Greaves Cotton Limited (GREAVESCOT) Q2 FY23 Earnings Concall Transcript

Greaves Cotton Limited (NSE:GREAVESCOT) Q2 FY23 Earnings Concall dated Nov. 14, 2022

Corporate Participants:

Nagesh Basavanhalli — Executive Vice Chairman

Dalpat Jain — Group CFO

Sanjay Behl — CEO and Executive Director

Dr. Arup Basu — Managing Director

Analysts:

Aashin Modi — Equirus — Analyst

Amyn Pirani — JPMorgan — Analyst

Pramod Amthe — Incred Capital — Analyst

Chirag Shah — Nuvama — Analyst

Jyoti Singh — Arihant Capital — Analyst

Gunjan Prithyani — Bank of America — Analyst

Ronak Sarda — Systematix Group — Analyst

Randeep Sen — MAS Capital — Analyst

Pankaj — Affluent Assets — Analyst

Sonal Minhas — Prescient Capital — Analyst

Jiten Parmar — Aurum Capital — Analyst

Sandeep Dixit — Arjav Partners — Analyst

Presentation:

Operator

Ladies and gentlemen, good morning, and welcome to Greaves Cotton Limited Q2 FY ’23 Earnings Conference Call. From the management, we have with us Mr. Nagesh Basavanhalli, Executive Vice Chairman; Mr. Dalpat Jain, Group CFO; Dr. Arup Basu, Managing Director, Greaves Cotton; Mr. Sanjay Behl, CEO and Executive Director, Greaves Electric Mobility. [Operator Instructions] I now hand the conference over to Mr. Nagesh Basavanhalli, Executive Vice Chairman, Greaves Cotton. Thank you, and over to you, sir.

Mr. Nagesh, can you hear us? Ladies and gentlemen, please stay connected. The management has got disconnected. Ladies and gentlemen, we have the management reconnected. Over to you, sir.

Nagesh Basavanhalli — Executive Vice Chairman

Yes. Good morning. Good morning, everybody. Thanks for taking the time. We welcome you all to our quarterly conference call for the period ending quarter 2 of ’23 — fiscal year ’23. As we are all aware, the Indian economy post-COVID and the recent festivities, sales are improving, consumer sentiment seems to be headed in the right direction. In spite of the global overhang of potential issues in the West. We are happy to announce the growth across the various business units in Q2. This has resulted in the highest ever quarterly revenue and also improvement in our profitability.

When you look at auto engines, when you look at retail, when you look at e-mobility, I think the story is quite clear. We are very proud of the strong and passionate leadership team that we have. And we continue to invest in building a competitive advantage in technology, product innovation, and design. We’ve already announced that we’re going to be bringing 5 new products in the e-mobility area, which will be showcased in the Auto Expo in January of ’23.

Some key points to note. Last mile mobility segment is recovering, reaching pre-COVID levels, hence has —

Operator

Ladies and gentlemen, the management line has disconnected again. Please stay connected. The concert will begin shortly. Ladies and gentlemen, we have the management reconnected. Sir, you may go ahead.

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. Sorry about the technical glitch in our landline, which probably caused the disconnect. Continuing on, last mile mobility segment is recovering, reaching pre-COVID levels. Hence, we are seeing the traction in both our automotive engines as well as on the penetration of EVs. E-Mobility business had the highest-ever sales. Powertrain business margins are improving. And in terms of electric mobility, focusing on a new product road map, which is designed, developed in India, for the Indian consumer is where our focus is along with our in-house technology and our supply chains.

In accelerating the EVR option with also the 700-plus outlets through both our Ampere-specific exclusive outlets plus the Greaves retail outlets as well as helping with the Greaves Finance where it makes sense. With the diversification strategy that we have started, H1 ’23 group revenue was about 135%. One or two other points to note. Global supply chain constraints, which we have talked about over the last several quarters continue to cause stress in the commodity cycle. However, we have seen in recent times that situation has improved, commodity cycle seems to be softening and it augurs well.

With that, in order to go over the financial numbers, I hand it over to Mr. Dalpat Jain who will take you through the financial performance.

Dalpat Jain — Group CFO

Thank you, Nagesh. Good morning, everyone. As Nagesh mentioned, in terms of the business overall, we saw good recovery post COVID and that reflects in the financial performance of the Q2, where all at the group level, the revenues were INR699 crores, which is a growth of 87% compared to same quarter of previous years. And it was 13% growth in Greaves Electric Mobility if we see from Q1. And if you look at consolidated level, it was 6% higher compared to Q1 of FY ’23. Overall, the profitability has improved in the engines of the powertrain business, we have seen margins improving with the reduction in the raw material cost.

And now as the revenues and the volumes are recovering, the impact of fixed cost reduction initiatives that company had taken were visible, and stand-alone EBITDA margins of the company in Q2 were at 8.9%. If you look at the H1 revenues, group reported total revenue of INR1,359 crores, and if we compare it with the highest-ever revenue of pre-COVID period, it was almost 135%. From balance sheet perspective, company had strong cash position. Our net cash position remained at INR1,268 crores as of 30th September 2022. Overall, in the Electric Mobility, where we have seen close to 256% growth compared to the same period last year.

And the total number of units were around 33,000, but there are some development over there at the industry level. The new battery guidelines are specifying some of the developments which are required in the product. Team is geared to meet the required standard as per the given deadline. But in the transition phase, we may see some disruption in the revenues at the industry level. But in the mid to long term, that will get again recovered because that will be an impact on the primary revenue in short term.

If you look at our B2C business, in the quarter 2, there was a 65% contribution of B2C businesses in the consolidated revenue, and the new businesses, the ones which are started as part of diversification strategy for the company have now started contributing 59% of the consolidated revenues. With that, I will hand over the mic back to the operator and we’ll open the floor for the question answers.

Questions and Answers:

Operator

Thank you, sir. We’ll now begin the question-answer session. [Operator Instructions] We have the first question from the line of Aashin Modi from Equirus. Please go ahead.

Aashin Modi — Equirus — Analyst

Yeah. Thanks for the opportunity and congratulations to the management for good set of results. Sir, my question is regarding the margins in the subsidiary. So if we see, we have seen a quarter-on-quarter decline of 35 basis points in subsidiary margins despite you’re saying that raw material cost is softening. So is it because of model mix? Or I mean, if you could comment on margins in the business?

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. Thanks, Mr. Modi. So overall, if you look at our subsidiary businesses between Electric Mobility, Greaves Finance, and GTL, you are right, there is a small drop in the EBITDA margin, which is more linked to with the sales and marketing expenses increase in electric mobility. Like we had spoken in the previous quarters, company is going to invest more on the brand-building initiatives and also sales promotion and marketing. And that’s where the other expenses have gone up and the EBITDA margins are marginally dropped compared to Q1.

Aashin Modi — Equirus — Analyst

Okay. So sir, our E 3-wheeler and E 2-wheelers have almost similar margins because I see that E 3-wheeler has grown higher quarter-on-quarter?

Dalpat Jain — Group CFO

That’s correct. EBITDA margins are higher in E 2-wheelers at current stage. But if you see from a long-term perspective, E 3-wheelers, once they build up the required volumes, the long-term margin should be better in E 3-wheelers.

Aashin Modi — Equirus — Analyst

Okay. And sir, my last question would be, regarding this you’re saying that this battery norms would have an impact on revenue and margins. So could you please tell us more about it? I mean what impact would it have on demand and what impact would it have on our margins?

Dalpat Jain — Group CFO

So while we will — Sanjay will tell more in detail about the overall guidelines. In short term, because of some specific requirements, there are a few changes which are being done in the product design. And to that extent, while the new product gets launched because this is a transition period, and after 1st of December, the products meeting with the guidelines have to be sold. So in the temporary period at the primary revenue level, there is going to be impact. It’s not going to be the impact at secondary level. But at the primary level, we are going to be moderating our production cycles to ensure that products which are going to the market are as per the required guidelines and in compliance with them. In terms — so that were on the revenue impact. Nagesh?

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. I’ll also add. Keep in mind, when we started, we said the industry size was somewhere in the range of 600,000 to 700,000 units, right, this year. That’s what we were producing. And this was, of course, up from 250,000 in the previous year. When you look at the last month of October, industry trended obviously aided by festivities, festival sales to almost 72,000 units, which is roughly 850,000 units. So what we are saying is the overall trajectory of electric mobility and the inflection point, I think it’s on track, in fact, if anything else, while we are not counting one month of festivities because we do believe in December, you’ll see a typical automotive slowdown, right? All we are saying is in the short term, as the phase-in and phase-out happens with the battery — by the way, battery standards, Phase I and Phase II is a very good sign.

It shows the sign of a maturing industry and it also helps organized players. So right? But short term, there are requirements of when do you manufacture and when do you sell, right? So that’s what Dalpat was talking about, wherein in terms of regulating the production, it won’t have any impact on the secondary as you’re already seeing probably in a band database as of this morning, I think they’re up to 14.8% when you look at our retail [Indecipherable] sales, up 29% from last month, right? So — but you — in terms of the primary sales and the production, obviously, we will have to manage that — in the phasing in of the first base, which is December 1st, and the second phase, which is April 1st, yeah? Thank you.

Aashin Modi — Equirus — Analyst

Okay. Thanks a lot. I’ll join back the queue for further questions.

Operator

Thank you. We have the next question from the line of A Pirani from JPMorgan. Please go ahead.

Amyn Pirani — JPMorgan — Analyst

Yes. Hi, thanks for the opportunity. And also thank you for separately talking about the battery safety norms. It’s actually something which I think everybody is invested in. So my first question is on that only. So it seems that at least looking at Waha [Phonetic] data that it hasn’t impacted you these changes and new to as it impacted you. And also, at least for now, thankfully, you are not one of the names which has been talked about in terms of the frame subsidy also. I’m sure that has something to do with how your product is engineered. So from a regulation point of view, can you spend some more time in helping us understand, where do you stand on the same two subsidy thing? Because some of your competitors have been named in terms of not meeting the norms.

Also, when you talk about meeting these battery norms, can you say what exactly you are doing? Are you changing some vendors? Was there some battery imports from — battery pack imports from China, which is now going to be done locally? So exactly what are you doing to meet these norms, if you can get some more clarity, that would be really helpful?

Dalpat Jain — Group CFO

Yeah. Thanks, Amyn. While broadly, we spoke about in terms of what is happening at the battery guideline level and what is happening in terms of the overall subsidy. I would request Sanjay to give specific details in terms of what E-Mobility business is doing. Sanjay?

Operator

The line from Mr. Sanjay has got disconnected, we attempt to reconnecting him back.

Dalpat Jain — Group CFO

Sure. So while Sanjay is joining, I mean, in terms of base electric mobility, we have been in compliance with the required guidelines. And as we had spoken and talked upon which was couple of days back —

Operator

We have Mr. Sanjay also connected now.

Sanjay Behl — CEO and Executive Director

Yeah. I’m connected now. So I have the question, Dalpat. You hand it over to me. I think I got disconnected. But let me give you clarity on battery standards first, and then I’ll come to the subsidy question that you had. First on battery standard. The first Phase 1 cutoff is on 1st of December. And as a company, we are fully geared up, as was also mentioned by Dalpat and Nagesh earlier to meet the guidelines, both in Phase I and in Phase II, Phase II cut off is on 31st of March. There are specifically three asks from Phase I and all of them, we are compliant, and we have been certified now, and we should be starting our production soon. But as you heard, there will be some transition loss from earlier inventory to the new inventory, though secondary will not get impacted. Coming to the second one. And I think just one other point. I think Nagesh did mention that I would like to reinforce. I think as a company, we welcome these upgradation of standards of battery safety because it really helps the serious invested players who are organized and who have capability not just to design, but actually assemble and then certify their products as for the stance standards that electric mobility has seen anywhere in the world, not just in India. So we’re very, very encouraged by these standards, and we are fully working to make sure that our vehicles are 100% compliant with that, and that’s where we are. On the same subsidy part, there is an industry, I think, verification, which is on. There is a standard that government has on at least 50% of DVA or localization, which needs to be done in indigitization of supply chain. As a company, we have been always been compliant right from the start are paying festivity rebates and there have been multiple audits, both by our certification agencies and independent auditors, which have been launched from time to time. The last one being on 29th of August, where these government authorized certified agency ARI had visited our plants and given us a green chit in terms of our localization content. Currently, we are in the process of answering a few queries that have come from certification agencies and to which we have responded and we’re waiting for the industry gate to open for the same subsidy release of money. And as and when it happens, we expect our subsidies also to get regularized. If there are any specific questions, then I will be happy to answer.

Amyn Pirani — JPMorgan — Analyst

That’s quite helpful. So just on the release of the fame money. So right now, as in like when you’re selling the vehicles, what is happening? I mean the fame money is not being released. So you are bearing the working capital, your dealers are bearing it. How is it working right now?

Dalpat Jain — Group CFO

If you look at the overall process, as you sell the vehicle after that, there is a 90 to 120 days of cycle, right? The dealer has to submit the documents and manufacturer has to approve that and then government releases it. So that cycle has been working regularly till last quarter. And now as Sanjay mentioned, there are a few details which agencies are taking and then the cycle should again restart. So that’s where it is. In the meantime, the subsidies recoverable and rescued by the company. So it’s a company which basically has that working capital cycle and not the distribution cycle.

Amyn Pirani — JPMorgan — Analyst

Understood. And just one last question, if I may. Not in the short term, but slightly in the medium term as the industry new moves to these new battery safety norms, what does it mean to for cost structures? Because I’m guessing that to make these changes, you will be making some changes in your vendors or your vendors will be investing some money to live up to these changes. So is there a change in the cost structure for the industry that you envisage beyond, say, March into next year? Or how should we think about it?

Dalpat Jain — Group CFO

Yeah. At a very high level, there will be, obviously, because some of the regulatory changes globally anywhere, any time in the automotive industry, any regulation comes in, right? It has added costs. Obviously, as we can see, we respect profitability. We have been watching that very closely. So we will obviously look at everything from looking at the cost side, how we can bring in more efficiencies, looking at, obviously, the pricing side, as you’ve seen, our ASP has gone up over the year, right? So I think we’ll look at both from a pricing standpoint as well as on the cost, and we will continue to monitor that. But yes, short term, I do expect some cost to increase. But again, like to reinforce, I think it’s a welcome decision, and we are fully geared to go forward.

Amyn Pirani — JPMorgan — Analyst

Great. Thanks a lot for these clarifications. I’ll come back in the queue.

Dalpat Jain — Group CFO

Thank you.

Operator

Thank you. We have the next question of the line of Pramod A from Incred Capital. Please go ahead.

Pramod Amthe — Incred Capital — Analyst

Yeah, hi. Yeah. This is a follow-up on the same regulatory question. What is the extent of cost hike you are looking forward for you and the industry?

Nagesh Basavanhalli — Executive Vice Chairman

So I don’t want to get into that right now unless the CFO has specific numbers right now to share. But keep in mind, there is a Phase I and a Phase II. Phase 1, like I said, comes in December 1, Phase 2 comes on April 1, right? We are working with our supplier partners to get some of the — especially some of the Phase II going, right? So the total cost. But like I said before, rest assured, we have a very aggressive cost-out program, right? And we will continue to be in that operating efficiency that we’ve always had because we’ve started from a lower-cost platform, right? We didn’t come from a very high-cost platform, right? And we will obviously also look at pricing over a period of time. So we will just manage it. We’ll see how the industry reacts. Hence, I’m not wanting to get into that in detail, but we are studying all of that as we speak. But enough to say that the uses of both market share growth and profitability or right continues here at Greaves.

Pramod Amthe — Incred Capital — Analyst

And I just wanted to get your view because when the regulatory changes happen, happening in just a short period of 4 months. Does it make any sense because when we are seeing in ice vehicles, it usually takes even when people are giving 3-years period, people are trading about. So here, considering that you talked about retail to be changed, if I heard you right, the retailing of the new product has to start from 1st December and 1st April. So hence, just a window of 4 months to make those changes. Does it make any sense for the OEMs to do Phase I and Phase II or some may take a call to just do a Phase II and get rid of it in one go?

Nagesh Basavanhalli — Executive Vice Chairman

So, I think I’ll do the high level and maybe Sanjay can add. Again, like you said, it’s a step in the right direction. And if that instills more confidence in the consumer and brings in more maturity to the industry, I think they’re all for it, right? So we are going about it in terms of bringing in the Phase I by December 1, and then getting into Page 2. Sanjay, do you want to add anything to that?

Sanjay Behl — CEO and Executive Director

I think it’s a fair question. And the only thing I would like to add is that the reason why it has been split into 2 phases, as per our understanding is also the industry one readiness time that is required to move from very base level upgrades to extremely high-level upgrades. I think there is a lapse time of about normally 4 to 6 months that is required. So while let go of immediate what is possible by the industry and the certification ability of the industry is also very critical because you’ve seen the number of models that are getting launched every month, every single component of vehicle needs to be certified.

So I think I understand and I believe that it’s a very informed and a very well-calibrated decision to go and take it to two phases. One, to start with the base level standards that are coming in terms of next level of safety requirements on battery and then really advanced level of technology that is required to possibly makes our batteries the best in the — across everywhere in the planet in terms of both design, integration and validation, which is the next phase. So I think that’s the reason why it’s going pickup into two. And as Nagesh said, it’s a very welcome move. And I think it will really help us as a company to take the next level and not many because there are a number of unorganized players is so large in India, I think it is separate. A lot of non-serious and very, very basic level of assemblers and it is guiding the customer safety tools completely next level. So that’s what it is. That’s why the two phases.

Pramod Amthe — Incred Capital — Analyst

Sure. Thanks. And related to the fame subsidy, I wanted to get — do you feel the industry practices will change considering that now for the first time, we have seen brakes being applied with the release of the subsidy. And hence, players like you or the others may like to get the cash in hand and then only give to the customer, one or some players who are cash rich like you would like to take that working capital call and differentiate yourself in the marketplace to put it upfront on the table to the customer. So do you see that happening over the next 12 months or so the smaller guys struggling to get those fame subsidies and you guys can take that call?

Dalpat Jain — Group CFO

I can start with that. Keep in mind, we are — we have brought in the discipline we do cash and carry with our dealers. So we select the money upfront, if you recall from our dealership, right? Plus, like you rightly said, I think one of the reasons we raised money to make sure that as the consolidation of the industry happens, right? And as the technology and the product improvements happen, we are geared up. So I think it’s definitely augurs well.

Sanjay Behl — CEO and Executive Director

Yeah. Exactly. So Pramod, that you rightly mentioned, there will be some churn with this kind of impact and with the regulatory changes on the guidelines with the working capital and the funding requirement. And you will see with the time industry maturing and some of the players who are well geared with the technology and the funding stocks we will do in the market situation.

Pramod Amthe — Incred Capital — Analyst

Yeah. Thanks a lot.

Dalpat Jain — Group CFO

And just to the last point, I think you said, will the standard change for our operating company like us. I think if you would have noticed Greaves, right, before the game subsidy, our journey to localization of our supply chain, it started. In fact, we have taken a hit last year and dipped our market share. We’re down to as much as 5% from which we have now come closer to 15% to actually get on to this full percentage of indigenization and localization of our suppliers. So standards will remain the same only get more strengthened as we go along. So we’ve always been 100% compliant on the standards has been [Indecipherable]. So that will remain the same. Of course, the business models will evolve as the market grows and consolidates, that we’ll have to evaluate.

Pramod Amthe — Incred Capital — Analyst

Thanks, and all the best.

Operator

Thank you. Participants are requested to kindly restrict your questions to two per participant. We have the next question from the line of Chirag Shah from Nuvama. Please go ahead.

Chirag Shah — Nuvama — Analyst

Yeah. Thanks for the opportunity. Sir, I have first question on — a follow-up on this battery norm changes. At industry level, what are the changes that are to be done because according to me, the time frame that has been given is not that significant big — that it required a big technological change, one. So if you can elaborate on what exactly it is and any loss of efficiency or performance or kilometer range or anything that because of which there could be impact over there? Because they were also asked for a sale of gaps between the placement has also been spoken about as one of the requirements, the battery pack?

Dalpat Jain — Group CFO

Yeah. So can I answer that, Nagesh?

Nagesh Basavanhalli — Executive Vice Chairman

Sure.

Dalpat Jain — Group CFO

Yeah. Okay. So in the Phase I, the requirement is really to move towards from a normal battery management system to smart management battery management system, that’s not BMS, that’s the phase. The second is hand enabled charges so that there can be data propagation between a charger and the battery. So if the battery i,s let’s say, reaching a certain temperature, it sends an auto signal for the charger to switch it off and so on and so forth. So I think these are some very, very base level changes as you rightly picked up, our requirement in the Phase 1, in Phase 2, the specific technical changes that have been asked is, one is to go for what is called IP67 battery, which is really to limit the water ingress inside the battery.

So there won’t be any water leakage inside the battery in a humid or in a rainy or a monsoon condition, which, of course, as you know, water can be is a carrier of a current and it could lead to some level of [Indecipherable] to avoid that, that’s one requirement, which is coming. The other requirement is this thermal propagation between the cells because you know there are many cells packed in the battery. So how does current really flow from one cell to another. And are there any sensors that have been put in case one particular cell is overheated than they could be sensors that probably it says 5 minutes before the actual switch off, but industry is looking at what is the right level of — so there are some gas sensors, fracture sensors, which have been asked to be put into the battery.

So this is the technical Phase I and Phase II limited kind of changes which are coming. Are we prepared with the industry buildup and as I think the technology system is maturing very rapidly in electric mobility in India. And I think it augurs really well. Our work with our suppliers and vendors gives us a lot of confidence that the Indian industry and the ecosystem, Indian supplier ecosystem is fully geared up. And I think we and as part of the industry, and we believe the whole industry will be able to meet up with both these challenges as we go forward.

Chirag Shah — Nuvama — Analyst

Yeah. This is helpful, sir. Sir, second question was on multi-brand retailing.

Operator

Sorry to interrupt. Mr. Chirag Shah, requested to kindly come back in queue as we’ve other participants also in the line.

Chirag Shah — Nuvama — Analyst

Okay.

Operator

We have the next question from the line of Jyoti Singh from Arihant Capital. Please go ahead.

Jyoti Singh — Arihant Capital — Analyst

Yeah. Thank you for the opportunity. Sir, my question is on the dealership side as we were expecting that we will reach 300 by end of September and 500 by FY ’23. So are we following that? And we are on track?

Dalpat Jain — Group CFO

Yes, we are on track on. We’ve crossed 300 dealers in last quarter, so we’re closer to 350, and we are on track in reaching 500.

Jyoti Singh — Arihant Capital — Analyst

Okay. And sir, another on the localization side, how much percentage we are doing localization currently?

Dalpat Jain — Group CFO

The current norm is 50%. We are well above 50%, we are closer to 60% of localized.

Jyoti Singh — Arihant Capital — Analyst

Okay. And sir, if you can comment on the NPL or [Indecipherable] like how much we are expecting for the FY ’23?

Dr. Arup Basu — Managing Director

So going back to your dealership question, as you know, we also, in addition to the MPF exclusive showrooms that Sanjay talked about, we also have the Greaves retail showroom that we sell both Ampere and other EVs, right? So technically, our outlets today is greater than 700 in the country. So our growth — in fact, we’ve added more than 30-plus Greaves retail stores in the country year-to-date, right? Point number one. Point number two, in terms of future sales for FY this fiscal year sales, I think, was the second question. As you know, we normally don’t give forward guidance, but here is the — some of the data points that I’ll share.

If you look at the entire last year, we did 62,000 units. In H1, we did 62,000 units plus. So technically, H1 has been greater than the entire last year. Granted last year, we had COVID impact in the Q1. And clearly, short term, we may have a little bit of bumps along the road in terms of primary like the CFO and Sanjay were talking about, right? So while we won’t put down a number, last quarter was 28,000 this quarter was 33,000, right?

So I think you can see the trend line. Our market share as of today morning is about 14.8% to 15% in [Indecipherable] database. So I think you have all the data in front of your ma’am, which probably shows you kind of where it is, and we have 29% month-on-month improvement versus last month, which is a record month.

Jyoti Singh — Arihant Capital — Analyst

Thank you so much, sir.

Dalpat Jain — Group CFO

Thank you.

Operator

Thank you. We have the next question from the line of Gunjan Prithyani from Bank of America. Please go ahead.

Gunjan Prithyani — Bank of America — Analyst

Yeah, hi. Thanks for taking my questions. I’m not going to harp too much on the regulation thing because it’s still evolving. But I’m just trying to get a broader picture on the industry. Now when I look at these norms, clearly, in your messaging, you do mention it may get challenging for some of the organized guys to me. And come F ’24 when you possibly see the same too sort of going away as well. I don’t know what the update on that is. But assuming it goes away, how should the entire industry sort of pans out? Do you see there is — there is — what does it mean from a competitive landscape perspective? And secondly, your midterm margin also, which you seem to be emphasizing that profitability will focus on profitability. But once the same too goes away, how are we thinking about the margins from a 3 to 4 year perspective? And that will be the first question.

Dr. Arup Basu — Managing Director

Yeah, I’ll take that question. So fair question. If you see our projections over the last couple of quarters, right, even at the beginning of the year, we said we should end up somewhere between 600,000 and 700,000 units. Last year was an industry size of electric 2-wheelers was about 250,000 units, right? So when you look at last month, aided by festivities, the projection is looking more like 850,000 or close to 900,000, right? So a short term, we’re still projecting that 700,000 plus because one month doesn’t make a trend. However, typically automotive cycles do go down in December, that’s because of the year-end change, etc., right?

But when you look at the trend, 250,000, and even if it becomes 700,000, that’s almost a 3 times growth this year. And from there, 2 times plus growth next year is not ruled out based on the trajectory. So the trajectory and the industry from where we play is strong. Second point I would like to leave it with this audience is we are probably one of the few players who bought into this early. We have understood the customers. We are both in 2-wheeler and 3-wheeler, B2B and B2C. Domestic today, but obviously, international is an option down the line, right? So it opens up a couple of other markets, point number two.

Point #3, coming to subsidy, you’re right, that’s a decision beyond all of us. We worry about the things we control. So what are we doing in terms of our continued focus on cost control? Our continued focus on frugality, making sure that the product redesign is adequate, meeting the product design, what the customer wants and needs, right? But yet bringing in innovation right, focusing on Indian-made Indian-style products, which innovate, but at the right cost and the feature set at the right cost is kind of what we’re going to focus. So on the cost side, I think we will continue our focus as and when and if a subsidy goes away, we will be ready to bring in more efficiencies because keep in mind the scale efficiencies will grow, but scale efficiency in automotive will get efficiency significant.

Secondly, on the pricing side, we’re not afraid to take pricing increases. It has been demonstrated. Our average selling price has gone from 40,000 to 95,000 plus. So we will continue to keep pricing actions. So we will look at it both on the pricing side, working on the innovation and the product as well as on the cost side. That’s how I would answer that today. And as and when and if subsidy goes away, I think we will be ready by a variety of actions.

Gunjan Prithyani — Bank of America — Analyst

Sir, just a follow-up, Nagesh, on the PLI kicking in. Do you see that as a competitive advantage for the ones who are qualified? How would you then approach the industry given we are not part of that list? And also on this ASP point, if you can share how the low-speed and high-speed mix has changed because my understanding is this 45% to 90%, a large part of that is attributable to the mix changing. So if you can share what is the underlying price growth we’ve been able to achieve x mix that — if you have any insights into that?

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. So let me take it 1 at a time. I think the first part is one was a mix. And then the first part of the question was the PLI. So let me take the PLI. I think it’s a fair question. Keep in mind, we are one of the players who are very clear, and we do that even in our traditional engines business. While we have the capability to do design and manufacture every component on the side, we use a combination of make and buy, right? And from day one, we’ve been very clear that we will use the right combination of make and buy. So same thing in the electric mobility while we would want to control the design and innovations on certain factors, right, like motors or a software controller, etc.

The manufacturer could be done by somebody else or the manufacturer could even come inside if the scale efficiencies and the commercial benefits are there. So we will work with like-minded partners in the supply chains, have access to PLI. So the way I look at this issue is, yes, while we may not have directly gotten PLI because of how it was structured. But we will work with partners who have access to this and the competitive advantage can be retained over a period of time. That’s how I look at it.

The second part, in terms of mix, yes, you’re right. The first — some of that movement happened because we moved to the what we call the high speed. But keep in mind though, we will continue to keep moving with our 5 new products coming in and especially the products on the 2-wheeler side, both in terms of product performance, which includes the speed, the powertrain, or the feature performance as well as on the pricing parameters.

While we have not determined the pricing, I think we will have products that will scan. We have been very, very careful as to where is the heart of the market and where we want to compete. And over the next couple of months, you’re going to see us have some pricing strategies that will probably reflect. So I think we will have that as and when the product rolls out.

Gunjan Prithyani — Bank of America — Analyst

All right. Thank you so much.

Nagesh Basavanhalli — Executive Vice Chairman

Thank you.

Operator

Thank you. We have the next question from the line of Ronak Sarda from Systematix Group. Please go ahead.

Ronak Sarda — Systematix Group — Analyst

Yeah. Hi, thanks for the opportunity. Sir, a couple of questions. One, a clarification. Did you say that the norms which are coming in from December 1 and March 31 are applicable more from a retail sales point or more from a manufacturing point? So could you sell the older generation products post-December 1?

Dalpat Jain — Group CFO

One is, there is an ambiguity out there, but we are considering that as a manufacturing point and basically on the — and that’s how we are preparing the overall thing. So basically from 1st December, the products which are getting sold in the market will be complying with the required guideline. But right now it’s ambiguous, it’s not clear.

Ronak Sarda — Systematix Group — Analyst

But we are preparing more from a retail sales plan. So we will be curtailing our manufacturing to address dealer inventory and [Indecipherable]?

Dalpat Jain — Group CFO

That’s correct. That’s right.

Ronak Sarda — Systematix Group — Analyst

Sure. And the second part of the question was more from a balance sheet standpoint. I mean, if I look at the — despite very high working capital, our September end net cash is up nearly INR1,300 crores. And we do have an option to further take $70 million from a strategic partner. So how does that work out? I mean, is there a thought process to strengthen the balance sheet further? Or when do we take that decision?

Dalpat Jain — Group CFO

So Ronak, if you look at the overall, the way business is performing and like we have mentioned, the operating cash flow continues to be positive for the businesses, including a profitability in electric mobility. So we will continue to evaluate it based on the overall business plan. Right now, balance sheet is having adequate liquidity to meet the requirements for the future expansion, and we should evaluate it as the time comes, the right time.

Ronak Sarda — Systematix Group — Analyst

Sure, sure. And the final question on the slow speed portfolio. I mean, would it be still viable to sell those slow-speed products post the phase 2 norms? Or does it become more of — I mean, more of a push side from — from Ampere Greaves? How does the dynamics change on the slow-speed portfolio?

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. Sanjay, if you can take this?

Sanjay Behl — CEO and Executive Director

Yes. So I want to ask, overall slow speed is currently trending at about 5% to 7% of the overall sales. And with with the norms coming, we feel that slow speed from about third of the market protocol about 2 years back or 1.5 years back, coming down to under 10%. And with the same subsidiary, its viability is definitely under challenge at this point of time. So then we’ll have to really see as to how the market augurs, but pain is not going to be infinite kind of a subsidy kind of part for the industry, and we are very well aware that we have to do adequately both in terms of our pricing and in terms of our costing standards to remain competitive as the same subsidiary subsides. Better slow speed has relevance in India.

Yes, the segment has relevant in India for last-mile micromobility, intra-city small-distance travel, we believe slow speed has viability. So we would like to keep the light bulls on, continue to keep watching the segment very, very closely, and then see as to whether we need to invest into growing the segment. And if it happens as the thing really subsides. So we’re able to see that going forward.

Ronak Sarda — Systematix Group — Analyst

Sure. Thanks. Just to follow up here, there are two parts to it, right? One is what you’re trying to say, let’s say, a year down the line when the same subsidy goes away, there might be a necessity to take INR30,000 to INR40,000 price increase on high-speed portfolio. And at that point of time, slow speed becomes viable. My question was more from the technology side. Do these two battery norms, I mean with those two battery norms, is it easy to make those technology changes in the slow speed portfolio itself or the viability is — I mean, I’m asking if the viability is more from the technical side?

Nagesh Basavanhalli — Executive Vice Chairman

So we even have to really check out because at this point of time, since this doesn’t have a same certification requirement, the development for these batteries is not really because all the battery standards are really being done to really upgrade to the same certification standards at this point in time. So Ronak, I’ll have to come back to you on this offline after validating with the technical team.

Ronak Sarda — Systematix Group — Analyst

Okay. Got your point. Thank you.

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. Okay. Welcome.

Operator

Thank you. We have the next question from the line of Randeep Sen from MAS Capital. Please go ahead.

Randeep Sen — MAS Capital — Analyst

Thank you for the opportunity. And congratulations on a great set of number. This is a reference to the B2C share increasing rapidly and now standing at 65%. So this is with respect to the branding of — are we looking at having a brand ambassador in the near future with respect to connecting to the masses. Any thoughts over there?

Nagesh Basavanhalli — Executive Vice Chairman

Yeah, I’ll take this. First of all, thank you for recognizing that. I think it goes back to a fundamental strategy 4 years ago, right? We said we will move from a B2B to a B2B plus B2C right? And we wanted to be closer to the consumer. So in that sense, whatever it takes us getting closer to the consumers, more dealership points, more products that are relevant to an — brand ambassador and or not, how we execute the marketing plan stay tuned because as we get into the auto expo, our electric mobility team led by Sanjay are working on a marketing campaign. So I would not like to get into that at this point of time, but stay tuned on that, yes, because it’s still working

Randeep Sen — MAS Capital — Analyst

All right. All right. My next question was, I think, 33,000 units this quarter. And if I just extrapolate that, let’s say, around 1.2 lakhs in this year, given the Ranipet plant capacity at million units, obviously, that’s in the future. But how would you like to share like the growth trajectory of Ampere from here on in terms of units, any projections?

Nagesh Basavanhalli — Executive Vice Chairman

Again, we don’t give forward guidance, but I will insist on going to the past. In December of 2020, we sold 2,000-plus units. January of ’22 or December of ’21, I believe, we sold almost close to 10,000 units, right? So — and the trajectory will continue. I mean you’ve seen month-on-month at the numbers are now very visible. The manufacturing capacity is already geared up for 0.25 million units, 20,000-plus a month in one shift. And if needed, we can go up to 2 shifts and obviously, we can double that capacity. So I think when it comes to the fundamental things that we control, which is manufacturing capacity, the talent, the product, some of that we are investing. As and when the market really takes off and the demand is there, I think you’re going to see us get to that point of time. Today, and we are doing all the things in our control to kind of be ready from the inflection point.

Randeep Sen — MAS Capital — Analyst

All right. And if I can just squeeze in one last question. One of the key elements of getting Abdul Latif Jameel onboard was to leverage their — the supply chain or the global export capability that they had. I think they had done it with Toyota also. So any traction over there in the exports, like any plans that we have in onboard already?

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. So we are working on an export plan, which is not ready to be discussed right now. But as and when it’s ready and the product and the country road map is ready, we’ll be talking about that. But yes, that is definitely in the pipes.

Randeep Sen — MAS Capital — Analyst

All right. Thank you so much, and wishing you all the best for the upcoming quarters. Thank you.

Operator

Thank you. We have the next question from the line of Pankaj from Affluent Assets. Please go ahead.

Pankaj — Affluent Assets — Analyst

Thanks for taking my question. Sir, you have guided about the numbers or you have given a trajectory of how the numbers have evolved over a period of time. So — and over the last 2 quarters, we have seen the EBIT margins improving. So just wanted to understand, next year, is the — as and when the numbers double from this level, where do you see the margins for EV division going hitting?

Nagesh Basavanhalli — Executive Vice Chairman

Pankaj, if you look at the overall electric mobility there are going to be different factors playing in the next couple of quarters, the 4 quarters. But if I see it from the long-term perspective, which can be, let’s say, 8 to 12 quarters down the line, the margin should stabilize in line with the overall EV vehicle industry because the operating leverage is going to play its own benefit at the margin level. The gross profit, as you look at the last quarters and the last couple of quarters are already reaching towards now 22% to 24%. With the fixed overhead remaining more or less at the similar level with the volumes, that’s the benefit which is going to slow down to EBITDA level.

Pankaj — Affluent Assets — Analyst

Sure. And second thing, you currently have ample cash. So just wanted to understand what are your plans regarding that? Any takeover or any investment regarding EVs?

Nagesh Basavanhalli — Executive Vice Chairman

So clearly, I think when you look at — we said we will invest in products we have announced five group products. We said we will invest in people and manufacturing capacity, and we already talked about it. we said we will invest in technology, and we continue to do that, especially as the combined group, Greaves Cotton and Electric Mobility will look at adjacencies in terms of powertrain applications where we’re going to get into, right? Last but not the least, yes, M&A is definitely also is on the cards. And as and when we are ready with any major announcements, we will come back and talk to you. So it’s all of the above.

Pankaj — Affluent Assets — Analyst

Thank you. Thanks a lot.

Operator

Thank you. We have the next question from the line of Sonal Minhas from Prescient. Please go ahead.

Sonal Minhas — Prescient Capital — Analyst

Hi, sir. Am I audible?

Nagesh Basavanhalli — Executive Vice Chairman

Yes, please go ahead.

Sonal Minhas — Prescient Capital — Analyst

Sir, I had a first bookkeeping question. So just wanted to understand, let’s say, if you’re selling 10 electric vehicles, what part of that are we financing through our own books in percentage terms? If you could just help understand that.

Nagesh Basavanhalli — Executive Vice Chairman

So Sonal, we don’t have any financing of electric vehicles from the electric mobility, right? We have tied up the various financial and the industry now the penetration of financing is close to around 30% to 35%. So overall, from a financing point of view with various financing partners is anywhere between 30%, 35%. Within the group, we have another company which is into financing and that’s the fledging one with a very small AUM. So in terms of the overall financing to the Ampere vehicles, the share is small, but at the overall industry level and Ampere level, the financial penetration is anywhere between 30% to 40%.

Sonal Minhas — Prescient Capital — Analyst

Understood that, sir. And the second question, sir, just wanted to understand, I was looking at for November. I see a depth in the sales comps like Okinawa and Hero Electric and you seem to be holding well. Is this somewhat like just trying to understand more from a market perspective, is this linked to the battery regulation norms which you were talking about earlier in the call? If you could just — like if there is anything to be read at all there? I just wanted to understand.

Dalpat Jain — Group CFO

So I would not like to comment on the competition. But however, all you can say is we continue to do what we need to do in terms of executing our strategy. So we’ll continue to do that.

Sonal Minhas — Prescient Capital — Analyst

Sure, sir. That’s about it from my side. thank you. Thank you.

Dalpat Jain — Group CFO

Thank you.

Operator

Thank you. We have the next question from the line of Jiten Parmar from Aurum Capital. Please go-ahead.

Jiten Parmar — Aurum Capital — Analyst

Yeah. My question is on we had received some time back some ARI observations. Are those resolved?

Dr. Arup Basu — Managing Director

They have been replied to.

Jiten Parmar — Aurum Capital — Analyst

Okay. Okay. So but that closure is not coming yet, right, on that?

Dr. Arup Basu — Managing Director

No. Closure in terms of — there was a certain deadline by which we had to respond and we have responded to every query, which is from our side to be done for ARI.

Jiten Parmar — Aurum Capital — Analyst

Okay. Now this — we had acquired a 26% stake in MLR Auto. So what is the status on that? Have we started utilizing this particular investment in the sense that we started outsourcing any work to them? Can you throw some more color on that investment and what happens to that?

Dalpat Jain — Group CFO

I’ll take that. So again, part of the strategy was also the 3-wheeler. And as you’ve seen in the E-Rickshaw side, where it impacts lights and likelihoods without the subsidy being a very strong thing there, I think you’re seeing good traction, point number one. Now in terms of MLR.

Yes. We have acquired the 26%, and we have a road map to get to a higher number, and we will execute that from in — as and when it’s appropriate and we’ll announce that, right? We have started building 3-wheelers out of that plant. It was — we have started building the dealer network. The dealer network is now greater than 70% from hardly 7% when we started, right? We are getting the products ready, both in terms of the IC engine, but more importantly, on the electric mobility side. So yes, you are going to see a lot more traction in fact, in the auto expo, expect also to see couple of new products from the 3-wheeler stable as well. Yes. So it’s an integral part of our strategy going forward.

Jiten Parmar — Aurum Capital — Analyst

Great. Thank you. Just final question. We have seen a reduction in the cash position and also if you can tell me whether the retail services are the EBITDA positive? Or what is the status from that rate? If you can — if you are allowed to disclose that?

Dalpat Jain — Group CFO

Yeah. So all the views are EBITDA positive. In terms of the cash in the second quarter, basically stand-alone, the cash position has increased. In electric mobility, the money has got utilized for a part of the CapEx and part of the increase in the working capital. So that’s where the quarter 2 cash movement has been.

Jiten Parmar — Aurum Capital — Analyst

Okay. Thank you so much. That’s all I have.

Dalpat Jain — Group CFO

Thank you.

Operator

Thank you. We have the next question line of Sandeep Dixit from Arjav Partners. Please go ahead.

Sandeep Dixit — Arjav Partners — Analyst

Hi. Just wanted a clarification. I understand from your comments is that we probably see some dip in EBITDA margins over the next couple of months as we transition because of the new market standards. Would you have any guidance on what would be the stable EBITDA margin we could look at beyond this initial changeovers?

Nagesh Basavanhalli — Executive Vice Chairman

So in terms of EBITDA margin guidance, I think, is what you’re looking for? Are you looking for the group perspective? Or are you looking for electric mobility?

Sandeep Dixit — Arjav Partners — Analyst

For Electric Mobility, sir?

Nagesh Basavanhalli — Executive Vice Chairman

Electric Mobility, okay. So like we said, there are a lot of moving parts right. Yes, with the phase from Phase 2, there are a lot of moving parts. Plus, like I said, there will be new products coming in, which give us a little more pricing power, hopefully, over a period of time, and our marketing campaign kicks in. So I’m not going to answer that question directly right now because there are a lot of moving parts, but we assure. Like I said before — is — this is on top of our mind, both from a cost efficiency standpoint as well as from a pricing standpoint, right, how we manage it over the next couple of quarters.

Sandeep Dixit — Arjav Partners — Analyst

Can I sort of ask sort of a related question? Like-for-like, what would be the increasing cost because of the new standards, 10%, 20%? What would we like to have sort of educated guess?

Nagesh Basavanhalli — Executive Vice Chairman

Sandeep, right now, it’s early overall — it’s not going to be in a way where it’s going to impact the margin significantly. That’s going to be managed with the right combination of product pricing and also the value engineering idea on the other side to reduce the overall cost.

Sandeep Dixit — Arjav Partners — Analyst

Okay. I think my question was slightly different. I was since I understand the margins are also a function of your other costs and your price. I just wanted to know what is the incremental cost to that?

Nagesh Basavanhalli — Executive Vice Chairman

Yeah. So right now, it’s early. Maybe we will talk about it when we talk in the next quarter.

Sandeep Dixit — Arjav Partners — Analyst

Okay. If I have a position to ask one more question. Normally, what we see is that any kind of a standardization or regulation tends to consolidate the marketplace, especially at the base of the pyramid. And when that happens, the marginal players get wipe out or rather thy move out to new places tend to take market share. Can we expect something similar once these norms coming?

Nagesh Basavanhalli — Executive Vice Chairman

We are using for some time in the earlier question as well. So overall, at the industry level, in the initial period as there is — there are many new entrants who come in with the different kind of expectation capabilities. Now as the industry matures, players who are having the right capabilities and also the overall funding structure, they will be able to grow and also gain in this kind of market situation. Consolidation would be inevitable in that situation. So we expect that to get played out as these things develop over time. And industry shall mature like the overall as the time passes.

Sandeep Dixit — Arjav Partners — Analyst

Thank you. Thank you. These were my questions.

Nagesh Basavanhalli — Executive Vice Chairman

Thanks.

Operator

Thank you. That was the last question. I now hand the conference over to Mr. Nagesh Basavanahalli for closing comments.

Nagesh Basavanhalli — Executive Vice Chairman

Thank you. Thank you, everybody. We appreciate your ongoing interest. We are certain that we will continue to work on our products, our businesses, operational efficiencies, and the distribution. We want to thank all of you for participating and all the questions you’ve asked. Stay tuned for more. Thank you, and have a great day. Thank you.

Dalpat Jain — Group CFO

Thank you.

Operator

Thank you, sir. On behalf of Greaves Cotton Limited, we thank you once again. Stay safe. With this, we conclude this investor call. Thank you for joining us.