolutely, no -- all I can tell you is this, there has been no major NPAs additional in the quarter. I'm not too sure whether I can share the numbers because I don't think they're published. They're debt listed. I don't know whether they've the numbers, but if they are, then I'll share it off-line or maybe put it in the website for everyone to see. Hinduja Leyland Finance is doing very well. The NPAs are very much intact. There are -- I mean, it's -- NPAs are -- it's on -- almost on par with the industry. There is nothing that has happened unusually in Leyland Finance, okay? It has been very astutely managed. You know why? Because it's got an extremely diversified portfolio. We have 50% of it -- of the book. At the end of the year, it is estimated -- now they're at about INR 20,000 crores, approximately INR 19,000 crores and odd. I think at the end of the year, they will possibly add another -- possibly about 20% to the book. Their growth rate has been very much on track. They are -- and the book composition is, they have 50% MHCV because they are very strategic to Ashok Leyland. The balance 50% is very well diversified. So they have 2 wheelers, which is highly-profitable portfolio, then we have got construction equipment. We have got loan against property. And then we also buy out portfolios from other financial institutions, including microfinance companies. So the whole business is pretty well diversified and very, very professionally managed.
And is the amalgamation of...
Sorry to interrupt, Mr. Kumar.
Fine.
We'll move on to the next question that is from the line of Mihir Jhaveri from Avendus Capital.
Just wanted to ask you when we say that a lot of prebuying will be happening in FY '20 and earlier Mr. Dasari has also spoken about 30% growth. Just wanted to clarify, are we talking about that growth during a limited period of time before the prebuying sets in, before the BS VI sets in? Or how are we looking at? I mean, how are we looking at from an FY '20 perspective in terms of growth? So...
See -- let me give it this way. I mean, I'm going to stretch a little beyond FY '20/'21 also. And I know all of you will be interested in the immediate quarter, next quarter and FY '19/'20, which is fair. I'm not saying it's unfair, but let me put it this way. We'll wait out for how Q3, Q4 is going in the current year. I think, like I said, January for Leyland has been good. Let us see how February and March goes. I don't see any change in strategy, point number one. Hopefully, the industry will be flattish if not grow a little bit, so that it sustains this 25% growth in the next 2 months. But we'll have to wait and watch because even if we do the weight, what happens is the weight of the fourth quarter is heavier than the first 9 months. So even if it is constant, you will see a little bit of de-growth, but that is more a statistic. What I'm bothered about is a little bit old fashion saying, hey, is the industry absorbing the same amount of vehicles as it was absorbing last year. But then we must also remember that tonnage of the vehicles are higher. So the revenues will be higher. So the revenue potential and the profitability will be slightly higher. I'm more happy -- I'm not unhappy selling smaller trucks. But if somebody were to buy a bigger truck for me, I'll be more happy because the margins are better. This is one point. As far as FY '20 -- '19, '20 is concerned, I know I'm being -- I'm going to kind of look into the crystal ball and gaze a bit, but what it tells me is that possibly the first quarter is not going to be so good because we again have a high base effect of the growth that has happened in the first quarter of the current fiscal. But if the prebuying starts -- I think it will happen possibly from the end of the second quarter and the third quarter more than the fourth quarter because what is going to happen is, people would want to have certainty of delivery because they wouldn't want to push their vehicle delivery risk to the fourth quarter entirely. But if I were a buyer -- let me put it, if I was a fleet operator, what would I want to do? I would say, let me buy this vehicle in the third quarter instead of waiting for the fourth quarter where that could be a huge last-minute rush for the vehicles because the vehicles cost will certainly go up. Now the cost going up again, it is -- it's a fact of life because you're going into a different emission norm. So if that happens, obviously, the cost of vehicle will go up. So people would want to prebuy, which is why you would actually see '20, '21 being a flattish year. Now if it is a flattish year, well, the favorable lining that appears is that of the phasing out of old vehicles and whether that would add numbers to the TIV. If it adds, it's good. We have to prepare ourselves for it because that number according to the people we speak moves from anywhere between 100,000 to 150,000 to possibly 275,000 to 300,000 on the TIV side. But after '20, '21, if all of us believe that, that is a growth story in India and there is an infrastructure story that will continue and we must remember that the government is putting in a lot of investments into roads, they're not putting these investments on passenger car. They're putting these investments for commercial vehicles and to ensure that there is connect between metro cities and even BMC category cities. So if we are going to do that, what we see happening is, the turnaround time of deliveries in the vehicles will come down. Productivity of vehicles will go up. And just as all of us feared, well, I didn't, when we said that GST will be implemented, there'll be 15% productivity improvement. So people will stop buying trucks, did not happen. There will be more capital flowing into this industry. And more important, the fourth point that I would want to say is that if you look at the -- this is the statistics, of course, is that the total supply chain cost to GDP is about -- I'm told, about 13% to 14%. If we have to be competitive as a nation, both internally and externally, we have to bring that cost down amongst a lot of transportation and supply chain, logistics companies, warehousing, et cetera, to somewhere around 10%, which means I see more investments coming in. So we -- when we are doing a planning, we are actually keeping all of this in mind because we can't run for our lunch. This is something that we'll have to run for life. We have to peer more than, say, 2 quarters or 8 quarters. So -- and then what we're doing internally as a company is, hey, we need to actually also see the devolatilization piece happening. So which is why LCV is a very, very important addition and an exciting addition to our portfolio. We are looking at the -- relooking at the way bus is being sold. We are looking at more fully-built vehicles. We are getting into fully-built capabilities as also with our subsidiary GTVS. And we are also making vehicles for the export market. Yes, the exports have come off a bit, but not too worried unless things are remaining a glut continuously in all the markets we go to fail, I don't think. So we are readying ourselves for the South East Asian markets also. And hopefully, the Middle Eastern markets will also revive and so should the SAARC market. Bangladesh is doing very well. We've won some tenders, and it has become a high-volume market for us. So that is a second piece. The third one is aftermarket. Aftermarket has actually reached INR 1,000 crore revenue in the first 9 months into it. Something it has never happened. The last full year, if my memory serves me right, with INR 1,100 crores, they're growing at about 25% to 28%. And I have a huge opportunity there where my penetration levels in terms of service, I mean, aftermarket parts, post-warranty is only at about 30%. I can take it up to about 60%, and we've got plans for it. So wherever I'm -- actually my cup is half full. I see that as a huge opportunity for us to take it forward, and we are working on these levers. Where I have a problem is actually to put it into a quarter saying exactly in which quarter it will happen because these are really directional -- these are more directional and strategic. And lastly, we are again redrawing our operating cost. So we are looking at it really hard. We have been doing it for the past few years. But I think the initial 2 years, '13/'14, '14/'15, were like extreme. But after that, we did let go because we also have to plan for growth. You can't do things which will affect your capability or capacity. So we did let go a bit because there were new businesses. We have got investments into EV. We are into solutions business. We are into a whole bunch of electronic businesses, all of which will start. We expected to start paying dividends after about 4 to 5 years. And the markets will learn -- will need to be patient about it. Because some of these things, I'm told, and these are coming from big research houses is that in the decade between '20, '19 -- I mean, 2020 to 2030, it is believed that solutions will form about 1/3 of the revenues of global commercial vehicles. So we have to make those investments. So it's a much larger palette of initiatives that the company is taking. It is just -- even while we ensure that we improved our market share in January.
Okay. Gopal, and just one more thing in terms of the channel inventory. How is this -- how is it looking like, sorry if I missed that, but how is that looking like right now?
Channel inventory is not anything of concern. It's at the same level as last year. And I think it is now even come down from -- it's about 5,000 vehicles or even lower now because going -- I don't have anything. We don't keep on pushing into the channel. Because for us, we'll offer very, very marginal credit and sometimes -- otherwise, it's all in cash and carry. So I can't force a channel to say, excuse me, borrow from the bank and please take my inventory, it doesn't happen. So we are not putting 45 days credit or 60 days credit like it happens elsewhere in the market. So my channel inventory is reasonably very well in control and believe me that is the only reason why we were the only company in India even across industries to have had very limited impact on the BS III to BS IV transition, which all of you know. Otherwise, I would've had a huge hit.
We'll move onto the next question that is from the line of Kapil Singh from Nomura.
Gopal, firstly, I wanted to check just one on the financials. We saw a very good improvement in raw material to sales. So any color you can give there because, for most of the companies, we have seen pretty sharp inflation in raw material to sales?
Yes. I think it's -- see, one of the main reasons has actually also been the mix of the products. So we have been -- see, what we have been trying to do astutely is to manage the mix, right? So for us, we know consciously that we are trying to grow our ICV business. But sometimes, we have to hold it back to grow our MHCV. So we have actually done well in the multi-axle vehicle and in the tippers where the margins have been better. We have been able to get some slightly better deals. So we -- like I mentioned to you, Kapil, I mean, we are trying to avoid this heavy discounting bit quite a lot. So even in January when we actually had the, what should we say, we had the market share growing, we were the only manufacturer to have raised prices, but still we were able to grow our market share because -- so we are ensuring that we are growing the company holistically. It's not -- so we're not offering too much credit in the market. We, in fact, offer nothing. We want -- we don't want to push our sales. At the same time, we want to grow our share, and we are astutely managing the mix. And the other thing is, of course, bus profitability, while I can't share the details, has improved dramatically. The bus head has had some strategies in taking out cost in the entire thing. We have taken out cost in logistics. And also, in certain parts of material, we have been doing quite a bit of benchmarking, so that has helped. The third thing is, of course, has been that, like I mentioned to you, aftermarket has grown. And you don't -- so the aftermarket mix has actually also resulted in the margins getting better. And fourthly, LCV gross margins are pretty good. So when we had the merged accounts coming in, it has got the effects of LCV also. So combined, you can actually see that the company has been able to improve on the GMs.
Okay. So this should be sustainable, right?
Yes. Hopefully, yes.
Okay. The other thing was...
I cannot -- no, I can't -- unfortunately, on a lighter note, I know we're in a investor call, but you folks are very -- know me I'm very informal on these things. I can't really put a stamp paper to it, but believe me, huge amount of effort is going on, on material and on cost, huge.
Okay. Can you also talk about -- you talked about the modular platform and the savings you're looking at over there and also on the operational cost side? How much cost can you take out over the next few years, next 2, 3 years? And just one housekeeping one. What is the current gross and net debt position?
Yes. I will ask Balaji to give the gross and net debt position. I mean, there is only, I think, one debt. There is -- 1 second. I -- if my memory serves me right, INR 1,710 crores or so was the debt position as of 31st of March. Am I correct, 1,700...
[indiscernible]
Sorry, 1,200...
[indiscernible]
INR 1,300 crores, I'm sorry. INR 1,300 crores net of cash is the debt level, predominantly driven by the working capital. We did build up a little bit of inventory to service the January volume because we got a feel that our January volumes are going to be higher, which is why we took a conscious decision to increase our product[Technical Difficulty]
Ladies and gentlemen, the lines of the management seems to have got disconnected. Please stay connected while we reconnect the management. Ladies and gentlemen, thank you for patiently holding. We now have the lines of the management reconnected. Thank you, and over to you, sir.
Yes.
Mr. Singh, may you repeat your question for the benefit of the management and the participants on the call?
Yes, sure. So I think, Gopal, you were mentioning on the debt, was it as of March or as of December? What...
As of December, it is INR 1,295 crores net debt.
Okay, okay, okay. And the other thing I had asked was, how much cost reduction are we looking at, including the modular platform and other cost-reduction initiatives over the next 2, 3 years?
See, I don't want to sound crazy or mysterious, but let me give a view possibly at the end of the year because we are drawing up a lot of plans now. Even there I wouldn't possibly give the entire number because then you tend to overpromise and underdeliver. But all I can tell you is that these numbers will not be insignificant, okay? So I already gave. Yes, so it'll not be insignificant. It'll make us more competitive. Now how will I use the cost? Will I -- one way to use the cost is to actually see that I gain more share in the market because I'm going to have a more cost-competitive product. The second one, I'll also use, as a finance person is to ensure that I deliver -- the company delivers better results on the bottom line and continues to deliver the ROC that it has been doing.
[Operator Instructions] The next question is from the line of Amyn Pirani from Deutsche Bank.
So my first question is on the prebuy. And like you mentioned, most of the prebuy would likely happen end of 2Q and 3Q. But I just had a question on what it means for pricing for the simple reason that, historically, as you know, the emission norm changes were manufacturing date based and not sales based and because every manufacturer needs to clear the inventory by 31st March, how do you think pricing will play out customers' expectation of pricing also? How will it play out next year?
See, unlike the previous case where it was a surprise, okay? So where -- you could say that we needed to ensure that we clear the inventory, this time, it's going to be planned. So to that extent, to answer your question, we are not expecting any heavy discounting on that. Where we're actually seeing is more a demand because that's what -- even last time, it was not something that the industry was ready for, right? So suddenly, if you say that it's going to happen. So even at that point in time, let me tell you, what actually happened is, we didn't actually have a discount. In that quarter, the profitability was good because the demand was high. Then the challenge was in actually getting the vehicles registered. Now this is not manufacturing base, now it is sales base, which means after 1st of April 2020, you need to sell only BS VI vehicles. So we will have to plan our manufacturing, so to ensure that we are not left with any inventory.
Okay, okay. And one thing in this quarter which is quite interesting, I don't know, if you can comment on that is that both the leaders have actually reported very robust and similar margins on the CV business, whereas, the third and fourth player have actually given bad performance. So are we seeing that because there is a decline in the market, the top 2 players are becoming stronger? And how is the pricing environment, because both you and the market leader have reported very strong margins in this quarter, which was expected to be a difficult quarter?
Yes. You see, I think, the whole thing about the CV business is to manage your cost because that is an inherent demand. It's not that it's not there. So when you -- actually when people start comparing quarter-to-quarter, it becomes very difficult. That's why I said, you'll have a high quarter and a low quarter because this is not like a fast car, this is not like a 2 wheeler where it's an impulse purchase or you can say that there is a trending. Here, this is a more capital equipment and people will have to see demand. They will have to participate in tenders. They will have to see the freight rates improvement and interest cost, et cetera, before they factor in all of this. Now coming to the top 2 players doing well, you can conclude maybe on a lighter note that the commercial vehicle industry is a good business to be in, until we got a pure play commercial vehicle manufacturer, maybe the alpha is even better. But jokes apart, we are seeing the trend unfortunately and very, very unfortunately. Actually, this is an industry that has been going well. Why do you have to choose the path of discounting to sell is something that beats us, okay? Otherwise, this can be like a supernormal profit industry if we choose to. And I'm not saying capitalization, but I'm saying that you don't really have to go and give customers, is a level of discounting, which seems unreasonable, right? But that being said, so what -- I mean, what can we do as a company? We have to participate in the market. So we do take decisions to go after certain customers, geographies. But at the same time, we have to take cost out of the product continuously and manage our operating costs. That's -- I mean, that's the only thing that you can do. And you need to get better and better at this. So there are separate initiatives for driving market share, and there are separate initiatives for driving down cost.
Fair enough. That's helpful. And just one last bookkeeping question...
Mr. Pirani.
Sure. I'll get back in the queue.
0We'll move on to the next question that is from the line of Jinesh Gandhi from Motilal Oswal Securities.
So my question pertains to the impact of LCV merger in this quarter, so...
Sorry to interrupt, Mr. Gandhi. Sir, can you speak a bit louder. We're not able to hear you.
Yes, is it better now?
Yes.
Yes. So my question pertains to LCV business merger. So A, you indicated there is a tax benefit coming in this quarter due to LCV merger. And secondly, there is margin accretion also happening. Can you indicate on both these things?
See as far as LCV merger is concerned, the tax benefit that is coming for the quarter is about INR 84 crore because there is an accounting method to do it. So a lot of tax benefit has also gone on the YTD side, okay? And we expect the overall tax benefit to be something around the range of upwards of INR 250 crores.
Balance?
For the full year.
Okay.
Okay. So maybe 3/4 of it is already accounted in the current quarter because it goes in YTD. You can't accrue everything in the current quarter. Then, actually, the PAT would have even been better. Okay. So we have to follow accounting standards. So we have taken, I think, about INR 84 crores, I think Balaji will confirm that again, is what we have taken in the current quarter. And as far as operating margins are concerned, I will only tell you one thing that the operating margins of the LCV business are higher than Ashok Leyland stand-alone. So we are actually going to see the benefit of LCV operating margins accreting to the business.
Okay. And secondly, with respect to inventory as of December '18 at company level and CapEx expected for '19 and '20?
Yes. Balaji, can you give the inventory?
12,763 vehicles, Jinesh.
12,760.
This 12,763 has come down by 3,500 vehicles in January. It got reduced by 3,500 vehicles in January. This 12,763 is as of 31st December.
Sure. And CapEx?
CapEx for the next year, I'll -- we'll have to come back after our budgets. But let us see whether we can rein it into about INR 1,000 crores and odd, but this will be into EV, this will be into new manufacturing. This, of course, includes the LCV and some new initiatives of the company. But I think I'll get a sharper number for '19, '20 by end of March because our guys are all putting the numbers here.
And for FY '19?
FY '19, I think the number -- Balaji, what is the CapEx still date?
Still date is about INR 600 crores.
INR 600 crores. So we may add another maybe INR 200 crores, INR 300 crores. What we had told you the -- what we told you in the beginning of the year, we stand by it, about INR 1,000 crores. And we are now doing it on capacity, remember that. So we've been very, very astute in our CapEx planning. And believe me, I don't want to be in my manufacturing head shoes, is really sweating and sweating the assets also. So we are actually ensuring that we are putting in the CapEx at the right moment because we are -- see we are -- it's not that we are not aware of what can happen. But I think we have to plan for growth, but also ready for some flattishness if that is there. But my take at the moment is that while '20/'21 may be flattish, there is growth in '19/'20 and there is certainly growth after '20/'21 also.
We'll move into the next question that is from the line of Hitesh Goel from Kotak Securities.
Just wanted to get a sense on the discounts in this quarter for you?
Well, the average discounts have been -- have -- they've gone up. They're at about 4 -- they're about 4, 4.5 -- INR 4 lakhs, INR 4.2 lakhs per vehicle, but it's an average vehicle. The tonnage of the vehicles have also gone up. But I mean, the discounts are huge. So what I look at is the net price realization that I keep sharing with you because absolute discount means nothing. So we did take a bit of a price increase in November. We did that earlier also. And we opened with a higher price base also at the beginning of the year, if you remember because we were the only players to have taken a huge increase in March of the previous year. So for us, we have actually been able to get a pretty flattish net price realization in the third quarter without -- otherwise, the net price realization could have gone down even further. Hopefully, January -- I mean, the January realizations have been marginally better because we again took a price increase. So what we do is -- I mean, we don't announce the price increase across all models, saying, all -- everything is good. We ensure that we do a proper mix study and say which are the ones that there is a demand flow, how much can they -- how much elasticity on the price do they have, and then certain things where we need to actually gain our presence on our vehicles and we don't increase prices there. But overall, we also monitor the gross margin to see that they make reasonably sensibly gross margins, and we're not giving away a truck and also some money. So essentially, this is a very astute exercise that happens every, I would say, every week in the company, if not every day, to ensure that we protect our net price realizations. But to answer your question, very high discounting rather unfortunate.
And just want to get a sense on the raw material pricing. It started to come off in December. And you guys have taken price increase, and there is a fear in the industry that CV cycle is going through a very tough patch. So can you just talk about that? How you guys are able to take price increase, despite raw material price coming down and streaming under pressure?
Well, we'll wait for -- I think that if the raw material price increase, see, what happens, the industry also -- the whole thing is on accrual basis. It's not like every day the price -- the purchase order increase. So we will possibly -- but at the moment, it's a little early. But I think that we would see better margins in the fourth quarter, clearly, because the raw material price increases will come off. But we must also remember that it is -- it's important to ensure that we keep rationalize the pricing. And while the CV market is tough and I believe that -- just see January, I mean, I'm not saying that's the evidence for all the quarters or all the months to come, but we increase prices and we gain share. Actually, we -- the industry was flat and we grew volumes. So it is possible. It's all about, let's say, proposition that you have on your vehicles also.
Yes, yes. No, just wanted to get, sir, in January, when you're talking about the numbers are flat, that is retail or that is wholesale number?
Wholesale.
So retail was -- what was the retail thing?
I'm talking about wholesale because see we only report wholesale thing.
But any idea on the retail side? What is happening on January?
I think retail was good. I mean, retail -- but I don't -- see, we don't have retail industry -- I don't have the industry retail details, no.
But for you and then maybe if you can give us?
It was good year. Better.
It was growing. It was grown. It grew also in retail.
It grew. It grew.
Okay. And my final question on axle load norms...
Mr. Goel...
Okay, sorry. Okay, I'll come back, again.
The next question is from the line of Raghunandhan from Emkay Global.
Just wanted to understand that 150 bps cost savings you alluded to, it is over which period?
Well, this is for our modular business program when we start launching it in '19 -- in '20, '21. And that's the base case that I'm looking at, to be honest with you. This is purely because you're bringing in modularity. See, just to answer to -- I mean, just to add, this is a strategy to neutralize any pressure that we possibly can also have during that year because of BS VI. So we have to figure out ways and means to see that we keep maintaining profitability.
We'll move to the next question that is from the line of Ronak Sarda from Systematix Group.
Sir, I mean, question on your LCV portfolio. I mean, the LCVs have been pretty resilient despite the other auto segments feeling the pressure. And this month, Tata Motors also reported the decline. How do you see LCVs in near term, say, with Q4 and FY '20? And a clarification on the earlier question. Raw materials have started to soften. Do we see any benefits accruing in Q4 and Q1?
Yes, I think so. We should see benefits of raw material price softening. We are in discussions with all the major suppliers of that. So if that happens, you are going to see the benefit coming in both Q4, Q1, if not even Q2 of next year, let's see, unless again steel prices start to swing up. LCV, I think, we are very positive about the growth because see, for us, as a company, it may be -- we are not yet fully matured in the industry, in the sense, we are -- we still have a lot of offerings to make in the product portfolio. So when I start making and adding to the product portfolio like I am -- the GURU 10-tonne, it is not an LCV, it's an ICV. But I'm introducing -- our share in ICV business has actually gone up. We were -- I remember when I joined the company 5 years ago, I think our ICV market share was 10% to 12%. And today, we are at about 20%, 22%. So you're adding products continuously. So when that keeps happening, my share of the LCV market will start going up, which will actually help me shore up the business. And secondly, I think this is going to be very important as a international export initiative. Huge market. So it takes time to convert. It's not easy. But to convert a right-hand side vehicle to a left-hand drive, it takes time. There is a whole -- it's actually like redesigning the vehicle. So we are now -- we are almost ready with our LHD variations. It'll happen now during the next 6 to 12 months and then we are also going to have the new vehicle coming in, which will complement the existing Dost. And we have already -- and the both -- what we're seeing now is, for example, in Dost, when we had only a single Dost, we were doing possibly about 3,000. Now, that number has grown significantly. For example, in the last quarter, if you look at LCV, we have done nearly about 14,000 units. And that's because we then added Dost Strong and -- which is a rigid-front suspension, and then Dost+, which is higher-end offering. So when I now start offering the new product, plus if I'm going to have some other variance in the existing modules itself, plus I'm going to put an initiative to drive the volumes of Partner, which is again a very superior vehicle, and I'm also going to kind of get my portfolio of ICV down, I'm going to fill in a lot of slots, which hither to I have not and that should help us to scale up volumes also.
We'll move onto the next question that is from the line of Jamshed Dadabhoy from Citigroup.
Two questions. First is, year-to-date. Could you give us a revenue split across subsegments, like MHCV, LCV, export, defense, buses? I know you mentioned aftermarket is INR 1,000-odd crores. And second question, could you give us a sense of how the balance sheet has changed post-merger of the businesses? What's happened to your net block? What's happened to total capital employed?
Well, I'll give you the broad revenue split that we have happened. So we have roughly the -- for Q3 of FY '19, if you were to look at the total revenues of INR 6,300-and-odd crores, we have had about INR 4,300 crores coming from trucks, and buses was about INR 439 crores, LCV was INR 572 crores. So overall, the numbers -- these are the 3 large numbers that I thought are very pertinent for you guys. As far as the balance sheet is concerned, Balaji, do you have the breakdown or I'll give it to you separately? I don't have the number readily, the addition gross block -- net block. We'll do that. It's not very significant numbers for LCV business. Let me tell you that because our overall gross block, I think, is roughly about INR 6,000 crores. So the addition would be marginal. It is not going to -- in fact, I believe if you were looking at ROC, let me answer the question to you, Jamshed, that the ROC -- incremental ROC will only improve the total consolidated ROC.
Okay. Got it. And could you share the number for exports and defense for the 9 months?
Defense has not been very high because there were no kicks. But export volumes were, again, we had export volumes of about 1,800 units on about 27,900 units, excluding exports. It's been a tad -- it's the same but see, I'll tell you the challenge -- not challenge, the thing about exports is, there are 2 parts to exports. And here, again, I would want to say, so I know that we've been saying that we will grow our exports to, I know, 1/4 of our revenues or so, but it is taking a little bit of time, but we're -- the opportunity very clearly exists, okay? It's not that the opportunity does not exist. We are putting in more resources there. The only thing is sometimes there is one timing mismatch. Sometimes, the markets have not been great. For example, in the entire UAE market and Saudi market and then you had the Qatar problem. So I'm not -- I don't want to sound being giving it as an excuse, but these are facts. So you can't push vehicles in a market where there is no demand. And then you heard the oil pricing uncertainty and this fact that was happening with U.S. Sri Lanka is a steady market, but this -- the level of political uncertainty is so huge. I mean, people -- there has been continuous change in the leadership and that has created a problem. Bangladesh is doing reasonably well. I think there are tenders coming in, this is one part. So we have to grow in the African market in retail. We'll also have to grow in the Southeast Asian markets in the retail. So we will be seeing something happening in the forthcoming year also, where we will be feeding some of the vehicles in these markets. We were getting the -- see, the products also have to be ready. We were possibly a tad slow in the products that -- because we possibly overestimated the speed at which we can do. We need left-hand drive products, which we are getting ready now. So almost -- most of the products, which are critical for our export strategy, are ready for launch over the next 6 months. So that when we have the left-hand drive products, then we can go for these markets. The second one is the project orders. Project orders are taking a lot more time. And there, basically, the project orders come from Africa and within the various countries. And Africa is not one large country, but we are discussing something in Senegal. It's now going on. I thought this deal will get signed off, say, 2 months ago, but it's not yet happened. When will it happen? I don't know. But similarly, we're doing it for a couple of other countries also. When these things happen, then, suddenly, you'll see the exports spurting up. So for us, when we look -- when have to measure exports also, I would want to see it on a slightly larger framework, not a quarter, possibly over 6 months what are we doing. And we are trying to build in consistency or annuities in export revenues. That will happen only through retail, which means I have to build my network there, and for which, we are getting the products ready.
We'll move on to the next question that is from the line of Jatin Chawla from Crédit Suisse.
My question is on the cost increase post-BS VI. Now we managed the BS III to BS IV transition with a lower cost because we had a different solution compared to our competition. Now with BS VI, everyone will be moving to SCR. So will your cost increase be higher than your competition because you will not have the advantage that you had in the BS III to BS IV transition?
I don't believe so. Even if it is there because there are certain parts of the BS VI, which I'll have to be put in by competition also. The delta differential moment upwards is not going to be very significant per vehicle. And we are figuring out a fix for that. So I'm not to -- I've had a discussion -- multiple discussions with our Head of Product Development and Engineering, and we are trying to lick that problem. At the moment, it's not a major issue for us, let me put it this way. I understand the logic of your question. I don't want to brush it aside. But I don't see that as a big negative for us at all in terms of the market. In fact, hopefully, let us see how our solutions are going to be different from competition and whether we can actually make an advantage of that.
We'll move on to the next question that is from the line of Aditya Makharia from HDFC Securities.
I just had one question with the BS VI coming in. This will be a nationwide rollout, right? It won't be staggered like it was -- like how we had BS III and BS IV?
No, no. It will be a nationwide rollout.
Okay. Across every city?
Even BS IV was...
For volume part.
Yes, but what happened ultimately -- the ultimate rollout was suddenly pan- India.
Right. But this should be pan-India from the first day, right?
That is the expectation. See, the government has not come out with any clarity. So we are readying ourselves for a pan-India. We are readying ourselves for the larger of the challenge, let me put it that way. If it is saying, of course, there is a complexity in terms of manufacturing, which can be handled, there is no issue. But the inventory management on a pan-India basis is what we are readying ourselves for.
The next question is from the line of Pranav Tendolkar from Rare Enterprises. As there is no response from the current participant, we will move on to the next that is from the line of Yogesh Aggarwal from HSBC.
Just one question, Gopal. You -- initially, in your comments, you mentioned the recent slowdown is because of the base effect and the axle norms and some finance availability. I just wanted to ask you 2 things around that. One, you think the full impact of axle norms is behind because I'm assuming most of the transporters are still reregistering their trucks, that is one. And secondly, is there no impact on the demand per se? Is it as good as it used to be last full year? Or there has been some slowdown in demand as well?
See, I'll put it this way. Very difficult question to answer. And we first clarify that. I didn't mention a slowdown. What I mentioned was that you saw a marginal de-growth that has happened. The reason that is happening is because of 3 factors. One is the base effect itself. Because last year, the growth was 42%. So you know the industry had grown 42% in the same quarter last year. So you did see a base effect. The second one was, of course, I mentioned about the financing. And the third one was axle norms. January has been flattish. So -- January has been flattish. So, to a certain extent, I'm satisfied because there is no de-growth, right?
The underlying freight movement has not slowed down.
I beg your pardon, please?
So the underlying freight movement...
No, no, there has not been any slowdown on freight movement at all. See that's what I'm saying. If there is an underlying freight movement slowdown, that's not because of the industry, it is because of the economy. So if -- I'm just telling you, if the economy were to slowdown, okay, and I keep repeating, I know this is, I mean, the commercial vehicle industry, truck industry does nothing, but move GDP. So if the GDP were to slow down, that will have an effect on all industries, including commercial vehicle industry. But if all of us decide that India is going to grow at a pretty decent space over the next few years and if -- then I think it's a reasonably good prospect for commercial vehicle industry. '19/'20 could be a little flattish -- I'm sorry, not '19/'20, my apologies, let me correct it. '20/'21 could be a little flattish. '19/'20 will be a growth year because of prebuy. And the growth should happen in Q2, Q3 and possibly Q4 of FY '19/'20. And '20/'21, how much of the incentive that the government is going to give because they keep announcing and then there is no clarity on whether that incentive will come in. But if there is an incentivization for scrapping the older vehicles, some of the fleet operators will make sense for them to trade it in because, especially the medium fleet operators. The fellows who will get affected are the 1 or 2 truck operators because they may be running extremely old vehicles and they must be moving sand and other kind of stuff. So for them, to invest into a new vehicle, can be prohibitive. Whereas, somebody who's in this business and who's carrying a reasonable inventory of vehicles, would want to say, if -- this is a good window for me to trade it in. If that happens, then that can possibly neutralize because, I think, that's what CM had also mentioned to the government that it would be a good time actually to introduce the scrappage policy. If that happens, again, going forward, it looks reasonable tariff provided GDP is going to grow because the base is going to get larger and larger. And you would need more efficiencies in transport system. So -- and trucks are getting better. Trucks are getting more connected. It's becoming more efficient.
We'll move on to the next question that is from the line of Sonal Gupta from UBS Securities.
Congrats on a good [set of ]. Sir, just wanted to get your sense on the defense thing, because in your press release, you also say that you bought these many tenders, we hope that there will be some orders around that? So just wanted to get your sense on that side, how do you see that scaling up in the next couple of years? What is the visibility we have on the defense?
See the challenge I have is my visibility is a little low on this. My capability is very high. So it's like we had 134 tenders. Out of which, we have executed some of them. We had -- pilot tenders have been done. They're happy with the products. So we have to read -- but they -- we see they do an initial trial order of, say, 5 vehicles or 6 vehicles, which have been done, they've been deployed. We've done multi-barrel rocket launchers. We've got mine-protected vehicles. We have got medium bulletproof vehicles. We have done a whole bunch of stuff. Now unfortunately or fortunately what is happening is the tendering -- and then the second part is kits, okay? So the kit ordering from vehicle factory, Jabalpur, has also been kind of negligible over the last 2 quarters. So if that happens -- the previous year, we had about 3,000, 3,500 kits. If that happens, that actually improves my EBITDA quite significantly because of the mix. Now we are hoping that the reordering will start from the New year. I think, at the moment, the government is putting -- I don't want to, it's an open call, but we all know why there is an uncertainty on the defense ordering. I think, hopefully, if that happens, then I'm better positioned than anyone else because I won the tenders. I mean, I have enabled myself. Now I'll have to wait for the orders. So if the orders start coming in at -- logic tells us that at some point in time, they'll have to start the ordering because they've approved different cart of -- different kinds of vehicles, both armored and nonarmored. And if that has happened, why have they done that? Obviously, because they want them, including revamping of tanks. That's work going on. The potential is pretty huge. But I presume all of this is being done because the government wants to augment its defense preparedness. And if that has to be so, especially on land systems, of course, then there is artillery and then there is aircraft, there is naval, et cetera, but we are not in that space. But in the -- on the land systems, if they want to augment their capabilities, we will be an important player. But I can't tell you whether they will order next year because if I -- see, we are internally preparing ourselves for that, let me be candid. But if I say so and then if it doesn't happen, it doesn't look very fair for all of us, which is why what we're saying is, we're prepared, we're waiting for the orders. If they come in, it will be very positive for the company. And this is not like we have to participate in a tender. We are talking about things we have won. So there is a slight difference between the artillery players, for example, who have created capabilities, but are waiting for tenders to happen. In our case, we have won the tenders.
Right. So we won the tenders, it's just that when the orders come in is it...
Exactly, exactly.
And as of now, there is no value attached to these orders -- I mean, order size is...
I can't because it depends -- suppose I say -- see, I will estimate that they will say, 200. And if they order 50, the number changes or they can order 120 also. We just look at vehicle factory, Jabalpur. It was a steady state some numbers, but suddenly, this year, it has come up. I don't know what the constraints are. But hopefully, they will start ordering again next year. So we are preparing ourselves because, finally, it's all about capacity planning also.
Ladies and gentlemen, that is the last question. I now hand the conference over to the management for their closing comments.
Yes. So I think a lot of interesting questions and I hope that we have been able to kind of answer some of the questions. And more importantly, the uncertainty that some of you people may have had in your minds, but I think that we are getting very well prepared for the future, and we are excited also by the prospects that the future holds for us because we have only been getting better over the past few years, if you really look at it. It's not just about operating performance, it's about -- we have added market share over the last 5 to 6 years. Our operating margins have been getting stable. It's not been oscillating very widely, but we are now in the -- we're continuously on the double digits. We have done a couple of turnarounds very well. We have cleaned both HFL and LCV has been beautifully turned around. If you refer to the subsidiary balance sheets about 3 years ago, they will tell you a completely different story. We have cleaned up our balance sheet to the best of our abilities. We have been kind of sharing all the developments of the company with you. We have been consistently launching products. And more importantly, we have been changing the -- we have been pushing the needle in terms of even the technology offering that we have, including the iEGR, which now competition is following or the earlier BS III vehicle. So -- and then, we have launched the latest 4123, which is again -- which I failed to mention, it's again a first of its kind. It's the world's first 16 wheeler truck with the patented parallelogram dual tire lift axle, which means the way it lifts -- because it makes a whale of a difference in terms of wheelbase. And wheelbase has an impact on load. Load has an impact on material cost. You can put more material and increase -- get a larger vehicle for larger tonnage or you do it a lot more intelligently because the whole load bearing thing is depending on the wheelbase. So there is a -- we've been displaying our engineering capabilities also. So I would only want to leave this perspective with you that I keep getting asked continuously and none of you asked it, but what about technology, what about -- I'm telling you that we are very, very well positioned to serve the Indian market. We have been proving ourselves consistently. And we are also well positioned to serve certain addressable markets in the globe, and we are getting better at this in terms of product capabilities. Some of this will start converging in the near future, and hopefully, we'll see all of them happening. Thank you.
Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines. Thank you.