Crompton Greaves Consumer Electricals Ltd
NSE:CROMPTON
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
264.9
477.05
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Crompton Greaves Consumer Electricals Q1 FY '20 Earnings Conference Call, hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nilesh Bhaiya from Motilal Oswal Financial Services. Thank you, and over to you, sir.
Thank you, Steven. Good morning, everyone, and welcome to the earnings call. Representing the management, we have with us, Mr. Shantanu Khosla, Managing Director; Mr. Mathew Job, CEO; Mr. Sandeep Batra, CFO; and Mr. Yeshwant Rege, VP, Strategy and Financial Planning. I will now hand over the call to the management for their opening remarks, post which you can open the floor to question-and-answer session. Over to you, sir.
Good morning. This is Shantanu here in our offices in Bombay, and thank you all for dialing in for our analyst call for the quarter. As usual, I'll try and provide some color over the business and our results for the quarter, and then we will be happy to take as many questions as time permits. Let me start today actually by first talking about our Lighting business. Our Lighting business, the LED part of our Lighting business grew 4% in value terms. The volume, of course, was stronger with the LED volume growing at 12%. This was -- along with the fact that our conventional business, which now represents less than 20% of the total Lighting business continues to decline and the conventional business declined about 21%. As I talk about the Lighting business, I'd just like to separate and give you some color on the 2 parts of our Lighting business. The first is B2C and second the B2B, both representing about half of our total Lighting business. Starting with the B2C business. Here, obviously, as we've talked before, our focus is to continue to introduce new consumer meaningful products which we price at a premium and support them with advertising and aggressively drive distribution. In this quarter, we introduced one of our biggest potential initiatives in Lighting, which was the antibacterial bulb, which is a first-time breakthrough product, which actually kills up to 85% of bacteria. Earlier a few quarters ago, we had also introduced LYOR, our 5-star rated bulb. Now both of these variants are at about a 20% premium to the base bulb pricing, and they are continuing to do well and grow. Their business is on an uptrend, and by this quarter, these 2 variants themselves contribute to about 15% of our lamp sales, and we are confident that this will keep increasing. And this is really important for our long-term strategy of restoring value in this market by bringing in premium initiatives. The antibacterial which was our most recent initiative is doing well. We have got strong both customer and consumer feedback in terms of its performance. So we're very hopeful of that, though it is, of course, early days. We will continue to strongly support our Lighting business with advertising because we believe that advertising is one of the key investment areas to drive the B2C Lighting business. The second part of our business, which we have not talked too much about in the past, but I would like to talk a little about today, is our B2B business, which represents about half of our total Lighting business. The quarter just ended was definitely a little soft for our B2B business, and this was primarily driven by the fact that a number of government and institutional orders were delayed due to the elections which happened in that quarter and the fact that a lot of our customers were occupied with the election, then projects got delayed. That being said, we believe that this is a key growth area for the future. Over the last quarter, we have made significant investments in strengthening our capabilities to drive B2B. We have now created a dedicated field force under the single national sales leader for our B2B Lighting business. We have also created 12 new key account manager positions who will look after the key B2B accounts across the country. We have also invested in technology by enabling this entire field force with salesforce.com, which helps us better manage the entire flow from lead to delivery and improve our supply capability also. So we do see that the B2B business will continue to be a key driver. Obviously, there is price erosion which continues, but our 2-pronged approach, if you will, to this, is going to be on B2C, continue to make success by introducing premium price variants with consumer meaningful distinctive benefits and investing strongly in building our B2B business. I also wanted to just make a couple of comments on the Lighting margin and how that has panned out. Like most of you are aware, a few quarters ago, our margin had declined from a double-digit margin to mid-single digits and then we had worked to drive cost and we had begun to restore the margins. This quarter, I just wanted to clarify that though the EBIT margin has declined, actually, on Lighting, our gross margin has actually improved by 100 basis points quarter-on-quarter. The reason for the decline in EBIT margin on Lighting this quarter is actually driven by 3 key things: number one, was our investment in advertising where we had almost 300 basis points higher investment in advertising, specifically behind the ICC Cricket World Cup versus the previous quarter; the investments which I mentioned earlier which we have made in our B2B business which we believe is going to significantly help accelerate that movement forward; and the third and last item was an adjustment in provisioning which we made this quarter. So we continue to believe on an operating basis our Lighting business should aim to and we will continue to work it towards a double-digit growing sustainable EBIT margin. Moving on from Lighting, I'd like to talk about our second segment, which is ECD. The ECD business obviously had a very strong performance this quarter, actually which is a continuation with somewhat acceleration of the ECD performance over the past few quarters. All 3 ECD segments of ours, Fans, Pumps and Appliances, have delivered strong double-digit growth. As at now [ until ] the ECD business, I would like to actually start with our Appliance business. It's a business we don't often talk much about. I think I had mentioned this a few quarters ago, that after having driven our way to play choices of Fans, Pumps and Lighting, the next choice for us is to make ourselves a meaningful player in the Appliance business, again, driven by consumer meaningful innovation, investing in the brand and driving our go-to-market. We began this program by saying that our first step is to work to drive geysers and coolers from their very, very small and insignificant positions over the next couple of years to a leadership position. The program started, like you may be aware, with geysers that we entered the last season of geysers in quarter 3, with an entire revamp of our geyser portfolio. Just to refresh your memory is that in the last 2 quarters, this program did well and our geyser business grew by 28%. The momentum of this program has continued and this quarter our geyser business has grown 44%. We are now continuing to work and have a lot of initiatives set up because we still see a lot of headroom for growth as we move into the coming winter season, but we will obviously talk more about that as we put programs and initiatives in market. The second big area for us in Appliances after geysers was obviously coolers, where really, we wanted to do the same thing, improve our products, drive our distribution, invest in branding with an objective of over the midterm getting to a leadership position. One of the key initiatives which we introduced this summer was the desert cooler called Optimus, which was again specifically designed to better meet consumer needs. It had superior air delivery, it has an easy drain feature which is something that consumers wanted and it also had a unique design to enable an easy clean of the product. This test program has also started very encouragingly. And though it's off a small base of last year, this quarter, our cooler business grew 138% in value terms, more than doubled. So we will continue to drive these programs, but our fundamental objective here is over the next couple of years, create a strong, robust fourth leg to our business by building our businesses in these areas. Quickly moving on to the balance of ECD. Fans obviously did very well, both in top line and bottom line. We are continuing to gain share and market share in our Fans business. Our latest share is again up by plus 1 market share point. It has been driven by the strategies which we'd already chosen and have been driving for a while. Premium remains the focus. In this quarter, our premium fans business grew 24%. New meaningful consumer initiatives remain our focus. Our Aura Fluidic, which was an entirely redesigned motor and fan, which enabled us to offer for the first time in industry confidently a 5-year warranty, has been a key driver of the business. But along with that, our other segments of Fans continue to grow well as we are driving deeper and deeper distribution in smaller towns in our overall program. Domestic pumps, also, again, had yet another wonderful quarter. The top line grew, our bottom line grew. In fact, here, the volume growth was slightly ahead of our top line growth, though both were in healthy double digits, driven by the fact that we are continuing to see significant traction and growth opportunities from Crest Mini, which we still see having the potential to drive growth for many quarters to come. I would also just like to mention in closing that this quarter versus the previous quarter, we have spent an incremental INR 45 crores behind advertising and sales, with primarily the focus of that being behind advertising. This is part of our ongoing strategy to keep investing in the brand to build our business. In spite of this incremental spending, we continue to make good margin progress, now having leading margins in actually our industry. And this has been enabled like we've talked in the past by really a couple of things. One is our ongoing strategic cost reduction program; the second is our continuous focus on improving mix and driving premium. So these investments are possible, which will pay off in the long term without taking short-term hits on total company margin, in fact, slightly continuing to grow it. With that, I'd just like to end, and then we'll throw it open to questions.
[Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital.
On the Lighting segment, I understand the reasons you've stressed and articulated, but as things stand today, it's been 2 months since the election. Are you seeing the B2B contracts coming back to life? And from a margin accretion perspective, do you think you'll be able to claw back that 3%, 2.5% that you've lost in LEDs from future onwards?
As far as the first part of your question goes, the answer is a strong yes. We have, in fact, now with the investments in things like salesforce.com, we have got far, far better visibility on our order pipeline. So yes, the orders are definitely coming back on the B2B segment. Secondly, in terms of how we [ bridge the margin ], the advertising part will come down. We will actually bring that down as we continue to build scale and cost. So it will be a gradual reduction because we really believe, especially for the B2C part of the business, advertising is a critical investment area. And as we traced our business and looked at our history, during -- if you go back 2 years, we had tremendous growth in B2C. And then, when we got into the period which was driven by demonetization and GST implementation, we were forced to cut back on advertising. And I fear we had a detrimental impact on our growth rates at that point in time. So we are committed to continue to spend. We will bring the margins back over time by driving mix and driving cost, but we see ourselves continuing to spend on an average somewhere between 2% and 3%.
That's helpful, sir. On the ECD front [indiscernible] the numbers don't seem to recon, because I think the segment revenues in ECD are up about 16%, but like you said, premium fans grew 24%, geysers you said grew 44% and I'm assuming pump [ was already ] seeing double-digit growth as well. So each of these segments seem to have grown above 15%, but the overall ECD revenue momentum is 16%. So clearly, we're missing some segment which might have de-grown. I mean, is that recall right?
Nothing de-grew. So we don't talk about, obviously, specifics by subcategory. But let me leave it at this, that if I just look at total Pumps, total Fans and total Appliances, which is our 3 types of segments, those totals, all of them, were within a couple of points of 16%.
The next question is from the line of Renu Baid from IIFL.
Sir, just an extension on the Lighting segment. You mentioned that there were certain provisions which were increased in the first quarter. So if you can elaborate a little more on this, what kind of provisions were these in Lighting and the nature of these? Should we expect some of these costs to recur in quarters to come? And as you mentioned, the margins in Lighting will improve gradually. So in that case, despite the lower base, should we expect that margins in Lighting will be single-digit levels for a few more quarters and thereafter increase? And also, what was the ad spend pertaining to Lighting alone for the quarter?
Renu, Sandeep here. I'll take that question on the provisioning. So if you look at -- and before that, let me just address the question on advertising. I think the Lighting ad spend was about 3 -- 2.5%, 3%, right? So if you just adjust that from the fourth quarter margin, you will still look at high single-digit margins in Lighting, right, despite sales in the first quarter being significantly lower than fourth quarter. So despite the negative operating leverage, which, to some extent, was adjusted by higher gross margin, right? So other than advertising, the additional impact of provisioning is because of the kind of provisioning policy that we follow. We have a very, very conservative provisioning policy, which recognizes bad debt at the time of sale; a provision for a doubtful debt at the time of sale itself. And in this quarter, because of whatever other things are happening in the political world, payments on some of the government and institutional customers got a bit delayed. So in line with our prudent accounting policy for even delayed payments, we have recognized a charge. Obviously, we are very, very confident that, that money will get collected and once that's collected, this charge will automatically, will get written back.
The next question is from the line of Deepak Krishnan from Goldman Sachs.
Sir, this is Pulkit from Goldman Sachs. It's good that you threw some light on the B2B business and the slowdown. Can we ask you that other than various government orders which obviously got impacted because of election, is there a general slowdown that you also witnessed on the institutional side, nongovernment? So the private sector, commercial Lighting business, has that also been impacted in the quarter? And what is the outlook for that segment going forward?
We did not notice too much of a slowdown or change in the private or corporate institutional business. That being said, in terms of our B2B business, a large percentage of it is -- our biggest strength is in the area of street lights. So street lights, whether they are bought by EESL or not, they tend be government business, a small municipality or a large institution. So we are a little -- currently, a little overweight, if you will, on government buyers.
Understood, sir. So my...
Mr. Krishnan (sic) [ Mr. Patni ], sorry to interrupt sir, but if you have a follow-up question, request you to the rejoin the queue, please? The next question is from the line of Venkatesh Balasubramaniam from Citi Research.
I had a couple of queries and these are both...
Sir, request you to speak closer to the handset, please. Your voice is not audible.
Yes. I had a couple of queries, which are both related to the Lighting business. Now when I see the Lighting business sales, I see that for the last 3 quarters, including the -- not this quarter, but the last 2 quarters at least, we noticed that Havells is delivering a much higher sales number than you people in lighting, if you see, much smaller prior to the third quarter. So is it like you have ceded your #2 share in lighting to Havells now? And if that is the fact, why is this happening, especially given the background that you have launched this Anti-Bac LED and actually, that should have given an impetus to sales? That is the first part of the question. The second part is the fact about the provisions which Sandeep was talking about. You say that they're very conservative and you're making these provisions at the time of the sales, bad debt provision at the time of the sales. I mean how can you be making provisions for bad debt at the time of sales? When you're making the sale, you already know if it's going to be a bad debt? I got a little confused with that answer.
Okay. Let me address the first one and then Sandeep will talk to second one. As for the numbers we have, we are still bigger than Havells in total lighting. Though, you are right; obviously, the gap is narrower than what it was a while ago. I obviously don't know exactly what Havells is doing, but, of course, as everyone does, we do study competition.And I'll tell you what our 2 key learnings are. Number one, we had a significantly larger conventional business than Havells. And just because of -- therefore, law of numbers, that hits us harder, the decline hits us harder. The second thing, and I think the more important and substantial thing is Havells invested in a stronger B2B program significantly before we did. As it stands, you could say that maybe that's a miss on our part. And that's why I think that they've got ahead, but that, on the flip side, has given us a lot of confidence that by doing those kind of things, by putting those kind of dedicated resources and structure, it will help our business grow. So these are the 2 reasons we see. One is the [ business match ] based on the size of the -- relative size of conventional business. And the second is B2B, we were not investing as strongly as we should have. Sandeep?
Yes. On the process for these provisions, earlier you're right that maybe a couple of years back, the accounting standard allowed you to recognize debts when actually the customers stopped paying, but 2 years back, the Indian accounting standards have changed. And like you do in the case of banks, even companies like ours have to make provision based on what they call expected credit loss method. We can maybe discuss the details separately, but that expected credit loss is a bit like what you would do in banks. So every time you make a sale, you have to take -- you have to recognize what could be the expected credit loss on that account and that is something that is computed using historical charts and data. So we could discuss that separately. But for the moment, I'm very confident that because this whole elevated provisioning was because of a temporary slowdown and whatever was happening in these institutionals over the last 4, 5 months, which is also correct.
The next question is from the line of Arnab Mitra from Crédit Suisse.
Wanted to ask on the other Appliances businesses, geysers and air coolers. Now obviously, your bases are low here, so Y-o-Y growth is going to look high and it's very hard to fathom what it actually means for your business. So I was wondering if you could give us slightly better sense, either in terms of what do you expect could be the contribution from these in your -- in overall sales, or within these categories, what market share do you think you could have now that the season for air coolers is also over and geysers is also over last year. So that will be helpful in gauging the overall context of this.
Okay. Our objective is -- and I think we've talked this before, is to achieve at least a #2 position and if not a #2 position, a #3 which is on path to become a #2 over the midterm and that's for the midterm 3 years. That's how we've set our goals and the reason is we believe that all the value is captured in these markets by people who are #1, #2 or #3. We do not want to be a #7 or #8 player. Obviously, then we will -- this will not happen overnight. We will continue to have season-by-season a number of new initiatives which keep driving us to our part. We have rarely only [ talked ] the first season of geysers and the first season of coolers. As far as the first seasons go, we're slightly ahead of our [ drive path. ]
And in terms of [ adversary ] business...
Sorry to interrupt, sir, but if you have any follow-up questions, request you to rejoin the queue, please. The next question is from the line of Inderjeet Singh from Macquarie.
Actually, just a continuation of Arnab's question earlier. On one hand, you say that your new products like coolers and geysers on very low base have delivered growth rates which are 30%, 40% or even 100%. And then you talk about Appliances growing a couple of percentage points around your overall growth rate of around 60...
Inderjeet, sorry, I misspoke. Pumps and Fans grew plus/minus 1 point on the average ECD growth; Appliances in total grew 40%, but its impact on the total ECD business was only about 1 point or so because of its relatively smaller size. I misspoke, I apologize.
So you're basically saying that the contribution of the Appliances within ECD are only 1% of the incremental growth has come from the Appliances segment, is that...
Yes. I would estimate about 1%.
Okay and when you say...
Mr. Singh, sorry to interrupt, sir. But you can rejoin the queue for any follow-up. The next question is from the line of Bhoomika Nair from IDFC Securities.
Sir, you spoke earlier about price erosion continuing in the Lighting segment. So what we understood earlier in your earlier comments was that the LED lamp pricing has kind of stabilized. So if you can just give some more color whether within the B2B or within the B2C, what is the kind of Q-on-Q kind of decline that you're seeing in terms of pricing?
If I look at -- for example, if I look at bulbs, LED bulbs which we just spoke about, I think the prices have more or less stabilized. But if you look at the other categories in B2C which is panels and battens, I think on a sequential basis, we are seeing price erosion at an average for the market of close to 10%. For B2B, of course, I think, especially in the street lighting and outdoor segments, we still see about 5% to 7% price erosion sequentially compared to the previous quarter for the market as a whole.
Okay. And what would it be possible to get a provisioning number, sir?
Yes. Provisioning would be about 250 basis points impact.
The next question is from the line of Achal Lohade from JM Financial.
This is Achal Lohade here. So just a couple of data point…
Sorry, you are unclear. Could you repeat?
What is the ad [Audio Gap]
Mr. Lohade?
Ad spend.
Ad spend.
INR 28 crores.
The ad spend for the quarter -- advertising spend was INR 29 crores.
And what is the corresponding number?
[ INR 24 crores. Higher... ]
INR 24 crores last year.
24.
Last year was INR 24 crores. This year is INR 29 crores.
Got it. And just the EESL revenues for the quarter?
The EESL?
INR 41 crores.
INR 41 crores for the quarter, yes.
The next question is from the line of Ravi Swaminathan from Spark Capital. The next question is from the line of Aditya Bhartia from Investec.
Sir, just wanted to understand the cost line items a little better. If we look at our staff expenses, those have risen quite sharply, especially if you adjust the ESOP -- the reduction in ESOP charges [ asset ]. What is that on account of? And conversely, if we look at other expenses line, given that our ad spends have risen by almost 20%, other expenses don't appear to have the risen all that much. So where is it that we are seeing cost savings over there and can that continue over a longer period of time?
I think last -- if you look at Q4, employee cost was INR 77 crores; that is now INR 82 crores. So between Q4 and Q1, the only change would have been a reduced ESOP and whatever annual increments that happen [indiscernible] salary [ hike in this ] fiscal year. So 1st April everybody's salaries get revised. So from INR 77 crores, the employee cost has become INR 82 crores. There is 2 elements, reduction in ESOP charge and annual increments, which have been in the range of 9%, 10%.
Okay. So if we...
Mr. Bhartia, sorry to interrupt, sir, you can rejoin the queue, please, for any follow-ups. The next question is from the line of Mayur Patel from IIFL Asset Management Company. As there is no response from the current participant, we move to the next question, which is from the line of Ashi Anand from Allegro Capital Advisors.
I just wanted to understand in the Pumps business, what is the share of agri pumps as of right now? And secondly, is [ agricultural ] an opportunity for us?
Agri pumps is about 20% of our business. And what was the second?
Sir and would [ agricultural ] be an opportunity for us?
What is that?
[indiscernible]
Can you repeat? The question was? The question you asked just now?
Yes sure, I just want to understand the [ agricultural ], the water initiative pipe water to every house, is that an opportunity for our Pumps business? And if so, would it be large and could you quantify that?
Obviously, we expect that the residential pump market has been growing roughly 5% to 7% every year. So that kind of growth is what we project will -- will also be true for the time going forward.
The next question is from the line of Vinod Bansal from Franklin Templeton.
Couple of things on the Lighting business. One is this provisioning amount one-off for the quarter and you expect absolute 0 next quarter? Two, your investments that you're making in B2B, what is your expectation of how much say a sales bump up in percentage points could you see in a year to come? Do you have a pipeline of orders or your own expectations? And three, because of all the investments you have made, does your 10% or thereabouts segment margin guidance stay for the year or that gets pushed back?
So provisioning, I don't think the right way to look at it would be on a quarter-to-quarter basis. Obviously, there are many variables in deciding the provisioning. One is the sales pattern and the collection pattern. So if, for example, we are able to collect some of the debt that the older receivables, particularly from institutions, then you could see a credit in a particular quarter. So the right way to look at it would be on an annual basis. And I think bulk of what we would have expected as a cost for the year has got charged in the first quarter.
On the other part of your question. On the B2B business, with the investments we're putting in, I guess, the best way to put it would be up till now, we have not been growing ahead of the market. Moving forward, like the rest of our business, we expect to be growing ahead of the market in revenue terms.Second was with regard to what is our margin. Again, we believe a 10% margin in Lighting is -- as we've stated before, is the right sustainable margin. We fully believe that our margins will keep improving from where they are. Now we will -- when it is important, when there's competitive areas in a particular quarter, we will make investments to drive this business, and we will manage our company because we are 1 company and not 2 companies in totality, right? So then nothing stops us that if we can find competitively superior cost reduction on say Fans, and we need to spend more on advertising to just stay competitive and grow our business on Lighting, we will do that, right? Because we operate as a single company and the benefit is really the scale of the company. But we do expect our margins to increase from where they are. And we fully believe that 10% is the right sustainable margin target for this business.
And one more...
Sorry sir, but you will have to rejoin the queue, please. The next question is from the line of Latika Chopra from JPMorgan.
My question is on Fans. You know you've registered a mid-teens revenue growth for the quarter. It was also enabled by good seasonality. Looking at the general industry environment, any comments on how the industry growth panning out? And are you very confident that this mid-teens growth can continue for the rest of the year? And also, any comments on the new construction-related demand?
Well, first, in terms of how the market is doing, like I said, our latest market share is, I think, for the month of May, and we have gained 1 share point. So obviously, the market is growing slower than us. Secondly was how do we see this moving forward? Again, I believe that with our program of innovation, investment in branding and go-to-market, we can aspire to continue to gain share, which means that we can aspire to continue to grow in the teens. Finally, in terms of construction and how that's impacting us, well, we do know, if I look [indiscernible] retail optic market data, there was an extended period where the market was actually declining. That decline has leveled off and now the market data is indicating that the market is growing in kind of mid-single digits. So I'm assuming that this -- because of the high correlation with construction, part of it is because of construction coming back.
The next question is from the line of Ansuman Deb from ICICI Securities.
My question was regarding the Fans segment. Now we are -- we are very strong in that segment. However, there is a significant competition in the fan space and also in the premiums fan space. Do we envision kind of an investment -- brand investments also in the fan space in the coming time frame to be able to retain our competitive advantage?
Absolutely. In fact, even, if you might have noticed in the previous quarter on the Cricket World Cup, we were advertising both Fans and Lighting and we have advertised Fans in the past. We believe that when we bring out a strong consumer initiative, whether it was anti-dust in the past or Aura Fluidic now, it is absolutely essential to support that initiative with meaningful consumer advertising, and we will continue to do so.
So that can lead to some amount of margin softening in the ECD segment?
Not really, because that is actually built in the base because we have been advertising. In fact, in the past, most of our advertising spend have been on Fans, including in the previous quarter.
The next question is from the line of [ Smita Chirma ] from Motilal Oswal Securities Limited.
So very quickly, last quarter, we were talking about a continuing double-digit margin in '19. And in this quarter, we reported the lowest [ offering ] that we've ever reported as far as the margin is concerned in that segment. So I'm just trying to understand the source of such a meaningful surprise. You've already discussed 3 reasons. Those reasons more -- they seem more like a part of the strategy than surprise to me. So the question is, the double-digit margin, was that an aspirational target more than a guidance for the year? And can you also just throw some light on how -- what was the reason for the surprise?
First, one part is that we had not forecast the impact of the elections on our B2B top line. So our top line was lower than what we'd expected, largely because of the delay in various orders on B2B. If we had got the volume which we had expected, the incremental investment in advertising would have largely been a wash. It might have been a little here and there, but not that significant because it would have been covered by incremental revenue. The provisioning was obviously something which we had originally not planned on and like Sandeep says, that tends to vary from quarter-to-quarter, it can also come back one quarter. The third one is -- was the investment which we made in B2B. As we have been implementing and executing the B2B program over the previous quarter, we saw clear opportunities, especially based on competitive benchmarking, et cetera, where we need to invest more. So yes, that was, to some extent, also unplanned.
Sure, so just like to...
[ Ms. Chirma ],...
Just let me finish because I need to know. The second part of my question was...
[ Ms. Chirma ], I'm very sorry, but if you have any follow-up question...
The second part of my question is not answered.
Yes, yes. Right. Go ahead. Go ahead. Ask.
Yes. So was that an aspirational target for the year or was it guidance for the year, does that still hold, the double-digit margin number?
Okay. First, to again clarify, we don't give guidance, right? We have never given guidance as such in terms of either top or bottom line. Second is, as I mentioned earlier, in terms of how we're looking at the margin, we do see a continuous margin improvement. Given the volatility of Lighting, there may be quarter-to-quarter need to invest a certain amount, right? But we do see ourselves moving towards a double-digit margin, and we fully think that a double-digit margin is sustainable. We have been -- if you look at over the past, I guess, maybe 8, 10 quarters, you'll find about half the quarters, we've delivered double digit and half we've not delivered double digit, right? So it is a bit of a volatile business. And like I also mentioned, we work more towards the total margin and profitability as a company as a whole. So we will -- where we do need to fund more competitive businesses, for example, if a competitor drops price, we will not let the competitor just get away with it, right? And we will look for other opportunities to fund. Another key source of funding, which we are continuing to do and we've done in the past, is we work, double down and work harder on cost reductions. And there still is a lot of opportunity for cost reduction, especially on [ aluminas ] and B2B business and Lighting. So we will [indiscernible] to that. Yes, there may be an odd quarter here or there where you hit a different number given the nature of the market as it currently is.
The next question is from the line of Shrinidhi Karlekar from HSBC.
Thanks for the opportunity and congratulations on good set of numbers. Sir, I just want to understand the demand from the newly [indiscernible] electrified households. Are you seeing demand from these houses? Has it already come or not, if it is still to come? And the second question is, sir, I want to understand how much of the demand for a more mature category like fans comes from the distribution expansion? And how much is more from an existing benefit in market? So these are my 2 questions.
Well, let me take the second one and try and provide some perspective on it. On Fans, our volume growth is slightly below our value growth. So we are also growing volume in healthy double digits. So what is happening is a little -- a part of our growth is coming from premiumization, which is current fan users buy more premium fans because they appreciate the benefit. But given the fact that we are having double-digit volume growth, obviously, we are getting new applications because really, there's not that much replacement demand, right? So now this is coming really from everywhere. It's coming from new [ house sales ], it's coming from new houses in urbanized areas, it's coming from low-cost housing in, for example, a Bombay city, it's also coming from small villages, which are getting electrification for the first time, right?But the volume growth indicates that we're getting new users with a little bit of premiumization, which means they're upgrading some users, which is also very much part of our strategy. Because on Fans, one very important thing is you see we are the market leaders. And if you look at our competition, most of our competition tends to have its business focused either on the premium segment or on the popular segment. We, on the other hand, bridge all the segments, which is why we are market leaders. So for us, we can't just focus only on premiumization. We need premiumization, but we also have to keep driving distribution expansion to make sure we're getting new users because as market leaders, we have to be adding those new users across the entire pyramid.
Right. And sir, that's the [indiscernible] has that already come or...
Mr. Karlekar, sorry to interrupt, sir. I request you to the rejoin the queue, please? The next question is from the line of Vinod Bansal from Franklin Templeton.
I have 2 if you allow me to have 1 small and a little larger. This Lighting revenue, you said the LED business grew 12%, commercial declined 21%, but the math doesn't add up because I thought LED was about 85-odd-percent of your total sales. So you should have been declining on a combined basis. That is one. It should have still grown at about 7%, 8%. Second...
[indiscernible] I'll just quickly clarify that question. When I said 12% LED, that was volume growth. 21% decline was value decline. Our LED value growth is 4%. Which tallies with the kind of price erosion which Mathew was talking about earlier.
Sure. Could you break those down, this 12% volume, into B2C, B2B?
I would say bulk of the growth [indiscernible] volume growth was more in B2C.
Okay. So B2C would have grown more like 24% and B2B almost 0-ish to get 12%?
No, I would say -- see, because we have 3 parts, which is bulbs, battens and panels. The biggest growth has come in bulbs and battens. Panels was relatively soft.
Okay. Fine. Overall, what is B2C growth?
Well, I think overall B2C growth is a combination of both the decline in conventional as well. So I don't think there has been any significant growth in B2C's total because most of the conventional decline also is happening in B2C.
Okay. Okay. And this question...
Mr. Bansal, sorry, sir, but I request you to rejoin the queue, please. The next question is from the line of Ravi Swaminathan from Spark Capital.
So sir, just had a question on Lighting. So I just wanted to know the margin profile of B2B, B2G and B2C, how -- I mean [ pecking ] order rates which is more [ profitable ]?
We have always worked and we continue to work on the basis that the margin profile across the different segments and channels is not materially different. And we consciously do that and because then we are sort of freed up to drive everything. So our margin profiles are really not materially different between our different channels and segments.
The next question is from the line of from [ Raymond Bovaria ] from [ Green AIF ].
Sir, just wanted to understand, given that we have paid off half of our debt, do we anticipate the interest cost to come down by a similar quantum?
Yes, of course. I think we have paid out INR 300 crores of the INR 650 crores bond, which was at about 9% interest. Obviously, all of which has got paid out, out of internal approvals. So we will have -- you won't get the full saving onto your P&L because the surplus funds are also earning some amount of return. So only the differential is what you will save.
Sir, and tax rate after guidance?
Tax rate now is the -- I mean, we have now no -- we had one unit in [ himashan ] which was having a tax holiday. That has got completed on 31st of March last year. So this year, we are at the maximum rate of tax.
The next question is from the line of Tanuj Mukhija from Bank of America.
Sir, this is Tanuj Mukhija. Just one question. Can you please quantify the cost savings from your project UNNATI scheme and how much margin improvement can we see in the next 2 to 3 years?
Roughly, UNNATI has been delivering now for a pretty sustained period INR 25 crores to INR 30 crores every quarter. Now that being said, we do not take all these INR 25 crores to INR 30 crores every quarter into the bottom line. This money is used for funding the investments we want to make in the business. In the past, most of this has gone in 3 areas. Area number one is investment in brand building. Area number two is investment in capability. We have been as a company on a journey for 4 years, and we have invested significantly in the different capabilities, skills, people, systems. So that's the second area. And the third area has largely gone into helping fund the price erosion of Lighting. So this UNNATI, is really not a margin driver. It is more providing us the flexibility to invest. Because if you track our business over time, we have made all these investments, done all these things while continuing to gradually build our margin to levels where today, our margins are among the leading margins in the industry, right? And that's how we [ do ] UNNATI. So please don’t take this INR 25 crores, INR 30 crores and assume that you can lump this into higher margins in the forward quarters.
The next question is from the line of [ Ashish Gupta ] from Anand Rathi.
Sir, my question is pertaining to the margin profile of both the segments. So in the consumer durable segment, as we understand that geyser and coolers are newer products for you, which is yet to break it into [ license ] and the pumps and the fans are doing good, are running good margins. So as these 2 newer product segments becomes larger and start contributing, do we see -- do we believe that the current margin profile, which is very healthy at least from the last 2 quarters we are seeing the EBITDA margin now [ probably ] all of 14%, what kind of sustainable margin for the company you see in the next 2 to 3 years' time frame?
First, just to clarify, obviously, we are investing in geysers and coolers, but both of them are operating on a positive EBITDA even to date. Secondly, as we build this business and as we understand these segments in industry, we fully believe that these segments as they grow can deliver the same kind of margins as the rest of our ECD business.
The next question is from the line of Mayur Patel from IIFL Asset Management Company.
Sir, congratulations for a very good set of numbers in [indiscernible] environment where we have seen a slowdown in various consumer [indiscernible]. So just have one question. Like you spoke a lot, but still, I'm now trying to understand this provisions in the Lighting business, [indiscernible] this is on the B2B EESL business only, right? Can you confirm that?
Largely, yes. Largely, it would be on the institutional side of the business.
Yes, but we have not seen any other listed players taking any kind of provisions on the EESL business, especially that...
Our policy does not recognize or distinguish the solvency of the counterparty. It is maybe a fairly conservative policy and doesn't distinguish between the solvency or the sovereignty of the counterparty. So we would take our EESL letter, give it the same risk weighted as a trade debtor would.
Okay. Sir, and there is no -- materially no provision on the retail B2C side, right?
Not very material.
Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.
Thank you, all. As always, we try to be as open and transparent as we can be to help you better understand our business. If you have any further questions or any further clarifications, please don't hesitate. We're here and available for anything you may want. Thank you so much.
Thank you. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.