Greaves Cotton Limited Q4 FY23 Earnings Conference Call Insights

Key highlights from Greaves Cotton Limited (GREAVESCOT) Q4 FY23 Earnings Concall

Management Update:

• [00:01:58] GREAVESCOT said it achieved the highest quarterly earnings revenue in 4Q23.

Q&A Highlights:

• [00:08:12] Aashin Modi from Equirus asked that despite reporting the highest-ever volumes in E-Mobility, margins remain subdued due to lower GM and higher employee count. Dalpat Jain Group CFO said the company has increased its headcount to prepare for future growth, which has led to higher employee costs. Also, the company has not fully passed on the cost of AIS 156 compliance to consumers, which has impacted GM.

• [00:09:29] Aashin Modi with Equirus asked that as of March 2023, how much subsidy is left for electric vehicles, and what is the status of the approval process for new players. Sanjay Behl CEO GEMPL replied that Greaves Electric Mobility is cooperating with the Ministry of Heavy Industries’ review of FAME II compliance and has received CMVR and ARAI certification for AIS Phase 2.

• [00:11:29] Jyoti Singh of Arihant Capital asked about the expectations for the electric mobility business going forward in terms of top line and margin. Sanjay Behl CEO GEMPL answered that the electric mobility market is growing rapidly, and Ampere is well-positioned to be a leader in this market.

• [00:13:35] Amyn Pirani at JPMorgan queried why is consolidated EBITDA and PBT still lower than stand-alone, even though all business divisions are profitable. Dalpat Jain Group CFO said the difference between consolidated and stand-alone EBITDA and PBT is due to the lower margins and revenue of the new businesses, Greaves Finance and Greaves Technologies.

• [00:14:32] Amyn Pirani at JPMorgan asked that will the GM for the new electric 2-wheelers and 3-wheelers be positive from the start or will there be a period where they are negative before they improve. Nagesh Basavanhalli VC said GREAVESCOT has a long-term philosophy of profitability and will invest in new products and technology to achieve this goal. Also, Ampere has a cost leadership philosophy and is well-positioned to improve margins as it scales up production of its new products.

• [00:18:55] Gunjan from Bank of America enquired about the EBITDA margin for the E-Mobility division in 4Q22 and the current operating EBITDA margin. Dalpat Jain Group CFO replied that at the EBITDA level, E-Mobility is breaking even with a marginal margin of approx. 1%, and the disclosed PBT figures primarily represent operating PBT with a small contribution from treasury income.

• [00:21:49] Amish Kanani from JM Financial asked about the secondary vs. primary sales trend in 4Q and 1Q24. Sanjay Behl CEO GEMPL said that in 4Q23, approx. 14,000 Ampere two-wheelers were sold, with almost the entire quantity being sold in the primary market, and the secondary market saw strong numbers as well. Registrations continued to grow, reaching nearly 10,000 in the quarter and crossing 13% market share, making Ampere the second-highest registered electric scooter brand in April.

• [00:22:09] Amish Kanani from JM Financial also enquired about the pricing strategy vs. market share and competitive intensity. Sanjay Behl CEO GEMPL said that the company’s strategy is to prioritize profitable growth and democratize electric mobility in the country on the back of two- and three-wheelers. GREAVESCOT will have products in each customer segment and operate in every use case segment with a range of prices from INR70,000 to INR110,000. The company’s market share will be the share of the segment rather than competing on price with other players.

• [00:32:28] Rushabh Shah from Emkay Capital asked what factors contribute to Excel’s high EBITDA margin in the cable business, and how can its expertise benefit GREAVESCOT. Nagesh Basavanhalli VC said that Excel was acquired for its high profitable business and should be margin accretive going forward. GREAVESCOT is cost and profit focused company with 40% of its business coming from international markets and a strong order book.

• [00:34:29] Samraat Jadhav from Prosperity Wealth asked about the details on the portion of the 9,000 retail network dedicated to EVs and the expansion plans for EV-specific retail outlets. Sanjay Behl CEO GEMPL said the dealer network for Ampere has more than doubled in the past year, expanding across all tier towns, and this growth is expected to continue as the electric vehicle industry grows. GREAVESCOT has a network of over 10,000 retail outlets, 170 service centers, and 20,000 mechanics to support its electric vehicle business.

• [00:43:26] Jiten Parmar from Aurum Capital asked about the timeline of new launches of NXG, NXU and Aero Vision. Nagesh Basavanhalli VC said GREAVESCOT has launched two electric two-wheelers, the Zeal and the Primus, and plans to launch a third, the NX, sometime in FY24.

• [00:45:33] Rishikesh Oza at RoboCapital.in asked about the growth GREAVESCOT is looking at in the e-mobility business in next 2-3 years. Sanjay Behl CEO GEMPL replied that Greaves Electric Mobility is expected to improve its market share and grow in line with the expanding market for two-wheelers. In the three-wheeler segment, the company anticipates even faster growth in the next 12-24 months.

• [00:49:48] Niteen Dharmawat ofAurum Capital asked about the trade receivable numbers, the subsidy numbers, and the aging analysis. Dalpat Jain Group CFO replied that the trade receivables mainly consist of cash and carry transactions in E-Mobility, Retail, and Engineering, with a significant portion secured. The subsidy amount, categorized under other financial assets, stands at approx. INR350 crores, with half of it aged less than 90 days and the other half aged more than 90 days.