Good evening, ladies and gentlemen, and welcome to Bajaj Auto conference call to discuss the 1st quarter of FY 2022 financial results. We have with us today Mr. Rakesh Sharma, Executive Director; Mr. Soumen Ray, Chief Financial Officer; Mr. Sanjeev Garg, Vice President, Finance; and Mr. Anand Newar, Divisional Manager, Investor Relations. My name is Aisha, and I will be your operator. At this time, the participants are in the listen-only mode. We will wait for a minute till the questions are assembled, and we will start with the opening remarks from the management. Good afternoon, ladies and gentlemen. This is Rakesh Sharma here. Thank you very much for joining the call. Unexpectedly, Q1 turned out to be a tumultuous quarter, which was not really expected when we were doing some forward-looking in January, February, and even early March. Thankfully, the pandemic peaked and started to recede, though it still remains a concern. Most of the country is now open with some restrictions on operating hours, as you know. Since offices, educational institutes, and public places remain only partially open, traffic is low, and the restoration of normal retails is therefore higher in motorcycles and lower in three-wheelers. We are hoping this improvement trend will continue, particularly as the vaccination program advances. Even through the peak pandemic, which was very intense and swept the country, particularly the north, supply chain demonstrated remarkable resilience based on the lessons from the first wave. Coordination with local authorities was also much better. Everyone has got now a playbook. This has allowed for continuity of operations while observing safety protocols. Hence, the supply side is generally ready to service higher demand levels. Some issues persist, like container shortages and poor visibility of semiconductor supplies. Internationally, most countries which we operate in Africa, LATAM, and Middle East, have returned to near normalcy. The situation in ASEAN and South Asia, Nepal and Sri Lanka, a little bit in Bangladesh, is still difficult. As you know, Philippines, in ASEAN, Cambodia, these are big markets for us, and they still remain closed. I hope you have had some time to study our Q1 results. I'll divide my opening comments into two parts. First is the highlights of Q1. It's difficult to compare this quarter with either the previous year or the previous quarter. I'll stay with just pointing out performance highlights compared to our strategic approach. The second part is the near-term outlook. As you know, we've been driving the business on two fronts, ensuring that we have the agility to recover in key segments and overseas markets as the markets return to normalcy. Second is to grow, share, and margin by driving up trading or premiumization within segments and across segments, both in domestic and international. Coming to the highlights of Q1. First, the domestic motorcycles business unit. Here, I would like to point out that our share in 125cc-plus segment or the top half, almost top half, which is 45% of the demand pyramid, increased from 22% to 25% in Q1, a clear number two position in this very important segment. Now, this segment, the 125cc-plus segment, accounts for almost 60% of our sales, while in the industry, it only accounts for 45%. Now, this growth has been driven by Pulsar 125, where we have launched yet another variant in May, which is a Pulsar 125 NS, the most stylish, powerful, and the most expensive 125cc in the market. It is met with a good reception, and along with the other 125 cousins, it has given our 125cc market share to an all-time high of 28%. 125 NS has also contributed significantly in lifting the EBITDA margins in that class. In the bottom half of the demand pyramid, which is the 55% of the industry, we continue to upgrade the customer through different ways, always conscious that the customer here is more price-sensitive. From KS, which is kickstart to electric start, from 100cc to 110cc, from drum braking systems to disc braking systems, offering the customer very accessible and small step upgrade opportunities. Here, too, we launched new models, the CT 110X, with a very bold style, met with a good reception, and Platina electric start, which is making electric start accessible to a large number of entry-level commuters. Both these have contributed in driving our growth and share at the bottom half of the pyramid. At an overall level, market share in domestic business increased by 1.5% points. I would say that the quality of market share, because of the share of the differentiated products, I would say the quality of market share has also improved, and both are in line with our strategy. In the domestic 3W business, the three-wheelers return to normalcy, which has commenced from October last year and steadily, we were adding 1,000 units per month to the sale, was interrupted in April and May because of the severity of the second wave. However, the retail outcome of June is heartening. It is much lower than our previous FY 2020 benchmarks, but it was much better than expected by us even in June, and we hope the trend will continue into Q3, and we'll see a slightly faster recovery than we experienced before in last year. Even though the volumes were lower, but there's an outstanding achievement here secured by the business unit, and that is that not only are we an industry leader by a big margin, and we have always been leaders, but the margin, the competitive ratio is now quite strong. We have achieved leadership in every single segment. The small passenger, the big passenger, cargo, diesel, petrol, CNG, whichever way you cut the three-wheeler market, Bajaj Auto is a clear market leader. This puts us in a very good competitive position to take a disproportionate share of the recovery as it unfolds. On the export business, the exports is now continuously breaching the 200,000 per month level mark, and it continues to perform robustly despite drop in sales in ASEAN, where Philippines, it's a very big market for us. We have the number one position in Philippines. Cambodia, which is a huge three-wheeler market for us. Uganda, we've got a 90% share over there. It's a big market for us in Eastern Africa. These are high volume markets, but they suffered lockdowns and a huge drop in retail. Despite that, exports has come in with a 200,000+ levels. Q1 was our second highest quarter ever in our history of exports. Our global market share is therefore estimated to have increased sequentially by 2 percentage points in motorcycles and by 6 percentage points in three-wheelers. Here, too, the share of premium motorcycles, which is Pulsar and Dominar brands, moved up from 19% in Q4 to 21% in Q1, with the Dominar 250 making its appearance in many high-end markets like Turkey, Argentina, Colombia, et cetera, and Mexico, and getting a very good reception. We now get over 85% of our revenues from markets where we are number one or number two. This is an important metric. As I've been pointing out, we monitor it continuously as it indicates pricing power and our ability to manage competitive threats. Indeed, it is because of this position that our pricing action to recover costs has been ahead of all the other Indian and Chinese competitors. Quite ahead of. The recovery of costs has been pretty good in these markets. Our exports to KTM continue to grow at a significant pace, 48% sequentially, powered by demand in the developed markets of North America, Europe and Australia. Some other highlights. We faced strong headwinds of cost increases, which was known. About 3.7% of this, we could only recover about 1.5%, keeping demand sensitivities in mind. The backdrop is really of economic hardship and a fragile recovery. The cost increase recovery needs to be calibrated with this in mind. Of course, we have to keep close watch on competition. We believe our price increases both in India and overseas were ahead of competition. Margins were further hurt by the loss of operating leverage due to lower volumes by about 1.6 percentage points. This was a little bit of a surprise because when we were entering quarter one, we did not realize that the second wave would be so severe, particularly in the north, which generally has a mini season because of marriages. That cost us about 1.6 percentage points of EBITDA. Slightly better Forex realization and better product mix mitigated these losses by about 1.3%, and this explains the difference between Q4 and Q1 EBITDA of 2.5%. Other highlights was Chetak bookings opened in Pune and Bangalore. We had to close them in 48 hours as there was a very strong response, and we felt we may not be able to satisfy the complete demand. Supply chain visibility on some of the imported components has improved. Still, we are not getting longer-term import certainty, though we see a strike rate of up to 1,000 units per month. Hence, further expansion is being planned, but cautiously planned. We have announced entry into 4 mid-tier towns, Nagpur, Aurangabad, Mysore, and Bangalore. Now, coming to the near-term outlook in domestic motorcycles. With near normalcy approaching in most geographies, we expect better retails compared to last year and last quarter. This may not translate entirely into billing because as compared to the same time last year, stock levels are higher this year. Last year, stock levels in the channel were lower due to the transition from BS4 to BS6. When the pent-up demand released itself in Q2, billing was not only servicing the high demand but was filling up the stock in the channel. Billing was higher than retails. This year in quarter two, we expect billing to trail retail. We expect a flattish Q2 compared to last year. For us, performance will continue to be driven by the 125cc portfolio, as well as some of the newer models in the commuter segment, where we are offering little upgrades. We have repriced the Dominar 250 as a strategic investment to expand the quarter-liter class. We will be introducing at least three new models in the sports segment as well as the commuter segment, which hopefully will inspire the customer to upgrade. Which is in line with our strategy of taking the kick-start customer to electric start, the drum customer to disc brake systems, the 100cc customer to the 110cc, the 110cc customer to 125cc, the 150cc customer to 250cc. We thought that it was important to make the 250cc, though its volume play is small, but it's our investment to expand the sub-segment. Domestic three-wheeler, we expect a steady improvement, which should be in the tens of thousands. Q2 should be substantially better than Q1 and also Q2 last year. We anticipate the need for some close liaising with financiers to ensure that the recovery is supported by the availability of retail finance, and this is a critical success factor in ensuring that there is a recovery in this segment. Internationally, we will continue our momentum and expect to hold the current performance levels steady. If the COVID situation improves in ASEAN and the few other countries which I pointed out, then this would be a bonus. It may occur, even if it improves in August, by the time we see shipments, it may occur in September or October. On the cost front, there continues to be material-led cost increase of over 3 percentage points. New pricing announced in early July, both in domestic and overseas markets, recovers about two-thirds of this increase, but there is still some work to do. We will evaluate the further scope as the quarter progresses, and we understand how demand is rolling in. However, a better operating leverage, we certainly expect Q2 to be better than Q1. Continued currency support and an improving product mix is expected to mitigate the cost increase situation which gets left over from the price increases which we have taken. With this, we can now open the floor to Q&As. Thank you. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star then one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions being sent in. The first question is from the line of Yogesh Aggarwal from HSBC. Please go ahead. Hi. Thanks. Hope you guys are doing well. Rakesh, a couple of questions. Actually, on your second press release on EV, the spend on mobility. While it's heartening to see spend going up there, in absolute terms, it's still quite small. Firstly, can you talk about the plans there? This investment is for R&D or is it for manufacturing? Is it to develop the supplier base? That was one. Secondly, you talked about Chetak. Is Chetak eligible for FAME benefits now? It was a bit surprising that most of the other EVs are eligible and Chetak wasn't earlier. What's the update there? Thanks. This is about the new EV company. Yeah. I did not entirely grasp your question, but I think you're asking about the announcement regarding the formation of the 100% subsidiary for EV. I think at this stage you should read it as a strong signal by the company in this announcement of ensuring that we have continued. We are a successful company in two-wheeler and three-wheeler mobility. We want to continue to be so irrespective of whether it is ICE or whether it is EV. We recognize there is a need for agility, there is a need to hire better talent, deploy it in a different manner, and to be possessed of a single-minded focus, which sometimes as a division and a large company can get diffused. We want to therefore create the corporate space to pursue aggressively our ambitions in EV. The exact playbook is being worked out, but it will have a substantive operation. I mean, all the operations relating to EV will be part of this company. As and when the playbook is clearer and we have baked the whole story, we will be happy to share it. When it comes to Chetak's application for FAME is certainly with the appropriate authorities, we expect that to be cleared any time now. The reason for Chetak not having the FAME benefit till now was because we preferred to be with a certain localization configuration, which while it took more time, but it allowed us to move to that configuration in 1 step instead of trying to do two, three steps. We just felt that from an operating point of view, it would be smoother. Therefore we did not go in for the FAME benefit. We decided consciously to not let the customer suffer in this, and the company sort of stepped in and filled that gap, which obviously when we start getting the FAME benefit, we will withdraw and the FAME benefit will go directly to the customer. It's very much on the cards now. Just to add to what Rakesh said, Soumen here, we have started this company with authorized share capital of INR 100 crore and a paid-up share capital of INR 5 crore because you need some money to do the formalities. How much will be the investment, what we will do? That we will share as and when, as Rakesh said, the playbook matures and we decide what all to do and what to do, and it is in a situation to be communicated to you. Suffice to say, we really did not open a company to invest INR 5 crores and run the electric vehicle business. On this space, just let's wait and watch. We'll come back to you when we are in a situation to share more details. Very well. Thank you so much. Thank you. Thank you. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead. Thanks team for the opportunity. Just to follow up from the comments that Soumen made, by when do we expect some more details on that? When we look at competition, they've announced tie-ups or they've already announced their CapEx targets. By when do we expect Bajaj to make these announcements? I really do not know. Me just telling you a number of either INR 200 crores or INR 2,000 crores, how does it make a difference? Unlike some of the other people, we don't need to raise money. We are sitting on INR 15,000 crores of cash. Setting up a factory, we don't need to go to people to ask for either debt or equity. As I said, we are preparing plans. We will decide how things happen, and we'll inform. I don't want you to miss out the fact that an organization which did not have any domestic subsidiary has chosen to focus on EV and start 100% domestic subsidiary. That is the first step. Let's wait and watch this space. We understand the interest, and obviously a company of our size and stature has not just gone in with its eyes closed, just generally to see what happens. Wait and watch. There is a reason why we are not sharing so much. We'll share as and when things cook up, they are cooked well, and they're mature, which is worth sharing. Right. No, the reason we ask is that CapEx tends to lead product development, which tends to lead model launches. Just hoping that the company is aggressive enough on this segment. Yeah. Binay, that kind of effort is already underway. We have a huge R&D apparatus, and we are collaborating with KTM, we are collaborating with vendors. We are studying the market in micro mobility segment. We have made an investment in Yulu, and we are looking at their vehicles. We are looking at high performance electric motorcycles and everything in the middle. There is a substantive R&D effort already underway. See, we feel that this whole manufacturing investment, which in the past people have been talking about and which has been stoking some kind of an excitement, frankly speaking, passes us by because we don't get very excited about it because we set up these plants very simply and easily. We announced some INR 600 crore-INR 700 crore investment just for KTM, Triumph and other high-end bikes of Bajaj a little while ago. It's not a very big issue in our mind. We have the resources, we have the engineering capabilities. We don't think that it is something important to stand up and really start talking about. Yeah, I agree with you that what is more important is what will be the product portfolio, how we will engage with that customer. On that, we are writing the script, and when we can share, we will definitely share our plan. Right now, suffice it to say that there is a huge amount of focus internally in this area, and we are getting into a position so that we can move very nimbly here. Just to add to what Rakesh mentioned, Binay. What is not visible because we are an INR 50,000 crore company. Whatever INR 300 crore, INR 400 crore, INR 500 crore we spend on R&D is not visible. R&D is a lot of manpower cost, people cost. We have a 1,400, 1,500 headcount R&D. When people say, "I am putting CapEx on R&D," some of these expenditures are revenue expenditure for us. It is already baked into my P&L. It doesn't become so obviously visible. Essentially, what we need to spend is on putting up a factory. On R&D, we do not need to spend $50 million or $100 million. Right. No, I take the point. It's very encouraging to hear all this. As you're aware, there's a lot of investor discussion on this. Absolutely, yeah. that even with the gasoline segment, which later on became very competitive and became very difficult for companies to enter and establish themselves. In fact, Rajiv Bajaj often talked about that me-too strategy doesn't work. The only fear is that, if some company is very late in launching electric vehicle, then that segment will also get a little commoditized. It may be difficult for latecomers to establish themselves. Nonetheless, we'll watch for updates from your side. My second question is on the gross margin side. How do we see gross margins moving from here on? Because it's most likely that the domestic share will increase in the overall mix. Exports will go down. In that sense, but at the same time, we will have three-wheelers rising. How does the management look at gross margins moving from here on? I'll give you two answers, Binay. This is a question which will be there in the minds of a lot of people, I'll take a couple of minutes. There are some headwinds and some tailwinds. I'll first tell you them, then I will say, what do I see as a net of that. The first tailwind that we will have is hopefully this quarter, the operating leverage will come back. I will not be an INR 7,000 crore per quarter company, I will become an INR 9,000 crore per quarter company. Clearly that leverage comes up, which improves my EBITDA, not gross margin. On gross margin, as we have mentioned in the press release, we have an under-recovery between cost and profits. In Q2 also, we will have an under-recovery. The cumulative under-recovery will increase from Q1 to Q2. Having said that, the only good thing that can happen is if there is some Forex, if the rupee depreciates further, we will get some more money. The mix will tend to get adverse, you're absolutely right, but as Rakesh mentioned in his opening remarks, let's wait and watch how much, because as of now, the pent-up demand coming back has not been as fast as it was last year. Let us wait and watch how the mix plays out. Directionally, will the margins possibly be a little softer? I really do not know. If I have to bet between better or softer, I would possibly bet around being softer. Great. Thanks a lot, Soumen Ray. That's really helpful. I'll come back in the queue. Just to end the conversation, just then the question would be, will the industry now come down to this 15% range of EBITDA? The answer is no. Clearly at these levels of steel prices, the near-term steel demand will not get impacted, but the longer-term steel demand will get impacted. For example, there have been articles around that builders are taking up prices of their flats by 10% for new bookings. Water will find its own level, and steel prices will unwind. For the temporary period, yes, we have a problem, certainly in industries where steel and ferrous metals are a large part of the product. Thank you. We'll move to the next question. Right. Thanks, Soumen Ray. Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead. Hi, sir. Thanks for the opportunity. Rakesh, sir, thanks for the opening comments. They answered a lot of the questions. On EVs, I just wanted to understand from you, what is your thinking on how electrification will evolve in scooters, motorcycles, and also three-wheelers, how fast do you think it's going to be? Do you think that the recent government actions in terms of subsidies which are coming through could accelerate the shift towards EVs in all these segments? Directionally, I think it's very clear that the industry is headed towards more and more of electrification. In spite of the heat and dust which is being churned up over here, the transition will not occur suddenly or immediately. India is a complex country. India is a large country with a lot of diversity. Even if you take developed countries for the 4-wheeler category, whether it is the U.S., it's Europe, Australia, or Japan, you have to just see the progression of the penetration of EV. Yes, of course, directionally, the world is headed that way, it is going to be a gradual transition. Somebody commented on first mover advantage. I don't think the jury is out still whether there is a first mover advantage or a disadvantage, because the consumer is going to evolve, the technology is going to evolve, and you have to harness all that. I believe that if I take the consensus of consensus, it's about three-five years, where we will start to see EVs becoming a significant portion of the two-wheeler, three-wheeler space. The government has shown its hand by backing it up. Still, the acquisition cost, there is a substantial gap still between the ICE scooter and the electric vehicle scooter. Government is plugging a part of it, but still, there is a substantial gap. Some people will have the ability to plug this gap further by using private equity money and all that. That's fine. It will help towards evangelizing the category. It will take time for it to resolve, because there is a second issue, which is the second issue in my mind, but nevertheless, it is there. It is about the range anxiety and the anxiety of adopting a new category. One point which I want to emphasize, which has been a very important point in our structuring of our planning is that you don't want to give a bad experience to a customer who's standing in the front of the queue to convert from ICE to electric. He or she should not feel that they've been made a sucker out of by having operating problems. The ability to give a friction-free, smooth operation to the customer, the ability to ensure it is very well supported, the customer is very well supported. Every customer is not digitally savvy and cannot work out the touch screens, et cetera. At that time, the company has to be there, present through its service network, service people, and engagement with the customer with systems and processes, so that the customer is not singed and you get positive word of mouth, not just for your brand, but for the electric category. We don't want this to get stuck. We have faced this, for example, in developing the three-wheeler category in many parts of Africa, because we couldn't supply the spare parts. We damaged the category for a long time. I won't tell you the names of the country, but we've gone through that experience. I see that this is very important. It's not just about giving a cheap price and throwing some two-wheeler, and the world is just waiting to convert. They may buy, but there may be a problem later on. I see that all these things, when you roll in, what kind of experience the customer will get, how those costs and prices will move. Petrol prices are moving up. I definitely see a three-five-year period when the transition will occur. This is the period where we want to make sure that we have a strong customer connect, we have strong customer understanding, so that we can segment the market, offer proper product backed up with proper service. We feel ultimately, the game will be back to style, design, performance, price, and all of this packaged under a trustworthy brand. Thank you, sir. Very detailed answer. On exports, could you just comment, we've seen COVID cases rising in some of the nearby countries and also some countries in Africa. Is the demand outlook still similar or is there any significant change from that INR 2 lakh per month kind of number? You've talked about container shortages of late. Is that still continuing or has that resolved? Like I said in the opening remarks, our current estimates are based on how the markets which are open right now. Like I said, COVID is a big problem still in ASEAN. Retails is very badly impacted in Philippines, Malaysia, Thailand, Cambodia, Myanmar. Out of this, in the ASEAN countries, Philippines is a very important market for us, both for two-wheelers and three-wheelers. Cambodia for three-wheelers. This is dampening the performance to some extent. Also, one or two countries in Africa, mainly Uganda, and I think a country or in Latin America is where we are still facing these problems. The performance, that's why, is quite exemplary because it is despite these key markets holding us back. Hopefully, if the pandemic recedes in these places, we'll be able to strengthen our export performance further. Container shortage is now a way of life, and at this point of time, there are always slippages, but it is affecting us in terms of taking up a lot of management time, and secondly, increasing the costs because the container goes up from $2,000 to $10,000 to Colombia, and you're shipping 150 vehicles. You can see per vehicle, there is a big incidence of cost. We use 33,000 containers every year, so it's a big exercise for us. Now it's a way of life. We are just learning to manage with it. Okay, sir. Thank you so much. Thank you. The next person from the line of Raghunandan N.L. from NK Global. Please go ahead. Thank you, sir, for the opportunity. A couple of questions. Firstly, on the electric side, three-wheeler operators seems to be sticking to CNG vehicles instead of EVs, possibly considering range or charging anxiety. What factors do you think would be necessary to trigger a shift towards electric? Also, any timeline for the three-wheeler launch? Yeah. That is a very good observation, and we have been struggling to establish a business case for electric three-wheeler opposite the CNG. The CNG footprint in the country is increasing at a very good pace. Our market share in CNG hovers between 85%-90%. One of the big drivers for even this little growth, which we have seen between April, May, June, and now what we are experiencing, is driven either by the conversion of diesel vehicles into CNG or by cargo vehicles. This drive of the government to build a network of CNG is a very significant drive. They're wanting to open 9,000 pumps by 2025. Today, there are 1,500. Every addition of every 100 pump stations creates a market of 10,000 three-wheelers for the industry, out of which 90% comes to Bajaj Auto. That is the reason. It's a move we are completely backing. It's a very clean fuel. There is a thin sliver of advantage for electric three-wheelers, if at all, depends on the electricity price in the state. The customers, if the pump is running good pressure, et cetera, then the drivers actually prefer CNG. It's not going to be easy to change CNG-powered vehicles, which are going to only increase into three-wheeler. Irrespective of that, we are going to put in a three-wheeler and which is under testing, like I've been saying. It's running in many parts of the country, and hopefully, we should be able to launch it by end of the calendar year. Thank you, sir. My second question to Soumen. A couple of things, actually. There have been media reports indicating a possible increase in outlay for RoDTEP scheme. Any thoughts on when these export incentives could recommence? Because that can be a margin trigger. Secondly, employee cost was on higher side at INR 3.6 billion compared to average of INR 3.2 billion last four quarters. Any one-offs? What could be the sustainable rate ahead? Thank you. I'll take the second part first. If you see last year, you would see that in Q3 and Q4, our employee costs had come down. We have changed certain terms of reference for retirement benefits, which have led to certain reversals. That INR 306 crores of Q4 of last year is more like a 330 kind of a number, 325, 330 kind of a number. That, obviously last year, there wasn't increments which were given. This year we have announced our increments, and it is effective from 1st of April. What has happened is, during the pandemic, obviously the number of deaths have increased compared to what it was earlier. We have a few insurance policies which covers employees on the time of their untimely death. The premiums of those policies has really shot through the roof. I'm sure you will keep on hearing this more and more in every analyst call irrespective of industry. These are primarily the reasons. You can take the current rate as a steady state rate, because we have given increments. I mean, the insurance will not be there, something else will be there. You can consider, I don't think you would want to bother for the last INR four, five crores. This is a steady state rate that you can assume. On the first question, if you know, you tell me. I'm looking at Rakesh and asking him if this answer can be given. We can only say, yes, it is additive. Yes, there is a cumulative benefit which is waiting from 1st of January, because that is what the announcement was. I'm yet to get last year's MEIS and so on and so forth. I don't know when, so I don't have an update. Thank you, sir. Thank you so much. Let's hope for the best. Thank you, Raghul. Thank you. The next question is from the line of Chirag Shah from Edelweiss. Please go ahead. Yeah, thanks for the opportunity. Soumen, first one, housekeeping question. If you can share the export revenue and the USD realization for this quarter. We know that, so we have kept it ready. The export total revenue was about INR 4,500 crores, and in dollar terms, what we sold, sell in dollar, it was about $580 million. Yes. Thanks. Sorry. Soumen, there's a follow-up on the USD realization. Sequentially, there should have been benefit for us, right? In the quarter of at least 40, 50 basis points on account of better rates. Has that materialized? How do we look at it going ahead? What is the broad range forward that we have? Chirag, I cannot give you the numbers of what is the range forward that we have. If you look at the press release that we have given, we have mentioned that we have benefited because of the Forex rate. We have benefited closer to a percentage point, 1 pp, because of Forex. Okay. If you look at the last quarter in general. Okay. This is vis-à-vis Q4 of last year. Yeah. Sequentially, yes. Sequentially. Yeah. Yeah. Similarly, if you look at Q4 of last year sequentially, we were hoping that worst of the commodity pressure would play out in Q1. If I understood correctly, you are further indicating that three percentage points raw material cost pressure is happening in Q2 also. Is it the right understanding? I do not know the percentage because things are still fluid, because conversations and negotiations are going on. Will we see a further pricing material cost increase in Q2? The answer is a unequivocal yes. This is not something only with Bajaj Auto. The entire industry will see it, and that is why you see there is a price increase which has happened in almost all players effective from beginning of July. Everybody in the two-wheeler industry, and also, if I remember correctly, three-wheeler industry, have taken up prices effective 1st of July. Which is because the cost increase impact was not entirely felt. Last time when we spoke, there was a hope that Q2 will be muted. The reality has not turned out so. Q2 is as strong and as aggressive as Q1 was, incrementally. If things are normal, if things stabilize where they are, probably this is the last quarter where there is huge under-recovery, and from here on, things should normalize? I just mentioned the other day that in the previous call. I have now dropped from a INR 9,000 crore quarterly top-line company to a INR 7,300 crore. Once I go up to, if everything goes normally, which is what the view is sitting today, I should get back to INR 9,000 crores a quarter on an average. I was referring to this commodity pressure and the passing side. Okay. Commodity pressure, Q1, there is a under-recovery. Q2, there is a under-recovery. Cumulatively, there will be an under-recovery. Now, will steel prices go up further? Frankly, I have no idea. In nine months, steel prices have gone up by more than 50%. I don't think I've ever seen, in my 23 years, I have never seen a commodity go up by more than 50% in nine months, other than oil. I really cannot comment whether Q3, how it will be, because today, Q3, we have zero visibility. That's right. One question for Rakesh. Can you update anything on new models that you intend to launch, maybe a big platform upgrade in any of the brands? There were expectations that next 12, 15 months, a lot of action is likely to happen from Bajaj Auto stable on new platform change or maybe even there is buzz of a new brand launch in 125cc category. If you could share some more light, it would be helpful. Well, you will see, what now, September onwards, substantive, a new platform and some substantive upgrades right till in the next 12 months, there is a calendar where you will continuously see this, both in the sports and the commuter segments. In the next nine-12 months, we don't anticipate putting in a new brand. These will be housed within the same brands of our existing portfolio of brands. Yeah. This is really helpful. Yeah. Thank you, and all the best. Thanks, Chirag. Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead. Hi. Absolutely. Can you share USD INR rates for the quarter which we realized? About INR 74 in a quarter. 74 in a quarter. Okay. Second question pertains to this new subsidiary. Would we be shifting this new capacity which we are putting of INR 650 crore into this, or this would be pure EV only? Which INR 50 crore? 650 crore investment. No. The Chakan facility is dedicated to high-end sports bike, catering to KTM, Husqvarna, and whenever we start manufacture of Triumph. That facility has got nothing to do with electric vehicle as of now. Okay. Last question pertains to three-wheelers. Primarily to Rakesh. We are indicating some bit of positive traction on the three-wheeler side. However, Bajaj Finance on their call a couple of days back indicated large stress on the three-wheeler front. Almost 19% GNPA in two-wheeler, three-wheeler portfolio, largely driven by three-wheeler. How do you see the financing side impacting your three-wheeler recovery? Yeah. A lot of the impact is from the old book. What I am really encouraged about is the progression which is taking place before the second wave, and then of late in June, et cetera, where with the new financing norms, still we are seeing For example, I will tell you, we were expecting 5,000 retails in June, but we ended up with 7,000. Till middle of June, we were thinking we will hit 5,000. These are retails. These have got nothing to do with stock. We have slightly upped our forecast to the plants for the month of July, and which till now is tracking pretty well. These retails are occurring with the different financing norms. A lot of the hit to the financing companies is from the period of before the first moratorium and what was it, aftermath of the moratorium, et cetera, which of course these financing companies have to now factor in. We have to work very closely with them through our dealer network also in attacking the right segments, in helping them with all the information which they would want to assess risk much better. It can be done because there are buyers which are coming back. The financing companies themselves are very keen to improve the denominators also. I think they are a critical success factor, but we will have to work closely with them in managing and supporting this recovery. You don't expect financing as a stumbling block for recovery in three-wheelers? No, I don't think that financing will withdraw, because including Bajaj Finance, there are a lot of financing companies which are out there in the fray. Yeah, the way we give finance, there may be bottom slicing of the more risky ones. There are distribution partners for financing. Those might get hit and stuff like that. Financing probably after this will become more mature and more robust. It will be in play and we'll have to work closely then. No doubt they're a critical success factor, but it's not a zero one situation. Sure. That's interesting. Just one clarification. You talked about the CNG ramp-up. For every 100 pumps, you said there'll be 1,000 three-wheelers required. For every 100 pump station, there will be 10,000 new three-wheelers. This is a thumb rule. Somewhere it can be more, somewhere it can be less, depending on the size of the pump and there is an issue about how much pressure there is and all that. Yeah. What happens is that when the pump comes and the CNG is a clear INR 1.25 per kilometer better than diesel. What happens is, if I'm owning a diesel vehicle bought from, let's say, a competitive brand, because their competition used to be slightly better in diesel, and it is pining for about three, four years, and I see another guy who's earning much more or saving much more because he's got onto CNG, there might be an acceleration. I might not keep the old diesel vehicle for five to seven years. I might just change from the diesel vehicle into the CNG vehicle. These vehicles then get collected and they are resold in markets where there is no CNG as secondhand vehicles. We are seeing this kind of a pattern, then they come to us. Wherever a CNG pump comes, it creates a very good opportunity for us. It's on an annualized basis, which I said. Thank you. We will disconnect the current participant. Please come back in the question queue. The next question is on the line of Aditya Makharia from HDFC Securities. Please go ahead. Yeah. Hi. Just wanted an update on the Triumph JV. Where are we in terms of timelines for the launch? Let me just correct you. It is not a joint venture. It's an alliance. It's a strategic alliance without equity participation. This partnership has actually got very hit by COVID because travel was not possible. We are in the stage of having made prototypes, and it requires physical presence to correct the prototypes, the clay models, then the prototypes. This whole process is taking time. We expect by probably towards the end of FY 2022, FY 2023 to present the product in the market. Oh, there'd be a delay of about six to nine months, based on what you're saying. Yes. Based on what we had indicated earlier. Yeah. Okay. Just a second question, a slightly broader one. You have mentioned that the recovery in two-wheelers is more K-shaped, with the bottom-of-the-pyramid customer being impacted. Do you expect this to continue, or do you think now with COVID unlock happening, things will change? See, in the immediate term, I feel that in the rush of the pent-up appetite relieving itself, we will not be able to separate the noise in the system. Once it settles down, I feel that the bottom section of the society has got considerably weakened economically, because the self-employed people, the tradesmen, the people working in restaurants, bars, et cetera, their savings and all have got quite diluted. We are seeing that there is a lot of weakness of purchasing power over there. The salary class and slightly better off have come out almost unscathed from the pandemic. There was earlier a lot of fear that people will be laid off, salaries will be reduced. Economically, they were not as pinched, and secondly, that security or fear of job loss has sort of disappeared. Because of these reasons, I feel that the upper half of the demand pyramid or the upper three-quarters of demand pyramid will probably continue to do better in the, let's say, next 12 months. Forget the next three months, where there will be a lot of pent-up demand, and the bottom quarter or bottom third is going to drag the recovery of the industry a bit. Got it. Thanks so much. Thank you. The next question is from the line of Priya Ranjan from HDFC Mutual Fund. Please go ahead. Yeah. Thanks. My question is on your new subsidiary. When this new subsidiary gets created, then the entire R&D structure of your electric mobility, which is sitting in Bajaj Auto, will that get transferred to this entity or it's still not clear? Priya Ranjan, as we have said, we have said whatever we could in the press release. It's a very evolving space. We are adapting to changing scenarios. We'll come back to the investor fraternity and media at large about when we are in a situation to share what we will exactly do in the new subsidiary. I understand the need of wanting details, but I'm humbly submitting that at this point in time, we would not like to share. Sure. Okay. Just on the product development cycle. If I say from, say, design to the launch, if the ICE engine motorcycle or ICE engine scooter was typically taking, say, one and a half year or two years. What will be the commensurate launch, from, say, design to launch period for, say, electric scooter from your point of view? Priya Ranjan, this is a question which I don't think can be answered, because there are multiple things. On one way to look at it is, if that battery technology that we are using in one is immediately retrofittable in the new model when it comes down. However, if you are looking at different performance measure from the newer vehicle, then a new battery has to be configured. I would like to believe that at this point in time, it would be directionally longer than ICE vehicle. If the battery interoperability is established between two innovation models, then the time can be cut down. Can I give you a three and a half year or a one and a half year? The answer is no. Okay. You said there is around 1,500 employee in R&D side. Is the R&D team joint or is it both the teams are different? Is there any different hiring policy for. Just to repeat here. R&D is one consolidated R&D. It's got horizontals and verticals. It's organized on the basis of technologies, and it's organized on the basis of product segments. As and when a project gets underway, a matrix team is formed, and it pursues that project. Sure. Okay. Lastly from Rakesh is on the export front. We have seen some kind of market share loss in, say, probably in West Africa. What are the steps we are taking to address that, if we can answer that? I would say that, yes, if you take the largest market, Nigeria, in West Africa, where we now have a 50%-plus market share. Yeah, it has moved down by three, four percentage points. A lot of that is to the Chinese, where we have seen, particularly in the last 12 months. Let me just think. Yeah. Since March 2020, when we were reeling under COVID, in that April onwards period, the Chinese companies, the ports, et cetera, had bounced back, and they had sort of seized the initiative, and they have come back. They continue to operate, as do some Indian exporters on the basis of price. We don't want to go down that track. Our whole objective, let's say, if I just keep to the illustration of Nigeria, is that there is no shortcut to it except to deliver an outstanding customer experience. We have invested heavily in a service network, in engaging with the customer, in product quality, and having constant engagements with the customer. Attending to quality complaints or any issues that the customer faces rapidly. Today, thanks to digitization, if there is a complaint experienced by the customer and it comes to the dealership, within a few hours it is known. If our CTO sitting in Akurdi wants to look at the complaint, he can look at it. Certainly, under him, there are teams which can immediately swoop down on this issue. I think that it is things like this, the product quality and customer experience, which will create a moat for us, and which will allow us to conduct this business at a respectable margin. It is impossible today to run the business sustainably for a period of time and drive scaliness at prices which are similar to Chinese prices. Therefore, we have not gone down that track. It gives some kind of a momentary relief, and this is things like working with wholesalers, throwing money and discount with wholesalers, and securing some kind of volume. That is the way the Chinese operate. Some Indian companies also operate like that, but we have invested in our own network to deliver a customer experience. It's a bit of a rocky road, but I think it's more sustainable. Thank you. That was the last question. On behalf of Bajaj Auto Limited, that concludes this conference. Thank you everyone for joining us, and you may now disconnect your lines.