TVS Motor Company Ltd Q3 2025 Earnings Call Transcript

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

Question: Chandramouli Muthiah - Goldman Sachs Financial, Inc. - Analyst : Hi, good evening and thank you for my questions. My first question is on the OBD 2B norms, which I expect to be introduced on April 1, 2025. I just want to understand what additional components you might need to add. Are there any price hikes we need to take? And is there any prebuy factor that we need to factor in heading into that period.

Question: Chandramouli Muthiah - Goldman Sachs Financial, Inc. - Analyst : Just a follow-up on that, sir I think we had OBD 2A exactly two years back, and I think that industry took between 1.5% to 2% sort of price increase at that point in time. So do we sort of compare similar to that sort of magnitude of price hike? Or is this going to be slightly different?

Question: Chandramouli Muthiah - Goldman Sachs Financial, Inc. - Analyst : Got it. That's helpful. My second question is just on the gross margin. So we did see an increase in electric two wheeler mix this quarter, but gross margin has been quite stable. So I just want to understand what were the drivers that helped maintain very stable gross margin this quarter in spite of increasing electric two wheeler mix?

Question: Chandramouli Muthiah - Goldman Sachs Financial, Inc. - Analyst : Got it, that's helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 11:30AM, TVSM.NS - Q3 2025 TVS Motor Company Ltd Earnings Call

Question: Chandramouli Muthiah - Goldman Sachs Financial, Inc. - Analyst : Got it. That's helpful. And just lastly, a housekeeping question on export revenues and spare revenues for the quarter, if you can share?

Question: Chandramouli Muthiah - Goldman Sachs Financial, Inc. - Analyst : Got it. Thank you very much, and all the best.

Question: Pramod Kumar - UBS - Analyst : Yeah, thanks a lot for the opportunity, sir. And congratulations on a decent set of numbers. Sir, my first question is on the operating leverage or the lack of it, because if you look at the -- first, this quarter numbers like your employee costs and other expenditures grew like 25% plus versus revenue growth of 13%. And if I look at the first nine months, we have seen 180 bps increase in employee and other cost expenditure as a percentage of revenue, and they have gone significantly ahead of the revenue growth. So I understand that there's a lot of things going towards capability building on new technologies, manpower hiring, and all that. So if you can just help us understand, by when do you expect the inflation or the growth in these line items to kind of moderate, so that we start seeing the benefit of operating leverage? The reason I'm asking this is like last four years almost the employee cost has compounded by 20%. And we can see the benefits of that in your products and the market share gains. But just trying to understand, are we expecting a moderation in the growth of these expense line items so that we can see some operating leverage benefit?

Question: Pramod Kumar - UBS - Analyst : I understand all that. Just trying to understand whether we're going to see some moderation in the rate of growth of these expense line items, nothing else. And this could be more for FY26, '27, I'm not looking at the immediate quarter. But just if you can help understand whether we will expect any moderation in the group rates? Or they'll continue to grow signally out of the revenue growth?

Question: Pramod Kumar - UBS - Analyst : Okay. (inaudible) And the second one, linked to the comment you made on PLI, by when do we expect you to start receiving the PLI amount, sir, so that we can start recognizing that in the revenue numbers, in the margin numbers?

Question: Pramod Kumar - UBS - Analyst : Q4, sir?

Question: Pramod Kumar - UBS - Analyst : Okay. And sir, on the export market outlook, if you can -- hello?

Question: Pramod Kumar - UBS - Analyst : Sir, on the export market, sir, if you can help us understand why we are doing well, we are gaining market share. In terms of the medium term plan for the next couple of years, where do you see TVS's export volumes in terms of overall portfolio for two wheelers? Because as you said in the opening remarks, you are kind of still ramping up on Latin America, I think Brazil is yet to be entered. So if you can just help us understand that. And also final statistics on iQube. How much of the network is already selling iQube because I understand you're not saying that at all your outlets at this point in time, including some dealers? These two questions, sir. Thank you.

Question: Pramod Kumar - UBS - Analyst : Thanks a lot, sir. I'll come back in the queue. Thank you.

Question: Kumar Rakesh - BNP Paribas - Analyst : Hi, good evening. Thank you for taking my question. (technical difficulty) My first question was around the investments that you have made in the international businesses. Have you taken the fair value assessment of all the international subsidiaries recently, or which all are pending to be done? I see that you have taken some write-off in this quarter. So for which entity is that and which all entities are yet to be evaluated for that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 11:30AM, TVSM.NS - Q3 2025 TVS Motor Company Ltd Earnings Call

Question: Kumar Rakesh - BNP Paribas - Analyst : Okay. Related to that, this quarter you invested in (technical difficulty) So can you just help understand that what is the rationale behind making that to be a subsidiary, especially when it is in a resale business cause largely many of the other OEMs have built by themselves. So what is the unique use case that we are looking at this business, we have raised their state, and want this to be our subsidiary?

Question: Kumar Rakesh - BNP Paribas - Analyst : I think my question was more from external business, going and investing in that instead of building by ourselves. So what is it, the unique case that they started bring in that we thought that we will not be able to bring ourselves?

Question: Kumar Rakesh - BNP Paribas - Analyst : Got it. Thanks. My second question was around the TVS Credit. So you spoke about that our diversified business now outside of two wheeler business as well. I noticed that the AUM growth of that business has been slowing down quite sharply from more than 20% growth a few quarters back, now is 7% growth. So what is driving that slowdown in the AUM growth of that business?

Question: Kumar Rakesh - BNP Paribas - Analyst : Got it. And I noticed that the credit cost has increased or has elevated at about 4.9%. So how the delinquency trend that you are seeing (technical difficulty)

Question: Kumar Rakesh - BNP Paribas - Analyst : So the credit cost of TVS Credit is about 4.9% for December quarter. I was asking around the delinquency business, how is that trending?

Question: Kumar Rakesh - BNP Paribas - Analyst : Got it. Thanks a lot for taking my question.

Question: Kumar Rakesh - BNP Paribas - Analyst : Got it, got it.

Question: Gunjan Prithyani - BofA Global Research - Analyst : Yeah, hi. Thanks for taking my question. And apologies if this is repetitive. Just trying -- the first question on the investment in subsidiaries. The INR740 crore, could you give us some sense where has this gone? And also, I do see the losses have certainly come down on subs in this quarter. So if you could give a little bit of color on what's really happened on the subs performance beside the TVS Credit.

Question: Gunjan Prithyani - BofA Global Research - Analyst : Okay. And anything like on the losses like this come off, is it the Norton or the e-bicycle business where we are seeing some universities behind and losses are shrinking. Any comments around that?

Question: Gunjan Prithyani - BofA Global Research - Analyst : Okay. Got it. And my second question was a little bit more on the product strategy. At the Bharat Mobility Expo, you had two interesting products. One was the CNG display and the other one was the 300cc bike. Anything that you can sort of talk about how soon should we expect these coming to market? Any broader strategy around both these product segments, CNG scooter and 300cc?

Question: Gunjan Prithyani - BofA Global Research - Analyst : Okay. Got it. Thank you so much.

Question: Amyn Pirani - JPMorgan Chase & Co. - Analyst : Yes, hi. Thanks for the opportunity, sir. So two questions from my side. First question is you have recently launched the electric three wheeler, and the features and the pricing seems quite attractive. I don't know If you mentioned about this in the past, but how do you see the e-rickshaw as a category? And is that something also which can be a business opportunity for you in the future?

Question: Amyn Pirani - JPMorgan Chase & Co. - Analyst : Okay. Thank you. And sir, secondly, again, apologies if this has been addressed earlier. I joined a bit late. What is like rationale of merging Sundaram Auto Components? And is there a plan to grow that business? And correct me if I'm wrong, currently this is 100% supplying to you? Or is there any external revenues that this entity generates? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 11:30AM, TVSM.NS - Q3 2025 TVS Motor Company Ltd Earnings Call

Question: Amyn Pirani - JPMorgan Chase & Co. - Analyst : Okay. But going forward, this entity will not have any business, it will just be entity with land and cash basically.

Question: Amyn Pirani - JPMorgan Chase & Co. - Analyst : Okay, okay, understood. Thank you.

Question: Kapil Singh - Nomura Holdings, Inc. - Analyst : Yeah, good evening, sir. Just on the electric scooter business, I wanted to ask because we are touching almost (inaudible) investment. What percentage of the scooter market does it cover? And then secondly, in terms of customers we are getting now, are these -- do you think are these scooter -- existing scooter customers who are shifted? Or are there additional motorcycle customers also shifting towards electric scooters?

Question: Kapil Singh - Nomura Holdings, Inc. - Analyst : Yeah, sure sir. These 900 dealerships, they would cover what percentage of the scooter market?

Question: Kapil Singh - Nomura Holdings, Inc. - Analyst : Okay. on the motorcycle portfolio, can you give some color? Just firstly on the industry also, the growth has been quite rapid especially in the second half. And for TVS as well, the growth rate has been slow by the standards that we set. So just if you could give your views on both.

Question: Kapil Singh - Nomura Holdings, Inc. - Analyst : Sure sir. My question was more on the recent data, we see that has seen quite a bit of weakness. So was that more temporary factor or --

Question: Kapil Singh - Nomura Holdings, Inc. - Analyst : Sure, sir. Sure, thank you so much.

Question: Parag Thakkar - Fort Capital - Analyst : Hello. Am I audible?

Question: Parag Thakkar - Fort Capital - Analyst : Yeah. Thanks a lot for taking my questions and congratulations for excellent numbers. I just wanted to know when that (inaudible) with margin of 1.5% will reflect in our quarterly results?

Question: Parag Thakkar - Fort Capital - Analyst : PLI benefit, which I think our peers have already recognized, right?

Question: Parag Thakkar - Fort Capital - Analyst : So this is a (inaudible) will come in -- from retrospective (inaudible) or from Q4 only? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 11:30AM, TVSM.NS - Q3 2025 TVS Motor Company Ltd Earnings Call

Question: Parag Thakkar - Fort Capital - Analyst : Okay, okay, great sir. Thanks a lot for the same. And if I heard correctly that in January, basically in two wheeler, we are doing extremely well. Because a suggestion when (inaudible) and he was very bullish about the January uptick in two wheeler sales, both in ICE and electric, I think. So whether you would be able to throw some light on that. That March quarter and upcoming year looks very good from both ICE and EV sales from TVS perspective. No, I'm not asking from the industry perspective. Of course, he has said that two wheeler industry is going to grow in double digits growth in this year, and you will outpace the industry. But --

Question: Parag Thakkar - Fort Capital - Analyst : Okay, sir. Okay, thanks a lot. That helped me a lot, and okay, thank sir. Congratulations. Thanks.

Question: Jay Kale - Elara Capital - Analyst : Yeah, thanks for taking my question, and congrats on a good set of numbers. Sir, first question is regarding EV two wheeler. I don't know -- it seems that the penetration for the industry is hovering around the 6%-odd, while we have done well. But what is needed for this penetration to move up further? Because a couple of years back, the broad expectation was that if EV two wheeler prices, scooter prices come down to closer to ICE vehicles, there will be an inflection point. Now as we see it, broadly the industry has reached similar to ICE prices of scooters. What is it needed for it to further give a (inaudible) in terms of EV adoption? Is it that motorcycles will only drive the further EV adoption over here? Or where are we seeing the gaps in EV scooters as an industry? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 11:30AM, TVSM.NS - Q3 2025 TVS Motor Company Ltd Earnings Call

Question: Jay Kale - Elara Capital - Analyst : Understood. And if you can just share EV contribution of -- for this quarter in terms of revenues that you had done last quarter. And just a few clarity on the Norton launches as well as the Hyundai three wheeler that you mentioned, the timelines and the kind of product that would have. And would it just be contract manufacturing? Or what would be our role in this? And how would it place?

Question: Jay Kale - Elara Capital - Analyst : On the EV contribution this quarter in terms of revenues, like you had mentioned last quarter.

Question: Jay Kale - Elara Capital - Analyst : INR800 crore. Okay, okay, understood. Great, thanks, and all the best.

Question: Raghunandhan N. L. - Nuvama Wealth Finance Limited - Analyst : Thank you, sir for the opportunity, and congratulations on the 11.9% margin. Sir, firstly, on the margin side, you have been doing very well over last few years. And going forward, the material cost reduction, premiumization, even the geography mix improvement, all these are triggers. If you can talk about efforts in this regard and how see the benefits to flow through in future?

Question: Raghunandhan N. L. - Nuvama Wealth Finance Limited - Analyst : Got it sir. Thanks for the detailed answer. Sir, in terms of demand outlook, how do you see domestic market in FY26, given that we have not had reached the previous peak? So and rural is also doing being well, how would you see the industry growth panning out?

Question: Raghunandhan N. L. - Nuvama Wealth Finance Limited - Analyst : Thank you very much, sir. And on the investment side, we've already done INR1,400 crore in the first nine months. How would you look at the full year number? Or Q4, what would be the number? And do you think this INR1,000 crore plus run rate will continue for FY26?

Question: Raghunandhan N. L. - Nuvama Wealth Finance Limited - Analyst : Got it, sir. Understood. Thank you so much, and all the best.

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Yeah. Hi sir. So again my question is on Norton investments till now. Given we are clearing the completion of product development, do we need to invest further in Norton beyond what we've already invested? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 11:30AM, TVSM.NS - Q3 2025 TVS Motor Company Ltd Earnings Call

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Got it, got it. And secondly, in the domestic market, some of the financiers, including banks and NBFCs are highlighting increase in delinquencies on the consumer loan side, two wheelers in that way. Are we seeing any signs of stress on finance ability for two wheeler customers? Or that is yet to be -- it's not as visible on the ground?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Okay. Got it. Okay. And just bookkeeping questions to Mr. Desikan sir. Sir, what was USD INR realization in this quarter? And how much would be CapEx for the full year FY25?

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Yeah, for FY25.

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : For the quarter and the year.

Question: Jinesh Gandhi - Ambit Capital Private Limited - Analyst : Got it. Okay. Great sir. Thank you, and all the best.