Bajaj Auto Ltd (BAJAJ-AUTO) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good evening and welcome to Q2 FY2027 results conference call of Bajaj Auto Limited. My name is Darwin and I will be your coordinator. 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 initial remarks from management. Should you need assistance during the 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. Anand Newar, Head, Investor Relations from Bajaj Auto Limited. Thank you and over to you, sir.
Anand Newar (Bajaj Auto Limited): Thank you, Darwin. Good evening, everyone and festive greetings to all. Thank you, everyone for joining for the call today. Welcome to Bajaj Auto's Q2 FY27 earnings conference call. On today's call, we have with us, Mr. Rakesh Sharma, Joint Managing Director and Mr. Dinesh Thapar, Chief Financial Officer. We will begin our call with the opening remarks from Rakesh on the business and operational performance for the quarter, followed by Dinesh who will take us through the financial highlights. We will then open the forum for Q&A. Over to you, sir.
Rakesh Sharma (Bajaj Auto Limited): Thank you, Anand. Good evening, ladies and gentlemen and welcome to the quarter two earnings call. Thank you very much for joining us. I'm delighted to say that the Q2 performance has built further on the record performance of Q1. It was a festival of records in Q2, five of them at the corporate level, highest ever volumes, revenue, EBITDA, PAT and free cash flow. I'm sure Dinesh will delightfully dissect these for you later. The operating environment was difficult with inflationary pressure pressures, logistic complexities and capacities getting challenged for high-end bikes
Rakesh Sharma (Bajaj Auto Limited): categories. However, some deft management ensured the record outcomes. Before we get into the BU discussion, a quick word on key organizational changes at the front end. We have considerably strengthened the leadership of our international and domestic business to drive growth and ensure robust execution. The exports business has been, till now, led by a President. This position has been upgraded to the Chief Business Officer level and four new President level positions have been created to drive Africa, Asia, LatAm, and advanced markets. Similarly, in the domestic operations, the motorcycle and Chetak business have been brought together into one new business unit, the two-wheeler business unit. This will also be led by a CBO and the India market has been divided into two halves, India 1 and India 2, with each being led by a President-level position. The In the back end as well, for procurement, for operations, and in R&D, similar appointments have been made. Almost all appointments are now done, and the new organization is in play. Now, let me get into the BU-level discussion. Starting with exports, the BU crossed its highest-ever volume of 7.8 lakh units in Q2, a growth of 41% year-on-year. This is the second consecutive quarter above 700,000 units. We continue to grow well ahead of the industry across all the regions in Q2. In Africa, the motorcycle industry grew about 35% year-on-year, while our motorcycle exports grew 83%. In Latin America, including Brazil, the industry grew about 12%, while we grew 44%. In Asia, which includes South Asia and ASEAN, the industry declined by about 7%, while our volumes grew 5%. In Middle East and North Africa, the industry declined about 29% and our volumes were also down 24%. So, this signals a handsome gain in market share almost all around. In the largest market of Nigeria, retails were at 30,000 units AVPM level, which is a very big growth over the same period last year and delivered a record market share of almost 60%. Even though this was a very handsome growth, the retails are still only at 60% level of the previous peak. The new Boxer 125 Heavy Duty upgrade introduced in Africa in FY26, early FY26, continues to scale up quite smartly with exports up by 50% plus, and it has been instrumental in driving the Africa growth ahead of the market. In the all-important sports segment of Latin America, which is 150cc and above, our exports grew by 50%, leading to being the number one in the S1, which is the 150 to 250cc segment. Three-wheeler exports did very well, too, crossing 1 lakh units in a quarter for the first time and also growing at 41% in H1. Two-wheeler exports from India grew 32% in H1 as per SIAM data. Bajaj Auto grew 47%, almost 1.5 times the industry. Our market share in two-wheeler exports from India has increased from 44% in FY26 to 48% in H1. And in three-wheelers, it has gone up from 60% to 63%, which means almost one in every two wheelers and two in every three wheelers exported from India carries a Bajaj badge. Overall, the exports business has jumped-shifted and sustained performance at high levels, moving up from 600,000 units per quarter levels last year to 750,000 units per quarter this year. We expect
Rakesh Sharma (Bajaj Auto Limited): I'll make a few comments on industry's behavior and early festive indications. Given the sharp up and down movements caused by the announcement of the GST last year, as well as the pent-up demands, we prefer to understand industry movement through a longer view instead of a weekly, monthly, or quarterly comparison. Hence, April to August for the past and September to December for the festive period. Since last year's base, the festive had commenced on 22nd September, so therefore we like to break the year in the halves of April to August and September to December. The two-wheeler industry, including electric scooters, demonstrated healthy YoY growth of 18% in April to August. The 150cc segment and the EV scooter segment grew much higher than the industry average and drove most of this growth. In the September to December period, we expect growth to continue to be in double digits, but it may not be as much as the April-August period due to the base effect. In general, the post-festive period is 1.25 times the pre-festive period, meaning September to December is 1.25 times the April to August period. Last year, this bucked the trend, and the ratio was almost 1.4 due to the GST impact. Some positive impact of the GST still continues, and therefore we expect the September to December period to be better than the usual 1.25 times. And that's why I made the comment that we expect the September to December period also to be in double digits, but may not be the 18% in the April to August period, but we have to wait and watch. In the immediate 16 days of the festive, two-wheeler registrations have grown by 10% as per the VAHAN portal. As has been the trend earlier this year, this growth has almost entirely been driven by the 150cc-plus motorcycle segment and the EV scooters. These, in our estimate, have grown at 24% in these 16 days even while the overall two-wheeler growth is 10%. Our comparable growth in this period of 16 days has been 32%, meaning 8 percentage points more than what the industry has grown by. We find ourselves very well-positioned in both the 150cc-plus motorcycle segment and the EV scooter segment, not just with Pulsars and Chetak, but also, I would like to remind you, with KTMs and Triumphs. And we will leverage this portfolio for growth, profitability, and competitive position. This objective is being realized to a singular focus on strengthening the Pulsar portfolio aimed at the 125cc-plus segment as we have been talking about this to you earlier. This focus is to the exclusion of the 100cc segment where we have made a conscious choice to protect profitability by increasing prices due to inflationary impact ahead of competition. And we are accepting the consequence of this. This certainly dampens the overall volumes of two-wheelers, but then it also has a positive influence on our margin story. Therefore, we continue to focus our products interventions in the Pulsar portfolio during the quarter and even earlier. During the quarter, we launched the new Pulsar 125 and the new Pulsar 150 in the classic range, and upgraded the Pulsar 160 range featuring several industry-firsts. TFT displays, electronic throttle body ride modes, projector headlamps, user-friendly features like crawl tech and traction control are bringing advanced tech within the reach of a larger base of customers and are driving acceptance. The new launches commenced retail
Rakesh Sharma (Bajaj Auto Limited): in August sometime. The share of new launches in our 125cc plus portfolio was 7% in August, it grew to 26% in September, and in the first 16 days of festive it has further grown to 33%. These new products launched in August onwards are now 33% in these in this festive period. The product pipeline remains active with further refreshes and upgrades planned across the 160cc to 400cc range over the coming months in both Pulsar and Dominar. In addition, we will have two new brands in the pipeline spanning the 125cc to 250cc space getting lined up for launch in FY27. So, by the end of festive, we hope to enter January with a completely refreshed Pulsar portfolio, and hopefully the old Pulsar portfolio would have also been flushed out of the channel system. Chetak, which is also now part of the two-wheeler business units, the industry continued to grow rapidly at 75% plus in Q2, and penetration is now, or penetration of electric scooters, is now 25% of the scooter category. As we speak, Chetak achieved a milestone of 1 million scooters on the road and September was our largest month so far with retails topping 45,000 unit levels, and the Chetak 3503 becoming the highest selling model of electric two-wheelers in India. And all this despite, as you know, of severe capacity issues, supply chain issues during particularly during September, where instead of 60,000 we could only manage 40,000 units. Market share has moved up to 23% despite supply constraints through the quarter, which impaired availability by as much as 20%. Significantly, the Chetak portfolio profitability has moved to double digits. In fact, at an overall level, our EV business, which includes three-wheelers and Chetak, is now margin accretive at the corporate level. We are expanding Chetak capacity to 80,000 per month by quarter four, which will help us get market share and unlock new reach. Today Chetak has 550 plus exclusive stores, with presence in over 850 cities through a combination of Chetak exclusive stores and the widely spread motorcycle stores. This gives us a network that has extensive reach and the capability to deliver a superior sales and service experience. Further addition of 75 exclusive Chetak stores is planned for Q3. Coming to Probiking, which comprises the KTM and Triumph brands, the business continued its high growth trajectory with 31% year-on-year growth and delivered sales of 40,000 units. In H1, the business unit sold 80,000 units, making it the highest ever H1 for Probiking. KTM growth was led by the adventure and high-performance street portfolios, with Adventure 350 and Duke 250 driving the growth in their respective segments. Triumph also sustained its performance of 11,000 units in the quarter despite availability being impaired by as much as 20%. Two marquee events were launched by KTM in Q2: the widely successful KTM Cup '26 version and the KTM Adventure Rally Extreme led by none other than the 2018 Dakar Rally champion, Matthias Walkner. The rollout of joint KTM-Triumph showrooms has progressed swiftly with 120 such showrooms already operational and more in the pipeline. The KT stores, as we call them, now contribute to over 15% of the KTM-Triumph combined volume. The adventure and high-performance street bikes are only 7% of the total motorcycle market, but they are growing four times faster
Rakesh Sharma (Bajaj Auto Limited): continue to lead to lead category development and market share through 10 serious purposeful models in both brands designed differently by terrain and rider needs. This is the most by any player in this segment and positions us extremely well in this high-growth niche segment. Moving to commercial vehicles, our three-wheeler business unit, the business delivered its highest ever quarterly volumes in Q2, achieving sales of 1.62 lakh units and growing year on year by 13%. The three-wheeler category has sustained growth of 8% to 10% over the past several years, with recent growth trending closer to 12%. In this expanding market, Bajaj Auto has maintained a strong leadership position in ICE three-wheelers, commanding nearly 90% market share now in CNG passenger vehicles and over 50% market share in the cargo segment. The electric three-wheeler market continues to grow rapidly with industry volumes expanding by more than 100%. Bajaj Wego remains the market leader in the e-auto segment with a market share of approximately 32% in September. The performance and the competitive position are the result of the strategy to segment this diverse market and deliver fit-for-purpose solutions for each segment. Consequently, the BU possesses the industry's most comprehensive product portfolio with about 20 models across ICE and EV platforms, from Ricki, the e-rick to Wego 9018, the EV three-wheeler with the longest range in the industry. While the e-rick segment has declined in H1 by about 19% due to regulation, enforcement, and upgrading, the segment is still large at 35,000 units AVPM. 10% of this is lithium-ion based and the rest the rest is lead-acid. Our Ricki operates in the lithium-ion space and is already the market leader. Government regulation and enforcement will continue to drive this segment further towards lithium-ion power trains as well as towards e-autos. We are well-positioned to capture this movement. To service the steadily growing demand, the network is being expanded and modernized from just over 900 stores in FY23, the network has now grown to over 1,600 stores. Capacity expansion initiatives for both ICE and EV three-wheelers are also underway, as current demand exceeds available capacity by approximately 10%. A quick comment on spares. Spares business crossed the INR 2,000 crore milestone for the first time, delivering robust 15% year-on-year growth. Complementing this performance, the Bajaj genuine oil business also achieved its highest ever quarterly volume. Finally, we remain optimistic about the near and medium-term outlook. Already, our capacities are being challenged, as I've said, in EVs, high-end bikes, and some three-wheeler subsegments. The overall capacity of 625,000 units per annum of is being expanded to about 775,000 units per annum over the next 6 to 9 months in a phased manner. This is a new imperative, in addition to the ones we've been sharing, which remain the same. With that, let me hand the session over to Dinesh for his update on the financial performance.
Dinesh Thapar (Bajaj Auto Limited): Thank you, Rakesh. Good evening, everyone, and thank you for joining us on this call. Before I begin, let me extend my festive greetings to all of you. I hope you've had a wonderful Dussehra, and I wish each of you and your families a very happy and prosperous Diwali in advance. Now coming to our results, we're pleased to report yet another record-breaking quarter, as you would have seen in the press release that we issued earlier today. The the quarter was full of milestones: volumes exceeded 15 lakh units; the revenue surpassed INR 20,000 crores; EBITDA exceeded INR 4,000 crores; and profit after tax also crossed another INR 3,000 crores. Each of these represents a first for the company, making this yet another milestone quarter for Bajaj Auto. Growth was broad-based across all our businesses: domestic and exports,
Dinesh Thapar (Bajaj Auto Limited): before I get into the financials. On the commodities front, this last July to September quarter continued to see hyper inflationary input cost pressures, really with no immediate signs of these cost pressures cooling off. As we had indicated in our previous call, the inflationary pressure extended well beyond the conventional metals complex to proprietary parts, electrical components, and conversion charges, and the escalation in these categories has continued to intensify. During the quarter, costs in electrical components increased in the mid teens, proprietary parts conversion charges saw double digit increases, and within the metals complex, aluminum, copper, nickel, and natural rubber also recorded sharp sequential increases broadly in the high single digit to double digit range. And towards the end of the quarter, as many of you may have tracked, steel prices also began to firm up and is adding to the cost pressures now in quarter three. Taken together, the impact of commodity and other input cost inflation in quarter two was in the whereabouts of between three, three and a half percent of revenue. To put this in perspective, as we had outlined in the quarter one call, the inflationary impact in the first quarter was already about four and a half percent of revenue, four, four and a half percent is what I had signaled then, and quarter two has now added a further three, three and a half percent of revenue on top of that, making the cumulative inflationary pressure over the first half exceptionally steep, as you would imagine. The magnitude of this cost escalation is unprecedented, creating significant pressure on the business with inflation of a scale that we would typically see spread over many years. We have responded through calibrated pricing actions, which really has covered about between 50% and 60% of the inflationary impact over this first half. The balance was largely offset through favorable currency realization and continued cost optimization initiatives, allowing us to protect margin despite the sharpest escalation in input costs, which I will elaborate on as we move through the financial performance. We had initially expected what might have been expected to be a quarter lasting a quarter or two has now extended into a third successive quarter, and as we look ahead, these inflationary pressures continue to persist, and I will touch upon the outlook and our response to the evolving cost environment a little bit later. Apart from material cost inflation, supply chain availability has also been quite constraining during the quarter. The supply environment has become increasingly volatile and erratic with disruptions at both the back end in terms of component availability and capacity and front end in terms of logistics and shipping challenges for our fast growing exports business. In our electric business, supply chain and capacity constraints across both two-wheelers and three-wheelers restricted our ability to fully meet underlying demand with our plans being delivered only to the extent of 75% of what we had originally planned for. Having said that, the teams across both the back end and the front end have done an exceptional job of navigating these challenges, enabling us to deliver record quarterly volumes and our best ever financial performance. Coming to currency, the realization in the quarter was favorable. The rupee depreciated through quarter two with our realized USD/INR rate coming in at 95.5, versus 94.4 in the previous quarter and 87.1 in the same quarter last year. This sequential and year-on-year tailwind contributed meaningfully to our realizations and profitability. Turning now to the financial performance, the momentum of the previous quarter has carried through with volumes and revenues scaling new highs. Volume crossed the 1.5 million mark for the first time, growing 20% year-on-year and marking the fourth consecutive quarter of record volumes. Revenue from operations surpassed the 20,000 crores milestone, a solid growth of 34% year-on-year. To put this growth in perspective, the revenue generated in the first half of FY27 has already exceeded the full year revenue that we reported just three years ago in FY23. Volumes remained the single largest driver of revenue growth. Beyond this, the revenue build up benefited from richer mix, reflecting the continued strength of commercial vehicles, premium motorcycles, exports, and the steadily increasing contribution of electric vehicles. Calibrated pricing actions that I've just referred to also contributed to realizations, while favorable currency movements provided the much needed tailwind. On the domestic front, our electric business continues to scale up with combined two-wheeler and three-wheeler volumes nearing 200,000 units, more than doubling year-on-year and marking its largest ever quarter. The portfolio now contributes more than a third of domestic revenues and over 20% of our
Dinesh Thapar (Bajaj Auto Limited): on enterprise revenues. Equally encouraging, as you heard from Rakesh, is the progress on profitability with continued improvement in Chetak's unit economics, complementing the double digit EBITDA margins in electric three-wheelers, driving further improvement in the overall profitability of our electric business that continues to register double-digit EBITDA in its entirety. Exports continue to sustain their strong momentum delivering another landmark quarter. Volumes approached 780,000 units, translating into the highest-ever quarterly export revenues of nearly $800 million. The performance remained broad-based with Africa reaching new highs, while Latin America continued its sustained run of strong performances. With exports contributing around 40% of our revenues, this remained a significant engine of growth and profitability for the company. In addition, the spares business reached a new high with quarterly revenues crossing 2,000 crores for the very first time and continuing to provide a steady support to the overall revenue and profitability. Taken together, the strength in volumes, improved realizations, a richer business mix, have enabled us to cross a significant revenue milestone even as the operating environment has remained quite challenging. Let me now move to EBITDA and margins and how we have translated the strong revenue growth into profitability amidst the hyper-inflationary cost environment that I mentioned. On EBITDA, we crossed the 4,000 crore mark delivering 4,172 crores. Again, a new high for the company with a strong 37% year-on-year growth. What is particularly noteworthy here is that the profit growth outpaced revenue growth with profit increasing by 37% year-on-year against revenue growth of 34%. Sequentially, EBITDA margins held steady at 20.9% as we navigated another quarter of a challenging operating environment. Higher realization supported by calibrated pricing action and favorable currency helped absorb a part of the cost inflation pressure. Operating leverage with a 20,000 crore quarter from higher revenue alongside disciplined cost management and a hard look, a very hard look that we did, on discretionary spend helped offset the remaining cost pressures and sustain our margins little bit. On a year-on-year basis, margins expanded 40 basis points with favorable currency realizations and really improved operating leverage being the principal drivers more than offsetting very severe and adverse cost price dynamics. This improvement came despite an adverse mix impact from the growing contribution of the electric two-wheeler business, which, whilst getting better, still remains dilutive to the overall company. I know many of you are keen to understand the step up in other operating income. It's a question that has been asked off in the past and so let me add-address this really upfront. Now there are three principle contributors. The first of this is the increase in export incentives, which has come on the back of very strong growth in our export business. The second contributor is the increase in PLI income and accruals, and there are really three elements to this on PLI. The continued scale-up of our electric portfolio, with the business more than doubling year-on-year, has resulted in higher PLI accruals to that extent. Secondly, as some of you would be aware, we have commenced exports of our electric vehicles and with the requisite certifications now in place, the eligibility for PLI benefits on these export vehicles is starting to reflect in our accounts. And the third element, which is probably the most significant as you see the change over the last quarter, is the rate transition under the PLI scheme, which is important in understanding the quarterly movement in accruals. As you'd be aware, having crossed the cumulative revenue threshold of 10,000 crores under the scheme for electric vehicles, we qualify an additional two percentage point booster over the base rate, and the base rate is 13%. So effectively with the 2% percentage point booster, the effective starting rate for the year moves to 15%. And as eligible revenues build up through Q1, the effective rate increases further, making Q2 really an important inflection point. So we typically start the year at around 15%, which now is 13% base rate plus 2% booster, and exit Q2 at around 18%, having reached revenues of the highest slab, and therefore, getting 16% base rate plus the 2% booster to take it to 18%. And therefore, that now represents the maximum applicable rate under the scheme that we had exited, right? So therefore, the rate for the second half is expected to remain at this maximum
Dinesh Thapar (Bajaj Auto Limited): which is essentially the rate at which we have exited quarter two, which is the 16% base rate and the 2% booster, so 18% on electric vehicle revenues for the second half. And lastly, you heard from Rakesh, and keeping with the broader growth momentum across the business, we've had a very good quarter on our Bajaj, you know, Bajaj Genuine Oil business, which is what we call BGO, with higher volumes really translating into increased royalty income and contributing to the step-up in other operating income. So, they're both really the three factors which have led to the step-up of the, the, the other operating income: export incentives, PLI accruals, three factors for that, and really stepped up royalty receipts for our BGO business, which has been quite buoyant. Turning to profit after tax, we recorded our best-ever PAT crossing 3,000 crores, coming in at 3,354 crores, up 35% year-on-year. Quickly, a word on cash. Consistent with our track record of strong free cash flow generation, we generated nearly 4,000 crores of free cash flow during the quarter, translating into a cash conversion of 100% plus of the profit after tax. This strong conversion was supported by a combination of robust earnings and favorable working capital movements, enabling us to translate our profitability into cash while continuing to fund the needs of the business. Moving to the consolidated performance, and as I explained last quarter, the year-on-year comparison continues to be impacted by the change in consolidation following the acquisition of the control of Bajaj Mobility AG, whose financial results are now consolidated into ours, although with a one-quarter lag. The current quarter therefore reflects a full quarter of its consolidated results, which was not reflected on the same basis in the corresponding period of last year. The reported growth rates therefore need to be viewed in this context. That said, from a headline perspective, consolidated revenue for the quarter came in at 25,126 crores, a growth of 60% year-on-year, and consolidated profit after tax stood at 3,400+ crores, also growing by 60%+ over the previous year. Alongside the impact of the expanded consolidation, the contribution from our subsidiaries now is becoming increasingly meaningful, supported by the continued scale-up of BAL, the steady expansion of our Brazilian business, and the consolidation of Bajaj Mobility AG, which essentially represents the KTM business. Together, these businesses are adding greater scale and depth to our consolidated performance. Let me now spend a minute on KTM and BAL. The recovery of the KTM business is gaining traction with significant improvements in both scale and profitability. Revenue grew 65% year-on-year to 701 million euros in the first half, while EBITDA turned positive at 38 million compared to a loss of over 180 million in the corresponding period of last year, of course, adjusted with the restructuring profit. This reflects the recovering motorcycle sales, a sharper focus on cost efficiencies, and a reduction of fixed costs. Inventory levels across the KTM system and the dealer network have now returned to normalized levels. In fact, in Q2, the EBIT also returned to positive territory for the first time since the conclusion of the restructuring proceedings. These are encouraging steps in restoring the business to a more sustainable operating footing, with the focus continuing on profitable growth, cost discipline, and cash generation. As Bajaj Mobility AG is a listed entity, its detailed financial results and other disclosures can be accessed from its website. BAL continues to scale up strongly, delivering another stellar quarter of robust growth and profitability. Total income stood at nearly 1,200 crores while profit after tax for the quarter came in at 243 crores, representing a strong growth of 85% year-on-year. To give you a sense of the scale of the business, assets under management are now nearly at 21,000 crores, growing more than 1.5 times over the previous year. The capital adequacy ratio remained very healthy at almost 19.5%, while the business continues to operate at industry-leading returns on equity of 26% as of 30th September. Looking ahead now, on commodities, we've entered a third consecutive quarter of an exceptionally challenging operating environment with input cost inflation
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