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Ladies and gentlemen, good day, and welcome to Bajaj Electricals Q4 FY '23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Varun Singh from ICICI Securities. Thank you, and over to you.
Yes. Thank you, [ Ayash ]. Good evening, everyone. On behalf of ICICI Securities, it's our absolute pleasure to host the management of Bajaj Electricals for this conference call. So on this call, we are joined with Anuj Poddar, MD and CEO; and the CFO, Mr. EC Prasad. So we request the management to kick start the presentation, post which we can open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Varun. Good evening, everyone. This is Anuj Poddar. Thank you for joining in for our call today. Hopefully, you had a chance to go through our results as well as the investor deck that we have shared. I'll just keep my opening comments very pleased. As you know, the market environment and the demand situation is fairly tough. In that situation, I'm pleased that we've reported a good performance this quarter. If I talk first about our Consumer Products segment, we've demonstrated or delivered a growth in revenues of about 9% in this quarter. That is well ahead of industry and therefore signals the market share gain that we have delivered, and that is something consistently for the last 2, 3 years, we've been focusing on increasing our overall growth in market share. And we've done this without surely impacting or hurting our margins. So our margin profile remains intact on an absolute basis, our profitability and EBIT for the consumer business is up.
Coming to the EPC business, that's the other headline that I will talk about. For all this while, we've always been speaking about the turnaround going on in the EPC business. We've been seeing that for the past couple of years and many quarters. I'm happy that this year FY '23 is the first year after about 3 years that we've delivered a positive or breakeven performance on the bottom line of EPC. Equally important is the trend that you see in the top line -- we've now started in the last year, expecting in bidding for new orders and starting to grow the revenue EPC, so we are seeing growth in the top line on EPC in Q4, but also importantly, you're seeing an order book expansion just to call out the numbers, our order book in March 22 exit was INR 800 crores on December 22, if it was about INR 1,200 crores on March 23 [indiscernible].
what we are signaling is that going forward, FY '24, we'll see a healthy revenue growth now for the EPC business, but we're also confident about the composition of this order book that you will see profits kicking into the EPC business. Last comment that I'll make is that we are on track on the demerger. We have our next hearing on the NCLT on the ninth of June. Assuming that all goes well, that should be the final [indiscernible] and we should be on track for having a demerger as of 30th June and therefore, being 2 separate companies on first of July. With that, I conclude my opening comments and hand it back to you, Varun, for the Q&A.
[Operator Instructions] We have our first question from the line of Achal Lohade from JM Financial.
My question was, first, in terms of the receivables, can you guide us in terms of what is the receivable for the CP business, including the lighting? Or if you could call out the EPC receivables is -- on the headline number, there is a substantial increase in the receivable days, if you could elaborate as to what has driven this? And how do you see it going forward?
Yes. Achal, this is easy EC. Prasad. Our total receivables is at INR 1,565 crores as against INR 1,361 in the last March, there has been an increase of about INR 220-odd crores. Now you see the breakup, the EPC business receivables has come down drastically from about INR 750 crores to INR 434 crores now. There has been an increase in the CP receive books from about INR 424 crores to INR 838 crores. This is predominantly because of 2 reasons. One is our business mix, which used to be predominantly towards trade until about last year. has changed. So this time, the mix has changed from [ 70, 30 ] to [ 65-35 ] in favor of the alternate channels, which includes your e-commerce modern retail, et cetera, where in sort of a channel financing, we do -- we give an upfront credit of about 90 to 120 days.
So that is one of the reasons. And apart from that, the market conditions have been tough. So over and above the channel financing facility, we also had to extend some more credit to our dealers and distributors, and that is the reason there is an increase. But I think over the next couple of quarters, this trend will start receding again.
So Achal, I will just add to that. First headline is all the receivables, the healthy receivables, there is no risk or no concern that we have in the [indiscernible] Number two, as we said, while it's a mix change in the channel profile, it is in the form of a liquidity support that we've given to channels because in a low demand situation, there 2 or 3 levers that you have. One is a lever of price discounting. Second is liquidity support. We've kept that within certain norms and penetration that we've done. But our ultimate are balancing 2 or 3 factors are revenue growth, our market share are pricing discounting seems such that to protect our margins and same liquidity support, such that all 3 are ultimately optimized for us, and we're comfortable with what we've done.
Understood. Second question I had with respect to the growth, the market share gains. Obviously, we see that we have done a phenomenal growth in 3Q and 4Q as well. So can you help us understand what is the extent of market share gain in some of these large categories like science and water heater and mixers. I think that would be very useful.
So Achal, there is no concrete third-party industry aggregate data that is there to derive from sit fact that our growth on revenue across most higher than industry reported growth. So we're doing the same interest on that. That's point one. Point two, I wanted to step back from this Q3 and Q4 that you mentioned to over the last 3 years, that's what we've been signaling that we will keep driving industry beating growth on a larger spectrum of 3 or 4 years, you'll see that we have done that. It's not number one, at least the top 2 as well as growth profile. Number three, we're doing that on the back of product launches, portfolio expansion, premiumization and brand [ spending ]. To me, those are the drivers. If you look at that also, some examples that we've given in the investor like product lunch. We did have some white spaces like within our product [indiscernible] which we're plugging in, for example [indiscernible] plugging that in. So that's the driver [indiscernible] Specifically, if I were to call out without specific numbers, I think we've changed market share in coolers and in fans in particular and then to a lesser extent, in some of the other longer-term categories there.
We have a next question from the line of Valuequest. Please announce your name.
This is [indiscernible] from Valuequest. A couple of questions from my side. So first, on the Lighting front. I think consumer Lighting obviously has been quite weak this quarter, and we've been guiding that all the GTM changes will sort of play -- start playing out from. So when are we on track for that? And apart from GTM, do you think there are incrementally more things that need to be done, particularly on product pricing, consumer pull. So you alluded to some of that in the deck, but if you can help us in terms of how you're thinking about consumer Lighting.
On the Lighting, our consumer lighting has degrown this quarter has been compensated with growth in professional Lighting. So on a cumulative basis, it is flat to a 1% growth. I think consumer Lighting degrowth that we're seeing is more a function of market. We're seeing that across since Q3 that there is a softness in there. It seems to be continuing into Q1 also at a market environment perspective. To your question between GTM versus product, I think our product profile, product launches is completely on track there. Again, we gave some examples in the current year. GTM, I think, is ongoing transitional and some of that is both internally as well as you need better market conditions for the distributors or the market or dealers, et cetera, to start taking on additional business or putting the money on to that. So I think that will also accelerate when the market accelerates for that. So there's a little slowness on the GTM. But on the actual product side, we are completely on track and actually very ready with our entire portfolio.
Understood. And on the consumer pull side, do you think we need to make additional investments, especially to build out Lighting given our market position right now? Or...
Yes. So we've not invested in the last few quarters on any marketing or media or [ brands ] but we will be doing that in this system.
Understood. So then, sir, how do we think about margins on the lighting front going ahead, assuming that B2B would remains stronger at least for the first half, given the context right now. And some of these additional investments, how are you looking at Lighting margins particularly playing [ well ].
So [ Ana ], I can only answer that from a medium to long term, short term is always hard to [indiscernible] I think in the medium to long term, we are very confident about the margin expansion. Again, if you look at this year also, don't look at the quarter, but if you look at an annualized basis, I think we've grown our Lighting margins by about 2 percentage points. I think on professional Lighting, directionally, we should top out at extremely high single digit, I don't know, like 8%, 9% sort of margins. Professional Lighting, consumer Lighting, we should in the 2 or 3 years be in the teams in that line. How that plays out on a quarter-on-quarter basis is the function of margin and also direction as our GTM as well as adapt the portfolio mix changes. So directionally, we are very clear in terms of exact timing, it's a function of many things.
Understood. One more question from my side on the fan category. So how much gross margin impact do you think we would have had this quarter given the fact that we will not have passed on the entire BLDC price increase or the star rating lead price increase OTC. And do you now see an environment slowly it would get passed on, which even the market leader has been alluding to that over the next couple of quarters, at least we should be the pass on the entire cost of these.
I have seen those comments. I only wish that the market leader does that sooner rather than later. We hold them accountable from the actual market actions rather than actual comments. I do think if they do that, we will not shy away from following through on that part. I think it is healthy for the industry and for the consumers to actually take those pricing calls rather than try and cut the cost of the product sector. That said, I think while we've been impacted by not being able to take the full twice increase in Q4. Some of that will offset in our case by a mix improving while we not fully passed on the price increase, but because the mix is earlier now, our share of premium fans is healthier, therefore, somewhat we be able to offset that.
Understood. But any broad sense in terms of how much higher the margin could potentially have been? I mean, hypothetically, if some of this impact had not coming in Q4. I mean just trying to get a sense in terms of how much the premiumization strategy has come through in the margins ex of the pricing...
You mean for us, Bajaj particularly.
Yes, for Bajaj, correct.
Again, very hard to call a number. I think there are so many factors that are at play that plans all of these things in. I was just looking at our margins for consumer FMEG business, that is our company minus [ EUPC ] On an annualized basis, our gross margin is up about 2 percentage point, okay, which is a heavy increase in 1 year. Again, to my mind, our own portfolio strategy, et cetera, and premiumization is a bigger driver of some of change. While the actual external market, some of that is offset because of price tactical price movements, et cetera, in the marketplace. So to us, that is more important than merely structurally, are we [indiscernible] that. Similarly, there on fans also I think we're almost let 5% underprice or starting and that 5% is a significant pricing -- so take a 5% incremental Will that happen in 1 quarter, 2 quarters, 3 quarters is all slow down to it hard to call. But I think we have a room for anything between 3% to 5% price improvement in at least, let's say, 3% coming down to the [indiscernible]
[Operator Instructions] We have a next question from the line of [ Akash Zaveri ] from Perpetual Investment Advisors.
My question is, what is the current consumer perception of 4- and 5-star rated fan versus the lower star rated fans?
Did you say foreign 5-star or 4- and 5-star.
4- and 5-star.
It's very early stages to hitting the consumer behavior and the market practices will evolve over the next, I would say, to 2 years, not immediately. I think Q4, I don't think consumers have really moved to star rated because of the non-star rated highly prevalent in the marketplace. Having said that, we're seeing on divergence stands compared to larger white goods where you see our rating. If you look at larger white goods,[indiscernible], they seem to have converged around the 3 stars. So maximum sales are happening around 3 star because people can optimize the pen price star rating. In fans, we're seeing the opposite behavior right now were actually polarized behavior either a segment of consumers buying 1 star fan or buy 5 star, very little idle. But I think that's also a function of supply and product evolution as more relevant products come into 3, 4 or categories, we'll see that start to even out a little more. The other view I have is that 5 stars rather than focus on star there's a lower focus on DLDC. I think ultimately, the currency of buying and selling in customer evaluation will move to joint start rating, not the technology. Because ultimately, technology is a means to that end. That's for us as industry to bother about. The consumer should be [indiscernible] And why I'm saying that is because technology will continue to evolve. The star rating is a currency that will remain.
Got it. And you said like our mix of premium fans has increased, how do we define premium.
So let me put it the other way. For us, we were largely known as a subeconomy manufacturer, in FY '22, 74% of our sales is coming from sub-economy [indiscernible] approximately 1,500 MOP,. Now that 74% is down to about 67%. So that's a 7 percentage point shift towards economy and premiums, everything other than sub-economy. I think a 7 percentage point shift in 1 year, are you strong, but I think that trend should continue as strong or significantly over the next 2, 3 years. We will significantly see an increase in premium brand share for us.
Okay. And how much is BLDC as a percentage of our current overall fans portfolio? And how do we expect it to move over the next 2, 3 years?
So for us, particularly right now, that is extremely small because we've just launched BLDC Fans this season. In the next couple of years, you'll see BLDC pickup as right now, it's negligible.
Okay. And my last question would be that -- could you throw some color on the current channel inventory scenario? Like how is it currently? And when do you expect it to normalize?
You're talking in the context of Fans in particular?
Yes. Yes. Fans in particular,.
So I think somewhere by end of Q2, that should have normalized as 3 to 4 to 5 months is adequate for some of that to start normalizing. But it's a linear line. It's not 0, so that is already starting to rest. But by end of Q2, you will pretty much have seen normalized and material trends. To the earlier point, I just want to add to BLDC. While I said that right now, it's negligible. Our products are pretty much there. So it's not that we were waiting to play the BLDC very much in the game, but I think that pickup will now start happening over the next couple of years.
[Operator Instructions] We have a question from the line of Manoj Gori.
So my question would be on the appliance side. So we have been taking a lot of efforts on appliances as well as our [indiscernible] Can you please update like what the current status, where are we and where we are heading probably FY '24 and FY '25?
So Manoj, you are from?
Sir, Equirus Securities.
Thank you, so the appliances, you see, we've had about a 16% growth in Q4, that's a good performance. I think the key driver for us in this quarter has been coolers, also aided by the weather heat that is there. That said, we continue to grow our supplies across the other categories. For example, we've given is of the [ 750 ] what mix [indiscernible] like we mentioned in the Investor Day that has been. [indiscernible] grills et cetra. So given that we are a very wide multi-category appliance there, we have continue to [indiscernible] various appliance categories. In terms of the reference to [ mophie research ], I think it has been weak year and a weak few quarters for [ morphie research ], but we're in the process of completely revamping the mopeds product portfolio. We should start seeing some action on that later half of this year, and we see more traction and growth in [ morphie research ] insurance. Overall, directionally, are work strategically on appliances in line with the brand reposition of build for life. We are upgrading our appliances, both in terms of quality and making them more aspirational premium seen that emanate payout across all the appliance categories, so not just [indiscernible]
Right, right. Sir, in appliances, so obviously, you rightly highlighted, like in Fans, as you highlighted, like 74% of sub-economy contribution came down to roughly around 67%. How do you define the premiumization in appliances? And obviously, some of the recent launches where you have started launching 3 Jar Mixer grinders, which I believe would be a premium product or probably 750 watt mixer grinder motors. So how do you see the overall mix changing over there? And probably how should we look at from next 2 to 3 years point of.
So given that there's so many categories and so many parameters, therefore, there isn't a [ cleaner ] metric. But to take the example that you mentioned the multiple examples. You mentioned 3 jar, that's an example, 750 watt at another example, in the case of iron, we are largely a dry and it becoming steel. In the case of coolers, we do not have the full range and you got a wider range and more higher ASP products and so on and so forth. So water heaters were typically older ignition waters if you look at a various motors the far more contemporary, a greater mix towards storage, water enters rather than just instance, more deportation et cetera. so on and so forth across all the various categories we're upgrading. If you look at gas bonus, coming 1 or 2 burner products to having an molar gas stores, et cetera. So every product category has various definitions of premiumization. But directionally, that's what you're seeing across all. I do want that from cash been still metal on last table. So there are so many of these various factors or components or elements of premiumization, but we are addressing all of them. Overall, tuning comes down to quality, durability design styling and ultimately, the brand progress that we're delivering. So I think all of this together is where we are confident that the next 2, 3 years, both are market share and our margin profile will enhance all of these movements across all the categories.
Right, sir. Sir, last question, if I may squeeze in. On the distribution side, we were focusing on better extraction from the touch points because I think we are fairly covered in terms of touch points at least in the smaller cities and town and probably we were sharpening our focus on better extraction into larger cities and towns. So any progress over there and probably how you would rate it probably in FY '23 versus FY '22 levels?
Yes. So clearly, again, if you see a growth in this quarter or this year, it is completely coming from [indiscernible] We have not grown on the trade side retail base numerically, that's kind of flat. All the growth is coming from extraction, point one. Point 2, within that also, our mix towards alternate the newer channels is becoming a year, like we said this year also. I think Q4 number I remember is about 35% versus 30% in the past. Our online share has been growing faster. The 1 I'll call out right now is modern trade has done exceptionally well for us. In modern trade, I think, is a good proxy for [indiscernible] more aspiration consumers. So there our visibility, our shelf space and number of SKUs and value for chain has actually been going up very well. So I think on all of these accounts, we're moving well. That's moving in tandem with the new product launches and the brand investment.
So we should continue to grow faster than the industry across categories?
I would hope so, and I would expect, sir.
We have a next question from the line of Aniruddha Joshi from ICICI Securities.
2 questions. One, we have seen there is some increase in the trade discounts. One, obviously, there was a muted demand. And secondly, there is correction in input prices. So to what extent the increase in trade discounts is there right now? And how do you see remaining in next 2 to 3 quarters? And what is the strategy of Bajaj to counter that? That is question number one. And secondly, we are seeing this might be a early feedback, but we are seeing that there are many consumer complaints regarding the BLDC fans. So just like similar to the white goods or even other products like mobile, et cetera, will there be any strategy to set up service centers? And can that act as a differentiation Also, what is the warranty period that Bajaj offering on this product, again, as a strategy to differentiate? Yes. That's it from my side.
So the first part on trade is down, you're correct. And I think there's a fair amount of discounting right now in the marketplace. Most of that is only driven not so much to the commodity, but probably because of a weak demand situation to actually protect sales, et cetera. To me, that's more tactical than strategic. I will tell you at the point of principle, we are not big fans of discounting. We have brands of rather have a higher preference towards preserving price [indiscernible] that said, like I gave you an example of sales, et cetera, we have to be tactical and we cannot afford to lose market share. And therefore, we will keep doing that more tactically speaking.
To us, the offset of compensation for that while we discount at a product level or SKU level to be competitive to protect the SKU sales. At a portfolio level, we are targeting ASP increase of realization increase. That's our strategic response to tactical discounting. In terms of consumer complaints on BLDC, I think you're correct, and I think some of that is a mix of not necessarily the leading players always, but sometimes Tier 2, Tier 3 players, et cetera. in particularly in the case of BLDCs because of the PCBs, et cetera, those have a differential life versus a critical part of the sand. But I would not attach too much importance to that right now. I think over the medium term. This is part of evolution of both the product and the consumer be willing to pay for that. Any will start seeing that becoming better. I don't think that should be -- it should not be a huge challenge in the long run. That's fair.
That is why I early emphasize that I think as an industry, as a mature industry and as leading players, our focus should not be on the technology. Our focus would be on giving the consumer a right product and energy efficient, which is directed. Technology has many frozen calls including AEC will have frozen call. So we will rather focus on how we do the maximum start the maximum energy efficiency. And that is for us to manage tradeoffs between a particular technology and servicing costs of that technology.
Lastly, to your question on -- actually before that question on service centers, I think Bajaj, one of its competitors strength is extensive best network of service centers. So I do think in the medium term for fair recuring BLDC, that will be a competitive advantage versus some of the non-latent. Your last question on product quality, typically our warranty is, like I said, in the case of times, not just BLDC, the first ones to come out with a 5-year warranty on the motor, but the 2 we are awarded on other products or the components of the [indiscernible]
[Operator Instructions] We have our next question from the line of Rakesh Roy from Omkara Capital.
So my first question regarding, sir, lastly, you are -- saying about regarding about same-store sales growth, sir. Can you highlight on this one, sir?
Yes, Rakesh, that was what I responded to one of the value questions also. Our actual distribution or reach is not expanded. That is now flat. So all our sales growth is coming from SSSG, it's the same as extraction that I answered earlier. So we are focusing on actually driving same-store sales growth, and that's where I think a greater -- both will come from in the future.
So sir, can we hope on this year, this will implement or maybe at a data for SSG?
So it's not external data that we published, that's an internal metric that we have in terms of extraction being created a greater growth driver. But I simply mathematically put -- I'm telling you my distribution network is flat. I think all my growth in this year is really coming out of [ SFS ] extraction. When I'm saying distribution may work flat, not growing. That's not because of cash importance, but I think at the number that we are versus competition, a marginal growth and value of that growth will be limited. And therefore, it's more important for us to focus on extraction. That's on a 3-year perspective. But if you look at a 5-, 7-year perspective, you will see distribution and network growth also.
Right, sir. Right, sir. So my next question regarding, sir, can you share the full year is number like how much is the appliance fan and lighting a [ morphie research ] more number, sir, for full year FY '23.
So we don't have that ready handy right now Rakesh, we have to get back to you.
We have our next question from the line of Arun Agarwal from Kotak Securities.
Sir, my first question is on the other expenses. So we have seen an increase in other expenses. Even last quarter, we talked about the retailer bonding program loyalty program. And the increase in logistics costs. So could you just share -- throw some light on how these costs have evolved during this quarter?
Yes. So I'll call out 2 or 3. I think logistics cost is up. I think that is above normal. This is part of our transition from mineral [indiscernible] To be honest, I don't think the agenda that we had on fixed cost optimization of last semis played out the way we anticipated it. First, I don't think the outsourcing was delivered the strategic goals that we had for it. So we did not realize that benefit them. And then the old process of pulling it back again, right now, we are not optimal to my mind. And each of these transitions come to the cost. I think there's fair amount of onetime cost in the mastics. I would yet say that we have at least 2 to 3 percentage points optimization that can come from music. Maybe it will now take another 2 years to realize that. but we're working on that. We will get to that at some point of time. We'll keep working on that.
So that is partly baked into Q4 because of this condition, we have some duplicate costs in Q4. To the RBP, I think while that's numerically appearing in other expenses, that gets netted off somewhere in the revenue in other lines of the discounting assets. It's more a function of RBP was a primary driver of discounting or giving value back to retailers -- we reduced the dependence on RBP. And in turn, we have certain other things that play out in the marketplace. I don't think that's so much -- while optically it looks like an increase in other expenses, that's more a reclassification because rather than RBP, our discounting [indiscernible] elsewhere in the [indiscernible] et cetera and looking higher over the [indiscernible] The other element -- the other smaller elements in the other expenses, there are certain warranty costs, warranty program that we what that sits in there, the R&D step-up of investments that we have, all of the R&D increased investments is also sitting in the other expenses. The combination of all of these [indiscernible]
Sir, is it possible to quantify the impact of that onetime logistics that you talked about?
So like I gave you guidance, I think you are sitting with about 2 or 3 percentage point improvement that should happen over the next 2 years on an incremental basis during this period of time.
.
And sir, on the ad spend, was it sort of in line with what we have been doing or it was slightly on the...
The ad spend between last year quarter, this Q4 was about flat at about 2.5%.
Okay. Sir, the other question I had is on your -- even when depreciation seems to have increased this quarter as compared to the run rate that we have been seeing over the past few quarters. So anything one-off in that?
Yes. So is EC. Prasad.. Last year, as you are aware, the logistics was outsourced. So now we have taken it in now. So all the go down that we take on rentals, we have to account for as a right-to-use asset and for which the depreciation has to be provided. So that is the reason of the [indiscernible] going up.
All right. Okay. And sir, also on your CP business margins, so I mean, it has been a slightly bit on the volatile side, and it's also lower than the peak that we have seen in the past. While we understand the demand is but directionally, if you could just help us guide how do you see your CP business -- consumer product business margins over the next 2, 3 quarters?
So again, next 2, 3 quarters is hard to call out because that's 2, 3 quarters more dictated by market and pricing and discounting. Unless we see a buoyancy in demand, I think margins will stay in pressure -- under pressure. But that said, the only long-term solution to margins is more strategic in terms of brand lift upliftment, portfolio mix [indiscernible], et cetera. So to us, that will be the real counter to any short-term margin pressures from external [indiscernible]
[Operator Instructions] We have our next question from the line of Achal Lohade from JM Financial.
Yes. Thank you for the follow-up opportunity. I wanted to check, if you adjust for these loyalty program points reversal or these logistic costs, et cetera. What is the adjusted margin for the fourth quarter and for the full year, if you can help us with that?
So Achal. A little tough again to quantify or give a specific number for me publicly, et cetera, and we have an internal sense. But let me give you a more directional answer to that. I think -- we had many of these things laying out some are onetime in nature, some are more a function of external market. It had not been for this commodity inflation over the last 1 year, and as it's not been for this demand slowdown and therefore, the DLD -- rather the DE transition, adding to costs, which we cannot pass on. Had it not been for logistics that has not gone for plan. I think we would have been sitting close to 9% to 10% right now. So what I'm saying is now, how do you say which element is completing how much none of it can all be correct in a situation. So now you take anything between none of these issues happening [indiscernible] 10% versus some of this happening so onetime, some not the number in between. So that's the best way I can put it out to you. So I think we're sitting anywhere between a 3% to 4% margin unlocking on a like-to-like as-is basis, plus over a medium term, as we go than move into different production in. On top of that [indiscernible] When will this play out, how will each of these factors there somewhere in the next 3 to 4 years, I'm very confident that we all accumulate together [indiscernible]
Understood. Just to clarify, this is the CPE margins you're talking about, right? Or it's inclusive only CPE.
Have its own trajectory and CPE, of course [indiscernible]
Correct. Correct. Sir, next question I had, if we see the power distribution, I see that there is a massive order booking actually Q-o-Q increase. Can you help us understand because if I recall right, the problems what we had faced was largely in the power distribution subsegment, right? So can you help us. Yes -- so can you help us understand that?
The headline is these are good orders, we will make money. So first, be very confident and clear about that. Number two, when we add problems in [ CD ], that was particularly rural electrification projects. These are [ RDA ] number 3, problems are partly of our own making, and I say we are all lucky. We have bitten up far more than we can show. We did not have the capacity to take on that size and quantum of business. I think about INR 5,000 crores [indiscernible] These are far more calibrated. Number four, our project management execution skills body are much better, that's demonstrated all the projects we executed over the last several quarters. If anything, all the legacy power distribution projects actually have been taken to closure and execution in money realized over the last 2, 3 years.
So that is anything in the greatest content that our ability to execute them and initial efficiency there also. And finally, to these specific projects, we've done very detailed surveys, technical evaluation, contingency planning in the numerical bidding strategy, commercial costing and upfront negotiation on the supply, et cetera. So the way these have been approached in every which way or minus completely different from the past issues. So again, to resummarize the nature of these projects within PD is very different from the [indiscernible] project. The quantum of this is far more manageable. The bidding, planning competition is far more robust and the execution capabilities are fully engaged. So we are very confident that this will actually be with not just profits in FY '24. But even the payment cycles, working capital, et cetera, we optimized to actually make that very healthy.
This is very helpful, sir, for the clarification. Just one more thing with respect to capital employed, is it possible to call out what is the EPC capital employed out of the total capital employed as it gets to much?
So yes, EPC capital incurred as [ INR 218 crores ].
That's on a reported basis, but as we see it getting demerged, what would that number be, given the unallocable will also get allocated to that, right?
No. So around the appointed date, the capital employed was INR 550 crores. So this was what was reported. So.
Everything will come in the existing company. Is that right?
Yes. Yes, that's right. So [indiscernible] between the current capital employed and the capital employed as on that appointed date will go to them as a cash.
Understood. Understood. And just a clarification on the other income of INR 34 crores. Is there any one-off out there?
Yes. So this is predominantly -- see, we have taken insurance on the warranties that we provide to our customers, those manufacturing warranties which is as an expense in the expense side. And the claims that we get from the insurance companies accounted as other income, which is about INR 11 crores there. So this will be our routine nature of income that we will be generating, but will be set up against the premium that we pay. We have generated treasury income of close to INR 5 crores. And there are certain write-backs of vendors. So this is about the INR 32-odd crores that we are talking.
You're saying INR 15 crores, INR 16 crores in write-back of the vendors?
INR 12-odd crores.
INR 12-odd crores. Understood. Understood. Great. If you could just give us statistics with respect to FY '23 versus FY '22 in terms of branch [ pain ], advertising ASP basically?
The Q4 to Q4 was 2.5% -- full year.
Full year, full year Yes, yes. Okay. Okay.
Let us come back to you on that I don't remember -- tell you the full year numbers.
[Operator Instructions] We have a next question from the line of Manoj Gori from Equirus Securities.
Sir, second half, so here I'm referring on the fans as a category. So second half was very interesting. So probably for you, as a company, when you look at your 3Q was extremely strong, still you roughly around 2-odd percent growth during 4Q. How do you rate it. And probably also you can say like how the -- have you seen any incremental comfort by trade partners for Bajaj as a brand? And probably have we started seeing any structural market share gains. So that would be helpful, sir.
So how do we rate ourself up and rating or judgment to yourself, so we can really report our performance. But I think the numbers show that nearly at least market share gains happen as long as we are doing that, we were happy about that. In terms of just -- how are we seeing acceptance of parts, et cetera. It's a little early days, but anecdotally speaking, I can tell you that, that perception is starting to change. I won't call out names of particular stores or signalers or channels visit to the last 2 weeks across North and South. And we're at least starting to see open met, and I'm talking a metro leading counter that would not stop our brand in the past, now starting to sometimes also be caught by supply Oh, I do not know you started doing this. For example, in Bajaj being ABS baseline. And if you look at our ABS baseline, you look at the quality, finish, paint, chain, et cetera, on that. I would say it's not equal, but better than most of our peers, et cetera. So I think as you start making the organic total or perception changes, the numbers will follow. We are really continue about that.
Right, sir. So also our focus has been across categories in appliances or fans or lighting. So probably which category would excite you more from a 3- to 5-year horizon and probably any mics goal or respiration targets that you have set for that category?
So you're asking us to choose between all our children. I think they're all simply precious to us. But that said, I think the delta for us in time is largely simply because of the market size and given that we are a lagger which is not to say appliances option is not important yet, but we're not -- the delta for us over there will not be as much because we have been in the leadership position. The other lighting is the other part where I think consumer lighting should see strong data for us, again, given the traditional weakness in that and the product level also. But catch-up, as that starts happening, we should see stronger growth for. So the first on [indiscernible] over appliance.
Right, sir. And lastly, sir, how do you see -- sorry, I would ask you to repeat it. But probably, how do you see the underlying demand environment? And any signs you probably see like things are taking some turn or probably you continue to see that demand weakness.
To be honest, we are continue seeing demand weakness. I have yet to see tailwinds on demand, et cetera. So I think we are having to fight for our sales and revenue. It is -- and I'm reading some commentary including FMCG, the essentials, et cetera, starting to see issues, we have get to see it in our business sector. Thank you. Just before [indiscernible] I want to answer the previous participants in the question on annualized brand spend. So FY '22 was 3%, FY '23, 3.2%.
We have our next question from the line of Utkarsh Somaiya, an Individual Investor.
Can you please give me a breakup of the following -- in the 2 segments, and consumer products. So the breakup of the current cash on your book, how much is you got to the EPC business?
So your question repeat, not very clear, breakup of the cash.
Right. And a few more line items [indiscernible] The breakup of the cash between the 2 segments, Consumer [indiscernible]
So we have a cash and cash equivalent and investments of about INR 412-odd crores, of which INR 200 crores pertains to [ EPC ], which I explained a little bit earlier, the difference between the capital employed as on the appointed date and the effective date will flow to them and balance will remain with the CP. So INR 200 crores approximately goes out [indiscernible]
Understood. And can you also give me a breakup of the operating cash flow. Breakup of the operating cash how much cash flow is generated by each business Is it possible to share that?
No. Actually, we don't -- because this is actually done at a corporate level. So we don't track the operating cash flow.
[indiscernible] Like qualitative, like does the EPC business generate cash?
It does. So most of see, if you actually look at the capital employed reduction has actually come from the EPC business because of the collections that they have been doing from the old outstanding. So there has been a significant generation from the EPC business. INR 200 crores that I mentioned is actually the generation which has been done by the EPC business between [indiscernible] '22 and now.
Sorry, you said the INR 200 crores cash you mentioned has all been generated on the current year.
Yes, that's right. That's right.
So from the INR 450 crores operating cash flow consolidated, is it fair to assume that, 200 crores is generate by EPC and the...
Yes, that's right. That's right.
Right. And I don't know if it's post is it possible to give me a breakout of the depreciation of.
Record depreciation.
Yes. The depreciation for the year was INR 81 crores.
We don't bifurcate the precision.
Okay. And what is the working capital days of each business.
I don't have the data right now, so probably we'll get back.
Okay. And just one last question. I wanted the ROC of each business, if possible? or the capital employed as [indiscernible]
Capital employed of.
Both the businesses?
So the total capital employed is INR 1,907 crores -- of which CP consumer business INR 700 crores. Lighting is INR 111 crores. EPC is INR 218 crores. And there is an unallocable of INR 877 crores, which is predominantly the assets would be and all of that stuff.
Sorry, I didn't get the unallocable part.
Unallocable is INR 877 crores. Majorly cash and land and the goodwill.
So which business does it belong to.
[ Akash ], your voice is extremely feeble.
I'm so sorry. I just wanted to understand the unallocable, which is the cash, goodwill and land, which business does that belong to date, INR 870 crores?
I didn't get the question.
The unallocated capital.
Land capital cannot be allocated to a business. So it's actually a common corporate as effective. That's why it's unallocated.
When you demerge the company, where will it appear in.
When it gets emerge, it will stay with the consumer business.
Okay. So I can fairly assume the entire INR 877 crores, is mostly likely the consumer business capital implies.
Extra for the cash.
[Operator Instructions]We have a question from the line of Chintan Shah from JM Financial.
I have 2 questions. So [indiscernible] multiple strategies. So just wanted to understand how are we positioning a Bajaj versus payers -- is it value or it's more in terms of product differentiation, et cetera, you highlight more on that? And secondly, in condition with that, so once a transformation journey, so we had a lot of white spaces to the in terms of the port, et cetera. So once
I'm going to interrupt you. Your voice is not very clear. I got that how are we positioning Bajaj, I did not get the follow-on.
Can you hear me now?
Yes.
Yes. So continue with that to your transformation journey, it's right with white petite, et cetera. So once that is sort of done. So how are we looking at continue to gain market share and higher margins versus peers. So what is the strategy on that if you can please up elaborate.
So on the first part, if I got it right, I got part of it. How are we pushing Bajaj, like I mentioned. Firstly, as a company, we are moving to a house brand, a multi-brand company, therefore, not a dependence on a in -- within that, Bajaj, of course, is a flagship for leading that. We are pushing that around the tagline of build for life that machine, which is really around durability of study less but it will remain a multi-category brand, and will operate at multiple price points. It's not at the 5 points, at least from our traditional endpoint, which is very low value product will start moving more northwards without vacating the economy of low-value segment, the pricing segment business, et cetera. In terms of the transformation and therefore, long term, how do we intend to grow our market share is really an extension of what I was saying strategically as we become a mighty brand company, product range becomes -- our portfolio becomes more fuller, you plug in all the white spaces that you have in our product portfolios. And then each of those product segments and subsegments, should have differentiating characteristics that to our viewpoint, should have some form of innovation or differentiation that provides a superior proposition to our consumers.
But I strongly start ticking over their purchase of bank savings in your favor, I think a 3, 4 percentage certain your actually, the exponential impact of that is far more than we actually end up [indiscernible] So if we keep doing that consistently, I think that's really what we are focusing on it. We'll keep doing that. And that's not a transformation journey, sometimes are finished, but that creating greater consumer proposition, innovation investment is almost a cantina doing that. That's how we see ourselves driving long-term growth. So hopefully, I answered your question, I could not hear it very clearly.
As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you very much. So thank you, everyone, once again, for joining us. As I said, this is a tough economic situation. It's been so for the last few quarters. We're not out of that and continue to see headwinds around us right now. Given all of that, I will only say that we are very pleased with our performance in Q4. More importantly, we are not focused on quarterly performance. What's important to us strategically, are we moving in the right direction, doing everything that they're saying on brand, on product on general discipline on approach to what we're doing. I think we are holding true to all of those assets. As long as we do that, we are comfortable and happy about this. Thank you very much.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.