Bosch Ltd (BOSCHLTD) Q2 FY22 Earnings Call Transcript

Bosch Ltd (NSE:BOSCHLTD) Q2 FY22 Earnings Call dated Nov. 10, 2021

Corporate Participants:

Annamalai Jayaraj — Director at B&K Securities

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

S.C. Srinivasan — Joint Managing Director & Chief Financial Officer

Analysts:

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Sonal Gupta — L&T Mutual Fund — Analyst

Priyaranjan — HDFC Mutual Fund — Analyst

Ravi Purohit — Securities Investment Management — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day and welcome to the Q2 FY22 Earnings Conference Call of Bosch Limited hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr Annamalai Jayaraj from Batlivala & Karani Securities. Thank you, and over to you, sir.

Annamalai Jayaraj — Director at B&K Securities

Welcome to Bosch Limited’s 2Q FY21-22 post result conference call. From Bosch management, we have with us today Mr. Soumitra Bhattacharya Managing Director; Mr. Mr. S C Srinivasan Chief Financial Officer and Joint Managing Director and Mr. [Indecipherable] Chief Technical Officer. Mr. Soumitra Bhattacharya will be making a presentation to be followed by a question-and-answer session. To view the presentation, please click the link provided in the con-call invite.

Over to you sir.

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Thank you, Mr. Annamalai Jayaraj and a very good morning from Germany and a good afternoon to all colleagues in India. I do hope that you and your family are all keeping safe and healthy. On the request of many members of the investor community, I will today be sharing a few slides that will summarize the key highlights of the quarterly performance of Bosch Limited along with my speech.

Like always, I will start with a brief on the macroeconomic policy, followed by automotive market update and will walk you through our financials. Finally, I would like to end with the highlights of the quarter affecting our business and update on Environmental Social and Governance, which is ESG and that is for us, Sustainability at Bosch.

India’s mobility and other economic activity has picked up sharply primarily led by the government’s vaccination program. Most mobility indicators are back to pre-COVID levels. RBI in its recent October policy maintained status quo on policy rates, clearly incentivizing growth and retained the growth forecast for FY21-’22 at 9.5%, following the 7.3% de-growth in the Fiscal 2021. While inflation has come off its recent highs and risk continued to remain, given the elevated commodity and crude prices, the government finally seems to be on track to achieve the fiscal deficit forecast and India’s external account remains healthy with record Forex results.

With this background, let us look at the automotive market development in the last quarter. The results are compared with July-September in 2020. Overall automotive market production and the state release the automotive market numbers. Overall automotive market production in quarter declined by 3%, including two wheeler segment, mainly due to the semiconductor crisis, which continues to hurt the overall automotive industry.

However, a gradual improvement in the global supply chain is anticipated as the capacity show some signs of recovery after a prolonged COVID-19 pandemic impacts. Going forward, elevated fuel prices, higher commodity prices continue to be a major concern not just for the automotive industry but across all industries.

Heavy commercial segment increased by 91% on account of a low base in the previous year and largely due to a healthy pickup in overall construction and mining activity, fleet replacement, better capacity utilization for the current year. The recovery is expected to continue in the coming months. By the way, we must remember, heavy commercial segment is still at a very low base and it will take quite a few years for us to reach the 4,80,000 which was the peak in 2018-’19.

Passenger car segment increased by 4% as the momentum remains intact on the back of easing of the lockdown and preferences for personal mobility. However, semiconductor crisis is still hampering the production for major OEMs, while the demand is good.

Tractor segment increased by 16% on account of healthy reserve levels, sustained government support in terms of procurement of food and grain, expected pickup in commercial demand are likely to aid the tractor demand. We must remember tractor came to the peak of ’18-’19 by ’20-’21 already, the fastest to recover.

LCV segment also increased by 8% largely driven by the surge in e-Commerce and transport of dairy and fresh produce. However semiconductor issues remain the concern in the coming months for this segment, while the demand is good. Two-wheeler segment decreased by 6%. The domestic demand was impacted by continued purchase deferrals in anticipation of attractive festive schemes, price hikes owing to commodity cost inflation and all-time high fuel prices.

While domestic demand recovery remains volatile, the steady two-wheeler exports from India continued to support industry volumes. Amongst the other market segments, three-wheeler segment increased by 30% plus. But please remember on a very low base, and as corporate offices and educational institutions are expected to continue to open in due course.

Let’s look at how the company performed in July to September quarter, compared to July to September 2020 amidst all these factors. Revenue from operations for July to September 2021 stood at INR29,180 million, which is an increase of approximately 18% as compared to the corresponding period of the previous year due to gradual improvement in business improvement from the pandemic hit period of the previous quarter.

Product sales of Mobility business sector increased by 17% whereas the business beyond Mobility which is consumer goods and Building and Energy Technology increased by 36%, mainly led by the Power Tools division. The domestic sales for this quarter witnessed an increase of 15%. Within BBM, the powertrain solutions grew better than the market growth, this I’m talking of Bosch business Mobility without the two-wheeler, primarily driven by the growth in tractors and heavy commercial vehicle.

Strong growth witnessed in the aftermarket business driven by higher exports as well as OE spare sales, we had a slight de growth in our two-wheeler business mainly driven by the semiconductor crisis and the impact on the premium two-wheeler segment.

Next slide please. The material cost as a percentage of total revenue from operations has increased from 59.4% in July-September 2020 to 62.8% in July-September ’21. Approximately 50% of the total material cost consists of traded goods, which is largely procured by way of imports from Bosch Germany and other group companies. The pricing of these products are determined at the beginning of every calendar year considering the planned volumes for the year is used in the — using the forecasted exchange rate based on actual volumes imported and considering the actual landed cost.

The prices of these products are adjusted albeit on an ongoing basis. In July-September 2021 the correction in pricing due to transfer price adjustments has resulted in an impact of material cost to the extent of 2.6%. This is a one-time impact. Employee cost has decreased to INR2,528 million in July-September 21 from INR3,083 million in July-September 2020 due to transformation/restructuring projects and other related measures.

Depreciation has increased by 4%, 4.1% in July-September ’21 against the previous quarter of July-September 2020 due to more additions in July-September ’21 as compared to July-September 2020. In case of other expenses, which stood at INR4,756 million in July-September 2021 as compared to INR4,112 million in July-September 2020.

Other expenses as a percentage of revenue for July-September ’21 was 16.3% as compared to 16.6% in July-September 2020. Absolute increase is mainly because of volume growth of 18% and higher spending of new businesses. And these new businesses are our project house mobility service and project hose electrification.

Next slide. With this, our operating profit stood at INR2,747 million in July-September 2021 as compared to INR2,084 in July-September 2020, an increase of 32%. The other income has also increased from INR1,015 million in July-September 2022 to INR1,243 million in July-September 2021 mainly — the major part of it is due to the increase in mark-to-market gain in marketable securities.

Coming to PBT and PAT. For the quarter ended September ’21, the Company posted a profit before tax of INR3,975 million as compared to INR3,086 million in July-September 2020. As a percentage of total revenue from operations, profit before tax stood at 13.6% in the current quarter. Profit after tax for the quarter ended September 2021 stood at INR3,719 million, which is 12.7% of the total revenue from operations.

Operating loss in July-September 2020 was INR648 million. You will remember the last two years both ’19-’20 and ’20-’21 where company had spent approximately INR750 crores each for the 3R program that I talked, which is behind us; 3R means, reskilling, redevelopment and restructuring.

Some other highlights I would like to share with you. We are very proud to be associated with Mahindra & Mahindra who is a strategic partner for Bosch for a supply of wide range of products and services from an array from Bosch India. Solutions include diesel gasoline powertrain systems, active safety systems, thermal management systems, connected mobility solution, what we call as the AdrenoX — what Mahindra has indicated as AdrenoX Connect.

The platform is equipped with a range of features jointly develop between Bosch and Mahindra and offers innovative, immersive and intuitive experience to the customers to enhance the user experience, convenience and safety in their recently launched flagship SUV program XUV700. And you can see the photograph here. The Government of India recently announced the automotive PLI, latest in a series of emerging industry focused PLI schemes.

Now, of course, all of you know that the government is taking the inputs from industry again and will release the finalized version. The PLI comes at the right time and is a much needed impetus for the automotive industry, which faces several and severe challenges since 2019, including the pandemic of COVID-19, labor unavailability [Phonetic] and of course the worldwide ongoing semiconductor crisis.

The focus on incentivizing advanced automotive technology, in short AAT components, will enable the industry to accelerate future technologies in mobility with the aim to bring India at par with global standards. Bosch India and Bosch Limited is fully committed to invest in bringing these future technologies in the mobility domain, especially in safety and electrification.

Bosch will to participate to maximize the PLI benefits which will help in overcoming some of the disabilities to linked to industrializing such technologies. Bosch Limited Board of Management yesterday has accorded in principle approval for the invest in Autozilla Solution Private Limited. This is a start-up from Hyderabad that operates on a B2B on E-commerce marketplace for buying and selling auto parts.

This is a part of an initiative to establish an effective digital ecosystem around our vehicle workshops and neutral vehicle workshops. Bosch Limited is in discussion with Autozilla to invest around INR133.5 million for a minority stake of 26%. The investment shall be subject to statutory approvals. The transaction will enable Bosch Limited’s Automotive Aftermarket division to strengthen the market pull through its extra loyalty program for independent car workshops and also our numerous Bosch service outlets.

Coming to ESG, I would like to talk about the sustainability aspect of Bosch India. In 2020, Bosch India achieved, and by the way, we are one of the few companies in India. Bosch India achieved carbon neutrality at its 37 locations across India. This was achieved by our four-point approach namely; energy efficiency, clean — new clean power, green electricity as well as carbon offsetting. Bosch focused on energy efficiency and significantly reduce its energy consumption with portfolio of measures such as use of LED lights, change to heat pumps, automation of building technology came into the forefront.

The installation of more than 27-megawatt in-house solar power plant has resulted in 35 gigawatt hour of renewable power which fulfilled 13% to 15% of our total energy requirements, further increasing the overall energy green content by 27%, through group captive business model. The model will enhance the ecosystem by building a renewable energy resource and reducing further the carbon footprint.

The energy that Bosch generates and the purchase of the energy units for manufacturing and administrative, in this case Scope 1 and Scope 2 of the greenhouse gas protocol or as it’s known GHG. This has a big impact on the overall mission. Keeping zero emission as a part of the manufacturing strategy, Bosch India implemented a new group captive business model.

The model allows Bosch India as a joint venture partner with renewable energy developers to build solar energy plants totaling 50 megawatts in the states of Karnataka and Maharashtra. With this, Bosch India will procure 50% of its energy requirements through renewable energy by 2021. The development will result in the reduction of 100,000 metric tons of harmful CO2 or carbon dioxide emissions year-on-year.

Since 2019, the purchase volume of green electricity has significantly increased from renewable sources. Bosch India intends to purchase electricity from existing plans in the coming years as well. Bosch has pledged to compensate for unavoidable carbon emissions from combustion processes like heating, diesel generators, through carbon Credits’ international renewable energy certificates. Offsetting projects are monitored and executed around the world, such as afforestation, wind farm projects through gold standard certified carbon credits and Bosch India purchasing International renewable energy certificates from hydro power plant located at Himachal Pradesh.

Coming to outlook. As Bosch India is nearing its centenary celebrations in 2022. So colleagues, you will be happy to know, in the year 2022 Bosch India becomes 100 years young. We started our journey, by the way, in Kolkata in 1922. We are more than ready to transform into a futuristic enterprise in a digital ecosystem while remaining true to our core of manufacturing and operational excellence, and of course, Make in India.

We’ll be happy to know next year we’ll be 69 years Make in India. The global supply chain voluntary teams will continue to disrupt the mobility recovery story. Bosch India will continue to absorb these development while we maintain a cautiously optimistic business outlook, with India surpassing the 1 billion inoculations of the public at large, we remain hopeful of the restoration of normalcy and the overall consumer demand, which will help us to surpass the pre-COVID business target and go towards the peak that India achieved in automotive area for example in ’18/’19 — fiscal year ’19.

During these times as well, Bosch India has remained committed to its investments to develop solutions designed in India, for India, by India. Our long-term strategy is to shape the market and technologies with innovative products and solutions in the area of PACE. PACE stands for Personalized, Automated, Connected and Electrified. We are focused in bringing diverse powertrain solutions with bi-fuels as well as flex fuel through also our two-wheeler portfolio. Our Project House Mobility Solutions has created a live, curated marketplace, allowing digital assets to be transacted in the portal within the Indian geography. This is a significant milestone enabling e-commerce for digital assets like API.

You will hear more about this in our launch of our Bosch India celebrations in February, just before our Board meeting in February ’22. Our Beyond Mobility business continues to focus on emerging e-commerce platform that has witnessed an exponential growth in the post-pandemic world. We are hopeful that the trends will continue and our very strong business on power tools as also building solutions and our very strong growth in aftermarket will continue to outperform the market, riding on this new channel.

I would like to thank you on behalf of Bosch India for your contribution and for patiently listening to our call. And until we meet of course in the Boston India centenary eve [Phonetic] in 2022.

So now I would like to — along with our team address your queries and thank you for your questions, please.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Jinesh Gandhi from Motilal Oswal. Please go ahead.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Hi, sir. Thanks for taking my question. First was a clarification on this iron cost impact which you have talked about, about correction in the contracted pricing. Can you give some more details about, this 2.6%? Is this primarily due to correction of pricing with the parent or what it is exactly?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Thank you for asking the question. Jinesh, I mentioned to you, this was just a transfer pricing which we had correction done and this is a one-time. So we will see ourselves back to the earlier projected material cost on which we want to over time further improve. But I already mentioned, this was a one-time impact.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Okay. Okay. And secondly, with respect to our consumer good business. I mean, thanks for giving a bit more granularity of our businesses. So, we have seen a fairly strong growth in the consumer goods business after a long time. So what all products are covered in this consumer goods business and what is driving such strong growth?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

So Jinesh consumer goods, we have segregated because they’re crossed more than 10% of turnover and this consumer goods represents the power tools business. And the power tools business Bosch India — Bosch Limited has seen a very good growth for multiple reasons. We have improved our entire dealer network. We have gone into — significant foray into e-commerce. So we are the market leader in power tools and of course our Chennai factory has been rated for the last — three out of the last four years, the best plant in India.

We are even planning to shift our Power Tools in Chennai into our Bosch facility, which should further help for us to grow and further localize and we are looking into the future with quite confidence on this business from multiple fronts.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Okay. And last question before I come back to queue is about the semiconductor update. So many of your customers are indicating improved chip availability of — from those of second quarter. Are you also expecting similar improvement where second half will be better than first half and FY ’23 to be better than FY ’22?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

So Jinesh, I would only say that the supply on chip, all of us and especially us, we can give only a directional answer. First point is this is a global crisis, this is not a India crisis. Second, the crisis impacts electronics and not just automotive. Third, I’ve already mentioned that it takes a long time for a fast [Phonetic] factory to be put up and for expansion [Indecipherable] it takes even nine months to a year.

Now having said all this, and the semiconductor suppliers to the Tier 1 — and we are a Tier 1 OEM has these bottlenecks and with the increasing demand, I would say we will see over time improvements, but we will not see a normalcy in the fiscal. And when I say normalcy as to meet the demands of the customer and it’s not just Bosch, anyone and everyone overall will not see this normalcy in FY ’21 or ’22. And my guess would be where we don’t have the data, nobody has the data yet that even the first couple of quarters, we may have challenges to get back to normalcy.

So, this is not about Bosch, this is about the global crisis. This is not about India and this is not about automotive. And the world will see improvements happening over quarters, but if you ask Jinesh, on what sort of improvement, there are two many ifs and buts, I think any of us can only give a directional feedback.

Jinesh Gandhi — Motilal Oswal Securities — Analyst

Thank you, sir. I’ll fall back in queue. Thank you.

Operator

Thank you. The next question is from the line of Sonal Gupta from L&T Mutual Fund. Please go ahead.

Sonal Gupta — L&T Mutual Fund — Analyst

Yeah, good afternoon, sir, and thanks for taking my question. Sir, just going back to, again, I mean like you explained one part if we traded goods there is a one-time impact. But I mean like I — if I look at your annual numbers, I see that almost 90% of the traded goods are from the Bosch parent or subsidiaries of the Bosch. So, is it correct to assume then, I mean like, because like in some places where I’m coming from, is we’re acting as a system supplier like in exhaust gas treatment, etc. So would it be correct to assume that, that is not really a very large portion of business for us, because otherwise I would have thought that the non-Bosch traded component should also be substantial?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

So there are two parts to it, because it’s a very deep question. One part is the traded goods which I’ve already mentioned that we take into trading and later we go in [Phonetic] for localization. And, we also look into what is the optimal localization and within that we also look at what we can outsource and what we localize in-house.

So the traded goods I’ve already shared on that 1 point impact on transfer price. On the other part, we do have, as you rightly said, mainly Bosch traded goods coming from different parts of the world, all at arm’s length protecting the public listed company in a very clear process oriented way. And in — and finally for non-Bosch parts, we have a very strong supplier development metallurgy where we look at strategic partners and over time and Denox is one such example.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. Or would like, I mean like I guess Denox is like the urea pumpsets, etc is done by Bosch itself. So would that be a major portion in the EGT as part of value that you have or… [Speech Overlap]

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Sonal, you can’t generalize these things. I said Denox is one such. There are other parts of trade that we also do. I’ve always been saying that for decades we’ve had — we start with trading, we see what are the volumes, we look at the in-house manufacturing and capex. We look at our supply development and then we take a call. So it’s a mixture of multiple products and it’s — and you report keeping in mind both pricing, localization and very important quality also. And it’s not just Denox. Denox is one part of the trading [Phonetic].

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. And just my second question on — basically, I mean, we’ve seen, I mean despite the sort of restructuring and the re-skilling and all that efforts that you’ve done as well as I mean like the margins are clearly much lower than what we had in the past while you’ve referred to the fact that there will be localization and therefore we should see improvement, but would it be sort of fair to assume that, I mean this, this sort of a margin is more reflective of the now the current product mix. And therefore, I mean we will only see a gradual improvement from here?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

So you’ve asked the question and given the answer. So it’s very difficult for me to comment because it’s both a leasing question and a leasing answer.

Sonal Gupta — L&T Mutual Fund — Analyst

No, basically — it’s okay, let me rephrase. I mean, like — sir, do we see a substantial scope for improvement with localization and also putting that in context of the PLI scheme itself that — will that accelerate your localization effort?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

So, two, three things. Sonal, I’ll keep it short and crisp. First is, you’ve seen that we have tight control over our other expenses. You’ve seen that on our personnel costs earlier which was around 14%, 15% we want to bring it, we have brought it down substantially and we will retain our personal cost, more importantly, productivity and more importantly ensuring talent retention.

And then on the material cost, I’ve told you that when you go into BS VI, you — not just for us, everyone’s metal content goes up. Finally, of course, our intention is to improve our EBIT, but we don’t give guidance. We don’t give future. The management is here to optimize everything, and we will do it. And we don’t look at quarterly results. We will do it over quarters and over the years. So in summary, there is a very clear focused plan, both for the core, the adjacencies and the new growth area, and we will balance these. And our focus is towards EBIT, but more importantly, our focus is towards also customer acquisition for not only current business, but also future business.

Sonal Gupta — L&T Mutual Fund — Analyst

Got it. Sir. Great, thank you so much. I’ll join back the queue.

Operator

Thank you. The next question is from the line of Priyaranjan from HDFC Mutual Fund. Please go ahead.

Priyaranjan — HDFC Mutual Fund — Analyst

Yeah. Thank you. Thanks for taking my question. So first on, I mean, just one clarification on say this 2.6% correction. I mean this correction in transfer pricing. Is it — just trying to understand, is it linked to the volume offtake or is it linked to the commodity cost or how should we look at it?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

I’ve already given an answer Priyaranjan, but I’ll just ask our CFO to answer this. Srini?

S.C. Srinivasan — Joint Managing Director & Chief Financial Officer

I mean, nothing more to add. I think if you look at it as we — as we go forward towards the localization of course, our priority is to localize products where the value addition in India will be quite high, and that will improve our profitability. And then in the next phase other products will also happen. So yes, as we mentioned in the last call, the ratio of manufactured products in India and traded it is quite high, traded portion is quite high. And hence that has an impact both on the material cost and the EBIT. But as the localization improves, there is a positive impact on the profitability as well.

Priyaranjan — HDFC Mutual Fund — Analyst

Understood. And just — just trying to understand, because of the chip shortage, how much revenue you might have lost in first half or is anything we can quantify, I mean, directionally or in numbers?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Look, the chip shortage has impacted everyone; Electronics, Automotive, everyone. So you know, it’s a very relative question from what percentage to what percent do we look, because there is — it’s a theoretical question, because you can’t supply it 100%. So I can do an arithmetic and tell you, based on 100% then what we supplied, what is the turnover loss, but it’s very theoretical. So in summary, both on topline and bottom line, the entire market has got affected. Just not Bosch.

Priyaranjan — HDFC Mutual Fund — Analyst

Correct.

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

And the chip supply crisis has been a crisis and will continue, nothing to do with Bosch in India or worldwide. But this is a worldwide crisis. So it’s — sorry Priyaranjan, but it’s a little theoretical, every company has got it, every company.

Priyaranjan — HDFC Mutual Fund — Analyst

Understood. But I mean just to understand, is it substantial if this crisis would not have happened?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Priyaranjan, of course it’s substantial worldwide. It’s like, you know what is the impact if we didn’t have COVID wave 2. Of course, India would have recovered faster. So answer is very clearly yes, not for Bosch, not for automotive in India for worldwide, it has had a major impact in meeting demand where supply has got — has ensured not being able to meet the pent-up demand for various products and services, not just automotive.

Priyaranjan — HDFC Mutual Fund — Analyst

Understood. And just one more question on say PLI scheme. You have highlighted about the PLI opportunity and so. So are you looking at both in say traditional parts or as well as I mean the new electrical parts in the PLI scheme as opportunity or you are more from conventional parts, which has not been manufactured in India so far?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Priyaranjan, I think all of us we have to wait for the finalized PLI scheme, which contains the elements of the advanced automotive technology. I’m sure you would agree to that. But however, based on what the government has announced saying that they will be focusing on AAT, Advanced Automotive Technology, we at Bosch believe that this is a positive move in the right direction by the government to incentivize the Advanced Technologies. And we at Bosch India as well as Bosch Limited would actively like to participate in it.

Priyaranjan — HDFC Mutual Fund — Analyst

Understood. And just on the power tool business. You — I’m just, I’m sorry if I’m not understood. I mean, do you, is it you said that you want to increase it to Bosch facility as well in some parts or other parts of the plant. So are we trying to bring more global capacity to India in terms of power tools. That’s what you wanted to tell?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

No, I said three things, Priyaranjan. I said that the power tools division is doing very well. Both from the sales, marketing and the products at the product level, at the accessory level, yeah. And also, the way we sell it including e-commerce platform and our reach with our dealers. I also said that our Bosch power tools plant has been an excellent plant. There are 18 power tool plants worldwide, and this has been in the number one position for three years and the fourth year, it is the number two by narrow margin. So, I said it’s a excellent and excellence at the world level.

The third thing I said is we are going to move in the near future into the new power tools plant, which is a Bosch location. So, which gives us added scope and chance for further localization in the future. And the last thing I mentioned was that the power tool business is developing very well and I have very strong hopes on a sustainable and continued improvement on a business, which is already doing pretty decently as well. That’s what I said.

Priyaranjan — HDFC Mutual Fund — Analyst

Okay, understood. And sir, lastly on this — the Prime Minister’s recent visit to the COP26 and their commitment of say, 1 billion ton lower emission in terms of the carbon, etc. So what is the regulatory roadmap you see for the CAFE and other, I mean the electrification etc?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Priyaranjan, this is a very broad question, I can only tell you, two, three points. Bosch is very committed worldwide, but also for India, in relation to COP26 ideology. We have shared with you today our EFG program where we were one of the few I don’t know the only or not but companies in India which have proactively become carbon-neutral and I explained it in details.

And second that in India, while electrification will come we will have to continue to look at the vision of this renewable energy increase. I think it is looking at 500 gigawatts in the future up from 135 or something in that front. And all these are very important questions while he has given a commitment for 2070, if I’m not wrong, not 2050.

Priyaranjan — HDFC Mutual Fund — Analyst

Yeah. Correct. But he has also given a commitment of say 1 billion ton of reduction in say carbon. So, my question was more from automotive industry point of view because automotive is also a significant part of this emission of this carbon, so do you see the CAFE norms etc is going to be more tightened going forward?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

I’ll just keep it simple. We have always said with the government that long term reforms we should announce and live. So whether the past CAFE norms, whether the Trem norms, whether the BS-IV to BS-VI norms, we’ve always said, when we catch up with the rest of the world, whatever long term reforms we announced, we should announce and we should live it.

This brings high credibility to our country some good examples we have, some examples we can include compared to creditibiity. So I think we should give somebody else a chance. And I would request Annamalai Jayaraj that we have the last question, because we have the last three minutes left.

Priyaranjan — HDFC Mutual Fund — Analyst

Sure sir. Thank you.

Operator

Thank you. Next question is from the line of Ravi Purohit from Securities Investment Management. Please go ahead.

Ravi Purohit — Securities Investment Management — Analyst

Hi, thanks for the opportunity. Sir, could you kind of share a bit on our export strategy? I think we had mentioned in our annual report this time and I think we had referred to it in a couple of con calls earlier as well. So if you could kind of elaborate a little bit more, you know on the export strategy and also in terms of, you know, we keep kind of reading about our parent’s presence with fuel cell technology that tie-ups with a lot of commercial vehicle manufacturers in Europe to supply them fuel cell.

So are there — can Bosch India shareholders kind of look forward to some of those technologies being brought into India either under PLI scheme or [Indecipherable] in some form or the other? So if you could just kind of share some sort of a peak into your future of what a shareholder in India can look forward to from Bosch India over the next two, three years given the kind of opportunities that are there through PLI scheme, or through various other metrics.

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

So Ravi, on the exports, this quarter we did well. I would say on a relatively lower base, but we had about INR350 crores and this is an improvement by 66%. But I would not go into that, I would go into more saying we have two approaches worldwide in Bosch, which is called local for local. And yet, we work very closely with our sister plants, our sister companies on wherever we need to chip in, either for a requirement or on a sustainable need. So we have that policy too. In summary, I would say we are doing well in our regional companies which is Sri Lanka and Bangladesh which — that service out of Bosch Limited by the way, both for [Indecipherable] and aftermarket, and we see that as a good chance.

And finally, I would say, along with that of course we had spoke to different countries like Germany, Czech Republic, Brazil, even China, Portugal, and South Korea. So in summary, I would say while our highest exports are back to Germany, we will have a further focused approach from ’22 on exports.

Ravi Purohit — Securities Investment Management — Analyst

Okay. And the other part as in terms of what we could look forward to in terms of newer technologies like fuel cell and some of the other things that the parent has been there, but from an India shareholder point of view, something to look forward to?

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

We do bring contemporary technology into India. And I already mentioned that we have focused on regarding our core, focusing on adjacencies and investing in the new growth areas. So that we will continue to do so from our cash flow and profits that we generate.

So, and of course we work very closely with our parent from all the divisions as well as the corporate client [Phonetic] all at arms length.

Ravi Purohit — Securities Investment Management — Analyst

Okay. Sir just one last very small question on the order book. I think you had mentioned that INR24,000 crore BS-VI orders which had dropped to like INR18,000 crores-odd. Any update what that number looks like as of now? Is it same, has it gone up, gone down? Last question. Thank you so much.

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

On BS-VI? Was your question Ravi on BS-VI?

Ravi Purohit — Securities Investment Management — Analyst

Yes, sir.

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

Yeah. Ravi, you know that BS-VI, the first year after launch for various reasons including COVID it didn’t take off as much. But now it’s on track and taking off, and we have a higher content on the BS-VI and we are delivering, and we see that this to continue. Yeah?

Ravi Purohit — Securities Investment Management — Analyst

Okay.

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

So Ravi, we have to finish because we are out of time.

Ravi Purohit — Securities Investment Management — Analyst

Yeah. Thank you so much.

Soumitra Bhattacharya — Managing Director, Bosch Limited & Regional President, Bosch Group in India

And I’d like to hand over to Mr. Annamalai Jayaraj and thank all of you all and best wishes from us.

Annamalai Jayaraj — Director at B&K Securities

Yeah. We thank all the participants, we thank Bosch management. Thanks sir.

Operator

[Operator Closing Remarks].