Bajaj Auto Ltd. (NSE: BAJAJAUTO) Q4 FY22 Earnings Concall dated Apr. 28, 2022
Corporate Participants:
Rakesh Sharma — Executive Director
Dinesh Thapar — Chief Financial Officer
Anand Newar — Divisional Manager, Investor Relations
Analysts:
Pramod Kumar — UBS — Analyst
Binay Singh — Morgan Stanley — Analyst
Raghunandhan N L — Emkay Global — Analyst
Kapil Singh — Nomura — Analyst
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Amyn Pirani — JP Morgan — Analyst
Gunjan Prithyani — Bank of America — Analyst
Chirag Shah — Edelweiss — Analyst
Presentation:
Operator
Good morning, ladies and gentlemen, and welcome to the Bajaj Auto’s Conference Call to discuss the Fourth Quarter and Fiscal Year 2022 financial results. We have with us Mr. Rakesh Sharma, Executive Director; Mr. Dinesh Thapar, Chief Financial Officer; and Mr. Anand Newar, Divisional Manager, Investor Relations. My name is Rutuja and I will be your coordinator. [Operator Instructions] I now hand the conference over to the management for their opening remarks. Thank you, and over to you.
Rakesh Sharma — Executive Director
Good morning, ladies and gentlemen, this is Rakesh Sharma here. Thank you for taking the time to join us for the call today. We announced our Q4 and annual results last evening. I’m sure by now, you would have done through the details and may have questions. After a brief opening remarks, we can move to the Q&A, but foremost, let me introduce our Chief Financial Officer, Dinesh Thapar. Many of you may already of know of him or know him. Dinesh has joined us from Reliance Retail where he was the Group CFO. Prior to that Dinesh spent a couple of decades with Hindustan Unilever Limited where he held a range of leadership roles across Corporate Finance, Business Finance, Investor Relations, supply chain and even in managing JVs. We are really delighted that Dinesh has come on board Bajaj Auto’s top team, and I’m sure you all will enjoy your engagements with Dinesh.
Dinesh Thapar — Chief Financial Officer
Thank you, Rakesh. Good morning, everyone and it’s an absolute pleasure to be here on the first earnings call. I have been into the business now for about 6 weeks and really coming on board and I look forward to engaging with you offline in the months ahead, trying to absolutely look forward. Thanks Rakesh, back to you.
Rakesh Sharma — Executive Director
Okay, great. So let me begin with the highlights for quarter 4 performance since we have regular interactions every quarter and refraining from going into a commentary of the full year I’m pressing to remain with the most recent most events. Overall performance in Q4 was a reasonably strong one. Given the backdrop of weak domestic demand rising costs and supply chain dislocations. Amidst this, we reported our second highest quarterly as well as annual profit. Fundamentally, I would like to attribute this to the inherently robust business structure of Bajaj Auto, which is a business spread across segments like entry level commuters, 3 wheelers, CNG 3 wheelers, KTM, high end bikes and across geographies, India, and of course overseas, all the emerging regions of the world. So the structure in itself is risk mitigating. It ensures resilience and supports us to ride out volatility. Now, let me talk about each of the business units. Exports. Exports remained strong and steady. Almost each month of FY22 the volume performance was over 200,000 units, delivering an all-time annual record of 2.5 million units export as well as the revenue of just over 2 billion U.S. dollars. I would like to call out a few of the highlights which are leading indicators of the continued performance at this level.
We grew our market share by about 2 percentage points in the whole year in all the regions; LatAm, Africa, South Asia and Middle East, and we have all witnessed a 2 percentage point improvement in market share. Over 80%, in fact close to 85% of our revenue continues to come from markets where we are holding number 1 and number 2 positions. This is a very important point because it gives, it’s a leading indicator about how we will be able to continue to harvest the return, post pandemic return in each of these markets. The share of sports brands, Pulsar and Dominar has continued to increase quarter on quarter and is at its highest now. We have a large order book from Dominar — for Dominar from LatAm, Europe and Asia and with Dominar we are securing leadership positions in the quarterly class in many countries. This is instrumental in strengthening the prestige of the Bajaj corporate brand and bodes very well for our channel partners. I must add here the supply chain issues in quarter 4 compromise the performance even in export otherwise we should have been better by at least 5% or so. In motorcycle business in domestic, the overall demand situation remained weak. As for VAHAN, the estimate the decline in registrations of motorcycles was 12% for the industry over quarter 4 of last year and this decline was visible across all segments. In fact FY ’22 has been the lowest for the 2-wheeler industry in a decade and so this is signaling two things. The 2-wheeler customer representing the relatively weaker section of the society has not recovered from the economic hardships and the cost increases on account of inputs and other regulatory requirements continue to retard the demand recovery. Bajaj Auto however fared slightly better than industry and declined less than the industry decline resulting in gain in retail market shares from 18% in FY ’21 to about 20% in FY ’22 and these numbers I’m quoting are from VAHAN registrations. We can confirm that our product, new product introductions, which I’ve been talking about in the previous quarter, they’ve been very well accepted. The Pulsar 252 twins, the N and F have had an outstanding reception enabling us to gain share in this sub-segment and indeed in expanding the segment itself. With the CT 110, we made a play for the, for improving the quality of our portfolio in the entry commuter segment and it is showing very good resilience despite price increases. It has forged a unique position based on its style and design. This has boosted our profitability in that segment.
In the middle segment the NS 125 which is the most expensive 125 cc unit segment, almost 22% more expensive than the average 125 cc bikes, it is doing extremely well. It is today 45%, of our 125 cc portfolio with a big thumbs up from the youthful buyer. Almost 60% of its buyer are below 25 years of age. I would also like to call out in the motorcycle business unit, the completion of a 2-year project at our dealerships which has put in place a robust system for measuring customer experience and using dynamic feedback to improve it in the moment as well structurally. Over 1,000 dealerships of motorcycles and KTM have been covered by the NPS system and these are done a lot to improve the customer experience at our showrooms and service centers. We will be building on this initiative in the months to come to redefine our processes and indeed to lift our culture in the showrooms and service centers and make it more customer-friendly.
On the CV business, the domestic 3-wheeler business to see improvement as economic activities return to normalcy. In detailed terms we’ve sold over 52,000 units in the quarter, an improvement of 15% over quarter 4 FY ’21. This brings our retail market share close to 70%, which is our highest ever. The overall leadership, we have now leaders in every segment, in passenger and cargo, large format and small format, CNG and otherwise. The current cost economics of CNG versus diesel, the government focus on increasing the CNG penetration and thus being a highly preferred choice for CNG leads us to expect to outperform the industry through this natural transition. Our market share in the CNG segment inclusive of passenger and cargo is now 77%. The CNG segment itself has moved from 24% of the industry FY ’21 to 62% in quarter 4 FY ’22 to just tell you which way the 3-wheeler industry is moving. Unchanging support of Auto Finance has been a key enabler for outperformance of this business unit.
EVs, our Electric 2 wheelers, we have sold over 3,300 units during the quarter and have an order book of over 15,000 units. We’ve also added another 12 cities during the quarter, including cities like Delhi, Mumbai, Surat and thus bringing the overall count to 20 cities. But I just want to take a moment and reemphasize the near term plan and the emphasis of these plans, but EVs we prioritize certainty and safety over speed. EV is a nascent segment and we are keen to see the responsible development of this category. It’s a great opportunity for Bajaj Auto at a global level and we are very optimistic about its growth. However, we believe we are the build phase which precedes the scale phase and in this build phase, we have 3 objectives. foremost build a dependable brand on the basis of product performance and customer experience included of high-quality service support, build deep capabilities in R&D, manufacturing, supply chain and customer experience and finally, build a portfolio of products across personal and business, low speed and high speed 2-wheelers and 3-wheelers fixed batteries and solvable [Phonetic] battery systems. So we expect that in the next 18 months or so, we will be guided by building capability, which hopefully will keep us in good stead to scale up and aspire for leadership, not just in India but globally. We will be launching our electric 3-wheelers in a limited way by the end of this quarter, probably in June.
A word about our financial performance. It was a good quarter. We delivered an EBITDA of 17.5%. This is our calculations. The underlying I must call out was 16.8, net of one-time accruals like Maharashtra government incentive. Even this is 120 basis points higher than the EBITDA in quarter 3. There are multiple factors that drove this improvement. So this was the mix of the business units in favor of export. The export constituted 60% of our volumes in quarter 4 compared to 55% in quarter 3 and as you know, exports, we enjoy relatively better profitability and that is what has impacted the margins. Secondly, superior performance of better margin products in the export portfolio as well as domestic and a net positive impact of price increases which were slightly ahead of the material cost increase. As you would have noticed, this has driven up EAC [Phonetic] by about 7% from between quarter 3 and quarter 4. EACs in export business, motorcycle business actually increased by 11% and this ties in with the earlier point I made about the increasing contribution of Pulsar and Dominar in the export portfolio.
We had accounted towards the accrual of incentive receivable from State Government of Maharashtra under the package scheme of incentive amounting to about 31 crores as part of income for the year and 315 crores as an exceptional gain for income pertaining to previous years, improvising on the outlook for coming quarter. While in the immediate term, driven by the marriage season in the month, we think that it will add luster to the retail demand in April and May. But we would like to watch the month of June, July and August to fundamentally understand whether there is a genuine and structural turnaround of the 2-wheeler industry in play or not.
We expect a shortfall of about 15% to 20% of our requirements on account of semiconductors. This will impact mostly the domestic business units and to a smaller extent the sports brands in international markets too. This is the result of the fault by some established vendors on whom we had single source dependencies. Our R&D teams have been developing alternative sources. However, the testing and validation actions require time. Therefore this will lead to a temporary loss of market share we think in quarter 1, which we should hopefully recover rapidly in quarter 2 by which time countermeasures on broad basing the supply chain are expected to be in full play. On the cost side, we definitely see some headwinds. We think we may see it too about 3.5% increase on cost, basically because of metals. As the demand environment remains fragile, we were observing it very carefully as we will be observing competition before we decide our move about recovery of the cost increases. However, on 1st of April, we have already taken a price increase of covering about 1.5% to 2% of this cost increase. And the balance, like I said, we’ll watch demand and competition before deciding on it.
Finally, the Board yesterday recommended a dividend of INR140, which amounts to about a payout of INR4,051 crores and a payout ratio of over 80%, in line with our dividend policy of distributing up to 90% of the surplus.
Thank you very much for listening in. And now we can open the floor for Q&A.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of from Pramod Kumar from UBS.
Pramod Kumar — UBS — Analyst
Thanks a lot for the opportunity, Rakesh and Dinesh and congratulations on our excellent top trend [Indecipherable] and also welcome Dinesh to auto space. So I look forward to interacting with you. Rakesh, my first question is on the export outlook because it’s been kind of more stable in terms of the volume trajectory off late though you’ve been talking about good 110 [Phonetic] market and they’ve also absorbed much price increases also with the domestic consumers. So given that context and the growth what you had this fiscal, how would you export as a phase for FY ’23 at the industry level vis-a-vis domestic demand? And also if you can provide some guidance on whether it can do a double-digit growth again in FY ’23 as a segment for the industry.
Rakesh Sharma — Executive Director
Hi Pramod, you meant a double-digit growth for the exports business? Is that what the question was?
Pramod Kumar — UBS — Analyst
Yes, yes.
Rakesh Sharma — Executive Director
Okay, the outlook for export is quite steady. We have been talking over 200,000 units, as you know, and we expect to continue this thing. Now like I mentioned in the opening remarks, our competitive position in all our markets is fairly strong. Out of the 70 markets or so, I would say, at least in 60 we have very, very leading positions. We have dealerships, service centers, people, manufacturing all that is very well in position. And most of the markets, we are doing pretty all right. All the regions are in the growth phase. There is a little bit of uncertainty about local currency movement vis-a-vis the dollar. And till now, it is not very alarming at an overall level. There are some hits and misses here and there but apart from that, we have seen the steady business environment overseas, and we feel that we should be able to get a disproportionate share of the market growth, which will mean that we continue to increase our market share. And like I said, the best thing is the performance of the culture like Dominars. As the year goes on, the new Pulsar will start to hit Latin America. And we can already see, I mean, our order book for Dominar, for example, is — I mean, we have already got an order book which we can’t service in the next couple of months. It is showing that the customer is really responding very well to upgrading to the 250 class. I’m getting a bit of a deja vu over here because a few years ago, when we launched the Pulsar 200 NS, we’re worried whether people will upgrade from 150 to 200 or not but we had an outstanding reception in Latin America, which sort of changed our fortunes with Latin America even for the corporate. I am seeing a same play in Dominar and subsequently hopefully with the Pulsar 250. And that bodes very well for our bottom line in the business unit also.
The only issue, which has to be really managed is the shortfall arising out of Egypt. As you know, that Egypt banned the 3-wheeler import, and we, through our distribution partners have been in touch with the government and supporting them. The government is trying to work out a solution, which sort of takes care of the congestion issue, which they have, the registration issue which they have, but still solves the problem of short distance mobility in interior villages.
We are in very, very close and very good discussions but these things take time. So that seems to be a big market. So in the immediate, we are facing a gap over there but I think in 3 months or so or 3 to 6 months, we will see a solution emerging from that region. So that business also will return.
So apart from that piece, everything else seems to be in good mix in exports, and we expect to deliver a double-digit growth. Our 5-year objective around counting 5 years from 2 years back is to double the international business on the basis of largening of deepening of our share in existing markets and to some extent, entering new markets like Brazil and Europe and a little bit in ASEAN.
Pramod Kumar — UBS — Analyst
Yes, Thanks Rakesh. Second question is on the profitability because at one end in 4Q, we had one of the best ever mix, right, because international is doing better at the expense of lower-margin category, 100 cc domestic. So with the married season going good and demand coming back to an extent for that category, you should ideally see some bit of normalization of your mix, right? And then there’s a commodity headwind. And in that context, I just want to understand, how do you see the business mix evolving with 3-wheelers coming back, but the same intent there’s electric 3-wheelers which are taking more share and you are launching the EV electric which could have implications for your margin mix in that category. And then there is the commodity overlay, right, which you kind of hinted to. So given this directionally, how should one look at of margins for the fiscal, I do not want to compare it to last quarter, which is a pretty upbeat number. So on a Y-o-Y basis, how should one look at margins. say for ’23 versus ’22, Rakesh?
Rakesh Sharma — Executive Director
So in your manner of asking your question, you answered it partly already because you’re very right. The margin is a blended margin for Bajaj Auto. And so the positive — let’s look at the positive first. I think a continued story of growth in the exports business unit and the improvement in the portfolio within the export business, which I talked about. So that’s a positive thing. You rightly said the return of the 3-wheeler business, it is growing from 10% because traffic is coming back, and it is now almost a novelty at 92% to 95%, and it will be over 100% in few quarters. And again, here, what’s happening is that the mix is changing in favor of better margin products for us. So that’s a very big thing. The arrival of the electric 3-wheelers would not have much of a play because our objective in FY ’23 is a cautious introduction. The 3-wheeler is a commercial vehicle, and we need to make sure that the customer and future customers are completely reassured about the vehicle as well as the support system surrounding the vehicle. So we’re not going to be making a big play. We’re going to be launching the 3-wheeler in June in a couple of cities only and then observe for 3 months and then expand to 10, 15 in that manner, pretty much similar to the playbook which we deployed in Chetak but that, of course, got interrupted because of COVID. So the — from a volumetric point of view, the 3-wheelers are not going to compromise the profitability of the 3-wheeler business because it’s pretty small. The third thing which I would like to say is that our price increases in exports business and to some extent in 3-wheelers and the sports brand. I’ve been ahead of competition and I’ve been digesting it pretty well. You’ve got to keep testing the optima [Phonetic] between share growth and profitability. And I think one of the good gains from quarter 4 was we tested it. We were ahead of the cost increases through our price increases but we did not compromise market share overall, basically. As you see, 3-wheeler market share has increased, if you see export market share has increased and we will continue in that direction.
Now some of the downside, I agree with you that arithmetically speaking, the size of the motorcycle business and that weight increase will have a downward pressure on the overall blended margin. Secondly, definitely, at least in the next few months, we can see that the cost increases are there. They’re very real. And like I said, we have only recovered, let’s say, one-third of it. So that will certainly be an issue to quarter 4. I cannot tell you what sales going to be on that, because if indeed this sparkle of April, May in term of demand continues and we see, we sense that demand is recovering nicely in June, July. It will order [Phonetic] the industry to pass on the cost increases and increased hike. If it does not, then it is a little bit more circumspect about price increases.
So — but then, of course, for us, there is that soft evaluation which is in place every quarter, 75 goes to 75.5 and 75.5 is now going to 76.2 kind of a realization. So that is deflecting the — mitigating this cost increase. So I would say that we’ll take it quarter-by-quarter. There are positives but there are downward pressures. And if at the end of the year, we are able to hold on to this, it would I think be a very, very good performance, but it will be challenging. Unfortunately, cannot be sure, even a bank at this point of time.
Operator
Thank you. The next question is from the line of Binay Singh from Morgan Stanley.
Binay Singh — Morgan Stanley — Analyst
Hi, team. Congratulations for good earnings in this environment. Two questions. Firstly, Rakesh, could you share a little bit more about your hedging strategy? What kind of realizations on rupee-dollar did you get in the March quarter? And how will the currency impact you in the coming year? Secondly, among your export markets, we’ve seen a challenging environment in countries like Sri Lanka and Nepal. Could you share what percentage of the 200,000 monthly run rate is coming from these countries? That’s it for now.
Rakesh Sharma — Executive Director
Okay. Let me take your second question first. See Sri Lanka, it’s got into the news recently because of the protest, etc. spilling over on to the street but it has been facing a foreign exchange crisis for time now and Sri Lankan government in response to that had banned the imports of auto products as well as some other categories. So actually, in FY ’22, our exports to Sri Lanka were very small. There was one tendering for 3-wheelers for the police and then there was — we had commenced the export of CT 100, which is very popular product in Sri Lanka on the basis of localization and this would be less than 1% of the overall. So FY ’23 does not really get affected because of Sri Lanka compared to FY ’22. Secondly, the second country, which you asked was about was Nepal. Nepal, we do again about 5,000, 5,500 units, including 3-wheelers per month. We have got the #1 position over there. So you can calculate in the overall scheme of things, it is not very big. So I think that the Nepal issue will probably be over sooner than later. And really, the season comes up around Dussehra time, so about a month or 2 before that I definitely see the country opening up. On your foreign exchange, I just — I think Dinesh will answer that.
Dinesh Thapar — Chief Financial Officer
So I think you had a question on foreign exchange. So just Rakesh mentioned this in his prior comments. So our realization for exports in quarter 4 was at 75.5. Clearly, better off from what was in quarter 3, which was just about a tad over 75. But the way rupee depreciation is happening, we expect that the next quarter could land anywhere between 75.5 or 76, that’s the current outlook that we have.
Binay Singh — Morgan Stanley — Analyst
That’s very helpful, Dinesh. And lastly, could you comment a little bit about KTM? How as KTM profitability in this quarter?
Rakesh Sharma — Executive Director
You see, we don’t get into segmented brand-wise profitability, as you know. But KTM in India and overseas enjoyed better-than-average profitability.
Anand Newar — Divisional Manager, Investor Relations
And Binay, just if I may interrupt over here. I think that with the change in structure now we are holding shares into BAIHBV [Phonetic] which is a listed entity. So the numbers are publicly available, and they can be directly sourced for there.
Rakesh Sharma — Executive Director
Sorry, my comment was really on the KTM business within Bajaj Auto. I was not commenting on KTM AG, and KTM business within Bajaj Auto, which is exports as well as domestic under the KTM and Husqvarna brand where overall profitability is superior but we don’t get into the details at that level.
Operator
Thank you. The next question is from the line of Raghunandhan N L from Emkay Global. Please go ahead.
Raghunandhan N L — Emkay Global — Analyst
Thank you, sir, and congratulations on a good set of numbers and welcoming Dinesh, sir. Sir, firstly, on the Q4 results, the press release had mentioned a deferral of raw material cost increase. Can you quantify what was the positive impact in Q4 margin because of this difference?
Dinesh Thapar — Chief Financial Officer
Okay. So I am not going to quantify the number but let’s you a directional sense of what we had said. We had anticipated that we are going to be getting some amount of cost inflation. What the team was able to do was on the negotiated part of the cost portfolio able to push that out into quarter 1. So a lot of that inflation is what we’re going to be seeing in quarter 1, as Rakesh had just mentioned. We think material inflation in quarter 1, as things currently stand could be in the range of between 3.5% to 4%, but that is now with metals. The metals portfolio continue to inflate. You’d be aware that on just some of the key raw materials that we have, which is let’s say steel and, that’s currently seeing inflation of anywhere close to 10%, 15% already. We don’t know where the quarter will end but 3.5%, 4% is what the impact looks like currently. At this point of time, we’re trending to try and recover about anywhere between a third to a half of that in the pricing that we’ve taken in, but we’ll wait and watch how the quarter plays out. But to give you a sense, the last quarter did benefit from that. I think the pricing impact what we saw benefit in quarter 1 was just about 1%.
Raghunandhan N L — Emkay Global — Analyst
Thank you, Dinesh, that was helpful. Rakesh, sir, can you talk about the expectation of a recovery in the student demand in FY ’23? Would it be fair to say that student demand pre-COVID used to be as high as 10% to 15% of volume which had substantially reduced in the last 2 years and this year, given the complete reopening of educational institution, this demand can come back strongly?
Rakesh Sharma — Executive Director
Yes, I think it is a fair expectation that on the basis of colleges opening up and all the segments open up, work from office starts to come a little bit more popular in the IT companies. On the back of that, certainly, there could be a positive play on that subsegment.
Operator
The next question is from the line of Kapil Singh from Nomura.
Kapil Singh — Nomura — Analyst
Hi, sir. Thanks for the opportunity. Could you talk about what was the spare parts and export revenue for the quarter? And also, we’ve seen a dip in the employee cost on a Q-o-Q as well as Y-o-Y basis. So some color and outlook for next year for the same.
Rakesh Sharma — Executive Director
So did you say employee costs? Okay. Let me just — yes, let me just, you wanted to know about the spares revenue. In fact, we have had very good performance by our domestic spare parts business unit. And the penetrating percentage is now increasing quite smartly. Two years back it used to be 14%. Now it is about 18%, and the spare part profitability, again, is very high. And we expect that this 18% will probably be moving into the 20% zone. I think that this is fairly ahead of our competitors.
Dinesh Thapar — Chief Financial Officer
Okay, let me take the question on the employee benefit expenses. So just to put the numbers out, we were at INR305 crores this quarter. Last quarter was INR339 crores. You’ve seen us mention in the press note that we’ve got a benefit of about INR30 crores. You’ll be aware that as a process one has to undertake actuarial valuation of the employee benefits to the end of every financial year through an independent actuary and that’s what we’ve done as per extant practice. In doing that, we’ve got a benefit that’s come out for valuation. You’d be aware that when you do that valuation, there are 2 factors which essentially drives the sensitivity of that liability calculation. One is the inflation rates that are taken and the others is the de-escalation and the other is the interest rates. And clearly, that’s been one of the factors which has led to the INR30 crore reduction relative to what we might have recognized in the preceding three quarter of financial year. So essentially, what we’ve done is to true up that impact in quarter 4 as we’ve gone and had and done the exercise independently. So that’s the INR30 crore reduction that you’re seeing in just the quarter to true up for what we may have accrued in the previous quarters. And because it’s coming in this quarter for the year, we’ve adjusted it in the current quarter’s financials. But on a year-on-year basis, I thought I heard you mention that employee benefits you’re seeing down. I’m actually seeing numbers of close to INR1,358 crores relative to INR1,285 crores in the previous financial year. So on a full year basis, employee cost are still up.
Kapil Singh — Nomura — Analyst
Okay, thanks for the detailed explanation. I also asked for the export revenue, please, if you can share that as well. And the spare part revenue number, if you can share if it’s available, otherwise I can get it from–
Rakesh Sharma — Executive Director
Kapil, I think separately send — share that with you.
Kapil Singh — Nomura — Analyst
Sure. Alright. Sir, one question is on the mix that we see for the quarter. There is a significant drop in volumes for CT and Platina. So is this a conscious choice of allocation that you are doing because of the chip shortage? And directionally, when you look forward for next 1 or 2 years, will this segment be a focused segment for you because you’ve been very successful in premiumization as a strategy globally? So I just wanted to know your thoughts on the same.
Rakesh Sharma — Executive Director
Yes. The first part of your question, the answer is yes. Absolutely, we have prioritized the use of the chip towards higher profitability products, higher profitability geographies. So we take a corporate look of all SKUs in all countries and India and then we prioritize for profitability. So in that respect, yes, Platina and CT have suffered a little bit more. Though I must point out here that the chips are like — there are different types of chips for different product classes. So it’s not all very fungible. But that will be going into too much of detail. Now our approach is really to participate in all the segments, as you know, but to try and move up the customer to a higher-level product where we enjoy a better margin and then we have some scope for differentiation. So therefore, when it comes to the absolute entry level, you would have seen that we have almost vacated the Kick Start segment. And our whole effort, which has been very successful, has been to take up the Kick Start customer into Platina electric start. Then you would have noticed that we have launched the CT 110X which is we’re trying to differentiate on the basis of a style and on basis of durability. And again, if you see the pricing, if you compare the CT 100 pricing with the CT 110X pricing, you would see a bigger difference. And again here, the whole point is to upgrade the customer. Then in the 125cc, you would have seen with the MS 125, even within the 125cc segment, we are trying to move the customers towards a higher end of the 125. But at the same time, we do see an opportunity at the entry point of 125cc to upgrade the 100cc customer there. And over this period of time, you will see a play coming from Bajaj Auto. I cannot say precisely what it is and the timing of it, but certainly the upgrade strategy of taking 100cc customer into 125 will be continuing to be played out. And similarly, you are seeing the same action taking place in the export segment, where the latest move is to take the customer up to the 250cc class. So that would be our approach, cover all segments but within the segment, move the customers to a higher price variant and move the lower segment into the higher segment. Those are the twin forces, our R&D is working on growth twin factors.
Operator
Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Hi, sir. A couple of questions from my side. One is with respect to the INR31 crore incentive which you have mentioned, how much of that is pertaining to previous 9 months of FY ’22 and how much is for fourth quarter? And second question on the price hikes, which you have taken in the fourth quarter.
Dinesh Thapar — Chief Financial Officer
Okay. To your question on the incentives, let me just take a minute and actually explain this for the benefit of everyone. So this is the package scheme of incentives that was announced by the government of Maharashtra in 2007 to provide certain benefits to eligible entities who are making a certain investment. And Bajaj Auto had made an investment in the Waluj plant, a little off Aurangabad. So we’ve now received the eligibility certificate after March 2 and 4,that’s happened with the authorities. This benefit is for vehicles that are manufactured in our Waluj plant and sold and registered within the state of Maharashtra, right? So with the eligibility certificate now having come in, we’ve accrued for this. We’ve done it in 2 parts. This benefit is available from 2015. It runs for 9 years to 2024. So it’s going to be available to 31 March, 2024. The accounting entry that we’ve talked this quarter will appear in 2 lines. There is INR3 crores that will sit under other operating income which is for the current year-end question to which your question Jinesh, how does that pertain across the year. Of the INR30 crores, INR8 crores pertains to Q4 and INR22 crores for the 9 months preceding it. So that’s INR30 crores which appears in the other operating income which pertains to the current year in question. And the INR315 crores that we have accrued for prior periods, which is for periods ranging from 2015 to FY ’21, INR315 crores of it, which sits in exceptional items. Like I mentioned, this incentive will be available for 2 more years up to 31st of March 2024.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Just a clarification. So the balance, INR22 crores for 9 months was also accounted in fourth quarter, right? Or it was accounted in the previous quarters.
Dinesh Thapar — Chief Financial Officer
Because we’ve now had visibility to the eligibility of it, we’ve accounted for full year’s accrual in quarter 4. The INR30 crores, of which pertains to the quarter in question and INR22 crores for the 9 months prior to it.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it. Got it. And on the price increases taken in fourth quarter?
Rakesh Sharma — Executive Director
On the price increases taken in the—
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Fourth quarter, the quarter went by, just this March.
Dinesh Thapar — Chief Financial Officer
Okay. So I just did mention, Jinesh, the price increase that were taken in the fourth quarter is in the range of close to about 1%.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Understood, got it. Great, thanks and all the best.
Operator
The next question is from the line of Amyn Pirani from JP Morgan.
Amyn Pirani — JP Morgan — Analyst
Hi, thanks for the opportunity. My question is actually on the domestic 3-wheelers. Rakesh, you mentioned that the 3-wheeler EV that you’ll be launching in June, it will be a limited launch initially. So my question is, as we look into the next 2 to 3 years, would it be fair to say that both CNG and EV could be eating into the share of diesel instead of really competing with each other? Or are there use cases in your view where EV could actually be more beneficial than CNG as well?
Rakesh Sharma — Executive Director
I didn’t give the last bit. Use cases were…
Amyn Pirani — JP Morgan — Analyst
Where EV is more beneficial than CNG itself.
Rakesh Sharma — Executive Director
Of course. Yes, initially, CNG has obviously eaten into diesel and I gave you those numbers, which show you the tremendous turnaround of the CNG-based 3-wheelers, their component increasing in last year, particularly in quarter 4. Now at this point of time, given where the CNG prices are and given the electricity cost and the cost of the EV 3-wheelers, we feel on total of ownership, there is almost parity. However both — we are expecting a major price increase in CNG in the coming months. And at the same time, this reduction in the cell cost which was being assumed by the industry over the last 5 years or so of a consistent decline in cell cost has not been experienced this year. In fact, costs are going back to almost 2019 levels. And therefore, we don’t see the electric vehicle becoming cheaper from that point of view. But — and therefore, right now, the cost of ownership is almost at parity assuming that both CNG and electric 3-wheeler prices rise. The penetration will now depend on how well we are able to reassure the commercial driver of range, resale value and robustness of the product. And that is what I am saying is that we want to take our time about it and go in a systematic way with this engagement. Now if I take a long short view of things, and we see that supply comes on stream [Phonetic] for cell cost and the reduction in cell cost resumes its downward journey, then over a period of 3 to 5 years, I certainly think that electric 3-wheelers will start to replace — will start to cannibalize CNG as well at some point of time. In terms of use cases, new use cases, which still now is not in operation, it’s a very mature category. So I do not see a lot of use cases coming up. But I do see, from our point of view, the eclipsing of the e-ricks. The e-rick which is actually a substantial subsegment in the present, almost like 40% to 50% is already this ramshackle lead asset based 3-wheelers, which is very, very widely prevalent in particularly in North and East India. Definitely, I see as and when we see auto based on lithium-ion and with much better customer with much better sort of features and owners liability and all that, they will start to eclipse the e-ricks because e-ricks are a very [Indecipherable] solution, and they will not be able to withstand a superior product. So I actually see a big new segment opening up for the 3-wheeler. So it’s not a new use case, but it certainly is a new catchment area of an existing use case. And we just have to see what is happening unfolding in China where, in fact, in many places, Chinese government has mandated that lead assets must move to lithium-ion and therefore, this whole sort of era of very tactical and very fixed products based on lead assets is a very such fragile, frail and unsteady vehicles, you may have seen a lot of videos of these vehicles toppling over and all that. I see that drawing [Phonetic] to a close in due course of time all that moving up to standard e-auto.
Operator
The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead
Gunjan Prithyani — Bank of America — Analyst
Hi, team. Thanks for taking my questions. Just two follow-ups from my side. Firstly, on the supply shortages that you all spoke about. Can you give some more color on which model is this for because my understanding was it is mostly for ABS models, above 125cc. And just a related point, if you can give us some sense of where is the channel inventory level now? Is it you all are losing out on the retail demand in the market because of shortages?
Rakesh Sharma — Executive Director
So Gunjan, this is affecting all models. This is not about ABS. That period of shortages on the ABS side, we have faced and we have overcome by developing by broadening our supplier base. So we are not having that issue but this is around injection systems, carburetors. So there are multiple things, and we are facing shortages across the entry-level in sports brand and even in RE, I mean, things like CNG 3-wheelers. The challenge for us at this point of time are dwindling and as we speak, I don’t see an issue in the motorcycle business in April. But I definitely see an issue in the retail level operation in the motorcycle business in June. And hopefully, by July — sorry, in May and June. But towards the end of June and July, we should be able to resume supplies based on development of other suppliers. In the 3-wheeler business, we have a very, very strong position. And what happens is that the lack of stock translates into an order book. And it’s just that there will be some irate customers who will now instead of getting the product off the shelf, will be getting it in 30 days’ time or so. This is not the case is also in Chetak in the electric 2-wheeler segment. So certainly, April, we should tide over. May, see some issues in some of the more undifferentiated brands in motorcycle business in India.
Gunjan Prithyani — Bank of America — Analyst
Okay. Got it. The second follow-up I had was on the exports. Now I do understand there is a little bit of seasonality or, let’s say, impact that we see in March quarter where volumes tend to be lower. But even if I look at versus last year, there’s clearly been decline. I’m just trying to understand how should I read this? Is this only supply-related challenge? And if you can just refresh us on the region-wise mix, which you used to give around Africa and LatAm, given these are the only 2 markets which are growing in I think Middle East and Southeast has not been growing yet. So some color on that.
Rakesh Sharma — Executive Director
So the way I would like you to read this is, see, there is a lot of base effect and I agree with you when you look at it at the surface it does seem like that. Because last year and this for a good 6 months, there was the lead [Phonetic] of the pent-up demand in the — and you see the other thing which was happening was that the transit times are increasing. As a result of which, there was a big increase in uptake by the distribution to the stock levels, that should be rebuilt and pent-up demand was coming up and all that. The way we look at it and what gives us confidence is the retail level, so — which, obviously, doesn’t get reported. But our retail performance across the board is at its highest ever. So if you had asked me the same question last year, our shipments were way ahead of retail last year because the stock has to be built up, transit times are increasing, and that gave it a higher base. And that is why you are seeing the — some negatives or small positives. But if I compare retail to retail, which I do internally for all the — we are having a very good movement. So this product will get ironed out, I think, in few months’ time. So for a few months, you might see — I think you might see this in about August, you might see that either it will be slightly negative or slightly positive. But at the retail level, it is a double-digit growth. In fact, I’m not wrong, I think Jan, Feb and March was our highest ever retail globally. So it’s running at that level. And this comment is mostly on motorcycles. I’ve already talked about the issue of a gap in 3-wheelers from Egypt because we used to do almost 6,000 units per month in Egypt and that’s now 0. So apart from that, one is seeing very good retail. In terms of the spread, about 50% — 50% to 55% is Africa. About 20% is Latin America, tad under 20% and balance 25% — 22% to 25% is Asia, Middle East, Asia and ASEAN. In ASEAN, the recovery for most countries — let’s say, our top 20 countries and the regions, all of them are now back to the pre-pandemic level. Places like Africa, [Indecipherable] even better. So they’re doing much better than the pandemic level. LatAm is also doing good. I think only Philippines, Malaysia are still not reached the pandemic — pre-pandemic levels. And of course, Nepal, Sri Lanka for other reasons. So I would say Nepal is still trading behind from pre-pandemic level. Other than that, almost all the countries and regions are back to the pre-pandemic level.
Operator
Thank you. The next question is from the line of Chirag Shah from Edelweiss.
Chirag Shah — Edelweiss — Analyst
Yeah, thanks for the opportunity and congratulations on good set of numbers. So first question is a follow-up on the chip shortage, your commentary that you would be able to procure 15%, 20% lesser than what you intend to. Now if I look at last whole year, how should we look at the volume buildup for this year? Because last year itself we were having supply challenges either ABS or chip or both combined at some point of time. Our base is already suppressed. We can expect a growth over last year, at least that kind of surprise — so for you, a reasonable double-digit growth over last year or even that is under a question given the shortages that you have indicated.
Rakesh Sharma — Executive Director
Yes. So let me summarize that for you by just commenting on each of the business unit. Exports, I already told you, I think Pramod had asked this question right in the beginning, and Gunjan also asked this question just now. On the back of our competitive position, improvement in retail performance, we definitely — and entry into some new markets, we will continue to drive for a double-digit growth in the export business unit. And export business is about 50% — 50% to 60% depending on how are the others. So that has the business very firmly on a double-digit growth track. When we look at 3-wheeler business, more certainly on a growth path and largely because, again, not just — that the market is coming back, but the market share is at an all-time high. And as the market returns, we are going to get 75% of that disproportionate share of that return because we’re sitting on a 70% market share. And I told you about most of the return of the market is in CNG, whereas market share is 77%. So very, very firmly on a good growth track. Domestic motorcycle business, some of the — this actually they suffered a little bit more because we have prioritized the chip allocation towards the more profitable segments as a result of which they have suffered more. But I think after quarter 1, we should be over — we should be through with this broadly of chip shortage because some actions have been ongoing for the last 6 months to broad-base our supply base. Having single-source dependency was a strategic choice. It held us in very good stead because it allowed us to develop innovative and proprietary solutions to things but the downside in our situation like this became that if there was a default then we suffered disproportionately, and that is what has happened. But we have, over the last 6 months, broad base of supply and July onwards, we should be coming back to it.
Now given the fact that we have got some really solid play in the sports segment and in the 125cc segment, already out there in the market, we could use the Pulsar 250, etc. have been accepted very well and we’ve got 3 more products. We are waiting for supply chain to stabilize the 3 more products, a good pipeline, which is waiting for its launch and of course, the 125cc continues to do well. A couple of launches here and there in the 125cc segment will also take place and I think we will definitely see a strong growth in the domestic motorcycle business as well. So apart from quarter 1 hiccup in the domestic side, I see all this falling in place very nicely. Someone had asked a spare parts question. And this year, we have definitely grown by 25% in domestic spare parts. We are going to further accelerate this. We have shifted our strategy in spare parts from being more distributor engaged to retailer where there is a stream of digital initiatives which allows us to engage with 25,000 retailers, of course, through distributors, that gives us a much better thrust into expanding the spare parts penetration and we have sensed an opportunity here. Because of COVID, some of the smaller manufacturers of spare parts in Northern India have gone weaker. And this has opened up a nice opportunity in a very, very profitable business segment. So that is well, we’re going to look at very, very high growth in this year.
So when I put it all together, the growth agenda is very much on. We will watch this cost increase and inflation a bit carefully and make sure that the semiconductor bit is history by July.
Chirag Shah — Edelweiss — Analyst
Thank you very much for your elaborate answer and just a follow-up on the EV front also, the 2-wheeler on the CapEx side. We are doing around 800,000 units a month broadly. How should we see that part of ramp-up? Are there any specific challenges on supply chain in that specific part of business, which is rendering our volume ramp-up?
Rakesh Sharma — Executive Director
The — I’ll tell you, we are not pursuing. What is hindering us is the semiconductor shortage. And the problem with this is that you can calculate yourself, that there is a 6- to 9-month waiting period. I think that is too much and the customers are — I’m very worried about annoying the customer. Now here, we are trying to win the customer, make Chetak a brand which people — we want people to fall in love with Chetak yet again. And there, we are in the first step itself annoying the customer because we’re not able to do. They think at least please tell us the date when we will give. And I feel very bad. I feel very bad that we can’t promise the customer. She’s saying that, okay, tell me a date, which you will give me in 2 months’ time, and we’re not able to do that. I don’t want our business and our brand to be in that position. So we have not pursuing volume but I can tell you one thing. By end of this year, our objective is to be the most preferred brand in 100 cities in 3-wheelers — sorry, in electric scooters. Chetak must be one of the most preferred brands. Now people may not buy it because it is the most expensive. But when they set out to buy, it must be in the consideration set. This is our objective. And this is going to be achieved on the basis of carefully getting into these 100 cities and delivering a very good customer experience, which is backed up by solid service.
In this segment, to not have service, when people are not very clear about what this product is, is not the right thing. We are putting in service network even before we are entering that part. So I want to be led by that aspiration rather than by a volumetric aspiration because on that, I’ve not got any control. If we get the supply chain, we’re going to max it. There is no hedging about it. We will max it. But I can’t give you a number because I don’t know the number. But we’re now going to spread the butter a little bit all over the country and make sure that we achieve that status in 100 cities.
Operator
Thank you. Ladies and gentlemen. This was the last question for today. I would now like to hand the conference to Mr. Anand Newar for closing comments.
Anand Newar — Divisional Manager, Investor Relations
Hi. Thank you everyone for joining the call. I see quite a few messages. I’ll be taking calls after half an hour from now. On certain numbers that I’ve not asked on the messages, I just quickly run through them. The spare revenues is about INR980 crores. Again, split is 80-20 between domestic and exports. Our exports revenue is about $500 million, translates into somewhere around INR4,000 crores. And on the financing base, it is close to the same number that we had last time, which is about 55% of our 2-wheelers are financed. And most of it, about 75% of it is financed through Bajaj Finance.
And just one more information. There is — our recording of this call will be put on our website, either by today or max by tomorrow first half. So you can probably get access to it and if you miss certain parts of the call, you can really get an access to it tomorrow. That’s all for my end. Thank you. Thank you once again for joining.
Rakesh Sharma — Executive Director
Thank you all.
Dinesh Thapar — Chief Financial Officer
Thank you all.
Operator (Operator)
[Operator Closing Remarks]