Bosch Limited analyst Q&A

We will now begin the question -and-answer session. T he first question is from Mr. Pramod Amthe.

So the first question is with regard to the capex. You alluded saying that many of your user segment may hit historic high volumes. So in that context, are you relooking at your capacities and also the capex requirement for the FY '27-'28?

Yes. It's my pleasure. Yes, you are, of course, fully right. In every cycle or this is an ongoing process in our company that we check the forwarding volumes predicted by the customers and by the market. We look at our technical capabilities and capacities and then we adjust our investments in accordance. So golden rule within Bosch, we all the time have some buffer left. And as soon as we drive into the buffer, we release the next capex for extension.

So would you call out the numbers, what it can be next year, the after compared to this year?

We are currently under -- or in consideration, and we do not want to give a guidance.

The second question is with regard to the India EU deal. I wanted to check your thought process in terms of, first, the imported components? Because in terms of purchased goods, there's a large chunk which comes from parent. What is the understanding with the clients usually when duties drop in such cases, usually it's a pass -through to the client, one? And second, what are the medium-term opportunities you look at exporting from India to global markets and whatever duties there for such products in the current state?

Yes. Perhaps the first part of your question, which is regarding imports. So we are importing mainly components from the parent. And it's also an ongoing process of localization. So this year, we have -- in '25, we have localized NOx sensor component for the common rails. We are going ahead with more localization for the common rail products. We will go ahead in the perspective of also local the NOx sensor. So this is a permanent review whenever commercially feasible, we are doing the localization. Your second part is in regards of the exports. We have increased already our export volume for the spark plugs in 2025, and we expect also further good development of volumes in the spark plugs and in components for the common rail products. We also expect an increasing export volumes in sensors, NOx sensors. And what we have relocated in the last, let's say, 1.5 years was pumps from Japan to India. So we deliver these pumps also back to India -- sorry, back to Japan and Korea.

So maybe just to add, I think we should keep in mind that the FT is just signed, and we are extremely positive about what it is likely to bring in the mid and long term for India and of course, also for our operations in India. So there, we are very, very positive. The fine print, as you know, needs to be studied in detail and the impact of what happens and how we can benefit from that is currently under study, and we are looking into every aspect of how we can benefit from this.

But would you call out what is your current import duty rates?

Do you have the numbers Karin. I think we'll have to get back to you on that.

Yes, exactly.

Mr. Mayur can unmute and ask your question.

Yes, you are.

So actually, over the last couple of quarters now, we have our -- this is a question more on the profitability and margins. We have stabilized in the region of around 13% plus/minus. What I wanted to understand is we are having a very strong tailwind across our portfolio. The CV industry is on an up cycle. The tractor is doing phenomenal. We have OBD-II on the 2-wheelers. The Passenger Vehicle outlook is strong. Despite so much of operating leverage and despite localization, why is it that we are not seeing a movement on the margins despite the growth coming and the narrative on the localization and other aspects?

You want to take it, Karin?

I take this question. So if -- yes, if you look at the overall result for the last 3 years, then of course, we had a tailwind with the growth, which helped us. But we also did a lot of cost improvement and localization. So you see the EBIT is -- or profit after tax is going up. So we are improving also the margins. Nevertheless, we also, of course, have to consider a certain product mix, which the market demands. And therefore, you sometimes see a growth, but please also consider that we have to look at the product mix itself. The second thing is, but this was for this quarter and was already mentioned that we had already, again, a very strong quarter with a very good 10.5% EBIT. And we also did already the first provision for the New Labou r Code. So therefore, product mix going forward, further localization working on the costs or on the structural costs also together with the growth, we see a good margin development.

So you believe that over the next 3 to 4 years, we should -- the margins should start picking up or should be meaningfully different as it directionally when compared to current margins?

Well, I would not give a guidance for the next 3 and 4 years. I only can show you what we have delivered in the last 3 years. And then you can see in which cycles of margin improvement we are.

So because it was quite for last almost 8 to 9 quarters, look, I'm talking more from an EBITDA margin. I understand you talk about EBIT margin from -- more or less nothing much difference was coming. I understand 2 years, we are comparing from around -- there is a 100 basis point movement. But given the tailwinds which we have, I was just thinking that shouldn't the operating leverage also now play out over the last 3, 4 quarters. Any specific product mix you want to call out, which is lower than our average margins, just as a qualitative understanding so that we are able to track the developments?

So look, it is the margin is, of course, if you have -- if new products are coming in, we are usually starting this -- we first bring the finished goods into the market, then we start the assembly and testing. Then if this is stabilized, we start with the localization. That means with every new product coming into India and coming into the market, we start a new localization round. So therefore, yes, the tractor is good. The tractor is stable. But of course, we have also the common rail. We have now the new exhaust gas components. And with this we are following the localization path also. But this is the product mix in the tactical c ycles, which we introduce into the market. There is no specific product. It is more technology is developing. And we are following the technology path, and we are following with the localization. And with more localization, of course, you have then the improvement in the margins as well.

Okay. Last question from my side is, from your vantage point and your discussion with the OEMs, is there any incremental discussion and development around TREM V possi bility. We are in February '26. So just wanted to have your understanding while there are certain things in the domain, public domain and understanding, but what is your understanding of the implementation, how gradual, where we are, and anything you want to -- if you can give your insights on that?

Yes. I mean, maybe I can answer that. At least at this point of time, there is no visibility of a precise date of TREM V implementation. So things are still quite open as far as we know with our discussions with the OEMs.

Hitesh Sharma, you can unmute and ask your question. Hitesh Sharma? Anyhow we will go the next caller. Mr. Nikhil Rao you can unmute and ask your question.

Hello. Can you hear me now?

Yes, yes, yes.

I just wanted to check what is the Bosch plan for the EV 4-wheeler vehicles in India? What sort of car components you are targeting to supply?

Okay. So maybe this is a very broad question, and this -- we need to distinguish also from the portfolio of Bosch Limited versus the portfolio of Bosch Group in general. Of course, from the Bosch Group, a lot of components go into a car, into an electric car as well. So that continues. From the portfolio of Bosch Limited, we will strongly aim to begin in e-axles and that would be the biggest component that comes into an electric vehicle. So we are in advanced discussions with several OEMs. And as we go forward in the coming quarters, we will let you know the exact nature of these things.

Which component, you said?

You don't see -- right now, you are not supplying anything any OEM right now?

We are supplying -- in India, we are not supplying e-axles to any OEM right now. We will -- we are in advanced discussions on several projects with OEMs, and we will come out in the open soon. The other components we are supplying are chargers or DC/DC converters, power electronics basically, that's going from our electronics unit.

Can I go ahead?

Yes, please.

So could you help us understand how demand from the Commercial Vehicle segment is shaping up for Bosch? And roughly how much of your CV offtake is currently driven by the replacement demand.

Yes. So as I mentioned in my initial talk and I explained the slides, the Commercial Vehicle demand both for HCV and LCVs has been very robust in the last quarters . And it's connected to, in our view, a good demand following the GST 2.0 changes and of course, increased offtake on government fleet orders and ongoing activities around construction and mining. We expect -- and of course, the LCV demand has also been quite robust, and this is primarily connected to last mile delivery, urban logistics and in-city transportation and so on or short-haul delivery activities. But this also remains very, very robust at this point of time. Based on the trends of what the budget came up with right now. And also our talks with the HCV and LCV manufacturers or OEMs, we see that this trend is likely to continue. And we expect strong infrastructure activity to continue and further in line with the GDP growth, we also expect HCV and LCV activity to be strong in the coming quarters.

Okay. And are you seeing good traction from the replacement side as well, right?

Yes, yes.

Okay. And are you also seeing an increase in your content per vehicle contribution or like a more favorable product mix with CVs?

Yes. So there are, of course, technology additions happening in the CV world, and that's quite favorable. There are also other talks on what we can do, which are maybe very preliminary at this point of time in terms of technology to be discussed in a forum like this. But at some point of time, we will update you on additional technology introductions that are likely to come up in the CV, HCV product.

I'll be ready to take the next question. Mr. Himanshu Singh can you please unmute yourself and go ahead. Mr. Mohit Jain would you like to go ahead and ask your question?

Yes. So I mean, Bosch has very wide portfolio options also for fuels, flex fuels and so on. We've been offering this all over the world. And of course, we also do that to our OEMs in India. The content per vehicle is not a major change in my view. We'll have to get to precise numbers, but it's not a very significant change. But the development -- I mean, the support to the OEMs is always there in the Indian context.

Understood, sir. My follow-up question would be like I think we had received some pilot order on hydrogen fuel engine. So what is the status on that? And is there any future potential for hydrogen.

Yes. So on the hydrogen activity, we are working very closely with virtually every commercial vehicle and bus OEM in India. And as you've probably seen in the press or in media, there's a lot of vehicle testing activity that's currently ongoing. All OEMs are testing their engines, testing the vehicles for readiness. And this is the phase it is in. There are currently at least no known plans of rollout from any OEMs very specifically. It's most likely also connected to how the infrastructure on hydrogen comes up. And there are other stakeholders involved, other players involved, and we'll have to get more clarity. But I think all OEMs are working towards readiness of hydrogen vehicles from their side. And we are fully in touch with all of them offering our technology and solutions and working very closely with most of them.

Just to add, like if you can clarify like by well in India, we expect that hydro engine will be commercially launched.

See, it's maybe better to take this question in 2 parts. One part is when would vehicles and technology mature? And that's the thing we can control quite well. And there, I would say it's going well on plan and OEMs and us are working very closely together towards this. The other side of this equation is when would infrastructure come up, when would we have hydrogen fuel stations, filling stations. And availability on at least major trunk routes or right corridors be available with hydrogen. And this seems to be still not very clear at this point of time. So we assume that by 2030, definitely, there will be quite some hydrogen activity happening. And we are working towards that right now.

Thanks for that clarity. We just have one question from one participant, Himanshu Singh. So his question is, will the new trade deal make the -- will the new trade deal make the material versus import map unfavourable for localization and might see some delays in localization. So if you can address that, sir?

Karin, do you want to take that?

Yes. What was the question. Can you repeat, please?

What was the first part? What is the -- what do you refer to that localization will -- could come to a delay?

No, I assume he refers it to as a consequence of the FTA would.

FTA?

Yes, FTA. Would there be a delay in localization because there is now an FTA and there is no motivation to do any localization here. See, maybe I can start and Karin can give you some more specifics. The Bosch approach with or without FTA has always been to have localized production wherever the demand is and our international production network always operates on that theme of producing in the region where it's relevant and where it's consumed. So that's how we operate on the work . And this has been the practice with or without the FTA. So FTA, we will have to see what is the actual impact and do we really need to recalibrate this approach and do something or do we positively benefit from this approach and then enhance further localization. In all probability, this will only lead to further increased localization for us as years go by and we will continue to be on this localization track. Karin, if you have anything specific to add, please?

Yes. Thanks. As you mentioned, the most important thing or the philosophy of Bosch is we try to do local for local. And therefore, volumes are much more important than an FTA or import duties whatsoever. And in addition, often localization goes along with a strategic approach, which we would like to do in a region. And therefore, yes, of course, there is -- could be a positive effect. We see it positive, b ut nevertheless, our localization road map has different directions.

See, even if there is an FTA and there is zero duty on a certain item, just the logistics may impact the landed cost. So there is always more sense when there are good volumes to have it fully localized and that's always been our endeavor.

Right Just one follow -up question from the same participant. On the quarter performance, we have seen dip in margins for the Automotive Products segment on a sequential basis. Can you give some color on that front?

Well, if you look on the quarterly basis, we have put in the provision for the L abour Code. If I correct this condition we have, again, a very strong performance out of operations.

Going forward, the next question is from Darshan Bhandarkar from Banyan Tree. Darshan you can unmute and ask your question. Darshan Bhandarkar [inaudible 0:54:34]

No, Darshan you are not audible. Darshan has put in the chat box. His question is why is the auto segment growth so much lower than CV, tractor, and PV growth rate? Hello. Am I audible?

Guru, do you take this?

No, you can take it, Karin. I don't think.

No, it is -- the question is why the CV and the -- are better in the growth than the passenger cars?

No. His question is why is the auto segment growth lower than the CV, tractor and PV growth rates?

So do you mean our growth?

Yes, Bosch growth.

Okay. I think our auto sector growth has been especially power solutions and aftermarket, power solutions as a whole, aftermarket has been ahead of the sector growth.

Okay, sure. The next question is from Gokul Maheshwari. You can -- Gokul you can unmute and ask your question.

Hi, thank you for the opportunity. M y question is just relating to the previous question you supply products to various segments of the automotive industry, whether it's 2-w heeler, passenger cars, tractors and CV. Which of the areas are we growing ah ead of the underlying industry and where are the segments where we are actually undergoing the industry growth?

Broadly, I would say in every one of the auto sector segments, we have been growing above the industry growth rates for all our products. The only area I would say we have not performed maybe so well in the last quarter has been our power tools division, which is the non-auto part. And there, we know what corrective steps we need to take, and we are on it right now. But apart from that, CV, 2-wheeler, passenger cars, all of them, we are ahead of the segment goals.

Just on the dividend policy, when I read that there is a change where you have now quantified, is that read it correctly, anyway 55% to 80% of profit. Is this a higher number than the previous policy or is the lower number?

Okay. So I think if you -- we've just brought a lot more clarity into our dividend policy right now. If you looked at our previous one, it was an open policy. There were no limits or ranges set and it was completely left open. And the Board discussed this and said it may be better to give a clear view and therefore, clear guidance on how this is going to work and that's what we've endeavour to do. Of course, the final dividends irrespective of this policy can always lie with the Board, and they take the final call on how this goes.

Okay, fair enough. A nd lastly, could you comment on your export performance for this year? How is the quarter or the 9 months shaping up? Just a qualitative comment in terms of how do you see the outlook for the export?

Yes. So we are in the exports, we are steadily grow. Of course, we are we are looking forward to do more. I mentioned it already, especially in spark plugs sensors, pumps to Japan and Korea. And therefore, in the last year, stepwise we increased our exports. But again, main focus for us is the Indian market.

Great. Thank you so much and all the best.

Thanks, Gokul. Due to lack of time, that was the last question. On behalf of B&K Security, we thank all the partners for joining the call and thanks to Bosch management for taking time out for the call and giving us the opportunity to host the call. Have a good day.

Thank you, everyone, and we are happy that the market momentum has been positive and we expect this to continue in the coming quarter, and we are looking forward to much better performance as we go forward. Thank you. Thanks, everyone.

Thank you. Bye-bye.

Bye. NOTE This document is a transcript and may contain transcription errors. This transcript may not be 100 percent accurate and may contain misspelling and other inaccuracies. While the transcript has been edited for clarity, the Company takes no responsibility for such errors.