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Good morning, ladies and gentlemen. I'm Pavitra, moderator for the conference call. Ladies and gentlemen, good day, and welcome to the Crompton Greaves Consumer Electricals Limited Q3 FY 2020 Investor Con Call, hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand over the conference over to Mr. Achal Lohade from JM Financial Institutional Securities. Thank you, and over to you, sir.
Thank you. Good morning, and warm welcome to all on behalf of JM Financial for the Q3 FY '20 Conference Call of Crompton Greaves Consumer Electricals. On the call today, we have Mr. Shantanu Khosla, Managing Director; Mr. Mathew Job, Chief Executive Officer; Mr. Sandeep Batra, Chief Financial Officer; and also Yeshwant Rege, Vice President, Strategy and Financial Planning. I will hand over the call to Mr. Khosla for his opening remarks, post which we can open the floor for Q&A. Thank you. And over to you, sir.
Thank you. Good morning, and this is Shantanu here in Bombay with Mathew, Sandeep and Yeshwant. Thank you all for joining in today. As usual, I'll give some brief overview, thoughts and perspective, and then we're happy to take whatever questions all of you may have. Let me today start with actually giving you a little bit of a perspective on our total volume performance. While we look at this internally very closely, we don't normally talk too much about this in calls, but I thought it's useful to share because, especially during challenging macro times, we really believe that volume is a critical number because it is the best indicator of the health of our overall business. Our total volume growth as a company, excluding B2B, really a consumer part of our business, ECD and B2C Lighting, was in healthy double digits at 13%. And both our segments delivered double-digit volume growth, which we think is a good indicator of the basic health of our business. Moving on to the ECD business, our current quarter continued its strong momentum, registering double-digit growth. Our growth was driven by Fans, domestic pumps and appliances. Growth in Fans was just under 10%. And year-to-date, our market share in Fans is up year-on-year by 80 basis points. We've been talking over the last couple of quarters of how we are now been beginning to drive the fourth leg of our business, which is the appliances business, to drive it towards a leadership position. We're pretty happy with the continued performance of this segment, and it has delivered strong double-digit growth importantly, not just for a quarter, but for the fifth consecutive quarter. Value growth was 64% in geysers. And obviously, the previous quarter, the key segment in Appliances, which we are focused on due to season was geyser. But additionally, our mixer grinder business was up 40% and our air cooler business, though off-season, more than doubled. The revamped geyser portfolio, along with continuous addition of products have propelled us from an also-ranked seventh or eighth player, and we are currently already a #4 player and have attained a double-digit market share at 11%. Our Pumps business. The Domestic business continued to grow robustly and close to double digits. However, the Agro business, as it has been doing for the last couple of quarters is -- was relatively soft. The Agro [ brought-in ] business, we believe, as we've talked before, continues to demonstrate to some extent a softness, really driven by 2 reasons: one is the overall impact of the macro situation, which we see in rural India, where Agro business essentially plays. But also importantly, due to simply the fact which is linked to the Pumps business that we had a strong monsoon. So coming out of the monsoon, water tables tend to be pretty good, which we have seen in the past also impact the business. This, of course, we expect as we move forward to settle down. Also importantly, as we've been consistently demonstrating, our margins have improved, and they improved this quarter by 100 basis points in this segment as our ongoing strategic cost reduction programs, efficiency driving programs are continuing to bear results. Moving on to LED business. The volume growth in LED bulb, battens and panels was up 13% in the current quarter. And we have actually also grown market share in LED lamps year-on-year by 110 basis points. However, as it is obvious from our numbers, the value growth continues to be negative. I just wanted to make a couple of clarifying points on this. As we have talked and as we have seen in the past, the reason for the difference essentially is because of ongoing price erosion in LED B2C business. Now over the last quarter, we did not see any further erosion. So it looks like this quarter, at least, the prices have begun to stabilize. However, we continue to face the base impact because prices really dropped about 15% to 20% last year, around July/August, so it will be another couple of quarters before we anniversary that base period and the volume growth starts translating into value growth in our B2C business. But we continue to believe, given the volume growth and the continued share growth, that this business is robust and we will continue to invest in it. Of course, like always with our B2C business, the caveat is, this is under the assumption that there is no further price erosion in the quarters ahead. Like we talked last quarter, we have continued to work aggressively on cost, and this is beginning to show results, though it is not all the way where yet, where we wanted to go. But sequentially, our EBIT margins in the segment improved from 5.2% in Q2 to 6.9% this quarter, which we believe is good progress and keeps us on track. The B2B part of the business remains challenging as we see impacts of the economic slowdown on institutional and government business with deferment of orders and execution clearances delay. Moving on to what we believe, and we've talked about as our strategic choices, which are really been working to drive our business. One, of course, is we continue to commercialize our innovation pipeline, which really has been a big driver of growth all these past years. We have recently introduced a new series of Silent Pro fans, which is going into the market as we speak. This comprises of both superior performance, lower energy consumption with BLDC motors and also much, much more silent performance due to its plastic construction. Geysers has been driven by a series of initiatives, which we put in over the winter, and we will continue to commercialize Regallio, Multifit, Qube. On coolers, as we're now entering the critical season for coolers, we are expanding our extremely successful Optimus series and our Classic and Prime window cooler. Even our Mixer Grinder, which remains a big opportunity for us in the rest of the Appliance portfolio, Brio, Ameo and [ El ] are 3 new initiatives going in. We see these programs continuing to drive both volume and revenue growth. The second key leg, obviously, has been our continued focus on brand building. Over the last quarter, for the first time ever, we add an advertisement campaign on Geysers, complemented by radio and print. This was one of the key drivers behind the continuous strong growth of Geysers. We will continue to focus on increasing our market outreach in the Appliance segment through our new product launches complemented by advertising and sales promotion activity. Even though, overall, as you're all aware, macro -- the overall macro situation in the country is challenging. As we've talked before, we believe this is an opportunity to actually step up our investments behind key long-term brand-building activities. In the current quarter, on advertising and sales promotion, we spent INR 21 crores towards brand development. In the previous 9 months of this fiscal year, our A&P spend has been INR 89 crores, close to 2.5% of revenue, which is 14% higher than the comparable period last year. So we will continue to invest in these activities to build our brands and build our market share. Finally, a few words on our go-to-market program. This stays [indiscernible] and is very much a key leg of our program to enable the commercialization of our innovations and brand building. We are seeing, as reported by third-party independent retail audit data, that across our categories, our distribution reach is continuing to expand. We have added 1.6 points incremental in fans and 1.1 points incremental in B2C Lighting over this period. Additionally, we have made and continue to make significant investments in data capability, in systems, processes and people. Our secondary sales in tracking through our tally patch now covers close to 50% of our business. These improvements in data availability, processes, our planning capability has actually allowed us to now, over this period, improve the period of settlement to our dealers of primary schemes to what historically used to be about 4 weeks, to what is today about 1 week. This obviously has been a big competitive advantage to us, again, given the macroeconomic situation because it has enabled us to significantly help our dealers', partners' working capital by reducing by 75%, the time period of processing their claims. Next, our overall business continues to be strong. We continue to drive in a strong double-digit growth. Our distribution continues to increase. Our market shares continue to increase. And we see this happening in a situation where we are also being able due to cost reduction, mix and other efficiency driving programs continue to increase our margin. So with that overall color, I'm -- we're happy to take any questions.
[Operator Instructions] First question comes from Pawan Rathi from Edelweiss.
So my question is on the Lighting business. How do you see it panning out over the next 2 to 3 years on both the price and volume front? And do you see the price stabilizing?
First, which is easier to answer. We clearly see Lighting as a key strategic, long-term growth and frankly, profitable growth business to be in. Second, we have, over this entire period, continued to deliver at least double-digit volume growth, which basically means more and more people are using Crompton Lighting. There is no reason why that double-digit rate of volume growth should not be sustainable in the short, mid and long term. On price erosion, we have seen that over the last 3 to 4 months, there has been no more price erosion. As we look at the cost structures and the teardowns we do and the global trends of material cost, we believe that bulbs from a cost point of view are now extremely efficient. Therefore, we think that price erosion should significantly reduce or not stop at least on a sustainable basis. Tactical price drops may or may not occur, that's very difficult to predict from a competitive perspective. But we believe that sustainable price erosion, at least in the B2C segment, should now hopefully be significantly lower. If that is the case, then obviously we believe that the volume, double-digit volume growth will translate into double-digit value growth.
[Operator Instructions] Next question comes from Bhavin from SBI Mutual Fund.
One question on Lighting. A few quarters back, you had mentioned a new facility, which started in April '19. That will be a key contributor for your margin trajectory to 10%. Would appreciate if you can give us an update on what's the ramp-up of the facility and way forward? And what are the bottlenecks that you have been facing in that facility, which you are taking corrective actions?
Thank you, Bhavin. Bhavin, just to clarify. We did not put up a new plant in Lighting. I believe what you are probably referring to are the investments which we made in our existing facility in Baroda, which is essentially were investments made to automate the production of bulbs significantly more than it is. We installed -- how many machines Matthew?
Seven, 7.
We installed 7 lines over a period of time. We have already installed and are operating out of these 7...
I think 4 are all...
About 3 to 4 of these lines are already fully operational. These lines are obviously, a, part of our cost reduction program, but actually more important than cost. They were to enable 2 other objectives. One was to increase our capacity; and the second was to ensure superior, more consistent quality. In terms of the margin glide path, from a cost point of view, we are more or less at the cost we need to be, which has sort of brought our margins up from about 5% to 7%. Over the next few quarters, assuming that there is no further price erosion, it really will be the growth and the scale benefits we'll get off the growth, which will give the balance couple of points to get us back to target margins.
We have next question from Atul Tiwari from Citigroup.
Sir, you touched upon the distribution reach in B2C Lighting and the Fan business. So if you could throw some more light on the same as to what is the proportion of the reach currently? And what are the targets? And if you could also throw some light on the new product introduction in the business and timelines, if any?
These are percent in fan and a reach. So it's gone up by about -- for the year about by 3 percentage points.
Okay. We can give you more numbers in detail if you contact Yeshwant later. But let me just kind of give you a rough indication for Fans, since those numbers are a little clearer in my head. As per the retail audit, which is similar to Nielsen, our Fans have -- currently had about low 50s distribution. And over the year, this has moved up close to 54%, 55%. So that is the extent of reach that our Fans have got.
And sir, what about Lighting?
Lighting in terms of percentage impact would be a little higher. And the reason it would be a little higher is not because we're adding significantly more outlets, but just as a percentage-wise we started on the lower base of distribution of Lighting. But either way, I think the important thing to remember is 2 things. One, is our distribution share is significantly ahead of our market share, and our distribution is growing.
Okay, sir. And sir, what about the new product launches over next say, year or so?
Well, obviously, I can't talk too much about things which are not in the market. Like I mentioned, we've got some -- coming into this summer, we have got some critical interventions, new product launches going in, in Fans and Coolers. In Fans, we have begun to launch our Silent Pro series. Our Silent Pro series is a premium range of fans. Its fundamental benefit is extremely silent operation and 50% less energy usage. It also gives superior airflow to competition. It is behind the entire range. The energy efficiency comes from the fact it's a BLDC range and it's a plastic construction. Similarly, as I mentioned, we've got significant new programs leveraging our Cooler business going in over this winter. For example, one of our coolers provides faster cooling even on the hottest day, and the technology and the design elements, which is providing this is the fact that it's got a significantly larger ice [ trait ] and competition, and it also has significantly superior airflow. Finally, on Lighting, we have just introduced a new initiative, a premium initiative, as we've thought we want to keep bringing value back into this category and that is a specially designed backup bulb. This backup bulb comes in 2 variants. One provides backup for, 1-hour and the second provides backup for 4 hours. So we will continue to obviously bring innovations, innovations that are consumer-meaningful, and we will continue to support these through advertising and, obviously, our go-to-market distribution.
Okay, sir. But sir, no plans of introducing entirely new products.
Sorry to interrupt, Mr. Atul.
This is just a clarification, ma'am. I was asking no plans for introducing entirely new products like, say, for example, water purifiers are completely different from what you currently sell.
Obviously, we have plans. And obviously, I can't talk about that.
We have next question from Sonal Salgaonkar from Jefferies India.
This is Sonali from Jefferies. Sir, I have one question on -- what is the market share in the appliances segment that you are in, of the subsegments in appliances. And secondly, what is the present demand scenario in the month of January that you are witnessing for both B2B and B2C segments?
Okay. And when you say B2B, B2C, are you referring, Sonali, to Lighting?
No, sir. Overall of your portfolio...
Overall, okay....
Including...
So -- got it, got it. So let me take that part, and then Mathew can respond to the first part of your question. Okay. On the overall demand scenario, as we've been mentioning earlier, apart from certain very specific pockets, we are not seeing a huge impact of a slowdown on the demand scenario. The 2 pockets where we had been seeing an impact and we continue to see an impact, we talked about them last quarter also, one is our rural business, which is primarily agricultural pumps. And the second is our B2B Lighting business. One of the other things which people have asked about in terms of the demand scenario has over this previous period, has also been destocking by trade, working capital, et cetera, et cetera. Now we have not seen a significant trend of down stocking by trade over this period. What normally happens is the previous quarter was the lean season for Fans and has always been. So in winter, this year, like every year before that, trade needs to hold less inventory because the demand is lower in winter than it is in summer, but we have not seen any significant down stocking happening across our businesses. So maybe -- and it's very difficult to pinpoint, overall on our business, maybe there's a point or 2 here and there, but it's clearly not a situation where demand seems to have collapsed. It's down by 20%. We're not seeing that kind of stuff.
And your question on the appliances -- segment share, I think in Geysers, as we had to mention sometime back, our share has grown to around 11%. If I look at the same number, about a year or 1.5 years ago, it was about 7% to 8%. So I think 2 continuous seasons of 50% to 60% growth has helped us to grow our share from roughly 7 to 11 in Geysers. That puts us in #3, #4, as we mentioned some time ago. In the Air Coolers, we are still low single-digit market share, somewhere around 3% to 4%. In the last season, we grew 100%, and that is, we reached to 4%. But we are still, as you know, there's significant, I would say, runway ahead to really get to double-digit shares. Mixer Grinder again became low single-digit share. And these are the 3 categories we said we will make significant progress in the next few seasons. Yes.
And Fans?
In Fans, our market share is roughly 27%, as -- [ growing ] ceiling fans.
And 2 to 3 years back, it would be?
It would be about 24% -- 23% to 24%.
We have next question from Venugopal Garre from Bernstein.
Just referring to one question asked earlier by Atul on the completely new product plan. I understand, it probably is not -- you may not willing to share the details. But given that we'll all been waiting for a few years for something big, can you at least share us a timeline? Is it a 12-month sort of a plan for you? Or we will be -- probably have to wait for slightly more time than that? That's my first question.
Okay. First, I just want to clarify that for all practical purposes, if I go back 12 months ago, the entire appliances category was a completely new category for us. Like Mathew said, 1.5 years ago, we probably had a 2-point share in Geyser, a 1-point share in Cooler and probably a less than 1-point share in Mixer Grinder. If I look at these 3 categories themselves, these 3 categories have a category size of...
INR 10,000 crores ...
About INR 10,000 Crores. So like we've talked before, one of our key focuses is to go become #2 at least in each of these categories. Second question is, what about a category which we do not play again? And I guess, Mathew mentioned earlier, as an example, [indiscernible], only because it was mentioned earlier, I'm saying water purifier or air conditioners or refrigerators, all right? Obviously, we are working on various options. But I want -- I said this before. And I want to make it absolutely clear, our objective is not to enter a new business. Our objective is to enter a new business successfully, and we are continuing to work on that. The moment we believe that we have a consumer reason, a technology reason and a sustainable competitive advantage, which can make us win in that, we will enter, right? But it is very important to realize 2 things in this story: Number one, there's a INR 10,000 crores category, which a year ago we were not present in. Number two, categories beyond the INR 10,000 crores, entry is not the objective. Most people who just enter destroy value. The objective is to enter successfully. And when we are ready with that proposition, you guys will be the first to know.
My second question is on the Lighting business. I just wanted to understand, when we look at the volatility of the business, given the price erosion in the LED lamps category, I wanted to understand, based on your own cost structure, et cetera, what is it -- would be required for you to actually lead the cost curve there? So what I'm trying to highlight here is that, actually you become a cost leader, you are the one actually driving the price erosion in the market because you have a better cost structure. So is that even possible? Or it's actually not possible to do that?
First, just to clarify, we have no desire to drive pricing erosion in the market, ever. Second, based on our best understanding, on parts of the Lighting business today, we are the cost leader. So for example, in bulbs, we are the cost leader. We also know that in certain other segments, such as battens and panels, we have work to do to be the cost leader. I would also just point out that 4 years ago, our position in Lighting was similar to what our position today is in mixer grinders or irons. And we went from that position to a close #2. One of the ways we did it was actually on bulbs. Being the cost leader, being one of the first people to not only be the cost leader but to advertise the benefit of that lower cost on LED to the consumer. And if you go back to what we did 4 years ago, which us put on this curve, it really was driven by that. The last comment I'll make on price erosion, and I know, I admit, and I'm the first person to say that the level of price erosion has consistently surprised us over the last 2 years. But I would like to reinforce that over the last 4 to 5 months, we have not seen any more price erosion. Based on our best judgment, we think that costs have come down to as low as they physically can.
We have next question from Arnab Mitra from Crédit Suisse.
Congratulations on a great performance on ECD given the context of the economy. My first question was on Geysers where you've seen very good success in the last 2 years. If you could just help us understand, looking back in terms of how you've achieved this? Were there examples where the product was significantly differentiated like you've had in Fans in the past? And how much has distribution played a role, given that the channel may not be exactly common with your fan and pump channel?
I would say, in terms of Geysers, I think, there has been significant work that we have done on the entire product portfolio. Just to give you a perspective, every -- none of the products that we sell today in this season existed 18 months ago. Now typically, in the past, our product refresh rate in geysers will be maybe once in 7 to 8 years. But we have completely refreshed the entire portfolio. Earlier I would say we had a product portfolio disadvantage versus the couple of the leading competitors. Today I would say, we are at least on par in some segments of the Water Heater business. We might be actually having a superior portfolio. And that's actually will help drive bulk of the growth. If you -- the second question you asked is about the channel. I would say, while our reach has improved in Geysers, there is still so much more that we can do. Even today, our Geysers rate is less than 20%. Maybe it was 10%, 1.5 years ago, it's improved. But that means still 70% of stores still don't have Crompton geysers. So I think there is a significant opportunity to leverage the channel further, which can drive the growth in the years to come. In terms of portfolio, there is still scope to develop this portfolio and build a completely differentiated and superior portfolio. There's still work to be done. That's what I would say.
And the last thing I'd add -- sorry, the last thing I'd add to Mathew, which was a key driver is...
Advertising.
Investing in advertising to the consumer. We have never done it before. It's not something we traditionally -- once in a while, people have advertised in the past, but it's not a heavily marketed category. We invested in the brand.
And one small question on the China supply chain, given the current situation, is there any risk to the supply chain, especially in lighting and stuff where China is a big source of the supply?
Well, right now, we are okay for the near and short, mid-term. Obviously, we're keeping a very close watch on it and are trying to work some [ audit ] plans. It's really all a function of how long this goes together. One of the -- well, it's odd in a tough human situation like this. But one of the benefits, which is -- has been that, in any case, normally before Chinese New Year and this period of 2 weeks where most of China tends to shut down, in any case, there's a lot of inventory buildup. So we also do that inventory buildup. Our vendors tend to do it. So that sees us through this period because of that. So it's really -- we have to wait and watch, like pretty much the rest of the world. The biggest -- it will have to extend significantly before it starts having a material impact on us. So we just really have to wait and watch it. We hope -- hopeful it should not and should settle down.
We have next question from Aditya from Investec.
Sir, just wanted to understand what proportion of fan sales for the industry are dependent on new construction? And what has really contributed to moderation of growth rates in the Fan market in the last few years?
See, the data indicates, and this is old historical data, that a very high percentage of fans are first-time new installations, and a smaller proportion of fans are replacement. That has always been the case. However, I think what's important to realize, especially as we talk about these macro trends is housing construction and real estate slowdowns and declines actually significantly predate the current last 12, 18 months of GDP slowdown, right? That slowdown has sort of been happening for the last 3, 4 years in terms of housing starts. So in many ways that has not affected the current growth rates because it's already in the base. The other thing which we saw, which impacted the growth rates in the recent period was relatively temporary, and these were the 2 incidents which happened 2 years ago. The monetization had an impact for about 2, 3 months, and the GST had a temporary impact. But beyond that, we are not seeing, like I mentioned, any significant slowdown. If I go back 4, 5 years ago, when real estate was booming, at that period in time, the market was growing exceptionally fast. But now the market is also growing at this 6%, 7%, which is, if you [ craned ] the long-term history of Fans' growth market, that's what the long-term has always kind of been. Maybe a point here and there, but nothing beyond that.
Understood, sir. And sir, could you give us an indication how large are the economy and premium ends of [ defined ] market? And how is Crompton positioned at both these ends?
The premium segment is roughly -- in terms of market, anywhere between 8% to 10% of the total market is premium, but that part of the market base obviously growing fast. Crompton has a strong position in the premium segment. I would say, in the premium segment, at a national level, we would be #2. But there are parts of the country where we're already #1 in the premium segment. The economy segment basically it's better to talk with the -- I would say, with the economy and what we call economy and subeconomy parts of the market together because there is a very thin line there. And that's the market would be around 25% to 30% of the market would be in that segment.
Understood. And how would Crompton be positioned there, sir?
I'm sorry to interrupt. But quickly to answer your last question, I'm with the leader in that segment. Okay. But I just request you to just give the other folks a chance, if you don't mind, and then come back. And if you don't have time, then feel free to connect with us post the call.
We have next question from Niket Shah from Motilal Oswal Asset Management.
Sir, I had just one major question on the rating of Fans changes which we were kind of highlighting in the last quarter as a significant opportunity for us. Would it be possible for you to give us some sense in terms of the progress that you've made? And also a rough sense in terms of how much price increase would it be needed in the post rating change [ era ] for us?
Two things. First part of your question, just to clarify, the current regulations are -- and though they are still not -- there's still little work going on, that by June 30...
Stop producing.
You have to stop producing any fan that does not meet the new standards. And by December 30, you have to stop selling fans, which meet. We are -- our progress towards having a plan, which not only meets this, but also, like I mentioned earlier, which actually provides us an opportunity to meet needs better and, therefore, grow our business competitively better is very, very well on track. And we are confident about the changeover. I will not give you a specific answer on the second question, because, obviously, that is competitively sensitive. And what I can tell you is every SKU of fan won't necessarily have the same percentage increase. These are all business and strategic choices we need to make. Second thing I will tell you is, we have spent a huge amount of -- we believe, superior work in reducing the cost differential which is required, and we believe we have solutions, which will maintain the value -- winning value of our product range.
Sure. Sir, just one question on that. Do you think that given an average realization on the complete Fan portfolio, any substantial price increase or -- what extent of price increase will the market be absorbed -- will be able to absorb without impacting significant volume growth?
If I could give you an answer to that, I'd open up a consultancy.
We have next question from Ashish Poddar from Anand Rathi Securities.
Yes. Sir, my question is last quarter, perhaps, we have also grown because of strong winter products. So my question is, do we still see -- because the winter has extended and still very severe in most part of the country, do you still see a good growth in the winter product? And what about the summer products, which start -- normally starts inventory filling from February? So do you have any sense, any color? So I'm just trying to understand -- it is just be -- because of the seasonal nature of products, so we are seeing a demand? Or you have seen sequential improvement in the demand scenario overall, in general?
Okay. First, just to clarify. Yes, we have seasonal products. But if I look at our ECD business, only a very small part of our business has a winter season, and that is geysers. I would -- I mean that's picking a number. I would say, more than 95% of our ECD business is summer-skewed, right? So the total business can't get driven by only a winter-skewed product. Obviously, the biggest season is the one we're coming in. Sell-ins are critical as they're going in now for our summer ranges, which is why all the launches of cooler and new fans. Right now, we are not seeing any significant changes in the scenario in the first half of January than versus what we saw in December. In terms of the overall picture, the story, nothing seems to be -- so we're not seeing suddenly people are not buying fans or buying fans, et cetera. It's kind of how it's always been.
Okay. And my second question is on your tax. So this quarter, we saw some negative tax because of some deferred -- because of some provisions of earlier year. So now from Q4, will we see 25% kind of tax rate -- -- effective tax rate?
Okay. Sandeep has been waiting for someone to ask that question, so I'll hand it over to Sandeep.
Yes, yes. From Q4, the tax rate will normalize to 25%.
Give the picture of the [ whole 275 and all ]…
Q4 will be 25%.
We have next question from Renu Baid from IIFL.
Since that [ job ] performance has been pretty good for the last quarter. Two questions from my end. One, if you can highlight a bit more in terms of Lighting. You mentioned that you want to do a lot of actions in terms of improving portfolio on value-added products. So if you can highlight both B2B and B2C, what have we planned and what's there in pipeline? Aligned with this, I missed the initial remarks. So what was the kind of volume growth we had in LEDs despite a 9% drop in sales?
B2C LED Lighting was 13% to 14% up in volume. Okay. And first part of the question, Mathew?
Yes, I think -- As Shantanu briefly mentioned, in the B2C part of lighting, we recently launched a month -- a couple of months ago, this backup light within 2 versions, bulbs which would give back up of 1-hour and 4 hours. So I -- as we mentioned before, I think one of our key strategies in Lighting is going to be to create differentiated consumer relevant value-added proposition. And I think this is one more after Anti-Bac. We have, of course, a few more planned in the next few months. Obviously, I cannot disclose what those are, but that is part of the strategy going forward. Similarly, in B2B, also, we have introduced some higher-end range, and that is likely to be -- that will be strengthened in the quarters going forward.
Sure. On the B2B side, how has -- because your overall comments and outlook has been fairly soft in B2B portfolio. So what in your view could drive an uptick or some recovery in this market? And also, if you can share what is the update on the Odisha Lighting project? How far are we in terms of execution and completion timelines, along with any change in scope or value for this job.
Okay. Let me take the first, and then Mathew will take the second. Obviously, our B2B business is largely dependent on private and government investment in infrastructure, right? So there is little control we have about the pickup of that. So as investment starts coming back in projects, be they private or be they government, we will naturally get a pickup in the business. Meantime, what we are doing is, we are continuing to invest in our capabilities. We're continuing, for example, like we talked in the past, we have invested in salesforce.com, a stronger organization, et cetera. So that -- as the investment scenario and infrastructure investment picks up, we'll be in a stronger place to take advantage of that. But when that will pick up is not really something which we can control. Odisha?
On the Odisha project, obviously, you know that they're already -- till now the going has been quite slow. There have been quite a few issues, which have been ironed out. The expectation is, of the total project size of about INR 90 crores, 50% to 60% should get executed in Q4. That is our best estimate at this moment.
We have next question from Vinod Bansal from Franklin Templeton.
Vinod here. Staying on the Lighting business. Could you speak about the recent volume trends in B2C segments in the last 3, 4 months?
I think over, Vinod, over the last 2, 3 quarters, this volume trend has been quite consistent. Pick a number between 10% and 15%, right, on any month. And the fluctuations, which have happened, have happened more based on realization per unit. So the volume has been very consistently and is continuing to grow.
So does that mean that at least for -- from now onwards, since pricing erosion has stabilized, it's not happening anymore, we should see positive value growth in B2C lighting, given that...
Okay. This is, Vinod, what I mentioned in my opening comments, the last price drop across the industry was July, August of 2019, which was a price drop of around 15%. So till we anniversary, assuming there's no more price drops in the next couple of quarters. So till we anniversary and reach that period and the base gets sorted out, we will still see a difference between volume growth and value growth. But come that period, assuming no further price erosion, automatically the volume -- the value growth will start keeping in line with the volume growth.
Sure. And on B2B, what is the risk that kind of price [ competition ] has seen in the industry that may spill over to B2B as well?
I think -- yes, in terms of cost, also in B2B, I think the amount of cost that any company has been able to share of the product costs have come down in the last few quarters. However, I think one of the reasons we continue to see some level of price erosion in B2B is because of the demand scenario. The fact is that the demand scenario has been quite muted in the last few couple of quarters. And as a result, I think that has led to more price erosion than anticipated. But I think in terms of costs, with previous costs we were able to come down has significantly slowed down in the last few quarters. So as the demand starts to pick up, we think that the price erosion will actually reduce, actually.
Let me rephrase my question. What I meant is, there's general understanding that B2B is somewhat better placed in terms of price competition. And therefore, if B2B leads the segment growth, you will not only see overall top line growth, but also margin expansion. Is that notion misplaced, given that if everybody start -- yes
No. I would say, in fact, the price erosion in B2B -- I think, if you look at the last few quarters, the B2B price erosion has not been less. In fact, I would say B2C price erosion, especially on bulbs and even battens, had been ahead of the curve, actually.
My simple answer is, yes. That notion is, as we speak today, a little misplaced. If -- again, if you go back in history, 3, 4 years, what happened is the price erosion and the cost reduction started in B2C about 12 to 18 months before. And B2B has started 12 to 18 months later. But now, as we speak, that same erosion, supported by significant cost reduction, has also happened in B2B.
Right. So there is not a very strong case for a margin expansion as such in the Lighting business, beyond what you're seeing already?
Well, like we've always said, it is a strategic business for us. We have a long-term great growth opportunity. And we've always said that we believe a going level of margin once we get where we need to should be around double digits. So we never see this business as a business which can have a 30% margin. A fair margin, we think, in the Lighting kind of business is about double digits.
Sir, I agree with that, but you're doing half of that. So doubling the margins from here would require a lot of...
That's to -- like I mentioned in the beginning, we were at about 5.5%; this quarter we've come back to 7%. Most of this recovery has happened as we've really driven further costs out. Now there's a little bit still left in pockets and cost. But most of the balance couple of points will come over time as we get the top line growing in value and we start getting scale benefits, because importantly, we're not cutting back on our investments in people, in R&D, and that's simply now getting spread over a smaller volume, and a couple of points will come from that over time.
We have next question from Rahul Gajare from Haitong.
Yes. I've got a couple of questions, but I'll just start with -- I've seen a fair bit of increase in the unallocable capital employed. You may, if you were to compare the last couple of years, this number has steadily moved up from INR 500 crores, INR 600 crores. And this particular quarter, we have almost touched INR 1,000 crores. So could you throw some light on what is really happening over here? And related to that would be, with all the cost saving that you have done on the overall business, we've seen consumer margin moved up almost 19% to 20%. So is there a further scope of increasing the consumable margin?
I'll let Sandeep take the first and then we can talk the second.
Yes. So there are 2 drivers with capital employed. One, of course, is that we repaid some INR 300 crores of our debt. So that was getting netted off from capital employed. As you repay it, that number goes up. And secondly, over the last couple of years, we have ramped up -- we have started a program where we pay off our vendors ahead of their credit terms. And that payment is at a cash discount of anywhere between 13% and 15%, which they offer. So that number used to be 0 about couple of years back. And now we are doing that program of about INR 250-odd crores. So that plus the debt repayment, would explain the swing in unallocated capital employed.
On the second part of your question, like -- actually we adopt this when our company started. Our goal -- our financial objectives are to grow top line faster than the market and to grow bottom line at least as fast as top line, which essentially means that we don't want to focus on building margin more. We want to focus on investing our efficiencies and savings, to build our market share more.
Okay. So you seem to have -- is there a further scope to see increased margins over here, you think?
There is always going to be further scope to reduce our cost and improve our effectiveness. Now our preference on how to reinvest this will always be towards building share as opposed to flowing it down to the bottom line only, because we believe in the long term holding margins and reinvesting and building share will create bigger value for our shareholders.
Last question for the day comes from [ Priyank Singh ] from HDFC.
Congratulations on a very good performance in a tough environment. So Shantanu, I just wanted a couple of clarifications and some more data on the significant market share improvement that Mathew alluded to on the premium Fan front. He mentioned it in a few markets we already have reached, say, #1 or #2 position in the premium Fan segment. Just wanted to get some clarity on what would be the premium Fan share and our overall Fan share at present? And over the last 3 or 4 years, what would have been the CAGR growth in the premium Fan versus the overall Fan at a company level that we would have witnessed?
When we started this focus 4 years ago on growing premium along with growing the base, the Premium Fan business used to contribute to about 10% of our Fans business. Today, the premium fans business contributes about 20% of our fans business. So we've actually -- when we set this goal, we had a 5-year goal of taking the 10% to 15%. But some of the innovations like, Antidust, Air 360, all of these have really helped us overachieve on that objective.
Right. And the way we define premium fan, how do we -- is there a price point cutoff above which we believe that this is a realization above which it's premium fan for us is...
From a consumer buying price, not MRP, what we call MOP, INR 2,500-plus.
Okay. Okay. And what would it mean? This share improvement that you mentioned in terms of CAGR volume growth, would you have that number available in terms of, say, last 3, 4 years CAGR of premiums and volume growth?
Yes, yes, we would. But I suggest you after the call, if you want that detail, you can just give Yeshwant a call and we can share the share trends if you want.
For this price of...
It's third-party data. So actually we can't share the [indiscernible] data. But you speak to Yeshwant, and ask that, and he can give you more details of numbers.
And also, a related question on this -- the price point that you mentioned, above this price point, whatever is the market size. Now what would be our share, Mathew mentioned and our overall Fan market share is about 27%. But in the premium category, above INR 2,500 MOP, what would be our market share in that segment?
Around 20% to 25% is that -- there are a fewer players playing in that segment. In the premium segment, it's not many players.
Correct. So what happens is in the total Fan market, at 27% we're the clear total Fan market leader. But at about a 25% share of premium, I'm still only #2 in premium.
That would be the last question for today. Now I hand over the floor to Mr. Achal Lohade for closing comments. Over to you, sir.
Yes, thank you. On behalf of JM Financial, I thank you, all of the participants. Thank you, management, for giving us the opportunity to host the call. You want to make any closing comments, Shantanu, on this?
Nothing, except thank you as always. Thank you for taking the time. Appreciate it. Our objective is to share our business and our thoughts as openly and transparently as we can. As always, if you have any more questions, we are freely available, just contact us. Thank you.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [ Door Sabha's ] conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.
Thank you.