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TVS Motor Company Ltd
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Ladies and gentlemen, good day, and welcome to TVS Motors Limited Q4 FY '22 Earnings Conference Call hosted by Batlivala & Karani Securities India Pvt. Ltd. [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 Pvt. Ltd. Thank you, and over to you, Mr. Jayaraj.
Thanks, Peter. Welcome to TVS Motor Company 4Q and FY '22 post-result conference call. From TVS Motor Company management we have with us today, Mr. K. N. Radhakrishnan, Director and Chief Executive Officer; and Mr. K. Gopala Desikan, Chief Financial Officer. Congrats on a good set of numbers on the margin front.
I'll now hand over the call to Mr. K. N. Radhakrishnan for the opening remarks to be followed by question-and-answer session. Over to you.
Good evening, everyone, and I trust all of you and your family members are safe. Thanks for joining this call on TVS Motor Company Quarter 4.
First of all, I'm extremely happy and delighted to share with you that Mr. Sudarshan Venu has been elevated as Managing Director effective today. As we know, Sudarshan joined TVS Motor in 2011, and he was appointed at the JMD in 2014. With his deep-rooted values, he has been instrumental in driving innovation in advanced technology and investments in the future technologies like digital and future mobility.
His passion for customer delight, quality and drive for cost management were exemplary. He has created aspirational products which are extremely successful in the market. During his tenure, the company has tied up with BMW Motorrad, established TVS Digital and recently invested in e-bikes, which is a growing segment in Europe. Under his leadership, the company has achieved more than 1 million exports volume. And due to his special focus on premiumization, it has resulted in the highest revenue, EBITDA and PBT during this year.
Coming to '21, '22, which was a very, very challenging year, as all of you know, impacted by COVID-19, we had same time last year a lot of shutdowns in wave 2. First quarter after that, we had subdued rural demand, supply chain-related issues and huge customer price increases driven by customer -- the commodity cost increases. This resulted the decline of industry -- two-wheeler industry by 11%.
TVSM, with its strong portfolio and focused exports, grew in the total two-wheeler sales by 7%, resulting in a market share gain during the year. With the focus on premiumization, successful new product launches, growth in international business and sustained cost-reduction initiatives, the company posted highest ever PBT of INR 1,243 crores in spite of all headwinds.
During the year, two-wheeler domestic sales clocks 2.05 million units, international front, the two-wheeler sales was 1.09 million. The company has achieved this significant international business milestone in a financial year for the first time.
On Q4, the revenue from operations grew by 4%, INR 5,530 crores as against INR 5,322 crores last year. The domestic sales declined by 11% compared to Q4 of last year against the industry decline of 23%. International market sales declined by 3% compared to Q4 of last year. The total two-wheeler sales declined by 8% compared to Q4 of last year against the industry decline of 19%. Total sales of three-wheeler during this quarter was 42,000 against last year is almost similar number.
Profit -- in EBITDA, we reached INR 557 crores, grew by 4% over last year Q4. Continued focus in cost-reduction initiatives helped the company to maintain the EBITDA for the quarter at 10.1%.
PBT for the quarter is at INR 373 crores as against INR 387 crores last year. Profit after tax is INR 274 crores as against INR 289 crores. On PT TVS, company sold -- the sales is at INR 18,649 crores as against INR 22,000 crores of last year. We also sold three-wheeler, 2,669 numbers compared to last year's 2,298 numbers. PBT for this quarter is 1.1 million.
Overall for '21, '22, revenue from operations grew by 24% from INR 16,751 crores to INR 20,791 crores. This is the highest. Two-wheeler sales in the international market during the year grew by 43% over last year as against the industry growth of 36%. Domestic two-wheeler sales declined by 5%. Industry declined at the same time was 11%. Three-wheeler sales grew by 39%.
Operating EBITDA for the year is 9.4% compared to last year 8.5%. During the year, the company posted highest ever PBT before exceptional item of INR 1,243 crores as against INR 826 crores last year. INR 30 crores incurred towards COVID-19-related expenses are reflected as exceptional items.
Profit after tax grew by 46%, INR 612 crores to INR 894 crores. And PT TVS continued to achieve profits this year. Two-wheelers grew by 46%, 8,025 compared to last year's 58,901. And three-wheelers, we grew by almost 88%, 11,043 three-wheelers compared to 5,863.
As you know, Board, at its meeting during March, declared an interim dividend of INR 3.75 per share, absorbing some of INR 178 crores.
On EV, we have excellent positive response from the customers and it continues to grow. TVS iQube electric based on the performance, dependable performance, reliable range and silent comfortable driving experience. As on today, we have more than 12,000 bookings. We are currently present in 33 cities, and we have sold so far 12,000 units of TVS iQube.
In '22, '23, this financial year, we will be launching a series of new products focusing on different customer segments. Company is [ redoing ] a complete portfolio of two-wheeler and three-wheeler in the range of 5 to 25 kilowatts, all of which will be in the market within the next 8 quarters. First of this product will be in this quarter. I'll give you more information closer to launch.
In TVS Motor, in line with the vision of electrification, we envisage a wide and reliable charging infrastructure for our EV customers across India. Recently, we collaborated with Jio-bp to access this widespread charging network for its customers. We also have Tata Power and CESL network. We have already tied up with them. This will substantially enhance the customer experience. As you know, EV industry is slated to grow rapidly and company has got a robust plan for this segment.
On outlook for '22, '23, we are expecting normal monsoon, and this will definitely help the agricultural sector to grow. This will be the fourth year in succession for favorable monsoon in India. The rural economy should get benefit because of this. The future economic impact of COVID is assessed to be lower based on the wave 3, which saw minimal hospitalization. The administrative response through vaccination drive and not resorting to broad lockdown measures is seeing positive impact on the consumer sentiment and overall economic activity.
The improved investment in the road infrastructure, economic environment with our current mass transit systems will further drive the demand for mobility for masses. This demand is today best served by the two-wheeler segment, making its fundamental very attractive in light of resurgence in India. Two-wheelers in international business is also likely to see a good growth during the year with current trend of crude oil prices and availability and stability of currency.
We have a strong portfolio of products, which will enable to grow ahead of the industry. And I'm extremely happy on the demand for TVS Raider and TVS Jupiter 125, one of the best whatever we have seen, and we even have very good order bookings towards both these products. We are very confident that these 2 new products will help us in the growth journey of TVS Motor, both in domestic market as well as international market. We are continuing to witness the trend of premiumization in all markets, and therefore, we are confident that our premium products such as Apache, Raider, NTORQ, Jupiter ZX, Jupiter Grande series and the Jupiter 125 will do very well.
The present geopolitical climate and allied economic consequences will have an adverse impact on different commodities and crude oil prices in the first half financial year. We have taken judicious price increases both in domestic and international markets to mitigate the impact on the commodity prices. We are pretty confident that this year, we will grow ahead of the industry, both in domestic and international. And with the strong portfolio of brands like Apache, Jupiter, NTORQ, Raider and StaR range and HLX, Radeon and TVS King and the new launches what we are planning this year, we will continue to grow ahead of the industry. And our sustained cost-reduction initiatives will help us to significantly improve our EBITDA going forward. Thank you.
So sir, we open the floor for questions.
Yes, please.
[Operator Instructions] The first question is from the line of Rakesh Kumar from BNP Paribas.
My first question was around your EV sales network and production capacity ramp-up plan. So our sales network for the last 2 quarters haven't been able to expand beyond 33 cities. I understand it's the reflection of supply constraints which we have. So what is the visibility now you have? And what is it that you are targeting now on the sales network expansion?
And also on the production plan expansion, you had talked about that the first quarter of FY '23, we should reach 10,000 unit production, I think that would also be critical for network expansion plans. So how are we planning on in EV?
We are definitely confident of ramping up to 10,000 by first quarter end. We had some challenges in terms of some of the semiconductor suppliers. But given the kind of relationship we have with them, they are all supporting us in terms of ramp-up. And we have an aggressive plan this year. Once we are able to reach 10,000 by end of this quarter, then -- as I said, there is going to be a new product launch as well. And we will have a very good quarter-after-quarter disproportionate growth, and we have enough capacity for that. Also, we have lined up with all other suppliers. So it will be a great journey in terms of the EV. I think most important is all the customers of TVS iQube really love it, and that is the reason we have over 12,000 bookings.
Great. My second question was on the acquisition side. We have made a few EV bike acquisitions, especially in Europe. And earlier, we had made an acquisition of Norton brand. So how are we planning about in terms of product and also the planned strategy around those? And more importantly, in the context, are these EV bikes would be purely for the European market? Or we are looking at it in conjunction with the Indian EV market and our strategy here domestic?
See, the general principle is, all these products will be applicable to many markets. But the first focus when we have acquired SEMG is to focus on markets in Europe because this is the market which is likely to grow very, very fast. And this product SEMG is also a leading provider of e-mobility solutions in this region.
And as you know, last year, they have done $100 million in revenue, and they were profitable last year. So we will leverage that. But this gives us a huge opportunity to expand the product portfolio of e-bikes and we will be very closely looking at which are the other countries where we can use similar platforms, and we can also look at, at some point of time, India.
Around Norton, as you know, it's a very premium brand. It's a special brand. And definitely, since acquiring in April 2020, we have set up an excellent facility with all the focus on right talent pool, focusing on quality improvement and ramping up for production. This is in [indiscernible]. And you will see this year production and sales happening in a small way. And then we have a very -- we are now articulating the plan -- 3- to 5-year plan for this brand. And once it is ready, we will share it with you, but we are pretty confident that both these investments are going to give us huge returns going forward.
The next question is from the line of Pramod Kumar from UBS Securities.
Yes. My first question pertains to your comments on semiconductor situation easing. You talked that in specific context of EVs. But just want to understand, will it also help you elevate the supply chain pressure on brands like Apache, Raider and Jupiter because they've been on the waitlist, all these 3 brands have been on the waiting, especially Raider, Apache and Jupiter 125. So -- and I understand the marriage season is ongoing and demand for some of these brands. So will there be any easing of supply -- the situation on production side for these brands as well when you look at the remainder of the 2 months of this quarter?
Surely because we are taking some alternate actions also. One of our suppliers were not able to ramp up. We had some -- lot of challenges are bottlenecks. So we are also looking at augmenting with some more suppliers in this area. And we are pretty confident, especially in Raider and Apache. Fortunately, we were able to get full support on Jupiter 125 and that supplier also has helped us to increase the volume.
So I think what is most important is there is a genuine shortage of semiconductor. So we have to plan some alternatives. And also, we have to give some time because both in Raider and Jupiter, the customer demand has been exceptionally good, and the reception has been exceptionally good.
Apache, we had a setback last couple of months and this month, we had a serious setback, but we are coming up with alternative soon. So I'm pretty confident that, one, the current supplier itself they are going to support us more. Plus, we will have some alternate suppliers also developed for the quarter. But the good thing is the demand trend, we are extremely happy in a difficult and challenging situation like this, both the Raider, Apache and Jupiter 125 huge demand, which is a very positive news.
Sir, on that comment on the demand side -- this demand, just trying to understand because we've never seen a stable month for Raider or Jupiter, and I understand you haven't even activated marketing campaigns for them in the big way because the capacity constrains. I was just trying to understand how much could be the demand with -- the Raider and Jupiter 125 alone as new brand introduction can add to your volume kitty, say, net of cannibalization, but some of Jupiter and all of that. So where do you think these brands can head to at a combined level in terms of volumes for your -- for the domestic market?
Domestic market, you have seen, we exited around almost 17% market share, which is one of the best for TVS Motor. And thanks to the existing brands as well as Raider and Jupiter. And this is with some constraints we had in Apache in February and March, so you can estimate. So we have a huge opportunity to gain significant market share this year with existing brands as well as these 2 new brands and we understand this Jupiter 125 is also moving in international market and also Raider is moving in a big way in international market.
So will that be wrong if we assume like these brands domestic price export can easily do 50,000 to 75,000 units per month, domestic plus exports, both the brands put together. Will that be a...
I don't want to guide with any number. All that we look at is whether the customers are delighted, yes. There is a huge demand, yes. Continuously invest in right capacities and work with the suppliers, work with the dealers and distributors and make sure that you grow profitably these brands.
Second question is for Desikan sir, and you also in a way. On the cash generation, sir, because the last couple of years, we've been investing very aggressively on either acquisition or capability buildup, right? And we've been -- our investments are probably are growing ahead of our cash flow from operations, with that said. So when you look back now with the SEMG acquisition being done and creation of the e-mobile platform and the expected monetization on the financing arm and some probable transaction on the EV side. So is it -- how should one look at as an investor and as an analyst on FY '23 cash flow generation and going forward, whether in terms of -- whether there'll be big investment happening again? Or we have kind of done bulk of the investments which you wanted so far? So how should one look at the free cash flow situation going forward, sir?
I would like to guide you saying that a significant portion of these investments made by the company are already earning good returns, for example, TVS CS. TVS CS, give me a minute, I'll tell you the numbers. During this quarter, TVS CS book size is now almost INR 14,000 crores, and the net worth of the company is INR 1,866 crores. And Q4 profit is INR 74 crores compared to last year Q4 of INR 62 crores. So -- and year as a whole also very, very good performance. So again, I go back to the other point. So a significant proportion of whatever investments we have made in whether it is TVS CS or PT TVS, Indonesia. PT TVS, Indonesia, last 2 years, it is giving us very good profits, and I'm very confident about this year also '22, '23. The markets are growing. Our exports are growing. There is a huge opportunity in SACL.
Also, the new -- 2 newly invested e-mobility companies are already profitable. Almost INR 700 crores we have invested in this. So we have already -- we always invest in the right segments and right businesses, and we are confident that we will deliver good performance and returns in the future. And we should understand that any company, you have to give 1 or 2 years to reach certain levels of complete maturity in terms of product, quality, standards and having the right network. So these investments definitely are going to give very good returns in the future. We are confident about that. Desikan, you want to add anything?
Yes. On the monetization part, just want to answer Pramod's question. See significant portion of the investments are behind us to be very, very clear to your question. And second is the company continues to generate free cash flow. And next year, we'll also -- we'll continue to generate free cash flow.
And sir, on the monetization part, you did share about financing our monetization and also potential opportunity on EV side.
Last time, we said that TVS Credit Services is evaluating various options for fund raise. And we are pursuing various options. We will come back to you at the right time. We are progressing on the front.
Okay. And sir, last one, sorry for this. But on the software side, I want to ask this question because we're seeing so many new features getting added to your products like voice command on a new product like NTORQ, a new variant. So I just wanted to understand, this is something which is unique in the two-wheeler industry, right, the kind of features what you are offering on your products on the connectivity and digital bit. I just wanted to understand, are these all kind of bought-out technologies, which you're buying from vendors under license or these are something which you developed in-house using your own software talent.
We completely believe in designing and developing in-house. Of course, we partner with the right suppliers. We can be really proud that we are really having the spirit of AatmaNirbhar India from design and development.
No sir, I was asking this more from the EV perspective because electric vehicles are more of software...
Even for EV, most of the significant proportion of these developments are completely done in-house. We partner with the suppliers for some of the parts to be produced, okay? That is the biggest differentiator.
[Operator Instructions] The next question is from the line of Raghunandhan N. L. from Emkay Global.
Sir firstly on the demand side, demand conditions are improving and your peers are indicating expectations of double-digit growth in FY '23. Can you talk about which segments are driving this demand improvement? You indicated good traction in rural. Can you also talk about other customer segment like salary, student, where all do you expect traction this year?
The good news is, again, last year, because of the lockdowns, urban initially got affected. And once the COVID situation in wave 3 became a little bit better with minimal hospitalization and better vaccination, we could see, I think, the people coming for better bikes. See, the biggest challenge was in the entry-level segment. If you look at the entry-level segment, we have the biggest challenge starting from mopeds and entry-level motorcycles, primarily because of one, the cost and the price increases whatever they have seen; second is because of the anxiety of the COVID and kind of almost 2 years of their income level being very, very subdued. okay?
Now we are seeing first time after COVID 3, the mobility, people are now doing their regular jobs. The self-employed are doing their job. Schools are opening. So I think it is positive for the industry, very, very positive for the industry. And I'm very confident that this year, you will see rural will come back. Urban will continue to do well this year. The premium products always does well. Now the challenge is the 50% of the market, which is in the entry level, those segments will improve this year. Definitely will improve. And also the retail financing company, now practically, for example, TVS CS, Desikan can highlight you, our collections are 100%. Correct, Desikan?
Last 3 -- last 4 to 5 months, there are no provisions there, and we have been collecting the earlier made provisions also. To that extent, it is extremely robust.
So I think positivity through many qualitative measures, we can look at it. It's very good for India. What we have to look at is this commodity increases, okay? If commodity increases can also a little bit -- because it is not that we have seen huge increases, but keep on increasing prices will have some challenges, but I'm pretty confident in the case of TVS, we have a range of products and range of customers, and we can definitely grow much, much ahead of the industry. So I'm very optimistic about '22, '23. Always this little caution of way for how is it going to be? Vaccination is going to help us, okay? So we all pray that let that be like wave 3, like Omicron, no hospitalization. So that situation comes, I think we will see a great year this year.
My second question was on the commodity inflation. How severe is the impact expected for June quarter? How much is the price hike? And net of price hike, what could be the Q-o-Q gross margin hit?
See, I don't want to look at any shift on the gross margin. I think the way we have to look at is there is a commodity increase. We are not able to pass on fully. So always there's [Audio Gap] between your own internal efficiencies and your own ability to look at the range and product mix and geography mix. That is exactly the way we look. The good news is for us, almost 35% of our income from the international market. International market is really, really doing extremely well. So most importantly, if you are able to grow your top line much faster, I think that gives you supply chain efficiencies. It gives you an opportunity on certain brands to increase price. Maybe you can even pass on fully the commodity prices, areas where the customers are not able to fully afford the pricing because maybe partially 2, 3 installments.
So we have different, different strategies. So I'm not so much worried about commodity prices really, really putting us a headwind. I think it is a combination of -- you would have seen our results. I think most difficult times, we have given the best numbers. And given lockdown not there and with existing models and with the alternate countermeasures what we are looking at in semiconductor and the new product, what it is today, Raider and Jupiter 125, I'm extremely positive about TVS Motor doing much, much better this year, both in top line and in bottom line.
Desikan sir, can you please share the exports and spares number for Q4?
Q4, what is the number you asked?
No, I didn't get the question, please.
Exports and spares, sir.
Just a minute. Exports revenue you are saying for Q4?
Yes, sir.
Revenues INR 1,899 crores.
And the USD/INR realization?
76.
Wonderful. Spares number, sir, if you have it handy? And sir, like the supply issues, which you indicated even in month of April, how much could have been the production higher, if not for the supply issues? That's my last question.
Again, I don't want to give a number. Raider was -- practically, we couldn't produce any Raider, I can say that. Whatever was there in the pipeline, we were able to sell. And Apache also significantly got affected. Sometimes one-off this could happen in a month, okay, but that was very shocking. But despite that, I think our numbers are very good. So that also shows the pull in the market for the existing model. So we have to manage between the existing models and the new model. Sometimes one-off brands have got a challenge. We will find alternate solutions from that.
Got it, sir. And the spares number?
Spare numbers, I don't have it straight away. I'll come back to you.
Next question is from the line of Gunjan from Bank of America.
Just 2 from my side. Firstly, on this Norton, I remember this release, which you had put out of about INR 1,000 crore investment. When -- what is the time horizon we are looking at? And how much has already been invested? And in the same -- on the same around investments, when I look at this year, you all have invested about INR 1,400-odd crores in the acquisitions or subsidiaries associates. When you look at F '23, what are the pending payments for acquisitions? Or how should I look at this investment number for next year?
See, about -- on the investment announced about GBP 100 million, GBP 40 million to GBP 50 million have already been made leading to the creation of a world-class facility and imminent launch of some of the new products that we have products -- the reengineered products what we are planning to do this year, okay? And also in -- this is -- this will be spread over 5 years. And these investments will be towards electrification, cutting-edge technology and world-class vehicles, manufacturing, sustainability and future of mobility. These are the areas we are looking at. And I can promise you, you will see exciting range of products for the global market from Norton. This is on the first question.
On the second question, I already highlighted to you, majority of the investments whatever we have done are giving us very good returns, whether it is TVS CS, whether it is PT TVS, whether it is SACL. And 2 of the e-mobility companies where we have acquired recently, both are profitable. So I think we are pretty confident that we are investing in the right segment and the right business. And we are very confident about delivering good returns from these new investments going forward.
Sir, I was just trying to get a number if there is a ballpark number in your mind that this is what -- how we look at F '23 CapEx plus investments. I mean I do appreciate some of these are very strategic in nature, but generally trying to make sense of the amount of spend which will be made in F '23.
CapEx next year will be about INR 700 crores, including our future mobility area.
And investments, any guidance?
Investments, I don't want to give any guidance at this point of time. Because as you said, these are all very strategic based on the future plans for the company, we will look at to invest in the plants.
Okay. And just quickly from my side on the financing penetration this quarter and if you are able to quantify the price hikes taken in Jan or in April, that will help us.
Financing penetration, Desikan?
Just a second, please.
I think financing penetration this quarter is almost...
Overall penetration for '21, 24 this quarter is around 58%.
58%. It has gone up substantially. That is the confidence, which is seen in the market, definitely, you are able to see it.
Okay. Price hike, sir? And then I'll join back in the queue.
Price hike, we have taken during this quarter, I think it was around 1.5%.
Next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Service.
A couple of questions from my side. One is with respect to the RM cost impact which you talked about. So was there any material RM cost inflation in fourth quarter or it was broadly stable?
No, there is RM cost increase in this year Q1 as well and Q4 also, we saw.
Okay. Any indication of what was the inflection seen in fourth quarter and expected in 1Q?
1Q not yet settled because there is always a lag, and there will be some negotiations which is going on, because last quarter increase itself is something huge. You have seen 1.5% price increase and may be uncovered is about another 1%. So that will be there, given the last 6 quarters of material cost increases, whatever we have seen because you can't immediately pass on, on all brands and every market. So we have to look at a combination of product mix, geography mix and also leverage the revenue growth, so -- and of course, thanks to the sustained cost reduction whatever we have done. So that is the best way.
But the most important is, if you look at year-on-year, we have managed our material costs very well, given all the headwinds that we had last year. Possibly a little bit of better semiconductor availability in the last quarter and container availability in international market in quarter 2 and quarter 3. I think that would have helped a little bit more on the revenue side, so -- but these things happen. However, if you look at overall as a company, highest revenue and highest PBT, and we are able to -- Q2, Q3, Q4, we are able to hit double-digit EBITDA margin under a very difficult situation.
Sure. No, that's a very commendable performance in tough times, no two ways about that. So second question pertains to when I look at the consolidated performance, the auto component business seems to be having substantial pressure, continuing to have PBIT losses. So what is happening in that business? What are you going to do turn around that business?
I already highlighted that. See, when we started TVS CS, it was also having a lot of challenges, but it is today one of the best performers. This year, the PBT itself is INR 156 crores, which is outstanding, and the book size is almost INR 40,000 crores. I think we have to -- we always invest in the right area. Same way, PT TVS. You look at PT TVS performance and you look at SACL performance. So -- and 2 of the investments, whatever we made, are already profitable last year. So a significant proportion of all the investments are profitable. And there are new investments we have made last year. I'm pretty confident that they are strategic in nature, and they are going to huge returns going forward.
Sure. So is it -- is the loss -- are the losses in the autocom business reflection of difficulty to pass through cost inflation to end customers? Is that the main reason or there's something else there?
I think markets have been very slow. All of us know that the markets have been very, very slow. I think the biggest challenge is this 8 quarters of lockdowns and country by country. Now look at China. Now China is on maximum lockdown and many things are getting affected, including containers. So I think uncertainty and unpredictability, definitely is one of the reasons where these are -- these last 8 quarters. But last 8 quarters, I think this also tested the robustness of the company, and I can be very humble and very polite in saying that we have done extremely well.
Sure. And sir, can you share what percentage of the auto component business revenue would be to third parties?
You are talking about SACL?
Right.
SACL, Desikan, you have -- how much is outside? About 60% is for TVS or 40% is for TVS?
Yes. It's only as far as Sundaram Auto Components is concerned, their dependency on TVS Motor is around 40%, slightly lower than 40%. The rest are only to outsiders.
Next question is from the line of Arvind Sharma from Citi.
Sir, first question more on the quarter side. The realizations were literally flat quarter-on-quarter. And you say you take a 1.5% increase. So how do we -- how do you clarify this thing?
I think primarily, we lost some volumes in the premium segment due to semiconductor availability, especially in February and March. That -- but I'm pretty confident that the kind of countermeasures we have taken that will become better in this quarter. Of course, April also, we had some setbacks, but I'm pretty confident that May and June, you will see the recovery there.
Great, sir. Sir, second question, we are already almost within a month into the first quarter. How much do you think that the commodity costs have been deferred toward -- will be lumpy in the first quarter. Is there any sense on that part?
See, commodity, in my opinion, has reached its peak. And even in Q1, we have not settled on the commodity cost increases because the increased requests have been very high. So still negotiations are going on. And we have increased prices even in this Q1. So I'm pretty confident that there will be a balance you will see going forward. I think once you see the availability of many, many ingredients for the raw material becoming smoother, you will see a stable situation. And equally this geopolitical situation easing out also will help going forward on the commodity prices. So I'm expecting maybe Q1, Q2 onwards, you should see some settling down.
All right, sir. Just one final question, it's more on the customer side. Where you selling your iQube, how much do you think is the commonality between the potential buyers in iQube and say something like Jupiter and NTORQ? Is there any commonality in the target customer base?
See, since we have not given March numbers, the numbers today, we are averaging around 2,500 per month sales. And 2,500 in these 33 cities, we are seeing techies buying this in the urban area. To answer you, once we start selling 10,000, 15,000 per month for about 6 months, I think we will be able to see how the total EV scooter to IC scooter, how it is happening. But my hypothesis there is scooter as a category today is 32% of the industry in IC. I'm very sure this will expand because more and more consumers will look at EV scooter. More and more consumers will look at scooter as a form. So I feel that both IC you will see change. EV will continue to grow. I'm giving my kind of prognosis at this point of time. But currently, if you -- if I look at the type of customers, they are all techy customers who wants -- the normal Jupiter type of customers we are just seeing now. You have to supply sufficiently into this market, then you can see what is the overlay of this type of customers.
Next question is from the line of Amyn Pirani from JPMorgan.
Congratulations on a good set of numbers. Just wanted to go back, apology for this on the point raised by Pramod as well as Gunjan. Now we understand that when you make an investment, you obviously have a 3- to 5-year view. Markets may not be as patient. So what would help us and maybe hopefully we'll hear more on this, is that maybe on Norton and maybe on the other businesses, if you could come out and share some of your 3- to 5-year plan in terms of maybe capacity which geographies, that would give us some comfort that, okay, investments are high, but that is fine. Like financial services has done and how Indonesia has turned around, these businesses will give us good returns in the future. That was just some point that I wanted to make. And hopefully, like you mentioned, if Norton does start production this year, hopefully, we'll hear some of your plans during the year.
I can promise you the time what we took for TVS CS and PT TVS, we will be much more faster and agile, I promise.
That's good to hear, sir. Secondly, sir, on the EV side, as you move from around 2,000 per month to, say, 10,000 to 15,000 a month on the two-wheeler side, do you think that the current format of distribution, which is how you sell it in the current existing TVS showroom would work? Or do you think you'll have to create a slightly different format, maybe a shop-in-shop or a separate distribution because the category, while it's a scooter, it's a -- it still has different nuances. I would love to hear your thoughts on that.
Absolutely. Absolutely. Absolutely. See TVS iQube, the company, we have also leveraged digital channels to our vehicle booking and sales and completely digitally enabled the purchase processes, test ride, booking, payment, seamless home charging, unit installations, providing truly hassle-free experience. So I think it is going to happen. It is going to happen. In my view, this could happen not only in India, many parts of the world, number one.
Number two, this could also change some of the IC distribution models as well. So today, I cannot give an inference that this is the model. So we are experimenting both the models. For example, iQube is available through some of our existing dealers. It is also available to the digital channel, but I cannot give you any conclusion what is the proportion through the digital channels and how we are going through that. I think some more numbers, maybe another 6 months when we start selling 10,000 per month or 15,000, 20,000 per month, I'll be able to give with much more confidence how it is panning out. But I'm very sure the new digital -- the new ways of doing business will happen.
The next question is from the line of Hitesh Goel from CLSA India.
First question on the iQube, right? Your current bookings are around 12,000, but you are expecting to ramp the production to 10,000 per month. Do you have the chip supply to really get to these numbers anywhere in the second half of this year?
Not even second half, we are looking at it in the first quarter itself how do we come to 10,000 and second quarter go much beyond that. I'm pretty confident. The most difficult thing we have got it right which is the acceptance by the customers. And as I told you, we have a range of new product lines also planned. So we are planning to really launch, go beyond 10,000 in the second quarter and beyond whatever number. So we want to really have a great year on EV ramp-up and EV sales this year.
Sorry sir, just to clarify, this is 10,000 per month capacity or 10,000 per quarter?
10,000 per month, now we are looking at. And not -- yes. So I want to hit 10,000 definitely by June.
So sir, why is the bookings only at 12,000? Just wanted a greater sense booking should have been...
See, we always -- we don't want to have customer dissatisfaction beyond a point. Once somebody books it, if I open my bookings, there are enough people who love this product. We have restricted this 3350s also. Once one month we reach 10,000, then we will ramp it much faster, okay?
And you are planning to get to all over India, right, which will happen by end of this quarter?
All over India, 100% all over India, and we will also start some international markets.
Okay. And sir, on the export side, my second question is on export side. Can you give us some color on what is happening on the export side because although oil prices have gone up, right, but there's inflation also, which is on the food prices, which could affect consumption, right? So can you give us some sense on how you see demand especially in Africa on the export side, what is happening there? Can you give us some color?
Exports, we see very good growth. And what is helping us is our product range and the kind of customer satisfaction we have on the HLX series or on Apache or even Raider whatever we have launched or NTORQ or the new Jupiter 125 also small numbers we have started giving, so -- and the three-wheeler side. I think Africa market is doing extremely well for us. And I agree, the challenges on inflation is across the globe this year. And the positive thing is the political stability, availability and stability of currency, they're all helping. And crude oil prices are somewhere on the higher side this year.
Sorry, just to rephrase, so if TVS is gaining market share in Africa and Latin America or the market is also expanding?
Both, the markets are expanding and we are gaining significant market share gains in every market where we operate.
Next question is from the line of Kapil Singh from Nomura.
Just wanted to check in terms of strategic acquisitions or investments, how do you think about it? What is the play that TVS wants to have in the mobility space? And how are you planning for management bandwidth for some of these new segments that we are entering into?
Participants, please stay connected. Lines of the management dropped.
Ladies and gentlemen, thank you for your patience. You have line for the management reconnected. Sir, you may go ahead.
Yes. Sorry, the line got disconnected. I think somebody wanted to ask some question.
Kapil, may I request you to repeat your question once again for the management, please?
Yes. Sure. Sir, I just wanted to understand your thoughts on the strategic initiatives in the mobility space and global motor biking space as well, what are the ambition? How do you think about acquisitions? And will there be more such strategic investments that we intend to do going ahead? Also, how are you planning for management bandwidth to look at some of these new areas and new geographies?
See, EV and future mobility, this is something definitely going to happen. And we have embraced the change, and that is why we have invested in TVS Motor as well as we are also looking at such strategic investment. So these strategic investments are based on looking at global market and opportunity because we feel that there is a great opportunity for TVS to leverage anything related to future of mobility. So we have a very strong plan, and we look at constantly on this area.
And on teams, we have -- for example, we have a separate team on Norton. We have a separate team on SEMG. And here, we have a separate EV team, more than -- almost 800 engineers, managers. And especially in certain areas like software and electronics, we are strengthening with the lateral hire. So we always believe in putting a very strong team and investing in R&D and facilities because most important is the belief that what I told earlier Pramod, AatmaNirbhar Bharat means it is also designing and developing and partnering with many, many suppliers and global partners who are best in class. So we always do that. Those partnerships are helping us plus the kind of resources that we have invested in and we always do that.
Sure, sir. So does this -- mobility is a very broad term. Does it include four-wheelers also, if there are opportunities or will you be restricted to two-wheelers? Some thoughts around that.
Now it is two-wheelers and three-wheelers.
Okay. Secondly, I just wanted to ask on PLI, how will the accounting work? Will you be booking on accrual basis or when we receive the cash flows. Desikan sir, if you can help us.
PLI, Desikan.
Your question is not clear, question please. So what was the question on PLI. I couldn't hear them clearly?
The PLI incentives, will you be booking on an accrual basis or you will be booking because cash flow as per the government notification will take place, they will pay after 1 year, right? For FY '23, they will pay in FY '24. So I just want to understand how will the accounting work? Will this come in your P&L in FY '23 only? Or you will book when you receive the cash flow next year?
We will be conservative in our approach, and we will account it based on cash flow basis only.
Next question is from the line of Pramod from InCred Capital.
This is with regards again the EV opportunity in India, considering your moped presence and also the number of acquisitions you're doing internationally, how do you see a low-speed two-wheeler opportunity in India? What's the market size as per you? And what it can grow? And do you see a role for TVS to play in the low-speed two-wheeler?
See, customer segment will evolve. Definitely, customer segments will evolve. When we started moped, we found that there are set of customers in the bottom of the pyramid, they wanted to carry load and they want to earn income. So today, moped is carrying something like 100 to 150 kgs of either agriculture produce or milk or whatever and it is used to for earning everyday income, okay? So I think we have to closely look at what is this type of application and what is the type of customer segment and then decide. I can't give a generic answer at this point of time. We are studying very deeply customer segment by customer segment. And I can promise you every customer segment in the EV space, we will have our product.
Sir, any estimates based on your studies, what is the market size there because as we have not registered?
Too early. Too early. Too early.
Ladies and gentlemen, due you time constraint, that will be the last question for today. I now hand the conference over to the management for closing comments.
Thank you [Audio Gap] the conference and stay safe, and we are all hoping that even if some wave of COVID comes, it will be like wave 3 and it will not lock down the country and all of us. And we will see that the economy will do well in India. And we want the rural, with a very good monsoon, should do well for this year. So overall, with the kind of new products, whatever we had launched Raider and Jupiter 125 and the portfolio of products what we have started from Apache, Jupiter, NTORQ, StaR range, HLX, Radeon and TVS King. And now iQube -- TVS iQube, I'm pretty confident that we will grow ahead of the industry, both in domestic and international. And our sustained cost-reduction initiative, product mix, geography mix, this strategy will definitely help us to go beyond now the double-digit margin whatever we have clocked quarter after quarter in the last 3 quarters. Thank you, and thank you very much.
Thanks.
Thank you very much. On behalf of Batlivala & Karani Securities India Pvt. Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.