Happy With Q3 Results, Market Share Gains In SUV; Expect Trade Deals To Benefit: Rajesh Jejurikar

Sakshi thanks for having me on the show again and always good to be with you on this show. Yes, we're happy with the numbers and you know like you played them out so it saves me the breath of repeating it. But very strong revenue, our highest ever revenue, strong very strong PAT performance and of course like you said every segmental performance which is market shares and overall auto and farm margins all have been very healthy. So yes, it's what I never got as a student but it seems to be a close to perfect report card.

Yeah, so let's just walk quickly through segments. SUV did very well. We had a 26% growth. So that was a big driver of performance. Tractors and commercial vehicles. So LCV three and a half ton if you'll recall we've been talking about it over the last few quarters. You know that's the segment we were waiting for growth to start and it's been like several quarters of flattish to negative growth and all the indicators were showing that it should start now and this quarter we saw that. So we saw 20% plus growth in the segment. In the segment we gained some market share, we have very strong market share here in LCV three and a half tons at 51.9%. It's a very strong portfolio, pickup portfolio there. Absolutely. Tractors again we saw very healthy segmental growth. GST was definitely a driver of some of this especially commercial segments. And to your question on outlook, one of the things we have to keep in mind is when we look at commercial segment which is LCVs or heavy, light medium and heavy commercial or even tractors, these are sources of profit for the customer and sources of income. And pricing does make a difference as does total cost of ownership. The reduction in price is quite substantial at 10%. Now that alone leads to a 4 to 5% increase in profit of a commercial vehicle pickup operator plus interest costs as they come down that helps the process. So overall we would expect LCV demand to kind of stay. Tractor demand there have been a lot of speculation on how long it will stay. I think we have to see it in a relative context and the relative context is that this year is likely to end up at 25%. So there will be a base effect. And you know if we expect to see 25% year on year in a segment like that on an ongoing basis that's not likely to happen and we'll talk more specifically in May about our outlook for the year. But we have to keep in mind as we look at next year that this year is going to be on a very high base of 24%. So overall we remain optimistic. Our SUV demand is very strong and again we'll put out the numbers in May by way of outlook for next year. But we remain very positive especially with two successful launches we've just had in January. Both the 7XO and the 9S have got a very very good response in the market.

So actually tractor margins have been extremely strong which is the core of the business. We haven't seen a very strong growth in PAT which at 7% commensurate with the revenues is because we've taken impairments at a PAT level about 550 crores in two of our international subsidiaries, our Kun foundry in Turkey and our farm business in Japan. So two of our companies have taken impairments which was worth equivalent to about 550 crores.

So that is why you see a PAT growth of 7% against a significantly higher revenue growth. But if you look at the operating margin of the core business which is the tractors business it's actually seen a very strong margin growth and the margin there PBIT percentage margin there is about 20.5% and if you look at only core tractors it's over 21%.

Yeah, first let's try, I'll focus only on the EU trade deal because the US doesn't seem to have any significant play related to auto. And there's some opening up of the sector for much bigger and more expensive cars so we're not in that space so I'm not really covering that at the moment. Let me talk a little about the EU trade FTA. So we think it's firstly an opportunity and it will enable us to think especially in categories like electric where we have cutting edge products and even others to get into the EU market with quotas that are very favorable for the size of opportunity that is there. We don't think that this will significantly affect us here for the following reason. The quota starts at 15,000 price point. On 15,000 there was a customs duty of say 30% plus. And most of the vehicles in Europe are more than 4 meters so they would pay a GST of 40%. So when you look at all of that, a starting point of 15,000 and including the costs incurred in India will lead to a price point of 35 lakhs. Now 15,000 product, the products we have in India are way way stronger than the 15,000 product that we're talking about. So our top end of our products are 22 odd lakhs ex-showroom. And we have very good options even in this 15 to 18 lakh price point. So we actually don't see this affecting us and it actually is an opportunity because it gives us an opportunity to get our products out there once we have a stronger left and right portfolio over the next couple of years.

So we already have a strong tractor presence and of course 50% tariff was a concern. At 18% India is kind of equal to the other countries which are exporting into US. So that disadvantage that we had for the last few months will get overcome. So yes, it's good to have this correction done for our tractor business.