Eureka Forbes Limited — Q1 FY26

Eureka Forbes Ltd Q1 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=3J4yuUED5ZI Published: 9 months ago

0:00 Ladies and gentlemen, good day and welcome to the Eureka Forbes Limited Q1 FI26 earnings conference call. We have 0:08 8 seconds Mr. Pratik Pota, managing director and CEO and Mr. Gorov Kandelwaz, CFO Eureka Fores with us. As a reminder, all 0:17 17 seconds participant lines will be in the listenon mode and there will be an opportunity for you to ask questions after the presentation concludes. Should 0:24 24 seconds you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. 0:36 36 seconds Before I hand it over to Mr. Pratik Pa, please note that the disclaimer certain statements made by the management in today's call may be forward-looking 0:45 45 seconds statements. These forward-looking statements reflect management's best judgment and analysis. As of today, the 0:52 52 seconds actual results may differ materially from the current expectations based on a number of factors affecting the business. I now hand the conference over 1:00 1 minute to Mr. Pratik Pa. Thank you and over to you, sir. Over to you, sir. 1:06 1 minute, 6 seconds Good afternoon and I welcome you all to the Q1 FI26 earnings call of Ureka Forbes Limited. 1:14 1 minute, 14 seconds Q1 was a difficult and challenging period. 1:18 1 minute, 18 seconds There was a continuing softness in consumer demand which was aggravated by pressure on trade working capital owing 1:26 1 minute, 26 seconds to the slowdown in cooling products especially in April and May and it was only in June that we saw uh some 1:34 1 minute, 34 seconds recovery in this tough external environment. We are pleased with the results we delivered in quarter 1. 1:42 1 minute, 42 seconds Overall revenues grew by 9.9% on the back of a double-digit growth in our products business. This growth was 1:50 1 minute, 50 seconds driven by a double-digit volume growth in both our key categories of EWPs and VCs. 1:58 1 minute, 58 seconds In EWPs, our strategy of focusing on driving penetration and premiumization worked well for us. Our economy range of EWPs continued to grow strongly. 2:10 2 minutes, 10 seconds During the quarter, we scaled up our range of EWPs with two-ear filter life. 2:17 2 minutes, 17 seconds These products significantly lower the lifetime cost of ownership and we are confident that they will help drive 2:23 2 minutes, 23 seconds penetration and growth for us. Uh we now have more than 40 products that offer 2-year filter life. 2:32 2 minutes, 32 seconds In the premium segment of EWPs, we scaled up a smart IoT enabled range during the quarter. 2:40 2 minutes, 40 seconds We are pleased with the early results and feedback. Our innovations launched in prior periods also continue to do 2:46 2 minutes, 46 seconds extremely well in vacuum cleaners. Our conviction and early bet on robotics is beginning to 2:55 2 minutes, 55 seconds bear fruit. We rolled out and scaled several new products during the quarter. 3:01 3 minutes, 1 second Forbes Smart Clean home mapping turbo, Forbes Smart Clean Auto Turbo, and Forbes Smart Clean fully automatic 3:08 3 minutes, 8 seconds cleaning station. We saw 52% growth in robotics, and this helped drive the vacuum cleaner category to strong double-digit growth. 3:18 3 minutes, 18 seconds One of the most encouraging new developments in this quarter was the service turnaround. We had a healthy double-digit growth in fresh service bookings. 3:28 3 minutes, 28 seconds This growth came from a combination of growth in AMC count and increase in the ASP. 3:35 3 minutes, 35 seconds We also saw an increase in the number of multi-year bookings. 3:40 3 minutes, 40 seconds We had taken several initiatives to drive service revenue growth in the preceding periods. We had first launched segmented AMC offerings to improve 3:48 3 minutes, 48 seconds affordability and to provide choice to our customers. We then invested in building a strong D2C engine for our 3:55 3 minutes, 55 seconds AMC's and nearly twothirds of our AMC's are now bought digitally. 4:00 4 minutes In addition, we strengthen our engagement with our business partners and our service technicians and rolled 4:07 4 minutes, 7 seconds out direct payouts to the technicians along with performance-based incentives. 4:13 4 minutes, 13 seconds As you're aware, we also launched differentiated filters and rolled out a campaign last year to create consumer awareness around them. 4:21 4 minutes, 21 seconds We are pleased to see that all these efforts are beginning to bear fruit and we are confident that this momentum in 4:28 4 minutes, 28 seconds service bookings will sustain in the periods ahead. 4:33 4 minutes, 33 seconds On the profitability side, the adjusted event margins for quarter 1 came at 11%. 4:40 4 minutes, 40 seconds After accounting for higher service charge payouts and with increased growth investments, our profit after tax grew by 24.1% over last year. 4:51 4 minutes, 51 seconds In summary, in a difficult external environment, we have started the third year of our transformation with a double-digit 5:00 5 minutes volume growth, delivered the seventh successive quarter of double-digit value growth in our product business, and witnessed a clear and decisive turnaround in our service business. 5:12 5 minutes, 12 seconds As we look to the future, we could not be more excited at what lies ahead. Our categories have low penetration and 5:19 5 minutes, 19 seconds offer immense potential and we are confident that we have the right strategy and the right set of plans to 5:27 5 minutes, 27 seconds win in this market and to deliver sustained and profitable growth. With that I hand you over to Goro Kandel for his remarks. 5:37 5 minutes, 37 seconds Thank you Fatip and good afternoon everyone. Before I start off, I would like to bring to your notice that we have given additional information in our 5:45 5 minutes, 45 seconds investor relations pack. We hope it helps in providing a better understanding of the business. 5:53 5 minutes, 53 seconds Starting off with the Q1 headline numbers, our revenues at rupees 607.7 crores grew 9.9% on a year-on-year 6:02 6 minutes, 2 seconds basis. As mentioned previously, starting Q1, there would be no divergence between reported growth and continuing business 6:10 6 minutes, 10 seconds growth. Profit after tax at rupees 38.5 crores grew by 24.1% on a year-on-year basis. 6:19 6 minutes, 19 seconds On the revenue side, product business continued to register double-digit growth both in volumes and value. Growth 6:27 6 minutes, 27 seconds was led by the economy and premium segments in water purifiers and robotics and vacuum cleaners. Our ahead of curve 6:34 6 minutes, 34 seconds investments in both innovation and the robotics category is the lee of and both of these now make meaningful contributions to our growth. 6:43 6 minutes, 43 seconds On the service side we reached a significant milestone. 6:48 6 minutes, 48 seconds Bookings grew by double digits in value and this was driven by both volumes and ASPs. 6:54 6 minutes, 54 seconds Within that multi-year AMC mix improved which helps in driving customer retention 7:01 7 minutes, 1 second while the reflection of service bookings and financials will come with a lag due to service amotization. 7:07 7 minutes, 7 seconds This provides a healthy revenue stream for the quarters ahead. Our transformation interventions have taken us to a place where we believe that we 7:16 7 minutes, 16 seconds will be able to drive double-digit bookings growth in service in the quarters ahead as well. 7:22 7 minutes, 22 seconds Moving to gross margins, our Q1 gross margins at 59.7% were rangebound versus 7:29 7 minutes, 29 seconds 60.5% last year and 20 basis points higher on a sequential basis. Commodity costs remain benign for most parts. 7:38 7 minutes, 38 seconds Given the challenging market conditions in the quarter, tactical promotions were run which led to a gross margin drop. We 7:45 7 minutes, 45 seconds believe that our structural advantages and guardrails on gross margin in the form of a healthy product and service 7:52 7 minutes, 52 seconds mix portfolio straddling various price points and effective cost management give us several levers on gross margin. 8:02 8 minutes, 2 seconds We continue to exercise cost discipline and both employee expenses and other expenses grew at a rate lower than 8:09 8 minutes, 9 seconds topline growth. Employee expenses grew 7% and other expenses grew 6.1% on a 8:15 8 minutes, 15 seconds year-on-year basis. It may be noted that the increase of 6.1% in other in other expenses is after growth investments 8:24 8 minutes, 24 seconds being sustained at elevated levels. The increase in service charge of 17.6% is attributable to the double-digit 8:32 8 minutes, 32 seconds increase in service bookings. As we have communicated previously, while the revenue is amotized over the tenure of 8:39 8 minutes, 39 seconds the AMC, the cost is recorded up front non-cash ESOP charges were rupees 5.6 crores and are expected to remain at these levels in FI26. 8:51 8 minutes, 51 seconds After absorbing the higher cost due to service bookings and growth investments, adjusted Eida margins came in at 11% in Q1. Adjusted PBT grew 14.2%. 9:03 9 minutes, 3 seconds Depreciation for this quarter stood at rupees 8.3 crores largely in line with the previous quarter and amotization 9:10 9 minutes, 10 seconds reflected an increase due to deployment of technology investments. 9:14 9 minutes, 14 seconds Other income increase was largely driven by higher treasury income linked to a larger cash balance versus previous year. 9:22 9 minutes, 22 seconds In summary, in challenging market conditions, volumes have grown in double digits and our transformation interventions have led to the service 9:30 9 minutes, 30 seconds business turnaround. This has enabled a robust performance for the quarter and provides the necessary platform to drive a performance in the quarters ahead. As 9:39 9 minutes, 39 seconds highlighted earlier, we will continue to be growth focused and aim for margin improvement on a full year basis. Thank you. 9:53 9 minutes, 53 seconds So should we open the floor for questions for questions? Yes. Thank you very much. 9:58 9 minutes, 58 seconds Thank you very much. We will now begin with the question and answer session. 10:03 10 minutes, 3 seconds Anyone who wishes to ask a question may press star then one on their touchstone phone. 10:08 10 minutes, 8 seconds If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets while asking a question. 10:19 10 minutes, 19 seconds Ladies and gentlemen, we will wait for a moment while the question cue assembles. 10:24 10 minutes, 24 seconds Request to all the participants. Please you may ask one question and one follow-up. If you have any further questions, you may rejoin the queue. 10:34 10 minutes, 34 seconds Our first question comes from the line of Omang Ma from Kotak Securities. Please go ahead. 10:41 10 minutes, 41 seconds Hi. Uh thank you for the opportunity. Uh the first question was on the service business. Uh your commentary this quarter uh is uh much more kind of 10:50 10 minutes, 50 seconds encouraging than you know uh past few quarters. I heard Goro mention uh that service bookings also could continue with double-digit growth going forward. 11:00 11 minutes Uh any outlook on how the revenue uh uh acceleration would take place? Uh do you have visibility of uh service growth 11:09 11 minutes, 9 seconds kind of uh uh not weighing on overall growth uh you know in few quarters any qualitative comments on that would help. 11:16 11 minutes, 16 seconds That's first question. Thank you. Uh no Oman thank you for that question. 11:22 11 minutes, 22 seconds Uh let me begin by first addressing the larger point about service revenue growth and then I request go to chip in and talk about when you can expect to 11:30 11 minutes, 30 seconds see this uh flowing and into the reported numbers. Uh I think uh you're absolutely right. All the efforts that 11:38 11 minutes, 38 seconds we've been making and that we've made in the prior periods uh we see them coming together now and helping us drive both 11:47 11 minutes, 47 seconds significantly improved customer experience uh and uh in this quarter especially uh strong double digit 11:54 11 minutes, 54 seconds service booking growth. What encourages us was is that uh a the growth came on the back of both AMC count growth. In 12:02 12 minutes, 2 seconds other words, there was a volume growth which which came by as also a greater number of multi-year AMC's and that's a 12:10 12 minutes, 10 seconds reflection of of customer retention and customer longevity and eventually you know higher lifetime value. So it was both a volume and a valuedriven uh 12:19 12 minutes, 19 seconds growth in EMC's. uh we also saw growth in both our offline channels and of course in the D2C online channel. So it 12:27 12 minutes, 27 seconds was a fairly balanced growth profile. In addition to the AMC growth, we also saw growth come by in a filters business. 12:34 12 minutes, 34 seconds And as you may recall in the prior uh investor calls, we've talked about uh putting in place a new go-to market 12:40 12 minutes, 40 seconds system for uh selling filters and and spares. And that's now begin to stabilize and that helped us drive 12:48 12 minutes, 48 seconds growth in in in quarter one. Uh as we look ahead at the at the at the periods ahead uh we feel uh very confident that 12:57 12 minutes, 57 seconds uh we will see double digit growth in service booking sustain uh and all the efforts that we've been we've made and 13:04 13 minutes, 4 seconds that we continue to put in uh in service transformation uh you know uh picking up pace and helping us drive growth. uh in 13:13 13 minutes, 13 seconds terms of uh impact uh in the P&L uh you can expect to see the numbers uh show up in the in the reported numbers by 13:21 13 minutes, 21 seconds quarter 4 of this year and GK you want to add anything? Yes and and among the reasons for that is that you know the revenue gets amotized and hence it comes 13:30 13 minutes, 30 seconds with a lag but I think the the important part from our perspective is that going by what we've seen in quarter one and the line of sight that we have that 13:38 13 minutes, 38 seconds pipeline looks quite healthy and you will start seeing this getting reflected from Q4 revenue onwards. 13:45 13 minutes, 45 seconds Understood. Uh that's very helpful. And the second one was on gross margins. uh you did mention about some tactical promotions uh uh you know had some 13:54 13 minutes, 54 seconds impact this quarter u I also kind of we picked up about this uh big exchange which you've launched uh uh you know uh 14:02 14 minutes, 2 seconds recently so any outlook you can give on that front uh I mean how how should we think about gross margins going ahead uh 14:09 14 minutes, 9 seconds and the impact of this uh exchange program on margins yeah I think so I think our focus is on 14:17 14 minutes, 17 seconds driving innovations and big adoptions going and our experience has been that our exchange program is quite has worked quite well. So that is something which 14:26 14 minutes, 26 seconds as a program we continue and that has helped in driving growth particularly in a premium segment. So that is one part. 14:32 14 minutes, 32 seconds Second from a gross margin outlook uh as I mentioned among we've got multiple levers in hand you know we've got a two/3 one/3 split of product and service 14:41 14 minutes, 41 seconds business in product we straddle all the price points uh our higher volumes have now given us buying efficiencies which 14:49 14 minutes, 49 seconds are coming in and hence our view on gross margin is that you know you know it will be rangebound there will obviously be elements of seasonality 14:57 14 minutes, 57 seconds which are there which will play out but we expect this to be rangebound I'll just also draw attention attention to the fact that you know if you look at 15:05 15 minutes, 5 seconds the last 3 years in some ways uh we've pursued a strategy of driving penetration our product growth has been 15:13 15 minutes, 13 seconds ahead of our service growth uh if you look at a three-year view of our gross margins they've been very very range bound you know so our belief is that 15:22 15 minutes, 22 seconds there are multiple levers in hand uh and you know we will keep gross margin in a at a place uh where we think that you 15:30 15 minutes, 30 seconds know it remains rangebound Obviously you're well aware of the market conditions. So we are very conscious of the fact that we will we will be 15:38 15 minutes, 38 seconds pursuing growth and we'll be price competitive in the market but we will use all levers available to make sure that you know our gross margin remains at a particular level. 15:49 15 minutes, 49 seconds Understood. Uh thank you so much. I'll just call back in the queue. Thank you. 15:54 15 minutes, 54 seconds Thank you. Our next question comes from the line of Aneruta Jooshi from ICICICI Securities. Please go ahead. 16:03 16 minutes, 3 seconds Yeah. Uh thanks for the opportunity and uh congrats for a great set of numbers. 16:09 16 minutes, 9 seconds Uh two questions. Uh one uh in terms of PPT you have indicated that we have 16:16 16 minutes, 16 seconds launched uh water uh filter with two years of life uh targeting the non-users. So if you can indicate about 16:25 16 minutes, 25 seconds the time or uh uh the findings that the company sales or marketing teams would have got regarding the market size uh of 16:34 16 minutes, 34 seconds these non-users and what will be the growth uh potential over let's say next two or uh 3 years uh in this market. Uh 16:44 16 minutes, 44 seconds that is question one and then second is uh an accounting question for GAR. So let's say a multi-year plan is taken by 16:53 16 minutes, 53 seconds any consumer. Let's say three-ear plan is taken by any consumer and he pays the money up front. So how does the accounting happen? Whether it is based 17:01 17 minutes, 1 second on the servicing or it is any periodic accounting uh that is done that every month some revenue is recognized out of that and 17:10 17 minutes, 10 seconds till that time whether the money is in current liabilities or uh some portion is in current liabilities and other 17:17 17 minutes, 17 seconds remains in uh long-term uh uh in a way obligations. Yeah. Yeah. These two questions. Yeah. 17:25 17 minutes, 25 seconds Uh I'll answer the first one and then request to on the second question. 17:30 17 minutes, 30 seconds Um uh I think um the two-year filter life products uh address a very 17:38 17 minutes, 38 seconds fundamental category barrier for water purifiers. 17:41 17 minutes, 41 seconds Um um the water purifier category as you know has a penetration of only about 6%. 17:50 17 minutes, 50 seconds Uh even in urban India the penetration of EWPs is about 12%. And rural cost is much lower at 3%. And one of the big 17:59 17 minutes, 59 seconds barriers that holds back EWPs is a perceived high cost of ownership. 18:05 18 minutes, 5 seconds Um if you recall about 2 and a half years back we had launched an economy range of Aquagard which addressed 18:12 18 minutes, 12 seconds another barrier which was the high upfront cost of entry and by launching Aquagard at less than 7,000 rupees we 18:20 18 minutes, 20 seconds have tackled that barrier and we have seen very very encouraging growth and and you know penetration increase thereafter and all the data had shown that more 18:28 18 minutes, 28 seconds than twothirds of the customers who had bought that economic device were category first- time category entrance. 18:35 18 minutes, 35 seconds This time with a 2-year filter life product, we we are addressing the other barrier which is the high cost of ownership barrier. And by launching 18:42 18 minutes, 42 seconds purifiers which have a 2-year filter life, uh our customers can actually save almost 18,000 rupees over the entire 18:49 18 minutes, 49 seconds lifetime of the of ownership. And we believe very strongly that this will help drive category penetration 18:57 18 minutes, 57 seconds immensely. And because of that uh we have launched a range of these purifiers and not just at the premium price points 19:04 19 minutes, 4 seconds but across starting in economy to mid-pric to premium and we believe that this can significantly expand the market. If you think about the current 19:13 19 minutes, 13 seconds market uh and the penetration being only 6%. 19:16 19 minutes, 16 seconds uh you can do the maths as the c as the penetration increases as we address this fundamental category barrier uh we will see the category grow uh and the and 19:25 19 minutes, 25 seconds look if you look at any other peer country in the neighborhood uh let's look at uh you know Sri Lanka penetration of about 18 to 20% China 19:33 19 minutes, 33 seconds upwards of 25% now Korea upwards of 60% Thailand upwards of 25%. So these are all markets which are very very similar 19:40 19 minutes, 40 seconds in profile. Uh and we believe that our penetration in India will follow the same trajectory as we systematically 19:48 19 minutes, 48 seconds attack both the consumer barriers um like the one I mentioned just now or indeed activate the triggers. Um so that 19:56 19 minutes, 56 seconds that's for your first question. More on the yeah I I'll I'll cover the book on on the accounting. I'll cover all dimensions. So revenue is done on a 20:05 20 minutes, 5 seconds straight line basis amotization. So let's say it is a 2-year AMC and let's say the cost of that is 7200 rupees. So 20:13 20 minutes, 13 seconds it will be a 300 rupee which is getting recorded every single month as a revenue. So that is how the revenue keeps getting reflected every month. 20:22 20 minutes, 22 seconds Hence you have a upfront bookings and a cash inflow of 7200. What you see in the financials is 300 every single month. 20:31 20 minutes, 31 seconds Coming to the cost bit of it, the entire cost of acquisition of this AMC of 7200 20:37 20 minutes, 37 seconds rupees that is recorded up front. So that cost is not amotized over the tenure of the AMC. That cost is upfront 20:46 20 minutes, 46 seconds and hence you see the service charge increase happening at a rate higher than what you would see reflecting in service revenue. Now coming to the balance sheet 20:55 20 minutes, 55 seconds part of it for the parts in a two-way MC up to month 12 that will appear in 21:02 21 minutes, 2 seconds current liabilities from month 13 to 24 uh that will appear in non-current liabilities and this keeps shifting for 21:10 21 minutes, 10 seconds whatever balances which pertain to within 12 month from the closing period. 21:18 21 minutes, 18 seconds Okay. Okay. Now this is uh very helpful just one further clarification. So essentially we are right now booking all 21:25 21 minutes, 25 seconds the costs but uh a partial revenue is getting booked when a service revenue is booked. Uh is that correct? 21:35 21 minutes, 35 seconds So as as this phase will get normalized let's say in a period of one year or maybe uh sorry to interrupt and 21:42 21 minutes, 42 seconds uh may we request you return to the question queue for any further follow-up questions please. 21:46 21 minutes, 46 seconds No no actually this is a uh just a clarification only. So uh we will see a margin uh relatively better expansion uh as we are booking the additional cost. 21:57 21 minutes, 57 seconds So is that understanding correct? 21:59 21 minutes, 59 seconds Yes. Because the costs are coming up front and hence the revenue will come later and then uh you will see a margin expansion. The thing to be kept in mind 22:07 22 minutes, 7 seconds is that on a sustained basis if you are growing bookings uh then there will be that cost which will come in but on a 22:14 22 minutes, 14 seconds standalone basis you're absolutely right that the entire cost of a 7200 rupee AMC is coming on day one while when you 22:22 22 minutes, 22 seconds start recording future months there is no corresponding cost that you have to record but then again you may book another AMC at that point in time and that cost will come. 22:32 22 minutes, 32 seconds Okay, got it. No, this is uh very helpful. Uh uh many thanks for this. Thank you. 22:41 22 minutes, 41 seconds Thank you. A request to all the participants. 22:46 22 minutes, 46 seconds Please follow with one question and one follow-up question and you may rejoin the queue for any further questions. 22:53 22 minutes, 53 seconds Our next question comes from the line of Harshett from AR Capitals. Please go ahead. 22:58 22 minutes, 58 seconds Hi. Uh thanks for the opportunity and congrats for a good set of numbers sir. 23:03 23 minutes, 3 seconds Uh two questions from my side starting with uh we see a double digit uh growth across the product category. Uh would 23:10 23 minutes, 10 seconds you be able to share uh whether in economy mass TM and premium all three segments green double digit for water 23:17 23 minutes, 17 seconds purifier and uh was the because of the uh you know average selling price max you know uh we see that uh probably the 23:26 23 minutes, 26 seconds value growth was a bit lower than the volume was uh specifically to any uh particular segment and do you think this trend is what is going to continue. 23:40 23 minutes, 40 seconds Hash, thank you for the questions. Um, let me let me start by responding to your first question. Um, which is about 23:49 23 minutes, 49 seconds uh the growth in our group profile in our EWP portfolio. Um I think as I mentioned in my opening remarks um we 23:57 23 minutes, 57 seconds had uh in line with our strategy a very deliberate focus on driving the economy segment to drive penetration and to get 24:04 24 minutes, 4 seconds in new users. that that strategic objective uh yielded us results very clearly in 24:12 24 minutes, 12 seconds quarter one as indeed it has in the in the preceding periods as well and we saw very strong volume and value growth in the economy segment and again in line 24:20 24 minutes, 20 seconds with our prior experience uh a dipstick on these new users or this new acquisition told us that most of them were first time category users. So again 24:29 24 minutes, 29 seconds the objective of doing penetration was was served by the growth of the economy segment. In addition, we also have a 24:36 24 minutes, 36 seconds very deliberate strategy of of upgrading the mid-pric segment and the mid-pric user by a premium oppos premium 24:43 24 minutes, 43 seconds offerings at competitive price points. U our prior innovations of Blaze Insta hot water product or indeed the 24:51 24 minutes, 51 seconds undertheounter uh product or our various stainless steel products or more recently in the last quarter a range of IoT products all of them help upgrade the consumer from mid price to premium. 25:02 25 minutes, 2 seconds As a result, we saw a very very strong growth in a premium portfolio as well. I think as Gor mentioned earlier in his remarks in his opening remarks, I think 25:11 25 minutes, 11 seconds we are the only brand in this category that has a very balanced portfolio across price points, across propositions and we've brought all of that to bear in 25:19 25 minutes, 19 seconds driving growth uh last quarter across price points. Uh on your second question uh I think we were fortunate to see both 25:27 25 minutes, 27 seconds a double-digit growth in volume and in value. So there was there was no dispersion or no material dispersion between volume and value growth. 25:37 25 minutes, 37 seconds Understood. Sir and secondly on servicing uh would you be able to share some uh comments on uh since we're ramping up the servicing portfolio uh 25:46 25 minutes, 46 seconds how is the filter production inventory management and is there any input element on this filteration side and as we see more bookings coming up uh are we 25:55 25 minutes, 55 seconds have enough service people or are we uh required for any further investment in this category 26:03 26 minutes, 3 seconds Ash that's a really good question and let me answer both parts of it I I think first of all given the growth that we are seeing in a product business and as 26:11 26 minutes, 11 seconds the category penetration grows expanding our service network and growing our service capacity is an ongoing work stream uh that will continue in the foreseeable future. 26:22 26 minutes, 22 seconds Uh we have a very large and a very very uh I think capable and a very solid uh uh network of business partners and 26:29 26 minutes, 29 seconds technicians uh in our existing markets and we intend to strengthen a partnership with them. But as the markets grow and as the as the 26:37 26 minutes, 37 seconds categories grow, we will need to ramp up our network of partners and technicians and that like I said is an ongoing effort. Number one. Number two in terms 26:45 26 minutes, 45 seconds of your question about imports etc. Uh all our manufacturing of filters etc is done inhouse. Uh we have two factories 26:53 26 minutes, 53 seconds as you know one in Gadun, one in Bangalore and it's all done inhouse. We have abundant capacity to accommodate for filter growth in the foreseeable 27:00 27 minutes future. Uh the third point around filters and it's important to underline this is that there's a lot of work that we've done uh and you'll see a lot more 27:09 27 minutes, 9 seconds of that in the near future as well on filter innovation to make sure that we are uh you know having very clearly 27:17 27 minutes, 17 seconds differentiated products uh across a filter range and relevant for different parts of the country. So for example um 27:26 27 minutes, 26 seconds we have a filter uh called ironail which removes iron from groundwater and from the water source and that's very 27:34 27 minutes, 34 seconds relevant in markets in the eastern part of the country. Uh uh last quarter we had launched a HMR cartridge which is heavy metal removal cartridge which 27:42 27 minutes, 42 seconds again is relevant in many markets where you have issue of heavy metals markets like Bihar, markets like UP, Chhattisgarh etc. So that's an example again of filter innovation and we'll 27:51 27 minutes, 51 seconds continue to do a lot more of these innovations to make sure that we offer differentiated and relevant filters for different parts of the country. Lastly 28:00 28 minutes on filters I mentioned that earlier also uh in order to make sure that these filters reach the consumer we are 28:09 28 minutes, 9 seconds strengthening our network of distributors and and partners. Uh I think it's important to call out that 28:16 28 minutes, 16 seconds historically we've been focused a lot more on AMC's and we haven't really had the same distribution outreach and filters as as required and this filters ecosystem is a very different ecosystem. 28:29 28 minutes, 29 seconds Um and uh therefore this new network of distributors that we've created and are strengthening will help us reach this 28:36 28 minutes, 36 seconds large large network of the the afterm market uh with technicians who who are not employed with us and not working with us but who service customers 28:44 28 minutes, 44 seconds nevertheless. So all of these put together uh will will help us really um uh realize and leverage uh the vast 28:54 28 minutes, 54 seconds opportunity which lies in tapping into the base of customers who um who don't sort of use our AMCs. I don't avail right now. 29:05 29 minutes, 5 seconds Uh thank you sir for this elaborate answer. Uh wish you all the best. I'll join the question cube. 29:14 29 minutes, 14 seconds Thank you. Our next question comes from the line of Mahul Desai from JM Financial. Please go ahead. Yeah. Hi sir. Uh thanks for taking my question. 29:24 29 minutes, 24 seconds So my question was more on the AITA margin side. Obviously you did allude to the fact that gross margins will uh remain rage mount and you also 29:32 29 minutes, 32 seconds highlighted that you know service charges might not uh materially come down because obviously you are focusing on uh increasing the bookings uh and 29:42 29 minutes, 42 seconds that double digit booking growth will sustain. So to that extent uh and obviously growth spends also my sense is that will continue. So can you pro 29:50 29 minutes, 50 seconds provide some flavor on how do you see AIDA margins will they be also rangebound at these levels or do you see 29:57 29 minutes, 57 seconds levers for AIDA margins to improve from this 10% level at least in FI26 or should we assume that you know the 30:04 30 minutes, 4 seconds margin expansion will be more seen in FI27 when the service revenues uh start kicking in? 30:13 30 minutes, 13 seconds Yeah uh thank you M for the question. 30:15 30 minutes, 15 seconds No, I think uh just for inance clarity, we continue to aim for growth and margin 30:23 30 minutes, 23 seconds expansion on a full year basis. Uh I think that is something which we have set out as an agenda and we continue to remain focused on that. So that's part 30:31 30 minutes, 31 seconds one. Part two in terms of uh what are the drivers that are available to us, I think first is going to be operating 30:39 30 minutes, 39 seconds leverage. With a gross margin profile like ours, growth automatically leads to an operating leverage. So that is something which will continue to be 30:46 30 minutes, 46 seconds there. The second element that is there is going to be to drive cost efficiencies uh in terms of wherever we 30:53 30 minutes, 53 seconds find opportunities that is something that we will keep working on. And you know if I were to kind of correlate these two with let's say our Q1 31:01 31 minutes, 1 second performance in some ways. Uh we are in a situation where the Q1 margins on a year-on-year basis are down by 46 basis 31:08 31 minutes, 8 seconds points. But this is after absorbing additional growth investments of 66 basis points and this is after absorbing 31:17 31 minutes, 17 seconds a nearly 80 bits on higher service charge. Yeah. So it just tells you that intrinsically the margin profile is quite quite strong and hence we believe 31:26 31 minutes, 26 seconds that we've got enough and more levers uh you know which are there uh to help achieve the ambition of driving a full year margin improvement. There should be 31:34 31 minutes, 34 seconds absolutely no doubt whether the margin expansion agenda is being pushed to FI27. Certainly not. It very much remains part of the ambition for FI26. 31:45 31 minutes, 45 seconds Got it. Got it. And when you say uh operating leverage, obviously your two big line items are you know your advertisements and sales promotion 31:53 31 minutes, 53 seconds expense and then the other big line item service charge. Uh so I mean I'm I was assuming that you know ESP spends as a 32:01 32 minutes, 1 second percentage of to sales might not come down in FI26 but uh is service charge is where you will still see uh an operating 32:09 32 minutes, 9 seconds leverage kicking in even when you are going for a double-digit booking flow. 32:15 32 minutes, 15 seconds So maybe it may not come in service charge because I think service bookings is something where we we we feel that there will be sustained double digit growth. But the other big lines which 32:24 32 minutes, 24 seconds are there where operating leverage will come uh employee cost for us it is a 300 growth plus line. If you look at quarter 32:31 32 minutes, 31 seconds one our employee cost increase has trailed revenue growth. 32:36 32 minutes, 36 seconds Even within other expenses if you were to look at there is one element which is advertisement and sales promotion. But outside of that there are other expenses 32:44 32 minutes, 44 seconds where we continue to exercise very very strong efficiency measures. So the levers that are available to us outside 32:51 32 minutes, 51 seconds of service charge is a fairly large universe to look at and I think our our trend so far has been that on those 32:59 32 minutes, 59 seconds lines we've been able to sustainably drive operating leverage and that is something that we believe will continue as we go ahead. 33:06 33 minutes, 6 seconds Okay. Got it. Got it. Thank you so much for this. 33:11 33 minutes, 11 seconds Thank you. Our next question comes from the line of Anupam Gowami from SUD Life. Please go ahead. 33:22 33 minutes, 22 seconds Mr. Anupam Gowami, your line is unmuted. Please proceed with your question. 33:27 33 minutes, 27 seconds Hi sir, uh sir, if you can just clarify uh how are we seeing the market competition now? What is our market share in this uh versus the competitors? 33:39 33 minutes, 39 seconds Okay. 33:39 33 minutes, 39 seconds And also uh sir if you could mention the service revenue if just a clarification from the previous participant if you 33:47 33 minutes, 47 seconds take the service revenue from the current liabilities that part and add it uh along with the cost should we get an 33:55 33 minutes, 55 seconds adjusted sort of feel that how the margins and service revenue are playing out. 34:01 34 minutes, 1 second Would that be a correct approach? That is all. 34:11 34 minutes, 11 seconds Sorry, I'll answer the first question and then I'll request Gorav to clarify on your second query. 34:18 34 minutes, 18 seconds Um, as you as you've mentioned and as I'm sure everyone has noticed, there has been uh a significantly increase 34:27 34 minutes, 27 seconds increased competitive activity in this category. 34:30 34 minutes, 30 seconds Um and uh that's a number of brands that have either entered or scaled up the presence in the last few months. 34:40 34 minutes, 40 seconds We believe that this is an extremely positive development for the category. 34:46 34 minutes, 46 seconds Entry of new players uh and new entrance with new communication, new innovations 34:54 34 minutes, 54 seconds all signal that they all believe that there is promise and potential in this category. number one. Number two, they they create more awareness about the 35:03 35 minutes, 3 seconds category. They create more interest in the category and more levels of visibility. So all of these will help stimulate and drive category growth 35:11 35 minutes, 11 seconds further. And as as the largest and the strongest brand in the water purifier category, Aquagard will stand to benefit as the category grows and expands. 35:21 35 minutes, 21 seconds Um we have been very very cognizant and very very watchful of the evolving competitive activities and we've been 35:30 35 minutes, 30 seconds very very swift to respond and to to to to take action as required. We stepped up our activation and our innovation efforts across different spaces in EWPs. 35:42 35 minutes, 42 seconds I mentioned earlier in one of my remarks that we have scaled up the twoear life products. We've also scaled up the range of our smart IoT enabled products. We've 35:51 35 minutes, 51 seconds also done a number of other things across all channels whether it is in modern trade or in traditional trade or indeed in e-commerce. We've been very 35:58 35 minutes, 58 seconds very aggressive and very very forceful in in our response. You'll be happy to know that uh notwithstanding the 36:06 36 minutes, 6 seconds increased uh competitive activity, our market share has uh not not not gone down. has remain absolutely unchanged 36:15 36 minutes, 15 seconds and we feel confident about about that going forward as well. 36:19 36 minutes, 19 seconds Yeah. Uh and on your second question uh just to get my understanding right what you're what you're saying is that all 36:28 36 minutes, 28 seconds you're trying to understand is that you know if you were to add the current liability part would that be a reflection of revenue? No, that may not 36:35 36 minutes, 35 seconds be the right way because this is a this is a ruling thing you know. So there is a particular balance as it stands at each each period end then you sell fresh 36:44 36 minutes, 44 seconds AMC's and there is then a fresh you know CL and noncl bifocation that happens because some of the pasts also expire. 36:52 36 minutes, 52 seconds So this is something which is an ongoing feature and hence looking at a standalone balance on a particular balance sheet date and taking that as a 37:00 37 minutes view that may not be the right way to look at it. I think a good surrogate in some ways it may not be exact would be 37:07 37 minutes, 7 seconds to maybe keep looking at the service charge line that gives an indication although I must call out service charge has got two components one is revenue 37:15 37 minutes, 15 seconds related and one is just the cost of servicing uh but I think the balance sheet approach may not be the may not give the exact answer or or even an 37:24 37 minutes, 24 seconds approximate answer in some way 37:30 37 minutes, 30 seconds I got it sir service cost as a uh cost just you know just a clarification on 37:38 37 minutes, 38 seconds that s I'm so sorry but there are several other participants waiting for their time thank you so much sir 37:47 37 minutes, 47 seconds our next question comes from the line of Mr. Ashel Rohare from Nwama Institutional Equities. Please go ahead. 37:55 37 minutes, 55 seconds Yeah, good afternoon sir. Thank you for the opportunity. Uh sir, if you could clarify in terms of the uh you know in 38:02 38 minutes, 2 seconds terms of uh what kind of installations we have at this point in time and how much is the penetration of the service 38:09 38 minutes, 9 seconds um operating uh for us uh at this stage and what could be the potential I mean if you were to paint a blue sky scenario 38:19 38 minutes, 19 seconds what would be that number in terms of penetration uh just a just a broad sense on the game. 38:26 38 minutes, 26 seconds Um Achel good afternoon uh thank you for your questions. Um in response to your first question about what is our uh 38:34 38 minutes, 34 seconds installed base um we have I'm happy to share with you uh that we have an 38:41 38 minutes, 41 seconds installed base in water purifiers of u you know almost 14 million customers uh and that has grown year after year. 38:51 38 minutes, 51 seconds Um notwithstanding that um the reality is that the category of water purifiers has a very low 39:00 39 minutes penetration of 6%. And earlier in the call I had talked about several neighboring countries 39:08 39 minutes, 8 seconds u not very different from ours in many cases who have much higher levels of penetration whether it is a 20% or a 60% or a 25%. 39:18 39 minutes, 18 seconds uh and there is no reason to believe that uh penetration in India could be any less. If anything the groundwater 39:26 39 minutes, 26 seconds quality in India that that we see that tells us that the relevance of water purifiers is even more is near 39:34 39 minutes, 34 seconds universal. I would I would uh draw your attention to the recent report by the central groundwater authority and which shows the water quality in different 39:42 39 minutes, 42 seconds parts of the country having deteriorated over the years and the fact that it you know groundwater in different parts of the country has traces of nitrates 39:51 39 minutes, 51 seconds arsenic pesticides heavy metals so this is a universal problem and therefore this category has universal relevance 39:59 39 minutes, 59 seconds and universal need whether it is in top down top urban India or whe it's in small town urban India or rural and we 40:07 40 minutes, 7 seconds have absolutely no doubt that as consumer awareness grows as affordability increases and as people 40:13 40 minutes, 13 seconds like us as category leaders we attack these category barriers we will see growth come by 40:21 40 minutes, 21 seconds two years back and maybe this is a bit of a flashback but two years ago uh when we had begun the transformation we were 40:30 40 minutes, 30 seconds asked this question repeatedly by people that the water purify category actually hadn't grown in the preceding four five years. And the question to us was what 40:38 40 minutes, 38 seconds gives it conviction that the category will grow. You have seen the growth over the last 7 8 quarters of water purifiers 40:45 40 minutes, 45 seconds growing by double digits both volume and value. We have seen the momentum sustain and continue and we have absolutely no 40:54 40 minutes, 54 seconds doubt as you look at all the data points. Uh our own consumer insight data the macro data we know that this 41:02 41 minutes, 2 seconds category will uh will will will have a penetration expansion penetration growth uh which will sustain over the next many 41:10 41 minutes, 10 seconds many many years. Um so I I mean I I don't want to put a blue sky number to Was never 100% penetration because that's the relevance in this country. 41:19 41 minutes, 19 seconds There is no consumer in this country who does not meet this category. That's on water. Let me now let me now let me switch gears and talk about vacuum 41:26 41 minutes, 26 seconds cleaners. Again, this category was felt was perceived to be one of absolutely no relevance or very low relevance. 41:33 41 minutes, 33 seconds However, the onset of convenient cleaning and especially robotics has changed the paradigm completely. In a 41:39 41 minutes, 39 seconds country like India, which is uh urbanizing rapidly and which is time starved and time scarce, something that 41:48 41 minutes, 48 seconds removes the burden of cleaning is extremely relevant and we are seeing that reflect in our robotics growth. And as I mentioned in my opening remarks, we 41:56 41 minutes, 56 seconds we we took a bet on this category very early on two and a half years back and we are seeing those results now come by. 42:03 42 minutes, 3 seconds Uh so whether it is cleaning or indeed earlier water, we see the the runway for growth being tremendous. 42:14 42 minutes, 14 seconds Sorry. uh sir uh on the service part of it you know the u uh where the AMC's are uh taken up by the customer out of these 42:22 42 minutes, 22 seconds 40 million customers what is the penetration at this stage and what kind of number would be would be more of a 42:29 42 minutes, 29 seconds fair number uh you know let's go five years or 10 years whatever you feel appropriate 42:36 42 minutes, 36 seconds yeah and no thank you that's a really good question and that again I think that question and you know that illustrates um the sheer the sheer 42:44 42 minutes, 44 seconds runway and the sheer opportunity that we have ahead of us. So out of this installed base that we have the large 42:51 42 minutes, 51 seconds installed base of Aquagard only a very small proportion of these these these customers avails 43:01 43 minutes, 1 second and avail organized services a larger part of um of the installed base avails 43:08 43 minutes, 8 seconds of either the service or the filters from the unorganized parallel market and our research shows that most of this purchase happens unknowingly. 43:20 43 minutes, 20 seconds Let let me let me let me rephrase that. 43:23 43 minutes, 23 seconds Most non-users of Aquagard EMC's believe erroneously, believe mistakenly 43:31 43 minutes, 31 seconds that they are availing of genuine Aquagard services and very often paying the same amount. So it's a question of 43:38 43 minutes, 38 seconds information asymmetry and knowledge asymmetry. So therefore as we drive awareness of genuine AMC's, genuine 43:46 43 minutes, 46 seconds filters, as we drive filter differentiation, as we drive our own goto market becoming stronger, as we drive digital love, we will see a much 43:55 43 minutes, 55 seconds larger share of this installed waves coming under the amit of our service offering. Um and one one reflection of 44:03 44 minutes, 3 seconds of that that that runway is the growth that we saw last quarter in service revenues. We like I said earlier we saw we saw a double- digit growth in service 44:11 44 minutes, 11 seconds bookings and we expect the momentum to sustain in the period in the future. So uh going back to your first part of the 44:18 44 minutes, 18 seconds question low penetration in product categories tremendous runway for growth low penetration of the installed and service tremendous runway for growth. 44:27 44 minutes, 27 seconds Yeah so really what we what lies ahead of us is an extremely exciting uh period of multiple opportunities. 44:36 44 minutes, 36 seconds Got it. The second question I had was with respect to uh you know the seasonality part of it. So if I see you 44:43 44 minutes, 43 seconds know um uh in the first quarter we have had a slight on a reported basis I'm not looking at the adjusted a bit at this 44:50 44 minutes, 50 seconds stage. Uh there was uh the margin was stable actually y uh at 10.1%. 44:58 44 minutes, 58 seconds So given what we are looking at in terms of the um uh service growth u would you 45:06 45 minutes, 6 seconds say that you know like you said 4q it will stabilize right for 2q and 3q could we see margins remaining stable offsetting the entire operating leverage 45:15 45 minutes, 15 seconds of the product mix if you could just give some clarity because if I look at the eida growth for the first quarter on a reported basis is 9%. Right? While bad 45:25 45 minutes, 25 seconds growth is 20%, helped by the other income. So just wanted a bit of a color on that 2Q and 3Q margins. You know, 45:32 45 minutes, 32 seconds could we see margins uh being stable? Uh y given the offset. 45:39 45 minutes, 39 seconds Uh so Archel I I'll just reiterate the principle that you know we are we are aiming for a full year margin improvement and and obviously that would 45:48 45 minutes, 48 seconds mean that you know for a full year margin improvement to happen uh that would be a journey which would need to span across quarters on a reported basis 45:56 45 minutes, 56 seconds you're absolutely right our margins are flat on a year-on-year basis uh and our expectation and our plan is that to 46:03 46 minutes, 3 seconds drive a fullear margin improvement uh there would be a need to keep driving margins ahead uh of of the previous year and the 46:11 46 minutes, 11 seconds balance 9 months. So that is what our ambition is. Uh again just to reiterate uh the fact that in our business 46:19 46 minutes, 19 seconds operating leverage plays a very very critical role with a gross margin profile which is nearly 60 60%. That has 46:26 46 minutes, 26 seconds a very large role. The second element is that our agenda on cost efficiencies that is something which continues. So our focus will remain very much on that 46:34 46 minutes, 34 seconds and we remain uh you know we we remain uh to our ambition of driving a full year margin improvement. 46:45 46 minutes, 45 seconds Got it. I I'll fall back in. Thank you so much. Thank you. 46:51 46 minutes, 51 seconds Our next question comes from the line of Parikit Kabra from PKD Advisors LLP. Please go ahead. 46:59 46 minutes, 59 seconds Hi, thank you for the opportunity and congratulations on a steady set of numbers. Uh I wanted to understand from the revenue perspective for the services 47:06 47 minutes, 6 seconds uh line uh I think you said that the margins will start improving by Q4 but the revenue growth rate should start coming sooner rather than later. 47:18 47 minutes, 18 seconds Appreciate what we mentioned is that the reflection of the bookings uh bookings growth that is happening now the reflection of that in revenue will start 47:27 47 minutes, 27 seconds happening from quarter 4. Now the implication of that is that the moment it starts landing as revenue that also then means it starts flowing into margins as well. 47:38 47 minutes, 38 seconds But why would it take uh so many quarters for it to to come up in the revenues? You said just straight line method, right? you'll start seeing it from uh immediately the next month. 47:50 47 minutes, 50 seconds No. So there is there is a straight line method where you know the revenue for what you've sold now that gets recorded in every single month from the first 47:58 47 minutes, 58 seconds month itself. But what you are carrying forward are the past EMC's where some of them lapse. So they go away and you have 48:06 48 minutes, 6 seconds a fresh booking that happens for which the for which the revenue gets recorded. 48:12 48 minutes, 12 seconds Got it. Got it. So then let me put it this way. uh will we be seeing doubledigit revenue growth from Q4 based on current trajectory? 48:22 48 minutes, 22 seconds As I mentioned service will the impact of service bookings will start getting reflected in our revenues meaningfully 48:29 48 minutes, 29 seconds from quarter 4. So currently you see service being a lag on the overall growth and it's a it creates a fairly 48:38 48 minutes, 38 seconds large lag at this point in time that will start coming closer and converging from quarter 4. 48:44 48 minutes, 44 seconds Okay. Thank you. Thank you. Thank you. 48:51 48 minutes, 51 seconds Our next question comes from the line of Dilwani from Gir Capital. Please go ahead. 48:57 48 minutes, 57 seconds Uh hi thank you for the opportunity. uh just uh wanted to ask one question uh like on slide 20 of the presentation we have given the weighted growth rates uh 49:07 49 minutes, 7 seconds expected so if we take a weighted average of our product portfolio it comes to around 13 13 and 12% growth rate for uh the projected period so uh 49:16 49 minutes, 16 seconds but despite that like in Q1 which is like a seasonally strong quarter we have done only a 10% growth so how confident 49:23 49 minutes, 23 seconds are we of achieving the numbers uh stated like the category growth rates 49:30 49 minutes, 30 seconds So I think uh just to clarify u what we what you see on slide 20 is an estimate of the total category and total 49:39 49 minutes, 39 seconds market. Uh and we what we are showing is that uh the total market size would be 49:46 49 minutes, 46 seconds 23,000 crores at a ker of 13%. Uh so that's the reflection of the category size and the category growth momentum. 49:54 49 minutes, 54 seconds Um coming back to your question about quarter 1, I think it's important to once again underline and remember that 50:00 50 minutes quarter 1 was a challenging period in part because of um because of uh you know soft consumer demand sentiment but 50:09 50 minutes, 9 seconds also because of the headwinds which the cooling category faced because of unseasonal rains, the compressed summer 50:16 50 minutes, 16 seconds and the mild summer. And in some ways our category was collateral damage uh as part of that headwind because trade 50:24 50 minutes, 24 seconds inventory was stuck um and the fact that there was working capital stuck which impacted velocity impacted other categories. So that's the first point. 50:35 50 minutes, 35 seconds The second point is that if you double click on the growth that we've had uh while the reported growth was 9.9%. 50:41 50 minutes, 41 seconds We've said clearly that our product business grew actually by double digits both in volume and in value. Uh and in a 50:50 50 minutes, 50 seconds otherwise challenging environment growing double digits was something that we were extremely encouraged by especially because of growth came on the back of volume expansion and volume 50:58 50 minutes, 58 seconds growth. So I would imagine that uh that the longerterm projection of the category growth that you see on slide 51:05 51 minutes, 5 seconds number 20 u they remain. If anything, I believe that in some categories, you' see faster growth and higher category 51:13 51 minutes, 13 seconds size. So, for example, to illustrate uh vacuum cleaner category, um it talks about uh the category becoming 1,500 crores by FI30 from 500 crores in FI23. 51:26 51 minutes, 26 seconds Add a keer as you can see on the screen there of 17%. I can tell you that uh with robotics going the way it is, we 51:33 51 minutes, 33 seconds are seeing that momentum already being surpassed and we expect that to sustain going forward. So we expect to see the VC vacuum cleaner category become much 51:42 51 minutes, 42 seconds much larger in the FI30 time period compared to what you see here. So if anything I would like you to uh go away 51:50 51 minutes, 50 seconds with a with a with a conviction that what you see on slide number 20 is a modest conservative estimate and both in 51:57 51 minutes, 57 seconds water purifiers and in cleaning you will see growth that will surprise us all. 52:04 52 minutes, 4 seconds Okay. Uh and uh just a follow up on it uh like uh we have on slide 16 given the details on the contribution of online to total AMC booking which stands at 64%. 52:16 52 minutes, 16 seconds So at what margin and what like by when we can like we expect the margin uh that contribution to stabilize. 52:27 52 minutes, 27 seconds So uh I think just to give a reference the contribution of online earlier used to be roughly 10 to 12% and has now gone 52:35 52 minutes, 35 seconds up to 65%. Uh from a profitability profile it is not very different from what we would have in offline. uh I 52:42 52 minutes, 42 seconds think the important part to call out on on is the rationale of this strategic initiative. What online does for us is 52:50 52 minutes, 50 seconds an ability to get customer attention to be better because with an online thing there are multiple you know I could prompt a customer I could send 52:58 52 minutes, 58 seconds notifications on app I could alert the customer so there's a bunch of things that I could do with the customer and that is why it becomes very very 53:05 53 minutes, 5 seconds critical from a strategic standpoint as far as customer retention is concerned from our perspective our ambition would be to take this number as as high as 53:14 53 minutes, 14 seconds possible so we've had over the last two two and a half years a journey from 8 to 10% which today is now 2/3. Our ambition 53:22 53 minutes, 22 seconds would be to to keep increasing this numbers as we go along uh because it helps in customer it helps in customer retention. 53:31 53 minutes, 31 seconds Okay, thank you. 53:35 53 minutes, 35 seconds Thank you. Our next question comes from the line of Netic from NV Alpha Fund. Please go ahead. 53:42 53 minutes, 42 seconds Hi sir. uh I just wanted to know uh you know uh what was the services uh revenue growth if I if I were to compare it uh 53:49 53 minutes, 49 seconds year-over-year um during this quarter this quarter. 53:55 53 minutes, 55 seconds Hi Net. So uh the service bookings growth that we've reported is a double-digit growth in in value 54:02 54 minutes, 2 seconds underpinned both by volume and ASP. As far as the service revenue growth is concerned, uh we constrained on sharing 54:10 54 minutes, 10 seconds that for the reason that the AMC business is something which is unique to us. Uh in our view, it is a source of competitive advantage and a competitive 54:18 54 minutes, 18 seconds mode because we have a very wide service network. So we don't share that split. 54:24 54 minutes, 24 seconds Uh however, I can share that at the big picture level, uh service is one/ird of our business. uh and you know uh as as 54:33 54 minutes, 33 seconds an important source of profitability for us but uh we beyond that we don't really share data points on service 54:41 54 minutes, 41 seconds right uh so okay sir uh then in terms of product revenue to say our growth why why it was just about double digits then 54:49 54 minutes, 49 seconds in that case it is not just about double digits it is it is more than more than just about 54:58 54 minutes, 58 seconds double digits because if the aggregate itself is coming to 10%. And service is under index which is one/ird of the business then by implication product becomes a higher growth. 55:10 55 minutes, 10 seconds So just for clarity it's not that the product business is a is a 10.1 or a 10.2% growth business. It is higher than that. Let me put 55:18 55 minutes, 18 seconds what I meant is what I meant is 11 12% not uh say 10% but about 11 12%. 55:26 55 minutes, 26 seconds Yeah, I think I think we've been very clear uh I think in our all our comments so far the product business grew in 55:33 55 minutes, 33 seconds double digits. It wasn't as GK as said marginally over 9.9 or 10%. It was a decisive double digit growth both in 55:41 55 minutes, 41 seconds volume and value. Beyond that I don't want to debate and pinpoint a number but I think you should walk away knowing that it was very clear double-digit growth. 55:52 55 minutes, 52 seconds Uh thank you. And I think just one last point to add that you know in a in a in an annuity business like EMC uh the 56:00 56 minutes critical lead indicator is bookings because that then gives you an assured revenue stream for the future. Your cash flow has all come in up front. You've 56:08 56 minutes, 8 seconds taken in the cost up front. Uh it's just a question of timing of recognition of revenue. So from our perspective we look at bookings as a as an important lead indicator. 56:18 56 minutes, 18 seconds God very clear. Thank you. 56:22 56 minutes, 22 seconds Thank you. Our next question comes from the line of Kesha Lahoti from HDFC Securities. Please go ahead. 56:30 56 minutes, 30 seconds Hi, thank you for the opportunity. So, what was the ad spend in Q1 as a percentage of sales and what is the budgeted spend for this year? 56:41 56 minutes, 41 seconds So as far as pens for the year are concerned uh Kesha we we we will continue investing for growth uh because 56:49 56 minutes, 49 seconds we've got a bunch of innovations which we've launched uh our bet on robotics has moved quite well and hence we will 56:57 56 minutes, 57 seconds keep investing for growth. We're also very cognizant of the fact that the market is in a bit of a challenging condition. We don't want to in a in a 57:04 57 minutes, 4 seconds market like this constrain ourselves but we'll keep investing for growth. Having said that we will be choiceful and calibrated about you know the spends that we do and where we get maximum ROI. 57:16 57 minutes, 16 seconds So that is the balancing that we will keep doing and and also keeping in mind what other cost efficiencies we are able to drive so that our ambition of 57:24 57 minutes, 24 seconds achieving a fullear margin improvement uh is also on track. Uh as far as the 57:31 57 minutes, 31 seconds quarterly number is concerned again uh we've maintained our spends at elevated levels uh versus last year we've taken 57:39 57 minutes, 39 seconds up our spends in absolute terms uh and and that is something which going ahead is something that we will continue doing but within the guardrails that I mentioned earlier. 57:51 57 minutes, 51 seconds Can I can I just add to that? Let me let me just add to that Kisha. Um I think look uh our advertising and promotion 57:59 57 minutes, 59 seconds expenses serve two objectives. First one and very important for our categories is consumer education and category 58:06 58 minutes, 6 seconds creation. So driving awareness, driving behavior change and the second one is about making sure that our innovations 58:14 58 minutes, 14 seconds that we have done reach the consumer. So driving awareness and and penetration driving our innovations. Uh I also draw 58:21 58 minutes, 21 seconds your attention to what you may have seen in the last month, month and a half, two months which is a very very dialed up visibility both in print and on 58:29 58 minutes, 29 seconds television to some of our campaigns. So for example uh the in the very exciting India England test series you would have seen our advertising on the 2-year 58:37 58 minutes, 37 seconds filter life. You may have seen in in in multiple newspapers our print ads on again the two-year products as also the 58:45 58 minutes, 45 seconds robotics products and you'll see that sustained o over time. So driving penetration and awareness and driving a premium innovation will be the agenda 58:53 58 minutes, 53 seconds that that you will see us do. In addition, we also have a task on service and you will see us driving awareness around service as well. Um lastly, uh 59:02 59 minutes, 2 seconds it's it's very very important that we bring this alive at the point of sale. 59:07 59 minutes, 7 seconds So the shopper marketing and the point of sale activation those work work areas will also get a lot of focus and indeed if you go to the market now you will see 59:16 59 minutes, 16 seconds a much much higher level of visibility around the products in in in the retail stores. So all of these will be genuine areas of investment for us and all serving the objective of driving growth. 59:29 59 minutes, 29 seconds Okay got it that is helpful. One last question from my side as we starting to see you know finally the service business is growing by double digit in 59:38 59 minutes, 38 seconds working terms. Uh what is your sense possibly maybe a few quarters down the line whether the service business can catch up the growth rate what the product business is doing? 59:50 59 minutes, 50 seconds Yeah. So the reflection of the bookings will start coming in from quarter 4 and I think that will from that period 59:58 59 minutes, 58 seconds onwards we expect the service business which currently creates a lag on the overall growth uh you know for that gap 1:00:06 1 hour, 6 seconds to start getting uh getting lower and lower. So you will start seeing uh the impact of growth coming in from quarter 4. 1:00:16 1 hour, 16 seconds U got it. My question is more on the you know the product business is still growing by good double digit what you highlighted possibly the service business maybe few quarters down the 1:00:25 1 hour, 25 seconds line we should expect a similar growth on this business also at least in booking terms. 1:00:31 1 hour, 31 seconds U so yes I think given the line of sight that we have I think we are quite confident that the service business will 1:00:38 1 hour, 38 seconds grow in booking terms and value on a on a double- digit basis. So that is something that we we are fairly confident about. 1:00:47 1 hour, 47 seconds Okay, sure. That's it. That's it. 1:00:51 1 hour, 51 seconds Thank you. Ladies and gentlemen, we will take that as a last question. I now hand the conference over to the management for closing comments. 1:01:01 1 hour, 1 minute, 1 second Uh thank you uh and thank you all for joining the call today. Uh I hope that you're able to answer the questions that you posed to us. Um in case there are 1:01:11 1 hour, 1 minute, 11 seconds any follow-up queries or any doubts uh please do feel feel free to reach out to us uh and we'll be happy to respond. Uh 1:01:19 1 hour, 1 minute, 19 seconds thank you uh have have a great day ahead. Thank you. 1:01:27 1 hour, 1 minute, 27 seconds On behalf of Eureka Phobes that concludes this conference thank you for joining us and human out of connect your