Bosch Ltd. (BOSCHLTD) Q4 FY22 Earnings Concall Transcript

Bosch Ltd. (NSE: BOSCHLTD) Q4 FY22 Earnings Concall dated May 19, 2022

Corporate Participants:

Annamalai Jayaraj — Batlivala & Karani Securities India Private Limited — Analyst

Soumitra Bhattacharya — Managing Director

Karin Gilges — Chief Financial Officer

Guruprasad Mudlapur — Joint Managing Director

Analysts:

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Pramod Amthe — InCred Capital — Analyst

Senthil Manikandan — ithought Financials — Analyst

Pinkesh Shah — Kotak — Analyst

Ravi Purohit — Securities Investment Management — Analyst

Basudeb Banerjee — ICICI Securities — Analyst

Jinal Sheth — Awriga Capital Advisors — Analyst

Navin Matta — Mahindra Manulife — Analyst

Priya Ranjan — HDFC Mutual Fund — Analyst

Viraj Kacharia — Securities Investment Management — Analyst 

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q4 FY ’22 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 — Batlivala & Karani Securities India Private Limited — Analyst

Thank you, Stephen. Welcome to Bosch Limited 4Q and FY ’22 post results conference call. From Bosch Limited management, we have with us today, Mr. Soumitra Bhattacharya, Managing Director; and Mr. Guruprasad Mudlapur, Joint Managing Director. To start with Mr. Soumitra Bhattacharya will be making a presentation, and they’ll be followed by your question-and-answer session. To view the presentation, please click the see meeting link given in the conference call invite. Over to you, sir.

Soumitra Bhattacharya — Managing Director

Thank you very much, Mr. Annamalai Jayaraj, and a very warm good afternoon to all the colleagues attending this conference call. I do hope all of you are keeping well, and are keeping safe and healthy.

So I’d like to start with a brief on the macroeconomic policy followed by the automotive market and then walk you through our financials. Finally, I’d like to end with the highlights for the quarter, which affects our business.

The Indian economy has been doing relatively well. Of course, I’ll say in a very difficult circumstances with both services and manufacturing, PMI showing strong growth. As I said, the rest of the world, India too, is actually inflate in witnessing a very high inflation. And this has resulted in the RBI revising the GDP forecast for FY ’22, ’23, lower than 7.2%. Also, there’s been a hike in the policy rate by 40 bps, and CRR by 50 bps.

Overall, the automotive market production in the current quarter declined by 3%, excluding, of course, 2-wheelers, mainly due to the semiconductor [Technical Issues] globally, and also due to the high base effect. While recovery remains strong in the CVs and PC segment, 2-wheeler, 3-wheeler and the tractor segment remained a laggard. Going forward, the elevated fuel prices and the higher commodity prices continue to be a major concern for the automotive industry. Colleagues, as you know, recently, we saw that the WPI climbed further to more than 15%.

Heavy Commercial Vehicle segment grew by 10% year-on-year. The growth in the segment was primarily due to the opening of the economy revival of the freight movement, higher fleet utilization level, and pick up also in the construction activities. The recovery is expected to continue in the coming months as well. The passenger car segment, which this includes, of course, utility vehicles, showed a marginal growth of 2% year-on-year, primarily due to the shortage of semiconductor.

Demand has remained intact with strong order book coupled with low inventory. In fact, inventory here is down to 18 to 20 days at the deal end, which is far below the normal. Production declined by 35% year-on-year due to the high base, which happened in the peaks of 2021, stabilizing now to the normals of 2018, ’19. And as per the IMD’s first-stage forecast for the monsoon is projected at a 99% LPA. This, of course, has implications of a plus/minus 5%. So basically, monsoons predicted to be normal and this be very, very important. This implies that a normal monsoon will, of course, support further demand. And actually, this can be linked to also a bumper rabi harvest.

The LCV segment volume, which improved by 17% year-on-year basis, which benefited from the rise in e-commerce and the increasing need for last-mile delivery. 2-wheeler segment degrew by 21% year-on-year. Domestic demand for entry-level segment remained weak, and failed to pick up. However, premium 2-wheelers and exports are performing better relatively. Amongst other markets, 3-wheeler segment declined 3% [Technical Issues] pandemic receding. We are expecting that the consumers returning to shared mobility service might get aided through the demand going ahead.

Let’s have a look at how your company has performed [Technical Issues] market. Next slide, please. So under the tractor and passenger vehicle segment, the company has done better than the market. However, the company has marginally underperformed in the heavy commercial and light commercial segment. This was timely driven by the fuel exchange. We believe the company will grow better than the market once the semiconductor crises reduces and recedes with our opportunity primarily in the LCV and pass car segment. Let’s have a look at how the company has performed January, March ’22 quarter compared to the January March ’21 with all the above mentioned factors. Next slide please.

The overall revenue from operations for January, March 2022 stood at INR3,311, which was an increase of 2.9% as compared to the corresponding period of the previous year. Here automotive sales have degrown by about 1% largely driven by powertrain systems while non-automotive sales have increased by nearly 31% largely led by power tools. Overall product sales have increased by 3.5%. Income from services mainly comprised of R&D services provided to OEMs and of course Bosch Germany.

January, March 2021 had a higher revenue as the CRS project for Isuzu Motors was completed in that quarter and the revenue was recognized based on the SOP date after operating income mainly [Phonetic] includes income from lease rentals, miscellaneous income and export incentives. January, March 2021 had reclassification of reversal of provision, warranty and doubtful debt and some other operating income to other expenses. Hence other operating income for the same quarter of the previous year is lower. Our material cost as a percentage of total revenue from operations has increased from 61.4% in January, March 2021 to 64.6% in January, March 2022. The increase on — this reason mainly on account of three areas, raw material price increases, less of cost of creating goods in January, March ’21 which was adjusted in subsequent quarters which resulted material costs being lower in the same quarter of the previous year and of course the impact due to supply chain. I would like to add here that your company is deeply focused on — focusing on recovery of raw material prices, electronic cost increases, including on in relation to the logistics cost increases.

Our implied cost for January, March 2021 include certain provisions which are no longer required and hence were written back. Hence the implied cost for the same quarter previous year is on the lower side. On a like-for-like basis personnel cost for the current quarter compared to the previous quarter without considering the write-back of the provisions has decreased from 9.8% to 7.7% of the total revenue in the quarter. Other expenses stood at INR480 crores. This amounts to 14.5% of total revenue in January, March 2022 as compared to INR489 crores, which is 15.2% of total revenue in January, March ’21, decreases on account of reduction in spending of administrative expenses.

Depreciation for the quarter is at 2.7% of the total revenue as compared to 2.9% of the total revenue of January, March ’21. Operating profit EBIT stood at INR346 crores in January, March ’22, as compared to INR527 crores in January, March ’21, a decrease of 34%, mainly due to a one-time credit that we had of approximately INR181 crores. This is 5.6% of the revenue of operations in personnel costs.

The other income primarily comprises of interest on fixed deposits and mark-to-market on debt mutual funds. The other income in January, March ’21 had a credit due to the reversal of the provisions no longer implied. For the quarter ended March ’22, your company posted a profit before tax of INR432 crores as compared to INR640 crores in January, March 2021. This was before exceptional items. As a percentage of the total revenue from operations profit before tax stood at 13% of revenue in the current quarter. Profit after tax for the quarter ended March ’22 stood at INR351 crores, which is 10.6% of the total revenue from operations. Profit after tax in January, March was — ’21 was INR482 crores. The tax expense for January, March 2022 is INR81 crores, which is [Technical Issues] income rate expected for the full year.

If we remove the one-time impacts from the financials on a like-to-like basis, January, March ’21, the EBIT will be 10% as compared to the January, March ’22 EBIT at 10.3%. If the one-time credits in the prior year mainly pertain to provisions no longer written back in personnel cost, wage settlement and accruals for retired benefits.

Modern India is a fast adopter of technology and legislation. India has successfully implemented the BS-VI Stage 1 [Technical Issues] norms for on-road vehicles in April 2020, and is gearing up for implementation of BS-VI Stage 2 emission norms, which will be effective with effect from April 2023. Bosch is fully prepared with technology of BS-VI Stage 2, and is already working with customers for series project executions. BS-VI norms have reduced the gap with EU norm significantly, and we are catching up the global standards in a quick way.

Example being the introduction of real drive emissions and in-service conformity in BS-VI Stage 2 that capture the emission performance of vehicles in real drive conditions, which is a big step forward. Europe is currently discussing targets for EU 7 legislation, and India is yet to start discussions on the next legislation, which is BS-VII. Nevertheless, Bosch has created internal scenarios for the next legislative target and then define the technology road map for the sale.

The technology road map for these future legislation scenarios is accessible to Bosch worldwide vision and hence, Bosch India is well equipped to bring these technologies to India as well. Overall, [Indecipherable] will be an opportunity for Bosch. Once again bring world-class products to India, and I would say not just world-class products, but innovative products as also in affordable price.

As we understand, the Government of India has agreed to delay the implementation of TREM Stage 4 regulation for tractors for six months, implementation from October 2022 with agreement that there will be no changes in dates on TREM 5 — Stage 5 implementation date that is April 2024. Both [Indecipherable] will see tractor applications moving from conventional to common rail systems.

Bosch is fully prepared with both components tailor-made common rail systems offered for the implementation of the new norm. Overall, Bosch will transform and transition from conventional products to common rail products in tractor segment with a positive impact in introducing advanced products and solutions into the market.

I would like to talk to you about the topic of sustainability at Bosch India. In 2020, Bosch India achieved carbon neutrality under Scope 1 and 2 at its 37 locations across India. We support the ESG, which stands, by the way, for environment for E, social for S, and governance for G, disclosures required by SEBI around BRR and BRSR for FY ’22, ’23, more importantly, starting this financial year, we’ll be adding an ESG section to our annual report for better and voluntary disclosures.

Our Board has responsibility of the oversight on ESG. And I, as the MD, am responsible for the implementation at Bosch Limited. Our target ESG vision is aligned with the vision of Bosch Group worldwide. I would finally like to mention especially that Bosch Limited with the plant, won the CO2 and Energy Efficiency Award, and our Nashik plant won the first place in sustainability culture worldwide across the Bosch Group.

176 teams from Bosch locations across the world competed for the sustainability and the EHS award 2021. The Directors have recommended a dividend of INR110 per share for this 12-month period. In addition, to commemorate the century celebration of Bosch India, a special dividend of INR100 per share has further been proposed. The overall dividend payout for 2021/’22 is now proposed at INR210 per share.

I would like to thank you, each and every one of you, for your contribution, for your support to Bosch Limited and for always listening patiently through this call. We would hope and like to meet you this year in person at our Annual Investor Conference and call in August ’22. We will now like to address your queries, and thank you. And look forward to your questions, please.

I have on the call with me, along with me, as Mr. Annamalai Jayaraj mentioned, my colleague, Mr. Guruprasad Mudlapur, the CTO and GMD of the company. Today, I would also like — I’m happy to announce our CFO, who has been inducted into our Board, Mrs. Karin Gilges, who will be — who is with us but will participate in the call from the next meeting onwards. I’m sure you also warmly welcome her along with me into Bosch Limited Board. Mrs. Gilges, welcome to the Bosch Limited Board.

Karin Gilges — Chief Financial Officer

Thank you very much.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Hi. Thanks for taking my question. A few questions from my side. First is on the localization for BS-VI components, so based on the volume growth visibility which we have, particularly for CVs and 2-wheelers. Do you expect to reach optimum level of localization in this financial year FY ’23?

Soumitra Bhattacharya — Managing Director

Thank you, Jinesh, for the question. As you know, Jinesh, we are systematically and continuously localizing. And also, we have a very clear plan on certain areas where we will not localize. So the strategy for localization is based on which components will we make and which components we will trade.

If you remember, Jinesh, last time, I had mentioned that our products and solutions, generally we localize, and we are doing that. There could be certain components, example in EGT, which worldwide, people like those who are solution providers like Bosch, if the whole system integrate the system to our solutions, but don’t manufacture each of them. So that we will continue.

In summary, we have localized quite a bit. We will continue because there are different products and solutions also which come into play, Jinesh, as the emission norm changes — and there are some areas — and I give you a small example on the exhaust gas treatment components, which will continue to outsource.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. And second question is on the PLI incentive given that Bosch has been one of the beneficiaries. So two-part question here. One is with respect to the listed entity, what all do we plan to manufacture under PLI scheme? And second is, given that top Bosch Limited umbrella entity, which has got the PLI incentive, would we be routing other components of the sister concerns to the listed entity? And if yes, I would — I mean what kind of margins will be recognized in the listed entity?

Soumitra Bhattacharya — Managing Director

Very, very good question, Jinesh, and I will try to answer both. So as you are aware, three of our Bosch companies, led by the flagship company, which is Bosch Limited, have applied and also been included in the PLI. And Bosch Limited actually has quite a lot of inflow from these two other sister companies also coming in. So, A, in summary, we have applied and we will work towards getting the PLI through other value addition as well as localization, both at Bosch Limited, but also at the other two sister companies that we have applied. And there will be — especially for our electronics company, a significant flow also through Bosch Limited.

Where — Jinesh, we are in discussion with the government, and this is not about Bosch. You see in the Indian context for electronics value addition, currently, the threshold level at 50%, is a big challenge for industry. So we have taken it up with the government as always in an agnostic — and nothing to do with the company. Electronics value addition on 50% will need a relook, and the government has been positive to say that we — based on the facts and figures, we are going to look at those areas.

And final statement, our work with the government [Technical Issues] how do we get into advanced technology, how do we incentivize only for advanced technologies to take India forward, and how do we give appropriate levels of value addition for participation of industry in the schemes to make it a reality.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. Thanks. I’ll fall back in queue for further questions.

Operator

Thank you.

Soumitra Bhattacharya — Managing Director

Thank you, Jinesh.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

The next question is from the line of Pramod Amthe from InCred Capital. Please go ahead.

Pramod Amthe — InCred Capital — Analyst

Yes. Hi, sir. Continuation of the same on the PLI. Would you be able to guide us what will be the capex for FY ’23 and ’24? And taking into account this new PLI scheme? And how this has changed compared to your earlier plan?

Soumitra Bhattacharya — Managing Director

So Pramod, I think you heard on second and third, we had our global CEO doing a virtual India tour, and I will quote him. Bosch India has spent more than INR9,000 crores in the last 10 years. You can safely take about anywhere between 55% to 60% of this capex in the last 10 years, has gone out through the listed company.

Second, we have a pretty good capex layout also for FY ’22, ’23. We are looking to the upwards of anywhere between INR550 crores to INR600 crores. And we will continue in that range. I’ve always told you anywhere between a minimum of INR400 crores up to INR600 crores is what we spend normally, of course, with that we will look at when — if and where necessarily we will look at intensifying also our capex spend.

So in summary, we have applied. We have always been spending capex rightly. I’m giving you an example of ’22, ’23 of INR550 crores to INR600 crores further. And we will also — whatever required further, we will not have a challenge. Our company is reasonably cash-rich in terms of cash flow. We generate every year, INR1,000 crores, INR1,200 crores, INR1,500 crores of cash. We have a healthy balance sheet with cash flow right now of about INR7,000 crores. And even after giving a healthy dividend, we will still have enough and more for capex and other organic and inorganic, including PLI spends.

Pramod Amthe — InCred Capital — Analyst

Sure, sir. Sir, second question is to the CTO. Considering you guys play an active role in the EV ecosystem. How do you see the current fire incidences in the industry? And also considering that you have a robust product and systems, are you going to — are you already seeing more inquiries from your customers for Bosch systems, and you expect the Bosch EV system penetration to go up drastically in the coming years?

Guruprasad Mudlapur — Joint Managing Director

Okay. So a very, very relevant question at this point of time. It’s very early days. So please expect some of these things to happen, and the market is still immature and things are developing the way it is today. This has happened all over the world, and things have also stabilized to a large extent all over the world, and we will see that in the coming months and a year also in India as well. Bosch [Indecipherable] does designs of battery systems and manufacturing of battery systems, all with high levels of safety built in. So we take care of this all over the world, and in India, too.

There are several things you need to do are designed at verifications after design, manufacturing. And when it’s actually deployed in the field to ensure that the batteries do not overheat or catch fire or any of the untoward incidents to happen. So we do take care of quite a lot about this. We’ve also been consulting the government on what are the norms they could bring in to make our batteries much more safer than what they are today in terms of tightening the battery management systems or [Technical Issues] designed or the way they are manufactured today, or the thermal protection systems that are in.

So we’ve done quite some consulting to the government, and several other industry players currently. We will see over the coming months an increasing awareness in the OEM community on what it means to have a safe battery. And I believe some of the OEMs already have a lot of this awareness, but we will generally see increased awareness, and thereby we should start to see more inquiries coming to companies like ours, which do high-quality design and manufacturing of battery systems.

Pramod Amthe — InCred Capital — Analyst

Sure. Thanks and all the best.

Operator

[Operator Instructions] The next question is from the line of Senthil from ithought Financials. Please go ahead.

Senthil Manikandan — ithought Financials — Analyst

Hi. Good afternoon. Thanks for taking my question. My question is with your broader strategic in nature over a three to five years’ figure. So how do you see the — kit value of electric vehicle business going up, like you can give some numbers, what is the current kit value and how would evolve over the next three to five years?

Soumitra Bhattacharya — Managing Director

So we have mentioned this before, Senthil, that from — hardly 1% to 2% now. And here, we are talking only now pass cars because segments like 2-wheelers and 3-wheelers will be different. We expect in the e-mobility case for India in a, I would say, realistic come optimistic manner that by 2030, India could possibly have up to 30% of its pass car and utility vehicle being produced under this mobility. It could also be 25%. So that’s one.

We also mentioned that ICs still will remain dominant. We also mentioned that diesel will play still a very strong role in the SUV segment. And of course, all of you know that with BS-VI Stage 1 and then Stage 2, and later BS-VI — BS-VII, diesel has also a very competitive edge in terms of both emissions as well as real efficiency, etc. So gasoline, diesel will play the majority role, minimum 70%. 50% on a very low base is likely to catch up. And of course, we also said India has this very big challenge of putting up the whole infrastructure base across the country, and which we believe that private public partnership will make it happen. So this is how we look at, and the view has not changed since then.

Senthil Manikandan — ithought Financials — Analyst

Okay, sir. So how do you see as a Bosch Limited progress in this landscape? So any overview about what percentage of revenue you’re targeting from the — anything you can say?

Soumitra Bhattacharya — Managing Director

Senthil, we don’t give guidance, you know that because you’ve been attending for a long time, yes. So I would not like to give a guidance. And this question is not about Bosch Limited. This question is, I think, for the industry that you’re talking. So, A, let’s be honest, in India, we are at a pretty decent stage. When you look at U.S., when you look at Europe, specifically in USA. To be very aggressive EV in California, which is different from some other states.

Today, Scandinavian countries very aggressive electrification even today, for example, is in Europe, Germany has. So we cannot make a comparison amongst us, including the China. Secondly, we believe that the electrification is there to stay. It will become a big player but you are going to see the movements mainly in big volumes between ’27 to ’30. The period between ’22 to ’25, there will be, as you see some of the companies getting into it.

Yet when you look at the overview of the total volume of cars — and Senthil you must remember, right now, we are talking of 3.6 million cars and utility vehicles sold in fiscal year ’21/’22. So we have to look at that picture. And this 4 million by that time will go to 6 million and — by 2025, let’s say. And so the volume and the percentage will be climbing, but on a very low pace.

And we are — I think our CTO had last time mentioned, Bosch has got a parent and acquisition value of EUR20 billion, not million, EUR20 billion. So has invested more than EUR5 billion on electrification, and has all the components, products and [Technical Issues]. And we have use our parents in a very big way, maybe initially trade and then also later localize. And as and when our customers launch our systems, we’ll let you know.

Senthil Manikandan — ithought Financials — Analyst

Thanks for the sense.

Operator

Thank you. The next question is from the line of Pinkesh Shah from Kotak. Please go ahead.

Pinkesh Shah — Kotak — Analyst

Yes. So my question is your biggest competitor [Indecipherable]

Operator

Sir, sorry to interrupt. There’s a lot of background noise that we can hear from your line. If you can move for a better place.

Pinkesh Shah — Kotak — Analyst

My question is your biggest competitor [Indecipherable]

Operator

Mr. Shah? Sir still, there’s a lot of background like that we can hear from your line, sir.

Pinkesh Shah — Kotak — Analyst

Okay. So now?

Soumitra Bhattacharya — Managing Director

Okay.

Pinkesh Shah — Kotak — Analyst

Okay. So my question is the biggest competitor NTK, making some booster for BS-VI engine. So what is your strategy to compete with NTK?

Soumitra Bhattacharya — Managing Director

Your voice was still not very clear, but I heard strategic pricing on BS-VI?

Pinkesh Shah — Kotak — Analyst

No, no, no. [Indecipherable] Yes. Actually, I’m asking for that NTK, your biggest competitor, making some new called [Indecipherable]. And for that, what is the strategy to compete with NTK in plug segment?

Soumitra Bhattacharya — Managing Director

Shah, none of us are able to understand your question here.

Operator

Mr. Shah, may we request you to rejoin the queue sir once again and move to a better place?

Pinkesh Shah — Kotak — Analyst

Okay, okay.

Operator

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

Ravi Purohit — Securities Investment Management — Analyst

Yes. Hi. Thanks for taking my question and congratulations on a decent set of numbers in a tough environment. So I have two questions. One on more strategic and long-term view, and maybe the — our new CFO could — if she can also kind of add her thoughts from Bosch AG’s point of view. In terms of — there was a time in Bosch was amongst the top decile auto component companies in India in terms of growth, performance-wise, ROE, ROC profile, margin performance. Whereas if we look at it today, today, we are curved in the middle of the ranking in terms of performances on growth, margin, ROE, ROC.

So in that sense, how do we kind of rate our own performance vis-a-vis our peers, vis-a-vis where we were five years back and where we are today, and where we want to be over the next five years? So if you could kind of give some strategic direction as to where Bosch India is really headed? And when I mean Bosch India, I mean Bosch Limited, the listed entity, right? So that will be kind of very helpful from our understanding point of view.

And second question was on — I think in our press release also, we had mentioned today about fuel cells and hydrogen cells. If you could kind of kindly confirm whether all of those will be routed through the listed entity, and we are actually thinking of bringing in all of those technology and production — products through the listed entity itself. That would be kind of helpful for us to kind of understand.

Soumitra Bhattacharya — Managing Director

Thank you. Was it Pramod who asked this question?

Ravi Purohit — Securities Investment Management — Analyst

Ravi Purohit, Ravi Purohit, sir.

Soumitra Bhattacharya — Managing Director

Okay. Ravi, Ravi, Ravi, hi, Ravi. So let me answer the second question first. Affirmative, hydrogen electrification will all run through the listed company. And I hope that gives you a clear answer.

Ravi Purohit — Securities Investment Management — Analyst

Yes.

Soumitra Bhattacharya — Managing Director

So now in relation to — you talked about profitability and long term. So Ravi, I think you know that we don’t give guidance, but I would like to say two, three things which are different from the past. And I always mention to you and the other colleagues that we are setting ourselves to make ourselves for fitter for the future, and we are not looking at quarter-to-quarter results.

And I’ll give you some examples. A, if you remember the fiscal year 2020 — sorry, ’21 and ’21, ’22. We took a hit in the P&L of INR1,500 crores for our 3R program. Now we did that by design. And today, our personnel costs from earlier 14% to 16% is down to 9%. But more importantly, our productivity has improved. We’ve done it in a very fair Bosch way, and we are doing major reskilling, etc. All this will come, including competency development. All this will come to benefit in the future. That’s one.

Second, in the new world, we do have a higher content of trading, but we have a very focused approach on localization, keeping in mind that we would like to localize what makes sense. And I gave some examples earlier on the exhaust-gas [Technical Issues].

Third, the diesel share in India had climbed to 48%. And you know today, it’s down to 20%, 22%. And there was a strong mix in Bosch Limited, also for diesel, while we very strongly came back on gasoline. And as we will do as electrification and hydrogen grows. Fourth, we have put in substantial amounts of money initially starting with INR100 crores, now INR200 crores, INR250 crores and we’ll move on even higher to invest for businesses of the future. We take this hit in the P&L by design, again, to prepare for the future.

So whether it’s competency building, whether it is having projects, working with our customers and rather than just only trying to get acquisitions. So in summary, I would say, getting an EBIT of 10% on a very challenging year, where semiconductor has actually hit, not only the OEMs turnover, but also ours, naturally which affects the contribution. And also where the world is undergoing a very high challenge in terms of supply chain, raw material price increases, we do see that is our profitability investment for the future, which will give us mid- and long-term benefits and results are in the right place.

Now I’ve given you an idea of the way forward of how the company is invested for the future, including for its people. By the way, we were — we have been declared as one of the best places to work in the top quadrant of the top companies in India to work for. So we are investing for the future. And I strongly believe that our quest to attain double-digit profitability and further improve on it over the years after having invested in businesses very expensive.

Ravi Purohit — Securities Investment Management — Analyst

Okay. Sir, just one brief question. So if I look at, let’s say, 10-year numbers, right? If you look at the revenue point of view, we are probably 50% higher than what we were 10 years back, whereas the profits are probably the same as what we are — what it was 10 years back, right? So 10 years is a fairly long period to assess performance. So in that context, would you say that there have been kind of misses that we’ve had to endure over the last three, four years in terms of transformation — or transitioning between, let’s say BS-IV to BS-VI to BS-II to BS-IV.

And we’ve kind of lost market shares, we’ve lost clients? Or is there anything that you could kind of pinpoint analyze? And what we call it like self-assessment of where — because if I look at our peers, like a lot of peers have kind of — over the last 10 years, their turnovers are probably 2 times of what it was 10 years back or 3 times or 4 times of what it was 10 years back. Profits are probably 2 times, 3 times of what it was. 10 year’s a fairly long rope in that sense, which kind of also affects shareholder returns almost seven, eight years, the shareholder returns are zero to negative. So in that sense, there are a lot of these things — so any self-assessment that we’ve done, anything that we kind of did wrong in the past, or missed in the past, and now we’re kind of course correcting and which kind of gives us confidence that the future will be better than what it was in the last five years while the performance will be better than what it was in the last 5 to 10 years, I would say.

Soumitra Bhattacharya — Managing Director

I think it’s a fair question. It’s a good question, and I’ll try to answer part of it because part of your question is also a guidance question. And I’ve told you before, Ravi, that we do not give guidance. So you should not attempt a guidance question.

Now having said that, I’ll still give you an answer in a very fair way. So seven years ago, we were about 12,000 people in Bosch Limited. Today, we are about 5,500 in permanent headcount, and 2,000 on temporary. So we’ve reduced dramatically on head count, number one. Number two, seven years ago, if I look also the market was greatly and mainly diesel. Today, the market especial [Indecipherable] utilities has greatly changed. You know that, Ravi, and all the colleagues in the con call know that we came compared to diesel later into gasoline. And however, though we came later, we have got a sizable portion of the market in gasoline.

Number three, any company which goes through transitioning and transformation has to take a call for a certain period of time to invest money to change the company. And we’ve decided and done that, and that’s why I told you that three to four years will be a period for the 3R program on reskill, redevelop, redeploy and restructure, and that is greatly behind us.

Now we are investing money for the future in relation to new businesses, which will be in the listed company, and I gave you examples of hydrogen electrification, and this will pay off in the long run, but it will not be in the short run. If you’ll ask me, it will be mid come long, and definitely not in the short term.

In relation to efficiencies and other things, of course, we continue to focus on. In relation to people, we continue to focus on. And in relation to our campuses, we are about to open in the Adugodi main, which belongs to Bosch 75 acres in the heart of the city, one of the smartest campuses, we are inaugurating on 30th of June for Bosch in India 100 years. So we have not been shy in investing for the future. We have reduced our headcount massively in all our plants and become more efficient. We are investing monies for the new businesses. And we’ve also done a lot of restructuring, redeployment, reskilling.

And we believe like our parent — by the way, it’s not AG Robert Bosch, it’s GMBH, or the largest private limited company, not to look at quarter-to-quarter results, but to secure ourselves for the future. And that’s what we’ve done.

Ravi Purohit — Securities Investment Management — Analyst

Okay, wonderful. Is it possible that I can squeeze in a last small question?

Operator

Sir, sorry to interrupt, but for any follow-up, may we request —

Soumitra Bhattacharya — Managing Director

Okay. Ravi, one small question.

Ravi Purohit — Securities Investment Management — Analyst

Okay. Sir, just we’ve been hearing about a lot of these biofuels and ethanol blending and CNG [Technical Issues] presence, and we make kind of engines which are like ethanol-compliant, or overnight if the government changes the ethanol content, would we have like ready-to-use supply systems, which can accommodate those changes? Or if you could just share something that is happening on the CNG and ethanol side. If — what kind of market share do we have? And what kind of strength do we have on technology side or systems and process side?

Guruprasad Mudlapur — Joint Managing Director

Yes. I’ll take this, Ravi. We have solutions for flex fuels. We have solutions for CNG, and we also have solutions when fuel blends happen. So right now, we are offering all those to the OEMs. And CNG, we have been doing it for years now, and flex fuels as well we are already doing it. As things progress and move towards higher blend levels, we will also have to bring in technology as relevant to the market in India, and we will continue to do that. Thought I can tell you is that Bosch has the complete portfolio of flexible solutions deployed somewhere in the world and — or also in India, and we continue to develop Indian applications and solutions as they may be necessary.

Ravi Purohit — Securities Investment Management — Analyst

Okay. Thank you so much. And really appreciate you answering all the questions. Thank you so much.

Operator

Thank you.

Soumitra Bhattacharya — Managing Director

Thank you.

Operator

The next question is from the line of Basudeb Banerjee from ICICI Securities. Please go ahead.

Basudeb Banerjee — ICICI Securities — Analyst

Thanks. A couple of questions. One on similar lines of last couple of questions. If I look at fiscal ’16 to ’19 average raw mat sales used to be some 53%, which because of the reasons you mentioned, supply chain limited, scope of localization, commodity cost and retail mix coming down combinedly, taking it up to almost 64% now. Though BS, so it’s commendable that staff costs you have taken down considerably, but this is almost 10 percentage point change in — decline in gross margin is huge in overall scheme of things. So I’m not asking for any guidance, but how to look at how much of that can be recoverable when commodities or supply chain issues normalize? And how much of it will be structural in nature?

Soumitra Bhattacharya — Managing Director

Thank you, Basudeb, as you’ve asked the question as well as answered. So I will say, yes, part of it is structural, and part of it will further change our material content and definitely not go up, but will stay constant and go down based on our localization plan. There are also some onetime impacts. So actually 64% should be looked at more towards that 61% or so.

So two things. In relation to recovery, we will do a fair recovery. Bosch is one of the few companies who has a very tight and good process of contracting beforehand, with most of our OEMs on ForEx and raw materials. And we will see that recovery flow through. And we will also be fair towards the OEM by being fair towards us, which is what we’ve always stood by. We are adding a certain element also on electronics increases worldwide as well as now the very turbulent stage of the supply chain. Today, the world [Technical Issues] more about supply chain efficiency or effectivity. The world talks about supply chain resilience. So we will look at the logistics cost increase and also create a scheme for recovery in a very transparent manner.

So in summary, inflation means cost increases happen, and that also means the optimal amount, the whole chain has to give into and up to the end consumer with the ability of the end consumer to then finally buy the goods and services. So Bosch will participate in that in an ethical and fair manner. And we will see that we are working closely with the OEMs and our other — our direct and indirect suppliers, and do the necessary. So the answer is, we will also protect our balance sheet and P&L.

Basudeb Banerjee — ICICI Securities — Analyst

Sure. And second question, sir, to comment on the working capital movement for fiscal ’22 as a whole. And how much of it is temporary in nature, and how much of it can be reversed? If any major line items you want to highlight. Because it seems it has taken away a big part of your cash flow picture.

Soumitra Bhattacharya — Managing Director

Basudeb, honestly, our company’s cash flow situation is pretty good compared to the market. We have a pretty robust way of our collections. Because you shouldn’t look at just one quarter, you should look at over the year, yes. And if you —

Basudeb Banerjee — ICICI Securities — Analyst

Cash flow for the year, sir?

Soumitra Bhattacharya — Managing Director

Yes. Even for the year, if I look at in reality, our cash equivalent and bank, while it may —

Basudeb Banerjee — ICICI Securities — Analyst

Sir, only working capital aspect?

Soumitra Bhattacharya — Managing Director

Yes. So working capital, again, sometimes, you increase your inventory by design. You have to be intelligent to have the right inventory in place so that you don’t land up not being able to supply. Does that give you an answer?

Basudeb Banerjee — ICICI Securities — Analyst

Other than inventory, any major changes in other foreign liability also?

Soumitra Bhattacharya — Managing Director

So again, I’ll repeat, the company doesn’t have issues on bad debt, number one. Number two, we don’t have any major write-offs on inventories. And number three, wherever we increase inventory selectively it’s with a very calculated choice. Does this answer your question?

Basudeb Banerjee — ICICI Securities — Analyst

Yes. Yes.

Soumitra Bhattacharya — Managing Director

You’re very reluctant, Basudeb. Thank you.

Basudeb Banerjee — ICICI Securities — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Jinal Sheth from Awriga Capital Advisors. Please go ahead.

Jinal Sheth — Awriga Capital Advisors — Analyst

Good afternoon. I just wanted to get a figure about your export strategy, sometime in the past that you guys had mentioned that we would want to grow exports in the coming years. So any thoughts on that?

Soumitra Bhattacharya — Managing Director

Okay. Thanks a lot, Sheth, for the question. Our FY ’21, ’22 exports as a percentage of sales is about 9% as compared to last year of about 10%. So we’ve been hovering at around 10%. Answer is, yes, in the midterm, we want to go towards anywhere between 12% and 15%. That is our intention. Positive news is our exports to our SAARC countries, you’ll be happy to know that we also have good sales to our neighboring countries. Besides three, a majority of our exports, of course, go to our parent in Germany.

But we also have started exports to Bangladesh and Sri Lanka, but we also do in many ASEAN countries. So short point, A, global Bosch policy is local for local. We see an opportunity for Bosch to further penetrate on an increase. And we have a very ambitious plant in Bangladesh, Sri Lanka and now Nepal. And of course, our export connections will remain with Germany on need basis. Our objective is anywhere between — in the mid-run, between 12% up to 15%. Right now, we are in the region of 10%.

Jinal Sheth — Awriga Capital Advisors — Analyst

Thanks for that. And hoping that this entire transformation phase leads us to better times in the next — in the coming years. Good luck.

Soumitra Bhattacharya — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Navin Matta from Mahindra Manulife. Please go ahead.

Navin Matta — Mahindra Manulife — Analyst

Yes. Thanks for the opportunity. I just had a follow-up question to your previous response. I think you mentioned that one should look at raw material to sales being at 61% and not at 64%. I just wanted to understand — I didn’t quite understand your comments on that, please.

Soumitra Bhattacharya — Managing Director

No, so sometimes, there are some onetime impacts. And so again, as I said, A, you have to look at the full year’s results rather than quarter-to-quarter. And so that is one. And you have to look at — which has caused the percent of sales. And you also have to take out the one-time impact. On the matter, which is affecting raw material, the material cost on the steel, aluminum and plastic costs, I already gave an answer that we would recover a very good portion of it through a systematic approach, including electronics and logistics.

Navin Matta — Mahindra Manulife — Analyst

Okay. I also noticed that in your presentation, you’ve again called out some transfer pricing adjustment also impacting this line item. So could you kind of quantify how much would that be on a year-on-year basis?

Soumitra Bhattacharya — Managing Director

Transfer pricing matter is always a timing effect. And so we do have a transfer pricing, and we also have agreed percentage on transfer prices between us and our parents, which is at arm’s length, and which has been checked out in all possible ways, including by auditors. And in case of January to March ’22, we have a 400 million impact.

Navin Matta — Mahindra Manulife — Analyst

400 million adverse impact?

Soumitra Bhattacharya — Managing Director

Yes.

Navin Matta — Mahindra Manulife — Analyst

Okay. So that should ideally get smoothened out as we go into the next few quarters.

Soumitra Bhattacharya — Managing Director

Yes, please.

Navin Matta — Mahindra Manulife — Analyst

Yes. Okay. That’s it from my side. Thank you so much.

Operator

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

Priya Ranjan — HDFC Mutual Fund — Analyst

Thank you sir. Just one thing on — in your presentation, you have mentioned about there is some — because of the fuel mix in the MHCV side and LCV side. There has been some reduction in top line, which has been achieved this year. So can you just bit elaborate on that? And is it because of CNG?

Soumitra Bhattacharya — Managing Director

Ranjan, there are two parts to it. First of all, in a conventional business, we have a pretty good order book. I just announced today in the press conference, just to give you a data point, that we have for Bosch Limited approximately EUR50 billion of acquisitions. So that’s quite essential. That’s number one. So our order book and acquisition is pretty good on the mobility side, yes, of course, in power tool and — just on — as I said, on powertrain and 2-wheelers, we have order book of more than EUR50 billion for the next five years, yes.

And second, in relation to — what was the other part of the question?

Priya Ranjan — HDFC Mutual Fund — Analyst

Yes. The fuel mix change is impacting our top line.

Soumitra Bhattacharya — Managing Director

Yes. Fuel mix change has impacted. I mean, look, worldwide, you must understand, Ranjan, what diesel was 10 years ago, whether in Germany, whether in Europe, whether in — I won’t take America because America has always been a gasoline. Everywhere, it has had a hit. Now it has had a hit on pass car and utility vehicle. So will diesel still be relevant? Answers is yes.

Starting with 3-wheelers where diesel composition to diesel, gasoline and of course, electrification, tractors totally diesel. Take heavy commercial vehicles will run on diesel for a very long time, and we will remain dominant as CTO mentioned, and hydrogen comes in also slowly come in. It takes light commercial vehicles will run on diesel for a long time, and then the electrification can also come in.

So, A, it’s a fact. Diesel, which retained — which had climbed to 50% market share, which is the highest point, has come down. And this impacts across all industries, and everyone, and of course, our company, too. But we have and tried to make up in other ways. So our turnover over the years has increased. Of course, you can ask all this other question, could it have increased further? And we are looking — I also announced to the press of 15% [Phonetic] growth over last year fiscal in ’22, ’23.

Priya Ranjan — HDFC Mutual Fund — Analyst

Yes. And then just one thing. I mean, I was more inclined towards the MHCV and LCV side because, I mean, pass car, we already know. But in MHCV and LCV, the phenomenon toward sales, the CNG, etc., is very recent. So —

Soumitra Bhattacharya — Managing Director

So there — yes, there is a certain percentage of CNG coming in. You’re right. Diesel is still, by far, the most dominant. That’s also right. And Bosch — as the HCV and MCV grows, Bosch has a pretty good percent on those areas, including LCV. And last time I told you, in rupees per — at the euro content or rupees per car content, our content value has gone up. I think I shared some data with you last year. Content per vehicle, I think I shared content per vehicle.

Priya Ranjan — HDFC Mutual Fund — Analyst

I don’t think so. I mean I will check back again. But okay, I mean we will —

Soumitra Bhattacharya — Managing Director

We can — next conference call, we can give you an indication about how we’ve moved on our content provision.

Priya Ranjan — HDFC Mutual Fund — Analyst

Sure. Sure. Sure. And just lastly, on the employee cost and the increase in the other expenses, I mean, that has certain extra, or one-time impact last year. But do you think this is a sustainable number, like, say, 7%, 8% of your top line as employee cost, which has come down this quarter. So is it a sustainable number or —

Soumitra Bhattacharya — Managing Director

Yes. 9% is a sustainable number. Look, that 4% is an incorrect number. Sometimes you get one-time credits. So I mentioned to all of you that it would be unfair to compare January, March quarter. And by the way, January, March quarter ’21, I mentioned this to all of you that this was an unusual quarter on a surge in top line and multiple one-time credits which came in, including reversals. So the 16% profitability of the quarter, in January, March ’21, is actually not representative. And I told you that it is more like 10%. And the other part, which I told you that earlier, Ranjan, you always have to look at the trend of the past four years, the earlier trend of 14% to 16% of personnel cost, will come down and stabilize around 9%.

Priya Ranjan — HDFC Mutual Fund — Analyst

Okay. Understood, sir. Thank you, sir.

Guruprasad Mudlapur — Joint Managing Director

Operator, this is — we would like to close the call at 05:00 o’clock. So just be mindful of the questions that you take.

Operator

Noted, sir.

Soumitra Bhattacharya — Managing Director

Mindful of the time.

Operator

The next question is from the line of Viraj from Securities Investment Management. Please go ahead.

Viraj Kacharia — Securities Investment Management — Analyst

Yes. Hi. Thanks for the opportunity. I just have two broader questions. They’re largely on the new business initiatives, which we have been investing for. So if you look at the parent commentary also on electrification, we’re looking at positive operating margin around 2024, 2025. And we also have in the past talked about — it will take time for these businesses to mature. So if we — one way to kind of just understand the investments which we have been making in the P&L, what would be a level of investment, say, on an annual basis will be making towards these initiatives? To get a perspective because the traditional — conventional powertrain business is also on a recovery pool. And what you see on a blended basis doesn’t really give a true picture on the performance of that business. So any perspective you can share on that?

Soumitra Bhattacharya — Managing Director

Yes. Thanks. I think it’s a very intelligent question. So I mentioned that, but I’ll repeat it. So we have in the past few years, and now we have upped it and we are going to allow anywhere between 1% up to 2% of our turnover and therefore, our profits to be kept aside, minimum for new businesses. So we are rather willing to have a slight short to midterm EBIT hit, and still delivered a decent EBIT and good cash flows, so that we secure our future by investing in new business areas.

Viraj Kacharia — Securities Investment Management — Analyst

Okay. And we should — so in relation to where the parent is looking into the profit — positive profit margin contribution, for us, where do you think — I mean where are we in that journey? I mean is it still quite early days given the kind of adoption which you are seeing in India [Indecipherable], the global penetration for EV. I mean, any perspective on that? And second question is, we’ve been hearing Bajaj Auto TVs, they have completely localized sourcing of motors, hub drive systems in the powertrain for theater core IQ, so if you can provide any update as to where are we in that globalization? I mean are they still our customers, are we still the single source supplier to those models? Thank you.

Soumitra Bhattacharya — Managing Director

Thank you. I’ll give an answer and then request also my colleague to come. So first, I want to say that the parent is dealing in a very mature market. Our parent has invested over the last 10 to 12 years. And when they started at that time, electrification was not the big thing in even Europe and America. Every year between EUR400 million and EUR500 million. So when I said EUR5 billion in the last 10 years, that’s a lot of money that also our parent invested.

Second, our parent has the highest ever acquisition of EUR20 billion. So obviously, our parent has a very strong portfolio, globally. Otherwise, you can’t get a value of EUR20 billion. And our parent obviously has taken a very conscious decision, which I believe is the right decision, which India would be willing to take at the appropriate time, not to look at quarter-to-quarter profits, but future proofing for the long run. And for these businesses, you need to put in — and we don’t borrow money because we have got our own money, so there’s no interest.

And lastly, based on a very good portfolio and an excellent relationship between our parent, with very competitive royalty and technology fees, we will invest and localize at the appropriate time where volumes are optimal for localization, and be a relevant player as we have been earlier in different technologies. So we are willing to take some quarters hit for the mid and long run because it’s far better to prepare yourself for the future. And luckily, we have our parent who is the lead in this business, including in electrification.

Guru, any comments?

Guruprasad Mudlapur — Joint Managing Director

Now I just want to add that we leverage quite a lot on what our parent does in terms of product portfolio. If we have to start from zero and develop an e-axle for the Indian market, it’s an overall R&D investment of maybe over $100 million, including quite some investment in manufacturing, which can also run into several million dollars. So it’s quite a lot of money. And if — that kind of money cannot be recovered with the volumes we currently have. It’s a no-go for purely local product development.

So understanding this, and also understanding what our MD just said that the parent has invested over EUR5 billion over the last 10 years and developed a huge portfolio of products, we definitely leverage on that. And we do the variant developments in India and offer that to customers. Most Indian customers, and most customers worldwide, are doing the same that we take the base platform and then we make customer variant and offer it to the market. So that’s how it is.

So if we do invest in R&D locally, you should see that as a component, which is on top of what has been globally invested. So it cannot be measured as something if we invest just 1 million, that’s not what it truly is. It’s an overall amount of platform investment plus what’s developed for our [Technical Issues]

Soumitra Bhattacharya — Managing Director

So we think we have to close, Guru, but to complement you, I would like to say a couple of last sentences to help you to connect the red dots. Because I find a lot of questions that you’re repeating on are perhaps missing a few red dots. So I’d just like to give you a summary of the red dots.

By design, we have upped our R&D expenditure in Bosch Limited. Today, we spend anywhere up to INR600 plus crores on R&D. India has the biggest — Bosch India has the biggest R&D center in the world, for India and the world, outside Germany. Second, we will invest in new businesses, even if it hits our P&L by 1%, 1.5% and up to 2% to ensure that we are secure for the future. Third, we have reduced our headcount significantly, up to nearly between 4,000 and 5,000 people to have currently a permanent headcount of only 5,500 as against what we had [Technical Issues] months.

Fourth, we will do localization as and when we deem right in an optimal manner. And of course, I mentioned to you where our material costs will more or less hover. Fifth, diesel, which was 50% approximately will not go back to that level. This implies for the whole market, the business, but also for Bosch. And lastly, I have given for the first time, not a guidance, but indication of around, and I hope that will be more than that 50% growth with a healthy EBIT for the fiscal year ’22, ’23.

I hope that helps you to connect some of the red dots in a very turbulent year. And of course, I forgot to mention that we will recover our RMI increases, electronics and logistics to a great extent in dialog and discussion with our OEMs.

Thank you very much. Over to Annamalai.

Annamalai Jayaraj — Batlivala & Karani Securities India Private Limited — Analyst

Yes. We thank all the participants. We thank management for taking time out for the call. Have a good day.

Operator

[Operator Closing Remarks]