Ladies and gentlemen, good day, and welcome to Ashok Leyland Q1 FY25 earnings conference call hosted by BNP Paribas Securities. 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 presenter, after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kumar Rakesh from BNP Paribas. Thank you, and over to you, sir. Thank you, Del. Good evening, everyone. On behalf of BNP Paribas Securities India, it is my pleasure to welcome all of you to the conference call to discuss the first quarter results of financial year 2025 of Ashok Leyland. To discuss the results, we are joined today by Mr. Dheeraj Hinduja, Executive Chairman, Mr. Shenu Agarwal, MD and CEO, Mr. K.M. Balaji, CFO. I will now hand over the call to Mr. Hinduja for his opening remarks. Mr. Hinduja, over to you. Thank you. Good afternoon, ladies and gentlemen, Ashok Leyland's Q1 FY 2025 earnings call. At the beginning of the year, there was widespread anxiety that the CV industry in Q1 and Q2 of the year might be low, owing to the impact of elections and other factors. On the contrary, the M&HCV industry volumes have grown in the first quarter by 10%. The M&HCV T IV in Q1 is now very close to the previous peak volume in Q1 FY 2019. Ashok Leyland's M&HCV volumes in Q1 also grew in line with the industry growth, resulting in retention of our market share at roughly 31%. While the LCV industry has remained flattish on a year-on-year basis, Ashok Leyland volumes have grown more than the industry to register an increase in our LCV market share. Our domestic LCV volumes in Q1 stood at 16,345 units, which is 4% higher than the same period last year. Q1 and FY 2025, in fact, has been a record quarter for Ashok Leyland. Our total commercial vehicle volumes in Q1 have hit an all-time high of 42,893 units and are up, and are 6% up as compared to the same period last year. Our CV export volumes have also grown by 5% in this quarter. Our revenues in Q1 have also been ever highest, growing at 5% over last year. Our EBITDA has grown by 11% to reach INR 901 crore. Our PBT at INR 701 crore is also at the highest so far in Q1 and has grown by 13% over the same period last year. Whether it is CV volumes or revenues or EBITDA margin or PBT, we have achieved all-time high numbers in Q1. You may like to note that during Q1 of last financial year, we had to restate the deferred tax liability as per the new tax rate, leading to a one-time reversal of tax liability of INR 172 crore. But for this reversal, our PAT for Q1 FY 2025 at INR 526 crore is also the ever highest. Our EBITDA margin is at 10.6% in Q1 FY 2025, up from 10% in Q1 of the previous year. This reflects our continued focus on better price realization, efficiency in sourcing, and better revenue mix. Other expenses have gone up due to a one-time expense incurred towards development of centers of excellence for battery packs, electric drive units, and software-defined vehicles. Material costs as a percentage of revenue is now at 72.2%, which is 1.5% lower than Q1 of last fiscal. Steel prices remain softer, and our efforts on cost saving continue with even more vigor. The growth in defense as well as in spare parts, both of which are higher margin businesses, also contributed to better profitability. Power Solutions volumes were lower than last year by around 20%, owing to pre-buy that happened in Q1 of last year due to emission change announcements. On a full year basis, we expect this business also to register healthy growth. Our net debt as of 30 June 2024 was at INR 1,295 crore. Going forward, we are confident of increasing our market share in both the truck and bus segments. Our product pipeline is very strong. You would see a host of new product launches from Ashok Leyland this year, which shall help us beef up our market and price position. Some of the export markets, which have been subdued for the last 2 years, have started showing early signs of growth. This should help us further in growing our international business volumes. Our focus on profitability remains. We are clear that we are not going to discount our products to win market share. Our market share wins will come on the back of our product superiority and our ability to deliver a delightful after-sales experience to our customers. The record financial performance of Q1 FY25 gives us even more strength to move towards our midterm objective of achieving mid-teen EBITDA margin. ... Switch and OHM are progressing well. We started delivering our first ELCV, the IeV4, in the market, and are receiving an excellent customer response. A few days ago, we launched our second offering in the ELCV space, named IeV3. Both these vehicles are segment first, and have the potential to transform the last mile mobility in the country. OHM, our E-MaaS subsidiary, is fully activated and is now managing electric bus operations in Bangalore, Ahmedabad, Bihar, and Chandigarh. Ashok Leyland's balance sheet is strong enough to support funds requirements of both Switch and OHM. Ashok Leyland's strategy is fully aligned with its sustainability commitment, net zero by 2048 and carbon neutral by 2030, as well as touching 1 million lives through our Road to School and Road to Livelihood programs. We have made good progress on the battery electric vehicle, alternate fuel vehicles, both in MLCV and LCV segments, to push the overall decarbonization agenda, and are running several customer pilots with leading industry participants. In FY 2025, Ashok Leyland is pushing ahead on its sustainability journey across operations, product development, dealers, and supply chain partners. Our ESG initiatives have been recognized by international ESG rating agencies at 13.4, which is considered low risk. We continue to remain optimistic about the CV industry prospects. Most macroeconomic parameters are favorable. Monsoon is likely to be good. The recent budget has provided for a flurry of robust economic measures. All this augurs well for the future of the CV industry. I now hand it over to the moderator for your questions and answers. Thank you. Thank you. 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. The first question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead, sir. Hi, good evening, and thank you for taking my questions. My first question is related to some of the product pipeline commentary that was given by Mr. Hinduja. Just trying to understand, I think this year, I mean, last year, this time, you, you'd mentioned that you're working on a 0 to 2 ton sort of LCV launch, and I think last quarter also you'd mentioned that back half of this year the company expects to launch more LCV products. So just keeping those two comments in mind, just trying to understand how the LCV product launch pipeline looks, and then potentially when you think you can enter the 0 to 2 ton category in LCVs? Hey, Chandramouli, thank you for that question. Yeah, we have been saying that, LCV, on LCV business, we see a very high headroom for growth in future, because you all know that we are covering only 50% of the market right now, and our intention is to grow to 80% addressable market in the near future. So this year we have lined up 6 launches in the LCV segment. A couple of those have already been launched in Q1, although the impact of those launches is yet to be seen because they have just recently been launched. We will be launching 4 more LCV products in the next few quarters within the year. As far as the sub-two ton segment is concerned, that is, a bit more medium-term project, so it is not going to be launched this year. But we are finalizing our approach on the sub-two ton as to what kind of product we would like to launch. So as and when that is clear, we will come back to you on that. But other than LCV, also there are a host of product launches that we will do. Specifically, on the bus side, as we have been saying, that while we are the leader in the overall bus market, but our bus market share on the ICV bus side is not as high as we would like it to be. So we are still kind of under 20% on the ICV buses, and therefore, in that segment, both covering school segment as well as the staff segment, we will be launching some new products, this year. Of course, other than this also, there are some other products that would get launched, but yes, as Dheeraj said, we have a very strong pipeline of, new products, that market will see in the coming quarters. Got it. That's helpful. My second question is just around the age of the fleet of CVs in the market. We've had a lot of news flow over the past five years around potential scrappage policy implementation. During COVID, pace of replacement demand slowed a little bit. Just trying to understand roughly where you see the current age of the fleet versus long-term averages, and how you think about replacement demand in the CV industry going forward. Yeah, you know, Chandramouli, as we have all seen, that, you know, you know, the aging of fleet is at its peak right now. We have never seen such a kind of aging happening in the CV industry. I think the number is close to 10-11 years. I think average aging in the industry has always been 7-8 years. Yeah, so there is this huge replacement demand potential that is available. Now, how that will unlock, of course, depends on lot of factors. But yes, I would say that in the next 2-3 years, this should unlock, and therefore, we are very positive, not just for this year's industry growth, but also for FY 2026 and FY 2027. Got it. Lastly, just a clarification on the HLFL potential reverse merger into NXTDIGITAL. Just trying to understand, you have spoken in the past about Hinduja Housing Finance and Hinduja Leyland Finance. Just trying to understand, in this reverse merger, do we expect the housing finance entity and the Hinduja Leyland Finance entity to be reverse merged, or is it just Hinduja Leyland Finance that we're looking at sort of reverse merging into NXTDIGITAL? The housing finance is 100% subsidiary of Leyland Finance, and Leyland Finance is the one that is being reverse merged into NXTDIGITAL. From a holding perspective, the new entity will be holding housing finance as well. Got it. That's very clear. Thank you very much, and all the best. Thank you. Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead. Hi, good afternoon, sir. I just wanted to ask for your thoughts on growth rates that you expect or the outcome that you expect for both M&HCVs and LCVs for this year. Now, some of the headwinds which were there, as you mentioned, are out of the way. So has the demand environment improved, and also, how is the pricing environment, so that was the first question. Yeah, Kapil, thank you for that question. You know, before the year started, as we all know, most of the research agencies were forecasting a very grim scenario for the CV industry, especially for H1. And I think it was more coming from the fear of, you know, the impact elections would have. And also, there was some unpredictability about the monsoon at that time. You know, some of the research agencies said even, even said that the industry might degrow by 10%-15%. But now I think Quarter One, where M&HCV has grown by 10%, has negated that philosophy. I think there is a positive narrative that is building up. I think some of our peers have also come out who were earlier quite conservative about the industry, but now they have come out, and they are also saying that, you know, there are good prospects of CV industry for the year. You know, so if Q1 is good, I think, Q2, we are already seeing good momentum on the ground. In any case, I think the general consensus was that H2 would be a positive growth. So given all this, we are quite optimistic. We think, you know, at worst, industry would be flattish, but we can also expect, some kind of a growth in the overall CV industry as well for the whole year. As far as pricing is concerned, I think we have been very consistent in our approach on pricing. You know, we are very clear that we are not going to discount our products to win market share. Our market share will have to come on the back of the strength of our products and our ability to provide a good experience to our customers. So I think that kind of, again, that kind of a narrative is building up in the whole industry. I think everyone is realizing that any gain in market share due to any short-term measure is only temporary. So I think it is helping the whole industry, and we would at least like to continue with the same approach even in the future. Just adding on to what Srini said on your first question, as you are all aware, Q1 generally is a slower quarter for this sector. Considering that shown growth and the on-ground demand still seems to show good signs of growth, it does seem the next three quarters should continue the momentum. Thanks, sir. That's great to hear. Second, I just wanted to also check on electric vehicles. You mentioned there is a strong response to the new launch. So if you could elaborate a little bit, like, what, what is the viability of electric vehicles in LCVs that you are observing? What type of customers? What is, what are the customers saying, on, you know, adoption of electric vehicles in LCVs? Also, if you can talk of some roadmap of approval under PLI and what is the profitability of electric vehicles at this point of time? In terms of the LCV, look, we launched the IeV4, it's been close to three months. As you're aware, throughout the country, there is no clear infrastructure that has been set up. So at the moment, the sales are happening more on a B2B basis for e-commerce companies and logistics companies. And, many multinationals who have their, own commitment to Net Zero are insisting that even the last mile delivery should be on electric product. So numbers are very small. So far, only one of our, peer groups has introduced one product. We've now introduced two, and, we do feel that the numbers will start picking up. Of course, what will help, is if BS3 commercial vehicles are included as well. ... that should add additional momentum to this. But irrespective of that, there is a slow transitioning, transition happening towards the ELCV segment. As far as, so your second question was? Adoption and PLI. Oh, adoption and PLI. Well, look, AL has been part of this PLI, and we are working towards through the investments that we're making. It is a five-year process that we're going to be going through. So as of date, there is not much further detail that I can provide to you, except that, yes, you know, like some of the other OEMs as well, we are very much part of this PLI scheme. So my question was more on, you know, product approval under the PLI, you know, the certification, where are we in that process? Yeah, Kapil, that is not a problem. So we are meeting all the requirements of the PLI as well as for FAME III, whenever it is announced. That approval process is already under control. I think if you're asking whether in terms of the localization requirement- Yeah. Then, yes, we are meeting those. Yeah. Okay, so we are hoping to get the certification and be eligible for PLI incentives sometime this year? No, so see, FAME III is something that we would be eligible for right away. As soon as the scheme is announced, we would be participating in the FAME III scheme. PLI, as you know, is based on a five-year horizon of investments, right? So that would take, like, that is more of a medium-term kind of program, right? But in the short run, definitely we will be ready for FAME III again when it is announced. Sure. So just one last thing on EVs, while we are at it. On electric buses, if you could also share your outlook? So we are definitely seeing more and more orders coming, and during this financial year, Switch has an order book of 950 buses for Delhi, and... Sorry, 560 for Delhi up to March 31, 300+ for Bangalore, and another 100 for UP. And, after April, we have an order for another 400 for Delhi as well, and we are participating as new product introductions are coming, a new 9-meter, et cetera. So we are participating in more tenders as well. So generally, we are seeing, you know, more and more states shifting towards electric buses. The speed seems to be much faster than we had originally planned for. Okay. That's great to hear. Thank you very much. Thank you. Thank you. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead. Hi, team. Thanks for the opportunity. Three questions. Firstly, in the opening remark, we talked about one-time expense and other expenditure relating battery pack software. Could you quantify that, and is that sitting under the standalone financials? Yeah, it is sitting in the standalone financials, Binay. Quantification will be a bit difficult because these are all one-off expense towards advanced engineering towards setting up of the center of excellence for the battery pack, electric drive unit, and the software-defined vehicles. And these are all of the revenue nature. So in a way, some of the EV investment is sitting under standalone also, right? So it's not entirely going into- Uh. Not the expenses done by Switch. No, no, no. See, you should understand, these are all related to the truck side. If it is for the bus and for the light commercial vehicles, then it will go to the respective company. If it is for the truck side, then it will be with Ashok Leyland. Yeah, let me just explain this a little bit more. You know, so far, you know, our journey on the electrification of vehicles, whether it is the medium and heavy-duty trucks in Ashok Leyland, or it is buses or electric or light commercial vehicles on the Switch side, you know, has been mainly focused on integration of the products and building a good product for the market. But you are all aware that Ashok Leyland, or for that matter, most of the other players, are right now just focusing on integration of the product, which means that we are relying a lot on our supplier partners, on their designs, you know, and buying sub-assemblies or components from them to build this product. Now, since we have a very good range of electric products, both on Ashok Leyland and Switch side, now in the second phase, what we want to do is, we want to go deeper into our technology capability, and that is why we are now setting up these three centers of excellence. Like Dheeraj said, one of these would be on battery pack and modules, the other would be on the electric drive unit, and the third would be on software-defined vehicles. So software, EDU, and battery pack, these are the three main ingredients of any electric vehicle. And now we are setting up these, these centers of excellence so we can get deeper capability into the technology behind the electric vehicles. So that is basically the intent, you know, going forward. Like, for, you know, internal combustion engines, you know, one would kind of invest in the capability of designing engines in-house. So this is on a similar nature, what we want to start now for electric vehicles. ... Right. And the reason we called it one time is because it's only coming in this quarter and won't repeat. Right? Because this sounds like an operational expense- Yes. That's why you called it out. Yeah, that's the kind of operational expense we would be investing more, but that would be in the nature of CapEx. So CapEx, of course, would be, if it is for buses and electric light commercial vehicles, that would be in this mix, and if it is for trucks, that would be in the ratio here. Oh, perfect. Team, secondly, you know, like last year, in fact, in your opening comment also, you added that defense and spares, high margin businesses. We had a very good FY 2024. Could you give a little bit, some color on the number for first quarter and the outlook for FY 2025, in particular for defense and spares? Defense revenues have been quite good in the first quarter of the current financial year. Especially, the number of defense vehicles which we have sold in this quarter is quite high. It is at a record high of—it has crossed 1,000 vehicles, I would put it that way. In this quarter, compared to 250 vehicles last year. And the revenue has also gone up accordingly. Revenue has gone up almost 3 times compared to the same period of last financial years. And on the spare parts business, the revenue has gone up quite significantly. It has gone up by about 12.5% overall. So, for defense, like- Yeah, that is- In defense last year, the numbers had almost doubled. So this year also, you are expecting in that sense, though, looking at these numbers, a 30%-40% kind of a growth, at least on annual basis. Yeah. So on defense, you know, as we have been saying in the past, not only that we could double or more than double our defense business last year in FY 2024, but our order pipeline is also very, very strong. And this has been the result of lot of, you know, effort on the product side that we have made over the last several years. So now our intention is to double the defense business again in the next 2-2.5 years. Great. Great. And sir, lastly, any number on investments for the year? Like in the last call, we had given a number on CapEx for FY 2025, in the range of INR 500 crore-INR 600 crore, but any view on investment number for FY 2025? That's it from my side. Thanks. Investments in the first quarter, we have not done any investments. On the CapEx side, I would say that we will retain our earlier estimate that Shenu had indicated earlier. It could be around INR 750 crore on the investment side. On the CapEx side, we will let you know. In case if there is anything, we'll let you know. As of now, there does not seem to be any major investment in the CapEx. Maybe for the full year, I mean, it might happen, but we do not know the quantum now. It could be around another INR 500 crore-INR 750 crore of the investments in the associate companies, primarily Switch and HLF. But we will let you know in case if that happens. Great, team. Thanks for that. Thanks. Thank you. The next question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead. Yeah. Thank you so much for the opportunity, sir. So in month of July, as per the one, we have seen good growth in the M&HCV segment. And, I mean, last quarter, we have seen a good demand from buses also. Just want to understand, how do you see the recovery of the cargo segments? And also, if possible, can you provide some update on the, how is the sub-segments growth, like the ICV and LCV and heavy commercial vehicles? Yeah. So, just on the medium and heavy commercial vehicle side, you know, it is true that while the overall industry has grown by 10%, the buses, the contribution of buses has been the maximum. I think buses have grown like 50% or so. The truck growth has been little bit muted in quarter one. I think we had negative 2% or 3% growth in the overall truck segment, but that was mainly, you know, because of downturn in the tipper segment. As you know, the tipper segment really got affected because of the elections, because lot of projects kind of got stalled and, you know, infrastructure projects got stalled. Even the new projects were not coming up because of the code of conduct and all that. Yeah, but that was a very temporary phenomenon. So from July or August onwards, we think even the tipper segment would start flourishing. Actually, I was in the market, and I met several customers in the construction and mining segment, some of the last, and I think there is a very positive pulse on the ground as far as tipper segment is concerned. So with the tipper segment coming up, the cargo segment also should start growing, we think maybe August onwards. Just on the sub-segment, with the heavy commercial vehicle, and how do you see the heavy commercial and the LCV growth, sir? Listen, so tractor and ICV has been growing very well. You know, even in quarter one, tractor has outgrown every other segment. You know, we have seen this trend, from multi-axle vehicles, that market, the demand is shifting to tractors, and there are a lot of reasons that we all know behind this, and this has to continue. You know, if even if you look at, you know, some of the markets outside India, you know, whether it is Europe or or any other market, in fact, you know, tractor trailer demand is up to the level of 60%-70%. In India only, it is, still, I mean, at 20% after having grown so rapidly in the last couple of years. So tractor trailer demand will definitely continue to increase, in the future. Construction and mining, as I said, would also increase, and ICV should also increase. I think the only segment that could show some kind of a degrowth will be multi-axle only, because that demand is continuing to shift to tractor trailer, as I just explained. Got it, sir. So on the margin side, is there any impact of the commodity prices in this quarter? I mean, this quarter, slightly, the gross margin has come down. Is it mainly due to the adverse mix? Actually, margins, we normally what we do is that we make necessary provisions on the commodity costs based on the trends. And the trends are, I mean, basically, the ones which are known from the market, and our sourcing head he recommends. And what happens is that we settle this after a lag of a quarter, and once the we cannot book this amount in the accounts at the time of settlement, so we take provision in the books of accounts a certain quantum as recommended by our sourcing head. So we go in that, and that will also be offset by the savings which we get by way of a lot of internal cross-functional initiatives covering value engineering, resourcing, turnover discounts, commercial negotiations, and share of businesses. So all these put together, it is a regular ongoing process which will continuously occur every quarter. And we do provide. Depending on the situation, we do provide, and it goes commodity-wise also, covering steel, spring steel, aluminum, then castings, forgings, as well as rubber. So all these are factors. Okay. Just lastly, sir, on the other expenses, as per the annual report, this category line for service and product warranties have seen a notable increase in FY 2024. Can you explain the reason for the increase, sir? Warranty expense increase in FY24. Oh, okay, warranty expense you mean? Yeah. Service and product warranty line items there, sir, in the part of other expenses. Yeah. So, yeah, so you know, we had, last couple of years, I don't remember the exact date, but we had extended our warranty period itself. You know, so I think earlier we were 3 years or 2, 1 + 2, maybe, + 2 years. 2 + 2, and then we extended it to 3 + 2. You know, so some of the vehicles are now getting into that third-year category, which earlier we did not have. You know, so warranty expense has kind of increased a little bit because of the warranty policy. But yes, I mean, as you know, I mean, the extra cost of warranty is being kind of nullified through various price increases, et cetera. Got it, sir. Thank you so much for this. Thank you. The next question is from the line of Pramod Kumar from UBS. Please go ahead. Yeah, thanks a lot for the opportunity. This is for Balaji. You talked about the Center for Excellence and the EV-related investments. I just want to clarify, would you call it as a material expense this quarter? Because your other expenditures shot up, like, 17%-18%, which is typically very high, given that volumes have not been much of a change. So would you call the expenses provisioned or expenses spent, sorry, as a material number? No, no, no, Pramod, these are all the expenditure relating to R&D. R&D materials are also booked under R&D expenditure only, which will form part of other expenditure. Yeah, that's what I'm asking. Uh- Is it? No, no. When I say, sorry, Balaji, just to clarify, I'm saying, is this a meaningful expense? I use the word material in that context. Is it a immaterial small expense, or is it a meaningful expense, what you have accounted for this quarter? No, it is a meaningful expense. It is a meaningful expense. That's why it is also being stated by our chairman in the, in his opening remarks. Okay. And, following up on the expense line items, given that the mix has generally been good, your non-vehicle revenues have also done well, difference is high margin. The sequential movement in commodity prices is, or RM to sales is slightly as it, it's, it's kind of, adverse. So is it fair to assume that, you're, you kind of, are being conservative here as a management on the provisioning for, raw materials, as you, as, as, which you were talking about in the answer in the previous question? Because steel prices are generally, started to see some cool off, even other commodity prices are not hardening. In fact, there is some correction only. I'm just trying to understand, by when do you take a call on the actuals and then, when if any excess provision done, when does it reverse out? As if you look at it sequentially, now we get lot of, as I indicated, we use lot of levers in bringing down the cost by way of value engineering and resourcing. In Q4, we got lot of turnover discounts, and then we got lot of savings by way of commercial negotiations, which will not be available in this quarter. So consequently, this adding to the provision, as I had answered in one of the for the earlier queries. ... all this, you know, will make appear as if the metal cost is slightly higher compared to the last quarter. Of course, mix also plays a very important role. We're still kind of optimistic on having a full year margin, which is reasonably higher than the previous year, towards our journey towards the mid-teen margin? Yeah, yeah. Definitely, I think we should expect that because, because, we think the industry is going to actually do better than, even our expectations. You know, so if that momentum continues in Q2 and then H2, in any case, so has always been optimistic. So, you know, we will have that operating leverage. Even on the cost side, you know, we still think we have a lot of headroom, so there is quite a rigor that is inside Ashok Leyland to attack the cost in several different ways. And on the commodity side also, we are not expecting any hardening really, at least in the next two quarters. Yeah. So we think we should be able to do better on the margin front. And lastly, I would also say that our intention is to kind of, you know, get better realization on our products. So some of these new products which will get launched will also help in our pricing equation in the market. Great, Shenu. And, Shenu, for just on the industry side, you talked about the average life already stretching so much. I just want to understand, when you talk to fleet owners and people in the industry, what is kind of holding them back? Because big part of this fleet is really aged, has lower tonnage, lower fuel economy, even it's kind of difficult in terms of tracking and monitoring movement and fuel usage, everything. So what is holding them back from replacing at least those seventh and the eighth year trucks? I can understand the BS6 trucks not getting replaced in a hurry because you are extending AMCs, which are, like, five, six years. So till that, I don't think they should kick in. But what about the earlier trucks, especially the used trucks, which kind of came into the industry post-COVID, by, which were bought by large fleet owners? So what's the feedback what you get, or what is holding them back from purchase? Is it, like, interest rate cycle, where we are, or utilization rates are not that great? And also, if you can talk about industry-wide utilization, where do you see that? Yeah, Pramod, very good question. So see, we are in touch with, of course, you know, most of the fleet operators in the country. And, you know, the, I think, I think there is nothing really holding back other than the fact that, you know, the prices of commercial vehicles have really jumped, you know, in last 3-4 years. Yeah, so that mental shock that happened in, like, when we transitioned from BS4 to BS6, is kind of, you know, taking time for people to kind of take a decision on replacement of their fleet. You know, so the way it happens is, you know, although the resale value, you know, is also quite upbeat, you know, the resale demand is also very, very positive for commercial vehicles. But then still, you know, if somebody has a fleet of BS3 or BS4, and at the price which they bought versus the price they are getting now in the secondary market, and when we compare it to the price of BS6, you know, so that is, that difference is, you know, just needs to be absorbed over a period of time. I think there is nothing else. If you look at the freight movement, you know, we look at the billion ton kilometers, you know, we look at the freight demand, you know, in absolute sense, or we also, when we look at the freight rates, I think all those parameters are good. I think, as the country progresses, as the economy grows, you know, all this replacement demand will have to happen. Will have to convert into new sales. Because, I mean, you know, these, some of these products are already into, like, 12, 13, 14, 15 years, right? I mean, they can't hold up forever. So that decisions will have to be taken by most of the fleets. Just to give a perspective on the volumes, roughly, you know, on the MSC truck side, there are about 37 lakh vehicles which are there on the road. This is from BS6, BS4 and below. And in this, if you look at the vehicles which have been sold in the last four years, predominantly BS6, that constitutes 10 lakh vehicles, and that roughly constitutes 27% of the total, fleet, fleet size. And the vehicles which are sold between 2017 and 2020, roughly, that constitutes 8.5 lakh vehicles, that is around 23%. So which means that BS3 and below constitute 50% of the total, vehicle population of 37 lakh cars. And the average age of that, between 8 and 15 years, that roughly constitutes 11.2 years. If, as Shenu explained, all these vehicles will have to gradually come for replacement in the year time to come. Fair enough. Fair enough. Thanks a lot for that. Very useful. Best of luck. Thank you. Thank you. The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Yeah, hi. Thanks, team, for taking my questions. Most of my questions have been answered. Just quick follow-ups. On the Hinduja Leyland Finance, can you sort of give us an update, as you know, on the timelines, when do we expect the restructuring to conclude, and what are the pending processes? And also, if you can sort of give an update on where things stand from an operational perspective, you know, how should we think about the value of that business? From the operational side, I will tell you, Gunjan, the asset under management for HLF is INR 40,000 crore, and for the HHF, the housing finance division, it is about INR 11,500 crore. So, both these put together, it is around INR 5,600 crore. ... that's the size. And, if you look at INR 51,000 crore, INR 51,500 crore, and, if you look at the profits, in revenue and profits, it is at INR 1,377 crore of revenue with a 10% of INR 130 crore of profit. Okay. And share the net worth, if I recall, is close to about INR 7,000 crore in the business, right? Yeah, this is for first quarter. Yeah, but these numbers of revenue and profit are for the first quarter, just to clarify. Okay. And timelines for the restructuring, where are we there on that? They've been going through all the necessary approvals, and at the moment, it is indicated that it should happen before the end of March. So before the end of this financial year, is what is the indication given. And, you know, just from a business concentration perspective, now, Leyland, you know, the vehicles would, you know, account for how much, you know, percentage of AUM or any color you can say, give on the business diversification on the NBFC? Yeah, I mean, the business has now become fairly diversified. It is, it's operating across all vehicle categories, including used vehicles as well. The Ashok Leyland business today would cater to less than 25%. Okay, got it. This is useful. The other two things which I just wanted to get your thoughts on, was, the DFC. I think you do call out that this is now close to commissioning in fiscal 2025 in the annual report. So, you know, just trying to get your thoughts, how should we think about impact of that in, you know, in the next two or three years? That's one. And secondly... Sorry, go ahead. No, I'm sorry. Go ahead. Go ahead with your question. No, no, it's okay. I, that's another topic, so maybe, you know, we get this passed. Okay, Gunjan, yes. So DFC, you know, I mean, so far it has not really impacted it a lot, although we are hearing about it in the news quite often. We have ourselves done quite a deep study as to how it will operate and it will impact. I think it is a more medium-term phenomenon, because I think, I mean, DFC is a good concept, but a lot needs to be done around it, you know, in terms of looking at the whole logistics ecosystem that needs to be developed around, around DFC. Yeah, so to that extent, I think it will take more time, although it might in the long term, it might impact, medium heavy-duty, or largely heavy-duty trucks, but it will also give a lift to the medium duty and light commercial vehicles. A lot remains to be seen, but, we don't think there will be a major significant impact in the next couple of years. Okay, got it. And last question was on defense. I know, Binay asked earlier, but if you can spell out what's the order book in terms of values, if, if at all you can share that, and also the revenue for last year in terms of, you know, what I see is the vehicles, but if you can share the value of defense contribution for fiscal 2024. Gunjan, I'm sorry, but we don't, we have never revealed that number of, defense. But we can assure you again that, like I said earlier, that we could double our top line on defense last year in FY 2024, actually more than double. And now going forward, based on a very strong pipeline of orders and visibility of the orders that can come in, we hope to double that number again, in the next two years or so. Okay, got it. Thank you so much. Thank you. The next question is from the line of Mukesh Saraf from Avendus Spark. Please go ahead. Yeah, good evening, and thank you for the opportunity. My question is, you know, on your engines, what I noticed is that most of the vehicles come with a 250 horsepower engine. And obviously, we are seeing a clear shift towards high horsepower vehicles, and also your commentary suggested that we will see more and more shift towards tractor-trailers and larger vehicles. So how are we placed in the future, say, we require 350 or 400 horsepower engines? You know, how are we placed there? Have we started doing some work towards developing those products? Because we do have one 300 engine, if I'm not wrong. So, do we look, we looking at some tie-ups in the future, or we kind of can develop this on our own? Yeah, Mukesh, you know, the capability of Ashok Leyland on the engine side is really very, very strong. You know, we have more than three or four different families of engines. So it is not that we do not have technology to, to go beyond 250 horsepower, where we are today. Definitely, we have the technology and the capability to produce those engines. So there are programs running, you know, to extend the higher horsepower, range in our products through our own engines, so there is no need of any tie-up as such right now. Okay. We can easily go up to, I mean, we can go easily up to 350, but we can go even beyond that whenever the market requires. But your observation is right, that I think the value of the market in some of the segments, which is at 200 or 250 right now, should continue to move upwards. And I think, the next value, especially in the tractor-trailer segment, around 280 or 300 horsepower. But we would be ready with it. We have programs going on, even with our, within our current engine families, we have the capability to go much beyond where we are today, right? Right, right. Would this require large investments from our side, or this is like an ongoing thing that we have anyway been doing? No, there would be some investments required, but nothing of a large nature, because as I said, you know, we already have a platform, engine platform. We call it internally A6 platform, which is a six-cylinder, very modern engine. So that platform already has capability to go up, go much over 300. You know, 350 also we can go easily. So we are- Okay. Running those programs depending on the need of the market, but no large, very large investments. Of course, some investment will be there, but nothing of a significant nature. Got that. Got that. Thank you. Second one is on your employee cost this quarter. Kind of it's been flattish now. The average number has been maintained at around INR 550 crore that we were even last year. Yeah, yeah. So, any settlements or any, anything coming up which could kind of, you know, lead to this going up significantly? Or should we kind of assume it will remain, at this ballpark? It is actually the manpower cost. It contains both the wages for the associates as well as the salaries for the executives. Between Q4 and Q1, that's not much of movement. See, our increments and our promotions are effective first of July. We will see an increase happening in the- Coming. in the coming quarter. This will be there for the next one year, till the first quarter of the next financial year. Okay, got that. So we haven't assumed any of those increases in this first quarter and provisioned accordingly? You are right. Okay. All right. Thank you so much. Thank you. The next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead. Hello? Yeah, hi. My question pertains to one is the commodity side. So you alluded to the fact that you're not expecting material increase in commodity prices, but we have provided for some increases in 1Q. So from the provision in 1Q, we should not see material increase going forward. Is that the correct understanding? Jinesh, again, this depends on case-by-case basis. That is, for each commodity, the stand would vary, and it will also depend on the outlook for the commodity as well as, Sure, sure, sure. Details of the discussion with the vendors. So there's a lot of combination of factors involved in it. But as of now, it appears, as Shenu indicated, it appears that we may not go for any provision in the next quarter. Got it. And secondly, what kind of price increase will be took in 1Q and in July so far? We have not taken any price increase in the first quarter. Uh- But in July also, we have not taken anything so far. So far, that's the status. Okay, because your peers have taken price increases in July and in April as well. So how do we think about the price increases within the current environment? Jinesh, we can only talk about our sales, and I clarified that we have not taken any price increase. Sometimes what happens is we might take a price increase, and to that extent, there could also be an increase in the discount, resulting in the net sale revenue being same at the same level. So we will never know that. But I can only clarify from our side that we have not any taken any price increases, neither in Q1 or in Q2 till now. Hello? Hello, I think Mr. Jinesh has lost his connection. We will move on to the next question. The next question- Yes, good, got it. ... is from the line of Joseph George from IIFL. Please go ahead. Hi. I have a couple of follow-up questions. One is on the industry. You mentioned that, you know, you saw about 10% kind of a growth at the TIV level. That obviously was on a low base, because last year we had the, you know, negative impact of the pre-buy. So I wanted to just get a clarification. I thought you also mentioned that you expect the M&HCV industry to be flat or see a small growth this year. Is that right? Sorry, on the M&HCV industry, what we said is that, you know, in the worst case, it might, we might see a flattish year. But going by the Q1 and considering Q1 is normally the slowest of the quarters, we do feel that the growth momentum should continue this year. Understood. And the second follow-up that I had was, in response to the question on pricing discipline. You mentioned that you are not looking to, you know, gain market share, with pricing, but could you also talk about the behavior of your peers? Because, I understand that last quarter there was some, you know, disruption by one of the players by cutting list prices, et cetera. So if you can just, give some color on, the, pricing discipline by peers. ... Yeah, Joseph, we don't want to comment on the peers, but we are very clear, you know, as Dheeraj also said in his opening statement, we are clear that we are not going to cut prices to win market share. We know very well by now that these short-term measures don't last much and don't give a permanent impact. So we are very, very focused on building strength in our product portfolio and expanding our reach. I mean, you know, I mean, there are normally, you know, various kinds of announcements in the market. I think some of those are also of tactical nature, so I would suggest you take a deeper look into those announcements. Sure. Okay. Thank you. Thank you. The next question is from the line of Aditya from Sowilo Investments. Please go ahead. Thanks. So, thank you for the opportunity. So my question was, I mean, on part of the DAC that was answered, but, what about this mandatory AC, which is gonna kick in, say, in the future? How do you see that impacting? Like, would people, preempt the purchases before the norms kick in, or what kind of effect that is going to have? And the second question is on, I mean, there have been reports of increasing profitability in the fleet operators and, you know, that, has helped, pricing discipline in the industry. But, any, any, like, adverse effect over there, do you... How do you see that affecting volumes as well? Yeah, Aditya, so, on the mandatory air conditioning for commercial vehicles, I think that is not going to impact much in terms of pre-buy, because the cost increase would not be very high. In any case, you know, our guess is like about 20% of the trucks getting sold have already ACs in them, right? So the balance, 70%-80%, there would be some cost impact, but it would not be of significant nature. And I think there is a fairly good understanding in customers' mind also about that. Now, profitability of fleet operators, yes, it is on a rise, and we have all seen the data coming up, coming out on that front. It is helping, you know, pricing discipline. The way, you know, the country is going, the way economy is going, you know, the way budget has been with higher allocations on road, highways, infrastructure, et cetera, you know, I think, I mean, we don't think that it should in any way affect the profitability of the fleet sector going forward. Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of the question and answer session. I would now like to hand the conference over to the Chairman, Mr. Dheeraj G. Hinduja, for closing comments. Yeah. Thank you so much for your questions, and I hope we've been able to provide better clarity. I would just like to sum up on the basis that, there were, I think, quite a lot of questions with regard to how we are seeing the market. And I'd just emphasize once again, Q1 has been a good surprise for all of us. We, on the ground, do see the demand to continue to be quite positive. And, barring any exceptional things that might happen, I think this year will continue to show up to be a good growth year. And even on the products, then we're seeing very good growth in the passenger side, ICV, on tractors, and we are going to be introducing many products across the range. And, I think a lot of questions were asked with regard to the market share as well. So just to clarify that during the course of the last, 18 months, we've been expanding our network, and especially in our weaker areas in the north and the east. And so the foundation and, our network is now coming very close to about 1,000 outlets. And with this foundation that has been set, this in itself should allow us to penetrate into areas of the country that we've not been present and increasing our market share and, our service, along with the product. So discounting is not an area that we're gonna be focusing upon. We do believe that we can gain market share through the areas I just mentioned. On the cost side, we continue to remain, you know, continuously going after wherever cost reductions are possible, value engineering possibilities. And the one area that we did not speak much about is on international markets. We are seeing a revival of some of our traditional markets. Middle East continues to be strong. African markets, we are gaining greater traction, and, we are looking at new markets where more products are also gonna be entering into many of our existing markets as well. We have delivered on margins over the last few quarters. Our aspiration is to continue the growth both in our sales, margins, and our bottom line as well. So, that's how we would like to conclude. Thank you very much for your interest. Thank you. On behalf of Ashok Leyland, that concludes this conference. Thank you for joining us. You may now disconnect your lines.