LANDMARKNSEQ1FY24August 17, 2023

Landmark Cars Limited

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Management on call

Sanjay Thakker

PROMOTER & EXECUTIVE CHAIRMAN, LANDMARK CARS LIMITED

Aryaman Thakker

EXECUTIVE DIRECTOR, LANDMARK CARS LIMITED

Surendra Agarwal

CFO, LANDMARK CARS LIMITED

Vishakha Maliwal

ICICI SECURITIES

Key numbers — 40 extracted

27%

customer sentiment remained buoyant in the first quarter. The Indian auto industry which grew at 27% last year further grew by 10% year-over-year in the first quarter. Now this is the most heartenin

10%

uoyant in the first quarter. The Indian auto industry which grew at 27% last year further grew by 10% year-over-year in the first quarter. Now this is the most heartening fact as there was some fear

rcedes Benz, our largest partner. Mercedes Benz: the first quarter in this financial year grew at 8%. The company has guided strong double-digit growth for the whole year. This will make rest of the

1,100 crore

ike last week and I'm sure these numbers would have gone up which translates to upwards of around 1,100 crores on ex-showroom price of sales and we being the largest partners for Mercedes Benz will clearly b

25%

benefit by this and this shows the appetite for luxury cars in India. You may also recollect that 25% of the Mercedes Benz cars sold are now priced at more than 1.5 crores. Now this 1.5 crores includ

1.5 crore

India. You may also recollect that 25% of the Mercedes Benz cars sold are now priced at more than 1.5 crores. Now this 1.5 crores includes the GST so I'm qualifying that and we have had a short supply of l

37%

ealerships and the deliveries will start in the first week of September. Honda incidentally saw a 37% decline in sales in the first quarter when the industry was growing. So, we are hoping that the H

rs,

arter and was really not so good and this happened because of the discontinuation of the petrol cars, which is what I had spoken to you last time. And this situation is likely to improve quite soon as

65%

business model. Just to put some numbers to it though it, though it has grown from a low base at 65% in the first quarter, we believe that our internal target is to make it three times of what we di

100 crore

rnal target is to make it three times of what we did last year which will translate to upwards of 100 crores of revenue in this year alone, hopefully more and again significant jump the year after. TPG gro

744 crore

ng into the detailed financial number; in the last quarter our new cars pro forma Sale was around 744 crores across all our OEM partners, after Sale revenue was 190 crores. Over the past 9 years after-sale

190 crore

new cars pro forma Sale was around 744 crores across all our OEM partners, after Sale revenue was 190 crores. Over the past 9 years after-sales revenue has seen a growth of 20% CAGR year-on-year and we exp

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Guidance — 16 items

Sanjay Thakker

opening

“This will be a nice and important but niche business for us because BYD as we all know is like the top manufacturer of EVs in the world and we are very happy that we have got the lag in over there already.”

Sanjay Thakker

opening

“Just to put some numbers to it though it, though it has grown from a low base at 65% in the first quarter, we believe that our internal target is to make it three times of what we did last year which will translate to upwards of 100 crores of revenue in this year alone, hopefully more and again significant jump the year after.”

Surendra Agarwal

opening

“Over the past 9 years after-sales revenue has seen a growth of 20% CAGR year-on-year and we expect this growth trajectory to continue.”

Sanjay Thakker

“Now I'll answer your last question first, whether the OEs will be okay or not.”

Sanjay Thakker

“So, this is something which we believe in, the customers will be happy to pay higher margin buying from us which we will bundle and our model is a very unique model which our Mercedes team has thought of and this also to take out the leakages in the system.”

Sanjay Thakker

“We have an internal target, because otherwise we will be just like the other guys.”

Sanjay Thakker

“The thing is that our cost structures will be significantly lower.”

Sanjay Thakker

“Same infrastructure, no marketing cost and the same trained manpower who will be selling and buying these cars.”

Sanjay Thakker

“The second question is that how quickly and how much we will expand with them.”

Sanjay Thakker

“As a sum Jeep plus Renault when do you expect your sales to bottom out sort of and start on a sort of growth trajectory?”

Risks & concerns — 6 flagged

Honda incidentally saw a 37% decline in sales in the first quarter when the industry was growing.

— Sanjay Thakker

The Jeep sales also saw a decline in the first half of the quarter and was really not so good and this happened because of the discontinuation of the petrol cars, which is what I had spoken to you last time.

— Sanjay Thakker

So, it is a difficult situation to let go of people and rehire them.

— Sanjay Thakker

We are going to be talking to some NBFCs to basically see if they can tailor make this product on a risk sharing basis.

— Sanjay Thakker

It's difficult to put a number of which models will exactly sell how much.

— Sanjay Thakker

That's as regards the Honda, as regards BYD is concerned it is difficult to see how the government will react because sometimes it is political posturing, sometimes it is the election, difficult questions completely.

— Sanjay Thakker

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Q&A — 6 exchanges

I had three questions, so I will go one by one. My first question is on your cost structure. Having a lean cost structure in these times really helps but just wanted to understand as a sales- oriented organization, are there any variable costs embedded in our employee expenses? One would assume the employee expenses to come down on a quarter-on-quarter basis and the sales were not happening. So, can you please throw some light on this aspect?

Sanjay Thakker

Thanks. It was quite a smart question. Now our salary structure has a kind of a 40-60 kind of variable to fixed structure. People make incentives on the cars they sell. Also, it is there on servicing the revenue that they generate, the customer satisfaction that they get. So, there is a detailed matrix of our HR which is there. The issue with manpower is that there is also a dearth of trained manpower in the industry. So, it is a difficult situation to let go of people and rehire them. So, in a situation I'll give you the example of a Honda, just for no other reason but because we are there, t

Thanks for pointing out that the website is not yet updated. We will take it up with the company and take down the name of Hriday Car immediately. So, that's actually the answer. What has happened is that one of the ways we could start the operations quickly was that we leased out the Hriday Car facilities as is and kind of took over all their assets and took many of their manpower on our roll and that's how we have been able to start our operations. That's the first answer. The thing that Landmark focuses on and which makes us stand apart is that wherever possible and I don't think this is go

Sanjay Thakker

So, this is a very interesting and in depth question that you are asking. I will answer both of them. First let us take the Jeep matter. My sense is that the Jeep sales will bottom out this month and have an upward trajectory starting from September. You may know that outside of America, India is the only market where Jeep produces four models which is the Wrangler, the Grand Cherokee, Meridian and the Compass. There is a clear focus back on India. The management has changed of Jeep India and we have been in active discussions with them and I'm really hopeful that the Jeep numbers will start t

My first question was that in one of the participants questions you mentioned that we will do bundling of EMI structures. So, is there any plan to get into NBFC policy?

Sanjay Thakker

Not currently we do not have any plans to become an NBFC ourselves. But to kind of answer your question there is a wide space in the industry where the leasing products are not done. Globally leasing is approximately 70%-75% of what the world buys. In India this number is 2%-3% confined only to the corporates and the reason of this is that the banks are not allowed to lease and hold assets in their books. Over a period of time, we will try to learn the business. This may be one of the starting points when we do the used car. We are looking at Mercedes Benz which is clearly doing it. We are goi

I have two questions. One is on Honda; I know we're preparing for the launch of Elevate which is why we've seen the current quarter, the Q1 numbers being a little softer. If you can just help me understand because the two models that we do sell through in Honda, they're not in the category of Elevate. So, why does an Elevate launch impact these volumes of City and Amaze so much? So, that was the first question. And the second one is on BYD, the government has made it pretty clear that they're not going to make it very easy for Chinese companies to come, set up, Indian manufacturing, invest dir

Sanjay Thakker

Let me answer the Honda question first. The Honda volumes did not go down because of Elevate coming or the expectation of Elevate coming. It went down also because the Jazz, the WRV and all the diesel models were discontinued in Jan to March quarter. So, from April we did not have 2 or 3 models that were selling last year. So, this was something which played a much higher role than the Elevate expectation. That's as regards the Honda, as regards BYD is concerned it is difficult to see how the government will react because sometimes it is political posturing, sometimes it is the election, diffi

Just one question; from March to June how has the working capital days movement been, I think the inventories was elevated in March? Has there been any cash release from there and was there a positive CFO in Q1 in case you can reveal that?

Surendra Agarwal

So, working capital as our turnover is we measure in the percentage and days so as a percentage is around 8% to 9% in the turnover. In terms of days, it is around 40 days. Little increase happened in the Q1 being the sales volume low. But we are mindful, we will be getting back to 40 days in the coming quarter. Pranay Roop Chatterjee: Any comments on the CFO, cash flow for operations? So, operation as Sanjay bhai already mentioned about the Q1 performance and we are hopeful to getting back in the coming quarter with the new launches. We are confident enough that we will hit the numbers what we

Thank you all for joining the call. It was in midst of the holiday season, so taking out time was really very heartening. As India goes into the next decade, the premiumization and luxury sales is clearly the theme. We are well positioned. We really can do a lot and we will kind of continue to do profitable high ROCE growth and that is what we will be focusing on. We will have and hit road bumps like the quarter which just went by. But we are not and I'm sure you will also not lose sight of the road ahead. Thank you.

Management

Speaking time

Sanjay Thakker

Moderator

Surendra Agarwal

Deepak Lalwani

Dipti Kothari

Pranay Roop Chatterjee

Vishakha Maliwal

Harini Dedhia

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Opening remarks

Vishakha Maliwal

Thank you. Good morning to all the participants and thanks to the Senior Management of Landmark Cars for giving us the opportunity to host this call. We have with us in the call the Senior Management of Landmark, represented by Mr. Sanjay Thakker – Promoter and Executive Chairman. Mr. Aryaman Thakker – Executive Director and Mr. Surendra Agarwal – CFO. I'd like to hand over the call to the senior management of Langmark Cars for the opening remarks. Over to you sir.

Sanjay Thakker

Thank you for hosting us, ICICI team. You have been quite supportive since the beginning. Let me first thank all the people who have joined the call in the midst of the holiday season. I hope we don't have to repeat and spoil your holidays going ahead. The Indian economy as well as the customer sentiment remained buoyant in the first quarter. The Indian auto industry which grew at 27% last year further grew by 10% year-over-year in the first quarter. Now this is the most heartening fact as there was some fear about last year's demand being a pent-up demand due to COVID. This is really an important signal that the demand continues. Our OEMs somehow did not participate in this rally of the last quarter. But starting now I'm confident that we will not only catch up the lost ground but outperform the auto industry. The reason for my confidence are what I will talk about it going ahead. Let's talk about one by one, some of the OEs which did not participate as well as the industry and we wil

Surendra Agarwal

Thank you Sanjay bhai, good morning, everyone and a warm welcome to one and all attending the earning call. Starting with some operational metrics before getting into the detailed financial number; in the last quarter our new cars pro forma Sale was around 744 crores across all our OEM partners, after Sale revenue was 190 crores. Over the past 9 years after-sales revenue has seen a growth of 20% CAGR year-on-year and we expect this growth trajectory to continue. A recent addition to our offering as mentioned by Sanjay bhai as well, the pre-owned car of our own brand; in the last quarter we sold car worth approximately 17 crores. The average selling price of car for the quarter has gone up from 15.6 lakh in Quarter 1 FY23 to 19.1 lakh in Q1 FY24 showcasing a growth of 22% year-on-year. So, our average selling price of the car is continuously growing. This rise in ASP is on the back of higher sale of top end variant being sold and all-round price escalation as well. The average selling p

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