Ladies and gentlemen, good day. Welcome to the Q3 FY 2023 earnings conference call of Hero MotoCorp Limited, hosted by PhillipCapital India Private Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the 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. Saksham Kaushal from PhillipCapital India Private Limited. Thank you. Over to you, sir. Thanks, Tanvi. Hi, good afternoon, everyone. On behalf of PhillipCapital, I welcome you all for the Q3 FY 2023 earnings call for Hero MotoCorp. For management introduction and opening remarks, I hand over the call to Umang Khurana, Head, Investor Relations. Over to you, Umang. Thank you so much, Saksham. Hello, good afternoon, everybody. Welcome to the investor call for quarter three FY 2022-2023. On the call today, we have, as usual, our Chief Financial Officer, Niranjan Gupta, the Chief Growth Officer, Ranjivjit Singh, and the Head for Emerging Mobility Business Unit, Swadesh Srivastava. We'll begin with the CFO's opening comments. Over to you, sir. Thank you, Umang. Good afternoon, good morning, and good evening, depending on which part of the world you are joining from. You would have seen our results, which we announced yesterday evening. We delivered a quarter revenue of INR 8,031 crores and net profit of INR 711 crores. Our top line is reflective of sequential market share improvement. We expect this to continue moving forward, backed by multiple launches and front-end actions. Our focus on increasing non-product revenue is yielding excellent results with our parts, accessories and merchandise business registering all-time high quarter revenue of INR 1,259 crores. Our gross profit per vehicle has reached all-time high of INR 19,800 per vehicle, which increases our operating leverage and will benefit when higher volumes kick in in coming quarters. This has been made possible through a combination of judicious price increases and accelerated sharing programs across the supply chain. Our EBITDA margin at 11.5% is after absorbing spends on our emerging mobility business unit to the extent of 70 basis points, reflecting underlying ICE business margins of 12.2%. With overall inflation expected to stabilize, our margins should be improving moving forward. Our profit after tax at INR 711 crores reflects improvement in PAT margins to 8.8% in quarter three, almost an improvement of 100 basis points sequentially. During the quarter, we commenced deliveries of Vida and are now present in three cities. We will continue to expand more cities in coming months and quarter. Moving forward, as we said earlier, while global headwinds are expected to continue, with some countries coming out of the woods while others may take a little more time, India is a relatively much better place. All key economic indicators are moving in the right direction. The recently announced union budget further solidifies the platform with its focus on capital expenditure on one hand and increasing disposable income on the other. This should help the auto sector. We expect double-digit revenue growth for the next fiscal for two-wheeler industry. As mentioned earlier, we are on path to market share recovery and backed by actions on all fronts, including multiple product launches, which are lined up in the coming quarters. We expect ourselves to grow ahead of the industry in fiscal year 24. On that note, let's open the floor for Q&A. Over to you, Umang. Thank you. Let's take the questions now, please. 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 remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead. Hi. Good afternoon, and thank you for taking my questions. My first question is on the product mix this quarter. The 125cc plus models have been 13%-15% of our volumes over the past couple of years. This quarter it appears to have fallen to close to 9% of the total mix. Is there any underlying trend you're observing that could be behind this? Any color here would be helpful. Thank you. Right. Let me just ask Ranjivjit to take this question, Ranjiv, on 125 cc. Yeah, sure. Thank you. On the 125cc, we've actually made good progress with Glamour XTEC. XTEC has added to the confidence that is given in the market a tremendous amount of acceptability. We've also had a campaign that's been running with Ram Charan, and that's created a lot of excitement in the market. We are strengthening our 125cc portfolio as we go forward, with the overall, you know, 125cc, which in the Super Splendor will be coming in with an XTEC, and I think that will give a very positive fill up to the entire portfolio. It's also the time for marriages, and it's a very good, you know, demand generation that will take place for the 125cc. We see a very positive outlook coming from the 125cc. Going forward, we're also strengthening our portfolio, coming in with a couple of more launches in FY 2024, we'll be sharing more details about this as we go along. Overall, premiumization has been a trend that we have really come in quite strongly in our overall portfolio. Now, XTEC contributes to over 30% of our portfolio. That's another big trend that's happening and it's helping us consolidate and further strengthen our position in our core markets. You know, 125cc is work in progress. You will see some new information from us coming in towards the end of this month. Then as we develop it further, we'll strengthen our position. Yeah. Also just to add to what Ranjivjit said. In the quarter, we've done inventory adjustments. If you look at that amount almost sort of 5%. Really speaking, what you're seeing as the, I think 9%, 10% underlying it is still 14%, 15%. Just to call that out. Yeah. Got it. That's helpful. My second question is on the Gogoro swappable battery, electric two-wheeler partnership. Just trying to understand if there are any updated timelines there. Just separately, if Gogoro plans partnerships with other OEMs or mobility services in India, would Hero in that scenario have exclusivity in certain geographies, or will Hero have to compete with the other Gogoro partners? Let me just ask Swadesh to talk about our EV plans and what he's done, and then I'll supplement if required. Swadesh. Yeah. Thank you for the question. See for us right now, there's a lot of focus on getting our Vida product and the Vida launches across the cities and the expansion plan through the country stabilized and really putting all the effort behind that. The subsequent products and projects as we get closer to rollouts will be shared in the due course. I think whatever is the right model for partnership or rolling out are will be disclosed. At this point, I would just say that, you know, the whole focus is going on establishing ourselves with our product. Thanks, Swadesh. That's helpful. Thank you very much, and all the best. Thank you. Thank you. Thanks. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead. Hi, team. Thanks for the opportunity. In the opening remarks, you added that there was a 70 basis point headwind from new mobility business. Could you elaborate a little bit more about on that? Yeah. Binay, this is basically around, because we did the Vida launch, in this quarter, and therefore we are calling out essentially all the spend that we have done on this unit, whether it is the manpower of the dedicated business unit or the advertising, spends that we have done. All put together, the PNL absorbs 70 basis points, which of course, if you look at quarter three of the last year, it was insignificant or negligible. Right. Right. To an extent, if I adjust for that, then obviously other expenses come down. In this quarter, it's fair to add that even the sales promotion spending would have been quite high because we had the Great Indian Festival running throughout October. Yeah, that's true. This quarter actually absorbs three things. One is the EV spends that we have talked about, which of course will continue moving forward, but that reflects that our underlying ICE margins are much stronger than what is reflected in the reported results, which allow us the funding of the investment in EV as we move forward. The other two which are there is either CSR spends, which in quarter three of the previous year was subdued. There was hardly any spend in quarter because of phasing, while this year it's been proportionate spend as far as this quarter is concerned. That's around INR 20 crores. There is a bit around the festive spends as well, which happened because it's a quarter, where, the entire industry and therefore it was spent, and therefore the festivity was reflective of that. You are absolutely right. Those are the 3 reasons for the elevated other expenses in this quarter. Yeah. No, no. Thanks for that response. Just further, like you said, that the EV expenses will continue in the coming quarter. Could you sort of share? Because a lot of the launch costs would have already been done, right? Now it'll be mainly more reflected in lower gross margin rather than higher other expenses. Is that a fair way to look at EV ramp-up? Binay, because we continue to expand to multiple cities, in the coming months and coming quarters. As you continue to expand, therefore we expect. In fact, I wouldn't say those are expenses or spends. I would actually say those are the investments in building a category. To that extent, those will continue. A similar kind of, you know, like 50, 70 basis point of, sort of a little bit of a drag on margin should continue because of electric vehicles. I wouldn't say drag on margin. I would say reinvestment of ICE margins behind building the EV category. That's how my definition of that would be. Of course, like I given in commentary. That's appropriate. Yeah. appropriate. Yeah. We do expect the underlying ICE margins to improve moving forward, which is what I have also given in my opening commentary as well. No. That's very fair. Just lastly, on the gross margin, good to see gross margin expansion playing out. Taking into account price hikes and the costing mix, do you see more tailwind on the gross margin side? Ideally, there would be, because now as we move, you know, we've seen over the last two, three years that cost inflations had been running ahead of price increases. Now logically speaking, it should reverse moving forward, where the cooling off or stabilizing of commodity or overall inflation allows some bit of more realization to go towards the margin improvement. Yes, directionally speaking, the significant headwinds of commodities that we had running inflation, running ahead of price increase, that we don't expect it to be. Equally, one can't forecast commodity prices. We will have to navigate this space. What is reflective of that even in the period of elevated commodity costs, we've been able to manage our gross margins very well by delivering gross profit per vehicle, which is an all-time high level. There's actually increased operating leverage. As the volumes go up, then obviously the more quantum will flow down to the bottom line straightaway. That's I think the key significance of the GP per vehicle going up. Great. Great. Thanks for those responses. I'll cut back in the queue. Thanks. Thank you. Thank you. Ladies and gentlemen, we request you to please limit your questions to two per participant so that the management is able to address the queries from all the participants in the queue. Should you have any further questions, you may join the queue back. The next question is from the line of Kapil Singh from Nomura. Please go ahead. Yeah. Hi. Good afternoon, sir. My question is on margin expansion that you talked about. If you look at over FY 2024, 2025, when we are targeting to get to a, you know, target range of margins that we talk about, do you expect, you know, that to be driven more by operating leverage or, you know, you expect further improvement in gross margins also? The question that is coming is mainly because, you know, there is a feeling that bikes have become expensive and, you know, maybe it makes sense to hold the pricing and let the operating leverage or volume increase play out. How are you thinking about it? Do you think there is more scope to raise prices or hold the gross margins here, which are probably at a good level, as you said? Kapil, you know, thanks for the question. As a business, one will continue to see that how do you exercise various choices moving forward. It will also depend on the growth of the industry that happens, the competitive price positioning. It's not a simple answer in terms of the price increases vis-à-vis inflation and also the commodity scenario. Yes, moving forward, the operating leverage should start contributing a bigger number on our direction to improve our margins towards our medium range guidance. Okay. Thanks, sir. Second, I just wanted to understand, you know, again, from a more, two, three-year outlook perspective, what is the strategy for driving market share and also in areas of exports as well as EV's? In particular on EV, just wanted to also understand whether you are thinking about a market share or a certain, you know, position within that segment, let's say being in top three, four kind of players on volume front or it is, you know, still early days to think about those type of things? How you are, you know, approaching that segment? Kapil, you have nicely asked three questions in one question. We will attempt to answer all the three. First, let me just request Ranjivjit over the medium term, what's our key actions to improve market share? Then I'll request Swadesh to talk a bit about the EV plans of the medium term. Sure. We've got a fabulous platform to build on, and we're looking at, you know, expanding that portfolio. We've talked about this before, that we will see product launches every quarter as we go along. This is going to be along our key focus areas around premium 125cc and scooters. We're feeling good about the portfolio that we have, and that will help us drive market share in the areas that I just highlighted. Besides that, there are going to be a couple of other very strong initiatives that we are continuing to improve on and continue to strengthen, which is around our channel efficiency, channel effectiveness, and there are the whole customer experience around that. A new visual identity that will really give a, and this is something that we're already piloting and consumers are feeling quite elated with the experience that they're having. And the conversion rates are improving there. There's a whole digital footprint from consumers, and that brings me to the third point of process. There's a fabulous improvement in terms of the scope that we see for how the consumer journey plays out with Hero. Looking at that very comprehensively, whether it's in the area of, you know, looking at what the choices are, what the options are, the whole omni-channel part. Also looking at the one app that we have recently launched. That creates a complete gateway into Hero from a customer service, loyalty, community, all of that comes together. A combination of these three things, which is our portfolio, our channel, and our processes are going to help us really strengthen the brand and our market share. The elevation of the brand and the continuing strengthening of the brand with the premium portfolio that we launch is something that you will see. I'm sure you would have noticed the launch that we did recently, which is Xoom. I believe that would be a good, you know, thing to reflect on in terms of how consumers are looking at Hero now. It's a very sporty 110 cc with industry leading features and with segment leading features, and that's coming out extremely well. Overall, I would say there's a lot of customer association that we're building around premium. There's a lot of experience that we're building with the Hero Dirt Biking Challenge. All of those things are gonna help us in terms of the future way forward. I hope that's that-. Swadesh? Yeah. Quick one on EV. Thank you, Kapil, for that question. You know, we have come in to really create this category as it's still nascent in the EV space. With this year, big milestones on the brand launch of Vida, which has come out as you have seen in a very differentiated and a new age way. With the launches in the three cities, the Delhi, Bangalore, and Jaipur, where the customers are really taking up to the product and the overall sales and pre-sales experience. With this sort of stage, the setup stage, we are really ready to now multiply into many cities going into FY 2024, establish ourselves wider into the market with this product. Subsequently, we have an accelerated portfolio to come in the next 18-24 months, where that will help us establish us deeper into many other segments as we have already gone wider in FY 2024, right. Basically, we have, you know, established the brand and the positioning with the ecosystem, set up this year, going into much wider markets next year, and then deepening our leadership with the accelerated portfolio over the next year. That's what we are looking at as a plan. Thanks, Swadesh. Kapil, let me just address the global business part also because of the third, 1.3 of your question, or 2.3. As far as global business is concerned over the medium to longer term, we do want global business to be at least 10% of our overall revenue. There are actions which are in place. There have been headwinds in the last year. We all know about a lot of key markets which have faced huge headwinds on currency inflation, some of the markets even closing down, like Sri Lanka. Obviously, these markets will come back, and therefore we will scale up. If I were to just sum it up in terms of the three legs that you talked about, on our domestic ICE business core, we are doing well. In the short term, we do need to recover our 125 cc market shares, which the actions have been lined up already by Ranjivjit. Our opportunity lies in building premium portfolio, which multiple launches are lined up not only coming year, but actually next three, five years. You will see therefore in the medium term us building meaningful market share of the premium backed up by the portfolio. On global business is medium to long term, which is actually scaling up to be a certain percentage of our overall revenue. On EV, clearly it is a geographical expansion, followed by portfolio expansion. Those are broadly, if I were to sum it up, strategies for us on the medium term moving forward on how we are going to grow on our top line and market shares. Thank you very much, sir. Thank you. The next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead. Hi, good afternoon, team. Thank you for taking my question. My first question was some clarification around the EV impact of 70 basis which you spoke about. Given that the revenue contribution was very small in the quarter and our geographical footprint is also very small, it seems to be a quite large impact, which we are talking about 70 odd basis points. As we move into coming quarters, when our geographic presence will start expanding and potentially we'll expand our product portfolio as well. Currently, the product is at the premium end and possibly will launch much more lower priced products as well. Do you see the risk of this impact or the way, Niranjan, you want to put it, the investment needs to be higher for the EV business in the coming quarters? See the because there's also a lot of initial expenditures which are there, and like you said, the contribution to top line has not yet started. Therefore, the moment your contribution to top line also starts, then that starts playing out at the same basis point actually accrues larger amount in terms of what one can spend. I think this is how we will navigate the space in terms of moving forward. As of now, we feel that we are sufficiently resourced both on CapEx and our P&L side, to fund our investment plans as we move forward because top line also will accrue. In fact, on the cost front, like you said, portfolio, remember that, you know, the industry gross margins on EV are low to close to being negative. That of course, with all the scale and the savings program as an industry and us also which will deliver, that will show a significant improvement. Therefore, you will see the GM improvements coming up with economy of scale and cost reduction plans over the next two years for industry as well as for us, which will actually act as a tailwind. The combination of these two which will reflect, we are not concerned about this. These are investments into building categories. Thanks. Very helpful, Niranjan. My second question was around your new scooter launch, which you recently did, Xoom. Can you just take me through the thought process, the areas we wanted to address with this new launch, and what corrective measures we are targeting with this launch and potentially other scooter segment launches? Sure, I can take that, Ranjiv here. You know, we are very, very excited about the Xoom launch. I think it's been very, very well received. I think the industry first corner bending lights was quite a quite a hit in terms of how it's laid out and the demonstrations that we have done and showcased have really been taken up very, very well. The fact that in a 110cc segment, coming up with such a sporty scooter with bigger, wider tires, with a disc brake, with the fastest acceleration in its segment, with a very aerodynamic design, with a lot of technology built in, including, you know, things around the Bluetooth and the storage and everything else, really ticks all the boxes in terms of what consumers will want from a scooter. I think that's the level of excitement and anticipation that we are getting for this. It really sets us up and it's a radically new design. It's a refresh and reimagined thinking, which is why we chose to also launch it under a new brand name of Xoom, which is very youthful, very exciting, very thrilling. It, it takes you from the city and into the other bumpy roads that you might want to go, or the gradients that you want to climb. There's a lot of, you know, use cases for this very beautiful scooter, and we're excited about it. Great. Thanks a lot for that. Super helpful. That answers my question. Thank you. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead. Amyn Pirani, your line has been unmuted. Please proceed with your question. As there is no response, we'll move to the next question from the line of Raghunandan NL from Emkay Global. Please go ahead. Hello. Raghun andan, yes, please proceed. Yeah. firstly, on the entry-level segment and rural demand, how are the demand conditions post the Uttarayan festival and commencement of marriage season? Are you seeing improvement in inquiries and bookings? Okay. On the entry segment and rural, we have in fact strengthened our position in Q3 in terms of market shares. You've seen the, you've seen that. I believe this is a really good time for us to take it even further. The marriage season is on. In fact, the marriage season will be there for the next six months. We, the auspicious dates are there. We are looking at a further, you know, strengthening and uptake for our entire e-entry as well as the 100, 110c c segment. That's where our strength is coming from. Rural has been a little bit lower in terms of the uptake compared to urban areas in terms of where we've seen that. We are seeing green shoots. The marriage market in UP, Bihar, West Bengal, all of these markets are coming back and we're, you know, it all goes well for overall the demand for the entry and the commuter segment. Thank you, sir. Secondly, on the share of profits from associates have seen a strong jump. Would it mainly be because of Hero FinCorp? Yes. Hero FinCorp has improved the profits. As you know, last year, quarter three was a loss, and this year, quarter three, they have delivered INR 192 crores of profit. Plus of course also there is a one-time gain coming on account of the investment done in Ather by GIC, which came after the initial round. Therefore, based on the shareholding pattern change, there's a one-time gain as per the accounting stance. A combination of the both the factors that have come in into that as well. Thank you for that, sir. Lastly, if Swadesh can speak about order bookings for Vida, the expected ramp-up in production, and Vida has been at the premium end. Would you expect a more range of products across use cases covering various prices going ahead, if you spoke about next 18 months? Yeah. Hi, Raghun andan. Yeah, the response has been great in the three cities where we have launched Delhi, Bangalore and Jaipur. As you might be aware, in Jaipur, we started on 22nd of January, and Delhi we have started on 25th of January. Bangalore we started 13th of December. You know, there have been bookings quite a lot and we have already registered 250, 300 vehicles in the three cities so far. We have a huge pipeline ahead of us to do the deliveries in the coming weeks of this quarter in these cities. As I mentioned, we are already going to launch a few more cities within this quarter, and then a much wider nationwide expansion next year will happen with this product. In terms of the product portfolio, as I mentioned, we have an accelerated plan where we have products coming in other segments as well. The mainstream, the main mass segment as well. That will help us cater to the different segments and different geographies. Overall, we have also set up multiple charging stations across these three cities. That was our promise to the customer that when we launch, we'll launch as a complete ecosystem. We have roughly 18 such stations in Bangalore and 15 each in Jaipur with multiple chargers at each of these locations. We are at a very strong position also from the customer feedback point of view on the product and the overall pre-sales and sales experience. We are very well placed to expand through many cities in the next financial. Thanks, sir. There's just to add, Raghu Nandan, on a clarification on the FinCorp. The loss I was referring to was nine months last year, where it was a loss of INR 260 crore versus nine months of profit this year of INR 461. As far as three months is concerned, it is INR 192 versus INR 131. So that the numbers are understood correctly. Yeah. Thanks so much for the clarification, sir. Just one more clarification. When you indicated that gross margins would be lower for EVs, this is without counting the PLI benefits. By when would you start accruing them? We will start accruing it moving forward because we've just launched it. You are absolutely right, we do not incorporate PLI benefits. The other point I was just saying that as we move forward, as scale moves up and cost reduction plans kick in, overall, the BOM cost of the EV products as an industry also will come down. There's a lot of localization happening. It's not just PLI, but there would be multiple things that will bring down, hopefully, the BOM cost of EV products moving forward. Thank you, sir. Wishing you all the best. Thank you. Thank you. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead. Hi. Thanks for the opportunity. My question was actually more on the retail and the wholesales. Your retails, especially in Q3, were quite strong. Wholesales, you know, have been subdued for some time now. Would it be fair to say that the inventory levels are now at a healthier level compared to the last, say, 1- 1.5 year average? Where would they be, and how do you see this moving, retail versus wholesale over the next six- nine months? Let me take in general. I'll ask Ranjivjit to probably add. You're absolutely right. We've been trying to keep a balance. Therefore, our retail in quarter three was strong. We're keeping an eye on inventories. Clearly moving forward, as we see industry growing and us growing on market share, and relative to that, we would say that we are quite comfortable as far as the inventory levels are concerned. Ranjivjit, would you like to add, amplify anything? Yeah. Definitely Q3 had the benefit of the festival and the retails were, you know, we led the industry in many ways in terms of the growth that we saw on retails. It's also a time for us to just make sure that, you know, the transitions, like we said, we talked about, we just launched XPulse 200T, which has got off to a great start. We launched the Xtreme 160R Stealth Connected 2.0. These are, you know, important for us just to make sure that the transitions are well managed, and therefore our inventory level is about in the region of seven weeks, which is pretty healthy looking at the future in terms of the marriage season, which I had highlighted earlier, in terms of how we're, you know, how the demand generation and how the demand is going up. It's looking good, in terms of the overall availability and the overall health of the business in terms of inventory. Broadly, can you help us understand where would we be, like five weeks, six weeks, or, you know, lower than that, broadly speaking? We've always outlined a range of four-six weeks when we take our own dealer stock levels. Mm-hmm. We'll continue to be in that range moving forward. Of course, the higher the growth, in terms of number of weeks, it will come down. This I'm talking about the dealer stocks, because that's what we usually measure. Okay, great. Thanks for that. I'll come back if I need you. Thank you. The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Yeah. Hi, team. Thanks for taking my questions. I have one follow-up question on the gross margin improvement. Could you give us some sense as to what is the benefit of price hikes that is flowing through in this quarter? I do recall that we've taken more price increases. Some color on that, please. I'll Gunjan tell you the overall price increases that we have taken, which we've been taking consistently over the last four quarters, in line also with what the industry has been taking. The last one that we took was on first of December, which was close to around INR 930 ex-showroom as a price. Other than that, of course, there is also. Before that, if you look at the quarter, it would be reflective of increase that we took in August, which we took around INR 300, in September around INR 500. There will be partial ones that flow in into the quarter as well. Other than that, LEAP savings, for instance, if you look at our LEAP savings, over these nine months, we've delivered close to around 80 basis point of LEAP savings into that. The combination of those two then, offset by a bit of mix. It's all a combination of various factors that is leading to leading to the gross margin improvements. Okay. The metal correction, my guess then would be somewhere in the range of what, 150-100 basis points. Does that sound. Yeah. right to you? Okay. Yeah. Yeah. Okay. Okay. The other question that I have, and this is, you know, going back to the strategy. I mean, you clearly, you've spoken a lot about what we are doing on 125 cc and premium. Going back to the, the, you know, the entry segment, which is really important for us, we've been continuing to take price increases and we did see, you know, October, November, which sort of did so well, because of the, you know, the Great Indian Festival that we ran, or there was more intervention or excitement created by yourself. When we fundamentally think about next 12, 18 months, I mean, it is on Hero to take the market back, right? To bring the market back in the entry segment. Why are we taking these sort of price increases and not, you know, sort of create that excitement, schemes, fairs, and get the market back? I'm just trying to understand the strategy around that segment. Gunjan, clearly our strategy around entry is to expand that category and therefore convert who do not own a two-wheeler today to own two-wheeler. Because we are the leaders in that segment and that's our strategy on that part of it. The price increases have been necessitated because of the commodity inflations that have been there. Moving forward, as we see, as we all know, even the interest rate hikes, probably we just saw today morning, 25 basis points rate hike, which is a softer rate hike. We see U.S. Fed also potentially going now slower. And inflation in the direction of cooling off. It therefore allows now pricing to be a much softer in terms of moving forward as we go in. I think that's the combination that we have done. There are lots of actions which we have done on the front end. Let me just talk to Ranjivjit. Ranjiv, do you wanna talk through what we are doing to expand the category and how, you know, it's about the products and what we are doing there? Thank you for referring to the Great Indian Festival. Of course, you know, we talked about that. In the entry level, we've done campaigns which have been extremely effective, like Mileage Ka Hero. That has really hit a sweet spot because that is a concern and people trust Hero for coming up with the fuel efficient bike. It's a key buying factor. That really helps us to consolidate and strengthen our market share there. We look at the consumers in terms of first time buyers and the replacement demand, we're also seeing replacement demand coming back and we are also driving the exchange market. We have a very scalable do it yourself kind of a, you know, app that people can evaluate within seconds their current vehicle and get a price for that. Then we have a system through which the Wheels of Trust through which they can exchange their bike. Then we also have Hero Sure outlets where they can buy new and refurbished bikes from there. We're really doing a market leading initiatives in terms of what the market requires for first time buyers as well as for replacement demand to further strengthen and give confidence to our consumers. In addition to that, or from a customer service perspective, we're going to wherever the customer is. We're doing a lot of micro, you know, workshops. We're doing mobile workshops to take our service to the consumer wherever he or she is, even if it's in the village or wherever. There's a lot of building of trust that Hero stands for, and we continue to work on that, very, very strongly. In fact, Gunjan, just to also, since you talked about the segment-wide price increases. If you track our price increase over the last three years, overall on the entry, we've taken far less than what we have taken in the other segments. That's also reflective of how we are trying to cushion the impact at the bottom of the pyramid. Offline, you can of course take these numbers from Umang, but overall. Okay. far less as compared to the other segments. We've been conscious of that. It's also important to note that if you look at 110, you look at 125, you look at all of these, it's also about the product and the features that you actually deliver. That's why in each of these segments, the variants that is actually at the highest price commands the highest volume in that. In a sense, it's not a direct correlation, but we've been conscious of cushioning the impact at the bottom of pyramid. That's reflective on last three years, how we have softened and taken far less price increase in the entry segment compared to the other segments. Consumers are also up to the easy finance schemes as well. Absolutely. That's making it easier. We're really, again, helping our consumers to fight over the inflation and acquire the and bring home the Hero. Sure. This is really helpful. I'll join back the queue. Just we can have the spares number, for the quarter. Spares revenue. Right. As far as the spares revenue for the quarter is concerned, is INR 1,259 crores for this quarter. Q2 was INR 1,244 crores, and last year, same quarter three was INR 1,186 crores. Okay. Thank you so much. Welcome. Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead. Hi, sir. A couple of clarification. One is, did you indicate inventories that are around seven weeks, now? It is, Jinesh, it is about looking at whether you are looking at the current sales or looking at the forward sales. When we are looking at our forward plan, it is at the top end of the four-six weeks if we take just the dealer stock. This is what we measure. Got it. Got it. The second question pertains to this RM cost savings. You indicated 150-200 basis points. That's the saving which we have seen on a YY basis or that's a sequential saving? It could be on Y on Y basis. Okay. Sequentially, this number would be about close to 70-100 basis points. Would that be correct? Absolutely. Probably around that. Umang can offline also take you through more details. Sure, sure. Third question pertains to the BS6 Phase II transition. Given that we are in season, for the marriage season and the BS6 Phase II transition is required by March end, how are you preparing for that transition? Yeah. We are, the transition is on manufacturing. In fact, we have some of the models we already started manufacturing. By March, actually we'll be transitioning on the manufacturing. From 1st April onwards, all our manufacturing will be on OBD2 Phase I, which is what the mandate is. Okay. Okay. We don't expect material price hike over there, I mean under 2% is what we have indicated. The price hike is not that material on the OBD2 Phase I. We would be, once we actually put out the product in the market, you will see that. It's expected to be probably in the range of maybe INR 500-INR 800 per vehicle. Right. Got it. Got it. Can you clarify on the other income, we have seen a good spike. Is there any one-off for mark-to-market gains on treasury which have led that? Other income is reflective of if you see, last couple of quarters, we were absorbing the MTM loss on Gogoro, which were one-off actually, and that's not there anymore in this quarter. The other thing is of course the, you know, if you look at the yields, the treasury income, they are again in the last two, three quarters, you had the yield hikes which were there and reflecting in the MTM losses which are not there. Broadly speaking, those make up in terms of the other income. Essentially, the MTM losses which were accounting in the last few quarters, those are not there and that's what reflective of the normalized level in our other income. Got it. Great. That's all. Thank you. Thanks. Thank you. The next question is from the line of Joseph George from IIFL Capital. Please go ahead. Hi. Thank you for the opportunity. I have a couple of questions on the EV business. When you launched the Vida V1 Plus and V1 Pro, the prices that were mentioned were INR 145K and INR 159K, both ex-showroom Delhi. The numbers in the press release yesterday was INR 135K and INR 147K and that too on road. Is the difference entirely explained by state level subsidies, or have you moderated the prices since you announced it during launch? No, no, we have not moderated the prices. It will reflect differently in different cities and sales. The prices are same. We have not moderated. All right. I'll come to you on this separately as well, Joseph. Yeah, just to confirm, we've not done any discounting or not changed any prices since launch. Yeah. It will be, you know, taking into account subsidies, state level, X, Y, Z, and Umang Khurana will offline share the full detail from the ex-showroom to on road. Understood. Thank you. The second question that I had was in relation to the EV business. Now, you know, for instance, this quarter you called out about 70 basis points of impact on margins because of the EV business. Is there any plan to, you know, park the EV business in a separate subsidy? A lot of other OEMs are doing it, you know, it makes it easier to continue to measure the profitability of the ICE business on a like-to-like basis, you know, rather than you having to call out this number every quarter. Any thoughts there? Joseph. Of course, that's why because of, in order to ensure, and we always do transparency of our P&L, that's why we called out both the numbers even though they are embedded in the same P&L. As far as corporate structuring is concerned, it's much beyond just the numbers or the segmental reporting. It's about various considerations one has to take into account at what stage of launch you are, the taxation, your balance sheet, your intent behind doing that. We continue to evaluate all options and as and when anything fructifies, obviously, you will know that. Understood. Thank you. That's all from me. Thank you. Welcome. Thank you. The next question is from the line of Shashank Kanodia from ICICI Securities. Please go ahead. Yeah, good afternoon, sir. Thanks for the opportunity. Sir, we do take cognizance of this fact that there is a changing narrative. I think till last quarter you used to guide us for double-digit volume growth, whereas this quarter you're seeing double-digit revenue growth. Does this guidance hold true for next fiscal as well, or we're just talking for FY 2023? The guidance is for the next fiscal, which is FY 2024, the double-digit revenue growth for the industry. Okay. Secondly, sir, if you can help us, you know, the exit more of a rural demand because on one hand we do read about new better wheat realization for the farmers and double-digit growth in tractor sales. On the other hand, I think two-wheeler segment is not really picking up pace. Is that category well penetrated in rural India, which is something which has been delaying in the past? How do you look at it? Let me request Ranjivjit to talk about the rural demand and how does he see panning out. We're already seeing a, you know, somewhat of a recovery coming in in rural. We are seeing the green shoots which are in markets like UP, Bihar, MP, Rajasthan. Just we think, you know, reasonably good growth there. We think that this is just the beginning. Like I mentioned that, you know, there is a marriage season that's ongoing, that continue for a few months. The crop outlook has been good. Overall, there's stability in the system. We're looking at people really coming out, being on the move. Their needs for personal mobility will continue to increase, and we'll make it easier for them to buy with our retail finance and many other enablers that we continue to work on. We believe this is a time when there will be positive, outlook from a rural perspective specifically, and that will play, we will of course, play to that. Sir, can you share some clear on penetration levels for two-wheelers in rural versus urban, if you have some idea about it? Typically it's about, you know, 45% is the penetration, and that gives a lot of headroom for growth for us in terms of when you benchmark versus other economies in other countries. That makes it a fertile ground for building out future growth. As Niranjan mentioned in his opening comments also in terms of the India outlook, I believe that will also play an important role in terms of how, you know, the industry will perform and within that, how well-placed we are. Overall, it seems like a reasonably good space for us to be in. Sure, sir. Thank you so much. Wish you well. Thank you. The next question is from the line of Jay Kale from Elara Capital. Please go ahead. Yeah. Thanks for taking my question. My first question is regarding the first time buyers and replacement buyers trends that you are seeing. I mean, in the last one or two years, have you seen a lot of the replacement buyers kind of postponing their purchases and in the recent festive and recent rain shoes that you're speaking of, are you seeing that coming back? Also if you could throw some color on what used to be the typical replacement cycle, how has it got elongated too, and how do you expect it going forward? First time replacement and that. Yeah. You know, overall, I think the market is looking and we are pleased to see the recovery coming back into the market after a hiatus of the last two, three years. You know, it was really affected by COVID. Overall volumes are coming back in the industry. First time buyers are, you know, coming back. Replacement is where also people who had delayed their decision in terms of, you know, that they need to replace the vehicles. That second-hand used vehicle market is also quite, you know, buoyant right now. We're driving a lot of initiatives to enable people to, you know, to be able to exchange their bikes through the DIY kind of apps that is available now on everyone's mobile phone. They can get a quote from Hero for their old bike through the broker system. It's a first time, you know, phygital kind of thing that anyone in the industry has come up with. It makes it really easy for someone to get an evaluation, go and then exchange their bike and buy a new one. We also have Hero Sure outlets which are helping people to buy a refurbished bike or even a new bike. I think these are the things that will really help drive the replacement demand. There is a fairly good double digit replacement buying at around 20% in terms of the customers that are out there. These are good opportunities for a leader brand like Hero to be able to help consumers make their move. Understood. And just on the scooter demand, I mean, we've seen in the last few months, you know, scooter demand coming back probably because opening up of schools, colleges, urban doing of metro. Going forward, how do you expect the scooterization trend? I mean, do you expect it to kind of largely, and this I'm talking about X of EVs, just the high scooters, to kind of stabilize at that 30%-33% range? Or do you expect that there is further room of, you know, increasing this contribution for the scooter industry, ICE specifically? Yes, a great question. I think the, we've also seen that the overall industry for the scooter demand has been going up. We've been strengthening our position. You know, we grew our market share from 6% to 9% already. With the launch of Xoom, and the launch of the portfolio as we go forward, we'll be further strengthening it. What's underlying this is obviously, you know, a multi-utility kind of a vehicle, as well as very much, the sporty needs and the more thrilling needs that people have to make, to go out for that exciting ride over the weekends or, even, do the night rides with better lighting systems that we have provided in our scooters. We see the growth of the scooter industry. You know, it's shown a very resilient growth, and we see no reason for it to change. We think it'll continue. We are, in terms of our portfolio, well-placed to take advantage of that. Having said that, you know, like what Ranjivjit just said, overall if you look at on a very big picture perspective, over the last three, four years, while quarter on quarter the share of scooter versus overall has shifted, down and up, but it remains between 30%-35% range as a scooter versus overall two wheelers. We do expect it to remain within that range moving forward as well. Great. That's helpful. Thank you and all the best. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments. Thank you everyone. Thanks for coming in. Have a lovely day ahead, and look forward to speaking to you soon. Bye-bye. Thank you. Thank you. Thank you. On behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.