Ladies and gentlemen, good day, and welcome to the Q3 FY 2024 Earnings Conference Call of Maruti Suzuki India 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. Pranav Ambaprasad. Thank you, and over to you, sir. Thank you, Sagar. Ladies and gentlemen, good afternoon once again. Welcome you all to the Q3 FY24 earnings call. May I introduce you to the management team from Maruti Suzuki? Today, we have with us our Chief Investor Relations Officer, Mr. Rahul Bharti, and CFO, Mr. Arnab Roy. Before we begin, may I remind you of the safe harbor? We may be making some forward-looking statements that have to be understood in conjunction with the uncertainty and the risks that the company faces. I also like to inform you that the call is being recorded, and the audio recording and the transcript will be available at our website. Please note that in case of any inadvertent error during this live audio call, the transcript will be provided with the corrected information. The conference call will begin with a brief statement on the performance and outlook of our business by the Chief Investor Relations Officer and Executive Officer, Corporate Planning, Mr. Rahul Bharti, after which we'll be happy to receive your questions. I would now like to invite our Chief Investor Relations Officer, Mr. Rahul Bharti. Over to you, sir. Thanks, Pranav. Good afternoon, ladies and gentlemen, and thank you for joining us. Today, I'll share the overview of the industry, and sales performance, followed by the business performance of the company. The Indian passenger vehicle industry registered a record sale of 4.1 million units in the calendar year 2023, making it the third largest market in the world and ourselves a proud industry. In the industry, the share of utility vehicle segment continued to expand. In quarter three, the share of SUVs increased to about 53%. Together with MUV, the share of UV in the industry is about 63%. In terms of fuel type, the share of CNG vehicles in the industry further expanded to about 16.5% in quarter three. Hybrid vehicles have also seen good traction, and now the share of hybrid vehicles are at 2%. I would also like to share some of the sustainability initiatives of the company. As you may be aware, for an automobile company, the carbon emissions from its products contribute about 80% of the total emissions. As for the last released fuel efficiency compliance report from Ministry of Road Transport, the company had the lowest carbon-emitting fleet in financial year 2021-2022. The second phase of CAFE regulations was implemented in the last financial year, where the CO2 emission targets were tightened. The results are yet to be released, but Maruti Suzuki is confident of meeting its target and very hopeful on maintaining the leadership in terms of lowest carbon-emitting fleet. And this is also because the company has embraced multiple powertrain approach rather than focusing on a single technology to reduce the carbon footprint. In CNG, a strong portfolio of 14 vehicles is helping the company in lowering the carbon emissions. Also, CNG fuel vehicles have lower running costs. In quarter three, with sales of over 127,000 units, the contribution of CNG vehicles in our sales has increased to an all-time high of 30%. In future, the company is exploring the option of compressed biogas. The company is on course to start production of battery electric vehicles in 2024. In addition to serving the domestic market, this mid-SUV segment product will be exported to developed markets such as Japan and Europe. Apart from products, the company also focuses on reducing the carbon emission in its operations. Use of railway in dispatches of vehicles is one such initiative. In 2023, a record 422,000 vehicles were dispatched through railways. The share of railways in total vehicle dispatches has now increased to over 20%. The upcoming railway siding and Manesar plant will further help in increasing vehicle dispatches through railways. With the objective to increase the use of renewable power, in next financial year, the company is planning to increase its solar power generation capacity from 26.3 MW to over 48 MW. Let me now share some of the business highlights of the company. In calendar year 2023, Maruti Suzuki crossed the annual sales milestone of 2 million units, which is its highest-ever sales in a calendar year. With its highest-ever exports of about 270,000 units in calendar year 2023, the company continues to be the largest exporter of passenger vehicles from India. With the good market acceptance of its all seven utility vehicles, ranging from entry SUV, Fronx, to top-of-the-line Invicto, the company continues to be a market leader in utility vehicle segment. During this financial year, the Grand Vitara became the fastest mid SUV to clock the 100,000 sales milestone. Now, Fronx SUV has set a new benchmark in the passenger vehicle category by becoming the only new model launch to clock 100,000 sales in 10 months. The company is optimistic on the growth prospects of domestic market, as well as the export potential of cars from India. It is planning a twofold increase in its annual production capacity to about 4 million by 2030-2031. The setting up of a greenfield project in Kharkhoda, Haryana, is part of our ambitious plans. Construction is already in progress at Kharkhoda, and first plant with annual production capacity of 250,000 units is on course to be operational in 2025. The company has plans to set up four such plants with a total capacity of 1 billion units in Kharkhoda. Next, in Gujarat. Recently, in the Vibrant Gujarat Summit 2024, the company signed an MOU with the government of Gujarat, as a preference to set up a new automobile manufacturing facility. This is subject to availability of a suitable land. This new plant in Gujarat is aimed to start operation in 2028-2029. In the future, the annual production capacity is expected to become 1 million units, with total investment, of INR 35,000 crore. After finalization of land and due approval from Maruti Suzuki Board, the exact location of plant will be shared. You might also recall that when we interacted during the last investor call in October 2023, the voting on the proposal to acquire SMG, Suzuki Motor Gujarat, was in progress. With over 98% votes in favor of the proposal, the acquisition has been approved by shareholders. We would like to thank all the shareholders for their support and alignment in thinking with the management. Now, SMG has become a fully owned subsidiary of Maruti Suzuki. The effect of SMG becoming the company's subsidiary has been incorporated in the consolidated financial statements also. Principally, the SMG's cost and revenue items have been adjusted to their natural heads. The raw material costs and standalone results also includes employee costs, manufacturing overheads, and operating income of SMG. So these three items have been removed from raw material costs and adjusted into their natural heads in the consolidated results. Effectively, in consolidated statement, the EBITDA margin has adjusted upwards, while the EBIT margin, as we have mentioned before, is largely at similar level. Now we come to the highlights of the quarter three. The company sold a total of 501,207 vehicles during the quarter. Sales in the domestic market were 429,422 units. The company exported 71,785 cars, the highest ever in any quarter. The same period in the previous year saw total sales of 465,911 units, comprising 403,929 units in domestic and 61,982 units in the export market. Growth in net sales outpaced the growth in sales volume due to a higher contribution of utility vehicles in total sales volume. And with this, the ASP increased by 6%. The net profit for the quarter rose to INR 31,300 million, from INR 23,513 million in the quarter, a year-on-year growth of over 33%. This was on account of higher sales volume, cost reduction efforts, slightly favorable commodity prices, and higher non-operating income. Now, I come to the highlights of nine months, April to December 2023-2024. In this nine-month period, the company recorded its highest ever nine monthly sales volume, net sales, operating profit and net profit. The company sold a total of 1,552,292 vehicles, registering a growth of 6.9% over the same period previous year. Out of the total sales volume, 1,346,965 units were sold in the domestic market and 204,327 units were exported. The company registered net sales of INR 982,403 million, a growth of 22.3% over the same period previous year. It may be interesting to note that our revenue from operations has now crossed the INR 100,000 crore mark in the nine-month period, which we had done in the last full financial year. Even on a full year basis, very limited manufacturing companies have reached this milestone. On that note, may I request your questions, feedback, any, any other observations that you may have? Thank you. Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets only 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 Pramod Kumar from UBS. Please go ahead. Yeah, thanks for the opportunity. Rahul Bharti, just wanted to clarify, if there were any one-offs in the quarterly results, and also, if you can just share the discounts, per car, given the high retail velocity. Yeah, and then I have a follow-up on the margins. Okay. No real one-off as such. In the quarter, was at, on wholesales, as we distribute over wholesales, was INR 23,300 approximately, sequentially, over Q2 of INR 17,700 of EBIT. Just to keep in mind that, this is distributed over wholesales, but actually we give the discount on retail in the market. Fair enough. So given that, I think the margin numbers look pretty interesting because you were at 12-13 last quarter with the best of the utilization and the best of the wholesales, and despite operating dealers and higher discounting, and I presume some of this should roll off. How should one look at the margin outlook from here on, rather than is it kind of what do you say probable that Maruti's margin band has now moved to the double-digit range at the EBITDA level? Mm-hmm. See, we never comment on margin outlook, but we can certainly discuss the margin drivers individually. Yes. You're well aware of the eight drivers. The biggest factor that affects us is the volume. You would be aware in the auto sector, the fourth quarter is generally a good quarter because of the cyclicity, the seasonality. Yeah. The second element is, since in a calendar year end, we try to minimize the stock at dealerships. So quarter three is generally where retail exceeds wholesales. In quarter four, generally, if you try to recover that stock, you need a healthy stock in the market also. So it is the reverse. So to that extent, the discounting should have an optical aberration, which is positive for us. We have also taken a price increase, which is also in the public domain, of the order of about 0.45%, so that may help. In commodities, steel may show some upward movement, while we expect some continuation of the past benefit on the PGM, palladium, rhodium, et cetera. On Forex, we gained somewhat in quarter three on direct imports, and you know that indirect imports happens with a lag, so that benefit should continue in quarter four. Of course, for direct imports, the rates which are prevalent in quarter four will apply, and we don't know. Yeah. All of us, it's in the future, so we don't know that. And of course, the volume, we are all dependent on the volume, uncertainty in the market, so that continues. Fair enough, sir. Second question is on the retail scenario and the inventory situation, because you have FADA coming on and off and talking about very high, alarming levels of inventory in the car industry, led by small cars. So if you can just help us understand, where does our inventory stand at the end of the quarter, and if you have the data refresh for what could be the likely month-end inventory for the dealers at your end? That will be really helpful. Within that, how is the small car inventory come down over the last few quarters? Because we've seen the wholesales kind of correct more meaningfully there. So if you can just help us understand the inventory situation, because that could have a, especially the small car inventory, could have a impact on the discounting from here on, right? So if you can just help us understand that, on the inventory situations. Thank you. See, I won't be able to comment on the FADA data, but whatever little I understand, there's a lot to do with the fine print and the assumptions. At least, Maruti Suzuki had a very healthy and low closing stock as a quarter end, below 45,000 units. So we started the new year light and ready to receive many more cars in the dealerships. There is nothing of concern as far as inventories in the market is concerned. It's a normal, healthy situation. And we have pending bookings at the end of the quarter of about 215,000. So nothing of concern, as you pointed out. Fair enough, sir. Thanks a lot for that, and wish you all the best. Thank you. Thank you. Thank you. The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Yeah, hi. Thanks, team, for taking my questions. A couple of questions from my side. Firstly, just, you know, just the extension of the data that you were giving on discounts. Can you also talk about the retails that happened in quarter three? Retail in quarter three was much higher than wholesale. We retailed about 530,000 vehicles. That was a reduction of about 115,000 stock. Okay, got it. Any meaningful change to the royalty numbers, or is it stays in that same range, 3.7%-3.8%? The royalty stands at 3.5%. It is sequentially lower by 30 basis points, but you would know, it depends on the product, the new models entering the scope and the models going out of going on discount, discounted royalty rate. This figure keeps hovering between 3.5%-4%. Okay, got it. Now my question is more on the growth. How should we think about growth going into fiscal 2025? What are we seeing in terms of, you know, customer bookings, inquiries, and more particularly in context of Maruti? I mean, if you can cover, you know, how this mini and compact car portfolio continues to sort of shrink. So, you know, one, industry growth, and how, you know, how do you see Maruti in that context faring in line below? Because we have a higher exposure to large segment. You know, little bit of thoughts around that. Right. So, before I go to the growth in next year, I have to mention that India is at a high base already. This year, we may close at about 4.18 million or 4.19 million or 4.2 million. There have been some preliminary estimates by SIAM on the next year growth numbers. They are yet to be finalized, but they are such at the CEO level. The preliminary information that was discussed in SIAM yesterday, in the SIAM Looking Ahead conclave, was 4.3 million for next financial year, 2024-2025. Of course, Maruti intent will be to grow faster. And you're right, it has, the growth could be much better had it not been for the small car segment. The small car segment, you know, is shrinking both in absolute terms and in percentage terms, obviously. We are expecting that the cost went up suddenly because of regulatory intensity. Too many regulations happened together. Finally, it's a function of affordability. There are so many people out there who want to buy a car. Affordability is the only big hurdle in simple economics. We think when the income growth will catch up with the higher cost of acquisition, small car growth should come back. So we are putting our hopes on the small car segment to come back sometime in the future, but not immediately. Okay, got it. And the second question I had was on the product side. When you look at your entire portfolio, we've done a lot in terms of, you know, plugging the SUV gap. But when you think, you know, across the portfolio, are there any more white spaces that we are looking to address in the next 12-18 months? Or anything where, you know, I mean, in particular, let's say the micro UV space, we are still not present there. So is that something, you know, we should expect, you know, as part of the plan? Maybe not in one year, but from a next two-three year perspective? One thing we've mentioned, that we will be launch having 28 models by the turn of the decade, which means we have to grow by at least 10 more models, and if some existing models need to be refreshed, that is additional. So certainly there is a model pipeline. Of course, the model pipeline has to reflect the need of the market as the consumer pull in the market. So we will be there where the consumer needs us to be there. One model that I can specifically talk about is our EV. That will be that we will have the start of production in this calendar year. Mm-hmm. I mentioned it will be exported also. But we'll be covering all segments that are important from a volume point of view. Okay, got it. Okay, we'll wait to hear more, as and when they come. Thank you so much. I'll join back to you. Thank you. Thank you. The next question is from the line of Raghunandan NL from Nuvama Research. Please go ahead. Thank you, and congratulations, sir, on stellar numbers. A couple of questions. Firstly, first time buyer share has reduced to less than 40% currently versus closer to 50% pre-COVID. How would you see the triggers for recovery in the first time buyer demand? And, you know, any signs you are seeing which could trigger this recovery? Raghunandan, very interesting question. We are also watching this carefully. The highest we had reached recently was in financial year 2021 of 47%, and it went to a low of 38% in the last quarter, quarter two. In this quarter three, it has inched upwards to 41%, but it is too premature to conclude whether it's a green shoot of recovery or it's just noise or some you know, quarter specific phenomena. So we would like a more sustained trend before we can make any conclusion. Got it, sir. And, on my second question, on the order book, we still have, lots of pending orders on the CNG automatic vehicles. Can you throw some color on how you are trying to address these production supply constraints? Okay. See, the good part is that the semiconductor issue is now has been resolved as of now. At least in the foreseeable immediate future, we don't have any such issue. Our capacity is roughly production capacity, which might be the next bottleneck, is about 22 lakhs, 2.2 million per year. And to echo if you notice in quarter two we did that kind of numbers. And so we need some headroom and capacity for if we have to attain growth. So of course, in Manesar we had shared that we'll have about 100,000 capacity coming by March 2024. And we could also utilize Gujarat more. And by in the year 2025, we should have the Kharkhoda plant, the first line of 250,000. Of course, with the ramp up, you don't get full capacity on day one. So, that capacity should come. But immediately, there are some minor bottlenecks that are holding up CNG supplies that should get resolved soon. Thank you, sir. Very helpful. Just one last question. On the upcoming BEV to be launched in 2024, historically, Maruti has always been providing the best cost of ownership for customers. Can you, you know, throw some color whether this will continue in EVs, considering the dedicated platform and aggressive localization efforts? See, the interesting phenomenon about EVs in India is that the customer profile is very different from what we have seen in the IC engine cars. So it's not necessary that the same parameters hold topmost in the mind of the customer. Typically, this is a higher segment customer who has charging infrastructure at home, who would most likely use it for commute to office, and has a predictable usage profile in terms of kilometers run, et cetera. So the first SUV that we are launching in the EV space is an upmarket vehicle. It's bigger than the Grand Vitara. It has a high range, 550 km range, battery of 60 kWh. So of course the range anxiety is something that we have taken care of extremely well. So it's a high-spec vehicle, and we are hopeful that customers will receive it well. Got it, sir. That was very helpful. Thank you so much. Thank you. The next question is from the line of Vipul Aggarwal from HSBC. Please go ahead. Yeah, hi. Thank you for taking my question, sir. My question is on CNG penetration. How is it shaping up in the southern part of the country, given there is a strong penetration of CNG pumps, and what is the simultaneous increase in the CNG vehicles overall from the industry perspective, and how is it working for Maruti? So yes, the CGD infrastructure helps a lot in CNG penetration. And you're right, some new geographies are getting added, and that is helping CNG sales. We have reached a penetration of 13.8%, and we see headroom going further. And the reason why we are hopeful is there are some models where the penetration is more than 50%. Ertiga, for example, is 57% CNG, WagonR, 50%, Dzire, 44%. Similarly, there are cities with high CNG penetration. Delhi has 47% CNG penetration in those models. Pune... Of course, Gujarat, traditionally, Delhi, Mumbai, Gujarat used to be traditional CNG markets, but now Pune has picked up big time. So new cities where you are able to reach a critical mass of stations, we find good absorption of CNG, and we are in good contact with the CGD companies to have joint promotion schemes, et cetera. Because for them, we sell one CNG car, but with that customer, they get to sell the fuel forever, at least, let's say, for the next 10 years. So they are also quite interested in partnerships for joint promotion. Thank you for that, sir. Second, follow-up question on the Maruti's CNG portfolio. So Maruti's models mostly have single cylinder CNG, while competition has launched dual cylinder CNG variant, which provides better boot space. So, what is Maruti's strategy to counter the same or do we expect any launches in the similar lines? It is a good feedback. Good is the input, and we are also monitoring consumer insights. So there are other technologies also. It is in our active consideration, and we are keenly aware of this. Thank you. So my second question is on export market. Can you talk about export strategy for the next three-five years? Like, what models you plan to launch, and how the existing models are doing, and are we also facing some challenges from this Red Sea issue, which is going on? I'll take your last question first. We are seeing some kind of logistical challenges because of the Red Sea issue, and there may be some increase in cost because of risk or because of rerouting of vessels, but should not be significant. The time of the lead time of dispatches might change, and there may be some uncertainty in vessels coming, picking up their consignments, et cetera. That's a small issue, which happens very commonly in the export business. So, last year, last calendar year, we did a high of 270,000, our highest ever, and we should be able to better it in the future years also. We've expressed our ambition to go up to at least 750,000 by the turn of the decade. And Africa is turning out to be a good market. Then we have Middle East. Middle East has picked up quite well recently for a number of reasons. The government is also signing some FTAs where we get some advantage in duty. UAE, there's an FTA. The Gulf countries, six Gulf countries, there's an FTA under consideration, and that helps. Latin America is next, of course, the traditional markets of ASEAN and Oceania. With our EV, we will reenter Europe and Japan. Thank you, sir. That was helpful. You asked about some models also? Yes. So- Yes, so any new model launches you are expecting in exports? No. We normally sell from our existing portfolio. Jimny three-door was the only unique one, which we were selling in exports, but not in domestic. Now we have the Jimny five-door. So, we have Baleno. The top models are Baleno, Dzire, Jimny, Swift, and Grand Vitara. Thank you, sir. Thank you. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead. Yes, hi. Thanks for the opportunity. Two questions from my side. First of all, you know, just a bookkeeping question on the margin improvement. You know, why the margins have improved, you know, quarter-on-quarter, they have declined. So can you just, you know, maybe spell out the key, you know, two or three reasons for the margin improvement on the YY basis, and, you know- Okay. What happened, you know, sequentially? Okay. Since the sequential structure is closer, I'll talk about sequential first. So first of all, as I had mentioned in the past, the operating leverage is the largest lever. So we gained about 110 basis points on the operating leverage. Sorry, we lost on that account because quarter three, as you know, has lower wholesale and more retail. Yeah. Discounts were up by, so that impacted by about 70 basis points. Advertisement was up by about 30 basis points, so that there was a net negative, about 210 basis points. On the positive, as I had mentioned, we gained somewhat on, Forex, about 30 basis points, royalty, 30 basis points. Commodity, I mentioned, steel, was marginally up, but we gained somewhat on, PGM, so that was an impact of about 10 basis points. So gain of about 70 basis points. So on the whole, sequentially on EBIT, we had about 130 basis points fall, from 11.2% in quarter two to 9.9% in this quarter, in quarter three. Okay, that's helpful. My second question is, you know, more on this, again, on this issue of, you know, first-time buyer and the small car weakness. I mean, do we need to start delineating both these things in the sense that, are you seeing a lot of first-time buyer actually moving from, moving upwards from smaller cars like WagonR, Celerio, and maybe going straight into these micro SUVs or even within your portfolio to a Swift or a Baleno? And how should we think about that? Because what is also happening is that while there is a lot of model launch momentum on micro SUVs and even, you know, more refreshes happening on the slightly bigger cars. In the entry-level cars, while you are still around, a lot of people have exited the models. And while you're refreshing, you know, these are still, you know, 10, 15, 20-year-old models. So how should we think about this? See, this phenomenon exists, but it is not the large part which explains this. Okay. So there is some amount of skipping of levels, but the whole small car degrowth cannot be explained only because of this. Mm-hmm. Otherwise, the total growth of the industry would have been much higher. Hmm. So, I would imagine that while there are some customers who are skipping levels, and which is a very positive sign, there are many of them who are expecting the prices to be more, you know, benign and affordable for them to consider a purchase. Just consider, you know, we had a price point of INR 2.5 lakh with the Alto 800. Yeah. That price point has vanished. Now, the minimum price at which you can buy a car in India is above INR 4 lakh. Yeah. Even at that price point, not much sale happens. Yeah. We are waiting for, you know, the income growth to in that segment of the population, and that is relevant to catch up, and then we can hope for some small car segment improvement. So, Rahul, if I can just, you know- Some relevant numbers. Yeah. For industry, the total hatches- Hmm. From 2022-2023, they were about 945, sorry, for Maruti. Yeah. They were about 945,000, and it has come down to 836,000. Hmm. In industry, the total hatch segment has now, you know, in this last quarter, has come down to 25%. Yeah. At the peak, it was in 2017, 2018, it was at 47%. Yeah. It's a huge shrinkage. Thanks, Rahul, for sharing that. If I can just, you know, squeeze in a follow-up on this. You know, assuming that the affordability and, you know, the income levels of the first time buyer improves, say, six, 12, you know, 15 months down the line, and whenever they come back, in your opinion, do you think they will come back at the lower-end hatch level, or do you think they will come at the upper-end hatch and the micro SUV level? And if they do come at the lower hatch level, will you also need to, you know, make some exciting product launches there? Just trying to understand how you're thinking about it. It depends on the shape of the pyramid, you know, the consumer pyramid. Hmm. Of course, the demand has to that whenever this such a phenomenon happens, it starts from the upper end. Okay. So, you're right, it's, it will start from the upper end and then go down deeper. That's a natural, continuous, progression that we have seen. And we have got some exciting products. In that segment, you, you know, you need a very, critical balance of all the parameters that the customer looks for. So, and that is continuously being researched. Of course, infotainment features, some kind of, SUV-ish feel, those are larger trends that are, affecting India. Fair enough. Thank you. Thank you, Rahul. I'll come back in the queue. Thank you. Ladies and gentlemen, that was the last question for today. With this, we conclude today's conference call. On behalf of Maruti Suzuki India Limited, we thank you for joining us, and you may now disconnect your lines.