Crompton Greaves Consumer Electricals Ltd

NSE:CROMPTON

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Q1 FY '21 Results Call of Crompton Greaves Consumer Electricals Limited, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Naval Seth of Emkay Global. Thank you, and over to you, sir.

[Naval Seth, Research Analyst]

Thank you, Stephen. Good morning, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today, Mr. Shantanu Khosla, Managing Director; Mr. Mathew Job, Chief Executive Officer; Mr. Sandeep Batra, Chief Financial Officer; and Mr. Yeshwant Rege, Vice President, Strategy and Financial Planning.I will now hand over to the management for their opening remarks. Over to you, sir.

[Shantanu Khosla, MD & Executive Director]

Thank you, Naval. This is Shantanu here, speaking from Bombay. First, thank you all for dialing in, and welcome to our quarterly call. Most importantly, I hope all of you and your families have been safe and healthy during these challenging times.Over this previous quarter, we have really, as I mentioned in the last call, focused on 3 key areas: firstly, the health and safety of our employees and stakeholders; secondly, cash and cost; and thirdly, a vertical agile startup as things open up and improve.Let me talk a little against the 3 of these. I'm glad to share with you that most of our employees have been safe from COVID-19. In fact, in total, from across the country, we had -- have had 14 cases of our employees who've been COVID positive. Thankfully, out of these 14, 12 have completely recovered, and the balance 2 are well on their way to recovery. We have obviously put in significant steps to ensure safety of our employees. We have been largely work-from-home from the end of March and continue that way. We have continuously been training, communicating our -- to our employees through virtual town halls, launching a learning platform to help build their capabilities during this time.We have also taken significant steps to ensure that all our factories and factory operations are done in a safe and appropriate manner. And so far, thankfully, these steps have all seem to work given the very low level of incidents among our employees.We've also driven a lot of engagement and recognition of our employees for their effort and hard work during this challenging period. In fact, this quarter, we ran for the first time ever, our annual and quarterly reward and recognition event virtually, and that has significantly helped engage our employees.Moving on to the second key priority, which was our focus on cash and cost. We believe we have significantly outperformed our going-in expectations in these uncertain times on this. Our constant focus to reduce our dues, coupled with incentivizing the company channel partners to pay faster has paid off handsomely, resulting in overall collections outpacing sales in both May and June. This has helped us close our quarter with a cash balance of INR 970 crores, including the fund raise and the debt repayment, which we made versus INR 585 crores in the end of March. We've honored all our statutory MSME vendor employee liabilities during this period, including continuing to make sure that our vendors, our customers and also, importantly, our employees, all have been receiving their dues on time and appropriately.Our liquidity and net debt position remains one of the best in the industry. And like I'd mentioned last quarter, we believe this is a competitive advantage and is extremely important as we continue to face the uncertainties of the future, and also balance this with investment in long-term growth of our business.Our aggressive approach to driving cost savings initiatives, which we identified in -- during this quarter to counter the COVID impact, along with stepped up effort on our regular cost-saving program has helped us maintain our profitability. We were actually able to ensure that our margin structure, both at gross margin level and also at PBT level remained at the levels they were in the previous year. This, we believe, is critically important and is a great recognition of the work which our organization and people have done during this period. Keeping our margin structure intact ensures that we stay the most profitable company in our industry, but also importantly, ensures that as we move forward and the top line keeps coming back, our margin structure being intact ensures that we are able to continue to deliver industry-leading profitability behind this growth.Thirdly, moving on to our third priority, which was vertical start-up of our business as lockdown began to ease, and in some cases, over the period, as we've all seen, come back. We have seen a steady improvement in our business. As all of you are aware, the month of April itself was a complete washout with everything being stopped. However, business began to pick up as we got into May and continued to pick up through June. In the month of May itself, we achieved about 70% of what we would have normally achieved in non-COVID period and this improved to about 90% in June. This, we believe, is extremely encouraging, especially since our unique secondary sales data, which we get through the Tally patch is indicating a similar trend to our primary sales of demand and primary sales recovery.Our supply chain also continued to improve. All our factories, Baroda, Baddi, Kundaim, Bethora and Ahmednagar resumed operations in the third week of April and are operational as of date. Obviously, all norms of safety laid by government and social distancing continue to be strictly adhered to in premises. We have now reached a level where our plants are operating close to 90% versus what they would have done in the previous year June. Most of our suppliers have commenced operations and the entire supply chain and distribution networks are running smoothly.Let me just talk a little bit to give you a flavor of how this recovery is happening across categories by talking a bit about June. In the month of June itself, our ECD business scaled back to 90% of what was recorded in the corresponding period the previous year. Pumps business showed promising results with residential pumps scaling back to activity of last year in June, while agro pumps actually delivered a 25% value growth in June. Our superior product portfolio in appliances, which I've mentioned before, is a key focus area over the last year and looking in the future, delivered a volume growth in June, even during the uncertain environment. Volume in geysers was up 42% in June.Our renewed focus behind kitchen appliances driven by the key mixer grinder segment continued to bear results with 125% volume growth in mixer grinders in June. Also, as we looked out, and as is happening, we have seen a clear shift in shopper preferences towards the e-commerce channel. Over this quarter, we've significantly stepped up our focus in the e-commerce channel, both in terms of portfolio across the price range to serve market demand for all product ranges on the channel.Our sales in e-commerce channel grew 400% in the May, June period versus the corresponding period last year. Our strong profitability and cash position ensured that we were able to continue to invest in key long-term investment areas. Through this quarter, we have continued to scale up our commitment in development of R&D capabilities in the year and have recruited several key people across key capabilities into the organization. In the long run, this is a critical investment for us to ensure that we continue to bring in innovative consumer-meaningful products that offer superior value proposition to the consumer.We have also started in housing TPW fans in Goa from this fiscal, thereby reducing our dependence on China imports from these fans in a big way. This makes our supply chain not only more localized but also gives us greater agility and flexibility moving forward.Let me -- we don't normally obviously give guidance, but let me give you a flavor of how we're seeing the current period that we're in, which is July and then moving forward. As you are aware, market disturbances due to, let me call them rolling lockdowns, continue. As we speak, this means some of our warehouses fall in containment of complete lockdown areas and some markets continue to be closed. We see this as something which is likely to continue for the next few months, given that COVID cases in India are still on the increase. However, we believe that we have the agility and the capability to adapt to these external challenges as we've been doing in May.So we see our business continuing to come back to normal levels through this quarter with encouraging signs emerging from markets, which has been open. As more markets open, we expect the business to only improve, and given the cost structure, which we have now developed for ourselves and the margin structure, we expect this to lead to continuing profitability improvements.Briefly, let me take you through the numbers, though -- and most of you would have seen it. The Board of Directors on its meeting on July 24 approved the quarterly results for the company. Total income was INR 713 crores. ECD stood at INR 597 crores. EBIT margin expanded 30 basis points versus corresponding period last year and stood at 20.6%. There has also been sequential improvement in EBIT margins by 60 basis points in the segment. Lighting revenues stood at INR 117 crores. Gross margins in June were at record levels for lighting as compared to what we have achieved in the recent past, mainly due to our continuous efforts to drive down costs and improve portfolio.Profit after tax for the quarter was INR 74 crores. Profit after tax margins expanded 120 basis points after last year and stood at 10.3%. PBT margin stood at 13.8% versus 14% in the same period previous year.So with that brief overview, I'd just like to stop and spend most of the time on any questions you may have. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Pawan Rathi from Edelweiss.

[Pawan Rathi;Edelweiss Financial Services]

So I have 2 questions. First of all, can you please explain the fall in the other expenses part? So basically, I wanted to understand what all factors led to that cost saving and to what extent? And how do you see it panning over the next few quarters? And my second question is on the Lighting segment. We see that the pricing has been improving since Q2 FY '20. So my question is, how do you see it going forward?

[Shantanu Khosla, MD & Executive Director]

Okay. I'll just ask the first part of that question to Sandeep.

[Pawan Rathi;Edelweiss Financial Services]

Sure, sir.

[Shantanu Khosla, MD & Executive Director]

Sandeep, you there?

[Sandeep Batra, Chief Financial Officer]

Yes, yes, I'm there. I'm there. So the cost reduction, the total cost reduction, would have 3 parts. One would be costs that are, in some sense, variable to sales. So because you had lower level of activity, you had lower level of such costs mainly transportation, maybe cost like after-sales service and all that. And the second level of costs are discretionary costs that we ourselves would have cut back, given the kind of environment that was being envisaged. These would include costs like advertising and sales promotion. And the third category would be those costs that we under our COVID cost-out program identified and got savings in. So the breakup of the lower costs would be on account of these 3 reasons. And obviously, going forward, it will all depend on what kind of activity gets picked up, what kind of discretionary costs do we, as a company, decide that we need to incur. That's all from my side, yes.

[Shantanu Khosla, MD & Executive Director]

Okay. Okay. The only thing I'd add is, obviously, some of these costs, and I guess a simple example is advertising, where we held back on advertising because, obviously, we did not have markets open. We will and we are this quarter restoring advertising. But there are some amounts of costs, which when we generally went into COVID, which, as Sandeep mentioned, which we were able to actually make our process more efficient and effective, these will carry forward on a going basis. Now we may choose to reinvest some of these back in demand generation, but those are decisions we'll take. So obviously, all the costs will not carry -- savings will not carry forward, but some amount of it will be genuine sustainable savings.On the second question, which you had was Lighting, on lighting margins, is that right?

[Pawan Rathi;Edelweiss Financial Services]

Yes, yes.

[Shantanu Khosla, MD & Executive Director]

Mathew, you want to take that? Okay. I think, Mathew, may have dropped off the call. Sandeep, will you take that also then?

[Sandeep Batra, Chief Financial Officer]

Yes, yes, sure, sir. So on lighting, we've seen sequential and significant improvement in our gross margins. There would be 3 reasons which would contribute to that. One has been -- which has been the initiative driven by us, which is under our cost reduction program. We had in the past mentioned that we have visibility of a cost reduction initiative, and they have all borne fruit in the last quarter. So you see result of all the cost reduction initiatives that we have taken. And the second one is a bit of a favorable mix last year whatever sales we had done to EESL were of EESL bulbs. This year, all the sales to EESL have been of street lights, which have a slightly higher-margin than -- which have higher-margin than the one on bulbs. And also, I think the pace -- and we've seen much greater stability in pricing remain, particularly in the B2C part of the business, which had as you would have -- as usual, know…

[Mathew Job, Chief Executive Officer]

Hello? Can you hear me?

[Sandeep Batra, Chief Financial Officer]

Up to the second quarter of last year, seeing…

[Mathew Job, Chief Executive Officer]

Hello?

[Sandeep Batra, Chief Financial Officer]

Significant amount of price erosion…

[Shantanu Khosla, MD & Executive Director]

Yes, Mathew, we can hear you now. Go on, Sandeep.

[Mathew Job, Chief Executive Officer]

Can you hear me?

[Sandeep Batra, Chief Financial Officer]

I think these 3 -- yes, Mathew, we can hear you.

[Mathew Job, Chief Executive Officer]

Are you able to hear me, Shantanu?

[Shantanu Khosla, MD & Executive Director]

Yes.

[Mathew Job, Chief Executive Officer]

I would say in the margins for Lighting, what I was saying is the prices we took up for consumer lighting, B2B lighting right from the month of May, these were announced in the month of March, but obviously, because of the COVID, the actual implementation could only happen from May. And we have seen a roughly 3% to 4% price improvement for B2C lighting, which also has taken our margins up to the highest levels we have seen in the last 2 years. For B2B, we've had, again, a strong margin improvement, but there, there's a mix of both the price improvement and cost reduction. Now going forward, we think that, as we also mentioned in the call last time, for B2C lighting, I feel that at least for bulbs and battens, which is 60% of the business, the price decline which we have seen is behind us. There could still be some possibility of a price decline happening in panel. But on an overall level, for B2C, we think the prices will be pretty much stable. For B2B, we do expect some price declines will continue, but we are confident our cost reduction program have been accelerated in a way in which we are implementing them will allow us to continue to improve our margins in B2B in spite of any such price declines that might happen in the market. Yes, that's it.

[Pawan Rathi;Edelweiss Financial Services]

All right. All right. Also, just a follow-up on the first question.

[Shantanu Khosla, MD & Executive Director]

I'm sorry, could we -- just with interest of time, if you can connect with us later, we'll answer, but let's just move on to the next person. I'm sorry to do that.

[Operator]

The next question is from the line of Renu Baid from IIFL.

[Renu Baid, Vice President]

Yes, can you hear me?

[Operator]

Yes, ma'am.

[Shantanu Khosla, MD & Executive Director]

Yes, Renu.

[Renu Baid, Vice President]

Yes. Sir, my first question is, if you can highlight little more in terms of the demand pattern in terms of region wise, urban, semi urban pockets, how have they responded in terms of pickup. Though there would be some initial pent-up demand that we saw in the month of June or probably early July, by when are we looking at the demand trends to normalize? And how has been the stocking level along the same lines? That's my first question.

[Shantanu Khosla, MD & Executive Director]

Okay. First, from a regional geographical point of view, there is almost a perfect correlation between geographies, cities, towns, areas, which have got a stricter lockdown and the impact on primary sales. So wherever the impact, the lockdown is more severe, we see an impact. When the lockdown opens up, we see business build and if another area, call it, Bihar gets locked down then the business gets impacted in lockdown, right? So it's absolutely -- so yes, therefore, we are seeing a better demand in general coming from smaller towns and rural areas. But that's primarily, we think, a function of those who are less lockdown than bigger cities. So that really seems to be the primary correlating factor.Now in terms of how we're seeing the overall all-India demand. Like I said, May was about 70%, June on our consumer business gone up to 90%. Importantly, as we've talked before, we also have this Tally patch data, which covers our secondary sales, and we get a read on 60-plus percent of our secondary sales, which is a movement out of our dealers, that is following a pretty similar trend of recovery.As I mentioned, if we look at the early parts of July, we're continuing to see an improving trend coming through. As we look at July, maybe a little better than June. But we still have to see. But again, it's a function of where the lockdown happens. And as that moves, we see impact. So the -- our final take is that the underlying demand is very much still intact. It is the operational blockages, markets being closed, et cetera, which tends to impact the business operations. If this trend continues, and that's obviously difficult to predict because we don't know how to go with this, we see it gradually coming back to normal levels in the periods ahead. So we're not -- for example, if May was 70%, June was 90%, we're not seeing July go back to 50% or 60%, we're seeing it progressing.

[Operator]

The next question is from the line of Saumil Mehta from BNP Paribas Mutual Fund.

[Saumil Mehta, Senior Research Analyst]

Just one question from my side. Can you talk a bit more about the industry as well as markets, especially on the fans business as to what is the kind of pent-up demand you're seeing? And any indication of down-trading and market share gains if at all for this quarter?

[Shantanu Khosla, MD & Executive Director]

Okay. First, in terms of market share, our latest market shares, which is, I think the April period only, still show us gaining market share like we've been doing over the -- consistently over the recent past in fans, in bulbs and in battens, which are the areas we measure market share. In terms of pent-up demand and a sudden peak and then a decline, frankly, we are seeing much more of a steady buildup since May, like I mentioned, 70% became 90% and then July is picking. So we're not seeing a sharp uptick and then a decline, even if we look at these at a micro level.The declines by micro geographies tend to happen when a particular geography or city is locked down in a containment kind of zone for 2 weeks. So we are seeing a more steady growth, both in the primary and also in the secondary sales, which is product moving out of dealers. Anything to add to that, Mathew?

[Mathew Job, Chief Executive Officer]

No, no. I think that's it. No. Nothing more to add.

[Operator]

The next question is from the line of Nitin Arora from Axis Mutual Fund.

[Nitin Arora, Equity Research Analyst]

Yes. Yes. Sir, just on -- more on the cost element. And I understand what you said about the ad spend and the fixed cost because the activity level was down. But if we look at on a steady-state basis, generally, where do you see this? Because some of the costs, which we are saving definitely will put to get the revenue growth, which is an important element of our business. But on an overall basis, when you have done this cost structuring, which you mentioned in your presentation as well, how much savings do you see in a steady-state basis if one has to conclude that? That's my first question.

[Shantanu Khosla, MD & Executive Director]

Okay. Yes. Okay, I don't think I can comment on specific numbers of element of cost savings, right? But 2 things I would point out. One is independent of COVID, we've had a consistent cost-saving program year-on-year, which has been delivering INR 100 crores to INR 150 crores of cost saving. These are savings on top of that. Now what we have saved this quarter, part of that is sustainable cost saving, which will keep flow -- being there quarter-on-quarter. Now like I've always said, we are today the industry leader in terms of our profitability and margin. So as these cost savings keep emerging, and as the business comes back to normal as COVID passes away, we will keep looking at opportunities to reinvest these cost savings in innovation, brand building and demand growth. For example, our investment in R&D, for example, our investment in things -- data systems like the Tally patch, et cetera, right?So the very -- I guess, the one thing which we can say with some confidence is that having been able to deliver these kinds of -- this kind of margin structure in spite of losing close to half the business due to COVID, we have confidence in our ability to sustain this margin structure and be able to invest in the areas which will give us long-term growth as we look out in the future. But I'm sorry, I can't tell you that, I mean, x crores of rupees will come in every month in the bottom line. We don't kind of talk that level of information. Sandeep, anything you want to add?

[Mathew Job, Chief Executive Officer]

Yes, Shantanu, I will add a couple of points. This is Mathew. We have -- the only thing I would like to add is if you will recall that in every year of the last few years, we have been saving roughly anywhere between INR 100 crores to INR 150 crores of costs through our -- through what we call project UNNATI cost reduction program. Obviously, in Q1, because the activity was roughly half of the previous year, the absolute quantum of cost saving that came into project UNNATI was also half what you would normally get in a quarter in the previous years. However, as the activity starts to recover, the quantum of savings in terms of absolute rupees, coming from this UNNATI cost saving will go back to the kind of levels we have had last year or the previous years. The COVID specific saving, which we spoke about the -- in this quarter was roughly in excess of INR 60 crores of cost, which we have shaved off additionally, which is related to COVID, about 40% of that was on respect of advertising. The advertising spend that has come down. The rest of it has been a combination, and a small part of that could be available in the next few quarters as well. So you can add the normal UNNATI savings that we have been delivering roughly INR 100 crores, INR 150 crores in a year, plus a part of this could carry over to keep -- and of course, as Shantanu mentioned, our intention is to reinvest the bulk of that into getting our top line back by gaining share. Yes, that's it.

[Operator]

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

[Bhavin B. Vithlani, Senior Analyst]

Congratulations on the cost and the margins front. My -- I have 2 questions. One is if you can give us the update on the new model launched on the premium side, how has been the performance of those fans? And any update that you see on the new energy rating, which was due, what's the new time lines on that? And second question is you spoke about R&D initiatives, which is really heartening. It will be useful if you could speak a bit more detail, are you speaking about completely new product lines or innovations within the product line? Some flavor on that, keeping in mind your competitive positioning, whatever you can divulge.

[Shantanu Khosla, MD & Executive Director]

Okay. Let me take your second question, and then I'll toss it over to Mathew for the first. There are -- obviously, there are a number of areas, which we are focused and identified as key opportunity areas to focus our R&D work on. This work could cover both new product lines and also initiatives, big initiatives on existing product lines. Some of the areas which we're looking at are on building our capability is -- one is, obviously, connectivity, IoT and technologies in that area. The second which we're looking at is really based -- it was an existing need and we've done initiatives like Anti-Bac on that in the past. But clearly, we believe due to COVID, this is going to be a fast accelerating need. But -- and that is looking at technologies and innovations in the area of wellness. And the third area is, which we're looking at is materials and technology in terms of materials and how they impact. So we've identified these 3 or 4 areas, which we will be investing in and have, in fact, commenced investment. They could lead to big initiatives on existing businesses or completely new lines of business. Mathew, first one?

[Mathew Job, Chief Executive Officer]

Yes. The -- you asked, when the new standard would be effective for fans, which was supposed to be this year, July, but now it has been postponed to 2022. So the roughly 18 months. As things stand today, the implementation of the new energy standards in fans have been postponed by 18 months. The second question was on the performance of the launch of our recent premium fans. The Silent Pro fans, which are the plastic fans, which work with very low noise and high level of efficiency was launched in the month of February. Unfortunately, in the month -- and we had expected great traction in the month of April and May because that is peak selling season. So there was, I would say, a setback because of the lockdown, and then we did not get traction in those periods. But what we start to see now is, we are getting our products placed in more stores. And wherever we have placed, the feedback and response has been excellent.So we think that if I look at it from a 1-year horizon, the targets which we have set for ourselves for the new range of fans remain intact, in spite of short term. That is the first 3 months, there has been an impact, but we are holding on and very confident of achieving the year 1 and year 2 numbers in terms of the entire category of plastic fans. Yes.

[Operator]

The next question is from the line of Mayur Patel from IIFL Asset Management.

[Mayur Patel, Principal & Fund Manager of Listed Equity]

Sir, just thanks for giving elaborate commentary on cost savings. Is it fair to assume this INR 100 crores, INR 150 crores cost saving this year also, there would be an incremental INR 100 crores, INR 150 crores cost savings? And obviously, some of it you will deploy back into the areas you mentioned.

[Shantanu Khosla, MD & Executive Director]

Yes, the answer is yes, that is our goal. And if you track our performance over the last 4 years, you would actually see that we have been delivering cost savings of about that scale every year. Now obviously, these cost savings go into reinvestment where needed. It's not just about building margin. In fact, I think I've mentioned it earlier, our overall thinking of margins is we are the industry leader, as a company, at least, on margins. And our objective now is not to further keep enhancing margin, but our objective is to continue to drive cost out of the system to create more flexibility to invest in innovations, brand and various capabilities for the short-, mid- and long-term demand building and share building.

[Operator]

The next question is from the line of Vinod Bansal from Franklin Templeton.

[Vinod Bansal, Assistant VP & Senior Research Analyst]

Am I audible?

[Operator]

Yes, sir, you are.

[Vinod Bansal, Assistant VP & Senior Research Analyst]

Shantanu, I have a couple of questions on the demand recovery side. One, you spoke about secondary sales tracking more or less in line with primary. Would you have some data on how is the final consumer sales happening from retailer to consumer? That's one. Secondly, since much of sales didn't happen in the month of March, I suppose the distribution inventory would have been low, how has been the channel restocking trend in March to June? So how has the inventory moved? And third, final question on the same subject is that electricals, I suppose, is mostly a metros and Tier-1 city business, where cities like Bombay, Delhi have been in the severe lockdowns. So when you talk about 90% on demand recovery to pre-COVID, this includes cities like Bombay, where we have large presence? And in that sense, if could you just confirm, it include those cities? And is it surprising you that demand has been so strong despite Bombay being in a lockdown and Delhi being in lockdown, et cetera?

[Shantanu Khosla, MD & Executive Director]

Let me take the last one first, just for clarification. Yes, that 90% level, which we had achieved in June to 90% of previous year June across the company are the total all-India figure. So it includes everything, right? Bombay, Delhi, Chennai, small towns, rural, everything, okay. So we are seeing that demand recovery. Now it varies. For example, the West has been relatively slower because the lockdown has been a little more extreme first in Bombay and then in places like Pune. Has the demand -- we're quite confident that this demand has come back to this kind of level, and it's not just a inventory adjustment game. And the reason is we saw it first built in May, then in June. And frankly, we're seeing it sustain over the first 3 weeks of July.Secondly, we've got the 2 bits of data. It's not just our primary sales through the dealer, but we're also tracking movement out of dealer. So the data is all quite consistent to indicate that it's a smooth and steady increase, and it's not artificial inventory buildups, which are happening. So I think I covered everything, did I miss anything, Mathew?

[Mathew Job, Chief Executive Officer]

Shantanu, if I may just add, you're right. I mean, we have all 3 data points for the month of May. We have our primary sales, we have our secondary sales, and we also have the first data from market bulb, which track tertiary offtake. And in the month of May, at least, all 3 are consistent with roughly 30% -- 25% to 30% below last year's level for May, all 3 levels, the primary, secondary and tertiary. In the month of June, we have data only primary and secondary, which is both showing at close to 90%. We think that we will get the data for June, the tertiary sales in the next couple of weeks, then we will know if it is all in line. But we think it will be. So that is -- that gives us confidence also for July.

[Shantanu Khosla, MD & Executive Director]

And the only other thing I would add is -- and I think I mentioned this in one of the earlier calls, our categories, while they are not as essential as say, foods. That being said, they're pretty much necessities. They're not really discretionary buys. When you need a fan, you need a fan, when you need a light, you need a light. So they're not like cars or air conditioners, et cetera. They are also not things which are bought on credit by the consumer. So the consumer demand, I do expect will come back overtime once the operational demand issues get completely sorted out, which have been created due to COVID.

[Operator]

The next question is from the line of Arnab Mitra from Crédit Suisse.

[Arnab Mitra, Research Analyst]

Similar to your commentary on ECD, if you could give us a sense of the nature of recovery in lighting? And if you could just let it into B2C and B2B. And do you see the ramp here being lot more slower and more time being taken here for recovery?

[Shantanu Khosla, MD & Executive Director]

I'll give you the top line and then Mathew can probably -- will give you -- can give you more details if you need it. The 2 businesses, B2C and B2B are very different. B2C, by and large, is following the same recovery trend which we're seeing in ECD. B2B is much slower. B2B is fairly a challenge as both on the order side and also on the execution side, right? So I would -- so this rate of recovery is largely of -- about our consumer-facing business and most of our company business is consumer-facing business. We do expect -- Mathew, anything you want to add?

[Mathew Job, Chief Executive Officer]

Yes. So if you see the B2C volumes, actually in B2C lighting, in the month of June, actually the B2C LED volumes have been actually higher than last year. Of course, you may not say that -- see that fully in the revenue because compared to the same period last year, there is an average of 10% price decline. So you don't see it in the value. But in volumes, actually, B2C is actually higher than last year in June. And in B2B, yes, as Shantanu mentioned, we see significant slowdown in order acquisition. But also in execution because, unfortunately, in this last quarter, our key supply base was for 2/3 of the time in the containment zone. So we had issues also in terms of supply. So that is the situation, there's significant difference between B2C and B2B and the way they're coming up now.

[Operator]

The next question is from the line of Pulkit Patni from Goldman Sachs.

[Pulkit Patni, Equity Analyst]

Sir, can you talk about where do you see there are visible portfolio gaps that we have? And we have spoken in the past about looking at certain inorganic opportunities also. Given the fact that we've also raised an NCD here, anything that we can talk about portfolio gaps and what could be our next sort of areas of growth?

[Shantanu Khosla, MD & Executive Director]

Okay. I think I talked this before, but let me again just clarify. What we look at is enter some categories or segments where we have the opportunity to not just become a small player, but become a #2 player. The reason we say that is because it's really the #1, 2 or 3 player in every sub -- in category who creates value. The 7, 8, 9, 10 player, doesn't. That is exactly what our game plan has been on geysers, coolers and now mixer grinders. We are looking obviously and have been looking at inorganic opportunities, which can help enable this. We are also well aware that we have a competitive strength of our balance sheet right now, and there may be people who don't have that balance sheet strength, which may provide opportunities during this period. We've actively engage in those kind of discussions. Obviously, I can't talk about what those discussions are, but as soon as something were to happen, of course, we will -- you will -- you guys would be the first to know. But it is -- inorganic is one of the routes, which we are actively pursuing to be able to deliver against the strategy of being in more and more segments. But with a proposition, which can get us to a meaningful market leadership position.

[Operator]

The next question is from the line of Charanjit Singh from DSP Mutual Fund.

[Charanjit Singh;DSP Mutual Fund]

Yes. Sir, I think you have talked about this changing customer preferences. So that is one thing which if you can highlight how customer preferences have changed during this time frame? And secondly, in terms of the market share gains, if you can highlight more in terms of quantitatively, what percentage of level of market share we would have gained? And in one -- which particular segments within fans, we would have gained the market share? Yes. That's all from my side.

[Shantanu Khosla, MD & Executive Director]

Okay. Mathew, you want to take that market share question?

[Mathew Job, Chief Executive Officer]

Yes. The market -- yes. In -- probably the last 1-year period in fans, we have gained roughly 100 basis points in market share. And it is -- it is across the categories. It is not coming from any single category, but it is across all the categories within our fans. So the 100 bps is what the market share gained over the last 12 months. Yes.

[Shantanu Khosla, MD & Executive Director]

Okay. And the first question was, sorry, could you just repeat it again?

[Charanjit Singh;DSP Mutual Fund]

You have talked about in your commentary in terms of changing customer preferences.

[Shantanu Khosla, MD & Executive Director]

Yes. Got it. Got it. Got it. Okay. We're seeing some potential -- these were changes which are happening in any case, but we see the changes accelerating. The 2 key changes, one is a channel mix change and the other is a consumer need change. And we think both of these present opportunities. In terms of channel, there are 2 key areas. One is obviously e-commerce. Now e-commerce has and remains very small not just for us but for the industry as a whole. We see this as an opportunity. So we are stepping up our investments in terms of joint business planning, digital marketing and even portfolio development to further leverage and grow the e-commerce channel. And we've got -- even in these initial days, we've got some wonderful early results like I mentioned, our May, June, e-commerce sales is up fourfold, albeit off a small base.The second channel change, which was again happening, but we are doubling down on our investments there is smaller towns and rural. A little less than a year ago, we put a special team in place dedicated to driving greater dealer appointment in 50,000 and below towns. And that program is something which we're continuing to invest in and drive because we think that's for long-term opportunity, potentially accelerating opportunity given the current macroeconomic situation.In terms of consumer need and consumer preference changes, we think one of the big new need segments, which was, again, a trend, but we think it will accelerate now is this whole area of health and wellness and cleanliness. And that's an area where, as I mentioned, we're putting a lot of innovation resources behind.

[Operator]

The next question is from the line of Vinay Jaising from ENAM Asset Management. As there is no reply from the current participant, we move to the next question from the line of Venugopal Garre from Bernstein.

[Venugopal Garre, Senior Analyst]

Just a small question, given that your demand is scaling up back to 90% in June, and I'm assuming it further scaled up in July as you talk about normalization. You had also mentioned somewhere that we did have some production challenges in -- especially, I think, in the lighting part earlier in this quarter. So I wanted to understand, given the social distancing requirements in factories as well as supply chain side of things, are we in a position to ramp-up production in line with demand going forward from here?

[Shantanu Khosla, MD & Executive Director]

First, to -- you're absolutely right about the B2B supply situation, but that was a very specific one. We have a vendor who is our primary vendor of street lights. And that vendor happened to be based outside Bombay in a containment zone, and that's been a containment zone for quite a while. So that was a very specific and unique one. In terms of our other went broader -- our own factories and our broader vendor base, we are ramping up to -- we're operating at about 75%, 80% of normal, in spite of all the -- implementing with a first priority, all the safety measures.Now we have done things, for example, in our fans factory of adjusting the layout inside the factory to ensure that there is a greater space. So social distancing of different workers in the workstations can be done, that has helped us. We have also adjusted our shift strategy. The third thing, which we're doing, and that's an ongoing process, which we've begun, is create more low-cost automation, right? So with a combination of these 3 things, we believe that we are good in terms of capacity requirements. The B2G shortfalls on supply, which we had in May and June were very specific related to one specific containment zone. And obviously, we are now addressing that.

[Operator]

The next question is from the line of Latika Chopra from JPMorgan.

[Latika Chopra, Senior Analyst]

Just a quick one on the fans business. What was the difference between volume and value growth trends? Has there been any action on the pricing front? Also from a channel perspective, if you could comment on what you saw in June and early part of July in terms of competitive dynamics, channel incentives? And just lastly one bookkeeping question on pumps. I think you mentioned something in the initial comments on agri pump growth being higher. If you could just give more color on how the pumps growth has really panned out by subsegment.

[Shantanu Khosla, MD & Executive Director]

Okay. Mathew, do you want to take that?

[Mathew Job, Chief Executive Officer]

Yes. The -- if I look at the longer-term trend for fans, the value is growing slightly faster than volume, obviously, because if I take a year or 18-month trend, the premium segment of the market has been growing the fastest. So if you look at the value versus volume, market size growth, the value is growing slightly faster. I wouldn't say it's significantly faster but it has always been trending ahead of volume growth. In terms of pumps, yes, it is right that in the month of June, for example, actually, pumps has delivered a growth over last year. And that's been primarily driven by agro pumps, which has grown roughly 20%, with residential pumps also coming in close to flat. So that's how the growth in this quarter has been. But in the -- but you would remember, in the last few quarters, actually, agri pumps was really down. So this quarter, in the month of May, June, for the -- we have seen a recovery in agri pumps. With residential pumps holding port as usual. So that's the answer to your 2 questions.

[Operator]

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

[Bhavin B. Vithlani, Senior Analyst]

So a couple of questions. One is, are you seeing any change in the consumer preference in terms of ground trading where the path of premium which we just spoke about, there is a change in the trend line on that? Second is, if you can speak a little bit about the reach where you had given -- where the overall reach in the lighting was about 15%, fan was about 48%. Have you -- have -- has there been any improvement on that front? These are my 2 questions.

[Shantanu Khosla, MD & Executive Director]

Mathew?

[Mathew Job, Chief Executive Officer]

Yes. In terms of -- if I talk about specifically to the quarter, in May, for example, in the month of May, we saw an unexpected demand for TPW fans, primarily driven by the need, which came up because of lot of these makeshift hospitals where they needed primarily either a pedestal fan or a table fan. There was even more than usual strong demand. And TPW is primarily a summer product, but there was even more accelerated demand in the month of May and to some extent in June, which we have started -- which we have seen that demand is starting to taper off now.So I would say, yes, there has been some level -- because the TPW fans are comparatively less expensive than ceiling fans. So I could say, theoretically, a mix was -- did deteriorate in the month of May, June, I would say, for the market as well. But we don't see any, I would say, significant down-trading in any segment other and the fact that there was an accelerated demand of TPW for this -- for the particular month -- for the particular period.In terms of reach, yes, if you see, there has been -- if I take again the year in -- the full year, the last 12 months, there has been an improvement of reach in fans. We have grown from about 48% to, making about 50% and in lighting, also, we are now present in more than 20% of the stores with LED bulbs. If you ask specific for the quarter, very difficult to say because this quarter has been a very extraordinary quarter. So I wouldn't put too much of -- I wouldn't put too much of importance in the data for the particular quarter because keep in mind, most of the salespeople, sales teams, distributor salesmen have not been fully active in this quarter, so let's discard this quarter reach numbers, but the trajectory is definitely on the growing trend for us.

[Operator]

Ladies and gentlemen, due to time constraint, we take the last question from the line of Mayur Patel from IIFL Asset Management.

[Mayur Patel, Principal & Fund Manager of Listed Equity]

Sir, any change in the dividend policy should we see, given that now the debt is behind us and a good amount of cash generation we are seeing almost on a steady-state basis? Should we expect any increase in dividend payouts?

[Shantanu Khosla, MD & Executive Director]

Sandeep?

[Sandeep Batra, Chief Financial Officer]

Yes, sure. So if you recall in the month of May when the Board met, at that time, there was significant amount of uncertainty about how the situation will play out given COVID. And at that time, the Board took a decision of actually not giving -- not declaring any dividend for last year. Obviously, the situation since then has significantly eased in the couple of months, and we've seen our cash generation is kind of in line with what it was last year. However, it doesn't mean that all the uncertainty around COVID is behind us, we don't know. So the Board will definitely relook at the whole approach to dividend. And I don't think that would call for any change in the dividend policy. Our dividend policy gives a significant amount of headroom to the Board to take a call. And if there is no need for cash within the company, then one of the options, for the Board, certainly is to give it back to the shareholders. But that's something is a Board's prerogative. I really won't be able to take any call or comment on that. But just to add that our dividend policy is fairly flexible to allow Board that choice as and when they were to exercise that. That's all. Thank you.

[Operator]

Ladies and gentlemen, I now hand the conference over to the management for closing comments.

[Shantanu Khosla, MD & Executive Director]

Thank you. We've gone through what is a once-in-a-lifetime event. In fact, we're still in the middle of it and an extremely turbulent external situation. In light of this, over this quarter, we believe that against the real 3 key goals, which we expect for ourselves, we have kept our people safe, engaged, productive and built their capability. We have emerged with a stronger position in terms of cash and we have maintained our industry-leading margin. We have demonstrated the agility to get our operations up to steam and back as quick as circumstances allow us. We have continued to be able to, given our profitability and tax position, invest in brand, innovation and the organization. So we feel quite good given the circumstances of where we've -- what we managed in this quarter. Obviously, looking forward, we don't expect another month like April, which is a complete washout. So we think there will be continuing steady improvement in the demand picture and the situation, which, given our profitability and our margins, we believe, will lead to industry-leading profit situation.That being said, we are also very complacent of the fact that COVID is still increasing in this country. We still have not reached a situation where the external environment is anywhere near normal. There is significant uncertainty. We don't know what may happen next week, week after next month before things settle down. But the way we have managed the extreme uncertainty of the past 3 months has given us great confidence in our ability to manage many more uncertainties which keep coming into us. And we are confident that we will keep investing to make sure that we deliver a stronger brand and balance sheet position and profitability over the coming quarters.So thank you very much. I'm -- I apologize if we could not handle all the questions. But as always, we've tried to be as transparent as we can. Please feel free to contact any of us if you have any further follow-up questions. Thank you very much. And most importantly, please stay safe, please stay healthy.

[Operator]

Thank you.

[Shantanu Khosla, MD & Executive Director]

Thank you.

[Sandeep Batra, Chief Financial Officer]

Thank you.

[Mathew Job, Chief Executive Officer]

Thank you.

[Operator]

Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.