Ladies and gentlemen, good day, and welcome to 4Q FY 2022 results conference call of Hero MotoCorp Limited, hosted by Batlivala & Karani Securities India Private Limited. As a reminder, all participant lines will be in listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir. Welcome to Hero MotoCorp Q4 and FY 2022 earnings conference call. I will now hand over the call to Umang Khurana, Head, Investor Relations and Business Support. Over to you, sir. Thank you, Mr. Jayaraj. Thanks so much. Thank you, Tanvi. Good day, everyone, and welcome to the Hero MotoCorp quarter 4 and financial Year 2022 investor call. Trust you're all keeping safe. On the call today we have with us Niranjan Gupta, Chief Financial Officer. Ranjivjit Singh, who is our Head of Sales, After Sales and Marketing. Sanjay Bhan, who is our Head of Global Sales. And Swadesh Srivastava, who is the Head of Emerging Mobility Business Unit. We will begin as usual with opening comments from Niranjan and then open it up for your questions. Over to you, Niranjan. Thanks, Umang Khurana. Welcome everyone again to Hero MotoCorp's quarter four earnings call. Firstly, good morning, good afternoon, good evening, depending on which part of the world you are joining from. I hope you, families, and your colleagues are staying healthy and doing well. These are interesting times, to say the least. It's not just VUCA world, but it may actually be VUCA plus or super VUCA. Looks like forces of nature are also branding and rebranding and launching variants as we do on the industry. More on that later. Let me first cover the key highlights of our results. You would have seen our results announced yesterday. We delivered INR 7,422 crore of revenue and a profit of INR 627 crore. For the full year, the revenue was INR 29,245 crore with net profit of INR 2,473 crore. Few highlights on that. Within domestic business, Splendor is going from strength to strength and registering all-time high market shares in its segment. As far as entry segment is concerned, we have recovered strongly in quarter four with a market share of 68.5% in that segment. As far as premium is concerned, we continue to build and extend the portfolio, and we have recently launched 3-4 months back the XPulse 4V, which is in high demand as we see, and more launches will follow. Our PAM business, which is Power Accessories and Merchandise, which is a profitable business, continues to surge ahead with a growth of 10% in quarter four and actually 24% in FY 2022, which is powered by extension of range as well as our deepening of distribution system. Coming to global business, it's truly and firmly on fast track now, having clocked 300,000 for the full year. We have a long way to go, of course, but we are confident of this being one of our key drivers of growth for the company in future. We launched VIDA brand in March. We are excited about that. We'll be doing EV product unveil on July 1, as announced earlier. We want to ensure that through rigorous testing, that the product we put in the market is of the right quality and safety parameters as we have always done earlier. For us, customer comes first, business will follow. As you've seen, we have declared dividend of INR 95 per share. Factoring various parameters including payout ratio, absolute dividend, our cash position, et cetera, this also signals our positive outlook for FY 2023 and our strong cash flow generation as well as our strong cash position. Coming to outlook, let me talk a bit more about that for the coming year. One of the things that's an area of concern for industries across the board is the cost inflation, which is triggered now by geopolitical situation, as we all know. Of course, this will be a watch-out, but we are no stranger to commodity inflation. We've been seeing cycles in the past as well, in recent past as well. We will continue to navigate this phase through combination of judicious price increases, cost savings, and of course, broad-based portfolio growth, including premiumization of certain models that we have. Coming to growth, of course, the macro indicators are really looking good. The GST collection we have all seen is all-time high in April. The e-Way bills have picked up. Almost all, in fact, I would say all sectors of economy have opened up. Grain prices are high. They're augmenting rural income. The monsoon forecast is decent and so on and so forth. It's clearly evident also that while COVID may not have gone away, but we've all learned now to get on with our livelihood and hence the consumer confidence and spending is bouncing back easily and actually solidly. Already we are seeing signs in April, and we have no reasons to believe why two-wheeler industry can't grow double-digit in FY 2023. We will have multiple product and variant launches in the coming fiscal. Added with all the actions already taken, we are confident of gaining market share and hence growing ahead of the industry. With that positive outlook that we have on the industry and our market share and our growth ahead of industry, let me now open the floor for Q&A. Thank you very much. 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 withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. We request participants to please limit their questions to two per participant. Should you have any further questions, you may please rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Yeah. Hi. Thanks team for taking my questions. Two questions. Firstly, on the demand side, you did allude that, you know, April we are seeing early signs. Could you share a little bit more color on, you know, what is it that we are seeing on the ground? And, you know, where are we in terms of channel inventory? Plus there are a lot of these supply chain constraints that some of your peers have been calling out, so maybe, you know, give us some perspective. Is there a challenge on the supply side that you all are also facing? That would be the first question. Hi, Gunjan. That was three questions in question one, but that's okay. Let me hand over to Ranjivjit to address it. Ranjivjit over to you. Yeah. Hi, Gunjan Prithyani, and hi, everyone. This is Ranjivjit here. I've, you know, I'm the Chief Growth Officer. This is the first time I'm talking to all of you, and I look forward to catching up with you. I request Umang Khurana to set up some time so that I can get to know you guys, better. I've worked in... Just take a minute to introduce myself. I've worked in, some of the other companies where we may have interacted, like Samsung and Unilever, et cetera. Yes, you know, April is looking good. So far we've had an upside thanks to, the marriage, thanks to the festivals. We set off a really good note with Gudi Padwa, and many other, you can see many as auspicious dates. Retails have been good. Dispatches have been good. As far as the inventory is concerned, we've actually been able to bring that down to about 6-7 weeks as we speak today, which is a better situation than we were at the end of the quarter. That's another indication that you've got. Overall, you know, the momentum is pretty strong. When you look at the entry level, we have gained market share month-on-month over January, February and March. We exited at for the full year at 62%, but in March we were at 74%. There were some campaigns that we did around mileage, and that really helped reinforce the key strength of Hero MotoCorp and of HF Deluxe and build confidence in the market. Splendor's done extremely well. We're at 82% market share in March. That's again a great testimony of the momentum that we've got. Overall, you know, it's been a good start to the year. Sure. Good to hear. No supply chain constraints, right? You know, typically, as we are going along, there are supply shortages on the chips side that we face, which are very similar to what the industry faces. I must say, I must compliment our supply chain team for having managed the situation well. Of course, demand outstrips supply in some of our key products like Xpulse. We've had a record month in March where we sold 5,000 retails of Xpulse, and that continues. Glamour XTEC is also doing great in terms of you know, the marriage season. It's in good demand. As you get more supplies of the chips, I'm sure we'll get even better in our positions across these segments. We're managing the shortage, but overall, I would say it's going pretty well, start to April. Sure. The second question was on the margin. Now, I clearly see some gross margin expansion in this quarter. You know, maybe just give us some sense on, you know, what has led to it, you know, price hike, LEAP, mix, what is it? Why is the other expenses higher in this quarter? A couple of things, Gunjan. One is, GM expansion is like you yourself answered, is a combination of price hike that we've done, as well as, LEAP savings. We've always talked about our accelerated LEAP 2 program, which has generated almost around 300 basis points of savings in this quarter as well. That we continue to put pedal on because that's the way to navigate the high cost inflation era, and you've seen us doing that in the last two years. On the other expenses, there are some phasing things. As you can see, CSR expenses more towards quarter four. If you know, take those phasing into account, I would actually advise to take a full year picture on the other expenses to get a sense of the overall annualized run rate of the other expenses. Thank you. Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead. Yeah. Hi, sir. Could you talk about what is the price increase that you have taken in current quarter? What is the cost inflation that you have seen and the overall outlook for margins for next year as well? Hi, Kapil Singh. As far as price is concerned, we took around INR 1,000, you know, at an ex-showroom level, price increase, in April first week. As far as cost inflation is concerned, as we have always been saying, it's very difficult to call out what the inflation will be. Effectively, we know that all commodities are going up, and our way of managing that would be a price increase, which we have done. We'll calibrate it moving forward, you know, in different quarters and different periods as well as the savings program, which we continue to accelerate, and we will do on overheads as well. That's the way to continue to manage. Obviously, at some stage, the commodities are expected to cool off, and we'll have to wait for that, for expansion, if any, on the margin side. Second question was on, you know, growth, particularly for ICE industry. Do you see that we have, you know, obviously there is a base effect, but beyond that, do you see that for next few years, ICE industry can keep on growing? I see that for Hero in particular, the scooter sales which used to be around 8 lakh have come down to nearly 3 lakh. How are you thinking about, will EVs be our growth engine now or are we equally focused on ICE as well? Yeah, Kapil. As far as, look, industry is concerned, I mean we have to bear, you know, take into account, the kind of shocks that the auto industry has gone through in the last three, four, five years. I haven't seen at least any industry going through such shock waves and still being resilient in terms of being at the volumes that it is. Whether it was BS6 and the cost inflation and the pandemic shutdown and then the geopolitical, things that are happening. There is, if you-- I think you have to go back fundamentally to the penetration levels, which are still under-penetrated as compared to, we know if you take comparable Southeast Asian countries, we are still probably at 1/3 of what they are and therefore there's a huge scope. It's not just a base effect, it's a long term. If you think that there's also the GDP factor, and we know that our economic growth has been soft because of the pandemic and those reasons, and which is going to bounce back as all the other indicators are. I think if you combine the economic outlook along with the under-penetration, there is a solid case for industry to continue to grow for the foreseeable future. That basis doesn't go away because of a few quarters here and there. As far as the scooters is concerned, yes, our scooter partly also in quarter four, that we had brought down the inventory and therefore retail is going to be higher. We've got job to do in scooter. We are going to launch variants around XTEC, similar to what we have done in motorcycles, and we'll continue to peg at that in order to improve our market share. Apart from that, as far as EV, it's not that, you know, by focusing on EV we are taking the foot off the pedal. We continue to focus on the scooter game because we've not reached anywhere close to our fair market share which is there. There is ample scope there. Of course as far as EV is concerned, you know about the launch that will happen. We'll navigate both the spaces. Okay. Thank you. We expect ICE industry also to have growth for next few years. That's what you would think? Yes, Kapil. There's no reason to believe why the growth will get stalled. Okay. Thank you, sir. All the best. Thank you. The next question is from the line of Raghunandhan N. L. from Emkay Global. Please go ahead. Thank you sir, for the opportunity. My first question was on EVs. The production is likely to kick off in AP plant from July onwards. Can you provide some details on capacity and volume expectations? Also the Gogoro Hero tie-up was expected to come out with a product in CY 2022. Does the timeline still remain? Raghunandan, let me just start off and I'll ask our EMBU head, Swadesh Srivastava, to actually pitch in. As far as you know the capacity is modular. Depending on what we want to do and the cities and the plan which will get unveiled of course on July first, we can always augment it. It's not, you know, it doesn't require to actually create a huge mammoth capacity right now to feed anything. It more depends on our plan as to which are the cities we want to go first and then next and then next. I think that's where it'll depend on. Of course the volumes part as well. As we said, the primary focus will be on quality and safety. Apart from of course giving competitive features and pricing. I think that will be our core plan. Quality safety will be first and that will also determine what our trajectory of launches and the expansion is. As far as Gogoro and this one is concerned, obviously we want to phase out things in a manner that once our launch comes with some space that comes, we're still sticking to that in FY 2023 we should be able to put in the product on the swapping system. Swadesh, you want to add anything? Thanks, Raghunandan N. L. Hello, Mr. Raghunandan N.L. This is Swadesh Srivastava, head of EMBU at Hero MotoCorp, and hello to everyone. I think Niranjan covered, you know, good most of the points there, but just to bring back the focus on the Gogoro product, it is well planned to be released this year. More details on the cities and the volumes you'll hear on July 1. Thank you. Thanks Swadesh. All the best. My second question was on Ather. Just wanted to clarify the investment amount. Q4 investment stands at INR 1.5 billion, and the total investment expected is up to INR 4.2 billion, which was announced in January, and this investment will happen in a staggered manner. Is that understanding correct? Also any update you can provide on Ather valuation in the latest investment round? Right. Raghu, firstly let me answer the second question, the easier one. I'll refrain from valuation on Ather. They can talk about it, but we'll refrain from that. But on the funding part of it, yes, I'll convert into crores. I usually associate billions with dollars and crores with rupee. Allow me that. INR 150 crores is what we invested. The total contribution that we talked about is INR 420 crores, like you said. It is likely to happen in this quarter itself, the balance which is INR 270 crores. Thank you, sir. That's very helpful. Can you share the spares number if you have it handy? Yeah, I can share the spares number if you want, which is for the quarter. It is INR 1,151 crore, the parts business revenue. Last year, the same quarter was INR 1,049 crore, and quarter three was INR 1,186 crore. That's a growth of 10% year-on-year. For the full year, we're at INR 3,933 crore versus INR 3,178 crore last year, which is a 24% growth. As a contribution to revenue, for this quarter, it stands at 15.5%, but better when we look at full-year basis, which is 13.5% to revenue, well above the 10%. We used to be in single digits, if you remember, some time back, three, four years back. Thank you, sir. That's very helpful. I'll come back in the queue. 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 a question on the demand recovery side. I understand that you've seen pretty good retails in the month of April and outlook for May is good. If you can just help us understand how much of this is kind of marriage season demand, because this is the first season of it in the last three years, right? If you can help us understand how much of outside of the marriage season and outside of the marriage season market, how is demand faring in April and especially towards the start of May, so that we can get more confidence on the sustainability of this demand once the marriage season kind of rolls out or ends by around mid May end or something like that. If you can just help us understand on the demand side in more detail, please. Right. Hi, Pramod. Let me hand over this question to Ranjivijit. Ranjivijit. Yeah, sure. So the, you know, the good thing is April, May and June, right up to July 15, have very much auspicious dates for marriage. In fact, it keeps building. May and June will continue to be very robust. Besides that, you've seen rural, that being a driver as well. All of you know about, you know, the way agriculture is, the wheat procurement, the exports, all of that are positive signs that are coming through, and we are seeing that in our business across two parameters. One is in rural, the second is semi-urban. Both of those are looking strong. Overall, it's a very, I would say, evened out quarter that we're going to be seeing as we go along. We've had a very good Akshaya Tritiya. That's been a very positive. Last year was pretty truncated. This year was good. Gudi Padwa sales were positive. We are seeing a spread across all across. Even Ugadi was a good period that we had. It's very well spread out is what we are seeing right now. Just as a follow-up to that, Ranjivjit, what level of inventory are you comfortable with? Because you're coming in here as a growth officer and you come from an industry which is also pretty strong on inventory, so from the electronics side. If you can help us understand your perspective as to what you think is the right inventory level at which you should kind of operate because some of your other peers have much lower inventory levels than what you guys carry, and because that kind of has an impact on the incremental wholesale performance. Like for example, if I pick April, there's a good 70,000 kind of a gap between your wholesales and retails being higher, based on Vahan. If you can just help us understand your philosophy around how you see the networks, and also any scope of network expansion from here on. Sure. Look, you know, at the scale at which we operate, we are the largest, not only in India, but also across the world. There is a certain amount of expectation that our customers have in terms of service levels, of having the product, the SKUs available to them. We are pretty good with 6 weeks, you know, as a norm. I'm really happy to say that today we are around that zone. With the upsides in terms of the demand forecasting as well as better in terms of how we are matching the inventory to the demand, I believe we are well placed. In addition to that, we are investing and expanding in the secondary networks, and that, again, requires the inventory to be placed, you know, in little bit more, I would say, far-flung rural areas, and that again is working to our advantage. Six weeks, given the complexity of our business, the number of SKUs, the geographies that we operate in, I feel is a very good position. We are well positioned for this quarter and as we go forward. Thanks a lot for that. Second question is for Niranjan. Niranjan, we've always maintained that the medium to longer term margin range for Hero is 14% or thereabout. I think you mentioned a band as well historically. How should one look at that going into FY 2023? Because we're gonna have volume growth coming back, which will be offsetting operating leverage after a gap of almost three years of decline for us, and exciting new launches and more premium products getting out in the marketplace, and the commodity intensity. How should one look at this, as in what outweighs what, and how would you like what kind of margin profile you will be comfortable as a CFO? Yeah. Pramod, the margin profile, comfortable as a CFO, is the medium range guidance that we have already given. Yeah. Now, having said that, there are always, you know, moving forward, there are headwinds and there are tailwinds. The headwind clearly is the cost inflation, commodity inflation, and we've been taking a very sensible price movements in the market because we don't want to destroy the demand and equally we don't want to hurt our margins too much. You've seen that calibration happening across the quarters, and we've been sensible about that, and we'll continue with that. Second plank, of course, is cost savings, which is a positive for us and a lot of programs, and that will continue. You are absolutely right. The other positive that will come this year will be the operating leverage, because we've been suffering with the negative operating leverage for the last couple of years, and therefore that will come positive. Now, how much that gets translated, et cetera, et cetera, the margin recovery will follow. The point is that we don't give guidance for an FY 2023. These are the factors that actually weigh in both on the positive side and the negative side. The other, of course, like you talked about, is premiumization. For instance, in all the XTEC variants that we are launching, some which we have launched, some more will follow across all the models. They're all priced between 7%-10% higher than the base variants, and they are doing well from the demand side. I think we continue to navigate very sensibly from a portfolio perspective, from a pricing perspective, from a savings perspective, and now from a volume perspective, which will come for the industry and for us, should be well-placed. We'll have to navigate this space. The medium range guidance doesn't change. Okay. The last one. Spares should sustain the momentum in terms of as a percentage of revenue been holding the 15% mark for last couple of quarters. So should one expect that kind of momentum to continue going to FY 2023? You're talking about the parts business? Yeah, parts business. Yeah, sorry. Yes. Domestic plus exports. Yeah, parts business, Pramod, we've been continuously moving it up. You know, we used to be between 7%-9%. We crossed 10%, 12%, now 13.5%. There are organic measures that are already in place, whether, as I said, increasing the range or deepening the distribution. So percentage as of now, maybe not a number to look at because, you know, obviously, you know, if we end up gaining huge market share on two-wheeler, that revenue will go up and percentage may seem lower. Having said that, we do expect the PAM business to continue on the growth trajectory. We have lots of opportunities there. Thanks a lot. Wish you both all the best. Thank you. Thank you. Thanks a lot. Hi, this is Umang. May I request everyone to please keep their questions to two at a time. Do come back in the queue right after. Thank you. We'll move to the next question from Rohil Gandhi from PPFAS Mutual Fund. Please go ahead. Yeah, hi. Thanks for the opportunity. I just had one question. It's regarding the trade payables. I just wanna understand your payable days have significantly gone up if you look at it from a full year basis. Can you just speak about that a little more? Well, you know, payable days, you could be looking at an aggregation. Our credit periods have not gone up, nor are there any overdue payments. In fact, if you look at the trade payables and balance sheet on a year-on-year basis, which is this year's trade payable versus last year trade payable, the trade payables are lower because of the lower production, which has actually happened. When you convert into number of days, sometimes it which part you are converting the quarter or the month or the fortnight because those numbers would not be available in published balance sheets. You may arrive at a certain number, which is not representative. None of our payable days or the credit days, nothing has gone up. Everything is actually in sync. Offline, of course, we can get chatting, and we can give you more data if you require. Thanks so much and good luck. Thank you. The next question is from the line of Amyn Pirani from JPMorgan. Please go ahead. Yes, hi. Thanks for the opportunity. I just wanted to, you know, go back to the other expense line item. I mean, you had some very attractive, you know, thing in 3Q and I think in 4Q as well. Is the sharp increase to some extent to do with the kind of subvention you may have had to give or is it just, you know, a quarter-over-quarter thing that we should not really focus too much on? No, I mean, it's got nothing to do with the financing subvention. That's actually a very low number. It's not material to the overall other expenses. It is by and large one item, of course, is the CSR spend. As you see, most of our, because of the pandemic, we were not able to complete the projects we had completed in quarter four. That itself would account for almost around 50 basis points-60 basis points of elevated spends in quarter four, making up for the full year obligation of the CSR. There are a couple of other items as well. Overall put together, the better number to look at will be the annual number in terms of when you want to look at the trajectory and the percentage happening. What is the financing share for fourth quarter? As you're seeing this improvement in retails, I mean, is there any sharp shifts either ways? I mean, how do you think this number could move during the year? I first talk about the number and then I'll ask Ranjivjit to talk about more about the financing and what he sees. The number, the financing overall in quarter four was 54%. Fincov share, you haven't asked, I know the question may come up later on, is close to around 34% out of that. It's the share is in the trajectory. Fincov has been around 35%-40% give or take, you know, here or there, between the quarters. Our financing penetration has been going up. For the full year also it's 50% + now. It's almost 50%-53% compared to 49% last year. Let me hand it over to Ranjivjit to talk about more about what's the financing picture, what's happening in the retail requirements. Sure. To drive approach. Ranjivjit? Absolutely. Look, this is an inflationary economy, and we know that our customers really need that help in terms of financing. A large part, 65%-70% of them are first-time buyers. They don't have a credit history or a rating. It's really important for us to be able to serve their needs. We are. That's what we're doing. We're actually aggregating a lot of financers who are helping these customers out, and that's how you see the numbers also growing from the 49% to the 53%, as we've seen. Going forward, that's going to be the name of the game. Pretty much, across not only urban but also semi-urban and rural, we're gonna be holding the hands and making sure that the financing is there for the people who really need it. That's gonna be a big growth lever for us and a big growth driver and enabler for our customers to buy Hero products. Great. That's actually good to know. I'll come back in the queue. Thank you. Thank you. Thank you. The next question is from the line of Ashutosh Tiwari from Equirus Securities. Please go ahead. Yeah, sure. You shared that the inventory number as of currently is around 6-7 weeks. What was the number at end of March quarter? 7-8 weeks. Okay. Secondly, can you share the actual retail numbers in actual retail volumes? Ashutosh, we don't share the retail numbers. On that we will Is it meaningfully higher than wholesale or how should one look at it? It is higher than wholesale because our inventory has gone down, so one can actually do a back calculation to see that, the retail numbers are higher and therefore has led to inventory correction. Okay. Thank you. That's all from my side. Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead. Hi. A couple of clarifications. One is on the other expenses. Is there any higher expenses related to the VIDA brand launch? Can you quantify the number if it is material? Jinesh. This also includes, like I talked about, this combined with, you know, the CSR spending overall put together, you could say around 80 basis points- 100 basis point overall is the impact, which is into other expenses for the quarter, which includes of course the CSR expenditure that I talked about as well. Okay. The VIDA brand launch will be close to about 20 basis points-40 basis points extra expense. Secondly, was there any impact of RM costs or commodity costs in fourth quarter or was it broadly stable on quarter-over-quarter basis? No, RM costs actually got neutralized also because of lease savings. We had accelerated lease savings delivery in quarter four. That's why you see also our. The way I think you guys also see the gross margin. That's how the definition of gross margin. Let's say the margin net of material costs has moved up because of that, so we haven't seen that. Moving forward, of course, in any case in the industry, the commodity cost, what gets reflected in the indices and the market, you know, comes with a lag of a quarter across the industry. That's the general. Right. Thing that happens. Therefore it will come out in quarter one, quarter two. Yeah, because many of the peers have indicated, commodity costs were stable on QOQ basis in the P&L. Just want to understand that's still okay. Got it. Yeah. Got it. Last clarification on the chip shortages. Is it fair to say that our core portfolio of 100, 125 cc is not impacted by chip shortages? I mean, by and large, yes. I mean, in a sense that, you know, apart from some of the variants that we've launched, which is XTEC variants and some variants which have connectivity, et cetera, et cetera. Some variants. If you look at our overall portfolio, I mean, the way to look at it is as an overall portfolio, what percentage is impacted in terms of volume numbers because of chip shortages or supplies or what is dependent on chip shortages, that is immaterial. That's actually a very low number. Ranjivjit also talked about how we are managing it. Ranjivjit, any further comments on this? No, it's just that, of course, the shortage does affect the top end, the more connected ones. Those SKUs and those are in demand. As we keep working on it to improve the supply situation, which is really something that's happening on an every day basis, we are seeing improvements in our supply. We will continue to make all our efforts to make sure that we plug the gap because, you know, it's important to serve the customer at that end as well. Got it. Thanks. I'll fall back in queue. Thank you. The next question is from the line of Hitesh Goel from CLSA. Please go ahead. Yeah, thanks. Thanks for taking my question, sir. Just wanted to get a sense that government had, you know, said a few days back that no EV launch can happen, no new EV launch can happen by any player for next one year as they're investigating this fire issue. Is that sorted out? Because you're talking about launch this year, right, on Gogoro and your own product. No, there's been a clarification that there's no official notification or direction from the government to that extent. All they are doing is examining the scooters that have caught fire and trying to understand that and then ensuring recall and safety measures. There's no ban by the government on EV launches. That's very clear. On the RM cost inflation for first quarter, can you quantify? Is my understanding right that there could be around 400 basis points under recovery in first quarter? You would have taken 2%, half of that. Most of the industry in that is in that ballpark. Is that calculation in the ballpark or I'm totally off? No, I won't quantify because, you know, this commodity inflation, honestly, I have even seen most of the big experts also faltering. I won't venture into that area. Yes, you know, we can all see that the commodity costs have gone up and that will impact quarter one, quarter two. As I said, we have actions lined up. Obviously we will endeavor to recover the cost in more ways than one. That would be our target. As it happens, we will navigate the space. The number seems very high, what you're quoting, yeah. Okay, great. Thank you, sir. Thank you. The next question is from the line of Mukesh Saraf from Spark Capital. Please go ahead. Yeah, hi, good afternoon, and thank you for the opportunity. First question is on the mix of your customers between, say, first time buyers and replacement customers. I think in one of the comments you alluded it's about 65%-70% is first time buyers. I noticed that it's probably higher than what we've seen last year. Could you kind of just give some comments on that and probably let us know what the numbers are? Okay, I hand it over to Ranjivjit to answer about the first time addition and the replacement buyers. It's actually pretty consistent. That's the nature of the market. Personal mobility is a key need in this country. Again, across all parts of the country participate in this. First time buyers are in the region of about 65%-70%, depending on, you know, in the commuter segment could be a little higher, in the premium segment could be lower. On average, that's where it is. There's the replacement and the additional which are pretty much equally split, in the balance of about 30%-35%. That's a very consistent thing. Our attempt as a brand, being the world's largest and being a very inclusive brand, is to invite more and more people to get their own personal mobility solutions from Hero MotoCorp. We have the portfolio structure that we do. We have the ways in which we have the dealerships that are spread across the country. We have the widest network of dealerships. We also have the retail financing that enables our customers to be able to participate in that journey. Actually I believe it's a very consistent story that we are building on and that builds trust for this brand over a period of time in a very consistent way. Sure, sure. Thank you for the clarification. Second question is on EVs. While we do get a sense of the high speed EV numbers, there seems to be a lot of these low speed EVs, you know, with the volumes obviously something that we wouldn't be able to track because these are not registered and it's probably, you know, below the radar. Could you give a sense of are these even having any impact on ICE volumes, especially in, say, rural and with any other markets which is where a lot of these low speed EVs, you know, seem to be getting sold? Hi, Mukesh. This is Swadesh. I think that's a good observation. Definitely there is more sales happening on the low speed, low range segment. Although a lot of new products are coming out in the higher range, higher speed segment over the last few months and going forward. We'll see much more uptick there. When it comes to impacting the ICE market or the ICE business, I think what you're seeing in the low range and low speed is a lot of people who have you know, short errands to run or people who are in an age group or the demographic that you know, they are not able to handle other form factors. They are really going into that. Right now it is not really eating into the ICE market. I think given the momentum, I think new use cases are coming in for those form factors. Going forward, you'll see the high speed and high range scooters also picking up in the EV segment. Right. Is there a case for, you know, companies like yourself also getting into that low speed segment to cater to that specific form factor requirements? See, I think right now the EV industry is actually in quite a nascent stage. You will see different use cases coming up, right? I think we want to definitely play to our strength. We have both our own homegrown product and the Gogoro partnership product. Both are well positioned at the heavy and prominent use cases, because we wanna make sure that we are catering to those customers. Over a period of time, will we not come in all the use cases? Given our portfolio on the ICE side, we will do the same on the EV side as well. Right. Right. Great. Thank you for that. I'll get back in the queue. Thank you. The next question is from the line of Sabyasachi Mukherjee from Centrum PMS. Please go ahead. Yeah, hi. I just have one question. If you can comment on the income tax issue that was there in the, you know, news a month ago? Yeah, Sabyasachi. Therefore, if you read notes 9 to 10, we have explained our comments and our status on that. Beyond that, I would have nothing further to add at this stage. Okay. Thank you. Thank you. Thank you. The next question is from the line of Nishit Jalan from Axis Capital. Please go ahead. Yeah, hi, sir. Thank you for the opportunity. I have two questions. Firstly, on scooters. In the last three odd years, we have tried to do a lot of work on that front in terms of product launches, pricing intervention. We have also got into a 125 cc segment. We have seen bouts of market share increase, but then again, we have started to lose now. What according to you is not going correct? What are your on-the-ground checks suggesting that despite having good products or despite having a reasonable portfolio, we are not able to scale up market share? Any feedback or anything that you think is not working and how do you want to focus on that going ahead? Yeah, allow me to take that. This is Ranjivjit here. So, look, we've actually had an excellent launch of Pleasure Plus XTEC. Let me start with the 110 cc segment and the XTEC launch, along with the campaign on Ladki Chala Rahi Hai, which was a very dramatic and powerful point of view that was expressed to consumers, and there was a lot of engagement around it. The market liked not only the product but also the brand building that we did. It's held very strong in terms of its market share. We will further strengthen our 110 cc segment as we launch more products. As we said, we will roll out more XTEC ranges as we go along in this year, so watch out for that, because that is going to increase our play in the 110 cc segment. As far as the 125 cc segment is concerned, Destini XTEC has already been shipped. We have dispatched that in March, expanding it to other markets within the country in terms of the inventory. It's got a very positive and good response that we are getting across the board for Destini XTEC. With the chip shortage situation getting evened out, the Maestro Edge 125 cc, which is the connected series, will also become a far more powerful player. We're very confident across the portfolio on the scooters that this year with this lineup that we have and the XTEC series, we're going to really make a mark. I can just reiterate that it's a very good lineup. The consumers are responding well and we will see us making gains in this as we go forward in the scooter segment. Got it, sir. My second question would be on the exports front. That is one area where we have started to do very well in the last one year or so. We have appointed some good distributors in important geographies. But obviously our base is still much lower than some of the other players in the industry. Can we expect a growth which is much faster than the peers and a faster scale up on the export front, so that we reach maybe half a million export or plus in the next couple of years? Just wanted some color on that on the export side. Thank you very much, Nishit. I was 45 minutes into the call. I was wondering, you guys have given up on our exports or are you still hot on it. I'm glad you asked that question. I think, we've had a fantastic year, as you can see. You can pretty much imagine, the amount of support that we've got from all of you all these years, inspiring us to keep going and pushing forward. We've just made the start. We're getting absolutely aggressive about it. Some of the numbers that you are already talking about are quite exciting. We certainly look forward to getting somewhere close to that. Yes, of course, the growth trajectory is gonna stay robust and solid, going forward. We have this year itself done better than competition. You know, our market share increase gives you that story. All in all, we are on the right path now. The progression is pretty much there, and so is the sight for a very aggressive end state position. Hopefully things will change much faster than they have in the past, and we are pretty much on track. Thank you. Thank you, and all the best. Thank you. The next question is from the line of Jay Kale from Elara. Please go ahead. Yeah, thanks for taking my question. So my first question is regarding the two-wheeler industry. You know, as a market leader, how do you see this industry? Of course, we are, you know, approximately, in FY 2022, we are around 35% below the FY 2019 volume peak. Now in FY 2023, you mentioned about growth, and we may have a, you know, double digit or maybe close to 10% growth as well. You know, in your internal assessment, what growth level do you see is a, you know, would be you would be satisfied with, from the low base? Because we've also seen around a close to 40% price increase in the last 3-4 years. Would you think that a 10%-12% growth is enough? What is your definition of a satisfying growth rate years? In continuation to that, do you think over the 2-3 years you will be able to scale back to the FY 2019 volume peaks of industry of 21 million? Or, you think that is a far-fetched given the price increases that we've already seen? Right. Good question. It's very difficult to call out what will be a satisfactory level, right? Obviously, everyone would like to go back to the FY 2019 peak as soon as possible. That would be the definition of where the satisfaction lie. I think, again, I go back. We've got to look at fundamental underlying factors which play to the long-term growth of two-wheeler industry. All those factors are intact. I'll repeat those, whether it is under-penetration, the need for mobility, whether it is the pent-up demand that has built up over the last three or four years, the big pool that is developing, which should actually now propel the replacement demands to be much, much, much bigger. Of course, financing, because remember, I mean, financing penetration should be nowhere less than 75%-80%, which is what COVID financing levels are. The moment they go up, then people are actually effectively means that you are preponing your purchases rather than saving and spending for that. I think the fundamental growth levers remain intact. How fast it happens, we will have to see. Of course, underlying or overplaying all that is the economic growth, the consumer confidence. Rural income, for instance, you know, has been there. It's not that during pandemic the rural income suffered. We all know that the GDP came out of rural growth. It was about willingness to spend because of having not enough confidence about future because of COVID. Second is dependency, more dependency of family members on the same rural income because of migration of labor. I think those sectors have played out. Now, with all the sectors opening up, people have moved back to urban areas, the industries have opened up, crop prices are up, agri crops are looking good, income is looking good. I think. But those are short-term factor again. Fundamental long-term factors still remain when you have to look at the entirety of the long-term growth. That's how I would actually look at. When you say double digit, you are saying ten, we are not saying ten. What we are saying, there's no reason why industry should not grow double digit or double digit could be anything. Therefore, growth is what we see based on what the indicators are very, very clearly. Early signs are very positive. Let's wait and watch this space. Yes. Thanks and all the best. That's all from my end. Thank you. The next question is from the line of Raghunandan N. L. from Emkay Global. Please go ahead. Thank you, sir, for the follow-up opportunity. Sir, on the raw material side, just wanted to understand that the expansion which has come on a QoQ basis that is helped by price increases being higher than the commodity. Yes, Raghu. You are absolutely right because the swings in the commodities meant that in quarter four the commodity costs were soft in a sense compared to the price hike. The second factor, as I said, is the lean savings. A lot of our lean programs actually, you know, during the year when we look at it, actually got culminated into quarter four. Actually we got huge savings out of those as well. That's around 300 basis points of saving that we got from our lean program. It's a combination of three things. As I said, prices, the costs in quarter four were relatively soft and of course the lean savings that we're talking about. Thank you. We have the next question from the line of Pramod Amthe, from InCred Capital. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. The question which I have is, you are still chasing the new capacity creation, whereas industry has been sliding for some time. What is the rationale to still keep on adding the new capacity? Is it more of a geographical balance which you're trying to achieve? That's the first question. Secondly, with regard to the same, how do you see the capacity creation for EVs? Especially when we look at the overall, two-wheeler industry, it seems to be sitting with a lot of idle capacity, and still it is trying to change the capacity when the Auto PLI came in to add up capacity. What are you looking at as an industry player? How will you get operating de-leverage? What is the incentive when you look at on the table? Does it still make sense to change the capacity for EVs? Right. Pramod. Firstly, on the ICE side, I don't know where you get an impression from, but we are not adding capacity on the ICE side. What you see is of course, fiscal benefits which are available in Chittoor side. And we know that the Neemrana fiscal benefit has expired. Therefore it's more, a geographical balancing and a fiscal balancing based on the benefits. Net-net, we are not intending to add capacities at this point in time on ICE. As far as EV is concerned, I wouldn't talk about industry. I mean, different players have a different view on capacities and they are creating. All I can say is that, look, no industry can have 30 or 40 players. You are looking at EV industry which is in nascent stage. There are players which are coming. There are more players which may come in. There will be a period of consolidation that will happen, which is obvious and which happens in any industry. Once the consolidation happens, then obviously the capacities will get rationalized at that point in time from an industry perspective. As far as we are concerned, as I said, our, you know, we will be calibrating it based on how we want to phase out our launches by cities, by towns, et cetera, et cetera, and our capacity will be modular. We're not going headlong into creating huge capacity at the outset, but we also know that we can calibrate it because it will be in modular fashion. I hope that answers your question. Thank you. We have the next question from the line of Raghunandan N. L. from Emkay Global. Please go ahead. Thank you, sir. I got disconnected. Just a clarification what I wanted was that, has there been any deferral in providing, you know, a pass-through to the vendors in Q4, which has also supported the gross margin? The second question I had was on accessory side. The 24% growth in FY 2022 is a strong number. How do you see the potential for this business over the medium term? Thanks. Let me take the first one, and second one I request Ranjivjit to take on. There's been no delay or deferral in the parts, which I talked about. It's a combination of price increase of commodities, it being softer in quarter four and accelerated lean savings program, which has come in more measured in quarter four. On the parts where we have grown strongly by 24%, let me ask Ranjivjit to talk about overall how does he see moving forward. On the parts, accessories, and merchandise business, I mean, there's really foundational work that's been done in terms of creating the distribution system, creating a full base demand system, increasing the width and the depth of the business and all of that engaging with the mechanics, with the, you know, what we call as the Asli Heroes. Bringing in oils into our portfolio and getting that to contribute well, it's a really good contributor overall to the business. Even from the merchandising part, we are conceptualizing merchandise along with, you know, when we conceptualize new vehicles so that we get the target audience right. There are many initiatives that are in place to make this a really strong contributor to the overall top line and bottom line. It's evolving very well. I'm quite happy with the way it's evolving. Thank you, sir. Anything you can share about the premium vehicle side, how you intend to, you know, strengthen the portfolio, the product launches, and any update on the Harley-Davidson tie-up? I'm very happy about, you know, for example, in our premium, the way XPulse has been accepted by the market. It's really in demand. In fact, there's a waiting queue for XPulse. The XPulse also, the 4V we got five awards very recently including the Two-Wheeler of the Year, et cetera. It's doing very well in that segment, and we're defining the adventure segment. We're expanding that adventure segment and leading it. The Xtreme is also doing well. The retails have been much better, and we're doing a lot of, you know, just getting more and more customers to engage with the brand in various activities that we do across the nation. Xtreme is doing well. There are a couple of launches that are planned, more in the 4T area, which will come up before the festival season. This is a portfolio that's going to see a lot of action as we go forward. We're very pleased with the way the whole premium portfolio is shaping up. It's really a lifestyle. It's about image. It's about not selling the product, but really involving consumers in the aspirations that they care about. Maybe I'll touch upon the Harley-Davidson part of it, which you asked. So as we said, I think I said it earlier in last few calls, that the work on the product is on track, which will come out. And we've talked about that will come out. Timing, we will not be able to disclose it right now, but we have started the work as soon as we have signed the agreement with Harley-Davidson, and that product is going to be right in the core key volume and margin area of the premium segment. Yeah. Thank you. We'll move to the next question from the line of Ronak Sarda from Systematix. Please go ahead. Hi, thanks for the opportunity. A couple of questions on the financial side. One, Niranjan, for you, I mean, what was the overall investment in, let's say, the associate Hero FinCorp and Ather? I think you gave the number for Ather of INR 125 crores. But was there any substantial investment in Hero FinCorp or any of the subsidiaries? Ather was INR 150 crores, and Hero FinCorp in this quarter there was no investment. We already had announced that Hero FinCorp is raising capital. I think that we had announced earlier that our Board had approved. That outflow will most probably happen in this quarter. Nothing in quarter four on Hero FinCorp. What will be the cash on books as of March 2022, if you have that number handy? March 2022 we have actually put in our published account as well. Our total investment size would be close to around INR 10,000 crores. Out of that, probably more than INR 6,000 crores-INR 7,000 crores will be in investment in various instruments, and the balance is in subsidiaries and associates and various strategic investments. Got it. Thanks for that. The second question is on the loss from associates, which is around INR 200 crores, for the full year. Can you help us break down this number between Hero FinCorp and Ather? How, I mean, how do you see this number panning out, let's say over the next 12 - 24 months? I won't be able to give that number out in this call. You can have some discussion with Umang. He'll get back with the details required. Broadly speaking, you know, this includes Hero FinCorp also, which had losses in the first half. They did have profits in the second half, but there was a net loss. Of course, Ather Energy will continue to be on cash burn for some period of time. Hero FinCorp has had positive results in second half. One would expect Hero FinCorp to turn out positive, and therefore, next year, it should only lead Ather Energy into that sort of a loss is concerned on associates. As our subsidiary is concerned, they're performing well. There is no material losses there between the different subsidiaries and the JVs that we have. Thank you. In the interest of time, that was the last question for today. I now hand the conference over to management for closing comments. Thank you, everyone. Thank you for coming in. Keep safe and look forward to connecting in FY 2023 as well. Have a good day. Bye-bye. Thank you. Thank you. Thank you very much. Thank you, everyone. Thank you. Thank you very much. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.