Hero MotoCorp Ltd (HEROMOTOCO) Q4 FY23 Earnings Concall Transcript

Hero MotoCorp Ltd (NSE:HEROMOTOCO) Q4 FY23 Earnings Concall dated May. 05, 2023.

Corporate Participants:

Umang Deep Singh Khurana — Head – Investor Relations

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Ranjivjit Singh — Chief Growth Officer

Swadesh Srivastava — Head – Emerging Mobility Business Unit

Ram Kuppuswamy — Chief Procurement Officer

Reema Jain — Chief Information and Digital Officer

Analysts:

Nishit Jalan — Axis Capital — Analyst

Gunjan Prithyani — Bank of America — Analyst

Amyn Pirani — JP Morgan — Analyst

Chandramouli Muthiah — Goldman Sachs — Analyst

Arvind Sharma — Citi — Analyst

Rakesh Kumar — BNP Paribas — Analyst

Nitij Mangal — Jefferies — Analyst

Mumuksh Mandlesha — Anand Rathi — Analyst

Jyoti Singh — Arihant Capital — Analyst

Basudeb Banerjee — ICICI Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Hero MotoCorp Limited Q4 FY ’23 Results Conference Call, hosted by Axis Capital Limited. [Operator Instructions]

I now hand the conference over to Mr. Nishit Jalan from Axis Capital. Thank you, and over to you, sir.

Nishit Jalan — Axis Capital — Analyst

Thank you, Aman. Good afternoon, everyone. Welcome to Q4 FY ’23 post-results conference call of Hero MotoCorp. Firstly, I would like to thank the management for giving us this opportunity to host this call.

Without further ado, I would like to hand over the call to Mr. Umang Khurana, Head, Investor Relations. He will introduce the management and take the call ahead. Over to you, Umang.

Umang Deep Singh Khurana — Head – Investor Relations

Thank you, Nishit. Good day, everyone. Welcome to the quarter four and full-year FY ’23 investor call. We have on the call with us today, and it is my pleasure to have Niranjan Gupta, Chief Executive Officer; Ranjivjit Singh, Chief Growth Officer; Swadesh Srivastava, Head of Emerging Mobility Business Unit.

We will begin the call with opening remarks from the CEO. Over to you, Niranjan.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Umang. Good afternoon, good evening depending on which part of the world you are joining from. I hope you, your families and colleagues are staying healthy and doing well. I am privileged to participate in this call as CEO of Hero MotoCorp. I’m sure you will continue to give your support as you always have as we craft the next chapter in this journey of [Technical Issues] Company.

You would have seen our results announced yesterday evening. Our revenues grew by 12%, EBITDA by 31% and profit after tax by 37%. Our margins have recovered to 13% in the quarter, improving by close to 200 basis point on year-on-year basis. Our focus on non-product revenue streams will continue, leading to PAM business registering highest-ever quarterly revenue of INR1,271 crores at 15% of the revenue. And we registered full-year revenue of close to INR5,000 crores, growing close to 25%.

We are excited about the coming fiscal and expect to build on our market share and margin recovery. We have host of new launches lined up and we will be launching new product every quarter in this fiscal. We’ve already announced our accelerated plans to roll out Vida across the country with an aim to cover 100 cities in current calendar year. At Hero, we have the widest and deepest distribution system in the country and we will be leveraging the same to ensure our reach on EV business.

Indian economy continues to be resilient as we have seen and is one of the fastest-growing major economies in the world, despite confronting challenges as financial sector inflation and geopolitical issues. All the key indicators are moving in the right direction and we expect the economy to outperform most other countries. Boyd by the economy and the other trends that we see, we do expect two-wheeler industry to clock double-digit revenue growth this year.

On that note, let’s open the floor for Q&A. Over to you, Umang.

Umang Deep Singh Khurana — Head – Investor Relations

Aman, let’s begin with the Q&A, please.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] First question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.

Gunjan Prithyani — Bank of America — Analyst

Hi. Thanks team for taking my questions and congratulations Niranjan on your new role. So, firstly, could you just talk us through what’s really been happening in terms of underlying trends, rural versus urban, how did recent festive Navratra go, entry versus — some color on what’s really been happening on the underlying retail demand. And it does seem going by further comments where the channel is a bit under-stocked. So could you also talk — indicate as to where our channel inventory is and what’s the thought process on restocking.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Gunjan; and thanks for the wishes. As far as underlying trend is concerned, what we have seen is, you have seen a overall double-digit growth happening in the two-wheeler sector in fiscal year ’23. We expect the trend to continue. Of course, premium is growing much faster than the commuter, but we do expect commuter sector also to come back. The initial sense of the recovery is good in terms of the rural as well and we do expect the government’s plans on the capex spending and the actual capexes to actually come into result as far as employment and income, and accordingly, the spends are concerned on the rural sector.

Let me just hand it over to Ranjivjit to elaborate on this further, on the underlying trends.

Ranjivjit Singh — Chief Growth Officer

Sure. So, firstly on — it’s really good to see the industry bounce back to growth. The overall two-wheeler industry has had a good growth. And in quarter four, we grew faster than the industry. We grew 3% market share quarter-on-quarter and over 2% year-on year. So that was good. Overall, our share in motorcycles was 51%. So that was a excellent recovery that we’ve had. And we had also talked about in terms of segments, 125 cc, we have increased our market share in Q4 to 22%, which was earlier around 14%, so it is a great, great bounce that we’ve had now. I’ll talk a little bit maybe later on in terms of the underlying reasons for that.

In entry, again, we’ve had a good improvement in our market shares. We saw an uptick in rural in March; thanks to the festival season. We see that continuing even now as we’ve got into the marriage season. Overall, it’s a broad-based growth that we’re seeing across entry, deluxe 125 cc, included in that, as well as scooters and premium. So it’s looking quite positive right now.

Gunjan Prithyani — Bank of America — Analyst

Anything on channel stock?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

As far as channel stock is concerned, we continue to be around the same zone of six weeks of the future sales as the inventory.

Gunjan Prithyani — Bank of America — Analyst

Okay. My second question is on this Vida, clearly there seems to be some change in the strategy with the price adjustment that we’ve done. So, could you give us the rationale as to why did we change the pricing? And is there — are we looking to get more aggressive from a scaling this business now versus earlier indication that we are more in a test mode, so some thought process around that.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, Gunjan, this repricing is across the industry, definitely the repricing helps access to more customers in terms of the EV category, and that’s what we’ve highlighted that this should enable faster EV penetration in the scooter category.

Swadesh, would you like to add something?

Swadesh Srivastava — Head – Emerging Mobility Business Unit

Yeah. Thank you, Gunjan, for that question. As Niranjan said, for the EV category, this is a good change. And as you also have seen in our announcement that we are going to 100 cities this year. And with the new pricing, we expect to grow really fast through our strength in the distribution network as well. So it’s a good thing for the category that much I can say.

Gunjan Prithyani — Bank of America — Analyst

Okay. Got it. I’ll join back the queue. Thank you.

Operator

Thank you. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead.

Amyn Pirani — JP Morgan — Analyst

Yes. Hi. Thanks for the opportunity and congratulations Niranjan on the new role. Actually my first question is a bit related to that. I mean — I think this is the first time in Hero, say, where we have an outside professional holding the role of CEO. So can you give us some broad idea as to — and I think you’ve announced a VRS at a non-worker level. I mean, I don’t know if this is the right forum, maybe you want to do this at a different forum, but is there something that you can tell us in the — is there any new formation around strategy for the next two to three years? How are you thinking about it? Is there something that you would like to guide us from medium-term point of view rather than just a quarter or the year.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Amyn, thanks a lot. And like what you have said, it probably calls for a different forum to outline the overall roadmap. However, I just want to share a couple of thoughts. Look, finally, the focus on customer is what is going to create the market cap. The very simple philosophy being that customers love translates to more products being bought at a higher price premium and for a longer period of time. And that with a viable business model creates the market cap. So in the end, that’s going to be the focus. Of course, the road to that will be accelerated, and we’ll be looking at various parts of our strategy in order to achieve that goal, but more about that later. And thank you for this.

Amyn Pirani — JP Morgan — Analyst

Sure. Hope to hear more of that maybe at a later date. Secondly, on the near-term market share and volume trend. So, I mean, like it was rightly pointed out, in the fourth quarter, you did see a market share improvement. But if I look at on a full-year basis, there was still losses both on an overall basis, as well as motorcycle. At least, April is just one month maybe you should not extrapolate, but it has started off a slightly relatively softer note for you compared to the other players. So what should we think about in terms of launches, because whilst Splendor is a great product for us and it continues to be a great product, it has become a very large proportion of our volume. So how should we think about launches and segments and market share as we look into the next 12 to 18 months?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, Amyn, let me start and then I’ll ask Ranjivjit to add on. Yes, if you look at a full-year basis, there is a loss of market share. But if you look at the trends, not last four, five months trend and not dispatch trend, but actually if you look at the VAHAN retail market share trend, the trends have been on the improvement.

Now, yes, there are things to be addressed, and you rightly pointed out, we have plans to ensure that we do have product other than Splendor in that segment, Ranjivjit will talk about that. Even beyond that, not just that, we are going to focus, as we said, in recovery — accelerated recovery in 125 cc segment. We have launched various Xtec variants. You will see a lot of them, resulting in full-year volumes and therefore growth in the year, which is what gives us confidence. You will see lot of launches in the premium segment in the coming year, while I can’t specify the dates of those, but just watch out for those. There will be a big launches that will come up in this fiscal year, which will then ensure that we can build the right premium portfolio and get our market share on that.

So we have, as I’ve said in my opening comments, we’ll have product launches every quarter of this coming fiscal year and probably this fiscal will see the maximum number of launches that Hero has ever seen in its history. So that’s what. But watch out the space. I’m sure, we are excited. And when you come to know the details, you’ll be excited as well.

Let me just hand it over to Ranjivjit to talk about how we are going to flank Splendor and the plans for that.

Ranjivjit Singh — Chief Growth Officer

Yeah. So let me just start with the entry-level HF Deluxe, we continue to add value to this beautiful product. We’ve introduced the canvas and we’ve added features like tubeless tires and the USB charger. Customers are loving it. And that’s also become a brand of choice and the product of choice in rural markets, as well as in urban, semi-urban markets. So we’re seeing a lot of great traction coming back into HF.

Then if you flank further over Splendor, the Super Splendor Xtec, again, some great features we’ve brought in like LED headlamps, Bluetooth, USB, digital speedometer. Customers are loving it. It’s off to a really flying start in Uttar Pradesh, Bihar, West Bengal. And the marriage markets are taking it up very, very well.

If you then move to Xoom, which is our scooter which has industry-first and segment-first features like the corner bending lights, as well as wider bigger tire and it has the fastest acceleration. That’s something that we’ve been very surprised by the demand for it. We have ramped up our suppliers, it’s — we are onto a better level now, we’ve added market share already in the 110 cc segment. And as we improve our supplies, which have already happened, we will see a dramatic improvement in that segment as well.

If you then look at flanking Splendor, we are working on something for a launch within this quarter. And a brand, which is really one which is most loved one of the high-selling the Passion+ is something that we will see a lot of excitement around soon. And I’m sure everyone would get excited by the volumes that that will get in. And then, like Niranjan said, we have a pipeline, a very, very exciting pipeline. We will have more news to share with you as we go along, but literally FY ’24 is going to be a great year.

Amyn Pirani — JP Morgan — Analyst

Great. Look forward to it. And I’ll come back in the queue. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.

Chandramouli Muthiah — Goldman Sachs — Analyst

Hi. Good afternoon and thank you for taking my questions. And congrats, Nilanjan, on your additional responsibilities. My first question is on pricing. We have been disciplined in passing on price hikes to consumers over the past 18 months. As you build out your EV franchise starting FY ’24, is it possible that price hikes on the ICE two-wheelers could help cross-subsidize the higher proliferation of electric two-wheelers, which maybe take longer to attain profit breakeven? Any color here would be very helpful.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Hi, Chandramouli. Thanks a lot. And look forward to meeting you soon. In terms of the pricing on cross-subsidy for two-wheelers, firstly, you are right, the industry, us, we’ve been very disciplined, very judicious in terms of the price increases, ensuring that we accelerate our savings program, so that the entire burden doesn’t get passed on to the customers.

Moving forward, as far as commodities are concerned, we don’t expect the escalations in the commodity like we have seen in the past, and that definitely provides some headroom, whether you call it for recovery, further recovery in margins or whether you call it funds being available to kind of plough behind the growth engines, whether it is growth within ICE or growth in EV. So, I wouldn’t say so much from a cross-subsidy point of view, but it definitely provides — the environment definitely provides some headroom of recovery and boosting the P&L moving forward.

EV, as you’ve rightly said, is going to be cash burn for a while. The important thing in EV in our view for success is probably not to look at so much at what’s happening on the cash burn, but to stay ahead of the market, of the competition on the cost curve, because income — players who can actually deliver our — the EV in the most cost-efficient manner are the ones who are likely to be winner fasters and which is where our teams are working on that.

And in fact, at this stage, let me just ask our Chief Procurement Officer, Ram Kuppuswamy, who is here with me, to just say a couple of minutes on overall how we are focusing on the cost reduction journey on the EV part of scheme of things. Ram?

Ram Kuppuswamy — Chief Procurement Officer

Lovely to speak to all of you today. At Hero, we take cost reduction very, very seriously and there is a rigorous program called LEAP and LEAD that we follow to drive this across the ecosystem. The three aspects of it which I’ll highlight today, which drive the results that these programs deliver. The first is across the entire ecosystem from partner through the customer service centers, all the different stakeholders in this value chain contribute ideas, which are then rigorously vetted and put through a funnel based process to ensure that we are looking at efficiencies at every step of the chain.

The second aspect of this is no idea is too small. We look at every aspect of cost in this overall value chain and we attack it to ensure that we’re driving the right level our efficiency. And lastly, I think, we also take a regular look at our competition. We look at a similar product, we do tear downs to ensure that we are understanding of what the market is doing what rest of the world is doing, and then we use that to inspire ourselves in terms of, I guess, that we should be looking at a lot more closely. So that gives us a strong program that we are able to run continuously through the year and drive efficiencies back into the business.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Ram. Back to you, Chandramouli.

Chandramouli Muthiah — Goldman Sachs — Analyst

Got it. Got it. That’s helpful. My second question is on the rural consumer, which you’ve touched upon briefly earlier in the call as well. There seems to be some diverging commentary, consumer discretionary companies are talking about in emerging pickup in the rural consumer cohort, but some of your two-wheeler peers are saying it’s not visible yet. So just from your vantage point, what is the urban versus rural market footfall and maybe dispatch momentum in your showrooms? Any color here would be helpful. And lastly, if you could, just share the spares revenue for the quarter and the exports revenue for the full-year please.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

All right. Ranjivjit, if you could comment on the rural urban quickly.

Ranjivjit Singh — Chief Growth Officer

Yeah, sure. So, we’ve seen this little bit of a sinusoidal kind of a curve on rural-urban. What I said earlier is that in March we saw with all the festivals — the Pongal, Ugadi, Padwa, the demand really went up in rural. And it is a — it would be a mixed bag, I can understand for the industry, because people at this time are careful with their money. They will go with brands that they trust. There are brands that have a customer service, which is really deeply rooted such as ours. We have the widest, the best dealership network that we do Splendor are also working very well.

The other thing which is there is due to inflation there are some resistance in what we do to overcome that is the retail finance penetration, which has gone up dramatically from already to about 59%. So there are steps that we have taken to make that very simple and easy for our customers to buy. And when it comes to the uptake in terms of marriages or festivals, we definitely see an upswing there. So the underlying growth, it was not only in March, we also see that now in April and May, and the marriage season will continue in June with the effect of the harvesting, the rains, everything, we still think it’s going to be a well-balanced growth that we will see.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

And Chandramouli, on the parts revenue, the PAM business that you talked about, for the quarter, as I mentioned, we did INR1,271 crores, which just in the previous quarter, quarter three, was around INR1,250 crores. But year-on-year basis, if you look at it, was INR1,151 crores for the quarter four FY ’22 and full-year was INR4,835 crores versus INR3,934 crores, which is a growth of around around 23%. As far as the global business revenues are concerned, we delivered INR1,150 crores revenue for the fiscal year ’23.

Chandramouli Muthiah — Goldman Sachs — Analyst

Got it. Thank you very much and all the best.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Chandramouli.

Operator

Thank you. The next question is from Kapil Singh from Nomura. Please go ahead.

Kapil Singh — Nomura Financial Advisory and Securities — Analyst

Hi. Good afternoon, sir. Can you share some details on how many new launches and refreshes we are planning this year? And also on Harley launch, should we expect it this year? We saw some very interesting, exciting images in media. So anything you can share over there would be helpful. Yeah.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Hi, Kapil. So, Kapil, in terms of the launches, while I will not specify the numbers, but couple of comments I can make. One, every quarter we will have a new product launch, the year will see maximum number of launches that we’ve ever seen in the history of our company. You can then add up the numbers and come closer to the numbers that we launch. As far as Harley is concerned, yes, the product, we will launch in this fiscal itself, it will be soon. And you will see the timeline and the plans coming out. So just watch this space.

Kapil Singh — Nomura Financial Advisory and Securities — Analyst

Okay. Great. Great to hear that. On the cost side, could you give us some update how much cost decrease you — or increase you saw this quarter and what are you expecting going ahead? And also on the pricing front, what was there in March quarter and for the June quarter with OBD II norms, what has happened on price?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, Kapil, as far as cost is concerned, you’ve seen that our margins have recovered by 200 basis point year-on-year basis; of which, around 70, 80 basis point is coming to the leverages on the other expenses, and the rest is a combination of the commodity cost, as well as LEAD savings. Moving forward, while I’ve always said that it’s very difficult to forecast commodities, but overall if we look at the scenario, it’s unlikely that the inflation in the commodities will be of the order that we have seen in the last two, three year has provide headroom whether in terms of containing the prices at the current level or actually deploying mild price hikes and deploying back behind brand and marketing expense.

As far as price is concerned, overall, cumulatively, if you look at fiscal year ’23, we took close to around INR4,000 increase and April ’23, the increase that we took amounted to close to around INR600 per vehicle basis.

Kapil Singh — Nomura Financial Advisory and Securities — Analyst

Okay, sir. Thanks a lot. I’ll come back in the queue.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Yeah, Kapil.

Operator

Thank you. The next question is from the line of Pramod Kumar from UBS. Please go ahead. Pramod, your line is unmuted. Please proceed with your question. It seems there is no response from the line.

Umang Deep Singh Khurana — Head – Investor Relations

Try the other Pramod. He’d logged off. Just try him again please.

Operator

Yes, sir. Sure.

Pramod Kumar — UBS — Analyst

Yeah, can you hear me now?

Operator

Yes, we can hear you from line 2, sir. Yes, please go ahead.

Pramod Kumar — UBS — Analyst

Yeah. Great. Thanks a lot and apologies for the confusion. And Niranjan, congratulations, and I think another set of congratulations for the result as well. So my first question, Niranjan, is on the 125 cc side, because you did say that 4Q you have seen some market share gains kind of coming back, but we are still long way off from where we used to be in terms of the market share like closer to 50% couple of years back. So if you can help us understand on 125 cc, A; and then the scooter segment as to what are the kind of numbers or targets, which you would be happy with or kind of market share gains which you’ll be happy with. So it kind of gives us a visibility on the runway for these branch making a come back. That will be the first question.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Pramod. As far as 125 cc is concerned, absolutely right, you are, that our path to recovery will not stop here. We need to get back to work and actually we see that as an opportunity overlaying on where we are today that that’s the roadmap that we have in the recovery. And you will see backed up by a lot of actions over the next couple of years to actually get back to the share that we were.

As far as scooter is concerned, we are — as you know, scooter, there is an EV penetration also that’s happening faster and therefore the way we are looking at the scooters is on a combined portfolio basis, which is not just the scooter on the ICE, so the scooter on EV as well, but that’s the best way to look at the scooter on EV, clearly you’ve seen our plans which we outlined that the initial three, four months were more of a setup. And now, it’s really more of a scale-up, which is where we have said that we’ll go to 100 cities plus, leveraging our own distribution system.

Let me now hand over to Ranjivjit to just talk a bit more about the 125 cc, the actions that we have taken and how we are confident of recovering market share moving forward over the next two years back to our highest-ever that was.

Ranjivjit Singh — Chief Growth Officer

Yeah. So Glamour Xtec is on an upward trend with the campaign that we have with Ram Charan. The consumers are really loving the Xtec features, the LED headlamp, the styling, all of that is working very, very well. We also have the Super Splendor Xtec, which has got off to a really great start. We will have more action in this segment as we go along. But — and what we see is it’s going to be broad-based across the nation, across the country that we will see the recovery is happening and we are looking at building up the momentum as we go along month-on-month for the 125 cc. So that’s something I wanted to just put out there.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Absolutely. And Pramod, let me also now call upon Ms. Reema Jain, who is our Chief Information and Digital Officer to talk just couple of minutes, because you talked about 125 cc. Not only that, but we have a lot of connected features that we’re bringing in our product on our path to the entire digitization, not just our processes, but of the products as well, which will — which gives us the confidence to ensure that our recovery path on the market shares and refreshment of the product is stronger.

Over to you, Reema, to talk about how we are building all these connected things in the product, process and the digitization map.

Reema Jain — Chief Information and Digital Officer

So, hello, everyone. Nice to talk to all of few. So as we are bringing a new set of bikes, all of them are coming with — most of them are coming with connected features. And what we mean by connected features is there is new experiences, which we are creating for our users, so that they can interact with a bike much more effectively. And they can really — the bike, they can use that as more of a smartphone on the wheels, and that’s something which we are seeing that our customers are loving. We are seeing the highest number of install level for our app, which is our Hero App and there is a great amount of overall active users on a daily basis on our app. So that’s something which we’re really seeing a great interaction from the customer.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Reema. And what happens Pramod is that we continue to talk about products, products and products, but all these connected features that come on the products, whether it is on ICE or of course EV far more allows us in future to not just focus on getting revenues from the product, but actually monetization of all these services that you overlay on these, including the one app, especially given the huge customer base of 110 million that we have. Hope that answers your question, Pramod.

Pramod Kumar — UBS — Analyst

Yes, yes, Niranjan. And the second question, Niranjan, is on the — your approach as a leader of the organization now, as to how do you see when you look at the next five years for the organization. What are the things which are like the key priority for us right because we’ve seen market share loss, we’ve seen marginal erosion, we’ve seen some segments where Hero could have done much better as a franchise, right. So given all that and the electrification, which is a parallel run, pretty disruptive one, what are the priorities for you as in — is it volumes or success in some segments and how do you see margins in that context, because EV ramp-up is definitely can’t be accretive for the near-term. So how should one — or rather how would you look at this from your vantage point, Niranjan.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Interesting question, Pramod. And as I said to Kapil as well that it does require a separate specific forum to outline, so that we can share thoughts, exchange inputs and then you can get more view on our longer term refreshed strategy as well, which is work-in-progress.

Having said that, let me just again share a couple of more thoughts on this. You talked about margins. We have seen the margins are on the path to recovery and we’ve been very sensible about deploying the price increases versus the margin recovery in terms of ensuring that there is a topline, bottom-line, because eventually it’s about profitable growth. It’s not about one or the second, which is, it will maybe about volume or this one. I mean, you got to breathe, you got to walk, you got to work, you got to sleep. So all of it, it’s about how do you balance these factors in terms to ensure that we are profitable growth journey as you move forward.

Shares, yes, as we have said, there are citadels, where we are strong, where we have maintained our strength, there were segments that we had lost shares some couple of years back. We have actually strongly defended those and that we have seen there are opportunities. The way we see is, is that where we are standing today the big opportunities for us in the premium segment, there’s a big opportunity for us in ensuring EV leadership, remember our scooter portfolio in the ICE segment we have a market share of 7% to 8%. So any EV or electric penetration that happened is accretive to our overall market share. And you’ve seen the plans on the outline.

On the geographical concentration, clearly, we have work to do on scaling up the global business. And of course, as we have always said that we will not shy away from any kind of opportunities on the M&A front in order to increase our topline, in line with the strategy. So that’s a very, very brief outline. We will be obviously focusing on prioritization and choices. And of course, accelerating and moving the wheels faster, so to say, as we move forward. For the time being, this is all I can say and more as we meet our different forums, Pramod.

Pramod Kumar — UBS — Analyst

Great. Great, Niranjan. Wish you all the best, sir. Thank you.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thank you.

Operator

Thank you. Next question is from Arvind Sharma from Citi. Please go ahead.

Arvind Sharma — Citi — Analyst

Yeah. Hi. Good afternoon, sir, and thank you for taking my question. The first question would be on Vida. We’ve seen price corrections. So is there any aspirational volumes that you have in mind? It could be breakeven, it could be the first milestone for Vida. Could you comment on that please?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Let me ask Swadesh to take that. Swadesh?

Swadesh Srivastava — Head – Emerging Mobility Business Unit

Hi, Arvind. Thanks for the question. Yeah, as we announced already, the last few months have been set-up month for us and we have done very well in the initial three cities. We are already live in eight more cities, Pune, Ahmedabad, Nagpur, Nashik, Hyderabad, Chennai, Calicut and Kochi. And we will be going over 100 cities in this calendar year. And with that, you will see fast expansion as we are going to utilize our distribution strength. And I won’t be giving a projection, but you will see a very fast increase of our volumes as well across these cities.

Arvind Sharma — Citi — Analyst

If you could, just share the current production capacity that you have for the Vida, if possible to share that.

Swadesh Srivastava — Head – Emerging Mobility Business Unit

So, our capacity is quite fungible actually on the vehicle side and we have enough and more capacity to flex as the demand shapes up. And we have done a similar exercise on our battery capacity as well.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Good thing is, Arvind, that which have outlined earlier as well, that we’ve got plants, I mean, EV is getting manufactured in our Tirupati plant. And therefore, you have the infrastructure, you have the utilities, you have everything, you have the suppliers. And therefore, in terms of the capacity ramp up, it can always happen in line with demand. We don’t have to buy a new land, we don’t have to actually buy new utilities or news, and so therefore, it will not be a constraint as we grow. It’s more about our strategy to move. And in that, we have made — we have pivoted already as far as distribution is concerned, which you can see very clearly that our focus on leveraging our current distribution, which is to the nooks and corners of the country, places us in a strong advantageous position.

Arvind Sharma — Citi — Analyst

Sure. Thanks for this. Second question would be on the ICE motorcycle portfolio. I understand that a lot of focus on the 125 cc. I just wanted to gather your thoughts on the even higher, the Xtreme and the XPulse brands. Are there any new products or new variants coming there, because that is where there was a big growth and over past few quarters, it’s been a slightly on the more sluggish part. So is there any new product enhancement that’s happening there or any other focus on that? I’m talking about that 150 cc and above category.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Yeah. Absolutely, Arvind. As we had outlined that we would be covering the premium segment across the cc or the engine capacity, as well as across the product segment within premium, which is the 150 cc to around 450 cc that you’re talking about. I did talk about some of the new launches that we will do in the upcoming year. And you will see that a few of them will be in the premium segment, which are in the higher cc. Won’t give out any more details, but clearly it’s not the 125 cc is the only focus, 125 cc is about recovery of market shares, premium is about building portfolio, and which is where you will see the new launches coming up across the higher CCs, including the ones that we just talked about earlier in the call.

Ranjivjit, do you want to supplement something on this — our focus on the premium and how we are addressing that in the coming year?

Ranjivjit Singh — Chief Growth Officer

Sure. So, firstly, XPulse is in the off-roading adventure segment is already the leader. And it’s doing very well. It’s become a favorite, not only in niche and pockets, but now the popularity is growing across the country. And as we bring in more and more products to represent the aspirations of the premium consumer, I believe that’s how we’re going to really build up our position in that space. So overall, I think, we’re going to be well-positioned in FY ’24 and there’s a lot of excitement that you’re going to see in this space.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Ranjivjit. Thanks, Arvind.

Arvind Sharma — Citi — Analyst

Thank you so much for taking the questions. Thank you.

Operator

Thank you. The next question is from Rakesh Kumar from BNP Paribas. [Operator Instructions]

Rakesh Kumar — BNP Paribas — Analyst

Hi. Good afternoon. Thank you for taking my question. First of all, congratulations again Niranjan on your promotion. Would highly appreciate you — hear your medium-term plans on a separate platform. We already see change in EV ramp-up plans. Looking forward to hearing more of such moves.

My first question was on the demand side for the last two years, unfortunately, we have gone into festival season with lot of optimism around demand and post festival season demand typically hasn’t stood up to those — our expectation and has softened down. What are the drivers which we are seeing this time around that gives us hope that the demand hopefully will sustain at strong levels or there is still some level of uncertain demand sustaining?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Rakesh. And certainly, we will have a platform, where we’ll share more. And you’ve already seen a couple of things which have come in the market, some of which you pointed out.

On the demand side, you’re right, the post festive probably wasn’t as the expectation. Having said that, if you really look at some of the — let’s look at on a macro basis. The capex spending of the government of INR7,50,000 crores and then moving up to INR10,00,000 crores this year is a huge amount of money. Now, by nature, the impact of the capex spending always comes with a lag. And therefore, that’s a big factor which we see, which will actually boost the demand moving forward.

The second factor is we are already seeing the spending in different sectors. So if you look at whether it’s the hospitality sector, whether you look at across-the-board, the consumer spending is going up. Of course, post-COVID, there was an adjustment in the categories where customers would open up their wallet to certain categories first and certain categories later. But again, the consumer confidence curve also, if you see, has been on the move. We have seen the key indicators, whether it is the GST collection, whether it is the inflation, which is kind of fine, we have seen the central bank monetary policy, which is now broadly on a pause more. The forex has held stable. So lot of headwinds which other countries see, we are not seeing now.

Now, when you overlay these along with the underlying need of penetration in this two-wheeler category in India, that’s very, very clearly an opportunity that we see it will translate into demand sooner rather than later. We’ve already seen that demand translating in the mid and the premium segment. If you look at in the premium segment, which is 150 cc and above, the motorcycles have grown by 28% in fiscal year ’23 compared to the overall 14% growth of the total motorcycle. So you can already see that one part of the India has started growing and started spending and being more confident about it. It’s only a matter of time when the other parts are participating in this category.

Ranjivjit, a little bit more color on the drivers of the demand that we see and why we are confident about rural demand coming back.

Ranjivjit Singh — Chief Growth Officer

Yeah. So, like I said, the green shoots we’ve already witnessed for the full year, of course, 14% to 16% with the industry growth, Q4 was about 5% for the industry; we did better than that and that’s really something that we are again seeing in April as well that we have had a pretty good balanced growth coming in relative to the market, relative to the industry. When we look at May and June, the number of marriage dates that there are and that also then drives buying in this season. We see that opportunity going out. If you remember, last year, during the festival season, we led the industry growth when it came to the festival demand, we grew by about 20%. So that was pretty good. And then we’ve had a good Q4 as well. So, if — with this kind of a widespread sort of a demand growth coming in with the macro and the other things that Niranjan spoke about, we see no reason not to have a good sort of a balanced demand coming through for two-wheeler industry.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Back to you, Rakesh.

Rakesh Kumar — BNP Paribas — Analyst

Yeah. Thank you. My second question was about two quarters back, Niranjan, we had discussed about how Hero’s headcount has been divergent from the production that the Company has been doing. And now I see you have announced VRS scheme. Can you please share some detail around how many employees you are expecting to participate in this scheme or how many employees are eligible to participate in this scheme? I see that your headcount at least the permanent employees this fiscal year have been largely flattish Y-o-Y. So they would be around slightly above 9,000 and possibly another 19,000-odd on the temporary employees as well. So total headcount about 29,000. So what kind of reduction you would be looking at?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, Rakesh, a couple of things; one, of course, in the journey, we do believe that VRS is a process of ensuring that you refresh the talent, refresh the people and of course, every four to five years there’s always needs in the organization as part of continuous process which is there. The second thing is that the current VRS was focused on the staff, where the headcount overall average around out of the permanent which you talked about 9,000, it’s around 4,500, the staff cadre. So this was focused on the staff cadre, not on the work cadre, which is where we are focused on.

Quantification, we will give in the upcoming quarter results and not right away. But can safely say that whatever — overall, we would have expected as a churn, the scheme has resulted in that. Also sufficient to say that and therefore, we continue to focus on not just the cost aspect of the manpower, it’s about the entire capability, it’s about the talent, it’s about succession planning, it’s about diversity and inclusion.

So on the manpower front, cost is just one simple item. I mean, eventually, it’s about the productivity. And productivity is not just cost as a percentage of revenue, productivity is about the composition of the manpower, the write-off structure, the right people in right places, capabilities that you have, the structures that you have, multiple things that go into that and we are focused on all those drivers to ensure our people productivity at the highest level.

Rakesh Kumar — BNP Paribas — Analyst

Thanks a lot, Niranjan, to answer that. I’ll fall back.

Operator

Thank you. The next question is from the line of Nitij Mangal from Jefferies. Please go ahead.

Nitij Mangal — Jefferies — Analyst

Hi. Good afternoon. Heartiest congratulations to you, Niranjan, and my best wishes.

Operator

Nitij, request you to use the handset, please. You’re not very clear.

Nitij Mangal — Jefferies — Analyst

Hello?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

I’m able to hear, Nitij. Nitij, go ahead.

Operator

Nitij, go ahead please.

Nitij Mangal — Jefferies — Analyst

Okay. Firstly heartiest congratulations to you, Niranjan, and my best wishes. I would like to hear your thoughts on the competitive intensity in two-wheelers. On one hand side, [Technical Issues] reporting the highest-ever profitability for [Indecipherable] but then on the other hand, there were instances of companies bringing down their brands to lower cc categories like the recent launch in the 100 cc category by our competition. How do you see this evolving and especially on the 100 cc category side? And also, do you think there is a risk of a price discipline breaking at some stage if this continues?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thank, Nitij. Looking forward to more discussions. As far as price discipline profitability, like you’ve rightly highlighted, that’s been pretty good. We actually delivered, if I’m right, the highest EBITDA per vehicle in this quarter. Probably I should have highlighted in my opening comments, but thanks for picking that up.

In terms of the competitive intensity, I would say, look, this will — it’s not like it’s a departure or a new feature. I think wherever any player finds a space or an opportunity to improve or to grow as a growth driver, this will continue to happen. We’ve seen that in entry segment over the last four, five years and I’m not going to explain, we all know that, and therefore, it plays out that every — and it’s fine. I think eventually competition, what I see is extremely good for the customers. It’s also good for the industry, because it challenges the industry to do more innovations, to do better, to deliver more value to the customer and eventually it’s about more — it’s not about just taking the slice of the cake from each other, I think the focus of the industry has to be on expanding the size of the pie, rather than picking cake from one another. And I think to that extent, the more competitions, the more competitive intensity drives innovation and more value.

Price discipline breaking down, I don’t see that, because more and more we have seen at least the last six years that I’ve been there’s been enough instances that in the two-wheeler, in this industry to win, you have to compete on the product and not on the price.

Nitij Mangal — Jefferies — Analyst

Understood. And also if I understand this, it also suggests you don’t necessarily I think you need to do anything specific in the 100 cc category for this new product that is coming.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, Nitij, while we’ll not lay out the plans, but these are always continuous actions that we take where we look at mapping out what’s happening on that space, competition space and how do we flank our products. So, it’s never about that you got to take one product and say that on that product launch, how do we counter that, it’s about our own strategy of actually segment-wise that there is a customer need which is there, how do we fulfill the customer needs better than anyone else can. And that focus will continue. And that’s where we will continue, but it’s never a product against a product, because it’s all — it’s not about one product getting launched and then we react to that, Nitij, but it’s about a continuous process of, as I’ve said, to win in this segment.

And Ranjivjit has already talked about the Passion+, which is one such thing again to be on the pipeline. So it’s not a reaction or a response to any of the new launches. This is an example that we’ll continue to look at all of these spaces, Nitij.

Nitij Mangal — Jefferies — Analyst

Okay. Got it. Thank you very much and all the best.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thank you, Nitij.

Operator

Thank you. The next question is from the line of Mumuksh Mandlesha from Anand Rathi. Please go ahead.

Mumuksh Mandlesha — Anand Rathi — Analyst

Thank you so much for the opportunity, sir. And again, sir, congratulation on the new role. Sir, my question on the gross margin improvement, which we saw this quarter. Can you talk about the factors driving that margin and quantify the impact of the price, again, the better mix? And also, sir, was there any impact of yen [Phonetic] in this quarter, sir?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, Mumuksh, I’ll probably comment more on the EBITDA margins like what I did earlier and we see around close to 200 basis point improvement year-on-year basis; of which, around 80 basis point you can see is the leverage coming from other expenses as a percentage of revenue. And of course, when you look at the rest of the part, there is a mix which is PAM is contributing as commodity costs, savings, commodity cost reduction, which is there and there is LEAP savings as well, which is forming part of that. So these are the combinations, and of course, I’m sure offline if you connect with Umang, he’ll be able to share more details. But on a high-level picture, these are the key drivers which are there in the numbers.

Mumuksh Mandlesha — Anand Rathi — Analyst

Sure, sir. And also, can you talk about some of the sales promotion or incentives planned for to grow the volume in executive premium scooter segments. How would you plan to support those segments, sir.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, as far as that is concerned, look, we we have our continuous programs on our marketing and sales side, which is based on the launches. And clearly, the new launches, like every year, are the focus that will get in terms of the go-to-market strategy understanding. But we won’t able to outline the details of the schemes, but rest assured that we will leave no stone unturned to back these launches to their success path.

Mumuksh Mandlesha — Anand Rathi — Analyst

Thank you so much for the opportunity, sir.

Operator

Thank you. Next question is from the line of Jyoti Singh from Arihant Capital. Please go ahead.

Jyoti Singh — Arihant Capital — Analyst

Yeah. Thank you, sir, for the opportunity. So, first question mine was on VRS, which already answered. And second question on the margin and revenue front. Sir, I just want your guidance going forward, what we are expecting?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Jyoti, thanks for the question. As you know, we do not provide any short-term guidance. Our longer term guidance of being in the tram line of between 14% to 16% on the margin, that tram line still remains. And we have reiterated that tram line even when we got down to 11% margin and you see it’s getting recovered to get into that line once again. So that remains.

From a portfolio perspective, our portfolio, moving forward, if you look at medium-term, one shouldn’t look at one quarter or two quarter. Clearly, as we move forward on more premium, underlying, the portfolio should be more margin-accretive. And other than that, of course, the scale, as it continues to play out in terms of volume growth and the savings that we do should provide a tailwind to offset any of the headwinds that may present themselves in future.

Jyoti Singh — Arihant Capital — Analyst

Okay. And sir, currently, how many days inventory we are maintaining?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

We continue to maintain around six weeks of inventory of the future sales forecast that we have.

Jyoti Singh — Arihant Capital — Analyst

Okay. And sir, on the VRS front, just one curiosity I have, because of the VRS initiative, did we gain any growth going forward on the revenue trend or it’s just the initiative?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

So, Jyoti, as I outlined earlier, that — it’s a part of the continuous process of refreshing talent. Of course, one of the outcomes of that is a reduction — an immediate reduction in the manpower and therefore the manpower cost that comes down. We will be quantifying that in the upcoming quarter in terms of the impact. But overall, one has to look at the overall people side, refreshing the talent like what I talked about earlier in detail.

Jyoti Singh — Arihant Capital — Analyst

Okay. Thanks a lot, sir.

Operator

Thank you. The next question is from the line of Arvind Sharma from Citi. Please go ahead.

Arvind Sharma — Citi — Analyst

Yeah. Hi, sir, and thanks for taking my question again. It’s on the industry guidance that you gave, double-digit revenue, if I may just ask, what is the break-up between your absolute volume expectation and the pricing, because I believe there would be a fair bit of pricing as well. So is it possible to elaborate on that?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Arvind, look, let me just give an overall answer for that. We won’t be able to quantify in terms of the numbers, we won’t be able to give the numbers in terms of what is the underlying volume and underlying price that’s built into this. But having said that, it’s always again a combination. So one sees that how to balance that off, and that depends on several factors. It depends actually on how the commodity cost play out, how the competition scenario plays out, but our judgment overall and then how the mix plays out. But overall, if you look at the real GDP growth forecast of 6% to 7%, which is what various industries, various analysts and economists have been talking about and if you overlay an inflation of around country inflation of around even 5%, that means that the nominal GDP itself would grow in double-digits. In fact, probably around 11% to 12% of the nominal GDP growth. Given the pent-up that we have in the two-wheeler category as we have seen, there is no reason to believe that the two-wheeler revenue growth would not be upwards of 10%. So that’s the overall high-level answer. Between the combination of volume and price, it’s always a dynamic thing that plays out.

Arvind Sharma — Citi — Analyst

Sure. Thank you, sir, and congratulations for the new designation. Thank you so much.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Yeah. Thanks. Thanks, Arvind.

Operator

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

Basudeb Banerjee — ICICI Securities — Analyst

Thanks for taking my question, and congrats to Mr. Gupta. Sir, [Technical Issues] ballpark question. Sir, like if I look at the business jitters now, where one is expecting inclusive growth beyond just the premium bikes, but also a rural inclusive growth exports bottoming out, margins are coming back in place, EV is scaling up. So, amidst all these things, where capex is under control, we can see that the valuations of Hero have been stagnating or impact lower than where it was exactly 12 months back, whereas all the peer sets two-wheelers, who might also be suffering from rural two-wheeler weakness have moved up either through buybacks or whatever ways possible. So looking at your balance sheet health, are you thinking of enhancing payout ratio further or doing buybacks like your peers in order to look at the valuation aspect down the line?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Basudeb. Interesting question. So — and good to hear from you, Basu, and we don’t usually see you’re asking question and would like to meet and Umang, maybe we can conduct the meeting. Basu, on the capital allocation, you’ve seen that our payout ratio has been one of the highest in the industry and we’ve been very disciplined about the way we pay out on the dividend, which is — I think we’ve paid out between 60% to 70% of the profit in the last four, five years clearly. We also keep an eye on the per share dividend. And overall, the dividend per share for this year is INR100, including interim and final, which plays out around 70% of the profit.

Like you rightly said that we have a very disciplined capex model, we have the scale-up that’s happening on the EV, the growth drivers on various things. And yeah, I mean, in terms of all of that and we have negative working capital as well. So the more business that we do, it generates a more cash. So in terms of capital allocation, we continue to, of course, you have seen in the past we’ve also invested or deployed capital behind the right opportunities. For instance, we invested in Ather, we continue to participate in Ather, we hold close to around 35% shareholding in Ather, which is doing well. We invested in Hero Motorcycles, which is, from a future perspective, we’ve invested in the NBFC, which is Fincorp, which is doing well. So we continue to do this capital allocation, it’s a continuous evaluation by the Board, where the money is required. And of course, all the other options, like you mentioned, are always on the table, but they are part of the continuous evaluation.

I would say that once we do the right things and get the right results, the market cap would take care of itself. So really I wouldn’t talk more about market cap. But yes, take your inputs and your suggestions very clearly. And as I said, rest assured, we continue to evaluate all the options of capital allocation in the interest of the shareholder and the long-term business.

Basudeb Banerjee — ICICI Securities — Analyst

So, simply sir, to summarize like in a broader way, one of your key peer who suffered massively from exports deterioration in fact is 10% higher than the levels it was a year back. And you also suffered from exports, but that is a very small part of your business. In fact, you domestic volume grew. So, and despite that, you were almost what 15% lower than the level. So from that disparity aspect, valuations are like from a dividend yield perspective, if we look at, just look forward to some steps from the management to enhance valuation whatever way possible just beyond earnings and revenue and EBITDA.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Sure, Basudeb. We take your inputs and accordingly we will incorporate that and feed that back into our stakeholder relationship committee and our Board discussions. Thank you.

Basudeb Banerjee — ICICI Securities — Analyst

Thanks.

Operator

Thank you. Next question is from the line of Kapil Singh from Nomura. Please go ahead.

Kapil Singh — Nomura Financial Advisory and Securities — Analyst

Yeah. Sir, just one aspect, if you could cover on export as well. What really is happening there and more from Hero’s aspect, because we have a lot of ground available to cover even if the market conditions are tougher. So what are the plan for next three, four years? And we’ve not seen much success in last two, three years. So, just if you can give some color as to what’s really didn’t work, what are you trying to change?

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Kapil, thanks for the question. Look, I’ll just address this again from an opportunity point of view. And rightly also but evaluating based on performance on the numbers for the last five years, probably would not be the right thing to do, because setting up businesses in each of these countries itself requires huge efforts. And as we have always said, we are in now 40-plus countries creates an opportunity. Overall industry, if you look at it, like you rightly said, 25% of the volumes come from global business. As far as we are concerned, probably we are more closer to around 5%. We get to scale it up to around 10% to 15% of our revenue in the medium-term, coming from global business. We are putting actions in place, some of the actions which are there, which we have put in place will take time to actually fructify. But rest assured, we are focused on this part of the geographical diversification, to get to our rightful share in our portfolio of revenue.

Kapil Singh — Nomura Financial Advisory and Securities — Analyst

Okay, sir. Thank you and wish you all the best.

Niranjan Gupta — Chief Executive Officer and Chief Financial Officer

Thanks, Kapil.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to the management for their closing remarks. Thank you, and over to you.

Umang Deep Singh Khurana — Head – Investor Relations

Thank you, everyone. Thank you for coming in. It’s been a pleasure. Happy to connect individually as well. Have a good day.

Operator

[Operator Closing Remarks]