bosch earnings call nov 2012

8/13/2019 Bosch Earnings Call Nov 2012

1/25


2/25

kindofdepreciation.AndevenagainsttheEuro,Rupeehasdeclinedbyabout15%orso.

Thishashadan impact inthequarterlyresultscomparedtothepreviousyear'sthirdquarterresultsbecauseourmaterialcost in

September2011wasintheregionofabout54%,55%whereasthisyearinthisquarterit'saround57.8%.

Thatmeansourmaterialcosthasgoneupbyabout3.6percentagepoints,3.7percentagepoints.However,youwill remember

thateven in Junequarter2012,ourmaterialcostwashovering intheregionofabout57,57.5.Socompared tothe immediate

quarter,the

material

costs

have

not

gone

up,

but

compared

to

the

previous

year's

corresponding

quarter,

the

material

cost

has

sharplygoneupforthereasonthatImentionedtoyou.

Then thereareotherexpenses like theemployeecostaswellasotherexpensesnothingmuch to talkaboutaccepting some

additionalexpensesrelatingtopowerandfuelandallthat.

Butanotheritemthatneedsexplanationisdepreciation.IhavebeendrawingyourattentioninthepastquartersaswellthatBosch

continuestoinvestbothintechnologyaswellasincapacityexpansionandtheseinvestmentsoverthelastsixquartershavebeen

prettyhigh.

Andasandwhenyoumaketheseinvestmentcomingintoproduction,thedepreciationneedstobechargedandbecauseofsomeof

theseassetscomingintoproductionorcomingintocommissioningandstartupproduction,thedepreciationcosthasalsogoneup

byabout1.5percentagepoints,1.6percentagepointsfromaround3.3%to4.8%ofsalesvalue.

Therefore,overallourprofitbeforetaxaswellasprofitaftertaxhavedeclinedbyabout30%comparedtopreviousyear.Andas

youknow,growthrateslessthan10%cannotreallygivehighlevelofmargins,giventhedepthofinvestmentsthatwehaveand

giventhestructureofourcosts.

However,Imustalsomentiontoyouthatourprofitbeforetaxaswellasprofitaftertaxintheformof,orasapercentageofsales

valuestillcontinuestobehealthyataround14%and10%respectivelyofsalesvalue.Sothatistheperformanceasfarasthethird

quarterisconcerned,exportsIhavealreadytalkedabout,rawmaterialcostsandinvestments.

yeartodate,yeahwehavegrownbyabout6%,7%,itisnotverydifferenttotheadditionsummationofthepreviousfirsthalfand

thethirdquarterthisyearand6%,7%isthegrowthinturnoverandabout9%or10%isadeclineinprofitbeforetaxandprofitafter

tax.

Butclearly,Ithinkgoingbythelasttwomonthsofperformancesoftheautomotivemarket,weseesomeamountofpickupbothin

thelightcommercialvehiclesideaswellasinthepassengercarside.Andgoingbythatandgoingbymydiscussionswithindividual

OEMs,et

cetera,

we

can

perhaps

say

that

the

worse

is

over,

but

the

recovery

is

going

to

be

perhaps

slow,

but

we

need

to

watch

this

closely.

That'sallfrommysideasmyinitialexplanationoftheresultsforthethirdquarter2012.Hello?

QuestionsAndAnswersOperatorThankyouverymuchsir.Ladiesandgentlemen,wewillnowbeginthequestionandanswersession.[OperatorInstructions].

OurfirstquestionisfromVaishaliJajooofAEGONReligare.Pleasegoahead.

VaishaliJajooGoodafternoon.

VKViswanathan,ManagingDirectorGoodafternoonVaishali.

VaishaliJajooYeah.

Sir

first

is

on

the

outlook.

Going

forward

from

here

on

the

CV

and

tractors

ifyou

could

give,

especially

on

the

CV

side

if

you

couldalso indicateMHCVandLCV,becauseLCVhas shown reallyagoodgrowth inpastand stillweareexpecting that itwill

continuetogrowlikethisandMHCVisnotgivinganystrongsignalofrecoveryalso.Socouldyoujustgiveanindicationfromthe


3/25

ordersyougetitmaybefromOEside,howaretheyexpectingthegrowthgoingforward?

VKViswanathan,ManagingDirectorSeemediumandheavycommercialvehiclesmarketdirectlydependsontheeconomicgrowth,particularly inthe infrastructureas

wellas in theminingsectorside.Wesee thateconomicactivitypickingupveryslowlyandwebelieve thatweshouldseesome

improvements in themediumandheavycommercialvehicle segment,particularlybecausewehavehad somepoorquartersof,

threeorfourquartersinthepastoneyear.

Frommyowndiscussions,Ibelievethatwewillseesomegrowthinthemediumandheavycommercialsegmentinthenearfuture,

butIcannotreallypredictthepercentagegrowthrates.Asfaralightcommercialvehiclesareconcerned,whichisthesegmentthat

providesthelastmileconnectivityandthissegmenthaswitnessedsomefabulousgrowthuntilthefirsthalfofthisyear.

Wehaveseengrowthof25%to35%everyquarterformanyquarters.ThisquarterwewillcontinuetogrowandIbelievethatthe

Septemberquarterwasanaberration.Wemaynotseethegrowthratesof20%plus,butclearly12%to15%kindofagrowthrate

isclearlypossibleinthissegment.

The third one is tractors, entirelydependent upon agricultural income, farmers' sentiments and finally the availability of credit

particularlyfromNABARD,whichisthenodalagencyfordisbursingloansetcetera.Thissegmenthadaphenomenalgrowthlastyear

closeto650,000tractors.Weexpectthissectortoshowadeclineforthisyearasawholebyaround6%,7%.Soagain650klast,year

thisyear

you

we

will

have

avolume

of

about

600,000.

But,weexpectthistocomebacknextyear,becauseofthefactthatthelatemonsoonintheKharifsideaswellasgoodmonsoonin

theRabicropside,shouldenabletractorstocomebackbothintheagriculturalsectoraswellasinthecargosector.Sothatismy

prediction,Vaishali.

VaishaliJajooAndsir,whatisthecontributionfromLCVstototalCVnowinyourportfolio,becausethereisadrasticchangeinthegrowthrate.

So,definitelyLCVscontributiontototalrevenuemighthaveincreasedintotalCVsegment?

VK

Viswanathan,

Managing

Director

No forus thecontributioncomesmainly frommediumandheavycommercial segment, lightcommercial vehicle segment

doescontributebutnotasmuchasheavyandmediumcommercialvehicles.

VaishaliJajooOkay.Howmuchwastheexportrevenueforthequarter,sir?

VKViswanathan,ManagingDirectorYeah.ExportrevenueforthequarterasIsaid17%to18%decline,butinabsoluteamountitwas2,320millionor232croresinthis

quartercompared

to

281

crores

in

the

previous

year's

third

quarter.

VaishaliJajooAndwhatwasthemajorreasonbecauseithasshownagoodtrendofgrowthinlastcoupleofquartersandtherewasasequential

declinealso.Couldyoujustgivesomeelaborationonwhytheexportgrowthhascomedown?

VKViswanathan,ManagingDirectorYeah,VaishaliasImentionedevenintheprevioustwoquarters'conference,exportshavebeensluggishprimarilybecauseofthe

weakeconomicscenarioinEuropeanmarkets.Theproblems,thedebtcrisisinEuropehashadatollonEvenNorthAmericaisnot

really very buoyant, although it's much better than Europe. So we are primarily trying to compensate these lower export

performancesin

markets

like

ASEAN

as

well

as

Africa

and

the

other

segments.

So

we

are

looking

at

other

opportunistic

areas.

But

clearly themarket inEuropewherewehaveaverystrongpresence, thathasdeclinedand thereforeYTDourdeclinehasbeen


4/25

around9%andforthisquarterourdeclinehasbeenaboutminus17%.

VaishaliJajooHowmuchisEuropecontributingnow?Itwas60%ifIamnotwrong.

VKViswanathan,ManagingDirectorItwasaroundmaybeit'snowcomedownto45%,50%.

VaishaliJajooOkay.Andjustonequestionon themaintenance side, if youcouldgiveaDiesel segmentandAftermarket segmentgrowth

separately?

VKViswanathan,ManagingDirectorYeah,Dieselsegmentobviouslydidnotperformedtoowellasyouknow,becausebothcommercialvehiclesaswellastractorsdid

notdowell.SoourDieselbusinesshasactuallydeclinedinthethirdquarterbyasmallsingledigitnumber.

VaishaliJajooOkay.

VKViswanathan,ManagingDirectorButautomotiveaftermarketaswellaspowertoolswhichhavebeenstronggrowthenginesinexcessof15%or12%etceterainthe

past.

VaishaliJajooOkay.

VKViswanathan,ManagingDirectorHasalsohadsomeamountofproblemchallenges,Iwouldsayproblems,theyhavegrownbuttheirgrowthrateshavealsocome

downbecauseoftightmoney inthemarket,verypoorsentimentsandalsoconstructionsectorhasnotexactlybemoving.But

theseareshorttermfeaturesinmyopinionandIthinkthesemarketswillrecoverratherquickly.

Wasitalsoinasingledigitaftermarket?

VKViswanathan,ManagingDirectorAftermarkethasbeeninsingledigit,butpowertoolshasbeenindoubledigit,butlowdoubledigitlevel.

VaishaliJajooOkay,okay.Thankyousir.That'sall.

VKViswanathan,ManagingDirectorThank

you

Vaishali.


5/25

OperatorThankyouverymuch.OurnextquestionisfromHRGalaofQuestInvestmentAdvisors.Pleasegoahead.

AnalystHellosir.Wedoappreciate theadversescenariounderwhichourcompanyhasbeenperforming.Sir lookingtotheninemonths

performancewhereinournetprofithasdeclinedby6%,doyouseethatinthefullyearcalendaryear'12ourprofitwilldegrowas

comparedtolastyear?

VKViswanathan,ManagingDirectorAtthispointintime,it'sverydifficulttosay.

AnalystOkay.

VKViswanathan,ManagingDirectorBecauseinthefirstninemonths,wehavenotreallygrowninprofittermsalthoughinsalestermswehavegrown.Buttomewhat

isimportantisnotquarteronquarter,butmedium,longterm.

AnalystIappreciatethatyeah.

VKViswanathan,ManagingDirectorAnalystYes.

VKViswanathan,ManagingDirectorWearealsoinvestinginfactoneofthereasonswhyeventhisquarter'sprofitshavebeenaffectedisbecausewecontinueto

investverystronglyinbrandbuildingaswellasinoursalesnetworkactivities.

AnalystOkay.

VKViswanathan,ManagingDirectorSo clearlywe are looking at laying some strong foundation for the future, despite this sharp, small hiccups in the short term

scenario.

AnalystOkay.SirmysecondquarterpertaintothatononehandwehaveambitiousCapExprogram,etceterawhichatonepointintime

youhadsaiditisaround600crore,700crore,whichIbelievehascomedowntoaround400crore,500croreforthisyear?

VKViswanathan,ManagingDirectorNo,itwillbeintheregionofaboutRs.5billionthisyear.


6/25

AnalystOkay.

VKViswanathan,ManagingDirectorBecausewehadalreadyinvestedasyouknowasperourearlierinvestmentprogram.

AnalystYes.

VKViswanathan,ManagingDirectorAnalystOkay.Andhowmuchareweplanningforthenextyear?

VKViswanathan,ManagingDirectorNextyearasofnowagainsameRs.5billion,Rs.6billion,butthiswillbereviewedineveryquarter.

AnalystOkay.

VKViswanathan,ManagingDirectorTakingintoaccountthemarketconditions,etcetera.

AnalystOkay,okay.That'sfine.Yeah.Anotherquestionpertaintothatwehaveseenthatwearenotrunningouralltheplans,infactweare

operatingfivedaysorsixdayslessinamonthduringAugustandSeptember.Nowthathasgonebacktothenormalof...

VKViswanathan,ManagingDirectorYesexactly.Wehavetotallygonebacktonormalcy.

AnalystOkay.

VKViswanathan,ManagingDirectorOctobermonthasyouknowhadlotofholidaysbecauseofBakriIdandPooja,Navratri,etcetera.

AnalystYeah,yeah,yeah.

VKViswanathan,ManagingDirectorThereforewedidn'thavetoreallyreduceorsuspendourproductioninotherworkingdays.


7/25

Okay.

VKViswanathan,ManagingDirectorAndallthefactoriesareworkingfulltimenow.

AnalystOkay.Sirjustlastquestionfrommyside,ifwehavetoappreciaterevenuebreakupofsay6,500crorethatwehaveachievedin

ninemonths.BroadlycanyoutellussirhowmuchistheCVsegment,PassengerCarsegmentlikethat?

VKViswanathan,ManagingDirectorSeewedon'treallylookatthesekindofsegments.Weareoperatingbasicallyfromthebusinesssectorviewratherthansegmental

view.

AnalystOkay.

VKViswanathan,ManagingDirectorWehaveadieselsector,wehaveagasolinesector,wehaveanelectricalsector,etcetera.

AnalystOkay.

VKViswanathan,ManagingDirectorSowemonitorourresults

AnalystOkay.

VKViswanathan,ManagingDirectorBasedonthesectorialperformanceslikediesel,gasoline,starters,generators.

AnalystOkay.

AndasIsaidearlier,dieselhasmarginallydeclinedinlinewiththemarketdiesel,othershaveactuallyperformedquitewell.

AnalystOkay.Willitbepossibleforyoutogivethebroadpercentagesofcontributiontorevenuebythesethree,fourdivisions?

VKViswanathan,ManagingDirectorNo,wedon'tgivethatandthat'sneverbeengivenofinthepast.


8/25

AnalystNowsirsincethedieselpricesarealsolikelytoincrease,governmenthasalreadydone itonceinthisquarter.Doyouthinkthat

canoverallaffectourbusinesssincewehavemajorcontributioncomingfromDieselsegment?

VKViswanathan,ManagingDirectorIdon'texpectanymajorreactiontothis.

AnalystOkay.

VKViswanathan,ManagingDirectorBecauseRs.5hasalreadybeenfactoredinmonthago.

AnalystOkay.

VKViswanathan,ManagingDirectorAmonthorevenmorethanthat.Sothathasalreadyhappened.

AnalystOkay.

VKViswanathan,ManagingDirectorAnalystYeah.

VKViswanathan,ManagingDirectorBecausethisitselfisaheftyincrease.

AnalystOkay.

VKViswanathan,ManagingDirectorSoIdon'treallyexpectdieselpricestohaveaverymajorimplicationonourdieselbusiness.

AnalystOkay,okay,okay.Fine.That'sall.Thankyouverymuchsir.

VKViswanathan,ManagingDirectorThankyou.


9/25

OperatorThankyou.OurnextquestionisfromApurvaDoshiofHSBC.Pleasegoahead.

AnalystYeahsir.Firstofallonthemarginfront, lastquarterwehadsaidthatbecauseofRupeedepreciationwhatwehaveseenthatraw

materialcostasapercentageofrevenueisgoingupto56%,57%.ButImeanthekindofforbrandingpowerwehave,isitpossible

topassiton?

VKViswanathan,ManagingDirectorPassiton,onwhat?

AnalystPassonrawmaterialcosttotheendconsumers.

No,that

is

depending

on

individual

market

situation,

individual

customer

et

cetera.

Our

objective

is

to

pass

on

as

much

as

possible.

Butitmaynotbepossibleallthetime.Sothat'sverydifficultformetosay.

AnalystButjusttounderstandmy,likeshouldweassumethattheselevelsshouldbetheconstantlevelsgoingforwardorarewelooking

atanypricehikesoranyofthosestuff?

VKViswanathan,ManagingDirectorNo,Ican'tsaythesethingsasyouwouldappreciate...

AnalystBecauseit'sabroadtrendImean,howdoyouseethathappening?

VKViswanathan,ManagingDirectorcomebacktonormalprofitabilitylevels.

AnalystOkay.Buttypicallyitcouldtakeanotherwhat,twoorthreemorequarters?

VKViswanathan,ManagingDirectorVerydifficultformetosay.

AnalystOkay,okay.Andon theCapEx sidewhat you said is you've incurredaround500crores this year.Themajorityof it isalready

incurredorsomethingwillbeincurredinthelastquarter?

VKViswanathan,ManagingDirectorMajorityhasbeenalreadyincurred,becausethisisacapitalexpenditureprogramthatwestartednearlyin2011,itcouldbecloseto


10/25

600croresaswell570crores,600croreskindofasituation.Butwewillwatchthisveryclosely,therearealsoopportunitiesbecause

asandwhenthenewgenerationdieselsystemstakeplace,youneedtobeprepared.

AnalystCorrect.JusttounderstandIthinkmostoftheCapExwouldbeonthedieselside,dieselfuelinjectionside.Sotypicallyhowmuchis

thecapacityutilizationandwhatwouldbethefreshcapacitynowwhichhascomingpostthisCapEx?

Seecapacityutilizationdiffers fromplanttoplantoreventheeachtypeofproductthatwehave.Buttypicallywehaveanything

around80%,90%kindofacapacity.

AnalystOkay.AndpostthisnewCapExwhichhascome in,which isreflecting inthesharp increase indepreciation,thiscouldfallto60%,

70%?

VKViswanathan,ManagingDirectorNo,

it

will

be

around

70%,

75%

Iwould

say.

Maybe

it

will

then

pick

up

as

you

go

along.

AnalystYeah,correct.Sobut like thecapacityhascome inandasyou rightlysay,thedieselhasactuallydegrown,sothatmeansyour

volumesarenotgrowing,rightandthenewcapacityhaskickedin,soyourutilizationhastocomedown?

VKViswanathan,ManagingDirectorAbsolutelyright.

AnalystOkay.ButdoesthischangeourCapExplanforfuture?

VKViswanathan,ManagingDirectorNonothing inamajorway,butwewillcontinuously lookatwhere the investmentsaregoingwhich segmentsareneeding

investments,whichsegmentswecaneitherpostponeordelaytheinvestmentsetcetera.Sothatwillbeanongoingreviewand

decisionmakingbythemanagement.

AnalystOkay.Andsironthetractorsideyousaidthatithasnotgrown,butifyoulookattheresultsofM&M,thetractorbusinesshas

donefairlywell.So,doesthatmeanthatwedon'tsupplytoM&M?

VKViswanathan,ManagingDirectorOfcourse,wedosupplytoM&M.Ican'treallytalkaboutmycustomer.

AnalystOkay.

But,whatwecantalkaboutisthatoverallthetractormarkethasdegrownthisyear.


11/25

AnalystOkay.ButwedosupplytoM&M?

VKViswanathan,ManagingDirectorOfcoursewedo.

AnalystOkay.AndsimilarlyImean,justabasicquestion,arethesegmentsofautomotiveancillarieslikethewipersorthebatteries,are

theyinthelistedentityortheyareoutsidethelistedentity?

VKViswanathan,ManagingDirectorWhichone,wipersetceterawedodistributefromour,intheaftermarket.

AnalystIntheaftermarket.Sointheresult,thatshowsautomotiveproductionothers,theotherswouldbepowertools?

VKViswanathan,ManagingDirectorNo,no.Nonautomotive there isone.One isautomotive, theotherone isnonautomotive.Automotive includesdiesel,gasoline,

startersandgeneratorsevensomeelectronicproductsandautomotiveaftermarket.

AnalystOkay.

VKViswanathan,ManagingDirectorThenwehavenonautomotive,whichincludespowertools,securitytechnology,packagingmachines,etcetera,etcetera.

AnalystOkay.So,thisotherswouldincludeallthesewipersandwhateverbatteryandallthatyousay?

VKViswanathan,ManagingDirectorAnalystIt'sincludedintheautomotivesegmentitself?

VKViswanathan,ManagingDirectorAsyouknowwipersystemsweonlydothesalesintheaftermarket.

AnalystCorrect.

VKViswanathan,ManagingDirector


12/25

Manufacturingourwiper,motors notevenwipersystem,wipermotors.Wedon'tmanufacturewiperbladesinIndia.

AnalystOkay.

VKViswanathan,ManagingDirectorThemanufacturingofwipermotorsetceteraisanothercompanycalledRobertBoschElectricalDrivesCompany.

AnalystOkay.So,basicallywejusttradeonthem?

VKViswanathan,ManagingDirectorThat'sright.It'saverysmallbusiness.

AnalystYeah.So,Ithinkthatwillbemynextquestion.Roughlywhatpercentageofrevenuewouldcomeoutofthesetraded itemsvery

roughly?

VKViswanathan,ManagingDirectorBatteriesand...

AnalystVKViswanathan,ManagingDirectorItisabout200crores,300crores,250croresto300crores.

AnalystOnanannualbasis?

VKViswanathan,ManagingDirectorYeah.Annualbasisyeah,yeah.

AnalystOkay.Sirthankyouverymuchandbestofluck.


OperatorThankyouverymuch.OurnextquestionisfromAshishNigamofAntiqueStockBroking.Pleasegoahead.


13/25

VKViswanathan,ManagingDirectorPleaseonlytwoorthreequestionsperparticipantplease.

AshishNigamSuresir.Sirmostofmyquestionshavebeenansweredtherearejustcoupleofthings.Atthemomenthowmuchwouldnetimports

beforBosch?Netimports.

VKViswanathan,ManagingDirectorSeeourimportsisroughlyabout3,000crores.

AshishNigamOkay.

VKViswanathan,ManagingDirectorAshishNigamOkay.Andsirtheplanstoincreaselocalizationlevels.Sohowdoyouseethismovingovertwoorthreeyearperspective?

VKViswanathan,ManagingDirectorTwoorthreeyearperspectiveisverydifficulttogivemyowncustomers,onwhomwedependupon.

AshishNigamSure.

VKViswanathan,ManagingDirectorTheydon'tgiveusguidanceandthereforeIcannotreallyprovideguidancetothat.

AshishNigamSoactuallysirlocalizationatthemomentwouldbehowmuchasapercent?

VKViswanathan,ManagingDirectorSee

it

depends

on

product

to

product

it's

growing.

But

Iwould

imagine

it's

in

the

region

of

about

60%,

65%

on

an

average

put

together.

AshishNigamOkay.Andwewanttoincreasethistoaparticularlevelthatyouallhavedecided?

VKViswanathan,ManagingDirectorNo.Ourtargetistoprogressivelyincrease.

AshishNigam


14/25

Sure.

VKViswanathan,ManagingDirectorIt'snotjustan increasesayforthesakeofincrease,becausethereshouldbeenoughvolumesfor localization.Youneedtocreate

capacitiesattheTierII,TierIIIlevels,youneedtoinvestindyesandtooling,etcetera.Thenyouneedtohaveenoughvolumesfor

localizations.

Fairenoughsir.

VKViswanathan,ManagingDirectorSoweareconstantlyevaluatingwhichproductsareidealforlocalization,whichproductscontinuetomakesenseforimporting.

Sowedothatandwecontinuetoprogressonourlocalizationstrategy.

AshishNigamFairenoughsir.Siractuallyalsowanttounderstandhowyourproductmixwillmovegoingintothenextemissionnormchangein

April2014,

because

you

had

mentioned

that

with

CVs

going

into

BSIV,

they

will

be

eligible

for

CRDi.

So

how

would

that

change

things

forBosch?

VKViswanathan,ManagingDirectorSeeCRDiwouldperhapscomein,Iwouldn'tsayCRDi.TheemissionEuroBharatStage4isexpectedin2015,notin2014.Todayin

2012about17or18citieshavegoneintoEuro3.

AshishNigamOkay.

VKViswanathan,ManagingDirectorTheothercities,etceterawe'llhavetogofromEuro2toEuro3andthatisexpecteduntil2014.

AshishNigamOkay.

VKViswanathan,ManagingDirectorSowearetalkingabout2015,whensomecitieslikefiveorsixorsevencitieswillgointoEuro4andthatisalongwayfromatleast

threeyearsfromnow.

AshishNigamFairenoughsir.Sonothinginthetermatleast?

VKViswanathan,ManagingDirectorNonothing.

But generallywhat does this do to your productmix every emission norm change.Does it reallymove the productmixmore

towards,ImeanwithletsayBSIVdocomeineventuallyevenletsay2015.Doyouthinkthiswillbeabiggamechangerforyouallin

termsof

just

being

eligible

for

CRDi?


15/25

VKViswanathan,ManagingDirectorYeah.Butthishasearlybeenreflectedandthisiswhywearealsoinvestingincapacityaswellasintechnology.

AshishNigamSure,surenojustokay.Iwantedtogetasense,likeisthereanyproportionofCVsthattCRDiatthemoment?

VKViswanathan,ManagingDirectorThereareofcourse.

AshishNigamAndImeanrationallythatcanincreasesubstantiallyafterthenextemissionnormchange?

VKViswanathan,ManagingDirectorItcanbutthatisslightlyinthenearterm.

AshishNigamFairenoughsir.That'sallfrommyside.Thankyou.


OperatorThankyouverymuch.OurnextquestionisfromSrinivasRaoofDeutscheBank.Pleasegoahead.

SrinivasRaoYeah.Thankyousir.Justwantedtocheckwiththat,youmentionedinyourcommentaryaboutthedieselsectornotdoingwell.I

meanonayearonyearbasis Imean is itprimarilybecause theMHCwhichhasdoneextremelypoorly,because inthePVside

dieselobviouslyhasdonemuchbetter.Sojusttryingtounderstandthedynamicsforyou?

VKViswanathan,ManagingDirectorSrinivasRaoYeah.

VKViswanathan,ManagingDirectorFirstandforemostisthecommercialvehicles,whichismediumandheavycommercialvehicles.

SrinivasRaoFairenoughsir.

VKViswanathan,ManagingDirector


16/25

Whichisbasically7tonsandabove.

SrinivasRaoSure.

VKViswanathan,ManagingDirectorAndthissegmenthashadasharpdecline.

SrinivasRaoAbsolutely.

VKViswanathan,ManagingDirectorAmountingtoalmost13%,14%inthethirdquarter.

SrinivasRaoYeah.

VKViswanathan,ManagingDirectorThentheotherdieselimportantsegmentisthelightcommercialvehiclesegment.Normallythissegmentistheverypowerfulengine

ofgrowthinthelasteightorninequarters.

SrinivasRaoVKViswanathan,ManagingDirectorButthissegmentalsohasnotreallygrownsignificantlyinthirdquarter.Butthatisnotaverysegmentforus,althoughwearealsoa

bigplayerinthis,thevaluerealization isnotthatverysignificant.Thenwehavetrackedasegmentwhichisanimportantsegment

thathasalsodeclinedbyaboutfivepercentagepoints,sixpercentagepointssofarthisyear.

SrinivasRaoSure.

VKViswanathan,ManagingDirectorWhat

Iam

saying

is

that

when

we

have

got

passenger

cars

and

utility

vehicles

in

diesel.

SrinivasRaoRight.

VKViswanathan,ManagingDirectorHereofcoursebothpassengercarsandutilityvehiclesaregrowingindiesel,dependingupontheavailabilityofthedieselcars.

SrinivasRaoYeah.


17/25

VKViswanathan,ManagingDirectorTherehavebeensomehiccupsasyouknowinthedieselcaravailability.

SrinivasRaoYes,sir.

VKViswanathan,ManagingDirectorBut SUVs areby and large diesel and that sectorhas performed verywell andwe have a very important stake in that SUV

segment.

SrinivasRaoVKViswanathan,ManagingDirectorAllsectorsareimportant,butintermsofsizeIthinkMHCVaswellastractorsareveryimportant.

SrinivasRaoFairenough.Becausethat'swhyIjustwantedtocheckonthedisconnectthere.Thisishelpful,sir.Thankyousomuch.

VKViswanathan,ManagingDirectorThankyouverymuch,Srinivas.

OperatorThankyou.OurnextquestionisfromPramodDangiofJeetayInvestments.Pleasegoahead.

PramodDangiYeah,thankyouforthetakingmyquestion.Myquestion,afollowuponthelastanswerwhichyougave,thatyousaidthevehicles

didverywell,butweallknowthat in last fiveyears,wehaveseenthe incrementaldieselizationofthepassengervehicles.So,sir

whatwewant to understand like howmuch of the growth in last four five years of the Bosch actually came because of the

dieselizationinthepassengervehiclesexcludingutility?

VKViswanathan,ManagingDirectorThat's verya toughquestion forme toanswer.But Icanveryclearly say that if I takea longtermaverageofourwholediesel

businessfromsay2007to2012thirdquarter.

PramodDangiRight.

VKViswanathan,ManagingDirectorOnanaverage,wewouldhavegrownby14%,15%inthelastfourfiveyears.

PramodDangiRight.


18/25

VKViswanathan,ManagingDirectorPramodDangiRight.

VKViswanathan,ManagingDirectorYeah?Andthereforemyownexpectation isthat increaseddieselization inpassengercarswillcontinuetohelpus inourgrowth

termsofcoursewearealsoasignificantlyimportantplayerintheSUVsegmentandthatisalsohelpingus.

PramodDangiRight.ButwhatwillbeweknowthatintheSCVtoMCVsegment,theBoschhasalmost80%,morethan80%marketshare,what

willbethemarketshareinthepassengervehiclessegmentinthedieselcarpassengervehicles?

VKViswanathan,ManagingDirectorSee,wedon'treallydisclosemarketshares.

PramodDangiOkay,okay,okay.Andgoingforwardlikewealreadyfromzeropercentdieselizationtothealmostthe35%to40%dieselization

inthepassengervehicles.

VKViswanathan,ManagingDirectordieselization1998,wehadincreased20%,22%dieselization.OfcoursethenthatwasTataIndica,TataIndigoetcetera.

PramodDangiOkay.

VKViswanathan,ManagingDirectorThenofcoursewehadbigSUV'sbecominganimportantplayer,thenMarutiwentittodieselsegment,thenothersalsowentitto

dieselsegment.Todayit'smorethan50%.

PramodDangiRight,right.Sothequestionmainlyisliketotargettounderstandlikesincewealreadyreachedmorethan50%dieselization,

soevenifitgoesto50%to60%or70%,howmuchincrementalgrowthwecanexpectfromthedieselizationperse?

VKViswanathan,ManagingDirectorSee,atleastwhateveristhegrowthwecanexpect.Wewillnotlikedoandwewillnot wewillmakesurethatourmarketshares

don't come down. So if the dieselization goes up from 50% to 60% for example. I'm sure Boschwill also grow in that same

proportionifnotmore.

PramodDangiOkay.Yeah,thankyou.



19/25

OperatorThankyouverymuch.OurnextquestionisfromAdityaMakhariaofJPMorgan.Pleasegoahead.

AdityaMakhariaHello?

VKViswanathan,ManagingDirectorHi,Aditya.

AdityaMakhariaYeah,hisir.IwasjustcheckingwiththelikesofMarutimentioningthattheirenginecapacitywillgoupto700,000unitsoverthe

next by2014,currentlythereareabout300k,isitImean,atsomepointwillyourpassengercarrevenuesovertakethatofthe

commercialvehicles?

VKViswanathan,ManagingDirectorPossible,butitwilltakeawhile.Becausetherevenuerealizationisquitedifferent.Andalsointermsofcommercialvehiclesboth

medium,heavypluslightcommercialvehiclesputtogether,thevolumeiscloseto800,000,900,000.

Todayinpassengercarterms,1.2million,1.3million,1.4millionisthetotalpassengercarsdiesel.Soasofnowitdoesn'tseem

likely,butmaybeinthefour,fiveyears'timeitcouldhappen.

AdityaMakhariaOkay.Andjustsecondquestionisyoumentionedthatyoubelievetheworstisover.Sowhatkindofsignsareyoupickingupon

theground?

Seetherearesome impulses.The impulsesare forexampleOctober.Ofcourse lastyearOctoberwasalsopoor, lowerbase,but

eventhen,weseeofftakeimprovingfromJuly,AugusttoSeptember.SeptemberwasabettermonthcomparedtoJulyandAugust,

October isabettermonthcomparedtoSeptember,November,Decemberalsoarefestivalmonthsandmanyschemesandmany

newlaunchesbyOEMsareplanned.

SoIbelievethat andalsowithsomeeasingofliquidityintheformoflowerCRRetceterashouldaidinnotonlymakingthemoney

availableatlowerratesbutalsoeasieravailability.Soclearly,weareseeingsomeoftheseimpulses,someofthesesignals.Theyare

notverystrongatthispointintime,butneverthelessonecanseethem.

AdityaMakhariaOkay.

Thank

you

sir.


OperatorThankyouverymuch.OurnextquestionisfromSrinathKrishnanofSundaramMutualFund.Pleasegoahead.

SrinathKrishnanSirthanksalotfortakingmyquestion.


20/25

VKViswanathan,ManagingDirectorYeah.

SrinathKrishnanYouattributedyourincreaseinRMtosalestoprimarilyForEximpact.IfacrossyourRMtosalesandthecurrency,thereseems

tobeclosecorrelationyes,butinthefourthquarter,thereseemstobeadivergence.Isthereanycompensationthathappens

duringthefourthquartergenerally?

VKViswanathan,ManagingDirectorCompensationisacontinuousexercisewhereveritispossible,itdoesn'tparticularlycomeinfourthquarter.Althoughwehaveour

fourthquarterasafinalquarterforthecalendaryear,ourcustomershaveJanuarytoMarchasthefinalquarterforthefiscalyear.

SrinathKrishnanOkay.

Sonothinginparticularthatweseeinfourthquarterwhichwedon'tseeitintheotherthreequarters.

SrinathKrishnanOkaysir. Inthisregardsir,wedounderstandthatECU issourcedfromtheparentcompanyestablished in India,theelectronic

modulewhichwouldhavea lotof importedsemiconductorsetcetera.Sohow isthepricingarrangementbetweenBoschIndia

andthe100%,isthereakindofacostpassthroughthatwehaveintermsofthecontractsforbuyingtheelectronicmodule?

VKViswanathan,ManagingDirectorSeewebyand largefollowtheprincipleofarm's length,what isthecomparablemarketpricesetcetera.Andwemakesurethat

thereisanarm'slengthpricingandthatthecontractsbetweenthe100%subsidiaryandyourcompanyareonafairandaequitable

basisforboththecompanies.

SrinathKrishnanYeah.That'sfinesir.Wedefinitelyunderstandthat.ButistheretheForExportionofthecosting,isthereapassthroughthat

isthereinthecontractorit'safixedpricecontract?

VKViswanathan,ManagingDirectorIt'snotafixedpricecontract.Basicallyit'sacostbasekindofacontractandvolumesareindicatedatthebeginningoftheyear.So

annuallythe

contracts

are

fixed

and

prices

are

monitored

on

that

basis.

SrinathKrishnanOkay.Sirintermsofthetwowheelersegmentwhichisrelativelysmallatthispointintimethoughtherearelotofopportunitiesand

fuelinjectionperseintwowheelersgoingforwardasemissionnormstighten,sowhatisourstatedviewongettingintothespace

andwhat'sthekindofpreparatoryworkthatwehavedoneandwhendoyouseethefirstfuelinjectionmodulethat'sbeensupplied

fromBoschIndiaintothetwowheelersspace?

VKViswanathan,ManagingDirectorNoweare intotwowheelersalready inawayformany,manyyears,sparkplughasbeenthebrandcarrieraswellasthemajor

suppliertoalltheOEMsaswellastwowheelersareconcerned.Ofcoursewearenotinthecarburetorbusinessnowasandwhen

thefuelinjectionsystemscomein,ourenginemanagementsystemscomein,wewillbeofcourseprepared.


21/25

WehaveestablishedaconceptcalledBikeHouse,whichdoesthedevelopmentalworkinBangalore.Andwearealreadysupplying

EngineManagementSystemsorEMSaswecallittooneofthemajortwowheelermanufacturers.

SrinathKrishnanThat'songlobalbasis?

It'snot Iwon'tsayglobalbasis,internationalbasisaswellasdomesticbasis.

SrinathKrishnanOkay,fine.Thankyouverymuchsir.


OperatorThankyouverymuch.OurnextquestionisfromKrishnanSambamoorthyofFortuneEquity.Pleasegoahead.

KrishnanSambamoorthyYeahhi.Youhadmentionedthatyouarecloselymonitoringtheworkingcapitalfront.What'sthesituationondebtorsandinventory

andhavetherebeendelayinpaymentsbytheOEMsandhowdoyouseethatgoingforward?

VKViswanathan,ManagingDirectorAsfarasinventoriesareconcerned,Ithinkourteamhasdoneaveryeffectivejob,becausewehadhighlevelofinventoriesin

themonths

of

June

and

July.

KrishnanSambamoorthyYeah.

VKViswanathan,ManagingDirectorBecausethemarketssuddenlyturneddownwardsandwehadtothereforequicklyadjustourproduction.Andthatiswhywehad

toresorttosuspensionofmanufacturinginquiteafewofourfactories.

KrishnanSambamoorthyOkay.

VKViswanathan,ManagingDirectorThathascomedowntoalmostnonactivelevelsnow.

KrishnanSambamoorthyVKViswanathan,ManagingDirectorAs far as receivables are concerned, no particular pressure baring one or two here or there,wherewe see some amount of

tightening

of

credit

is

in

the

field

in

the

retail

markets

like

service

market

or

in

the

spares

market.


22/25

KrishnanSambamoorthyOkay.

VKViswanathan,ManagingDirectorButthis isunderstandable,becausewhenthemoneymarketsaretightand interestratesarehigh,youseesomekindofdelay in

payments.Thatdoesn't really lead tobaddebtper se,but thataffects the rotationofbusinessand thereforeourbillingalso is

affected.That'swhyoneofthereasonswhyoursalesrategrowthisslightlymutedisbecauseofthis.

KrishnanSambamoorthyOkay.Thanksalot.


OperatorThankyouverymuch. [Operator Instructions].Ournextquestion is fromAmynPiraniofDeutscheBank.Pleasegoahead.Mr.

Piraniyourlinehasbeenunmuted,pleasegoahead.

AmynPiraniYeah.Hisir.Thanksfortakingmyquestion.WhatIwantedtoknowisthatwithinthetractors,wouldyoubeabletogiveasenseas

toareyougettingmoreordersforhigherhorsepowertractors,isthereachangeinthemarketmixassuchwhichalso...?

VKViswanathan,ManagingDirectorYeah.Weseeincreaseddemandforhigherpoweredtractors,earlieritusedto25,30,35kindofhorsepower.

AmynPiraniOkay.

VKViswanathan,ManagingDirectorAmynPiraniOkay.

VKViswanathan,ManagingDirector50horsepower typeetcetera.So theyarenotvery significantlydifferent, Imean yes therearecoupleofpercentagepoint

increasesforhigherversuslower.

AmynPiraniOkay.

VKViswanathan,ManagingDirectorButnodramatickindofturnaroundinthesituation.


23/25

AmynPiraniOkay.Andjusttounderstandsirwouldthatalsomeanthatmoreandmoretractorsarebeingusedfornonagripurposesoristhat

conclusionnotreally...?

VKViswanathan,ManagingDirectorIthinktheratioisstillthesame.

AmynPiraniOkay.

VKViswanathan,ManagingDirectorIthink55:45or60:40iscontinuingtobethetrend.

AmynPirani60foragriand40fornonagri?

VKViswanathan,ManagingDirectorThat'sright.

Okaysir.Thanksalotsir.

VKViswanathan,ManagingDirectorThank

you.

OperatorThankyouverymuch.OurnextquestionisfromRikenGopaniofInfinaFinance.Pleasegoahead.

AnalystHello?

VKViswanathan,ManagingDirectorHello.

AnalystSirwantedtojustunderstandtheoutlookthatyouhavegiventhatyoumighthaveseenthebottomrightnow.AndsoistheOEM

productionalsoseenrampingupespeciallyontheCVsideorthatisnotsomethingthatyouhaveseenrightnow?

VKViswanathan,ManagingDirectorInsomesectors,includingOEsegmentforcommercialvehicle,weareseeing.Butthepointisfromwhichleveldoyoulookatit.IfI

look

at

it

from

the

low

levels

of

July,

August,

clearly

there

are

some

signs

of

improvement.


24/25

AnalystOkay,okay.Becauseasyoumentionedaboutinterestrates,sothatactuallyinthelendingmarket,theyhavealreadybeencutby

mostof thebanksandjustquiteabitof reduction thathashappenedon the interest rate side.Butat least theOctoberdata

doesn'tsuggestanypickupatall.Soisthereanytrendthatyouhaveseendifferently,whyyouthinkthebottomisinplaceImean

isthereanyrisktothisthatyouthinkrightnowordoyouthinkmoreorlessitshouldstabilizehere?

VKViswanathan,ManagingDirectorSeeIamnotsayingthatweareseeingaverydramaticincreaseinthedemandsituation.Butclearlygoingbytheordersthatweare

getting and goingby the sentiments that areprevailing and the fact that aswe alluded to that the interest rateshave already

declinedbyabout50to75basispointsattheretaillevelgiveustheoptimismthatmarketwillseesomeimprovements.

Okay,okay.

VKViswanathan,ManagingDirectorAlso please understand that last four quarters I thinkwe have had some,we have not really had a significant growth in the

commercialvehiclesegment.Sonormallyitcatchesup,thepentupdemandcomesupandthereweseesomeimprovements.

AnalystAllright.Andsironethingonthemarginside,asyoumentionedthatthegrossmarginpressureisclearlyonaccountofthecurrency

move.Sowouldwebehavinganypricechangeinordertotakecareofthisinthenextquarterorso?

VKViswanathan,ManagingDirectorComeagainIdidn'tunderstandyourquestion.

AnalystAsyouhadmentioned inyour initialremarksthatthegrossmarginerosion ismainlyonaccountofthecurrencymovement

againstus.Soisthereanypricecorrectionthatwewouldbetakinginordertotakecareofthisorwhatwouldbeourstrategy

toimprovethegrossmargin?

VKViswanathan,ManagingDirectorSeeIthinkweshouldalsolookatitfromtheabsoluteperspective.Whenwearecomparingagainstlastquarter,therehasbeenan

increaseinthematerialcosts.Butifyouseethesequentialquarters,theincreasehasnotbeenverysignificant.

AnalystOkay.

VKViswanathan,ManagingDirectorAndtherefore,Iwouldimaginethatitshouldsettledownatthesepointsintimeandwhereveropportunitiesarethere,wewilltry

andgetpriceincreases.

AnalystOkay.Butasofnow,wehaven'ttakenanypriceincrease?

VKViswanathan,ManagingDirectorAnalyst


25/25

Okay,okay.Thanksalot.


OperatorThankyouverymuch.Ladiesandgentlemen,duetotimeconstraints,thatwasthelastquestion.Iwouldnowliketohandthefloor

backtoMr.AniketMhatreforclosingcomments.

AniketMhatreThankyou Inba.OnbehalfofStandardCharteredSecurities, Iwould like tothank theseniormanagement teamofBosch for

takingtimeoutforthecallandpatientlyansweringallthequestions.Thankyouverymuchgentlemen.


AniketMhatreAndthankyoutoalltheparticipants'forbeingthereonthecall.Thanks.

OperatorThank you very much sir. Ladies and gentlemen, on behalf of Standard Chartered Securities Limited, that concludes this

conferencecall.Thankyouforjoiningusandyoumaynowdisconnectyourlines.

bosch earnings call nov 2012

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