Eveready Industries India Ltd

NSE:EVEREADY

Earnings Call Analysis

Eveready Industries Reports Robust Growth and Strategic Initiatives

In Q2 FY25, Eveready Industries achieved a revenue of INR 362.4 crores, slightly down from INR 364.9 crores, yet marked a healthy EBITDA margin at 13.2%. The battery division maintained a commanding 53% market share, with promising growth in alkaline batteries at 62%. Strategic initiatives, including a new alkaline battery facility and enhanced distribution channels, aim to capture the growing demand. Management remains optimistic for the second half, projecting modest overall growth, especially in lighting and flashlights, following enhanced product offerings. They expect a minimum of INR 400 crores as the breakeven mark for lighting, signaling robust potential ahead.

Navigating the Market Landscape

In the recent earnings call for Eveready Industries Limited, the Managing Director, Suvamoy Saha, framed the company’s current position and strategy within the context of a changing market landscape. Amid a competitive environment marked by both opportunities and challenges, Eveready remains anchored by its significant brand equity and a distribution network that spans millions of retail outlets. As the company pivots toward increased efficiency in its distribution processes, it underscores a commitment to innovation and responsiveness to consumer preferences.

Revenue Performance and Segment Insights

Eveready's financial overview revealed revenue of INR 362.4 crores for the second quarter, slightly down from INR 364.9 crores year-over-year. Despite this top-line stability, the company reported strong EBITDA margins, notably 17.5% for batteries, which makes up a considerable portion of their revenue mix. The battery segment, which includes both carbon zinc and alkaline batteries, witnessed notable shifts in consumer preferences, especially as alkaline battery sales surged by an impressive 62%, a reflection of the company’s focus on product quality and strategic distribution.

Strategic Initiatives and Future Outlook

The call highlighted actionable strategies, particularly the implementation of a new Route to Market (RTM) initiative aimed at modernizing distribution channels. This effort promises to enhance operational efficiency and drive sales. The management anticipates observable performance gains as these strategies take full effect, particularly in the latter half of FY '25, where they expect modest overall growth exceeding previous fiscal performance. Emphasizing this point, Saha stated they aim for improved performance in the second half, supported by ongoing marketing initiatives and an uplift in product launches.

Challenges Faced and Mitigating Actions

Despite a favorable input cost environment contributing to healthy margins, Eveready faces headwinds, particularly in its carbon zinc category, where weak rural demand has been a concern. The management addressed these challenges confidently, stating that efforts are underway to revive and adapt strategies in response to market conditions. Saha indicated that growth momentum would surpass prior year performance, hinting that quarterly comparisons might be subdued but still improving.

Investment in Manufacturing and Market Position

A significant strategic development announced during the call is the establishment of India’s first alkaline battery manufacturing facility. This plant is designed to not only meet growing consumer demand but to also facilitate cost control and quality assurance across the production chain. With current alkaline market penetration estimated at 6-7%, Eveready recognizes the substantial growth potential in this segment, as it aligns with broader consumer trends towards higher quality products.

Looking Ahead: Revenue and Margin Guidance

Looking forward, the company anticipates an overall year of modest revenue growth, with the second half expected to be stronger due to a return to more stable market conditions. The management provided a cautiously optimistic revenue guidance for Q3 and Q4, indicating an intention for performance improvements that could potentially exceed current metrics, though they expect Q1 and Q2 will continue to be their peak quarters due to seasonal trends. With a stabilized margin performance relative to last year, Eveready aims to leverage their recent operational enhancements for continued profitability.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Eveready Industries Limited Q2 FY '25 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.

[Nishid Solanki]

Thank you. Good afternoon, everyone, and welcome to Eveready Industries India's Q2 FY '25 Earnings Conference Call. Today, we are joined by senior members of the management team, including Mr. Suvamoy Saha, Managing Director; and Mr. Bibek Agarwala, Executive Director and Chief Financial Officer.

We will begin the call by sharing the standard disclaimer. Some of the statements that may be 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 disclaimer in this regard is available in the press release document, which has been circulated to you earlier and also available on stock exchange website.

I would now like to invite Mr. Saha to share his perspectives with you. Thank you, and over to you, sir.

[Suvamoy Saha, executive]

Thank you, Nishid, and a very warm welcome to all of you on our second quarter earnings call. We at Eveready are custodians of 2 very valuable assets: the will of Eveready brand and a formidable distribution infrastructure. It is the responsibility of the management team that these assets are used wisely to provide value for all our stakeholders and deliver growth in each of our business segments.

On this call today, we will try to outline the underlying opportunities across the businesses and provide an update on where we stand. In terms of financial parameters, we are stable and our margins have stayed healthy. We also remain optimistic for the balance of the year. Profits have trended well, aided by favorable input costs. But before I share thoughts on the business segments, I wish to cover the highlights of some of our key strategic initiatives.

As mentioned in our earlier calls, the RTM exercise was kicked off by us to streamline our distribution processes to deliver higher levels of efficiency and also become more contemporary. Such an elaborate exercise that encompass the entire process of selling came with its share of challenges and risks. We made these challenges over the past few quarters, including the one under review. But now the revamp system seems to be on the cusp of yielding results. We expect that the performance gains will become apparent in the coming quarters.

Just as we modernize our traditional general trade channels, we also focused on developing alternative channels where our offerings have seen traction like in modern trade, e-commerce, quick commerce and electrical outlets.

Communication is a good aspect of our growth aspirations. We have set our E&P stance at a pace for consistent consumer engagement. As a consumer-facing company, our chief endeavor is to bring quality offerings that are in [indiscernible] with the times and engage our consumers with this. Our strategy involves a combination of advertising and BTL promotions in order to maintain saliency of the brand and the leading presence in the marketplace.

We have initiated steps to build our manufacturing facility for alkaline batteries in order to support growth aspirations. This is going to be the only alkaline facility in the country at this time and we aim to drive strong gains on quality and cost, with control over the production chain. Our desire to be an innovative brand will draw support from this investment.

In order to derive comprehensive benefits or cost and efficiency, we are planning for this facility to be a multiproduct facility, and eventually other categories will also be produced here.

At this point, let me cover some thoughts on our business segments. Commencing with batteries. Despite some shifts in the market, we are pleased to have retained our robust 53% market share in batteries, underscoring our ongoing leadership in a highly competitive segment. The overall segment saw modest contraction, primarily arising out of weak demand from the rural segment. However, our diversification within battery types showed positive momentum. Our alkaline battery segment saw an impressive 62% growth in value. This demonstrates a promising trend as consumer preferences gradually shift and we are well positioned to meet this demand with the quality and reliability of our products.

The marketing traction that our alkaline range has seen has been good. This has emboldened us to take the whole step of putting up the manufacturing facility that I referred to a little earlier. Also, the headroom to grow is fast as India catches up to the global trends in terms of our capital usage.

In the carbon zinc category, which still services the bulk of the country's domestic demand, we are the de facto leaders in both volume and value. This gives us the right to play and win. Batteries being the dominant contributor to our top line and margins, naturally all possible efforts are made to create strong leverage in this space.

Let me now come to flashlights. I'm glad to share that the pace of degrowth in the battery-operated category has abated to single digit. It may be recalled that the level of degrowth was at a much higher number a year ago. On the other hand, the rechargeable segment is maintaining growth as has been the trend in this category. The battery operated flashlights have a strong correlation with monsoon. Although not very uniform, the monsoon this year was somewhat abundant, thereby translating into healthy demand within the target market in rural cities. The rechargeable flashlights grew on the back of unique and innovative models introduced by us.

Introduction of new models with rich feature functionality by our design group as per identified consumer needs is the core of this business. Two new launches during the quarter appeals to the people's imagination significantly. One was called the Siren with a panic button for the vulnerable at times of distress. Beam light is the other one with a differentiated offering is designed for farmers who need to keep night vigil to protect their crop.

Backed by these tailwinds, the category had a decent 15% revenue growth during the quarter and 7% for the half year. We intend to deliver a healthy growth for the full year and maintain this momentum. As the leader in the organized space, we aspire to balance presence in both battery operated and rechargeable categories.

I move forward to the lighting business. The industry continues to witness price erosion in the consumer segment, particularly in bulbs and batteries, though at a somewhat reduced pace, but still pronounced compared to the same quarter of last year. We have now a respective lineup of SKUs in the retail market, comprising of not only bulbs and batteries, but also in emergency lines, luminaire and accessories. We are under-indexed in the consumer luminaire space and our focused definition is now being provided to see higher traction.

While we managed to grow volumes in most product types, the overall top line for the business remained muted on account of price erosion. We are confident of seeing significant growth coming in the coming quarters as the pace of quarter 3 last year onwards already captured a very significant part of the price erosion.

The BU team is also focusing on the segment of professional luminaires catering to institutions. Professional luminaire is the higher growth segment of the lighting market, and we are under-indexed there, as we inherently tend to focus more on the consumer side. However, this being our new trust area, we will make amends to that.

We have assembled the team with the requisite expertise and with the necessary connect to this market. The results have started coming in. And though, from a small base yet, this segment is showing growth. In summary, lighting is an area of focus, and we expect to exceed the year on satisfactory level of growth.

I want to bring a peak review of the quarter's results. We reported revenue of INR 362.4 crores during quarter 2 relative to INR 364.9 crores previously. I have already explained the dynamics from the respective categories contributing to this revenue while the top line is muted, EBITDA and PAT stood strong with significant improvements over the previous year. EBITDA reached 13.2% and 13.7% of revenue for the quarter and the half year, respectively. Similarly, PAT stood at 8.1% and 8.3%, respectively. All 3 business verticals, including lighting, had positive EBITDA for the half year with batteries [Technical Difficulty].

[Operator]

Sorry sir, [indiscernible] lost your audio between -- when you said about batteries.

[Suvamoy Saha, executive]

A&P spend for the quarter stood slightly higher than those of the previous years, but as per plan. Manpower cost also showed an uptick at 12% from the -- for the quarter as compared to 11.3% of the previous year. This is on account of investments within manpower, particularly for the Lighting segment, and more specifically for professional luminaires. This will get neutralized that we start seeing revenue growth in the forthcoming quarters. These impacts were softened by initiatives to contain costs in other aspects of the operation and favorable [indiscernible] prices.

At this point, I would like to share our thoughts on the outlook for the year. The year is shaping up, by and large, as expected with an improved growth outlook for the second half. In batteries, we are fully geared to charge ahead with our zinc carbon and alkaline offerings across distribution channels, suiting requirements of consumers across price points and needs. One should expect stable performance relative to the past year as we exit the year given the muted situation in the carbon zinc space.

The margin should hold as we are covered for our requirements on key input materials. Flashlights should deliver positive growth on the back of differentiated SKUs that we have launched. Similarly, we shall see healthy accretion to growth in lighting, given the many initiatives, which I have mentioned earlier. Overall, we see a year of modest growth for the full year, but exceeding the second half at far more enhanced level with a positive impact on margins.

With that, I would like to invite you to pose your queries which we will be more than happy to answer. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of [indiscernible] from Varun Capital Advisors.

[indiscernible], may I request to unmute your line and go ahead with your question, please. The line for the participant dropped.

Next question is from the line of Avi Jain from AJ Associates.

[Unknown Analyst]

Am I audible?

[Operator]

Yes, you are.

[Unknown Analyst]

Sir, I have 3 questions. The first question is -- since you're saying that our price erosion started from Q3 of last year and you are seeing -- you're hoping for an uptrend going forward in the following quarter. [indiscernible] you see that the revenue run rate will be maintained at the [indiscernible] kind of a level for Q3 and Q4, which obviously dropped last year significantly due to the price erosion?

[Suvamoy Saha, executive]

So I see, generally, our quarter 1 and quarter 2 are the big quarters. Quarter 3 and quarter 4 are generally up [indiscernible] quarter. So as we have indicated that we'll have a growth momentum. So we'll try to be closer to that, but it may not be equal to the quarter 1 and quarter 2 numbers.

[Unknown Analyst]

But it will definitely be better than Q3, Q4 of FY '24, right?

[Suvamoy Saha, executive]

Definitely, definitely. Because that is why we state that our -- all the [indiscernible] all has been done and that is where growth momentum will come from H2.

[Unknown Analyst]

Second is more of a hygiene question on the financials. Now if you look at your PBT, given that the revenue was flat, year-on-year. And if you look at your overall expense items, more or less, they were [indiscernible] or there were some increases, for example, [indiscernible]. The EBITDA growth has predominantly come from the increased end-of-period inventory that we have. If you look at your [indiscernible] inventory because that is a big negative number, hence, the EBITDA is higher.

So I just want to understand that, I understand that it was a flat quarter compare to last year and PBT would not have increased and whatever PBT increase coming in from the increased inventory that we have at the end of the year, in Q3 and Q4, what are good things? Or what are the levers that you are seeing will actually generally help in increasing the EBITDA margin? Because this EBITDA margin is not a real EBITDA margin increase per se. This is just end of inventory increase because of EBITDA has increased.

[Suvamoy Saha, executive]

I did not get your point. Why don't you think that is a real margin?

[Unknown Analyst]

So if you see our CDP, right, all our expenses, all the line items, they all are either flat or increase. Now there is only one line item, which is a change in the inventory of [indiscernible], right, which is minus INR 16.2 crore that figure deposit is -- it is negative INR 16 crores, that is adding to your PBT. If you take that out, your ending inventory would not have increased. This is on account of end of period inventory increase, right, because of which it is reflecting through in the PBT. And no other cost lever has reduced. So year-on-year, I don't see any improvement in any cost levers. Your material cost is same, finance cost is down a bit, employee cost has increased by almost 7%, 8%. Other expenses are up by almost 10%. So what cost of optimization, where is it showing? I just want to understand that in the financials?

[Suvamoy Saha, executive]

So I think your reading of the P&L has to be, the changes in the inventory part of cost of material only. It's not that year-end inventory because what happened -- you have to see the entire change in inventory along with the cost of material as well because some time you consume from opening stock sometimes you may consume the [indiscernible] from opening stock. So isolation change in the inventory is not a real reflection of what is the cost saving. It is not the cost saving that whatever differential you are seeing quarter 2 that -- this year, INR 16 crores, last year, INR 5 crores.

You have to see entire 3 line item of cost consume material and the credit line. All 3 together actually give you cost. This is why we maintain that this period the profitability improvement is [indiscernible] because of the favorable material cost we have because this period, our zinc prices, especially [indiscernible] product for us, is having a much better pricing. That is why we've got a margin improvement there.

[Unknown Analyst]

So basically, just -- so the RTM -- the optimization that [indiscernible] from the RTM, obviously, [indiscernible] that has not probably kicked in quarter 2, given that other expenses and employee benefit [indiscernible] are still elevated. Do you see that the optimization from [indiscernible] will start hitting in Q3 and Q4? Or do you still think that there is some 2 quarters away from?

[Suvamoy Saha, executive]

I've already told that from the Q3 onwards, the benefit will start shipping on. And of course, Q3 starts showing that in Q4 will have the full scale here. So H2 will have the benefit and what intended objective of the RTM exercise. .

[Bibek Agarwala, executive]

And [indiscernible], I might just add that is not to sort of look at lower cost, but increased efficiency, which results in growth. When we started, we never started with the objective of reducing cost. We started with the objective of improving efficiency as a result of which we can start growth. And that is what is going to happen from quarter 3.

[Unknown Analyst]

Just the final question on the pricing in terms of the Lighting segment, right? As the retail customers, I have done certain market [indiscernible]. And I understand that, especially in terms of tubelight, Eveready pricing is almost 20% to 30% lower than other competitors like [indiscernible], et cetera. So are you still in market share? Are you still -- the sizing is still because you want to gain market share? And do you think that you can increase your pricing in the near term? Or do you think that it will still take some time for you to charge a more favorable pricing, at least in terms of lighting because that is where we are seeing industry whether there's a price erosion?

[Suvamoy Saha, executive]

So you are right to the extent the percentage is not correct. You are right to the extent that [indiscernible], they see that the highest level on pricing. But being there as a boost of other competitors, we are by and large similarly priced, we are one of them. So I would say we would put ourselves at #3 along with a few others. So I don't think that pricing taking order is going to change very significantly. What's going to change is that because we are going to offer significantly higher range of products, our portfolio is increasing.

Our distribution rate is increasing. We should be able to start growth. So as I said in my speech, I mean, remarks earlier, that we are under-indexed on consumer luminaires. We are under-indexed on professional luminaires. So once we get our act together in these aspects of the business, that should be [indiscernible] it is not going to come by increasing our prices suddenly and trying to get -- because they are far ahead of us [indiscernible].

[Unknown Analyst]

So [indiscernible] concluding, I just try to comment that your distribution strategy is working because most of the retailers and distributors are now placing Eveready products, especially lighting and they are pitching those products to the customers. So I just want to congratulate the management that you have done a good job in terms of ensuring that the distributors and retailers are taking your product and showing the benefits to the customer [indiscernible] in relation to your other highly priced competitor, so good job on that.

[Suvamoy Saha, executive]

I just would clarify on that, that we are really sort of focusing on some of the under index part of our business, which should provide us with further levers of growth as we go forward.

[Operator]

Next follow-up question is from the line of [indiscernible] from [indiscernible] Capital.

[Unknown Analyst]

I hope I'm audible. Sorry, last time I was -- last time my line was not audible. Sir, my question is, have you spend out a segment-wise revenue and EBITDA, in case I have missed out, for H1, it would be helpful?

[Suvamoy Saha, executive]

Okay. So segment-wise, revenue for the H1, batteries for us is INR 456 crores, flat light INR 108 crores and lighting is INR 166 crores.

[Unknown Analyst]

Flash light is INR 108 crores and lighting is?

[Suvamoy Saha, executive]

INR 166 crores.

[Unknown Analyst]

INR 166 crores. And on the EBITDA side, sir?

[Suvamoy Saha, executive]

EBITDA side as a percentage you can take -- the percentage for H1 will be 17.5% for the battery, 11.5% for the flash light and 2.5% for the lighting business. .

[Unknown Analyst]

Perfect. Perfect. So now, sir, coming to battery segment. The industry dynamics clearly show that alkaline is gaining share with all the natural tailwinds with respect to the higher usage of the electronic products and we are also gaining share. So in there, if you can highlight further what different are we doing, which is leading to such a strong market share? What I remember is a market leader in alkaline battery had launched a value battery, which was at the same price of carbon zinc so they could gain -- what has been the steps taken by Eveready to gain market share in alkaline batteries?

[Suvamoy Saha, executive]

So it's like this -- first of all, I would just like to clarify that the value segment of alkaline is still at a premium of about 20% to the premium carbon zinc product. So the cornerstone for our strategy is that we are available in nearly 5 million outlets, whereas the value alkaline of the competitor, the so-called competitor, is available only in about 500,000 outlets. So that makes a difference. So we go to every [indiscernible] corner of the country, whereas the alkaline has still penetrated that deeply.

Now we still recognize that alkaline is something that is for the future, and we have to play in that area. So we have taken this kind of bold step of putting this manufacturing facility, which we have talked about. And we are sort of ramped up our distribution to ensure that all alkaline friendly outlets get our coverage. So that is exactly where we are. We have not compromised on our distribution or the placement of our carbon zinc products. So there is really no clash. There will be some little cannibalization here and there, but I don't think that is of any great significance. Where we have [indiscernible] this quarter and the half year is that the [indiscernible] part of our business has gone down somewhat, which we are trying to see how to sort of recoup over the next 2 quarters.

[Unknown Analyst]

Right. So carbon zinc decline in volumes is also to do with the flashlight segment underperforming? Is that understanding correct?

[Suvamoy Saha, executive]

Yes. It is partly correct. While there are -- the rural part used to use a lot of these carbon zinc batteries for their flashlights as they have moved into rechargeable flashlights, obviously, they don't need the batteries. But there are other usages.

[Unknown Analyst]

Got it. Now coming to the [indiscernible] battery segment, which is a market of INR 300 crores batteries -- roughly sold at INR 10 MRP. What would be this for the similar metric for alkaline industry?

[Suvamoy Saha, executive]

Come again, what is the INR 300 crores?

[Unknown Analyst]

So there are roughly around 3 billion batteries which are sold annually as an industry size, which is shown at MRP of INR 10. So somewhere we come to a market size of INR 3,000 crores. What will be the same dynamic for alkaline metrics? How many units and what is the average selling price of alkaline battery?

[Suvamoy Saha, executive]

Okay. So first of all, let me -- okay. So you were talking of the company price of selling to the retailer -- to the distributor?

[Unknown Analyst]

Yes, you can say. Yes, yes, yes, correct.

[Suvamoy Saha, executive]

Yes. So first of all, the size of the volume-wise, the size of the carbon zinc battery is 3 billion pieces. Okay. And at the consumer level, it is about INR 3,000 crores which is again that if you [indiscernible] blended consumer price of about INR 10 to INR 12. These are all very rough numbers. The equivalent of alkaline -- the value alkaline underline particularly because it has a slight blend of also the premium alkaline, that would be higher. That will be something closer to -- the consumer level, it is INR 22 as I said, the value alkaline. If you put the company price, it would be around INR 15, INR 16.

[Unknown Analyst]

And what would be the volume demand in terms of annual sales?

[Suvamoy Saha, executive]

Roughly, I would say that it will be roughly around 300 million, against 3 billion. So volume-wise, it is still about 10% of the total carbon zinc [indiscernible]. And 50% of that goes into OEMs and 50% to the retail market.

[Unknown Analyst]

And OEM going in which industry?

[Suvamoy Saha, executive]

It goes into usages like particularly one prominent [indiscernible] is electronic automation, the EVMs.

[Unknown Analyst]

Okay. Okay. Got it. And sir, in terms of this industry size, which is around INR 450 crores for the value alkaline battery. How do you see this -- sorry, sir?

[Suvamoy Saha, executive]

You take the whole alkaline. I mean that INR 450 crores is correct. It [indiscernible] part, which is the premium alkaline, which sells to the consumer at about INR 50. .

[Unknown Analyst]

Got it. So now talking about the total alkaline industry segment of INR 450 crores. How do you see that evolving? Is this industry also growing at 30%, 40%, where you would be doing because you have such a large distribution strength, you are growing 3x of the industry? How has been the growth? And any particular consumer segments which are witnessing a solid nonlinear high demand growth coming for alkaline batteries?

[Suvamoy Saha, executive]

So typically, alkaline battery is taken by 2 types of consumers. One is -- one who wants to buy higher-priced products. So typically richer people who think that -- we know -- if the price is higher, it would mean that the product is better. And another segment of people who are not discerning who take these batteries for higher drainage devices like [indiscernible] or camera. So these are the typically the types of consumers who take alkaline batteries, and they are obviously Tier 1 maximum Tier 2 terms, but not below that.

You know that people would be more sort of price-conscious and would prefer carbon zinc batteries. And because some devices simply do not require the alkaline batteries. But if you look at the global market situation, most of the countries show heavy skew towards alkaline because as people become prosperous, they feel to go towards price [indiscernible] of the product.

[Unknown Analyst]

And on the industry growth, anything that is firing out according to you? Or is it that your growth is far superior than the industry?

[Suvamoy Saha, executive]

I think pointed out is right. Our growth because we are just now coming off a smaller base. Our growth is about 3x level of the market. So the market is growing at around 25%. We, last quarter, grew at 60%. So you will see we have sort of saturated our [indiscernible] a little bit more. I see that growth trend remain similar. .

[Unknown Analyst]

Got it. Just last question, again on -- sorry to ask more on the alkaline battery because that's the excitement. On the industry players, anything that we have seen in terms of market share, gains, losses that you can comment with respect to the #1 player ,#2, #3, #4? I think the other 2 smaller players have also started becoming a bit aggressive in terms of the distribution and everything. So anything on the competitive landscape, if you can highlight?

[Suvamoy Saha, executive]

So as you know, I'll just give you the landscape both for carbon zinc as well as alkaline because we must not forget that the [indiscernible] market of carbon zinc battery is still about 94% of the total market. I mean, you must not forget that. Alkaline [indiscernible] market, if we ignore the [indiscernible] 6%, 7%, right. .

Now in the carbon zinc space, [indiscernible] is obviously the market leader quoting something like 60% share. And our 2 competitors -- significant competitors are [indiscernible]. [indiscernible] which is the 6%, 7% of the total battery market, and we are very excited about that market just as much as you are excited about it and which is the reason why we are putting up a plant, we are still very small. So in that market, [indiscernible] the displayer because they have been around for a long time, they have communicated. They have been around for 20 years -- pushing alkaline day in day out. So they are about 85% of that market, and we have just come to [indiscernible]. I mean, to -- just cross the double-digit [indiscernible]. So we have a huge [indiscernible].

[Unknown Analyst]

Perfect. Perfect. Perfect. And any other new players added that we have found getting aggressive in alkaline battery other than?

[Suvamoy Saha, executive]

No. So sorry, I did not respond to that part. So [indiscernible] and Panasonic also drew a little bit of alkaline, but not significant yet. And no other players, but there are a host of players who also play in the OEM part like [indiscernible] and stuff like that. .

[Unknown Analyst]

If I can squeeze in one last question on the gross margins, which your participants were asking. So what has happened is, over the last 6 months, we have seen a almost a 400 basis point of margin expansion. And I believe a maximum of it has come in the battery segment. And our key raw materials tends to be zinc and electrolyte [indiscernible] which constitute almost 60% of the raw material. So anything that has gone significantly lower on the raw materials or any price increase that we have taken on the battery side or with the mix changing, our ASP has gone up, which leads to also a gross margin gain. So roughly, if you can help us crack down the gross margin gains that we have seen in the 6 months?

[Bibek Agarwala, executive]

This is mostly on account of material margin. So they are very hardly any right change because these are MRP driven markets. So this is mostly -- that is why I was trying to explain to the earlier gentlemen who has raised the point on the cost part. So this is mainly [indiscernible] at the 60% of the component from the EMD and the zinc. And they are a little bit softer during the quarter, and that is why the [indiscernible] has been grown there.

[Unknown Analyst]

Okay. And so we did not...

[Operator]

Sorry to interrupt you sir. Kindly come back in the question queue for a follow-up.

Next question is from the line of Chirag from Keynote Capitals.

[Unknown Analyst]

Am I audible?

[Operator]

Yes.

[Chirag Maroo, analyst]

Yes. I have a couple of questions from my side. [indiscernible] is there any update on the [indiscernible]?

[Suvamoy Saha, executive]

So the status remains the same. So there is no further update on the [indiscernible]. As we have said that in the past that from the [indiscernible], it has moved to some other party called in [indiscernible] now moved to some [indiscernible] companies. So we are waiting for the next hearing.

[Chirag Maroo, analyst]

Okay. Is it possible for you to give a bifurcation of flash light revenue mix? Earlier, it was around [indiscernible]. Has that changed [indiscernible]?

[Bibek Agarwala, executive]

You want to split of the flashlight revenues between the 2 segments. It is nearly 50-50 for the half year. .

[Chirag Maroo, analyst]

And what is our revenue from the alternate channel?

[Suvamoy Saha, executive]

Alternate channel. The alternate channel revenue for the quarter will be around [indiscernible] or alkaline? What is you asked? You want it [indiscernible]?

[Chirag Maroo, analyst]

Alternate channel. Alternate channel.

[Suvamoy Saha, executive]

Basically constitute to 16% of the total revenue. So it's around INR 60 crores in the total mix. .

[Avinash Nahata, analyst]

Okay. I mean, sir, I wanted to have an update on the CapEx that you are planning for alkaline? How is the location for the [indiscernible]?

[Suvamoy Saha, executive]

So we have not yet finalized the exact location, we are sort of going between 2 locations. I think we should be able to take a final decision on this. We are just trying to see which ecosystem serves us better. So we should be able to take a call by the middle of December or thereabouts -- a final decision.

While you know our work on machine building and on many other parameter or other equipment has already started and they are in fairly advanced stage of progress.

[Chirag Maroo, analyst]

So generally, as you said earlier, that this [indiscernible] a year time after the location being planned. So can I say that in H2 FY '26 this plant will commercialize and [indiscernible] started coming in [indiscernible] benefit due to cost savings of [indiscernible] H2 FY '26?

[Suvamoy Saha, executive]

Yes. I think H2 will be a good target to take because what you said is right, we did say that it will take one year from the time we settle on the land. But because we have now progressed quite significantly on the main part of the project, which is machine building. We feel that even if we decide by 15th of December, we should be able to go live latest by 1st of October.

[Chirag Maroo, analyst]

And sir, just last one for my end. What would be the expected debt levels after the CapEx that we would do? Could it be around approximately about INR 480 crores, INR 500 crores level?

[Suvamoy Saha, executive]

So as of now, you see our debt levels are INR 456 crores, and we are -- sorry INR 256 crores, and we are continuously reducing. So we are looking for around INR 150 crores [indiscernible] for this project. So while the existing debt will keep reducing at their normal repayment schedule and there will be additional INR 150 crores added to that. You can clearly see it will be a INR 400 crore [indiscernible]. .

[Chirag Maroo, analyst]

One last question if I can squeeze in. Just wanted a broad thought like we are going to be the only manufacturer of alkaline batteries after our capacity commercialize. Any scope that we would be doing some kind of white labeling for other players?

[Suvamoy Saha, executive]

That's a possibility. I mean, we do the same for carbon zinc. So of course, we whole premise for the alkaline plant is to sell Eveready [indiscernible], not make private label business, but it is the part and parcel of any business today. So of course, we will be open to that.

[Operator]

Next question is from the line of Mithun Aswath from Kiva Advisors.

[Mithun Aswath, analyst]

I just wanted to understand -- obviously, your competitors does not have a plant in India and has continued to grow. I remember in the last con call, you mentioned that even if -- even after putting up the plants, your margins are not going to go higher in the alkaline segment. So I'm just trying to understand the viability of putting up a plant in India? Just wanted to hear your thoughts on that and what sort of return on capital do you expect from that [indiscernible]?

[Suvamoy Saha, executive]

Okay. First of all, I think you might have misunderstood that. Again, the whole premise of putting up the plant is not only will we need sort of [indiscernible] growth in the this particular category, but also with the objective that it would improve our margins. But I would leave Bibek to answer to that, and tell you the return of capital.

[Bibek Agarwala, executive]

Yes, definitely. Today, our position is that we import the material from outside and there is a duty impact, then the importer add a lot of profitability to that. So when we're manufacturing in India, definitely, there will be a very substantial margin gain, especially on the alkaline B2C side. And that is our objective. And of course, any investment has to have a [indiscernible] IRR and ROI. So we have taken a fair chance of the very decent ROI, especially for the alkaline project.

[Mithun Aswath, analyst]

Great. And just wanted to understand, till the -- in the battery business also, are we seeing the same sort of kind of cannibalization, which we saw on the flash light. And hence, the overall growth does not appear in the flashlight as well, these are other battery segment kind of degrowth and the rechargeable flashlights are growing. How even the battery segment is a much larger part of your business? And if you are saying that the carbon zinc businesses [indiscernible] and the alkaline is where the growth [indiscernible] 93% of your business comes from carbon zinc. It's going to take a lot of time and effort for you to grow revenue. If you see over the last couple of years, despite a [indiscernible] revenue as a total company, that would have been quite flat.

So I just want to understand, you had very high aspirations of doubling your top line. But I'm just trying to understand where are we in that trajectory? We're also looking at stepping up looking at a new product line. I just want to understand where we are and do you see a lot more difficulty and what you saw maybe 18 months back?

[Suvamoy Saha, executive]

Okay. So first of all, let us talk a little bit about the flashlight side. The flashlight side, it is quite clear that the battery operated one has been degrowing for some time. This company did not, for whatever good [indiscernible] reason, I mean there is no point in going back to the history, did not enter this and even consumers were taking on 2 rechargeable flashlights. This company did not go enthusiastically into that. It is only in the last 2 years that the company decided that, I mean, we need to play in that as well.

So from a 0 level contribution, today, we have come to a stage where we are 50% from rechargeable flashlights into the overall turnover of flashlights. This half year, and this quarter, we grew, as I mentioned, by about 16% and 7%, respectively. And we hope that this will be maintained. The flashlight market has a play of a lot of unorganized players. We are also trying to take necessary, if I may say, action to neutralize because when there is an organized market where there is less bit of tax compliance then lease adherence to [indiscernible] rules, et cetera, et cetera. It becomes [indiscernible] mixed bag, we are trying to also navigate that particular part.

So flashlight, I think [indiscernible] is going to remain a growth driver for the company in the times to come. Now this has come to batteries. I must once again highlight that cadence still for the whole Indian market is 94% of the market, right, where we hold 60% of the market. We are a small player in the 6% of the market, which is the alkaline market, and we have just become a 10% plus player in that area.

But we identify that we're growing prosperity, people will shift to alkaline and it has happened in all other countries. So we have taken this preemptive state, if I may say, or let us say somewhat adventurous or say, aggressive step of putting up a manufacturing facility that provides us with higher level of margin and gives us control on the production chain. So we would play in both because there will be price sensitive consumers would continue to and they don't require the alkaline because [indiscernible] go into flashlight and [indiscernible] stuff like that [indiscernible]. We will put alkaline into the hands of the people who can afford to pay higher price and they may have [indiscernible], costlier devices, which require alkaline.

So I think there can be still coexistence. It has happened in most countries, but with growing affluence [indiscernible] to alkaline and then there is a correlation. Obviously, I mean, our battery is something that people need for their [indiscernible] they can only use either an alkaline battery or carbon zinc battery. Now if you were using carbon zinc battery and [indiscernible] carbon zinc battery.

But I think India is still far away from that conversion. While there is very, very decent tailwinds behind the alkaline category at this point of time. So I don't think, overall, see this year, the problem we have faced is nothing to do with alkaline cannibalizing [indiscernible]. It has come because there has been very poor [indiscernible] right through the half year from the real part of our business where we have suffered. So that is something that we are analyzing [indiscernible] that took place and what is -- what are the countermeasures that we need to do? Is it just a temporary market problem? Or is it something to do that? Or whatever? So that part is what we are focusing on. It has no reflection on the overall market.

[Mithun Aswath, analyst]

But just wanted your thoughts on the carbon zinc category, would the market itself [indiscernible] declined in the first half?

[Suvamoy Saha, executive]

[indiscernible], as I told you, we declined from the rural part of the market.

[Mithun Aswath, analyst]

I'm just trying to understand the trend, if there's an x number, do you feel that even growing at low single digits? Or do you say [indiscernible] stagnant?

[Suvamoy Saha, executive]

So if [indiscernible] maintain this growth, I think carbon zinc is going to grow at very low single digit. [indiscernible] it has grown the [indiscernible], but it has come specifically from a geography, which is unaffected by alkaline. So we are trying to use a sort of -- understand that particular [indiscernible]. [indiscernible] In fact, our premium carbon zinc batteries have grown, they have actually key decent [indiscernible] pace of growth varied between say 4% to 10%, which has been good for us because they're very profitable products [indiscernible] alkaline.

The rural part doesn't co exist with alkaline and that has when the growth has taken place. So this particular hypothesis is not applicable in the current.

[Operator]

Next question is from the line of [indiscernible] from [indiscernible] Investments.

[Unknown Analyst]

Sir, my question was, can you please provide product-wise, volume, value and EBITDA number for this quarter?

[Suvamoy Saha, executive]

So battery, you can see that for the quarter, our revenue is INR 240 crore. Flashlight is INR 48 crores and INR 85 crores is a lighting business. EBITDA percentage is at 17.5% for batteries, 8% for flashlight and 2% for the lighting business.

[Unknown Analyst]

Volumes, sir?

[Suvamoy Saha, executive]

Volumes -- they are not sort of -- there are different [indiscernible] in lighting there are very many product SKUs which are not sort [indiscernible] make no sense by counting them.

[Unknown Analyst]

For the battery segment, sir?

[Suvamoy Saha, executive]

Battery segment -- so for quarter 2 battery segment, it is at 316 million.

[Unknown Analyst]

Okay and flashlight?

[Suvamoy Saha, executive]

Flashlight [indiscernible].

[Unknown Analyst]

And second question is that you have introduced some new products like Siren torch, mosquito bats, [indiscernible], et cetera. So where are we capturing these products -- kind of which product vertical?

[Suvamoy Saha, executive]

So this mosquito bat is under battery. And Siren is under the flashlight.

[Unknown Analyst]

[indiscernible]

[Suvamoy Saha, executive]

It will be for lighting -- accessory business of the lighting it could be.

[Unknown Analyst]

Okay. Third question, sir, is there is a lot of correction in the prices in the LED market? So at what level of revenue can we reach the breakeven -- on the PBT level?

[Suvamoy Saha, executive]

[indiscernible] maintained the annual level [indiscernible] we said INR 400 crores is a very good number to become a breakeven for the organization, seeing the past trend. And last year, we ended up at INR 310 crores. We are looking for how can we -- this year actually -- year-end, we are targeting to make it break even. So INR 400 crores is a good level to do a business breakeven for lighting business.

[Unknown Analyst]

When do you plan to reach -- when do you think we can reach 5% EBITDA margin?

[Suvamoy Saha, executive]

So first, we have to definitely cross INR 400 crore benchmark. And then, of course, [indiscernible], I think the 5% would be between INR 500 crores to INR 600 crore company can easily target 5% plus EBITDA margin.

[Unknown Analyst]

All right. Just one last question. With current price, when do you think we can reach $100 million revenue in the LED business?

[Bibek Agarwala, executive]

See, it is not only LED [indiscernible] lighting portfolio, what the disturbances happen, as you know, that industry [indiscernible] last 2 years, [indiscernible] 15% to 20% [indiscernible] happening. This period also if you see our lighting area despite a very healthy volume growth. Now over [indiscernible], it is becoming very unpredictable. We have not anticipated that the [indiscernible] will happen in this quarter. So if you see at least -- if you ask me at this current stage, we think it will take at least 4 to 5 years to reach to $100 million of revenue for lighting business.

[Operator]

Next question is from the line of Priyankar Sarkar from Square 64 Capital.

[Priyankar, analyst]

Sir, our reach is close to 5 million outlets, I think as you rightly mentioned in the call earlier. So sir, why are we not using this super distribution to launch newer products in newer categories I mean, honestly, it has been more than 2.5 years since the new management has taken over. And so by when can we expect to enter at least indicate to the street, what is the fourth category that we will be targeting? I think the large part of the investor community is actually eagerly waiting to hear this from the management.

[Suvamoy Saha, executive]

Okay. So Priyankar, it is like this. We are -- last 2 years, we took a very bold initiative of changing our distribution. I mean, it may seem pretty sort of modest to an outsider, but it was a huge challenge internally because involve the entire ecosystem of our selling personal distributors, channel partners [indiscernible]. So we naturally faced a lot of challenges, and we have overcome thankfully, all of that. And so we could not focus on these diversification efforts.

Today, because things have now come under control, we are looking at adding adjacent products. We are looking at adding newer categories. We have already started the work. I think it will take us another maybe 2 quarters before we can meaningfully articulate on the same, but you would see a lot of adjacent products being added throughout business.

For example, we have added these mosquito rackets. We have added a lot of accessory items in our lighting side. We are -- so similarly, we keep adding. We will shortly be out with power banks. So these are adjacent products. These cannot be treated as categories per se. They will add heft to our overall turnover, but we really need to also look at, as we very likely said, for [indiscernible] category, which we will be able to articulate in the course of the next 2 quarters.

[Operator]

Next question is from the line of [indiscernible] from RW Equities.

[Unknown Analyst]

Hello?

[Operator]

The line for the participant dropped. We move on to the next participant. Next question is from the line of Saket Kapoor from Kapoor & Company.

[Saket Kapoor, analyst]

[Foreign Language] [indiscernible] a very small [indiscernible], if you could provide the revenue breakup between battery, flashlight, and the lighting in your press release or the opening remarks -- in the press release a document that will [indiscernible] a lot of our queries. And if you could give that number for H1 also, sir, what is the breakup between -- in percentage, [indiscernible] between battery, flashlight and the lightning? Sorry, if you have given the number -- pardon me for that.

[Suvamoy Saha, executive]

Okay. Saket, we [indiscernible] suggestion. It is a positive suggestion. We actually have been articulating these breaks in this call. But we take your point that we can even articulate it in the press release that we give out. Thank you. Thank you for the suggestion.

[Saket Kapoor, analyst]

Okay, sir. Can you give the breakup for the first half, sir?

[Suvamoy Saha, executive]

So our batteries is at INR 456 crores, [indiscernible] INR 108 crores and INR 166 crores is lighting.

[Saket Kapoor, analyst]

INR 456 crores, INR 108 crores and INR 166 crores.

[Suvamoy Saha, executive]

Absolutely, right.

[Saket Kapoor, analyst]

Okay. And you are looking for closing the year for the lighting segment at INR 400 crores?

[Suvamoy Saha, executive]

No, not really. I'm not told [indiscernible] where we can have the breakeven of the industry in the standard. [indiscernible] is it like this, we are currently at a breakeven level. But the previous person who asked the question, say that what level you can see breakeven on a sustained basis. To which Bibek answered that it is INR 400 crores. He didn't say that this year, we are attempting to go INR 400 crores. But for the historical fact, we are breakeven actually slightly positive even for the [indiscernible].

[Saket Kapoor, analyst]

And you mentioned about the fact that H2 is generally softer than H1. So can you explain the key factors that attribute and these categories do generally [indiscernible]?

[Suvamoy Saha, executive]

So H1 has a seasonal [indiscernible] in the flashlight business and to some extent, in the result part of the battery business, which did not happen this year. But the flashlight business did happen, and that generally gives a kind of a little bit of a, I would say, [indiscernible] skew to the [indiscernible] half to that extent is little muted.

[Saket Kapoor, analyst]

Okay. sir, when we look at the finance cost, it is lower significantly and [indiscernible] the team, do we have any ForEx impact also in our numbers? [indiscernible]

[Suvamoy Saha, executive]

Not really.

[Saket Kapoor, analyst]

[indiscernible] the operational numbers and the savings will continue for the second half also?

[Suvamoy Saha, executive]

So savings in the case, you can see we are continuously reducing the [indiscernible], right, and getting the interest -- borrowing at a very cost-effective way. So that is why more and more we do the rate reduction, the interest costs will automatically come down.

[Saket Kapoor, analyst]

[indiscernible] finalizing the game by the middle of December. And when we will be drawing the money for the same?

[Suvamoy Saha, executive]

Similarly, at that point of time because the major [indiscernible] be requiring for the machines and all. So probably mid of December onwards will start drawing revenue.

[Saket Kapoor, analyst]

Yes, right. And lastly, sir, on the other expenses part, do that line item have any one-off? Or are those variables in terms of the increased revenue?

[Suvamoy Saha, executive]

[indiscernible] basically other expenses, these are basically [indiscernible] promotions and all other expenses are there. So these are routine expenses are there.

[Saket Kapoor, analyst]

Okay. Because that has increased by 10% year-on-year also and Q-on-Q also.

[Suvamoy Saha, executive]

[indiscernible] to advertisement is high. So -- and out of INR 7 crores absolute increase we see INR 6 crores is increase in the [indiscernible] only.

[Saket Kapoor, analyst]

Okay. And lastly, sir, when we speak about RTM coming into play for H2, what can be the increase in margin or the incremental margin that are expected to flow into the P&L when RTM impact benefits will be fully absorbed?

[Suvamoy Saha, executive]

See, RTM will help us to increase the revenue, which is the need for the hour, right? We are currently having a very decent margin. If you see quarter-by-quarter, yes, we are giving a decent margin. And of course, the way we are doing material hedging. Now, of course, the margin may not improve much, but your absolute values will keep increasing as our revenues keep going up. And that is the focus first stage. And of course, that whatever will come from the efficiency, it will be coming in there. But more and more revenue will be giving up a very higher absolute value of the profitability and may not to the extent margin, barring the efficiency factor.

[Saket Kapoor, analyst]

And this route to market is the main capital interesting that we have done [indiscernible]?

[Suvamoy Saha, executive]

Yes. [indiscernible] us formulating the plans and [indiscernible].

[Operator]

Next question is from the line of [indiscernible] from [indiscernible].

[Unknown Analyst]

Yes. Sorry, the line got cut earlier. And congratulations on a good remarkable show in a tough market. Sir, I just wanted to check, I was not sure when you mentioned that the CapEx is towards a multiproduct facility. So I just want to check this multiproduct will be within the alkaline category or are there any other products also that might come up in that facility?

[Suvamoy Saha, executive]

So basically, this plant is for alkaline but in order to make it more economically viable, we are also thinking of adding some other product line. Those are not within alkaline. They could be other [indiscernible]. Because the more you develop scale, you get more efficiency out of [indiscernible].

[Unknown Analyst]

But it will be in batteries only [indiscernible]?

[Suvamoy Saha, executive]

[indiscernible] also do flashlights.

[Operator]

Thank you very much. As there are no further questions, I will now hand the conference over to the management for closing comments.

[Suvamoy Saha, executive]

Okay. Thank you, everyone, for taking time out to join us on this earnings call. I hope we have adequately answered earlier questions. If you still have more queries, please reach out to our Investor Relations team, and we will be happy to address those. Thank you, once again, and look forward to connecting with you again in the next quarter.

[Operator]

Thank you very much. On behalf of Eveready Industries India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.