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Havells India Ltd
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Ladies and gentlemen, good day, and welcome to the Havells Limited Q3 FY '18 results conference call hosted by HSBC Securities and Capital Markets Private Limited. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as of the date of this call. These statements are not the guarantee of future performance and involve risk and uncertainties that are difficult to predict. As a reminder [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Shrinidhi Karlekar. Thank you, and over to you, sir.
Thank you, then. Good afternoon, everyone. Welcome to the Q3 FY '18 earnings call of Havells India. The management today is being represented by Mr. Anil Rai Gupta, Chairman and Managing Director; Mr. Rajesh Kumar Gupta, Director of Finance and Group CFO; and Mr. Rajiv Goel, Executive Director. I would now like to hand over the call to Mr. Anil Rai Gupta for the initial remarks, post which we will open the floor to Q&A. Over to you, sir.
Thank you, Shrinidhi. Thank you very much. Thank you all for joining the call. We've just finished our board meeting a couple of hours back, and hopefully you would have received the investor's note by now. Basically, I can say that the performance was a good quarter. We had -- last year, if you all remember, this was a demonetization quarter in which the company did very well, so I really cannot call it a base effect over the demonetization. So hence, what we see as 11% growth or 14% excise adjusted growth is quite a satisfactory performance for us. Margins have seen improvement across the categories, which also is in line with whatever we had been working over last year or so. As we had communicated to you, that post-demonetization, there was some pressure on the margins. But over a period of time, with the raw material prices stabilizing, we've been able to adjust the pricing in the market along with that.The GST stabilization happened during the last quarter, especially we got a lot of good [fill up] on the 15th of November with many of our product categories coming under the 18% rating. Havells was probably the first company to pass on the entire benefit to our trade channel to the consumers. Directly, the entire saving was passed onto the consumer on the same day. And hence, it also talks about the strength of our IT systems, the way we have been able to pass on the entire savings.I believe that going into the fourth quarter, this will also have an impact on generating additional demand for the branded segments and especially the organized sector. So we are quite hopeful of the upcoming quarters. Consumer durables and lighting has definitely shown good growth. I would say that the switchgears and domestic wires have also stabilized and come back with a little bit of growth in the coming quarter, which definitely is very positive for the future quarters.Underground cables, for the 6 months after GST, saw a big slowdown because initially, all the government contractors and the infrastructure projects were very slow in placing orders because of the confusion and the high rate of 28% on underground cable, with underground cables also coming under 18%. And now the confusion going away, we expect that this should also turn around. And so I believe that the next few quarters should be quite decent, both in terms of growth as well as in terms of margins retention.As far as Lloyd is concerned, I think when we acquired the company after June, both third -- second quarter and third quarter are weaker quarters because of the higher reliance on air conditioning business in this. And going into the fourth quarter, we are now heading into the season. So the next 6 months should see a definite uptake into the Lloyd's business as well, which should help normalize margins also to come to the normalized levels in the coming 6 months.Thank you very much, Shrinidhi, and now we can start the question-and-answer session.
[Operator Instructions] The first question is from the line of Manish Agarwal from Bernstein.
Firstly, on the Lloyd business, how did the transition to the new labeling norms impact the margin in the quarter? And also, did you see any element of prebuy in the quarter? So I'm asking about prebuy to get a sense of elementary levels in the channel and if it could impact sales in the first few months of the season ahead.
So Manish, the last quarter did see a little bit of preponement of sales for not only Lloyd but also all brands and which hopefully should affect the demand. Because the original demand, the tertiary demand will be low in the month of January and February. So there might be a little bit of a slowness in demand uptake in the first 1 or 2 months. As far as transitioning to the new star ratings are concerned, it will happen. It has already started since January, but there are stocks in the system with many of the traders. So over a period of time, it will happen. So first quarter will be a mix of old stock and the new stock. And then, hopefully by end of March, this will all be our new stocks.
And so how does it impact your margins?
So I think, because most of the competition was clearing out stocks in the fourth quarter -- or in the third quarter, so there was some impact on the margins. And it was also sort of impacted by the fact that most of the foreign exchange gains were, to some extent, passed on to the consumers. So that is also affected. But I think, in the coming quarters, the margins will get normalized.
Okay. And secondly, just one question on other income. The bulk of the other income in the quarter is due to ForEx gain. So going forward, should we factor in INR 8 crores to INR 10 crores of ForEx of other income or the normal INR 25, INR 30 crores?
[Quarter win].
We don't know how foreign exchange will behave. So we can't really quantify this number.
We take the next question from the line of Aditya Bhartia from Investec.
Sir, this is the second consecutive quarter of extremely strong margins in the wires business. Just wanted to understand the reason for the same. Is it only on account of mix or is there some inventory gains involved as well?
No, I think these are -- so last quarter, we had a gain on inventory and the mix, but this one, this quarter has been a normalized level. So it will range between -- you can't [ measure it ] because underground cables is a business where the margins can vary because of some old orders in hand and all that. So I think this would be somewhere in this range, if not maybe 1% here or there.
Okay. So we can consider them as sustainable margins?
Sustainable margin, as I said, it is very difficult to predict 100%. But similar margins can be attained.
And sir, what really has changed between, let's say, today's situation and a year back for margins to be expanding so sharply? Is it on account of organized players gaining, and therefore you having better pricing power?
No, I think 1 year back would not be the best comparison. As I said, 1 year, we were just back -- we were just coming out of the demonetization impact. And at that point of time, on one side, the raw material prices were going higher and we were not able to pass it on to the market. So I think maybe you can see the margin uptake over a longer period of time and that could be seen as more of a sustainable kind of a growth.
Absolutely, sir. But sir, even from a longer period of time, we typically used to have maybe between 12% to 14% kind of contribution margins. And that's why my question, that from 12%, 14% to the 17% kind of an improvement, is there anything that has changed in the market as well?
Yes. So not so much in the marketplace, but I think it's over -- it's -- underground cable, especially, has started doing better. You're right, an organized sector could have created a little bit of impact, maybe a little bit more pricing discipline on the company front. So a lot of factors have contributed to this.
Understood, sir. And sir, on switchgear business, how are you seeing demand on the switchgear side panning out? And how it's been the response to our B2B footing?
B2B is, I will still say that we have the teams there. It is improving. However, it is still a very small part of the business. Over a period of time, it'll become larger. And it is right now seen -- more effective seen in lighting because that's directly going for refurbishment and changing of the old technology to new technology. On the switchgear side, I believe we've had a, let's say, a very slow growth in the last few quarters, mainly because of the residential sector contributing low. Construction demand was low. I think, over a period of time, this should improve. As you've seen, we've seen 11% growth in this quarter; domestic demand will increase also. We are putting a lot of focus on our exports. So everything should put together and lead to additional growth now.
We'll take the next question from the line of Renu Baid from IIFL.
First question is on the ECD side, where this quarter we have seen strong 33% comparable growth. So can you help us understand what proportion of this growth was driven by fans, which was also hurt because of lower -- higher [indiscernible] rate and an off-season? And how has the water heaters, which are -- recently gained market share in the top 2 or 3 categories, how did that perform overall well?
Well, I think you can say that, obviously, fans is the largest category. But still, that has also shown good growth. But one of the reasons that I would say also is that in this category, I can consider a little bit of a base effect over last year of demonetization because that was probably demand which was hit in the third quarter last year. And it was -- a lot of sales came from Cables & Wires in November, December last year. So a little bit of a base effect, but generally speaking, we're seeing a good growth coming in all business segments, whether it is fans, water heaters...
Particularly water heaters.
Particularly water heaters as well.
Right. And in the comments, specifically you mentioned about the premium fan segment, but is it that you've seen growth coming in your core segment back or it has been much more broad-based across all the segments and some pre -- as in stocking activity picking up for the next season or so?
So one is, of course, the November, December is also a little bit of a stocking period, but we are seeing growth across categories, across segments also. And I think premium fans, last 1.5 years, we've focused a lot on developing new models with great innovation [ possibilities ] in various models. And now we are definitely, by far, almost 2/3 of our fans are coming from premium fans. So that also indicates a lot of market share gains in the premium fan.
Right. Sir, one more quick question here is, in the ECD segment, we have been launching a lot of new products. Water purifier has been one where the positioning again has been at the mass premium segment. So what is our view in the medium term? How could some of these categories, including water heaters, water purifiers, could be in the entire ECD space, say, from the next 12 to 15 months perspective? Can they be cumulatively almost 1/3 of -- or more of our ECD segment, closer to 40%-plus, or it will take time?
No, I think water heaters plus appliances put together, it's already -- are you including the domestic appliances as well?
No, in this I was not including, but yes, include them, how do the numbers look like?
It's already around 40%. And going forward, I think it should range between 40% and 50%.
Okay. And sir, was there only one range of price hike during the last quarter or there was something else even after the GST rates being rolled back? Any further price increase for commodity inflation?
No. So there was -- before the GST rollback, I think there was one price increase because of commodity. So by that time, the commodity price increase had been baked in, but I think after that also, almost an 8% reduction in prices with GST coming down from 28 to 18.
Okay. So some benefits was further passed on?
Yes, the entire benefit was passed on. However, still, despite this reduction also, we are definitely, in terms of fans, our average price level -- realization continues to remain the highest in the industry.
The next question is from the line of Atul Tiwari from Citigroup.
Sir, I have a question on the P&L, the quarter's P&L. So this item change in inventories of finished goods, et cetera, it's about INR 247 crores positive. So this is really a high number for the quarter. Normally this number is between INR 70 crores to INR 100 crores. So what is driving this kind of very big number?
So one, on a small scale, it is mainly a collection of ForEx for the upcoming season; for example, fans. But in this case, the big difference is coming because of Lloyd, so that's also going with the season. So inventory gets piled up in the industry and gets liquidated in the next 6 months. So this is normal for Lloyd over last few years. But because it's coming for the first time in Havells, so that's visible here.
Okay, okay. So this purchase of traded goods is like INR [ 6 20 ] crore. This is also for Lloyd, so probably you have large components and the stuff and -- okay. So we should like kind of see both these items together in a way, the purchase of traded goods sales.
That's right.
Okay. And sir, in terms of, say, the medium-term outlook, now I mean, in this quarter, we have seen 13%, 14% kind of excise adjusted growth. So should -- I mean, and now are we confident that this 14%, 15% kind of growth can continue for 2, 3 years?
2, 3 years, yes. I think over a period of time, yes, that's something at least we are looking at.
We'll take the next question from the line of Gunjan Prithyani from JPMorgan.
I just wanted your thoughts on this margin for the core Havells business if, ex Lloyd, if I look at margins, they are now at about 15%. The workload got to about 16% last quarter, but there were clearly some one-offs in the last quarter. So does this mean that margin trajectory for the core Havells business is -- has moved up to, let's say, 14% to 15% range now?
Yes. We can say it's safely 14% to 15%. It is depending upon the product mix, but yes, that's what we continue to strive for.
Okay. And sir, second question I had on this lighting segment, this -- the growth. Now we are clearly seeing huge value growth in this business. Has this just got to do with the price stabilization in the industry or is there more to it? If you can share your thoughts how should we look at growth for the next 2, 3 years for this segment.
So Gunjan, this is more driven by the product. It's not price stabilization. Yes, on the consumer side, it is helping. But largely, you should see our initiative. If you remember on the investor day, we articulated how we [have spent time] on the team on the B2B. Anil just mentioned that the lighting is the biggest beneficiary for the time being. It will spread to other product categories as well. So I think we are winning several projects now, so we are moving very confidently in that space. And normally, the entire retrofitting in the industry as well as the corporate offices and all these deep [peer] knowledge are now catching up. So I believe this is at least a 5-year story, if not a decade. However, lighting will continue to spearhead this entire transformation in the landscape.
And would you be able to share as to how much B2B is currently and what -- I mean, how do you see that progressing in terms of the mix -- the segmental revenue mix?
So we -- actually we're not going into those detail. What we can say is it's the start of a very promising note, and there's no reason why 1/3 of our business in time to come should not be B2B. And eventually, it will converge. You see, the lighting will become a B2B as far as the Professional Luminaires is concerned. So right now, let's say we have Consumer Luminaire and Professional Luminaire, but B2B will become part of the Professional and Consumer will be on distribution and development business. That's how overall segregation will work in the future.
Okay, got it. And just last question, these GST rate cuts, which got effective towards the second half of last quarter, have we seen any acceleration in demand post that? Or what are you picking in -- from the market in terms of -- does that really lead to demand improvement? And also again, on the Cable segment, any movement from unorganized to organized on the back of this rate cut [ recently ] which happened?
Clearly, I think it's a very moral booster for the industry, and I think is a positive sentiment both for the consumer, and we believe for the network as well. So I think we are now seeing -- look, everything takes some time, but we definitely see -- a, I think it settles the entire GST disruption. And the trade-outs and all this is here to stay now. '18 is very reasonable in terms of when people perceive it. Customer also know this is something you [indiscernible], there's any longer postponed [indiscernible].[Technical Difficulty]
[Operator Instructions] Ladies and gentlemen, thank you for patiently holding. We now have the line for the management reconnected. Thank you, and over to you, sir.
So I know -- I don't know whether Gunjan is still around. So Gunjan, I don't where we left, but all I was saying, that the entire ecosystem seems to have stabilized now, which I believe will really put a strong building block for the growth from here on. That's why we believe we feel more positive about growth and each stakeholder, whether it's a manufacturer, distributor and the consumer, I think seems aligned to this GST stabilization. So hopefully, things should only look up from here.
And sir, unorganized to organized, any movements in the...
It is too early to say, but definitely I think these people will also move to organized. So we always maintain it's not that unorganized will go away. I think they will also move towards organized, the one who is -- were willing to change; and which means that the level playing field for the incumbent organized players. So I think the translation is already underway.
The next question is from the line of Nilesh Bhaiya from Macquarie Group.
This is Inderjeet. I wanted to ask that on the Cables business, what we saw during quarter was GST rates being brought down. My understanding is that pre that, there would have been a little bit of unorganized trade picking up market share. Is it possible to kind of give us a number or a sense that without that or post that reduction back to 18% how much was the growth in Cables?
Cables has not grown, as we said, this quarter. When we say Cable is underground Cable, the more B2B institutional business. I think there has been general slowdown because of the GST, even after the rates have come down in just a sort of month or a month or so. So I think -- but we believe from this quarter onwards, although the pent-up orders, which have not been released, should start seeing the growth. And Cable, maybe at times quarterly review may not be the best way to evaluate these businesses. So we believe that the end of the year, we should end on a strong note on the Cable side as well.
Sure. My second question is on Lloyds. Now where are we in terms of getting the product on the new labeling and everything? Is there -- have you fully sorted that out? Or is there still -- we'll need some more time to get all those products in the market?
No, no, we are fully sorted out and we...
Fully ready for...
Yes. [indiscernible] will be fully available now.
[Operator Instructions] We'll take the next question from the line of Charanjit Singh from B&K Securities.
Sir, just wanted to understand this thing in a very traditionally environment where GST changes are happening, and we have been able to clock a decent growth. And FY '19, we could see a big pickup in the infrastructure spending from the government side. So I think the 15% kind of a growth, which we are talking, could be very conservative. So if you can just highlight the infrastructure-driven demand, which can drive the growth in the different segments, how that can pan out in FY '19? And it could sustain maybe for next 2 to 3 years?
One thing we are very positive about is this whole GST transition. Though it has initial hiccups, initial demand might have slowed down a little bit, but ultimately it's a great move by the industry, which is benefiting the consumer, the industry as well as the government taxes will improve with compliance improving. So this is a great move. I think whatever was left in terms of reforms has already been done. I would say that we are moving into FY '18, '19 with a very high degree of optimism. However, the overall dynamics of the industry or the infrastructure development, infrastructure requirements has to be still seen. And it has to be taken with a pinch of salt. We can only probably comment whether we are in a very fast growth phase or we are still, let's say, struggling to get this double-digit growth. I think over a period of time, we'll come to know. But things have started looking a bit up, especially in the last couple of months.
And sir, the other question would be on the pricing for the Lloyd products. Post this change in the energy norm, so how is that pricing now and how is it comparable with the competitors, if you can highlight that?
So I think the comparison remains same. If the new norms come in the cost increase, whichever is there, has been passed on to the consumers by all the manufacturers, still we are very early in the season. So it's very difficult to say. But I don't see that, that changing in any way dramatically.
The next question is from the line of Vikash Mantri from ICICI Securities.
Wanted to understand in the Lloyd business, what has been the growth for us there? And what has been the profile change or the revenue change from when we acquired [indiscernible]?
What -- sorry, can you repeat the question?
Growth is 16% and profile changes.
Yes. So growth is 16%, Vikash, for this quarter, if that is the question. Hello?
The line for the current participant seems to have dropped off from the queue. We'll move onto the next. That is from the line of Naveen Trivedi from HDFC Securities.
Sir, if you can just give some more [ dope ] about the -- our ECD performance, because if I see the base also of ECD, that is also very high as compared to the other segments. There also, we had seen around 16%, 17% growth in the third quarter FY '17. So if I see that phase and if I see -- look at the growth which we had achieved this quarter, it is an excellent performance from the point of view where we -- our last part of the contributions still comes from Fan. So if you can give some [ dope ] about the segment performance?
So I think I have already mentioned here. There's a little bit of -- maybe you can say that there is a base effect over the last quarter. And now, second quarter growth was slower as compared to the third quarter, also because of the fact because of the high GST rate, which has now come to a [indiscernible] size level. I think we are going through the season quite hopeful that ECD will continue to be a good backbone for growth for us. We have done very well in the Water Heater business despite the industry is going through a tough last year. And Fans also has done well with our new launches, with our focus on the premium segment, it's also done well. So I will say it is -- second quarter should be seen -- a little bit of a -- more of aberration because of the new GST implementation which happened.
So you may say that the full restocking benefit had come in the quarters rather than quarter 2?
That's right.
So sir, is it possible to share the same contribution in the ECD segment; if not the quarterly, on an annual basis, how now things have changed in terms of mix?
Sorry?
The Fan contribution in the ECD segment. If not for the quarter, if you can give some dope about the yearly number?
Well, we said the Fan should be around 60%, 65%. On an annual basis, it could be 70% also, because normally water heater, as you're aware, is a seasonal product. So in a quarter, the Fan could be 60%, but I think come summer, overall Fan should be around 70% of the ECD business.
And the second is water heater in that segment from the contribution?
Frankly, the water heater will be almost at par.
[Operator Instructions] We'll take the next question from the line of Nishit Jalan from Kotak Securities.
Sir, you mentioned that you are seeing signs of turnaround in the Switchgear segment, which has been slow for the last few quarters. Can you throw some examples or more light as to what gives you so much optimism on the segment. Is it that you have started seeing construction picking up in the residual segment? Or you think that you are gaining market share? What is the basic reason why you are seeing that Switchgear segment should also see growth improvement going ahead?
Well, actually, the Switchgear, where we're coming from there from a negative growth, if you would have observed in the past, I think we are -- seems to be stabilizing. I would not claim there's too much optimism. You see at a 8%, 10% in Switchgear. We see this will not be really optimistic growth. Construction continues to be the challenge, I think, for the economy. So one could not claim that the things have really turned around. I think what we have been mentioning here is that there seems to be a stabilization in the business, then slight degrowth to what we observed in the last few quarters. And within that, the Switches segment has grown there also because new ranges which we have launched. So there's a lot happening from the company side on this entire Switchgear and Switches range. But yes, I think the construction, I would not claim that it has opened up the way we could talk about the infrastructure. For infrastructure, we definitely believe is opening up much more. I think there's lot more opportunity on the infra side both for, let's say, our Cables business, the wire, the retrofit businesses. But construction is still -- I'm sure it has been your observation as well, has not really started in a way one would have desired.
Okay, sir. Sir, just one more question, if I can squeeze in. In the ECD segment, you have mentioned that Fan has shown a very good growth because of premiumization as well. Is it possible to split the Fan growth in terms of value and volumes? We just want to understand how is the industry doing in terms of volumes? And how much of that is because of premiumization that you have been doing constantly?
I think it would be almost similar for us. It's not that there is significant price increases. There have been some, but there are largely because of commodity. In fact, if you argue, the numbers have slightly come down because of the GST changes and all. So it is a mix of that. So if at all, there will be a 2%, 3% value and volume difference but not significant. We normally don't segregate them because we have a very wide range of Fans. But if you really push us, then I would say not more than 2% to 3% difference between volume and value.
We'll take the next question from the line of Shrinidhi Karlekar from HSBC Securities and Capital Markets.
Sir, my question is on Lloyd margin. Sir, would it be fair to expect about 4% to 5% incremental EBITDA margin should be possible due to in-sourcing of manufacturing in Lloyd business over say next 3 to 4 years?
I think, Shrinidhi, in 3 to 4 years, I'm sure a lot will change. I think on a quarterly call, it's very difficult to...
What -- Rajiv, what I'm trying to say is, is the -- like currently, we have like brand margin and the distribution margin, while the manufacturing margin is still with the erstwhile Lloyd. So when we are in-sourcing of the -- when we are in-sourcing the manufacturing, because of that decision should we expect 4% to 5% EBITDA margin? That's really the question.
So one would expect that when manufacturer says that the value chain should belong to the manufacturer, and in this case, if they're aligned like we have in other product category, I think this should be normal expectation. But I think you must be aware that -- see because of the competition, how the things will stack up in next few years, changing landscape of the companies and what their strategies would be. So there's a lot which goes into the margins than just the in-sourcing. However, I think definitely, it would have a positive influence. How much that would be? I'm sure we will have more opportunities to interact there with better data analysis as well.
We'll take the next question from the line of Bhargav Buddhadev from AMBIT Capital.
Sir, just one question. Lloyd's positioning in the MBO market has been fairly weak. So sir, is there any plan in place to improve Lloyd's presence in the MBO market?
I think there has really been increasing results from that, Buddhadev. And I don't know whether you are aware, even we have started the national chains like Reliance and Croma. So - and other regional retail which traditionally the Lloyd has been -- which was primarily part of the strategy. So it's not that they could not have done that, but I think the entire strategy was different. Obviously, once it is with us, we are trying to also tweak the similar strategy, so that we really become a brand which is available to every segment of the customer then you see being excluded from anywhere. So as part of that, I think we have been reaching out to everyone. And we must share that we have got a very positive response from them.
So sir, are we saying that we are now available with Reliance, Croma, Snehanjali, Kohinoor?
So we were not talking only Bombay, Buddhadev. We view beyond Bombay as well. So yes, I think on different level, we are engaging with everybody. And I'm sure in next few months, you will see us with all the leading brand chains.
We'll take the next question from the line of Dhaval Mehta from YES SECURITIES.
Sir, my question is on A&P spend. Sir, in this quarter, there has been a sharp increase in A&P spend somewhere around 4% of sales. So I understand that on a quarterly -- it will be -- not be right to see it on a quarterly basis. But anything to call out over here?
You're talking about general or specifically for Lloyd?
In general.
In general, so it's a seasonal impact. Last quarter, with post-demonetization, we had curtailed our A&P spend a little bit, just to see how the demand is panning out, and it was seasonal as well. So this was a festival season both for Lloyd as well as for Havells. So I think it is nothing out of the ordinary.
Okay. So annually, we should expect in the range of 3.5% to 3.7% of sales, right?
Right.
We'll take the next question from the line of Pulkit Patni from Goldman Sachs.
Sir, my first question is you did explain earlier on why the margins for Cables & Wires has gone up in the last 2 quarters. I did not quite understand the competition was under pressure, which is why we could get better margins. If you could please just explain that part on how come the margins have increased so significantly in Q2 and Q3 in the Cables & Wires business? That's my question number one.
I think, I don't know, Patni, where we -- Pulkit, where we spoke about the competition. Maybe there's some, I think, confusion there. What we said last year, even in the -- amidst increase in commodity pricing, we were unable to pass on, see because of various reasons, demonetization was one, weak demand scenario, you see then the GST disruption. So if you see this quarter and maybe slightly the last quarter also has some inventory gains, you are aware of that. So the first one, where we have taken the step, but finally you have to pass on. You see the cost increases to the market. And this is why you see sort of improvement in that. And we believe depending on the product mix, because even this quarter the Cable has been pretty weak. So the mix has taken it in favor of Wires. See, generally, it has been a better margin profile than the Cables. So it's a mix of few things we still believe as they have given us these margins. And going forward, we believe this should be the margin profile of this business, give or take a couple of percentage or 1.5 percentage here and there depending upon how much is the Cable part of our overall product mix.
Sure, sir, because...
Cables & Wires also as the Cable -- underground Cable increases as a percentage, the overall margin goes down. But in absolute terms, it will go up. So for example, in the fourth quarter, the infrastructure, the government demand starts kicking in. So there might be a higher uptake for underground Cable as compared to domestic wires. And hence, maybe on an overall basis, the margin might look lower, but it should -- individually, it will not be lower.
Sure, sir. Sir, actually the reason I asked that was because in the previous quarters, [ demon ] quarter we didn't have a margin compression as much as we've seen an expansion, which is why I was wondering that a 20% or 17% margin because then if this continues, it's actually very good news.
20% is an outlier, we mentioned last time also. It is because of inventory gain. So I think, anywhere between, let's say, 15% and 16%, that should be an ongoing sustaining basis.
Sure, sir. That's useful. And -- but just one more question. If you could share the Lloyd number for Q4 last year, I understand you didn't own the company then, but just for us to work the Q4 number for this quarter?
Kuldeep will come back, because right now we don't have that handy with us.
The next question is from the line of Ajit Motwani from Bharti AXA Life Insurance.
Sir, just wanted to understand the pricing part on the Lloyd's business post this new rating. You have seen the pricing?
Sorry, what's the question again?
On -- the pricing side on the new ACs after the rating change, have you hiked prices?
Yes, everybody has hiked prices, including Lloyd.
Okay. The extent is -- would be how much, 5%, 7%?
I can't give you a number because as part of it is due to raw material base and part of it is due to rating change. But it could be in the range of maybe 8% to 10%.
Okay. And secondly, on the revenue mix side of the ECD, you said 40% is Water Heaters plus appliances and 60% is Fans, right?
Yes, for the quarter.
For the quarter, yes.
Yes.
And the growth, you are saying is higher for the ECD -- sorry, the Water Heaters and the kitchen appliances as compared to Fans?
Yes.
The next question is from the line of Abhineet Anand from SBI Caps Securities.
First question is, can you give the volume growth for Wires and Cables separately for 9 months?
I think, 9 months, we will revert back to you, because 9 months, we do not have.
For the quarter, is it possible?
Yes. For the quarter, Wires has been flat and Cable has been negative.
Negative to what extent? Is it possible to state that, sir?
I will say...
Low single-digits.
Okay. My second question is now that Lloyd is almost 2 -- I think, almost 2.5 quarters, is it possible to give some range as to full year -- what could be a Lloyd margin for the full year, because the 2 quarters that it has operated has been the lean quarters? And summer is maybe coming. So for the full year, any guidance on Lloyd's margin?
No. As of now, no. I think maybe the next quarter when we have discussion, because we would have seen at least 1 season. The season is basically from Feb to June. So it has not even started. So that will be a better discussion at that time because we will have some more data.
Because I think there's a lot of moving parts in this season as well because of the rating changes. So I would suggest that we give it some more time to publish, let's say, on regular basis. I think over time, there will be a lot of investment on Lloyd as well. So just give us some more time.
We'll take the next question from the line of Snigdha Sharma from Axis Capital.
Yes. All of my questions have been answered.
We'll take the next question from the line of Vikash Mantri from ICICI Securities.
Sir, just wanted to understand the Lloyd's business growth, we talked about 16% growth and 11% growth last quarter. Can you help us, what is the full year number as base that we are working for with Lloyd's? And what should be the steady-state margins we should assume for this business now?
Yes. So we are working on the gross sale as the base on this of the last year. On this basis, we have computed this 11% and 16%.
What is that amount, sir, for the full year, if you can give?
Full year? INR 2,000-odd crores, gross.
Gross. And what is the -- so we have done INR 830 crores as of now, and we are -- still think we have had growth.
That is -- Vikash, that is net. So I think I suggest you engage independently with Manish because you see there are a lot of moving parts in this. The way they used to compute their sales and the way we do it in our own accounting system, I think there's a hell of a lot of difference. So because otherwise, you see we will end up confusing each other.
[Operator Instructions] The next question is from the line of Achal Lohade from JM Financial.
Sir, a couple of questions. You said for the Switchgear segment, Switches was one of the key drivers. If you could quantify in terms of how much is Switches' contribution now? And how do you see that moving on next, let's say, 2 to 3 years?
I think we don't differentiate within the product category. So we just gave you a little bit of a guideline that this has helped...
Okay. No, because the reason why I'm asking, I imagine Switches will be more replacement as compared to Switchgears. So one could see a much higher growth and much less dependence on the new construction as compared to Switchgear?
Yes, I think, in general, that is -- that's where -- that's what is playing out, Achal. What we are saying for various reasons, we don't want to go deep into the allocation of various businesses.
Right. Okay, okay. Fine. The second question I had with -- was with respect to the Lighting segment, how much does LED now constitute, because I think you used to give that number before. So I was just curious to know what you see LED contribution now? And would we see the percentage growth improving as in non-LED actually percentage come off?
Look, last time also we mentioned lighting is almost like LED. So I think, we don't -- for -- so LED is almost 80%, 80%-plus now. So that's why we have stopped differentiating and giving separate numbers. So yes, the growth is all LED lighting. LED is lighting now.
Right. So in that case, why I'm asking, sir, is because earlier the growth used to be in high double-digit. I understand it's now the function of base as well. But is it fair to assume that a growth of between 20% to 30% is definitely doable as compared to 70%, 80% what LED growth earlier used to be?
Yes. So LED, you see this 21% growth as I said, I think this looks sustainable. Hopefully, it could be better from here, and -- but yes, now easier. I think you have to appreciate the LED as a base has also becomes the lighting base. The LED is used to be very small part of the business, when you can see 35%, 45% growth, but overall number used to be 10%, 12% of lighting, maybe lower, 8%. So now the entire lighting especially constituted by LED itself.
Right, right. Precisely, that's what my question was, sir, that given the base now, is it fair to assume between 20% to 30% growth? I think that's all from my side, sir.
The next question is from the line of Amit Seth (sic) [ Amit Shah ] from Advent.
Could you just help me understand -- there was a steady statement which gave ECD growth as 21%. Could you just help me understand the bridge to the 26% and 33% given in the financials, which are reported?
I think this is part of our Fans facility, which is -- comes from the exempted unit as it was. So if you do it from that side adjusted. That's why this difference is coming from 26% to 33% -- it's 26%, not 21%.
Yes, my apologies, 26% to 33%.
Yes. So this [indiscernible] hardware facility, which is exempted unit. That is -- so for example, this is to be done in the like-to-like comparison. The last year Fan figures would have included an excise component to it, because it was coming from an excise exemption zone. So now it is net of GST completely.
Understood. The second question was, you gave the breakup of Fans as 60% within ECD. Could you just help me understand how much was the newer segments like Water Purifier or Male Grooming, the newer segments, how much do they constitute within ECD?
No, they are marginal. In fact, water purifier, we started on the last week of December. So they are not part of this. So primarily, you can say it is -- in the rest of the 40% is 95% appliances and Water Heater.
The next question is from the line of Ravi Swaminathan from Spark Capital. Ravi, your line is in muted.
Hello?
Ravi, We are not able to hear you. Can you use the handset mode while speaking?
Hello, am I audible now?
Yes. Thank you.
Yes. What is the breakup between fixtures and lamps and lighting? Just wanted to know that, sir.
No, actually, we do not do it on that basis. Only we do Plumen and...
Lighting has become very different than what it used to be earlier, wherein we could differentiate between CFLs and the luminaires. Now it has become completely one consolidated thing. So we can call this consumer side and professional side, but the rest -- otherwise, to actually go down what is LED lamps and LED fixtures doesn't make much sense anymore.
Okay, okay. Because why I am asking is that lamps -- I mean, because of the falling prices, there could be some margin pressures in that various fixtures. If it is a bigger portion of the revenue, it could sustain margin higher or there could be more scope for growth, so that's why I was just asking on this.
Not really. Most of these products are -- we sell as a branded product and are very high quality. So the lamps are also viewed by the consumer with that perception.
Okay, okay. And the bifurcation between B2C and B2B and B2G? I mean, basically to government, EESL, orders and how will that be?
So I think B2G would be how much?
Not much. It could be [indiscernible].
Approximately 5%, EESL.
EESL is 5%. And going forward, would we pick these orders? What is the visibility in that?
5% to 10%, not more.
Okay. But orders are there in the pipeline, sir, for -- regarding EESL?
Not much at the very moment. I think we are very conscious of the EESL, in general, government business. In fact, we don't do much government business. But -- so we are very conscious. Our core play would continue to be the branded and distribution and now more of B2B we are able to see great retrofitting opportunities.
Got it. And sir, across all segments, are distribution touch points compared to last year, this year, how much would be? That's my last question.
That we are not tracking for this call. But all I can say, in general, there's improvement in all our touch points largely on the retail side. So the whole focus is on the distribution, on the retail side and getting more into the so-called what you call the unbrand areas, where we have not been present earlier.
The next question is from the line of Harshit Kapadia from Elara Capital.
As for government directive, there has been -- industries have been asked to stop the production of IE1 motors. So have we done that? And have we shifted completely to IE2-based motors? And what is the price differential between 2? And can we see any uptick because of that in the...
Look, motor itself is not a very significant part of the business as we speak. But I am informed that we have already stopped this. Frankly, we could not make much sort of understanding on what you are saying. But I'm just informed that we already stopped that.
Okay. Is there a price difference between IE1-based motors and IE2-based motors?
We do not know. I think it's something we are not focusing on this call. So you can inquire independently on this.
Okay, okay. Sir, next question is on Lighting segment. Earlier, you used to give a breakup on -- in lighting in terms of how much is a part of street lighting, because that is based on the order book. So if you could just help us, the revenue that you have out of INR 287 crore, how much is that portion?
So we just said before discussion, was similar that around 5% of that is on the EESL. We didn't use to give a street lighting. Basically, we used to give on EESL. That is 5% of the business.
That's 5% of the business. But you don't supply directly to any state, or at least municipality?
No, no.
No, that's not there. Okay. But do you plan to do that, sir, in the future?
No, we are very wary of the government. So we will see when the opportunity comes. Now we're dealing with the EESL.
Okay. And sir, final question is on margin front. Sir, in the last conference call, you had suggested if you are looking for a long-term improvement in margin, there are only 3 ways that you plan to do it. It is either through consolidation of warehouses or integration of back-end operations. So are we looking that as a long-term improvement? And how much can you quantify would there be an improvement because of these 2 factors?
No, we are not consolidating much on the warehousing side. Profit margin, look we are -- as we just said, that it should be between 14% and 15%. So already, multiple efforts are being done in every respect. Out of each, these could be 1 or 2 sort of ways to do it, but these are not the only ways. But yes, our whole idea will be to maintain our margins in the business.
So one of the way would be just improvement in the product mix. Is that [indiscernible].
Product mix, the product costing, you see efficiency both at the sales side as well as the production side. There will be no just 1 or 2 ways of doing this.
The next question is from the line of Atul Tiwari from Citigroup.
Sir, just a clarification. In response to an earlier question, you had mentioned that there was some bit of prebuying in the AC segment because of the change in rating. Did it apply to any other product category as well?
No. No, it's only for ACs.
So it's only for ACs, right? So yes, because it did appear that you said [ it did apply. ] Okay. And the second thing is, is it fair to assume that there was some deferment of purchase decisions in the core business in the previous quarter because of high GST and that kind of spilled over into this quarter after the sharp GST cut, so that could normalize going ahead?
Yes, this is largely on the Cable side we said, that you see, government made all these large contracts that we're expecting that 28% is very high distributor rationalization. So -- and it happened in somewhere middle of November. So I believe they will take time before they started releasing orders on that. So that why's we said, hopefully there should be a lot of a pent-up demand or the stuck projects which now should see the -- saw light of the day.
Okay. But apart from Cable, did any other category see such a sharp decline or...
No.
Thank you. Ladies and gentlemen, that's the last question. I now hand the conference over to Mr. Shrinidhi Karlekar for his closing comments.
Yes. On behalf of HSBC, thanks to all of you participants for joining this call. We also want to thank management of Havells India for giving us the opportunity to hold this call. Sir, do we have any closing comments?
No, everything is fine, Shrinidhi. Thanks for arranging this call, and thanks everybody to be on the call.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, on behalf of HSBC Securities and Capital Markets Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line. Thank you.