Eicher Motors : Transcript of the proceedings of the 40th Annual General Meeting

Transcript of the proceedings of 40th Annual General Meeting of Eicher Motors Limited held through Video Conferencing on Wednesday, August 24, 2022 at 1.00 p.m. IST

Swati (Moderator): A very good afternoon to everyone. I welcome the shareholders and all the directors and officers of the company to the 40th Annual General Meeting of Eicher Motors Limited. Mr. S. Sandilya, Chairman of the Board will chair the meeting. Mr. Atul Sharma, Company Secretary shall assist the Chairman in proceedings of this meeting from a secretarial perspective. I now hand over the mic to Atul please.

Atul Sharma (Company Secretary): Thank you Swati, welcome everyone to the 40th Annual General Meeting of Eicher Motors Limited. We have 64 members who are attending this meeting through video conferencing [100 members, in total, attended the meeting], so we have the requisite quorum. All the Directors are present for this meeting except Mr. Siddhartha Lal, who should be joining us shortly.

S. Sandilya (Chairman): Mr. Siddhartha Lal has joined.

Atul Sharma: Mr. Siddhartha Lal has joined, so we have all the Directors present for the meeting. We also have Mr. Virinchi Nandula from S.R. Batliboi & Co., Auditors of the Company, Mr. Amit Gupta from AGSB & Associates, Secretarial Auditors and Mr. Vijay Gupta, who is the scrutiniser for this meeting. Now, I would request Mr. S. Sandilya, Chairman to proceed with the formal agenda of the meeting.

S. Sandilya: Good afternoon, everyone. I welcome the members to the 40th Annual General Meeting of the Eicher Motors Limited. This AGM is being held through video conferencing in compliance with the circulars issued by the Ministry of Corporate Affairs and SEBI in this regard. I confirm that quorum for the meeting is present as confirmed by the Company Secretary and I call the meeting to order. All directors of the Company are present. Now introducing the Directors who are present, Mr. Siddhartha Lal, Managing Director, may acknowledge.

Siddhartha Lal (Managing Director): Good afternoon, this is Siddhartha Lal here.

S. Sandilya: Mr. B. Govindarajan, Whole Time Director and CEO of Royal Enfield.

B. Govindarajan (Whole Time Director and CEO of Royal Enfield): Hello good afternoon everyone I am Govindarajan.

S. Sandilya: Mr. Vinod Aggarwal, Non-Executive Director.

Vinod Aggarwal (Non-Executive Director): Good afternoon, Vinod Aggarwal, I am in Gurgaon office.

S. Sandilya: Ms. Manvi Sinha, Independent Director.

Manvi Sinha (Independent Director): Good afternoon.

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S. Sandilya: Mr. Inder Mohan Singh, Independent Director.

Inder Mohan Singh (Independent Director): Good afternoon, everyone.

S. Sandilya: Mr. Kaleeswaran Arunachalam, Chief Financial Officer.

Kaleeswaran Arunachalam (Chief Financial Officer): Hello Good afternoon everyone.

S. Sandilya: I will now talk about the performance of the company for the year 2021-22 and briefly cover the financial and business performance, new product introduction and also geographical expansion among other highlights.

Coming to the overall business performance, the two-wheeler industry in India went through another challenging year as it was impacted by the uncertainties and restrictions on account of COVID in Q1, followed by severe supply chain constraints. Although the demand started showing signs of recovery in the second half of the financial year 2020-21, the second wave of COVID in the first quarter of the current financial year i.e., 2021-22 resulted in subdued consumer sentiments. This was followed by a global shortage of semiconductors from the second quarter leading to a severe supply shortage for motorcycles and a muted festive season. A sharp surge in the prices of key commodities such as Precious metals, Aluminium, Steel, Crude oil, Copper etc. led to a significant increase in the overall cost of ownership of motorcycles across models. As a result of the above factors, the motorcycle industry sales volumes saw a decline of approximately 10% in the financial year 2021-22 as compared to the previous financial year.

Notwithstanding the prolonged supply side constraints, your Company actively pursued development of alternate vendors to steadily improve production. During the year, your Company transitioned its most loved motorcycle Classic to the All-NewJ-Series platform and launched a new adventure crossover Scram 411 in domestic markets. Both the motorcycles received excellent response from the customers.

I will commence with the performance of Eicher Motors Limited at a consolidated level. On a consolidated basis, Eicher Motors recorded a total revenue from operations of Rs. 10,297.8 crores, an increase of 18% over the previous year.

Consolidated Earnings before interest, depreciation and taxes (EBITDA) was Rs. 2,172.3 crores, an increase of 22% over the previous year.

EBITDA percentage increased to 21.1% in the current year, from 20.4% in the previous year.

Eicher Motors' consolidated net revenue and EBITDA do not include the financials of its joint ventures - VE Commercial Vehicles and Eicher Polaris Private Limited. The profit/loss of the joint ventures are accounted under the equity method as per the relevant accounting standard and are included in EML's consolidated total comprehensive income.

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Eicher Motors' share of profit from the joint venture - VE Commercial Vehicles was Rs. 60.2 crores, with a significant improvement of 94%, as compared to the previous year.

Total Comprehensive income, excluding share of loss from the discontinued operations of Eicher Polaris Pvt Ltd, was Rs.1,657.4 crores, which is 20% higher compared with the previous year.

The Royal Enfield sales volume: Company's total sales volume was 5,95,474 motorcycles in 2021-22, a decline of 2% from 6,09,403 motorcycles in 2020-21. Sales performance was impacted by COVID-19 led demand and supply disruptions. The production operations gradually returned to pre-COVID levels as supply chain constraints eased over a period. In India, your Company's sales volume was 5,21,236 motorcycles in 2021-22, a decrease of 9% from 5,73,728 motorcycles in 2020-21. India continued to be the largest market for your Company. The share of India in your Company's total sales is 87%.

In International markets, your Company recorded a good performance despite the limitations faced at the beginning of the year. The total export volume was at 74,238 motorcycles in 2021-22, an increase of 108% from 35,675 motorcycles in 2020-21. Europe region had a significant growth of 193% during the financial year 2021-22. North America and Latin America also witnessed a growth of 120% in the sales volume for the year. Your Company's focus on growing international business has resulted in an increase in the share of export volume to 12.5% in 2021-22 from 5.9% in 2020-21.

Your Company has reported a sharp 45% year on year growth from non-motorcycle businesses such as spare parts, accessories, apparels and services. The non-motorcycles revenue stood at Rs. 1,587 crores for financial year 2021-22 and the business accounted for 15% of overall revenue.

With a focus on delivering best-in-class service experience and bolstering its digital capabilities, Royal Enfield took multiple initiatives during the year. Fully implemented the auto replenishment model for all channel partners, thereby improving the availability of parts. Reducing turnaround time for roadside assistance. Service Care 24: Designed to insulate customers against repairs after the expiry of the manufacturer's warranty.

A lot of awards and accolades have been won by the Company. During the year your Company was recognised with many awards and accolades. Major awards received were "Car and Bike Modern Classic Motorcycle of the Year"; "Top Gear Motorcycle of the year 2022 - for the All New Classic 350"; "2022 Autocar Viewer's Choice Bike of the year"; "Two wheeler of the year BIKE INDIA 2022 Award"

The All New Classic 350 was launched in September 2021, with a resounding response from consumers. The New Classic 350 also created a new benchmark for digital launches, including a Guinness World Record, as more than 19,500 concurrent viewers joined the live webcast of the launch on the launch day. Your Company has shipped more than 200,000 units of The New Classic since its launch in the year, despite supply chain constraints.

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Your Company debuted the 120th Year Anniversary Edition of its flagship 650 Twins motorcycles, the Interceptor 650 and the Continental GT 650 at the International Motorcycle and Accessories Exhibition 2021. The two premium, special edition motorcycles with a limited production run of only 480 units globally, were distributed as 120 units each for India, Europe, Americas and South-East Asia.

Your Company unveiled the Scram 411 - the brand's first adventure (ADV) crossover and a new sub-category that is optimised for agility as well as challenging terrain. Available in a vibrant array of colourways across 3 variants, the motorcycle has been received very well by consumers and experts in India.

Now talking about brand, your company's brand being the oldest motorcycle brand in continuous production - continues to nurture the spirit of pure motorcycling through a host of unique motorcycling experiences and programmes.

Your Company marked its maiden foray into motorsports this year, with the first edition of the Continental GT Cup 2021, Launched in partnership with JK Motorsports.

Your company partnered with the Border Security Force for a one of its kind, all women - Seema Bhawani Shaurya Expedition motorcycle ride. Conceptualised to propagate the message of women empowerment, and celebrate women's achievements, the Seema Bhawani Shaurya Expedition 2022 saw 36 women riders traverse across the country.

Two Royal Enfield Himalayans accomplish the unthinkable feat of traversing the treacherous journey to the South Pole. The Company's two employees successfully completed this expedition in 28 days, in December 2021.

A Quest for the Pole was conceptualised as an attempt to test the resilience and endurance of man and machine. The success of this monumental effort stands testimony to Royal Enfield's commitment to Pure Motorcycling and the resilience of the human spirit.

With a focus on expanding global presence, your Company has started setting up Completely Knocked Down (CKD) facilities in key export markets. These facilities include an assembly line for production of a motorcycle kit. During the year, your Company has started two new CKD facilities, one in Colombia and the other in Thailand - in addition to an existing facility in Argentina, with robust supporting facilities in India.

Your Company has also state-of-the-art production facilities in Chennai, India (at Vallam Vadagal, Oragadam and Thiruvottiyur) the three plants as well as technical centres in the UK and India housing the best teams from across the world. Together they conceptualise and manufacture motorcycles for India and international markets.

Now moving to global operations. In 2021-22, your Company has made remarkable progress in its long-term ambition of becoming a Premium Global Consumer Brand from India offering access to an unhindered, authentic, pure motorcycling experience. During the current year, your Company has made significant strides towards unlocking newer opportunities in international markets led by expansion of our international footprint and

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commencement of operations in key markets such as Singapore and Netherlands.

During the year, your company has registered sales of 74,238 units in the International Markets, which marks a stellar growth of over 108% year-over-year.

In the Europe markets, the largest market region for Royal Enfield this year, accounts for 41% of the total international volumes and reported a growth of over 193% year-on-year for the financial year 2021-22. Your company gained around 7% market share in Europe's middleweight segment in 2021-22.

Americas, including North and South America is amongst the fastest growing overseas markets for Royal Enfield. Sales of Royal Enfield motorcycles have clocked a growth of 120% year-on-year, and accounted for around 35% of the international business volumes. Royal Enfield's market share in the middleweight segment in the Americas region climbed up-to 5% in the year 2021.

Your Company's presence in the Asia Pacific (APAC) markets has increased significantly over the last 4 years and the Company has started operations in Singapore during the year. The region accounts for 14% of overseas volumes and holds immense potential for middleweight motorcycles and in particular, Royal Enfield.

Within the SAARC nations, your Company has operations in Nepal, Bhutan and Sri Lanka. For the financial year 2021-22, volume contribution from SAARC nations stood at 10%, delivering stable volumes amidst the tough macroeconomic backdrop, COVID related challenges and economic fluctuation

Now let me move to VE Commercial Vehicles, the joint venture company.

The Company has just completed a year that started on a tentative note with a fresh lockdown announced in April and spread of the 2nd wave of COVID. This year again a downside scenario was planned quickly along with detailed action plans. With meticulous planning and good coordination between various teams, several actions as highlighted below were implemented

• The company had taken the initiative to invest in a greenfield industry leading state of the art factory, in Bhopal
• Successful launch and establishment of a New Volvo Trucks range platform.
• First synergies from successful integration of Volvo Buses into VECV
• Major expansion projects undertaken and completed within record time
• Network expansion: Added new customer touch points
• Progress on emerging technologies: Productionised Eicher Skyline and received first large tender for EV Buses

As a result of these initiatives, VECV has been able to gain the confidence of its customers and gain market-share as well. At the same time, steps have been taken to reduce costs and conserve cash, while not compromising on any of the long-term initiatives.

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