Eicher Motors Ltd

NSE:EICHERMOT

Earnings Call Transcript 2023-Q4

[Operator]

Hi, good evening, good morning, good afternoon to all of you wherever you are in the world. Welcome to Eicher Motors Q4 FY '23 both Results Investor Call. We have with us senior management of Eicher Motors represented by Siddhartha Lal, MD and CEO Eicher Motors Limited; Mr. B. Govindarajan, CEO of Royal Enfield and Whole Time Director, Eicher Motors Limited. Mr. Vinod Aggarwal will be joining shortly, he is MD and CEO of Volvo-Eicher joint venture and the Whole Time Director, Eicher Motor Limited; and Mrs. Vidhya Srinivasan, Group CFO, Eicher Motors Limited. So over to you, Sid.

[Siddhartha Lal, executive]

Hello, everyone, and a very good evening to all of you, and thank you so much for joining this late hour in India, at least on our call for our Eicher Motors Limited earning call for the quarter and the year ended March 31, 2023. So overall, the financial year has been absolutely fabulous for Eicher Motors. We made really, really good progress towards our long-term vision, our goals and have registered an absolutely stellar performance this year. So it's been our best ever financial and business performance as it were this year. And I'll begin with the highlights -- business highlights for Royal Enfield.

We registered our best ever sales of more than 834,000 motorcycles, so 834,000 motorcycles this year, beating our previous best, which was a pre-pandemic 2018/'19 year. We also took huge strides in our international business front. And for the first time, we have seen over 100,000 or over 1 lakh unit sales in the export markets. So it's a big inflection point, we believe, because that's when and also in the domestic market, we had enormous growth. Of course, there're different challenges, but we have also started our CKD operation in Brazil this year -- the previous year, which is an extremely high potential market.

So overall, we have 4 CKDs. In addition to Brazil, it's Argentina, Colombia and Thailand, all relatively large to very large potential markets. We also had 2 outstanding launches last year. Again, the first physical launch after pandemic was the Hunter in Bangkok with Global Media, which was really, really highly appreciated the launch, the motorcycle, the refinement of this Roadster style motorcycle, which is perhaps totally fit for the city roads in Bangkok and also for longer distances.

So it went off super well, whereas Super Meteor 650 launch in Jaisalmer in Rajasthan, with a long stretch of right that we all were on with the Global Media again, and it really proved itself to be the absolute best middle-weight cruiser in the world today. And that's the kind of reviews that we've gotten also to have had a chance to look at those.

Both motorcycles are doing extremely well in both in India and in international markets in their segments. So again, 2 successes -- new product successes behind us in segments that we've not necessarily been in, in the past. And again, after a break of 2 years, we returned to Goa with our new format of Rider Mania, which we call Motoverse now. And yet 3 outstanding days of a sound of motorcycles across Goa, but also entertainment, music, talks, art, shows, all sorts of things that really got the hearts and souls and bodies of our rider community moving, and it was extremely well taken.

I believe, even though we had absolute record numbers of over 14,000 visitors, I believe this year will be a hell of a lot more based on the success that we had last year. So it's been absolutely fantastic. It's also starting to become a bit of a global event with a lot of international participants also coming in. So that's the business highlights on Royal Enfield.

Then we move to VECV and just in time with Vinod also joining us now, Vinod Aggarwal, as you can see on the screen. And we've had an absolutely tremendous year excellent performance in VECV this year. We had a highest ever sale of Eicher trucks and buses over 77,000 units, and record performances in our business segments is our VE Power train where we sell engines to Volvo Group globally at Volvo trucks, where we distribute and sell Volvo trucks in India, and the engineering components business as well.

We had robust profitability, improved profitability through the quarters and improved market share across the board. So in our light-duty, medium-duty and heavy-duty and buses and Volvo trucks segment, everywhere we made huge strides, market share gains and had a very successful year overall. We also celebrated 15 years of the joint venture with Volvo, so Volvo and Eicher. It was -- we had a lovely event in our state-of-the-art new manufacturing unit in -- plant in Bhopal, where the entire Executive Board or the management team of Volvo Group, all of them came down. They spent time with us in Bhopal, and reconfirmed our commitment towards modernization of transport -- commercial transportation in India and of working closely together between Volvo and Eicher in the coming years as well. So it was really a very good highlight last month in April with our 15th anniversary of the joint venture.

Coming to consolidated financials for Q4 and for the full year of ended March 31, 2023. We had 5 quarters in a row of record revenue, which, again, last quarter was record revenue for EML consolidated, and our best ever annual revenue. So for Q4, we had a revenue of over INR 3,800 crores, up 19%. And for the financial year, revenue at INR 14,442 crores. It's a 40% growth over last year.

Our profit in EBITDA have also been growing year-on-year and sequentially, and we registered our highest ever PAT at EBITDA for 4 quarters in a row and for the financial year. So again, record numbers through. For our EBITDA for Q4 was INR 934 crores, up 23%, for the full year was INR 3,444 crores, up 59%, and PAT was at INR 906 crores, up 48%, and PAT at INR 2,900 crores, up 74%. So good absolute profit growth of EML and EBITDA margin for the quarter stood at 24.5%, against 23.7%. And for the full year at 23.8% against 21% last year. So again, big growth in profitability as well from previous year.

And overall, in the Board meeting that we held today, the Board of Directors of Eicher Motors Limited, has declared a final dividend of INR 37 per share for the last year, implying a payout some of INR 1,012 crores, which is around 35% of our profit after tax. And the dividend per share is the highest ever for EML and is around 76% higher than the previous year.

In addition, the Board has also approved a cash outlay towards capital expenditure for Royal Enfield business at INR 100 crores for the financial year '23, '24, so this year that we're in already, which includes investment towards EV manufacturing, EV product equipment and, of course, product development for our Internal Combustion Engine portfolio. So large chunk of it is only for product development in both ICE and EV. So that's the overview of Eicher Motors Limited.

Now we will have both -- we'll have Vinod Aggarwal talking to us about VECV. But before that, I'll hand over to Govindarajan, CEO of Royal Enfield to give us more details about the business of Royal Enfield in the last quarter and then the last year. Over to you, Govind.

[B. Govindarajan, executive]

Thank you, Siddhartha. Hi, everyone. I hope you guys are doing well. Royal Enfield has a spectacular year, not only we resisted the strong performance in the domestic market, as Lal was mentioning, we also crossed a very important milestone in the international journey is over 100,000 motorcycles dispensed from India. Let me begin with solid performance of this quarter and the year. For the Q4, we sold almost about 214,685 motorcycles, which is up by about 18% by the last year. Our demand is continuing to stay very resilient. It's actually further getting aided by our new motorcycle launches, which we have done, which got excellent response from our consumers.

Our market share in the domestic market in the motorcycle segment, especially on the 125cc and above, it grew to almost 33.5% compared to about 32.9% in the Q4 of financial year '22. For the full year, the total stand-alone motorcycle sales of Royal Enfield stood at almost about 834,895 motorcycles, registering a growth of almost about 38.4% compared to last year. And in the motorcycle market share, we gained almost about 7.2%, which is a record one, and we also gained almost about 31.3% market share in more than 125cc. So every third motorcycle is now the Royal Enfield in India.

Our international markets, the momentum is continuing, and we crossed, as Sid mentioned, about 100,000 motorcycles mark for the first time. And we also registered about 23% growth over the previous year.

Despite the macroeconomic backdrop, our retail growth in the international market is ranging between 27% to 45% across various regions in the financial year 2023. Our market share in the middleweight segment across the markets has climbed, especially in Americas, about 7%, and the APAC is almost about 8.9% and EMEA is about 8.8%. We further strengthened our footprint in Americas with our fourth CKD plant in Brazil, which is very important for us to be looking at that market. And we also have plans to launch the CKD facilities, which we have signed up for Bangladesh and Nepal.

At U.K., we are actually implementing direct distribution by ourselves. We have already taken over in this month, and we are aggressively working on expanding our reach in the existing and a few newer international markets during this upcoming years.

Happy to share with you, Royal Enfield has achieved the fourth strongest brand globally as per the Global Auto report from the U.K.-based brand finance for the 2023. Royal Enfield is the only motorcycle brand to future among the top 10 global brands in this. You all know, on the product front, we have introduced 2 new exciting motorcycles, the all new Hunter 350 and the Super Meteor 650. The Hunter 350, which is stylish, very accessible roadster, which was launched in the month of August in Bangkok, has received excellent response worldwide and has won numerous awards also as well.

It won the Indian Motorcycle of the year award, IMOTY 2023. India's most prestigious automotive awards and several others. The Super Meteor, we launched this year in January is performing very well. We have excellent response from the markets all over -- outside India also. We have a very good booking in Europe, Americas and APAC region. Our non-motorcycling business is continuing to grow very, very consistently. Our endeavor to deepen rider engagement with their motorcycle has resulted in an outstanding growth in spares, accessories, apparels everywhere, and we have witnessed a growth of almost 52% year-on-year and this led by the strong growth, especially in accessory business.

On the EV journey, we have been making a very steady progress. I can say EV journey in Royal Enfield the top gear now. Our intention is to create uniquely differentiated electric motorcycles with strong Royal Enfield DNA. We have commissioned a very, very capable team who are committing and we started committing very big investments in terms of product development and product strategy and in the product testing and development area.

Currently, we have laid a robust long-term product and technology road map on the EV and towards developing supplier ecosystem is what is the focus as of now, which we are doing it. There are a lot of prototypes, testings, which are going on in -- that's why I said it is in the top gear. We are very committed. It's in full blast now.

In addition, you all know we have made a strategic investment of almost EUR 50 million in Stark Future in January '23. Now both the teams are working well, and they are collaborating very well to learn from each other and looking at what is the co-creation and the development, which we will do, and how do we leverage each of the strengths? That's what is the work going on.

In conclusion, at Royal Enfield, we had a very great year, but I must say we have also even better one, which is planned, which we will see it in time to come. And we have a very strong lineup of motorcycles for the year '24 and a robust plan of growth on the rebalance, which we have articulated.

Now I will request Mr. Vinod Aggarwal to walk us through the VECV performance and updates. Over to you, Vinod.

[Vinod Aggarwal, executive]

Thank you, Govind, and thank you, Siddhartha, and a very good evening to all of you. For VECV, last year was a record year in various respects. If you look at our overall sales, last year, we closed at 79,623 units trucks and buses, which was against our earlier peak of 72,969 in '18, '19. So we have grown by 9% as against the earlier peak in '18/'19, whereas the overall CV industry is still down as compared to the earlier peak. 3.5 tonne and above industry, which is down by 15% as compared to the earlier peak of 557,000 units in '18, '19 to 474,000.

So industry is still lower than the earlier peak, whereas we have grown by 9%, which means that we have grown in market share in all our product lines. For example, in light- and medium-duty trucks, 5 to 18 tonnes, this year, we have market share of 31.5%, and it is consistently improving year after year. Last year, it was 30.2%.

In Brazil, this year, we have market share of 24.8%. Again, it is improving consistently year-after-year. Last year, it was 21.9%. In heavy-duty trucks, again, it's a very good steady growth year-after-year. Both Eicher and Volvo together, last year, we had a market share of 8.3%, which was a year before, 7.3%. So there has been consistent improvement in market share all across. And we continue on our commitment towards increasing uptime to our customers, we are very, very advanced in the digitalization services. We are offering 100% connected trucks. And based on that, we are able to offer various types of services like the predictive maintenance or remote diagnostics or -- so that takes the entire customer satisfaction experience to a new level.

And of course, we are continuing to improve on our network. Every year, we are adding a number of new dealers. Our penetration is improving in the country as a whole, and that is also one of the reason of improvement in the market shares. And we also reiterated our commitment to the sustainable transport by delivering 40 electric buses to the prestigious city of Chandigarh, and there buses are running very, very successfully. And we focused wide range of future-ready solutions encompassing decarbonization, increasing uptime and connected solutions at the Auto Expo 2023. And we were also ranked #1 in the dealer satisfaction survey for the second year in a row. And we also won 6 Eicher and Volvo trucks and buses. Six of our products were ranked #1 across relevant categories at prestigious Apollo CV Awards.

Now coming to the overall revenues. Last year, we closed with the total revenues of INR 18,952 crores, which have grown by 48.9% over previous year, revenues of INR 12,724 crores. And for quarter 4, our revenues were INR 6,200 crores, which are up by 43.9% from last year's quarter 4 of INR 4,307 crores. As far as EBITDA is concerned, for full year we have EBITDA of INR 1,375 crores, which is at around 7.5%, grown by 92.1% over previous year EBITDA of INR 716 crores, which was at 5.9%. And for quarter 4, we have EBITDA of INR 619 crores, which is at 10.4% as against the previous year quarter 4 of INR 288 crores at 6.8%.

And then as far as the PAT is concerned, for full year, we have PAT of INR 579 crores as against INR 111 crores last year. And for quarter 4, we have PAT of INR 319 crores from INR 99 crores last year.

Now, of course, I hand it over back to Siddhartha for closing remarks.

[Siddhartha Lal, executive]

Thank you, Vinod, and thank you, Govind before that. I think after a couple of really sticky years previously, I think we've had an absolutely stellar performance in EML and VECV last year. It's been a year of consolidation in some way because after all the different forces around the world in terms of the COVID and supply chain, all of that, it's been a settling year. It's been a year where we've all been able to settle down, get back to full focus as we do and get back to a growth and profitability and development of future for both RE and VECV.

So we've had a really solid year, and I'm delighted to say that the combined revenue actually, if you look at it like that, which we don't in our financials, but if we just to combine EML, which is RE and then VECV together, we have over INR 33,000 crores revenue now and -- which equates to over $4 billion in revenue. So now it's really sort of starting to crank up and become a sizable company.

And it's not just that. It's -- we really set ourselves up for a really -- a very strong base now for the coming years and for the next phase of growth that we have. We see some points of inflection. We see that Royal Enfield has crossed 100,000 or 1 lakh units internationally. And we're seeing that the interest, the demand, the virtuous cycle of dealers making good money, of dealers wanting to have Royal Enfield outside of India and then customers, big demand for our bikes, which is coming in, that's -- we're seeing the point of inflection there.

We're seeing a significant point of inflection in VECV with heavy-duty trucks, where, for years and years, we've been -- aren't selling. But now it's really starting to move in its own momentum now, and it's starting to grow. And heavy-duty trucks, we all understand, is -- in revenue terms, is the lion's share of the commercial vehicle market. And we've reached a threshold level, I would say, of a couple of thousand units per month really to 1,000, 1,500, 2,000, even 3,000 in some months, we've crossed in heavy duties. So it's been really strong, and we see that inflection coming up. And with all of this, we are delighted about our past performance about how things are going about how the -- how smoothly the company is operating and in the new normal situation where there is a bit more choppiness than there was pre-pandemic. But we are able to manage all that because our extremely focused approach in both Royal Enfield and VECV. We have a tremendously sharp focus and tremendously sharp leadership, and that's what I believe will be our biggest strength in the coming year.

So thank you very much for joining us, and now we can have some questions.

[Operator]

First question is from Jinesh Gandhi.

[Jinesh Gandhi, analyst]

Am I audible?

[Operator]

Yes, Jinesh, Go ahead, please.

[Jinesh Gandhi, analyst]

Congrats on a great set of numbers. My -- a couple of questions from my side. One is, can you talk about the driver of realizations and gross margins in this quarter for Royal Enfield, the standalone business?

[Vidhya Srinivasan, executive]

Yes. So as far as sales is concerned, I think there has been a combination as far as we've had ASP growth in the quarter, which is really driven by a higher share of international volumes which has happened. We've also had a bit of pricing impact because we've taken price increases on account of [indiscernible] billion in the past. So I think those 2 factors are really responsible for the increase as far as revenues are concerned.

From a margin standpoint, I think there are multiple series of factors, which are coming into the picture, we've had raw material savings of approximately about 0.9% quarter-on-quarter. And we've had some -- it's really because of various initiatives that are taking place internally and also some of the commodity tailwinds which are coming through. And that's reflecting in our raw material savings. Apart from that, obviously, the pricing is also leading to the gross margin improvement. And a little bit international mix improving is also obviously contributing to gross margins as a combination of all those factors.

[Jinesh Gandhi, analyst]

Got it. And commodity cost tailwinds are largely behind? Or do you see further savings coming in 1Q, 2Q?

[Vidhya Srinivasan, executive]

I think one thing I think we should say is that we're kind of watching. I think, on steel, for example, there's been a bit of price increase, but we are -- we have, for example, done a price correction of about 1.5% in May 1. So we kind of monitoring how the impact is playing out.

[B. Govindarajan, executive]

Just to add, Jinesh, it's not the point of discussion on an everyday basis how the commodity is actually hitting. The super commodity inflation cycle, our understanding is it's not the one which is facing us. There will be blips which we have to manage because of business.

[Jinesh Gandhi, analyst]

Got it. Got it. And last question on expansion or ramp-up of new models, both Hunter and Super Meteor. So how are we planning to ramp it up, both in terms of production as well as the launches in the export markets where we have not yet launched, for example, Hunter is yet to be launched in LatAm and other markets and Super Meteor beyond Europe. So how do we see that?

[B. Govindarajan, executive]

Yes. So Super Meteor is the first hybrid cruiser from Royal Enfield, which is [indiscernible] we have already discussed about 4,000 plus Super Meteor across the globe. What's happening there is more and more the demand is coming up. The team is also now working on how do we improve the production. And we are on the process. You will see the production ramping up within the next weeks to months to come. So it will be a constant ramp-up increase, which will take place.

[Jinesh Gandhi, analyst]

And product launches in Global Markets, [indiscernible] Hunter and LatAm and Super Meteor beyond Europe?

[B. Govindarajan, executive]

Yes, yes. So we started launching market by market, almost most of the market we have introduced. I mean, when we are talking in the last 2 days even in Australia and all, our team is actually launching the Super Meteor. We have done Hunter launch in USA. So depending upon the availability, depending upon the homologation in hand, we keep launching it. But you know...

[Siddhartha Lal, executive]

Sorry, sorry Govind [indiscernible] to cut you, But just to reconfirm that all of our products are global products. They will all have a place in every market. by and large. I mean there may be a small exception here and there, but certainly, for example, in the case of Hunter, in the case of Super Meteor they will go to pretty much every single market we have. Now there's a cadence, as Govind said, because of homologation, because of market situation, because of seasonality in markets, although that we prioritize some markets over others. But other than that, you're going to see all our products in every market.

And over time, you're going to see that happen quicker. I can see the back tone -- or the background you're coming from is that, okay, look, it's been many months [ why isn't ] in globally. Yes, we understand. And we are -- in our future products, we are trying to reduce the gap where from launch in -- global launch to availability across the globe, right? So we are trying to move that further.

[Operator]

Next, we have a question from Chandramouli.

[Chandramouli Muthiah, analyst]

Can you hear me?

[Operator]

Yes.

[Chandramouli Muthiah, analyst]

So the press release mentions that the Super Meteor 650 will be launched soon in the APAC and Americas markets. So just trying to understand sort of based on your international market models, is Americas a larger opportunity for Super Meteor than Europe? Or is that maybe not the right understanding? And also based on sort of initial customer feedback, is the Super Meteor likely to be more of an export market-focused product than domestic for us? And are there any supply chain factors to keep in mind as you ramp up production on this model?

[B. Govindarajan, executive]

I'll go from behind, which you are talking about [indiscernible] it is a global product. So -- and it is also equally [indiscernible] by the consumers in India and the booking is going up. Obviously, you don't ask me what's the booking number, I'm not going to tell you. But booking is very good even in India. International market, the traction has been very good. As Siddhartha mentioning, we are opening market by market with the ramp-up coming up and the homologations, which are coming up into this. So it's in the execution mode. You will see these things, which will happen in the next weeks to months come. It's all -- everywhere it will be available.

[Chandramouli Muthiah, analyst]

Got it. That's helpful. My second question is on the export markets. So it appears that we are around close to a 10% market share on average in the global middleweight market in the previous fiscal. So we've made a lot of progress in setting up sort of more exclusive Royal Enfield stores in the recent years. So could you share some color around what are the incremental market development activities that we are considering in the export markets? Are there any details on the current split of sort of volumes between the exclusive stores and the multibrand outlets? And what percentage of the exclusive stores are company-owned versus third party? And sort of lastly, if you could share just export market revenue for the full year and then non-motorcycle revenue for the full year?

[B. Govindarajan, executive]

Too many questions, maybe I lost track. Maybe I will just go. In terms of number of outlets, we are almost having about 1,150 premium retail outlets outside India, which has exclusive stores and also multibrand outlets. If I have to talk about, about 207 are exclusive stores, outside India, I'm just talking about, and almost over 950 is the multibrand outlets.

[Siddhartha Lal, executive]

Just to add there, none of them are company-owned. These are all third-party stores.

[B. Govindarajan, executive]

So what's our focus is that in the international market -- we have -- we almost got the market share in all the markets where we are in the middle way is anywhere between 8%, 9%, 10% range. That's where we are. The addressable market is very good.

It's quite huge. In fact, that was just explaining. It's as good as about what's there in India now for the middleweight is about 1 million motorcycles outside India. So there is a huge headroom for Royal Enfield to grow. What Royal Enfield have to focus on is getting the right products, and that's what we have done with our Classic 350 on the J platform. Then the Hunter 350, which we brought in and the Super Meteor and very recently, we have done a refresh on our Twins platform, motorcycles on Continental GT and Interceptor. All these products are getting accepted very well. We are also working extensively on the community connect because what we understand is delivering a pure motorcycling experience. And that's what we focus on even outside India. And clearly, a culture of motorcycling is that's what we believe is Royal Enfield. So with all this backwards issue sorted out, with the retail outlet numbers which are going up and in the products, we have a huge headway for us to grow in the international market.

[Chandramouli Muthiah, analyst]

Got it. That's helpful. And just lastly, if you could share the export market revenues and the non-motorcycle revenues for the full year, please?

[B. Govindarajan, executive]

Yes. We'll come back to you on the September when you're picking out the numbers.

[Operator]

Next question we have from Kapil Singh.

[Kapil Singh, analyst]

Congratulations on a good set of numbers. Firstly, if you could just talk about what you're seeing on the demand outlook across these segments? There was some discussion that we had last time that on Hunter, we are also looking to expand presence across Tier 2, Tier 3 towns. So how is the reach right now? And overall, what are you seeing on the industry?

[B. Govindarajan, executive]

Okay. The Hunter, we will talk about it. Hunter, when we launched, we started looking at the main markets, [ A plus B involved ]. Now the next focused area, which we have been talking about in Hunter is Tier 2, Tier 3 cities also. But for Royal Enfield, last year, in all the areas, rural -- everywhere the growth has been very good. Now with the ramp-up, which has been the most on the very good situation for Hunter and the booking is also going up. So the supply situation has become better, it has eased out. So now the focus is more on even in the rural markets. That's on the Hunter. What's the next question which you're asking, Kapil?

[Kapil Singh, analyst]

On the overall market, what are you seeing, right? So in domestic and exports both?

[B. Govindarajan, executive]

Look, exports, there are macro issues, which all of you know, the inflation pressures, energy cost highers and all those things. But the mobility solution, which is required, especially for the 2-wheelers hasn't come down. There is no signs which is showing at this stage, it's on a high pressure point, but it has to be watched because nobody can spare that particular situation on a macro level. As far as the domestic market is concerned, I think it is coming back, the overall market. The market -- it may not come up to the pre-pandemic level completely, but it is coming up. The good sign for Royal Enfield, which we are looking at is the premium segment, our premiumization is better. The premium segment is growing, and we have grown better than that. And as that segment is growing, and with the outstanding products, which we have launched, especially Hunter, which is now getting -- reaching into all the rural area and Super Meteor the Classic 350, and the new products which we have lined up for the coming year, we see when the market opens up, we will have a very good traction and a good growth for Royal Enfield.

[Kapil Singh, analyst]

Great. And sir, the second question was on electric vehicles. We started some initial CapEx there. So could you talk about how do you see the salience of electric vehicles in your segment over the next few years? Is it viable as you see things right now or it will take some time? And how much CapEx is going towards electric vehicles? Can we talk about what kind of capacities we are creating there, and when we will start launches?

[B. Govindarajan, executive]

So electric -- the transition will take place. It's only the question of how many years it will take. Initial adoption is not the motorcycle, it's scooters. Over a period of time, the adoption will take place even in the motorcycle segment because the cost -- the total cost of ownership if I have to put the battery cost and all the other costs which are there for motorcycle of our nature, which is there, especially for the usual motorcycles. It will be a bit tough because ICE will be cheaper in that way. But over a period of time, when the commodities like batteries and all those things so the cost comes down, the tCO will come down, which has become a compulsive reason for the consumer to buy, but it may take a few years. That's our understanding at this stage.

What is important is even that ICE in the segment where we are the premium segment that is growing. And we see at least for a few years that the growth will be continuing. So we have to invest both in ICE and in EV, and that's what is the capital outlook, which we have talked about. As Sid mentioned, about INR 1,000 crores, which is evolving ICE new products and also EV. At this stage of the state where we are in EV, our focus is more on product development rather than just the capacity enhancement. Capacity enhancement will come at a point of time, and we have done the strategy of at what point of time we have to build the capacity.

But we have the factory space, which are available at our Vallam facility. We will build up the line, which is required for EV manufacturing also at that place.

[Kapil Singh, analyst]

Any time lines you can share on the launch? When is it expected?

[B. Govindarajan, executive]

The timing wise, I think it's up in public. A lot of people have been saying that 2025, 2026 and now what we are working on. We have to get a product which is very disruptive when it comes at a point of time. It can't be -- we are also there, right? So our focus has been what sort of a product, what sort of an experience, what's the take for Royal Enfield when we come out with an electric motorcycles. So our product strategy work and what are all the products and the number of products at what point of time you have to come up. That all has been lined up. So our focus as of now is all about getting the product right and working with the ecosystem and the suppliers to see that all the capacities are blocked and get the motorcycle on. So you will see at an appropriate time when we come up. Maybe at an appropriate time, we will come back to you and then say we are ready now that's the time we are going to launch.

[Vidhya Srinivasan, executive]

So I think I just informed the values that you guys are asking for. So international revenue is about INR 2,080 crores, and non-motorcycle for the year is about INR 2,041 crores.

[Operator]

Next question we have from Amyn Pirani.

[Amyn Pirani, analyst]

I just had a follow-up on the export. So we know that the seasonality of exports is slightly different from domestic. But especially in the last few months, we've seen lot of volatility. Now when I look at near-term numbers, March was very strong, but I guess that was because the Hunter exports ramped up and then April. So when I look at April, is it seasonality? Or is there some slowdown? Can you give some sense as to what you're seeing, at least for the very near term? Because I think we have passed the stocking cycle for the -- riding season for the overseas markets, if I'm not wrong. So some color there would be helpful.

[B. Govindarajan, executive]

As our focus always, as we mentioned, we don't look at the short term, every week, every month, how things are, right? But what we normally look at is for a long term, what is that we have to do for those markets. Our international market ambition is very high because the addressable market is very good and our product is getting accepted very well. The brand is being recognized very well. Everyone starts looking at Royal Enfield products are really gorgeous looking, and it is exactly what they want, simple, which has a relevant technology, which is there in the market. With all these things, we see there's a huge potential for Royal Enfield to grow.

April, one of the months, you know there are issues in some countries, there are [ port ] transitions which are there. There are strikes going on in some countries. One thing which we have to bring it to all of you is, in fact, in the U.K., we are taking over the distribution from this month onwards. So there are some stocks which has to be adjusted and all those things. So these are all the operational metrics, which is what is being there. Riding season is starting now, and retails are becoming better. We have a clear vision of how do we become the leader in the international markets for which all the activities which are required, that's where is the focus on that.

[Amyn Pirani, analyst]

That's helpful. And just 1 question on financing. What would be the broad retail penetration for you in India right now? And how do you see that moving.

[Vidhya Srinivasan, executive]

Yes, it's about 55% is our penetration. I think it's been pretty consistent, and I think we know, obviously, see that over a period of time, we keep ramping up, but we'll -- I mean, it's been pretty steady for us.

[Operator]

We have question from Pramod Kumar.

[Pramod Kumar, analyst]

Hello, can you hear me?

[Operator]

Yes.

[Pramod Kumar, analyst]

Govind, Sid, Vinod. Great set of numbers. So I think I'll first ask the CV question because there's a lot discussed on RE already. On VECV, Vinod, sir, I think, a great performance, and I would like to use this opportunity to ask you on the outlook for the CV industry, M&HCV industry, particularly for FY '24. Because there are a lot of concerns about whether the growth is slowing down, or whether we are in the last lap of the CV up cycle. So if you can share your thoughts, given your decades of experience in the space, how do you look at the M&HCV volume growth for this year, sir?

[Vinod Aggarwal, executive]

I think there is still a lot of room for further growth because if you look at the industry position, it is still lower than the earlier peak of '18, '19. And we are in the recovery cycle. And if you look at the -- first of all, if you look at the overall economy, Indian economy now $3.5 trillion. And we are fairly confident that this economy is going to grow year after year. And if you go by the government's estimates, they are saying $5 trillion economy in 3 to 5 years. And it doesn't happen in 3 years, 5 years or maybe it will happen in 6 years or 7 years. Therefore, the growth is imminent. The economy is going to grow. And if the infrastructure investments where these are going. Like this year, the allocation is INR 10 lakh crores in the fiscal budget. And next 2 years, it is going to be, I think, $1.5 trillion, it's INR [indiscernible] crores. So therefore, the CV industry is going to be benefited with all this traction in the economy as well as the infrastructure investments.

The second major reason of growth is the replacement market is going to be very, very strong because the old trucks, they are not able to meet the productivity or efficiency requirements of the customers. So therefore, all the old trucks, which are more than 5 to 6 years old, which are there with the fleet operators or with the transporters, they would be required to replace because it's more and more improvement in infrastructure and also the expectations of customers who have to meet the speed requirements, who have to meet the timeliness requirements, who have to meet the productivity and the cost requirements, these can only be met by the new trucks.

Therefore, the pent-up replacement demand due to the COVID and real replacement, which is going to happen in a very strong manner. That is going to be there. So that is the second major reason of growth happening. The third is, you are asking about the heavy-duty trucks. Heavy-duty trucks, the early peak were 295,000. We are still at 247,000 last year. So heavy duties, they are still lower than the earlier peak. Even though the light and medium-duty trucks, they are -- they have now reached the earlier peak. As far as the bus market is concerned, you will see a lot of growth coming in the demand from the state transport undertaking because state transport undertakings have got very, very old fleet. So there will be huge requirement coming this year itself, or the bigger buses from the state transport undertakings.

And the school segment is becoming very, very strong for the light and medium duty buses are the -- you can say, up to 11-meter buses. So therefore, that demand for buses will see good growth in the current year.

Only, right now, the stress in the global markets or the exports out of the country, they are down significantly. But they will also improve once the situation improves in the South Asian markets of Bangladesh and Nepal, but mostly the pain is there in Bangladesh and Nepal and Sri Lanka of course. However, the market is both in Middle East and African markets is not that impacted. And of course, there will be good market even in the Southeast Asian like Indonesia or Malaysia or we are also now going to export to Latin American countries. So therefore, I am very, very positive in our M&HCV industries. You will see good growth at least for next 2 to 3 periods.

[Pramod Kumar, analyst]

So Vinod, is it fair that the industry could see double-digit volume growth on the M&HCV side this fiscal, too?

[Vinod Aggarwal, executive]

I'm expecting that, yes.

[Pramod Kumar, analyst]

Okay. And second question is on Royal Enfield, Govind. I think great performance so far. So -- but how should one look at growth for the company or generally in terms of the industry-wide premium segment, as you look into the next 2 to 3 years, Govind, especially on the domestic side because for us, Hunter has definitely done very, very well in the domestic market and probably going to work very well in international too. But what I'm trying to understand is when do you expect the portfolio ex-Hunter to make a stronger come back, like the Classic, the Meteor, the Himalayan. When do you expect that portfolio to start firing for you? Because you talked about demand recovering on the domestic front, the premium category. So is it fair to assume that we could see growth on a consistent basis even for all the models except for Hunter as well?

[B. Govindarajan, executive]

That's quite a big question that you have asked. Let me just -- see, the overall 2-wheeler even now what is in India, it hasn't come to that level of a pre-pandemic. It is inching up there. It's slowly coming up. The sentiments are positive. It is slowly coming up, as Vinod was mentioning, the economic growth is pretty positive. Premier position in the 2-wheeler segment is better. The discretionary spend is also going up. So all the signals which are there, the market is going to grow. What we are now looking at it is that the market is growing, have we done our basics right and are we on top of it? Our brand positioning is strongest, the 2-wheeler brand in India with unparalleled heritage.

We have premiumization of the market. We are there and all the products, which we have, we have the fantastic new products which have been launched, especially Hunter. Now we are going into the rural market also more. And we have about 2,100 premium distribution network. So India, I think with the product, with the network and the market development activities, which we are doing, with the economic things which are getting opened up, we feel there is a good potential for us also to grow.

Even now, our market share in the motorcycle is only about 7%, 8%, right? So there's always a good potential for us to do that because Royal Enfield looks at actually developing the market rather than looking at only taking a pie out of it. We always believe like that.

International, the addressable market to promote is almost over 1 million units. They're also -- we have a market share of only about 8%, 9%, as of now. All the new products, which are global products of Royal Enfield, these are all getting launched one by one. This year, you will see the traction in those areas also. We also have a huge potential in the nonmotorcycle opportunity, right? We are in accessories, apparels and spare parts is well sorted out. And in the international market, as of now, we have to now get on to accessories business and all in a bigger way. We have the configurator, which we launched for our accessories. So even the older motorcycles, if somebody wants to change the accessories, they can actually do configure, seed on the configurator and then order.

So what we are looking at is we are continuing to focus on what is right for the company when the market open up. There is a possibility for Royal Enfield to really, really [indiscernible] the market share, Pramod. That's the confidence which we have.

[Operator]

Next, we have question from Gunjan Prithyani.

[Gunjan Prithyani, analyst]

Most of my questions have been answered. I just had 2 follow-ups. One, I'm just trying to get some clarity on this production, which has been sort of lagging for the last 2 quarters. If I look at the dispatches have been -- they have been, let's say, to some extent, quite ahead of where the production level is. So is this a supply constraint that we're still facing? Is this some deliberate inventory adjustment that we are doing?

And particularly, the production is lower from Meteor 350. So I mean just trying to get color on what's going on for the last 6, 7 months on the production side?

[B. Govindarajan, executive]

Gunjan, I don't think we have any issues in the production to be honest now. Having said when you raised it, we'll have to go through it. But I must tell you, Hunter, when we're looking at a point of time, what should be the capacity which we have to build, we build a particular capacity to -- fantastic situation to be in more than what we have invested and then what we thought the Hunter has started doing very well. So we immediately started looking at the ramp-up. So Hunter ramp-up is almost done. The second new product is similarly Super Meteor. That also has come back as a positive thing to us is that it's a good number. The booking is going up. International market, it is doing very well. But in the month of April, we had OBD transition. So we have to be careful about the inventory. To that extent, we also did some adjustment in the overall inventory. Otherwise, production is not a constraint. Model to model, when the ramp-up is taking place, maybe it will take some weeks and months, but it's all in the Royal only, Gunjan. We don't need to worry about that.

[Gunjan Prithyani, analyst]

So I should read mostly this as a transition to OBD that some level of inventory adjustment has played out in the last couple of months?

[B. Govindarajan, executive]

In the domestic market, yes.

[Gunjan Prithyani, analyst]

Yes. Okay. And the second, a little bit on the non-motorcycle business. Now if I look at, this has gotten to about 15% of our -- new close to 14%, 15% of our revenues. Last year, of course, saw a big jump, but then motorcycle revenues last year were lower. But in a normalized year like F'23, we are at about 14%, which is quite a good number. So I mean just trying to figure out how should we now think about the growth in this business, does the share of revenues continue to inch up further? Or should we think this growing in line with the bike business? And if you can just give -- share more on what's really been driving this growth? I mean, spares is something that we all understand, but maybe on the other parts on the non-motorcycle?

[B. Govindarajan, executive]

Yes. Let me just give you some color onto this. Our motor cycle accesses from nowhere we are in a very good state now. We are adding more SKUs, not just because we have to add SKUs and get business. While we do this, it's all about how do we get the consumer to enjoy the comfort. So some SKUs are on comfort, some SKUs are under style, some SKUs are on safety, some SKUs are for the experience, if he has to go for a touring or something like that. So what we are looking at is in every product, what are all the SKUs, which we can add in the accessories business, which gives them the experience which the consumer wants. So there's a lot of work which is happening in building the SKU for the GMA portfolio that itself will bring in more revenue into this.

We also brought in the configurator, Gunjan, and for the accessories because in our purchase cycle when the new motorcycles are being purchased during that time they can go into the [indiscernible] platform on our website. So that's where they normally buy it. That's where the majority of the GMA purchase also takes place. But we also found for the older motorcycle segments that people want, so we brought in a configurator, which we are extending. There is a traction which is coming up.

In the apparel, we are once again looking at our riding gear range improvement, collaborations with leading brands like Alpinestars, TCX and all. So it's all about what sort of an experience which we will give in through this product, wherein the consumer will see, wow, I have a really a nice product from Royal Enfield, which we should actually buy. So that's how -- it's a business which has to view and revolve around the motorcycling, and that's where the focus is also, Gunjan.

[Gunjan Prithyani, analyst]

Okay. Got it. Sorry, just last question, if I can pitch in here is on the Bullet. So Bullet still stays on the -- is still on the old platform, right? And now the OBD transition has happened. My guess is that it is compliant under the new norms. But if you can give us some color as to when this moves to the new platform, anything, any timelines you can share?

[B. Govindarajan, executive]

Bullet use is, as of now, it is available, and it is going. And at some point of time, Gunjan, we will do the transition. The way we have done the transition on the Classic 350 seamlessly which you yourself have asked is there any order inventory which is left out, we are good in that transition. So we will do that transition smoothly.

[Operator]

Next, we have question from Raghunandhan.

[Raghunandhan N. L., analyst]

Congratulations on a good set of numbers. To BGR, sir. Sir, for Super Meteor and domestic market, out of the order bookings that have been received, how would be the customer mix? Trying to understand what would be the share of existing RE 350cc owners who would be upgrading to the 650cc Meteor. Trying to understand whether this is being seen as a credible upgrade by existing owners?

[B. Govindarajan, executive]

Look, our Super Meteor is [indiscernible] cruiser and, as of now, we have dispatched almost about 4,000-plus units across the globe. If you have to look at, we have Meteor 350 and we also have Super Meteor 650, right? Those who enjoy an easy cruising, which gets on to that long distance also and cruising also enjoys is about Meteor 350. The 650 Super Meteor is, yes, it is also for the people who enjoy long distance ride. But that's also an easy cruising, gorgeous looking motorcycle. So it will take some time for people also to understand, and especially well the road development activity takes place in India, I tend to become very happy about it because that's where the Super Meteor will actually find a space. And more and more new roads, which comes up and people enjoy long-distance riding, Super Meteor is an exact product because it's so simple to handle.

On the upgrade cycle, whether the 650cc, will people will directly move there because it's Continental GT is -- the people who love that Continental GT is one set of consumers. They enjoy the style, they enjoy the customization, which can be done on that. Somebody who like the Interceptor 650, which is a roadster type. So that actually caters to the set of consumers who want an experience. Super Meteor is for a long-distance ride. So that -- this is a firm set of consumers. So it depends on what the consumer wants, but we have all the set of products which are available. And it actually answers to the needs of those consumers. So it won't be a direct replacement from 1 to 1 type.

[Raghunandhan N. L., analyst]

My second question on the network expansion in domestic market, how do you see the target for the number of outlets? I mean mass market 2-wheeler players have notably higher number of outlets compared to Royal Enfield. Even car companies like Maruti have many more outlets than us. So on an annual basis, what kind of network addition would you expect?

[B. Govindarajan, executive]

As of now, Raghu, we are almost about 2,100 premium retail outlets across India, which has a mix of studio stores and the dealership outlets. What is more important to look at is the market is also growing. Some area where at a point of time, the auto cluster, which has been very good, so probably would have been there. And we've also gone in for our stores there. In some areas in the auto clusters coming up, at that area, we were not present. So now the focus to the team is actually to look at because we went in for a particular expansion. Now what we have to look is, it is always proliferate, consolidate and proliferate. That's how we should actually look at any of these strategies.

We should not blindly proliferate because we are very conscious of the dealer profitability, and we give utmost importance for every outlet's profitability for the dealers. So to that extent, our focus as of now is optimal reach is what is required. If we have to increase numbers in the area where the auto clusters are coming up, we will go there. In the area where the auto clusters are not okay, we will refine that area because we have different formats. And we will actually adopt that format. So if I have to tell you in 1 sentence now it's all about optimizing the entire retail network.

[Operator]

Due to time constraints, this was the last question. I'd like to handover to Sid for his closing comments. Over to you, sir.

[Siddhartha Lal, executive]

Thank you all so much for joining us so late in the evening in India at least, and yes, we're absolutely delighted about, like I said, our performance last year. I think it was absolutely fabulous we have had a good start into this year, and we have lots of exciting things, both on the RE side, on the VECV side, new products, new initiatives, and of course, a lot of work being done on the EV journey as well. So lots of interesting deals on -- in EML and in VC. So thank you very much once again for joining us, and look forward to seeing you next quarter. Bye-bye.

[Operator]

Thanks I can see many follow-up questions or a few questions unanswered. So I'd request all of you to reach out to the IR team for all your queries. Thanks. That's all from us.

[Siddhartha Lal, executive]

Thank you.

[Vidhya Srinivasan, executive]

Thank you.