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Ladies and gentlemen, good day, and welcome to Bajaj Electrical Limited Q4 and FY '24 Earnings Conference Call hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from AMBIT Capital. Thank you, and over to you, sir.
Thank you. Hello, everyone. Welcome to Bajaj Electricals 4Q FY '24 Earnings Call. From the management side today, we have with us Mr. Anuj Poddar, Managing Director and Chief Executive Officer; and Mr. E.C. Prasad, Chief Financial Officer of the company. Thank you, and over to you, sir, for your opening remarks.
Thank you, Dhruv. Good afternoon, everyone. This is Anuj Poddar. I would like to start by acknowledging that we would have had -- we'd have liked to have had a better quarter than we ended up having. That said, I'll just call out some of the challenges and some of what's gone well for us. In terms of challenges, our Consumer Products business has faced the impact of weak demand, particularly in kitchen appliances. Appliances have pulled us down as well as general trade, we witnessed weakness in demand.
I would also say that part of that is due to the fact that our dependence and contribution from rural markets as well as dependence on nonpremium segments is much higher than competition. What is working well and continues to work well for us is our growth in alternate channels. Across all the subsegments there, we've had double-digit growth.
We have seen growth in the Fans business, our Coolers business and Morphy Richards also in the last couple of quarters, we've been depressing growth in our sales there. Our Lighting business, I would believe, continues to do well. While you see a certain contraction in the revenues, that's largely because of LED price erosion in Consumer Lighting. And in the case of Professional Lighting, the base effect was high. Last year, Q4, we had a high base. That said, to me, overall performance in lighting business is satisfactory, and our margins there are actually continuing to strengthen and therefore, you see the EBIT performance in the Lighting business is good.
The underlying trends in the Lighting business in this quarter has also been good, and therefore, we are confident about the year ahead as well. What stands out for us in this quarter despite the pressures on the profitability, on cash flow, working capital balance sheet, we've done extremely well.
We've added cash flow from operations or rather generated cash flow from operations of about INR 147 crores in this quarter, demonstrating our intent to maintain a healthy grip on the operational part of the business.
I'll just call out the 2 main drivers or drags on our CP margin performance. One is the discounting that both competition industry and we had to resort too, particularly in a weak demand situation. And this is partly accentuated in our case because as you know, we've been churning out our product portfolio from phasing out old products into new products.
A fair amount of old products because they're getting phased out have been heavily discounted by us. And the second area, which we hope to solve as we go forward is logistics, that we've spoken about in the past, that remains a bit of a drag for us, and that has continued, impacted our operational performance, but we are working to address that.
The last point I'll make, while we see Q4 numbers, I'll call out that April has turned out much better. We witnessed growth top line growth in April, both for our Consumer business as well as Lighting business. Fingers crossed, but clearly, Q1 looks much better than Q4 has been.
With that, I'll hand it back to AMBIT. Thank you.
[Operator Instructions] The first question is from the line of Natasha Jain from Nirmal Bang.
Sir, my first question is on the Consumer Products segment. Your presentation mentioned growth in Fans now assuming at least 60% of your top line in CP comes from Fans, yet we saw operating deleverage players. So firstly, I want to understand if you can tell us the volume growth in premium and non-premium Fans and also the value-wise split between premium and non-premium.
Second related question is, were we able to take any price hike? And also if you can throw a little more light as to how massive channel discounting has been despite pickup in growth, both at industry and Bajaj level? So this is my first question on the CP side.
Natasha, I'll try and answer your question. Let me know if I missed anything out. So firstly, Fans, for us, as Bajaj, has not been about 50%, I think you mentioned 60%, Fans for us is in the 40% contribution range. So we remain largely an appliance-driven company.
In terms of volume growth, premium, non-premium, both have been in the single digits. That said, our non-premium has grown faster this quarter. So our share of non-premium, which is everything excluding premium, is about 70% because of higher growth in the non-premium for us this quarter.
In terms of price increase, like I called out in the opening comments, rather than price increase, I think we've been impacted by a fair amount of discounting in order to -- given the demand situation. So we've not had a price increase in Q4, but we've taken a price increase effective 16th May, so that comes into play later this weekend.
Understood. Sir, my second question is on the lighting side. So your presentation mentioned that there was EBIT margin improvement mainly on the back of gross margin improvement. So on that 2 question, sir, can you give us split between your Consumer and Professional Lighting and also if you can quantify volume growth between the 2 and if we were able to take price hikes in this year? And is that a reason by EBIT margin [indiscernible].
So Natasha, our CL is -- our Consumer Lighting is about 35%. Professional Lighting is about 65%. We've not had a volume growth in CL. So the decline that you see in revenue is pretty much approximates the price erosion, volumes being relatively flat.
In PL, in Professional Lighting, quite honestly, we don't look at it in volume terms because given the nature of product and service solutions business also, so there, volumes don't have a direct bearing.
Sir, but were there price hike, can you -- is that applicable in this segment or how should we read the gross margin in...
I'll answer differently. Firstly, if you see an industry commentary also that you've had fair amount of LED price erosion in consumer lighting through all of this year. So they haven't been price hikes rather than there's been a downward pressure on pricing. That said, my sense is sometime in Q1 as soon as May or June, we should see the price bottom out because a lot of the price erosion was coming because of DOB technology that is already now stabilized. So I don't see any further price erosion because of that. So prices should flatten out. And going forward, volumes and normal growth should come back into Consumer Lighting also, both for us and for industrial.
Next question is from the line of Rahul Gajare from Haitong Securities. We have been disconnected from Mr. Gajare.
Next question is from the line of Praveen Sahay from PL India.
Sir, my question is related to the Consumer Products segment. As you have mentioned that the Fan and the Morphy Richards have given a growth, can you give some more color on the Fan growth, how is that, single digit, double digit of the growth, how you would have seen? I can understand that 70% contribution is a non-premium, but how is the growth part being 2%?
So Praveen, your voice is not very clear, but I'll answer what I heard. So our growth for Fans for us has been in the single digits, both in premium and the non-premium segment. Mind you part I will add is that we've had some more launches towards absolute end of the quarter. So some of that pickup is happening, it happened in the last 15 days of March, but also now happening in April.
The one example I'll mentioned there, the small motor BLDC Fan, that was a segment we were absent in, that is something we launched towards the end of the quarter, and we'll continue to do well in April. So I'm confident that our growth in Fans during this year will pick up further.
And there is no price hike so far?
So price hikes now are coming before 16th May. So we've rolled that out in the announcement from 16th May.
How is the Morphy Richards, good?
Morphy Richards is high single digits. I think it's the second or third quarter in a row but we are back to growth in Morphy Richards. And that is happening both on volumes but also expansion of portfolio in Morphy Richards.
Lastly, sir, can you give the A&P spend for the quarter and the year?
3%, both the year and the quarter is at 3%.
Next question is from the line of Anirudh Agarwal from Valuequest Investment Advisors.
Anuj, the first question was on the appliances business, right? So appliances for us continues to be fairly weak. Obviously, the industry context is what it is. But you mentioned that April, you have seen growth in the consumer business. Is that also -- are you also seeing some sort of revival in appliances now on this piece or is it largely still led by Fans?
So Anirudh, appliance call out, it's kitchen appliances that has been dragging us down through last year as well as in Q4. In fact, Coolers grew in Q4 also. Coolers by the time of Q1, actually, we pretty much topped out. That's true for most of the leading top 4 brands and coolers have topped out. That's a level of demand. We've got back some supplies from May, but in general coolers are in short supply, so that continue to grow.
The growth that we're seeing in Q1 is led by Fans, Coolers to the extend stocks available. And some, I wouldn't say bounce back in kitchen appliances, at least the downfall is slightly adjusted over there. To crack it up Morphy continues to do well in Q1 April so far also.
And on gross margin, Anuj, obviously, I mean, there is some extent of additional discounting. Any quantification of this, on a normalized basis, assuming that you would not have to resort to this additional discounting, let's say, whenever overall macro has improved from here, what is the sort of gross margin that the business can deliver in that context?
So Anirudh, I'm little, what should I say, apprehensive of giving that number, but I will still give it you to let you understand the level of discounting impact to the cases. It's almost through various means the discounting is as high as 6% -- 5% to 6% across different product categories that is happening.
How much of that can we pulled back, when? That part, I wouldn't want to venture a guess, but some of that is what we're pulling back. So the 16th May that we’ve spoken about is I think 6% is very high. We are willing to take a relook at how we drive that. I think that is hurting our margins, and I'm not sure the demand elasticity is that high in this. We will take a bet that, we will take a price hike and, in fact, hopefully not have an adverse volume impact on that. But not all of the 6% can be rolled back right now.
Right. And this 6% would be largely primary or a mix of primary and secondary, how would that be?
So for me -- so firstly, direct impact to me, so 6% is impacting me. But the way that -- those discounts have been the structured, some of it is contingent on secondary sales or secondary volumes, but I'm talking about impact on us, so therefore, financially, it's a full impact on us.
Last question from me was on overall expenses, right? So both on employee cost this quarter, we've seen a reduction. So what sort of run rate should we consider for employee costs going ahead? And on the other expenses front, what sort of elasticity do you see on other expenses?
I mean this year, despite top line degrowth, other expenses have remained fairly elevated. But in a scenario where top line starts growing meaningfully, hopefully, that is soon. What sort of elasticity would you see on other expenses? How much operating leverage would we get in that case?
So Anirudh, first in employee costs, you're seeing a little correction this quarter because of true-up of certain provisions. We had higher provisions that we trued up little bit. Also, particularly with the variables and incentives, given the performance and opportunity we'll look at that. That said, I think we have a Q4 figure this year and Q4 of last year, employee cost in the investor day.
I think from a future extrapolation, it is somewhere between these 2 figures, okay? We will remain optimal on employee cost. Our annual salary hike comes into play in July. That's when we'll see normalized inflationary impact on employee cost. But we're coming in focus with the digitization et cetera, remaining a lean company, lean team.
On other expenses, I think both ways we are kind of fixed. So this is the level of other expenses that we think we would operate at, which means as our volumes or value of sales grow, that should translate to operating leverage for us. We don't see other expenses going up in variable sensor.
Final question, Anuj, versus the plan that you had laid out some time back, any structural changes or anything that you would want to revisit as part of that plan?
I don't know what you're alluding to, but 2 or 3 things that I see that should add delta to us. Consumer Lighting is where I think we are very early stages. I'm confident that this year, we will see good growth in consumer lighting.
Number 2, logistics remains something quite -- I will accept that we've not improved fast enough. I wanted to see improvement on logistics cost. I think we may be a few months away from that. Just recently given this, we reviewed, we may bring in some other external consulting intervention in logistics because we want to see improvement in that much faster.
I think there's at least 2% to 2.5% case sitting just in logistics. So to me, the 3 levers of performance that should drive improvement in the coming year, one is consumer lighting; secondly, logistics, once we start getting that right; and third is operating leverage in the Consumer Products business side. In the operating leverage, I would include reversal of some of this discounting.
Next question is from the line of Rahul Gajare from Haitong Securities.
Sorry, I got disconnected last time. So there is always a strategy where one would either go for growth or one would go through a margin. You did indicate that 40% of your business approximately is about Fans. So how much is the growth that you've done in the Fans business in this particular quarter? Can you just spell that out?
So in terms of growth, we have grown in single-digit in Fans. And like I said, it's about 40-plus percent is the contribution of Fans to our total revenues in CP. Because some of our fans launches were slightly delayed, so it's come in, in March. So we've seen the benefit continue into April also.
Some of our fan launches were slightly delayed. So it's come in, in March. So we've seen the benefit continue in April also, like an example, we've shown in the deck also small motor BLDC Fan, et cetera. So as this has been part of the narrative we had, as Bajaj continues to upgrade or fill in the white spaces in our Fans portfolio, including our premium clients, BLDC now the small motor, decorative fans, et cetera, that has continue to add, and we'll continue see growth in that.
The second piece I'll call out there, we've got some reference to it to the Nex. Nex we continue to launch new fans. We continue to see pickup in the run rate of mix. We've got more expansion happening in terms of offline stores to grow and start seeing visibility of Nex fans in the stores, off-line trade also, we've got more direct dealer and distributors appointed for Nex. And you should see a pickup this year also for online sales of Nex. So I think between Nex fans overall and Bajaj cooling fans, FY '25 should see faster growth for us.
Okay. So if you were to choose between growth and margin, which direction are you likely to go for? Because in this particular quarter, we've seen, in fact, even through the year that we've actually got hurt on both, growth and margin. Just because if there is a lot of discounting typically, at least the growth number should have been much higher than what it has come through.
So I agree with you, Rahul. It's a fair question. I think we didn't try to choose one or the other. In hindsight, it looks like this is how it's transpired. If you just and -- one thing we track is a 2-year -- we've got a 2-year draft on our margins and decline margins and everybody's growth margins.
I think if it's not just -- don't take it a quarter level, but if you look at an annualized basis, margin decline has been slightly better than some of competition. That said, I think we've been -- this discounting has not helped us adequately in terms of growth.
So now we're really looking at that, which is why I'm calling out this price hike from 16th May. We will now try and see if we take a price hike, maybe we won't see an adverse impact on volume. So that's the current thinking. We will try and flip it around the other way.
That -- one of the reasons for lower profitability has been new product launches. So are we done broadly with all the product launches that we had to or there is still more gaps to be filled?
No, there's a lot more. So I would say the next 2 years, we will continue to see. We've always said that right now we're seeing enough. You're starting to see all the new products that we've spoken about, but it's not a onetime exercise, it's 2, 3 exercise. We'll continue to see that over the next 2 years.
I don't think -- that does not mean it will be adverse for the next 2 years, but simply means as we get to a tipping point over the next 12, 18 months, our pricing power will improve. So right now, we are only seeing the cost side of that, but not seeing the gains of that. So over the next 12, 18 months, we should start in the gains of that in terms of us going to price ourselves upwards.
Next question is from the line of Manoj Gori from Equirus Capital.
My question is, if you look at over last 3, 4 years, we have been taking many initiatives and probably, we have revisited some of the strategies like product launches, logistics, we revisited Morphy Richards, so probably, where are we placed, how long will it take to probably finalize strategies on most of the categories? And when should we expect to see some benefits? If any color, probably it would be very difficult to give a specific number, but any color that would be helpful.
So Manoj, it's good question. I will put it this way. I think strategically, we are very much not such on plan, but doing well. It's operationally or execution-wise that we've not fully on pace with what we wanted. When I say strategically in terms of the brand architecture, how the brands that we spoke now, new product launches, and the features of the new products that we've been showcasing as well as design, if you go out, do channel checks, et cetera, you will have a positive feedback on that.
So I think that is important. For us, where that is coming through in a measurable way, though we don't publish that, if brand scores, our brand has significantly improved over the last 2, 3 years across product categories and across the brands that we have. Similarly on quality metrics, we've seen significant improvement. And when I say this with all measurable metrics that we are tracking on quality. So in terms of product, new product launches, product and brand strategically, we are doing well.
On Morphy Richards, it's taken us some time, but the last 2, 3 quarters, we are starting to see that traction on Morphy Richards also both in terms of category expansion and revenue growth. Operational and execution-wise, where I'm saying we've been slightly weaker, not delivered to what we aspired for, has been particularly aspects around logistics and logistics come inventory and making sure the right product is available at the right part of our geography, I think that is where we've been, behind the curve.
I won't go back into history of the Mahindra Logistics experience and subsequent to that, we've taken it in-house last year. We have not managed to improvise it the way we wanted. That said, like I said in the opening comments, we are revisiting that.
We might bring in an external intervention offer consulting to get that right this year, if we've not manage to get that right on its own. So that to me remains a 1 point which we need to solve for and address because I think not just logistics side of cost, but its impact on sales boost is also to us very important.
Sir, secondly, if you look at, probably from March onwards, we have started seeing some positive growth momentum. So is it broad-based rural versus urban, premium versus non-premium or probably any light on that?
So I'll just call it out saying we've seen growth in April, I've told you, it's after many months that we've seen sales growth. In fact, it's almost -- it's sort of very early double-digit growth. But I don't extrapolate that for the full quarter, but the fact that during the month, we've got a double-digit growth, that's positive news from our perspective.
Given our contribution mix from rural, et cetera, while we've not cut that because there's always a margin of error in that, but it did happen because it's both across rural as well as urban and across, therefore, price points. So I'll just leave it at that right now.
Sir, last question on kitchen appliances. So obviously, we have gone through a very tough times at the industry level over last few quarters. Do you see things probably have bottomed out probably further decline should not be visible for the industry and for Bajaj in specific.
I would put it this today, Manoj, that if I have to pick between kitchen appliances, fans, coolers, even water heaters for coming segment, I would think fans, coolers, water heaters will be my growth drivers more than kitchen appliances would be, at least over the next couple of quarters.
That said, this festive is what I'm banking on. Kitchen appliance has been subdued for a while. So by festive, hopefully, kitchen appliances should also come up and pick up pace.
[Operator Instructions] Next question is from the line of Natasha Jain from Nirmal Bang.
So my question is you've mentioned about PPT that GT channel degrew by 3% versus all other channels grew by strong double digits. And yet we saw our top line comprise of 8%. Can you tell me what is the revenue contribution from different channels and also versus the rural versus urban.
So Natasha, firstly, you're right on the math. So that's well at 3%, others at double digits. The reason it doesn't add up to 8% because at the channel level we track and get gross sales data. So overall, we're reporting on accounting at net sales. So that's why it causes certain discrepancy.
Number two, in terms of contribution, so GT is at about 62%, which means the balance adds up to about 38%. And in terms of rural, urban, that part, we don't publish here.
[Operator Instructions]. Next question is from the line of Manoj Gori from Equirus Capital.
Sir, one question which I missed, probably on the EPA side, like any costs that we recognized during the quarter and probably how should we look at in the coming years, probably what should be the calculation? And then probably as a percentage of sales or probably as a percentage of volumes, how should we look at?
Yes, cost for the current year was about INR 9 crores, and we expect it to be about INR 12 crores next year.
And sir, some of the competitors have also highlighted that, that would be passed on. So should we assume that industry would be passing it on, especially when you look at the price hikes have been very difficult?
So my view on that, Manoj is, I mean, you'd pass on or not is on a holistic basis, not a line-wise thing. I do think as an industry, we are guilty of not having passed on overall costs, whether it was star rating impact on Fans or overall commodity impact or the [indiscernible]. Cumulatively, we've not passed on adequately to the market.
I believe that's a defensive strategy, we should have and in our individual case, we prefer to pass it on, but have to match competition. But now we'll take the call, at least like I said, for me, we will now take diverse situation and try and pass on more cost there.
Next question is from the line of Hardik Rawat from IIFL Securities.
My questions are broadly answered. I just wanted to understand one thing. You mentioned that you're planning -- the Board has approved a proposal to raise up to INR 500 crores through NCDs. Just wanted to understand what this raise would be for?
So that's enabling resolution that we have taken so that if some opportunities comes up for an inorganic sort of a deal then we have the money in place. So nothing planned as of now, but that's just enabling resolution.
[Operator Instructions] Next question is from the line of [ Amit Kumar, undetermined ] Investment.
Just one question, I just want to -- I'm just sort of trying to reconcile the broad macro data with what is happening in the industry, right? So last year, you had almost -- in fact, even better than expected. So expectation was 6%, 7%, you're definitely ending up with 7%-plus, actually closer to 7.5% kind of GDP growth, right?
I mean this is a category which is still not -- I mean, whether it is kitchen appliances or other appliances, so to speak, it's a category which is not sort of fully penetrated, so much of opportunity in rural areas and bottom of the pyramid population as well. And then we are looking at a situation where at the industry level growth has been so disappointing last year.
So we've seen that in a few other consumer categories also FMCG, et cetera, at the beginning of the year. But in the fag end of the year, FMCG seems to have recovered. So any sense, I mean, what is really going on? I mean there is obviously there is that unorganized to organized shift opportunity also available, smaller regional brands sort of shifting to Bajaj or some of the other brands and then premiumization.
The whole of last year has been pretty disappointing from a macro perspective and from a demand perspective itself, especially in light of the kind of GDP growth numbers that you are seeing basically. So could you just -- I mean, do you have any thoughts on what is going on in here?
So Amit, this is a question better for some economists. We are lay people here. That said, I'll give you a certain couple of pointers or hints to where to look at this. If you look at the Q3 GDP data, it was about 8%, 8.2 something, but the private expenditure growth, consumption expenditure growth in that was 3-odd percent.
So delta of almost 5% was a historical high delta between GDP growth and private consumption expenditure, which is not usually, you probably have a couple of percentage points gap between these 2.
So what that also shows is a lot of the GDP currently is being driven by infra or CapEx rather than actually consumer expenditure and consumption, that's point one. Point two, reasons for this, or before that, to your point on, it seems to be a broad trend across consumption sectors, not just our sector, but also FMCG.
I can agree with you. In that, while you said Q4 FMCG has shown growth, I think it's very early stages, not being very strong growth. I won't call out a legal company names. But there is some positive commentary on there in FMCG, including couple of weeks ago, what Nielsen mentioned, maybe Q1, you will see some growth in FMCG, including rural bounce back as well.
I would be very happy to see that because I think us as FMEG or FMCD typically have a lag of 1 to 2 quarters from FMCG. So once that happens, we would hopefully follow suit on that. And only the third point that I would point you towards is keep watching interest rates and inflation. As that cools off, particularly interest rates cools off, I think that should be a big trigger for consumption expenditure to come back.
I think that's something holding people back right now. And sorry, just one fourth point I'll slip in is, the government, I would like to believe is cognizant of this. There's enough chatter, there was some chatter around this year, we open account in February, but since that is just a word of account, maybe in the July budget, we will take some planned intervention to boost consumer sentiment. I think there are easy ways and means to do that without impacting fiscal deficit.
Okay. But I mean there is no sort of specific drivers for this segment, which is the appliances and durables for a segment which is sort of keeping things so muted. Nothing...
No, no, nothing negative to the segment. I think it's a proxy or a marker of overall consumption sentiment right now. And I do remain bullish that will turn around. And for whatever it's worth, like I told you in April, we've seen growth. Maybe part of that is with the good monsoon outlook, maybe demand has been subdued for a while.
At some point, low base effect will kick in. So statistically, many of these things will play out. But directionally, I think we should not be too far out from consumption expenditure coming back into play in one form or the other.
Just on the other point that I mentioned that right now, GDP is being driven by infra and CapEx cycles. That also has, finally it has to percolate down to consumption expenditure that really has a lag. So if normal case consumption expenditure doesn't pick up, then this infra CapEx population down to people's hands and spending back that automatically will also come into play.
[Operator Instructions] Next question is from the line of Dhruv Jain from AMBIT Capital.
I had a question on the CapEx, right? So you've done about INR 130-odd crores of CapEx in FY '24. Just wanted to understand what's the kind of direction in terms of CapEx intensity should we look at it from FY '25 and FY '26 perspective? Any specific categories that you're looking to invest a lot more on from an in-house capability perspective?
Yes. So Dhruv, most of these CapEx were leaking to the new products that we invested on, especially in form of the tools and molds, et cetera. And as Anuj mentioned, this would continue for another 2 years, so you can expect a similar sort of CapEx levels for the next 2 years.
And just add to that, Dhruv, 1 second, in terms of capacity, otherwise, we're not looking at some big bang large-scale factories, but our capacity across most of our products are fans, mixers, water heaters, lighting has continued to increase over the last couple of years. That's 2 smaller CapEx intervention that we're continually making.
Okay. And I just had a question on the new products, right? So you've been driving this new product initiative for some time now. So if you could just throw some light on as a percentage of sales, what would be the contribution and any direction that we should think about it? And if you could just say that -- if you could just give some data around margins, what could be the kind of margin differential between these 2?
So Dhruv, sorry, we don't disclose our contribution from new product development. That said, obviously, we track it internally. So that has had a steady state growth over the last 2 years. We used to do that as part of our own Board meeting also today, but it's not data that we publish here.
Next question is from the line of Praveen Sahay from PL India.
Sir, can you give the CapEx number for this financial year? And also, as you were explaining about the plant expansion, can you give some color on the in-house manufacturing contribution right now and the way forward?
So the CapEx spend for the year is INR 124 crores and the in-house manufacturing is about 20%.
INR 124 crores for FY '24?
Yes.
And how is the plant for?
Next year will be a similar level. It will be in the range of about INR 150-odd crores, similar levels. So next few years will be similar level.
Okay. And the in-house, as you've mentioned that 20%, is there any material change you are expecting in the coming couple of years?
So indication in the last 2 years has grown from 17% to 19% to 20%, I think this year, it should go up to 22%, 23%. So that's the kind of incremental that is going to happen. But what's happening is qualitatively, there's more high-end stuff that's been coming in and the lower-end commoditizing is being getting pushed out there.
And second part I'll add to that, all of the tools, molds that we talk about, that CapEx is not restricted to our plant. So that is where we did a control over, a lot of that is placed at the third-party manufacturers also.
Because earlier, if I remember, you had guided for 25%-odd to reach by '25 and that will also improve your -- some bit of a margin profile as well. So that's why just query on the in-house how it's 20% to go forward?
So I would -- again, I'll comment and I don't remember what exactly you might have heard me say in the past, but I've always said, we don't have a target number that might be where we end up with, but that's not a goal by itself. But the quality of that is important.
So what we do in-house and what we do outside, that is important. Secondly, the ROE or ROCE is important to us to establish the pure EBIT margin. So if you connect what I said earlier also, we are also investing in the quality of manufacturing and our control on the production cycle at third-party manufacturers.
So increasingly, all the tools, molds, dyes, et cetera, third-party manufacturers also increasingly owned by us. So to us, we are not really white label services, but our contract manufacturing and our IP, our product, our control over the production and quality over there. So to us, that is how we're looking at manufacturing.
And also, if you can give some numbers on the how is the distributor count has increased by end of FY '24?
Sorry, Praveen, can you repeat? I didn't hear this.
So distributor count, how is that at the end of FY '4?
Distributors is about 750 right now, 749, yes. So to give you a sense, last year in March '23, it was 660. This year, March '24, we've exited at 749.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to management for closing comments.
Thank you. I'll just thank everyone once again for attending this and I'll reiterate what we said. We've had a mixed quarter. We'd have liked it to have been better. We've had some shortcomings, particularly on the CP business led by appliances and general trade. But at the same time, there are other positives in terms of our lighting business alternate channels, coolers and some growth in Fans and Morphy Richards also. April has started off better for us. We remain positive for the year ahead. Thank you.
Thank you. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.