- Outlook: Festive season sales declined in the early double digits, impacted by delayed monsoons/harvesting. However, it is hopeful of making a recovery in the upcoming wedding season on the back of multiple positive indicators – such as good monsoons, an improving consumer confidence index, the reopening of the Hospitality sector, and the recent cut in fuel prices.
- RM cost inflation and price hike: The LEAP-2 savings program led to savings of 320bp YoY, largely on account of saving on RM as well as some other variables.rec
- Net RM costs were higher by 110bp QoQ, and this needs to be covered. It took price hikes of INR1,200 in Jul’21 and INR1,000–1,200 in Sep’21 (total of INR3,000 since Apr’21).
- Premiumization: The Premium segment has done well, with its share growing to 6%+ over Oct–Nov'21, driven by new products. It is on track to cross 10% by Mar’22.
- Exports: It has a much higher target than the current run-rate of 300k units/p.a. It has tied up with a distributor in Mexico and launched renewed products in Nigeria in the Taxi segment. Exports have lower margins; at similar volumes, margins would be equal to, if not better than domestic margins. Gross margins are also lower v/s exports.
- Spare and accessories revenues stood at INR11.4b (13% of revenues v/s INR4.5b or 8% revenues in 1QFY22). Accessories also are doing well, with the highest sales seen in Oct’21. It has added adjacent products such as Lubricant Oil, which is also faring well.
- Retail financing penetration further improved to 55% in 2QFY22 (v/s 51% in 2QFY21), with the share of HFCL 35–40% in financing for HMCL. This improvement was led by innovative financing schemes, such as offering four bullet payments for farmers, in line with their cash flows.
- Capex: It has a capex plan of INR10b for the next five years, of which 50% capex/investment would be towards EVs, Premium, and exports.
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