Eicher Motors Ltd (EICHERMOT) Q1 FY23 Earnings Concall Transcript

Eicher Motors Ltd (NSE:EICHERMOT) Q1 FY23 Earnings Concall dated Aug. 10, 2022

Corporate Participants:

Siddhartha Lal — Managing Director and Chief Executive Officer

B. Govindarajan — Chief Executive Officer, Royal Enfield

Vinod Aggarwal — Managing Director and Chief Executive Officer, VE Commercial Vehicles Ltd

Kaleeswaran Arunachalam — Chief Financial Officer

Analysts:

Binay Singh — Morgan Stanley — Analyst

Jinesh Gandhi — Motilal Oswal — Analyst

Kapil Singh — Nomura — Analyst

Gunjan Prithyani — BofA Securities — Analyst

Hitesh Goel — CLSA — Analyst

Presentation:

Operator

Welcome to Eicher Motors Q1 FY23 post result con call. That the management give us the opportunity to host the call.

We have with us Mr. Siddhartha Lal, MD and CEO, Eicher Motors; Mr. B. Govindarajan, Executive Director, Royal Enfield; Mr. Vinod Aggarwal, MD and CEO of Volvo Eicher JV; and Mr. Kaleeswaran Arunachalam, CFO for Eicher Motors Limited. So over to you Mr. Siddhartha Lal for your additional comments.

Siddhartha Lal — Managing Director and Chief Executive Officer

Good afternoon, and hi to everyone. Thank you very much for joining us. And thank you to ICICI for hosting this. Welcome to the Q1 of FY 22-23 earnings call for Eichen Motors Limited. I hope you’re all doing well. This quarter marks multiple new milestones for Eichen Motors Limited and for VECV, our joint venture with Volvo.

Firstly at Royal Enfield we are continuing path to becoming a premium global consumer brand from India and we delivered our highest ever sales in international markets. In India, where we continue to define the middleweight segment and have greater than 85% share in the above 250CC segments in motorcycle further strengthened our hold on the greater than 125CC segment with a 36% segment share which is now puts us in number one position in all motorcycles above 125CC. That means, one in three motorcycles sold above 125CC. So now even though we are not present in let’s say 150 to 250. We are still counting that share and one in three motorcycles really been able to grow the market towards Royal Enfield in India, that is additionally, we also recorded our highest ever revenue and on highest EBITDA at Eichen Motors Ltd. this quarter. And we’re just getting started with all these numbers are not including of course latest motorcycle in our portfolio, which we just concluded a global launch of all new Hunter 350 which is a premium. neo retro style compact muscular roadster style motorcycle.

We’ve just returned from Bangkok where we hosted Global Media. Media from all over the world from Latin America and North America, Europe, India, of course and ASEAN, Japan, Korea, Australia and New Zealand. So from everywhere and I believe they really, really liked the motorcycle. It was a very fresh new concept from Royal Enfield for them and you can read the reviews, the embargo was lifted early this morning, can read actually the from Global motorcycle media. We’ve also launched at very accessible price, amazing motor cycle with great handling with 17 inch wheels, all the vessels that one requires in the segment, but also extremely defined handling characteristics ride and handling being nimble but also didn’t extremely accessible price point which we extremely confident will assure all lot of new motorcyclists into Royal Enfield’s world.

These are customers who like the brand Royal Enfield. We have a positive leaning towards it. They love the brand Royal Enfield but for now 350CC offerings for example, some of them may not be interesting that they may not subscribe to a classic look, they may not want Cruiser bike. So they like Royal Enfield but they don’t currently have anything in the portfolio that is interesting for them and that’s where the 150 comes in and our sole objective with this motor cycle is to get new customers who were originally not buying Royal Enfield motorcycle. So that’s on Royal Enfield EML.

Coming to VECV, which is our joint venture with Volvo Group the company recorded its highest ever first quarter volumes in Q1, we gained market share gross light, medium and heavy duty segments and over the last year and we continue to remain a profitable truck company which is not which is saying a lot considering all the bad times at past. And so it’s, we continue our strong business model that we’ve always had the resilient business model that we had with VECV. The quarter also witnessed the inauguration of the first Eicher electric city bus delivered to the City of Chandigarh, that’s a great milestone for us, we believe we have really strong electric offerings in the bus segment and this is the start of things there.

Recently Volvo Buses India has launched its next generation Volvo 9600 platform in India, it’s all new, modern platform and we’ll have factory build sleeper, should see the photographs of that it’s absolutely stunning, it looks like better than business class offering in an airplane and we will also have seater coaches in 15 meters and in 13.5 meters buses and they represent the largest and most modern buses in India by far. We also recently released our annual integrated report for FY22 that report captures the performance from the last financial year in addition to a host of initiatives undertaken by Eicher Motors Limited towards its commitment for next year and for a much stronger ESG vision.

With the robust all around performance at EML and a strong product pipeline and plans in place, we are absolutely confident to push forward on our long-term strategic business plans, objectives. We move to the financials.

For the consolidated financials for the first quarter of FY 22-23 in revenue EML clocked its new highest ever quarterly revenue at INR3,397 crores, up 6.4% quarter-on-quarter Q4 of FY 22 up 72% year-on-year. So, but obviously last year was, there was a COVID effect, but still up 72% from last year. Our EBITDA for Q1 solid in INR831 crores, which is our highest ever quarterly profit, up 9.8% quarter-on-quarter and 129% year-on-year. EBITDA margin for the quarter stood at 24.5% and against 23.7% in the previous quarter, 0.8% quarter-on-quarter improvement and it grew 6.1% in the same quarter last year from the same quarter last year. So great improvement again. And profit after tax was at INR611 crores which is similar to the same which on quarter-on-quarter, which was INR610 crores previous quarter but largely the fact that it’s changed lesser because of lower other income and account of mark-to-market losses of treasury income and partially offset by state government brands which received during the quarter.

So that’s our overall quarter I believe an absolutely stellar quarter, a great starting point for this year and for our future plans and there’s lots of new things happening at EML and all super excited about those, but before I get into all of that ask Govindarajan, CEO of Royal Enfield to tell us more detail about the Royal Enfield business. Over to you Govind.

B. Govindarajan — Chief Executive Officer, Royal Enfield

Thank you, Siddhartha. Just to add more points on what Siddhartha talked about the Hunter 350, Royal Enfield, if you look at the cadence, we have a Classic 350 and we, our VTR, we have Himalayan, and we have the 650 CC between Continent and GT Interceptor. When we started looking at there is a space for more [indecipherable], which can address the younger audience, which has an urban fit, which is very compact, nimble, easy to maneuver and a vehicle which can actually connect with the younger audience more and more. And that’s where we actually brought in the Hunter on the same well refined J-Series machine or trend.

This is the Hunter 350. Myself, Siddhartha, we were there in Bangkok along with the world’s best journalist across the globe. We rode the motorcycles, we actually curated what is called night ride and all of us rode in smaller batches and everyone came back and then said exactly what we wanted to land in for the younger audience, and that’s where we landed this on the 6 to 8. We did all these things and we launched.

Today is the day we actually — the embargo and the journalists are lifted. You can see the reviews which are coming up in this. This is one such motorcycle, which we wanted to offer the pure motorcycling to a larger audience across the globe. So the larger audience, we also wanted to keep it at a very accessible price point. So we actually came up with our — the factory for Series at INR149,900, which is a very accessible price point, which has been very well accepted by the consumers. You can see the reviews on the social media.

All the journalist who rode the motorcycle, the review started coming in. It’s so well received even by them. Hunter 350 on launch, you can see we have become the top 10 trending in the Google searches. Everyone is now searching for it. You can see what exactly the organization wanted to launch and what the product positioning have to be exactly this landing in that. And the booking is open. It’s — there’s a lot of buzz which is happening at our dealership format. So Hunter 350 all in all, it’s a global product for the younger audience who wanted a bit more compact accessible motorcycle and that’s what we have delivered to the Hunter 350.

Let me now share with you some of the highlights in Royal Enfield for Q1. Total sales, we sold about 186,032 motorcycles in the quarter, up by 52.3% year-on-year from last year and 2.1% higher than the Q4 FY ’22. In India, we sold 1,57,642 motorcycles, which is 51% higher than the previous year. On a Q-o-Q basis, its volumes are more steady. Our market share above 125 CC is hitting nearly about 36% in this quarter as against 32.9% in the previous quarters, as Siddhartha was mentioning.

International success for us, it has been a steady growth, which is happening month-on-month. We have recorded a new high in our international business. We dispatched 28,390 units making an increase of 50% Q-on-Q and about 62% over last year. New variants for BTR, we have launched in new three colorways in this quarter. All this have been received very well by the market. With the pandemic situations under control, we also did the Himalayan Odyssey in this year. We were very happy about conducting that. We had about 70 participants riding almost 2,700 kilometers for 18 days. It’s making after about two years that’s being done.

On the occasion of the World Environmental Day, Royal Enfield galvanized over 2,000 riders across this community for a pan India cleanup, right, with a focus on creating awareness for and uniting communities to demonstrate concern towards efficient waste management system. When we are doing this, our retail network as last call also we have said, now we are into optimizing the retail outlets. India, our network expansion plan is as per the target.

We are, as of now, almost about 2,132 retail outlets. Internationally, during this quarter, we did an expansion, especially in the markets like Kuala Lumpur, Argentina, Colombia and Mexico and 12 multi-brand outlets also which have come up. So the total count, including the multi-brand outlet is almost about 850 numbers plus. With the upcoming festive season, in the market, consumer sentiments, supply chain, you all have been asking is steadily, it’s improving. The parts availability is becoming better. We are quite confident our sustained growth in Royal Enfield will continue in the coming quarters.

Now I will request Mr. Vinod Aggarwal to talk about the VECV’s business. Over to you, Vinod.

Vinod Aggarwal — Managing Director and Chief Executive Officer, VE Commercial Vehicles Ltd

Thank you, Govind, and Siddhartha, and a very good evening to — on the friends who have joined today.

First of all, let me give you the details about the industry. As far as the commercial vehicle industry is concerned, I think after three years of very, very bad recession, the industry is on the recovery path. And if you go by the trends of first quarter, I think this year, we are going to see very handsome numbers in the CV industry, which will be still far away from the earlier peak of 2018,’19, but still, it will cover a lot of ground — lost ground in last three years.

If you look at some numbers, this year, first quarter, the CV industry has gone up to 105,000. I’m talking of excluding 3.5 tons. So 105,000 as against previous year’s first quarter of only around 40,000. So therefore, even if you just consider that balance nine months, if we take as the same number as of last year. Last year, balance 9 months was around 300,000. So 300,000 plus 105% of first quarter, it gives you 405,000 without considering any growth in [indecipherable]. And if you add growth of maybe 10%, 15%, which is the current trend, then we reach a figure of maybe around 430,000, 450,000. So therefore, the industry will be — it is still away from the earlier peak, but also, it is getting closer.

So therefore, industry situation is going to be good for the CV industry. And within the industry, the buses are doing very well because schools have reopened and the situation has improved in other segments also in buses. Similarly, in light and medium duty is almost at the earlier peak levels, if you look at the monthly figures. And heavy duty is also — we are now getting consistently every month, 17,000 to 18,000 units every month.

Now within this industry, if you look at our figures, which Siddhartha had briefly mentioned in his address, we have improved market shares in all the segments, like in medium duty, we are at 27.7%. And in heavy duties, we are 7.4%. And in buses, we have, in fact, made much, much bigger progress. We are at 28.6% market share in first quarter, which earlier used to be around 17%, 18%. So we have made improvements in the market shares in all these segments. And we have been focusing a lot on expanding our distribution reach, and we have improved our distribution network. We have added 29 more network bonds in last quarter, and we are almost adding every quarter, every — two touch pads every week. And we are consistently focusing on improving our uptime and improving our after sales with our customers and through our initiatives like 100% connected trucks and the uptime center. And our product train is improving there every day with better customer value proposition in various applications.

Coming specifically to the financial figures. For the first quarter, we have total revenues of INR3,934 crores, which is highest ever for the first quarter and it’s up 140% as compared to INR1,639 crores last year, first quarter, even though last year, first quarter figures are not comparable because we had the COVID-impacted quarter. These numbers are very small. Nevertheless, I think first quarter number, INR3,934 crores, a very, very respectable figure. And EBITDA margin for quarter 1 is INR271 crores. Last year, we had only INR18 crores in EBITDA, and we are at 5.3% EBITDA margin as against 1.1% last year. And in spite of cost decrease in put costs as well as sustained changes in price management, I think we are doing reasonably well as far as the profit margins are concerned.

Profit after tax for quarter 1 was INR62 crores against a loss of INR72 crores last year. And we sold 17,469 in quarter 1 as against 5,806 units last year. And the core is volume by also by 3.1%, with significant growth in some of the E-export markets. And as Siddhartha mentioned, we are very happy that we could launch first electric city bus in the city of Chandigarh in the first quarter. And this month, we are going to give the balance of the electric buses in Chandigarh. And of course, subsequently, we have also received an order of 150 electric buses from the City of Surat.

And recently, we launched Volvo Next Generation — Volvo 9600 Intercity sleeper ports, which is absolutely state of the art and which will create new standards in comfort, safety and sustainability. And of course, we are also coming out with more new models of Volvo — buses, both in Volvo as well as Eicher brand name from our first quarter launch of Volvo bus. And looking forward, as CV industry is improving, I’m sure we will continue to do well in the CV industry, and we are continuing to invest in products, services and network. And together with strong alignment with Volvo Group, we have all the elements to address upcoming market and technology needs, and we will continue to do it in a sustainable manner.

Now I hand it over back to Siddhartha for closing remarks.

Siddhartha Lal — Managing Director and Chief Executive Officer

Thank you, Vinod. Thank you so much. And as you’ve heard from Vinod, there’s a lot going on at VECV. We’re continuing to do well and a great value proposition in light, medium duty, in buses in our, of course, Volvo truck, Volvo bus segment. But I think of particular interest is the continued growth in our market shares in heavy duty as well, which is the really big market out there.

So we have a 7.6% or somewhere in that region last quarter, and it’s continuing to improve on a regular basis. So we’ve had — it’s really a story of focus of continuous improvement and now of enormous customer centricity, which is bringing a great uptime and aftermarket to the customer, which is super important in VECV. And from Govind’s synopsis, I would just like to say that even at Royal Enfield, we are — I think one thing you can always take back from EML is that we’re absolutely super focused. We don’t do too many things. We do a few things. And I believe we do them exceptionally well. We have a great pipeline of motorcycles. This is just the beginning, but lots of amazing motorcycles coming. We are able to enter newer and newer markets. Within the markets that we are present in, we have lines of dealers waiting to get our distribution because it’s a brand that is growing and doing well and they’re making money from it.

So it’s — there’s a very positive virtuous cycle that is coming. We’re also doing super new interesting things in the entire world of pure motorcycling as we call it, pure motorcycling experiences. So it means breakthrough things on how we do events, activities, all with the sustainability focus, rides, custom motorcycles, competition, all of it, which is what brings desirability to brand Royal Enfield around the world.

So we continue to do that. We have very, very strong and engaged teams, which is the cornerstone of Royal Enfield. And we really believe that with all of these — this extreme focus that we have on our customer and understanding consumers and bringing the right product and story out is what is the advantage that Eicher Motors brings on the table, and we continue to invest in that. And we believe we will continue to meet our long-term ambitions and targets. As we’ve seen in the past, we’ve been growing growth, true global motorcycling company and a very strong trucking company in India and that path continues.

So that’s it for me now. Looking forward to seeing some of you tomorrow in our investor meet here in Chennai and over for question and answers, please. Thank you.

Questions and Answers:

 

Operator

[Operator Instructions] So first question is from Pramod Kumar, UBS.

Pramod Kumar — UBS — Analyst

Yes. And congratulations Siddhartha, and Govind for making the RE very, very accessible again, I think quite surprising. So start sticking with that, I just wanted to understand given how the price point is. And this is — it used to be like, say, 4, 5 years back in terms of the showroom price. So how do you see the volumes evolving for Hunter in the domestic space? And on the export front, do you see this brand widening your customer base in the visible market even in a wider ray?

And what will be the volume potential on the export side because it’s a much more useful product, much more, I would say, compact leasing handles. So what will be your thoughts on the domestic and the export volume opportunity? And then I have a follow-up question for Kalees on the financials.

B. Govindarajan — Chief Executive Officer, Royal Enfield

Yes. Thanks, Pramod. Good, everyone, you’re liking the motorcycle, it is really a lovely motorcycle. The first question which you raised is what does it make to us in terms of domestic volume? Every product, Royal Enfield, which is launching, as Siddhartha mentioned, we are a very focused company. We always look at it. What is that, the experience which we give. That adjacencies has actually started giving us the volume. That’s how it is. You can see all of the products which we have launched so far. We launched our Continental GT and Interceptor 650. It added volumes to us.

We had Thunderbird when we changed it to BTR on the J-series engine, then that actually doubled the volume there. Classic 350 when we upgraded to the new Classic 350, it has been holding its position as the #1 motorcycle, which is selling in 120 CC and above. Now we are adding Himalayan and the Scram, which we added, you already have seen. Scram has added volume to this even in that venture character. Now Hunter is a motorcycle which we really thought that if you bring in a motorcycle, which is accessible for the consumers globally, everyone wanted a particular format. Here is one for an urban take.

The consumers who are having a true low for Royal Enfield, they express their love for Royal Enfield in acquiring some motorcycle of Royal Enfield. They wanted a motorcycle, which is a bit more accessible bit more lighter, a bit more nimble. As a result of it, they could not buy anything in the Royal Enfield offering, but they love the brand of Royal Enfield. That’s where we really felt Hunter is a motorcycle, which comes and addresses that and there’s a huge consumers who are actually inquiring our product, and there are drop-offs, which comes up in the journey. We feel this is a product which is going to actually address all of them, and that’s how it will actually add volume to us. All the products you would have seen, it’s been actually adding volume to us over a period of time.

The second question which you asked is about the international market. International market, Royal Enfield has been entering the entry segment in a way through the [indecipherable] BCC because all of our J-series are now up by compliant. So it’s opening up that segment for us when you are entering into the market. And all the guys, the journalists who all came and then rode with me and Siddhartha when we were there in the launch, all from U.K., Europe, Brazil, North America, Thailand, all the guys, all the journalists who rode, everyone came back, wow, that’s a fantastic motorcycle, which fits into our country also not even one turn back and then said, maybe it is okay for this country, not okay. Everyone said, yes, there is a space for that. So we also see there’s a good traction possible even for Hunter 350, which adds into the international markets volume.

Pramod Kumar — UBS — Analyst

And Govind, any volume targets there because the media because of suggesting 10,000, 15,000 being cited to the management in terms of domestic volumes. So I just wanted to clarify on that fact and also on export volume potential?

B. Govindarajan — Chief Executive Officer, Royal Enfield

We don’t normally give any numbers. Pramod we look at how many places have to be happy with our motorcycles when and — when we give it and then enjoying the experience. And what we want is that more and more people should come into the Royal Enfield fold, enjoy the motorcycle. We are here as a company in promoting motorcycle as a culture. And if we are focused into this and create product adjacencies, we feel probably even that number can be lower, why it should not be more. But we don’t look at any numbers precisely to that, Pramod.

Pramod Kumar — UBS — Analyst

And second is on the pricing bit and what it means to the profitability for the company because the pricing is really, really accessible. I think there are wage reductions and other cost savings. But even adjusted for that, it looks like you have gone for products and volumes here. So I wanted to understand from Kalees and, as to how should one read the volumes? the pricing and the volume growth comes from an in terms of impact on gross margin and on operating leverage. And consequently, what could be the ultimate outcome on the EBITDA side. So if you can help us with that. Thank you.

Kaleeswaran Arunachalam — Chief Financial Officer

Sure. Just as a starting point, Pramod on this, I think there are opportunities right at the variant level. So we have an entry variant, mid variant and a premium variant. We have all seen over a period of time, products variant model has helped us to improve the portability also. So while there is an attractive launch price, the variance is one opportunity available. And there will be VAV that will be continuing as we go forward. But more importantly, the product as Govind was rightly addressing, is to look at a growth opportunity for India. So as we move forward, it is important for us to balance growth, profit and profitability.

So from our perspective, we think the incremental capital employed for this particular product is already part of the J-series. So the incremental profit that we’ll be getting in absolute value will be higher. The incremental ROCE will be higher and usually, it will be accretive or the EPS also.

Pramod Kumar — UBS — Analyst

Fair enough, Kalees. I get that. Thanks a lot and best of luck and see you tomorrow. Thank you.

Operator

Next question is from Binay Singh from Morgan Stanley.

Binay Singh — Morgan Stanley — Analyst

Hi. Thanks for the opportunity. Congratulations for good set of numbers. I just carry on from the earlier question on margins. Clearly, a good quarter. But from here on, how do you see margins playing out? Because on one side, is it fair to assume that the commodity tailwind is yet to play out? And in fact, even volumes could start to go up. So you’ll see some volume leverage. But on the other side, the Hunter would be margin dilutive. So if you could comment a little bit about directionally, where do you see margins going from here? That’s the first question.

Kaleeswaran Arunachalam — Chief Financial Officer

Yes. Binay, we don’t give any forward guidance on margin. But at the same point item, let’s look at the levers available and how are we approaching it, starts with revenue. I think a large part of pricing action that we had to do with the catch-up pricing on various accounts that is now largely behind us. There is mix that will continue to grow positively both on the domestic side and with international catching up. That’s a positive sign that will continue.

We do think it’s very, very early days for us in international and the potential to grow significantly high from here. On the cost side, the commodity intervention is probably stabilizing right now. We are getting into a phase where the super commodity cycle is over. That would — no further any global political disruption that will come into affected. But right now, it looks like we’re getting into a zone of stability. So there is no need for any further pricing action in a significant manner as we have done in the past, unless we are compelled in to do that.

So therefore, on a base business, pre-Hunter, we are on — ready to move towards an operating leverage. So as you could see, the numbers for this quarter is also a visibility from that perspective. Operating leverage has started ticking and that’s where the EBITDA margin is moving towards 25,000. Now going to Hunter, we need to look at the holistic business model. On a base business, EPS at the x percentage of EBITDA. On the incremental business, whatever it is going to deliver the straight come into the bottom line. And that’s why we said it will be EPS accretive at the end of the day. And on a combined basis, it should further add value to both organization and all the stakeholders.

B. Govindarajan — Chief Executive Officer, Royal Enfield

Just to add, Binay, in the coming quarters, I think inflation, as Kalees was mentioning, the super commodity cycle, that’s slowing down a lot. We can see that. It is not that in the same pace, it’s there. We also kicked in a lot of value engineering activities because of the volatility in the subregion, which we could not get the results were offered, that will also start flowing in for us in the coming quarters.

Binay Singh — Morgan Stanley — Analyst

Thanks. Is it fair to assume that directionally the trend should be upwards only. And in term of what we saw lower margins that it sort of distorts the other levers, which all seem to be pointing upwards.

Kaleeswaran Arunachalam — Chief Financial Officer

Yes. Binay, maybe now we will look at Q1 and Q1 results, and we will get to that as we move forward to the forward quarters.

Binay Singh — Morgan Stanley — Analyst

Okay then I move on to the next question, which is on the volume side. Encouraging to see the market share trends. But when I look at July volumes, they are the lowest that you’ve done in eight months or so. So could you talk a little bit about both the demand side of patient as well as the supply side of things?

B. Govindarajan — Chief Executive Officer, Royal Enfield

Yes. Sure, Binay. I think in the July number, I’m sure you would have seen a shift in the market. The Hunter, which are supposed to be launched around 8th of August, 10th of August. So the entire pipeline which has to be built out in such a way that inventories are built and also working capital of the dealers have to be managed. So we have not billed getting our Hunter motorcycles to the dealers in the month of July. If I have to talk about what’s happening in the demand side is in India, especially, we have reached about 125CC a good market share. In the middle weight also, we are continue to growing. The market inquiries are really good. More and more inquiries are there, more and more — the desirability of owning the motorcycles are higher.

On the conversion level, there’s a bit of a pressure point, which we saw last about 30, 40 days. But with Hunter coming in, where we see that is getting addressed apt time even in the Indian market, with the Hunter coming at an accessible price point. We once again give an uptick on to demand, which is there in India.

Binay Singh — Morgan Stanley — Analyst

Thanks. And just one thing, what is the average consumer age now because we’ve been saying a lot about Hunter addressing younger audience. I always thought your average buy rate was actually below 30 anyway. So what is it for the portfolio now?

Siddhartha Lal — Managing Director and Chief Executive Officer

It’s about 30 around.

B. Govindarajan — Chief Executive Officer, Royal Enfield

30 is average age. Binay, I think what is more important what you have to look at it is not only the age, which has to be looked at. One can be even from the heart, right? One can look at it well, I want to drive a motorcycle when a guy at 60 can feel it. Hunter is a motorcycle, which has to be there in an accessible form, nimble, easy to ride, and it can actually go through an urban city in a tight corners of even the traffic and that more and more a motorcycle, which is lighter in weight compared to classic, compared to our mid-tier that’s going to address for the people who really love Royal Enfield and they also want to own motorcycle from Royal Enfield with a particular format. And that’s what is in Hunter, which is going to give an additional volume to us.

Our average age of the consumers are coming down. More and more young guys are actually coming into the fold of Royal Enfield fundamentally because, as we mentioned, as a focus company, we are looking at motorcycling as a company rather than a motorcycle company. And that’s where the younger guys are enjoying the motorcycling as a culture in Royal Enfield.

Binay Singh — Morgan Stanley — Analyst

Thanks. And best wishes for Hunter launch.

Operator

Next, Jinesh Gandhi from Motilal Oswal.

Jinesh Gandhi — Motilal Oswal — Analyst

Hi. Am I audible?

B. Govindarajan — Chief Executive Officer, Royal Enfield

Yeah.

Jinesh Gandhi — Motilal Oswal — Analyst

My question pertains to the RM cost pressures that you talked about. So is it fair to say that we are largely — I mean the entire cost pressures are now in the P&L and second quarter onwards, there would not be a material impact going forward?

Kaleeswaran Arunachalam — Chief Financial Officer

That’s right, Jinesh. We don’t see any significant headwinds on the material cost as we stand right now.

Jinesh Gandhi — Motilal Oswal — Analyst

Okay. And can you talk about the price hikes taken in 1Q and 2Q so far?

Kaleeswaran Arunachalam — Chief Financial Officer

We have not taken any price increase in 2Q. In 1Q, we have taken about INR3,000 per vehicle in our 350 CC portfolio, and entrants, we have taken about INR5,000.

Jinesh Gandhi — Motilal Oswal — Analyst

Okay. Okay. Got it. And secondly, with the supply side issues now, given that we have on boarded additional supplier on the EBS side and broader improvement. Would it be fair to say that going forward, there would — I mean, based on the current facility, there will not be any material supply-side related bottlenecks?

B. Govindarajan — Chief Executive Officer, Royal Enfield

With the visibility we have today, Jinesh, and the actions which we have taken to protect and it is different levers, right? You have to look at sourcing, different countries sourcing, different levels of sourcing. One more is holding inventory, trying to manage our whole situation. I don’t see it to be a major problem at this stage, supply chain volatility. It is slowly settling down. From a sheer efficiency of a supply chain perspective, should I say that everything is in order, it will take some time, but it is not disturbing us.

Jinesh Gandhi — Motilal Oswal — Analyst

Okay. Okay. And Kalees, can you talk about the state government grant, which you alluded to in the opening remarks? What’s the quantum?

Kaleeswaran Arunachalam — Chief Financial Officer

So it’s about INR40 crores, Jinesh. I think you need to look this together along with the mark-to-market. So for the quarter, because of the interest rate hikes that we have seen, we have to take mark-to-market action of about INR120 crores. And then we have about INR40 crores of state moment incentive in the form of soft loan that has been obtained. So we have done an NPV accounting for that. The fair accounting has taken about INR40 crores into the P&L. So net-net between mark-to-market and in terms of the incentive NPV that we have accounted for, we have lost about INR80 crores. And the mark-to-market anyway, as you would go national, we start approving in the forward quarters.

Jinesh Gandhi — Motilal Oswal — Analyst

Sure. And this INR40 crore would be part of operating other income or other income?

Kaleeswaran Arunachalam — Chief Financial Officer

Other income. It’s part of other income.

Jinesh Gandhi — Motilal Oswal — Analyst

Got it. Thank you.

Operator

Next is Kapil Singh from Nomura.

Kapil Singh — Nomura — Analyst

Yeah, hi good evening. Firstly, Kalees, one question to you. If I look at the difference in the consolidated and standalone revenue, it’s quite high this quarter. It’s about INR150 crores. Normally, it’s quite small. So if you could give some color over there, please?

Kaleeswaran Arunachalam — Chief Financial Officer

Yes. So typically, if you look at our international business, Kapil, the shift is slowly moving towards Americas. So what needs to be led by Europe, the business is moving towards Americas, and the lead time for Americas is slightly higher. So as you look at it today, the average lead time for us from India to Americas could be anywhere between, say, 8 to 12 weeks. So any shipments that we have done until last week for Americas gets reversed at a consolidated level because it’s in transit. So that’s the difference that you’re seeing in.

Kapil Singh — Nomura — Analyst

Sorry, I didn’t get it fully. Can you explain it in more…

Kaleeswaran Arunachalam — Chief Financial Officer

Inventory adjustment that has been built from the India standalone business, which is not a retailed out at subsidiary level. And therefore, you adjust it at a consolidated level.

Kapil Singh — Nomura — Analyst

So these are bikes that are built from India — thing. but they are not retail in the core international markets?

Kaleeswaran Arunachalam — Chief Financial Officer

Correct. Because it’s transit.

Kapil Singh — Nomura — Analyst

Okay. So that difference is sitting in the revenues over there?

Kaleeswaran Arunachalam — Chief Financial Officer

Yes, that gets reversed in the console.

Kapil Singh — Nomura — Analyst

Okay, understood. But then in that case, the India revenue should be higher, right?

Kaleeswaran Arunachalam — Chief Financial Officer

It is right. So if you look at from a sequential quarter perspective, India revenue is almost at the same level on a like-to-like basis.

Kapil Singh — Nomura — Analyst

Okay. So these were shipped in the previous quarter you’re saying?

Kaleeswaran Arunachalam — Chief Financial Officer

Both, we will have both. One would have got a positive gain what have got reversed last time, orders are positive right now. And what we billed this time would have got reversed a negative. So maybe, Kapil, I can take it offline to give you an update.

Kapil Singh — Nomura — Analyst

Sure, sure. And second, I just wanted to check on Hunter. Govind, you alluded to the fact that there are several customers who come, but there is nothing that is suitable for them. So they have not been buying it. What is the primary reason that those customers have not found something suitable? Is it because they want a different form factor? Or is it because they think that the product price is too high for them or not as accessible?

And also in terms of capacities because historically, we’ve seen that for new products, we end up having a very long waiting period. So are you — what kind of capacities are you prepared with for Hunter? And do you think you are prepared for the kind of demand, initial trends that you’re seeing?

B. Govindarajan — Chief Executive Officer, Royal Enfield

From the capacity which you have asked about, yes, we are aware that initially, when we started using the new product launches, we always used to have a supply-demand situation mismatch. But from Classic 350 onwards, you can see in the market that, that situation wasn’t there because we also have built in inventory and then went into the market.

The back end, we have now sorted to deliver the BTR also — sorry, the Hunter also because tester, everything is ready. And that’s why we started building the motorcycles also. So capacity is not an issue, if I have to tell you one. Second is you’re also asking about who are the customers who are looking at Hunter, what is the reason? Everyone who are there who wants to own the Royal Enfield. There’s always an expression of love towards Royal Enfield. He comes and then train his journey points all the motorcycles, which are there. Sometimes they feel that well love this motorcycle, but maybe it has to be a bit more lighter in handling.

So Classic is nice, but someone will like the Classic appeal. And that’s why this motorcycle, which you’re bringing it to come — or those people who really loved Royal Enfield brand, who likes motorcycling as a culture, but wanted bit more agile and a vehicle stylish, fun for them to ride and easy to manage this requirement. And that’s why we found that this set of consumers who are get to be addressed by Royal Enfield field with our own search because Royal Enfield as a company, we always say that we make motorcycles only listening to the consumer more and more. We go to them. The community actually tells us what they want. And this is an understanding which we got from the community that, yes, we need this motorcycle in this particular format, and we landed that motorcycle and it is getting accepted very well.

Kapil Singh — Nomura — Analyst

Okay. And wish you all the best for the launch.

B. Govindarajan — Chief Executive Officer, Royal Enfield

Siddhartha, you want to add anything on this?

Siddhartha Lal — Managing Director and Chief Executive Officer

Sure. I mean, we do an enormous amount of work before we launch a product. But before we start working on engineering. So the Hunter was late 2016, early 2017, we started actually conceiving the idea. And both to meet — on the J Series, as you know, which is our new 350 cc platform, both the Meteor and the Classic are replacing existing products. So that we call is renovation. But we believe we also needed innovation, which is to get new customers into our portfolio. And while riding and understanding and seeing customers who are not yet buying the Royal Enfield but are interested, this is the kind of insight that we get that they want something which is more agile. They don’t subscribe to, let’s say, Classic look. I do. I love my Classic, but some people don’t subscribe to that look. Fair enough, but they like Royal Enfield.

Some people don’t want Cruiser, fair enough, but they like Royal Enfield. And we’re understanding, who are these customers, what do they want, what is their interest, what are they doing, why and what type of look. So with all that great insight that we build, we then come up with the concept of a new motorcycle like the Hunter. And as you can see in the past, we’ve been able to really get the right divisions and get the right segments and understand. So we’ve not had one that would, let’s say, new product which has not hit the market, which has not got the right consumers that we wanted to.

So whenever we launch like — even when you launched a sub-brand of Himalayan called Scram, we got new customers and we got — we did what we were trying to accomplish because we understand the consumer need super well. That’s the forte of Royal Enfield, and that’s what allows us to bring a product like Hunter, which is really fresh. And we know it will attract a different [indecipherable] than we’ve been getting to play because we’ve been told that.

Operator

Next, we have in queue Gunjan Prithyani from BofA Securities.

Gunjan Prithyani — BofA Securities — Analyst

Congratulations on the launch. I have two questions. First, maybe I’ll take exports given it’s not covered so far. Clearly, it’s been a great journey last year. I’m just trying to understand in terms of the overall opportunity. I mean how should we think about exports? How much can it grow? I mean we are at about mid-single digit or high single-digit market share in most markets. And when you think about the overall opportunity size, is there something that you can share? How big the market is in the mid-weight category? And what is the aspiration on the market share there?

B. Govindarajan — Chief Executive Officer, Royal Enfield

Yes, sure. It’s — our international story have to be understood what is our thought. We, as a company, we don’t rush things. We go to the market, understand the market and then grow the market. That’s what we did. That’s what is the success which we brought in India for a period of time. We wanted to go into the international market in particular product specifications, we have to come to a level. So we went to international market first with our Continental GT and Interceptor.

It actually opened up a good recognition and an acceptance of Royal Enfield as a global motorcycle brand, fundamentally because it came at a different design level, different quality level because that’s where our tech center started working seamlessly. At that point of time we started looking at the markets, we said we’ll go to one market, one city, one outlet. We will not go and just sign up to all the dealers and distributors. We never wanted to take that route because we are not that sort of a company because we wanted to build a culture of the motorcycling around that.

When we are building with our world-class technology centers, which are there at our manufacturing facilities is viewed in very well, the J Series engine, which is now in Euro 5 compliant which is now opening a new set of consumers. If I have to tell you how the acceptances, in U.K., the riding community actually came around. Almost about 8,900 people have signed up as the — riding community, you have Royal Enfield community. They just came around. So the community build is taking place in all the countries where we are.

Now in the last one year only, we are actually looking at our retail outlets going up. Today, internationally, we have almost only 850 retail outlets in multi-brand format and in our our owned stores. There’s a huge potential for us to actually open up the retail stores to go near to the consumers because every country are different. And that country has to get suited to their retail outlet. What is giving to us is all the products which we are launching and giving to the market compared to last year, we have doubled. In my opener, it’s — we are working on it is that with all the products which are coming in and the market is just getting opened up, we see there’s a huge potential for us outside India. The way we hit growth in India is starting outside India.

Gunjan Prithyani — BofA Securities — Analyst

Okay. Got it. So fair to assume that this can comfortably double from the levels where it is in the next two or three years, that kind of potential is there for market share to reach low deal levels?

Kaleeswaran Arunachalam — Chief Financial Officer

So maybe just to add to that, Gunjan, to answer this part. I think eventually, today, we are in about 70 odd countries. And the size of this market is as big as what is there in India. And our run rate, which used to be about 10,000 a year, we are now clocking at 10,000 a month. And we do think it’s pretty early days in terms of whatever inroads that we have made into international driven by people, product and the network backed up with CKD in certain markets. So we do think the journey has just started, and we still have a long way to go, and it will mimic what we saw in India a few years back.

Gunjan Prithyani — BofA Securities — Analyst

Okay. Got it. My second question is on the domestic again. Now going back to Hunter launch. I know you’ve covered it a lot in terms of how this bike is different. Maybe I’m just trying to understand, there is already a younger population, which is there buying RE. How do you know in your thought process, what is the risk of the existing customer down-trading to this because there is clearly a risk of cannibalizing which — thinking about these three models, in particular, let’s say, Classic Meteor and Hunter. How do you differently that you don’t see an existing customer who’s looking to by, let’s say, a Classic does not down — let me not use the word down does not cannibalize into your existing portfolio?

Kaleeswaran Arunachalam — Chief Financial Officer

Any of the product newer it is launched into the market, see we brought Hunter 350 is a new product. It’s 2 days now, and Volvo just lifted today. As at was mentioning, our understanding by living along with the consumer, listening to the community who are not part of the Royal Enfield. If you’re part of the Royal Enfield gang, then you will be having a different view. So we went to the community. We were trying to understand what do they want and all.

Everybody while looking at motorcycle, which is to be very agile. And as I mentioned, slightly lower in weight because that’s where they were looking at. This is the Hunter, which is actually addressing to those set of consumers across the globe, let alone in India. As Siddhartha was mentioning, someone likes Class, right? We differ there. So Siddhartha likes Classic motorcycle. I like Meteor in our portfolio. Someone else like a different form. So we are looking at — Hunter is a form, which is actually there for that urban setup, which is there for the current level of traffic situations. And the younger audience who want — I want to use for commuting and from a leisure purpose and from enjoy purpose and for fun, but I need something which is very agile, nimble, easy to handle, lightweight. So that’s where Hunter born.

Will it come in and then take the Classic market away, it can’t. But will there be a bottom line to some extent here and there, probably yes. But that’s how the market will mature over a period of time. That’s how it would be. We don’t see as a company that it is the same vehicle. It is different because that’s what consumers told us, and that’s how we brought the vehicle there. And we are seeing the last 1.5 days. That’s why I said is just 1.5 days month baby, in 1.5 days, whatever the new inquiries bookings which are coming up, it is encouraging to us to see that there are new consumers who we’ve been looking at that these sort of consumers have to come in and enjoy the motorcycling in the Royal Enfield brand. And that’s what we wanted and that’s what is happening as of now.

Gunjan Prithyani — BofA Securities — Analyst

Okay, thank you so much.

Operator

Next, we have in queue Hitesh Goel from CLSA.

Hitesh Goel — CLSA — Analyst

Thank you for taking the question. I have two questions. First, I wanted to get a perspective from management, right? Before COVID, I mean, in peak, we used to do 75,000 a month kind of domestic volumes, right? And we have seen the impact on volumes in the domestic market, which I believe is due to pricing because the brand has not gone impacted. You have been launching a lot of products also and the product feedback is pretty good. So this number, do you think will start coming in next two years when the income increases and there’s no increase in prices from here on if there’s stability in commodity prices. So what is the thinking on that?

And secondly, on exports front, you have talked about brand getting established. So should we assume margins will go up significantly there because of scale, you would give lower retailer margins, right? Because initially to build a brand, you’ve given higher retailer margins, in that case, and the promotional expenses will come down. Just a sense on these two aspects.

B. Govindarajan — Chief Executive Officer, Royal Enfield

In terms of domestic market, report postcode, I think let alone the motorcycles, Hitesh, all the products are being looked at, how will the market come back post COVID situation. I think it is shares coming up and it’s coming to the normalcy level. Not that it has come to the pre-COVID level for everyone, any product for that matter. So when the COVID situation comes in, I think it will be bad for everyone in the same speed with which the market grows. Hunter will add us more volume into the overall. That’s what we are expecting. Our growth will be there. The next question which you are asking is about international margin.

Kaleeswaran Arunachalam — Chief Financial Officer

So Ritesh, I think, again, the journey of international within the market is into two parts. We have developed markets and developing markets. Developed markets is already margin accretive to us. So any further growth will only further act towards. There are markets like Brazil, which has got huge potential in terms of what it can offer as volume to us. Having said that, as you would note, there are challenges around the entire tax structure and the product structure. So we are trying to see how to go about it and one by one we are sorting that out. And over a period of time, as scale improves, these markets will also start mimicking operating leverage that we have seen in the past for Indian business.

Hitesh Goel — CLSA — Analyst

But any view — sorry, just a clarification on any clarification on the retailer margins in developed markets? Has they come down because where you have established a brand like Argentina, Colombia, Thailand, just to get a sense on the trajectory of the months.

Kaleeswaran Arunachalam — Chief Financial Officer

Just as an example, we do take a color on that, depending upon the country’s growth, margin profile, potential and what is there in the future. We have done that in the past, but I wouldn’t want to give any forward guidance on that as to would that be the way forward for it. That’s a lever that is available.

Hitesh Goel — CLSA — Analyst

Sure, thank you.

Operator

That was the last question. I’d like to hand over to the management for closing remarks.

Siddhartha Lal — Managing Director and Chief Executive Officer

Okay. Thank you all very much for attending this. And as you’ve seen Eicher company on a mission and moving forward rapidly. And we have an Investor Day day after tomorrow, for those of you who are coming, we will welcome you tomorrow evening. And so those who can’t make it, we will be broadcasting the day, and we’ll have a pretty intense day of — to explain what we’re doing, our business model, our plans, all of that. So we urge you to join online in case you’re not attending physically. Thank you very much, and look forward to seeing you soon. Bye-bye.

Operator

[Operator Closing Remarks]