Eveready Industries India Ltd
NSE:EVEREADY
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
303
481.7
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Eveready Industries India Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Eveready Industries India Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. [ Nishid Solanki ] from CDR India. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone, and welcome to Eveready Industries India Limited Earnings Conference Call. Today, we are joined by senior members of the management team, including Mr. Suvamoy Saha, Managing Director; and Mr. Indranil Roy Chowdhury, Chief Financial Officer. Before we begin, let me share our disclaimer. Some of the statements made on today's conference call could be forward-looking in nature, and the actual results could vary from these forward-looking statements. A detailed statement in this regard is available in the press release document, which has been circulated to you earlier and is also available on the stock exchange website.
I would now like to invite Mr. Saha to share his perspective. Thank you, and over to you, sir.
Thank you, [ Nishid ]. Good afternoon, and a very warm welcome to everyone on the call hosted to discuss Eveready India's first quarter performance for the period ended June 30, 2022. As you know, the company's home to the iconic Eveready brand, synonymous with the category, the name instantly [indiscernible] batteries. Throughout its history, Eveready has taken a very process-oriented approach to establish its credentials. In batteries, we enjoy the distinction of having a 50% plus market share very consistently, an achievement that is limited to only a handful of other FMCG companies. This has been the result of an icon brand together with one of the best-in-class distribution networks.
Before we go into the discussion on the various businesses of the company, I would like to highlight the current cultural ethos and the professional ethos of the company in the backdrop of its recent history. The company went through a period of turbulent sometime back, which had nothing to do with the fundamental structure of its businesses. However, as a consequence, there were many adverse impacts on the operations like a near-stoppage of consumer communication, cutback on distribution investment and a complete defocus on growth.
Over the last few months, the company has consciously worked itself out of this situation. As a very fast and important step, running of the organization has been handed over to a professional management. There is not 1 promoter who is in an executive role now. Most importantly, the focus of the company is now generating growth. We ended FY 2022 with the same level of turnover as we had 8 years back. We have ambitious targets for growth, which in turn entails on investing in distribution and continuous communication to our consumers. The management team is working relentlessly to achieve the same.
The company today places the highest accent on governance and transparency. And it is with this spirit that the company is initiating earnings calls from this quarter, whereby it reaches out to investors and analysts with a view not only to answer their queries as transparently as possible, but also improve from any meaningful input received during the process.
Also another point to mention is that in the past, the company went into somewhat unrelated areas like tea, confectionery or appliances, none of these ventures were supported and eventually all petered out. Today, the company is a focused 3-category player: batteries, flashlights and lighting. Even if we consider any new category in the future, we will do so only after we are clear that we have lined up appropriate support for the same.
Now I'll start my comments on the description of the business dynamics of the company. To start with, the brand Eveready has consistently enjoyed over 65% top of mind recall amongst consumers and that puts us at the forefront to take harder share in our chosen segments. It has solid acceptance in the new categories within Batteries and in our other segments of Flashlights and Lighting.
The company is also home to the PowerCell and [indiscernible] brands, which we have utilized across our range of portfolio as we seek to build strong affinity with differentiation. The popularity of our brands is matched by our extensive distribution reach. Presently, we maintain a direct outlet reach of 750,000 stores in the country. Added to this, with the aid of the wholesale channels, this reach enhances to cover approximately 4 million outlets. I have already mentioned that our business today is comprised of 3 business lines.
Let me commence with batteries, in which we are present in both technologies for portable consumer dry cells, namely carbon zinc and alkaline. Since the batteries of both technologies have the same basic functional needs, usually consumers do not make purchasing decisions based on technology, but on price points affordable by them. Alkaline batteries are higher priced and offer proportion at higher service. We have an overall leadership of this market with share of 52% as per Nielsen data for the quarter ended June 30, 2022.
The market share position has remained nearly unaltered over a long period of time with minimal brand investment support, indicating high legacy engagement of the consumer with the brand. Additionally, we have identified several high-growth subsegments where we have opportunity to leverage our strength to gain share in the foreseeable future. Our research and marketing teams are engaged in taking a fresh look at the battery portfolio with a view to review innovation needs of the category both from technology and brand perspective. We expect this work to be completed by end of this year.
As a segment, Batteries are well penetrated as an industry with a market size of 2.8 billion pieces and an estimated INR 2,750 crores in value terms. These are estimates as per Nielsen and the value being at market operating consumer prices. Despite a high degree of penetration, our per capita consumption of batteries lags global averages, thereby highlighting the headroom for growth. Therefore, usage increase as well as premiumization are consumer trends that will drive growth in the future.
Now I move on to Flashlights. This has been traditionally our second core category. Over time, particularly in the last few years, the marketplace has become crowded with a vast number of unorganized players. While we have an estimated 60% market share in the organized segment, we have not yet participated meaningfully in the market of rechargeable flashlights, which has grown fast, though with significant share of several unorganized players and substandard products flooding the market.
We intend to deliver quality products to our consumers and leverage the strength of our brand to capitalize on these growing segments. Flashlight market size is estimated at INR 1,100 crores, at comparable company level pricing, of which traditional battery-operated torches are at INR 400 crores and the rechargeable torches have grown to INR 700 crores.
The latter provides a significant window of opportunity. The company's brand and distribution are a terrific fit to the flashlights category. We also have the expertise of technology to bring out products which will be definitely superior to the products available in the market. Work is already afoot in developing a full range of rechargeable flashlights, which will be introduced to the market over the next few months. We expect that we shall have a comprehensive range by end of this financial year. The range will cater to the needs of the price-conscious rural consumers as well as meeting the expectations of higher-priced products through urban distribution or e-commerce.
The third segment that we are present in is LED lighting. The consumer market for LED lighting is a sizable one, estimated at INR 12,000 crores at consumer price level, growing around 10%. A key feature of the market is that it is quite fragmented and new single-player accounts for a big share in this INR 12,000 crore market. When the company made an entry to this market quite some time back, it remains kind of a peripheral business as adequate focus was not provided. This approach has not changed. We believe that we can be a notable player in this market and all our plants are now centered around this belief.
The company's brands are great feat for this market as demonstrated by research and store uptake. Even our general and modern trade distribution are perfect fit for the partners with some tweaks in the route to the market, on which work is underway. Sometimes that the company also initiated a distribution channel addressing electrical outlets. Here again, some work remains to be done to improve the efficiency of this channel.
At the back end, we have now a dedicated development team that is working towards creating a range that covers every price, feature and utility as required by the customers. This transcends the entire gamut of bulbs, panels, downlighters and emergency lamps. While we have an entire range of products in the consumer market under our brands, we have also identified some products which will serve as our so-called hero SKUs as we entrench ourselves in the market. We have negligible share in the market at this point of time, but we aim to go significantly faster than the market and expect to garner a reasonable market share as we go forward.
With this as the backdrop, I would now like to share our perspectives on the key developments during the quarter ended June 30, 2022. We had revenues from operations of INR 335.4 crores, representing growth of 19% as compared to the same period in the previous year. Actually, the revenues of a disengaged business, namely Appliances, are ignored, the growth stands at 21%. This healthy growth in top line performance was backed by volume gains despite the market slowdown due to inflationary conditions. However, we do need to recognize that this growth is at a low base of the same quarter last year on account of profit.
EBITDA during the quarter stood at INR 42.1 crores in at 12.6% of net sales. There is an erosion of 8% on account of inflation in key input materials, part of which could not be passed on and the return of certain business overheads, which were not there last year owing to the pandemic restrictions. However, in a relief towards the end of the quarter, commodity prices started easing up, which should build back margins. However, exchange rate erosion continues to be a worry.
We were actively engaged in augmenting the Flashlight and Lighting segments and the focus has been strengthening vendor outreach during this period. In keeping with our growth aspirations, we augmented our managerial strength by way of several mid- and senior-level inductions.
In line with our present business mix, we have healthy cash generation from our traditional segments of batteries and battery operated torches, whereas as, as outlined earlier, our endeavor is to get growth flowing from our new business segments in a methodically and a process-oriented manner. The management retains clear focus in maintaining high level of revenue growth with healthy earnings profile, and this will become evident as the business mix evolves.
As shared by me today, the continuing emphasis of my management team is on enhancing presence in our chosen categories to achieve our healthy business momentum.
With that, I have reached the conclusion of my remarks, and would request the moderator to open the event for questions from the participants. Thank you very much.
[Operator Instructions] The first question is from the line of [ Nikhil ] from SIMPL.
Yes. Am I audible?
Yes, sir, please proceed.
And really appreciate the company carrying out the con call. Clearly a great sign in terms of the improvement at the company level. So continuing with what you mentioned, if you can help us understand -- I have a few questions on the business itself. Now while we've talked about -- in our annual report, we talked about improving the health of each business, but as a priority, where do you see -- where do you see more low-hanging fruits for us? And similarly, in terms of the organization structure, how is the organization structure being created for each of the segments? And who would be the key hiring which we would have done or who are the people who are already looking at each of the segments. So if you can help us understand on these 2 aspects?
Okay. Thank you very much. Thanks for your question. So basically, on the matter of priorities, I would say we are a 3-category player, as I mentioned in my earlier speak. And we have equal priority for each 1 of these 3 segments. We have got -- coming to the organization structure, we have specific focus groups addressing these individual segments. So there is really no question of any diversion of priority from one to the other. Okay?
Now in terms of low-hanging fruit, I would say that, as I also -- you also understand, batteries and battery-operated flashlights are mature businesses for -- at least for the company. The other 2 segments that I mentioned, rechargeable flashlights and lighting, these are really sort of newer segments for us and both offer huge growth opportunities.
So in terms of there being low-hanging fruit and with my assumption that brand and distribution is strong for both these segments, I would term those as low-hanging fruit sort for company. And again, I would reemphasize, I mean, there is sort of no dispersion of priority in any which way because we have got a clearcut objectives for the 3 different business teams and they are pursuing those.
In terms of organization hiring, the key hiring, we have a ManCom of 9 persons. Three out of that -- 4 out of those at the management committee level are new hires who have joined talented individuals who have joined from outside the company. And we have got maybe another 10-odd people who would be at the CXO minus 1 level who have joined the company in the recent past in the last 6 months or so. So we have structured the organization to cater to each of these 3 businesses in the most addressed manner. And towards that, naturally, we had to evolve roles. So today, 80% of CXO and CXO minus 1 level of people are handling new enhanced responsibilities. So that is -- I believe I have answered your questions.
Yes. Just 1 continuation on this. How would the KPIs of the new hires or the hedge of the -- each of the segment be connected with the -- so would the KPIs be more on the growth of each of the segments because we have an amalgamation of business there, 2 businesses are quite mature and where the focus should be more on profitability, and 1 business, which is on growth. So how are the KPIs associated with each of the management segment?
Okay. So I would just clarify on 1 point. While I also did mention that batteries and battery-operated torches are mature categories [indiscernible], there are areas of growth opportunities which we cannot forego. So I would say that if the KPI would primarily be, of course, on top line, but with a healthy profit profile. I mean it is not that we would be chasing market share just for the hake with no money being made. So I would say it is a balanced approach. However, greatest action would be kept on top line growth for the simple reason that this company has not grown over last 10-odd years.
Okay. And just last question, I'll come back to the queue after that. In the lighting business, we've seen that there are a lot of incumbents with an equally stronger -- actually more stronger brand recall, which they have built over the last 8, 10 years. So the risk is like the way we had to close -- we had to bring down our appliances business, how do you see our positioning in writing different from what it was in appliances business? And based on whatever market research and whatever the study you would have done, how do you see our positioning versus incumbents? What gives you the confidence to build up on the lighting business?
Okay. So number one, I would like to sort of tell you that Eveready is among the top 5 recalled brands in the lighting segment, okay. While our market share is small, there is a tremendous amount of awareness of Eveready brand and very, very strong acceptance. So on the brand front, there is no disconnect vis-a-vis the consumer.
Now coming to the point that you raised about appliance and lighting, how they are different, I would say that it is the degree of focus. See, the appliance category, the way the company had done it was purely kind of a trading operation, where you just outsource your products from someone, put the Eveready brand and put it out to the market. And there was very little value addition. Whereas the lighting business that we are pursuing today is backed up by a full development team. We have got tremendous control on the way that products are designed. We have an exclusive manufacturer who is only exclusive to us who is doing the work on contract, which is really kind of an extension of the -- so we have taken tremendous amount of, what shall I say, focus and address in going about this business.
So it is quite different from what was there for appliances. Another point I would like to mention is that the distribution is a strong fit, which was not the case in the appliance. Appliances go through completely a different channel, and it doesn't have to do anything with the FMCG channel. So I think we are on a much, much sweeter spot as far as lighting is concerned.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Thank you very much for the call and the interaction with the investor community. Sir, I just wanted to understand more from the strategy perspective now that the new management has come. And you spoke about the 3-category focus area, battery, flashlight and LED light. But in general, all these 3 sectors, I presume, especially the -- our battery segment is kind of a mature segment, right? So is there any other category that also we are looking at maybe on the EV side or something apart from the dry cell battery. So any thought process on that in terms of our strategy for growth over the next maybe 3 to 4 to 5 years? Yes.
Okay. Deepak, our hands are completely full with these 3 categories. We have loads of work to do and loads of headroom exists for us to grow in these 3 categories, even in the battery category. The Battery category itself in this quarter grew by 16% odd with a volume growth of something closer to 5%. The thing is that we just need to sort of pick our growth areas and grow from there.
So at this point of time, if you ask me if we have got any thoughts or vision on a new category, I would say no. But conceptually, only in concept at this point of time, we certainly would like to one day go into another segment, but we would go only after we know that we have done full justice to these 3 business categories, and we have the support available for any new category that we take on. We would not like to repeat the mistakes of the past where categories were just added on with no support. And in just about some amount of time, they all sort of came to kind of a natural death. I hope I have been able to answer your query.
Yes. Yes. I understood. And in terms of Battery, you said it's growing at about 16%, that's what you said?
That is the growth that we clocked in the first quarter.
Okay. And what sort of growth we expect over the next maybe 1 to 2, 3 years?
So I would say that in the blended company business, we would certainly aspire for double-digit growth. I mean -- the first quarter, the 21% growth may be a little sort of seem a little bloated for the simple reason that the previous quarter of last -- the same quarter in the previous year was a very low quarter because of COVID, but we would certainly like to settle for a growth level, which is maybe lower than 20%, but I would say somewhere around there.
Maybe 15% to 20% growth, right? I mean...
Maybe I think mid-15 would be a very good target to chase for this company, where we have seen 0 growth in 10 years.
Correct. So that's the CAGR one may look at over the next 3 to 5 years, right? I mean, in terms of growth for our company?
Sorry, come again?
So that's the CAGR growth that we might look at over next year?
Yes, yes, yes. One is looking at. I'm not talking of sporadic growth of 1 quarter to the other, that will happen. I mean, due to the situation, circumstances. I would say, a long-term sustaining compounded growth of, I would say, double-digit growth of between 12%, 15%, wherever it falls.
Fair enough. I understood. And sir, in terms of EBITDA margin contribution, which segment gives the highest, I mean, margin to us in terms of...
So this is dry batteries that has the highest margin profile, followed by battery-operated flashlights and then the new category of rechargeable flashlights and lighting.
No. Sir, I could not follow. Can you please just repeat that?
So you asked me which category gives the highest margin. So that is our traditional core category of dry cell batteries, which is the highest margin, that is followed by battery-operated flashlights and then the 2 categories of rechargeable flashlights and lighting.
Okay. Fair enough. I understand.
The next question is from the line of Rajesh Kothari from AlfAccurate Advisors.
I really appreciate your time for this conference call. It is a good practice to do that. I have a few questions. So my first question is in the lighting business. As you rightly mentioned that the focus basically is to capitalize now on the brand and do the distribution network. And so what do you think, say, 2, 3 years' time frame, what kind of building blocks you need to put in place to make sure that you become a, what I would say, a sizable player?
And also, in this segment, there are most players including the top #1, #2, #3, all these 3 players are basically reporting decline in margins and that segment all of a sudden is not growing because number of payers are increasing. So in that kind of an environment, how do you think the profitability of this segment is going to be? And what is going to be your strategy to be different? Are you going to manufacture? Are you going to do outsourcing? Can you give some more color in this lighting segment?
Yes. So see, first of all, I'll take you the growth and comparison with the bigger players. We are a very marginal player today as of now. So we have got enormous headroom. As you know, the market is highly fragmented. So anybody who offers decent distribution, in other words, availability to the consumer and who offers a well-recognized brand has headroom to go.
Now some mature players may have hit the margin block. They may have hit their growth momentum, which is understandable. But their case and our case is slightly different. So we have -- we ourselves feel that we have a tremendous amount of headroom, and that is what we are going to sort of try to base our future tactics to grow.
With regard to building blocks, see, as I said sometime before in this call, we have set up the entire team which is required to cater to the needs of the consumer, which starts with a very robust development team. So we design our own products. It is not that -- obviously, there are some products which we outsource because lighting, as you know, has to have a very large range. It is not feasible to produce everything yourself. So some are certainly, but those are all as per our design. So that is the very basic thing that we are differentiating ourselves. I mean, maybe finally, the output of light is, ultimately, that is what you are trying to get.
But we do -- we think we do it in an efficient manner. We have about 50% of our business coming through the manufacturing process of one of our exclusive contract manufacturer, so which is 100% control on that process. So with this, I think we are going about it in a very systematic and process-oriented manner. And we are quite hopeful about despite what your remark, which may be correct about the bigger players, the kind of blockages that they are facing.
Sir, currently, what is the revenue of this segment, I'm sure it will be very marginal, but any number which you like to give currently?
So we ended the quarter with INR 67 crores, and it is not really -- in order to understand the annual throughput, it is not good to INR 66 crores x -- or INR 67 crores x4, because we are growing like this quarter itself was a big growth of 84%, though, again, I once again draw attention to the last year same quarter has been very low. So our growth trajectory is obviously 84% would be sustained, but we would certainly look at a 25% to 30% growth in the Lighting segment in the current year.
So basically, I don't remember what was your FY '22 full year Lighting business. But when you say this year is roughly about -- first quarter is about INR 67 crores. So in 3-year time frame, what do you think the size of this business can become for Eveready?
So this is -- I'm throwing this, but I'll put a more concrete number for this year. One would think that we would be certainly higher than INR 300 crores. And in the next 2 years, the target of the company should be to cross INR 500 crores certainly.
And at that level, because the economy of scale starts probably once you cross INR 300 crores, INR 400 crores. So as you reach that INR 500 crores, then the profitability of this business will be equivalent to the company profitability? Or still you think it will be kind of a markdown compared to the average company profitability?
As you are aware, the Battery category is far ahead on the margin profile. Okay? I would very much doubt whether the Lighting category can ever come to that. But yes, you are right. Due to the heft, we will certainly improve our margin profile to something closer to the Flashlights category, which lies in between today.
Understood. Last question from my side. On the overall company perspective, how do you see the brand investment, including advertisement and non-advertisement? How do you see that as a percentage of the revenue?
So I would say we are taking -- see, first of all, as I mentioned, there was really no communication in the previous 5, 6 years, right, due to financial difficulties that company had unconnected to its businesses. So we have taken this year a target of spending at least 5% on ATL activities. So we will go on from there. ATL and BTL together could be about, say, 6% to 7%.
Understood. So 6% to 7%. So -- and in first quarter also, you would have spent something in similar?
No. First quarter, we could not -- we did not do because first quarter, we could not have the films ready to be aired, which we hope to do in the second quarter. Towards the end of second quarter. Actually, the films are currently in the process of making. So it depends on how quickly the producer can sort of do it for us. So it would be -- maybe towards the end of the quarter or latest early next quarter.
So despite probably first quarter almost negligible and then second quarter also probably looks like a very low number, despite that, the full year, it will be 7%. So are you saying, therefore, the exit rate can be as high as 10% plus, which you....?
No, no, no. I would say we will maintain our total uniform rate between ATL, BTL together about 7-odd-percent.
Okay. So right now, it is more of BTL. That's what you're trying to say?
Yes, yes, that's right.
The next question is from the line of Chirag Lodaya from Valuequest.
Sir, if you can help us understand what is the inherent profitability for battery segment versus flashlight segment? In past, it has been volatile. So if you can help us understand what is the profitability or margin range one should expect?
So you know the volatility that you mentioned, is purely a function of commodity prices. These categories do have some influence on their margin profile based on how the commodity prices are sort of behaving. So prior to the recent commodity push that happened over the, say, last 8 or 9 months, the margin was at -- for batteries was at 50%. It has then thereafter, taking a heat of 20% cost increase in the input materials, which partly or about 50% of that could be passed on to the market.
So the margin today has settled down at 45%. So I think 45% is a minimum sustainable margin for batteries. For flashlights, I would say the battery-operated one, it would range between 35% and 37.5%. And -- but as I said that if commodity prices lease off today, we will build back margins and it could come up to 50%.
Okay. And how about other 2 segments, sir?
So again, we are entrenched to these segments, the rechargeable flashlights and lighting. Since the margin profile is certainly lower than the other 2, so they would be between 30% and 32%.
Okay. Okay. And sir, just for Battery and Flashlight, can you help us with the EBITDA margin range. Broad range would be helpful.
So EBITDA percent of Battery for last year was about -- I mean, in the recent past has been trending at around 17%, 18%. But it went as high as 25% 8 or 9 months back. The Flashlights are currently, Flashlight as in battery-operated ones are currently trending at around 14%, 15%. In Lighting, we are just about breakeven.
Okay. And the 17%, 18% and 14%, 15% is a maintainable margin going ahead? Was that understanding correct?
See, the point to be noted is that this is after all the commodity adverse impacts that we had to absorb after passing out about 50% of the impact to the market. right. Now what has happened from end of last quarter, commodity prices have started easing up, as you also know. So this should actually help us make the margins better than what they are today. But I'm not taking a case on this because this is just my hope and optimism, or as the trend currently suggests, there is 1 still adverse, which is the currency rate, which is certainly ruling much higher than the desired level.
Right. And sir, just my last question on what is the current debt and cost of borrowing and CapEx plans over next 2 to 3 years?
So our current net debt stands at about INR 325 crores. Our average cost of borrowing is 8%. We have no big CapEx plans just now, at least not for this year.
And gross debt would be, sir?
Gross debt would be just about maybe INR 40 crores higher than that. I mean, it depends on the movement of cash at the month end and all that. So really nothing much different from what I told you.
The next question is from the line of Darshit Shah from Nirvana Capital.
I have just a couple of questions.
Sorry to interrupt, sir. Sir, we're not able to hear you clearly.
Sir, I have a couple of questions. One question on the contingent liability that we kind of have in our books. So can you just throw more light on what's the case there? And how do we foresee the outcome in that particular case, if you have any idea?
Sorry, which one are you referring to?
The INR 171 crores.
Yes, yes, I understand. So this is the penalty imposed by CCI, which is currently being -- is under appeal from the company. So the case is presently in the court process and sub judice, and I am unable to make any comment further on this. So that is the factual situation. CCI has imposed a fine and we have appealed against that.
Okay. And sir, on the margin front, I think you said after what the commodity is what we have seen, the margins would be 17%, 18% in Batteries and around 14%, 15% in Flashlights, battery-operated. With the ease in commodity prices coming up. So what will you broad blended margins the company would probably do because the past 2, 3 quarters have been quite volatile, we have done 20% and -- on the lower side done 11%, 12% operating margins?
So you know the blended margin for the company provided, we see the easing up as it does, it could be somewhere in excess of 10% because of nothing else, but this -- the Lighting segment, which is sort of -- which will pull down the overall rate. So I would say that in the immediately foreseeable future, we could certainly look at 10% plus.
However, even as I said, as Lighting picks up volume, and as commodity prices ease up on the battery side, that could grow at a faster rate.
So currently in Lighting, we are almost at breakeven at around INR 300 crores kind of business?
That's right. That's right.
Okay. And sir, you an thing mentioned on the currency part. So how are we kind of affected with currency, if you can please highlight?
So you know the battery raw materials, they are 70% of that are either imported or they are dollar denominated. So the currency has a huge impact on us.
Got it. And sorry, sir, from my little less understanding, what are the major raw materials that we kind of -- I mean, I understand lead would be one of them.
No, it's not lead. We don't use lead. We use zinc. Manganese ore, -- acetylene black. We need tinplate. We need paper. These are the main commodities.
The next question is from the line of Mithun Aswath from Kivah Advisors.
Yes. Hello? Can you hear me?
Yes, yes, we can.
My question, I think a lot of that you've already answered in terms of the Lighting business, but just wanted [indiscernible] since the group and -- the Dabur Group has now become the promoters of their business. I just wanted...
Mr. Mithun Aswath, your audio is breaking up. We're not able to hear you.
Hello? Can you hear me now?
Yes, sir, please go ahead.
Yes. I just wanted to understand, since the company is part of the Dabur Group now, are there any synergies that you get from the group, which Eveready could benefit from? That was the first question. The second question was in order to reduce our debt, are there any assets that the company has, which could be disposed of, historical assets? Those are the 2 questions.
Okay. Thank you. So let me answer the synergy bit. So first of all, let me clarify that we are not part of Dabur. We are an investment of the Burman family. So Dabur is a separate operating company. We are a separating offering in company. We have our own businesses to handle. So really, on the synergy front, I do not know what exactly do you mean because -- and we are in unlike products in any case.
The only synergy, I can say is that we have got the new promoters who have come on board, and we look forward to them for guidance. So I would say the same type of guidance which has benefited Dabur over the years, I hope that benefit would also come to us. So that is on synergy.
With regard to repayment of debt, I think the operational cash flows of the company are adequate to look after those. I mean, we will see if at all, there is anything that needed to be done on the other front.
Right. And 1 more question. There were quite a lot of write-offs in the last couple of years of some of these receivables. Is there any potential chance of recovering any of that in the next coming quarters or years?
So you are correct. I mean, that was a way we completely cleaned up our balance sheet by taking provisions, which are -- should have been taken as a measure of prudence. We have lodged cases in respect of each of those receivables, and we are pursuing those cases in a vigorous manner. Now when and how the court process will finally end in getting us some amounts back, I'm really unable to say. But I can say that management is trying its best to recover.
Right. And 1 last question for the results, could you just give us the breakup of each segment's revenue. Within the Battery segment, you mentioned that you are quite strong on the dry cell battery. I just wanted to understand, other segments of the battery market where you're not present and you're looking to get into, how large are those opportunities? And do you sense that you could make inroads there? If you could just touch up on that.
Yes. So first of all, let me go to the category-wise breakup. Batteries, we ended at INR 212 crores, Flashlights at INR 57 crores and Lighting at INR 67 crores. Those were the turnover of the 3 categories. With regards to Batteries, as I said, that we are present both in carbon zinc and alkaline. These are the technologies that occupy more than 99% of the market. There is a very small niche segment of rechargeable batteries in which we play, and I think we could be one of the market leaders, but the category is so small, it is really nothing much to track at this point of time. And it is a category that went up and then it's dead because of the hassle factor.
People -- the consumers found it too hard to keep taking batteries out of the gadget, putting them back after charging, and many times, those batteries last so long that by the time charging is required next time, the charger itself is lost. So that has become a very niche segment used by professional photographers and no one else. So basically, that's it. I mean we are presently not in button cells. And that we are having a look, but I don't think that would be a segment for the company would find very exciting to enter. There are also a couple of other very old technologies. These are not new technologies. But because the company is taking a fresh view of the whole sector, we are trying to review all these other categories.
Right. And 1 last one, if I can squeeze in. Earlier there was quite a lot of imports from China. And I think the government put clamps on that. I just want to understand how much of the market is unorganized. And as things become more organized, you could obviously grow the market. I just wanted to understand implications of that for you and how you're seeing this scenario?
So the newly emerging rechargeable flashlights market is currently by and large a play off an informal economy, where the unorganized players rule the roost. So that is comprising of both imports from China and also unorganized players out here who do not pay taxes. So the thing is that the segment itself is so small that it would be hard for anyone to go and sort of get successfully an antidumping duty done because these are basically all undervalued imports.
Now one way of doing it is if -- like the government has done in the past, that it brings in mandatory standards of minimum quality assurance for the consumers in terms of a BIS standard. Then that's a great thing because that same thing happened in batteries and all these cheap undervalued imports stopped overnight. And we are appealing to the government to do the same for flashlights.
And as a result, it is good for the economy because this entire area is today prevailing in the informal part, where the government is losing out on taxation, everything is done in cash. So certainly, this is some area that the government should look into.
The next question is from the line of [ Aditya ] from Skill Ventures.
Sir, we have been looking to sell some of our noncore assets, but it has been put on over because of proceedings initiated by KKR. So what is the current status now? And some of these assets had been either collateral to some of our group companies. So how are we placed in the group company defaults?
Okay. So first of all, your last part, none of our assets have been ever collateralized to the so-called earlier group, I mean, we are no longer part of that group. But there was no collateral given to any of those entities. So the status of the case against KKR is now currently under arbitration and sub judice, but we expect that there could be some result in the foreseeable future.
And as I mentioned in the earlier part of the conversation, our operational cash flows are good enough to sort of take care of our repayment schedules.
And we had some INR 81 crores of freehold land that had also been pledged. So these have been pledged for our own company's manufacturing facility for some other purposes?
Yes. So whatever you see as pledged or hypothecated, those are for the company's own borrowings.
Right. And this land, are we looking to monetize this plan?
I'm not really being able to connect which lend you are referring to. But at this point of time, in view of the KKR case that is going on, there is no plan as such to sell anything.
Right. And just approximately, what would be the value of these noncore assets?
See, there is nothing noncore. We utilize each and every asset for our productive use.
Right. Okay. And in our annual report, we had mentioned that there were some nonrecurring charges of downward advances, inventory of closed appliance business and some other expenses as well. So what would be the -- what will be the amount of these nonrecurring charges, these onetime expenses?
So to the extent that I remember, I think the provision was taken for something like INR 27-odd crores.
I mean, which is a combination of all these factors that you mentioned just now.
Right. So in the last year, there were onetime charges of around INR 25 crores to INR 30 crores.
Yes, that's right. That's right.
Right. And in our other financial assets, there is -- we have given security deposits of INR 28 crores. So have these been given to [indiscernible] promotor group company?
No, no, no. These are for -- I think a bulk of that is the security deposit that we have given to CCI for the appeal that we made. So they have, when entertaining our appeal, they have taken that 10% as a security deposit, which we have given. So that is certainly the bulk of it. This is the operating deposits, which is related to plants and whatever it is.
Right. Okay. And sir, my last question is what would be the status for the Preferred Consumer Products Company Limited. Will it be merged or will it be dissolved?
No, no, no. This company owns something like 25% of shares in that. There is now no connection with that. We are just a plain shareholder. And there are no sort of business transactions with that.
Okay. So we are holding 25% of that?
Yes.
The next question is from the line of Dikshit Doshi from Whitestone Financial Advisors Pvt Ltd. Mr. Doshi, your line is in the talk mode. Please proceed with your question.
Hello.
Yes. Please go ahead.
My questions have been answered, so thanks for the opportunity.
We will move on to the next question. That is from the line of [ Varsha Ganesh ] from [ Sharvas Capital ].
Am I audible?
Yes, you are.
Sir, firstly, thanks for opportunity and for patiently solving our queries. I have 2 questions basically. On the context of exports, how does the company's presence look like in international markets? That's my first question. And secondly, as sir mentioned about combating the unorganized sector by pushing the government to implement the BIS standard, does the company have any specific ideology or any strategy, any particular strategy would -- maybe implement to combat the same, like maybe a price reduction on the -- for the rechargeable flashlights and LED lights in -- something like that -- is there any particular strategy the company is going to adopt?
Yes. So may I first take on your second question first. So it is like this, we are moving ahead with that business irrespective of BIS. I mean, see, BIS is something that the government has to do. We can only appeal to them, and we can, as good citizens, abide by such standards as and when we are established. Correct? Now -- so we are -- while we would be certainly making efforts to get that so that Indian consumers get products of some minimum specification. Correct? We are not banking on that. We are going ahead with the business in the current context where there is no BIS certification requirement.
So what we are doing is we are trying to bring products and it is finally the consumers call because the consumer is wanting products at a particular price point. Now in order to meet that price point and also our own standard that we would meet certain specifications is a challenge, but not an insurmountable one. We have the advantage of technology. We have the advantage of a team that understands knows how to deliver.
So that is the base of our current policy on this business. We would, on 1 hand, pursue actively in getting this country into a proper standards process on the flashlights category, but we will carry on with this business irrespective of that, in reaching products to the consumers at the price points they desire. And that would again be based on the 2 key assets I'll keep mentioning about: availability through our distribution and the brand assurance.
I'll now take on your second question. We are very small in exports. And currently, this is not a focus area for the company.
We'll move on to the next question, that is from the line of [ Priyankar Sarkar ] from [ Famy Ananta Capital ].
Thanks, sir, for taking my question and for doing the call. So couple of questions. So I think Bain consultancy was appointed a couple of quarters back. So I just wanted to figure out what [indiscernible] that they have made. That's my first question. And the second question is that are the promoters still looking to increase their stake further? I mean, that's a broader question I have. These 2.
Okay. So listen, Bain came on board from 1st of January. So they have barely spent about 6, 7 months working with the company. Now they really have not been engaged to kind of give some kind of bombastic suggestion. Rather, they are working shoulder to shoulder with all of us in identifying areas of opportunity, granularity of data, better decision-making, et cetera, et cetera.
So really, I mean, the company has not told them or given them a mandate to come out with any big time, some [Foreign Language] suggestion. We just want to make improvements in our operations, and they are assisting us in that pursuit. With regard to the promoters increasing their share, I have not had this conversation with them. So I'm afraid, I cannot answer this question and it is actually be better answered by the promoters because it is entirely their privilege.
We'll move on to the next question that is from the line of Sultan from Perpetual AMC.
Sir, am I audible?
Sorry to interrupt Mr. Sultan. Sir, can you use the handset mode while speaking and not the speaker phone.
Am I audible?
Yes, sir, please proceed.
Thanks a lot for the opportunity and addressing -- solving our queries. So I just wanted to ask, as we are entering into the rechargeable batteries segment. So what different we are going to offer that we will have edge over the other players and the unregulated market?
Okay. So first of all, let me clarify, we are already in the rechargeable battery market. And as I mentioned, we are the market leader in that space. The 1 that we are entering or we have already entered, I mean we will enter more meaningfully is the rechargeable flashlights. Again, based on the products which are currently prevailing are low-priced products and did not really meet the standards of minimum specification that one would follow.
So our offering would be based on the assurance that our brand provides, yet, we would try to address the price points as per the requirements and affordable by the consumer. That is where we stand.
The next question is from the line of [ Gautam ] from GCJ Financial.
Thanks for having the con call and giving us opportunity to add the questions. First, is there any one-off in this quarter in terms of any one-off cost?
No, there aren't any one-off cost.
Okay. And just a suggestion that you should give us the segment breakup of each of the product every quarter, which will help us to understand which sector is going at what price -- rate.
Okay. We take your suggestion. We'll think about it.
Okay. And can I get the EBITDA margin in each of the segment during the quarter?
So during this quarter, as I mentioned a little while back, Battery was at around 17% plus, Flashlights at 14% and Lighting at a breakeven level.
Okay. Okay. And if I heard it correct that you mentioned that your revenue will grow by around 15% to 20% for the next 3, 4 years, right?
I would say more like 15%.
Correct. And you used to have a margin of about 20%. We had in 1 quarter of 2022 and 2 quarters during 2021. So how soon can we achieve that kind of margin that was mainly due to Battery and Flashlight?
Yes, that is true. And as I mentioned, that was prior to this huge run that commodities took. So if commodity prices leads up to the levels that we are prevailing at that point of time, we would come back to those kind of margins.
No. But we have a strong brand. So obviously, we should be able to...
We already command a premium over all the competing products beyond a particular point, which is about 20% odd. Beyond that, the market starts resisting. And as a result, we stopped -- we did not pass any further after passing the first 50%. So at this stage, the market is not ready to accept any further price increase. It is not just us, many other categories are facing the same problem.
So I think let us not become impatient. Commodity prices have already started easing up from the end of the last quarter and let us hope that things will get better.
But you believe that 20% plus in Battery and 25% plus in Flashlights margin is achievable, right?
So as I mentioned to you, if we go back to commodity prices as they were prevailing about, say, 9 or 10 months back, there is no reason, it is mathematics. I mean, we don't have to do anything special really.
Okay. Okay. And have we replaced our borrowings -- high cost of borrowing. I mean what is the average cost of borrowing?
We have done. We have done to the extent possible. Our current borrowing rate is 8%, which I think is a reasonable one, considering our size and scale and past whatever.
Okay. And you said there is more CapEx during the year, right? We don't have any CapEx plan?
There is some small marginal CapEx, but not any big ticket CapEx.
And in FY '24 or '25, if you...
So that will depend on how we scale up these categories. So that would be something, obviously, the CapEx decision have to be supported by the payback, ROI and things like that. I mean, I cannot today rule out that there will be no CapEx in the next 3 years. But certainly, this year, there are no big ticket CapEx.
Okay. Great. And sir, what is the tax rate, I mean, do we have some carryforward losses, which will continue for some years?
So we have some benefit from our plant in Assam. Our current rate is math, so it is 16% odd.
Okay. And all the best for the future.
The next question is from the line of [ Saket Kapoor ] from [ Kapoor Company ].
Thank you for listening to your investors' request and giving us an opportunity to place forward before the management to have a better understanding. Thank you and we look for continuity of the same. Sir, firstly, if you could give us some color on the seasonality factor. Do we -- in our business, how does the seasonality factor play? And how are the volumes -- how do volumes play during those times? If you could give some color on it, sir?
Yes. So [ Saket ], it is like this. July, August are typically high offtake months, primarily due to monsoon. This year has been a little disturbed because some parts of the country saw delayed onset of monsoon. But overall, I would say second quarter is higher volumes for battery, flashlights and then closer to Diwali is higher volume for Lighting products. That is how it is. But I wouldn't put too much into the seasonality because we have to do our business consistently right through the year. But what we have seen in the past also, the fourth quarter is always a lower quarter.
Correct, sir. And looking at the employee cost, sir, as a percentage of sales, how should this line items if...
So currently, we are 12%. And this is what is one of our address areas this year in which somebody mentioned about then, this is 1 area being is working with us. And we -- our target -- maybe we are not yet ready to actually give you an exact time target, but our target in a foreseeable future would be to come down to 10%.
Right, right, sir. And sir, when we look at the product profile for the batteries, which were used in the medical apparatus, at those times, I think, so during the COVID times, we had a higher margin because of the change in the product mix. So I think currently, we are -- currently, the sales to those are not in that percentage. So how -- to which segment will be the batteries will be catering to because we have a line of -- different lines of batteries, different products, the categories are very different and the margins are also very different. So how are things shaping up for the battery segment, especially the ones which are for the -- [indiscernible] equipment -- wherein the battery prices are also -- are higher than the normal price -- normal battery.
Yes, so it is like this. See, the high margins that you saw was a period, it just coincided with COVID, at which point of time and -- maybe due to COVID, commodity prices were very low. Oil prices have gone down, all commodity prices. So it has really nothing to do with the health devices. It is just that commodity prices in those days were extremely favorable to manufacturers. And they have gone up and then again looking to be going down. So there is really the company usually has similar margin profile all these batteries. Of course, there are premium batteries, which fetch more margin; there are popular batteries, which fetch lower margin. But that is how it is, the business is like that. It has nothing to do with really health devices, in particular. Health devices give some temporary volume jump.
Right. Sir you mentioned INR 325 crores as the net debt number. So what are our current year majority, sir?
Are you think our -- I do not have the exact data on me, but I think it could be somewhere around INR 50-odd crores, which have been planned and we'll see to that. There is -- there are no issues with regard to the repayment.
Okay. Sir, earlier also when the previous management was also used to guide investors that in our business, debt should not be a part of the company's operation. And therefore, now with what kind of time lines are you looking to retire debt completely? And what are our current working capital requirements have been? And also on the utilization levels, how are our utilization levels currently shaping up?
So as you very rightly said, this company is an FMCG company primarily, and it doesn't require any debt. So the requirement for working capital could be for a 60-day period, net of receive payables, maybe this net of payables, it would be about 30, 35 days. So it really doesn't -- it's a net cash [ earner ]. So the debt that you see, whether it is in the form of working capital or in term loan, this is all legacy and due to reasons other than businesses. So in due course of time, the company's profitability will allow us to repay those, and then we don't have to hopefully take any further debt.
Right. And the last point, and then I'll come in the queue. Okay, ma'am, I'll come in the queue. No issues with that. But thank you for the opportunity to all of us, sir.
Ladies and gentlemen, we'll be taking the last question. That is from the line of Nikhil from SIMPL.
I hope I am audible.
Yes, you are.
Yes. Sir, in the beginning of the call, you mentioned that there was -- the company has not grown over the last 10 years and battery being our largest business, would we have seen a lot of market share in the core business over the last 10 years. So what was our market share 10 years back and what is it today? And do you think that the market share recoup can be a source of growth even in the battery other than the market growth itself?
Yes. So let me put it this way. We have been holding on to this market share of 50% -- a little more than 50% for quite some time consistently, right? Now what has not allowed the company to grow is, during this journey, there have been always some peripheral business on which the company did not focus and eventually dropped another peripheral business. Battery maintained a very steady trot with very, very modest growth; very modest growth; 1%, 2% growth.
And in the process, what has happened, we have got ourselves now these areas of opportunities, which we did not see before. So Battery today offers some avenue for growth. I wouldn't say very huge growth, but it does offer some avenues for growth. And so does the other categories, which we are now focusing on.
Okay. And just 1 follow-up here. If you look at over the last 5, 6 years, and this could be intuitive, there is a market research here. If I look at the amount of investment that Duracell has done in terms of branding and advertisement, have you lost any pricing premium to Duracell or have they gained market share in the overall market? So would the market have grown at, say, 5%, 6%, and we've grown at 1%, 2%. Is that the case what we have seen? And is Duracell the largest competitor?
No. So what has happened is, see, you are very correct in assessing that Duracell has consistently done communication over the last 5 years, I would say, over the last 10 years. But the market was not amenable to a higher price point product, which typically Duracell sells. Till 2 years back, they decided to get into the market with lower-priced products, right? So actually, when they started selling that lower-priced product, people who came under pressure was not Eveready, but it was our other competitors. So actually, we had drops in their market share and Eveready sort of stayed the same, by and large. Duracell gain some 5%, 6% market. See, prior to that, they were very, very small. They were very peripheral product and very niche. Now they try to get into a wider market, and that just coincided with the COVID period, when incidentally, apart from us, the other competitors, like Panasonic, Nippo, they had really supply issues. But as we can observe from the marketplace. I mean, I do not know what we actually did.
So it looked like in that period, Duracell took advantage of that. And they seeded this lower-priced product incidentally, which is a loss-making product.
Okay. Thanks for answering all the questions in so much detail.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
So I thank everyone for taking time out to join us on this earnings conference call today. I hope we have adequately answered all your questions. If you still have any more queries, please reach out to our Investor Relations team, and we will be only too happy to address them. We endeavor to interact with all of you every quarter through this forum. Thank you once again, and look forward to connecting again in the next quarter. Thank you, and god bless.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Eveready Industries India Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.