Hyundai Motor Company

Ladies and gentlemen, good day and welcome to the Q1 FY26 earnings conference call of Hyundai Motor India Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anil K. Matre from Motilal Oswal Thank you and over to you, sir.

Thank you, sir. Good evening and we welcome you all to the Q1 FY26 Earnings Consent Call of Sundari Motor India Priority Management. Today, we have with us Mr. Anshul K, Managing Director, Mr. Karun Garg, Chief Operating Officer, Mr. Vahidur Har, Chief Financial Officer, Mr. Gopal Prasad C.S., Chief Manufacturing Officer, Mr. Saravanan P., Pouching Head, Finance, and Mr. K.S. Harriyar. Thank you Aniket. Good evening everyone and welcome to the Q1 financial year 26 earnings call.

Before we begin, I want to remind you of the safe harbour. We may be making some forward looking statements that are to be understood in conjunction with the uncertainties and the risks that the company faces. The conference call will begin with our MD remarks on the performance and outlook followed by earnings presentation for the quarter after which we will be happy to receive your questions. Now, I hand over to our MD. Vote you sir.

Thank you Hari. Good evening and welcome to the first quarter earnings presentation. Compass Corps for financial year 2026. As we enter the 30th year of operation in India, we are filled with immense pride in a journey that began 29 years ago with a bold vision to transform mobility for the Indian customers by not just providing smart mobility solutions but a future that reflects innovation, sustainability, and a deep connection with our customers. Since our first car roll-out, Jenda has grown alongside India, becoming a trusted household brand and a strong contributor to the nation's automotive and economic development. Over these three decades, we've gone beyond manufacturing cars. We have great experiences introduced innovations, and built relationships that have stood the test of time. Guided by our global vision of progress for humanity, HMIL will continue to drive product innovations and market growth while contributing meaningfully to the society. Talking about the domestic sales performance during the quarter, The prolonged softness and demand continues to weigh on the overall industry sentiment driven by persistent macro-challenges and further intensified by uncertain global environment. In these challenging times, we continue to remain agile and focus on advancing our core areas such as enhancing brand presence periodic product updates, expanding our footprint, and consistent drive to enhance our rural presence. It is indeed a matter of pride that Hyundai Creta has marked 10 successful years of completion of enduring leadership in the mid-size segment since its launch in 2015, a powerful testament to the unwavering trust and confidence our customers' place in the brand. Continuing with its legacy, Creta became the highest-selling SUV during the quarter, fortifying its position as the undisputed ultimate SUV. Our focus on enhancing the CNG adoption has led to record highest-ever CNG contribution, over 16% in the quarter. supported by the dual-cylinder technology and the introduction of new variants of CNG offerings. As part of our drive to expand rural presence, we continue to unlock wider spaces by extending our network through strategic outlet additions and targeted rural marketing activities. These focused efforts have resulted in our highest ever rural penetration of 23% square. In addition to the above initiatives, we have also strategically revealed our sales promotion schemes in response to the current market dynamics, which enabled us to stay competitive in a challenging market environment. While the near-term market sentiments continue to renew it, we expect a gradual recovery in industry demand on the back of a good monsoon festival season coupled with government measures such as interest-related income tax relief and upcoming pay commission. On exports, we achieved a remarkable growth of 13% in the volume during the quarter, showcasing the global appeal of our products and thereby underscoring HMI's positioning as a manufacturing hub for emerging markets. Notably, our export contribution in the overall sales mix improved to 27% during the quarter, replicating our operational flexibility to navigate and balance the headwinds in the domestic market. We are confident to maintain a positive momentum in our export operations in line with our growth commitment. Coming to the margin in a highly competitive landscape with heightened price pressures, we closed the quarter with a strong EBITDA margin of 13.3%. This resilience was driven by quality of affairs, enhanced focus on boosting exports and disciplined cost control measures. As part of our strategic expansion plans, recently we have commenced engine production at our Pune plant. This new facility will support both our Pune and Chennai operations, thereby enhancing efficiency and ensuring smooth scaling of production. To conclude, we are pleased to announce that HMIL will be hosting its first ever investor day on the 15th of October 2025 to unveil our near to mid-term plans. As you are aware, we already announced that we will be launching 26 products by the end of the financial year 2030. we will be sharing more details about these new launches, power trend diversity and other strategies during the coming investor day. Thank you for listening. Now I hand over to Hari.

Thank you, sir. Let me begin with the key business highlights. As we mark 10 glorious years of Creta in India, we are humbled by the love, trust and loyalty our customers have shown us and we remain committed to raising the bar always. Since its debut in 2015, the Hyundai Creta has become a phenomenon. Such is its impact that the mid-sized SUV segment is now often referred to as the Creta segment in the country. Despite increased competition, the Hyundai Creta continues to lead from the front, maintaining its undisputed number one position in the country every completed year since its launch. As part of our strategic expansion initiatives, we have kickstarted engine production at our new Telegon plant, a significant milestone in our overall growth journey. Committed to the vision of making India made for the world, our brand item has scaled over 3 million unit sales in India and export markets cumulatively. With over 2 million units sold in India and over 1 million units exported to global markets, Brand i10 stands as a shining example of HMIL's commitment to delivering world-class products. At HMIL, we have consistently worked towards democratizing global technologies and high-end features for a broader set of customers. We are proud to mention that the company achieved a remarkable milestone of selling over 1.1 million sunroof-equipped vehicles in India over the last five years. Going forward, we shall continue with our commitment to shape the future of mobility by blending cutting-edge technology and innovation and future-ready product offerings. In partnership with IIT Madras and Government of Tamil Nadu, we recently unveiled the design of the Hyundai H2 Innovation Centre, a state-of-the-art research and development hub poised to serve as a catalyst for innovation in the field of green hydrogen technology and its ecosystem. This initiative demonstrates our commitment to make in India by empowering local innovation, nurturing talent and supporting the development of scalable, affordable and sustainable hydrogen solutions. Moving on to sales performance for the quarter, we achieved total sales of 180,399 vehicles in Q1 financial year 26 compared to 192,055 vehicles in same period last year. In the domestic market, we sold 132,259 vehicles compared to 149,455 vehicles in same period last year. The demand in domestic market continued to remain weak during the quarter amid challenging macro environment. Exports, on the other hand, grew by a strong 13% year-on-year to 48,140 vehicles as compared to 42,600 vehicles in same quarter last year. This is attributed to the strong global appeal for our products and our strategic focus towards optimizing exports amid the challenging domestic market conditions. Talking about the volume mix during the quarter, despite challenging market conditions, our SPV contribution was quite strong at nearly 69% with a strong traction in both urban and rural markets. Hatchback continued to witness decline in line with the industry trend whereas sedan volumes remain flattish on year-on-year basis. Our fuel mix continues to evolve in alignment with consumer demand and regulatory trends. Our CNG contribution reached its highest ever number of nearly 16% during the quarter, driven by great response to our dual-cylinder technology and other product interventions on CNG, whereas EV contribution was at 1.4% during the quarter. Now coming to the financial highlights for the quarter. Our revenue from operations stood at Rs. 164,129 million in Q1 financial year 26 as against Rs. 173,442 million in Q1 of previous year. While the challenging domestic market conditions impacted the volumes and revenue, the company could maintain the margin resilience largely supported by better export numbers and cost control measures. EBITDA for the quarter stood at Rs. 21,852 million as compared to Rs. 23,403 million in Q1 financial year 25. We could maintain strong EBITDA margins at 13.3% as compared to 13.5% in Q1 financial year 25. EBIT stood at Rs. 16,571 million in Q1 financial year 26 as against Rs. 18,113 million in Q1 last year. EBIT margin was at 10.1% as compared to 10.4% in same quarter last year. PAT for the quarter was Rs. 13,692 million as against Rs. 14,897 million in Q1 financial year 25. Despite the challenging market dynamics, we could maintain the PAT margin at 8.2% as against 8.5% in Q1 of last financial year. It is pertinent to mention that EBITDA, EBIT and FAT margins in Q1 financial year 26 are better than financial year 25 full year margins. We would also like to give more clarity on the key factors for driving the margins during the quarter. On a year-on-year basis, the margins were impacted mainly due to higher discounts. The impact was however minimized by better model mix, higher export contribution and cost reduction efforts. The reduction in margins on a sequential basis was largely due to the tail-ended impact of government incentives and enhanced discounts in domestic market in response to the overall market dynamics, whereas the cost optimization efforts through localization and value engineering continued during the quarter after. And lastly, as announced earlier, we will be hosting our first ever Investor Day on 15th October 2025 in Mumbai. And we will be sharing more details in due course. This concludes my presentation. Thank you all for your time and attention. Now we open the floor for Q&A.

Thank you very much. We will now begin the question and answer session. Please note that the management might use English-Korean translation for better communication. Hence, there could be a slight delay in the responses. Please note the management line will be on mute mode till then. Participants, anyone who wishes to ask a question may press star then 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Our first question comes from the line of Binay Singh from Morgan Stanley.

Please go ahead.

Hi team, thanks for the opportunity. Our general understanding is that exports tend to be more profitable than the domestic business. But when I look at this result, where your cross margin is one of the highest that you had, is it fair to assume that the export cross margin is 7-800 business point higher than domestic? Because that's the only way to sort of, you know, deconstruct and make the margin. Is that a fair assumption?

Hi Vinay, Hariran here. So, let me give clarity on our gross margin for this quarter. So, if you look at on a sequential basis. So, basically there are two important factors here. One is higher export mix or there is one reason. Apart from that we also had material cost optimization. Basically what we are doing is we are continuously working for improving our localization and other cost optimization efforts. So, that also helped us with better gross margins during this quarter. If you look at on a year-on-year basis again, one is export mix plus the material cost optimization. Apart from these, we also had better model mix in domestic during the quarter plus the price increase which we did in January this year. So, all these things have collectively supported us with the better gross margin during this period. I hope I answered your question.

Yeah, just to follow up on that, you know, in your slide 9,

you've given this cost and other reductions which is 549 million is that the material cost reduction number that you are saying that you've seen the benefit quarter over quarter because that's quite small as a percentage it's only 30 basis point also is that the number when you are saying material cost optimization so again if you look at maybe let me give more clarity on a year-on-year basis

So, at a PBT level, of course, the major, the drag on the margins was because of the higher discounts as we had indicated in the presentation as well. But this was, you know, the major part of this was offset by, there are three important factors. One is the material cost reduction. So, if you look at material reduction, so we had an impact of nearly 70 basis points during this quarter. Followed by that, we also had the price increase Yeah, this is on a year-on-year basis. Okay, okay.

I was focusing on quarter-to-quarter.

To get the number of quarter-to-quarter, what is the material cost benefit? Because I think... Even on a... Yeah.

So, even on a sequential basis, we had a significant material reduction translating to nearly 60 basis points. So, that also supported us, you know, on the margin frame. Okay, thanks.

And lastly, on the export outlook, last call, we had given a 6-7% outlook for export growth this year. Now, if I look at the guidance, it implies that exports for the remaining part of the year will grow at 2-3%.

So, are you changing your export guidance or maintaining it or do you expect the growth to slow down very sharply for the rest of the year in exports?

See, Vinay, what happens is, of course, we have been doing very well in export in the recent time. So, the Q1 number reflects that. So, what is happening is that we are seeing a very good demand for our products across different geographies. Even if you look at this quarter, so, for example, markets like Africa, we have seen a growth of 28%. Again, Mexico had, we have seen a growth of 14% like that. So we expect that the momentum should continue in the near future. But one thing we need to understand here is that there is also a seasonality factor because normally what happens is exports for us generally it is better in first half of the financial year as compared to the second half. So, considering that, I think we would like to keep the guidance at the similar level, what we had indicated during last running time. Having said that, we will be continuously looking for opportunities to maximize our export volumes wherever possible.

Great, great. Thanks for that, Harry. Thanks for the detailed response. We will come back in the queue.

Thank you. Our next question comes from the line of Kapil Singh from Nomura. Please go ahead.

Yeah, hi sir. Thanks for the opportunity. So, first question is on the demand condition itself. You know, we have seen a weaker demand through the last few months. If you could just give some details of region-wide color, rural versus urban demand. Also, you know, we have seen some improvement in the mix of CNG as well as, you know, the feedback on Creta EV seems to be good. So, electric vehicles, what kind of adoption and response you are seeing and, you know, can we see these numbers ramp up going ahead? A lot of questions there. So, okay, let's take one by one and then I'll give you a overall perspective. So, a couple, clearly the rural contribution continues to go up. In quarter one, we had a rural contribution of 22.6%. And for your reference, last year, same quarter, it was 19.9%. And full year, last year, financial year, it was 20.9%. So, very clearly you can see that, you know, there is a clear shift in demand towards rural markets and it is not a surprise because we have seen that the road infrastructure, the monsoon, the minimum support price everything is going for rural and of course urban markets basically because they are affected by the general sentiment you know whether it is reading about the world economy or what is happening or the uncertainty that does not affect the rural customers. On the TNG front again like MD mentioned in his opening comments. This was the highest ever CNG contribution quarter for us. If I go model by model, I would like to tell you that Aura CNG contribution was 89%. extra CNG contribution was 30% NEOS CNG contribution was 18% these 3 models put together CNG contribution was 46% and when you compare this with quarter 1 of last year it was 33% so from 33% we have moved to 46% and the movement you have in the denominator the full base then from 11.4% we have moved to 15.6% so this CNG contribution increased besides increasing volumes has also helped us to reach the CAFE norms couple so just to tell you quarter one CAFE our target was 117.286 actual is 112.856 so we have achieved CAFE very comfortably by minus 4.430 and addition on this has been Creta Electric so which has received a reasonably good response and also it has helped Creta not only being the number one SUV in this quarter, but if you see this calendar year, three out of six months, Creta was the number one model across segments. So, I think it is really enhancing the brand Creta and of course as we know we are celebrating 10 years of Creta. Overall demand scene so far looks sluggish. In fact, June was the lowest PIV in the last 30 months if you leave aside December. I will repeat, June PIV was the lowest in the last 30 months if you leave aside December. So, this was not very good. But at the same time we are now entering the festival. So we have every reason to believe that the worst is behind us. We will start with the Kerala Onam, the Ganesh, Janmashtami, Rakhi, Independence Day and then of course the Navratras start. Just to tell you this year Navratras are in September and Diwali is in October. Whereas last year both Navratras and Diwali were in October. So what will happen is this year both quarters through financial year as well as quarter 3 the festival effect will be there also interest rate although 100 basis point interest rate has been cut By the RBI this year, I believe the effect to the customer is still being passed. If you remember Kapil, it was in 2008 when the last time 100 basis point interest rate had cut. You know, so this is a very significant cut. Today's newspaper says that maybe there will be another cut happening with the baseline inflation really at a very low level. Also, income tax savings generally people do in the second half. We have the pay-to-wage pay commission coming in. 43% of our, 44% of our sales comes from salaried employees, out of which 16% are government employees. So, I think there are some positive offshoots. At the same time, underlying, there is definitely a weakness in the market so far. You know, I hope I have answered all your questions. In case there are follow-ups, I will be happy to take. Yeah, so thanks for the detailed answers. Another question, the second question was on material cost reduction. Could you give some color, what are the areas in which you are reducing this cost? What are the potential areas where you can reduce costs? And if, you know, any potential number you've identified, like how much is possible to reduce over next, let's say, one or two years?

Kapil, if you look at on the material side, first of all, last quarter, of course, the commodity for us was more or less stable. On the other side, again, as I mentioned, there are two things here. One is we are continuously improving our localization level. If you look at the number, for example, a year back in financial year 24, the localization level was somewhere around 78%. Within a matter of a year, we have significantly improved this number to nearly 82% now. So, clearly we are reaping the benefits of our localization efforts in the current period. Apart from that, we also at the plant level, we also do some value engineering activities. We try to identify some scope of cost reduction at the plant level. So, these things have also supported us in keeping the material cost under check. Going forward, again, though I cannot, you know, we cannot give any specific target number, but we still see a lot of opportunities to improve the localization. For example, even for the EVs, you already know that we have already localized this battery assembly pack and we are also working for, you know, improving the localization and other EV components as well. So, these things, again, should definitely help us even going forward to have a control over the material cost.

Thank you, sir, and congratulations on a strong performance and also beating the CAFE numbers by a good margin.

Thank you.

Thank you. Our next question comes from the line of Pramod Kumar from UBS Securities. Please go ahead.

Yes, thanks for the opportunity. My first question is on the comments you made on the rural demand trends and rural trade going up is positive for you. But just want to understand, because even with rural trade going higher, we see that STDs continue to be seeing a pretty good traction for you. It's not slipping. So just wanted to understand, What are you discovering as you are going more to the rural network in terms of consumer purchase behavior? Because historically rural is kind of what do you say bracketed along with small cars, hatches and not SUVs and more premium products. But looking at your ASPs and the kind of actually category mix what is shown doesn't seem to be affecting you as you are increasing your exposure to rural. So, if you can just help us understand and sort of especially from your vantage point you have been in the industry for long enough from your earlier days to now what is the kind of evolution what is seen in the rural demand? And what does it also kind of mean for as you look at both monthly demand revival or festivities and also the pay commission coming in? Will there be a difference in the buying pattern this time compared to the last pay commission? Sorry for the long question, but I hope I kind of made my question pretty clear.

The question is long and answer will be short. Very, very clearly to answer your question, rural SUV penetration today stands at 68.8% for me. You know, so very clearly I think the key buying factor for rural has changed. You asked me that yes, I have spent 32 years. I never expected that rural will come out of small markets, you know, small cars. But that said, if you see 2015, Frankly speaking, SUVs used to contribute 13% to the overall sales. In fact, before Kratom 2014, it was 9%. So, actually there is a paradigm shift across and rural has really caught up very, very fast. And today, rural customers have also become aspirational. And I think one key reason for that is that the road infrastructure has improved tremendously. Earlier, if you see, rural customers were very hesitant to buy a premium car because they were not very sure about that, you know, the reliability, you know, because the road infrastructure was bad. The second thing is the service. If you see Hyundai, you know, our service network and for that matter, the entire industry, if you see, very, very strong in service network. So, today, one is fixed network. We have 586 services. service network in the rural areas you know total outlets plus we have urban I mean rural service vans 110 exclusive mobile service vans which are serving the customers in the rural areas so that is also giving the customers the confidence I think the third is, if you see, while the urban economy or urban sentiment is affected by the general, you know, what is happening on tariffs, what is happening to the world economy, what is happening to the Russia-Ukraine war, what is happening to, you know, general stuff, rare earth matter. But rural is very simple. You know, rural is monsoon. MSP you know and I think very clearly if you see over the past 3-4 years I think monsoon has been not only more than normal but also not very very skewed in favor of only particular regions you know it has been very very well spread across the country. Even this year it has started on a very positive note. So I think all this while what is happening is aspiration is taking over functionality and Hyundai is clearly reaping benefits. It is also reflected in terms of future because you are talking about future. So what we are doing now is the further network I think although currently 47% of my network is rural and 53% is urban but if you ask me 7 out of 10 outlets now I am making are in the rural areas So, I have expedited the network in the rural areas considering that what kind of demand I am seeing there and considering especially the affinity to SUVs which directly helps me. I hope I answered your question. In case there is a follow-up, I will be happy to take.

Sir, on the pay commission, what does it imply for pay commission as it has been called there is a repeat of the last pay commission when it was more dominated by small cars. So, how do you see that making the kind of change in consumer preferences?

So if you see, 16% of my sales is to government employees. 16%. So very clearly that is clearly benefited by the pay commission. I don't think that the same funda of small cars applies even for the government employees, you know. Very clearly even their aspirations are coming in. That is point number one. Point number two, this whole funda of small cars, I think people are misinterpreting it to hackish. So, I just like to explain this. You know, if you see, hackish percentage is continuously going down. Very clearly, it is going down. In quarter one, it has gone down to 21%. However, what is happening is 6 to 8 lakh rupees segment where people earlier used to buy hackish, are now buying cars like extra or say for that matter punch as well and that segment is really growing at a very fast pace so customer choice has moved from hatches to suvs and in the same price range because obviously he gets a better ground clearance he gets a better visibility he gets fixed airbag as standard He gets a sunroof. He gets a very good body type. So I think this is how you need to not differentiate when you say small cars. It is no more about hatches. I think we have to see whether the price segments are also moving up. And I think less than 10 lakh and more than 10 lakh is not really moving too much in favor of more than 10 lakh. I mean, just to, yes, it moved 2-3 years, but now last 1-1.5 years, it is very stable. But yes, more and more SUVs are getting sold. The last point is about the first-time buyers, where very interestingly, let me tell you, even, I mean, first point is at an all-model basis, Our first time buyer percentage has gone up from 32% in 2020 to 40% now in 2025. And even in models like Crater, first time buyer percentage is 32%. It used to be 13% in 2020. Now it is 32%. Even in venue, it is 45% now, it used to be 29% earlier. So you can see how clearly even the first time buyers because of good financing, because of more and more youngsters coming in, because of the children playing also an important role in influencing that decision of their parents. I think all these factors are making aspiration more important than functionality, resulting in better SUV sales. Thank you.

Sir, just a follow-up, sir. Network expansion, you talked about 7 out of 10 incremental increases, but any broad number as to where you want your target to, or your overall network to grow for this year and next year? Any number of outlets which you're going to have at the broad network level, urban plus rural?

Look, I would only say that we are very flexible in this. We continuously see the market and we do a balance between the viability of the network. Also very important, as you know, if you see S8DA dealer satisfaction, last three year average, Hyundai is ranked number one and way ahead of its peers as well as industry average. So I think we need to keep track of that as well. And so what we are doing is, especially in lunar areas, we are going for new dealer companies. We are giving opportunity to the existing dealers to expand. In fact, 75% of my overall expansion is being given to existing dealers so that they can keep their costs low and sales per dealer company continues to go up. So I will not give you the targets for this year and next year because obviously this is a confidential strategy. But at the same time, like I said, a big focus area on rural. And today I am present in 75% of the districts in the country and it continues to go up. Almost 50 to 60 LOIs are in the pipeline which should be activated in the next 5 to 6 months. So I think this is the best I can do in terms of sharing the data. Thank you.

Sir, last question on Creta. It's been a phenomenal achievement that the brand which triggered the SUV segment is still without any incentives because the showdown is clearly creeping up the price point. We've seen that last year with the small SUV, this year with the midsize SUV. Practically outside of Creta, every model is on a discount. and abundant inventory available. So how do you see that? It's of course one thing which you should be very proud of and what you've done here and the affection of the customers very much with you but isn't that a bit of a risk as well when you look at the year forward before the big upgrades coming on Creta or the big platform change? Should we expect that there will be discounts or incentives which will keep up in Creta as well or you have a strategy around to keep it kind of inflated from the discounting bit because once you start discounting it's just never going back.

right so just want to understand your thoughts on that so this question has been asked to me every 3 years since the last 3 years that will Creta continue to grow happy to report that continuously every year it has grown double digit you know very healthy double digit not because Creta remains the same please see what we have done to the Creta you know you saw the phase shift which we did in 24th January it was almost like a full model change And the result was fabulous. And not only the product, if you see the entire marketing campaign, the brand ambassador, what we have done, now the 10-year thing has come and you would have seen the kind of activities we are doing. So, the whole idea is to continue to keep on creating excitement around the brand, number one. Number two, if you see the kind of variants we have been able to introduce in Treta, you know, like for example, we got a feedback that customer wants an automatic in the lower trends. Now, that gives me an opportunity to maintain my ASP, average selling price, at the same time give more opportunity to the customers by democratizing the AT, you know, or maybe bringing sunroof in the lower variants as well. So, you know, rather than joining the price war or the discount war, what I am doing is bringing in those premium features in the lower variants, which really helps me, you know, to do that. That is the point number two. Number three is, if you see on dependence on CRETA, even venue today is contributing 17 percent to my sales and it is number 14 in the list out of total 100 brands even extra contribute 13 percent to my list uh uh i 10 10 percent aura 11 percent continuously going up high 29 percent so i think whether you see hatchets sedans suvs unlike many of the industry players who are very very skewed towards only one We have a very healthy mix of hatches, sedans and SUVs. And obviously, because SUVs is the way where customers are wanting, more and more launches happening there and more and more contribution also coming there. At the same time, I would say that sedans as well as hatches continue to be a very important part because they are also helping me to meet cafe. If you see the CNG penetration in Aura is 89%. And even in Exeter, it is very high, more than 30%. And that has also helped me in addition to the... Thanks a lot. Yeah. Yeah.

Thank you. Thanks a lot and wish all the best. Thank you.

Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict the questions to two each per participant and you may rejoin the queue for follow-up questions. Our next question comes from the line of Vipul Agarwal from HSBC. Please go ahead.

Thank you for taking my question. So my first question is on the localization of your ICE portfolio. So it's currently around 18% of your partner is still imported. So is it possible to pin down a few parts which are still can be localized pretty easily or maybe in a time frame of next couple of years and what kind of margin expansion we can expect from that localization over there?

So, Vipul you are asking about ICE localization and ICE portfolio? Yes, is it correct? Localization and ICE portfolio, yes. Yeah, so the localization level as I had mentioned earlier which is about 82 percent it is it is a blended localization including EVs. But of course, if you look at our EV contribution in our total portfolio it is it is quite less in the current scenario. So what we are doing is that as I mentioned, so we have been continuously trying to improve the localization. We have been identifying a lot of opportunities. Recently, even in last year, we have localized many of the components. For example, even Sunproof is a classic case which we have localized last year. So these are all some of the initiatives we have taken and that is giving us a lot of advantage even in terms of margins. So, going forward again see what we are doing also is that we have a dedicated localization team working as part of the procurement function. So, their role is basically to identify such kind of opportunities wherever we can go for such you know implementation as such. But one thing we need to understand again there are some items for example, if you take electronic items or chips. where the availability of these components in the domestic market is still a challenge. So, those cases obviously, we need to go for the import sourcing only. Nevertheless, we will be continuously looking for opportunities here wherever possible we will try to go for the localization.

So, sorry actually my question was like on the look like you you localized the sunroof. So, do you have any like big parts in pipeline can be localized soon and not available or maybe it's like it's very visible at this point in time that this is part will be localized in next couple of years if you can share uh if possible

may be little difficult to give specific details but as I mentioned see there are lot of opportunities again as I mentioned last year like financial year 24 the localization level was 78% and we have improved to 82% in the current scenario so you can understand you know quite lot of efforts we have done here so this will be a continuous process so I think wherever there is opportunity we would like to you know capitalize on that

So, added to that, we have been localizing the high technology part by partnering with the global players and this will not only help us to reduce cost but at the same time we can reduce the entire supply chain. As Harish said, we will continue to focus, giving a very strong focus in the government of the India initiative, the Make in India program.

Understood. Thank you, sir. So, my second question is on the premiumization trend like sir already mentioned that now you are giving you are basically democratizing the high end features like ANT and other features. What we see is like now light seats, dashboards, mostly sunroof are largely available across the across the models. So, what which part now what what what part can be premiumized now like maybe if I am looking from say let us see if I take three years perspective and take a revenue pattern. I will how what would be your explanation to go beyond the growth of beyond the volume growth stagger in next day to four years and that it will be driven by premiumization because I think that large part of premiumization is largely done in the industry now.

Not really I would say I would like to differ with you even on sunroof quarter on quarter from 51 percent last year we have moved to 54.4 and let me answer your question. One is, more and more models with sunroof. Even today in my portfolio, for example, hypothetically speaking, Neos does not have a sunroof. Aura does not have a sunroof. Why not? So, I think opportunities like this exist. This is point number one. Point number two, more and more features are coming in. It's not only sunroof. Suppose today in-car payment has come in. Maybe more and more models can come with in-car payment. Then, like I mentioned, in the lower trims, We are adding automatics. We are adding sunroofs. We are adding, you know, EDAS. So, as Indian market evolves, I think there will always be an opportunity. And the biggest point is because we are a part of Hyundai Motor Company, where, please understand, as Hyundai Motor Company, we are very strong in the US market. We are very strong in the Korean market. We are very strong in the European market. So, these are all developed markets. So, we get a first-hand experience of what are the features which are working there and typically what we have seen is with a couple of years lag, some of those features are very, you know, clearly they become a rage in India. And Hyundai has been a benchmark creator here. Like, for example, two and a half years back, we introduced ADAS. And today, ADAS is contributing a good 12.5% to my overall sales and eight, nine of my models are having ADAS already. Because and then that time I had not predicted maybe that highways will have a speed of 120 kilometers an hour. But then it has happened in India. So, I think as India grows, as India becomes younger and aspirational, there will be and as our technology prowess goes up and as the electronic architecture in the system, in the cars becomes more and more important with more and more software defined vehicles, I think by being a part of Hyundai Motor Company will give us a huge edge in more and more opportunities in localization. Oh, in premiumization. But I cannot answer how much basis point it will help in profitability. That is very, very hypothetical and very, very difficult to answer.

Thank you. Thank you. Our next question comes from the line of Raghunandan from Nuama Research. Please go ahead.

Thank you, sir. And congrats on that equality of pace. On my first question, we are strong in UVs and Creta has been phenomenal, but there are white spaces in NTDs. Considering there is a plan to launch eight models by FY27, can we express any action in the NTD space?

As you know that we have already announced that we are going to have 26 new models including facelifts in the next five years. So on 15th of October, we are going to have the investor day and I think more details on the future models you can expect on that day. Please kindly bear with us till then.

Thank you. Secondly, on Kalidau plant, engine manufacturing started recently. Would vehicle manufacturing be on track to start before the end of the year? And also by end of next year, what kind of capacity utilization ramp-up can happen there, given that you would marry all the new production to happen from there?

Raghu if you see yes recently we have started the engine production even the vehicle production plan is well on track as we had earlier committed we are planning to start the vehicle production from this plant in quarter 3 of the financial year 26 so that is point number 1 and number 2 on the utilization level again as we had indicated earlier also during the initial period the capacity utilization will be little low only but as we move forward we would like to accelerate you know basically on the both on the export side as well as well as on the domestic side because as we had discussed earlier also going forward domestic we expect the gradual recovery should be happening with all these stimulus measures from the government side even on the export side we expect the momentum should continue basically as you know we would like to position ourselves as the manufacturing hub for the emerging markets So, we are looking at a lot of opportunities here. So, once this capacity, you know, commences, I think that really should open up a lot of opportunities for us even on the export front as well. So, that is what, you know, we are basically looking forward in the near future.

Thank you, Hari. It's just last case. Can you share some discounts as a percentage of sales?

Yeah, I'll call back to you. Thank you so much.

So, discounts during the quarter was 3.4% on ESB, the domestic discount.

Thank you. Our next question comes from the line of Gunjan Prithyani from Bank of America. Please go ahead.

Yeah, hi. Thanks for taking my questions. I actually had the follow-ups on Manjian I think who asked about this discount. Is this 3.4% comparable to the 2% that you shared in the last quarter?

Yes, yes, it is comparable. The market situation has changed. But two things you must keep in mind. One is all the results obviously include this 3.5%. So all the EBITDA and the PAC, PGT, whatever you are seeing, include that. That is point number one. Point number two, ASP has actually gone up quarter on quarter. 760 last year, same quarter, and now 765. So in a market where competition is giving discounts to the tune of 4.5%, 5%, so in a market where competition is giving discounts you know to the tune of 4.5 to 5% and of course having price cut we have been able to quarter 1 financial 25 to quarter 1 financial 26 increase our ASP and keep the discounts much under check so yes so this is our strategy going forward and we believe that similar levels or slightly lesser levels should be going forward as well

Yeah, no, I think what I'm trying to understand is, you know, given the discount rise when I look at the numbers now about 1.4 percentage point increase versus last quarter on discounts and then, you know, the operating leverage being lower in this quarter, I'm just trying to sort of think through that you've been able to deliver very, very, very resilient margin in that context. So, You know, is there anything beyond product mix? Because you did speak about RM 50 basis points. Is the model mix and export mix that big a tailwind that we were able to offset almost two percentage point impact of discounts and lower operating leverage?

Gunjan, yes, one is basically as you have rightly mentioned, one is the export mix, higher export mix we had whether it is a sequential basis or even on a year-on-year basis, the export mix has been much better. We also had the price increase in domestic market in the month of January. So, that also has supported us with some margin improvement. Apart from these things, in fact, if you look at even the model mix, The model mix in domestic was quite positive especially with more of Creta phase. I think that is also you know supported us positively during this period. And of course, material side as I already explained. So, the localization efforts and the other cost optimization efforts have really supported us big time like you know as far as the margin improvement is concerned.

Pretty solid performance in that context. It is just to be clear there is no impact of engine plant commissioning in this quarter and if there is anything you just give us some sense how should we think about this depreciation line item going into the next quarter for this plant.

So this quarter we started our engine operation in the middle of June month only. Fast stretch very negligible impact in the P&R.

Okay. Okay, and my second question is on the export business. Now, export, the growth, the volume growth is pretty strong, but I do see the ASP has come off pretty meaningfully. Is there, you know, can you just throw some light on, is this a geomix change? Is it more, you know, sort of aggression in the export markets, something that we should be reading from a strategy perspective or some color on that piece?

So again on the ASP front if you look at on a year on year basis export there is some decline in the ASP. This is mainly because of the increased discount level in the recent times. See what is happening is that we have been seeing very strong demand for our products across the different markets. Even in the recent times, we are getting lot of fleet orders. For example, markets like Middle East, Africa, for our models like Verna, Aura, we are getting lot of fleet orders. So, in order to meet these demands, we have also supported with some higher discounts. So, that has basically resulted in some reduction in the ASP for exports. However, if you look at on a sequential basis, ASP is more or less stable for us on the export front.

So basically if you see I think this is a very good and I think as a strategy we decided that yes in terms of capacity utilization as well as overall margins and like you also mentioned that solid performance in that context. I think one reason was that we were able to increase and enhance export by giving a little bit of a higher incentive. So I think we have looked at it as a holistic strategy quality of sales and MD mentioned in his opening remarks as well and since IPO we have been mentioning this balance between domestic and export and this lever that we enjoy versus some of the other companies I think that really helps us to navigate through some of these challenging domestic market environment and that is what we have used. Thank you.

This last question if I can just very quick one.

I am going to have several other participants waiting for their turn. Thank you so much. Our next question comes from the line of Raghuvendra from Ambit Capital.

Please go ahead. Thank you for congratulating this set of numbers. I'm just asking you to give me some quantitative view on how you are looking at things progressing on SAFET 3, SAFET 3 norms and the likely implication on cost. If you can aggregate between a small car and a movie kind of vehicle, any directional guidance you'd like to share?

Look, Hyundai has been in India now for 29 years. We have met all regulations and we have always believed that SIM is the one agency which talks to the government and that's the best for the auto industry. As far as general, I would say that as a part of HMC, HMI is one company which has access to all technologies. You know, we have petrol, we have CNG, diesel, strong hybrid, plug-in hybrid, CNG. you know, even for that matter, even hydrogen vehicles, you know. So, we are watching this and waiting for the final notification to come in. And as we have met in the past and as we are doing it currently, we are fairly confident that we will be able to meet Cafe 3. But we do not have any individual view. We will go by Sian's collective view from the auto industry. Thank you.

Okay. Thank you.

Ladies and gentlemen, we'll take this as a last question for today. I now hand the conference over to Mr. Aniket Matre for closing comments.

Thank you.