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Bosch Limited (OTC:BSWQY) Q4 2020 Earnings Conference Call May 22, 2020 6:30 AM ET
Company Participants
Soumitra Bhattacharya – MD, Regional President, Bosch Group India & Director
Jan-Oliver Rohrl – CTO
Srini Srinivasan – CFO
Annamalai Jayaraj – Batlivala & Karani Securities India Pvt. Ltd.
Conference Call Participants
Pramod Kumar – Goldman Sachs Group
Prateek Poddar – Nippon Life India Asset Management Limited
Jinesh Gandhi – Motilal Oswal Financial Services
Pramod Amthe – CIMB Research
Sonal Gupta – UBS Investment Bank
Soumitra Bhattacharya
Thank you very much. Very good evening to all colleagues attending the con call and for you taking part. I hope each of you are doing well under these current challenging times. I would like to start with a brief about the macroeconomic factors influencing our business.
As we speak, the global economic environment is extremely challenging, with economic activity coming to a near standstill ever since the breakout of the COVID 2019. With greater depths to which activity has plummeted earlier in the April-June quarter and due to the rising risks of setbacks from further spread of the virus in some regions of the world, economists are developing the scenarios on global GDP forecast.
Overall, global GDP is expected to contract sharply between 5.9% to 8.7% in the calendar year 2020 and to likely recover sharply by 2% to 5.3% in calendar year 2021. In India, the government’s response has been spontaneous and focused on containing the spread of COVID-19 with a nationwide lockdown since midnight of 24 March 2020. Google mobility data, which is a useful proxy for understanding people’s behavior under lockdown, shows that the nationwide lockdown has been followed stringently across the various states of India and, in fact, more diligently relative to most of the other countries. India’s growth rate is likely to come down to 4% for the financial year 2019-2020, with the Jan-March 2020 GDP at 0.5% year-on-year. Full year or fiscal year ’21 GDP is likely to contract sharply to around minus 1% and around 0.5% and thereafter recovering in the fiscal year 2022.
Last week, Prime Minister Modi announced INR20 trillion, or in Indian terms we call it a 20 lakh crore, financial package, which was focused largely on micro, small and medium enterprises, shadow banks, formal sector, workforce, migrant labors, farmers, agri, middle-income households, which have been hit the hardest during the lockdown primarily due to nonavailability of liquidity. We await further measures that the government may announce to stimulate demand.
Until now, there has been no direct stimulus for auto industry. Some examples which the industry had requested were GST rate reduction for certain periods of time from 28% to 18% or even the much awaited scrappage policy. The impact of COVID-19 on globally integrated Indian automotive sector has been swift and significant. Initial disruptions from the Chinese supply parts to the Indian OEMs quickly pivoted into large-scale manufacturing disruption with nationwide lockdown, resulting in loss of turnover during the period of the lost term.
With this background, let us look into the automotive market development in the last quarter, which includes the lockdown period due to COVID-19 pandemic. Overall, automotive market production decreased by 23%. Low production was recorded in March 2020, volumes declining across all segments as OEM-based supply chain issues and lockdown of facilities.
HCV segment declined by nearly 61%. Factors like surplus capacity from transporters and inventory reduction by dealers further aggravated the business. Passenger car segment declined by 18% plus — sorry, declined by 18% as OEMs focused on transitioning their portfolio to BS-VI and impact the supply chain due to global lockdown caused by COVID-19 in the last few days of March 2020, which is also a year-end for many of the OEMs. LCV declined by approximately 40% on continuing slowdown in consumption and weak macroeconomic indicators. Amongst the other market segments, 3-wheeler segment degrew by nearly 25%. The tractor segment declined by 7%.
Amidst of this weak auto market performance, we now look into the performance of our company, Bosch Limited, for the quarter. Total revenue from operations is INR22, 368 million, a reduction of 18% as compared to the corresponding period of the previous year. Mobility business sector declined by 23.7% due to factors mentioned earlier. Business beyond mobility solutions also declined by 18.2%. The domestic sales for this quarter declined by 23.1%.
Material cost as a percentage of revenue from operations has declined to 53.9% during the quarter as compared to 54.6% during the corresponding period of the previous year. The reduction is mainly contributed by cost reduction measures with our suppliers, favorable product mix and optimization of freight rates as also higher service income during the quarter.
Employee cost has declined to INR2,763 million in January-March 2020 from INR3,364 million in the corresponding quarter last year, a decline of 17.9%, mainly contributed by the structural reduction and other short-term measures initiated by the company considering the turbulence in the auto market. This includes manpower restructuring for long-term sustainability as also partial closure of plants, productivity improvement programs, both in direct and indirect areas to retain profitability.
Depreciation charges have marginally gone up by 1.8% during the quarter mainly driven by depreciation on building additions in quarter 3 of 2019 on leased assets with the change in accounting standards for leased assets effective from 1 April 2019.
Other expenses stood at INR4,134 million in January-March 2020 as compared to INR3,835 million in the corresponding period of the previous year, an increase of 7.8%. The company’s transformation projects like zero-based budgeting, ZBB, along with budgetary control measures have started yielding the expected savings. There were also additional costs on incubation projects like electrification, mobility solution, higher R&D costs due to completed BS-VI projects and impacts on forex.
Our operating profit stood at INR2,256 million for January-March 2020 as compared to INR4,065 million in corresponding period of previous year mainly due to loss in contribution on the reduced turnover. The other income, mainly consisting of income from marketable securities and increase — and interest, have decreased by INR222 million mainly due to higher profit on sale of investments in Q4 of 2019 to fund the buyback and also the reduced MTM gain, which is partly offset by the higher interest earnings on fixed deposits.
In continuation of our organization-wide transformation, we continue to implement restructuring projects across the value chain, including impairment of fixed costs. Manpower adjustments will be done in a socially acceptable manner with focused approach on reskilling and redeployment in the new business areas. Towards these various initiatives, an additional restructuring provision of INR2,969 million has been created and shown as an exceptional item for the quarter.
For the quarter January to March 2020, the company posted a profit before tax of INR3,611 million before exceptional items as compared to INR5,660 million in January-March 2019, which is a decline of 36%. Profit before tax after exceptional items stood at INR641 million, which is 2.9% of revenue from operations. Tax expenses for the quarter has a net credit of INR170 million due to consideration of the indexation benefit of the MTM gain relating to long-term investments, which is retrospectively considered for the whole year during this quarter. The profit after tax from continuing operations before exceptional item is at INR811 million or 3.6% of total revenue from operations.
Now I would give you a synopsis of the annual results for the financial year 2019-’20. The company recorded a total revenue from operations of INR98,416 million, which is INR9,842 crores, a decline of 18.6% compared to the last financial year. The mobility business sector declined by 24%. Business beyond mobility declined by 14%.
Material costs as a percentage of total revenue from operations declined from 55.2% in 2018-’19 to 53.9% in ’19-’20 mainly due to continuous cost reduction projects with our suppliers, optimization on freight costs and higher increase in service income. The employee costs also declined by 6.1%. Other expenses also declined by 6.5% with various measures undertaken by the company to retain profitability in long and short term, as elaborated earlier.
The company posted a profit before tax before exceptional items of INR16,364 million in comparison to INR23,341 million in 2018-’19. As a percentage of total revenue from operations, it stood at 16.6% in the current year as compared to 19.3% in the previous year.
The net profit after tax, or PAT, from continuing operations is received is INR5,848 million as against INR15,394 million in 2018-’19, showing a decline of approximately 63%. The decline is mainly attributed to turnover reduction, onetime exceptional item of INR7,168 million towards transformational projects, including asset impairment and exceptional items of INR1,448 million due to concessional rate of tax availed by the company.
The impact of deferred tax assets due to exercising the option of a concessional rate tax of 22% plus applicable surcharge and cess for the domestic companies has been defined as an exceptional tax item.
Further to the approval of the shareholders, the company has transferred, by way of sale, Packaging Technology division to a stand-alone subsidiary of the Bosch Group. The sale is executed effective from 1 October 2019. Accordingly, the results of the Packaging division are shown under discontinuing operations and, hence, does not form part of the company’s performance for the quarter and the year mentioned above.
PAT for the period, including discontinuing operations, stood at INR6,498 million in the financial year 2019-2020. The company has also prepared a consolidated financial statements for the group, which has one subsidiary company, which is MICO Trading Private Limited; and an associate company, which is Newtech Filter India Private Limited; and a joint venture, which is Prebo Automotive Private Limited. The subsidy company has not commenced its operations, hence, there is no material impact on the group’s financial statement.
The COVID-19 situation has severely impacted the Indian economy with a complete stop of almost all economic activity due to lockdowns imposed to flatten the curve. The end of this unprecedented event is uncertain as the various states grappled to contain the situation and balance lives versus likelihoods. As announced earlier, as the Bosch Group in India — and please note, colleagues, this is not just Bosch Limited, Bosch Group in India has 15 legal entities. We have pledged INR50 crores of rupees to aid the nation for combating COVID-19. This amount will be invested in various initiatives such as manufacturing of masks, assistance in refurbishing ventilators. Right now, colleagues, we are refurbishing 125 ventilators in the Bangalore region. Design of breathing devices and other community welfare topics related to combating COVID-19. As a socially responsible and value-driven organization, we are committed to supporting the nation in all possible ways to end the spread of COVID-19.
What is our outlook? The continuing slowdown in the Indian economy has been aggravated by the COVID-19 situation, which has brought the auto sector to a grinding halt in the last quarter. With special economic package of INR20 lakh crores or INR20 trillion, we expect to see some revival in the overall economic scenario, but the impact in the auto sector will be very slow because we have not seen any specific auto industry direct stimulus being given. With the gradual lifting of the lockdown industry, recovery is also expected to be slow. This will be constrained by supply and demand bottlenecks and reduced access to labor corridors due to travel restrictions.
In the long term, COVID-19 situation will also keep — will cause deep-rooted changes in consumer behavior and how businesses are organized. Under these challenging market environment, our short-term focus would be trying and ensuring that we get an optimal result for the year 2021. However, our long-term focus for India remains positive. We remain invested in our tech-agnostic approach, investing and continuing to invest in new age topics like electrification, mobility solutions.
Thank you, and I await your questions.
Question-and-Answer Session
Operator
[Operator Instructions]. The first question is from the line of Pramod Kumar from Goldman Sachs.
Pramod Kumar
I hope all your employees and stakeholders are doing fine in this period. My first question is more of a clarification on your transformation charges. This is like the fourth straight quarter where you have this item being called out and it’s been rising, right? So I just want to understand, between, say, December quarter and March quarter, there has been almost INR1 billion kind of increase in these charges. If you can just help us understand a breakdown of these expenses as to how much of this will be on account of employee separation and how much of this will be on account of other write-downs or impairments, which could have otherwise come in different sets on the operational line like other expenditure or raw material costs. If you can just help us understand the nature of this expense, that would be very helpful.
Soumitra Bhattacharya
So Pramod, we have already given you a breakup earlier in my speech itself, but I will repeat the same to you. Also, we have, for the full year, already given an exceptional item of INR710 crores. And this, I’d say, nearly — INR717 crores, so let’s say, INR720 million, you can say, round of. And this includes for our 3R program, which we have talked about, restructuring, redeployment and reskilling, and that is INR600 crores plus. And we have also done a certain amount for impairment, and we also have a small amount for the BS-IV to BS-VI transition, where most of the money we get back from our customers, but as a matter of caution, we’ve provided a little bit for the BS-IV inventory. So we have been doing it quarter-to-quarter. And also, as you know, we are very conservative and we keep a clean book — set of books.
Pramod Kumar
And will you — will we expect this to kind of continue even in the next fiscal? Or we have seen the bulk of it already in FY ’20 in terms of the transformation charges?
Soumitra Bhattacharya
Yes. So Pramod, we will take it as and when we need. But there could be some more coming up. I can’t state how much. But we have taken the bulk of it already in the previous year.
Pramod Kumar
Fair enough, sir. And the second question is on the production outlook for the industry. As in — I know you wouldn’t [indiscernible] guess in terms of the percentage decline for individual subsegments, but if you can broadly share given where you sit and your discussion with the OEs as to which the category impacting — or as to which categories do you see coming back slightly or being less impacted in terms of the supply chain dislocation and also the demand that we do. And which are the ones that you can just — say, for the tractor, what lead comes first and what could be a [indiscernible] in terms of the pace of recovery in terms of production and supply chain management, sir?
Soumitra Bhattacharya
So Pramod, this is not only for you but for all the colleagues in the con call. I just share a set of numbers for you to understand the gravity of the situation for the industry. 2018 was the peak in the automotive industry, and I’m going to read out a set of numbers under different segments and then compare it with our forecast for 2020-’21. So 2018, the industry had a peak of 4.07 million cars. And in 2021, we are looking at approximately 2 million. In HCV, approximately 5 lakhs, and we are looking in 2021 approximately of 2 lakhs. LCV, we had about 7 lakh vehicles in ’18, and for 2020-’21, we are looking anywhere between 2.5 lakhs to 3 lakhs. In tractors, the peak in 2018 was 9 lakhs and for fiscal year 2020-’21, it’s anywhere between 4 lakhs 50,000 to 5 lakhs. In 2-wheelers, we had a peak of 25 million in 2018, and 2020-’21 would be anywhere between 12 million and 13 million. In 3-wheelers, we’re looking at — we don’t know what it could be, but we are looking at it.
The point I’m trying to say is we must appreciate and understand that 2018 peak was the highest ever in the shortest period between ’17 and ’18, which was an unusual week. So that we must understand. The second we must understand, we had an economic slowdown in 2019-2020, where I already told you the market degrew by minus 17%. Yes. And on that, you must understand, we’ve had the COVID.
So if it takes between 3 to 4 years for us to get back to the 2018 levels pre-COVID, post-COVID, you can add another 1.5 years. And in that, as stated, that if it takes between four years minimum to six years for the industry to come back, then in Bosch, we want to come back earlier because we have had a good acquisition. BS-VI inputs into the content per vehicle is improving. We are looking at adjacencies, and we want to grow to new business areas.
So it’s going to be, in summary, a very tough call. The numbers I read out for 2021, which is our guesstimates right now, this has a big aspect. The aspect is if the government gives a direct stimulus, these numbers will change dramatically. If the sentiment comes back and as the GDP growth dramatically changes, these numbers will change. So under the current circumstances, without the stimulus, this is where it looks like.
Pramod Kumar
And sorry, I lost the number when you said it was 3-wheeler, I think there was a drop in [indiscernible].
Soumitra Bhattacharya
I said compared to 1.25 million in 2018, which was a peak, we could be looking at a sub-1 million for 2020 — ’21 for 3-wheelers.
Operator
The next question is from the line of [indiscernible].
Unidentified Analyst
I had three questions. One was related to the BS-IV, BS-VI transition. As part of the transition, we, of course, have gained some new market share in terms of the 2-wheeler business — growth in the 2-wheeler business. But also there is potential for losing market share in some of the other applications such as in certain — attract manufacturers due to competition. So could you give us an understanding of pre-BS-IV versus post BS-IV, so there is a BS-VI, how does our market share flatter look like across applications?
Soumitra Bhattacharya
I think we lost you. Can you repeat the question? Just the last part of it, how does what? We lost you there.
Unidentified Analyst
Yes. How does your market share look like across applications in the BS-VI scenario? And how it will change over the next 3 years?
Soumitra Bhattacharya
Largely, we do not give guidance. We do not give market shares. I think you have been in the call. However, I can tell you a couple of facts before handing over to our Chief Technical Officer, who also runs this business, the powertrain business. We made an announcement in the Auto Expo, this was pre-COVID naturally, that we had done a lifetime acquisition for BS-VI, which was INR24,000 crores, which was our biggest acquisition ever that we’ve done in Bosch Limited. So that tells you — gives you a feeling of — I won’t use the word dominant. I will only use that we have very good relationship with our customers where we handle from conception right up to SOP, and our team, headed by Mr. Rohrl, has done a fantastic job on that.
The second I’ve shared in the slides today in the press conference, we had the annual press conference, and I shared the number with you, we’ve done 79 projects so far with our customers. And one of the reasons for our R&D billing for services has been so good is because of all these projects. And thirdly, we believe after a slow start, the BS-VI will come back because our solutions are affordable. The pricing gap is not much between BS-IV, BS-VI. And when the industry recovers, you will see a higher content per vehicle from Bosch and also turnovers becoming better from this. So market share, we’ll not comment. I hand over to — okay, I think he had nothing more to add. Thank you.
Unidentified Analyst
So if I were to understand you correctly, I’m not — I understand you do not want to provide guidance. Obviously, it’s fair. But from a conceptual perspective, let’s say, we had a certain content per vehicle in the BS-IV era, and in the BS-VI era, for like-for-like, our content will be higher. But would we be — would our share of the total spend by the customer be — across all their platforms be the same? Or is that likely to decrease?
Soumitra Bhattacharya
The content per vehicle will improve. I think you’ve got your answer.
Unidentified Analyst
Okay. And the second question was with respect to the export business, given that globally there is pressure in all economies, by and large, does that — so that’s obviously a headwind. But at the same time, there is a whole talk about India becoming an auto platform for auto export. Is that something which the Bosch Group and Bosch Limited is looking at to enhance further? And could you share some thoughts on that?
Soumitra Bhattacharya
So Rajdeep [ph], let me tell you a couple of facts, one in the automotive area and one in the nonautomotive area. Let me start with nonautomotive. Power tools business is a part of Bosch Limited. And in power tools, we opened a factory four years ago at Chennai, in Oragadam, which has been declared for three years the best power tool factory amongst 21 power tools factories across the world. And in the fourth year, it is number two, and the delta between number one and number two is 0.1. Now our content on power tool manufacturing for the biggest product, what we call SB, is going up towards 70% and average going up to 55%. And this was massively lower earlier. So you can just see, when we do well on these, it goes up.
Now the same thing for diesel. In the years and decades, India has regularly done on innovative, affordable products. And we believe strongly, we are giving innovative, affordable solutions now for BS-VI. Now for the third part that I want to share, and this is something for the first time that all of you are hearing. We have formed a wholly owned subsidiary inside Bosch Limited, a 100% manufacturing company. And we are going to be putting a lot of new age and edge technology on manufacturing in this wholly owned subsidiary and use that. And this is 100% owned by RPN.
So in summary, I can tell you our focus on localization will continue. We benchmark ourselves across the Bosch world. I gave you an example on power tools. I gave you an example on diesel. And our approach on this will continue to be so, while also focusing on new age business where sensor, software and services will be included and with focus on digital space, including focusing on battery and focusing on energy and other areas. And as we make progress on official announcements, we’ll keep you updated.
Unidentified Analyst
And final question for me. In terms of our focus on electrification of the automobile, what activities do you think would be within Bosch Limited? And secondly, how long do you think before we see electric MHCV in India or the world?
Soumitra Bhattacharya
So we brought electrification into Bosch Limited with the project [indiscernible] electrification. And we believe in India, that electrification will start the TCO benefit-wise on two wheeler, three wheeler. But we also believe strongly that ICE is still the dominant technology for a long time. We have stated it before. Now post COVID, we can state it with even greater authority. ICE will be 80% plus and maybe much more than 80% even in 2030.
Operator
The next question is from the line of [indiscernible].
Unidentified Analyst
Sir, my first question is on the supply chain resumption. I mean if you can just help us understand how do you see the next few months supply chain ramping up in terms of production capability, if demand is there. Secondly, I mean, do we have still a significant exposure from China? And any plans to localize that in the near future?
Soumitra Bhattacharya
So I’ll answer it in two parts. The second part, I’ll request our CFO, Srini Srinivasan, to say it, but I’ll just give the preamble and hand over to him. Look, in supply chain, I’d already mentioned to you — so not to you perhaps, but in the earlier press conference, 25% of India’s GDP is under the containment zone. So it’s not about Bosch India. The whole industry is going to face challenges in the coming months on supply chain until all containment zones are opened up.
The second part I want to share is along with supply chain management, India will face a major labor issue. And the third and last point, and this is not for Bosch Limited, and I’ll come to Bosch Limited and hand over, automotive industry relies on Tier 1, Tier 2, Tier 3. One of the chain breaks down, then the OEMs can’t deliver the vehicles. Lastly, for Bosch India, we do not employ a single contract label on the shop floor. And right now, our employees, either white collar or blue collar, are not the main concern. Our main concern is safety and health, and we have opened up all our units. And we are starting safely with 15%, 20%, and we’ll ramp up and do what is necessary from the market demand and a customer demand. And we believe that we will manage. Now on the ecosystem, on our sub-suppliers, our CFO will answer on the steps being taken.
Srini Srinivasan
Yes. So while our own plants have opened up and most of them are working on single shift. As you know, there’s also a curfew between 7 p.m. and 7 a.m., so everything can’t work on all the three shifts. And demand is also quite low. So we expect over both May and June to operate that way. But as the OEMs’ plants also ramp up and many of them are slowly starting, we should also be ramping up.
However, it’s also important to understand that our supplier base is distributed all over India, both in the north, west and the south. And many of these suppliers are also in red zones, are in containment zone. And as our MD just said, even if one part is missing, then the whole component cannot be supplied. And we also face challenges because many of our suppliers have migrant labor, who, after the lockdown was lifted, have gone back home. So at the moment, some of them have started on single shift, or if they have to move on to double shift, then they will require labor. And from that point of view, then new labor may have to be recruited.
So we have been working very closely with our supplier base, including standard operating procedures, including assisting them and ramping up and what protocols need to be followed on health and safety, thermal scanning and all of that, guidelines have been issued, handbooks have been issued. So from that point of view, we are having regular weekly calls with our supplier base to really assist them in ramp-up, but there are some challenges remain as respect to, one, on the demand side; and secondly, on the labor side. And we do expect that the ramp-up will be slow. But from our side, put effort around to ensure that we are able to ramp up.
As far as imports from China are concerned, I think China has already ramped up quite well. In between, there were some bottlenecks on logistics, but over a period of time, that is also being sorted out.
Unidentified Analyst
Okay. So I mean if — so what I meant, what if there is demand, let’s say, at around 50% of your levels, China supplies won’t be an issue, right? Is that the correct way to read this?
Srini Srinivasan
Unlikely to be an issue.
Unidentified Analyst
Okay. And second, I wanted to understand maybe from Bosch side and all ecosystem as well. How does this impact on the cost side given running on single shift and there may be some stoppages in between, some — there is some shortage of supply? Also, I mean, does this temporarily tweak your just-in-time — just-in-time system to a hybrid kind of system for timing? How are you looking at those things?
Srini Srinivasan
So operating on a single shift definitely and also with safe distance in the plant and others is not the most optimal productivity point of view from a plant efficiency point of view. So our focus, I mean, during this COVID period and during this time is, of course, on liquidity. And then we look at how do we ramp up so that, yes, once the production cycle starts. And we know eventually, demand will also start coming in. So slowly, we’ll ramp up. So at the moment, yes, in a 1-shift operation with safe distance and looking at all the protocols, our productivity obviously is not at the standard at the most optimum level.
Unidentified Analyst
Okay. And about the [indiscernible], are we keeping some more inventory just to be on the safe side on…
Soumitra Bhattacharya
You have to speak a little louder, Sandeep [ph].
Unidentified Analyst
Yes. So I wanted to understand on the inventory side. I mean are we keeping some more inventory to be on the safe side to ensure continuous supply of components? Is there a tweak to the just-in-time system?
Srini Srinivasan
In fact, I mean, we have adequate inventory because if you look at it, March, the entire lockdown was quite abrupt. And with BS-VI sort of coming in, we had enough components and raw materials in our inventory. Of course, there would be some elements or some parts where stocks and inventories are required. So as I said that we are in very, very close contact with all of our suppliers. Supplier-wise, we know exactly what’s happening, what date, how many people are working on shifts. So it’s all a question of when the ramping up physically can happen due to the reasons I mentioned, and then inventory management can be optimized.
Operator
The next question is from the line of [indiscernible] with Bank India Mutual Fund [ph].
Prateek Poddar
This is Prateek Poddar actually here. Sir, two questions. One is could you just talk about the sustainability of cost, which we are seeing because of the restructuring projects which you have undertaken, how sustainable it is? And going forward, will we see more improvement in this? That is one. And the other was a bookkeeping question in your automotive products segment results. There’s a — it’s a negative INR54 crore. That is because you have included the onetime restructuring cost into it, right?
Soumitra Bhattacharya
So answer to your second question is yes. First question, let me give an answer. This was also stated before. And if you remember, pre-COVID, we already talked with you for nearly a year now. We started our 3-year program more than a year ago before COVID. And it was not knowing that COVID would come. It was a part of our transformation process. And we let — we already told you on the redeployment because we are not just taking people out. Bosch doesn’t sack. If at all, we give EVR, and we have redeployed many of our colleagues. We have reskilled many of our colleagues. And also, we have done restructuring to ensure right spans of control.
Now this will continue, and that’s why we’ve also provided for. Of course, it’s a sustainable system. Of course, you are already seeing the benefits now in these quarters, and this will continue. So — because it’s not a onetime effort. And more importantly, what we are doing, I mentioned to you that we are also trying to improve our focus, and I gave you that example on BS-VI on the growth and content per vehicle through our core areas, in our adjacencies and including in the new business areas.
So it’s not just transformation at cost level. It’s also transformation at the top line level. And this you will see unfolding, and it’s not just at 1 quarter it ends. You will see it unfolding in 2020, ’21. You will see it even more in ’21, ’22. So summary is we want to bounce back in the next 3 years at a rate faster than the industry level.
Prateek Poddar
Sure. Sure. Sir, and just — if I look at other expenses, on a Y-o-Y basis, any bad news or just the normal course of business?
Soumitra Bhattacharya
You look at other expenses in two ways. First of all, on other expenses, we have done tight controls. On the other side, it also includes what you see as a benefit on the top side on R&D, yes? The cost of that are also then are things. So when you take out that on a like-to-like basis, we have improved tremendously in other expenses. Already, you can see the benefits in our personnel costs. You can see in a tight situation, we have actually improved on our material costs. And other expenses, you have to look on like-to-like basis after taking out the very strong R&D turnover that we got through our projects, and the costs are included there. So even that has undergone transformation and will continue. And also, we have an impact due to Ind AS 115. So basically, that will also be under our focus. There’s no one element which is not under our focus.
Operator
The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services.
Jinesh Gandhi
A couple of questions from my side. First is you talked about the wholly owned subsidiary, which you have incorporated under Bosch Limited. So this would be focusing on any particular components? Or this would be based on primarily high-tech manufacturing? And what are the components that they will be manufacturing then?
Soumitra Bhattacharya
So Jinesh, I gave you and your — on all the colleagues on the line a feedback on our announcement so that you know. Obviously, we will fill up wholly owned subsidiary. You will hear more as we go along, and you will hear announcements on this. There are some very clear concrete plans on that.
Jinesh Gandhi
Understood. Understood. And you also touched upon sensor software and services into — so this will also be part of Bosch Limited? Or this is primarily at a group level and Bosch will benefit out of that — will Bosch Limited will benefit out of that?
Soumitra Bhattacharya
Bosch Limited benefits out of — for example, we’ve got a very sophisticated electronics factory. A lot of these electronics are supplied and the ECUs are supplied by that separate legal entity directly to Bosch Limited for our powertrain systems, which we’ve been doing for either diesel or gasoline. So naturally, these are businesses where we coordinate and work with our sister companies. And Bosch Limited benefits, while our sister company also benefits with a very strong footprint on electronics.
Jinesh Gandhi
Sure, sure. And you talked about the 79 projects in the BS-VI. These are for passenger vehicles and commercial vehicles, right?
Soumitra Bhattacharya
Our CTO, Mr. Jan Rohrl, will now take over. He’s running this business also, by the way. He’s the President for that area besides being the CTO and the GMD. So over to him.
Jan-Oliver Rohrl
The good part is the number is, let’s say, understated. It’s an understatement. It’s far more projects that we are running. And it’s passenger cars. It’s 2-wheeler. By the way, we always have to look at the tubular marketing as well. It’s 3 wheelers in that area. It’s the commercial vehicles, whether it’s light-duty, medium-duty or heavy-duty vehicles. So it’s across everything that is running on highway. And the beauty is that it’s not limited, not [indiscernible] what we understand on the electronic fuel injection equipment and after treatment system.
But I think it is noticeable to remark that one of the biggest acquisitions, single acquisitions that we had this year was linked to a hybrid vehicle, which will come to India, also under the header of BS-VI, yes? So as we are not limiting ourselves to one technology or favoring one technology only, we are very open. And that is including, of course, let’s say, alternate sources of powertrain solutions and including, in that case, also hybrids.
This is related to the on-highway part of it. But one must not forget that we have changes as well in the off-highway world. And this is just coming in also end of this year, in October. And the biggest, let’s say, acquisition target for us in this year is specifically in the off-highway world and coming back to, let’s say, also the announcement from the Finance Minister and Prime Minister Modi with regards to the stimulus package, which is focusing quite a bit on agriculture. I think we can, let’s say, support here the agriculture boost and doubling the farmers’ income with technology also related to powertrain solution and help the mechanization of, let’s say, the farmers’ land.
Soumitra Bhattacharya
Jinesh, if I may add a sentence to what our CTO said. Also don’t forget, for you and your colleagues, that, a, ICE will continue to remain dominant where Bosch Limited is very strong. And don’t forget, in diesel, the mood has changed, yes? The government of India has openly said that we understand why particulate matter is high in terms of crop burning, double burning, dust and debris and including in winter [indiscernible].
It’s only 12% to 15% of this whole challenge on particulate matter, which comes from vehicles and old vehicles. And to end, that was the reason why the industry as well as Bosch had suggested as technology-agnostic, let’s implement the scrappage policy to take out 8 lakh vehicles, which are 20 years old.
Jan-Oliver Rohrl
Just one last thought because I think our MD mentioned that with regards to the diesel, which is, of course, a CO2 efficient resource and contributing 15% less than any kind of gasoline vehicle. And having in mind now that emissions are no longer a problem as the public — for the public opinion and also for the policymaker with BS-VI technology coming now into the market with the 1st of April 2020, all OEMs related to passenger cars are relooking at their engine road maps and bringing back also or in, I would say, diesel engines in their thought process and planning process beyond 2020, so also in 2023. So the diesel as any other ICE has a good future ahead.
Soumitra Bhattacharya
And finally, those of you who attended the Auto Expo, very few of us did, but we were there, the pricing that — the initial offerings on diesel, on BS-VI, are variable. The delta cap is quite amazingly low.
Jinesh Gandhi
And do you think that’s because entire cost has not been passed through or just because of your affordable solution?
Soumitra Bhattacharya
Jinesh, you and me as a customer finally go and ask ourselves what is the price of a product. And second, you and me also know it is not sustainable for anyone to do something which makes a product only bleed. So I think in India, we are good, where we partner between us, companies like us and others, with OEMs to finally give a solution to the customer who’s satisfied. I think let’s be thankful for that.
Jinesh Gandhi
Sure. And sir, you touched upon…
Soumitra Bhattacharya
Give a chance to other colleagues, Jinesh.
Operator
The next question is from the line of Pramod Amthe from CIMB.
Pramod Amthe
First is a clarification with regard to your BS-VI acquisition, which is a new number, which we have put across big INR24,000 crores. This is to be executed over what duration of time, if you can give some sense on that?
Jan-Oliver Rohrl
So let’s say, the lead projects, they will come in now as we speak to the market for passenger car, for commercial vehicles. We have a lot of variant projects in that. You can imagine that one is not limiting itself to, let’s say, one driveline, but there are 2 to 3, sometimes 4 drivelines that we have to cater our solutions to. This is for this year. This is for next year as well because as I just mentioned, let’s say, other OEMs are relooking at their engine strategy for 2021 and the years to follow. So also for state when BS-VI stage 2, so the India real driving emissions would be kicking in and acknowledging that, as I stated earlier, diesel is a CO2-efficient fuel resource combined with common way technology and after treatment system like SCR, we can do good here.
So this is for the years to come. It’s not limited here to 2020 only but also 2021, ’22 and then ’23. The acquisitions have just started now for the stage 2 BS-VI RDE, which is kicking in 2023. This is, by the way, something which the automotive industry, of course, is also still needing. We are relying on the firm policy in India and, let’s say, 2 to 3 years now has done a very good job in that and also astonished the automotive world with the precision of introduction dates. And I just can hope and wish all the policymakers that they continue on that path. The next thing to really target would be the CO2 and having clear ideas on what plans, on what the CO2 target would be for the years to come.
Pramod Amthe
And the second question is considering the government plans of making India projects or many of the components, and you guys do a lot of high engineering stuff. And you have been acquiring big customer acquisitions. So in that context, how are you trying to fit in to reduce the import costs in a bigger scale, say, for 3 years down the line for you to do more in India?
Soumitra Bhattacharya
Look, Pramod, our company has been doing Make in India since 1953. And we are very clear that whichever product we can localize at the right time, which we can also offer and which makes commercial sense in terms of volume, we will localize. And we have seen the benefits of localization, but you can’t randomly localize and — for everything. So Make in India will be a continued focus. We did it well before the Make in India strategy in India. We will continue that. And BS-VI is a classic example of global working, local engineers working and arriving at solutions there. We got a pre-COVID acquisition value of INR24,000 crores, and as our CTO mentioned, much more than the declared 79 projects. That tells you a story.
So in summary, we still believe that the midterm, both India and we will bounce back. And in the long run, India is still a sweet spot in the world. In the short run, we are going to go through a very, very tough time, all of us. [Indiscernible] and all of us. We have the last two questions, Jayaraj, from the colleagues?
Annamalai Jayaraj
Yes, sir, we’ll take only one more follow-up.
Operator
The next question is from the line of Sonal Gupta from UBS Securities.
Sonal Gupta
Sir, just a clarification on this new age business subsidiary. This is owned by Bosch Limited, the listco or by the parent, sorry?
Soumitra Bhattacharya
We told you it’s 100% subsidiary of Bosch Limited.
Sonal Gupta
Okay. Okay. And just on the hybrid side, I mean, like you mentioned, you have done some acquisitions on the hybrid side. So could you give us some sense of — I mean what all components are you doing on the hybrid side?
Jan-Oliver Rohrl
Well, we offer ourselves always as a system solution provider. And this is adding, of course, from the top line perspective significantly, and by the way, not only when we start selling components but also when we are, let’s say, writing down the efforts from the engineering side, and that’s why we could contribute also top line-wise on the engineering services already for Bosch Limited. So we are looking for system solutions while we are also limiting ourselves to only offer a whole system. But components, depending on what the customer is asking for, and we are following here the customer requirements.
Operator
Due to time constraint, that was [indiscernible] session. I now hand the conference over to Mr. Annamalai Jayaraj for closing comments.
Annamalai Jayaraj
We thank all the participants for taking time on attending the call. We thank Bosch management for providing us the opportunity to host the call. Everyone, good weekend.
Soumitra Bhattacharya
Mr. Jayaraj, thank you, colleagues, for joining us. Stay safe and stay healthy. Thank you.
