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IFB Industries Ltd
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Ladies and gentlemen, good day, and welcome to the IFB Industries Limited Q2 FY '19 Earnings Conference Call, hosted by Nirmal Bang Equities Pvt. Ltd. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Chirag Muchhala, from Nirmal Bang Equities. Thank you, and over to you, sir.
Yes, thank you. On behalf of Nirmal Bang Equities, we welcome you all to the Q2 FY '19 Results Conference Call of IFB Industries Ltd. The management is represented by Mr. Prabir Chatterjee, Director and CFO; Mr. Rajshankar Ray, CEO, Home Appliance division; and Mr. Arup Das, Head Marketing, Engineering division.I now hand over the call to the management for their opening remarks, post which we can take questions. Over to you, sir.
Thank you, Chirag. Thank you for hosting us. Good day, everyone. It's a pleasure to have you on -- all on our con call for the second quarter FY '19 results. We have with us my colleague, Rajshankar Ray, CEO of Home Appliance division; and Mr. Arup Das, Head Marketing, Engineering division.I'm sure you all have gone through our post on second quarter investor presentation. During the quarter, company has reported a total income of INR 659 crores with a growth of 8.8% over same quarter last year. EBITDA before exceptional gain was INR 44.4 crores, and the margin for the period was 6.7%.During the period, we had an exceptional run, INR 19.56 crores, from Compulsory Acquisition of factory land by Bangalore Metrorail Corporation.Company also, during the half -- first half 2019, reported a total income of INR 1,254.2 crores against a growth of 10% over the same period last year. The margin for the period was INR 79 crores with 6.3 percentage. Margin during the period was not as per our expectation, mainly because of weakening of rupee, commodity price increase and increase in import duty operating items. Besides this, during this period, company also entered into a business transfer agreement on 15th of October with Ramsons Garment Equipment Private Limited and Ramsons Udhyog Private Limited for a consideration of INR 35 crores, catering into laundry business, what I mean is, Industrial Laundry Equipment.With that, I will request you to start the question-and-answer session.
[Operator Instructions] We will take the first question from the line of [ Pritesh Chheda ] from Lucky Investment.
Yes. Sir, some more comments on the margin side because what reasons you gave does not get reflected in the gross margin number. The gross margin is expanded, a lot of it is because of other expenditure line. So if you could tell a little bit more light on the other expenditure line as to whether margins have come down. And second, in the past calls, you had made a comment that once when the INR 600 crore revenue kicks in, the company generates operating leverage and we head towards double-digit margin. But that doesn't stand true when we look at the numbers. So your initial comments, plus the past comments that you have made on INR 600 crore revenue and how the P&L for quarter 2 came up, just don't gel well, so if you could tell some reason.
Yes. I'll tell you. The first point is the operating expense that you have seen that it has gone up compared to this thing. This is mainly because of the GST. We have a practice of the service defective, which franchisee used to give us as a free replacement. Earlier, we used to just replace it without entering into the book because it is defective stuff. But as per GST, we have to take them on a purchase. And when we send them back, it's a sale. So it has affected both sale and purchase, equally. But as a result, that expenses is showing INR 20 crores higher. That is -- there is no effect on P&L because of that, this is mainly because of the change in practice after introduction of GST. That is one. Second, what I said INR 600 crores was absolutely okay, but this period, so from -- specifically second quarter, because of the commodity price increase, oil price increase and the effect of ForEx, it has affected us terribly and we could not increase any, substantially, price. We do have done from 1st November this quarter, in the coming quarter. So that is why we are affected. And the remaining was -- we grew these by around 10%, 12%. That is the reason. Because of this, ForEx going up, commodity price going up, we are doing a lot of internal exercise to bring down the import items as well as with the -- coupled with the price increase, I think, we'll be able to come back to the -- our desired expectation.
Sir, what you are saying is not getting reflected in the gross margin, sir. It should get reflected in the gross margin, all the reasons.
The -- I said, mainly, material cost and the other expenses, these are the partly gross margin. So it's more or less in line with other than the material ForEx and this part.
Okay. And your comments on growth? So growth has slowed down, so is there any market share loss in...
That -- RSR, will you explain this?
Yes. This is Rajshankar here. The growth percentage that you see for this quarter versus the previous quarter, there is some reduction in the growth percentage that has come because the previous quarter was the quarter in which the GST had just been introduced. And there was a literal stock out in the channel because in the months of June and July and August, there was a lot of purchase taking place, so with people thinking that post-GST, rates would increase and so on. So the growth figure that you see for the quarter has that issue. We don't see any particular growth-related issue in Q3 and Q4, for example. So that figure will correct itself. I think the question that you asked Mr. Chatterjee around the margin, if I can just sort of address this a little bit more specifically. The combination of the various categories that we have, there was a particular margin structure we had and especially a degree of margin that we used to make from the sale of microwaves. Now the issue that we've had in this quarter is a bit the ForEx level which went up significantly from 67 to 74. The margin structure around the microwaves was seriously impacted. And in addition, there are the issues around the commodity pricings, et cetera, which I think everyone knows. So...
And the duty.
The microwaves also had the additional 10% duty, AC has also had the 10% additional duty coming in. And in the middle of the season, with the degree of stocks in the market, there was no way we could pass on the price increase. So that we have done from 1st of November, that is done to address the issue of the increased cost, specifically.
Can you give some highlight on the sales growth and the category growth and market shares in home appliances for the different categories that we have?
Yes. Mr. Chatterjee, would you like to answer that?
The -- I will say that, overall, we had around 14% growth. Category-wise growth, if somebody wants to know, I can explain later on, actually. You can call me one-to-one, I will explain.
Have we lost any market share anywhere in the front loads?
In the Q1 and the early part of Q2, there were 2 specific areas where we did lose market share. One was in microwaves, where the custom duty impact and the price increase that we did for part of the custom duty impact. On the online space, we lost volumes to Samsung, specifically, which did not increase the pricing. And also, in the front loader space, there was a specific market program that Samsung ran, where they were giving mobile phones free, et cetera, along with washers. We lost volumes there. However, in the period of, let us say, August-end, mid-September to now, we have recovered most of that loss, basically. So if you take the full Q2 per se, which is July, August and September, there would be part degree of market share loss in microwaves and front loaders because of the reason that I just gave you.
[Operator Instructions] Next question is from the line of Mitul Mehta from Lucky Investment.
Sir, Mitul Mehta. Sir, my question to Mr. Rajshankar, you did explain about margin erosion that you witnessed due to the several reasons that you mentioned. Now my question is, see, one is the gross margin and the other is the EBITDA margins. Now the [indiscernible] impact we saw, obviously, was other expenditure, which rose significantly. But the gross margin, despite the ForEx and raw material cost pressures, actually, extremely healthy if I were to compare your numbers with the rest of the industry. So we're still at about 45%, 46% gross margin, but our EBITDA margins were way below. So that is, obviously, in the other expenditure. So this whole GST thing that you explained, this whole accounting change, now -- so how do we have to look into this? So is it a very, very comparable number?
No, no. This is offsetting actually, you have to do same amount of sales, same amount of purchase, it offsets. Only thing in the GST, you cannot take back any material without showing it as a purchase. And whenever you give the material, the replacement of the defective parts, you have to show it as a sale. So similar amount is added to sale and purchase. Effectively, this has got no impact on the profitability.
Okay. Then the other expenditure increase, can you give us an estimate as to where the other expenditure was up?
See, other expenditure, like I have told before, and also it is 65% to 70% is variable in nature. For example, freight, service expenses, ancillary, advertisements, sales, promotions, these are variable with the volume, okay? Besides that, some part of rent, insurance, repair, which is fixed, which is very negligible, and there are hardly any change. The variable part varies with the volume. Like, for example, IFB in the Engineering division has grown up by around 20%, 26% and the appliance has grown by 11%, so depending upon the operations, there are variability and accordingly, change. So there is not much impact other than that the stores, which has gone up, which I said, but it has got equal amount existing so it is a nullifying effect, it will have no impact on the profitability. There is no area where expenses has otherwise gone up significantly.
So, sir -- so now, your understanding of your assessment now, you've been kind of guiding for quite some time that we should be hitting double-digit EBITDA margin of 6% to, let's say, 10%. So when are we likely to see this improvement?
Yes. So Rajshankar here. I can answer that partly, and then Mr. Chatterjee will -- can add on to that. The -- to get to that double-digit margin, there are 2 actions that we have been working on, which we have also been sharing. One is the revenue itself and the investments that we have in manpower or what we have made in the network, et cetera. The revenues that we are currently getting, we can get much more for the investments that we carry. I'm now talking specific appliances, not the company-level revenues. So the first action is the revenue because, per se, if you look at the cost structure that we have, other than the manning costs, there isn't any other significant cost head that we carry. This is the first point. The second point is, with respect to the work that we have done on the material costs, which is the gross margin structure that you spoke about, which is healthy, so all the localization, et cetera, that we had done on the washers, bringing manufacturing into India for the electronic controllers, et cetera, and ramping up the new models which have a better margin structure, the work on all of that is now complete. However, what was unique in this particular quarter is the rapid change in the ForEx situation. And normally, what we do is that, on a quarter-to-quarter basis, the input costs are adjusted into the pricing. But we could not do that in this quarter simply because of the way the events on the online space or the buildup to the season was there. So even though we have made improvements in the cost structures on the manufacturing side, we actually lost a lot of margin on the traded product side. And to us, specifically, that is microwaves. And we used to carry very healthy margins on that side, and they have eroded because of the customs duty and the ForEx situation, and we could not pass through that thing into the pricing. So for us to do the double digits, one is the revenue, which we presented and the actions being taken, we are quite confident the revenues will follow. On the costing side, we have made the price corrections as of 1st of November, but it will take maybe a quarter for all of that to flow through into the markets because of the stocks that are at various stages of the supply chain. Mr. Chatterjee, would you like to add?
No, that is exactly because that the increase in the duty -- basic duty for the imported items, number one, and dollar. If you see for the same period last year, we -- our average purchase price was around 64.5, whereas these has become now 68.5. And to a large extent, we could not do any price increase to recover that because the products were in the market, part of it in stock, legal metallurgy active there. You cannot change whenever you want to do it. So that is why had to wait, and from the 1st November, we have increased. And if the oil price, dollar agreements more or less stable, then we are hopeful of doing better, coupled with the increase in revenue. For example, October, our revenue was much more than what we expected. Let's hope for the best.
So, sir, just to make my doubts clear. So you've had a price increases...
Excuse me, sir, this is the operator. I'm sorry to interrupt. No, Mr. Mehta, your voice is not really audible. So can you please speak from the handset mode? Because...
Yes, yes. Just last question. Yes, sir, can you hear me, sir?
Yes.
Yes, I can hear you now.
So, Mr. Sekar (sic) [ Rajshankar ], how much price increase have we taken? And to what extent now are we fully protected as far as the dollar goes?
So if you look at washers, the price increase would be roughly in the range of 3% to 4%, similar amount on the microwaves. If you look at the second part of your question with respect to how well we are protected now, as far as manufacturing is concerned, we are completely protected. As far as traded items are concerned, we are not fully protected because the combined effect of the dollar and the customs duty, we have been able to cover, currently, maybe to the extent of 65%, 70%. We still have to work on the remaining 20%, 30%, basically, which has to be addressed through actions like model mixes, new models. That part of the work is still unfinished as on date.
So second half, our margins should look better?
Exactly.
Yes, second half should definitely look better.
[Operator Instructions] Next question is from the line of Nitin Arora, from Axis Mutual Fund.
Just one question related to the demand side. How has been the -- you're doing the call almost after Diwali. So just wanted to understand how the demand, overall, panned out, given the e-commerce sales. And with respect to the price hike which you talked about, 4% to 5%, how much is actually getting on the ground approved? So these are the 2 basic questions.
So the first point was on sales. We are well represented online and also off-line. And specific to the season, which is, let's say, end of September to, let's say, early part of November, we have done much better than expected. The market has been very healthy and the stock movement has been very good. So that's the first part. The second part, in terms of the price hike and actually, on the ground, I didn't understand that part of the question.
So the price hike which you would have taken to your distributor or let's say because you run your own stores as well as on the other side, is it a pushback coming from the pricing? Or it's getting absorbed?
No, no. It will get absorbed. There's no issue there.
Okay, okay. Because what we are hearing that, generally, though you are in a very different category, washing machine. But refrigerator is something we are looking at a pushback, so I think that's why I asked the question.
No, no. We -- see, our price hikes will be across washers, microwaves, the dishwashers, the dryers. There is no issue there at all. I think the only area where there is going to be, from our point of view, some confusion in the market is going to be on the pricings around air conditioners. Because the air conditioning space, in terms of pricing, is really up in the air as on date, because of pricing increases out of China, the ForEx and the custom duty, the impact of all 3, together. And I think all the companies are sort of wondering what they will do in the market around the air-conditioner pricing. Other than that, as far as we are concerned, there's no problem at all.
With respect to the market growth, which you talked about is pretty healthy, how much would be the washing machine market will have grown by, the front load and the top load, the market growth in, let's say, Q2, and even if you talk about, let's say, October and November till date?
See, there are no official figures out. My own estimate is that Q2, overall, was subdued, less than 10%. And as far as the season growth is concerned, I would have expected the market to have grown by around 15% to 17%, basically, in between 15% and 20%.
You're talking about this 15% to 17%, would be in October and November until date period?
Yes. I would take a period of, let's say, end September to early November.
How much would that be attributed to pricing part if I have to conclude in 15%, 17%?
No, actually, I don't think pricing has anything to do with that. I think it's just consumer sentiment, and there are some very interesting finance options in the market now. So if you're interested to purchase, I mean, there are multiple ways you can arrange finance. So I think every one is helping.
We would take the next question from the line of Sonali Salgaonkar from Jefferies.
Sir, my first question is regarding the import of higher -- sorry, the impact of higher import duty on compressors. Sir, on an average, let's say, on an industry basis, could you please give us or help us understand how much of the overall cost is the compressor cost in the product categories that you just mentioned in the earlier question?
Yes. So the impact duty on the compressor will affect the people who are manufacturing within India. And depending on the quality and the specification that you're choosing, your cost would vary. So I wouldn't be able to give you an exact figure for the industry, but it could vary anywhere between 25% to 35%, depending upon what quality of a compressor you are choosing. As far as IFB is concerned, as on date, we are not manufacturing within India, so these are imported in CBU form. So the impact that we would face or anybody else would face, those who are importing CBUs, would be an impact, like I just said a little while earlier, of 3 things put together. One would be the basic price increase from within China, the second would be the increase in the ForEx level, and the third would be the custom duty impact. So all 3 would kick in together.
Sure. Sir, my second question is you just mentioned that, as per your estimate, the market could have grown 15% to 20%, overall, from end September to early November. Sir, in this period versus similar period last year, has there been any price growth to pass on due to the appreciating rupee?
No. I think -- not I think, actually, most -- all players have not been -- have not made any pricing changes in the Q2. Some players made pricing changes in Q1. I think post-Diwali now, almost everybody would be required to pass on the price increase. I mean, somebody might choose not to pass it on, but then that would be something that would affect margins. We have passed it on, on first of November.
Sir, how much is the price increase? 4% to 5%?
3% to 5%.
3% to 5%. And over the next 2, 3 quarters, so assuming the current scenario remains the same, would you be looking at further price increases?
No. As of now there is -- what we typically do is that, every quarter-end, we look at the changes in the input costs and the ForEx situation, and we take the pricing costs. Now if you ask for a sort of an estimate of what will happen over the next few quarters, I think oil is not abating. So its impact on areas, like plastics, freight and other down-the-line commodities, the impact would be stable or it should actually reduce from the peak levels. The ForEx, which are hit close to 74 is also moderating. So if the oil goes down, even the ForEx situation should logically stabilize. And the other commodities, like steel, [ ABS ], which were actually raising very rapidly, consequent to oil and ForEx, should also stabilize. So I wouldn't expect anything dramatic in the next, let's say, 2 quarters or so.
Sure. Sir, and this 3% to 5% price increase in your view would be sufficient to cover up most of these escalations?
So, like I shared, it's completely sufficient as far as our manufacturing products are concerned. As far as our imported products are concerned, we still have 20%, 30% work left basically. So we've been able to pass through maybe 65%, 70%. And 20%, 30%, we still have to figure out ways to address it, which we are working on.
Sure, sure. Sir, last question from my side. Sir, considering that Q2 and even Q3 are seasonally lean quarters for air-conditioners, has there been any instance of the industry or any player passing on the cost of higher import duty on compressors?
No. Nobody has done it as on date, basically.
[Operator Instructions] Next question is from the line of Manoj Gori from Equirus Securities.
Sir, a couple of things. So first would be on the washer segment. You're planning to launch 6-kg variant in the second half of FY '19. So any updates on that?
Yes. In quarter 4, the 6-kg variant will be introduced.
So it would be at the -- since the start of fourth quarter? Maybe in January onwards?
It will probably be towards the end of the fourth quarter, because we will do the field trials, the commercial trials, et cetera, in the fourth quarter. So it would be in the market in full starting the first quarter of the next year.
First quarter FY '20, right, sir. Sir, secondly, on the Engineering margin. So if we look at during the current quarter, your profitability was largely driven by your Engineering business. So there was approximately -- your EBIT margins were close to 27%, so which has been very high. So what had actually led to such strong profitability in your fine blanking division?
Mr. Chatterjee, would you like to take the question? Hello? Hello?
Yes, sir?
Is, Mr. Chatterjee -- he would like to take the question or you want to...
Sir, just allow us a minute, we are just trying to reconnect, Mr. Chatterjee.
Mr. Das, you can answer, please, until Mr. Chatterjee comes online.
Okay. See, as far as the fine blanking business is concerned, yes, we have increased our market share and went into the product category, which are more profitable. And second point was we grew more than the market. As a result of which, these 2, coupled together, so we got the volumes and went into the products which were higher margin products, led to the ultimate increase in the bottom line.
Right, sir. So in the presentation, we had highlighted like Q3 would be relatively weaker due to a number of reasons. So again, your margins would come back to approximately 12% kind of levels? Or it should be like -- it would be now above that 12% to 15% range?
See, as far as once the top line decreases, there could be a possibility of decrease in -- percentage terms, it may remain the same. But what will happen is the absolute terms, the values may decrease. Because the top line will decrease because of this drop in customer requirements on account of the year-end.
Yes. Sir, just to further clarify. From approximately 12% in first quarter, we have increased to 27% in second quarter. So should we expect a similar range of 20% to 25% for the coming quarters and years?
See, our EBITDA, if you see, it's not 27%, I think it's in the region of 17%.
I think, actually, you're adding up the exceptional gain in...
I'm talking of margins from the operation.
There was an exceptional gain on account of the position of the land banks.
Yes, land sale.
So I think...
That has been added because I was looking at the quarterly numbers that you have published in your quarterly results. So that segmental results show...
Yes, so the land-related amount goes as an income into the Engineering vertical, which is why I think you're seeing that increase.
Right, right, right. Got it, got it.
Part is operational improvement which they have actually made and part is that land sale-related amount.
Sure. Sorry, sorry. Sir -- further, sir, Rajshankar, if we look at your Q4 and Q1 sales, which is largely, if you look at the AC sales, where your volumes are quite higher, and if you look at it, it would be approximately 15% to 20% range revenue contribution for the Home Appliances. Now when we say, like, price hikes have been very difficult. So again, can it be a further drag on your Q4 and Q1 performance, because your revenue contribution would be significantly higher from your ACs and you say, like your price hikes have been very difficult to take for your AC category? So again, when we say about the improvement in the second half, so again there would be some pressure coming from your AC there.
Yes. So this is a very good question. And if you remember, let's say, at the end of the Q4 or the Q1, the challenge that we had was to grow the volume of the air conditioners by using the distribution network that we've created to carry the ACs properly. So the primary challenge was establishing volume and establishing the brand in ACs. But what has changed after the Q2, which is a combination of the customs duty and the ForEx level, is that now, along with the volume challenge, we have to be able to manage the margin challenge. Now if you ask me, frankly, in the next 2 quarters, it is very difficult to address the margin challenge in air conditioners totally because it will require us to completely localize manufacturing into India, which is the work that we've started, but it's not going to finish in 2 quarters. So we will need an interim solution to address the margin structure partially, which is what I mentioned a little while back. But we will need the actions on the manufacturing products to actually compensate for part of the loss of margins on the air conditioners, which is what we are working on right now. So to the question that you had is that, is the AC margin structure going to be a challenge? Yes, it is going to be a challenge, we will have to find ways to address it.
Right. So till now, we don't have anything in specific, like what could be the actions but right now, you're just planning to come up with something, right?
Yes. So we have actually detailed out actions. But since they are in pipeline evaluation, being discussed, et cetera, I'm not specifically sharing it because it's a little premature. But since we're in November and the AC season will take off from January, obviously, yes, there is a lot of work that is already getting done on this.
We will take the next question from the line of [ Pritesh Chheda ] from Lucky Investment.
Sir, in appliances, the bulk of the business is, in any case, washers, when I was looking at the last year's annual report. So in the first half, specifically how would have washers done for us in volume and value growth rate? And how would have market done in value and volume growth rate for front load and top load?
Yes. So, Mr. Chatterjee. Are you back?
Yes, I'm back. The front load growth was around 6% in value, and top load was around 14%.
And what it would have been in volume?
Volume is top load around 6%, almost same.
Same number, right, because there was no price increase.
No.
And on the -- what would have market grown at the same time?
Rajshankar, do you want to add?
Yes. I think similar, similar numbers, basically. The -- like I said, in the Q2, on the front loads, we lost some shares to Samsung. So to our growth, you could add a little bit, the market would be higher because we have lost some shares to Samsung in this -- in the second quarter.
Okay. And any reason why front load has grown 6% because this category and this product line used to grow much faster than what is there?
No, but the -- another reason was...
This growth percentage, sorry, Mr. Chatterjee, I'll just finish one part of the answer. What I just shared a little while back, this growth percentage that you're seeing on Q2 is on the base of the quarter of last year, which had the impact of the GST, which was a favorable impact. So if you look at these figures end of quarter 3 or end of quarter 4, you will find them significantly different.
So this number of 6% and 14% you gave for quarter 2 or you gave for first half?
First half, I said.
Okay. So you are...
No, there is one more item, one more significant [ data ] that in the last year, the Diwali was in October, so major push material went out in September. This year it is in November, so that also will have some impact.
So should we believe that by the end of the year, the numbers would be double-digit number for front load?
Yes, yes.
Yes, yes.
Yes, yes.
Sure, sure.
Okay. And I have one follow-up question, I was just looking at my past notes. So we had this whole indigenization program in washers and it was supposed to bring indigenization level higher in the current year as well. And there was a margin expansion probability because of the indigenization. I don't see that playing out as a lever. So you had this one strong lever in terms of indigenization, so what's happened there?
Yes, so the localization is complete. The lever of the margin structures on that has also started kicking in because the models were released in Q2, and they have been ramped up in Q2, Q3 and then in Q4. But the expansion that we had on the manufacturing products was actually eaten away by the loss of the margin on the traded products, which was a combination of the duty hike and the ForEx, which is what we have to work on to get the full realization back into the books, basically.
But sir, your order in washer is hardly a business component, it's some 15%, 20% of your appliances sales. Still, that was roughly...
Yes, it was actually very healthy. So even in that 20-odd percent, the contribution from the microwaves was quite healthy for us, actually, and that has been negatively impacted in Q2.
Okay. Lastly, sir. It still doesn't explain the other expenditure, rightly. So if you could once again give some highlight why the other expenditures has risen?
I told you. There are 2 parts. The other expenditure, in our case, 75% to 76% is the variable, okay? For example, freight, franchisee expenses, ancillary expenses, those are variable in nature, okay, number one, and what has been sales promotion, the service expenses. There are -- other part is which is [indiscernible] and thing, there is hardly any movement there. But there is only one new element which is added now post GST. See, in our warranty and others, earlier, we used to give free replacement of the defective parts to the franchisee by discharging the duties by paying the VAT. But after GST coming in, so now the rule has become you cannot take or give anything without doing a purchase or sales. As a result, the defective material which just they have return may not have any value, but we had to purchase it from them. And similarly, a corresponding sale by -- through which we have given the material back to him. So similar amount is added to sale, similar amount has gone to purchase. So it is knocking off [indiscernible]. That is not actually an increase in existing, but because of the change in the law, we had to put it like that.
So your sales growth has to be deflated to that number?
Hardly anything, actually. INR 15 crores, INR 20 crores. Hardly anything.
Sir, INR 20 crores means 3% sales growth gone away and INR 20 crores in our operating expenditure means then the operating...
That -- to that extent, yes. But it is nullifying, actually. It will have not a large effect. But of course...
So if you're saying...
Hello?
Yes. If you're saying that the fixed expense line was flat, still your other expenditure growth rate is 24% and your sales growth rate is 5%.
No, no. But the overall sales growth is around 14%, 15% because there are Engineering division, which has grown 26%, where ancillary and others have gone up significantly. Understood? Each of the growth is not in line with the Engineering growth. Engineering. As I mentioned, we had a growth of 26%, 27% where the requirement of those items are much higher. Understood? And which is variable in nature.
I'll take this off-line, sir.
Next question is from the line of Amish Kanani from JM Financial.
Yes. Sir, this year, the online sales was anecdotally [indiscernible] was extended in Dussehra and Diwali as well. So the growth that we have observed, and you mentioned there was a good growth in October as well, is it despite the online sale? Or was it due to online sale? I'm not aware of...
It's -- yes, it's both, actually. It's both. We had good growth in both.
Okay. So the growth is healthy in both online and off-line?
Yes, yes, yes.
Okay. And, sir, this finance availability, there were these anecdotal reports of some NBFCs probably growing slow on funding side. But you did mention that there was some innovative finance options that was being offered. Again, I don't know if it was online, off-line or both. But the question is, sir, is the concern on the NBFC space, is it now getting felt? Or are we worried about that? Or it's not a major issue in our type of item, and probably the ticket size is lower?
Yes. So NBFC issues, as far the appliance industry is concerned, I don't think there's any issue at all. And it might have to do with the ticket size, it might have to do with the collection cycles that customers have got used to now. Also, the dominant player in finance is Bajaj Finance, but now you have other players like HDFC, TVS Finance, ICICI...
Capital First.
Capital First, all of them expanding their operations. And added to that, you have the credit card companies themselves promoting finance. So to a consumer, there are multiple options today, and I think that, that is also helping sales.
Next question is from the line of Kunal Bhatia from Dalal & Broacha.
Sir, I just had a question in terms of sort of ForEx loss, which is sitting in the other expenses. How much would it be in actual terms on a year-on-year basis?
The amount, we -- because it is -- some part is in [indiscernible], some part is [indiscernible], so overall, around 1.5% to 2%.
1.5% to 2%?
Of the material cost.
Of the material. And sir, how much would it be sitting in the other expenses?
Other expenses, there is nothing from ForEx.
Okay. Okay. Okay. And sir, you also mentioned a lot on the custom duty impact. So the custom duty part in this quarter would be how much in actual terms? Because I believe even that would be sitting in the other expenses.
No, no. These are structurally -- because of the import duty going up, our purchase price for the trading item will be higher. It would be a effect in the material cost only.
Right. Okay. I was just trying to find out any reason for that other expense rise. Okay, sir. And sir, in terms of the localization, at what levels are we because of the completion of the program in case of top load and front load?
Hello? Could you just repeat that question? I missed it.
What would be the level of localization in case of top load and front load?
Yes. So in top load, the level, currently, with the new models that we are rolling out is sitting at about 14% to 15%. And in the top loads, it is sitting at around 23-odd percent.
Okay. And sir, do we expect any further decrease in this?
As of now, over the next, let's say, 2-odd quarters, it will remain. We are working on projects to increase localization on the top loader, but they will take 2 quarters and beyond.
Okay, okay. And, sir, in terms of -- you also did mention in terms of the online sales of goods. Online sales currently would be what percentage of our total?
Of the industry or IFB?
For IFB.
For IFB, online constitutes about between 14% to 16% of sales.
14% to 16%. And sir, versus how much would be industry at the moment?
I don't have an accurate industry estimate on this, but it is sub-10%, basically.
Sub-10%? Okay, okay. And sir, in terms of financing in especially -- specifically for IFB, what percentage of our sales would be on finance?
20%. 20%. And in the festival month, it goes up to 30% to 32%.
Next question is from the line of Saurabh Ginodia from Stewart & Mackertich.
Sir, my question is for Mr. Rajshankar Ray. With the new entry of Voltas, Beko in the appliance side, they're offering a lot of schemes and extended warranties on ACs, refrigerators and washing machine. So just wanted to have a view on the competition intensity in the segment.
Yes. I remember having discussed this earlier. So I think the competitive intensity is already high. And in addition to Voltas, we will also see an entry very soon of players like Midea, who are already discounting very heavily on the online platforms, where they have built up some exclusives, et cetera. So I would expect the competitive intensity to remain the same. In -- so far as Voltas presence is concerned, it is already well represented across all areas, so to the same channel they will offer washers and electricity, et cetera. We will have to wait and see what is the impact of the duty increase and the ForEx increase on their side of the business. So I think it would take at least 2, 3 quarters for the whole thing to be really clear.
Okay. And, sir, if you can share the volume details for the quarter for front load and top load for microwave and...?
Volume, I will speak to you separately, please.
Next question is from the line of Ansuman Deb from ICICI Securities.
Yes. I wanted to understand the volume growth that you talked about, around 14% to 16%, that you expected or that was the number that we actually had this quarter?
That was the -- see, for the first half.
First half, around 14% and 16%, respectively, that is.
Yes.
[Operator Instructions] We will take the next question from the line of Manoj Gori from Equirus Securities.
Sir, sorry if I missed out. But just want to understand like when we said like we have lost market share to Samsung. So what were the key reasons for this loss of market share?
Yes. So this is market share loss between end of June to, let's say, mid-September or, let's say, third week of September. The specific reason was that I think they sort of decided that across categories, they wanted to gain market share. So there was some very heavy discounting. They were offering mobile phones free to consumers along with the washers, so we lost shares in that period. But from, let's say, end of September to now, we have recovered it back. That was a temporary loss driven by discounting or consumer offers, you can look at it that way.
They have withdrawn all the offers now, like...
They have not withdrawn. It is still there in the market. But these sort of things have a limited shelf life because, ultimately, the customer -- they would get excited for a while, but the effect doesn't last.
Right, sir. Sir, secondly, if we look at Ramsons, so if I understand correctly, now it would be a part of IFB since 15th of October.
Yes, that's right, 18th October.
Okay, sir. And in FY '18 Ramsons is approximately INR 42 crores, INR 43 crores of sales?
Correct.
And, sir, what will be the sales of Ramsons for the first half till September?
I -- they have grown by about 10-odd percent in the first half.
And sir, how are we looking at this Ramsons going forward, like maybe from a 3-year, 4-year horizon? And what are we expecting that this INR 40 crores [ grows to ]?
See, the direction that we have is that this is a product and a sales team, which is very strong in industrial laundry. And if you look at our own earlier team, it is a team that was strong in industrial dishwashing, but much smaller than Ramsons as far as the laundry side is concerned. Now the advantage that we are chasing is actually the Ramsons team not only selling laundry equipment, but also selling dishwashing equipment. And our team, along with the dishwashing equipment also having the very aggressively placed laundry range. So if you look at the data and the projects of infrastructure within India, and you look at the growth of the launderettes cross the larger cities like Mumbai, Bangalore, Delhi, where people are outsourcing laundry, then if you combine all of this, the data says that this could easily, for IFB, be a INR 500 crores business over the next, let's say, 3- to 5-year horizon. Very obviously, this is margin accretive, which is one of the questions that we face repeatedly. This is a highly profitable segment. So both from the revenue point of view as well as the margin point of view, it is very good business for IFB to chase. Have I been able to answer your question?
We will take the next question from the line of Chirag Muchhala from Nirmal Bang.
Yes, sir. A couple of questions from my side. So, firstly, what are the updates on the plans to foray into the refrigerator category?
So the refrigerator category field testing, et cetera, we are now closing formally with all the observations, et cetera. But as of now, with the ForEx level, the way it stands, and the customs duty in place, I think our conclusion right now is to focus and fix margin issues first and then to look at what a refrigerator segment could bring to us. So over the next 2 quarters, we will be focusing on fixed income margin issues basically. And the refrigerator right now, with the ForEx and customs duty, the way it is, it is not margin accretive, so we will not proceed further now on that.
Okay. And, sir, like AC, which other products do we import as a CBU, completely built unit?
It is air conditioners, microwaves. These are the 2 largest ones.
Okay. Okay. And sir, lastly, I mean, for Q2 or for first half, can you do the share of IFB Points and multi-brand retail outlets as a percentage of our total sales?
So IFB Points for us are about 14% to 15% of business. And multi-brand, if you add up both the directly serviced multi-brands as well as the multi-brands serviced through the distribution network, then both put together would be about 55%, 60%.
Okay. Okay, sir. So there are no more questions, sir. So I would like to thank you for giving us the opportunity to host this call and to all the participants for their presence. So would you like to make any closing comments?
Thank you all for participating.
Well, thank you very much. Ladies and gentlemen, on behalf of Nirmal Bang Equities, we conclude today's conference. Thank you all for joining us. You may disconnect your lines now.