Ladies and gentlemen, good day and welcome to Bosch Limited 3Q FY 2024-25 Post Results Conference Call, hosted by B&K Securities. From Bosch Limited Management, we have with us today Mr. Guruprasad Mudlapur, Managing Director and Chief Technology Officer, and Ms. Karin Gilges, Chief Financial Officer. At this point, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the management presentation and opening remarks. Also, may I remind you of the safe harbor? The company will be making some forward-looking statements that have to be understood in conjunction with the uncertainty and risk that the company faces. Over to you, sir. Good evening, everyone, and welcome to this call. Thank you for joining us today. Let me give you an overview of what's happening in the global and Indian macroeconomic environment and update you on our financial and business headlines. As we embark on the journey into the new year, there are different perspectives on how the global and local events will shape our businesses. The newly elected U.S. government is expected to bring in new policies, higher tariffs, tax reforms, immigration changes, and short-term growth stimulus. However, inflationary. Global growth projections have slightly softened but remain stable as economies face disinflation. Subdued demand, geopolitical uncertainties, and potential trade conflicts can create uncertainties. Domestically, growth is expected to slow cyclically with weakening consumption and uncertain business sentiment due to proposed tariffs and China's export pressures. Stock markets continue to fall as FPIs pull out with resultant pressure on forex reserves. However, seasonally, the Q4 of FY could see forex remittances to build up the reserves. Inflation in advanced economies is within the target range with many central banks either turning neutral or cutting rates. RBI would also support flagging growth, and we expect shallow rate cuts this calendar year 2025 up to 75 basis points. The automotive industry grew by 3 percentage points year-on-year in Q3 FY 2025 compared to Q3 FY 2024 but saw a sequential decline when compared to Q2 FY 2025 due to seasonal cyclicality post-festival demand normalization and a high base effect. OEMs adjusted production to manage inventory following a build-up during Q2 festival peak. The passenger cars' 4% year-on-year growth is driven by robust SUV demand, rural traction, and aggressive festive promotions. Inventory levels also eased from 70 to 55 days, aided by sustained discounts and marriage season demand. Demand in heavy commercial vehicle segment remained subdued due to mining and construction slowdown and rising vehicle costs. Also, there is a shift towards higher tonnage vehicles due to better roads and logistics growth that is further impacting the overall volume. However, buses and tippers showed recovery with a strong recovery pattern compared to the sequential quarter. For light commercial vehicles or LCVs, the market growth has remained muted due to slowdown in economic activity, especially in urban centers. Also, part of less than 2-ton volume is shifting towards three-wheelers. The three-wheeler segment also experienced muted growth due to slowdown in economic activity, negating the marginal growth for shift towards three-wheelers from less than 2-ton light commercial vehicles or LCVs. Strong year-on-year growth in tractors is backed by favorable monsoons, improved yields, and higher minimum support price or MSPs for Rabi crops. The sequential decline reflects seasonal cyclicality, a usual trend for the segment. Two-wheelers recorded festive-driven surge in October, followed by weaker demand in November-December due to inventory realignments and subdued domestic conditions. Growth was sustained by motorcycle demand, rural sentiment, and new launches with cautious optimism around EV traction. In this slide, we illustrated the market's trajectory from peaks of FY 2019 through the challenges posed by COVID to the subsequent recovery. The data highlights the automotive sector's resilience with passenger vehicles and LCVs reaching record highs in FY 2024 and two-wheelers set to reclaim pre-pandemic levels by FY 2025, signaling strong consumer demand. Also, three-wheelers have rebounded sharply, driven by surging demand for electric variants. However, the recovery in HCVs remains sluggish, reflecting cautious fleet expansion amid the economic uncertainties. Looking ahead, sustained macroeconomic stability, policy support, and consumer liquidity will be critical in maintaining momentum and ensuring broad-based growth across segments. Segment-wise sales performance, quarter on quarter, the Mobility business has grown by 1.6% in October-December 2024 as compared to October-December 2023, driven mainly by the Mobility Aftermarket business, which grew by 8.8% on account of higher sales, higher demand for diesel systems, automotive batteries, and lubricants. The Two-Wheeler business grew by 23.9%, mainly on account of higher sale of exhaust gas sensors, ramp-up of OBD-II norms implementation from April 1st, 2025. The Consumer Goods business grew by 8.8%, driven by higher demand for grinders, drills, cutters, spares, and accessories. The Building Technologies business grew by 7.6% as a greater number of orders for installation of public address and communication systems were executed. The M obility business has grown by 4.4% in April-December 2024 as compared to April-December 2023, driven mainly due to Powertrain Solutions business, which grew by 2.3%, mainly due to higher sales of electronic throttle body, injectors, and high-pressure pumps. The Mobility Aftermarket business, which grew by 8.5% on account of higher demand for diesel systems, batteries, and rotating machines. Two-Wheeler business grew by 17.5%, mainly due to increase in exhaust sensor sales on account of OBD-II ramp-up. The Consumer Goods business grew by 8%, driven by higher demand for grinders, drills, cutters, spares, and accessories. Building Technologies business grew by 15.1% as a greater number of orders for installation of public address and communication systems and video surveillance systems were executed. Quarter on quarter, revenue from operations in October-December 2024 stood at INR 44,657 million, which is a growth of 6.2% over October-December 2023. The growth is driven by Mobility Aftermarket business, Two-Wheeler & Power sports, and Consumer Goods business as seen in the previous slide. Likewise, revenue from operations in April-December 2024 stood at INR 131,768 million, which is a growth of 5.5% over April-December 2023. The growth is driven by Mobility Aftermarket business, Powertrain Solutions business, and Consumer Goods business. Quarter on quarter, EBITDA in October-December 2024 was INR 5,826 million, which grew by 0.7% over the same quarter of previous year. The improvement in EBITDA is marginal as majority of the revenue increase came from engineering service revenue. EBITDA in April-December 2024 was INR 16,628 million, which grew by 8.1% over the same period of previous year. EBITDA as a percentage of total revenue improved from 12.3% in April-December 2023 to 12.6% in April-December 2024. The improvement in EBITDA margin is on account of growth in revenue, improvement in material cost. Profit after tax stood at 10.3% of revenue from operations as compared to 12.3% over the same quarter of previous year. During the quarter, the company has made a provision of INR 471 million towards restructuring its operations to be competitive in the Mobility business, and the same has been disclosed as an exceptional item for the quarter. Likewise, profit after tax for nine months ending December 2024 stood at 11.1% of revenue from operations as compared to 15.4% over the same period of previous year. The reduction is mainly on account of profit on sale of the PHMS or Project House Mobility Solutions business in the previous year. Bosch Limited takes immense pride in shaping the future of Indian mobility through its advanced engineering solutions. The next-generation electric vehicles powered by Bosch's Vehicle Control Unit and Accelerator Pedal Module, or APM, mark a significant leap towards sustainable transportation. The PS division has been successful in piloting knowledge search using GenAI for high-pressure diesel pumps, simplifying access to product knowledge across its entire lifecycle. By integrating both engineering and quality documentation, the tool provides a holistic view of the product's history and performance. The user-friendly tool ensures that the valuable insights are not just a query away, regardless of the user's level of experience. The Two-Wheeler division achieved a milestone as the iconic 350cc motorcycle models were assembled for the first time with Bosch's Engine Management System, or EMS, marking a significant step towards their collaboration. Our R&D efforts remain focused on developing advanced engine control units to enhance vehicle performance. Meanwhile, the LSF MH ramp-up at the Bidadi plant progresses seamlessly, gearing up for successful implementation of OBD-II regulations with OEMs by April 2025. Bosch Limited showcased its innovative advancements for the future of the automotive sector at the Bharat Mobility Global Expo 2025, held from January 17th to 22nd. At the event, Bosch presented a range of advanced solutions, reaffirming its commitment to shaping India's mobility future. The showcase highlighted Bosch's ability to seamlessly integrate hardware and software, delivering end-to-end capabilities to meet the needs of an ever-evolving mobility landscape. These innovations were well received by customers, industry stakeholders, and the government bodies. With these updates, I conclude my speech. Thank you for listening patiently. We will now address your queries. Feel free to ask your questions. Thank you. Thank you, sir. We shall now begin the question and answer session. For participants who wish to ask a question, I request you to please raise your hand. Alternatively, participants can also type in their questions in the chat box. We will now wait for a moment as the question queue assembles. Yeah. The first question is from Pramod Amte. Please unmute and ask your question. Pramod? Pramod Amte, you can unmute and ask your question. I don't know. I think he's unable to unmute, sir. Yeah. Sir, in the meantime, I mean, any update on this TREM V implementation date, sir? No, we do not have any further updates on the implementation date. At least we have not heard of any further changes there. So as of now, that 1st April 2026, there is no change as of now, sir? Yeah. That's where it remains. We have not heard of any further changes. If there's any update on that from the government, we will certainly let you know. One second. So anybody has any question, please raise your hand, please. Yeah. Mr. Lakshminarayanan, you can unmute and ask your question. Hello? Yeah. Yeah, yeah. We could hear you, sir. You can ask your questions. Yeah. This is Lakshminarayanan here. I think two questions I have. One is I just want to understand, our employee cost has been elevated as a percentage of revenues. What band of employee cost as a percentage of revenue do you normally target at? Okay. I will take this. So in the employment cost in this quarter, it's mainly coming out of we had a very good turnover in our service projects where we have the service project is R&D projects with our customers. And therefore, you can see one portion, which is going, for example, for testing into the other expenses. And the other portion, these other engineering costs, are going into the personnel costs. So therefore, or due to the fact that we had in this quarter a lot, I think it was all over 27 projects which we have closed for this year, for the calendar year, we have overproportional bookings in the employee costs as well as in the other expenses. These are the counterparts of the income from services. So if you look at a steady state, where do you think these numbers should settle at? Well, in a so in a steady state, of course, also depending on the product mix we are seeing on the current product mix, roughly 10%, I would say. It depends all the time a little bit on the product portfolio which we deliver in this month. 10% on the mid-run is a normal figure. Currently, we have a very good productivity also. So 8%-10%. Yeah. Yeah. Got it. Got it. And another question is pertaining to your rental income. I just want to understand, in the first nine months, what has been our rental income or income from rental properties? And when compared to last year, nine months, how is it? Yeah. So what we see in the rental received, we have mainly the Adugodi campus, of course, where we also offer office space to other group companies. And this is, of course, in accordance with the market prices. The rentals, they will be updated every year. The rent received was more or less April-December 2024 to April-December 2023, marginally lower, but this depends how much office demand do we have all the time. Sorry, it is slightly higher by 6.5%. Sorry, it's the other way around. We have a slight increase coming out of we yearly check the rental rates that we rent it out to comparable market prices. For last year, for the full year, you had almost INR 1,569 million for the full year, and you anticipated to be around 7% higher. Yes, exactly. We could rent out some more offices. In addition, the adjustment of the market prices for the rental fees. Got it. Regarding this sale of the Building Technologies division, can you just tell me what is the profit contribution they have to the overall Bosch and what kind of cost associated, and how does one look at it for the next financial year? It's a very small business. I think the revenue that goes out is about INR 450 crores. We have how much? INR 400 crores is the revenue that goes out. Approximately, that's the revenue that goes out. And the profit is also quite small. It's 6%. So what kind of cost it would actually have so that just to understand whether the impact on our margins next year when this actually gets rebased? About 6%. Yeah. Margin is about 6%. Okay. So it's not a major impact on our business operations in any way. Got it. Got it. A small part of the business remains. A major part of that Building technology business is being sold. Got it. Last question is a little long-term. So if you look at what we hear from the slowdown in Europe, and we see that there is a movement of manufacturing from Europe, particularly Germany, to other parts, especially India. So how do you look at it, and what has been any kind of capacity build-up you're actually making to utilize this opportunity for Bosch Global? And any thoughts on that? Yeah. I mean, this is something we constantly assess. As you're probably well aware, Bosch operates in what's called the International Production Network concept. India is well integrated into that International Production Network and is fully visible in that network. We have full visibility of the rest of the Bosch International Production Network as well. We know what's happening globally in terms of slowdown, what is likely to happen as well. Not everything is known, of course. Things are very dynamic, as you have noticed in the last two weeks. Also, there has been a lot of changes. These are things we are watching constantly, and we are planning several scenarios. We continuously do that. And our manufacturing colleagues are constantly looking at several scenarios on how to keep looking at what could be the right strategies to shift or have manufacturing shifted to India or things which are moved either in the mid-term, short-term, long-term into India for manufacturing here. So this is something that's a constantly ongoing topic, and we constantly assess this. So to answer you, yes, this is something on our radar all the time. We do this assessment on a very regular basis, and we keep track of this very regularly. My question is that as the velocity of these discussions or the intensity of these discussions have increased in the last 18 months or so, how do we think about it? Yeah. I mean, at least for us, it's not something new. We've been having this discussion over the last several years already. They have only intensified for some companies in the last 18 months or two years, especially for some post-COVID. But we've had these discussions for several years, and we've had several relocation projects already ongoing. We continue to assess this on a very regular basis, see what makes sense, where does India have the right kind of base for either local manufacturing because the technology is also available here, the market is available here, and we can locally manufacture and use it in India or locally manufacture, use it in India, and export out of India. So this is an assessment we constantly do, and then we take the next steps as we go forward. So like I said earlier, this is an assessment we do on a very regular basis, and we keep updating this as part of our manufacturing strategy assessment all the time. Thanks, Lakshminarayanan. Reminder to all the participants. Anybody has a question, please raise your hand. Next, Mr. Pramod, you can unmute and ask your question. I think he's still having some problem. In the meantime, I'll take some questions from the chat box. You can hear me? Yeah, yeah. Now I can hear you. Okay. Please go ahead. Yeah. Thanks. Sorry for that. Some mic. Yeah. Yeah. So Yeah. So Yeah. So this is with regard to your gasoline engine portfolio which you were showing in the Auto Expo. It's interesting to see more of gasoline products being displayed as compared to a strength in diesel. And also, many of the manufacturers have displayed new products to be launched in the CNG and also in terms of flex fuels. I wanted to understand from you, what are the real challenges your customers face which you resolve in this area of operations one? And how does your content per vehicle change here for a supplier like Bosch? Sorry, I don't know whether I understand the second part of your question. How does Bosch resolve some of the technical challenges these new fuels bring on board? And how does the content per vehicle, what Bosch supplies in the gasoline, improve or change with these new technologies or new fuels? I think it's hard to give a very generic answer on content per vehicle. I think if you are also at the Bharat Mobility Show, and you said you were, we've showcased our complete portfolio on gasoline injection as well. And that should have given you an overview. We have the full portfolio there as well and a pretty good market share there too. So yeah, I think to answer your question, yes, there is more and more usage of this with our OEMs. A lot of them are going in this direction. And we continue to have more engagements with several OEMs, and this is increasing. Content per vehicle, of course, depends on several factors depending on whether we sell a system, whether we sell a component, whether we go just with an ECU in some cases or another sensor or whatever. So it actually depends on what we offer to the customer. So it's very hard to say what exactly is the content per vehicle. Sure. Thanks. Actually, the second question is with regard to the aftermarket growth. It's good to see near double-digit growth, almost like 8.8% in the first nine months versus your company's overall top-line growth of just around 5%. Wanted to know what subsegments of this aftermarket are driving it in the sense filters or lubricants. What are these drivers for this aftermarket one? Second, why is considering that rule of thumb aftermarket is supposed to be a superior profit margin business? Why is not fully reflecting into your profitability or EBITDA margins? Yeah. I mean, it has the aftermarket. All segments of aftermarket have grown quite a bit, especially our diesel components, lubricants, filters for OEMs and for exports. All segments have grown. We've had very good growth in our aftermarkets, and our margins have been very good with the aftermarkets, like always, so I would say the aftermarket business has been doing well. Yeah. Yeah. So the aftermarket business, the margins have been very steady and very good. Because we are hardly seeing some 30 basis point improvement in margins considering the growth variation on. Yeah. It depends on the weighted average, right? So it is the sales in that area. Yeah. The aftermarket sales volume versus what we had as yeah, what we had in the other areas. So that's why you don't see that directly. Do you want to comment? Yes. Yes, degrew quite a bit. Our solutions area degrew quite a bit. And that's why you don't see direct contribution on the margins this time. So of course, the growth in the aftermarket is helping us all the time in the overall EBIT. And as Guru already mentioned, we had a good increase in the sales of diesel components where we also make some exports in the filters and lubricants. Meanwhile, if we look on a quarter-to-quarter compared to the last year, we see in this quarter a slightly lower sales in the powertrain solutions. We see good sales in the Two-Wheeler business. And if you then have the overall mix, of course, then we are still having a good development also of our margins. Okay. Sure. Thanks from all of us. Thanks, Pramod. In the meantime, I'll go for some questions in the chat box. So first question is, we have had a sharp improvement in gross margin by around 350 basis points Q1Q. Could you please explain the reason for the same? Can you please repeat the question? Yeah, yeah. So I have had an improvement in the gross margins by 350 basis points Q1Q. Could you please explain the reason for the same? Yeah. Okay. So first of all, of course, if you see the gross margin, it is depending on one time on the product mix. But what we also see is that we had a, let's say, carryover effect of the RMI and ECI from the big customers. And in addition, of course, we are also working in the gross margins to make further improvement on the material cost side with our material ratio, with RPP measures, with engineering, etc. So it is not one single thing. It is a combination out of different measures. Okay, okay. So and then there is a question, how does Bosch India plan to leverage its position in the automotive industry with the ongoing shift towards electric vehicles and alternate fuel technologies like hydrogen? And also, there are some sub-questions also on that. What are all the Bosch strategies for maintaining its position as a leading supplier of technology in the mobility sector, especially given the rapid technology advancements? And can you discuss some of the key innovations Bosch India is working on in terms of mobility solutions, particularly in areas like software development, hardware design, or hydrogen technology? Also, are we doing any work on hydrogen technology for global Bosch? I wish you were present at the Bharat Mobility Show. Whoever asked the question, we would have been able to share. I mean, we shared a lot of our technology demonstrators and products and our software and hardware. You would have had a first-hand look at what we had to show. So it would have probably convinced you better rather than me orally telling you something now on the call. But let me try and answer you briefly. See, we've always been a company which has invested globally 6%-8% on R&D. That's been our core strength and that we continue to do 6%-8% of our sales on R&D, I meant. That is what keeps our innovation engine going all the time. And this is something which is core for Bosch as a technology company. We do this very consistently and over many, many years. And this is what keeps us ahead of many other competitors and keeps us in a very, very strong position in the auto tier one space and also makes us one of the most preferred partners for our OEMs in terms of advanced auto technologies, some of which you named, be it hydrogen, be it electrification, and even within electrification topics like silicon carbide or other technologies which go there or today topics on artificial intelligence or others. So we do these advanced investments. And just to give you a number on fuel cell developments, today we've invested maybe over EUR 2.5 billion in Europe. On electrification, over the last 10-15 years, we've invested over EUR 7-8 billion developing various products in this segment. There has been a consistent track record of investments, R&D-led development, which creates not just IP but also a solid portfolio which gives us a generational lead into products, technologies, and lots of advanced ability to go to customers and showcase and be a preferred partner to customers. This is what we do. This is what we do in the context of being an advanced technology company in the world. We do the same also in the context of India, where we leverage the strength of our parent by using platform developments which happen globally. We also use that in India. Sometimes we do local developments. Many times we use developments which have happened globally. We also use that to bring it into India. And then we also do totally local developments if it warrants locally. What is also unique in India is that we have a very big sister company called Bosch Software Development Center, which BGSW, which is about 25,000 engineers, which does a lot of software, hardware, and product development, which is one of the biggest software development companies for Bosch globally. And this does a lot of developments for us and helps us build advanced technologies for India, for the world, and also sitting out of here. So in that sense, this has been part of our DNA. This is how it keeps us on the cutting edge. And this is what makes us unique. What is also unique in our context is that we are not just a design company. We design to manufacture. We have a legacy of doing a lot of things which are highly manufacturable. So we have an extremely strong design for manufacturability. And we do couple all our design strength into manufacturing. So we have extremely good manufacturing capabilities. And that's how we ensure that everything we design, develop, and work with our OEMs is also very good with high-quality, high-volume manufacturing capabilities. So this is the end-to-end manufacturing design-led manufacturing capability of Bosch, which is what you see consistently over the last 130+ years globally and in India already over 100 years now. I wish you were at the Bharat Mobility Show, and there you could have seen a flavor of this as well. I would like to add and give you also a commercial perspective because in our purchasing organization, we have a dedicated group which are screening here the Indian market for suppliers for the future, especially in the context of electrification and hydrogen. And this is not only in India for India, but we are working very close together with our German organization because what we are looking for for the future is local for global as well. And therefore, we set up this a couple of years ago already, this dedicated group and work from this perspective also on the topic. Thanks for the detailed answer. And there are two questions on the same subject. So what has led to sharp decline in Consumer Goods margin this quarter? And where do we see the margin heading going forward? Yeah. Okay. The Consumer Goods market, you know, it is all the time a seasonal effect, and especially in the Consumer Goods market, also at the calendar year, dealers look at their inventories. We have all the time in December a quite low market. We can see this seasonal effect year over year, so therefore, for the Consumer Goods, please have a look at the average, and we don't worry that we will see in other quarters a very good take of our Consumer Goods. Okay, and then there is a question on the forex. What is the forex rate for import during this quarter? And is forex passed through to the OEMs? So the exchange rate effects on the one side, of course, we are usually, as all other companies, also doing a hedging. And in addition, yes, there are clauses in several contracts where we have implemented this as well. Okay. And then there is a question. So you had previously mentioned that Bosch is looking at consolidating the automotive businesses in India. Is there any update on the same? Yeah. I mean, I don't want to jump the gun on any information as sensitive as this. If there's any update, we will let you know when the news is allowed to be shared. So till then, I can't share such information. Okay. Can you please explain the nature of the restructuring costs and will this continue for coming quarters also? Yeah. Okay. Thank you very much for this question. We are looking forward, of course. We have a portfolio. We have more common rails. We have a very good plan to go further ahead with the productivity, etc. So therefore, you have some time to make some adjustments. But this is not a beginning of everything. Yeah. So this is really we are looking now into the next year. We are looking forward. We look at our product mix. We get new products in like the NOx sensor, who has a comparable low value add. So we look at the product mix. We look at our productivity, which we need to be competitive here in the market. And therefore, sometimes we have also to think about some adjustments. Okay. There is a question on this building solution business. What is the rationale for divesting building solution business? And you indicated 6% margins. Is it a PAT margin or EBITDA margins? This is the EBIT margin. The first part of the question was the rationale. This is a product business. Therefore, we all the time also have to look at our portfolio, and we have to manage our portfolio. We have to see what is our core and what is our strategy. We also therefore have to overall see the Bosch strategy. Just to add to that, this was something which was announced already some time ago as part of a global realignment. It's not something new that we're doing. It's part of an ongoing process. It's realignment of our Building Technologies division globally. It's being carved out globally. You may have seen that the Building Technologies division globally has been sold to a venture capitalist, Triton. This is an ongoing part of that sequence. In India, we are doing it to a subsidiary of our parent, who will then take it back to Triton. Okay. There is a question on this OBD-IIB norms for two-wheelers. What can be the content increase for Bosch on OBD-IIB for two-wheelers? Hello? Do you have the exact? Okay. I'll have to get back on the exact number. I don't have the exact number here. Okay. I don't know whether yeah. There is a question on E-Axle project. Status of the E-Axle project? Or do we see any demand from the OEMs? Yeah. I don't know what you mean with the status of the E-Axle project because there are quite a lot of E-Axle topics under discussion. We are talking about quite a lot of E-Axle projects currently with several OEMs. And since the projects are all under discussion with OEMs, I cannot be more open in a forum like this. But I can assure you that there are several projects under discussion. Yeah. I'll just run through the questions. Any missed out, I'll just ask. And there is a question on this after-sales. So what is the expected growth rate in FY26 for the after-sales division or business? Yeah. We typically expect between 8%-10%. Okay. Yeah. Broadly, those are all the questions, sir. No more questions. There's no more. Do you want to make any closing comments, sir? No. I think it's been a tough quarter overall. I think we've done reasonably well considering the environment and the circumstances. I would say thank you for your attention and your questions. We hope the upcoming quarter is a good one. In view of the cyclicality, we expect it to be a much better one. Thank you, everyone. And let's look forward to a better quarter. Yeah. We thank all the participants and the management. Have a good day. Thank you. Thank you. Bye-bye.