Bajaj Auto Ltd Q4 FY2023 Concall Summary

Key Takeaways

• Record FY23, exports the lone drag: Revenue crossed ₹36,000 cr and PAT hit a new high, but Q4 export demand worsened sharply, with Nigeria’s elections and demonetization making February a “disaster.”
• Domestic premium mix is the margin engine: 60% of domestic motorcycle sales now come from 125cc+, Pulsar reclaimed over 50% share in the 150–250cc class, and 3-wheeler market share hit an all-time high of 78%, all lifting Q4 EBITDA margin to 19.3%.
• Chetak price cut worked instantly: A pricing revision drove retail from 3,000 to ~5,500 units and bookings to ~8,000; management calls FY24 the scale-up year, with over 10,000 units/month available from June.
• Commodity tailwinds are turning: Management sees early steel-led inflation in Q1 FY24, and has already taken a round of pricing to cover OBD-IIA compliance and cost context.
• What to watch next quarter: Whether the Triumph launch on 27 June translates to retail momentum, the pace of electric 3-wheeler dispatches once FAME certification arrives, and any actual improvement in dollar availability for exports.

Export Crisis & Recovery Bet

• Demand collapse concentrated in Africa: Nigeria was the epicenter, with elections and demonetization crushing February volumes; March was described as a “return to lower normal,” and April is trending better than March.
• Channel stock deliberately minimized: Exports have trailed retails for 15 months as the company downsized distributor exposure; pipeline inventory covers are now low, and in March retails began to outstrip billing.
• Pricing discipline held: Management did not chase volume with price reductions to offset local-currency devaluation; instead it passed on cost increases and protected EBITDA standards.
• The recovery trigger is dollar availability, not demand: Some demand green shoots are visible, but the binding constraint is foreign exchange in key markets, and management admits it has no real basis to predict when that eases, hoping for “another three months” to reach equilibrium.
• Surge readiness is explicit: With pipeline inventory lean and demand assumed to improve gently, the company says it is poised for a surge as soon as currency becomes available and trading conditions improve.

Sharma: “Our approach to managing the exports business in these turbulent times has been to stay the course, because we have seen in the past the pendulum keeps swinging, and to stay the course without compromising on the fundamentals.”

Domestic Premiumisation & Market Share

• 125cc+ is the growth story: Industry growth is almost entirely driven by the 125cc+ segment; the 100cc segment is only marginally positive, and management expects the recovery to stay lopsided in favor of higher-salaried consumers for at least another year.
• Pulsar reclaimed dominance: Market share in the 150–250cc class is back above 50% after weakening pre-FY22; new variants and a media campaign are planned through the year to sustain momentum.
• Platina 110 ABS as a differentiation play: The first 110cc with ABS is building volume steadily, supported by a massive test-ride campaign and IPL advertising, fitting the strategy of chipping away at the entry segment without price discounting.
• CT brand deliberately deprioritised: The decline in CT numbers is conscious; management calls the entry segment a red ocean and will only attack through meaningful differentiation, not vanity market share.
• 3-wheelers at all-time highs: Domestic 3-wheeler recovery reached 109% of pre-COVID levels versus 45% for the rest of the industry, with March market share hitting 78%; CNG expansion and Bajaj Auto Finance support are driving both share and profitability.

Sharma: “You've got to bleed if you just want to enjoy the vanity of a number and market share, you know.”

Electric Vehicles: Chetak & E-3W

• Chetak pricing revision was the unlock: The price cut had an “immediate and profound impact,” with retail jumping from 3,000 to ~5,500 units and bookings to ~8,000; an upgraded model is due within weeks of the call.
• FY24 is the scale-up year: Availability crosses 10,000 units/month from June; cost reductions are underway to improve accessibility; network expands from ~85 towns to 120 towns and 150 stores by end of H1, covering 80% of India’s high-speed EV market.
• Electric 3-wheeler launch is cautious by design: Field testing is complete and production has commenced, but dispatches await FAME certification; management will run a limited launch for three to four months to observe and resolve issues before scaling city by city.
• The market is waiting for Bajaj: Management noted that competitors appear to be holding back, waiting for Bajaj to enter, which “puts a big responsibility on us”; the e-auto targets the ~50% of the 3-wheeler market currently served by e-rickshaws and suboptimal vehicles, adding new segments without cannibalisation in the first phase.
• FAME removal scenario: If the ₹45,000 subsidy goes away, the industry will consolidate in favor of stronger players; the market will shrink initially from the upfront price shock, but operating costs even without FAME compare favorably with ICE scooters, so demand should return.

Sharma: “I will keep it cool for three to four months. ... the invasion will commence after, you know, we are fully satisfied that our customer is happy.”

Triumph Partnership & New Launches

• Non-equity strategic alliance: Jointly developed products will be made at the new Chakan facility, sold globally under the Triumph badge; Bajaj Auto manages India and select overseas markets, while Triumph handles most global markets directly.
• India network integrated: The existing Triumph dealership network in India was integrated with Bajaj Auto operations on 1 April 2023; a new exclusive network of stores built to Triumph global standards is being set up.
• Global launch imminent: The new lineup launches in London on 27 June 2023, with retail sales to commence sometime thereafter.
• Other launches: Adventure X launched at ₹2.8 lakh; Pulsar NS series received upside-down fork upgrades; Yulu supplies commenced in Q4 with three products targeting low-speed, short-distance personal, commercial and delivery segments.

Margins & Commodity Outlook

• Q4 margin walk: EBITDA margin reached 19.3%, up 220 bps YoY and 20 bps QoQ, driven by richer product mix (higher CV and sports motorcycle sales) which offset the negative operating leverage of a smaller revenue quarter; price realisation and material costs were flattish sequentially.
• Commodity cycle turning: After a mixed bag in Q4 (aluminium, copper, nickel hardening; electrical, rubber, polypropylene softening), management sees early steel-led inflation emerging in Q1 FY24 and has already taken a pricing round to cover OBD-IIA compliance and cost context.
• FY24 margin ambition: The attempt is to sustain margin while competitively investing behind the business, with modest improvement in operating margin; many moving parts include currency, inflation, and export mix.

Thapar: “We think that the cycle is turning, particularly on steel. Who knows how it will go through the rest of the quarter, but if any indications are to be gone by, we think we could be looking at some inflation in material costs, which is largely steel led in the course of the current quarter.”

Guidance & Commitments

Key Metrics