Havells India Ltd
NSE:HAVELLS
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
1 290.35
2 082.4
|
Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Ladies and gentlemen, good day, and welcome to the Havells India Limited Q2 FY '20 Earnings Conference Call hosted by SBICAP Securities Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Abhineet Anand from SBICAP Securities Limited. Thank you, and over to you, sir.
Yes. Good morning, everyone, and welcome to Q2 FY '20 Post Result Conference Call of Havells Limited. The management is being represented by Mr. Anil Rai Gupta, Chairman and Managing Director; Mr. Rajesh Kumar Gupta, Whole-Time Director and Group CFO; and Mr. Rajiv Goel, Executive Director. I will hand over to the management now. Over to you, sir.
Thank you very much. Good morning, everybody. Thank you for joining us on the Havells India Q2 Investor Call. So as you might have seen the results already, I think the investor communication has already review since yesterday. So what we've seen in Havells and Lloyd, demand remains a bit sluggish, more so in the real estate, industrial and infrastructure segment, which has impacted growth in industrial switchgears, industrial cables and professional luminaires, which have experienced very muted growth. However, consumer demand is slow, but still residential switchgear, consumer luminaire, domestic wires and the Havells ECD business has sustained growth, which we believe is due to market share gains and new product launches.On the Lloyd side, it's a mixed bag. We talked about distribution realignment in the last quarter. It's almost in its final stages. We've seen a lot of traction from large-format retail and regional retailers, which is a positive sign. Due to this you see sales, though the season was low because of -- after the summer things have slowed down. And the second quarter and third quarter is slow. So we've experienced flattish growth in AC sales. The major disruption has been in LED panels. And I think because second quarter, third quarter are generally higher for LED panels. There has been a major decline. There's been a price decline in LED panels across the industry for about 25%.The online channels launched via 2 Chinese players, coupled with swift reaction from some leading LED brands further aggravated the pricing and volumes. So LED may have some overhang in the third quarter, but we are now looking at this business in a very different way. And our mainstay business continues to remain ACs. Washing machines is showing a very positive sign. We're looking at more product launches in this product category. And LED panels will continue to remain as a filler, so that we have the comprehensive product range. So the profit decline in Lloyd is mostly largely attributed to the LED business.I think at Havells, we are quite positive. Their contribution margins have been sustained despite the sluggish sales or sluggish environment. There have been -- there has been a strong instances of reducing nonessential costs. The results of which will be quite visible from the next quarter. The demand outlook remaining benign, we are focusing on improving the profitability through better pricing and cost control and materials in SG&A.With this, I close my opening remarks and we can now open for the Q&A session.
[Operator Instructions] The first question is from the line of Bhoomika Nair from IDFC.
My first question is on Lloyd. You know if you see over the last 2 years -- it's been about 2 years plus since we've taken over the company. And we were at about INR 100 crores EBITDA plus and first half has seen a loss in that sense. So how are you seeing this business now moving ahead from a more long term -- medium to long-term perspective? It's been 2 years on. We've done dealer rationalization, trying to diversify the current portfolio was one of the aspects, which we were looking at when we acquired the company. So how are you seeing this company going ahead? And how will things change now that we have our own factory?
Yes. So thank you very much, Bhoomika, for asking a question on the medium and long-term prospects because there are challenges in the short term. And I think those challenges are a little bit more aggravated because of the market situation in many of the product categories. As we saw a slowdown in AC sales last year, which impacted the behavior of many of the players in this -- leading players in this industry. And this year, we've seen a major disruption in the LED panels business. So I think while we are on the track of a distribution realignment, enhancing the product range, upping the premium image of the product category and the brand, and also setting up the complete supply chain for our mainstay business of air conditioners. So all these things happened in the background, including the distribution change also happened because some of the large distributors had to be changed to multiple distributors in many of the states. And they all, obviously, take a little bit more time to get settled.So on this backdrop, the things which have to happen on the positive side, which will impact us in the medium term, long term, that are continuing to happen. So which gives us a very positive outlook. However, because of these -- a couple of disruptions in the last couple of years, I think it has impacted the business on the profitability side as well as the slowdown on the sales side. But we remain quite optimistic. The plant is now operational, which gives us far more control on the supply chain, the inventories, the cost -- and the costs, and how we respond to the market situation. I think there, we have a much better control on the mainstay business, which almost 70% of the business is on the air conditioning business.Washing machine, which was just a product pillar. I think now it's becoming a little bit more sustained in terms of our product offering to the market. The dealers and distributors have started viewing us as a complete player rather than just an AC player. And the fact that we are sustaining well even in this LED's disruption is actually creating positive impact amongst our dealer channels, which will show some results in the coming time. Though it will have a negative impact in last quarter and maybe a little bit of an overhang in the third quarter, but at least the long-term prospects seem quite fine.
And how has our market share moved over the last 2 years? And where do you see this settling at? By when do you see this dealer rationalization of the distribution team settling down?
So I believe we probably gained market share in air conditioners in 2018, '19. However, we've seen a little bit of a decline in market share in this year because the AC sales for the competition grew well. But we were hit by our focus on some of high-cost air conditioning -- air conditioners from China, distribution realignment. So we've seen some market share loss in the first 6 months. But I think with the setting up of the factory, as I said, better control on costs as well as inventories, we will be retaining this very quickly.We talked about the distribution realignment. That's almost complete in most of the states. What I mean by distribution alignment is: one, some of the very, very large distributors whom the company was depending upon, have now been closed down and have been replaced by distributors who can become long-term player for us, and not just taking the company, dictating the terms on the company as well as most of the large retail channel, regional retailers and modern format retailers have already completed their 1-year of operations with the company. And in such relationships, it takes time to gain market share in those counters. But the first year has been extremely positive. With people like Reliance Retail as well as regional retailers like [ Sundaram and all ] and Viveks and all. So it's been a very positive thing. I think this will continue to build from here itself in the coming years.
Okay. And my second question is on -- if you can just comment in terms of demand, how it has panned out in the last couple of months, especially given the festive season. Are you seeing any uptick on ground?
Well, in the second quarter, we didn't see much of an uptick. I think October is a special month with all these festivals coming in. So there is a little bit more positivity in the environment, and we are seeing that last -- for example, last year, October, what we also saw the same thing, but November was the financial crisis, and things started slowing down from there, the NBFC crisis. So we are seeing a similar optimism in the month of October. How long it sustains because -- it needs to be seen. But at least the initial phase of the season has been positive.
Okay. And lastly, if you can give any guidance in terms of top line for both Havells as well as also Lloyd in terms of outcome?
No, we'll wait for how it pans out. As I said, it's a good start, but let's how -- see how it pans out.
[Operator Instructions] We take the next question is from the line of Bhavin Vithlani from SBI.
Just one question. Sir, for Lloyd, you mentioned that you are repositioning brand as a premium one. And our checks on the channel suggest that the larger players are actually quite full on the pricing front. So any rethought on the pricing front? Where do you want to gain scale and trying to strike a balance between...
So as I said -- yes, as I said already, that last couple of years has been a little bit of a disruption. First, in the AC business and in the LED business. So yes, the competition has played a pricing role. For Lloyd, we are very clear that we need to have a medium to long-term strategy. For us, the only way up was because it was already a price there. So the only way could we be different was to move upwards. Just to remain there, just to play on pricing with the kind of investments that we are putting in, in distribution, brand as well as in manufacturing of product, we could not have sustained that for a very long period of time. So that readjustment had to happen. That investment in van and channel has to happen. So I think for us, it's a no brainier. Yes, it's because of the competition behaving differently because of the market situation that puts additional pressure on us in the short term. But I think we believe the long-term strategy is very clear.
The next question is from the line of Venugopal G from Bernstein.
On Lloyd, I just want to quickly ask, you've changed the format of your presentation. You have not given the EBITDA margin in this quarter. So just wanted to check if you could give us that number? And also, you mentioned about some unabsorbed costs. I'm assuming that has more to do with the underutilization of the new facility and not really a one-off startup expense, right?
Yes. So Venu, you might be aware that as per the -- as you see audit requirement both from SEBI and Corporate Law, we are no longer allowed because Lloyd has fully aligned now with Havells, the back office is completely integrated, the entire operations are complete integrated. So I think -- and since their quarterly results are audited from this year, I think, we have advised the auditors not to have a different shelf. So I think but if you look at the contribution sheet, we have given separately. I think you can make out, but we are refrained from now disclosing the Lloyd's EBITDA margin independently.On your second question, yes, these are basically unabsorbed costs because of the factory. As you are aware, the factory has started, but this is a lean season for Lloyd ACs, and that's why there is a significant entire absorption, which is probably a nonrecurring in nature.
Got it, got it. My second question again is on Lloyd. On the TV business, given that it was a fairly relevant product line for you, at least last year. And you would have analyzed competition in terms of what they've been doing over the last 12 months in terms of the channel strategy as well as the sourcing strategy. So is there any way in which you can actually compete with them rather than lying low? Can you actually replicate a strategy where you can actually compete with them head on either by changing the way in which you're sourcing your products or by aligning the channels accordingly?
So I would say, Venu, I think there are learnings in the last 12 months. And while you may say that it was a very relevant product category, it becomes more relevant in a particular time of the year. And I think the learnings, which we've had over the last 12 months will definitely ensure that we continue to remain positive in this business, both on the sales side and the profitability side. But obviously, I don't think that we have the kind of market share at this point of time that we should think of taking head on the large players in this business. It is, as I've already mentioned, the strategy behind this is to build a comprehensiveness to the Lloyd product range in the channel. And that's what's very important for us right now, which supports our other product categories in the Lloyd rank.
And just to add, Venu, we are not going to vacate the space. So we will continue to remain relevant. As Anil just mentioned, we have certain dynamics. And definitely, they will be leveraged for our future strategy. However, let's be very clear that AC would be the mainstay of this business. Whatever your plan, they may be 50% of our business, other product categories will then cost to the other half, where I think TV plays own role. I think these disruptions also creates a new environment, new market. So please be rest assured that we'll continue to be relevant. But I think things like taking head on and all, these are all -- that's not the way we think. But relevance will continue, and there will be learnings, which should be aggressively deployed in our strategy going forward. Not only for TV, for all other product categories in the consumer segment.
The next question is from the line of Aditya Bhartia from Investec.
Sir, my first question is on the demand scenario for the core electricals business. Now if you look at the residential construction market, it had been weak for last few years. But we have all of a sudden started seeing very, very sharp slowdown in demand. Is it because until last year may be project completions were still going on in the…[Technical Difficulty]
Excuse me, this is the operator, Mr. Bhartia, your voice is breaking up sir.
Hello?
Yes, this is better.
So just wanted to understand that, is it a case that projects completions on the residential side have now started slowing down. While until last year, we were seeing launches being slow but completions were still going on. And that's the reason that we are seeing a slowdown in our core business as well?
I think two things, I would say. As I say, one is, we've seen a significant slowdown as compared to even the last 3, 4 years, since November of last year. So the only way you can tie this is to the NBFC crisis. So there is a shortage of capital for real estate in the marketplace. So that is one reason that we can attribute it to. Also, SMEs, the small traders, there is suddenly cash has dried up in this segment. So that is one reason. And the other reason is also the sentiment. I think this overall sentiment in last 1 year has been of a slowdown. And it just has a ripple effect on the way people look at businesses, people delay their purchases. And I think it's a combination of many things that [Technical Difficulty]. As you rightly said, 4 or 5, last 3 or 4 years things have slow -- been very slow in the real estate market. But I think it's just a delaying of decision in the last 1 year because of capital availability or tactics.
Sure, sir. And sir, are we seeing destocking also happening at the distributor end?
Yes, it is definitely much lower as compared to what used to be because, right now, as I said, the sentiment. There is more forward thinking towards saving rather than actually spending. So there's less positivity in the environment. So people also stock less. So I would say that the trade stock would also be at a lower level as compared to earlier.
And sir, can you tell us on the Lloyd business, you have stated in the past that you would like to get the room AC to pushing down to 50% in maybe 4, 5 years' time. Is that still a target that we are looking for, given that TV has started -- is now having its own set of challenges. And then in fact we are looking for a launch of refrigerators.
So you're right, the product -- new product launches, we would definitely look at reducing the share of air conditioners. But as I said, TV has been more of a disruption in the last few months. It's very difficult to pan out a 4, 5-year strategy of how it would be in the next 4, 5 years. So I think the way it is to -- we also believe like in Havells, frankly, we've never seen what should be our share in 3 or 4 years for any particular business. The whole idea is how we can grow our market share in each product category, whether it's a small business or a large business. So a smaller business item as small as a water purifier or a perfume grooming business. There also we want to remain relevant and keep increasing our market share. A larger business like this case of wires also, there are also this -- so -- and wherever it takes us to in terms of distribution of product categories. So I think that's not really the aim, and I don't think we are really aiming for a number of what a particular product should be as a part of the portfolio.
Sure, sir. And sir, when should we expect the launch of refrigerators?
Most probably the first quarter of next year.
The next question is from the line of Renu Baid from IIFL.
Sir, few questions from my end. First would be on -- coming back on the Lloyd and the ref segment, do you think we would be required to make some more investments on the channel side? And how prepared are we with respect to the product? And what could be the potential sourcing model? Will it be more of a outsourcing model to start with imports or domestic assemblies of the existing plants? So if you can share some more structural thoughts on the ref segment, which you plan to enter?
Renu, we would not like to speak a whole lot about the refrigerate segment, I think it will be more relevant when we start the product category, but it will be an outsourcing model. That's one thing to begin with. And secondly, we would not need to make major investments in the distribution side of the refrigerator business because it will be the same existing distributors and regional retailers and large format that would be dealing in this product category.
Sure. And on the Lloyd, what was the kind of ASP spend during the current quarter given it was anyway a weak quarter. So how should we look at the comparable numbers on a sequential basis?
So it was similar to last year, Renu.
Sure. And now within Lloyd portfolio, also given that television is going through a consolidation phase and we have seen high double-digit declines of 15%, 16% plus. So overall, as a portfolio, do you think the current year, one can still expect flattish revenues or the at least a 10% kind of correction would be more real in terms of how the year has already panned out in the first half, and we're already in October. So how should we look at the revenues panning up in this, at least, for the given financial year, which is going through consolidation?
I think, as you know, the things are evolving, as you mentioned, hopefully, the festive season should bring more optimism. I think the only way we could articulate right now is that H2 should be better than H1. I think that's the way we should look at it. And H2 hopefully should have good growth -- some growth over last year. But maybe I think in the next quarter when we have a call, we have better visibility how things are panning out. So and there's a lot of moving parts right now in the ecosystem.
Correct. And on the core business, if you look, we had mentioned that once we'll -- after Lloyd's phase of expansion this year, next year, we're targeting capacity expansion across categories for the core portfolio. So if you can highlight with the segments, are we expanding? What is the kind of CapEx outline individual? At least, broad segment wise? And do you think any of the new CapEx could benefit because of the lower manufacturing tax rate, which has been proposed by the government?
So Renu, I think from the core side of the business, we talked about CapEx for most of the product categories, which is already underway. So whether you would see water heaters and cables and wires, I think the major significant CapEx expansion, which will happen last -- next year would be for fans. But the rest of the product categories in switchgear, lighting and ECD other than fans and cables and wires is pretty much already underway, which hopefully should get completed by March or April and some spillover for next year.
Sure. But no major benefit on account of any greenfield expansion. Most of these are brownfield in nature?
Yes. Most of them are brownfield.
And sir, my last question would be on ECDs. There was a base tool, which before this year growth, tapering off. But would you read through that, despite this being a seasonally weak quarter and new product categories being added, growth rate tapering off below 20% should signal any red alert or are you think probably it's more of a short-term phenomena? And we should be back to 20% kind of growth rate in this category for us.
Well, I think we are used to quite good growth there. You see these smaller businesses, which were there last year, are now achieving a meaningful size. And I think to keep expecting a very high-growth from those businesses on a larger base might be a bit of a difficult thing to do. And of course, the demand environment has been bleeding. It's not, we believe, it has turned around in a big way. In fact, the new product launches like some -- the launches like small domestic appliances businesses, in fact, shown better growth. So we are definitely seeing a little bit slower growth as compared to the overall product category growth in larger businesses. So it's a good mix of things. And I think we still believe that in most of the product categories, we are gaining market share.
Yes. And I think, Renu, by what we mentioned about the categories maturing, the most of the category now whether it's ECD, water heater and PG, I think they have broken into our top 3. So we have achieved one of the objectives, we always take for ourselves that we should not remain only relevant, but also we should be top 3. So I think this is a very healthy sign. And despite this entire sort of consumer apathy, which has aggravated in Q2, I think, we are fairly sort of -- and choose better performance, which ECD has delivered. And I think it will only gain from strength to strength here.
And the performance for the water purifier segment should be improving and savings...
Yes. And all segments actually. If you look at every segment, as I said, not only remains relevant, they're breaking into top 3.
One last question, if I can ask. What is the kind of targeted quantum reduction in the nonessential costs that we are looking during the rest of the year or going into...
No, I think there is no -- as we said, we don't move by targets, Renu, but there will be a positive impact. I think there's no denying that, I think material costs are benign. So you will see, I think, we believe that by the end of Q2, our margin performance should be sort of exclusively better than H1, the margin performance.And there's a general higher consciousness built around this industry. That's the whole idea.
The next question is from the line of Keyur Pandya from ICICI Prudential Insurance.
Sir, my first question is on the Lighting. So if you can throw some light on the source of degrowth as well as some fall in margins. So is it because of the EESL or B2B, B2C segments? So if you can give more highlight on that. This is first. And second, in the ECD or in general core business, so with the expansion of brands like REO and Standard, should we see that our profitability should plateau somewhere what it is currently?
On the first part on the Lighting part, if you see a little bit of slowdown has happened inside in the industrial segment, which has impacted the growth in professional Luminaire business, I think the consumer business continues to grow. In fact, I would say that the margins in this business are quite healthy. A little bit of a slowdown in the professional Luminaire business has contributed to lower margins in this business because of the factory and other costs also. But I think that is definitely -- these margins are sustainable margins. In fact, we definitely believe that our ASP management, our pricing management has been much better than the competition during this time. We've not succumbed to the pressures in the marketplace and, hence, also gained market share during this time. On the other part, I think REO and Standard are brand strategies, which needs -- these are needed for new channels, new markets, affordable housing, for example, or rural expansion. The way they are working on is that, as I was saying earlier, it's not really going to affect our margins in a big way. In fact, even we've been dealing -- we've been doing Switchgears in REO brands in the last 3 or 4 years, and we've seen margin expansion over the last 2, 4 years. So it's not that these brands are affecting the margins in any way.
Okay. Okay. Sir, lighting pricing pressure continues?
We think pricing pressure is in every product category; Switchgear, Cables, Wires, Lighting. And how you manage -- that is how you manage the distribution channel, and frankly, we are not a company who believes in that lowering the prices can increase your market share. We work differently.
The next question is from the line of Arnab Mitra from Crédit Suisse.
My first question on Lloyd was that, you know, now that your capacity -- the factory started, would you expect a significant part of your production in the fourth quarter, which is a reasonably big quarter for ACs to come from in-house production? And whatever gains you have on margins, which is savings on import duty and other kind of things, are they significant savings in the context of the other costs in the factory? And will they lead to some kind of an improvement just because of the manufacturing, sourcing, shipping in-house?
I think the Q4 will not fully reflect year-over-year supply chain because they are taken well in advance. So I think the Q1 of next year in terms of financial would be more relevant. I think as far as the costs are concerned, these are buildup figures. So normally factory takes almost 3 to 4 quarters before it can start realizing the benefit. So I think next year would be more relevant for understanding the cost benefits of the factory. I think the real benefit is that the supply chain is far more secured, and I think it is not dependent upon the third-party in third country. So I think that is to our mind was the first feat which has been achieved. And I think the savings and all is an ongoing process. But definitely, it will accrue, but that'd be more relevant for next financial year.
Okay, that's helpful. The second was on Cables where you've seen a big margin expansion. So this 18.4% margin, is it sustainable? Or is there some kind of gain that you had in the quarter, which probably is commodity linked? How would you look at the margins in the quarter, this quarter that went by?
There is no onetime gain, but there is -- sometimes, there is a little bit of a time lag between commodity prices and the market price. But this is more operational only. This is only operational. However, we continue that it will be more at -- in between the levels of 15% to 17%, which has been cost consistent over the last many, many quarters.
The next question is from the line of Tanuj Mukhija from Bank of America.
Two questions from my end. Firstly, could you give us some sense about your margins in the AC business and margins in the LED panels business?
We don't do differently and we don't do independent assessment and don't share. So we would not like to discuss that.
Okay. Sir, just a follow-up on that front, I mean, given that it's difficult to head-on compete with the Chinese players in the LED panels, how do you plan to turn around the profitability of the LED panels business? Wouldn't it be better to vacate this space?
Well, I think we've already answered this question. And as Rajiv has also -- already mentioned, that it is not right for a long-term strategy for us to vacate the space. And we will continue to remain relevant and it will be relevant to all the category in our portfolio. And we are a company who always believes in keeping product profitability, always top of mind, but also be a part of the relevant portfolio.
Okay. And sir, my second question on the core electricals business is that we have seen other building materials company with rural penetration do reasonably better-off in this quarter? So could you just elaborate a bit more on your plans on targeting specifically towards rural and affordable housing in the core electricals business?
There is a continuous development on the rural expansion business. And I think we are -- pretty much the distribution channel is already set up for expanding the rural business. And we are continuing to see growth in our REO brand business, which is primarily for the rural parts and affordable rural houses.
Okay. Sir, would -- as of now, do you only [ expand such a ] segment to rural areas or even other categories get into the rural segment?
We are expanding product categories [ in the rural ].
The next question is from the line of Vinod Bansal from Franklin Templeton.
Couple of questions. One, beyond the numbers in the electricals business, if you could talk about overall sentiment, business environment in the more recent months, this month and the previous one, let's say? We will be 4 to 6 months back. Is the sentiment, overall, slight bit better? Is it improving? Or we are still in a sluggish phase currently?
I would generally say that we are still in a sluggish phase. This is what we've been noticing even in the month of September. October is generally a more positive month because of the festival season. There is generally more optimism, I think, within the [ phase ]. So we are seeing that uptick in the month of October. But as I said earlier, let's see how it pans out over the entire quarter and the next half. So -- but I think there has not been a major change in terms of capital availability was changing on the market sentiment in a big way. Consumer segment is still not very bad, but I'm talking maybe more on the infra side and the kind of direct CapEx side as well as on the residential building segment.
Right. Earlier, you spoke about hoping for 2H to be better than 1H. Sir, I was just wondering, are we seeing specific signs to have a hope of a better couple of quarters to come by? Or -- I mean, they are more and more of this...
Yes, I think we -- as I said, we are a learning organization. We have learnt in the last 12 months. So we've taken certain corrective actions in Wires also as well as there is a high degree of focus on consciousness on the cost side as well. So we are ensuring that this H2 will be better than H1. Depending upon the market environment, I think we will respond to the fact, but I think from a margins and a profitability front, we'll be definitely better-off in the second half as compared to the first half.
Sure, sure. Also on the tax rate cut, I wonder if it's possible to spell out a new strategy? Now that you have an extra money at hand, do you wish to retain it or some partly passed on to the consumers to lift demand? What is your sense on how companies -- you would do when in general the industry would be looking at this extra money availability-wise?
I think it's too early to say this. Let's see how it goes. I think we really don't believe in -- I mean, frankly, if more money was needed for more expansion, that could have been done through any other means as well. So tax cut is not going to change the way we retain our long-term strategy on business.
Right. If I may, what I meant here is that, let's say, reduce prices a bit or give higher commissions to dealers, all these things just to boost the near-term demand until the time overall macro improves. Is that something that is on the table? Or you...
I think as I've already mentioned, a brand in distribution-oriented business behaves differently than a commoditized business. And we've seen -- it'd have been -- in most of the businesses that we have, our pricing or our margins are higher than the competition, whether it's in ECD business, Lighting business or the Switchgear business. And we've experienced this in the past by reducing our prices or ASPs, does not increase your market share, so there are 10 different things you need to do to increase your -- or even hurt your market share. So I believe pricing is not the main thing, and this is something where we believe this way of actually changing your strategy according to the market situation might not be the best way to deal with a brand in distribution-oriented business.
[Operator Instructions] We move to the next question from the line of Sonali Salgaonkar from Jefferies India.
Sir, my first question is again towards the medium-term outlook for Lloyd, say after -- over the next 5 years, what is the kind of product mix that we envisage in nodes post the new launches in terms of refrigerators and by then probably we would have attained a sizable amount in washing machines as well? And a follow-up to this is that, you mentioned earlier in your remarks that the impact of disruption in LED could also be seen some part into the third quarter as well. So my question is, will we be seeing any further costs from the newly commissioned AC plant also in Q3?
Yes. So on the -- I think, medium term, you have been sort of tracking this along. So you are aware of our strategy when we acquired this also. It will be a full stack consumer appliances player, Lloyd, and I think that strategy hasn't changed a bit. So whether it is adding refrigerator or expanding their range in the washing machines. [ Anyway I need a TV ]. You see there may be a disruption, but we believe we will continue to remain relevant in this business as well. So I think that will continue. And I think our vision in terms of what we want to achieve hasn't changed. There are disruptions in this market, but these are large markets and the boosting in this industry, the demand is unsatiated. And I think there is a long-term growth, which is fairly visible and confirmed. So I think that, that will continue to happen. On the other question, on the Q3. In fact, we've already started. So that cost will continue to happen. And over the Q3, we're having some more production than Q2 where the stabilization would also happen. So unabsorption will continue, and I think it will only get addressed more so in Q4. And the better-off payoffs will come in the next financial year.
Got it, sir. And just one more question regarding the utilization of the sizable cash that we have on the balance sheet. Sir, any firm plans on the same?
No, no. I think that this is now what we require. I think -- I will not claim it sizable, so -- you know, our dividend payout has already gone to 40% to 45%. So the plans are pretty much I think we want to retain that much sort of liquidity in the system. So we do not see this in excess of what our needs. And if it is that, that will be dealt appropriately by the Board.
All right. Sir, and any quantification of CapEx in terms of how much you would like to do in FY '21?
FY '21, I think we are looking more like a INR 300-odd crores. As you said, the major sort of what has been done this year. But I think the Fans, we're going to expand our CapEx with this and some spillover from [indiscernible]. I think it will be more likely INR 300-odd crores.
All right. Sir, my last question. New launches, any specific segments you'd like to comment in which you'd like to launch?
No. I think these are now normal routine in all of our product category they are launching. But no, nothing specific big bang launches are going to happen.
The next question is from the line of Rahul Gajare from Haitong.
Just one question. Basically, large performance this time was impacted by LED -- decline in LEDs that we've seen. Now I think that there's similar thing which is happening in the air-conditioning side also where a whole lot of private labels are actually almost having an onslaught on the market where the price differential between some of the leading players and the private labels are anywhere between 25% to 30%. Now that is a very large discounting that is going on. So in that backdrop, where pricing pressure could also hit the AC business, what are your thoughts on dealing with Lloyd as a whole?
The AC business, I don't know, private labels, what kind of differential you're talking about. But yes, I think there is a general within the established players also. You would've got the last 2 where there have been a certain price decline. And we believe these are markets where we have to go in and we have to see how things evolve. If you would see, we are far better positioned with our own plant, you see, in terms of flexibility as well in terms of costing. So I think that's something we will have to take it as it comes. But just having a private branch and all doesn't mean the market is just going into a tailspin. In our view, this is more in terms of how the growth evolves for the industry as a whole. And if there are reactions in the market, ultimately, we're part of the ecosystem, and we will have to take tactical approach based on what -- where it comes from.
Okay. Sir, just a continuation of this particular question. Along with private label, there have also been efforts by the government through EESL and all, you know, to really bring down the ownership cost of air-conditioning. Any thoughts on participation in any of these such tenders from EESL?
We think that's always evaluated on the merits, in particular cases and environment. So we have been participant in the overall Havells environment in EESL, and we think -- but we think this is not taken by the perspective SBU. There's no strategic bar or sort of push. We are just like any other segment for the demand, and we will react based on what comes out of that.
The next question is from the line of Achal Lohade from JM Financial.
Just wanted to check in terms of the Switchgear business, we've seen kind of very weak numbers for the last couple of quarters. Is it possible to highlight, in terms of the industrial Switchgears, tie-up with Hyundai? How it is panning out? And what kind of growth -- can we go back to the double-digit growth anytime soon in this particular segment?
So as I mentioned, Achal, in this business, there are various parts. One is the domestic residential [ survey protection ] which continues to do well, where we definitely feel that we've gained market share, which is -- there are not many industrial players in this business, but what we understand from the marketplace is that we've gained market share in the domestic residential business. There has been a slowdown in the industrial business because I think last year there was a lot of push on the government spending in infrastructure in the electrical space. So there has been a slowdown on that side. Hyundai is continuing. It's a little bit of a long-term thing because development of industrial Switchgears along with Hyundai, it needs -- it takes time. But it is on the right track and it is growing.
Got it. And just with respect to the ECD, you said the growth was more driven by the small domestic appliances. In Fans, particularly, have you seen any market share -- further market share gains or any market share loss out there? Because we've seen other companies doing fairly well this quarter.
Yes, I think we've -- it's not better, but we've definitely done very well in Fans as well. So as I said, it's a larger product category, the growth is a little bit slower than the overall product category because [ with one of our categories], we would have grown faster. But I don't see, in fact, especially in the premium segment business, our market share continues to remain between 25% to 40% in each segment of the premium category. And I think that we are doing extremely well.
The next question is from the line of Charanjit Singh from DSP Mutual Fund.
So I would just like to understand in terms of what is our manpower strength right now? And what is the expectation for the year-end? And secondly, on the Lloyd front, have we done any major leadership changes?
So we've never given our manpower numbers in the past. And frankly, we don't even have it right now. But I think it's a regular process, so manpower is constantly being evaluated and being added wherever it is required in the business. And there has been quite a lot of stability in terms of the leadership in all businesses, that is just not Lloyd, but all businesses all across the country.
Okay. And on the A&P spend, how do you expect for the full year number in terms of customer sales to pan out?
So I think we have been tracking for the whole year if you take out the seasonality on around 3% for the Havells as a whole. So we don't see much -- major changes on that account.
Okay. And sir, just lastly from my side on the small kitchen appliances. So right now what will be the contribution? I understand if it is very small, but how do you see this segment scaling up for the ECD over the next 2 to 3 years? That's all from my side.
I think small domestic business is not any more small. It's -- as Rajiv has already mentioned, that it is -- we have a meaningful player relevance in this product category. So it is -- we are quite bullish about this business. And the best part is just like our Fans, we are not operating in a low price, low economy kind of segment in this product category. The product is perceived as a premium product. And still, we are -- volume-wise, we are amongst the top 3 or 4 players in this industry within 5 years of [ RMP ]. So I think the strategy that we have always for our products, we always have a medium- to long-term strategy that within 5 to 7 years, we want to be a meaningful player amongst the top few players. So it's moving very well in that direction.
The next question is from the line of Atul Tiwari from Citigroup. [Operator Instructions] We move to the next question from the line of Amnish Aggarwal from Prabhudas Lilladher.
Sir, my question is on the Lloyd business.
Excuse me, this is the operator. Mr. Aggarwal, you are requested to speak closer to the phone, please?
Sir, my question is regarding the Lloyd business where you indicated that in the longer term, you are raising maybe 50% of the sales. So can you share your long-term vision that which other products will account for the balance 50% of the sales?
Yes. I think we've already answered this question, please. Can you move on to a different question, please?
Okay. My second question is regarding the ECD business where Fans are a very dominant part of our business. But in Fans, now we are having lot of competition in the premium segments. So what is the outlook on the category as such?
Well, as I've already mentioned, that our market share continues to be extremely strong, we are the leaders in the premium segment. In various categories of premium segment, our market share ranges between 25% and 40%, and we are gaining market share there. So while there is competition, I understand and, obviously, people would want to take part of the market share. It all depends upon how we keep coming out with new product launches with new technologies in the premium segment category, both on the aesthetics as well as functional side. So there, we are quite, I would say, positive on the thing that we will continue to dominate this part of the market for some time.
The next question is from the line of Latika Chopra from JPMorgan.
Most of my questions have been answered. Just one bit on the online channel. We have seen a lot of disruption in the LED space coming from this channel. Do you envisage this channel becoming meaningful for any of the other consumer-facing businesses that you have? And what are the current failures that you have here? And how is the margin profile?
I think the current failure that we have is the fact that we are not a discounted player on the online channel, which keeps us in good stead with all the other channels like modern format retail, CSD and the traditional channel. So this is a differentiation that we carry out, whether we are dealing with the large players in the online channel as well, and in every product category, weak or strong. And because of that, according to the product categories, let's say, relevance on the online channel, we continue to remain doing well. For example, a small product category like personal grooming, which is more of an online category, even there, our sales are 50% from the online channel, and still we continue to do well in the traditional channel. So we are a very strong player on the online, as long as we are not discounting the product to kill the others. So there's no point in actually taking away market share from the other channel and put it on the online channel. So that's not what we do, and we are heavily relevant. We follow policies, even strategy of different model, different channels, all those kind of strategies are being put so that every alternate channel is a relevant channel for us.
The next question is from the line of Kunal Sheth from B&K Securities.
Sir, in your remarks, you talked about some of the cost measures that you were planning. So any specific measure that you would like to talk about and any number you want to put out in terms of savings that you are targeting?
Well, I think, Rajiv has already mentioned, there is general consciousness built around the system to ensure that there are -- there is a higher focus on nonessential costs. So the essential costs, whether it is manpower, distribution expansion, advertising, CapEx, there we continue to maintain the same path that we have been following.
Sure. Sure. So any number you would like to put out? Or it's more from a general belt-tightening perspective?
Yes, that's right. General belt-tightening as you rightly mentioned.
Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Abhineet Anand from SBICAP Securities for closing comments. Over to you, sir.
Yes. I would like to thank the management for giving us the opportunity to hold the call. And I would like to thank all the participants who attended the call.
Thank you. Time is up.
Thank you very much, ladies and gentlemen, on behalf of SBICAP Securities Ltd. That concludes this conference call. Thank you for joining us, and you may now disconnect your lines.