On the 2 launches you referred to, are these new models or variants and some timelines around it - what are we trying to plug with those 2 launches?
Both launches are planned in this quarter. They are new value propositions for the customers with exciting interventions in the technology space, and we expect new customers to be driven into our showrooms based on these new launches.
On Hero FinCorp - what is ailing that business in terms of profitability and asset quality, and when do you see those things peaking and reversing?
On HFCL, the loan book grew by 4% versus last year. Performance got impacted during the quarter by high credit cost and NPA, a trend across the industry. With interest rates falling and improvement in credit quality and collection efficiency, we are confident that going forward HFCL will go back to profitable growth.
On Battery-as-a-Service offered with VIDA V2/VX2, can you give some more details on technical parts and how you track profitability for the BaaS service?
At a fundamental level, Battery-as-a-Service addresses key barriers for people to enter the electric category. It's a highly differentiated industry-leading offering - a pay per kilometer battery subscription model that allows customers to look at total cost of ownership in a different way and finance the 2 elements separately, with offerings based on actual scooter usage.
I believe there would be some sort of a tracking element that you would use to track it, right?
Absolutely. Very early stage - VX2 was launched on the 1st of July and we have started rolling this out. Early green shoots; consumers are looking at various aspects, we have multiple plans in offering, and we've been able to get a tremendous amount of interest into the segment.
On VIDA - we've seen a sharp ramp-up in volumes; is this mainly driven by VX2 and what percentage of sales are coming from VX2; is the product gaining share from ICE scooters or from bike customers?
We have a very healthy mix - V2 is positioned more in the sports range and VX2 has come in to appeal to family and other buyers, expanding addressability of the portfolio. With the differentiated Battery-as-a-Service offering and introductory pricing, we've seen new consumers walking in with curiosity. Early days but a lot of green shoots, with healthy offtake across both categories.
On the 125cc segment - Xtreme had a solid start last year with positive feedback, but volumes have started slipping meaningfully; what is holding us back in ramping up Xtreme, in terms of marketing investments or higher dispatches, and what's the plan going forward?
Xtreme 125 continues to be an extremely loved product. The sporty 125cc segment has seen headwinds this quarter, hovering around 43-odd percent of the entire 125cc, and almost all players faced those headwinds. Xtreme continues to gain market share within sporty 125cc; we have introduced a single seat variant with great acceptance, refreshed colors, and more exciting interventions are planned in Q2 - we'll continue to gain share but need to speed up a bit.
On the industry - last year base impact is big on festive, but despite a bumper marriage season Vahan retails have collapsed in July and you've been underperforming; what gives confidence in 6-7% expectation, and any color on sustained outperformance of premium even during marriage season?
The last 4 months show two distinct patterns - April and May had peak marriages with rural outpacing urban, while June and July had early monsoons disrupting demand, but demand doesn't go away and should come back strongly in festive given marriages in November/early December. We're making interventions with new products including HF Pro bringing aspiration, 125cc launches, scooter launches and Destini taking scooter share beyond 6%. On premium, we have a differentiated strategy selling from Premia outlets with close to 125-odd outlets now and increasing throughput per store.
In the 6% YoY increase in ASP that we've seen, what is the price hike impact?
The price increase what we've taken in the last 4 quarters is around - we'll share the details separately with you. Umang will take it offline.
On our 440cc bike segment - annual report indicates Premia showrooms scaled up to 80 stores, but we haven't seen much volume scale up for X440 and Mavrick; can you shed light on this?
Our Premia expansion is rapid, with close to 124-125 Premia outlets now covering almost 47% to 48% of the entire upper premium industry, including the 440cc platform. We have Harley X440 and Mavrick 440 - exciting products with a lot of customer love. We are expanding the Harley lineup with new additions and will continue to sell Mavrick from Premia outlets in select markets.
On the industry, what have you seen on the ground in rural and urban and why the softness in the month of June and again July; and on financing penetration that came back to 65% in July, what are we seeing on the financing side?
For the last 4 months, two distinct patterns emerged: when the year started rural was outpacing urban growth, and for the last couple of months urban is growing a little stronger; early arrival of monsoon disrupted the last couple of months but augurs well for festive. From a financing standpoint, Q1 generally has lower finance penetration driven by marriage buying with cash purchases; as Q2 and urban markets open up, finance penetration goes up, a phenomenon observed year-on-year and expected to strengthen into festive.
On financing, is there cautiousness or change in the lenders given more stringent lending norms earlier, or is it more just seasonality?
We are not seeing much change in the lending trends or norms. In Quarter 1 the penetration actually comes down, largely driven by seasonality; in July penetration moved up to 65%, almost in line with last year. It was more of seasonality which drove lower penetration in last quarter.
On the HF Deluxe Pro - given affordability challenge in that category and a higher price for the new product, what is the thought process - are people waiting for a significantly better product even if more expensive, or are they looking for a better price?
Fundamentally there are 2 levels of challenges in the entry segment: affordability (encompassing total cost of ownership and mileage) and aspiration (since this is the first bike). HF Deluxe continues to remain strong, while HF Deluxe Pro adds improved mileage, graphics, digital meter, LED head lights, and aspiration. We address both affordability and aspiration with a more robust portfolio and are seeing some good initial responses.
Is there a risk that HF Deluxe Pro starts moving into entry-level Splendor price points, or are those brands so distinct that nobody really moves between the two?
There still continues to be substantial difference between what Splendor offers and what HF offers; these 2 are very strong brands with their own customer base. Entry-level mobility customers - HF will continue to excite them, while Splendor continues to enjoy a robust and loyal fan following that grows with more variants.
On margins - despite operating deleverage, margins have been maintained; what cost areas did you control, and is it sustainable since other expenses came down sharply?
We are holding on to EBITDA margins at 14.4% as normal course of business. Gross margin improved 100 bps YoY driven by mix and price increase, fully offset by adverse operating leverage. Operating expenses are almost in line with last year, slightly lower in absolute terms, due to ongoing cost management; the gross margin gain was impacted by adverse operating margin from lower revenue.
As volumes improve in the coming quarters, partly festive and partly because of the April production cut, should we expect costs will increase and we should think of 14%, 14.5% as the range?
That's right. We've given the guidance on the margin that the margins will operate between 14% and 16%. In the short term, you are right, it will operate on the lower band of this range.
Last quarter you said industry growth would be 6% to 7%; how do we stand on that, and inventory in June quarter inched up to 6-7 weeks - what kind of growth going into festival are you building?
Full year growth forecast for the industry was around 6% to 7%; in Q1 retail industry grew at around 3%, 3.5%. It dampened in the last couple of months but there's postponement that should largely come back in festive, taking growth back to 6 to 7 percent. On inventory, we are operating at close to around 7-odd weeks and will build inventory for the festive.
Can you just clarify what's the loan book now for HFCL?
It is Rs. 54,735 crores.
On the 125cc strategy - how do you position the brands in that specific 125cc strategy, and could you throw light on upcoming and existing portfolio strategy?
There are 3 vectors: performance where Xtreme is positioned, style where Glamour is positioned, and efficiency and mileage where Super Splendor is positioned. They are 3 very distinct audiences, each with a strong value proposition. We are augmenting the portfolio further in Q2 making us stronger in each of these 3 vectors, which will help us gain significant further improvement in market share in 125cc.
On ASPs excluding spare parts revenues, on a quarter-on-quarter basis it's not changed much despite OBD II price hikes - is this a mix impact or have there been some pricing changes?
Largely quarter-on-quarter the ASP is down by Rs. 1,900, mostly because of mix impact from PAM business. On the OBD II price increase, dispatches started in the previous quarter, so the price increase got spread between quarter 4 and quarter 1; the full impact of that price increase was not there in the last quarter - it was shared between Q4 and Q1.
On commodities, what is the outlook for Q2 and has the pricing fully passed on the cost pressure?
This quarter our commodity prices went up by 0.5%. Looking forward, we believe it will be range bound, and with our LEAP program, the cost saving program we have, we are confident of neutralizing the impact.
Could you elaborate a bit more on the Battery-as-a-Service economics for the VIDA V2 / VX2 subscription plan?
We are offering Battery-as-a-Service on the newly launched VX2 with 2 options - VX2 Go and VX2 Plus. On VX2 Go we have 2 plans of 2 years and 3 years, and on VX2 Plus we are offering 2, 3 and 5 years. We are building the usage pattern of consumers, and depending on usage you could select a package that caters to you.
How is the ICE scooter portfolio doing and any plans to strengthen this portfolio further, including ICE and EV?
From an ICE scooter perspective, as we ramp up supplies we are seeing great traction. Last couple of months our overall scooter market share has been north of 6%. With Destini 125, Xoom 125 launched and Xoom 160 impending, we cover all white spaces in the scooter industry. We're confident we'll continue to move northwards in ICE scooter market share.
Can you update further on our partnership with Harley and any plans to launch new models there?
Our partnership with H-D continues to be strong and we are developing products with them. One will be launched very soon sometime in quarter 2. Going forward there are a couple of exciting products which will come in Year'26 - many things are in the pipeline and the relationship goes from strength to strength.
My question was on volume ramp-up - we haven't seen that kind of ramp-up in the last 2-3 quarters for this segment; are we doing some refreshers or anything for this segment?
There is a new product from the H-D 440 portfolio which you'll see in quarter 2 launch. Going forward also there will be exciting products which will come through from the H-D portfolio.
EV portfolio scale-up is good with 10,000+ retail in July; how are we placed given the rare earth conundrum and how are we addressing it; and on the entry-level motorcycle slowing down, what mitigation steps are we taking?
Rare earth is an industry-wide phenomenon and a challenge. Key components like magnet availability in EV motor and ICE engine speed sensors, wheel speed sensors, bank angle sensors are all required commonly. We are covered for quarter 2 FY '26 for both ICE and EV vehicles, and continue to work on alternatives to circumvent the problem.
On the entry-level motorcycle slowing down, how are we as the market leaders looking at this problem and what mitigation steps are we taking?
Two fundamental problems to address are affordability and aspiration. We've seen significant market share improvements in the entry category, 600 basis points in the previous quarter, 800 basis points year-on-year this quarter, operating close to 67% market share in entry. We continue to drive innovations in finance, leverage our large park of own customers for replacement, and brought HF Deluxe Pro with improved mileage and tech features along with an emotional campaign driving customers to showrooms.
On the network - how many sales touch points and service touch points do you have, and on the VIDA portfolio including VX2, what is the kind of channel network we're operating?
Overall we operate with more than 6,000 sales and service touch points and continue to expand in critical areas. On VIDA, we are focusing on expanding in select network and are now present in more than 400 cities with a network of more than 600 touch points for consumers. VIDA is offered from Hero as well as Premia showrooms, and we are looking to expand as we ramp up.
As a clarification on Xtreme 125 - is that now available across the 6,000 touch points or is that also restricted to Hero 2.0 and Premia only?
Almost all our outlets now are 2.0 from a dealership standpoint - the network touch points close to 5,000-odd are being upgraded rapidly. Xtreme 125 is available everywhere; it's not restricted to select outlets only.
Over the past 3 quarters, exports have significantly outgrown domestic; over the next 12 to 18 months how do you see the export market opportunity shaping up and any targets there?
We are now making products specifically suiting global markets with focus on 10 to 12 markets. Last year we grew by about 40% plus, and this year also we want to grow by over 40%. Going forward we would like to have 10% of our revenue and volumes coming through from the global business - we are quite aggressive on the global business.
How do you see the ABS regulation for the less than 125cc market - what kind of price hike could be the impact, and what options are you working with the government to ensure not major impact on the industry?
MoRTH issued a draft notification on 23rd June making ABS mandatory for ICE vehicles greater than 50cc and EV greater than 4 kilowatt effective 1st January '26. The requirement will grow up to 5x current capacity. We are committed to rider safety and best-in-class engineering features; this is going to be expensive but volume gain will reduce material cost. We are in talks with the government and SIAM on alternate options and a practical implementation timeline.
On the entry-level issues in terms of affordability plus aspirational part - is there a permanent dent in the revival of that market or how is your assessment, given the segment shifting to higher end?
The segment has been under stress for a while, but at a granular level there has been postponement of purchases for several reasons - the average holding time of bikes in these categories has gone up significantly in the last 4 years and is coming back. In quarter 1, first-time buyers jumped to almost 74%, which normally hovers around 71%. As we keep innovating in affordability and aspiration, we will continue to drive new customers and nudge older ones to faster replacement cycles.