Maruti Suzuki India Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Pramod Kumar - UBS - Analyst : Yeah, thanks a lot for the opportunity. So the first question is on the festive demand outlook what you guys have shared. If you can just provide some color because I pick up in media articles which have got published post the press was that you're talking about the period ending with Shradh or start of [Navratri] till Diwadi, but based on whatever insight you have on the booking numbers and the scheduled delivery. The reason I'm asking that is because on [Bohan], cumulative festive retail for the industry is still down around 4% as of this morning. I understand there's a bit of a lag in counterpart registration, but it can be that the registration on is still reasonably mid-single-digit negative, and we are talking about a double-digit growth. So can just help us understand the period we are looking at and the data you're looking at and also some color on what's the expected retail in this number of INR3 lakh between today and until the end of Diwali, sir. Unidentified Company Representative Okay. So this time, we have retained the festive period from the beginning of (inaudible). I repeat from the beginning of Shradh until Diwali and the reason we are doing that is because there was a month end in between, we wanted to avoid any impact of month-end sales to come into the picture to a like-to-like comparison. So from the beginning of [shot] in Diwali, year-on-year, we have grown by 14% in our retail sales. Retail sales is relevant because in the festive period, that's what the two customer interest is. So against the last year figure of 260,000, this year, most likely, we will be closing around 297,000. And I should also give you because sometimes wholesale clouds the picture. For the full year, April till October this time, we are hoping to clock about 3.9% growth in retail sales.

Question: Pramod Kumar - UBS - Analyst : I think still September was a decline so not wrong of 0.8% (inaudible). Unidentified Company Representative You're talking about wholesale?

Question: Pramod Kumar - UBS - Analyst : The discounting you expect will not be seeing any step-up which you typically see in a big way during the December quarter in the month of December. Unidentified Company Representative Could you kindly repeat that?

Question: Pramod Kumar - UBS - Analyst : And on discounting, sir, what's the discount -- average discount per car, what we had in the quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 11:30AM, MRTI.NS - Q2 2025 Maruti Suzuki India Ltd Earnings Call

Question: Pramod Kumar - UBS - Analyst : And sir, more color on the demand because the demand going into the season for the industry was not looking good. So what has changed? If you can just help us some color in footfall, inquiry conversion regional flavor, urban versus rural. Anything which you can share, which can help us understand the demand -- the festive demand, which is according to (inaudible) to be better. So if you can just help us understand that, that will be great, sir. Unidentified Company Representative Sorry, I would like to replace a couple of steps. India is now the third largest car market. It does happen once in a while that the market takes a (inaudible). So we are not to -- of course, we would like the market to grow faster. But we are not too overly concerned about it. I mean the Indian customer does want to buy. So there are times when these slightly dormant. There are times when it comes forward. And so this year, if you want to understand the outlook, we are hoping to close this year on retail sales about 3% to 4% growth which is precisely in line with maybe slightly better than the projections that we had at the beginning of the financial year here.

Question: Pramod Kumar - UBS - Analyst : The pay commission -- Unidentified Company Representative (inaudible) doing quite well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 11:30AM, MRTI.NS - Q2 2025 Maruti Suzuki India Ltd Earnings Call

Question: Pramod Kumar - UBS - Analyst : Before I fall back in the queue, just a query, the clarification, I'm getting message from clients. They just want to clarify again the 14% growth that you're referring to is point-to-point like-to-like start-off start last year to the festive to start of (inaudible) this year till festive, right? Or is it start of (inaudible).

Question: Pramod Kumar - UBS - Analyst : So it's the same thing. The confusion was, are you saying end of (inaudible) last year to festive and start of (inaudible) start this year to festive additional point, that's not the case, right?

Question: Pramod Kumar - UBS - Analyst : Yes, absolutely. So even in the base here, you're starting from (inaudible), am I right? Unidentified Company Representative

Question: Pramod Kumar - UBS - Analyst : That was the confusion. So sorry, sorry for us, but I'm getting queries from clients to clarify this. So I had to do that. Apologies for that. But thanks a lot, and I'll fall back in the queue.

Question: Raghunandhan NL - Nuvama Research - Analyst : And congrats on the strong performance in the fiscal period. Sir, on still period, just one question. How do you see the trend in terms of first time and replacement barriers? And are you getting confidence of recovery in hedge banks given that there's some recovery in first-time buyers? And going forward, there could be benefits of expected interest rate cuts pay commission benefits, how do you say or by when do you see the recovery in catch-back? And also relating to (inaudible),how much would be the inventory in hatchbacks by end of the month? Unidentified Company Representative So no major discernible change in trend that I can share at the moment. And just inventory at the end of the month, we hope to be within 1 month.

Question: Raghunandhan NL - Nuvama Research - Analyst : Is it better now?

Question: Raghunandhan NL - Nuvama Research - Analyst : On hybrids in press conference, there was indication of 25% road tax rebate. Can you talk about the road tax rebates in Punjab and other states and the benefits you are seeing because of this? On a related note, would you dispense further expanding hybrid product portfolio in [Ulsan Hatchback] in future? Unidentified Company Representative Some states are giving benefits in hybrids. For example, Haryana is giving 25% road tax waiver. (inaudible) is giving 50% co-tax waiver. Rajasthan similarly is giving something -- [set] is doing something. There are some states which have it in their policy, but they are yet to implement it. Having said that, I think it's -- it's a great technology, which saves CO2 and drastically cut (inaudible) consumption and does not have the anxiety of range, charging for such a requirement. So extremely customer friendly. And we think in the immediate onwards for the midterm, it is a potent technology for both national objectives, CO2 and oil import cutting. So we would like to enhance it as much as possible. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 11:30AM, MRTI.NS - Q2 2025 Maruti Suzuki India Ltd Earnings Call

Question: Raghunandhan NL - Nuvama Research - Analyst : So all the best on EVs and hybrids. Just one housekeeping question. Can you share the exports for Q2? Unidentified Company Representative The exports for Q2 is -- it is actually the volume. It's about [INR5,261 crores in rupee terms].

Question: Kumar Rakesh - BNP Paribas - Analyst : My first question was on quarter-on-quarter gross margin movement. I noticed that most of the key commodities have been largely benign since April, May [which] as to iron copper. Also in the P&L, the line item changes in inventories of finished crude was positive during the quarter. This is probably the first time in the last several years when this was positive. Usually what happens that you build actual inventory ahead of the festival.

Question: Kumar Rakesh - BNP Paribas - Analyst : Sorry for that. I'll repeat my question. My first question was on quarter-on-quarter gross margin movement. I noticed most of the key commodities have been largely benign since April, May, such as steel, iron and copper. Also in the P&L, the line item changes in inventory of (inaudible) crude was positive during the quarter. So this is probably the first time in the last several years when we saw this to be (inaudible). Usually, there is a factor in when inventory (inaudible) which happens in this quarter as of festival this year also, I think were building inventory for this are ahead of the launch. And hence, that shows up as a negative line item and the changes to inventory. So can you just help us understand this movement in gross margin with whatever granularity you can? Unidentified Company Representative Yes, sure. See, there are a few factors which has contributed towards it. The first one is as you would have seen that the sales promotion expenses reached slightly higher this quarter. So that is contributing on the gross margin impact. Commodity has some point as (inaudible) highlighted in the opening statement about 0.5%. So these are the 2 predominant factors which is impacting, which is on the sales promotion as well as the commodities of (inaudible). Of course, we have some favorable impact on the exchange rate and (inaudible).

Question: Binay Singh - Morgan Stanley - Analyst : Very encouraging to see the 14% commentary that you are seeing at least some signs of demand recovery. My question is on the discount side. Typically, in Q2, what we see is that we put in inventory, retail sales is big and the accounts run on retail sales and the wholesale is such as a higher. And then in Q3, actually, the discounts are paid out. So when you look at Q2 this year, is it fair to assume that retail number that you get for 20, this time, retail is higher than wholesale for the actual account will be lower? And secondly, any commentary on how do you see the discount number in Q3 because there has been a big drag in gross margin this year this quarter? Unidentified Company Representative Yes. First of all, commenting on your Q2. Yes, your analogy is right that the retail is higher than in Q2. And Rahul already gave you the October outlook, the festival outlook. So you can see the directional trend, how it is going. Directionally, we are in a position where retail is picking up. Directionally retail picks up the reason why you should have an abnormal behavior (inaudible) understand.

Question: Binay Singh - Morgan Stanley - Analyst : And just a second question, just 2 parts. One is that the 14% number that you are seeing, do you think this is in line with the industry as per your internal insight? Or has Maruti gained share? And lastly, incremental commodity pressure. Any commentary on that with the spot prices the way you are seeing? Unidentified Company Representative We won't be able to comment on competition. But yes, what we can say is the retail sales growth year till month, October included, is almost in line with that of market, maybe slightly lesser. So -- but testing, it will be difficult to comment and commodities is a mixed bag. So it's fairly flattish on an aggregate level, if we talk about there are some going up, some going down. So fairly stable.

Question: Kapil Singh - Nomura - Analyst : I just want to understand for the growth for this full year, we are talking about 3% to 4% in retail and first half has been flattish. So is it that we are feeling that demand conditions in the second half of the year will be better? Or are there any reasons where Maruti will gain share? Also on the CNG mix, if you could comment, we've seen very good improvement, it's at 33% already. Do you see this rising further? And any thoughts here where it could get to in the medium term? Unidentified Company Representative I'll take your second question first. (inaudible) across multiple factors. One is the distribution infrastructure in the country. Today, we are at 7,000. It will go up to 17,000 by the time of the decade. And the number of models will also keep going up it has a lower CO2 footprint. So it's good for the environment also. Customers in upper segments, premium SUVs are accepting it as a quality fuel, it's not supposed to be an economy fuel any longer. So there are factors going positive for it. We don't have a projection, but it's positive. Obviously, if you do the math, yes, then somewhere the H2 will be as what we discussed because we are predicting in retained sales 2% to 4% for the whole year. And we did about 3.9% till October. So that's how we expect it to be. Yes. No, I was just trying to understand any factors that you feel will be supporting this. Is the overall strength that you play the network change, the service change, the number of models that you have? And the number of powertrain technologies that you have, of course, sometimes we have to (inaudible) with some stent offer for our customers with some discounts also. So it's the combined strength of all factors that helps.

Question: Kapil Singh - Nomura - Analyst : Okay. Sure, sure, sir. And just one last thing from my side. We have given a long-term target of having 28 models in our portfolio. Like I'm just trying to understand from a dealership footprint point of view, how do you think about the sales network to accommodate these models, if you understand what I'm trying to say? Unidentified Company Representative So that is the question. When we had come to investors for -- during the time of SMG acquisition, we had mentioned how to manage scale with complexity is one of our biggest management thinking points and this is one of them. So of course, we have to do some more thinking on it, and we'll keep updating you as we go along. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 11:30AM, MRTI.NS - Q2 2025 Maruti Suzuki India Ltd Earnings Call

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : My first question is just on the model lineup. So I think we have mentioned that we plan to launch one EV per year over the next five to six years and potentially. Unidentified Company Representative On an average (inaudible) to it on an average because we are talking about 5 to 6 till the end of the decade. So that makes average one a year.

Question: Chandramouli Muthiah - Goldman Sachs - Analyst : Got it. That's helpful. And just trying to understand, for the December quarter, how we're looking at the key commodity prices that might affect our P&L? And also what effect we expect from whatever we've seen in lead lag on the Japanese in our accounts? Unidentified Company Representative See, on the commodity side, as we said earlier, we expect it to be fairly stable. There will be pluses or minus within a particular commodity. But as a basket, we expect the sale is driven. Yes, it's a good question. I mean we have to see several macroeconomic factors, U.S. elections being one of them. So -- but what we are doing is we are consciously stepping up our coverage of the hedging because at the end of the day, we are in the business of making cap. So we have to be conservative in our approach. So we are setting up the heading to see we have less and less volatility on the exchange side. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 11:30AM, MRTI.NS - Q2 2025 Maruti Suzuki India Ltd Earnings Call

Question: Gunjan Prithyani - BofA Global Research - Analyst : I just had a few clarifications on the comments that you have made in press around the rural and the urban growth. Rural, you guys mentioned 8% and urban minus 2%. I assume this is for first half of the year. Is that correct? Unidentified Company Representative No, no. It was at minus 2% and 8%. Rural is positive, Urban is negative on the net, net, it is nearly flattish. Wholesale and about 2.4 -- 3.9% on aggregate.

Question: Gunjan Prithyani - BofA Global Research - Analyst : Okay. Got it. And the -- so what really sort of drives the small car recovery? Or I mean is that something we expect when the first-time buyer demand comes back, how do we think about hatches as a category coming back? I know you all had spoken about fiscal '26 is when we see that recovering. Is there more that you can share? You're seeing green shoots in the market. So outlook for next year for the small car segment. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 11:30AM, MRTI.NS - Q2 2025 Maruti Suzuki India Ltd Earnings Call Unidentified Company Representative Still nothing new that we can share at this point of time. There is an affordability challenge that we see both from an income point of view and from the cost of cars point of view. But the only thing I can mention is that we've been able to arrest the decline because of some excitement and some limited models in the market.

Question: Gunjan Prithyani - BofA Global Research - Analyst : Okay. Got it. And last one on the capacity, if you can update, are we on track for that 300,000 capacity on in quarter four. Any recalibration there? Unidentified Company Representative So our plant in [Carcara] is on track. We hope to commission it within the end of this financial year.