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IFB Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Q3 FY'22 Earnings Conference Call of IFB Industries posted by Nirmal Bang Institutional Equities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Bhandari from Nirmal Bang Institutional Equities. Thank you, and over to you, sir.
Thank you, Stephen. Nirmal Bang Equities welcome you all for 3Q FY'22 results conference call of IFB Industries. Management is represented by Mr. Prabir Chatterjee, Director and's CFO; Mr. Rajshankar Ray, and MD and CEO, Home Appliance Division; Mr. Arup Das, Head of Marketing and Engineering Division; Mr. Anand Reddy, CEO of Motor Division. I now hand over the call to management for opening remarks, post which, we can take questions from participants. Thank you, and over to you, sir.
Thank you, Mayank. Good afternoon, everyone. And a warm welcome to all the participants for IFB Industries investors call for the third quarter FY '22. Let me begin by wishing everyone very Happy New Year. Hope all of you are safe and healthy. Joining us today on the call is Mr. Rajshankar Ray, MD and CEO of Home Appliance Division; Mr. Arup Das, Head of Marketing and Engineering Division; and Mr. Anand Reddy, CEO of Motor Division. I'll now start with the third quarter results. During the third quarter, the company reported a total income of INR 923 crores, which is at the same level of last year and there is no growth in sales during November and December. Q3 '22 was quite challenging for the company due to slowing domestic demand and [ unabated ] cost pressure from key customer. Gross margin was significantly affected as material costs continued to increase. EBITDA for the quarter was INR 30 crores with a margin of 3.25% compared to INR 114 crores during the same quarter last year. For the period ending 31 December 2021, the company reported a total to [ INR 2,433 ] with a growth of 27% over the corresponding period last year. EBITDA for the year was INR 74.04 crores with a margin of 3.0% which is significantly lower because of very high increase in material cost due to commodity price increase, which still could not be passed on to customer entirely. Similarly, operating expense was also higher during the year. With this, I will request you to start the question-and-answer session.
[Operator Instructions] The first question is from the line of [ Aviral Jain from SG India ].
So I had 2 broad questions. From a 3 to 5-year perspective, what is the glide path for each of the divisions namely the Home Appliances Division, the Engineering Division -- Fine Blanking Division and Stamping Division as well as the Motor Division. So what sort of on revenues came in on a normalized year say FY '21, [ FY '26 2.5 years ] from now is where do you see the platform going to in terms of sales? And would be the stable margins given a lot of investments have been made into internal manufacturing, including AC manufacturing and also presses on the Fine Blanking side. While this quarter will not be -- definitely not reflective of long-term margin trajectory for the business. But the question is more about 2 to 3 years from now, how the revenues will scale in each of the divisions and margin there on an EBITDA level?
You said you had the 2 broad questions. Is it covering it?
Yes, the second question was around the inventory accounting. So do you -- does the company follow P4 method or weighted average inventory cost method because the kind of gross margin comparison we've seen in terms of EBITDA margin compression is not led by input price pressure and a lot of it could not be part of. So those are the two broad question, I have.
Okay. So I'll answer the first one, and then Mr. Chatterjee take the inventory accounting question that you had. If you look at a 3- to 5-year horizon for the Appliances Division, then as far as the revenue under a stable condition is concerned, there are 2, 3 levers that we have for the revenues to be in line with what the potential is. Now the first one is the air conditioning segment, where the investments that have been made have still not yielded the volumes. And in terms of where we stand, a certain number of air conditioners have been sold over the last 1.5 years. The feedback of the product is good, but the penetration in the market is still not what we wanted to the end. That plan specifically within the January to June period of this year, which is the season period. And in terms of a range that we've rolled out in terms of the reach that we plan in this season, we should be able to stabilize the air conditioning sales. If you look at a 3-year horizon, then the potential that we have shared earlier from the AC segment, is that the plant has a capacity 500,000. And that if you look at it in terms of revenue potential that's about INR 1,000 crores. So step one is the realization of the AC potential. The step 2 under the revenue is related to the reach that IFB has. So in terms of the distribution reach, in terms of the reach to directly service accounts, which is a breakup of large format retail, multi-brand retail and also our own IFB stores in e-commerce. Currently, our reach on a monthly basis is roughly about 30% to 35%. And the programs that we are working on over a 3 to 5 year horizon if you see, we should be reaching somewhere around 60%, 65% on a monthly bucket I'm talking about.
And sir, when you say 30%, 35% of the counters of the overall universe is what you are reaching....
On a monthly bucket. So IFB today has about 13,000 counters across India where we are present. And roughly about 30% of that is what we are engaged with in terms of a commercial transaction on a monthly basis.Over a period of 3 to 4 months, maybe much more gets covered, but we are now focused on a monthly engagement. And we've been wanting to do this for the last, let's say, 2, 3 quarters. But because of the interruption et cetera, it has not happened the way we want it. But a big agenda, which is not 2, 3 year horizon but let's say a 3 or 4-quarter horizon, if you take this 30%, 35% to 60%, 65%. So this is step 2 after the key revenues. And the third is that in the washer segment itself, in terms of an increase on the top loader segment that we have, where we've been averaging about 20,000, 25,000 odd top loaders in a month. But with the range, et cetera, that we've rolled out now, we expect this to go to around 35,000 odd per month in the short term. And keeping the front loader segment energized with new introductions continuously and retaining shares that we have in this segment. So the three major steps would be the AC, the channels extraction and the growth in the washers primarily through top loaders.There are smaller buckets, which are the fourth step, which would be that AC growth that will be -- I mean, the dishwasher growth that we've been seeing for the last 2 years, the growth from the industrial segment, these are smaller pieces which complement the 3 big pieces that I spoke about. So if you add up these 4, that will give you basically the kind of revenues that you would expect to see in a stable state, let's say, a 3-year time period. Does that answer your question on the revenue side?
So broadly, from strategic perspective, it does answer the question. And would that translate into and again, I'm not quoting or wanting an exact number from you, but would that constitute a 20% to 25% CAGR on the existing products plus AC revenues on top?
So I wouldn't put it at 20%, 25% plus AC revenues. It would be -- you could expect, if we do the channel extraction bid properly, which we have to in meters, then a 20% plus AC revenue is something that we should deliver. That is the potential that is waiting to be extracted.
And so one more question on AC is, does this include the white label partnership that you have for half of the capacity?
Yes, yes, both put together. And the second part of your [ rights part ] was around the margin side. And this is something that in many quarters, we've discussed and if you see last year in the Q3, we had a very stable sort of a margin profile, much better than before. But from the January '21 onwards, with commodity price increase and being unable to pass this to the market has been a real problem that we've dealt with. But what we've said is that our internal attempt is to get to a stable 2-digit margin. And that is something that we have to deliver, which is in the current context, that means being able to knock off this material cost impact that we've been experiencing, partially through price hikes and partially through competing material cost savings program that we began around March, April of '21, which has taken us some time, but these are all about to go into implementation.
And sir, this material cost saving program, does this mean changing the [indiscernible] of certain products or it does mean the efficient manufacturing or the chain manufacturing methods, which would require less wastage?
So it is 80%, 85% around the material cost profile, which is alternate sourcing and looking at basically areas that we can save money through value engineering. There is a large amount of saving on the electronic side because of localization and consolidation of purchases of washers and ACs.On the manufacturing overhead per se, our conversion costs are very low. So there isn't much to be said there. Even though that is being worked on, but there isn't a substantial saving. Do you have a third point on inventory accounting? I think Mr. Chatterjee can answer that question.
And what was the exact question on inventory...
Sir my question was, so does the company operate on a weighted average cost method or various [indiscernible].
No. It is for different stock differently, but really from the clearly [indiscernible]. And finished goods which is up we need to [indiscernible] whichever is lower regarding accounting standards.
Okay. Let me ask one more question around this one. So obviously, you would have seen material price inflation through the quarter, and there is a certain cost which have been passed on as a price hike. So you wouldn't have realized the full price hike for the quarter. So it's -- I would take 100 days as a base for cost price and say, INR 130 is the kind of price that you would want from the end product. Has those 2 moved in, obviously, these 2 haven't moved in tandem. So how much of the price hike -- raw material price hike has been passed? Or if those prices hikes going to sustain through the entire quarter, how much are still to be priced on?
Our estimate around 4% to 5% is yet to be recovered because the price hikes are continuous. It is not that for one quarter and it's stopping. So from time to time, we are seeing price increase. But even now as of date, we have got 4% to 5% depending on different products, the recovery is still pending. And even in February, we had some increase plan to increase.
The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.
My first question is that in this utilization of 100% in AC business maybe in the next 3 to 4 years. What are you assuming in terms of breakup between on our own B2C sales and our white label sales?
So if you take a 3-year horizon, around 300,000 would be the IFB brand sales and about 200,000 would be the OEM sales, which is a tentative breakup.
Sure, sure. And to reach this 200,000 figures, have we entered into any sign-ups with any large OEM partners? Or we are still in the process of doing that?
So we've already begun supplies. However, in terms of a fixed listing by large OEMs, et cetera, it is something that is still on going, but supplies have started. I would -- I mean, as a specific answer to your question, as on date, let's say, around 50,000 to 75,000 a year would be something that is more or less share, the remaining 125,000 odd is something that we still need to work on.
And in terms of configuration of AC is being sold on a white label basis, would it be fair to say these would be primarily premium ACs, 5-star rated ACs? Or it would be sort of a, 2-star, 1-star kind of ACs?
It's 3-star, 5 stars, 1, 1.5 tonnes, 2 all of them. But because of the quality levels that we are delivering, the positioning is above the average in terms of the white label positioning in the market.
Okay. Understood. And in terms of, when we reach say, 75% to 80% utilization levels through a combination of white lable and B2C,will there be a significant EBITDA margin difference between both these segments B2C and white label?
So the EBITDA for the IFB is obviously higher. But the thinking that we had was that the OEM sales hedged to dilute overheads, and that volume also helps us to price on the buying side better. So just as an example, an exercise that we've been doing for the last 3 months, which now has to come to conclusion in the fourth quarter is that, if you look at electronics purchases, then combining the purchases of AC and washers together gives us a significant opportunity for cost reduction. And if you look at the volumes of the OEM, added to the IFB brand of ACs, obviously, the purchase increases that much margin. So that is how the OEM would help us. So it will be indirectly accepted as margin on both sides, essentially.
And have you achieved scale in the AC business, would it be fair to say the reviews are MRPs become more competitive and buyback will sort of increase market share?
So our thinking is that if you look at the price of the product that we have today, we believe that the price for the product is right, even though the feedback from the market is that they would like this to be positioned lower by anywhere between 1,000 to 2,000 per piece. But our communication in the market has been that the value inside the AC is much more than that, which has taken us time to settle this in the market, but the market is now settled and the value that the IFB should have, I think, is being accepted much more than year back. So the benefit that we will get from the scale-up of volumes, we would not like to pass this through in terms of pricing, but we would like this to fix the margins on the business overall. So for our margin story to be properly fixed, getting the gross contributions from the AC segment is a very, very important part of that fix action. So I would not expect big changes on the pricing side, but the volume has to help the margin. And I've been able to answer this the way you wanted to?
Sure. Sure. Sir, my last question is that, as you've sort of achieved scale in AC, do you see acceptance from your channel partners, mostly in these large format retail stores to significantly improve. Because as of now, we are mostly perceived as a single product company, I know that in dishwasher and micro, we have good share. But these are smaller categories -- obviously AC is a large category.
So yes, so this is a very important point you made. And one of the strategic objectives of growing the ACs is also that we become the channel should be multi-product partner. So the AC growth will be helpful to the other product categories is right. Your point is absolutely right.
And in terms of market presence, we are targeting primarily South India as of now to become successful as we see or we are adopting a Pan-India strategy?
Pan-India strategy. And the feedback that we have is much better from the North and the West and also parts of the East, the South remains a challenge to be cracked in the Jan to June period this year.
Next question is from the line of Nirav Vasa from Anand Rathi.
Sir, in the call, you mentioned that 4% to 5% is the quantum of prices hikes that will need to normalize our gross margins. Would it be possible for you to inform what is the quantum of price hikes taken in 9 months?
Mr. Chatterjee, are you there?
You answer.
The total amount that we've been able to take, if I see April onwards, as a result of new model introductions also would be in the range of about 2%, 2.5%. And our expectation is that out of the 4% or 5% gap, which is still unrecovered we would have between a 2% to 3% increase in pricing starting this month and the remaining would be knocked off through material cost savings.
Sir, number for the 9 months, you told it's 2%, 2.5%. But when I compare this number with your peers, which have been there, where the number has been actually double digits. So any specific reason -- why our cost -- our price increase has been much lower compared to other peers?
Yes. So the price increase has not been double-digits actually. It's been single, in terms of something which is declared and something which is actually happening in the ground. So if you see some of the major players till, let's say, mid of January, there was actually little price increase.
But sir, I'm talking of the 9-month period.
Yes. I'm talking on April onwards only. And if you look at the January to March period of the last year, in that period, we have made about a 4% increase, which were later followed by others in terms of a declaration, but actually nothing really changed on the ground. So if you see a Jan to December period, you will find a much higher percentage increase.
So what would that number be for the calendar year?
That would be about 4-odd percent that happened in February and March and another 2%, 2.5%. So that will be about, let's say, 6%, 6.5%.
And sir, the second point was pertaining to the air conditioning segment. We have 2 areas. One is our own brand sales and second one is contract manufacturing. So like I understand that the pricing is different, but the working capital cycle is also totally different. So I wanted to understand, first thing is that what kind of EBITDA margin do we make in our own brand sales and in the contract manufacturing space? Second thing is that by, after what is the credit period which is -- which we give to the brand? And third is that, sir, now that the PLI has come in. So how do you see our positioning as compared to peers who already have PLI benefit with them?
So as far as the working capital cycle is concerned, currently, we are operating OEM at either 15 days or 30 days cycle. So between the trend working capital rotation and the OEM rotation there isn't too larger difference. This is the point one. We wouldn't specifically break up the profit margin between OEM and brand, but the brand is a little higher for obvious reasons. As far as the PLI is concerned, we have participated in the PLI even though we've kept a smaller investment outlay because the largest part of the investment that we made in the AC segment is just one year before PLI. So it didn't qualify. So we have chosen the lower slab, which is a INR 37 crores benefit over a 5-year period. And whatever was the realistic estimate of the investments to be made that we have participated in and we've got the clearing. So does that answer your questions?
So that would be for the lower category of components, right?
Yes. That's right. So that's in the area of sheet metal, electronics and [indiscernible].
So would be the revenue threshold that we will have to deliver to meet to those -- to get those incentives?
I think the revenue threshold was in 2 parts. One was INR 100 crores and the other was a INR 200 crores, if I remember correctly. We've chosen the lower number. So the revenue threshold is not a problem, so it will come in many phase.
And then for -- how do you see the -- apart from air conditioners what -- how would be your outlook for the washing machine segment in terms of volumes for the next year and other categories, if you can share, it would be really helpful.
So as far as top loaders are concerned, the -- what I just said a few minutes back was that, we were seeing, let's say, an average of 25,000 a month going to 35,000 plus a month, which is in the short term. As far as the front load segment in washing machines is concerned, we are overhauling the complete range. The capacity now is about 60,000 a month, which we are upgrading as well, and we expect to be running full capacity basically as far as the next year is concerned. Currently, the outlook on these 2 is as follows.
And overall industry-wide volumes, if you can share for this category?
Industry-wide volumes as on date, I don't have the figure, but I can give it to you separately, if you want.
I'm seeking your expectations. Because what has happened is that last 2 years because of COVID lockdowns and everything there are major bump up, which was seen across entire kitchen appliances category. So thought of the buying, which was delayed was done in last 2 years. And there were also times when there was acute shortage with OEMs. So now I wanted to understand now with this scenario getting normalized, what kind of industry-wide growth can be seen in the washing machines category?
Okay. So I will answer it like this, that if you see what has happened over the last 2 years is that the spread of the purchase has increased significantly. What I mean is that the growth rates from the smaller towns, both for fully automatic top loaders and for front loaders high has been high, in some cases as high as 30%, 35% on a stable base. So if you look at the repeat sales that will come from markets like that, even with normalization, the industry should be comfortably growing in the, let's say, mid double-digit rate.
[Operator Instructions] The next question is from the line of Manoj Gori from Equirus Securities.
So if you look at, obviously, festive season, if I'm not wrong, was relatively muted than what we were expecting, what the industry was expecting. And obviously, when we look at the flat revenues that we have reported in Home Appliances, volume definitely would have degrown. So how would have industry secondary sales spanned out, whether channel has lowered their inventory levels? How the market shares have moved? So just a brief overlook like how the consumer demand pattern that you have been observing and what's the current outlook given that there has been some sluggishness during Jan as well because of...
Manoj, so if we look at the market shares, as far as top loaders is concerned, it has remained the same. As far as front loaders is concerned, there is a slight 1%, 1.5% increase that we've seen in the last 3 months. As far as the customer sales versus company billing is concerned, your point is right, there was destocking in the channel in the months of November, December and also in January where the actual customer offtake has been healthy, but the channel has reduced inventory in terms of purchases on the company.
Right. And sir, going forward, if you look at -- to have 4% to 5% price hike to normalized levels or decent set of profitability, but given where the crude prices are heading and probably over the last few weeks, other metal prices have relatively been steady. So do you feel like there could be some uncertainty again on the margin front or probably you'll be able to pass it on to the end consumer and how difficult it could be?
So if you look at where the price increases came from, one was on the electronic side, there was a significant increase, and plastics and metals, there was a significant increase. But plastics have stabilized and metal, our understanding is that after this quarter, it will stabilize. As far as electronics is concerned, it has been stable for about a quarter now. So I -- our personal understanding is that the cycle is coming to an end and the price increases that we will do, starting this month, will restore the balance, which has been seriously disturbed since January '21. We don't think that the increases will continue the way it happened in January, June and September, October of the last year.
And sir, last question. So you talked about the price increases roughly around 4% during Jan, Feb previous year, and roughly around 2.5%, 3% again. So this is the actual absorption or the actual price hike that you have taken, right?
Yes. So that is why I answered that question, saying that something is declared but something actually is happening 6.5%, 7% is actual.
Yes. And so in fact, from the February onwards -- from the current month, the 2.5% kind of price hikes are actual pricing that we have already taken?
No from this February, over and above this 6.5-odd percent, will be another 2% to 3% that we will take. So which will take us to -- if you compare to January '21, then by the end of this month, we would have be up by about 10%, 11%.
Right. And in that case, sequentially, your margins should improve? Or should it be stable? Can you throw some light.
No, the margins should improve because they have been very poor and down from the last year quarter 3 levels. So we have to get back to that level, Manoj.
Right. And sir, last question just, so given that, obviously, sales were under pressure at primary level, so what were the efforts and obviously, the gross margins were under pressure. When I look at the other expenses, even the employee cost, which have increased from first quarter of FY'22. And also, as a percentage of sales, when I look at the other expenses, I'm like -- I'm just trying to understand like there is hardly any cost-saving initiatives that the company has taken. Just in case like if we can save at least some portion like the gross margin erosion that we have been witnessing.
Yes, Mr. Chatterjee.
Manoj, we are [indiscernible] expense, where large expense is variable. So it is around 84% is variable. YTD, if you see, we have spot around 27% the value growth. So the other fixed expense is around 15%. So like Mr. Ray explained in the first is that in operating expense, we don't have much areas to display. And the employee cost of course, because last year was low because first quarter there is a [ grated card ] and we implement this year [indiscernible] the impacts of that and few areas, we are adding people to increase AC and washing machine price. That's all I'll say.
The next question is from the line of Ramakrishnan from [ Equirus Capital ]
Sir, I have some basic question. One is on the Home Appliances for the quarter, we did around INR 774 crores, if you can give us some breakup plan so from the washing machine and other AC and all the other products. And that is question number one. Second is on the Engineering. Again, our margins have come down. Last year, again, we have doing a INR 15 crores, INR 16 crores EBITDA, segmental profit, which has come down to INR 6 crores. And in the Motor also, if you can throw some light, if the motor is basically for the washing machine, or there -- why we are losing money there?
Ray, sir?
You can answer this, Mr. Chatterjee.
The washing quantity you come to me separately as you need a breakdown. On Engineering part, Arup I'd request you to explain.
Sir, if you can give us a breakup of INR 774 crores, what is the percentage of -- I just want the sum percentage that what is the washing machine and other...
That is there in the presentation. The washing machine is actually 60%, ACs 12%, microwave ovens is [ 15% ]. Arup? As far as the Engineering margins are concerned, our business and Engineering business is related to OEMs, so as we have been discussing during this con call, the iron prices had really shot up. And these OEMs have a policy that is like, for example, the quarter 3 increases comes in the subsequent quarter and they give retrospective. So all the price increase spending, which is we are supposed to get from the customers for quarter 3 will come in quarter 4. So when it comes with the retrospective, the margins automatically will have its impact.
Sir, Engineering is mostly that there's chain.
No, no, no. It's automotive, working parts. This for the engine, transmission, braking, it's for the automotive it is mainly commercial vehicles, so it has a big spread.
And what percentage -- is the chain is going to be a bigger percentage of this or it's a...
See chain comes under the aftermarket division. So that has a revenue of about INR 8 crores to INR 10 crores small. So that's small. The Engineering, other business or Fine Blanking, et cetera, is much bigger.
On the Motor part, sir, it's the motor captively used motor? Or is it -- we are also selling outside?
We have both. Anand, please reply.
See, we have 2 motor divisions. One is the Appliances Motor Division, which mainly caters to the motor requirement of our washing machine division. And the other division is the Automotive Motor Division, which caters to all major OEs like Renault, Nissan, Mahindra, Tata, Hyundai, Maruti and other people through Tier 1 suppliers.
Okay. These are like a small motor -- these are all not DC motors?
No. These are DC motors, 12 volts and 24 volts DC motors. We have mainly 3 categories of motors. One is HVAC cabin cooling blower motor. Second one is the engine cooling fan motor; and the third one is [ windowless ] mechanical motor, which goes into the passenger vehicle as well as small commercial vehicle, mainly predominantly passenger vehicles.
Sir on that -- so are we using the BLDC -- so do we have plans to move into BLDC motors for the washing machine and all that because that are all energy efficient?
Yes. Within the next 6 to 8 months' time, we will be moving towards BLDC motor for -- we will be manufacturing BLDC motors for washing machine applications as well as conditioner applications.
That again -- this will be internally manufactured?
Yes, it will be internally manufactured, but we will be capturing to all other OEs, not only dependent on capital consumption, we will be supplying to other washing machine and air conditioner manufacturers also.
Sir, over a period of time, see what our AC, washing machine and all these engineering, what will be the breakup like a big picture in next 4, 5 years?
See, as of now, 84% to 85% is Home Appliance, 15% is Engineering but when it grows both will grow simultaneously. The overall the percentage may not change much.
The next question is from the line of Srinath V. from Bellwether Capital.
Just want to understand that, see the AC business, we have had actually kind of had 2 poor summers due to lockdowns, and if we have a complete season where we grow at, say, 5%, 10% in volume terms from the previous peak, how is the capacity of the overall system? Has there been that kind of capacity addition? And would we buy default this completely sold out because there will not be enough supply because we can't import ready product from China? I just want to understand how the market dynamics is right now.
So, Srinath, for the IFB volume projection or what we are targeting from Jan to June plus indication that we have on purchases by the OEMs, we expect that this March, April, May period will be fully packed, which is running at 40,000, 45,000 month kind of a capacity. We just have to hope that there is no disturbance. So for us, being new into the segment with our own manufacturing from March '20 and the first summer disturbed with the lockdown then the second summer disturbed. So if we get one clean run, I think the factory will be fully utilized this season.
Are we carrying any inventory, because even if we have 6 months of production, we'll barely hit 3 lakhs. So do we have inventory or have you been able to utilize the plant through October, November to kind of create some sort of inventory?
Yes. So we've been building up stocks looking at the market movement from October onwards. So we've built up stocks in November, December and January. And with what the plant will deliver plus the stocks that we have, we are expecting to have a mix season this time.
Got it. Got it. And on the 6-kg washing machine, we have had a kind of -- if you look at our 3-, 4-year numbers on top load to scale up after we hit INR 100 crores about 4 years back, has been kind of stagnant and trending. So how do you see the top load as in 6-kg is probably like half of the market, have we tracked the product? Last time you had shared some feedback that we have not been able to kind fix the profitability at that particular price point. Has there been any solution to this problem and how are we seeing that because existing without that product to get to INR 200-plus crores in top load would be kind of a challenge.
Yes. So that's a good question. The issue of the profitability remains at that price point, and there are 3 points. One was, over the last 1.5 years, the movement from that 6-kg capacity to 6.5 and 7 has actually accelerated as a result of the pandemic. So the basic 6.5 plus segment has gotten bigger. This is the first point, which is good for us. The second is that around the 3 months back, we had fully ramped up our range of top loaders with [ sheeters ] as an in-built function. And we have been getting very good discount. And going forward, we are seeing good volumes from that in production.The third is that around 4 months back, we began an exercise on a redesign of the top loader for a lower platform, which can go into the segment, which is around at INR 15,000 customer price for a top load model, whether 6-kg or 65-kg. And we've been working on the design. We have not committed CapEx to it right now because we are waiting for the other issues of volume and profitability to be fully fixed, but we would introduce this product into a CapEx cycle sometime early next year. So with these 3 actions, I think the top loader volume potential will go back to what we wanted, which will be above 30,000 a month kind of a level.
Perfect. So it will be a completely different platform itself to make that INR 14,000, INR 15,000 product. So you'll have to kind of completely reengineer the product.
Yes. And we've been working on the design and the design is ongoing. So what we decided is that over the next, let's say, 3, 4 months, we will finish the design work and be ready. And once we stabilize the volumes and the margin profile, then we will commit the CapEx.
Got it. And just a kind of short term question, in November December, did we have any share loss or the market itself kind of collapse and the ancillary question to that would be, where was the demand shrinkage? Was it coming out of big cities or the trend that smaller cities were growing kind of decelerated, because we've seen global numbers are trending very strong and suddenly they just flipped off. So what was your reading at the overall level in, say, washers or in categories where we have very strong product?
So the market just went down. And I don't think anybody really has an explanation for what happened, but the market significantly dropped in December and November. It was also subdued in January. We have to see what February goes like. As far as IFB is concerned, our total customer deliveries in November, December were higher than our primary billing. So there was a destocking in the channel, which, for us, I think, is what we can control. The market that has went down, Srinath nobody really understands what happened. It just sort of switched off.
In metros, non-metros prior to -- what's the pattern uniform or anything that you read when you saw the data as they came in?
It was surprisingly unified. It was across areas, some states were more, for example, Andhra was much more than any other area. But within Andhra itself was uniform across Andhra.
My last set of questions on dishwashers, you're already aspire to kind of. Yes. Okay, I'll back in the queue.
Next question is from the line of Gopal an Individual Investor.
I have just a question in terms of the discretion that has happened in the month of January around the Omicron, that has an effect on the overall sales or it is catching up in the month of February? That's my first question. And second question is, I mean in earlier quarters, we have alluded that there is a potential to introduce new product that is refrigerator. So that is still being evaluated or have you concluded anything on that?
What was the first question, please? I couldn't catch it. Could you just repeat?
Sir, the discretion that has happened because of the new variant. So does that impacted the overall sales in the month of January, February?
No. Okay. Sorry, I got it. No, the Omicron did not have any impact, even though the numbers have been very high in terms of, let's say, the people getting affected within the company and sales people being off the market. The numbers were very high, but it has not had any impact on demand. That is our understanding. And your second question was related to, could you just...
Yes, it was regarding the new product introduction. So we were...
On refrigerators it is being evaluated. And I think we will decide this in the Q1 of the coming financial year.
And there are any CapEx plan around that?
So that will be a part of the evaluation itself in terms of a formal project.
Right. And the third piece is not a question it's a bit of suggestion. See we have seen a good product of air conditioning, but in the income section is that a kind of mix review about the product. So if we could have a [indiscernible] who can address the queries of the end consumer...
This is on which platform please? Mr. Gopal. Hello?
Sir, it seems like we lost the connection for the current participant. We move to the next question.
did you catch, he was suggesting that we respond better on our social platform. Did you catch the name of the platform that he was speaking about?
No sir. I'll move to the next question. It is from the line of [ Aviral Jain from SG India ].
I have 2 questions. One was, what's the realization difference obviously, costs of -- on a like-for-like basis for a particular AC model, as you would -- the company realization on under IFB brand would be a certain factor above the OEM realization. So also, I wanted to understand what the manufacturing margin clearly as an OEM, white label supplier on the AC side, but not percentage margin, but what's the realization difference between sort of like-to-like product?
Mr. Chatterjee, would you like to answer that?
The realizations are not comparable. They take from the [indiscernible] okay, there is promotion expense all are different.
Okay. Understood. And second, on the e-commerce side, I -- is there a deferential market share? Does IFB have a better market share on Amazon, Flipkart marketplaces -- online marketplaces? Or is it uniform across what it has on the offline channels as well?
So if you look at front loaders, our market share on [ this summer ] slightly higher than the offline. If you look at top loaders, our market shares on the online are lesser than the offline. In the case of microwaves, it is similar both online and offline. In the case of dishwashers, offline is higher than online. In the case of AC, it's both the volumes are very small. So I don't think the comparison will be right. Does that answer your question, please.
Yes. And arguably, e-commerce would be growing faster given they are providing a lot of convenes and also sometimes lot more discounts to the customers.
So that used to be true in last year. This year, we are seeing both at similar levels because many markets in the offline space have been growing very rapidly actually, especially the smaller Tier 2, Tier 3 cities, there is a lot of growth coming, and that is offline growth and that is not online growth.
The next question is from the line of Manoj Gori from Equirus Securities.
Sir, one question on the....
Mr. Gori, may we request you to move to a better reception area please, your is breaking up.
Is it better now?
Yes.
Talking about this -- some of the brands that we have been associated with, any new brands that we have tied up for the upcoming summer season and what's the visibilty of the OEM volume, obviously, for the branded there would be limited visibility. But any commitments and what the visibility of raw material OEMs seeing?
So we haven't added any brand, Mr. Gori, but we have to just service the ones that we are associated with. And the indication would be a Jan to June period of somewhere around 50,000 to 60,000 basically.
Right. So you have a fair bit of visibility from the OEM sales. Is that understanding correct?
So fair in the sense that these are indications, but these are also not firm commitments to give. So growth for the IFB brand, we have a volume buildup ground up. And OEM based on their indications, but both are subject to listing. So I wouldn't call it an absolutely fixed volume in that sense.
The next question is from the line of Srinath V. from Bellwether.
Just want to give some maintenance data out. Could you kind of give e-commerce contribution as a percentage. The second data would be, what is financing contribution as a percentage of top line -- as a percentage of store, these 2 data points, could you please share.
Mr. Chatterjee, would you like to answer that?
Yes. The e-commerce, as of now, it is 20%. But in some point of time, it is higher. But the average steel YTD figure is around [ 20% ]. And the financing is around 21% to 22% as a top line.
Okay. [indiscernible] will be constant between 20 and 35 in that range?
On the e-commerce you're saying or the financing?
The financing.
Yes. [indiscernible] it goes up.
Got it. Got it. And the last data point sir, could you share the contribution from IFB points to top line? Is it about 12%, 13% is like this...
14% to 15%.
Okay. Thanks to the data points. And just want to get one question on dishwashers. How do you kind of see this category now that looks like we're coming to the end of the pandemic, do you still think this is a category where we can consistently kind of do over INR 100 crores sales, INR 150 crores sales. And how are the market dynamics as we stand now?
So if you look at the dishwasher segment, after the rise last year, it has dipped. And currently, we are averaging about 3,500 or 1,000 dishwashers a month. But our understanding is that the placement of the dishwasher across the media counter is still low. So we think that we can do anywhere between 6,000 to 7,000 consistently per month of dishwashers. And if you take that on an annualized basis, it is much more than INR 100 crores actually. So that is the short-term target that we have in dishwashers.
Okay. Perfect. The last one...
If you take, let's say, 70,000 dishwashers in a year, then this is more than INR 200 crores.
Perfect. So that would be the kind of target over 2, 3 years as we kind of -- and are we looking to manufacture this product because we would be the only person to do it. I don't think everybody has been importing it from Turkey I guess. Is there a case to manufacture, will we be able to kind of get better cost metricies or control of product?
See, right now, no. But if our volumes crossed 150,000 a year, manufacturing will make sense. So it will take, I think, maybe 2, 3 years for us to get to that sort of number.
Okay. So as we get consistently in the product category, then we can look because I'm guessing there will be OEM opportunities also there.
So without the OEM opportunity, if we reach a level of 10,000 a month, manufacturing would makes sense.
Perfect. The last one is on microwave. Just want to understand what is the update, our new product range which is more for cooking rather than reheating and what has been the broad feedback? How are the growth of that particular range of contribution of that range to top line and any mix changes in the microwave space such as interest.
So we went commercial just last month, Srinath.And the first 1,000 units was introduced, and we started from the North. During the field trials, there was a lot of positive feedback around the way the product had come, and we are looking forward to scaling this up. But it will be, let's say, the Q1 of the next fiscal year where we really see a full spread of that, and then we'll be able to gauge the market share of that. We just went commercial last month.
Perfect. Perfect. Let me check out the stores and I'll share my feedback too.
Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments. Over to you, sir.
Thank you, everybody, for joining the call.
Ladies and gentlemen, on behalf of Nirmal Bang Institutional Equities, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.