Is it broadly fair to assume that for FY '27, exports will actually do much better than domestic on volume growth?
Most of the analysts and media people have failed to predict what is going to happen in the West Bengal elections and all that. This is a very difficult situation right now to do some crystal ball gazing. But I can say one thing that export is on a very strong wicket because we are capturing a disproportionate share of the growth because of our retail presence. Mexico is doing very well. And I'm hoping if the U.S.-Mexico FTA in June, July gets signed, I think we'll see a superb growth in Mexico. With our plant over there, which is only 3% duty and with our 300-odd stores over there, which is double that of any other competitor, including Japanese, I think we're in a strong position. So therefore, I think exports will continue to do well. In quarter 1, we definitely see it pushing the needle hopefully beyond 2,00,000 units per month also. Whether exports will do better than domestic or not, I cannot say that.
Can you provide some thoughts on the upcoming models? Can we expect the 125cc affordable motorcycle this year?
That's a good try, Raghunandhan, but I'm elated by the appointment, but not elated enough to spilling the beans. But now that you have said that I'll tell you that there's going to be a stream of new products, and we are trying to advance their introduction so that we have got some good new refreshed portfolio in time for the season. We'll have a new range in both the 125cc and the 150cc plus range. There will be hopefully, I think we will see these new introductions hitting the market as early as July in the Pulsar brand itself.
In the Pulsar brand, the new 125cc will come out? And what about the other one, is the 125cc affordable one, you are not yet disclosing the date for that?
Yes. That is very much in the cards but have a look at these new ones when they come. They're really looking stunning. And we hope to change the game with this in both the 150cc and the 125cc segment range. And in NS ranges, there have been introductions of the NS 400 upgrades and some variants, which have been hugely accepted in even markets where we don't enjoy a good competitive ratio like UP and all. So yes, both these ranges will make their appearance in July.
Around the 3.5% to 4% RM impact and the mitigating factors being price hikes and currency, there's still a reasonable gap to cover. Any thoughts on our appetite to take more price hikes? Is there a range of margin we sort of anchor around to manage growth versus profitability?
Of course, once we get to full year basis and when I mean full year, essentially, once we get to steady state, obviously, the intention will be to continue to hold margins and drive margins the way we have. But I think at this point of time, I must tell you that when I tell you 3.5% to 4% of turnover as commodity inflation today, that's our view here and now. But we have had 3 refreshes in the last 4 weeks on this front itself. We've taken pricing to cover 40% of the inflation from 1st of April. We are taking a very, very hard look at all costs that we are spending in this quarter. And then, of course, there is the currency as well because the currency has moved from if you see last quarter, we averaged out at close to $91 that is $90.6. The currency is hovering between $94 - $95 as it were. The intention will be to try and see how do we bridge pretty much as much of the material inflation through a mix of the pricing that we have taken. I think next round of pricing will probably be the last of the recourses that we will take.
Have you seen some impact of the price hike and in which segment? And this 7% to 9% growth is only for motorcycles. What do you expect for scooters in that case? And are price hikes happening in exports — is the market doing well or is Bajaj Auto gaining share across the board?
There has been a decline in the motorcycle industry's growth between quarter 4 and April. And there is, of course, 1st of April onwards, price hike being taken in different measures by almost all companies. We had also taken a price hike on 1st of April. What this means is that depending on the product group, the benefit which the GST rate cut had given to the customer, almost 30% to 40% of that could get rolled back. So obviously, it will have some impact on the demand. Secondly, there is already some adverse sentiment, which is set in. People have become cautious. The whole LPG shortage has brought this crisis into the homes of each customer. The upper half is maintaining very strong growth. In the 3-wheeler segment, actually, the ICE segment has come down, but the electric segment has seen very, very fast growth. Internationally, demand has remained very healthy, particularly in Latam. Nigeria has finally come to even-stevens and we hold a 50% market share there through almost 800 retail level stores.
Can you remind us how are we placed on the currency hedging? Will we be able to realize the full tailwinds of the currency, which may help offset the balance impact of the commodities for the next quarter?
Yes, Kapil. Short answer to that, that we're not hedged, and therefore, we are realizing at market.
On Chetak, we've been around this 30,000 run-rate for a few months now. What steps are we taking to take it to the next level? Could you talk about capacity, product action or any other plans to take it up from here?
Chetak, we have not been able to fulfil the demand, which has been there for one reason or the other. Sometimes we also get exasperated that everything is not working in every department and every month. And therefore, we have not been able to reach our potential, which I think is much higher in terms of share. But things did come together to some extent towards the end of the quarter 4. And we have now a capacity of 50,000 units per month. I think we will max that. We are taking steps. There is some serious work going on to see how and where we should expand capacity in a quantum manner. We have now reached a position where we think a substantive increase in capacity in Chetak is needed.
On EV revenue of INR8,000 crores, EBITDA margin is in double digits, and this is despite being EBITDA neutral for 2-wheeler. And also, can you share the PLI incentive for the year?
I think the first piece is I had mentioned, Raghu, that we've got to a stage of double-digit EBITDA margin, which has been true for the last 2 quarters on our electric business. But remember, when I talk about this, it's always electric 2-wheelers plus 3-wheelers put together, in which Chetak is EBITDA neutral. So, in many ways, the rising proportion of electric 3-wheelers is leading to that. PLI claim for the year, we're still aggregating it, but it is in the whereabouts of about INR900 crores.
On exports, when you said that Nigeria is almost there at last year's level, can you give us a little bit more color on the monthly run rate of 25,000 there versus the peak of 50,000? And Brazil, a bit more color, where are we on market share in Brazil?
Nigeria, we are now clocking a steady 35,000 plus last 2-3 months and a 5,000 plus in 3-wheelers. So that's very, very healthy. But I'm just sort of keeping a watch on Nigeria because Nigeria fuel prices have increased substantially almost by 30%. For the moment, we are seeing very good traction in Nigeria, and we are in readiness for the season. Brazil has done quite well. At this point of time, we are so small in Brazil. Brazil is a very big opportunity, and it's a very, very large country. And we had taken a top-down approach. Our approach has been to keep the brand forward rather than volume forward. We also get limited by the manufacturing capacities, which has to go through step changes. Right now, our capacity is closer to 60,000, let's say, it's 50,000 usable. We are seeing in the next 12 months hoping to hit that kind of thing.
Just clarifying no container availability issues because that's something that's been flagged in the market as well?
Yes, that's a big nightmare, but this is where years of experience of the logistics team and the excellent work between the plant and the logistics team is really paying out. We export one container every 10 minutes. That's the scale of our operations, and we have to catch 4 ships every day. And with all the chaos, which is going all around, a lot of out-of-the-box thinking has been done to find alternate routes, ensure container supply. And I can tell you that despite all these disruptions, just on the basis of logistics in export, we have not lost any sale. Of course, we have lost sale in the Middle East because there's nothing going over there to the Gulf country, but that's 5,000 – 6,000 units per month.
On your comment on moderation in motorcycle growth — when you say 7% to 9%, are you talking about the next few months, or is it for the full year?
I would say, in the next few months. At this point of time, I won't wager a full year exit. And you're very right, there will be a base effect, which will start kicking in. Obviously, we had a lower base in the first half last year and the second half sales. So, there will be a base effect to contend with in the second half. So, it really a lot depends on how inflation and pricing impact how much of the GST benefits will start to reverse. A lot will depend on that.
On 3-wheelers — 3-wheeler growth has surprised most of us. Is there anything structural happening there? How should we think about the size of the category over the next few years?
Well, please go back and read my comments for the last 2 – 3 quarters. Some of you have asked that where do you see growth coming for Bajaj Auto. And I've been saying, even though it's a humble vehicle, that we are sitting on the threshold of very large growth in 3-wheelers. The industry growth in 3-wheelers in quarter 4 total was 25% plus. In April, it was 25% plus again. But consolidated, this is being driven by the exploding requirements in the country, particularly in non-metro locations in smaller towns. This is being driven by the huge spread of the road network. This is another area where we are now getting capacity limited, and we are working to expand the capacity, particularly the larger 3-wheelers. So, they will go from the railway station or bus station to another point in a shared manner. And there, the larger format 3-wheelers work. So, I think this will continue. It's not stoppable.
Book-keeping question on the revenue line — other operating income has seen a sharp jump in the last 2 quarters. Is there anything to call out there? Is it mainly related to export-related incentives?
That line, I mean, typically is driven by 3 pieces by the scale-up of electric and therefore, resultant PLI. You may recall I had mentioned this the last quarter as well towards it, you start to move towards the higher slabs. So that's the first one. The second is obviously with scale-up of exports, there is clearly export incentives which come in which get reported on to that line. And the third is, of course, a fairly robust growth that we are seeing on our BGO or oils business and the royalty that we earn on that. These are really the 3 reasons why that line inflates. There's nothing else which is of material significance that sits in those numbers.
Clarification on the 400 basis points potential impact as a percentage of sales — is this sort of from 1st Jan onwards, 1st April onwards? Just want to understand what the time frame is for this observation? And the quantum of price hikes, that's 40% of that 400 bps?
I think when I mentioned that commodity cost impact of about 3.5% to 4% of revenue, I'm fundamentally talking quarter 1 over quarter 4. Yes. So effective April onwards. 40% of that impact has been taken so far starting April.
On the LPG/manpower/shipping impacting demand servicing — is that something that we were able to manage through and then potentially grow beyond that 7% to 9% that you guided for the broader market?
We are definitely looking at I mean, if the industry grows at 7% to 9%, which is what our current estimate is. And this estimate is really based on the April outcome. And like I said, within that, the segments we operate in are growing at almost 1.5x twice that 7% to 9%. And there, we are outperforming the industry for the last 5-6 months in the 150cc plus segment. So, in that way, it's good news for us. The April performance, I would say, was impaired by 10% to 15%, largely because of the availability of vehicles because the vendor system did face a lot of and continues to face a lot of difficulty because of manpower migration and fuel availability and stuff like that. So hopefully, this will resolve itself over a period of time.
On the buyback — what are the milestones that need to be crossed? And what is the timeframe that you have in mind to execute the buyback?
So today is when we've announced the quantum I mentioned, the underlying spirit was to try and ensure that we pay out 100% of last year's profit of INR9,825 crores. So, the buyback, therefore, translates to INR5,633. We get started straight away for a buyback of this order of magnitude, we need to go to seek shareholder approval because you might be aware that any buyback, which is in excess of 10% of free reserves needs to go to the shareholders. That threshold for us would have been nearly INR3,500 crores. So given that the buyback is now INR5,600 crores, we will get started straight away with the process of seeking shareholder approval. And then this is essentially a process which will run right now, starting now and likely culminate by the end of July with the SEBI filing. Looking at the fresh timelines, I would expect that payouts would essentially happen sometime in the second week of July likely. That gets paid out second week of July and then, of course, dividend gets paid out after the AGM, which is also in July.