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TVS Motor Company Ltd
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Ladies and gentlemen, good day, and welcome to the TVS Motors Limited 4Q FY '23 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.
On behalf of B&K Securities, welcome to 4Q FY '23 post conference of TVS Motors Limited. I also take this opportunity to welcome the senior management team of TVS Motors Limited. We have with us today, Mr. K N Radhakrishnan, Chief Executive Officer; Mr. K. Desikan, Chief Financial Officer. I will now invite Mr. K N Radhakrishnan for his opening remarks to be followed by question-and-answer session.
Extremely happy to share the overall performance of the company for the year '22, '23. The company achieved significant milestone both in terms of revenue and profit. Company posted a revenue of INR 26,378 crores and the profit of INR 2,003 crores, despite various headwinds, we have challenges in significant shortages during the first half of the year, challenges in the international market during the second half of the year. The company bought 3.5 million units of 2-wheeler sales with retail sales growing ahead of the industry, both in domestic and international markets.
We are also pleased to inform you that the company has over 1 lakh delighted EV customers now. With outstanding performance was possible with the best-in-class quality products, superior customer experience and customer delight. Let me now get into more details about the full year numbers and then quarterly results.
In terms of overall, the revenue from operations grew by 27% last year was INR 20,791 crores and this year, INR 26,378 crores. Domestic 2-wheeler sales numbers grew by 23% against the interest rate growth of 16%. Domestic EV sales dispatches were at 97,000 as against 11,000 during the last year.
3 wheeler sales remained flat during this year. Profit, the operating EBITDA for the year is higher at 10.1% compared to 9.4% of last year. During the year, company posted the highest ever PBT with a growth of 61%. INR 2,003 crores against last year's INR 1,243 crores and profit after tax for the year grew by 67% from INR 894 crores to INR 2,491 crores.
Now talking about the quarter. Revenue from the operations grew by 19% in this quarter, INR 6,605 crores during this quarter up against INR 5,530 crores during last year's fourth quarter. Fuel domestic ad sales grew by 19% compared to Q4 of last year.
I think the industry grew apart by 4%. [indiscernible] sales have grown ahead of the industry. Two wheels international market industry declined by 36% compared to Q4 of last year due to increased inflation, currency depreciation and inadequate currency availability.
The company ensures that the customer retail is higher than the [indiscernible] , moderating the stocks with the channel partner. The total 2-wheeler sales declined by 2% to last year's against the industry decline of 6%. EV 2-wheeler sales is sequentially growing quarter after quarter. During this quarter, the sales was at 43,000 as against 29,000 what we have seen in Q3.
Total sales of 3-wheelers in this quarter is 29,000 as against last year's 42,000, last year's last quarter number. Profit for the quarter EBITDA is at INR 680 crores, grown by 22% over Q4 of last year. We continue sole focus on premiumisation, cost reduction initiative, which helps the company to improve EBITDA.
For this quarter, it's higher at 10.3%. PBT for the quarter grew by 47%, INR 547 crores as against INR 373 crores during Q4 of last year. PBT for the quarter includes a fair valuation gain of INR 62 crores on the equity share held by the company. Fair valuation gains shown as other income.
PAT for the quarter is 49% growth at INR 410 crores as against last year's INR 274 crores. Now looking at the performance of TVS credit. TVS Credit has done extremely well. The book size is now INR 20,500 crores. Portfolio is well diversified, covering tractors used vehicles, consumer durables, MSME besides 2-wheelers.
Overall, for the year, TVS credit posted a PBT of INR 511 crores as against last year's INR 151 crores. For the quarter, the PBT was INR 140 crores as against INR 75 crores comparison with respect last year fourth quarter. The collections are robust, warranting minimum provision. PDVs continued to perform well. For the year, it posted 5 million PBT against $3 million during last year.
Now coming to EV. We have seen a significant change in the EV growth for TVS Motor Company. During the year, domestic the EV [indiscernible] industry saw robust growth almost 3.1x. The growing sensitivity to climate impact and improved total cost of operation, proposition to accelerate consumer interest and thanks to government, the FAME 2, enhancement, realize, state subsidy and other EV-related infrastructure initiative of the government, reinforced consumer base and consumer segment.
During Q4, we delivered 43,000 numbers resulting in a share improvement quarter-on-quarter. Recently, our order book is close to 30,000 units. We are presenting 235 touch points across 135 cities. We will be launching as promised new series of new products, focusing on different customer segments with a complete portfolio in the range of 5 to 25 kilowatts in the next 9 to 15 months.
Electric 3-wheeler, both passenger and cargo are getting ready, will be launched in the upcoming quarter. [indiscernible] customers presently have access to more than 2,000 charging points with various charging network players. We have partnership with many network players. On IQ is 156 Phase 2, we have transitioned successfully and the production of April 2023 were constrained due to the changeover and some supply chain challenges, but we are pretty confident that we will start ramping up much faster in May.
The order book for TV continues to be very robust, and we will retain the growth momentum. Now regarding [indiscernible], we have fully complied with all requirements made down under the same quality documents at [indiscernible]. We would like to reiterate that [indiscernible] has fully committed to the government of India's vision to promote electric mobility and fully support the government of India initiative faster adoption of electric mobility, development of electric behavior ecosystem in spirit of [indiscernible] or the electric development happened in house.
TVS would like to submit that we are fully committed in building the electric vehicle system in India and always willing to render all necessary population assistance to the government of India. In order to improve the customer choices on charging time, we gave outward charges from May 2022 when we launched our current variance of TVS iQube.
Due to ambiguity in the rentation [indiscernible] 2023 we offered charges as a part of the overall price of the vehicles. And as a goodwill [indiscernible] show appreciation to our customers who purchase TVS iQube from the period of May 2022 until April 2023.
TVS will implement the benefit scheme to its customers who have paid over and above the threshold limit fixed by day. Just to clarify, in some cities, some of the cities our prices, including chargers are within the threshold limit specified by paying. In some cities or specific models, we are slightly higher than the threshold limit of it.
The average refund is about 1,700 per vehicle. Over the next 2 to 4 weeks, company will be reaching out to customers who are eligible to refund for this refund and the overall impact -- cost impact is less than INR 20 crores. Our industry outlook, 2324. We are expecting the GDP growth to be around 5.5%.
Our [indiscernible] recoveries are visible. However, rural recoveries is slow, but we are expecting that it may take more time. But most critically is [indiscernible] , the employing road instructor economic environment with our current mass transit system will drive the demand for mobility for markets.
The growing population with a demography will support sustained industry growth, especially for 2-wheelers. The mobility demand is best served by the 2-wheeler category. And I'm pretty sure that in the medium to long-term cap at India along the India is expected to witness a double-digit CAGR on 2 wheels.
Majority of international markets will likely grow during second half of the year. EV industry will continue to grow rapidly as consumer industries better with active quality support from the general and state government through PLI M2 and specific support from the state policy. Our plan for 23, 24, we will continue to invest in new products, and you will see many new product launches in [indiscernible] and EV segment, both in 2-wheeler and 3-wheeler this year from the company.
Also more than in the recent [indiscernible] study, TVS products are rated best-in-class, both in iQube S and appeal. There's a [indiscernible] in succession. Last 2 years, if you know, due to pandemic, the strategy was discontinued. Thanks to all our customers for having full sale in TVS and TVS products. Customers of TVS [indiscernible] are extremely delighted and volumes of these products will further enhance this year, both in domestic and international markets.
International market, we are also having plans to expand in [indiscernible] Middle East. The expecting premium [indiscernible] continues to maintain growth momentum. Scooter policy, consisting of [indiscernible] will also see further growth. As you know, company delivered over 10% EBITDA during '22,'23.
Sharp focus on premium products, material cost reduction, optimization fixed costs, and we are confident that the same intensity drive will continue in '23/'24, and we will further strengthen to deliver better EBITDA in the year 23-24. Complete product portfolio, unwavering focus on the consumer, quality, new products with attractive quality and technology features, the company is confident about [indiscernible] the industry, both in domestic and international markets.
[Operator Instructions] The first question is from the line of Chandramouli Muthiah from Goldman Sachs.
My first question is on IQ. We've done well on electric scooter volumes up almost 40% quarter-on-quarter, but you have spoken of some supply chain shortages in April. If you could elaborate a little on this, maybe what the kind of components where there is volatility in supplies?
Is it limited to a small group of suppliers? And what is giving us more clarity where the ramp-up is visible, that would be helpful.
Yes, it's a small set of suppliers, both on the electronic component side and the transition of the [indiscernible] was also happening. What is good about is more than 30,000 bookings are there, and we are strengthening our [indiscernible] You would have seen last year, this year, April, May, Jan, Feb March we are approving.
And you will see the momentum from May in terms of delivery of better ramp-up and better delivery to the customers going forward.
My second question is on IC scooter and premium motorcycles. There has been a noticeable improvement in mix of IC scooters and 125 cc plus motorcycles, both in domestic and export markets. Could you share some color on the factors that helped the company achieve this improvement in product mix?
And is this current mix sustainable in our view? And finally, if you could just expose the revenues and the Ronin volumes for this quarter, please?
Overall, we are seeing -- like I said, [indiscernible] , we are seeing very good pickup. I think the challenges in the [indiscernible] but overall, if the [indiscernible] is likely to be better this year, then we will see all coming back the sentiments coming back. And all of us know that this is the first year with lesser challenges on the semiconductors in the first quarter.
Last year, we had [indiscernible] From the consumer point of view, 125CC segment in the market is doing extremely well as an industry I'd say, okay?
And is very much welcomed in the market and customers are delighted with the Raider. Jupiter 125 is also very much liked in the market. [indiscernible] in the 125 segment. Overall, I think that is the place where we have very big products, and we are confident about growing ahead of the industry there.
On premium, partly continues to do well. And Ronin, as you know, it's a special category. It has started doing well in many markets. average, we are doing about INR 2,000, INR 2,500 every month, and it will continue to go out in the coming months.
And just the exports and spares revenues, if you could share those numbers, please?
Space revenues is around -- for the quarter, it's about 667 about 10% of the overall revenue. And overall, as a year ago INR 2,640 crores about 10%.
And the exports revenue, sir, for the quarter?
Just to give me a minute. Revenue for the quarter is about INR 1,366.
The next question is from the line of Pramod Kumar from UBS Securities.
Now I'm just trying to understand, will we see inflection point here where you will see a step-up in capacities for Raider and also for Jupiter 125. And because of the fact that 125 CCs as a segment is also doing very well. So if you can make any comments on volume targets or production targets what you have for these brands for FY '24, sir?
The Raider when we started, all of you will recollect, we started with 10,000 that we increased to 15 to 20 -- now last quarter, we have done almost 30 plus. We are constantly looking at market demand. What you said is absolutely right. The demand has to be much ahead of the capacity and production so that we are able to fulfill the demand.
And we are also getting better capacity utilization. Raider, we are constantly reviewing and supporting the market and pay to be a great brand, both in domestic and international. And when you look at Jupiter 125 also, it has also grown month after month and now average we are doing about 25,000 plus, and there is a good headroom to grow.
Put together, these 2 products are likely to grow further in the future. And like I said, the industry is also doing extremely well in the 125 CC.
126CC is there a welcome change in the industry and the market, and TVS has got 2 great brands. And into is a great brand, as you know, and into also has done well. Between the Raider, Jupiter 125 , I think company will further strengthen the 125.
Any production numbers? Is there an expectation that you can take ready to 50 -- because if I'm not wrong, you're not even doing any marketing or no launch. There's been no launch or any ad campaign for Raider or whatsoever and still it's ramped up to 10% versus the category.
We monitor, and we will keep constantly, we will improve from 15,10 to 15 to 20 to 25 now it is crop 30%. There is a constant effort to look at which products are doing well, and we constantly look the same. And Jupiter also, we started with 10 and 15 or 20, now 25%.
We will continuously monitor this and start investing behind. And the supply chain is also fully supporting. Markets are supporting, customers are supporting. That will be the strategy of the company. I don't want to give a guidance on the numbers going forward.
But we will constantly look at the requirement and the demand, and we will keep constantly upgrading the capacity and production.
Still on Evs is that a fair starting that improving volumes, where use economics on EVs should be getting better and better and the drag on the overall should -- or rather, let me put it the same, are you sensing that breakeven for EVs at the EBITDA level is around the corner for you?
Yes, I always believe that what is most important is delighting the customer. And I want to thank all the TVS IQ customers who are stood with the company. And if I speak, if there are more than 30,000 customers who are booked, I think that is the credit I would like to give to the product and the customers who are facing the company, number one.
Number 2, we are continuously looking at how do we start increasing the capacity and how do we get the supply chain supporting us fully. Number 3, we wanted to also get into international markets. The moment the top line starts coming in, every element will start following.
And I think as I said, it is making positive contribution, okay? These are the -- once you grow the top line and once you start getting the positive contribution, that is the time you should start looking at all our costs. This is the investment type, both in the products and in areas of investment in terms of marketing, in terms of people, in terms of every element of that.
We are extremely happy on the progress of EV. We want to now launch many products in the EV segment, including the 3-wheelers. This year is going to be a very important year, 23 24 because we will also start looking at some of the international markets.
This year is going to be another milestone here in the EV segment. I would like to say that.
I understand the macro is very dynamic. There's not much of visibility on when things will improve. But can you just make some color on your export market share progress, in key markets because we don't get the data very easily. Every OEM that, they're protecting market share.
But if you can just help us understand how is your market share trends in key markets in Africa and [indiscernible] on both 3-wheelers and 2-wheelers ? Any color which you can share on these markets will be like really helpful? And how are we doing there on the market share front.
The principle of the company, we always believe in keeping the right stocks. Okay. And if you look at domestic, we keep anywhere between 25 to 30 stock. Same principle be used plus whatever is the transport time, see right time and then there are distributed, their dealers there.
Depending upon that, we will look at because from the customer view, if you keep around 30 days plus the logistics and distribution time, that will be fine because they will get a fresh way, that is number one.
And we have seen last year industry de-growing a significant way, especially in the African market, some of the markets like Bangladesh. Other than the ASEAN markets like Indonesia, most of the market, a lot of geopolitical challenges and availability of currency evaluation.
Overall, I think it was going through some difficult sense. We decided to -- the retails are much higher than whatever we discussed because when this decline happens, decline happens very sharply. Immediately, we look at maintaining the momentum of retail customer retail equally correcting the stock levels at each of the countries.
That's why you have seen [indiscernible] been moderate. Now we are in it stabilized. And I'm going forward month after month, you will see improvement in terms of the [indiscernible] However, there are markets where we have to closely watch especially African markets, the recovery we have to grossly watch.
But we should understand that any of these markets taxis mode and the 2-wheeler taxis are very, very critical for their livelihood. I think that the local markets and the government also will support that. And if you look at even the 3-wheeler, again, taxi segment is biggest one.
Overall, I'm of the view that we are seeing it in the past also. I think we have to be a little bit more cautious. We have to be looking at it onto and take the plan as we go.
[Operator Instructions] The next question is from the line of Kapil Singh from Nomura.
Firstly, I wanted to understand the margin outlook if you can comment both on pricing movement in Q4 and beyond that? And also on the cost movement that you saw in Q4? And what do you expect beyond that?
We took up prices just a real I'll tell you, the Q4 price increases was almost 5%. Equally, we also got the commodity costs a little bit soft. That has helped put about 90 bps. However, all of you know that the IV international market, we have to also moderate our dispatches.
And normally, IB turnover will be around INR 1,800 crores to INR 1,900 crores. This quarter, it was only INR 1,300 crores, INR that range. Primarily because we started looking at the retail customer retail industry and then we started moderating.
Overall, it's not a healthy quarter, plus all of you know that we have really a significant proportion of EV here. Overall, we have [indiscernible] cost and price increases well. I think there are opportunities. We look at very closely the commodity costs this year also. And as we look at the radiating and also the new products with features -- we will reduce the prices. Constantly, we will review the prices.
Sir has there been any price increase for the implementation of OBD2 now? And any cost increases.
Some prices we took in April. It is March, it is not the first week of April. We took about 1% kind of a price increase for this quarter. because many of the OBD2 change happened in March. Along with that, we took up the prices. And this month also, we have taken the marginal pricing in certain models around 0.8% to 1% kind of.
And sir, what is the cost outlook now? Are you seeing any increase in commodity cost or they are stable?
My opinion, I think commodity costs will be around the same level or slightly softer because there is no logic of commodity prices are going up, but we have to constantly look at it because if every industry has got their own challenges. There are some business in certain areas, commodity growth increases.
We have to constantly look at it and see, but I don't think there will be sharp in [indiscernible]
There's a difference in profit we've been stand-alone [indiscernible] Talk us to what really is happening there because the gap looks like about INR 75 crores this quarter and increased slightly from last quarter. Just what is the outlook here? And also on CapEx and investments, the last 2 years has been around INR 2,000 crores.
Is it a steady run rate to assume for next 1 or 2 years as done?
See, 2 things. One, whether the subsidiaries like North and our EMG or the I think these are the future investments, maybe CMG and go if the situation in Europe. You can't predict the geopolitical challenges that Europe has seen that as a little bit affected TMG and GAG.
But I'm very confident that these are our future technology. And Northern, we are definitely investing engineering, development and separating capabilities will be leveraging and not on will be a super premium category. I'm really confident that these investments will start yielding very good results going forward.
Your other question was about -- can you repeat the other question?
Including our EV precise, investing in product. Raider or Jupiter 125. Between [indiscernible] will be 2. Investments will be to the tune of about INR 700 crores.
The next question is from the line of Gunjan Prithyani from BOA.
I just had a follow-up on question. The investments in this quarter. Can you just give us -- there's one investment that you've done in previous credit, but it's also in this Singapore, what is this for?
And if I look at the whole of F '23, if you can just give us an idea overall how much have we invested in these subs breakup around that as well?
These are investments in CMG, Ion mobility, Northam, [indiscernible] TBS Digital. These are primarily the investments we have made and I just wanted to only highlight one thing. All of you would have seen previous credit performance and previous PTV performance.
But for the investment, whatever we made, I don't think these companies would have so well, okay? You have seen the overall results of previous [indiscernible] we have posted 11 crores profit, and the book size is already over INR 20,000 crores, then we will grow much, much faster this year going forward.
And you are seeing [indiscernible] is almost $5 million for the last year. These are the investments which are helping us today, but they were invested 5 years, 7 years back, and we have invested in people, in terms of products, in technology and capability.
That is what is giving us a business. And I'm pretty positive that whether it's not of CMG or [indiscernible] definitely, it will all start giving us very good returns going forward. Desikan, do you want to add anything?
I tend to agree with you. All these [indiscernible] all the investment. Unfortunately, the accounting comparison makes us to write-off all these special or incurred on development of technology, investment in technology. And therefore, that should be viewed more as a strategic investments and 100%, it will be rewarded.
And I just want to reiterate to all of you that TVS normally looks at domestic and developing countries. Now with these products, we are already in the developed countries. And we will be entering into many developed countries. TVS will become a global brand with these investments and the new products, whatever we are looking at the EV.
It is going to be a milestone in terms of building TVS brand globally.
TVS Credit, we have invested almost, I think, INR 600 crores this year. I'm just wondering, is this something -- there was always a thought process that we could bring in external investors. I mean do we -- are we still pursuing it?
Or we are okay to internally keep funding this from the standalone balance sheet?
As informed earlier, we are exploring various options. And therefore, it's an appropriate time, we will differently come back.
Just moving to the other question on EVs. Thanks for clarifying all the issues around same. If you can just give color on what is happening to the subsidies, which have been accrued? Are we starting to get that? Or if is that a really big amount to get worried about?
And a broader-level question that when sim starts to run down going by the current time line of F '24, we still don't have much progress on the PLI. How do we really bridge the gap in terms of pricing? If you can just talk a little bit around how should we be thinking about the whole EV scale-up aspiration after same runs down -- and at the same time, we also need to defend this double-digit EBITDA margin, what you all have been guiding for?
We are fully committed in building the electric vehicle export system in India and always willing to enter all kinds of cooperation and assistance to the government of India. And as you know, we are supplied with all rules and we are confident that the claims will be secured by government at the earliest.
In terms of change, see definitely any new technology we have seen government interventions will be there to build the technology. And we have seen that not only today, even in the past. Okay.
When exports in India was very, very limited. We have a lot of incentives on exports. I can recollect 14%, 15%. But today, there are many companies like [indiscernible] who are doing extremely in the international market, especially building TVS bank 2-wheelers globally.
And that is definitely a positive thing. Over a period of time, these incentives have come down, okay? All of you know that. I also view that these incentives will help customers to look at this technology. And over a period of time, government also actively involved with OEMs and understand how to look at it, how to take it forward.
From the OEM side, what we need to build is scale and customer satisfaction. For that, we need to invest, that is why we are planning a very clear strategy on having a series of products, not only IQ, IQ variants to many other products which are relevant to variant customer segments.
And then increase the scale. That is number one. Number two, [indiscernible] we can always look at reducing cost because supply chain will have benefit, okay? And I'm pretty confident that going forward, we will have many variants. Whatever we do on the 2-wheeler in space, we will do it in that space.
And please understand this is a great opportunity for somebody like TVS to really get into several markets, okay? Today, we are not able to [indiscernible] very good demand from many of our international distributors for IQ. But I want to satisfy the demand in the Indian market.
But by the end of this year, maybe second quarter, we will start third quarter, we will start interest business as well. Overall, I think we have to look at the profitability of this will come in terms of volume, scale, variance, premiumization, export, cost reduction, I think that is the way we have to look at it.
And there will be -- may also seriously look at how to take a same or other benefits over a period of time. I was to you that thanks to government, they are taking the right steps. I think we will definitely demonstrate how this can become a successful business in terms of [indiscernible] delivering very good profits in the future.
When is the electric 3-wheeler launch expected any time lines around that?
I think very cost the company will give you more update, but it is there. In this financial it is there.
The next question is from the line of Amyn Pirani from JPMorgan.
Just going back to the investments bit. On Norton, is there any operational update that you can provide in terms of whether you have launched the product or what is the time line of launching the product? And what is the kind of ramp up that we can assume over the next, say, 1 to 2 years?
That would help us give some context to the investments that you're doing there?
We are investing in the engineering side, development side, supply chain side and the products are getting developed. All of you know when we took over Norton after the acquisition, quite a lot. Only the brand was there. Practical products were not there.
It's like building up from practically the zero base, okay? And the right talent pool we have now -- we have got capabilities in India. There is a lot amount of work which is going on, okay? And I'm pretty confident that you will see products coming out of that brand in the [indiscernible] category.
I don't want to give any guideline on the time line at this point of time, but it will be a tether success story in the history of TVS Motor. I can promise you that.
Related question, I think the question on investments keeps coming back because if I look at the last 2 years, despite a very strong operational performance and record profits, post CapEx and investments, the free cash flow is negative. I think the concern or question that most of us have is that when I look at FY '24 and potentially FY '25, should we expect positive free cash flow?
Or will we remain in this investment phase beyond the EV and IC, which we are doing? I think some color there would help us, sir.
I think the major investment of this has gone into the company, which is more successful which TVS is. And PVC, you have seen the kind of results. Last year was INR 151 crores and this year crores. And you will see disproportionate growth there, number one. Number 2, [indiscernible] we have seen how it has scaled. And CMG and OIAG, these are the investments where please understand -- I told you about CMG and OIAG.
I think last year to this year, there are unprecedented geopolitical challenges in Europe. I think it will improve as we go. And this is a new area of e-cycle. And these cycles are going to be out of the day. When it starts when the market starts changing, whatever difficulties we have seen in the geopolitical situation in the Euro will also change.
I'm pretty confident that we are investing behind the right technology, right area, right products, making the scale better, making the company to take it to many developed markets, which TVS has never done so far. I'm pretty confident that you will see these investments starting yielding very good results and cash flow is becoming much positive.
We are already seeing significant success in almost all ICE categories. And even in EVs, we are now the #2 brand. One category where we are still a bit behind is the 100 to 110 cc motorcycle segment. And that category is not growing also, but still a large category. Is there some plan, say, in the foreseeable future for some product intervention there?
And is there a thought process around that?
We are closely monitoring. I think I agree with you. I think this is a segment where we have our products, okay? And we have a good opportunity there. But please understand, I'm pretty happy that many other areas, we are practically either #2 or coming closer to #1, whether it is the case, whether it is now the Raider or in scooters, okay?
I think this gives us a lot of bandwidth to also focus on the entry-level computer got cycle. I think you will see some response on [indiscernible] I can't disclose what kind of plan of action we have. But definitely, one positive thing is the Raider 125CC both scooters and motorbike doing extremely well forward.
And please understand in the international market, the same taxi segment, [indiscernible]
is doing one of the breast. In the international market, we have crossed already 3 million in [indiscernible] So sometimes you have to be patient okay?
So because sometimes, you have to wait for the opportunity, and we will do that in the compatible segment in India, especially in the entry level. That I promise you.
We have the next question from the line of Pramod Amthe from Incred Capital.
The first question is with regard to the [indiscernible] upgrade. What is the extent of cost increase you are incurred? And what changes you have made in the battery system to comply with it on? And has it been all passed on to the consumer?
I didn't get you. What was the question?
For the EVs, the upgrade for the new standard for [indiscernible] what is the upgrade made in the batteries? And what is the cost increase? And has it been completely passed on?
New standards, we have already implemented. I think you know as for the standard, we have completely we are a proactive company. We have been implementing many of these standards much ahead. We had only one challenge of certain supply chain because there are some modifications required.
And you have seen our product, which is whatever we have produced in the [indiscernible] We have already even into the market. And the pricing and cost, I think this -- we will be closely monitoring and we will look at what kind of -- our strategy is very simple, grow the market, okay?
Then it will get huge benefits in terms of cost, supply chain cost. And we have to always look at pricing very carefully because this is one area where the volume is very, very critical. The growth is very, very critical. But as I told you, we have a positive margin.
The reason I was asking you was considering or number 2, are you getting the pricing power now to pass on at least the incremental cost on the EV upgrades?
One, you look at our variance, our variants are priced higher. And the products that we are going to see launching this year, you will see how we are planning to launch and I may not be able to give you guidance now because we have just one product and a few variants on that.
Being the #2 in the 2-wheeler space, how do you see the supply chain improving, especially with cells? Are you getting more confidence post the PLI that you will be able to procure them in a year's time and hence, be able to localize better as you go forward? Or you still have to rely substantially on imports next 2, 3 years? As a large player in 2 wheelers.
Absolutely, absolutely. Once you have volumes, there are many people who are investing locally, localized the sense you would have seen many companies, and we are partnering with many of them. It's a question of all us. Once the volume starts coming up, I'm pretty confident over a period of time, you will see India becoming self-sufficient in many areas, okay?
I'm pretty confident. So what is most important is volume. Most important is series of products, most important is customer delight and satisfaction. And Indian brands can do very well in the international market. That's what we have learned in the journey in the international market. It's very, very critical that we invest in the product, we invest in right technology. We invest in the people, the supply chain, okay?
And over a period of time, I think it will help for India. That's why I said [indiscernible] will definitely is design and development and complete stability solution.
The next question is from the line of Hitesh from CLSA.
My question is also on EVs. We've recently seen price cuts by competition, especially Bajaj Auto and Hero has also taken. So can you give us some sense if you have taken price cut? And is this more of a pass-on of cost reduction as scale increases?
Or is it just heightened competitive [indiscernible]?
Normally, I don't want to comment about competition. They have a strategy that I appreciate their strategy. As far as we are concerned, I told you we have now transitioned into the new phase of AIS, and you have seen the variance from the company. There is a very clear product launch plan this year.
We'll continue to launch products in various segments. And we will also start international business. So we are pretty confident. Okay. whatever strategy we have used in IC, you will see TVS also looking at [indiscernible]
But have you taken any price cuts or not in the EV segment in IQ?
Exactly answer. I think we have transitioned, and we have put on the products, and we are looking at new products to be put and variants. And these variance will have better feature better depending on the customer segment that you will be able to price a little better. It is an opportunity from the point of view of the customer.
Just on a follow-up on that. Is it right to say that on gross profit, actually, the company would be making money on EV right now given where the ASP or prices of the scooter, right? If I go by the raw material cost, whereas but there could be EBITDA loss because of the marketing and the employee expenses that you have? Is the understanding correct? I'm not asking for a number, but...
I don't want to give any guidance on that. I wanted to talk about investments and any technology when you invest. I have given this kind of an answer even before TVS, when we invested or when we went into Indonesia, I think initially, there were challenges, but we believe we'll be staying with them today to 5 million profit in Indonesia. And it will grow much, much ahead.
Thanks to -- we stayed there, thanks to the products what we put. So I think these are investments. This should not be looked at as cost. Kind of software engineers who we have hired or electronics there, there on our investments for not only for EV, even for [indiscernible] even for future technologies like Flex Fuel.
So in my view, investments are our future. And you have to go through some initial breed of investments and the returns may be lower there, but they are what is going to help you in the next 3 to 5 years.
Sir, I would appreciate if you can give us some sense on the breakeven in the EV business because that will help investors, right? I understand the investment strategy. But in terms of what volumes will you break even some...
We've seen our overall performance with overall volume, we are still better than EBITDA of 10.3% better than last year of 9.4%. And we have done almost 97,000 of EV, so that you can understand.
Sir, most global companies and good quality companies give some guidance on the new vertical line? I understand that you've done well and you're scaling up in the EV segment, but you are becoming a leader now in this space. It would be appreciative if we can...
Continue to do better in EV. We will continue to do better in the overall EBITDA, continue to grow ahead of the industry. That's all I can give you.
The next question is from the line of Aditya Makharia from HDFC Securities.
Sir, just wanted to check in terms of a subsidiary, we were supposed to put the EV business in a subsidiary, where are we in that scenario?
It still continues to be the parent funding. We will keep you posted. So we do have a subsidiary created for this purpose, but not yet taken any call or decision not transferring the related business and that's the EV business. Once taken will keep you posted.
Just to understand, the PLI incentive also requires us to put the EV business into a subsidiary. Is the understanding correct?
PLA has got certain guidelines. I don't think there is any specific guidelines that it has to be a separate subsidiary.
So nothing like that?
Yes.
What is the amount of subsidy that is stuck up with the government so far for us, if you could help us understand that?
The subsidy, like I said, the government is processing that and we are expecting it early as early as possible.
Yes. But could you give us a sense around what is the quantum that is stuck with the comment at the moment.
I'll check that and come back to you.
The next question is from the line of Kapil Singh from Nomura.
Yes, sir, just on the PLI, I wanted to understand when will we start getting the inflow from that? Because is it FY '24? Or will the product get approved in FY '24 and therefore, it will flow from FY '25?
See, PLI, the final discussions are going on. So once we have full clarity, we will let you know. But there is substantial support from the government in this area. Okay.
The government is also working actively with many OEMs, and we will let you know once it is concluded.
Sir, would you use the incentive in PLI to also in pricing the product better for the customer if the same subsidy were to discontinue?
I already told you the subsidies are to support these technologies to the customer, okay? And it is in the interest of the customer and the company. We have first to build scale and volume. Once you have huge volumes and you are present in various segments, that is the time you can also come up with a lot of products, various segments.
We can price it differently. And in the EV, one of the best advantage of IC is international market, especially developed markets, okay? So it's a combination of product range. Pricing on the variance with technologies, international market both developing and developed. So I think most importantly, this gives us a huge benefit. And once the volume starts coming up and all of you know the kind of localization which is happening on the supply chain, I think it is going to definitely help TV businesses and brand India.
So I think we have to wait for a couple of years when the entire ecosystem of supply chain. But for supply chain, they need volume. So that's the reason I always believe in customer satisfaction, customer delayed on the product side, which the OEMs have to take lead.
Second, build the volume significantly build the volume. Then supply chain will start completely supporting. That is the time we can also discuss more and more localization. Okay, and there will be huge leveraging of costs.
Sir, any volume level at which you think we will start to see inflection in this thing?
We have process 25,000 and then we will scale up. That's why I said 23, 24 milestone year. We wanted to -- I already gave you -- I think we have here present only in 235 touch points in 135 cities, and we can further expand in India, very much interested in the international market on our products.
So it's -- most importantly, we have an opportunity to scale up the much higher capacity. And we are not entering into new products and new segments. So I think it's a question of product we have got it right now. We have to get the new products also arrived tale of the capacity supply chain, then we start looking at international cable.
So it's going to be a very, very good year, 23, 24 for DBS. Quarter after quarter, we have seen last year, we have scaled up. You will see the same thing in Q1 of this year, Q2 doing better than Q1, Q3 doing better than Q2, that kind of time line we have put -- more than what I'll update you every quarter.
Just on the exports also, you can comment, you mentioned that the retail sales are much better than wholesale. Any indication you can give like we have been doing about, let's say, 70,000 to 75,000 in the last couple of months. How much would be the retail?
We have been better than that. I always believe in keeping the right stock in the industry. So we have moderated our dispatch depending upon whatever is the retail and you know the industry decline numbers, okay?
We are better than that in terms of retail. So we always moderate. And going forward, at some point of time, you will see the numbers becoming -- the skin number is becoming better and better.
Sir, I understand. Just trying to understand if you are still correcting inventory or inventory correction phase is over?
Most of most of the pace is getting over.
That was our last question for today, sir. I would now like to hand the conference over to the management for the closing comments.
So thank you very much. You have seen 22, 23 highest revenue and highest profit -- and with our product range and customer quality and the plans on new products with attractive quality and technology and features, both in [indiscernible]
and our plans to go for both premium products and focus on the international market, both developing and developed and our initiative with the scale continue cost production.
We are pretty confident that we will outperform the industry, both in domestic and international markets and continue to improve our EBITDA. Thank you. Thank you very much.
On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.