Eicher Motors Ltd (EICHERMOT) Q4 FY23 Earnings Concall Transcript

Eicher Motors Ltd (NSE:EICHERMOT) Q4 FY23 Earnings Concall dated May. 11, 2023.

Corporate Participants:

Siddhartha Lal — Managing Director and Chief Executive Officer

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Vinod Aggarwal — Managing Director

Vidhya Srinivasan — Chief Financial Officer

Analysts:

Jinesh Gandhi — MotilalOswal — Analyst

Unidentified Participant — — Analyst

Kapil Singh — Nomura Holdings — Analyst

Pramod Kumar — Goldman Sachs — Analyst

Gunjan Prithyani — Bank of America — Analyst

Raghunandhan — Emkay Global Financial Services Ltd — Analyst

Presentation:

Operator

Good morning, good afternoon to all of you, wherever you are in the world. Welcome to Eicher Motors’ Q4 FY ’23 Results Investor Call. We have with us senior management of Eicher Motors’ represented by Mr. Siddhartha Lal, MD and CEO, Eicher Motors’ Limited; Mr. B. Govindarajan, CEO of Royal Enfield and Whole Time Director Eicher Motors’ Limited, Mr. Vinod Aggarwal will be joining shortly. He is MD and CEO of Volvo Eicher joint venture and Whole Time Director, Eicher Motor Limited; and Mrs. Vidhya Srinivasan, Group CFO, Eicher Motors’ Limited.

So over to you, Siddhartha.

Siddhartha Lal — is the Managing Director and Chief Executive Officer

Hello, everyone, and a very good evening to all of you, and thank you so much for joining this lead hour in India at least on our call for Eicher Motors Limited earning call for the quarter and the year ended March 31, 2023. So overall, the financial year has been absolutely fabulous for Eicher Motors. We made really, really good progress towards our long-term vision, our goals and have registered an absolutely stellar performance this year. So — it’s been our best ever financial and business performance as it were this year. And I’ll begin with the highlights — business highlights for Royal Enfield. We registered our best ever sales of more than 8 lakh, 34,000 motorcycles, so 834,000 motorcycles this year, beating our previous best, which was a pre pandemic 2018-2019 year.

We also took huge strides in our international business front. And for the first time, we received over 100,000, over 1 lakh unit sales in the export market. So it’s — it’s a big inflection point, we believe, because that’s when also in the domestic market, we had enormous growth. Of course, there are different challenges, but we have also started our CKD operation in Brazil this year, the previous year, which is an extremely high potential market. So overall, we have 4 CKDs. In addition to Brazil, it’s Argentina, Colombia and Thailand, all relatively to large to very large potential markets. We also had two outstanding launches last year. Again, the first physical launch after pandemic was the Hunter in Bangkok with global media, which was really, really highly appreciated the launch, the motorcycle, the refinement of this Roadster style of motorcycle, which is a totally fit for the City Roads in Bangkok and also for longer distances.

So it went off super well, whereas Super Meteor 650 launch in Jaisalmer in Rajasthan with a long set of rate that we all were on with the global media again, and it clearly proved itself to be the absolutely best middle-weight cruiser in the world today. And that’s the kind of reviews that we’ve gotten also if you have had a chance to look at those. Both motorcycles are doing extremely well in both in India and in international markets in their segments to gain two successes – new product successes behind us in segments that we’ve not necessarily been in the past. And again, after a bit of two years, we returned to Goa with our new format of [Indecipherable], which we call Motoverse now.

And yet the outstanding days of sound of motorcycles across Goa, but also entertainment, music, talk, art, shows all sorts of things that really got the hearts and souls and bodies of our rider community moving, and it was extremely well taken. I believe even though we had absolute record numbers of 14,000 visitors, I believe this year will be a hell a lot more based on the success had last year. So it’s been absolutely fantastic. It’s also starting to become a bit of a global event with a lot of international participants also coming in. So that’s on — that’s the business highlights on Royal Enfield. When we move to BCV and just in time with Vinod also joining us now, Viniod Agrawal as you can see he is on the screen.

And we’ve had an absolutely tremendous year excellent performance in VC this year. We had a highest ever sale of Eicher trucks and buses were 77,000 units, and record performances in our other business segments is our VE Powertrain where we sell engines to Volvo Group, Doubly at Volvo Trucks, where we distribute and sell Volvo Trucks in India, and the engineering components business as well. We had robust profitability, improved profitability through the quarters and improved market share across the board in our light-duty, medium-duty and heavy-duty and buses and Volvo Truck segment everywhere, we’ve made huge strides, market share gains and had a very successful year overall.

We also celebrated 15 years of the joint venture with Volvo and Eicher. It was — we had a lovely event in our state-of-the-art new manufacturing unit in plant in Bhopal, where the entire Executive Board or the management team of Volvo Group, all of them came down. They spent time with us in Bhopal, and reconfirmed our commitment towards modernization of transport — commercial transportation in India and of working closely together between Volvo and Eicher and the company — years as well. So it was really a very good highlight last month in April with our 15-year anniversary of the joint venture. Coming to consolidated financials for Q4 and for the full year of ended March 31, 2023, we had five quarters in a row of record revenue, which, again, last quarter was record revenue for EML consolidated and our best ever annual revenue.

So for Q4, we had a revenue of over INR3,800 crores, up 19% and for the financial year, revenue at INR14,442 crores. It’s a 14% growth over last year. Our profit and EBITDA have also been growing year-on-year and sequentially, and we registered our highest ever PAT and EBITDA for four quarters in a row and for the financial year. So again, record numbers through. For our EBITDA for Q4 was INR934 crores, up 23% for the full year was INR3,444 crores, up 59%, and PAT was at INR906 crores, up 48% and PAT at INR2,900 crores, up 74%. So good absolute profit growth at EML and EBITDA margin for the quarter stood at 24.5%, again, it’s 23.7%. And for the full year, a 23.8% against 21% last year. So again, big growth in profitability as well from previous year.

And overall, in the Board meeting that we held today, the Board of Directors of Eicher Motors Limited has declared a final dividend of INR37 per share for the last year, implying a payout some of INR1,012 crores, which is around 35% of our profit after tax. And the dividend per share is the highest ever for EML and is around 76% higher than the previous year. In addition, the Board has also approved a cash outlay towards capital expenditure for Royal Enfield business and INR1,000 crore for the financial year ’23-’24. So this year that we’re in already, which includes investment towards EV manufacturing, EV product equipment and, of course, product development for our internal combustion engine portfolio, so large chunk of it is only for product development in both ICE and EV.So that’s the overview of Eicher Motors Limited. Now we will have both — we’ll have Vinod Aggarwal talking to us about VECV.

But before that, I’ll hand over to Govindarajan, CEO of Royal Enfield to give us more detail about the business of Royal Enfield in the last quarter and in the last year. Over to you, Govind.

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Thank you, Siddharth. Hi, everyone, I hope you guys are doing well. Royal has been a spectacular year, not only we resisted the strong performance in the domestic market as Siddhartha was mentioning, we also crossed a very important milestone in that international journey is over 100,000 motorcycles dispenses from India. Let me begin with solid performance of this quarter and the year. For the Q4, we sold almost about 214,685 motorcycles, which is up by about 18% compared to last year. Our demand is continuing to stay very resilient. It’s actually further getting added by our new motorcycle launches which we have — which got an excellent response from our consumers.

Our market share in the domestic market in the motorcycle segment, especially on the 125 cc and above, it grew to almost 33.5% compared to about 22.9% in the Q4 of financial year 2022. For the full year, the total stand-alone motorcycle sales of Royal Enfield stood at almost about 834,895 motorcycles. Registering a growth of almost about 38.4% compared to last year. And in the motorcycle market share, we gained almost about 7.2%, which is a record one. And we also gained almost a 31.3% market share in more than 125 cc. So every third motorcycle is now the Royal Enfield in India. Our international markets, the momentum is continuing, and we crossed, as mentioned, about 100,000 motorcycles mark for the first time. And we also registered about 23% growth over the previous year.

Despite the macroeconomic backdrop, our retail growth in the international market is ranging between 27% to 45% across various regions in the financial year 2023. Our market share in the middle rig segment across the markets as climbed, especially in Americas, about 7%, and APAC is almost about 8.9% and EMEA. We further strengthened our footprint in Americas with our fourth CKD plant in Brazil, which is very important for us to be looking at that market. And we also have plans to launch the CKD facilities, which we have signed up for Bangladesh and Nepal. At UK, we are actually implementing a direct distribution by ourselves. We have already taken over in this month, and we are aggressively working on expanding our reach in existing and a few newer international markets during this upcoming years. Happy to share with you, Royal Enfield has achieved the fourth strongest brand globally as per the global auto report from the UK-based brand finance for the 2023.

Royal Enfield is only modest brand to feature among the top 10 global brands in this. You all know on the product front, we have introduced two new exciting motorcycles the whole new Hunter 350 and the Super Media 650. The Hunter 350, which is stylist, very accessible Roadster, which was launched in the month of August and Bangkok has received excellent response worldwide and has won numerous awards also as well. It won the India Motorcycle of the year award emerging 2023 India’s most prestigious automotive award in these levels. The Super Media, we launched this year in January is performing very well. We have excellent response from the markets all over outside India also. We have a very good booking in Europe, Americas and in APAC region. Our non-morcycling business is continuing to grow very, very consistently.

Our endeavor to deepen rider engagement with the motorcycle has resulted outstanding growth in spares, accessories, apparels everywhere, and we have witnessed a growth of almost 32% year-on-year this led by the strong growth, especially in Accessories business. On the EV journey, we have been making a very steady progress. I can say EV journey in Royal Enfield is the top gear now. Our intention is to create uniquely differentiated electric motorcycles with strong Royal Enfield DNA. We have commissioned a very, very capable team for committing and we started committing very deep investments in terms of product development and product strategy and in the product testing and development area. Currently, we have laid a robust long-term product and technology road map on the EV and developing supplier ecosystem is what is the focus as of now, which we are doing that.

There are a lot of prototypes, testing, which are going on in. That’s why I said it is in the top year. We are very committed. It’s in full last now. In addition, you all know, we have made a strategic investment of almost EUR15 million in Stark Future in January 2023. Now both the teams are working well, and they are collaborating very well to learn from each other and looking at what is the co-creation and the development, which we will do and how do we leverage each other strengths. That’s what is the work going on. In conclusion, at Royal Enfield, we had a very great year, but I must tell you, we have also even better one, which is planned, which we will see it in time to come. And we have a very strong lineup of more cycles for the year ’24 and a robust plan of growth on the rebalance, which we have articulated.

Now I will request Mr. Vinod Aggarwal to walk us through the VECV performance and an update. Over to you, Vinod.

Vinod Aggarwal — Managing Director

Thank you, Govind, and thank you, Siddharth, and a very good evening to all of you. For VECV, last year was as — in various respects. If you look at our overall sales, last year, we closed at 79,623 units, trucks and buses which was against our earlier peak of 72,969 in ’18/’19. So we have grown by 9% as against the earlier peak in ’18 ’19, whereas the overall CV industry is still down as compared to the earlier peak 3.5 tonne and above industry, it is down by 15% as compared to the earlier peak of 557,000 units in ’18, ’19 to 474,000. So industry is still lower than the earlier week, whereas we have grown by 9%, which means that we have grown in market share in all our product lines.

For example, in light and medium-duty trucks, 5 to 18 tonnes. This year, we have market share of 31.5%, and it is consistently improving year after year. Last year, it was 30.2%. In Buses, this year, we have market share of 24.8%. Again, it is improving consistently year after year. Last year, it was 21.9%. In heavy-duty trucks, again, it’s a very good steady growth year-after-year. Both Eicher and Volvo together, last year, we had a market share of 8.3%, which was a year before 7.3%. So there has been consistent improvement in market shares all across. And we continue on our commitment towards increasing uptime to our customers, we are very, very advanced in the digitalization services. We are offering 100% connected trucks. And based on that, we are able to offer various type stocks that we see like predictive maintenance or more diagnostics or — so that takes the entire customer satisfaction experience to a new level.

And of course, we are continuing to improve on our network. Every year, we are adding a number of new dealers. Our penetration is improving in the country as a whole, and that is also one of the reason of improvement in the market shares. And we also reiterated our commitment to the sustainable transport by delivering 40 electric buses to the prestigious city of Chandigarh and there — these buses running very, very successfully. And we showcased quite range of future-ready solutions encompassing decarbonization, increasing uptime and connected solutions at the auto export 2023. And we were asked to add number one in the dealer satisfaction survey for the second year in a row. And we also won 6 Eicher and Volvo Trucks and versus six of our products were ranked number one across relevant categories at prestigious Apollo CV awards.

Now coming to the overall revenues. Last year, we closed with the total revenues of INR18, 952 crores, which have grown by 48.9% over previous year, revenues were INR12,724 crores. And for quarter 4, our revenues were INR6,200 crores which are up by 43.9% from last year’s quarter 4 of INR4,307 crores. As far as EBITDA is concerned, for full year, we have EBITDA of INR1,375 crores which is at around 7.5%, grown by 92.1% over EBITDA of INR1,760 crores, which was at 5.9%. And for quarter 4, we have EBITDA of 619 crores, which is at 10.4% as against the previous year quarter four of INR288 crores at 6.8%. And then as far as the PAT is concerned, for full year, we have PAT of INR579 crores as against INR111 crores last year. And for quarter four, we have PAT of INR319 crores from INR99 crores last year.

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

Siddhartha Lal — is the Managing Director and Chief Executive Officer

Thank you, Vinod, and thank you, Govind, before that. I think after a couple of really tricky years previously, I think we’ve had an absolutely stellar performance in EML and VECV last year. It’s been a year of consolidation in some way because of probably all the different forces around the world in terms of the COVID and supply chain, all of that, it’s been a settling year. It’s been a year where we’ve all been able to settle down, get back to full focus as we do. And get back to growth and profitability and development of future for both RE and VECV. So, we’ve had a really solid year, and I’m delighted to say that the combined revenue, actually, if you look at it like that, which we don’t in our financials, but if you just to combine EML, which is RE and then VECV together, we have over INR33,000 crores revenue now and — which equates to over $4 billion in revenue. So, now it’s really sort of starting to crank up and become a sizable company.

And it’s not just that. It’s we really set ourselves up for a really — a very strong base now for the coming years and for the next phase of growth that we have. We see some points of inflection. We see that Royal Enfield has crossed 100,000 or 1 lakh units internationally. And we’re seeing that the interest, the demand, the virtuous cycle cycle of dealers making good money or dealers wanting to have Royal Enfield outside of India and then customers, big demand for our bikes, which is coming in, that’s — we’re seeing the point of inflection there. We’re seeing a significant point of inflection in VECV with heavy-duty trucks, where for years and years, we’ve been — aren’t selling. But now it’s really starting to move in its own momentum now, and it’s starting to grow and heavy-duty trucks, we all understand is in revenue terms is the lion’s share of the truck — of the commercial vehicle market.

And we’ve reached a threshold level, I would say, of a couple of thousand units per month really to 1,000, 1,500, 2,000, even 3,000 in some months, we’ve crossed in heavy duties. So, it’s been really strong, and we see that inflection coming up. And with all of this, we’re delighted about our past performance, about how things are going, about how the — how smoothly the companies are operating and in the new normal situation where there is a bit more choppiness than there was pre-pandemic. But we are able to manage all that because we’re an extremely focused approach in both Royal Enfield and VECV. We have a tremendously sharp focus and tremendously sharp leadership, and that’s what I believe will be the biggest strength in the coming year.

So, thank you very much for joining us. And now we can have some questions.

Questions and Answers:

Operator

Sure, sir. We can start the Q&A session. First question is from Jinesh Gandhi. Jinesh, you can ask your question.

Jinesh Gandhi — MotilalOswal — Analyst

[Indecipherable]

Siddhartha Lal — is the Managing Director and Chief Executive Officer

May we move to next participant?

Jinesh Gandhi — MotilalOswal — Analyst

Am I audible?

Operator

Yes, Jinesh, please.

Jinesh Gandhi — MotilalOswal — Analyst

Hi. Congrats on a great set of numbers. My — a couple of questions from my side. One is, can you talk about the driver of realizations and gross margins in this quarter for Royal Enfield, the standalone business?

Vidhya Srinivasan — Chief Financial Officer

Yes. So, as far as sales is concerned, I think there has been a combination as far as we’ve had ASP growth in the quarter, which is really driven by a higher share of international volumes which has happened. We’ve also had a bit of pricing impact, because we’ve taken price increases on account of Hunter and Bullet in the past. So I think those two factors are really responsible for the increase as far as revenues are concerned.

From a margin standpoint, I think there are multiple series of factors which are coming into the picture. We had raw material savings of approximately about 0.9% quarter-on-quarter. And we’ve had some — it’s really because of various initiatives that are taking place internally and also some of the commodity tailwinds which are coming through, and that’s reflecting in our raw material savings. Apart from that, obviously, some — the pricing is also leading to the gross margin improvement. And a little bit international mix improving is also obviously contributing to gross margins as a combination of all those factors.

Jinesh Gandhi — MotilalOswal — Analyst

Got it. And commodity cost tailwinds are largely behind, or do you see further savings coming in 2Q?

Vidhya Srinivasan — Chief Financial Officer

I think one thing I think we should say is that we’re kind of watching. I think on steel, for example, there’s been a bit of price increase, but we are — we have, for example, done in a price correction of about 1.5% in May 1st, so we kind of monitoring how the impact is playing out.

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Just to add, Jinesh, it’s not the point of discussion on an everyday basis how the commodity is actually hitting. The SOFR commodity inflation cycle, our understanding is it’s not the one which is facing us. There will be blips which we have to manage because of business.

Jinesh Gandhi — MotilalOswal — Analyst

Got it. And last question on expansion or the ramp-up of new models, both Hunter and Super Meteor. So how are we planning to ramp it up, both in terms of production as well as the launches in the export markets where we have not yet launched, for example, Hunter is yet to be launched in LatAm and other markets and Super Meteor beyond Europe. So, how do we see that?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Yes. See Super Meteor is the first hybrid cruiser from Royal Enfield, which is [Technical Issues] we have already dispatched about 4,000-plus Super Meteor across the globe. What’s happening is there’s more and more, the demand is coming up. The team is also now working on how do we improve the production. And we are on the process. You will see the production ramping up with the next weeks to months to go. So it will be a constant ramp-up increase, which will take place.

Jinesh Gandhi — MotilalOswal — Analyst

And product launches in the global market, primarily Hunter in LatAm and Super Meteor beyond Europe?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Yes, yes. So we started launching market by market, almost most of the market we have introduced. I mean, when we are talking last two days, even in Australia and all, our team is actually launching the Super Meteor. We have done Hunter launch in USA. So depending upon the availability, depending upon the homologation in hand, we keep launching it. But as it is–

Siddhartha Lal — is the Managing Director and Chief Executive Officer

Yes. Sorry, Govindarajan, me to cut you. But just to reconfirm that all of our products are global products. They will all have a place in every market by and large. I mean there may be a small exception here and there, but certainly, for example, in the case of Hunter, in the case of Super Meteor, they will go to pretty much every single market we have. Now that the cadence has gone because of homologation, because of market situation, because of seasonality in markets all of that, that we prioritize markets over others.

But other than that, you’re going to see all our products in every market. And over time, you’re going to see that happen quicker. I can see the back tone or the background is coming from is that, okay, look, it’s been many months why isn’t in globally? Yes, we understand. And we are — in our future products, we are trying to reduce the gap from launch in — global launch to availability across the globe, right? So we are trying to do that further.

Jinesh Gandhi — MotilalOswal — Analyst

Got it. Thanks and all the best.

Operator

Thanks, Jinesh. Next, we have a question from Chandramouli. Hi.

Unidentified Participant — — Analyst

Hi. Can you hear me?

Operator

Yes.

Unidentified Participant — — Analyst

Yes. Thanks for taking my questions and good evening. So the press release mentions that the Super Meteor 650 will be launched soon in the APAC and Americas markets. So just trying to understand, sort of based on your international market models, is America a larger opportunity for Super Meteor than Europe? Or is that maybe not the right understanding? And also based on sort of initial customer feedback, is the Super Meteor likely to be more of an export market-focused product than domestic for us? And are there any supply chain factors to keep in mind as you ramp up production on this model?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Yes. I go from behind, which you are talking about [Indecipherable] global product. So — and it is also equally being by the consumers in India and the booking is going up. Obviously, you don’t ask me what’s a booking number, I’m not going to tell you. But booking is very good even in India. International market, the traction has been very good. As Siddhartha mentioning, we are opening market-by-market with the ramp-up coming up and the obligations which are coming up into this. So it’s in the execution mode. You will see these things, which will happen in the next weeks to months come. So all — everywhere, it will be available.

Unidentified Participant — — Analyst

Got it. That’s helpful. My second question is on the export markets. So it appears that we are around close to a 10% market share on average in the global middle-weight market in the previous fiscal. So we’ve made a lot of progress in setting up sort of more exclusive Royal Enfield stores in the recent years. So could you share some color around what are the incremental market development activities that we are considering in the export markets? Are there any details on the current split of sort of volumes between the exclusive stores and the multi-brand outlets? And maybe what percentage of the exclusive stores are company-owned versus third-party? And sort of lastly, if you could share just export market revenue for the full year and then non-motorcycles revenue for the full year? Thank you.

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Too many questions, maybe I lost track. Maybe I’ll just go. In terms of number of outlets, we are almost having about 1,150 premium retail outlets outside India, which has exclusive stores and also a multi-brand outlet. If I have to talk about about 207 are exclusive stores outside India, I’m just talking about and almost about 950 is the multi-brand outlets.

Siddhartha Lal — is the Managing Director and Chief Executive Officer

And just to add there, none of them are company-owned. These are all third-party stores, all stores.

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

So what’s our focus is that in the international market, we have — we almost got the market share in all the markets where we are in the middle way is anywhere between 8% and 10% range. That’s where we are. The addressable market is very good. It’s quite huge. In fact, we’re just explaining, it’s as good as about what’s there in India now for the middleweight about 1 million motorcycles outside it.

So there is a huge headroom for Royal Enfield to grow. What Royal Enfield have to focus on is getting the right products, and that’s what we have done with our Classic 350 on the J platform, then the Hunter 350, which we brought in and the Super Meteor and very recently, we have done the refresh on our twins platform of motorcycles on Continental GT and Interceptor.

All these products are getting accepted very well. We are also working extensively on the community connect because what we understand is delivering the pure motorcycling experience, and that’s what we focus on even outside India. Clearly, a culture of motorcycling is that’s what we believe is Royal Enfield. So with all the spare parts issues sorted out with the retail outlet numbers, which are going up and in the products, we have a huge headway for us to grow in the international market.

Unidentified Participant — — Analyst

Got it. That’s helpful. And just lastly, if you could share the export market revenues and the non-motorcycle revenues for the year please.

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Yes. We’ll come back to you on the second point when we’re digging out the numbers.

Unidentified Participant — — Analyst

Sure. Sure. Thank you very much and all the best.

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Thank you.

Operator

Thanks. Next question we have from Kapil Singh. Kapil, please unmute.

Kapil Singh — Nomura Holdings — Analyst

Yes. Hi. Thanks, sir. Congratulations on a good set of numbers. Firstly, if you could just talk about what you’re seeing on the demand outlook across these segments, there was some discussion that we had last time that on Hunter, we are also looking to expand presence across Tier 2, Tier 3 towns. So how is the reach right now? And overall, what are you seeing on the industry?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Okay. Hunter will talk about it. Hunter when we launched, we started looking at the main markets plus we involved. Now the next focus area, which we have been talking about in Hunter is in Tier 2, Tier 3 cities also. But for Royal Enfield last year, in all the areas, rural, urban everywhere, the growth has been very good. Now with the ramp-up, which has been lost on the very good situation for Hunter and the booking is also going up. So the supply situation has become better, it has eased out, so now the focus is more on even the rural markets. That’s on the Hunter. What’s the next question, which you’re asking?

Kapil Singh — Nomura Holdings — Analyst

On the overall market, what are you seeing, right? So in domestic and exports both?

Siddhartha Lal — is the Managing Director and Chief Executive Officer

Look, exports, there are macro issues, which all of you know, there are inflation pressures, energy cost is high and all those things. But the mobility solution, which is required especially for the two-wheelers hasn’t come down. There is no signs which is showing at this stage, it’s on a high pressure point, but it has to be watched because nobody gets that particular situation on a macro level. As far as the domestic market is concerned, I think it is coming back the overall market. The market — it may not come up to the pre-pandemic level completely, but it is coming up.

The good sign for Royal Enfield, which we are looking at is the premium segment, the premiumization is better. The premium segment is growing, and we have grown better than that. And as that segment is growing — and with the trending products, which we have launched, especially Hunter, which is now getting — reaching into all the rural area and super media, the Classic 350. And the new models which we have lined up for the coming year, we see when the market opens up, we will have a very good traction and a good growth for Royal Enfield.

Kapil Singh — Nomura Holdings — Analyst

Great. And sir, the second question was on electric vehicles. We have started some initial capex there. So could you talk about how do you see the salience of electric vehicles in your segment over the next few years? Is it viable as you see things right now or it will take some time? And how much capex is going towards electric vehicles? Can we talk about what kind of capacities we are creating there and when we will start launches?

Siddhartha Lal — is the Managing Director and Chief Executive Officer

So electric, the transition will take place. It’s only a question of how many years it will take. Initial adoption is not a motorcycle, it’s scooters over a period of time the adoption will take ways even in the most cycle segment because the cost — the total cost of ownership, if you have to put the battery cost and all the other costs which are there for motorcycle of our nature, which is there, especially for the lesion motorcycles, it will be a bit tough because ICE will be cheaper in that way. But over a period of time, when the commodities like batteries and all those things when the cost comes down, the TCO will come down, which will become a compulsory reason for the consumer to buy, but it may take a few years. That’s our understanding at this stage.

What is important that is even that ICE in the segment where we the premium segment that is growing, and we see at least for a few years that the growth will be continuing. So we have to invest both in ICE and in EV, and that’s what is the capital outlook which we have talked about. As is mentioned about INR1,000 crores, which is involving. ICE new products and also EV at this stage of the stage where we are in EV, our focus is more on product development rather than just the capacity enhancement, capacity enhancement will come at a point of time, and we have done the strategy of at what point of time we have to build the capacity. But we have the factory space, which are available at our Vallam facility, we will build up the line, which is required for EV manufacturing also that place.

Kapil Singh — Nomura Holdings — Analyst

Any time lines you can share on the launch, when is it expected?

Siddhartha Lal — is the Managing Director and Chief Executive Officer

The timing is, I think it’s up and public. A lot of people have been saying that 2025, 2026 and what we are working on. We have to get a product which is very disruptive when it comes at a point of time. It can’t be — we are also there. So our focus has been what sort of a product, what sort of an experience. What’s the take for Royal Enfield when we come out with the electric motorcycles, our product strategy work and what are all the products and the number of products at what point of time you have to come up, but all has been lined up. So our focus as of now is all about getting the product right and working with the ecosystem and the suppliers to see that all the capacities are plot and get the motorcycle on. So you will see at an appropriate time when we come up may be at an appropriate time, we will come back to you and then say we are ready now that’s the time we are going to launched.

Kapil Singh — Nomura Holdings — Analyst

Okay. Thank you so much. Have a good day.

Siddhartha Lal — is the Managing Director and Chief Executive Officer

Thanks.

Vidhya Srinivasan — Chief Financial Officer

So I think I just confirmed the values that you guys are asking for. So international revenue is about INR2,080 crores, and the non-motorcycle for the year is about INR2,041 crores.

Operator

Thanks. Next question we have from Abhay Virani [Phonetic]

Unidentified Participant — — Analyst

Hi, thanks for the opportunity. I just had a follow-up on the export — so we know that the seasonality of exports is slightly different from domestic. But especially in the last few months, we’ve seen a lot of volatility — now when I look at near-term numbers, March was very strong, but I guess that was because the Hunter exports ramped up and then April. So when I look at April, is it seasonality? Or is there some slowdown? Can you give me some sense as to what you’re seeing actually for the very near-term because I think we have past the stocking cycle for the riding season for the overseas markets, if I’m not wrong. So some color there would be helpful.

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Our focus always, as we mentioned, we don’t look at the short-term every week, every month, how things are, right? But what we normally look at is for the long term, what is that we have to do for those markets. Our international market ambition is very high because the addressable market is very good and our product is getting accepted very well. The brand is being recognized very well, everyone starts looking at the Royal Enfield products are really gorgeous looking and its exactly what they want, simple, it has a relevant technology, which is there in the market.

With all of these things, we see there’s a huge potential for Royal Enfield to grow. April 1 or month, you know there are issues in some countries. There are poor transitions which are there. There are strikes going on in some countries. One thing which we have to bring it to all of you is, in fact, in the UK, we are taking over the distribution and from this month onwards, so there are some stocks which has to be adjusted and all those things. So these are all the operational metrics, which is what is being there. Riding season is starting now, and retails are becoming better. We have a clear vision of how do we become the leader in the international markets for which all the activities which are required, that’s where is the focus on that.

Unidentified Participant — — Analyst

Thank you. That’s helpful. And just one question on financing. What would be the broad retail penetration for you in India right now? And how do you see that moving?

Vidhya Srinivasan — Chief Financial Officer

Yes. It’s about 55% is our penetration. I think it’s been pretty consistent. And I think we do obviously see that over a period of time, we keep wrapping up, but we will be steady for us.

Unidentified Participant — — Analyst

Great. Thank you. I’ll come back in the queue. Thanks a lot.

Operator

Thanks. Next, we have question from Pramod Kumar.

Pramod Kumar — Goldman Sachs — Analyst

Hello. Can you hear me?

Vidhya Srinivasan — Chief Financial Officer

Yes.

Pramod Kumar — Goldman Sachs — Analyst

Hi, thanks, Govind, Sid, Vinod, the great set of numbers. So I think I’ll first ask the CV question because there’s a lot discussed on RE already. On BCB, Vinod, sir, I think, a great performance, and I would like to use this opportunity to ask you on the outlook for the CV industry, M&HCV industry, particularly for FY 2024 because there are a lot concerns about whether the growth is slowing down, whether we are in the last lap of the CV up cycle. So if you can share your thoughts, given your decades of experience in the space, how do you look at the M&HCV volume growth for this year, sir?

Vinod Aggarwal — Managing Director

I think there is still a lot of room for the growth because if you look at the industry position, it is still lower than the earlier peak of 2018, 2019. We are in the recovery cycle. And if you look at the — first of all, if you look at the overall economy, Indian economy now $3.5 trillion. And — and we are fairly confident that this economy is going to grow year-after-year. And if you go by the governments estimates, they are saying 5 trillion economy in three to five years. And it doesn’t happen in three year, five years or maybe it will happen in six or seven.

Therefore, the growth is imminent. The economy is going to grow. And if the nfrastructure investments where these are going, like this year, the allocation is INR10 lakh crores, in the fiscal budget and next two years it is going to be, I think, $1.5 trillion, 10 lakh 1000 crores — so therefore, the CV industry is going to be benefited with all this traction in the economy as well as the infrastructure investment. The second major reason of growth is the replacement market is going to be very, very strong because the old trucks, they are not able to meet the productivity or efficiency requirements of the customers.

So therefore, all the old trucks, which are more than five to six years old, which are there with the fleet operators or the transporters they would be required to replace, because it would have more improvement in infrastructure and also the expectations of customers. You have to meet the speed requirements. You have to meet the timeliness requirements. You have to meet the productivity and the cost requirements these can only be met by the new trucks. Therefore, the pent-up replacement demand due to the COVID and real replacement which is going to happen in a very strong manner, that is going to be there. So that is the second major region of growth happening.

The third is you were asking about the heavy-duty trucks. Heavy-duty trucks, the earlier peak were 295,000. We are still at 247,000 last year. So heavy-duties they are still lower than the earlier peak. Even though, the light-and-medium-duty trucks, they are — they have now reached the earlier peak. As far as the bus market is concerned, you will see a lot of growth coming in the demand from the State Transport Undertaking, because State Transport Undertakings have got very, very old fleet. So there will be huge requirement coming this year itself or the bigger buses from the State Transport Undertakings. And the School Segment is becoming very, very strong for the light and medium-duty buses you can say up to 11 meter buses.

So therefore, that demand for buses, we will see good growth in the current year. Only right now, the strategy in the global markets or the exports out of the country, they are down significantly. But they will also improve once the situation improves in the South Asian markets of Bangladesh and Nepal. Mostly the pain is there in Bangladesh, Nepal and Sri Lanka of course. However, the market is both the Middle East and African market is not that impacted. And of course, there will be good market even in the Southeast Asia, Indonesia or Malaysia or we are also now going to export to Latin American countries. So therefore, I am very, very positive by CV industry. You will see good growth at least for next two to three years.

Pramod Kumar — Goldman Sachs — Analyst

So Vinod ji, is it fair that the industry could see double-digit volume growth on the MHCV side this fiscal too?

Vinod Aggarwal — Managing Director

I’m expecting that. Yes.

Pramod Kumar — Goldman Sachs — Analyst

Okay. Thanks a lot for that sir. And second question is on Royal Enfield, Govind. I think great performance so far. So — but how should one look at a growth for the company or generally in terms of the industry-wide premium segment as you look into the next two to three years Govind especially on the domestic side because for us, Hunter has definitely done very, very well in the domestic market and probably going to work very well in international too.

But — what I’m trying to understand is, when do you expect the portfolio ex- Hunter to make a stronger come back, like the Classic, the Meteor, the Himalayan, when do you expect that portfolio to start firing for you? Because you talked about demand recovering on the domestic front the premium category. So is it fair to assume that we could see growth on a consistent basis even for all the models except for Hunter as well?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

That’s a very big question you have asked. Let me just see, the overall two-wheeler even now, at least in India, it hasn’t come to that level of pre-pandemic. It is inching up there. It’s slowly coming up. The sentiments are positive. It is slowly coming up. As Vinod was mentioning, the economic growth is pretty positive. Today position in the true wheeler segment is better. The discretionary spend is also going up. So all the signals which are there, the market is going to grow. What we are now looking at it and the market is growing, have we done our basics right and are we on top of it. Our brand positioning is strongest, the two-wheeler brand in India with unparalleled heritage.

We have premiumization of the market. We are there all the products which we have. We have the fantastic new products which have been launched, especially Hunter, now we are going into the rural market also more. And we have about 2,100 premium distribution network. So India, I think with the product, with the network and the market development activities, which we are doing with the economic things which are getting opened up, we feel there is a good potential for us to also to grow. Even now, our market share in the motorcycle is only about 7%, 8%, right? So there’s always a good potential for us to do, because Royal Enfield looks at actually developing the market rather than looking at only taking a pie out of it. We always believe like that.

International, the addressable market that promote is almost about one million units. There also, we have a market share of only about 8%, 9% as of now. All the new products, which are global products of Royal Enfield, those are all getting launched one by one. This year, you will see the traction in those areas also. We also have a huge potential in the non-motorcycle opportunity, right? We are in accessories, apparel, spares, well sorted out, and in the international market, as of now, we have to now get on to accessories this business in a bigger way. We have the configurator, which we launched for our accessories.

So even the older motorcycles, if somebody wants to change accessories, they can actually do configure seed on the configurator and then order.So what we are looking at is we are continuing to focus on what is right for the company when the market open. There’s a possibility for Royal Enfield to really, really garner the market share. That’s the confidence, which we have.

Operator

Thanks. Next, we have a question from Gunjan Prithyani.

Gunjan Prithyani — Bank of America — Analyst

Hi. Thanks Basu and thanks team for taking my question. Most of my questions have been answered. I just had two follow-ups. One, I’m just trying to get some clarity on this production, which has been lagging for the last two quarters. If I look at the dispatches have been — they have been, let’s say, to some extent, quite ahead of where the production level is. So is this a supply constraint that we’re still facing? Is this some deliberate inventory adjustment that we are doing? And particularly, the production is lower for Meteor 350. So I’m just trying to get color on what’s going on for the last six, seven months on the production side?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Hi, Gunjan. I don’t think we have any issues in the project we harnessed now. Having said, will you raised it we’ll also go through. But I must tell you Hunter, when we’re looking at a point of time, what should be the capacity, which we have to build. We build a particular capacity to a fantastic situation to be in more than what we have invested and then what we thought the Hunter has started doing very well. So we immediately started looking at the ramp-up up. So Hunter ramp-up is almost done.

The second new product is Super Meteor that also has come back as a positive thing to us is that it’s a good number. The booking is going up. International market is doing very well. But in the month of April, we had an OBD transition. So we have to be careful about the inventory. To that extent, we also did some adjustment in the overall inventory. Otherwise, production is not a constraint, model to model when the ramp-up is taking place, maybe it will take some weeks and months, but it’s all in the road-only, Gunjan, we don’t need to worry about that.

Gunjan Prithyani — Bank of America — Analyst

So I should read mostly this as a transition to OBD that some level of inventory adjustment has played out in the last couple of months?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

In the domestic market, yes.

Gunjan Prithyani — Bank of America — Analyst

Okay. And then second, a little bit on the non-motorcycle business. Now if I look at this has gotten to about 15% of our — close to 14%, 15% of our revenues. Last year, of course, saw a big jump, but then motorcycle revenues last year were lower. But in a normalized year like F ’23, we are at about 14%, which is quite a good numbers. So I mean, just trying to figure out, how should we now think about the growth in this business, does the share of revenues continue to inch up further? Or should we think this growing in line with the bike business? And if you can just give share more on what’s really been driving this growth? I mean, spares is something that we all understand, but maybe on the other parts on the non-motorcycle?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Yeah. Maybe I’ll just give you some color onto this. Our motorcycle and accessories, we are in a very good state now. We are adding more SKUs not just because we have to add SKUs and get business. While we do this, it’s all about how do we get the consumer to enjoy the comfort. So some SKUs are on comfort. Some SKUs are on the time, some SKUs are for the experience, if has to go for a two or something like that. So what we are looking at is in every product, what are all the SKUs which we can add in the accessories business, which gives them the experience which the consumer wants. So there’s a lot of work which is happening in building the SKU for the GMA portfolio that itself will bring in more revenue into this.

We also brought in the configurated, Gunjan, for the accessories because in our purchase I think motorcycle are being purchased during that time they can go into the Meteors platform on our website. So that’s where they normally buy it. That’s where the majority of the GMA facility also takes place. But we also found for the older motorcycles that people want so we brought in a configurated, which we are extending. There is a traction which is coming up. In the apparel, we are also looking at our riding gear range improvement, collaborations with leading brands like Alpinestars, TCX and all. So it’s all about what sort of an experience which we will give into this product, wherein the consumer will see, wow, I have a really nice product from Royal Enfield, which we should actually buy. So that’s how — it’s a business which has to give and revolve around the motorcycling, and that’s where the focus is also, Gunjan.

Gunjan Prithyani — Bank of America — Analyst

Okay. Got it. Sorry, just last question, if I can pitch in here is on the bullet. So bullet still stays on the — is still on the old platform, right? And now the OBD transition has happened. My guess is that it is compliant under the new norms. But if you can give us some color as to when this moves to the new platform or anything, any time lines you can share?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Bullet you see as of now, it is available, and it is growing. And at some point of time, Gunjan, we will do the transition. The way we have done the transition on the Classic 350 seamlessly, which you yourselves have asked. Is there any order inventory is left out? We are good in the transition. So we’ll do the transition smoothly.

Gunjan Prithyani — Bank of America — Analyst

Okay. Got it. Thank you so much.

Operator

Thanks. Next, we have questions from Raghunandhan.

Raghunandhan — Emkay Global Financial Services Ltd — Analyst

Thank you for the opportunity and congratulations on a good set of numbers. to BGR sir. Sir, for Super Meteor domestic market, out of the order bookings that have been received how would be the customer mix, trying to understand what would be the share of existing RE 350cc owners who would be upgrading to the 650cc Meteor trying to understand whether this is being seen as a credible upgrade by existing owners?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

Look, our Super Meteor is a thoroughbred cruiser and as of now, we have disposed almost about 4,000 plus units across the globe. If you have to look at — we have Meteor 350, and we also have Super Meteor 650, right? Those who enjoy an easy cruising, which gets on to that long distance also and cruising also enjoys it’s about Meteor 350. The 650 Super Meteor is yes, it is also for the people who enjoy long distance, right? But that’s also an easy cruising, largest booking motorcycle. So it will take some time for people also to understand. And especially, when the road development activity takes place in India. I tend to become very happy about it because that’s where the Super Meteor will actually find a space. And more and more and more new roads, which comes up and people enjoy long distance riding Super Meteor is an exact product because it’s so simple to handle.

On the upgrade cycle, whether the 650cc people will directly move there, because it’s Continental GT is the people who love that Continental GT is one set of consumers. They enjoy the style. They enjoy the customization, which can be done on that. Somebody would like the Interceptor 650, which is roadster type. So that actually caters to the set of consumers who want an experience. Super Meteor is for a long-distance ride. So that — this is a fun set of consumers. So it depends on what the consumer wants. But we have all the set of products which are available and it actually answers to the needs of those consumers. So it won’t be a direct replacement from one-to-one type

Raghunandhan — Emkay Global Financial Services Ltd — Analyst

Thank you, sir. My second question on the network expansion in domestic market, how do you see that target for the number of outlets, I mean, mass market two-wheeler players have notably higher number of outlets compared to Royal Enfield. Even car companies like Maruti have many more outlets than us. So, on an annual basis, what kind of network addition do you expect?

B. Govindarajan — Chief Executive Officer at Royal Enfield and Wholetime Director of Eicher Motors Ltd.

As of now, Raghu, we are almost about 2,100 minimum retail outlets across India, which has a mix of studio stores and the dealership outlets. What is more important to look at this, the market is also growing some area where at a point of time, the auto cluster, which has been very good, so probably would have been there. And we’ve also gone in for our stores there. In some areas with the auto clusters are coming up at that area, we will not present. So now, the focus to the team is actually to look at because we went in for a particular expansion. Now what we have to look at is it is always here rate consolidated and product.

That’s how we should actually look at any of these strategies. We should not blindly produce rate because we are very conscious of the dealer profitability and we give utmost importance for everybody outlets profitability for the dealers. So to that extent, our focus as of now is optimal reach is what is required. If we have to increase numbers in the area where the auto clusters are coming up, we will go there. In the area where the auto clusters are not okay, we will define that area because we have different formats. And we will actually adopt that format. So — if I ever tell you in one enters now it’s all about optimizing the entire gain involvement.

Raghunandhan — Emkay Global Financial Services Ltd — Analyst

Thank you, sir. That’s very helpful. That’s all from my side. Have a good day.

Operator

Thanks all. Due to time constraints, this was the last question. I’d like to hand over to Sid for his closing comments. Over to you, sir.

Siddhartha Lal — is the Managing Director and Chief Executive Officer

Thank you all so much for joining us so late in the evening in India at least, and we are we’re absolutely delighted about, like I said, our performance last year. I think it was absolutely fabulous. We’ve good start into this year — into this year, and we have lots of exciting things, both on the AR side, on the BC side, new products, new initiatives, and of course, a lot of work being done on the EV journey as well, so lots of interesting things on — in EML and in BC. So thank you very much once again for joining us, and look forward to seeing you next quarter. Bye-bye.

Operator

[Operator Closing Remarks]