Ladies and gentlemen, good day, and welcome to Ashok FY 2024 earnings conference call, hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the call concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Joseph George from IIFL Securities Limited. Thank you, and over to you, sir. Thank you, Michelle. Hi, good afternoon, everyone. On behalf of IIFL Securities, I welcome you all to the FY 2024 results conference call of Ashok Leyland. From the management team, we have with us Mr. Shenu Agarwal, MD and CEO, Mr. Gopal Mahadevan, Whole-time Director and CFO, Mr. K.M. Balaji, Deputy CFO. I will hand over the call to Shenu, sir, for the opening remarks, post which we'll start with the Q&A. Over to you, sir. Good afternoon, ladies and gentlemen. It's a pleasure to have you at the Ashok FY 2024 earnings call. I thank you very much for the interest shown in Ashok Leyland. The domestic MHCV industry witnessed a YoY growth of about 3% in Q1, backed by a favorable macroeconomic environment and a strong replacement demand. Healthy growth in the end user industries like cement, steel, and infrastructure, as well as improvement in general manufacturing activity and consumption trends, continue to stand in favor of demand from fleet operators. Good pickup in bus demand has also augured well for the industry. The growth in MHCV segment is slightly muted, owing to the effect of some pre-buying in Q4 of last year because of implementation of OBD2 norms from April 1 this year. We expect the growth trajectory to improve going forward. Significant allocation towards capital expenditure in the Union Budget 2023-2024 would continue to provide the necessary traction to MHCV demand in the near to medium term. As far as LCV industry is concerned, the progress of the monsoon and its impact on rural demand remains a key factor to watch for. Overall, we maintain our earlier guidance of 8%-10% growth for MHCV and 5%-6% growth for LCV for the entire fiscal FY 2024. The commodity prices moved marginally northwards in Q4 of last fiscal. Since we pass on the effect of commodities, generally with a lag of a quarter, we had some impact from this, which was to an extent neutralized with efficient inventory management. It is expected that commodity prices would soften in the coming months. Ashok Leyland has been able to beat industry growth in Q1, as well in both the MHCV and the addressable LCV segments. On top of that, we have also been able to raise consistently, including a price hike in Q1 this year. What is good to see is increases is improving. We are also putting efforts in reducing our costs, both the product costs as well as overheads. All these are visible in our YoY margin improvement. The EV business housed under Switch is crucial for future-proofing Ashok Leyland. While we will continue to look at external investors, Ashok Leyland share in the meanwhile, fully support the efforts of Switch in developing world-class products. Switch presence is growing, and I am happy to share that our electric products are performing extremely well. We are also preparing for launch of our Switch electric LCVs in the second half of the year. During the quarter, Ashok Leyland has launched AVTR 6x4 EDPTO Ready Mix Concrete, ecomet Star 1915, 2820 G 45 FPS, ecomet Star 16 and 18 ton, 24 feet, 4225 MAV, and 13.5 m bus with 19.5 ton GVW, thereby expanding our range further. I am extremely confident that with these launches and the continued network expansion, we will add on to the market share gains achieved in the last few quarters. Now, I will quickly run you through our Q1 performance. In Q1, our MHCV volumes have grown at 7% on YoY basis, as against the industry growth of 3%, resulting in market share improvement for Ashok Leyland. Bus PIV volumes grew by 39%, and the corresponding growth for Ashok Leyland in bus segment was at 93%. Bus market share has improved for Ashok Leyland from 20.2% last year to 28.1% now, that is by 7.9%. Truck PIV was almost flat in Q1, and AL volumes have grown, resulting in a market share improvement of 0.6% from 31.1% last year to 31.7% in Q1 this year. This is the sixth consecutive quarter of 30% + market share for Ashok Leyland. Our Q1 LCV volumes have grown by 3% over last year. That is, in current year, Q1 was at 14,821 numbers, versus previous year Q1 of 14,384 numbers. IO sales have registered a 12% decline in Q1, YoY, consequent to the meltdown in many economies around the world. We did 2,222 numbers in Q1 in the current year, versus 2,527 numbers in Q1 in the previous year. Relatively speaking, our performance in IO is still better, as overall CV exports out of India has declined sharply this quarter. Good performance in aftermarket sales continued in Q1. Our aftermarket sales, at INR 617 crores, grew by 34% over same period last year, which was at INR 459 crores. Volumes under power solutions business have doubled in Q1. That is at 8,776 numbers in Q1 this year, versus 4,381 numbers in Q1 previous year. Q1 revenues stood at INR 8,189 crores, 13% higher than Q1 of last year, at INR 7,223 crores. EBITDA for Q1 was at INR 821 crores, which is at 10%, as against INR 320 crores at 4.4% in Q1 last year. Our PAT was up more than 7x, INR 576 crores versus INR 68 crores in the previous year. You may note that the tax expense for the quarter considers a one-time deferred tax credit of INR 172 crores on account of expected transition to low tax regime. Operating working capital is at INR 1,522 crores as of June 2023, primarily supporting the increased activity levels. Capital expenditure for the quarter is roughly at INR 95 crores. Net debt as of 30th June, 2023, was at INR 1,464 crores, as against a negative of INR 243 crores at the end of fiscal year 2023. I now open the floor for questions. Thank you. Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead. Hi, good afternoon, and thank you for taking my questions. My first question is around sort of the cyclicality of discounting in the CV industry. Over the past sort of seven to eight years, I think that there have been maybe a few instances where discounting slowed down a little bit. This we seem to be in the midst of that sort of scenario right now. There seems to be more confidence that lower discounting in the CV industry can sustain for a longer period of time. Just trying to understand what's giving you that confidence, and any color on that would be very helpful. Yeah, I mean, it is true that historically things have happened a certain way as far as discounts are considered. We have an opinion that currently, CV industry is poised for a lot of change, and I think everybody in our industry understands that, and also understands that everyone needs to invest in this new change that is coming upon us. I mean, generally, we have heard from our peers as well in various media reports, everybody wants to focus on profitability. Of course, it is very difficult to say how competition would respond as far as discounts are concerned. Generally, the feeling, at least right now, is that people want to maintain more healthy practices and look at value selling, look at generating more profits, so that we can all, as industry, also invest in the, in the new things that are upon us in the future. Got it. That's helpful. My second question is on the plan to launch sort of a zero to two ton LCV over time. I understand this is pretty large volume category within LCVs, which you're not playing in at this point, so it makes a lot of strategic sense to participate there. If you could give us some idea on what sort of timelines you have in mind to put this product into market, and just your thought process around sort of competitive intensity there. I think the zero to two ton LCV market is more competitive than sort of the two to eight ton segments. Just any early thoughts there would be super helpful. You know, as we also stated in our analysts meet, I think last month, was that we are seriously considering an option of getting into sub two ton segment. As you said, it is a very attractive, large-sized market, having now achieved, more than 20% market share in a relatively short period in 2- 3.5 ton, gives us confidence that we can be an active player in the sub two ton as well. Now, of course, right now it is too early to comment on the timelines, et cetera, because, you know, this market is a very mature market, and it's entrenched with the competition that has been there for many years. Therefore, whatever, whenever we want to enter this, would depend on, you know, us being able to come up with a very sharp proposition on what kind of product do we want to come up with. That will take a few more months. As we said in the analyst meet as well, you know, hopefully, during the year sometime, we would be able to tell you more about this. Got it. Thank you very much. All the best. Thank you. Thank you. The next question is from the line of Kapil Singh from Nomura Group. Please go ahead. Good afternoon, sir, congratulations on a strong set of results. Firstly, I wanted to talk about industry growth because first quarter has been soft, and you had guided for same as well due to pre-buy. What are the signals you are reading from the ground? If you could talk about that first. Kapil, thank you for the question. I think the pulse on the ground is very strong. We don't see any kind of negativity in any of the segments, actually. You know, the momentum is going well. I think the growth was a little bit muted, like we explained in the last call as well, that there could be some pre-buying in Q4, and therefore this quarter, it was expected that the growth would be slightly muted. We are still happy that we had a marginal growth in the MHCV segment, but especially in the bus segment, there was tremendous growth in the market. We are... As I said, you know, in my opening comments, that we still maintain our guidance that we gave last time of 8%-10% growth for MHCV and 5%-6%, roughly, for LCV for the entire year. We are still maintaining that guidance. Therefore, we think that the momentum would actually further increase going into Q2, Q3, and so on. Okay, great to hear. Secondly, if you could just talk about, as you look ahead over the next two to three years, you know, we have talked about market share, further expansion to around 35% and margins we are aspiring to get to 15%, right? What are the levers that you are seeing for both, that are possible from here on as we move towards that goal? Kapil, there is a lot of opportunity that Ashok Leyland has as far as market share is concerned. You know, I mean, we have been talking about, you know, the disparity in our market shares when we look at geographical market shares. You know, North and East, although we gained substantially last year, but still, we are ballpark, like 25% range there, although we have improved from 20 to 25 now. We definitely want to improve our market share in North and East to roughly 30% or more. If we can do that, definitely we could be touching close to 35% overall. Even in product segments, we have a huge opportunity in some of the specific segments. For example, like, in MHDB buses, in medium heavy duty buses, we have a market share of 50% or more. But in ICV buses, which is about two-thirds of the bus industry, our market share last year was still, like, around 15%. You know, we have substantially improved in Q1 in ICV buses, and we want to continue to do that, right? I mean, we have our play very well understood. We have our actions deployed in the right place, whether it is product segments or geographies. We hope, I mean, just if we continue to focus on the fundamentals, whether it is product segments or establishing the right network or getting our network right in the white spaces we have right now, I think we can move towards that number of 35% in the next few years. As far as margins are concerned, you know, I think in the analyst meet last month, we said in the near term, we want to achieve a double- digit EBITDA. In the longer, in the medium to long run, we want to aim at mid-teen, which is roughly around 15% EBITDA, right? I mean, we are happy that in Q1 we could achieve double- digit EBITDA, actually, because a lot of things worked in our favor. Double digit is what is our focus in the near term right now. Great. Sir, if I could just lastly, here on the EV side as well, we have seen quite a few orders coming in, for, you know, from the various governments, Ashok Leyland so far has not really participated very aggressively in those orders. What is your outlook now, as we look into, you FY 2024, 2025? No, Kapil, that's not right. I mean, we have been participating in the tenders that have been floated by STUs recently, especially the CSL 2 tender that we participated. We are in discussions with all these STUs, wherever we got an opportunity to get into contracts, you know. Yeah, I mean, we have a pretty healthy order book that we are going to now focus on executing. Okay, sir. Thank you. Thank you, and wish you all the best. Thanks. Thank you. The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Hi, sir, thanks for taking my questions. I have two questions. Firstly, on the margin, just trying to get a little bit more color. The gross margin expansion of 200 basis points, despite some cost push, it's quite strong. I'm just trying to understand what were the levers for improvement here. More specifically, when I look at the remainder of the year, you've got, you know, better operating leverage yet to play out. You've got, you know, steel, correction tailwind yet to play out. If you can just, you know, give us some, you know, thoughts on how we should be thinking about margins for the remainder of the year, will we be decisively able to improve where we are in quarter one? Yeah, hi, Gunjan, this is Gopal. See, essentially, there are two things. I know you are, you know, you are looking at Q1 versus Q1. What has happened last year is there are two things that have we have been actually, you know, working on. One, of course, if you look at the general industry trend, there has been a softening of steel prices, right? Even there in Q1, there was a slight amount of steel price increase. The pace of growth of steel price increases happened from Q1 of last year to Q3, Q4, and then, you know, coming off has been helping the industry. That is the outside. What have we done at Leyland? At Leyland, what has happened is when you compare Q1 of last year with Q1 of this year, this is actually baked in four quarters of price increases. Net price realizations have approximately gone up per quarter, say, by about 1.5%-2%, depending, of course, there is a mix, et cetera. The second thing that has happened is last year, you know, as we have shared with you, we had embarked on a huge cost reduction, material cost reduction program. You know, which is we had looked at, you know, bulk buying, consolidating vendors, alternative design, changing some of the, you know, the belts and whistles, which were actually helping to drive performance, but at the same time, which was enhancing performance, but was also bringing down cost. All of this resulted in the first quarter itself. You know, first quarter typically is not a great quarter for this industry. We were saying that can we hit a 10% margin in the first quarter? That was the internal question that we had, and we were able to do that. Three factors, much better revenues than last Q1 of last year, where we then ended up with 4.4%, and this quarter we ended up with a 10% EBITDA, Q1 versus Q1. Second one is consistent price enhancements that have been able to deliver better net realizations. Third one is cost reductions on the material front, which has resulted in the gross margin expansion. Okay. For the remainder of the year, is there any further cost? Like, I guess you're talking about the reset initiatives that you'll have taken and of course, the modular platform. Is there more to come from those initiatives? Going into the remainder of the year, it's essentially going to be operating leverage and steel correction, which is yet to play out. No, because you see, whatever, you must understand one thing, you know. One, price increases, for example, if you do it quarter-on-quarter sequentially. they have a impact as we move forward. There's a stepladder method of actually incremental improvement in the net realization that will happen, right? Similarly, when you do cost reduction, there is a reverse stepladder method, maybe a descending stepladder method, where the costs start to come out, quarter on quarter. To be candid with you, in the, in the forthcoming quarters, we are expecting the benefits of the cost reduction initiatives that we have been doing for the past few quarters. Over and above that is the play that if steel prices were to come up, and I think the general consensus from external reports is that the second half of the year, steel prices are going to be soft. We are already in the second quarter. The first half is almost going to get complete, right? After that, in the second half, steel prices are going to get soft. We believe that, you know, if the industry were to grow at about 10%-12%, which is not at all bad, if you look at the 45% or 48% growth that the industry has posted last year. I think riding on that volume base, if the industry grows, say, even by 10% this year, there is scope for margin expansion. Got you. Then after that comes in the operating leverage and the other benefits that you can get. Okay, got it. That's good to hear. The other question I had was on the Hinduja Leyland Finance. If you can just refresh us on where we are in the timelines, how long it can take for the business to demerge? I know you all raised money, but, you know, just figuring the demerger timelines there. Okay, I'll tell you what is happening is it's not a demerger. Hinduja Leyland Finance is actually going to merge into NXTDIGITAL. It's a reverse merger that is happening. Reverse. There's no demerger. I think the timelines, there are some, you know, the procedural formalities that could be completed. Our expectation is that it should happen anywhere between Q3 and Q4. No major deviation in the timelines. Okay. Last one from my side will be just the inventory levels. Is there any, you know, where are we versus the, you know, typical inventory levels in the channel? I would only say that in this quarter, we have actually brought down inventory levels a little bit, you know, because we are very kind of, you know, very nimble-footed in this inventory management. We don't have any significant inventory in the pipe, that is company or dealerships. I think it's a pretty, very manageable level. Month on month, it keeps oscillating, but from our side, there is no stuffing of the inventory at all. Okay, got it. Thank you so much. Thank you. Thank you. The next question is from the line of UBS. Please go ahead. Yeah, thanks a lot for the opportunity, and congratulations on a great set of number. My first question is on the non-vehicle side, because looking at the QOQ, model mix and the way the volumes have come off, and the ASP looks like your non-vehicle side of the business has done very well. If you can just throw some color on the quantitative aspects there as to how's sales, how's defense, how's gen set business done, that will be great. Thank you. Thank you, Pramon. Let me just start with the power solutions business first, and I want you to, just, keep this in context, that there was supposed to be an emission norm change from, with effect from July 1, which actually got postponed now by about 12 months some. Because this announcement of postponement did come very late into the quarter, there was some pre-buying that happened in the quarter, which, you know, would impact our Q2 and Q3 volumes as far as PSP is concerned, right? All of that pre-buying did not happen that we were anticipating, because the announcement came like a week or 10 days in advance, that the launch would get postponed. Otherwise, we would have registered even a higher volume in PSP. Just keep that in mind. Although overall, we are doing well, and, you know, in the whole year also, we would register significant growth in our PSP volumes. Just for quarter one perspective, you have to just keep in mind that some pre-buying has happened in quarter one. The coming to defense business, yes, last year was not a very good year for defense, right? Therefore, you are seeing very high growth percentages in the defense business. Now, you know, even in the last call, we said that defense pipeline is now building up very, very sharply. We have just announced receipts of a INR 800 crore order from the, from the Army. I think, the pipeline is building up very robustly. FY 2024 and even FY 2025, we see very healthy defense volumes to happen. Just see that in context of the last year, which was not very good, right? The base itself was not so good. On parts, I think we are very, very happy and also very confident that we would, we have not just registered a very good increase or growth in our parts business, but also continue to do so. Last year, we did about 30% growth or more than 30% growth in our parts business. Even in this quarter, you have seen that the parts business has grown beyond 30%, right? This is really not just about the growth itself, but it also, I think, reflects how our network is spreading overall and how our market share is getting, you know, more and more spread out even in north and east areas. You know, so it's a culmination of all those efforts. Yeah, overall, on non-vehicle business, we are very optimistic. Thank you. Second question is on the discounting side, because the discounting scenario has seen a big change over the last three to four quarters. Gopal, if you can just help us understand what used to be the typical discounts, what the industry was seeing on HCVs, and where are we today? As in, just trying to understand how much of this profitability delta has come from discounting reduction alone. You see, the profitability delta, this quarter also, we raised prices by 2%, yeah, net. It depends on the model, okay? I'm giving a very average number, because what happens is, you have certain SKUs, and there are north, south, east, west pricing, et cetera, that happens. Definitely, discounting has, you know, in absolute terms, between last year and this year itself, would have come down by anywhere between 10%-15% in terms of per vehicle. Okay, don't add that straight to the margin, because what happens is, discounting is one stream of activity, price realization is another stream, billing is another stream of activity, net price realization is the third stream of activity. What has happened is, quarter-on-quarter, like you mentioned, as I had mentioned, know that 10%-12%, why is it coming? Quarter-on-quarter, if you look at it, four quarters, average, we would have raised prices by 1.5%-2%, right? You would have actually had last year, maybe about, you know, roughly about 7%-8%, 8.5%, and then you have another 2% coming this quarter. Sequentially, you would have had about 10% of price increases that is happening. That, the industry is also holding, which is good for us, because that means that the industry is able to absorb these prices and still deliver a marginally higher, you know, growth, which is good. Gopal, do you expect this is like something which you've not seen historically, even forget, after the last two, two years, where discounting went out of control, and now you're having a great turn on pricing. We've never seen this kind of very strong pricing in this industry for the longest period of time. I don't recollect if you, from your experience or Balaji's experience or even Shenu's, if you have seen this even, like, say, 15, 20 years back, I don't recollect, at least in the last 15, 17 years. I'm just trying to understand, what's driving this price discipline, sir? 2018, 2019 was a good year. Yeah, 2017, 2018, 2019. While the discounting was happening, net price realizations in the BS4 regimes were actually getting better. The margins for the industry was good. That was on a lower cost structure as well, right? The content cost was much lower than where we are today. The average truck sizes were also much smaller. Yeah. If you look at the price increasing velocity, because it's one thing. Because it ultimately adds up, right? Everything adds up, the customer also, there's some bit of demand sensitivity at some particular level, right? I'm just trying to understand from a very high discounting-led environment, where net pricing was actually collapsing, to environment where net pricing is going up sharply, how is the industry, how is the customer base reacting to this? I'm just trying to understand how far can we continue to have such run. Great. Will we see some. Yeah. Let me put it in perspective, and then I'll request Shenu also to add. See, there are two, three things here. Your point is right, okay, but what has happened is, unfortunately, the cost of the vehicle went up by approximately 20%- 22% in Q1 of FY 2020. What happened is the whole thing had imploded, right? Because it was bang into the thick of COVID. There is no demand, and you are launching, and you are forced to launch products as to, for regulatory compliance with a product which was 20%-25% more. It could be 13%, 14% in some SKUs, but broadly, I'm saying 20%. Once that happened, the pricing power was virtually not there in the industry, and the industry always, like you rightly said, already had the practice of discounting. The situation went outwards with further discounting happening for a very limited customer demand. Last year, what had happened is after 2021, we saw in Q4 of 2021, 2022, maybe second half of 2021, 2022, demand coming back. Last year, the lot of, you know, pent-up demand, so to speak, started to happen because you must understand, India suddenly turned into a high growth economy, and you need transportation to fuel this growth, right? What happened is, whatever demand that had actually not taken place in the past, suddenly, and the axle load norms also, which had created capacity of maybe about 160,000 vehicles, had also kind of the impact was over. We had the industry, I think the demand suddenly started to shoot up last year. That is why the industry grew by about 45%-48%. When this was happening, when some of the players decided that, no, we don't need to actually keep discounting to acquire customers, we saw the price realizations holding on. You know, hopefully, what we are expecting is that the same rationale will continue as we move forward. Frankly, I think customers have to be acquired from capability and not by discounting. If this continues, the industry's breakeven point, I'm not just talking about Leyland's, the industry's breakeven point will come down quite sharply. What will happen is, the same amount of volume or even a slightly lesser amount of volume can give disruptive margins. We, and this, along with the, you know, the commodity prices coming off, operating leverage kicking in, and better pricing that has happened over the last several, say, six to eight quarters, all of this should see, you know, better profitability for the industry. We have, I mean, in all humility, we have been actually posting better results, at least till now, and we have been taking costs down, which we have been sharing quite openly with you. We have also shared with you our medium-term target of mid-teens EBITDA. We said this time that let us share what we are doing as a company and what we are aspiring as a management team, so that the, you know, the investors understand, you know, what is our, you know, cadence. Yes, good to hear that, Gopal, and wish you guys all the best. Thanks a lot. Thank you. The next question is from the line of Arvind Sharma from Citigroup. Please go ahead. Hi, good afternoon, sir, and thank you for taking my question. The first question would be on the AVTR range, the modular platform. Would it be possible to, just, you know, help us with the overall contribution of this range to your total volumes? If you can, just comment on the profitability as well. Start with the first question. Well, you see, AVTR is a range that factors in the, you know, the higher tonnage vehicles. We possibly will not be able to share exactly how much of it, because all I can tell you is that we actually monitor this for the heavy commercial vehicles. We also talk about the intermediate commercial vehicles, and we look at the margins. To be candid, the team is now working on how do we improve the profitability of the intermediate commercial vehicles even further. As far as the heavier commercial vehicles are concerned, all I can tell you is that the higher the tonnage of the vehicle, the better is the margin, because the realizations per ton improves, right? AVTR range has actually been a big success on three grounds, I would say. One is product performance. Absolutely, I would say in certain cases, above industry, there is a clear demand pull for complaints on the product from the industry. This industry is, if you ask me, the toughest of all the industries. If you take the two-wheeler, four-wheeler, and then you take MHCV trucks, I would say that MHCV trucks is has got the finest and the most, I would say, knowledgeable of customers, because this is used for commercial purposes. Here, the AVTR, I think as a product, has had exceptional acceptance by customers. This is one. The second one is the complexity of production has come off quite a bit, which is why we are able to increase our throughput on production, even though the tonnage of vehicles has gone up and serviceability also goes up. The third one, as far as AVTR range is concerned, is that, you know, the, we possibly will see the benefits, and we are seeing the benefits of the complexity of production actually coming down in terms of, you know, number of parts, the assembly of vehicles, the number of vendors, the inventory that we need to carry. We're seeing that slowly happening. As we move forward, you know, these are things that we shared with you in 2020, 2021, and all of that is happening. AVTR is a very, very crucial and an important, step for us. Thank you so much, sir. If I could also ask a second question, more on the bus segment. Can you throw some light on the new orders from STUs that you are seeing? How much are, what's the proportion of electric buses to ICE buses? Do you foresee a time when a majority of these new orders would be on the electrical side? Yeah. See, I mean, the electric thing has just started, you know. I mean, there have been, like, two large tenders so far, and therefore, as a percentage of the total bus industry, it's still very, very small. I think, I mean, we are seeing that in the market is gradually going to move towards more and more of electric. It has not even penetrated the private sector as yet, you know, because of ecosystem challenges. But yeah, I mean, there are several reports in the market that indicate that about 30%-40% of at least the STU demand can be electric. Y ou know, different governments have been proclaiming different things, some are even like we just heard a few days back, that government wants 100% of STU demand to be electric now. Going forward, and achieve that by 2030 or earlier. Yeah, we will, I think, see, the timing can be different, but definitely this is going to happen. Electrification will happen, starting from buses and then moving on to the smaller, vehicles, the LCV range, and then also even in the trucks in some special, specific niches. Yeah, it is bound to happen. It is just like, what would be the inflection point that is to be watched for. Got it, sir. Is there any proportion that you can share between sales to STUs and the private orders in the bus segment for Ashok Leyland? Is there any proportion that you can share? Sorry, can you say it again? Sir, the proportion of volumes from STUs and private orders, is there a proportion that you can share? Gopal, can you- See, you know, the overall numbers, if you look at it, actually, there has been. I think we didn't discuss much about the bus in this call because everybody was discussing on trucks. Actually, this quarter, we possibly have again gone back to number one in buses in India. You know, our product range is much expanded today, and we are still working on the bus portfolio because for us, the bus portfolio is very, very important. The second bit of it, I would say, is that the bus portfolio actually is becoming more and more profitable. It was when, you know, the maximum impact that happened on COVID was on account of buses, because was on buses, sorry. You know, no schools, no intercity transport, all institutions were shut, everything was work on. Suddenly, things have started to come in. Even the large software giants are now insisting that you need to work at least 3x a week or 4x a week. All schools are up and running, colleges are up and running. What happens is that we are seeing that there is a market improvement. To just to add to what our MD, Sheenu, mentioned, that you know, the EV bit of it is just starting. Now we are seeing STUs also actually ordering a lot of, you know, diesel buses. To give you an idea, today, in this quarter, okay, I'll tell you the PIV, broadly. We have approximately about, you know, out of the STU would account for approximately 7.5%-8%. It has been, the STU has actually grown by about 55%. Out of the total buses, which is, you know, you take it as private, STU, ICV passengers, the largest is actually on ICV passengers, essentially in school bus segments, which actually accounts for nearly, you know, 71%. You have about 8%-9% in STU, and the balance is private buses. This ratio will start to actually change when governments are going to order more and more of STU, I mean, STUs are going to start ordering because they. See, there are two things that have happened also. You must remember that the scrappage has also affected the government vehicles and including buses, where they will be mandatorily, possibly, not mandatorily, but be pushed to replace their existing fleet, some of which are very old. Also, you will see private passenger transportation going up when intercity starts to grow further. Got it, sir. Thank you so much for the elaborate answers. Thank you. That's all from my side. Thank you. The next question is from the line of Pramod Amthe from InCred Capital. Please go ahead. Yeah, hi. Thanks for taking up my question. The first question with regard to the electric trucks, there are some signs of some mining companies that are just importing the trucks from abroad. How are you looking at the space, and when you plan to introduce the products here? Hi, Pramod, thank you. Thank you for the question. You know, as far as the trucks are concerned, we are working on several different applications as far as electric is concerned. We want to focus on some of the niche applications where we are working very closely with some of the customers. I think going forward, within the next few quarters, you would see some kind of activity in that space. These would not be in a true sense, commercial launches, but these would be some kind of large scale, medium scale, customer pilots that we intend to do, right? Those discussions are ongoing on the market side as well, with customers understanding their requirements, understanding the local geography, the application, et c. At the same time, with that information coming in now, we are maturing our technology and tweaking it to suit to the market requirement. Yeah, I mean, you know, I mean, we are not in a hurry to kind of commercially launch or make a lot of noise about it, you know, but we want to make sure that we focus on maturing the top technology in the right way, make it well-suited for the applications that are in the market and that are ready to absorb this kind of technology. Working with some very mature, large customers, you know, who have a lot of interest in these vehicles, either because of the TCO, compulsions or because of their own environmental goals, you know. That is our focus area. Second one is to Gopal. There seems to be a substantial movement in the net debt from a net cash position to a net debt from March to June. Is it all attributable to working capital? What is the working capital situation now? Second, with related to the same, is what is the investment into subsidies which have gone into the June quarter? Hey, you are right. I mean, the predominant part of it, and I'll ask Balaji to give the number of days of working capital. See, what happens, you know, there is nothing wrong in this working capital moment, let me assure you, because... You know, we have possibly, over the past several years, you know, we have been talking about negative working capital year-end. You will see that this is a traditional pattern that happens. In the first quarter, the working capital actually becomes positive. The reason is, you know why? The, you know, especially the February and March month, there is a lot of demand. What happens, your inventory, FG, and since we don't have, maybe we do offer a little bit of credit now, but otherwise, the, you know, the collections are also pretty high. What happens is, on the asset, the current asset side, it is actually, it comes down quite low. It comes down quite a bit. You have, and complementing that, you have the vendors, the current liability, which goes up. The net working capital becomes negative, right? There is a huge rush of cash that happens in the month of February and March, but which is why we don't keep, you know, kind of exemplifying it or, you know, trying to expand it beyond a point. In the month of April, May, June, what happens is that the demand is actually lower than what it is in the fourth quarter. The creditors need to be paid out. When that happens, you see a sudden, you know, payment cycle that comes in. When that happens, the working capital tends from negative to positive, which is why approximately INR 740 crore-INR 724 crores of net cash, which was there, has actually become INR 1,400 crores. INR 1,500. INR 1,500 crores, INR 1,474 crores of debt. Among that, we, I think, have also provided some support in terms of, I think, about INR 150, INR 215 crores or so to Switch. The main reason is working capital. You know, this will again start to stabilize. As we go forward, in the second and third quarter, again, it will plateau. In the fourth quarter, again, we'll gain. What happens is, year-on-year, we will actually see that the net cash generation is getting better. You know, that's what happens. Balaji, yeah? Actually, you would have seen in the last quarter, our working capital was around two days, and now it has increased more to support the activity. It has increased to nine days. This is only reflected by way of movement in the debt also. Our debt, we were in a surplus cash position, if you recall, at the year-end, INR 243 crores. From there, now we have moved to INR 1,400 crores. Roughly INR 1,700 crore of movement has happened. This is primarily because of the working capital movement, which has gone up from - 1 day or -two days to now nine days, plus nine days. It's 11 days. That is attributing to the change in the debt situation. It will keep improving. As you see now, quarter on quarter, it will keep improving, finally we will end up in the better than what we did in the last financial year, Q4. Sure. Thanks, all the best. Thank you. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead. Yes. Hi, thanks for the opportunity. My question was actually related to what was just discussed right now. Just sticking to the cash flows, you mentioned that CapEx was INR 95 crores for the quarter. What was the investment in Switch in the quarter? I think the investment in Switch, I think, we did about INR 200 crores or so. Not in investment, not in equity. There was no equity investment that was done. There was some, you know, some temporary short-term loans that were given, if my memory serves me right. Okay, okay. Just want to clarify, Amyn, you know this company as well. Yeah. Whatever numbers that Balaji gave in terms of working capital days, that does not include the Switch support. Yeah. See, just to give you a perspective, when we said that, you know, we have already shared with you earlier itself, I think even before the investment, you know, meet that we had in Mumbai, we had mentioned that we will support Switch in one way or the other for about INR 1,200 crores in the current year. Yeah. That plan will not change. Whether we will do it as, you know, as loan funding, whether we will give it as equity, whether we will give it as other instruments, is all we are actually taking a decision. Switch business plan will continue because this company is going to come out with some very good launches, both here and in U.K., and we are looking at two variants of LCV coming out, another variant of a bus coming out, and maybe a European model bus also coming out. We are not going to let this, you know, let this action slow down. That plan will continue and, you know, we will continue to support infuse funds as and when required. This year, I think the overall estimate, we stand by it, which will be about INR 1,200 crores, which we have shared with you already. Great. Thanks for that. Just on the Switch, the electric bus that you mentioned, now, at least in India, you know, most of these EV buses are being bought as of now by the STUs, and the model in which they are being bought is of a build, operate, kind of a, you know, model. Do you have any initial thought as to when you launch a EV bus? Obviously, I'm guessing that over a period of time, there will be a demand from the non-STU category also. Are you know, gearing up for or planning to, whenever you launch, you know, bidding for these build, operate, and transfer kind of projects, or would you want to focus on the non-STU segment for the EV buses specifically? Yeah, see, as far as the EV buses for the private sector, which is outright purchase kind of a model is concerned, it will take more time, you know? We are working with the customers to penetrate into that segment, or rather, to say, let us say, develop that segment. There's no segment right now, right? That will take a little bit more time, because it's not just about the product, it's also about, you know, a lot of ecosystem challenges that we have to deal with. We are working with our customers on some of those challenges to be overcome. On the STU, which is like here and now, the only model right now is, the build-operate kind of a model. You know that Switch has participated in some of these tenders, especially in the last leg of tenders, and we have won some of those tenders as well. Definitely we are going to try to execute those, and we are in discussions with various STUs to be able to do that. If I can just squeeze in one last question, you know, on this model. Obviously, the way the financials and the profitability will work on these models is different from how we have looked at the company for all these years. How should we think about, you know, when you start, this will be long term, you will not make the money upfront, you will keep the, you know, asset on your books. You know, maybe not today, maybe later on, you know, whenever you can, it'll be helpful for us to understand how should we think of the profitability and the ROCs on this kind of a business, and how does it differ from your existing business, you know? See, I mean, you know... Yeah. How do we look at this? We look at it as portfolios You know, we are a commercial vehicle manufacturer. Yeah. We have a vision. We want to be number, you know, in the top 10. Yeah In the world. We need to do a lot of actions on multiple fronts, which is we have to expand our LCV portfolio, we need to enhance our market presence in India, we need to grow our exports further. There are defense vehicles that need to be enhanced. There's a lot of work that's going on. This is one bit. The second bit is we also need to be a very, very relevant player in future fuels. Yeah. We cannot afford not to be there. What are the future fuels? Of course, there is CNG, LNG, with which we have actually got working variants other than what has been introduced in the past. We are working with some of the large organizations in India, which you know, for hydrogen, you know, H2ICE. That is happening. We are also having some collaborations happening on hydrogen fuel cells. Coming to EV, that is why we also had a separate company called Switch for EVs. Yeah. At the moment, when Switch is. We have to participate in the market as it is evolving. We need to pick and choose orders as we move forward, right? That is why we have a company called as OHM, which is not yet kind of operationalized, because we first wanted to do that in Switch. You will hear more about OHM in the coming months when we decide to operationalize. Today, OHM is just a, it doesn't have any operations on the entity itself. When we do that, our view and our, you know, strategy would be to house all the eMobility as a Service, the eMaaS the long-term returns, asset-based financing in OHM. Okay. If you actually step back and look at it, there is no major difference that you will see, at or at a 30,000 ft level between a company like HLFL, which is a finance company, and OHM. Yeah. Correct? Yes. Asset lending. Only difference is here you are doing operating leases. Yeah. Which means you manage the vehicle, you run the vehicle, you ensure that the STU or the customer pays for it, and it is a pay per kilometer with assured guarantees, et cetera, and these are slightly longer term contracts. Yeah. We will now, as if the country starts to kind of move in this direction, it will happen to akin to what is happening in solar, or what happened in solar over the last 10, 15 years, 20 years. You know, long-term contracts, great annuities, you know, payment mechanisms are matured, costs have come down, they have even got better than grid rates. So we may actually see that happening. At the current juncture, the EV industry is still pretty nascent. Right? But what we said is, "No, we need to participate as a bus manufacturer," that is why we are creating OHM. You will hear more about this in the future, and we would be more than happy to serve customers as a direct sale also. We are readying ourselves for that. The market will also start saying: Hey, why should we go to this? Let me own the asset and let me own to operate it. Where there is, you know, where the customer has the heft of financing on their advantage. See, customers in this business won't leave any money on the table. Yeah. If they find that they have got a better arbitrage opportunity, better funding capability, better rates coming from banks, and if they believe that they can run it more efficiently, they will buy the vehicle of us, like buses are being run today. Yeah. Great, that's very helpful, Gopal. I'll come back in the queue. Thank you. Ladies and gentlemen, a request to all the participants, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Chirag from White Pine Investments. Please go ahead. Sir. Thanks for the opportunity, sir, congratulations for good set of numbers. I only had one question on defense. If you can indicate what was the revenue from defense or growth YoY? More importantly, what kind of products have we saw? There are multiple products which we now have on plate. Also a roadmap for next 12, 24 months, which product basket is likely to see conversion, if you can help with that, it will be helpful. Yeah, I mean, as you know, that we have developed a wide variety of products now, all within the land mobility scope, right? We have a wide variety of products. I mean, there are, like, normal vehicles, like Stallions, and now we have some armored vehicles, you know, and so on, so forth. Yeah, I mean, like I said in my opening comments and later even, you know, last year was not a good year, but we do FY 2024 FY 2025 to be very good years. There are a lot of discussions going on with ministry, with the army. There are a lot of tenders that are coming up. There are some that we have already won, right? Overall, I mean, without disclosing the specific details of what is coming up, overall, you know, it seems like we will have a good pipeline on defense for at least next couple of years, including this year. Okay, sir, if I can just clarify. Is it what about the businesses, what is giving in Stallion's way, or is there more products which are coming across, like whether six by six? It's a variety of products. It's not just one product, it's a variety of products. For example, the previous order that we have won is like a gun towing vehicle, and also there is some advanced kind of development happening on the Stallion, right? It's like a variety of things that are coming up. Thank you. Just one question, Gopal. If you look at the past, you know, historical trends from Q1- Q4 margin trajectory, if what you are indicating plays out on the industry side, we have generally seen 400-600 with sequential margin improvement from Q1-Q4. Whenever industry volumes, every quarter, it keeps on moving up, margin trajectory for the industry tends to move up in this band, you know, whatever the start point is. Except for one or two years of exception, where margins were more or less stable. If that happens, then this year itself, you will end it with closer to the ambition or aspiration margins that you have around 15%. Is this the right way, given the tailwind that you have been highlighting? You see, this is feasible. You see, we can't comment whether it is, you know, it's going to be 15%, 16% or not. Let us, let the year go out. All we can tell you is that I think for the, probably the first time, or maybe once or twice earlier, but we have got a 10% margin in Q1. I just wanted to share an interesting, you know, data point, which we didn't mention. If you look at Q4 EBITDA, where we had 11% EBITDA being posted for the quarter, our revenues were about INR 11,626 crores, around INR 11,600 crores. This quarter, when we have actually done a, you know, 10% double-digit EBITDA, just 1% lower than the sequential quarter, okay, just 1%. The revenues are actually INR 8,100 crores, which means it's roughly 30% lower, but the margins have actually not deleveraged that much at all. That has been possible for the reasons of, you know, the, the efforts that the company has taken, the pricing that the industry has been able to do, the company has been able to roll out, the cost in the material side that has come off, and we are also able to rein in our overhead so that you can see the, you know, the benefits of it coming. If the industry were to continue, you know, there are a lot of things. Why do we say industry? It's not because the company is not making it. Company will always attempt to perform better than industry in all fronts, whether it is on products, whether it is on, you know, market penetration, market share, pricing, et cetera. If the industry were to continue that, I think that we would not need to now have much saner pricing to customers. I think Q4 profitability can be significantly enhanced from the Q1 levels. What it is, we'll have to wait and watch. No, fair point. It was more of a directional thing I was trying to understand. Yeah. One thing I think you need to keep in mind that last year. You know, I mean, if you look at our last six or seven years, we went through two migrations on emission norms, BS3 to BS4 and BS4 to BS6, right? That built up our cost significantly. Then you know that we had this unprecedented inflation for about six to eight quarters in FY 2021 onwards, right? That increased our material cost as a percentage of sales tremendously, you know. We were like in BS3 era, roughly around FY 2017, FY 2018, we were still around 69% in material cost as percentage of sales, which actually went up to, like, roughly around 78% by FY 2022 in just a span of six years. Inflation and two migrations on emission norms, right? What was good about last year, as you know, that industry had a major tailwind coming out of COVID and coming out of other factors. Last year was a kind of a typical year where the industry grew 48% in trucks, even in heavy duty trucks and even in LCVs. On top of that, there was a kind of a very strong price realization benefit that also happened, right? Just keep in mind that those two things would not follow the same path, right? The industry, we are not saying industry will going, again, grow by 48% in MHCV, we are saying 8%-10%, right, on last year's base. Price realizations would be, would not be to such a high extent, right? You know, most of the effort going forward, although I'm not saying we will not increase the price, we have increased the price in Q1, and we'll look at other opportunities whenever they come in. The effort, I think the focus would be now onwards, more on cost reductions, that how we can, you know, reduce our cost, how we can look at value engineering. Because of these two migration changes, you know, we have a lot of product, new product, new aggregates that have come into the picture, right? Whenever there is a new aggregate, new design, there is a good opportunity to look at value engineering there, right? I mean, those are the things that we are more focused on. The last year was a different year. This year would be different factors that would play out. Yeah, thank you. Thank you very much for the elaborate answer. All the best. Thank you. Ladies and gentlemen, we take that as the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you. Hello, Shenu, sir. Would you like to make some closing comments? Yeah, yeah. Thank you. Thank you. Thank you once again, ladies and gentlemen. Q1 has been good for Ashok Leyland in terms of MHCV market share gains and margins. Even on the LCV front, we had a gain in our market share. Overall, a good run continued in Q1 for Ashok Leyland. Contribution from defense, LCV, aftermarket, and power solutions was also very supportive in the overall performance. Revenue mix was also very favorable. Price recovery and cost savings went as per our plans, and we are quite satisfied with those. With the robust economic growth outlook as well as the increased outlay on infrastructure, we expect a good demand situation going forward as well. Softness on commodity cost is expected to continue for the subsequent quarters, which should help with our margins going forward. Given this backdrop, we hope to continue with a good run, both on margins and on market share. Thank you again for the interest shown in Ashok Leyland. Thank you very much, sir. Thank- I would now like to. Thank you, sir. Mr. Joseph George, for your comments. Over to you. Thank you, Michelle. Thank you, everyone. I would also like to thank the entire management team of Ashok Leyland for taking out time. I would also like to thank all the participants for joining in. Thank you. Thank you very much. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference. We thank you for joining us. You may now disconnect your lines. Thank you.