Thank you. Ladies and gentlemen , we will now begi n the question -and-answer session. Anyone who wishes to ask a question, may press * and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, yo u may press * and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, w e will wait for a moment while the question queue assemble s. The f irst question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.

Hi thanks team for taking my questions and thanks for really comprehensive update across businesses. Before I get to my question, I jus t wanted to check one quick thing, were there any one-time costs that we need to keep in mind around Triumph launch in this quarter?

Nothing of significance Gunjan. There was a cost at the launch event that we incurred, but I would say in the overall scheme of things that is not very significant.

Okay got it . Now two questions from my side. Firstly, on three-wheelers, clearly this business has been surprising positively . I just wanted to understand if you can share your outlook in terms of wha t is real ly driving the market expansion here and it was quite intriguing when you mentioned that the margins for electric three-wheeler are actually not dilutive. So, if you could jus t share thoughts on how we should think about this business over the next 1-2 years and this whole scale up of electric three-wheeler, is it contribution margin positive, is it EBITDA margin positive, if you can share some thoughts around that?

For ICE three-wheeler business, the fundamental driver is conversion. There are two things, one is of course in line with every other segment of the auto industry , there is a recovery post COVID, and people are coming back on the streets and there is traffic and there is need for mobility and the earnings of the three-wheeler drivers have improved which has unlocked the retail finance, 90% of the business was financed. So those drivers have started to kick in and drive the thing. T he second thing is tha t the country has very decisively promoted the usage of CNG and t he CNG powered three wheelers really deliver a much better economics compared to diesel power ed. Now t raditionally our market share in the diesel segment was much low er but on the back of pro ducts which are really best in class, we have en joyed a very high m arket share i n CNG powered vehicles so as soon as the pipeline network penetrates territory, we see a migration from diesel to CNG in a very powerful manner and when that migration happens, the first choice is Bajaj Auto so therefore we are seeing excess CNG passenger leve l. Our market share of 9 0%-93% like Bajaj Auto Limited October 18, 2023 nobody is able to sell any CNG three wheelers a nd so much so that now the CNG distributors like the public sector undertaking, they work very closely with us because this auto line gives them a good 8%-10% off take of their CNG. So, they are also very interested in making this happen. So, the system is working well, and I think this should continue. There are still vast areas left where the network is rolling in. The numbers are not coming to my mind, but I think the government this year has got some idea of some 4 ,000 new pumps being put in and the more they do that, the drive will continue. So, the ICE business is set. The E-auto business now if you see over the yea rs what has happened is that because the autos were restricted in large parts of north and east, it has given rise to this semi organized industry, what we call the E-rick which are both lead acid and now , of course, lithium-ion powered and the need for intracity mobility has been very, very strong in the smaller towns of northern India . I am sure if you travel to Saharanpur, Lucknow, and these places you might have seen how choked the system is with these small three wheelers and they are now 50% of three-wheeled mobility. Now when we ent er with E-auto, which are expensive but they do not require permits so there is a very strong possibility of converting the E-ricks as they are known to E -auto provided they deliver a value performance. So , the entire north and east is our first target and there we do not sell too many ICE autos and we should be able to get the E-autos moving over there. I am going to let Dinesh take on the margin point but the way we have done the pricing, we find that we are largely more or less agnostic to E-auto or ICE auto.

To your point, we are driving for near parity margins between the E-auto and ICE auto. It also helps, one, of course for incremental growth opportunity, but in many ways, it becomes agnostic of the fue l type as we said across markets but to the point that you asked very specifically, yes, it is an EBITDA margin positive and for a few reasons. When you think of the contribution of the battery cost therefore the cell cost, the overall cost is relatively lower compared to that of a two-wheeler. We have not added significant manufacturing cost, establishment cost or marketing cost. We are putting up a new EV three-wheeler factory in Waluj that will come up at the end of the year, but we are not really expanding fixed costs substantially for it to affect the economics. Limited marketing and advertising spend, given the very strong equity that Bajaj has, and the fourth factor really is that PLI adds on to it as well because clear ly domestic value addition in the case of three wheelers is comfortably poised well over 50%, which is an essential condition for PLI.

Okay got it . This is super useful. Just second question Dinesh specifically to you, this dividend policy change, can you tell us a little bit as to what triggered this change and I do see the scope of fund deployment has been expanded to quite a few new inclusions. So, if you can just give the thought process around it and earlier again buybacks were not part of Bajaj Auto Limited October 18, 2023 that shareholder return that you spoke about that also seems to be included so if you can just share what triggered this and why the change now?

Thank you Gunjan for picking it up because we were hoping it would come up in Q&A and therefore, we would answer it. At the Board, we discussed today the amendments that we are making, I think taking cognizance of the fact that there are multiple routes these days available to really reward shareholders or payout excess cash, right and so what we have done is to really expand the remit of that to a concept called the overall payout to shareholders, which would be a function essentially of the dividends plus the buybacks or any other such similar routes that might exist probably in the future but really expanding the remit to a variety of ways by which you can return cash to shareholders. Despite the earlier dividend policy that we had with slabs set up, we think based on the P AT of the year and the surplus funds that are available on the balance sheet now t here are various slabs that we propose to give out . Fundamentally we alter it. The first slab is at 50, which is similar to what it was in the past. The second slab was 70%. For cash i n excess of ₹15,000 crores, earlier we used to say up to 90%. We just said greater than 70% because then it allows the Board the degree s of freedom to decide how we need to pay out to shareholders over a period of time through mix of dividends and buyback. So, we have just expanded the limit to really call out that buyback might be one more way of r eturning surp lus cash to shareholders in the future and remains at the discretion of the Board then to do it through a mix of dividends or buybacks.

Okay got it. Thank you so much.

The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead.

Good evening and thanks for the opportunity. My first question was on exports. You mentioned that you are expecting a gradual recovery . W ithin exports it se ems that three wheelers as a category have been i mpacted much more than two wheelers and I am guessing it is because some specific markets which were large contributors are near zero right now. So, if you can give some comments around how you see the three-wheeler export recovering and are there any new m arkets or new opportunities which could offset some of these larger markets like Egypt which have gone into some kind of regulatory bans kind of situation?

Yes, you are right, the three-wheeler recovery is slow, and if you see, Egypt had hit us even before thi s downfall commenced in Q2 of last year. So , there is something which has already impacted us . I n terms of the CV whether there is any other market which is behaving very differently, no, I would not say that. It is just that because the three-wheeler is a more expensive product it becomes that much more difficult for people to acquire it. It Bajaj Auto Limited October 18, 2023 is following a very similar pattern to a two-wheeler, so it is largely country driven and a few percentage points behind a two-wheeler but following the same tr ajectory as two wheelers. In terms of making up the deficit of Egypt, which was a very, very large market for us , we have got about 11 markets, which I would not like to name, which are under active business development. I do not think any single market will replace Egypt, but in a combination if the markets improve, we will start to see this mitigation happening in these 11 markets. You see, we have been throug h this cycle be fore. We used to export 20,000 units 7 years back out of which 10,000 were to Sri Lanka and then Sri Lanka banned it, but we went to 25,000 units with zero in Sri Lanka on the basis of opening up Cambodia, Philippines, Ghana, Mexico, Colombia , Bolivia. We h ave dozen countries which collectively combine to overcome this 10,000-unit gap so that is how we sort of met the challenge of the ban in Sri Lanka. The same way we are approaching the Egypt issue. It is just that the macroeconomic conditions have made business development a little bit more difficult, but over a period of time through these new markets, we should be able to overcome the Egypt deficit.

Okay that is helpful. And just going back to the three-wheeler or the E-auto where like you rightly mentioned you have already gained a lot of market share in the cities that you have launched. As you expand this, how do you see the value proposition of a CNG and EV . I guess it's clear that both of them are winning against diese l as a whole but between the two, I mean is CNG still a better value proposition than the EV how do you think you would like to position it as you expand going forward?

The E-auto is a better proposition than CNG in these conditions , which are if the FAME is not disturbed as things stand now . The other thing is that in a lot of markets when people buy CNG vehicles, they also have to buy a permi t and that itself is very expensive. So , the acquisition cost in markets where it is restricted and permits are not freely available and in those markets E-autos do not require any permits, so it is much, much better.

Okay that is quite helpful Sir and thank you for taking my questions and all the best.

Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead.

Hi Sir, good evening, and congratulations on a strong set of results. My ques tion is on the three-wheeler ICE business, do you expect the volumes to grow from the se levels as we look ahead?

Yes, we think these volumes will continue to rise on the back of the penetration of the CNG network and the recovery in traffic condition but again it will be steady progress. I do not expect them to rocket upwards because we are at a very, very high level and now, to be Bajaj Auto Limited October 18, 2023 frank, we have reached a very high level of market share. So, the growth which we have seen in the last six months or so has been driven by the recovery of the market , penetration of the CNG n etwork and e xpansion of our market share from 60% to 80% , in CNG has gone to 90%. So now I think we will ride the market growth rather than the combination of market and share growth. So therefore, there will be growth, but it will be muted . It will be less than what we have been experiencing.

Thanks Sir. Second question is on electric two wheelers just wanted to und erstand that as we look to expand the portfolio, which segment customer are we targeting for example what I am trying to understan d is the 100cc motorcycle customer also looking at electric two wheelers. Is it only the scooter customer who you think we wi ll be addressing and in that context what kind of electric mix are you thinking about for scooters or for motorcycles going ahead?

We are targeting all those customers who are very economically driven and for whom this scooter format is acceptable. So, you will find that people adopting the electric two-wheeler range from people who had previously owned entry level mot orcycle to s omebody who is buying it in addition to supplementing a car in the garage. We have got the full spectrum of users and the pro position which is reall y getting traction for electric two wheelers are one based on economics that simply as things sta nd now people save money depending on how much they ride every month. Anybody riding 50 kilometers and above sa ves a substantial amount of money by shifting from ICE to electric.

Just to conclude. I mean do you think at some point the ICE two-wheeler industry will sort of stop growing do you see that on the horizon in the next 2-3 years.

I do not think so because if you sort of step back and see overall the penetration of ICE has been low, still some scope over there. The road building progr am is always very good in terms of facilitating the sale of ICE particularly for intercity commutes and if you see we have no t yet recovered to the 2018-2019 p eak as an industry . We are still about 25 -30% down over that peak and I think the ICE industry is very much dependent on how the economic recovery reaches the pockets of the customers at the bottom of th e pyramid. As economic recovery is happening, consume r optimism is improving. We are seeing an improvement at ICE and therefore we do not see in the near term th at E-two wheelers are going to apply the brakes on ICE . They will continue to grow the penetr ation. Having said all this, we have to see the recent data after the recent FAME reduction, you will see that in the last three months , high speed EVs have been only 65,000 units per month. Festive may pump it up for some time, but there are only 65,00 0 because the acquisi tion cost is very high. It makes monthly sense, but the acquisition cost is still high most of the two-wheelers Bajaj Auto Limited October 18, 2023 on-road prices are ₹1.25lakhs to ₹1.3 lakhs and the customer who is really receptive to this is the economically sensitive c ustomer. So largely that is a segment, so therefore the penetration has sort of slowed down.

Thank you very much Sir. Great answer and wish you all the best.

Thank you. The next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.

Hi good evening and thank you for taking my questions. My first question is t he clarification of the E three-wheeler profitability commentary so I think we were making a statement that it is not margin dilutive for Bajaj Auto and also we sort of commented that it is on margin parity with the electric two wheelers I am just trying to understand should we think about it as a positive margin product or should we think a bout it as on par with other corporate EBITDA margin in that 18 to 20% switch.

Thank you. The line was a bit foggy, so we missed the question. But I think just to rephrase, your answer whether the margin profile for the electric auto is at p arity with the enterprise or with the C V businesses if that is your quest ion, I mentioned that the margin is at parity with our CV business after considering the impact and the benefit of the PLI.

Got it. That is helpful. My second qu estion is on the electric two-wheeler business. So you did mention a plan to get to 10,000 plus units per month there and there was some commentary on the number of products that you might launch in the remainder of this fiscal year and the next fiscal yea r so if you can just clarify again what is the product pipeline in terms of some number of launches planned in this fiscal year and the next fiscal year on the electric two-wheelers side.

Yes, so like I said once this fest ive is over, we will be introducing new models in Ch etak and by the time we are sitting down at th e same time let us say next year, we will have a much fuller range. We have set up exclusive showrooms. One of t he reasons why we were doing that was when we were thinking about whether to go to exclusive Chetak showrooms or take the easier w ay out of putting them in Bajaj sh owroom like some other people have done. It was because we were sure that as this market grows, it is small right now, it is only 65,000 units, 70,000 units, it is small, but as it grows it will need to be segmented and these segments will need different prod ucts. And we can see in the market also some companies have got a range of products . You cannot do justice to a range of products without having an exclusive showroom. So that is the reason that is always there in our mind , so we are starting from post fes tive we will have introductions which will expand the range. So, you can expect something startin g from let us say N ovember onwards and then something by Bajaj Auto Limited October 18, 2023 end of Q4 and then further on in Q1 and Q2 these products will be int roduced. I cannot really talk about what specific product etc at this stage.

Got it. Thank you so much for your response and all the best.

Just suffice it to say that we are now in a phase where we are going to expand t he business volume metrically, expand the retail network substantially and expand the range. So, we are at that phase now which you would have already seen with the ris e in market share. We are only hoping that FAME does not play a spoiler and does not retard the penetration rate which has stagnated in the recent past.

Thank you. The next question is from the line of from the line of R aghunandan NL from Nuvama Research. Please go ahead.

Thank you Sir for the opportunity. A couple of questions to D inesh Sir. Firstly, steel and crude derivatives have seen some increases recently, do you expect some cost incr ease in commodity basket for Q3 versus Q2.

Thank you for your question. You are right very recently there has been a slight uptick, but I think when I look at the forecast out ahead for this current quarter which is essentially Q3, I think given the softening on some of the other commodity baskets especially noble metals which have kind of corrected quite significantly . So, I think on balance I would expect the quarter to be quite flattish from commodity costs.

Thank you good to hear that. Dinesh, Sir, can you share some numbers on spares , exports, and financing ratio for the quarter?

So, our exports was about 406 million for the qu arter, you have our exchange rate that is 82.6 and finance penetration for the quarter for our motorcycles business was 77% and 90% for our three-wheeler business, not fundamentally different from what might have been in the previous quarter.

And share of Bajaj Finance would be.

Share of Bajaj Finance would be 43% of the total retail.

Okay and the spares number Sir, if you have it handy.

Spares is anywhere between ₹1,200 crores to ₹1,250 crores for the quarter. Bajaj Auto Limited October 18, 2023

Thank you so much and lastly can you share the Triumph pending order book?

Quite frankly I do not have that number readily in my mind, because we h ave stopped monitoring it . W e were only monitoring the bookings when we launched the booking campaign so now it has gone into busi ness as usua l as it is with Cheta k or as it would be with any of the motorcycle or three-wheeler businesses where it is not something which we are really looking at. Before the deliveries had started, we were monitoring, and we reached something like 1 8,000 at that point in time. We have delivered 8000 but there have been fresh bookings also. So, you can assume that it is still aroun d 10,000 if not an upwards mark.

Thank you so much Sir, wishing all the best.

Thank you. The next question is from the line of Mumuksh Mandlesha Shah from Anand Rathi. Please go ahead.

Thank you so much for the op portunity. So, with strong festive growth expected led by an uptick in consumer sentiment how do you see the full year domestic industry growth versus the earlier guidance of 5 % to 8% and can you indicate what could be driving the better consumer sentiment there?

Well, I would sort of wait till November end to see whether the sparkle of festive growth is like a phuljadhi or is a more sustained improvement in the fortunes of the industry because one thing which we have noticed over the years which you w ould have also picked up is that the highs and lows have become sharper. I mean earlier 33 days of festival a ccounted for 15%, 17% of the year. Twelve months means 8% on the average for each month, but festive would account for double, which would be 16 %-17%. Now it has become 20%. So, we cannot extrapolate this 20% and say that is how the balance of the year w ould be so therefore I say that one would need to look at post festive November to really take a call whether the fortunes of the industry have decisively shifted from the 8% range to the double-digit range or not. Right now, I would say if you were taking a full year viewpoint. I would still say that ye s 5% to 8% is where the trajectory is. Let us see how it goes in November and then we will be able to take a call.

Got it Sir. Just on the EV potential for exports market for both two-wheeler and three- wheeler, just want ed to understand have those markets also develop ed any EV ecosystem there?

The penetration of electri c two wheelers outside Europe and rest of the world is very low but they are on the horizon, and everyone is dea ling with th e issues of cost, price, margin, Bajaj Auto Limited October 18, 2023 range anxiety , and battery life and things like that. The ecosystem, I must say o utside of Europe is not as well de veloped as it is in India, but there are opportunities which are bubbling because of our very wide footprint all across the world. Obviously, we are monitoring these both for two wheelers and three wheelers and appropriately we will enter some of thes e markets. It is very much in our planning and again, I do not want to sort of jump the gun and announce which markets we are entering, but very much in the planning.

Thank you so much for this.

Thank you. We will be able to t ake one last question. We take the last question from the line of Binay Singh from Morgan Stanley. Please go ahead.

Hi team thanks for the opportunity. Just going back to the electric three-wheeler comments that you guys made , quite interestin g to note that the profitability is closer to the ICE version. Just to understand, do you think that will al so be the case when you ramp up pan India or is it just that you are in a small pocket, so the competitive intens ity over there is lower and secondly linked to that when we talk about why the electric two wheeler margins are a lot lower than t he electric three wheeler, Dinesh highlighted three things right PLI, battery cost being lower and lower advertising and sales spend so looking at these three it is very likely that PLI will go in two wheeler also. So how do you see the two-wheeler margins then trending over a period of t ime like scale build up over there. So, any comments on sustainability of this three-wheeler margin that we are talking about in a pan India basis and then any comments on trajectory of two-wheeler how does that churn.

So, I think there are a lot of things which should be clarified to you so please listen carefully and take the notes because number one, who tol d you competitive intensity is low in the marke ts where we have launched . W e are in fact the last mover because the re is Piaggio and M&M and a host of other companies. All the players who are present all over India are also present in the places we launch. The reas on why we delayed our launch is when we did our testing and trials with a consumer, we got strong feedback about certain expectations they had from Bajaj Auto because they feel Bajaj is the leader. So, we had to go back and l ast year I was constantly telling you that it had been postponed and for this reason that we had to get the product so off in the bull’s eye region and only then launch it . So, people had a head start over us. I do not think that the competitive intensity which we will now encounter as we move into newer and newer cities will be more or less. If we do not encounter E-rick then it might be less. So, I would say the competitive intensity is the same. The very important point which Dinesh highlighted to the reason why the margins are different, which I do not know whether you mentioned or not but the key reason, the biggest reason is that the c omponent of the cost of the battery in the vehicle present between two Bajaj Auto Limited October 18, 2023 wheeler and three wheeler is different, so three wheeler it is much less, secondly in three wheeler only the battery has changed for us and there has been a little bit of some other stuff which is there, i t is essentially the same three wheeler, what we are saying to t he customer ‘Technology nayi but barosa wahi’, essentially the power train has changed and the three wheeler has remained the same. Marketing and all the other costs are a smaller factor. The PLI, I think you are confusing PLI and FAME. The PLI is equally applicable to two wheelers also and to three wheelers also.

Right. I was just picking up from the comments that Dinesh made but then to an extent, this is a very encouraging commentary.

I also want to say when space gets limited your ability to adopt one chemistry or the ot her also gets limited. Now when yo u have a larger space d vehicle like a three -wheeler, you have options of different types of chemistry. I mean we do not have to pack them so tightly and therefore you have better flexibility in making more value decisions on the budget, so it is not jus t about that the battery cost is constant and it is divided by the total vehicle cost. The battery cost itself can change because you have a greater degree of freedom in choosing a better value battery.

And then just look at it in terms of growth because then it looks like a good growth vertical for us that.

Yes, it is.

And wou ld you say that between all the business segments, just taking like a three -year CAGR view or so fair to s ay that the three-wheeler business, ICE plus EV domestic should at least be on track or in a similar run rate as the two-wheeler business because like this is opening up a new vertical, right the EV side opens up market which were earlier restricted.

So it will be on a healthy track, but at the same time I feel that the two-wheeler business for us and particularly with the now tailwinds supporting the top half of the industry more than the bottom half and that is our playground where we have strengthened and the fact that we still have a lot of room to grow in terms of market share even in the 125 cc+ segment. The 250cc to 500cc segment is opening up for us . Thanks to the Triumph collaboration. I mean we were in a very, very margin al presence through Dominar 400 an d a little bit of KTM. This is a vast segment which is opening up and the 125cc+ segment also offers us continued opportunities to increase market share and for that we are well placed in terms of our DNAs, product innovation, and leveraging R&D and a ll that. So, I would say that the two- wheeler business also has got very significant upside oppor tunity for growth. Let us say a year back we could not imagine it or envision it over the three-wheeler opportunity that was Bajaj Auto Limited October 18, 2023 looking for like tanking but thanks to the surge in CNG and thanks to the recovery and now of course the ability to take the E auto and cannibalize the E-rick, three-wheeler business also comes back very strongly as the growth vector for us.

Just lastly how many electric three wheelers did we actually sell in the quarter is the last question.

Six hundred.

Great. Thanks a lot team. Thank you.

I am guessing you are aware of it, but just for it to register with the rest of the audience the PLI is about 13% once DV A norms are met and we are clearly meeting them very comfortably because we already have an existing auto business, a three-wheeler business. So really the benefits of localization are being extended to that business. Therefore, we are meeting the D VA quite comfortably and also the proportion of the b attery pack to the overall cost is much lower so when you are meeting the DVA percentage the up set that you get on PLI is 13% which is quite significant and that in many ways helps bridg e the economics of the E-auto with the ICE auto.

And that we are getting the PLI incentive so is it already something that you are getting, or you will start to get it?

The process that the government is mandated which we are going thr ough, which essentially involves a certain process that has to be followed with the testing agency registration and eventual certification for PLI. So, we are going through hoops on that one, but the fundamental condition on domestic value addition being at a 50% threshold is comfortably meet for the year.

In this quarter there is obviously no PLI incentive.

Because we have product and we clearly wanted to do a calibrated launch so we have launched without the benefits of PLI coming into the financial at the moment, but we are going through the process of certification, so we should have it at some point.

Great. Thanks for that Dinesh.

Thank you very much. We will take that as the last question. I would no w like to hand the conference back to Mr. Anand Newar for closing comments. Bajaj Auto Limited October 18, 2023

Thank you everyone for joining the call. I can see a few participants still waiting to ask

00 pm today. Thank you and all the best for the great festival.

Thank you very much. On behalf o f Bajaj Auto Limited, that concludes this conference. Thank you for joining us, ladies, and gentlemen. You may now disconnect your lines. This transcript has been edited for readability and does not purport to be a verbatim record of the proceedings.