FY26 closes record-strong (rev ₹46,830cr +15%, EBITDA 14.7%).

Trying to understand growth between urban, rural, more color on entry segment, and how to think about volatility from one month to another given October-November were great but December saw tapering off.

GST has given the market a big unlock with both urban and rural growing strongly. Urban has more things going their way with income tax benefits. Rural saw peak response in festives, far better than expected. Wedding season unfolding from February and early festives from March means quarter 4 should also be strong. The volatility in Q3 was because festives were a little early compared to last year. January was high double-digit growth for the industry and us, and momentum is expected to continue.

Any thoughts on how to think about FY27 growth outlook?

Industry has been growing double digit since October and expected to continue into next year. However, in second half of next year, due to high base, we see some moderation in growth. Overall, the industry for the next financial year is likely to grow in high single digits.

On commodity side, what was the commodity hit reflected in Q3, how much more to go in Q4, and have you taken any pricing action or mitigation?

We are seeing inflationary trends in aluminum, precious metals and forex. Commodity impact in previous quarter was approximately 40 to 50 basis points. We are seeing similar trends continuing in current quarter. We've already taken 1 round of price increase in January. We are monitoring the situation closely and will be taking adequate price increase if required during the quarter.

How much was the price hike?

The price hike we've taken in January was INR300 per vehicle from 1st of January.

On channel stock, where are we right now and where would you look to take it heading into the marriage season?

We've seen very strong retail momentum this year and have significantly reduced our channel inventory this year. We are very judicious in terms of planning. As we move forward into quarter 4 and next year quarter 1, which we expect to be extremely strong, we will adequately be planning the channel inventory.

On Destini, after this initial wave of euphoria, what are you planning to do to make sure you sustain and grow these numbers?

It's a great product with strong consumer response across markets. We launched another variant Destini 110 with 12-inch wheels and large floor board. Strong response from West and South markets where we have over-indexed. We expect this momentum to continue, aided by overall scooter industry traction, and we'll continue to outpace industry growth.

On exports, what geographies are emerging as important, any specific regions or countries doing well, and how to think about this over the next 1-2 years?

We are the market leader in Bangladesh and continue to gain share despite geopolitical issues. We have done very well in Colombia with massive growth and 700 basis points still available between us and #1. Recently introduced products in Europe, opened new Latin American countries, new dealerships in West and North Africa, and started presence in Philippines. Global markets remain a big focus area with significant headroom for growth.

On the interplay of commodity and pricing, given GST has been a key driver of growth, would price increases to offset commodity be a dampener? And does operating leverage take care of commodity challenges?

GST rate reduction took prices back to 3 years back, a significant 10% price reduction. Commodity headwinds are largely from aluminum, precious metals and currency. We've taken price increase in January. We continue to look at LEAP cost saving programs, mix improvement, and operating leverage as big drivers in mitigating commodity impact. Market conditions are strong and I don't see big concern in taking judicious price increase.

On Xtreme 125R, dealers say product is popular but supplies may be inadequate. How to think about this directionally over the next few quarters?

Performance has been consistent since launch. We introduced the dual channel ABS recently with amazing response. As we scale into Q4, you would see this doing far better. Already contribution has gone up to almost one-third of total Xtreme portfolio. This is a sporting sub-segment that developed post-COVID with customers downgrading from 150 to 125cc, and we want to keep adding features like ride modes and ABS.

On Colombia subsidiary, how is the business progressing after impairment last year and any investment needed?

This year has been one of the best years for the Colombia business. Volumes have grown more than 200%. Market share improved from 5% to 9%. The business has become profitable with PAT of USD 5 million in first 9 months. Overall the health of the business has improved significantly.

On Hero FinCorp, losses have been increasing over last 3 quarters - is that becoming a bottleneck for financing availability for Hero MotoCorp given share of financing has been trending down?

I don't see that as a concern. Financing contribution from Hero Finance is almost 25% this quarter, improved quarter-on-quarter. HFCL has plans to increase secured lending which moved from 61% to 68% with plan to take it to mid-70s next year. There are plans to bring down credit cost and improve collection efficiency. We expect them to get into green next year.

Once Hero FinCorp gets listed, will there be any change in relationship of how you access financing?

I don't see any change in any of the criteria. I only see it becoming more strengthening. Their share of business with HMCL should only grow post listing.

On strategy going forward, are you looking to gain market share across segments or specific segments? From margin perspective, should margins rise further from current levels?

We are very clear on where the headroom for growth is. Other than premium, we have gained significant share in Q3 across entry, scooters, EV, parts and exports. Categories where we are underrepresented like scooters, EV, exports are higher growth and our focus. Global markets growing at 50% with big headroom. Parts business is highly profit accretive with biggest park size in market. Supply chain and capacities being bolstered as enabler.

Just your thoughts on the margins also?

With growth, we will get overhead dilution and see expansion there. Net impact of commodity and FX versus pricing is a fraction of the GST benefit. Price increases to mitigate cost increases net of savings is not material to impact demand. So we will hold the margin.

On the breakdown in growth outlook, where should we expect higher growth between segments? Why has scooter growth been higher than motorcycle growth?

Macro trends like urbanization, congested cities, more women in workforce, gig economy growing all favor scooter expansion. Scooters may have higher growth rate going forward versus motorcycles. Hence our focus to grow much faster and be a bigger player in this category. Vivek added that we are seeing broad-based growth across all segments with some growing faster. Growth across entry, deluxe, EV, premium with rural coming back and scooters/EV/premium expected to grow faster.

We're hearing that Hero is looking at some kind of rejig or restructuring of its vendor/supplier base. Anything to highlight here?

There is nothing specific. We have one of the best supplier relationships and as a process we want to increasingly work closer with them through co-development, early involvement in development and capacity planning. As we see rapid growth in EV, exports, scooters, there is need for capacity augmentation at supplier end and we are working closely with them. No specific rumbling or issue.

Could you enumerate the EV revenue and the losses in the EV business?

This quarter our EBITDA investment was INR208 crores for the quarter. The revenue for Q3 was INR450 crores. We can quickly share details offline.

Was there any impact of increase in tariff rate in Mexico currently and going forward on exports?

There is no impact because we have localization. Being a relatively late entrant on export, we are not so globally integrated that we just ship full vehicle from one place. Our approach has been more local-for-local localization partnerships. We have that in place in Mexico so we did not see an impact.

On FY27, in which customer segments do you expect better traction? Are you seeing more demand on first-time buyer side? Trends on rural, urban? Any risks for next year?

From an FY27 perspective, all segments responding well. Good unlock in demand over last quarter continues this quarter. First half of year will be a little higher. Scooters doing well. Q1 is heavy in marriages and up to festives, so motorcycles should also do very well. Rural segment doing well with good harvest. Winter crop should start manifesting from Q1 onwards.

How are you seeing traction from first-time buyers - has there been an increase this year?

From first-time buyer perspective, in January we have seen these customers inching from average of close to around 75% to close to around 80-odd percent. With GST unlock, we have seen a lot of first-time buyers coming into the category. This was one of the reasons for the phenomenal festive response, and we expect this to continue into Q4 and Q1.

When do you see new capacity or capacity expansion coming up?

We are looking at FY27 as the year in which we would be able to see a marked increase on this front.