Bosch Ltd

NSE:BOSCHLTD

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Post Results Conference Call of Bosch Limited hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Private Limited. Thank you. And over to you, sir.

[Annamalai Jayaraj, analyst]

Thanks, Faisan. On behalf of B&K Securities, welcome to Bosch Limited 1Q FY '22-'23 Post Result Conference Call. From Bosch Limited management, we have with us today, Mr. Soumitra Bhattacharya, Managing Director; Mr. Guruprasad Mudlapur, Joint Managing Director and Chief Technology Officer; and Ms. Karin Gilges, Chief Financial Officer. Mr. Soumitra Bhattacharya will make a PowerPoint presentation, and will be followed by question-and-answer session. To view the PowerPoint presentation by Mr. Bhattacharya, please click the Teams meeting link which we have provided in the conference call invite.

Over to you, sir.

[Soumitra Bhattacharya, executive]

Thank you, Mr. Annamalai Jayaraj for your continued support and friends and colleagues. Good afternoon, and welcome to this part of the call. I sincerely hope that all of you are healthy and keeping safe. Today, we had our Annual General Meeting, and it was a very positive meeting. And we would like to first share with you the macroeconomic policies followed by later an aftermarket automotive market update and then walk you through the financials. Finally, I'll end with the highlights for the quarter, which is affecting our business.

The global economy is facing a downward risk on growth, and we all know that because there's very high inflation happening. Some of the large economies including the U.S. already started contracting. While the central banks continue to hike key policy rates in the last few weeks, one has noticed that their narrative is slowly shifting from inflation to growth.

Coming to the Indian economy, a host of indicators suggest that the economic recovery is ongoing. The PMIs continue to be in expansion, GST collections you've already seen are at an all-time high and continue to be robust. Capacity utilization levels are also inching upwards and investments for new projects are also showing a positive movement. Employee conditions and supply chain pressures, there are, of course, tight situations, but relatively, they are easing a little bit. We see a good progress of the monsoon. Of course, colleagues, the monsoon was still not totally even, though, of course, reservoirs are getting filled up. Also, the Kharif's sowing has been progressive. We see a positive year-on-year change thus far. That said, like the rest of the world, India too is facing a high inflation, which has resulted in the RBI revising the GDP forecast for FY '23, now down to 7.2% and also hiking the policy rate by 90 bps and the CRR by 50 bps. I also have to say colleagues that the RBI governor is doing a very splendid job in trying his best to ensure India stays in a relatively sweeter spot.

Overall, the automotive market production has increased by 31% in the current quarter with the exclusion of 2-wheeler. The bulk of the increase can be contributed to the lower base of April-June 2021, which was, as all of us, nonaffected by the COVID second wave, hence, we have done a comparison with the January-March '22 quarter or which is the quarter 4 of FY '21-'22, and here, we see it greatly flat. Now this is driven by seasonality. Historically, the first quarter of a financial year is lower than the last quarter of the fiscal year. The chip shortages in the industry, which affected during April and May production of fast cars and LCV from June, I have to also say that there has been in the industry an improvement in the chip supply.

And while we are aware that in June, there was a 1-week shutdown at Suzuki for maintenance, within the segments of PC and LCD which were generally flat or minor de-growth, this has been driven by a slightly higher backlog order and waiting period. Again, I have to say, you can't take it generically. You have to remember that these order backlogs are defined on modules and mixes. For example, in fast cars, we see that for the automatic and the higher end, the backlog is still relatively high.

The tractor market grew by double digits in April- June 2022. This has been driven by a lower base of January- March 2022. The Kharif sowing reported on year-on-year decline of 5.3% as on July 1, 2022. Now 2-wheeler consumption sentiments are still low. This is possibly due to the price hike witnessed at the entry level bikes, BS-VI variants of these bikes are in the range of INR 70,000 up to INR 90,000 against INR 50,000 to INR 60,000 for BS-IV bikes. Chip shortages IN premium segment also led to lower inventory and larger waiting periods.

Now let's look at the automotive market outlook for 2022. Now on this slide, each row represents a particular segment. For instance, the first row represents fast car followed by HCD, then LCD, tractors, 2-wheelers and 3-wheeler segments, respectively. The first column represents the 2018, and here, as referred to the calendar year production volumes, which is considered as one of the best years in the Indian automotive industry and the industry was at its peak.

The second column represents the 2020 production volume. First column represents a '21 production volume. The fourth represents the first half of '22. The fifth and sixth represent the quarter 3 and quarter 4 forecast. The last column represents the expected calendar year 2022 volumes. Basis of these numbers, we are expecting a better year for PC and LCD segments, and we are likely to breach the 2018 peak.

Heavy commercial vehicles, 2-wheeler and 3-wheeler recovery will take quite some time, as we all know, to reach the peak of 2018. Tractors, of course, was the front runner, which peaked already last year, and we are expecting on a high base, a minor degrowth this year.

Coming to profitability. The overall revenue from operations for April to June 2022 stood at 35,444 million or INR 3,544 crores, which is an increase of approximately 45% as compared to the corresponding period of the previous year. Please remember the previous year quarter was badly hit by COVID. Now here, the automotive sales grew by about 48%, largely driven by Powertrain, while the nonautomotive sales increased by about 54%, largely led by power tools. Overall product sales have increased by about 49%, primarily on account of a low base of April-June 2021, as I mentioned earlier, owing to the second wave of COVID-19 pandemic.

Income from services mainly comprises of R&D services provided to OEMs and Bosch Germany. While the billing of our R&D services was at a healthy 1.1 billion for the quarter, the income recognized in the books based on customer SOP dates was about INR 628 million. The balance income would get recognized in the subsequent quarter based on project completion dates of customers. So this is very important to understand, colleagues, that what is it that we built and what is it that we have recognized.

The other operating income includes some income from lease rentals, miscellaneous income and export incentives. In April-June 2022, we have received the installment of our claim for refund of taxes under the mega project scheme of the Government of Maharashtra, pertaining to our Nasik plant and also increase in miscellaneous income. Hence, other operating income for the current quarter was relatively higher. Our material cost as a percentage of total revenue from operations has increased from about 59% in April-June '21 to about 64.6% in April-June '22. This is mainly due to 3 reasons: A, change in product mix over the same quarter of the previous year. B, impact of transfer pricing adjustments as respect to imported traded goods. And C, most importantly, raw material price increase. Sequentially the material cost as a percentage of total revenue from operations has remained at 64.56%.

Our employee cost for April-June 2022 is INR 270 crores or INR 2,702 million as compared to INR 271 crores in April-June '21. Hence, as a percentage of revenue from operations, employee costs improved from 11.1% in April- June 2021 to 7.6% in April-June 2022, mainly due to higher revenue from operations compared to the same quarter of the previous year. Our other expenses stood at INR 553 crores, approximately 15% of total revenue in April- June 2022 as compared to INR 428 crores with a 17.5% of total revenue in April-June 2021. Increase is in line with the increase in sales, increased spending on new businesses that we are doing from Bosch Limited as well as increased advertisement expense which is that we've done specifically for our Power Groups business.

Our depreciation for the current quarter is at INR 65 crores, 1.8% of the total revenue as compared to the INR 67 crores or 2.7% of total revenue in April-June 2021. Our operating profit stood at INR 385 crores in April-June 2022 as compared to INR 240 crores in April-June 2021, which is an increase of 61%. Our other income primarily which consists of interest on fixed deposits, change in market value of mutual funds, which are debt based. The other income has reduced from INR 99 crores in April-June '21 to INR 57 crores in April-June 2022, mainly on account of reduction in market value of mutual funds in the current quarter. This is driven by the sell-off in the bond yield. During April-June 2022, RBI has increased the repo rate by 90 basis points. That said, the sovereign bond market has sold off between 90 to 150 basis points across the 1- to 5-year segment. Our average portfolio duration has been hence reduced from 1.5 years to 1.1 year.

For the quarter ended April-June 2022, your company posted a profit before tax or PBT of INR 438 crores as compared to INR 335 crores in April-June 2021. As a percentage of total revenue from operations, PBT or profit before tax stood at 12.3% of total revenue in the current quarter. Profit after tax for the quarter ended June 2022 stood at INR 334 crores, which is 9.4% of the total revenue from operations. Profit after tax in April-June 2021 was INR 260 crores.

Bosch has set foot in India as early as 1922 with a sales office in Calcutta, now Kolkata. The history of our company is an invaluable part of its existence. For over 60 years, Bosch India has traversed a remarkable journey in the Indian automotive industry and for 69 years make in India. For the last 5 years, Bosch has invested around EUR 100 million or INR 800 crores, developing our smart campus, which we call the Spark.NXT campus, which has a capacity to potentially house 10,000 Bosch associates and was officially opened at a ceremony inaugurated virtually by the Prime Minister on 30th June this year. The 76 acres site is Bosch's first smart campus in India and features multiple smart solutions based on sustainability, security, user experience for our associates, customers and visitors. Not only did the Prime Minister inaugurate our campus, but it was done in the presence of our honorable Chief Minister of Karnataka, Mr. Basavaraj Bommai, and our Bosch Global Board of Management member, Ms. Filiz Albrecht.

The campus will meet up to 85% of its total energy needs with in-house solar panels and the purchase of Green Group Captive power. Almost 2/3 of the annual domestic water demand at Bosch in India is set to meet through rainwater harvesting projects. The campus is a testimony to Bosch's existence as a AIoT company aligned with India's program for carbon neutrality and sustainable targets. By the way, I would like to remind all colleagues that Bosch Worldwide and Bosch India attained carbon neutrality under Scope 1 and 2 already in 2020. Bosch India will continue to invest in technologies which are economical, subsidable, safe and secure.

I would like to thank you on behalf of our leadership team for your contribution, your support and for your patient listening throughout the call. Together as a leadership team, we will now address your queries. And thank you very much and your questions, please.

[Operator]

[Operator Instructions] The first question is from the line of Pramod Kumar from UBS.

[Pramod Kumar, analyst]

My first question is on the electrification. If you can share your thoughts on the 2-wheeler electrification which is happening quite rapidly. Is there anything which you would like to highlight in terms of new order wins or how the content for Bosch is kind of keeping pace with the rapid electrification already in the space. If you can throw some color on that?

[Soumitra Bhattacharya, executive]

So I will hand over to our Chief Technical Officer, who also heads our electrification project. Over to you, Guru.

[Guruprasad Mudlapur, executive]

Thank you, Soumitra. So specifically on the 2-wheeler electrification topics you asked, we have a full portfolio from the motors, all the power electronics and of course, battery system. We have been in first generation products with several OEMs. We continue to have further design ins with new OEMs right now. We are also discussing on getting our batteries, which are, by the way, designed to very high levels of safety and performance, get designed into new OEMs as we speak today. So we will, of course, hear more about where they are in which OEM as and when the OEMs announce their products.

[Pramod Kumar, analyst]

And second question is on the hybrid side, given the expectation of electrification and in the car industry as well, the new launches what Toyota Suzuki are talking about, strong hybrid technology in India. What are your thoughts on that broadly hybrid technology and its relevance in India? And also if you can kindly confirm whether you are participating in this technology rollout with Toyota Suzuki?

[Guruprasad Mudlapur, executive]

I cannot comment specifically on an engagement with an OEM right now in this call. But we have a full portfolio of solutions for the hybrid applications as well. This is something we've offered to OEMs already for the last 6, 7 years now. We've done that all. I'll repeat the answer again. I said we cannot comment on specific engagements with an OEM on hybrid topics right now, at least not during this call. But in general, we have a very good portfolio of solutions for the hybrid applications. In fact, we've been one of the global leaders in hybrid batteries for a long time now. We have offered solutions also to the Indian OEMs. In terms of its applicability and usefulness, I think it's a very debatable point in terms of what efficiencies it brings in. And as an intermediate technology towards full electrification, probably, it has a value. But the ultimate choice is with the OEMs and in terms of how they can show economics to the consumer. We will, of course, provide technologies as they ask. We have the full portfolio here.

[Pramod Kumar, analyst]

Sorry for that, just the reason I'm asking this is a company in a way Bosch has a presence in India on business because the idea of this technology is to grab market share, both from petrol and diesel categories and diesel is quite relevant to the segment of mid SUVs. And it's a technology, it's a fuel where we are reasonably stronger, relatively stronger. So I just wanted to talk on whether in India, would you have the presence to understand the implications on the content share and there's a meaningful shift towards strong hybrid. And then I think I understand the sensitivity around not disclosing specific details, but I just want to understand if for OEM were to come to you today requesting for us some hybrid solutions. What would be the time line for you to kind of meet that requirement and the OEM to commercially launch products? I'm just saying that hybrid as a technology takes more and more OEMs would do that. So if you can just help us understand from a project time line perspective, what could be the premium to management duration by when an OEM can follow with particular fact.

[Guruprasad Mudlapur, executive]

So I mean it's a very generic question. As I said, the hybrid technology is available, and we've offered it to several OEMs globally and also in India. So you are now referring to from the start of offer till an OEM gets into production, what would be the sort of time line to introduce technology? I would say typically, and this is a very generic statement. Again, it's typically between 12 months to 18 months.

[Operator]

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

[Sonal Gupta, analyst]

So just a related thing, given that we are seeing SUV sort of gaining share in the passenger vehicle market. And while the diesel is also stronger. What we're seeing is that across OEMs, there's clearly gasoline-direct injection has also gained considerable share. So just wanted to understand in terms of, I mean, are you participating in that market, at least with a few OEMs? That was my first question.

[Guruprasad Mudlapur, executive]

So very important and good question. We have a strong presence, both in diesel and in gasoline. DDI is segmentalized as you are aware. And in India, the utility vehicle market is also broken up into different parts, there are different types of SUVs. So while we started with diesel a long time ago, we came in with gasoline relatively later than diesel bur we have progressed significantly. So the answer is yes, we do participate. And I would like to also mention that while electrification is a buzz word, IC in India is going to be there for a long time. Today, electrification is at a very nascent stage. And by 2030, while we expect the electrification to increase and improve and the most optimal in India could be an e-mobility case of 2030 to the extent of 30%, 70% still continue to remain IC.

[Soumitra Bhattacharya, executive]

So I think GDI, you can observe in the market has started to come into performance passenger car segment as well. So typically, OEMs launch 1 liter, GDI, 1.5-liter GDI and also 1-liter normal car. So these kinds of variants are already available in the market. So it's not just the SUV segment, but also the passenger car segment.

[Sonal Gupta, analyst]

Got it, sir. And sir, just when you talked about the BS-VI transition, I think, a year or a few years back, actually, you talked about the fact that the OHT segment and the construction equipment space will also be a meaningful part of your BS-VI transition order book. So given the changes that have been, I mean, time lines have been pushed in that space, et cetera. So I just wanted to understand, like, would you say that now a substantial portion of that has got into production or there is still a lot of immediate chunk of that transition is still left?

[Soumitra Bhattacharya, executive]

So you have to segregate on the emission norms between various groups on BS-VI versus example factors or new markets. So yes, Bosch is playing in every area of the emission legislation and like BS-IV to BS-VI, also for the emission [ change now ] either for CPCT or for [ BS-IV ], we are fully in. And I'm happy to say that we have a pretty solid order book. Now of course, we don't give you the acquisitions customer-wise, but I can confirm like we did for all BS-IV to BS-VI transition that we have done well. We are continuing to acquire. And we are also happy that the Government of India is laying down the time lines and are generally complementary. Some small shifts have happened but generally...

[Sonal Gupta, analyst]

Got it, sir. And just my last question, if I may, please, is that we've seen a step-up in the RM cost to sales over the last couple of quarters, it's gone closer to almost like 65%. I understand this might be due to, I mean, the commodity prices spiking up. So to that extent, as we are now seeing some moderation in commodity prices, should we expect that these numbers should moderate and you should see some benefit of commodity price moderation?

[Soumitra Bhattacharya, executive]

So good question again, Sonal. I already in my talk, I gave you that there were 3 elements of the reason for this natural cost increase. you refer to one, a very important one, which is raw material price increase. We are working very closely with a win-win situation with our OEMs and our other customers on raw material price increases, logistics price increases and electronics price increases. Because every organization and every segment, whether it's OEM, Tier 1, Tier 2, we can absorb some amount, and we can also not absorb some amount. And I call this a win-win situation where even finally, the OEM can pass on a certain amount into the customers. So if I summarize a complex topic, you will see that generally, the OEMs have the mix and model changes have increased, led to the price plans being relatively higher compared to the past. And if you see, this also then has to slow down into Tier 1 like us and Tier 2, and we are conscious of this, and we are working on this. And however, as I mentioned in a fair and win-win situation.

[Operator]

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

[Jinesh Gandhi, analyst]

First question pertains to the clarification on RM cost side. So clearly, there is some impact of adverse ForEx movement on the RM side. So this ForEx cost passed through or that is on a negotiation basis?

[Soumitra Bhattacharya, executive]

So I didn't get the name -- Jinesh.

[Jinesh Gandhi, analyst]

Jinesh Gandhi from Motilal Oswal.

[Soumitra Bhattacharya, executive]

So we have a very robust system of contracting, Jinesh. And of course, it's customer to customer. And I'm sure you follow the company for quite a while and our contracting process with our OEMs and also with others is robust, very clear. And again, it depends on case to case, but we do ensure that risks are mitigated, including ForEx as well as very importantly, we also have a very strong treasury and we do a very strong risk management through hedging. So on both fronts, whether it's a customer front, where we have very transparent but solid contracting as also in our own internal processes because Bosch is a very process-oriented company. We have strong processes on risk management in our ForEx, including very systematic hedging.

[Jinesh Gandhi, analyst]

Okay. Great. Second question pertains to the BS-VI Phase 2, [indiscernible] April '23. So how do we see that transition influencing our product offerings?

[Soumitra Bhattacharya, executive]

So Jinesh, this part of it, what you're referring to, we call it in Bosch core and then reviving the core. And Bosch is very strong both in core and in reviving the core in Bosch India that is Bosch Limited in the automotive area and therefore the [indiscernible] area. So I mentioned to you, you have to look at the emission and legislation road map for all elements of mobility. And I can assure you and your colleagues that Bosch plays on these areas front-ended just like BS-IV to BS-VI. So I don't have to go through every element where we are very strongly contented where we can support our customers from inception right up to SOP. And I think that's our USP on our strength.

And I also mentioned to you, Jinesh, that we have the largest R&D center in India. This is not just for powertrain, but the largest R&D center across all our sectors outside [indiscernible]. So these things be tackled. And my final point, which you have not asked, but for this to be answered for some of all who may ask this question, as my colleague mentioned, our parent is very strong on the transitioning to the transformation, which will happen in India. For example, the last 12 years, our parent has spent between EUR 450 million to EUR 500 million for the last 12 years on electrification, hydrogen, hydrogen ICE, hydrogen SUV, stationary fuel cells and so on and so forth.

And we have very strong connections with our parents and then we do localization here. And finally, we give innovative and affordable solutions through India. So core and revive and then the transformation. And I end by saying our spark bot mix when you go to the lower Bosch in India 100 years is exactly this. What is our next spark? To work with the customers and consumers across different segments, which provides technical and innovative solutions for the future.

[Jinesh Gandhi, analyst]

Got it. And any thoughts on how diesel on the passenger vehicle side will get impacted under BS-VI is to our [indiscernible]?

[Soumitra Bhattacharya, executive]

Jinesh, we've come to a settling point in diesel, yes. This question which you had asked is asking is a very valid question, for example, 2 years ago. If you remember a few years ago, 4, 5 years ago, 5 years ago, India touched the peak at 48% of diesel, maybe half of, and it climbed from 15%. So today at 18% to 24% of diesel share, exhausted on fast cars and [indiscernible] vehicles is something that it is settling down. Of course, content per vehicle is going up where Bosch has a play.

Of course, there are many segments, like, for example, SUV, where people still prefer the higher top and therefore diesel, so we believe this is going to stay there. We believe ICE will still play a dominant role. And we believe that the transitioning and the transformation will also happen, all of which we are doing. And of course, Bosch Limited also works with our sister companies. for example, we work very closely with our sister company, which makes the ECUs, which goes through Bosch Limited finally. So quite a few things also then from our sister companies close to Bosch Limited.

[Operator]

The next question is from the line of Rajesh Ranganathan from Doric Capital.

[Rajesh Ranganathan, analyst]

While diesel has settled down to a certain level, one, CNG has been increasing in India, both in Pascal and in LCVs. Can you please comment about our strength in CNG and how that compares to, say, our strength in diesel. Hello?

[Soumitra Bhattacharya, executive]

Okay. CNG is a part of our portfolio also. Bosch has CMG solutions, Bosch has solutions for flex fuel. So we see that in certain segments, you're right, we see in certain cities. Again, you're right. Right now, if you look at the overall percentage, it's relatively still pretty low. But if you look at segment-wise and if you look at cities, it's happening. So Bosch has a play on CNG. And we also have solutions for it.

[Rajesh Ranganathan, analyst]

And would you be able to comment on a related strength between, say, our strength in diesel versus CNG?

[Soumitra Bhattacharya, executive]

Look, Rajesh, I'll give you a small example. Bosch came to India in 1953 with in-line pumps, diesel. Relatively, we came later into that CNG, but look at our presence in gasoline today in a market which is relatively more fragmented. It's pretty strong. So in CNG also, we have the technology. You have to yourself understand and accept that CNG in relation to rollout in India is very much dependent like EV on infrastructure. So while certain cities like Delhi, have had after tank improved infrastructure, CNG has not been a rollout across India.

So a, it will take time for that to happen; b, it will be city-specific based on infrastructure and acceptance; and c, it will be segment-specific. So we have the strength. Bosch, our parent and Bosch India is a full portfolio organization. And we will use our strength whenever required based on timing to get deeper into the market. So the question is valid, the total weightage is still relatively low, and we have our entire portfolio.

[Rajesh Ranganathan, analyst]

And with respect to in the previous calls, we've discussed this, you mentioned that you have a road map for localization and you also participated in the government scheme for localization. And also, you had a plan for discussing with the global Bosch organization for potentially making India hub for export, especially for diesel-related technologies. If you could comment on these 3 in terms of what has been the progress over the last few months in terms of what decisions have been made or how much progress has been made in these 3 areas?

[Soumitra Bhattacharya, executive]

So first question is on PLI. Yes, the Bosch Group has applied, including Bosch Limited, and we've been approved. So we are [indiscernible] we will work and we are working on that. The second part is in relation to diesel. We retained our strengths in diesel and gasoline and allied ADS. And we have brought in for our various plants, different elements from our various sister companies or even countries and done a certain amount of strong consolidation. And we will continue to look and focus wherever it makes sense for our company Bosch Group as a whole. We will continue to remain strongly local for local.

In relation to export, we look while I have mentioned that we have strong focus on growth in the domestic market, which we will continue to see this year and the years to come. This year, I mean, fiscal year '22, '23 over the previous fiscal. We will be in a bandwidth depending on what we need to do as a policy and strategy between 9% and 12% on export. Perhaps the max we could go over the years would be 15%. But our domestic and local play will have the highest weightage as before. So there's a clear strategy on what we will do and what we will not do. And finally, on diesel, yes, I endorse in your direction, what you mentioned, we will use our strength to do further consolidations.

[Rajesh Ranganathan, analyst]

And on localization, if you could comment on the progress?

[Soumitra Bhattacharya, executive]

On localization, we have a very systematic localization plan, partly driven by PLI, but greatly driven by business. So we have always focused and met localization targets right from the time of [indiscernible] assemblies, common rail injectors, pumps, and we have multiple plants in India, and we will continue doing that. But again, I make one point very clear. We will not do localization for localization. We will do when it makes sense. So sometimes this question is a little counterproductive because if you localize the localization and it is not meaningful, then you actually don't create business. So we have a robust process. We have done it in the past. We are continuing to do it, and we'll do it in the future, but at the right plan.

[Operator]

The next question is from the line of Sanjaya Satapathy from Ampersand.

[Sanjaya Satapathy;Ampersand:Analyst, analyst]

And also congrats on a different set of results. So you have already discussed about localization plans, et cetera. But if you can just help us in understanding that current profitability, the profit margin of yours is really far from the 18%, 19% kind of margin that we used to observe pre-COVID and BS-VI. So is there a possibility that we can go back to those kind of margin in near future?

[Soumitra Bhattacharya, executive]

Rajesh, that's a very leading question, and it's also a guidance question. So very politely, but as always, I'll have to tell you, A, we do not give guidance, and we don't take leading questions. However, I'll give you an answer in a generic way for you to get a direction. If you look at Bosch Limited, we have also been investing a certain percentage of our profits for new business areas very actively. Yes. And this is what is called as preparing the soil for the future.

So we will spend a good amount of money in our electrification process, in our hydrogen road map in different elements for the future. And this is something which you get pay back for the future. The request I have you in your community is, please look at the mid and long term and not quarter-to-quarter. Because we should not get into a euphoria on a quarterly result which goes up or in a bit of a depression when it goes down. So this company is prepared to invest for the future, which will bring in future sustainable benefits with the optimal profit. Second, we have very strict cost control processes. And third, very importantly, Rajesh, we have rightsized the company. Many of the analysts will know that this company had a headcount some 7, 8 years ago of 11,000 to 12,000 people.

Today, if you look at the permanent headcount, we're nearly half, and therefore, our productivity levels are very high. If you remember, many of you I mentioned, when you asked why is EBIT down to 7% in '19-'20 and 2021, we did a CR program and one of the sub-elements was we spent INR 750 crores each year for the CR, redeployment, resched and restructure. And today, see you've just seen the financial results on personnel cost. But what we are not seeing is the huge competency building that we are doing, whether it's digital QLC, you're not seeing that Bosch Limited has climbed to the top quartile of the GPTW and is now amongst the best workplaces in automotive, component and auto companies.

And the good news is, 3 days ago, when we did our [ dipstick ], we are further grouped. So you must understand that we are tackling business in a holistic way. People who are the great assets to take this company forward. Infrastructure, we gave you an example of the 76-acre campus, which is one of the smartest and the best. Our average age of this company, Bosch Limited is now down to 37. And most importantly, looking at future mix of talent link with technology.

So in summary, I would say, and this, you also see in our growth in Powertrains and then you see our growth in aftermarket and all this profitable growth. And finally, you will see that we will continue to invest significant sums and optimal chance for new technologies and still give a decent return, which I call a double-digit EBIT.

[Sanjaya Satapathy;Ampersand:Analyst, analyst]

Understood, sir, My name starts with Sanjay...just correcting it. And thanks a lot for this elaborate answer. And I think you're saying that you are currently investing for electric mobility and all those new technologies. So it seems like the development-related expenses are on the higher side. But when I'm looking at the cost mix, you correctly said, your staff costs have fallen compared to what used to be as a percentage of sale, your other expenses and most other things have fallen.

The only thing where the increase is happening is in the material cost as a percentage of sales, which seems to be 55% of sales has gone up to upwards of 60%. And can you clarify if that is where the development cost sitting or that the bought-out components are so much higher nowadays that the raw material costs have gone up and you will have to do a lot of input substitution as well as localization and those will be very critical and really long drawn-out process that is at least 3, 4 years away before you kind of settle into your historical margin levels.

[Soumitra Bhattacharya, executive]

So Sanjay, that's again a leading question. Yes. You know it and I know it. But I'll answer part of it. Basically, in terms of material cost, you have to understand a product mix change has changed the material cost for not just us, the entire industry. So that correction, I think I would request from you and the community. BS-IV to BS-VI changed the material content for every month. You added exhaust gas treatment, yes? And you added a few other things. So your material content will go up if your product mix changes...

[Sanjaya Satapathy;Ampersand:Analyst, analyst]

Hello?

[Operator]

Hello Mr. Satapathy?

[Sanjaya Satapathy;Ampersand:Analyst, analyst]

Yes.

[Operator]

Does that answer your question, sir?

[Sanjaya Satapathy;Ampersand:Analyst, analyst]

I couldn't hear -- anyway, doesn't matter.

[Operator]

Sir, we are not able to hear you. Ladies and gentlemen, request you all to please stay connected while we check the line for the management. Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Over to you, sir.

[Soumitra Bhattacharya, executive]

Sanjay, I'm back, I got what you were asking, and I'm going to keep my answer short. The material content, if it goes up, there are different elements. And one part is the mix, and I gave you an example of BS-IV to BS-VI, and that can be applied as well. This is not for Bosch only. This is for the industry. Please understand that. Second is, you can cover the mix with the right optimal pricing, which we do. Third is raw material price increases across the world has happened. I suppose you would agree to that on RMI, ECI and LTI, and that we are tackling.

So in summary, we have a clear localization plan for product-wise and also system-wise. Second, we do by design a mix change, which requires for different norms and emissions and legislations, which are bringing us closer to Europe and reducing the gap in number of years in terms of technology. And third, we are very, very clear of because some of your colleagues asked on ForEx and X, Y, Z which we have been doing for decades and we will do. Summary, when you have EBIT, you have to manage your EBIT to also invest for the future, which, in the last few years, we started aggressively also. And then after all this, we will still deliver a double-digit EBIT.

[Sanjaya Satapathy;Ampersand:Analyst, analyst]

And we sincerely wish that you will bounce back to sector-leading margin sometime soon.

[Operator]

The next question is from the line of Ravi Purohit from Securities Investment Management.

[Ravi Purohit;Securities Investment Management;Analyst, analyst]

Sir, from whatever you've mentioned so far on the call about localization, is it fair to assume that all our future localization programs are going to be driven through the PLI led CapEx? And if yes, then does it require us to set up new greenfield manufacturing units to participate in this PLI or whether the existing plants will suffice for us to kind of do this PLI-led CapEx? And second is, can you please provide an update on the 100% subsidiary, which you had created 2 years back to take the benefit of the new taxes, income tax dispensation at 15% and because the manufacturing will need to start by March '24. So how are we and where are the for that company?

[Soumitra Bhattacharya, executive]

Okay, Ravi. Very briefly, our localization, again, as mentioned to you before that I say it, of course, we have applied for the PLI. And of course, we are going to work on the PLI. But we have been doing localization also without the PLI. So it answers and not all. And even during PLI, we'll use PLI and we will continue to go for localization. In relation to the 15% company, we have something in it. We are looking for other things which are meaningful, and we are not doing it for the tax benefit. In relation to our plants, we have the adequate capacity both for existing as well as future expansions as also the people.

Finally, are we willing to invest money into all this, either through P&L or for CapEx, you have seen we have done it year-wise. And even during COVID, we did not stop either on the revenue or on the CapEx, we did not go shy. So we'll continue this. I want to make one point, Ravi, to you, but also to all colleagues. Bosch Limited and Bosch in India is a company which is a long-standing player, which looks at putting its actions for the mid and long run, not on a quarter-to-quarter basis. This you have to appreciate, understand and also please accept. PLI does not require that it needs to be greenfield. So PLI has gotten definition of how it's qualified. For example, the need to be advanced automotive technologies or the value add needs to be at a certain level and so on. There is no requirement that it needs to be greenfield.

[Ravi Purohit;Securities Investment Management;Analyst, analyst]

Right. Okay. And just to clarify to Mr. Bhattacharya, also, we are not really seeking answers for quarter-on-quarter basis. All our questions and we could go back and check on all the calls that we've been there, our questions are always over the next 3 to 5 years, what is our horizon, what is the plan, what is the strategy? So please be rest assured, our focus is not on a quarter-to-quarter basis.

[Soumitra Bhattacharya, executive]

I'm delighted, Sanjay, sorry, Ravi. That actually that is the last question. And I look forward to, again, contacting you all either in our future meetings, yes.

[Operator]

Sir, should we conclude the call?

[Soumitra Bhattacharya, executive]

Thank you very much.

[Operator]

Ladies and gentlemen, on behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.