Havells India Limited — Q3 FY24

HAVELLS Q3 23/24 Earnings Conference Call https://stockanalysis.com/quote/nse/HAVELLS/transcripts/345793-q3-23-24/ Published: sourced from public earnings transcript

Operator Ladies and gentlemen, good day, and welcome to the Q3 FY 2024 earnings conference call of Havells India, hosted by DAM Capital Advisors Limited. 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 concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Bhumika Nair from DAM Capital Advisors. Thank you, and over to you, ma'am. Bhoomika Nair Executive Director, Research, DAM Capital Advisors Limited ... Of Havells India Limited. We have the management being represented today by Mr. Anil Rai Gupta, Chairman and Managing Director, Mr. Rajesh Kumar Gupta, Whole-time Director, Finance, and Group CFO, Mr. Ameet Kumar Gupta, Whole-time Director, and Mr. Rajiv Goel, Executive Director. At this point, I'll hand over the floor to Mr. Anil Rai Gupta for his initial remarks. Post which, we can open the floor for Q&A. Over to you, sir. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Good morning, everyone. I wish you all a very happy new year. Thank you for attending the call today. Hope you would have received and reviewed the results by now. Sustained infrastructure spends lead the growth in the B2B category. We participated this quarter in several marquee projects through professional lighting. Proud to share that the lighting solutions illuminated at Shri Ram Mandir in Ayodhya were done by Havells. Lighting delivered a strong volume growth in this quarter. However, price deflation continues to be a significant drag impacting the value growth. Small domestic appliances category benefited with festive demand. Higher base in fans led to muted growth in the ECD segment for the quarter. With the transition now behind us, we expect normalcy in demand markets, and the summer season should augur well due to the low quarter, low base in the last quarter as well. Lloyd, with 18% two-year growth, approaches ensuing season with confidence to leverage on its strengths for further growth. Segmental contribution margins have improved. However, segment results are impacted due to high A&P spends. During the quarter, we have formed a subsidiary in the U.S., with plans to distribute HVAC in U.S. markets, which is one of the steps towards forming a base for exports in the developed market. Despite muted consumer demand, we carried on with brand and talent investments, which remain the cornerstone, cornerstone for sustained growth. We can now move on to Q&A. Operator Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touchtone telephone. If 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. The first question is from Natasha Jain, from Nirmal Bang. Please go ahead. Natasha Jain Lead Research Analyst, Nirmal Bang Yeah, hi, sir. Thank you for the opportunity. So my first question is on the Lloyd segment. So can you just throw some light on how the overall demand was in terms of— Anil Rai Gupta Chairman and Managing Director, Havells India Limited Can you please come closer to the headset? Natasha Jain Lead Research Analyst, Nirmal Bang Yeah, am I audible, sir? Hello? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yes, yes. Natasha Jain Lead Research Analyst, Nirmal Bang Yeah. So my first question is on the Lloyd segment. Can you throw some light as to how the overall demand was, especially in terms of volume growth? And, was there any pent-up effect in the sales for the third quarter, and also how the pricing pressure has been, given the stiff competition there? Anil Rai Gupta Chairman and Managing Director, Havells India Limited I think, third quarter is not a very good representative because almost 65%-70% of our sales come from air conditioners, which is not a consumption quarter for air conditioners. So I would say that we would be in a much better position to answer this question about the demand scenario, the pricing, in the fourth quarter, and especially the first quarter of the financial year. So I, you know, we are quite satisfied with the fact that overall, Lloyd, in the first nine months, as we see over the last two years, we have gained market share. We have delivered a very strong, over 30% kind of a CAGR growth, which augurs well for the upcoming season. I've also mentioned that last year, the season didn't do very well because of, you know, intermittent rains. We're expecting both, for air conditioners and fans, a good quarter in the fourth quarter and the first quarter. Natasha Jain Lead Research Analyst, Nirmal Bang Understood, sir. And, in terms of fourth quarter, how would you say the shelf filling has been, especially in the GT and MT channels? Anil Rai Gupta Chairman and Managing Director, Havells India Limited At least for our brand, I would say that the shelf filling has been lower than last year, because as I said, last year there was a very high expectation of a very high season this fourth quarter, but the trade didn't see that. So I would say there was a muted enthusiasm in the trade, and also the company's strategy has also been that we will be focused more on... because of the two plants, manufacturing plants that we have, and enough capacity during the season time as well, that a lot of dependence would be on the actual consumer demand than the shelf filling. Natasha Jain Lead Research Analyst, Nirmal Bang Understood, sir. Sir, my second question is on the lighting segment. You mentioned that there was a strong volume growth. So was it driven by B2B or B2C lighting? Anil Rai Gupta Chairman and Managing Director, Havells India Limited We have seen strong volume growth both in B2B and B2C segments, but there has been a heavy price erosion in the overall last 1 year. This is now stabilizing over the last three months in terms of lighting. So if you see year-to-year, yes, there has been volume growth, but value degrowth. Natasha Jain Lead Research Analyst, Nirmal Bang But then margins have improved significantly, I mean, by 153 basis points on a YOY basis. Can you just throw some light why that happened? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Overall, last year, our margins were impacted due to the fire that we had in the lighting manufacturing unit. But also, you know, the company's focus has been to take projects which are not just based on pricing, but based more on innovation as well as in the consumer sector. So we are seeing margin improvement, but also coming back to normalized levels as well. Natasha Jain Lead Research Analyst, Nirmal Bang Understood, sir. Lastly, in terms of wires and cables, surprisingly, there has been a margin decline here. So why is that so? If you could also particularly highlight which segments saw higher ad spends. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Well, actually, the ad spends were spent on all these businesses. Overall, we are happy with the fact that, product to product, we have seen improvement in contribution margins. It could be also because of the product mix that sometimes the margins are affected. But if you see contribution margins, we are seeing improvement in businesses. Overall, EBITDA margins are, you know, muted because of the higher ad spends in the quarter, which will get normalized in the coming times. Natasha Jain Lead Research Analyst, Nirmal Bang And so you said product mix has led to, declining margins for wires and cables. Am I right? Anil Rai Gupta Chairman and Managing Director, Havells India Limited I'm sorry. Natasha Jain Lead Research Analyst, Nirmal Bang Sir, for wires and cables, you said the product mix has led to declining margins, right? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yes. Natasha Jain Lead Research Analyst, Nirmal Bang Understood. Thank you so much, sir. Operator Thank you. The next question is from the line of Rahul Aggarwal from InCred Equities. Please go ahead. Rahul Agarwal Director within the Private Client Group, InCred Capital Hi, good morning. Thanks for the opportunity. Sir, two questions. Firstly, on consumer demand, you know, mainly on the residential real estate side, we see premium and luxury doing well in urban areas across the country. You know, how far do you think we are before this should start contributing to Havells' top line? You know, because I'm sure that, you know, light, fans, switches are being bought by these apartments, and, and I'm assuming that factories, warehouses, anyway, are contributing better. That's the first question. Anil Rai Gupta Chairman and Managing Director, Havells India Limited So I think, overall, if you see, you're actually right, that we are seeing good traction in the residential segment, especially on the premium side. But as you can see that the premium side is more in the urban areas, and there we're seeing good traction. We have seen in the last one or two years, some slowness in demand from the B2C areas as well as residential areas. We do believe that it is more because of an inflationary impact, because the raw materials have been on a high over the last couple of years, which have now started abating. And I think, you know, the deferred purchases from this geography, I think will start kicking in from the coming times. So overall, the residential business and the consumer business will also start having decent growth. Rahul Agarwal Director within the Private Client Group, InCred Capital So we should expect like, you know, starting summers next year, obviously, the base is also in favor. Next year should look better for B2C versus B2B, right? Purely from a growth perspective. Anil Rai Gupta Chairman and Managing Director, Havells India Limited I think the B2B investments would continue to grow because we've seen high spend from the government sector. We have now started seeing, you know, investment in the private capital as well. So that also will have its own journey on growth. But yes, you are right, we will, it will start seeing in the summer improved B2C as well. Rahul Agarwal Director within the Private Client Group, InCred Capital So secondly, on new CapEx, you know, all three segments, cables, lighting and wash, you know, ref, I think. So cables, we are investing INR 300 crore, three and a half lakh kilometers. Just wanted to know what's the sales potential here, and how... You know, what's the gestation period to reach 90% utilization from the south plant? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Overall, in the underground cables business, we believe that we are increasing our capacity by about 25%. Domestic wires is also increasing, but that also is led by demand, and we are putting in a facility to cater to the southern markets. So overall, but where there is a capacity constraint, which is underground cables, we are seeing a 25% jump in capacity expansion. On the refrigerator side, the plan is for the manufacturing plan is still under evaluation, and we will come back to you when once it is formalized. Rahul Agarwal Director within the Private Client Group, InCred Capital So that's not started, you know, the construction is not started on ref, is it? It's under planning, is it? Anil Rai Gupta Chairman and Managing Director, Havells India Limited That's right. Rahul Agarwal Director within the Private Client Group, InCred Capital Okay. Okay. On the lighting side, you know, what are the gaps we are filling on CapEx? You know, what are we doing there? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Pretty much, you know, what we have seen after the fire, the CapEx, which was supposed to be done, has been done, and so most of the production has now come in-house. Rahul Agarwal Director within the Private Client Group, InCred Capital Got it, sir. Lastly, just a small question on cable and wires. Obviously, in the last two years, we have seen abnormal demand. These growth rates don't look, you know, long-term sustainable. Your sense on, you know, how does the next year look like on industry growth rate? And based on your past experience, is there a possibility of pricing or margin pressure for this segment? Because there is some understanding that some capacities are coming up, including yours, over the next six to nine months in India, and hence, that might have an impact. That's my last question, sir. Anil Rai Gupta Chairman and Managing Director, Havells India Limited I think we've seen value growth in, you know, almost 60%-65% of our business is domestic wires, which is more long-term, you know, structural in nature and, you know, because of the residential demand. And it is more brand and retail-oriented as well. So there we see that, you know, this, the strength of margins should continue in the future as well, and there we also don't have much capacity constraints. It's more of, more dependent on, you know, the brand acceptance, the distribution. On the underground cable side, while we are impacted with the lower capacity, but I don't see a major structure shift for at least a few years because we, we do believe that the investments on the CapEx will continue and, will help the cable industry, in the coming times as well. But that is still a smaller part of our overall business, but we will see improvement there as well... Rahul Agarwal Director within the Private Client Group, InCred Capital Got it, sir. I'll come back in the queue. All the best. Operator Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Bhavin Vithlani from Edelweiss MS. Please go ahead. Bhavin Vithlani Equity Research Analyst, SBI MUTUAL FUND Yeah. Good afternoon, gentlemen. And the question is on the switchgear segment, considering the low growth we have been seeing, and especially the growth we are seeing in the real estate and the building materials segment, complementary segment. So the question here is: Are we losing market share in this segment? Second, if you could talk about the capacity that we have, and if you anticipate the growth, would we be in a similar situation we are in the cable space here? Because when I look at last five years, barely any investment has gone into this segment. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Sorry, I missed you. I lost you a little bit. Can you repeat the question? Bhavin Vithlani Equity Research Analyst, SBI MUTUAL FUND Sure. So the question is on the switchgear segment, especially considering the low growth of 1% that we have been seeing for a reasonably long period, and the growth that we are seeing in the real estate segment and the building material segment, which is 15%-25%. So the question here is that, is Havells losing market share in the switchgear segment? That is one. And second, given the growth that you are anticipating in the real estate segment with a lag, or do we have adequate capacity in the switchgear, considering when we look at the segment CapEx, which has been very low for the last five years? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Well, we have been constantly monitoring our market shares in the switchgear segment also, where we believe that we have not lost market share. In fact, if you see in this particular quarter, you know, we have seen growth both in the project segment as well as the retail segment. There has been a decline in sales to a particular segment of the market, which is telecom OEM segment, where we were very strong players, but we have seen low demand in this third quarter, as well as the exports have been flat over last year. There is some weakness in our strong markets of Middle East and Africa. But otherwise, generally, in the other market, which is the retail and the project segments, we have seen growth as well as market share improvements. We do not have capacity constraints in the switchgear segment. We were constantly being added with maintenance CapEx, and there we do not see, you know, visualize any problems in the on the capacity side. Bhavin Vithlani Equity Research Analyst, SBI MUTUAL FUND Sure. Just a follow-up here. Hypothetically, in case we do see a 25% growth in the demand next year, as the demand comes with a lag, would we have enough capacity to service such level of high growth? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yes. Yes, we have the capacity. Bhavin Vithlani Equity Research Analyst, SBI MUTUAL FUND Great. Yeah. Thank you so much for taking my questions. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Thank you. Operator Thank you. The next question is from the line of Renu Baid from IIFL Securities. Please go ahead. Renu Baid Analyst, IIFL Research Yeah, hi. Good morning, team. I have two questions. One, broadly, the B2C demand and market uptake has continued to remain fairly soft now for three to four quarters. After some green shoots, which were visible September, October, again, that seems to have died down. So what has been your reading on the demand environment? And, in your expectations, by when can we see the demand turning positive? Anil Rai Gupta Chairman and Managing Director, Havells India Limited A good question, but actually, you know, it's a little bit of a longish answer, because, you know, we are seeing different things happening in the B2C segment. One, of course, there is slowness in demand in the B2C category areas, rural areas. And hopefully, with inflation abating, I think this should start kicking in growth in the coming times. If you break it down, as I said, you know, it's we have seen strong volume growth in lighting. Renu Baid Analyst, IIFL Research Mm-hmm. Anil Rai Gupta Chairman and Managing Director, Havells India Limited It's not just because the market, but also our internal efforts. There we see discretionary growth, regrowth, because of value erosion in LEDs. Even within ECD, we have seen a high base for fans over last year, because of the market. Otherwise, you know, we've seen a stronger demand in case of ECD. Can we say that, okay, you know, for domestic appliances, this was a Diwali quarter, last year was not. Renu Baid Analyst, IIFL Research Mm-hmm. Anil Rai Gupta Chairman and Managing Director, Havells India Limited But overall, we have seen better growth in other products other than fans. So it's a mixed, mixed bag. I said switchgear also, we have seen growth in the retail and the residential side, but we saw some regrowth in the telecom OEM side. So overall, it's a mixed bag. I think some green shoots we are seeing, and with a very low base for summer products in the coming quarter, I think we will start seeing improvement in the B2C side. Renu Baid Analyst, IIFL Research Correct. And secondly, how should we look at the pricing environment? Because that also is a function of the demand, especially for seasonal categories like fans, as well as air conditioners. Both these segments had seen change in energy ratings and during the label change because of which cost structures were a bit elevated. So where are we in terms of absorption of the fixed overheads and are there any pending price hikes, which you think could be passed on in the forthcoming quarters? Anil Rai Gupta Chairman and Managing Director, Havells India Limited I think at least for Havells and Lloyd, we have been able to, you know, pass on the price increase or cost increase due to the energy rating changes. And, we don't anticipate it, we don't anticipate any further price increases in these two product categories. In fact, we have seen margins improving over the last one year, and, that is something which will also happen because of improved economies of scale in the fourth quarter and the first quarter. Renu Baid Analyst, IIFL Research Sure. And lastly, if I can, on the RAC side, where we have had some arrangement for Middle East market and now also looking at distribution setup for U.S. So what kind of incremental investments you think we'll have to deploy for distribution as well as product modifications for the developed markets? Anil Rai Gupta Chairman and Managing Director, Havells India Limited So as far as the product modifications are concerned, pretty much it's already happened. And as you know, our certifications are happening. The US market, some of the products are under development. But you know, these are not very large investments, even for brand building or distribution. These are ongoing operational investments which will happen. But this is, this is again, you know, the way we are treating export markets is more of brand building and distribution reach rather than just, you know, looking at going for volume. So it's a long-term play. It will take its own time. Unlike in India, where we have a very strong distribution channel of brand, where we can grow faster, but this Middle East, US markets will be a long play. Renu Baid Analyst, IIFL Research Sure. Just a clarification, these would be all for Lloyd brand and not a kind of white labeling arrangement, the way we had for the switchgear segment for overseas markets? Anil Rai Gupta Chairman and Managing Director, Havells India Limited We are more focused on Lloyd brand, but we are not closed to white labeling as well, as long as it satisfies the margin needs and the volume needs for the operation. Renu Baid Analyst, IIFL Research Got it. Got it. Thanks much, and best wishes to you. Thank you. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Thank you. Operator Thank you. The next question is from the line of Fatima Pacha from Mahindra Manulife. Please go ahead. Fatima Pacha Investor Relations, Mahindra & Mahindra calls Hello, sir? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yes. Fatima Pacha Investor Relations, Mahindra & Mahindra calls Yes, so for this, macro question, do you think, at the margin, you know, see, we've seen this in, FMCG, but even in durable, do you think a lot of new brands, because of the entire, online space, have entered and at the margin, they're chipping away at the large guys' market shares? Do you think that is the reason that the margins, our, B2C franchise, in a way, is not able to grow as much? Like, even if there is 6%-7% growth in the market, you're able to grow at 3%. Something like that, would you say? Anil Rai Gupta Chairman and Managing Director, Havells India Limited I would say, you know, the electrical market, in the electrical market or consumer durable market, we have actually seen stronger brands grow stronger. If certain brands have entered the market, it is also at the cost of some brands going out of the market and competition as well. In fact, if you see the air conditioning industry, we have seen consolidation of, you know, market shares towards four or five big players, as against having a very long tail of small players with low market share. So some of the competitors are also weakening there. Even in fans, if you see that, you know, certain market shares are being replaced with certain brands, you know, more electrical brands are launching products, but it's also replacing. Over a period of time, this, these become, you know, large businesses, and then investments have to be made into those businesses also, where sometimes we have seen the large electrical players who specialize in fan products are not able to increase market share beyond a level. Fatima Pacha Investor Relations, Mahindra & Mahindra calls Oh, wait. So up to 5% market share they reach? Anil Rai Gupta Chairman and Managing Director, Havells India Limited I'm sorry? Fatima Pacha Investor Relations, Mahindra & Mahindra calls So what I've realized is they reach 4%-5% market share, and then they stall. But that 4%-5%, if there are 10 players, then they take away the growth for the others, right? In a way. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yeah, but I would say that that is what I was saying, that it's also being replaced by some players going out of the market as well, or, you know, stalling their growth. So I don't think it's really impacting the market shares of the bigger brands, or stronger brands, national brands, in any meaningful way. Fatima Pacha Investor Relations, Mahindra & Mahindra calls Okay. And second question, sir, like, if you go to see the entire durable industry, you know, both white and brown goods, the last good quarter we had, I think, was post-COVID, the December 2020 quarter, right? The Diwali of 2020. Post that, we've seen two years of absolutely, you know, not much volume growth. We've had revenue growth in between because of the price increases. But volume CAGR would have been, you know, minuscule in terms of a three-year CAGR. So what is your sense? Like, you know, is just that the absolute apathy for the product or... How would you ever, you know, signal a turnaround or any... Because, like, you've seen it in two-wheeler, right? First time you've seen two-wheeler growth, at least recover from the bottom, but we're not seeing anything in our space. How should one read this market? Anil Rai Gupta Chairman and Managing Director, Havells India Limited During this time, a couple of things have happened. You know, we've had two successive bad seasons because of the COVID as well, including last season was marred by, you know, unseasonal climate because of rain. So we've seen that. As well as during this time, also, unprecedented raw material prices were increasing, and hence, you know, when we were trying to pass on, the industry was trying to pass on that cost increase to the market, it was facing headwinds in terms of consumer. I think with things stabilizing, we don't know what the climate will be, but at least we can be hopeful about that. And the raw materials are now stabilizing. We do believe that, you know, whatever we've seen muted growth in the last two or three years, we should be seeing improvements in the coming years. Fatima Pacha Investor Relations, Mahindra & Mahindra calls Fair enough. Thank you. Operator Thank you. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead. Aniruddha Joshi Senior Associate, ICICI Securities Yeah, thanks. Thanks for the opportunity. So two questions. One, the lighting and even switches segments are moving from basically functional categories to lifestyle or fashion kind of products, and this transition may continue over next decade also. ... So now Havells is more of a functional or a high trust kind of a brand. So how do you see the brand transitioning in both the segments? And also considering there are a whole lot of smaller players who do not really have any ability to move towards or achieve the brand, perception also to some extent. So how should we read about Havells' efforts in these two categories? That is question number one. And question two is, what is our real right to win in Middle East and USA? These are really absolutely premium end of the market, with very high per capita GDP. So, Havells, Lloyd, which is more of a mid-priced brand, so how do we understand the winning strategy for Lloyd in these markets? Yeah, thanks. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Your first question. Operator There's a disturbance in the background, sir. Aniruddha Joshi Senior Associate, ICICI Securities Okay. Is it, is it fine now? Operator Yes. Yes, sir. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Okay. No, I think, I think to your first, question, I think it is more structural in nature. I think, you are right that from the functionality, it is also moving, more for convenience. And I think, I think this is still in transition, and I think these are very, sort of, higher end of the market, what we call the premium end of, of the market. So I think in a market like India, you, you have to address across the spectrum. So I think our both lighting and, and, and switches, you see, have this functionality of what we call the automation, you see, or through IoT. I think that segment we are already addressing. And I think, if you recall on this, call, this was asked how the margins are improving in lighting. As a part of the reason also is attributed to a lot of innovation, which is currently, I would argue, more pronounced in B2B, but it's moving towards B2C as well. So I think in, and similarly, switches, the automation is gradually, but, surely now taking a larger, share of the overall, switch, sort of category. So I think these are the things which augur well for a trusted brand, but as you move premium, people want to stick to the more premium brand, which you can address, their not only needs, but also, the anxieties they have when they move to the new technology. So it's something we believe will continue to grow, but which will take some time to reflect into the overall numbers. But overall, the market is still sort of transitioning to those models. Second, on the Middle East, you asked the question. You see, if you know, the Lloyd is a market leader in Kerala, and Middle East is a very large market, which is also, you see the Kerala and the NRI population is there. So that is something what we start with. And, it's not-- if you, if you look at that market, there are a lot of Chinese players as well in that market. So we have positioned ourselves, you see, you see what we call the mass premium, even in Middle East. So there is a market for all the brands, and we believe we are still the first Indian brand who has launched in such a serious manner in Middle East. I think this is something we will gain, and we'll invest behind the brand like we have been doing in India. So we have never claimed that we will just go there and acquire the market share. But I think Middle East is also a showcase to the world these days, which is a lot of buyers which come from Africa, the CIS and the larger sort of, you see Middle East cohort. So this is something what we believe is the brand building towards the international business, which we want to take in the right earnest as far as the Lloyd is concerned. Okay, sure, sir. So just on the first thing, so should we continue to model market share gains as the category keeps transitioning more towards the top end? So will, will that be a, is that, is that also the- Yeah. Or then? I think it's some 6% from there. But yes, I think you, what you're saying is right. Now, how fast that transition happens, I think that remains to be seen, because as I said, India is a very diverse market, so I think you have to play for all kind of consumers. Havells is known for mass premium. I think this is something what we will continue to strive for. Okay. Aniruddha Joshi Senior Associate, ICICI Securities Sure, sure, sir. Yeah. Thanks. Operator Thank you. The next question is from the line of Siddhartha Bera from Nomura. Please go ahead. Siddhartha Bera VP, Nomura Yes. Hi, sir. Thanks for the opportunity. Sir, first question again on this margin side in Lloyd, we have seen a good improvement sequentially. Can you just highlight if it was purely due to the lower commodity the cost which you have now, or are you looking at any sort of pricing action or mix, which has also led to this improvement? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance No, I would say these are the cost-saving initiatives, you see, which we have been taking for quite some time in Lloyd. A part of that definitely is commodity, but also, you know, we all agree when we started the thing, there are inefficiencies, and gradually the efficiency sticks in. So I think it's a process of efficiency which will, we are very hopeful, will only continue to gain ground, but there is no change in the strategy of Lloyd per se. These are things which in any business after establishment, the efficiency should start from getting factored in. So this is a part of that process. Siddhartha Bera VP, Nomura Understood, sir. But sir, if I look at it slightly longer term now, it's been like, nearly three years when we have been reporting a sort of loss in this Lloyd entity. Going ahead, like you are saying, that summer season is expected to be good, can we expect some pricing action so that, next year we, we probably come back to that sort of breakeven type of levels, because of these efficiency initiatives also, which you are taking? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance So Siddhartha, I think, we have, we have. I know everybody's very eager to get this question answered, so in various forms and sessions, this question keeps coming back. Look, we believe this is a very large opportunity, consumable as a whole. I think if there's one category where India is least penetrated, is the air conditioner. I think we have established a good credential there. We are now part of the top four in this, as our chairman just sort of elaborated, that the market is getting consolidated in terms of the larger players. I think this journey will continue. Let's not measure them in few quarters here and there. You see, we are here for long term. I'm sure our investors are here for long term, this country is for long term. Let's just focus on that. Let's not just get, you see, mired in this quarter and that quarter. So I think as we, as we grow, as we progress, I think everybody will be testimony to that. But we are very focused on our long-term commitment to India, which we believe is a strong growth credentials available to us. Siddhartha Bera VP, Nomura Got it, sir. So lastly, on this ECD segment now, if we see contribution margins are probably back to that earlier 2022 levels, but EBIT margins are still lagging a lot behind. So going ahead, if we see pickup in this category, like you are expecting to, sort of, see in the coming years, can we, with then overhead costs also normalizing, can we sort of, expect to see those 16%-17% EBIT margins which, we had reported sometime in the past? Or do you think the mix now or the competitive intensity is, somewhat different, and we may not go back to that earlier levels of margin? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Look, our focus is on contribution margin, because ultimately, EBITDA, these are all derivatives, and sometimes quarter-to-quarter they got distorted. Like this quarter, there has been disproportionate A&P. But I think you would see, in our entire kitty, even across other categories, I'm sure you would have already observed that there will be a improvement in the margins as we move forward because of what we just aggregated, both on the cost saving, you see, and also the premiumization. There's a lot of trust on the Havells side. I think this will continue to improve from there. Siddhartha Bera VP, Nomura Okay, sir. Got it. I'll come back with that here. Thanks a lot. Operator Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Sonali Salgaonkar from Jefferies. Please go ahead. Sonali Salgaonkar SVP, Jefferries So thank you for the opportunity. So my first question is again on Lloyd EBIT margins. We understand that there has been a good and notable improvement in the contribution margin, but the EBIT margins have sort of remained, you know, almost similar year-on-year. So, should we assume that we will continue to spend more on the A&P and promotion as a part of our strategy behind the brand investment of Lloyd? And, when do we expect this to normalize? Anil Rai Gupta Chairman and Managing Director, Havells India Limited No, I think, Sonali, as we have said, A&P this quarter has been disproportionate, so I'm not saying you should read too much into that. And as far as the A&P, while all other costs, you see, will be kept gradually getting normalized in Lloyd also. You see, when you start a business, you obviously disproportionately invest in the business. So I think, all these initiatives which we are taking, you will see further, gradual but sure, sort of normalization of all the expenses and percentage. But some percentage of the sales will definitely is the requirement of the consumer businesses, which we will stabilize in some time. So that something will be all the same in Lloyd as well and in Havells. Sonali Salgaonkar SVP, Jefferries Got it, sir. Sir, and what is the current capacity utilization of Lloyd and the volume market share also, if you could just let us know? Anil Rai Gupta Chairman and Managing Director, Havells India Limited So I think let's not go into market share, because the people have different views on that. But you know, we are part of the top three and top four in the country. As far as the utilization is concerned, you see, we have kickstarted our Sri City facility. We are now balancing the production both in the north as well as ..., depending on the regional requirement. So I think our capacity utilization will be close to some of 60% across both these facilities. Sonali Salgaonkar SVP, Jefferries Got it. Sir, my second question is regarding switchgear. Now, we understand that, you know, the housing demand and the CapEx demand is very strong, has been very strong over the past one, one and a half year. Is there any particular reason that we are, you know, showcasing just about a mid-single digit growth in switchgear for the first nine months? Anil Rai Gupta Chairman and Managing Director, Havells India Limited So as I think we just sort of elaborated earlier, that there is a growth we are seeing both in the B2C as well as the project, but there has been a lot of growth last year on the OEM for telecom, which for some time, they have taken a pause. Hopefully, it will sort of resume next year again. So you are seeing just the deceleration on that, but otherwise on both the projects as well as the B2C, we continue to sort of do well. Sonali Salgaonkar SVP, Jefferries Got it. So just last question, we understand that your demand focus is more domestic, but any issues that you fathom because of the Red Sea logistics issues, mainly for the procurement of raw material if any? Anil Rai Gupta Chairman and Managing Director, Havells India Limited No, nothing. Nothing. We have no, either on the supply chain, incoming or outgoing, we have not seen any significant impact on that issue. Sonali Salgaonkar SVP, Jefferries Perfect. Thank you very much, sir. All the best. Operator Thank you. The next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead. Abhijit Akella Associate VP, Kotak Securities Yeah. Thank you so much for taking my question. The provision on write back Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Your voice is breaking, Abhijit. Abhijit Akella Associate VP, Kotak Securities Am I... Yeah, am I audible now? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Better. Yes, yes. Abhijit Akella Associate VP, Kotak Securities Yeah. Just, if you could please just help us understand, what this INR 40 crore provision write back within the segmental results pertains to? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance ... Yeah. So, you are aware that the government had brought out the E-waste regulation, particularly consumer, there was some time back, before a few years back. At that time, there was no clarity on how that should be treated. So as out of abundant sort of conservatism, you see, we started making ad hoc provision on the sales, and it was largely applicable on the Lloyd products at that time. Abhijit Akella Associate VP, Kotak Securities Best estimate. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Yeah, on the best estimate we did that. And, once now the government has come out, CPCB has come out with a lot of clarity, and we have submitted all the sort of data, all the industry players. So they have come out with a specific number which everybody, every company needs to comply with, which is they need to either pay that or we should take that, that number of the material. Now that we have a clarity on that, we have taken provision based on that clarity, and that's why our best estimate, you see, has been adjusted again, that which has resulted in the one-off reversal of the provision. Abhijit Akella Associate VP, Kotak Securities Okay, thank you. On the P&L, this would have stacked within other expenses, right? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Yeah, that's right. Abhijit Akella Associate VP, Kotak Securities Okay, thank you so much. The last question I have is, actually related to the cables market. Just wanted to seek your perspective. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Sorry, sorry, just come again. Again, we just are sort of leaving. Abhijit Akella Associate VP, Kotak Securities I hope I'm audible better now. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Yes, sir. Abhijit Akella Associate VP, Kotak Securities Mm. Thank you. Yeah, just on the cable market, in light of the recent developments that have been there in terms of you know, the income tax structures and that sort of thing. Just wanted to seek your perspective on whether you think this, these developments might potentially impact that category, lasting way on a structural basis, and whether that might open up opportunities, new opportunities for someone like Havells. So would appreciate your thoughts. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Oh, that I think, quite frankly, we don't have much comments to offer. And, I think these are still things I think which they are, I'm sure, best managing. So we will, frankly, just refrain from commenting on this. Abhijit Akella Associate VP, Kotak Securities Okay. Thank you so much, and all the best. Operator Thank you. The next question is from the line of Praveen Sahay from PL India. Please go ahead. Praveen Sahay Equity Research Analyst, Prabhudas Lilladher Private Limited Yeah, thank you for taking the question. The first question is related to the cable business. As you had already mentioned that the product mix led to the margin contraction. So can you bit elaborate on that, this, like, product mix, like, of towards the cable sales is on the higher side for the quarter? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Yeah. Yeah. So, you know, between cable and wire, our wire has better margins than cable. So in this quarter, the cable growth has been slightly higher than wire. That's why this is a product mix, but in terms of contribution improvement, there'll be improvement in both the categories as far as from the last year. Praveen Sahay Equity Research Analyst, Prabhudas Lilladher Private Limited Okay. Is there any number to quantify that, or how much contribution of cable? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance So less. Praveen Sahay Equity Research Analyst, Prabhudas Lilladher Private Limited Usually 65% is a wire, so this quarter is usually, unlike, like- Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Yeah, yeah. That's right. Praveen Sahay Equity Research Analyst, Prabhudas Lilladher Private Limited Oh. And the second question is related to your, you know, the commentary given in the press release, also in the call you had mentioned that one commentary is a recent trend suggest some recovery. Also, the comment you had made of a green shoot in the B2C portfolio. Is there anything to quantify in that or to number to support your commentary? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance No, I think this is a, this is a feeling we have. I think let's, let's not make it too special because it's very difficult to put a number. What we believe that there has been some degree of, you see, muted performance by the industry as a whole on the consumer side. We believe it is coming out of that slack, and there's a feeling we are getting maybe in the this last last sort of couple of months. So we are just hoping that it should translate into, into some tangible results. But as of now, I think we'll keep it there and, and then, and let's see how it pans out. Praveen Sahay Equity Research Analyst, Prabhudas Lilladher Private Limited Oh, okay. Thank you, sir. Thank you for taking my questions. Operator Thank you. The next question is from the line of Bhavani Kumawat from Phillip Capital. Please go ahead. Bhavani Kumawat Equity Research Associate, PhillipCapital India Hello. Hello? Hello, am I audible? Operator Yes, yes. You're okay. Bhavani Kumawat Equity Research Associate, PhillipCapital India Yeah, sir, thank you for the opportunity. Most of my questions have been answered. Just one question, sir, if you can just share the advertisement spend in the Lloyd category particularly for Q3. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Your voice is breaking. Bhavani Kumawat Equity Research Associate, PhillipCapital India Hello, am I audible now, sir? Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Yeah, yeah. No, I, we, we got the gist of your question. So we give the advertisement on the whole, so again, I think we will not go into further breakup of the same. Bhavani Kumawat Equity Research Associate, PhillipCapital India Sure, sir. Thank you so much. Operator Thank you. The next question is from the line of Lovish Swain from Phoenix Advisors. Please go ahead. Lovish Sain Senior Investment Associate, Phoenix Advisors Oh, good morning, sir, and thank you for the opportunity. My question is related to the RAC business. We are seeing that new capacities are coming online for all major brands and contract manufacturers. So how do you think this will impact the overall industry supply along with the industry demand? So just wanted to have your thoughts on how this, industry supply aligns with the industry demand over the next couple of years. Anil Rai Gupta Chairman and Managing Director, Havells India Limited So I think, everybody, these are all seasoned players. Everybody is anticipating that the potential which India offers is unparalleled, and I think everybody wants to be ready for that. And I think... I'm sure the long-term players do not look at what they can, you see, achieve in 1 year or 2 years. These are, these capitals are very long-term plans, and I think it hardly give true justice to the potential we have, considering the under-penetration related to just other developing markets, not just developed markets. So we believe one can't really look at what will happen in next four quarter or six quarter. But I think longer term, I think we are aligned with what everybody perceives as a growth potential in India for the RAC market. Lovish Sain Senior Investment Associate, Phoenix Advisors Perfect. Thank you. And just one follow-up. So does this mean there is a possibility that we could see a price war in the coming quarters, given that all these capacities and the PLI schemes and, there would be a need for all these players to produce and sell to get this incentive? Anil Rai Gupta Chairman and Managing Director, Havells India Limited No, I think the price war is something like a war cry you are mentioning like. But I-we do not believe-I think everybody is positioning their product with the consumer on certain basis. And I think that's something we continue to believe will happen. So no, we are not expecting any significant price wars on that. Lovish Sain Senior Investment Associate, Phoenix Advisors Perfect, got it. Thank you, sir. Operator Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Thank you for the opportunity. First question is just an observation on the employee cost. Year-to-date employee cost up around 19%. So, I mean, just so some gaps you identified and have filled up the positions, or just if you can clarify, since last two years, we have seen more than mid-teens kind of employee cost growth. So first question on that. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yeah. No, I think this has been the sort of investments in the people in the talent across the category. I think we are investing for growth. Sometimes the growth may not appear within the time frame you look at, but I think there has been a lot of categories in-house, which we are disproportionately investing into, because we see a lot of potential for future growth there. So yes, I think this has been partially, which is organic. I think which is some growth will always happen in the employee cost in a year. And some are obviously there has been a lot of latent hiring and acquisitions in the company, which is timely investment for growth. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Similar growth should we see going ahead also next 4-5 quarters? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Well, I think, it will, it will stabilize. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Normalize. Anil Rai Gupta Chairman and Managing Director, Havells India Limited There will be growth, Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Sure. Sure. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Growth will not—it will stabilize, but growth in this, Havells will continue to be there. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Of course, yes. Second question is on both AC and fan, more summer-centric products. So how has been the channel stocking situation? I mean, AC had a weak summer, and fans had this starting introduction. So if you can just clarify, how is in the channel inventory situation? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yeah. You see, compared to last year, definitely channel stocking is much lesser. In last year, as you know, in the fans, because of the transition to the BE, there was significant uplift by the channel. This year, clearly, this has not been the case. So, if you look at them, compared to last year, the channel stocking is lower. And in AC also, because last year, there was some challenge with the channel because of one seasonal reason or they have been slightly conservatism on the pickup in this quarter. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited No, I mean, think channel inventory levels in the system, are it normalized levels or they are still above normal levels? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Normal level, and I would say that from last year, maybe lower level. That's what I meant to say. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Okay. Okay. And just last question on the AC side, so probably on Lloyd specific, so since RM prices have stabilized, now the levers for the profitability are more on the pricing side? I mean, do we have to take price hikes, or do we have internal cost levers to improve the profitability? If there are any, if you can just give few examples, basically, of the cost levers that we have. Anil Rai Gupta Chairman and Managing Director, Havells India Limited No, I think the cost initiative, as you said, and RM is just part of one of the cost initiatives. You know, we have set up two plants. As I said, when you set up new plants, there is a certain degree of inefficiencies. So just because RM is stabilizing, let's not conclude that their cost initiatives now are reached their sort of potential. So I think that will continue, and there will also be the product mix sort of improvements would also be there, more premiumization there as well. So I think it will be a... The profitability will be a combination of a lot of efforts, not just a single arrow. So I think there are a lot of arrows there which we will continue to see. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Basically, just wanted to understand, if pricing is an external factor, it depends on how the competition also behaves. Whereas the cost is one internal factor, which is more in control of the company. So on the cost side, which are the levers? Just wanted to understand that part. Anil Rai Gupta Chairman and Managing Director, Havells India Limited As I said, RM is one of the levers, efficiency is the other lever. There will be multiple levers. Keyur Pandya Senior Equity Research Analyst, in the Investment Team at ICICI Prudential Life Insurance Company Limited Okay. Thank you, and all the best. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Thank you. Operator Thank you. Next question is from the line of Amit Mahawar from UBS. Please go ahead. Amit Mahawar Executive Director, UBS Hi, good morning, sir. I just have one question. You know, I think, in 9 months, ex-Lloyd growth in volume is definitely more than the value growth you've shown, you know, 8%+. Lloyd in 9 months, 16% value, of course, volume is definitely higher. So I don't have a question on growth. My question is more on the Lloyd supply chain. You know, as you build your brand gradually, that's a journey. On the supply chain part, is my understanding correct that in the next, maybe, say, 3-5 quarters, as you optimize your current expanded capacity manufacturing, you will have a significant sourcing of compressors and motors, broadly around 50% higher than the last year, roughly. ... Will that period, you know, in that be the period where you're, you will be able to get the cost right, because only when you get the cost right, can you get the price right. So I just wanted to have some qualitative colors on it here. That's the only question. Thank you. Operator Thank you. Anil Rai Gupta Chairman and Managing Director, Havells India Limited I think- Operator Sorry, sir? Anil Rai Gupta Chairman and Managing Director, Havells India Limited No, I think, does he need an answer? Operator No, sir. The next question is from the line of Latika Chopra from JP Morgan. Please go ahead. Latika Chopra Head of India Consumer and Discretionary Research, JPMorgan Yeah, hi, thank you for the opportunity. I have two questions. The first one is specific to the key ECD segments of, you know, fans, geyser, kitchen appliances, and, let me also loop in Lloyd, and you can answer separately for them. What is the salience of e-commerce channel now in the revenue mix versus pre-COVID? And are your market shares and margins for this channel lower versus the offline channel? Anil Rai Gupta Chairman and Managing Director, Havells India Limited So this is around 5%, Latika, and on the e-com side, only some categories it could be higher, but on the AC side, it's around 5%. Like, for instance, we see the SDA as well as the personal grooming, normally these tend to be higher. And on the net-net, margins are not very different from the offline, because you see our pricing is pretty much similar to across the channels. So on the net, the margins are not very different. Latika Chopra Head of India Consumer and Discretionary Research, JPMorgan But what about market shares on these, on this channel versus the offline channel? Anil Rai Gupta Chairman and Managing Director, Havells India Limited The market share also is, I think, we are top, top three, in online, which is again reflective of what we have in the offline. Latika Chopra Head of India Consumer and Discretionary Research, JPMorgan Sure. And the second one was on, we were just trying to get some color on, how is the salience of consumer financing, you know, behaving for the Lloyd portfolio? You know, are your competitors more aggressive on this metric incrementally, versus you? Anil Rai Gupta Chairman and Managing Director, Havells India Limited I think everybody's... Some from here and there are similar. They're not much different, because it's being offered by similar players. I think nobody is manufacturing them themselves. These are being offered by, by same players to everyone. So I think on the salient side, everybody's on an almost similar platform, but yes, the saliency is increasing. As we get more formalized, as we get more MFR, large retail chains even, there the propensity of financing is higher than on the standalone network. Latika Chopra Head of India Consumer and Discretionary Research, JPMorgan What roughly it would be for you now for Lloyd? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Lloyd will be around 30%-35%. Latika Chopra Head of India Consumer and Discretionary Research, JPMorgan All right. Thank you so much. Operator Thank you. The next question is from the line of Amit Mahawar from UBS. Please go ahead. Amit Mahawar Executive Director, UBS Yeah. No, sir, I just wanted the answers. That's it. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Ah, actually, don't get confused, Amit. Sorry, your voice was very feeble. You were telling me about the compressor supply chain? Amit Mahawar Executive Director, UBS Yeah, no, I just—the question is very simple. This year you will have a very significant procurement, right? Last year, Lloyd had a 2x, you know, increase in the raw material purchase of traded goods, right? From INR 7 billion to INR 14.5 billion. Obviously, we are advanced sourcing here. So this year also, when you start, you know, servicing the 2 million capacity, you'll have a significant procurement of compressors and motors. So I just want to understand, is this period the first period where you'll be able to get the cost optimized in the next maybe three quarters? And because of that, you'll be able to maybe price it better than you could have been. So, you know, I just wanted to understand qualitatively, are we, you know, in this period, heading toward a significant, significant cost rationalization? Thank you. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Correct. No, I think your sort of prognosis is correct, Amit, and that's what we meant that it's not just the raw material, it's also a lot of efficiency which we are building in, and I think procurement efficiency is definitely one of them. And I think as our volumes grow, we will also able to negotiate better terms with the supplier, because compressors also tend to be very sort of consolidated industry in terms of the suppliers. But I think now we have what we call the right sort of seat at the table, which will be able to have a better negotiations with them, both in terms of the cost, but also in terms of the supplies. See, our inventories also, this can be much more efficiently managed now. We don't need to keep everything ourselves, because we realize we have a better prediction, you see, on the supply side. So I think all these things, this is what I meant when I said there will be multiple things we are working on, on the cost saving, which hopefully should start reflecting in ensuing quarters. Amit Mahawar Executive Director, UBS Very, very helpful. Maybe I'll just add to this question, if you allow me. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yeah. Amit Mahawar Executive Director, UBS Is there any reason for your suppliers sitting in China for compressors or a supplier sitting in India for motors? Because other, everything else is internalized in here, as I understand it. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yeah. Amit Mahawar Executive Director, UBS Is there any reason that supplier has not to give you the same cost sheet vis-a-vis the number one, number two, you know, that he gives to the number one, number two? I just wanted to understand that. That's it. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Hopefully, hopefully, I would say that will convert. You see, these are the learnings that one has to go through. We want... First we went, we want to move up the value chain even more. As I said, when I say seat on the table, that's what I mean. That's what you ask. Amit Mahawar Executive Director, UBS Mm-hmm. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Hopefully, that will happen. Things take time, but, you see, we are in for long haul. This is just, just stay put. Amit Mahawar Executive Director, UBS Sure. Thank you very much, and, good luck to the entire team. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Thanks. Thanks, Amit. Operator Thank you. The next question is from the line of Chintan Shah from JM Financial. Please go ahead. Chintan Shah Assistant VP, JM Financial Hi, sir. Thank you so much for the opportunity. So I just had one question, and it's slightly longer term in nature. So over 4-5 years perspective, do we think the Lloyd or more specifically, RAC segment, can deliver a margins which say, similar to or close to what we do in other segments? And if yes, I mean, if you could just help us understand what could be the levers there? Anil Rai Gupta Chairman and Managing Director, Havells India Limited No, other segment means, I'm sure you're not comparing them with Switchgear, basically. Chintan Shah Assistant VP, JM Financial No, no, no, not, I mean, on overall basis, excluding Lloyd. Anil Rai Gupta Chairman and Managing Director, Havells India Limited It will, it will reflect, you see what the industry structure is, and I think what gives us, you see, the more sort of, optimism is that this industry is on a whole, you see, making a decent amount of margins and return on capital. So as we said, and we have been saying this for quite some time now, this is a journey. I think we are investing, behind the, behind the product, behind the brand, behind manufacturing, you see, behind A&P. And in the journey there will be disproportionately to begin with, but then I think things start, getting normalized. That's how we have seen it, all the businesses, since, since Havells has been born. So I think this will, the journey will continue here, and there is no reason, if we are, like, among the top quartile in margins in all other categories, as far as the industry is concerned, I think Lloyd will also have a similar journey and we will reach there. So I think that path is very clear. Obviously, everybody wishes to reach there early, but, as long as I think we keep walking, I think we'll, we'll start running also in some time. Chintan Shah Assistant VP, JM Financial Okay. Got it. That was helpful. Secondly, right now we have enough capacity, say, for 1-2 years, but say, 2 years down the line also, we'd like to add capacity in the RAC segment or we'll, you know, again, switch back to going more towards outsourcing? Anil Rai Gupta Chairman and Managing Director, Havells India Limited No, I think as our internal working on any capacity, once we reach 70% or 75% of capacity, we start putting up the new manufacturing. This has been. We have been doing for fans, we have been doing for cables and wires. The similar philosophy will be applied to Lloyd as well. Chintan Shah Assistant VP, JM Financial Okay, got it. Understood. That's it from my side. Thank you. Operator Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead. Pulkit Patni Managing Director, Goldman Sachs Sir, thank you for taking my questions. Actually, most of them are answered. Maybe one question and sort of, repeat of what different people have been asking in different forms, but, and again, slightly longer term. So, you know, few years back, there were 5, 6 players in each of these segments, and margins used to be much better. Today, thanks to how capital markets have been, abundant capital available, a lot of the ODMs now have raised cash, which means they also have capital. How do we get comfort on how margins move for everybody? Or are we looking at maybe in a few years a situation like China, where effectively margins compress for everybody as a, as a sector? And this becomes relevant in the context of you know the kind of commentary that has been coming from most companies in the last two years. I understand demand has been weak, but how does margin actually as an industry go up from these levels? So that's the only question I want you to answer. Anil Rai Gupta Chairman and Managing Director, Havells India Limited You're talking RAC or you're talking generally? Pulkit Patni Managing Director, Goldman Sachs No, generally. I think across, across. I mean, today, lighting, there are 20 players. Today, fans, you know, everybody is there, and more people are entering. It's not... So I'm saying across the consumer durables electrical segment, how do you look at margin in context of ample capital available, everybody wanting to do everything, ample capital is being permitted now, thanks to PLI and multiple other things. So generally is what I want to know. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yeah. While, you know, your analysis is right, that there is ample capital available, new players coming in, you know, I also sometimes you feel that when players are coming in, some old also going out. But if you look at past two years, in every industry, there's no meaningful player who's come up to the level of being number two or number three player in that industry. And that also means that, you know, we have not seen, in fact, if you see our all product segments, cables and wires have actually seen improvement. But in terms of lighting, consumer durables, overall structurally, the margins of businesses have not gone down, at least for Havells. Because, you know, Switchgear continues to remain at a similar line. Wherever there has been a dip, those have been temporary, maybe for a year or two, because of the raw materials volatility. And we have maintained that, you know, sometimes it becomes more difficult to pass on the entire cost to the consumer because it's not just because of competition, because the consumer also you don't want to, you know, like in last year, there was 25% increase in raw materials of copper and aluminum. So there is, we see some contraction there, but now you see these margins are coming back. So while over the last 5 years or so, if you see purely Havells as a whole, overall margins have not really, you know, made a difference. In fact, they are now improving and coming back to, levels of what they were earlier. So, generally, the prognosis is correct, but, you know, brands, strong brands, strong companies would try and maintain their margins, you know, despite the industry structure, through innovation, through brand recognition. And during this larger, longer period of time, you know, the brand investments and technology innovations also keep happening. So I think overall, the fact that Havells' PNL without Lloyd has actually maintained its or dip only during certain periods of time, gives us confidence that, you know, we'll be able to do that in future as well. Pulkit Patni Managing Director, Goldman Sachs Got it, sir. So based on what you said, I understand that leaving aside Lloyd, it is fair to expect that even from these levels, margins will inch up slightly over the next few years? Anil Rai Gupta Chairman and Managing Director, Havells India Limited Yeah, and Lloyd definitely has a much better, you know, runway to improve the margins. Pulkit Patni Managing Director, Goldman Sachs Understandably. Okay, this is very useful. Thank you. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Thank you. Operator Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I would now like to hand the conference over to Ms. Bhumika Nair for closing comments. Over to you, ma'am. Bhoomika Nair Executive Director, Research, DAM Capital Advisors Limited Yeah, I would just like to thank everyone for being on the call, and particularly the management for giving us an opportunity to host. So wishing you all the very best, and look forward to a better second calendar year 2024. Thank you very much, sir. Operator On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Anil Rai Gupta Chairman and Managing Director, Havells India Limited Thank you. Rajesh Kumar Gupta Whole-time Director (Finance) and Group CFO, Finance Thank you. Powered by