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Havells India Ltd
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Ladies and gentlemen, welcome to Q1 FY '19 Conference Call of Havells India Limited hosted by Batlivala & Karani Securities India Pvt Ltd [Operator Instructions] Please note that this call is recorded. [Operator Instructions] I would now like to hand the conference over to Mr. Charanjit Singh. Thank you, and over to you, sir.
Thanks, [ Shihsri ]. Good evening, everyone. We would like to welcome you all to the Q1 FY '19 earnings call of Havells India. The management today is represented by Mr. Anil Rai Gupta, Chairman and Managing Director; Mr. Rajesh Kumar Gupta, Director of Finance and Group CFO; Mr. Rajiv Goel, Executive Director. I would like to hand over the call to Mr. Anil Gupta for his initial remarks, post which we'll open the floor for Q&A. Over to you, sir. Hello?
Good evening, everyone. Yes. Hello, can I start?
Yes, sir. Please go ahead, sir.
Okay. Good evening, everyone. Thank you very much for joining the call. So FY 2019 has started on a very encouraging note with secular growth across all product verticals in the first quarter. It has been partially supported by lower revenues in the GST-disrupted quarter of last financial year. Still, the growth is well dispersed and seems sustainable. Switchgears business has also grown after several quarters led by exports as well as domestic markets. ECD continues to do well, though it was mostly -- most affected in the last year in the first quarter, and also headed by Lighting and Cables. Lloyd completed the first -- one full year since its acquisition. We are greatly satisfied with this progress and are positively disposed on its underlying potential in the long run. To summarize, we are quite optimistic on sustaining growth ahead in both revenues and profitability for the rest of the year. We can now proceed to Q&A.
[Operator Instructions] We have a question from Mr. Naveen Trivedi from HDFC securities.
Sir, if you can just give us some idea about the breakup of the ECD business in terms of how new products are panning out and if you can share about how fan market has like -- and your growth in the same segment.
Okay. Generally, we don't really give certain numbers. But as you can understand, a large part of this business is Fans and Fans has shown a very decent growth in this quarter results. Not that we've not grown well last year, it's just that GST disruption had been the maximum in the consumer durables category in the last year. And hence, we can say that this growth is partly headed by a low growth in GST -- lower growth than last year. But overall, I would say that the Fans growth has been decent. Our focus on leadership position in the premium Fans category has really led to this growth. First quarter, I would say that the market has done decently well. But I think -- I definitely feel that we have gained market share both in the premium category as well as in the [indiscernible] category. So -- and we continue to do well in the appliances category. We mentioned last year that the -- there was a lot of corrective actions in the domestic appliances business, and that has now shown leading growth in this. So overall consumer durables, all 4 categories, including Fans, has moved to [ growth ].
Sir, is it possible to share our market share in the fan market or Fans segment?
Well, I think overall here, definitely around 15%. But in terms of premium, 17%. And in terms of premium fans here, definitely above 40% of the -- 40%, 40%.
40%. And is it fair to say that premium contributes around 18%, 20% of the market?
Around what?
Premium segment contributes 18% to 20% of the total fan market?
Around 1/4 of the market.
Okay, fair point. If I can just ask about one more question on the Lloyd business. Considering the -- that it's summer, you reported 14% growth during the quarter. So how this thing has panned out well for you considering this season was expected to be very weak for the -- this season. So if you can just give some highlight on that part.
So I think, first of all, it is a product mix of all the products: air conditioners, LEDs and washing machines. However, as you can understand, that it is largely led by air conditioners. There has been a lot of efforts put in, in the last year on Lloyd. Also, on the brand building, the channel expansion, getting into newer channels, ultimate channels. So a lot of it is also due to that. And also, there are the -- changes in the energy ratings there also helped the ASPs of the products, as well as consumer also going towards higher-end products, say, in both of these [ categories ]. So in effect, the change in the brand perception, the premiumisation of the business is definitely helping. However, I really wouldn't say that -- because we still are a small player in this segment, there is a lot of scope to grow, and we definitely should give Lloyd a breathing space for showing long-term potential. So I think midyear focus is on putting in investments in Lloyd in the coming years.
Fair point, sir. If you can just share the last thing, the AR volume growth in RSC and the market growth in -- during the quarter.
There I think we'll have to look at in-depth and get back to you.
[Operator Instructions] We have a question from Mr. [indiscernible] from Axis Mutual Fund.
Just 2 questions. I'm not asking you on a year-on-year where you still have a base in your favor and next quarter also base in your favor. Q3 where you start catching up with 180 crore, 190 crore profit. My first question is related to Lloyd. As you mentioned, you're still a lower or, let's say, a small player in the market. When we saw Videocon leading out the space, which used to sell about 14 -- almost 24 in lakh units, isn't it, it was a chance for you to go ahead, acquire that market, rather than increasing your price higher than Daikon and Voltas and still fighting for now because everyone caught and came up -- captured those units? So I just want your thoughts on that, and then I'll take up the second question.
So I think there are certain discrepancies in the fact that you have cheating in terms of your numbers that the competition is doing as well as our market shares or our pricing. So I think the best is that maybe we can take it offline, and you may want to spend some time on the overall strategy. There is -- there are some discrepancies which I don't think I would want to take time on this call.
Okay, sir. Sorry for the [ JFK ] data. It was not mine. So they must be having a discrepancy there. My second question is relating to your base business sequentially. When you look at quarter-on-quarter, you're still sort of 3% decline when we look at your part in Lloyd. I just want to understand, especially from the ECD segment and Lighting because you said in Q4 there were some one-offs in Lighting, that the Lighting grew very fast. And sequentially, I think it should be normalized, if I'm correct. Correct me if I'm wrong. Which are the categories you're looking in this year which will, let's say, have a peak crore category or less than 100 crore category, which can eventually become a 150 crore or 180 crore category? I just need your thought on that, that's it.
So I didn't get when you were comparing sequential degrowth over this because most of the categories that...
So when we add your Lighting, your Switchgear -- when we add your Lighting, your Switchgear, your Cable and your ECD, quarter-on-quarter, segment-wise, it's a 3% decline when I add these 4, yes.
Yes, that -- I -- there is always a seasonality. And this year, in fact, the decline is lesser than in the past few years.
Absolutely.
Q4 is actually the highest sales because of the year closing, and a lot of momentum is coming into play at that point in time. And seasonality was some part of it. So I think there are various initiatives by the company. There are many new product categories, which are -- for example, we have launched personal grooming a year ago. We launched water purifiers just very recently. Solar is a product category which is new. [ View ] is a segment that is now established a distribution base all across the country. Now we are pushing more product categories to that and getting into the rural and the semi-urban segments. So I think there's huge opportunities for organic growth in every product category. And so I will not say just next few quarters. But generally speaking, there are many, many opportunities for growth.
Any thought to where you're looking at, let's say, a Water Heater or something that I -- and my question was pertaining to that. Any top 2, 3 categories?
Water Heaters, they are already in the top -- yes, Water Heaters, they're already in the top 3...
Absolutely. That was an example. So I'm saying apart from Water Heater, any particular category where you think you can grow much faster than...
I think product categories like -- I think domestic Fans, water purifier, solar, air coolers. So there are so many product categories which have a potential to definitely grow at a much faster pace than the overall growth.
We have a question from Mr. Inderjeet Singh from Macquarie.
My first question is regarding the Switchgear growth. Would you want to kind of comment as to what was the driving factor behind that? Is there already signs of real estate starting to already kind of get better in that -- for that market?
So I would say that Switchgear is a mix of growth factors. I think generally speaking, I would not say that there is a huge divider in the real estate but stabilization of the distribution segment. The GST was a great move by the government to bring clarity amongst the entire trade network. But it has taken some time for the trade also to get used to the new regime. And I think that has stabilized and that has given good parameters, good opportunities for growth in the trade segment. I think as a company, we've always maintained that we are extremely strong in the retail segment, and this was affected over last few quarters after GST. So it's coming back and it's definitely helping us. The old base of last year has helped us. Exports growth has also helped us. Certain product categories like Switchgears and even motors, with the change in the efficiency ratings, I mean, that's why they're scared to invest. So I think it's a mix of things and combined together. I still would take some more time to say that the real estate sector is coming back, which is definitely the largest part of our consumer switchgear. So we'll be happier if this kind of growth continues in the 3 quarters. Then you can say that things are coming back.
Sure. My second question is regarding Lloyds. So how do -- how would you characterize the progress until now? And would you think -- how far are we from a stage where we can start even normalizing the capital deployed in that in terms of working capital and those kind of things? And where are we in terms of eventually putting up a plant for the air conditioning business in that? And that's it from my side.
First of all, I would say the [indiscernible] is now more than satisfying, absolutely satisfying, more than satisfying, I would say. It had no surprises. Things there even turned out to be better than what we thought. Things are turning out to be better in terms of speed of implementation of certain initiatives that we are doing. So until now, it's been absolutely satisfying. The nature of the business is such where there will continue to be seasonality. As long as a sizable part of the business will be air conditioners, there will be seasonality within this business. And I don't think -- even then, we're looking at smoothening of the working capital in that sense. Working capital is very efficiently deployed in this business. When will factory come up? Yes, it can, helping -- reducing the inventory to a certain extent. But it will not -- the business will not change a whole lot.
We have a question from Venugopal from Bernstein.
Sir, on the -- you mentioned on the Lloyd business the impact of FX, rupee and stuff. So I just wanted to understand 2 things there. Rupee depreciation was so bad in the last 2, 3 months or rather YTD. So is there any residual risks that you see from here or in terms of potential future impacts this year because you would be sort of buying internationally or whatever the exposure you'll have? That's one. And the creditor side, because you have fairly long creditor days with some of your Chinese suppliers, as you said, what kind of FX exposures are there which are potentially going to hit you when you actually do the tax settlements? And how does that accounting work? So that's my first question.
We know -- yes. So we know -- having known the question, though, usually it's 1 question. It's basically answered that this is the statement of liabilities at the end of the June quarter. So what you are for the year only takes then the full exposure of all the [ titles ] which have remained unpaid as of -- that are due. So to direct line, if you're still not -- it's delayed, we'd like to explain money's actual payment is due. But I don't want -- so I'm saying whatever the rate of the dollar, we have taken the hit and which is reflected in our financial accounts. So you could argue this is -- this could be something which is for the year, depending on the ForEx movement.
Got it. Okay, got it, yes. Okay. Got it, got it. So it's already reflecting in your P&L. My second question is Lighting business. You mentioned in the commentary that street lighting was a business you're seeing growing fairly well, really sharp growth in the last couple of quarters Y-o-Y perspective. Now here, when I look at that sequential decline, and the reason I'm saying sequential decline is because you made a commentary saying that we're actively sort of not looking at EESL now. We're just sort of trying to more of that, maybe pricing pressure or whatever. So does that really in any way impact how you look at growth for the segment this year? That is sort of my -- one of my questions -- second question rather.
There's 2 parts to your question again. One is a sequential part, and the other is the ESL part. I think we've always maintained in the past that we were asked this question why we are not very aggressive about ESL. We always maintain that we will be looking at businesses where we normally don't do a lot of government business. It's only the businesses where technology is understood and there's not a huge number of players like [ 5 or 9 ] kind of operators and it becomes more like commodities. So we have taken businesses in the past which are requirements only. And that's why our focus on the ESL business can be choppy. We've always maintained that. And so we look at decent margin business in ESL. And so it's not that we want to get a risk out of ESL. ESL will continue to remain as a great potential business. Again, various technologies will be asked for rather than commodities. There we'll participate and we'll continue to do the business. But we have to look at the Lighting business as separate other than ESL. So there is Lighting business but in...
So is there a way to quantify the last year's ESL number? Or is there a way to quantify last year's ESL number sitting in the Lighting business? I just want to understand what is the outlook.
I think whatever is -- yes, whatever is -- yes, there's a category that is all ESL business. So I think that we will have a [indiscernible] this quarter.
So you'll be merging that with Lighting, right?
Yes, I think we'll get back to that number, okay. And as far as your second question goes on the sequential part, normally in professional over there, which is one part of the business, which is almost 40%, 45% of this Lighting business, there we see a spike in the fourth quarter. And that's because of government projects coming in during that time, closure of many projects, CapEx projects, government projects. And hence, any shortfall that you see over the fourth quarter and the first quarter can be termed as seasonality. So it's really can we see sequentially there being one? We -- I think overall, Lighting continues to be extremely exciting opportunity for growth for us. And also, it will be sort of a guiding factor for us for growth in the semi-urban and the rural sector. So there we will take Lighting as the distribution in this -- into this region, in these areas, and then followed by other product categories. So I think overall, with the LED-ification that the government begets on LED, definitely they'll still continue to offer great opportunities for growth.
We will have our next question -- we have a question from Mr. Balwinder Singh from Canada HSBC Insurance.
If you can talk a bit about the margin improvement that we have seen in this quarter and also the raw material outlook.
Any particular category that you're asking?
Yes, we have seen sharp margin improvement in consumer durable segment. And also -- I -- also then in Others segment. So if you can talk about both those segments. And also on the raw materials side, what outlook do -- you can share.
I think margins, though, over -- quarter-on-quarter might not be a right reflection, right comparison because, as I said, consumer durables had -- was impacted the most in the first quarter last year. With the lower volumes, the margins also got affected. And hence, I would say that if you'd see sequential margins for ECD, we are in the range and continuously improving. As far as raw materials go, there is a business of Cables & Wires which get directly impacted. And any increase or decrease in the commodity prices normally gets passed on to the consumer. I think there is a time like there's a sharp increase or decrease. Then there could be a hit or a gain. Otherwise, generally speaking, it gets passed on. There is an inflationary pressure on the -- of the commodities, on the businesses. And hence, a lot of focus on rightly pricing the products in the market, but also a lot of focus on the efficiencies within the factory. So whenever that comes, it's passed on as few as possible to the consumer, but more the margins who are in [indiscernible]. Overall, I think the fact that we've been able to maintain margins despite an inflationary push on the commodity prices is also reflecting on the overall efficiency of the company, and that -- we'll continue to maintain that. Overall...
I think basically on the Cable segment, we have seen margins improve from 13.5% last year to almost 17% in this quarter, earlier quarter for us.
So again, you'll have to see it sequentially. So sequentially, there has been a consistent positive improvement in this segment. So I think overall -- and so it means 15%, 17%, 18%, there should be a good reflection of that.
We have a question from Ms. (sic) [ Mr. ] Saumil Mehta from BNP Paribas Insurance Fund.
Sir, I just want to check on one thing. The warranty provision number for this year has gone up significantly. For which part of that business is it? And, I mean, on the medium-term business, do we see any concerns of those warranty provision numbers are thriving?
Actually, warranty provision overall is largely because of consolidation of Lloyd. And I think you would notice that last year, Lloyd was there only for 1.5 months, not for the full 3 months. So that's why suddenly your number looks much higher compared to the past years. And if then, I could say it's not comparable with the past year. But if you look in a world which is -- and if you normalize this thing, there is nothing we can change in the warranty provision.
So that number as a percentage of total sales should not be moving up significantly from currently. Is that a fair assumption?
That's right, that's right, that's right. Let's see from next quarter. You would not see this anomaly.
Okay, okay, okay. And sorry for the repetition. I just wanted to check. What kind of inventory levels do you have right now? And with the rising copper pricing and some of the commodity prices, do you see working capital as an issue in coming quarters?
[indiscernible]?
Yes.
There is -- again, inventory levels are pretty much, you see, under control. And we don't see that increasing commodity would lead to any increase in the inventories. So this commodity has been oscillating in the past, but I think it has been pretty much within the limits we have set for ourselves.
We have a question from Shrinidhi Karlekar from HSBC.
Sir, just 2 questions from my side. Sir, would it be possible to break the 18% like-for-like growth in Cables & Wires segment in volume and price? And would it be possible to give some guidance on the volume growth of this part of the business? And then, sir, the second question, can we just...
We'll start...
On Cables & Wires.
Okay. In cables & Wires, 8% growth in volume and overall 18% growth. But also, there is a reverse base effect in this business segment as compared to other businesses. Because last year, because the implied GST rate was coming down and hence there was an offtake of extra stocks by the distributors as against other businesses, this was actually the other way around. So there is a base effect in this business as well but on the -- both sides.
And sir, how do you see -- I don't want numbers, but how do you see outlook for this part of the business on volume growth?
So I think decent. We are still looking at good potential to grow in the coming quarters.
And sir, last one, if I may. So the -- your data point as an adverse effect impact for a sequential decline in Lloyd business -- Lloyd segment margin, would it be possible to quantify the absolute impact that it has on this quarter?
I think there you need to take comparison over the last year similar quarter, wherein there was a seasonable impact. So not much product mix has changed over last year. Hence a similar pattern would continue to remain in the coming quarters.
Anil sir, what I'm -- was asking is really -- maybe I'm not getting what you are trying to say. But I just want like -- one of the reason for the sequential decline in Lloyd business was because of FX impact, right? So I just want how many crores of FX impact did really happen during this quarter?
Actually, that we have already said one of the impact is around INR 8.5 crore, which is already captured in the financials of Lloyd. Apart from that, you see, it could be another couple of percentage points on the sales for this quarter. But, you see, this could happen that -- in any case, the prices it could get reflected in the future quarter. So it can get recovered. But yes, you could argue that it could be a couple of percentage points on that.
We have a question from [ Lakshmi Narasimhan ] from Tata Capital.
I would just want to know what do you see to be the reason for the fall in revenue Y-o-Y in Lighting & Fixtures? And how do you see the growth going forward? And how do you look to arrest this?
Y-o-Y or sequential year?
Y-o-Y.
Y-o-Y, we've already mentioned that there is overall growth about 25% if we take out the ESL effect, which were shown as others. So ESL, if we take out, last year was a INR 50-crore business; this year, it's only a INR 1-crore business. If we take that effect out, it's almost a 25% growth.
So my follow-up question to this is, do you then see your margins also improving in this segment considerably going forward?
Why would it be so?
With ESL...
No, I want to mention that ESL also we don't take commodity orders. There also we take products which are not very low margin and based on higher technology.
We have a question from Pulkit Patni from Goldman Sachs.
Just, sir, one bookkeeping question. On personnel expense, clearly, there's a pretty significant jump in the quarter from a range of about INR 160 crore, INR 165 crore, which we were doing every quarter, we moved to almost a INR 200-crore range in this particular quarter. What is the run rate that we should expect from here on? Or does this quarter include some one-off in the personnel expenses?
[indiscernible] including Lloyd. So last year, only say 1 to 1.5 months was for Lloyd. So this time it has been added. And other is the increment. So the increase is -- the increment effect as well as Lloyd full quarter impact has come in, in this quarter.
No, sir. So if I just read through the numbers, every quarter it has been in the INR 160-crore, INR 165-crore range. So is it that this quarter had the increment and then after that it continues this way or does it fall back to INR 165 crores?
No, no, no. No, this is right, Pulkit, that this is because of increment normally, which gets structured in the first quarter. And so that -- so we should assume this number going forward for the year.
We have a question from Mr. Bhargav from AMBIT Capital.
Sir, is it possible to share the cash conversion cycle of Lloyd as well? Because I think in the presentation, only the stand-alone bit is highlighted. Or does it include Lloyd as well?
It include Lloyd as well. It is combined.
So, sir, I mean, is it fair to say that despite Lloyd being a sizable part of revenue, overall cash conversion cycle is just about 18 days?
Yes, that's right. 14 days in this particular quarter.
So sir, can we assume this as a trend going forward? Meaning that, including Lloyd, we can still manage with less than 20 days of cash conversion cycle?
We will try to live up to your expectations, Bhargav.
Sir, secondly, if you can just share in terms of how many exclusive showrooms we'll have for Lloyd now. And secondly, if there's any addition on the MBO side for Lloyd?
For Lloyd?
Yes.
For Lloyd, it's about 55 right now, and we continued -- continuously expanding. And multi-brand outlets are opening by the day, so multi-brand outlets, regional retailers as well as modern format. As I've shared in the past, that Lloyd was not present in multi-brand outlets, the other outlets -- large-format stores as well. So that's a continuous endeavor.
We have a question from Niket Shah from Motilal Oswal.
Just wanted to know what is the comparable number for Lloyd in the last year first quarter? Because I think we didn't consolidate completely in the last year first quarter. So what will be a comparable number to that?
So it would be -- if you do on a like-to-like basis, it would be 14% Y-o-Y growth.
14% Y-o-Y growth. And safe to assume bulk of them -- I mean, obviously, because AC is a larger category, safe to assume that even AC would have seen a similar growth?
Let's say bulk of it is AC. The heavy lifting is by ACs only.
Heavy lifting is done by AC?
Yes.
We have a question from Mr. Vinod Bansal from Franklin Templeton.
Just one thing on the Cables business. I believe you discussed this a bit earlier as well. The margins continue to be very strong despite the fact that commodities have gone up in the last couple of months, perhaps more. This business used to be 12%, 13% margins at the segment level till about FY '17, and we saw a benefit in FY '18 because of lower commodity. Yet, your margins have remained surprisingly strong. Could you share some -- what's happening in this business because I suppose this was the most commoditized of all. And where do you see the margins going ahead in next, say, 1 or 2 years?
So actually, this business is definitely more commoditized than other commoditized commodities. But, however, I would not say that it is a commodity business. It is still a very brand-oriented, distribution-oriented business. But as compared to, let's say, a switchgear or a fan or a lighting, this is -- there is a lesser value addition as compared to other products. We sell by brand, so a constant investment in brand and distribution definitely helps us improve the margins. And hopefully, this is definitely a more -- on the raw material side is -- also this is more of a commoditized product, hence the margins can vary a little bit, but we'll continue to strive to maintain these kind of margins.
Right. If I may just persist with this, I think last year we mentioned that there was a onetime low cost inventory benefit that sort of uplifted the margins. And the guidance, I don't know if I remember correctly, but about 15-odd percent should be sustainable number. So are we to assume that 17% is more doable now and the 15% is like a lower number to look at?
So I think let's look at a range between 15% to 17%. As I said, the raw material side is very commoditized and hence it is difficult to predict monetized, to predict the exact margins. Yes, in the second quarter of last year, we did get an update from the -- for the lower commodity and the advantage of inventory that we had. But otherwise, generally speaking, 15% to 17% is the kind of margin rate that we should expect.
Right. Okay. And if you can give us some broad sense without quoting numbers, would this kind of sort of a higher-margin scenario would be there for your peers as well in the industry?
That I'm not sure of, I can't say at this moment.
Okay, okay. Can you also, in the Cables business, give us a volume breakup between your retail and your institutional -- industrial business? You said 8% total volume growth, the breakup of that into the 2 segments?
Yes, almost 50-50.
We have a question from Mr. Ashish Jain from Morgan Stanley.
Sir, firstly, can you share the EESL number for 4Q, which is there in Lighting. Because last year -- last quarter you reported Lighting including EESL.
Around INR 30 crores. In quarter 4 of FY '18 you're asking?
Yes, sir.
Around INR 30 crores.
Okay, got it. Sir, secondly, if I look at your commentary on Cables & Wires, I think last couple of quarters we have been seeing that volumes are flattish and the revenue growth was more driven by price hikes and all versus this time we're talking of 8% volume growth. So should we think this is more sustainable and can accelerate further? Or there is something else to this?
No, I think let's see -- it's start of the year, let's see how it develops over the next few quarters.
Sir, the only reason I'm asking because the last couple of quarters you've been talking of flattish volume growth and from that if this 8% to 10%, would you -- okay, so you would not draw any tend or demand improvement kind of a trajectory from there?
Yes, I think it's too early to say this. As I was saying earlier, that the GST disruption which happened, it took some time for the trade to come back to its normal level. And though we were expecting within a couple of months it will happen, it took some more time. And I think things are now almost back to normal. So that may be an impact as well.
We have a question from Abhineet Anand from SBI Cap Securities.
So first thing is on our CapEx plan for the RAC capacity, where are we on that, sir, in terms of what is the expectation of FY '19 CapEx?
So we are looking at almost a INR 300 crore kind of a expansion plan on this. And I think by the fourth quarter of this financial year, we should be up and running.
And what volume or the capacity in terms of RAC are we looking at for this INR 300 crore CapEx that we are doing?
Initial 600,000 [indiscernible]
In terms of [Indiscernible]
600,000 pieces.
Okay. And secondly, Havells ex of Lloyd for the current year F '19, what's our expectation in terms of sales growth for the year, sir?
For the year?
Yes, sir.
It's just 1 quarter gone, so let's wait. We are not guiding any forward.
Okay, okay. And lastly, sir, what is in the mix of wires and cables in our -- the Cables & Wires business?
I'm sorry, can you repeat the question?
Mix of wires and cables.
It's 50-50, Abhineet.
We have a question from [ Keyur Shah ] from Emkay Global.
All my questions have been answered.
We have a question from Harshit Kapadia from Elara Capital.
Just a few questions. Can you give out how much is your inverter sales compared to your overall sales in the AC division for Lloyd is at present?
30%. Month-on-month basis improving at now up to 30%.
30% of your sales. And -- but this number is much lower than the industry. So we -- can we think that...
Industry is also maybe 35%, 40%. So, yes, I think it is improving for us also every month. But I think 30% is a good place to be in. It grew from 8% to 30% in a year.
In a year's time, okay. And sir, you have tied up with Hyundai for industrial switchgears. So when is that going to start -- we're seeing to reflect in your Switchgear business?
It's already started. So we are already supplying some switchgears to Hyundai. And on the other side, on the other industrial products also, by end of the year we should be having the products also for that.
Sir, how much of the export revenue you said one of the reason why Switchgear was higher was because of the exports. So how much of the export content consisted [indiscernible], sir?
I think the exact numbers, we would not like to share.
We have a question from Aditya Bhartia from Investec.
Sir, my question is on Lloyd business. This year we had unfavorable weather, despite that you have delivered around 14% like-for-like revenue growth. Is it that we've gained market share in this business? And a related question is, that despite revenues in Q1 being higher than what we had recorded in Q4, margins are somewhat lower. So is there any seasonality in margins involved?
No, I think as far as margins are concerned, as Rajiv has already explained there were unfavorable foreign exchange movements, which have impacted the margins. So otherwise, things have been quite stable at -- from a pricing and cost point of view. As far as -- I think overall market, yes, region to region, it has varied. So some of the regions like Northern region had intermittent rains and hence the growth was lower. I think it's -- we need to look at more competition numbers as well as more market data to actually see how much market share has been gained or lost. But I think it's not a very prudent way to look at just a quarter. I think over a period of 1 year we need to look at these kind of market share figures.
Okay. And on margins, sir, even if we exclude commodity -- sorry, ForEx impact of INR 8.5 crores, we still had around 9.3%, 9.4% margin in Lloyd business this quarter, which is lower than what we had recorded in fourth quarter, which was extremely impressive at over 12%. So that's why I was asking that...
Okay. So Aditya, we're not talking of INR 8.5 crore, we are saying that, you see, what has happened, we -- as the ForEx cost keeps going up since, you see, April, it gets captured in your new pricing for the modern -- for the products you are having. So it gets repriced, which means that price increased for the same value now you are incurring the higher cost. So this is that ForEx, which is embedded into that, which was not the impact in the first -- for Q4. That's what we're saying, not INR 8.5 crores. And even if you see the ad, you see, we have invested significantly higher in Q1 than Q4. So please do not go by -- when you are looking at EBITDA number, which is a summation of lot many variables than just the price. Price actually has not changed, price maybe have slightly improved only, but there are headwinds in terms of the ForEx cost capturing as well as it is a much higher ad spend, which is 7% in Q1.
Understood, sir. Understood. And coming to the Switchgear segment, just wanted to understand, have we started seeing contribution happening from our B2B foray both, I mean, in Switchgears as well as if you can comment anything on other segments as well on the B2B initiative?
I think there are 2 aspects to B2B. One is the building projects and the other is the enterprise business, which is more focused. So it's not just Switchgear which gets into these product category, it's a lot of other product categories like Lighting and Cable. And we've definitely gained a lot by bringing all these products into these enterprise business kind of a solution. And where we are targeting now newer customers like Reliance and Hyundai and Tata projects. And so there is a lot of focus on enterprise business. I think, overall, it gets captured in the all product categories. It is not just Switchgear. So we are definitely seeing traction from there. But as we see more investments coming in both in CapEx as well as in real estate, this thing will definitely improve in the coming years.
We have a question from Mr. Pranav Tendulkar from Rare Enterprises.
I have 3 questions. One is, can you highlight the demand drivers in Cables & Wires business? Second is, what is the outstanding inventory -- raw material inventory in Cables & Wires business? And third is, can we take now the capital employed in the Lloyd's business as a normalized one, adjusted, obviously, for seasonality? So these are the 3 questions. And if you can explain me how are fixed asset investments in the Lloyds business you are looking into that. So is it an ROC incremental decision? Or is there a IRR that you are looking on that? Or how -- what is the logic behind that fixed asset investments in Lloyds business?
So on your first question, into the demand drivers. So, you see, as we said, we are 50-50 cables and wires, and we also explained that around out of this 18%, 7%, 8% is -- 9% is the volume growth. So on the Cables side, it is largely at the infra. So we see lot of investment happening both by the government and also by the private sector as well. So that is growth on the Cable side. Wire, I think it will naturally, as I said, this is a branded product for us, more distribution oriented. So this is the general growth we see in the market after the GST disruption. And the fact that the rate has also come down from 28 to 18. As far as the outstanding inventory, the inventories are normalized. There is no significant inventory on Cables & Wires. It is -- yes, there will be volatility in commodity like last year Q2 we had certain upside on that. There might be some downside, but it is not something significant. I think these are fairly well, as I explained earlier, within the tolerance limits we have set up for ourselves. On the capital employed. Yes, I think it's a normalized capital employed in Lloyd. It is as per what is for the Havells as well. So we follow the same prudential norms for Lloyd in capital employed. I guess, [indiscernible] seasonality, which you already mentioned in your question as well. And finally, on fixed asset. I think it's not ROC, I think it's more strategic. You see, you can't be a long-term sustainable player just by outsourcing from others, whether domestically or globally. So I think that is the first thing which comes to our mind. You might be aware, in Havells, 93% of what we sell, we manufacture ourself. Industry may be less than 50%, but that's not our guiding factor. And our ROC continues to be superior in the top quartile in the industry. So ROC will follow, that's not the first thing. Yes, I think it is something, which will get delevered, but the first thing is how we strategically position ourself into the industry and the consumer mind.
We have a question from Mr. Niket Shah from Motilal Oswal.
I just want to know how much is the spread between our fixed speed AC versus inverter AC?
30% is now inverter.
No, I mean, the spread between pricing of a fixed speed AC of a similar tonnage versus an inverter AC.
I think that pricing and all, we don't like to discuss. Normally, it will be -- I don't know -- yes, so I think if you want we can take it off. But normally, we don't want to discuss this on the public call.
Sure. And just wanted to know how much would be imports now as a percentage of our raw material cost on a consolidated company-wide basis?
Imports or inputs?
Imports.
Yes. We'll have to check that because Lloyd coming into play, so it's become a sizable part now. So we'll have to check that number.
We have a question from Ashish Shah from Goldman Sachs.
Yes, just one small thing. On the AC business, sir, as I understand, the primary sales would be around 14%, considering most of the Lloyd contribution would come from AC. But if you can help us understand if the secondary sales are also in the same range or have we seen any variation over there?
I don't think there will be a much of variation in the secondary sales because there is not any pressure on the trade to stop the product. So the more and more over the last 9 months or so, I think, the pressure has eased over the trade.
We have a question from Achal Lohade from JM Financials.
Just wanted to check on the Lloyds part. As you said, earlier it was more exclusive stores and now we are also penetrating into multi-brand stores. Would you be able to give a quantification, would that be a bigger driver for the growth in the current quarter on a Y-o-Y basis?
No, no, no. So I would not say that exclusive stores were the bigger push. The exclusive stores was small, multi-brand outlets was also small. I think Lloyds was more distribution oriented, but now we are expanding the channels into other alternate forms as well, so which are these large multi-brand outlet, regional retailers as well as modern format retailers.
How much would that be -- contribute in first quarter, sir? I'm just trying to understand the mix. And is that [indiscernible] to growth?
No, I think, Achal -- no, no, Achal, the mix has not changed significantly for Q1. So you could safely take this is on a comparable like-to-like basis growth. The new channels have not contributed significantly in Q1 growth.
We have a question from Mr. Abhishek Roy from Stewart & Mackertich.
Sir, most of my questions are answered. And just I want to know that, sir, how many AC sales were done in Q1?
Quantity, we can't -- we don't provide. I think we already shared the financial numbers with you.
Okay. And sir, do you think that this Cable & business -- Wires segment is sustainable going forward, that type of margin?
We've already mentioned there is a range that we are looking at, and we'll continue to strive to maintain the margins, but we are looking at a range.
I now hand over the call to Mr. Charanjit Singh. Please go ahead, sir.
We would like to thank everyone on the call, and thanks for the management for taking their time out and giving us the opportunity to host the call. Sir, if you would have any closing comments?
No, thank you very much, and thank you, everybody, for joining the call late in the evening.
Okay, sir. Thank you.