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Ladies and gentlemen, good day, and welcome to the Crompton Greaves Consumer Electricals Limited Q4 FY '22 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Harshit Kapadia from Elara Securities Private Limited. Thank you, and over to you, sir.
Thank you, Fabian. Good morning, everyone. On behalf of Elara Securities, we welcome you all for the Q4 FY '22 and FY '22 Conference Call of Crompton Greaves Consumer Electrical Limited.
I take this opportunity to welcome the management represented by Mr. Shantanu Khosla, Managing Director; Mr. Mathew Job, Executive Director and Chief Executive Officer; Mr. Sandeep Batra, Chief Financial Officer; and Mr. Yeshwant Rege, Vice President, Strategy and Financial Planning.
We will begin the call with a brief overview by the management, followed by a Q&A session.
I'll now hand the call to Mr. Khosla for his opening remarks. Over to you, sir.
Thank you, Harshit. Good morning, everyone, and thanks for dialing in for quarter ended 31st March call. First, I hope all of you and your families are fully vaccinated, healthy and safe.
Before I touch upon the Crompton performance, I'd like to briefly give an update on our Butterfly acquisition. In the last quarter, we had executed a share purchase agreement on February 22 to acquire 55% stake in Butterfly. The transaction was closed on March 30 through the stock exchange settlement process. We have launched the process of mandatory reopen offer to the public shareholders of Butterfly for the acquisition of up to 26% stake at a price of INR 1,433.90 per equity share. The tendering period for the open offer commenced on 23rd May and expected to conclude on 3rd of June.
As we've mentioned before, this acquisition, we believe, is a transformational step towards Crompton's long-term strategic goal of becoming a leading Pan-India player in the critical small domestic appliances segment. As one of the few integrated manufacturers in this space, Butterfly offers immediate scale in kitchen appliances with its diverse portfolio, increasing our share of SDA Significantly. This diverse portfolio spans a complementary set of segments, including mixer grinders, stoves and cooktops, table top wet grinders, pressure cookers. We have obviously commenced the post-merger integration plan with the objective to run the business operations smoothly and start monetizing identified synergies.
As we moved into the process of integration, we are overall finding that the process is going on extremely smoothly. We have installed a new Board of Directors, have put in some key capability, including the Managing Director, Mr. Sriram who use to run our Fans business. The overall organization feedback from Butterfly employees, whom we -- which we are collecting on a regular basis is positive and they all see this integration as a good thing for the business and also themselves.
We are continuing to see that both on the demand side and on the cost side that the synergies are beginning to be identified and we are beginning to execute our programs against them. We will obviously talk much more in terms of actual performance at the end of the current quarter. But so far, we are extremely pleased with the program.
As communicated by the Butterfly management at the end of its quarterly results, there were certain charges, which we -- which had been taken into the Q4 P&L of Butterfly. This included a reduction in stock levels in the channel due to uncertainty created by the transaction; lag between the steep increase in commodity prices and pricing action, which has now been collected; and the assessment of management that there was a need for some additional provisions to be made, including provisioning for old and aging inventory and additional provisioning for expected credit loss.
As we've been operating -- the business has been operating over the last couple of months or so, we believe that growth in revenue and margins is being witnessed on expected lines and we do expect the structural profitability of the business to continue to be strong.
Moving on to the way we're seeing the overall economy right now. The economy was really well on its way to recovery before the commencement of the last quarter with both manufacturing and service sectors exhibiting consistent growth. However, life is never simple. The emergence of new COVID disruptions in January plus the issues created out of the Russia/Ukraine crisis, and more recently, rising inflation has continued to pose stretch challenges. Further, volatility in financial markets, supply side disruptions and protracted shortages of critical imports, such as semiconductors and chips, post downside risk to the economic outlook.
However, we do believe that some of the reforms undertaken by the government, such as significant increase in capital expenditure on infrastructure, thrust of domestic manufacturing and technology-enabled development should continue to keep our economic growth relatively robust.
Moving on specifically to the Crompton business. In Q4, the business was significantly impacted in the month of January due to the disruptions caused by Omicron. While the impact of the illness of Omicron is relatively lower, the extent of the number of people who got infected was significantly higher. For the first time, we had large numbers of our own employees impacted via the Omicron variant.
However, on the positive side, post January, the business quickly came back to normal, and February and March maintained a strong growth category. Growth was strong across categories in February and March and the total company growth for February and March was a nice double digits with a 2-year CAGR of 36%. In fact, the month of March itself was the highest ever recorded revenue month for our company.
For full year '22, revenue grew by 13% versus last year, and importantly, the profitability was broadly maintained despite steep increases in input cost and stepped-up investments in key initiatives like brand building, investments in our R&D center and innovation and strengthening alternative channels.
The ECD business grew by 3%; on a 2-year CAGR basis, 29%. Net of Fans, ECD grew by 7%.
The Fans business continues to be impacted due to an industry-wide slowdown. Fans for the quarter performed strongly, growing at 9% with a 2-year CAGR of 32%.
Lighting revenues declined by 7%. However, the growth momentum continues in B2C LED business with a 2-year CAGR of 14%. The key drag continues to be our B2G segment.
As far as market share goes on a rolling 12-month basis, we have gained 3 points market share in Fans. Crompton is the only company to have gained market share quarter-on-quarter over the last 2 years by demonstrating the all-round constant improvement across our key pillars.
We have also improved market share both in the water heater category and the strategically important LED downlighter or panels category by 1%.
Our EBITDA margins came in strongly superior to most of our competitor set at 14.5% for the quarter despite continuing extraordinary commodity cost headwinds. Anticipated increase in key commodities on account of the new COVID variant and the geopolitical tensions continued to put pressure on profitability in Q4. As we have been doing, we have been focusing our efforts quarter-on-quarter in mitigating these cost impacts.
We have consistently been addressing these through our accelerated cost savings through our UNNATI program, where we saved about INR 68 crores in Q4, continued focus on premiumization across segments and appropriate pricing actions. We have also worked to use our cash book to advance contracts on commodities.
With these, we continue to do relatively better on margins in a year highly impacted by commodity inflation. Importantly, this helped us maintain our long-term investments in brand building, our new R&D center and strengthening our alternate channels. We do expect raw material inflation to continue over the medium term. And our plans to continue to mitigate them remain the same.
During the quarter, we witnessed strong improvement in working capital requirements. Our working capital was lower by INR 148 crores. Our cash position stands at INR 1,514 crores stand-alone as on the year ended FY '22. We have earmarked INR 666 crores for the open offer process on Butterfly Gandhimathi Appliances Limited.
We continue to maintain a very healthy balance sheet and cash position, which we believe will continue to help us stand strong, especially in these turbulent times.
As mentioned, we have continued to invest in our key strategic choices. On go-to-market excellence, we focus on superior partnership with trade. We are empowering our channel partners to help them grow their business and continue to support them during these tough times. Our percentage of regularly build dealers continues to stay at a high level.
We are focused on improving reach. Our efforts are clearly visible in improved reach on a rolling 12-month basis of our overall Fans portfolio by 4%, LED bulb by 1%, LED panel by 1%.
Technology as an enabler stays a key focus area. This helps us improve our secondary sales tracking and information gathered from our Tally patch, which gives a direct secondary sales data, now covers 85% of our total sales.
Our investments that we have been making in alternate channels continue to pay strong dividends. Our rural sales through both direct and indirect distribution model delivered an exponential growth of 146% in Q4 over last year, albeit off a relatively small base. We continue to gain share in this market. This channel's contribution has grown to close to 5% from 2.2% in the previous year. It also witnessed a sequential growth of 30% over Q3.
Product innovation, where we have invested significantly, stays a key focus and a key driver for our business. And we continue to introduce over this period a number of critical initiatives on fans, appliances, pumps and lighting and these are all helping our business stay robust.
We have set up brand awareness across media platforms to increase recall across consumer touch points. Several brand awareness campaigns were executed in lighting and water heater segments across both above and below the line platform. We executed a strong campaign on ceiling lights, positioning on the 3-in-1 lighting molds, which clearly has resulted in share growth in the segment.
We launched a plumber loyalty program named SAATHI, which is built on a technology platform, which will help increase our share in the Pumps business.
In Q4, our investment in A&P activities stood at INR 17 crores.
However, the commodity cost headwinds continued in Q4 and even in the month of April, putting continued pressure on margins. However, we have seen a little bit of softening of input costs in the medium term and we do expect that in subsequent quarters we will begin to see some extent of benefit on this.
Rising interest rates and inflation is another headwind as we look forward and this potentially could dampen the growth, though the base effect given that the last year in this quarter we had a strong COVID impact should show high growth. We would continue to invest in our long-term growth initiatives of brand building, innovation and alternate channels. We obviously closely monitor commodity costs and take appropriate pricing, mix and cost-saving actions to negate to the extent possible these input costs.
Now quickly taking you through the numbers. The Board of Directors at its meeting held on May 26 approved the quarterly results of the company for the quarter ended 31st March. The total income for the quarter was INR 1,532 crores; consolidated, INR 1,548 crores.
ECD revenue stood at INR 1,231 crores and EBIT margin at 18.5%.
Lighting revenue stood at INR 301 crores; consolidated, INR 317 crores. And EBIT margin stood at 11.4%, consolidated 14.1%.
PBT stood at INR 215 crores. PBT margin stood at INR 14.1 crores.
Tax stood at INR 182 crores and PAT margin at 11.9%.
I'd like to now stop here and take any questions you all may have. Thank you very much.
[Operator Instructions] The first question is from the line of Bhavin Vithlani from SBI Mutual Funds.
Sir, I have 2 questions. One is in the previous call you had mentioned that Butterfly's acquisition will be EPS-neutral for year 1. Now given the results that have come out in the fourth quarter, do you still maintain that? And if yes, why? And if there is a change, also why?
The second is more of a housekeeping question. If you could just help us with what was the growth in the full year basis for water heater, Pumps and air coolers business?
Okay. Let me take the first one and then if Sandeep has anything to add, he can add on to that.
Yes, we had said that we expect year 1 to be largely EPS accretive. We continue to expect that to be the case. To be clear, as we had mentioned, the impacts, which you saw on the Q4 P&L of Butterfly is preacquisition given that it came in on the 30th of March, and as explained, the bottom line impacts were largely driven by elements which we do not see as recurring.
As we have seen the business over the past 6 weeks or so, we are quite comfortable with what we had forecast ourselves in terms of the base business and also the way top and bottom line synergies would begin to flow in. Anything to add, Sandeep?
No, no. I think just to reiterate that whatever was our business case for year 1 basis, which we had called out that the transaction will be EPS-neutral in the first year, the entire base case is very much intact.
Yes. In terms of your question in terms of the full year growth for water heater, the full year growth has been in excess of 30%. Air coolers, I don't have the exact numbers, but it is in low double digits. But please keep in mind that these 2 years, we have had part of the selling season being disrupted. So I think that has had some impact on the cooler growth, but that is closer to low double digits while in heaters it's more than 30%.
Fans.
And Fans, in fans, our growth has been about 18% -- for the full year has been 18%.
Pumps also, sir?
Pumps has been basically a 2% growth. As I mentioned, both of the industry is facing a significant issue for the full year in Pumps. We have delivered a growth of 2%.
The next question is from the line of Ravi Swaminathan from Spark Capital.
Sir, if you can give the volume and value growth breakup across all these products for full year and quarterly will be great, sir.
Quarter 4?
Instead of -- I mean, we're happy to share. But instead of us reading out all these numbers, you can just contact Yeshwant after the call and he'll share the tables. No problem, okay? Would that be better?
Sure. But on a blended basis, what would have been the price increase that you would have taken across the ECD business year-on-year for the full year if you can just share that?
Sure. Full year would be -- yes. The full year average price increase across ECD, if I take, would be close to 15%.
For full year, I think it will be 15% this quarter, okay.
Roughly, yes. Around -- between 13% and 15% because there are different seasonalities for different categories within Appliances. But yes, the average would be somewhere between 13% and 15%.
Got it, sir. And the Pumps business has been slightly on the softer side. If I recall, right, it's the second year. What is posing the challenges over there? And what is the part to recoveries you can talk about there?
I mean the pumps industry has been facing an industry-wide issue. Obviously, one of the contributing factors would be -- there are 2 contributing factors I can think of. One is the kind of monsoons that have been there last year. I think that has played a significant part, especially in some of the big pump markets. There has been excessive monsoon last year, for example, in Bihar, for example. So that is one.
And second, I think definitely, the kind of price increases that the industry has seen to the tune of around 30% is definitely having some dampening effect on volumes, especially when you combine that with the kind of monsoons that have played out in the large markets.
So I think -- so one, that is an industry-wide issue. Definitely, if I look at the top 5 players, I would think that most of them have actually not grown their business. So it's an industry-wide issue. I don't think there's anything that we do to prompt it.
[Operator Instructions] The next question is from the line of Renu Baid from IIFL Securities.
I have one question each for Crompton and Butterfly. First, for Butterfly, we did mention that margins are impacted because of commodities. What kind of price hikes have been taken? And by when do we expect gross margin of 40%, which the business was doing earlier to revert back, and thereafter, the synergies to kick in? So some color on the margin trajectory.
An average price increase has been taken starting from -- towards the end of March in some channels and some channels in April to the tune of 4% to 5%. Obviously, you mentioned how much time would it take to get back to 40%. And I think 40% margins were primarily only in the first quarter of last year. Thereafter, the margins have come down.
So we are rather looking at, one, growing our revenues. And I would have more in EBIT margins than look at the gross margin per se because that is how we would like to get the benefit of the scale that we will create as we go forward.
And we do expect that EBIT margins will recover pretty faster. This fourth quarter margin numbers, as mentioned very clearly, are nonrecurring charges.
Right. So the idea was even if you adjust gross margins because this company has pretty flat gross margins of 14 percentage, so if we have under recoveries of 3 to 5 percentage points, then at the EBITDA or EBIT level to come to 10% could be a bit of a struggle in this kind of environment. And then trying to do the math on EPS accretive is where I was coming from. So because...
I think, Renu, what you must add, it has a combination of, as always continued mix improvement for the cost reduction and pricing, which results in us getting to our target [indiscernible].
I think quarter 4, also keep in mind that the top line growth also was soft for Butterfly in quarter 4 obviously because of the -- as Shantanu mentioned, almost INR 50 crores to INR 60 crores of revenue was lost because of the uncertainty around the transition that's happening.
So that currently, we are feeling good about the initial progress in Butterfly, business-wise and organizationally. And we are seeing absolutely no reason. If anything, we are seeing reinforcement that the forecast and the projections we were making are very much doable.
Sure. sir, my second question is if we look at the core business Crompton portfolio, while 2-year CAGR is optically higher, we were against a low base of the first wave, which has significantly impacted March numbers. But on a 3-year CAGR basis, ECD portfolio has just been up 12%, which actually is in line or actually slightly softer than the average price increases taken in the last 12 months.
So are we seeing demand headwinds in terms of volume growth because of price increases? Any pockets of slowdown you're seeing? Or you think now, along with the inflation impact, a mid-teens kind of growth for the portfolio should be doable with new product expansion coming on ECDs or the Appliances side.
Again, you need to just look at these numbers, ECD minus Pumps and Pumps because there is no doubt that Pumps have been relatively slower, including volume decline over this period. So if I talked about the non-Pumps part of the business, I think we feel -- unless we had some new headwinds, we feel reasonably good about the demand situation. And we've been seeing that over the second half of this last quarter.
Pumps, I think the recovery will take a little more time because, as Mathew said, given the nature of the category, it is linked to overall macroeconomic situation and inflation more than the others.
The next question is from the line of Sonali Salgaonkar from Jefferies.
Congratulations on exhibiting a great margin resilience amid these challenging times. So again, I have one question each, one on Butterfly and one on Crompton. On Butterfly, can you please help us understand the key synergy drivers, which you have identified in terms of revenues, cost and distribution channels as well?
And second question on Crompton is, you mentioned the price hikes taken during the year in ECD. Can you please help us with the price hikes taken in Lighting as well and the CapEx numbers?
Okay. On Butterfly first and I'll only touch the key ones, right? Obviously, we've got a very detailed list of these. First, there is clearly an opportunity, which we are seeing in the premiumization, in the more premium segments of the existing Butterfly categories. They tend to be more developed there. And we have already begun the work given the back-end capability that Butterfly has to develop products, which can better meet these more premium needs, which is a faster-growing segment.
Second, there is clearly a go-to-market opportunity. Now the interesting thing about the go-to-market opportunity is that we all knew and we all talk about the fact that the Butterfly business is largely South-based. And West and North, if you will, are largely white spaces. Now that remains. But even more interesting, if you start unpeeling the South you see that there are clear growth opportunities in terms of white spaces by investing in go-to-market, in non-Tamil Nadu. So states like Karnataka, AP, Telangana represent an immediate relatively low-hanging fruit.
Finally, there is clearly an opportunity to get more investment for synergy in terms of consumer marketing, advertising, et cetera, which we've also begun. So those are, if you will, 3 blocks of revenue synergies in the existing categories.
In terms of cost. Well, there are a large number of synergies starting from simple buying synergies. Now for example, material, which has bought copper for motor winding, the consolidated group now has a much bigger scale in copper buying, et cetera, et cetera. So there are simple -- some simple scale synergies in terms of buying which can come.
But beyond that, as we've demonstrated in Crompton itself, if you put in a good focused program on cost reduction, you can see lots of them. So frankly, we have that now. We have this cost reduction program in place, and we are seeing a path to significant cost synergies in all kinds of areas.
Yes. And the other question was in terms of Lighting, how much is the price increase during the year, it's about 7% during the year. Obviously, it's much lower than ECD, but it is also true that the commodity impact in Lighting also has been lower.
Right, sir. And CapEx and also a follow-up question on the synergies. Are there any quantified targets that we have identified during the first 2 years or so for revenue or cost?
Absolutely, yes. Can I share them at this point? No.
On CapEx, Sonali, other than, I mean, if you look at maintenance CapEx, for us, will be in the INR 40 crores to INR 50 crores range. Obviously, if there is any decision taken to significantly expand capacity, that will have its own CapEx implications. But for now maintenance CapEx, you can consider to be in the INR 40 crore to INR 50 crore range.
The next question is from the line of Siddhartha Bera from Nomura.
Sir, my first question is on the Appliance side of the business. We have seen the growth coming off quite a bit over the past few quarters. Can you highlight what would be the reason here? And going ahead now, will you also focus on the Crompton supplies portfolio? Or will it be entirely led by Butterfly only? So if you can just highlight here.
Yes. I think like in this quarter, quarter 4, obviously, the January impact of Omicron was across all categories, including appliances. But if I just give you some numbers, for example, as I mentioned, water heaters, we grew by 30% in -- even in this quarter.
So structurally, I don't think Appliances growth is coming down at all. There might be a little bit of it here and there, but that's got more to do with quarter-on-quarter movement of numbers. So if I look at it structurally, I wouldn't say that there is any downtrend in Appliances growth.
Second thing is, like we said, the Crompton Appliances portfolio will continue on its strategic part irrespective of the Butterfly acquisition. In fact, if I look at it, I would think that there should be a significant benefit to our growth when we leverage the capabilities that Butterfly brings to the table.
So without a doubt that the Crompton growth in terms of -- in all our categories will continue to be driven like it was being driven all these years.
And there is no overlap. There is very limited overlap. No may not be the right word. Very limited overlap between Butterfly's portfolio and our products.
Yes. In fact, the capability that the Butterfly R&D brings should actually help us to actually help drive the Crompton portfolio even stronger. So there is no downside at all.
But sir, would it be possible to quantify like how much will the Appliance growth in, say, Feb, March, April in that period understanding that Jan might be affected?
Yes, Feb, March is addressed.
18%.
Okay. Understood. And sir, last question on the Fans side. I mean we understand that a couple of new players have also come up like Finolex and we already had some other players also now focusing on the fans segment. So going ahead, what is your outlook on the growth side? Will, from here, market share gains you think will be difficult or probably the profitability of the industry might be lower? How to think about the growth in the Fans?
So new companies have been entering -- provide some time, some of the well-known names of other industries have been entering this segment for more than 2, 3 years now. And it is also true that the competitive intensity in the fans industry has multiplied many fold over the last 5, 6 years compared to the period before.
But the fact remains that, as Shantanu mentioned before, we continue to gain share. In every quarter, we are probably the only company which has gained share every quarter in the last 3 years. So there will always be challenges for us to face, but there are also opportunities. For example, driving BLDC growth, gaining share in BLDC.
So I think a lot of the headwinds that will come with the increase -- the entry of new players. At the same time, there are standards getting increased. As you know, that BEE is going to come in with the new standard for January. In fact, a lot of these will be -- will serve as opportunities for us to grow further.
The next question is from the line of [indiscernible] from [indiscernible]
As you indicated that we have gained market share in Fans. So can you indicate the exit market shares in -- on the [indiscernible] water heater, cooler fan for March?
And second question, in case of Butterfly, whether all the restructuring is largely done, needs further extraordinary expenses we had to take. Are they already in the March quarter or there will be any such -- and do you see any such possibility for any such extraordinary expenses in currently?
Okay. The extraordinary expenses are that we don't see them coming up again and again. Obviously, the complete restructuring, integration, et cetera, et cetera, is not yet done. That's a process and we expect that process to take 12, 18 months, actually similar to what it took when we first set up Crompton.
However, as we move forward, just like in the case of Crompton, everything will be focused on things and activities that build the business and build the organization. Therefore, we expect that each activity will pay out in itself.
Yes. In terms of the existing market you have, in Fans it's 29% exit March [indiscernible] what it was the same period last year.
There seems to be some disturbance in your line. We'll move on to the next question. The next question is from the line of Akshen Thakkar from Fidelity International.
Yes. Two questions from my side, sir. Could you just throw some light on how the air cooler business is doing. These last 2 years, you had some disruption. This will possibly be the first summer where you don't see disruption. So how is that panning out?
And also some color on how the Pump business growth in your estimation normalizes over the next, whatever, 4, 6 quarters, how are we thinking about that? That's question one.
And question two is in Lighting. We've had, obviously, volatility in the B2B business. Now that's in the base. If we roll forward 12 to 24 months, do you think this business steady-state can grow at double digit? Or do you think there are still overhangs either from pricing or from high savings of B2B that will impact growth?
See the air cooler business has been doing well. You're right, in the last couple of years, unfortunately, we have had the COVID impact because COVID hit in the peak of the selling season for air coolers. Air coolers is a highly favorable business.
If I look at the current period, which is starting from March, we have seen good traction. Of course, it's got to do with a very hot summer that has been going on across the country. Although there has been some impact also on commodities in air coolers. But I would say air coolers growth is up to our expectation. That's one.
In terms of like Lighting, yes, we -- actually, if I remove the government business, which has been where I said there has been a significant amount of challenge that has been going on, even in quarter 4, the business -- Lighting the B2B business is able to recover and showing a double-digit growth, if I exclude the government business.
We think the government business will still take some more time to recover. So that would create some -- still some headwinds to the growth in Lighting. But definitely, I would think Lighting B2C and nongovernment B2B business together should be perfectly capable of delivering double-digit growth going forward.
Sorry, what would be the [ share ] of the government business right now?
Within the B2B portfolio, almost 25% to 30%.
And B2B would be, what, about 45%, 50%?
Only half of the Lighting business.
So 25% is government and that you think will have growth headwinds, 75% will grow at double digits. Is that sort of probably fair to...
That is our expectation going forward, yes.
Okay. Great. That's it for my side. I'll step back for another question. Just wanted to thank Sandeep for all the wonderful work that he has done as the CFO and all the best to him in his new innings.
Thank you, Akshen.
The next question is from the line of Devansh Nigotia from SIMPL.
On the Lighting segment, I mean, for last 3, 4 years, you may...
Mr. Nigotia, your audio is a little bit low. Can you speak closer to the handset?
Yes. Am I audible?
This is it better.
Yes. Sir, in the Lighting segment, I mean for -- if you look at last 2 years and even before that, I mean, the B2B business challenge has been continuous for us. But when we look at the peers in the industry, they have been growing at a fairly stronger pace with similar mix of B2B and B2C. So I mean if you could just elaborate a bit more on why the government business, we are facing so much challenge? And what steps are we taking to rectify that?
Okay. I think, first of all, the mix of B2B and B2C is not same for all the companies. That is one.
The other thing one needs to get in mind is a mix of conventional products and energy is also not the same for all the products. So obviously, some of our competitors have far lower mix of conventional compared to Crompton. A lot of other companies have a much lower mix of B2B versus the Crompton. So obviously, there is some significant difference in the makeup of the Lighting business.
Now I would say that one area where we have grown a little slower and which is where we are placing a lot of focus now is to grow our B2C Lighting business. And that is where you see that after a gap of a few quarters, we have started to gain share again in B2C Lighting, although it is still, I would say, slower than what we would like to do. But that is where we could force all our energy to drive growth going forward. And then B2B, the government business comes back, that will help the overall growth of the Lighting business for us.
But in case of conventional and LED, I mean, that has slightly stabilized at 80-20 for last 2 years and...
No. In fact, the conventional lighting is now down to single digits. And if I look at it, it's been declining 20%, 30%, almost on a yearly basis. So it's not going to be long before the conventional will hardly cease to exist.
And of course, one of the benefits we will have is, obviously, since it is declining pretty sharply, every year with every passing year in the base, you have much lower in conventional lighting. So that will also help us as we go forward to see the growth.
Okay. And how should we understand that we eventually going to be the promoter of the company because now they're stated at 6%. So eventually, who's in charge the vision and mission for the company? Who will eventually be the key decision maker? Major top level decisions, who will be the key going forward?
This company from its day formation has been a Board-driven company. Even when we had both Advent and Temasek as promoters, the decisions were taken by the Board. They continue to be the key representatives of the shareholders, and we continue to be a Board-driven company and that is how we believe it will remain.
So we are management, we serve at the pleasure of the Board. The Board is ultimately the key authority. And the Board serves at the pleasure of the shareholders, right? So there's really never been operationally, if you will, a separate promoter decision-making process.
The next question is from the line of Girish from Morgan Stanley.
I just had one question. If you can give us the FY '22 value and volume growth ex Pumps business, please?
Ex pumps is difficult to [indiscernible]. I can tell you, for example if I remove -- in ECD, if I remove Pumps, ECD would have grown roughly 17%, full year growth is 17%. Because with Pumps, the ECD growth comes out to 12%. That's because Pumps earlier fully grew 2%. But if I exclude Pumps from ECD, we have grown 17% in ECD. And Lighting has grown roughly 9% for the year.
And pricing, you had said was 15%. So implicitly, would it be like fair to say...
Yes. For pricing, I would say 13% to 15%. But it is very difficult to then cover because, you know, this is why we have taken 13% to 15% per category. The mix of the category is also a change because of low growth in Pumps. So it would not be wise to say then that the volume growth is only 3% or 4%.
Because it's not right to look at volume growth average out there, right? Because these are all units. So a pump would cost INR 10,000 and appliance could cost INR 1,500 and a bulb could cost INR 100. So when you look at volume and value capacity, you need to look at it by segment.
Yes. But it would be fair to say that both in -- if we take out pumps, it would be fair to say that in both pumps and appliances, volume growth is in low single digits. And I think it's still pretty good given the situation, which was there during the year.
The next question is from the line of Rahul Agarwal from Incred Capital.
Just 2 very short questions. Firstly, on the cost savings, INR 68 crores. Just wanted to know, this is at the gross margin level or the EBITDA level? And if you could just highlight some line items here.
And the second was the nature of the debt raised for Butterfly, it's about INR 1,155 crores. Now what is the form rate of interest and repayment schedules we just discussed? It looks like a bit higher than what I would have expected as an analyst. Just 2 questions.
Yes. Most of the INR 68 crores saving would have accrued at the gross margin level. Most of it, not all, a significant part of it.
The debt that we have is we have to -- we had raised CP, commercial paper in 2 tranches, INR 600 crores each. One tranche is repayable in September and the other one in March of next year. And the overall cost is around 5.5% at which we have borrowed this.
Got it, sir. And on the gross margin level, the cost saving, INR 68 crores, could you just elaborate a bit? I mean how does this number, basically, how do you calculate this?
This is actual savings accrued in the quarter, right? So it is not something which is reduced, which may come into benefit in 6 months later, right? So these actual savings accrued in the quarter.
And when Mathew said that they are gross margin, let me give you an example out of the kind of things we're talking about. If you take pumps, pumps has 2 motors. It has the basic motor, which runs it and it has a motor which starts it. We have converted in pumps the starting motor from copper winding to aluminum winding. Now the cool thing about this thing is it's not only saving you cost on the material, but it so happens that aluminum winding has a higher torque than a copper winding motor.
So this actually, in fact, improves the starting performance and reduces pump jams. So it's projects of this nature because, frankly, we've been doing this kind of work now for 3, 4 years and been saving 2% to 2.5% every year.
Perfect, sir. Got it. And best wishes to Sandeep for his future endeavors.
The next question is from the line of Achal Lohade from JM Financial.
My question was if we look at the overall scenario, you've been talking about different demand scenario for last few quarters, right, I mean, if I recall since last 3Q FY '21. And we have also seen market share gains. Yet we are talking about the volume growth is actually kind of flat or marginally positive for us.
So is it fair to say that the industry has seen a decline in volume? And if yes, I mean in the context of people saving on the other expenses and spending on the announced improvement, how do we tally these 2 things, sir?
Yes. So obviously, like we said, we have taken 13% to 15% price increase in most of our categories. And if I look at most of our competitors, they would have also have taken maybe slightly lower, maybe 8% to 10% during the year. So assuming that the industry has on average taken 10%, 11% kind of price increase, we think the market volume growth maybe flat, maybe marginally plus or minus, but nothing beyond that. So that's one.
Again, the problem is the overall number, like Shantanu mentioned, gets a little bit clouded in Pumps because of Pumps has been the big laggard. So -- but otherwise, I would think the volume growth would be in low single digits.
Yes. And therefore, during this -- the second part of your question, if you will, 14%, 15% inflation. These are categories, which typically use to take price increase of 2% to 3% a year. So in the context of that, it's huge level of price increase. So the consumer behavior will definitely be -- okay, my fan is giving me a little bit of trouble. I get it repaired instead of buying a new one. I delay my purchase a little bit. Maybe I buy a slightly cheaper fan. So that kind of consumer behavior will definitely happen in this period when you have extreme inflation.
Now we had expected when we ended last calendar that this was sort of behind us. But obviously, the Ukraine and everything has created another round of inflation. So it is very probable that while value growth may rebound nicely in the coming year, volume growth of the categories may still remain muted until inflation settles down to a somewhat normal level, but that we will have to see as we move forward.
Understood. And the second question I had, specifically on the Lighting business. You mentioned that the B2G and also partly B2B is creating the hurdle actually in terms of when comparing with peers. My question was, any update you could share on the fixture part of it? Because I presume the fixture mix is reasonably low as compared to the market leader. If you could talk a little bit on that, that would be of great help.
Let me talk to B2C. Okay, B2C, you have the bulb business and then you have batteries and panels. In fact, the struggle that we have been having in B2C is more on bulbs. And in batteries and panels have been -- especially panels has been growing pretty strongly. And then Shantanu mentioned, we always have to gain share in panels. Although our panel share is actually below our overall B2C lighting share. So there is still a lot of opportunity to grow our -- filling lights share.
But bulbs business, obviously, I think it's as true for all the key players. The bulb business, to a large extent, because of the actions of many of the players have got, to some extent, commoditized. And that's why you see most of the large players are losing share in bulbs. We have, for example, managed to hold our share in bulbs and actually started growing batteries and panels. So LED fixture is actually growing much faster than the bulb business.
Would it be possible to give a mix, sir, how much -- just last clarification, if you could. Should you say fixtures mix within the B2C, sir?
I would say now it's about 50%.
The next question is from the line of Rahul Picha from Multi-Act.
My question is on Butterfly. I wanted to understand the EPS-neutral thing a bit better. So when I work out the numbers, the price that we have paid for acquiring the company, I think in my calculation, we need to do INR 100 crores to INR 120 crores of profit in Butterfly for it to work out to be EPS-neutral. So is my number way off compared to what you are working with internally? Or is there some misunderstanding?
Yes. There is some difference. I don't know which profit number you are talking. I mean, whatever you are saying INR 100 crores and INR 120 crores, whether it is EBITDA or whether it is PAT, but I would suggest...
PAT, sir.
No. I think you reach out to Yeshwant. He will help clarify.
Okay. Yes. And on the margin improvement side that we are talking about, so which are the main sources through which you expect margin improvement?
And a question connected to that, when I look at A&P spend for Butterfly, it is roughly in the range of 10% to 12% of sales for the last many years, which is very high when I compare it with peers across industries in the consumer durable segment as well.
So within that, I wanted to understand what was pure advertising? And what is just simply sales promotion and discounts and channel-related promotions? And how do you look at that spend evolving going forward?
See, margin levers, we mentioned the goodwill combination. Shantanu covered already the cost part of it. Obviously, we think there is significant cost synergy available and we started working on it already, and we have good experience in Crompton having done this for 5 years.
There's also a mixed lever available. And probably also it's a mix between the products, but it's also a mix of retail versus e-comm because a lot of the growth in pipeline in the past has been driven by e-comm and retail trade growth has been comparatively underperforming. The moment -- one of our focuses is to get that level up, and when that happens, obviously, we'll get some benefit. So a combination of mix and costs will help drive.
Your second question on A&P, most of the spend in the past has been on promotional and very limited in terms of brand building. We think, obviously, as we start expanding to other regions, it's going -- we're going to have to spend significantly in advertising. So there could be some recasting of the mix between advertising and promotion. And what we think is a lot of the benefit that we will then accrue from cost savings, margin improvement, a significant part of that will have to be reinvested in building the business outside the South. So that is what is in our entire the model going forward.
Okay. So on an aggregate basis, you expected...
[Operator Instructions] The next question is from the line of [ Aakash Javeri ] from Perpetual Investment Advisors.
My first question is that, in general, how do we see the BLDC fans doing over the next 3 to 5 years? And could you throw some light on the technology behind it? Is it something difficult to figure out? And do we have any IP on the motor? Or if you could just throw some light on that?
Obviously, BLDC is definitely going to be -- BLDC technology obviously is going to be one of the key areas, which we expect will grow in the Fans business. So obviously, BLDC being one of the most promising technology really goes to be one of the key focus areas for us going forward. We have been -- until now, we have been working in partnership with some of our partners in terms of developing the BLDC technology. That we believe is one avenue that we will continue to pursue.
And we are also looking at other options in terms of how can we develop from some consumer-differentiated proposition and then see if any IPs can be developed around that. I think the approach which we will follow there in BLDC is going to be no different from what we have done for all the other categories. But definitely, it's going to be a key focus area for us going forward.
Just another question was on when we expect mandatory BEE rating to kick in for Fans?
January.
January, yes. January next year. January.
January next year. And so we see the data between BLDC and induction motor reducing over a period of time, although BLDC always be slightly premium.
I mean it has been reducing already. If you see the gap between BLDC and induction motors have come down from being more than 2x to significantly lower. As the volumes start to build, I think that gap will come down. Whether they will actually get to induction motor level, very difficult to say at the moment.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Harshit Kapadia for closing comments.
Thanks, Fabian. We would like to thank the management of Crompton Greaves Consumer Electricity for giving us an opportunity to host this call. And we would also like to thank all the investors and analysts for joining for this call. Any closing remarks, Shantanu, sir, you want to give to investors?
So thank you all, thank you all for joining. As always, we're trying to -- our objective is to give you as much information as we can and be completely transparent. If anyone feels they need anything more, please do not hesitate and contact Yeshwant or any of us and we'd be happy to help. Take care, and all the best.
Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining. You may now disconnect your lines.