GREAVESCOTNSEQ2 FY2023November 15, 2022

Greaves Cotton Limited

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3executives

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Management on call

Arup Basu

Managing Director, GCL

Dalpat Jain

Group CFO, Dr Arup Basu, Greaves Cotton, Mr.

Nagesh Basavanhalli

Executive Vice

Key numbers — 37 extracted

135%

it makes sense. With the diversification strategy that we started H1 FY23 Group revenue was about 135%. One or two other points to note, global supply chain constraints which we have talked about over

rs,

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 to take you through the financial performance. Dalpat Jain: Th

Rs. 699 crore

hat reflect in the financial performance of the Q2 where all at the group level the revenues were Rs. 699 crores, which is a growth of 87% compared to same quarter of previous year and it was 13% growth in Gre

87%

nce of the Q2 where all at the group level the revenues were Rs. 699 crores, which is a growth of 87% compared to same quarter of previous year and it was 13% growth in Greaves electric mobility, i

13%

ere Rs. 699 crores, which is a growth of 87% compared to same quarter of previous year and it was 13% growth in Greaves electric mobility, if you see from Q1 and if you look at consolidated level, it

th in Greaves electric mobility, if you see from Q1 and if you look at consolidated level, it was 6% higher compared to Q1 FY23. Overall, the profitability has improved in the engines of the powertr

8.9%

at company had taken were visible and standalone data EBITDA margins of the company in Q2 were at 8.9%. If we look at the H1 FY2023 revenue group reported total revenue of Rs. 1,359 crores and if we

Rs. 1,359 crore

e company in Q2 were at 8.9%. If we look at the H1 FY2023 revenue group reported total revenue of Rs. 1,359 crores and if we compare it with the highest ever revenue of the pre-COVID period, it goes almost 135%.

Rs. 1,268 crore

sheet perspective, the company had a strong cash position, our net cash position remained at the Rs. 1,268 crores as of 30th September 2022. Overall, in electric mobility where we have seen close to 256% growth

256%

1,268 crores as of 30th September 2022. Overall, in 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, bu

65%

the primary revenue in short term. If you look at our B2C business, in the Q2 FY2023, there was a 65% contribution of B2C businesses in the consolidated revenue and the new businesses, the ones which

59%

s which 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 mike back to the operator and we wi

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Guidance — 20 items

Nagesh Basavanhalli

opening

“We have already announced that we are going to be bringing five new products in the e-mobility area, which will be showcased in the Auto Expo in January of 2023.”

Dalpat Jain

opening

“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.”

Sanjay Behl

“There are specifically asks from phase 1 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, the secondary will won't get impacted.”

Sanjay Behl

“As a company we have been always in compliant right from the startup and subsidiaries till date and there have been multiple audits both by our certification agencies and independent auditors which will be last from time to time.”

Sanjay Behl

“Currently we are in the process of answering a few queries 5 | Greaves Cotton Limited (www.greavescotton.com) that have come from certification agencies and to which we have responded and we are waiting for the industry gate to open for the FAME subsidies, release of money and as and when it happens, we expect our subsidies also to get regularized.”

Sanjay Behl

“If there any specific questions and I will be happy to answer.”

A. Pirani

“Understood and just one last question, if I may, not in the short term, but slightly in the medium term as the industry and you move to these new battery safety norms.”

A. Pirani

“because I am guessing to make these changes, you will be making some changes in your vendor or your vendors will be investing some money to live up to these changes.”

A. Pirani

“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?”

Nagesh Basavanhalli

“Yeah, right, a very high level, there will be obviously, because some of the regulatory changes globally, anywhere, anytime, in automotive industry, any regulation comes in, right, it has added cost.”

Risks & concerns — 5 flagged

One or two other points to note, global supply chain constraints which we have talked about over the last several quarters continue to pose stress in the commodity cycle.

— Nagesh Basavanhalli

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 standalone data EBITDA margins of the company in Q2 were at 8.9%.

— Dalpat Jain

So, my question is regarding the margin to the subsidy, so if you see we have seen a quarter-on- quarter decline of 35 basis points in subsidiary margins, despite saying that raw material costs are softening.

— Aashin Modi

While we are not counting one month of festivities, because we do believe in the December you will see typical automotive slowdown right.

— Nagesh Basavanhalli

Ronak spoken on slow speed is currently trending at about 5 to 7% of overall sales and with the norms coming, we feel that slow speed from about a third of the market protocol about two years back or the five year back coming down to under 10% and with the FAME subsidy, its 12 | Greaves Cotton Limited (www.greavescotton.com) viability is definitely under challenge at this point of time.

— Sanjay Behl

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Q&A — 13 exchanges

Thanks for the opportunity. Congratulations to the management for a good set of results. So, my question is regarding the margin to the subsidy, so if you see we have seen a quarter-on- quarter decline of 35 basis points in subsidiary margins, despite saying that raw material costs are softening. Is it because our model makes? if you can comment on the margins.

Dalpat Jain

Overall, if you look at our subsidiary businesses between electric mobility, Greaves finance GTL, you are right, there is a small drop in the EBITDA margins, which is more linked 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 promotional marketing and that is where the other expenses have gone up and EBITDA margin is a marginally dropped compared to Q1FY2023 . 3 | Greaves Cotton Limited (www.greavescotton.com) So, these E-3 wheeler and E-2 wheeler

Thanks for the opportunity and also thank you for separately talking about the battery safety norms. It is actually something which I think everybody is interested in. So, my first question is on that only. So, it seems that at least looking at Vahan data that it has not impacted you these changes and used to add an impact at you and also, at least for now, thankfully, you are not one of them names, which has been talked about in terms of the FAME subsidy also, I am sure that has something to do with, how your product is engineered. So, from a regulation point of view, can you spend some more

Dalpat Jain

While broadly we spoke about in terms of what is happening at the battery guidelines 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. So, while Sanjay is joining me, in terms of the electric mobility, we have been in compliance with the required guidelines and as we had spoken and talked up. Let me give you clarity on battery standards first, and then I'll come to the subsidy question that you had. First on battery stand. First phase 1 cutoff is on 1st of December and as a company, we ar

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? 6 | Greaves Cotton Limited (www.greavescotton.com)

Nagesh Basavanhalli

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 1 and phase 2. Phase 1, like I said, comes in December 1st, phase 2 comes on April 1st, right? We are working with our supplier partners to get especially some of the phase two going. Right. So, the total costs, but like I said before, the rest assured we have a very aggressive cost out program. Right and we will continue to be in that operating efficiency that you've always had because we have started from a lower cost platforms, right, we did not come from a ver

I have the first question on follow up on this battery non changes at industry level what are the changes that have to be done? Because, according to me, the timeframe that has been given is not that significant that it required 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 that. Because there also asked for sale gaps between failure the placement has also been spoken about as one of the requirement of the battery pack.

Sanjay Behl

So, in the phase 1, the requirement is really to move towards from a normal battery management system to smart battery management system. That's smart BMS that's the first. 8 | Greaves Cotton Limited (www.greavescotton.com) The second is CAN enabled charges so that there can be data propagation between a charger and a battery. So, the battery is let us 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 base level changes as you rightly picked up our requirements in the phase 1. In phase 2, a speci

Thank you for the opportunity. My question is on the dealership side, as we were expecting that we will reach 300 by the end of September and 500 by FY23. So, are we following that, and we are on track?

Management

Yes, we are on track now. We have crossed 300 dealers in last quarter, in fact it is closer to 350 and we are on track in reaching 500. Okay, so another on the localization side how much percentage we are doing localization currently? The current norm is 50%. We are well above 50%. We are closer to 60% localized something. Okay and sir, if you can comment on the ampere, as I like, how much we are expecting for the FY23? So, we have got your dealership question. As you know, we also in addition to the Ampere exclusive showrooms that Sanjay talked about. We also have the Greaves Retail Showroom,

Thanks for taking my questions. I am not going to have too much on the regulation thing, because it's still evolving, but I am 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 in FY2024 you possibly see the FAME to sort of going away as well, I don't know what the update on that is, but assuming it goes away, you know, how should the entire industry sort of pans out? Do you see What does it mean from a competitive landscape perspective and secondly, yo

Nagesh Basavanhalli

Yeah, I'll take that question. So, first 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 6,00,000 to 7,00,000 units. Last year was 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 or close to 9,00,000. Right so A short term, we are still projecting the 7,00,000 plus, because one month it doesn't make a trend, however, typically automotive cycles do go down in December. That'

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

Dalpat Jain

Ronak there is ambiguity out there, but we are considering it as a manufacturing point and that is how we are preparing the overall thing. So, basically from 1st December the products which are getting sold in the market will be compliant the required guidelines but right now it is not clear. But we are preparing more from a retail sales point. So, we will be curtailing our manufacturing to adjust dealer inventory That is correct. And the second part of the question was more from a balance sheet standpoint and if I look at the despite a very high working capital our September and net cash is u

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, is with respect to the branding of Ampere. 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

Yeah, I think if possible, thank you for recognizing that. I think it goes back to a fundamental strategy four 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 consumer, more dealership points, more products that are relevant will continue to do that. Brand Ambassador and/or not or 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

Thanks for taking my question. So, you have guarded about the numbers, you have gained the trajectory of how the numbers have evolved over a period of time. Sir over last two quarters, we have seen EBITDA margins improving. So, just wanted to understand next year as and when the numbers double from this level? Where do you see the margins for easy division going?

Dalpat Jain

So, Pankaj we look at the overall electric mobility, there are going to be different factors playing in next couple of quarters, the four 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 ICE vehicle industry because operating leverage is going to play its own benefit at the margin level. The gross profit as you look at the last quarter and the last couple of quarters are already reaching towards 22% to 24%. The fixed overhead remains more or less at the similar levels with the

I had a first bookkeeping question. So, just wanted to understand definitely selling the 10 electric vehicles, what part of that are we financing through our own books in percentage terms, if you will just help understand that?

Management

Sonal we do not have any financing of electric vehicles on the Greaves electric mobility right. We have tie up with various financials and the industry now the penetration of financing close to around 30% to 35%. So, overall, from a financial point of view with various financing partners is anywhere between 30% to 35%. Within the group, we have another company which is into financing and that's a fledgling one with a very small area. So, in terms of the overall financing to the Ampere Vehicles share is small. But as overall industry level and Ampere level the financing penetration is anywhere

Sir my question is on, we had received some time back some ARI observations. are those resolved?

Management

They have been replied to. Okay. So but that closure has not came yet. Right. The closure comes in the second deadline by which we had responded to every query, which is from our side. 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 or how can you throw some more color on that just trying to understand what happens to that. So, again, part of the strategy was also the pre-dealer and as w have seen in the e-rickshaw side, where it impacts the li

Just wanted clarification. I understand from your comments that we probably see some dip in EBITDA margins over the next couple of months as we transition because of the new battery 16 | Greaves Cotton Limited (www.greavescotton.com) standards. Would you have any guidance on what would be the stable EBITDA margin we could look at beyond this initial changeovers ?

Nagesh Basavanhalli

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? Electric mobility, sir? Okay. So, like we said, there are a lot of moving parts right now -- yes, with Phase 1, 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 rest as

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 have asked. Stay tuned for more. Thank you and have a great day. Thank you.

Management

Speaking time

Nagesh Basavanhalli

Moderator

Dalpat Jain

Management

Sanjay Behl

Ronak Sarda

Sandeep Dixit

Jiten Parmar

Aashin Modi

A. Pirani

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Opening remarks

Nagesh Basavanhalli

Good morning everybody. Thanks for taking the time. We welcome you all to our quarterly conference call for the period ending Q2 FY2023. As we are all aware, the Indian economy post COVID and 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 have already announced that we are going to be bringing five new products in the e-mobility area, which will be showcased in the Auto Expo in January of 2023.

Dalpat Jain

Thank you. Good morning everyone. As Nagesh mentioned, in terms of the business, overall we saw a good recovery post COVID and that reflect in the financial performance of the Q2 where all at the group level the revenues were Rs. 699 crores, which is a growth of 87% compared to same quarter of previous year and it was 13% growth in Greaves electric mobility, if you see from Q1 and if you look at consolidated level, it was 6% higher compared to Q1 FY23. 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 standalone data EBITDA margins of the company in Q2 were at 8.9%. If we look at the H1 FY2023 revenue group reported total revenue of Rs. 1,359 crores and if we compare it with the highest ever revenue of the pre-COVID period, it goes almost

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