Lastly, your thoughts on hybrid? How do you see the potential? Can we expect more launches from your end?
See, we are very happy that the sales of hybrid and the penetration thereof have gone up in this financial year and some geographies are doing better than others for obvious reasons. And it's an excellent technology. The customer response is very good, and we have also, as part of our CSR, introduced high voltage courses in ITIs, etc. So that the serviceability of such vehicles remains high, and customers always have a reason to feel happy. And many more states are responding positively. So, I think it's a matter of chance from all three sides - from customers, from policymakers, from industry. We hope to see a positive push from all three stakeholders for this excellent technology.
My question is regarding the profitability because volumes have hit an all-time high for the quarter but our EBITDA and EBIT per vehicle have kind of hit a seven quarter low or almost a 2-year low. So how should one look at profitability on a per vehicle basis? I understand the percentages will get impacted because of the new plant, but if you can just help us understand how should one look at the margins in the near to medium term when there is seasonality, weaker demand on a sequential basis? How are you looking at profitability in terms of absolute EBITDA per vehicle or EBIT per vehicle, if you can share your thoughts on that?
See Pramod, it's always very difficult to predict margins. It's the resultant of many-many factors. The volume is easier to predict, margins depend on several factors. But what I can share with you is, Maruti Suzuki has far many more levers than any other car manufacturer in the country to handle any kind of headwinds or any kind of impact on margins. So, if you compare it with other companies, in the other companies' best of times and Maruti's lowest of times, we are probably doing better than others. So, we have to keep that in mind. One phenomenon that we have to be conscious of is that the overall demand is not growing. , as in the press conference also our Chairman mentioned that 88% of the country is not participating in the car growth story that's because entry level cars are just not growing, so, we have to be conscious of that fact and sometime India will have to take a call on how to address this if manufacturing has to grow, and auto is a large part of manufacturing sector. So, this has to be taken care of. One qualifier I would like to put, one of the levers that I talked about, was exports and we have been talking about exports for a long time now. Fortunately, when domestic growth is in very low levels, exports have cushioned the decline and we hope to grow exports in a healthy manner in the future and also in the medium term. Similarly, we have levers on decarbonization. So, our cost of carbon reduction should be lower than others.
If I look at the opening remarks from the CFO sir and you, there have been some lumpy or seasonal items in the quarter. If you were to all put together, what will be the quantification of that when you look at next quarter? Because next quarter will also have seasonally weaker volumes. So, I am just trying to understand how much of these lumpy items we are able to shed in the next quarter to offset the operating deleverage? So, if you can just help us understand the one-off nature in Q4 in totality.
So, if you see the opening remarks which Rahul did, there was a combination of positive and negative factors. So, I think it will be fair to count both, both the positives as well as the negative factors. In terms of the factors, which contributed downwards, as we articulated, there was a lumpiness on the other expenses and I and Rahul both quantified that, which is about 90 bps. But at the same time there were some positive factors also like the sales promotion was lower by 40 bps. So that also we have to kind of take into account. Also, if you see this particular quarter, the mix was slightly adverse by about 40 bps which we again covered in the opening statement. So, these are the three factors broadly we have to see on both sides and that's how we have to take a calibrated view. It's not just we should see only the negative ones.
And secondly, we talked about a new plant ramp up having some headwind. But is there any cost item which will not repeat next quarter? Anything which is to do with starting the plant? Because we understand staff and all will be more linked to ramp up of plant. But is there anything linked to this which is only specific to the first quarter of a plant starting and won't repeat in this 30 basis point headwinds?
Some part of it obviously, since the plant started in February. So first two months there is cost but not sales. So going to the next quarter you will have both sales and cost. So, it will normalize as we go, and the gap will kind of even out and the plant is going to ramp up as we progress in the year. So yes, but this is something which Chairman sir also said during the press conference that we are constantly keeping a watch on how the capacities are moving for next year.
Will seven-seater Grand Vitara qualify as a new SUV in your view or is that a variant?
We keep hearing about such concepts and models about ourselves from the magazines and from analysts. So, let's wait till the time comes. I have not heard of a Grand Vitara seven-seater internally at least.
Now we have seen some RM pressure in this quarter coming from steel. But it looks like there is more to go given the safeguard duty and generally the increase that we have seen in the HRC prices. Is there anything that you can give us a sense of what sort of headwind can come through on the steel side and a little bit on the price hikes that we have taken? We had two announcements, one in Feb and then in April. What does this mean in terms of blended price hike? Do any of these reflect in Quarter 4 and how much will it be for Quarter 1 of fiscal '26?
Okay, first let me answer your commodity part of it. I think as we clarified earlier also, thanks to the government, safeguard for the grade of steels which we import, there is no significant direct impact. So that answers your first question. Commodity movement, yes. I mean we are keeping a very close watch because we are all in a volatile world today. So, we are keeping a close watch on all the commodities and progressing accordingly.
I mean of course the blended price hike on an aggregate would be much less than the range that we announced. So, I am just trying to understand is, can you quantify the blended increase? And the reason I am asking this is there's also improvements that you are making. Like you called out six airbags in every car. So, are these price hikes to cover up those costs or is it just the normal course of annual hikes that we take?
See, there are two parts to your question. One part of your question is what about the regulatory hikes? The regulatory hikes as we have clarified before also it's a pass through and we will keep doing the pass through. So that is one part of your question and the rest of it, I mean if it is forward looking, we would not be able to comment on this point. All we can say is that whatever it is a regulatory hike, which will be a pass through on cost.
My first question is on capital allocation. I think we have potentially more than Rs. 60,000 crores of net cash on the books, almost 20% of our market cap. So just trying to understand over the next 2 or 3 years, are you thinking about returns to shareholders as a potential use of this cash on the books, just in terms of your shareholder return and total return strategies?
So, you would have seen our announcement earlier when we announced our results. So, this year we have the highest ever dividend of Rs. 135 per share which has been stepped up compared to Rs. 125 per share in last year. So that answers part of your question. On your other question, I mean we have to keep looking for the market scenario and then decide accordingly. I think difficult to give a straight answer at this point. We will keep looking at the scenarios.
My second question is just around the product pipeline for the next few years. You have said that you want to get to 28 models by the end of the decade. And there could be some consumption stimulus over the next couple of years in the form of the pay commission, both central and state pay commissions over the next 2 to 3 years. So just trying to understand in the previous pay commission we had the benefit of the launches on Baleno and Brezza which really helped the Company's growth. So, over the next 2 to 3 years is that sort of compact SUV segment, maybe premium hatch segment, something that we focus on in our new product launch plans just to take advantage of some of these stimulus measures which might benefit market growth over the coming cycle?
So, if there is a similar kind of increase what the government had done as in the past, of course the consumer response is expected. And yes, it favors those kinds of segments. So, the quantum remains to be seen how much is the quantum that happens and the scale also is it just on central and state government or extended to quasi government sectors also P SUs, that remains to be seen. So of course, consumption goes up when such stimulus comes from the government side.
And the last question Rahul is with regard to as EV comes into place in the first half, how are you looking at it, I would say the overhang in terms of profitability or it should be a headwind in profitability in the short term, one, or should it because export oriented you should be able to position it better and limit the impact? And second, how are you trying to mitigate this as it gets more and more domestic volume centric on the EV? Are there any levers which you are looking at for the next 2-3 years to neutralize it?
See we have to be conscious that by design EVs will have a much lower profitability and that's true for the entire industry. We can't expect EVs to have the same level of profitability as IC engines. And if they were, then the government probably doesn't need to have a 5% GST or so many schemes or so many support policies on that. So, we have to be conscious of that. Having said that, our efforts on decarbonization will be through multiple technologies and we will try to leverage all possible technologies to reduce carbon to supplement our EV efforts. Exports will obviously help us a bit as compared to a standalone domestic scenario, because you get better economies of scale, and you may get some pricing power in some markets or others. So, it remains to be seen.
And what is the progress on some of the PLI schemes which you applied? Can it benefit you guys as you go forward? What to expect there?
See, the government assesses the PLI after SOP because only then your data is getting verified, so it is slightly premature to be able to take a guess on PLI eligibility.
Relating to the other expenses item, which went up to 90 basis point, this is lumpier and more seasonal in nature. So, ideally this shouldn't continue in the subsequent quarters. Would that be correct? And also, on the commodity side there was an impact of 20 basis point. How do you see for the subsequent quarter? How much can be the impact of commodity given that there has been increase in steel prices and there is also the safeguard duty?
Thank you, Raghu, for your question. Let me respond to your other expense question first. As Rahul articulated during the opening presentation, there are a few elements on the other expenses which has impacted like we had a higher profit for the full year, correspondingly, the CSR expenses are higher. There was also some repair and maintenance in some of our lines in the Manesar plant which contributed. Also, we did a conscious digit alization push and there were some expenses on digitalization, which came in this quarter and some other miscellaneous lumpy expenses. So that's broadly the composition of the other expenses which is there. Your second question on the commodity. On a sequential basis; so, if you look at it, it is predominantly impacted by steel as you rightly pointed out. So that, on a sequential basis, is impacting on the commodity side.
Can you talk about how you're seeing the impact of safeguard duties, free trade agreements? Also, if you can talk a bit about CAFE norms and the hybrid potential.
Too many questions. Okay. See safeguard duty on steel, we are extremely thankful to the government. They have found a way of minimum import price in which they have taken care of both the steel industry and the user industry, primarily auto. We just hope that the steel industry doesn't use it to raise commodity prices in the market and we will be monitoring the situation and reporting to the government if necessary. As of now, since our imports are above that particular threshold, so we are not affected directly. On FTAs, there are discussions happening. There are three discussions happening at the moment. India -UK FTA, India -EU FTA and possible India-US BTA. So those discussions are being primarily led by Ministry of Commerce and Industry is in consultation with them. I am sure the government will take a very calibrated call in the best interest of the country and of all industry and economy put together. So, we are expecting some kind of finalization of CAFE-III soon and industry is in discussion with the government on this with the Ministry of Power, Bureau of Energy Efficiency and they are seized of the matter. They have gone into great details, and I think we are expecting the policy to come out in about a month or two.
So how do you see the domestic market volume? Because you did talk about weaker demand. If you were to just quantify what does your econometric model suggest as potential growth for the industry in FY26 and also on a related note, on exports, is this fair to assume that we should still aspire to double digit growth despite the global macro situation and thanks to the kind of order backlog we have on Jimny? So is it a double digit fair expectation for FY26?
Not just double digits. We mentioned an outlook of 20% growth for the coming financial year for exports. I took your second question first. On demand in the domestic market, industry has forecast a very modest growth of between 1% to 2%. We should be doing better than that. And we have a couple of SUV launches this year. So of course, a lot depends on how the whole organization responds to the customer. So, we look forward.
Just starting on this point about mix being a 40 basis point or so headwind, could you expand a little bit. Does it have to do with exports also, we saw export share being down this year and if you could also share the CNG mix this quarter and last quarter.
On a quarter basis, yes, you are right. There is a little bit of a lower export. But as we said overall, if you look at the export outlook for the full year, we did 17.5% higher than the previous year. And as Rahul said, next year also the outlook looks quite buoyant. We are projecting about 20% growth. So, export is really not a thing to get worried about. It's actually positive. In terms of the car mix, yes, in this particular quarter the small cars were higher. So, which is kind of contributing to the adverse mix. But going forward, I mean I think we will have to observe the market and see. I mean we can expect a more calibrated mix going forward.
So, another way of asking this question, next year export as a percentage will go up. So, is that favorable mix for you or neutral, negative, positive?
What we have to look out for is more segments within the domestic market. I will give you an example. For Quarter 4, the UV share sequentially came down from 39.7% to 36.8%,for Maruti Suzuki in Quarter 4 versus Quarter 3. CNG came down from 36.1% to 33.7%. So, this is the data that I shared. In fact, in domestic market, the share of mini segment went up from 6% to 7%. Share of compact segment went up from 39% to 42.7%. So, let's be conscious of those changes.
Just going back to the margin queries. I know there have been quite a few. But this plant-related cost, just to be clear, the entire cost for the quarter has been taken into account. Right. We shouldn't be looking for any Increase from this Rs. 120 crores odd number that we have accrued in this quarter.
See, whatever cost has been incurred in the last two months has been taken into account. That's the right way of accounting it. As I said earlier also in the previous question, going forward the plant will also start producing vehicles and selling vehicles. So, there will be a more normalized effect of that as we go into next year. Of course, too early to say with the demand situation, how exactly the capacity utilization will be, that only the coming quarters will say.
Just second question on e VITARA, can you just sort of refresh us with the timelines? When do we see the domestic launch and again on the export side, when do we see the exports beginning, any timelines on price unveil and exports on e VITARA?
So today in the press conference we mentioned that we hope to do the start of sales within the first half of the financial year and this year we expect to do a volume of about 70,000 units. A large part of it comes from exports.
One is on the discount side; can you share the number? And secondly when we talk of the increase in cost because of the new plant, our employee cost does not seem to have increased much in the last two quarters. So, would there be further increase on that side or is this reflection of the new plant as well what we have seen in this quarter on the employee side?
See if you look at the discount on the sales promotion part of it, sequentially quarter-on-quarter we have a 40-bps benefit which is reflecting. On your employee cost, I think it is more as a percentage to sales, it's stable. I do not think there is a major variation in that.
What kind of CAPEX do we expect for FY26, as against the Rs. 10,000 odd crores at consolidated level in FY25?
Again, we answered this question during the press conference. So, this year our CAPEX has been in the range of roughly Rs. 8,400 crores. And the range we are expecting for next year is between Rs. 8,000 to 9,000. So that's the range we are expecting.
Just the export revenue and the royalty number please.
Export revenue was about Rs. 5,500 crores, royalty we have mentioned it's around 3.5%. Gunjan had asked about the network stock. So, we closed the financial year with about 28 days stock, which is quite healthy.
So, the first question is with regard to sourcing. Post this steel protectionism or similarly the trade barriers which are going up in the globe, how do you look at the sourcing of your current product mix and also going into the EV space, any relook at the dependence on one nation, how you plan to reduce it for next 3 to 5 years?
See steel we are fairly localized. A very large part of our steel, between 85% to 90%, is local. The safeguard duty that was applied was neither on our purchases or our vendor purchases. So, there was no direct impact, and we thank the government for it. We just hope that the steel industry does not use the opportunity to raise commodity prices in the market and we will be monitoring that. I mentioned earlier also, it is very difficult to predict the way the global tariff wars and all, everything associated with it is going. But one thing that we have to watch out for is the supply chain for rare earths elements and we will keep a close watch on that. So far, by and large things remain stable. But it's a dynamic situation as all of us know.
And the second one is with regard to the new plant which has come up, how do you see it playing out in your overall scheme of production planning, one? Second, similarly for sourcing arrangement amongst your plants, what's the benefit it can bring on to the table?
So obviously the economies of scale will accrue for all plants put together. Sourcing is common for all the plants, for components whether they are used in Gujarat or Haryana or within Haryana, whichever plant. So, economies of scale benefit us. In terms of production planning, increasingly we are making our plants more flexible so that more lines can manufacture more models. And we are also taking care that the newer lines that are established can manufacture EVs also. EVs are, as you would be aware, they are far heavier vehicles because of the battery weight and the body strength to handle that weight. So, there is some difference in the production line on that account. But we are making it flexible, whether it is in Gujarat or Kharkhoda. The utilization is something that we have to closely watch, and the operating leverage associated with it. That is something we will be watchful of.