Bosch held its conference call on 13 February 2019 to discuss its results and future.

Highlights of the call

During the quarter ended December 2018, the Indian automotive market showed a marginal decline of 0.1% against the quarter ended December 2017.

The highlight of the quarter was the Commercial Vehicles segment, which grew by 12%.

Heavy Commercial Vehicles grew on account of increased infrastructure development, road construction, building of irrigation facilities and affordable housing projects across the country.

Light Commercial Vehicles grew due to increased thrust in agriculture, FMCG as well as e-commerce sectors.

The Tractor segment increased by 19% mainly on account of farm equipments subsidy by government and minimum support price for agricultural crops.

Passenger Cars segment decreased by 9% mainly on account of higher fuel prices, higher interest rate and increase in insurance cost along with NBFC crisis affecting financial lending. This decrease resulted in degrowth of the overall market by 0.1%.

Three-Wheeler segment grew by 8% backed by increased demand from SAARC countries especially from Nepal.

For the period October to December 2018, revenue from operations showed a muted growth of 0.8%. In absolute terms, the revenue from operations for the period stands at Rs 3095.5 crore.

The Mobility Solutions segment declined by 0.6%.

The business beyond Mobility Solutions witnessed an increase of 6.9%.

The domestic sales for this quarter grew by 2.2% wherein the Mobility Solutions declined by 1.1% and business beyond Mobility Solutions increased 22.6%.

Export sales fell 14.4% mainly from business beyond Mobility Solutions segment, partially offset by increased automotive sales of 6.5%.

In Mobility Solutions, Powertrain systems showed a decline of 2.7%, mainly due to the weak automotive market.

Aftermarket witnessed a growth of approximately 6% after recovering from the GST transition issues and increase in demand from SAARC countries.

The business beyond Mobility Solutions show a growth of 6.9% compared to the previous quarter. This is majorly due to security division as well as solar energy division, wherein the growth is in double-digit, which is partially offset by degrowth in the thermal technology division.

Material cost as a percentage of revenue from operations increased from 52.8% in October-December quarter in 2017 to 55.5% in the current quarter of 2018.

This is mainly due to the negative effect of FOREX on material cost and product mix.

The employee cost for the quarter decreased 1.1% is on account of productivity improvement and benefits of continuing or restructuring programs.

For the nine months period ended December 2018, revenue from operations increased by 11.4%.

The Mobility Solutions grew by 10.5%, whereas the business beyond Mobility Solutions increased 20.5%.

For the nine months period ended December 2018, material cost grew from 54.1% to 55.5%, mainly due to the same reasons for the quarter.

Depreciation declined 18.6% in the quarter ended December 2018 as compared to the quarter ended December 2017 due to low additions in R&D assets which attract higher depreciation rate. However for the nine months period ended December 2018, there has been a decrease of 15% on account of lower base for the current year as compared to previous year as well as low additions in R&D assets.

Other expenses for the quarter declined 6.5% mainly driven by certain one-time accrual in the previous year quarter. For the nine months, other expenses increased 3.6%.

Q3 operating profit decreased 0.6% mainly due to negative FOREX variation.

Nine months period ended December 2018, operating profits increased 28.8% driven by higher turnover productivity and cost reduction.

Other income increased from Rs 102.2 crore in the quarter ended December 2017 to Rs 178.6 crore in the current quarter of 2018 on account of higher mark-to-market gains on marketable securities and increase in interest on investments in fixed deposits.

For the nine months, other income increased 19.9% due to MTM gain on marketable securities.

Bosch Limited has always committed to deliver best-in-class automotive solutions.

It is helping customers to meet the challenge of manufacturing vehicles, which are compliant with BS-VI emission standards from April 2020 as per the ruling of the Supreme Court.

Bosch has also recently showcased its business beyond mobility offerings that are fast embracing the digital platforms and IoT services.

Q3 saw particularly the weak market conditions in the overall automotive or mobility sector with low consumer sentiments and tight liquidity.

There has been some amount of inventory pile up at the company's OEMs but also dealers inventory is expected to have gone up.

However, with the pro-people budget expected to spur consumer spending and changes of BS-IV to BS-VI the company's forecast for this year is a mixed bag which is a moderate forecast.

The company was at a nearly a double digit till recently. Q3 saw relatively low growth.

The management expects to go back to double digit in the coming quarters.

In aftermarket, it caters with the wide menu card of products and services including servicing.

Aftermarket pack has grown tremendously, whether it is 4-wheeler, 3-wheeler, 2-wheeler.

It has lot of Bosch car services, it has a lot of Bosch diesel services across the country and it are very strong in different parts of its portfolio.

It has also made its dealer network more transparent and has ensured that the policies for them are simplified. In a very strong way the company is going to put a very strong digital footprint. So, it expects that it will do double-digit based on these conditions.

The management indicated that it has gained substantially new orders.

The company does acquisitions to ensure profitability.

Over the years, it has kept tight control over cost and it has improved on personal cost

On electric vehicle solutions its parent has been spending over the last 10-years €400 million every year. So Bosch worldwide GmbH is deep into electrification. Bosch India's menu card for its parent is all areas of electrification excluding making the battery cells. Bosch India does the battery pack but it does not make the battery cells and this is the policy that Bosch, its parent has taken. It also grew the factory management systems and so on and so forth. So it has a deep knowledge of electric vehicles.

After market segment has been delinking from OEM segment. The company caters to after market with a wide menu card. Aftermarket has grown quite fast. It has also made dealer network more transparent. It is also in the process to put a strong digital footprint. Thus it expects to get back to double digit growth going forward.

The letter of offer for buyback of up to 10,27,100 equity shares of the face value of Rs. 10 each of the company on a proportionate basis by way of a tender offer through the Stock Exchange mechanism for cash at a price of Rs. 21,000 per equity share for an aggregate amount up to Rs. 2,156 crore was sent to the eligible shareholders.

The buyback period opened on February 06, 2019 and shall close on February 20, 2019.