Bajaj Electricals Limited — Q3 FY26

Bajaj Electricals Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=u0KzrdxPqBM Published: 3 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to Bajage Electrical's Q3 FI26 earnings conference call hosted by ICICA 0:09 9 seconds Security. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation 0:17 17 seconds concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please 0:24 24 seconds note that this conference is being recorded. I now hand the conference over to Mr. Manand Goyel from ICIC Securities. Thank you and over to you Mr. Goyel. 0:34 34 seconds Thank you. On behalf of ICIC Securities, we welcome you all to Q3 and 9 month FY26 result conference call of Bajage 0:44 44 seconds Electricals Limited. Today we have with us senior management represented by Mr. 0:49 49 seconds Shakhar Bajaj, chairman, Mr. Sanjay Sachadeva, MD and CEO, Mr. Mr. Vishal Chhatta COO Consumer Products, Mr. 0:58 58 seconds Rajesh Nyak, COO, Lightning Solutions and Mr. Suketu Sha, Finance Controller. 1:04 1 minute, 4 seconds Now I hand over the call to the management for their initial comments on the quarterly performance. Then we will open the floor for Q&A session. Thank you and over to you sir. 1:15 1 minute, 15 seconds Thank you. Uh good evening ladies and gentlemen. I am Shaker Vaj. Thank you for attending the Q1 earnings call. We 1:24 1 minute, 24 seconds hope you've had a opportunity to review our financial results and earnings presentation which are available on the stock 1:32 1 minute, 32 seconds exchanges from an industry and macroeconomic perspective. The period began with an 1:40 1 minute, 40 seconds encouraging festive momentum and reflected the underlying resilience of 1:46 1 minute, 46 seconds the domestic economy supported by steady GD GDP growth and this is reflected in the performance in the lighting solutions vertical. 1:57 1 minute, 57 seconds Lighting solution vertical delivered a strong performance achieving revenue growth of 9% representing a 2:06 2 minutes, 6 seconds best-in-class revenue growth and margins. While these macroeconomic factors were broadly supportive of 2:14 2 minutes, 14 seconds industrial industry demand, the company's performance for consumer products during the period diverged from 2:21 2 minutes, 21 seconds the broader market primarily due to internal actions around inventory normalization 2:29 2 minutes, 29 seconds undertaking to address channel conditions. Consumer product witnessed a decline in revenue of 25% during the 2:38 2 minutes, 38 seconds quarter. primarily attributable to deliberate channel normalizations 2:45 2 minutes, 45 seconds undertaken in response to elevated inventory levels across categories. 2:51 2 minutes, 51 seconds This was a conscious and prudent action aimed to restoring channel health and ensuring alignment with the evolving 3:00 3 minutes demand environment rather than a reflection of any structural weaknesses in the underlying 3:09 3 minutes, 9 seconds business. Importantly, these measures have strengthened the quality of our distribution, improved 3:17 3 minutes, 17 seconds inventory visibility and positioned the company to participate more sustainability 3:25 3 minutes, 25 seconds sustainably in demand recovery as market conditions normalized. 3:31 3 minutes, 31 seconds Before I hand it over to Sanjay Sardave, I would like to highlight [clears throat] that the fundamental strength of our business remains firmly 3:40 3 minutes, 40 seconds intact. Our brands continue to enjoy strong consumer awareness. Our market shares [snorts] rema across key 3:49 3 minutes, 49 seconds categories have remained stable and our distribution reach remains deep. The actions undertaken during the quarter 3:58 3 minutes, 58 seconds were tactical in nature and do not in any way dilute the long-term competitiveness of positioning our 4:07 4 minutes, 7 seconds portfolio. I now hand it over to Sanjay for detailed business and financial highlights. Thank you. 4:17 4 minutes, 17 seconds Thank you chairman sir. Good evening ladies and gentlemen and thank you for joining our investor call. 4:25 4 minutes, 25 seconds As chairman said, we have delivered mixed performance for this quarter. So, let me start with lighting solutions. 4:32 4 minutes, 32 seconds We have [clears throat] remained open and proactive in expanding our presence within the lighting solutions vertical through adjacent and complimentary categories. 4:42 4 minutes, 42 seconds As part of this strategy, we initially entered the switch gear segment in Q2, followed by the announcement of our 4:48 4 minutes, 48 seconds foray into solar solutions in Q3 and more recently the launch of wires this month. These initiatives are 4:57 4 minutes, 57 seconds aligned with our objective of building an integrated portfolio, leverage brand strength, distribution reach, and 5:05 5 minutes, 5 seconds execution capability to drive long-term sustainable growth. 5:11 5 minutes, 11 seconds This vertical has consistently delivered revenue growth and margins against the H1 revenue growth of 6%. We have 5:18 5 minutes, 18 seconds accelerated our growth to 9% this quarter owing to higher mix towards focus categories like ceiling and 5:25 5 minutes, 25 seconds outdoor lights which has also helped achieve a bit of close to 7% 5:32 5 minutes, 32 seconds versus last year of 2%. This is quite encouraging for us and we are confident to continue the momentum in the upcoming quarters. 5:42 5 minutes, 42 seconds Now let me talk about consumer products. 5:44 5 minutes, 44 seconds We have embarked on a journey of cultural and structural change in the way we engage with the channel to move to a more balanced approach between 5:53 5 minutes, 53 seconds demandled sell through and a volume push. 5:57 5 minutes, 57 seconds To embed this approach, it is important to have healthy channel inventory. Over the past few quarters in the investor 6:05 6 minutes, 5 seconds calls, we have highlighted elevated channel inventory levels as a key key operating concern. 6:12 6 minutes, 12 seconds As a result of this transition and the corrective actions taken, channel inventory levels are on a path of normalization. 6:20 6 minutes, 20 seconds There are still certain pockets especially the summer related products where the channel inventory 6:27 6 minutes, 27 seconds remains high and we look forward to its normalization as season picks up. 6:34 6 minutes, 34 seconds This structural shift to secondary opt execution will strengthen our channel health, improve revenue predictability, 6:43 6 minutes, 43 seconds improve margin quality, enhance working capital working capital efficiency and flushes out high cost incremental 6:52 6 minutes, 52 seconds sale practices and positions the company and it positions the company for sustainable demandled growth. 7:01 7 minutes, 1 second This has started reflect reflecting in stabilization of market shares across all key categories. 7:08 7 minutes, 8 seconds The EID margins were negative owing to operating deliber. 7:13 7 minutes, 13 seconds I would now like to highlight certain operational parameters that have been have begun to show early signs of improvement. 7:22 7 minutes, 22 seconds While the benefits of these initiatives are not immediately visible and will acrewue over time, they form a critical 7:29 7 minutes, 29 seconds part of our broader effort to streamline and strengthen our operations. 7:34 7 minutes, 34 seconds Logistics which has been a persistent area of focus for the past two years is now being addressed with increased 7:41 7 minutes, 41 seconds rigor. We have initiated a comprehensive review across key drivers including overall 7:49 7 minutes, 49 seconds inventory levels, space optimization and elimination of high cost incremental sales practices. 7:58 7 minutes, 58 seconds Several corrective actions have already been implemented and we believe we are moving in the right direction and postnormalization 8:07 8 minutes, 7 seconds tangible benefits are expected to be visible in our results. 8:13 8 minutes, 13 seconds A part of this is already getting reflected in this quarter's cash flow from operations where we have generated operating cash flow of 211 crores and 8:22 8 minutes, 22 seconds ended the period with a cash and cash equivalents balance of 620 crores. 8:28 8 minutes, 28 seconds This strong equity position provide us with adequate financial flexibility to deploy growth capital judiciously 8:36 8 minutes, 36 seconds while maintaining balance between strength and capital discipline. 8:41 8 minutes, 41 seconds In parallel, we are undertaking a detailed review of other variable cost elements such as product demonstration, 8:49 8 minutes, 49 seconds customer service expenses and trade schemes with a clear focus on improving cost efficiency and margin quality. 8:58 8 minutes, 58 seconds Additionally, fixed cost which has expanded over last few years are now under tighter control. 9:05 9 minutes, 5 seconds Capital expenditure and innovation investments are also being evaluated more stringent stringent stringently to 9:13 9 minutes, 13 seconds ensure that growth capital is deployed judiciously and delivers superior returns on investment. 9:21 9 minutes, 21 seconds With this I would like to open the call for questions. Uh thank you. 9:27 9 minutes, 27 seconds Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If 9:36 9 minutes, 36 seconds you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies 9:44 9 minutes, 44 seconds and gentlemen, we will wait for a moment while the question assembles. 9:52 9 minutes, 52 seconds The first question comes from the line of Natasha Jen with Philip Capital. Please go ahead. 9:58 9 minutes, 58 seconds Yeah, thank you [clears throat] for the opportunity. So my first question is on the consumer uh products portfolio. The 10:05 10 minutes, 5 seconds topline growth as well as margin the decline has been very severe. Now now that all your peers said numbers are out 10:13 10 minutes, 13 seconds everybody has uh even if top line has been modest, margin improvement has come through because of winter products and they are high margin and Bajage is any 10:21 10 minutes, 21 seconds which way uh one of the better players when it comes to say gizers or room heaters etc. So wanted to know why such a sharp decline. 10:33 10 minutes, 33 seconds So Natasha one of the things which I'll answer in more detail. One of the things when we are flushing out 10:40 10 minutes, 40 seconds stocks so while uh we are not selling to our distributors but we are running 10:47 10 minutes, 47 seconds promotions on that that stock to move to trade. 10:51 10 minutes, 51 seconds So part of that will get reflected in the margin drop. 10:56 10 minutes, 56 seconds uh so keep uh that in mind and that is one of the drivers of the margin drop 11:03 11 minutes, 3 seconds but this is temporary so underlined margin will be healthier than what you're seeing and you will see that improving as you move forward 11:11 11 minutes, 11 seconds yeah and Nadasha on a uh like has been said that we have taken corrections as far as the inventories are concerned 11:21 11 minutes, 21 seconds uh however in terms of the secondaries uh trade for example uh we have uh you know improved our 11:29 11 minutes, 29 seconds actually market share and uh our growth has been flattish as far as water heaters are concerned in instant for example we have a single highdigit 11:37 11 minutes, 37 seconds growth so the tertiary uptakes which happened which are reflective of the market share uh clearly indicate that we 11:44 11 minutes, 44 seconds continue to maintain our strength uh in this space understood so can you just deep dive a 11:53 11 minutes, 53 seconds little bit as to what are these steps that you've taken in terms of inventory normalization and how can what kind of benefit or rather when will this benefit acrew in the numbers? 12:05 12 minutes, 5 seconds So the inventory normalization has uh taken across uh our trade channel uh and 12:13 12 minutes, 13 seconds also uh in our aggregators uh which service the e-commerce channel uh we are on that journey as was uh 12:22 12 minutes, 22 seconds stated in the opening remarks. Uh we expect the normalization process to 12:30 12 minutes, 30 seconds continue in a quarter or so we should be in a healthy place. 12:37 12 minutes, 37 seconds Understood. Uh so my second question is on the buyers division. So uh broadly can you tell us the strategy here as to 12:46 12 minutes, 46 seconds uh will it be completely outsourced and what are the estimates that we can build in for Baj say in the medium term both 12:53 12 minutes, 53 seconds in terms of topline contribution from this as well as margins and uh will you be uh selling this from your existing FMEG channel itself? 13:04 13 minutes, 4 seconds Yeah, this is Rajes here of wedding solutions business. So [clears throat] strategy as of now is that we introduce considering the strength of our distribution which is there in the 13:12 13 minutes, 12 seconds market and as the channel overlap is there we feel that it is uh completely uh logical to enter into this particular 13:19 13 minutes, 19 seconds space which is growing much faster and in that uh we are the strategy on manufacturing or outsourcing as of now 13:26 13 minutes, 26 seconds we are exploring that what is the most beneficial way and we are just enter into that and looking at the current 13:34 13 minutes, 34 seconds traction we feel the outlook will be As of now we don't want to project in terms of numbers or revenues which are coming out of that looking at the forward numbers. 13:45 13 minutes, 45 seconds Got it. So just one related uh one related question on that in terms of buyers uh the lot of incumbents right 13:53 13 minutes, 53 seconds now and uh some of them in fact larger peers are losing market share in this segment and on top of that the commodity 14:00 14 minutes volatility is also extremely high. Just want to know I mean I understand tan expansion is one of the strategy here and we can leverage our channel reach 14:08 14 minutes, 8 seconds but is that the only mode here in this business what would what would lead a dealer to switch from say a polycab or a hls to a baj. 14:19 14 minutes, 19 seconds So again brand strength which is there and the as you are aware that and the quality of what we are going to 14:27 14 minutes, 27 seconds offer which comes along with the brand the trust which is created on that basis we are in this particular business and 14:33 14 minutes, 33 seconds which is the legacy of brand miss and when you say quality so you you are outsourcing it completely right 14:42 14 minutes, 42 seconds yeah but it's definitely the product which is not complete mean it is not offtheshelf product we do add in terms 14:49 14 minutes, 49 seconds of what we are looking for from that particular product before we enter into the category. 14:54 14 minutes, 54 seconds Understood sir. Thank you so much and all the very best. 15:01 15 minutes, 1 second Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question 15:08 15 minutes, 8 seconds comes from the line of Manoji with equest capital. Please go ahead. 15:13 15 minutes, 13 seconds Yeah, thanks for the opportunity. So I just want to understand the thought process behind this channel correction. 15:21 15 minutes, 21 seconds What made us took this decision? Why we took this decision? Uh so first if we can answer that. 15:31 15 minutes, 31 seconds Uh if uh you look back at the year so far uh we have seen that the summer 15:40 15 minutes, 40 seconds season did not pan out as per the expectations and owing to that the channel was 15:48 15 minutes, 48 seconds carrying a significant amount of inventory. 15:51 15 minutes, 51 seconds Now if you look at our business uh and the uh contribution of summer's products 15:58 15 minutes, 58 seconds which is or relatively volatile products like coolers and TPW etc. our business is almost 20 25% contribution typically 16:07 16 minutes, 7 seconds comes from in in a in a normal year comes from these businesses which in this year was at you know uh 16:15 16 minutes, 15 seconds approximately half of it and therefore the channel had been carrying the inventory. Secondly, the second summer which typically comes later also did not 16:24 16 minutes, 24 seconds pan out and this was impacting both the health of the channel as well as their ability uh to stock up for relatively 16:33 16 minutes, 33 seconds faster moving products. So we as we has been said earlier also thought it is prudent and judicious 16:40 16 minutes, 40 seconds to take this correction rather than loading the inventory into the channel more and more and we expect as it 16:48 16 minutes, 48 seconds normalizes in the coming days. It will actually be more beneficial for the business uh and our channel partners. 16:55 16 minutes, 55 seconds So one thing is if you look at we just commented like we have gained market share. So ideally our position in the channel should have been better versus 17:03 17 minutes, 3 seconds peer. Pier have reported relatively better set of numbers on the topline side. Third, if you look at an air 17:11 17 minutes, 11 seconds cooler company which have which has reported the numbers, they have reported by and large flattish kind of number and 17:18 17 minutes, 18 seconds their sole business is air coolers. So on one side we are talking about market share gains but on the other side we are 17:26 17 minutes, 26 seconds saying like our channel inventory was higher as compared to peer that is that the right interpretation 17:33 17 minutes, 33 seconds and then if it that's the case then probably our Q1 Q2 numbers probably the 17:40 17 minutes, 40 seconds correction that we took in Q3 that should actually should have been more visible in Q1 and Q2 if we would have 17:48 17 minutes, 48 seconds maintained that normalized levels of inventory. 17:53 17 minutes, 53 seconds So like I said the uh levels of inventory remained elevated and uh the 18:02 18 minutes, 2 seconds assumption was it would go down first in due to the summers did not pan out and then uh after that which was quarter 3 18:11 18 minutes, 11 seconds uh which was about the festive period we thought it's the right time uh to normalize this as we move into the next 18:17 18 minutes, 17 seconds uh financial year. Now as far as competition is concerned I really can't comment on that but for us for example 18:25 18 minutes, 25 seconds coolers uh are down by almost uh 38 to 40%. 18:31 18 minutes, 31 seconds uh versus our sales last year. So we have been impacted as far as the seasonality is concerned. 18:39 18 minutes, 39 seconds Right. Sir, one last question if I may. 18:42 18 minutes, 42 seconds Uh if I look at the Q3 performance and somewhere the channel would have uh normalized in terms of inventory levels 18:51 18 minutes, 51 seconds then in this case I presume like other brands would be having higher inventories in the channel as of now. In this case, 18:59 18 minutes, 59 seconds is it not the uh is this understanding correct that their market share probably in the coming months and quarters might 19:07 19 minutes, 7 seconds be at risk because even your retailers and dealers would be in fact they would like to liquidate other brands inventory 19:15 19 minutes, 15 seconds first and then probably go for primary billing. 19:21 19 minutes, 21 seconds uh market shares are reflected by the tertiary offtakes which happen off the shelf and uh as has been said in the 19:30 19 minutes, 30 seconds opening remarks uh it's about changing the principles of doing business. It's not about stuffing 19:37 19 minutes, 37 seconds the channel uh but it's about giving the optimal level of inventory and an approach which drives market share and 19:46 19 minutes, 46 seconds consumer pull. So I think the hypothesis that the more you fill in the inventory into the channel the that translates 19:54 19 minutes, 54 seconds into a a higher market share is not necessarily something uh which we 20:03 20 minutes, 3 seconds so sir uh somewhere should we expect a normalized performance from fourth quarter onwards or it will take some time still uh probably it should be more visible during FI27. 20:15 20 minutes, 15 seconds uh it would visible be more visible during FY27. As we said earlier, we are in the path of normalization. 20:23 20 minutes, 23 seconds Uh in pockets, there are still some uh additional corrections which we need to take. Uh and therefore by FY27 should start seeing positive results. 20:34 20 minutes, 34 seconds Sure sir. Thanks for this uh and wish you all the best. 20:43 20 minutes, 43 seconds Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question 20:51 20 minutes, 51 seconds comes from the line of Pravin Sahai with Prabhuas Dilatar Capital. Please go. 20:57 20 minutes, 57 seconds Yeah, thank you for opportunity. Uh my first question is or a clarification is uh related to the uh as you had 21:04 21 minutes, 4 seconds mentioned in the uh you know opening remark that the summer products still have higher inventory. Is it uh uh what we have said? Let's just clarification. 21:16 21 minutes, 16 seconds It is uh lower than what it was in the beginning uh of the quarter and we said that it's in the process of 21:23 21 minutes, 23 seconds normalization and it would take probably one more quarter for it to completely normalize. Also uh we think is that uh 21:33 21 minutes, 33 seconds because of the bad season the channel partners are also being cautious in in loading uh you know taking stocks at a 21:42 21 minutes, 42 seconds very very high level. So it's a a mixture of both. [clears throat] Okay. 21:48 21 minutes, 48 seconds So the stock cor is taking into base. Uh one way is uh the ones which are high and are not seasonal that correction is 21:57 21 minutes, 57 seconds we are we are seeing the secondary is much higher than what we are selling to the trade. Other correction way of doing 22:04 22 minutes, 4 seconds correction is the summer products where the usual loading which happens in partly in quarter three and partly in quarter four. We'll be more cautiously 22:12 22 minutes, 12 seconds loading it because we want the stocks to be flushed out which is already sitting in the channel. So that is another way of correcting the stock in the channel. 22:23 22 minutes, 23 seconds All right. Got it sir. Uh second question is uh related to the commodity inflation. So uh is there any price hike 22:31 22 minutes, 31 seconds expected from uh you know the paj or uh you had taken to uh you know mitigate the commodity inflation so far? 22:43 22 minutes, 43 seconds Yes, we took uh we have already announced a price increase uh ranging from 2 to 5% uh from with effect from 22:51 22 minutes, 51 seconds 1st of February and uh how much of the uh commodity 22:58 22 minutes, 58 seconds inflation is uh expected to cover with this uh we expect to cover bulk of the 23:07 23 minutes, 7 seconds commodity inflation uh with this uh price three plus at the same time we continue to do activities 23:15 23 minutes, 15 seconds around uh VA and V value engineering and validation and uh as and when uh we feel 23:22 23 minutes, 22 seconds it's the right moment we might decide to pass on some of that benefits to the consumer also but as of now uh the 23:29 23 minutes, 29 seconds commodity impact uh we have utilized it by and large. 23:35 23 minutes, 35 seconds Okay. Uh next question is related to the uh you know the some uh some time back you had announced for the switch gear uh 23:43 23 minutes, 43 seconds so how is the uh you know the so far traction from that uh uh segment. 23:51 23 minutes, 51 seconds So when uh this is Rajes again uh when we launched we had a good response from the trade current partners as well and 23:58 23 minutes, 58 seconds that time we were working on creating a stock and the stock took little more time. So secondary has started since last month and the feedback from the 24:07 24 minutes, 7 seconds market in terms of quality and other parameters is much encouraging and we are looking forward for the higher numbers coming through coming quarters. 24:16 24 minutes, 16 seconds So now you have a three uh vertical switch gear uh solar solution and the wire. Uh any target uh the company has 24:24 24 minutes, 24 seconds said for the next couple of years where to reach. 24:29 24 minutes, 29 seconds So these are all big categories and that is where we are trying to test the water and try to see how we can uh get our share rightful share in this particular 24:38 24 minutes, 38 seconds segments. As of now we are working on 3 years plan. we will not be able to reveal numbers till we finalize that with the board. 24:48 24 minutes, 48 seconds Okay. Thank you sir and uh all the best. Thank you. 24:56 24 minutes, 56 seconds A reminder to all the participants that you may press star and one to ask a question. 25:08 25 minutes, 8 seconds Once again a reminder to all the participants that you may press star and one to ask a question. 25:24 25 minutes, 24 seconds The next question comes from the line of Rachel with simple. Please go ahead. 25:29 25 minutes, 29 seconds Hi thanks for the opportunity. This might be a repeat question. Now the be transition happening in 26 you know how 25:38 25 minutes, 38 seconds are the channel distributors reacting this time because a similar transition happened during 2023 and that time the 25:46 25 minutes, 46 seconds industry saw higher inventory levels at the distributor end which took some time to normalize and are distributors now 25:55 25 minutes, 55 seconds willing to stop or is there any caution uh and do you see see any risk of excess inventory 26:03 26 minutes, 3 seconds uh related to prolonged winter in the distributor channel for fans. 26:10 26 minutes, 10 seconds So [clears throat] like I mentioned during the last uh call also uh we are 26:17 26 minutes, 17 seconds in a we have in a better position uh to navigate this change this time and uh 26:25 26 minutes, 25 seconds because firstly there was already a slightly elevated level of inventory with our partners. uh we navigated that 26:32 26 minutes, 32 seconds change well and did not feel the need uh to you know put in more stocks uh as far 26:38 26 minutes, 38 seconds as uh fans were concerned. So it's a normal process of uh channel inventory normalization which we have already 26:46 26 minutes, 46 seconds talked about earlier. Uh and uh so far there has been as and when the season 26:52 26 minutes, 52 seconds progresses uh we've also u mitigated the cost impact commodity impact is 26:59 26 minutes, 59 seconds different but from a design etc point of view we have mitigated that impact uh like I said earlier from a VAV point of 27:06 27 minutes, 6 seconds view. So going forward we remain cautiously optimistic that there would not be any any resistance uh from the 27:15 27 minutes, 15 seconds channel partners or distributors in in stocking up. Of course it is dependent on how the season pans out and how the summers pan out. 27:26 27 minutes, 26 seconds Okay. So what what are the ground level at the channel inventory? How are their sentiment currently? If you could you know give some color on that as well. 27:38 27 minutes, 38 seconds Uh I'm sorry. Could you please repeat the question? 27:41 27 minutes, 41 seconds Uh just more on the be regulation transition part. How are they reacting to it? If you could give some color on that. 27:51 27 minutes, 51 seconds Well, it's a it's a regulation. So as far as the partners are concerned uh 27:56 27 minutes, 56 seconds [clears throat] 27:57 27 minutes, 57 seconds the at least on on ground, I I don't see any massive uh you know resistance or uh 28:04 28 minutes, 4 seconds problems around it. because it is now the second time which is happening. So people are used to this ratcheting uh happening over a period of time. 28:15 28 minutes, 15 seconds Okay. Thank you. 28:21 28 minutes, 21 seconds Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question 28:28 28 minutes, 28 seconds comes from the line of Aloc S with 361 asset management. Please go ahead. Yeah. Hi. Uh just two questions. 28:37 28 minutes, 37 seconds Firstly, uh you know this initiative that you have taken it's it you know maybe it's a good cleanup and hygiene is there is there now should we think like 28:46 28 minutes, 46 seconds a board approved process where uh you know inventory in the trade beyond a particular duration would be considered 28:53 28 minutes, 53 seconds to be like you know kind of kind of flushed out this way or this would be a one-off uh event. uh how should we think? 29:05 29 minutes, 5 seconds So there is no board approval or inventory flush out. Uh though this was discussed in the previous board meeting 29:12 29 minutes, 12 seconds but it was no uh there's no board approval per se. If you can talk more about exactly what the question is. 29:21 29 minutes, 21 seconds Yeah. I was just trying to no I was just trying to think through that you know how in retail also there are some you know inventory kind of processes in 29:29 29 minutes, 29 seconds terms of liquidation etc which at times are board approved with respect to you know beyond a particular timeline you you account for the inventory in 29:37 29 minutes, 37 seconds particular method so I was just trying to gauge that uh you know from either shrinkage or write off or just trying to 29:45 29 minutes, 45 seconds not push more inventory or is it just one time cleanup how we should think see I think there are two things uh I'm I'm thinking I think maybe it's you know the 29:53 29 minutes, 53 seconds earlier earlier inventory levels in the trade would be high and you know we decided before the before the season we kind of prune it to an optimal level so 30:02 30 minutes, 2 seconds that the next primary sales for bajad becomes much more smoother cleaner and and nis for the trade uh should improve 30:11 30 minutes, 11 seconds going ahead was that the thought process uh you know be when we took off initiated this process of of kind of uh 30:19 30 minutes, 19 seconds reducing the primary Yeah. So, uh if you are trying to draw parallel with retail industry for example, 30:28 30 minutes, 28 seconds uh it's apples to oranges because here we are not flushing out our inventory. 30:35 30 minutes, 35 seconds It is about channel hygiene uh and the channel partners inventory. As far as we 30:41 30 minutes, 41 seconds obviously have our own process of uh looking at whether slow movers etc which are not it's a very small part of our 30:50 30 minutes, 50 seconds overall business and those are the normal practices which we follow as and when we want to you know liquidate those 30:57 30 minutes, 57 seconds but that's business as usual. Uh it is not something uh what we were alluding to over here. It is not our inventory 31:04 31 minutes, 4 seconds which is uh an issue. Uh it is the inventory with the channel partners and the channel hygiene which we were more focused on. 31:15 31 minutes, 15 seconds Got it. And uh sure sure this is helpful. And uh can you can you kind of 31:21 31 minutes, 21 seconds elaborate so then you know what were the outstanding or in elevated levels in terms of days uh or categories uh you 31:31 31 minutes, 31 seconds know which are which had which are kind of bulked up in the trade. uh what has it come down now to and what is like a 31:39 31 minutes, 39 seconds normal hygiene level as a process going ahead you would want to maintain any such maybe quantification would be 31:46 31 minutes, 46 seconds helpful yeah that's it from my side so hi uh this side so if I have to 31:53 31 minutes, 53 seconds elaborate from the number of days we just want to give you a fact that uh in consumer products it is down by 30% in 32:01 32 minutes, 1 second terms of number of days uh so that's one bit of it now how How much inventory we want to carry in the channel at the same time what's the healthy is the dynamic 32:10 32 minutes, 10 seconds number that keeps on changing based the scenario environment and the seasonal factors. So while there is no return thumb rule around it but we are very 32:18 32 minutes, 18 seconds cautious in the way we want to culturally operate with the channel. Okay. Yeah sure. Thank you. 32:30 32 minutes, 30 seconds Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question 32:37 32 minutes, 37 seconds comes on the line of Anoj Seagel Manus capital. Please go ahead. 32:44 32 minutes, 44 seconds Yeah. Hi, thank you. Uh this question is for Mr. Baj. Uh Mr. Maj over the last several years you know you had also 32:52 32 minutes, 52 seconds embarked upon the uh rain reach expansion program where the focus was on a polebased system and it was followed 33:00 33 minutes for some years and then uh from our understanding it was abandoned. uh are we going back to that same philosophy of 33:08 33 minutes, 8 seconds uh you know going back to a pullbased uh model and uh sort of my question is why 33:16 33 minutes, 16 seconds did we abandon that model and why are we you know going back to the same model again. uh that is one and secondly you 33:24 33 minutes, 24 seconds know if you look at the business over the last almost more than 10 years the business has not uh delivered on its 33:32 33 minutes, 32 seconds potential both on the top line and on the margins especially on the margins. 33:36 33 minutes, 36 seconds So how should we think about you know the consumer products business let's say over the next uh you know five years uh 33:44 33 minutes, 44 seconds in terms of what it can achieve both from a topline and bottom line perspective and I mean if Mr. Saja could pitch in that would be helpful. 33:54 33 minutes, 54 seconds Yeah thank you very much. uh see I'll tell you that uh the RP which was introduced was a outstanding uh thing 34:03 34 minutes, 3 seconds which we had done and we had improved our distribution very well but one thing which we found was that because of that 34:11 34 minutes, 11 seconds distribution it was coming out to be a problem that we were covering all the outlets 34:20 34 minutes, 20 seconds around two lakh outlets we had covered the cost was not working out. So now we are doing a RP but in a different way. 34:29 34 minutes, 29 seconds We are doing it by also having direct dealers. We also doing a distribution which is uh like RP we don't call it RP 34:38 34 minutes, 38 seconds but the distribution by which we are covering uh outlets uh to uh now like 34:45 34 minutes, 45 seconds for example if somewhere there's a 10 lakhs sale per year and there somewhere it's only 10,000 sale per year or one lakh. 34:53 34 minutes, 53 seconds Earlier we were going to every outlet. A 10 lakh outlet also will be visited every week and a one lakh will be also visited every week. Now we are going to 35:02 35 minutes, 2 seconds do a channel depending on the demand and the possibility we will increase the movement and visit to that place where 35:11 35 minutes, 11 seconds there's a 10 lakhs business and relatively less visit to those which is one lakh business. So therefore that is where the 35:20 35 minutes, 20 seconds change will take place compared to what is being done earlier. But RP as a procedure was good and what just now 35:27 35 minutes, 27 seconds what you've been hearing which is what we've done in the last one last starting from last last quarter is that please 35:35 35 minutes, 35 seconds concentrate on secondary rather than primary and therefore because of that secondary sale though we have shown a 35:43 35 minutes, 43 seconds negative 25% uh negative growth in case of consumer product as was mentioned the market 35:51 35 minutes, 51 seconds share has not gone down much because actually we have reduced our inventory level. 35:58 35 minutes, 58 seconds We have reduced the inventory level of our dealers as was mentioned by so Ketu has been reduced by almost 30%. So 36:06 36 minutes, 6 seconds therefore because of which their margins will improve because you know if you keep inventory which you don't need you 36:12 36 minutes, 12 seconds are ending up paying uh carrying cost go down cost and all that. So we have reduced our inventory to that extent. 36:20 36 minutes, 20 seconds Our godown requirement has gone down. Our total carrying cost has gone down. 36:26 36 minutes, 26 seconds That's why our cash flow has improved by 210 cr because we have been able to 36:33 36 minutes, 33 seconds free our cash which was uh you know dead either in inventory or in outstanding. 36:39 36 minutes, 39 seconds So that is where also at the month end we don't like this type of pressure which comes in because we want to 36:45 36 minutes, 45 seconds achieve our top line. So top line is only a transfer from our stock to our distributor stock which we don't want. 36:54 36 minutes, 54 seconds We want a secondary sale and therefore the whole emphasis in secondary sales. 36:58 36 minutes, 58 seconds That is why uh this correction which is taking place and normalization which is taking place will result in long-term 37:07 37 minutes, 7 seconds margin improvement for dealers. Our cost of carrying will come down and it will be a win-win for all. 37:15 37 minutes, 15 seconds Does that answer your question? No. Yes, it it it answers the question. 37:22 37 minutes, 22 seconds But I you know only hope that this also leads to sustainable growth and improvement in the uh profitability of the business. I mean as you know the 37:30 37 minutes, 30 seconds margins in the consumer product business have been you know low single digits and they have been stuck there for a while. 37:37 37 minutes, 37 seconds So either the cost structure of the business needs to be uh you know reviewed or we need to have sustainable 37:44 37 minutes, 44 seconds growth uh for uh the business to absorb the higher cost base and it doesn't so I don't know you know what is being done 37:52 37 minutes, 52 seconds on that front to achieve sustainable profitability at least in line with your peers you you'll see that happening the 38:01 38 minutes, 1 second improvement will you see starting with the fourth quarter but next year should be showing a substantial improvement because all those corrective action 38:09 38 minutes, 9 seconds which we are talking about by doing that doing that your cost is coming down and therefore your margin obviously improve 38:16 38 minutes, 16 seconds my inventory carrying cost goes down might go down I've already given up lot of the our go down number of outlets through 38:25 38 minutes, 25 seconds whom we are selling keeping inventory is being reduced all those areas are being done because we realize what you're saying is correct that cost has to be 38:33 38 minutes, 33 seconds kept under control because margins cannot keep improving by improving selling prices. The margins will only 38:41 38 minutes, 41 seconds improve by reducing your cost and that's what our objective is. So you'll see things happening in the this quarter also and coming in the next quarter. 38:53 38 minutes, 53 seconds Okay. Thank you very much. Welcome. 38:59 38 minutes, 59 seconds Thank you. A reminder to all the participants that you may press star and one to ask a question. 39:10 39 minutes, 10 seconds Once again, a reminder to all the participants that you may press star and want to ask a question. 40:11 40 minutes, 11 seconds Once again, a reminder to all the participants that you may press star and one to ask a question. 40:39 40 minutes, 39 seconds Thank you ladies and gentlemen. As there are no further questions, we have reached the end of question and answer session. I would now like to hand the 40:46 40 minutes, 46 seconds conference over to the management for closing comments. 40:50 40 minutes, 50 seconds Thank you very much uh all of you who have joined this conference and the questions and answers which have been uh 40:59 40 minutes, 59 seconds had. So we'd like to wish you all the best and let's hope the next few quarters you will see some improved results. Thank you very much Shaker Bajage here saying goodbye to you. 41:13 41 minutes, 13 seconds Thank you on behalf of ICAC Securities that concludes this conference. Thank you for joining us. You may not disconnect.