IFB Industries Ltd
NSE:IFBIND
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
908.15
2 329.8
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
IFB Industries Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the IFB Industries Limited Q4 FY '21 Earnings Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mayank Bhandari from Nirmal Bang Equities. Thank you, and over to you, sir.
Thank you, [ Faisal ]. Nirmal Bang Equities -- welcome to you all for 4Q FY '21 results conference call of IFB Industries. Management is represented by Mr. Prabir Chatterjee, Director and CFO; Mr. Raj Shankar Ray, MD and CEO of Home Appliances 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 evening to all of you. I welcome you all for IFB Industries' investor call for the fourth quarter FY '21. Hope all of you and your family members are healthy and safe during this uncertain, unprecedented and challenging time. Today, we have with us Mr. Raj Shankar Ray, MD and CEO of Home Appliance Division; Mr. Arup Das, Head of Engineering -- Head of Marketing-Engineering Division; and Mr. Anand Reddy, CEO of Motor Division. With this, I will start the commentary. During the fourth quarter ended March '21, the company has reported a total income of INR 805.56 crores, a growth of 64.4% over the corresponding quarter of the previous year. EBITDA for the quarter was INR 58.4 crores with a margin of 7.2% as against 1.2% over the corresponding quarter of the previous year. The revenue during the quarter was below expectation. As a result, margin was also not well as per our expectation. Also, I need to mention that current tax during the quarter was high because we received this government grant of INR 17.02 crore under MSIPS, which is taxable as per income tax act. However, as per Ind AS 20 revenue recognition will be spread over the useful life of asset. Impact of this was INR 6 crores. And along with this, there's an impact of INR 4 crores on account of brought forward losses, without which the rate of tax is 24%. For the year ending period March 2021, company reported total income of INR 2,735.66 crore with a growth of 6.7% over the corresponding period of the previous year. Growth in the YTD period was lower due to loss of operation in April and May due to COVID. EBITDA amount for the period was INR 228 crore with a margin of 8.3% as compared to 5.1% during the same period of the previous year. There has been significant improvement in the margin, and it has gone up by 320 basis points due to lower material cost and operating expenses. YTD tax has also been similarly affected, as mentioned above. With this, I will request you to start the question and answer session.
[Operator Instructions] The first question is from the line of Abhishek Ghosh from DSP Mutual Fund.
Sir, if you can just help us understand this receipt of INR 17 crores. Was it pertaining to the quarter?
No. This is a capital grant given by the government under MSIPS, with that, when we spend money on the CapEX on AC, on that there was a 25% subsidy given actually, which we received during the period of February and March first week.
So that's what I'm saying for the quarter, the revenues are higher to the extent of INR 17 crores. Is that...
It is not considered as the revenue. That is what I have said. As per Ind AS 20, this is paid over the useful life of the asset. In that case, it will be spread over 13 years.
So this is not part of...
We got only INR 12 lakhs during the period.
Okay. Okay. And sir, there is a sharp increase in the revenues of dishwasher. Hello?
Carry on. Carry on.
Yes. So we've done almost a very high number in fourth quarter. If you can just help us with the outlook of that segment?
Mr. Ray, I would request you to take it forward, please.
Yes. Raj Shankar here. The demand of the dishwashers actually has been increasing consistently since June '20 when the first wave of lockdowns started getting released. And we expect that whatever sales run rate we registered in the fourth quarter will actually increase even further, now that the supply situation is much more stable than it was in the last year. This increase in volume is coming because the market has been reset.
Okay. So you've done almost about INR 87 crores for the quarter if I'm not wrong. And what you're hinting at that the revenue run rate can even further move up here? Is that the way to look at it?
Yes. We have done around INR 95 crores, actually, INR 94.73 crores for the quarter.
Okay. Okay. And this is mostly out -- this is mostly like you manufactured it in-house? Or how does it work?
So the dishwasher is bought out currently as a CBU and for the foreseeable future, it will remain as an bought out CBU.
Okay. Okay. And sir, you have also spoken about -- that effective Jan '21, you've taken a price increase. And also, you've spoken about the industry participants. If you can help us understand what is the price increase that you have taken and did the industry also take price hikes in 4Q? Or was it more a phenomenon of 1Q, FY '22?
The blended price increase that we took was between 7% to 9% and we have made the price increase in January '21. The industry actually, largely, did not change prices. They held it till March. They began to do some increases from April, but then the lockdown was in place. We have to wait and watch what they do now that the markets are opening up. My own personal expectation is that everybody will pass-through the increase because the impact from the raw material has been extremely high from November last year to -- and it is still continuing. So we expect even Q2 to be -- to see price increases on the material cost side.
And the 7% to 9% of blended price increase that you took, you have largely covered for the raw material price increase? Or...
So we were covered for the raw material price increases up to January. There has been further price increases in April. And we have to evaluate how much can we pass-through once the markets are stable.
Okay. So you have not -- if you had any price hike in 1Q FY '22?
Yes. That's right. The price increase we took was in January. As of now, April -- half of April was almost under lockdown. In June, we would expect maybe by first week of July, the markets to be stable. We will then look at the pricing situation maybe in early August.
Okay. And sir, have you lost market share in 4Q FY '21, because you took price hike, while the industry did not take -- any color there?
Yes. The point is correct. We lost market share, because 2 of the major competitions decided to undercut us after we increased price in January, and they held it in Feb and March. So for the period of Feb and March, yes, we did lose market share.
Okay. And have those competition initiated the subsequent price hikes in 1Q FY '22, because it's almost -- 1Q is almost over? Or have they still lagged the prices...
We were watching in April, and they have begun to pass-through on the price increases. But April, after 20th was practically sort of shutting down of the markets.
Correct.
And May and June has been fully closed. So my own expectation is that when the markets open, they will pass it through, but we have to wait and watch, because they didn't change prices in Feb and March.
Okay. And sir, just one more thing. You will be launching the front-load 8 kg segment as well, which will come in the 2Q FY '22. If you can help us understand what proportion of the front-load market is that 8-kg segment?
We are already in 8-kg.
Sorry. My bad -- I think you will be launching in the top load investment segment.
In the top load, we are also present in 8 kg. And in fact, in this quarter, we will be launching capacities up to 11 kg. Could you tell me which point you're referring to, I'll be able to answer it...
Yes. I would just come back to this one, because the presentation is pretty elaborate. I just went through. And I kind of -- I'll just come back to you on this one. Sir, the other thing is in the AC segment, if you can just help us with your -- you have sold about 50,000 is what you mentioned. There is a budgeted of 1 lakh. If you can help us with what is the current capacity? And what is the contracted-out capacity? And what is your own kind of volume that you're looking at? And how should one look at the revenues or the volumes as far as the AC segment is concerned?
So our capacity, which we have also shared earlier, is 500,000 per annum for the investment on air conditioners, which we have put in. And the targeted breakup that we had shared is that, there is no annual contracted capacity commitment in that sense, but there are OEM contracts in play. And we expect that the volume on a annual basis will be roughly about 200,000. And our own internal target was that we should be selling at least 200,000 of the IFB brand, so therefore 400,000. Now what has happened for us in the AC segment is that the plant, actually, as soon as it started last year, we had the first wave of the lockdown. And that washed out last year's season. And this year, our buildup was starting. But again, we had a lockdown. So the industry billing of the Q4 is largely sitting in the channel because no sales happened and the billing from the industry in January, February, March, et cetera was quite high. So once the markets open and the situation is stable in July, we expect pent-up demand and our focus will be to get back to whatever we have lost and maximize our sales from July onwards running up to March of this fiscal year. We don't think that the OEM volumes are going to be a problem. We also think that with the channel related work that we have done over the last few months and specifically the response to the new ACs that we got, that our own volumes will also be healthy from July, August onwards. So some initial 2-3 months of pent-up demand, which has not been serviced. And we don't have any inventories in the channel. So that benefit we should get and followed by of course the season. Does that answer your question, please?
Yes. Yes. So just one last question. When we look at your margin profile, we had seen very strong improvement in 2Q, 3Q of double-digit margins, but again, that has gone back to sub-7% margins, about 6.5% for the previous quarter. As per the volatility in the margin continues, right, because that was also -- how should one look at the margins going forward internally, how are you looking at it, given the pressure in raw material, negative operating leverage, all those factors. How should one look at the margin profile more from a medium-term perspective?
Yes. So that's an absolutely the right thing to ask. And if you look at our Q2 and Q3 performance versus Q4, the 2 -- actually, the 3 margin drivers that we have, one is, we have very healthy gross margins on the washer segment. And when the volumes of that are in line with what we should be delivering, the basic gross margin stays high. And on top of that, the air conditioner comes in, and the material cost, profile of the air conditioner was going to be very healthy with the localization of the controller, which is presently under imports. And compared to Q3, what happened in Q4 is that the basic volume of the washers went down, because of this pricing issue and the margin structure on the air conditioners could not be fixed, because of the -- it was a near panic or extreme stress on the electronics side. So the component imports were affected, our own localization for example was affected. So what was to be completed in early Jan is now going to be completed end of Q2. So as far as our margin construct is concerned, if the volume of the washers remains in line with what it should be, the AC material cost profile is fixed, then the margin remains healthy. And it is, of course, helped by products like dishwashers, microwaves, et cetera, for the general demand in the market is much higher than before. So going forward, the 3 margin drivers are the washer volumes, the AC material cost profile, and of course the added benefits from products like microwaves and dishwashers gross margin accumulation.
The next question is from the line of Nirav Vasa from Anand Rathi.
My first question pertaining to PLI for air conditioners. So sir, as we see from the document, there is a lot of focus on creating the ecosystem for air conditioners. So how does that -- how are we preparing ourselves to address this opportunity?
The final shape of the PLI, which the government formalized lays stress on lots of investments downstream, which is basically on the component side. So for IFB, the PLI benefits can come from the planned IFB investments in motors for which there is a project that we are starting, which will be completed in this fiscal year. There is no PLI per se on the sales of finished goods products. And on the component side, so, let us say, some of our suppliers make investments in electronics or in other areas around the air conditioners, they will be able to access PLI and part of that benefit will flow to us. So the PLI construct that the government has taken is slightly more long term. It will not have immediate impact in terms of margins, because of some percentage that you're getting on sales. But it is the right direction as per us, because over a 2, 3-year kind of a period, it will definitely build supplier capacity in India.
And sir, getting new customers is also very important that you were talking for the capacity for air conditioners. So any success in that? That scenario was not very great, but just...
We have had actually a lot of inquiries around the OEM sourcing. But what we had wanted is to what will the few players for the kind of the product quality that we have in our air conditioners, which will be higher-priced than the typical OEM supply. And to that extent, our internal estimate of 200,000, we have more or less yield that capacity for [indiscernible]. Now we will struggle a bit. And then as the further expansion comes, then we will plan it. Does that answer your question, please?
Yes. Sir, it does. But if I look at the other categories in which you were present, would you be open to replicating this model also, because I believe there is a lot of demand for outsourcing of bigger equipments like washing machines in which you're already present?
So that is a very good question. It is something that we discuss internally as well. But as on this, there is no conclusion on servicing OEM with the products other than the air conditioners. We have been approached by people. Those opportunities we are evaluating, but there is no decision taken right now.
And sir, my final question would be on the BEE rating. Sir, as you are aware that the Bureau of Energy Efficiency is looking to revise energy ratings and after delay of multiple times, it is now expected to be implemented by the end of this calendar year, but there are mixed views from the industry. So sir, just wanted to get your thoughts on this.
So we would be very happy if it changes on time. Because when we designed our present air conditioner platform, it is already capable of the energy norms that were supposed to have come last year. The reason why the industry is essentially resisting this is because they don't want to make the investments for producing the air conditioners that the new energy norms [ warrant ] but we are ready. And if it is 1st April, we'll be more than happy to change over to the new norm on 1st of April.
Sir, but just to -- sorry to cut you off...
Yes, please. Yes, please.
So sir, just wanted to understand if the BEE rating happens, as per my understanding, it is mainly with every rating changes there, the focus increases more and more towards electrical component of the air conditioners, that is towards the PCB boards, circuits and those kind of things, which consume less power and give higher efficiency and maybe something in the coolant aspect. So how do we have a significant edge as compared to peers. If you can elaborate a bit more, that would be really helpful?
Okay. So the energy efficiency that the air conditioner delivers comes from two, three elements. The first is the compressor specification. So there is a practice in the industry to essentially use a lower spec compressor to try and deliver a higher power. And if you look at the IFB air conditioners, we use twin rotary compressors, which is quite unique in the industry. Most of the mainline players don't use it. And a measure of that is the kind of power that we deliver. We are the highest in the industry in terms of power delivered. So the first is the compressor. The second is the essential design of the heat exchangers. If you look at the total surface area of the things, and typically, the industry languages rules. So some people try to manage with 1 row, some people manage it 1.5 row. We are doing 2 row condensers. And therefore, the essential surface area for heat exchange is much more. And as you move to higher energy efficiency, we need to have better heat exchange capability, which is going to need more surface. And the third is the essential capability of the controller to manage the fine-tuning of the running of the compressor. So the controller is a little bit not expensive, essentially because it has to have more power to control the compressors more accurately. So as far as our platform is concerned, the compressor platform, the heat exchanger platform and the controller platform, all 3 are already in place. Because when we began manufacturing, we were ready for the new energy realm. So for us, it is a minor tweak to deliver what is required, as per the minimum.
And sir, just one more thing. Sir, there -- some industry peers are also saying that because now copper -- as copper price has risen exponentially, industry peers were also thinking of shifting from copper to aluminum. Any thoughts on that? Do you think it is possible?
It is technically absolutely viable to move from copper to aluminum. If you look at the automotive industry and you look at regulators and engine parts, everyone has moved from copper to aluminum years back, but somehow in the air conditioner industry, the customers has never been positive towards aluminum. And some of the reasons behind that were large-scale failures on aluminum condensers that specifically 1 manufacturer had problems with, and we sort of created this perfection. So I don't think it is a technical issue, but whether the Indian consumer will accept a condenser in aluminum instead of copper, we have to wait and see. As of now, the customer is willing to pay the extra price, because the customer believes that copper is a better heat conductor than aluminum. It is more a market perception issue actually than a technical issues.
[Operator Instructions] The next question is from the line of Rajesh Kothari from AlfAccurate Advisors.
My first question is, can you elaborate little bit in terms of the competition intensity in the washing machine segment, particularly from Haier kind of a player and also for other segments. How do you see that over next 12, 18, 24 months?
We -- for our kind of price and product position, we don't see any increased intensity from Haier. Essentially, because it operates at lower price points. And that will always remain. So today it is higher, tomorrow it is someone else. If you say, overall, has the competitive intensity increased in the washer segment, my answer would be that it remains the same. It is being competitive. It will remain competitive. And players occasionally, like 2 of the mainline players were in February and March, so presently they will basically use price tactics to undercut, but it can only be a short-term phenomenon. You cannot undercut in perpetuity.
Okay. And what would be -- do you disclose your market share say, over the last 3 years, FY '19, FY '20, FY '21 for each of your segments?
Yes. We give indications based on our own estimates because the publicly shared data is erroneous. We do give indications.
So what would be your market share gain or loss in FY '21 for all your segments?
Gain or loss in FY '21?
Yes.
So FY '21 compared to FY '20 was the same in terms of market share. But our assessment is that in the Feb, March and, let's say, first 2 weeks of April, we have lost about 2.5% to 3% share, because of the pricing issue that I spoke about. And we believe that, that share will come back, because once the competition starts increasing price from now when the markets open. As far as categories like dishwashers, microwaves, et cetera, are concerned, our shares have been stable, if you look at the last 2, 3 years.
Okay. And typically, what is your total branding spend as a percentage of revenue?
Mr. Chatterjee, would you like to answer that?
Yes. We spend -- last year, we spent around 2.03%.
Okay. And going forward also, you plan to spend about 2%, 2.5%, 3%? Or how it works?
Yes. Around that.
Okay. Okay. Fine. And last question from my side. In terms of the contract manufacturing, what you are talking from the AC plant, 2 lakh capacity, which you are almost like booked from your customers, this will start by when?
Sorry, could you just repeat that question?
The AC plant, what you're talking about, the 2-lakh capacity, you said that you are most tied up from...
So this started in March, in April also. But unfortunately, after that, there was a lockdown. So looking at their inventory, et cetera, I would expect that the cycle again start from mid-July, because I would expect that the markets will be fully opened by first week of July.
Okay. So you are basically saying that as and when the things normalize, from the day 1, I mean, from June, July, whenever, you are like almost like 100% utilization. That's what you are trying to suggest?
No. It will not be 100% utilization. It will be lesser, because if you look at 100% utilization, then it comes to roughly about 40,000 a month. We are not going to get 40,000 a month in July, August, September, but the pent-up demand of May and June and looking at their inventory position, we have to see what kind of the figure comes, in the first 2, 3 months after the markets open. From, let us say, November, December onwards, then the inventory buildup starts, we will be running full capacity.
Okay. So November, December, you will be running full capacity?
Yes, yes.
Okay. Okay. And sir, one strategic related question. If I look at IFB in last 5, 7 years, our margins were basically at the lower end and of course, FY '21, we have seen significant improvement in margins. So basically, what are the steps which you have taken which you think it will make these margins more sustainable in nature? Because the big brands, whether it's Voltas or whether it's Whirlpool, whether it is Havells, they have big budget, there's a big presence, there is wide distribution network. So and if I look at Voltas, for example, the best of the margins were about 10%, 12% kind of EBITDA margins. So what makes it that either we need to spend like our competitors to get to a wider reach, to get a wider presence at the same price point, or all we need to do something as to maintain this margin, right? So can you give some color on that?
Yes. So our margin profile and being able to deliver levels like Q2, Q3 of the previous fiscal year, come from actually 2,3 points. The first is, we don't really need to increase spend per se to increase revenues. Because the channel network that we have and the exception from that network has been continuously increasing, because of actions we've taken on the ground. And the channel extraction was in full slow in Q2 and Q3. We just need sustainable volumes similar to what we were enjoying in Q2, Q3, which we had in January, but then we didn't have it in Feb and March. So the first thing is the volumes of the washers. The second is that the air conditioner adds gross margin onto the company, because there has been no increase per se on the sales side of the volume or the service side of the volume. It's just the additional people in the plant ready. So the air conditioner is very good in terms of gross margin accretion. And we need to compete with the control of localization project because that adds a signification margin to this product category. So the first action washer volume, the second action, be it controllers, localization on air conditioner, and the third action which I just mentioned a while earlier, is that there are some categories in which we have very healthy volumes now. Microwaves, where our position is among the top 2 in India. Dishwashers, where the pandemic has helped the market to expand. So the volumes have significantly increased and can increase further. And then we have product categories like industrial products, kitchen appliance products, all of which are very high gross margin profile.So the third point is to maximize the volumes from these categories. So washer volumes as the first pillar, air conditioner, material cost profile led by the controller the second pillar. And the third pillar is the volumes in the segments like microwaves, dishwashers, et cetera. So these are the 3. And in none of these 3, do we really need to increase spend to drive revenues. If you do these 3 well, I think this expectation that we deliver from consistent margins and motor volatility that will get [ after ]. Does that answer your question?
Yes. You are right, partially, but I was just looking at it from a different perspective that if I look at the history of IFB Industries from FY '12 to FY '20, we had 4% to 6% EBITDA margin story. In FY '21, particularly in 2Q and 3Q, we have seen significantly increase in margins because, of course, the demand growth has been very, very encouraging. And I'm just trying to wonder that because people who have already bought it, [indiscernible] really long cycle products. These are not 1 year, 2-year replacement cycle. These are like 5, 7, 10, 12, 15 years replacement cycle of products. So whether same kind of a demand growth will come back because historically, if you look at India, then growth, whether it's AC, whether it's washing machine, whether it's a refrigerator, it has been a 7%, 9%, 10%, 12% CAGR over last 5, 7, 8, 9 years. So unless until this growth sustains to -- and moves to 18%, 20%, then yes, you are right. But if let's assume, if it comes back to 7%, 8%, which was a historical growth trends, then what happens to our margins?
So that's a very good question. And if you look at -- and a lot of the data of the last year is quite relevant, because if you look at growth rates, the growth rates from tier 2, tier 3 have been very high. And penetration levels in tier 2, Tier 3 are very low. So if you look at overall India, and if you look at, let's say, front loading penetration, it would be, maybe 3%, 4%. Washer penetration is sitting at about 8% to 10%. If you go to tier 2, tier 3, that value of 8% to 10% will probably drop to 4% or 5%. So penetration is very low. And for IFB, what this means is that over the last, let's say, 3 to 4 years, we made a lot of addition in network, specifically in the tier 2, tier 3 areas. And we need to get the extraction right from this network. And I think that will give sustainable growth, exactly of the type that you have described.
Mr. Kothari, may we request that you return to the question queue for follow-up questions. The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.
Sir, just continuing on the AC part. So while now you're going a little more aggressive on the AC part. What has been your experience in terms of -- what is the price point for AC in terms of where have you kind of benchmarked it or kept it at a discount to the market leader or, if you can just help us understand with that? And the ease or the difficulty with which you're able to pace -- place product because in AC, you already have more than 40, 50 brands already. So what is your experience? If you can just help understand with that.
So if I have to answer this very specifically and if I take the example of, let's say, 1.5 tonne, 3-star air conditioner, which is the highest volume segment. Then for the product that we introduced in the market, we had a price position of INR 37,000 to INR 37,500. If you look at the segment per se, there were people selling it at INR 34,000, but it sell above the mass. And in fact, since we started till now and because it was sort of a erratic kind of market largely closed last year, we had initial struggle in explaining to the markets why this price point is right for the product which we is being offered. And there was a lot of resistance, especially from the larger dealers, et cetera. But what happened in the Jan to March period, specifically let's say, from February to April, is that once the initial placements were made and the customers started buying them, the feedback of the air conditioner was very, very positive. So as on date for the price position we have, which is higher end of the mid segment, we are very comfortable with our pricing. And I think the hard work in establishing the pricing has been done. Now it is about getting the channel extraction and the counter [ shelves ]. Our placements are many more counters than what it was, let's say, 7 or 8 months back.
Okay. Okay. And sir, in terms of the contract manufacturing part of the AC, even the earlier apprehension was that since you are also a brand, you could have -- there's a conflict of interest there. So how has been the response from whatever interactions that you've had with either present plans or potential plants as far as the contract manufacturing part of the AC is concerned?
It's actually been quite pleasant. We have not had that problem of us being perceived as competition. It's been quite complementary actually. So that didn't happen.
Okay. Okay. And what is the peak revenues adjusted for the seasonality in AC that you can do with the current gross flow. Because there's a seasonality element there. So what is the realistic peak revenues that you can do given the current gross flow of the AC for this?
So if you see, in any given month, we can go up to 35,000 in the month easily and 40,000 in a month with a stretch. So 40,000 is what we can do. But when we are in the peak season, what we will be doing is, we'll be using inventory, which is produced earlier and therefore, the sales peak will be more than 40,000, but we will address it through inventory. The other thing is that there are very minor things to be done in the plant level to increase the 40,000, beyond 40,000. Does that give you what you wanted in terms of details?
Yes. Yes. That's helpful. And in terms of the revenue mix, as you early pointed out in the current quarter, your top load plus front-load is sub 50%, which is usually something like 60% in a regular quarter, and that's probably the reason for gross margin. So if you can just help us understand the contribution margin difference between -- and without quantifying, just broadly, that is the dishwasher contribution margin must inferior to that of washing machine. For an AC, how should one look at it from that perspective?
So the dishwasher, gross contributions are similar to the washers. And the air conditioners are lower today. Once we complete the controller localization, they will not be as high as the washers, but in percentage term, they'll still be significant. In the washers, we have very significant gross margin.
Okay. And just two last questions. One is in the IFB point or the distribution mix, what is your current touch point and mix of that because you mentioned you've added a lot of them in the Tier 2, Tier 3 cities, a mix of that would be helpful.
See IFB points contribute about 13% to 14% of our sales. And distribution, which was sort of hovering at 2% to 3%, over the last 2 years has now moved up to 15%, 16%.
No. I didn't get it, sir. What distribution was 2% to 3%?
The distribution segment, which is indirect dealers, let's say, 3 years back, that was hovering at 2% to 3%. Very miniscule. It has now risen to roughly about 15% of sales.
And what are the -- so 30% is IFB and distribution points, what are the other modes?
E-commerce would be roughly around 14%, 15%.
Okay.
The remaining is the multi-brand dealers, who we service directly.
And beyond, is that other one?
Yes. That's right. Yes.
Okay. And this includes...
Which this includes key accounts.
Sure. And one last question. Any thoughts of getting into a new product now that AC has now kind of come in going into a refrigerator or any other existing categories. Any thoughts?
Those are being evaluated, but as of now, there is no decision on that. But there is an internal evaluation that is ongoing.
[Operator Instructions] The next question is from the line of Pavan Kumar from Ratna Traya Capital.
Sir, can you explain the gross block addition in the sense, there has not been much of cash, what would I say, property, plant, equipment addition in this current year, but AC plant has -- you have done significant CapEx on ACs, I suppose.
I will tell you. Last year, our total addition was INR 115 crores. The AC largely it was done a year before, but around INR 44 crores were pending, which is done during this year. Washing plant including routine, we did around INR 19 crores. And Engineering division, we have done around INR 48 crores mainly in Bangalore and some part in Kolkata.
Okay. So this -- so has all the AC plant CapEx got capitalized as of now?
Yes.
Okay. There is nothing lying in...
I think around INR 4 crores to INR 5 crores of additional CapEx, this should be capitalized this year.
Okay. And should we assume the depreciation absolute level to be steady from here on?
Yes. It is expected because the -- if you see the -- compared to last year, the last year was around INR 89 crores, it has gone to INR 99 crores actually, the depreciation.
Right. Right. And what would be the CapEx plans going forward, sir, for FY '22 and FY '23?
The current year actually for Engineering division we have around -- routine CapEx of around INR 17 crores. And for Motor division, we have around INR 34 crores. For the washing machine and appliance division, because of this pandemic situation, we are yet to decide on the outlay. We'll decide once situation normalizes, but of course there could be little routine CapEx like every year.
Okay. But are there any -- any -- the numbers in our mind that look at medium-term planning?
That's what we are working on it. Because once this situation normalize, we'll decide and come back to you, maybe next quarter or quarter after that.
Okay. And one last question. Can you give us the contribution of contract manufacturing in this particular quarter, exactly Q4?
Arup Das?
Can we give it to you off-line, please?
Okay, sir. If you can give me your email ID, I will just do that.
Mr. Chatterjee, you can just connect with him, he'll give it to you.
Yes. Because these all you can get in the investor's presentation, at the backside, my e-mail id is there.
Okay. Fine. I'll do -- I'll mail.
[Operator Instructions] The next question is from the line of Pritesh Chheda from Lucky Investments.
One question on margins. I actually couldn't still get a fix, because our annual margins have changed a lot from 4% to 6% to what we see at about 8.5% in FY '21. With the revenue scale rising higher, do you see these margins sustaining and going higher, because like some of your peer sets who are also in a product like AC, have a better margin than you. So these 9%, 8%, 9% margin what you have reported in FY '21, first of all, are these sustainable, and with the business base rising higher can they expand?
Mr. Chatterjee, would you like to answer that?
You answer please.
So we wouldn't want to give a forward guidance on this. But as we said, the areas specific to the margin related area, one is, we need to get this AC controller localization done, and that is accretive to AC margins. And the volume benefits from the washer segment and the other segments is also helpful to gross margin accumulation. So...
But sir, AC just 10% of your revenues. You have more than 75% of your revenues coming from your core products which is washer and microwave and then if you have this the emerging core product in the form of dishwasher. So at least on the 75% of your business and obviously, this 8%, 9% margin that we have seen is not purely because of ACs, right? So ...
Yes. That's right. That's right. Last year's improvement in margin is driven by the core product category.
Yes.
Revenue expansion in this is accretive to margin. Yes.
Okay. And my other question is, sir, the dishwasher, what would be your dishwasher revenue for FY '21?
Last year, it was around INR 97 crores.
You got INR 97 crores for full year.
Just 1 minute, just 1 minute.
You said INR 97 crores for quarter 4.
So you were talking about the YTD?
Full year, yes. Yes, yes.
The last year was INR 104 crore, INR 104 crores.
And INR 95 crore for quarter 4?
Just one minute. Quarter 4, I'll just tell you. Quarter 4 was INR 95 crores, INR 94.73 and the YTD was INR 312 crores.
Now this category can it grow at 30%, 40%, considering this category would have emerged under COVID and there will be a lot more willing buyers to now buy a dishwasher. Is it a possibility, sir?
Yes. It is a possibility because this category is now driven by availability. -- whatever has happened in the last 1 year, the idea that hygiene is important. Everywhere the concept of a dishwasher has really traveled. And now for a player like IFB, the challenge is that we need to display this everywhere. If we display this everywhere, the volume benefits will come from everywhere. So the more we expand placements, the more this volume will grow.
Okay, okay.
And here the margins, because -- it's a bought-out right, for us?
It's a bought out, but gross margins are healthy in this category.
On the EBITDA side, will it match this the margin of core product?
It will be slightly lesser, but it's healthy.
Okay. Okay. Because in the market, in any case, there are only a couple of players I think last year who were selling dishwasher, lot of them Siemens.
I want to make one correction actually. Actually dishwasher fourth quarter was INR 31.5 crores and YTD was INR 104.77 crores YTD. I just missed the...
So how much did dishwasher grow then in FY '21, INR 105 crores versus?
It grew by 134% last year in value terms.
Okay. Okay. So then -- so then they're actually be about 30%, 40% growth there. If it can be a much higher growth.
Yes. Yes.
Because I was wondering INR 300 crores.
No. No.
The Next question is from the line of Rusmik Oza from Kotak Securities.
Sir, my question was on the AC segment. What could be the margin difference between what you're going to do in sort of 2 lakh capacity of contract manufacturing versus the 2-lakh capacity you are thinking of selling on your own. That is one. And the second is, can the overall revenue run rate on annualized basis at optimum utilization go above INR 1,000 crores for the company?
So the second question that you had asked, this had come up in the previous investor call also. And yes, the potential for the company is more than INR 1,000 crores on the air conditioners segment. We need to realize it through the OEM sales and through our own expansion of our network sales. So that is the answer to the second part of your question. As far as the first -- for the first part is concerned, as far as the OEM sales are concerned, the margin is up to the dispatch from the plant to the OEM. And as far as the own brand sales are concerned, after the plant, you have all the overheads related to the sales and marketing. For the company, we expect going forward that actually the net might be similar. This is what we are working towards.
Okay. And a similar question, will the margin on AC actually be higher than your overall EBITDA margin of 8% to 9% that you have been working on in FY '21?
It will take us some time to reach that level. We have to finish the controller localization. The wait was basically the wait for the markets to stabilize. The way we look at it, more than the EBITDA percentage on a category, what is happening with the growth of categories like air conditioners, dishwashers, et cetera, is that the gross margin accumulation is increasing, whereas the fixed overhead in terms of the cost of a sales person or marketing, it remains similar with a slight increase. So at a company level, it is definitely accretive. Have I been able to explain that to you?
Yes.
The next question is from the line of Deepak Mehta, Individual Investor.
Sir, my question is on the long term, so if you say 5 to 6 years, so if you say our country is getting $5 trillion economy of opportunities. So your brand comes in premium segments. So what can be your market share going forward and revenues you are looking for if the per capita income gets increased. So how -- what kind of CAGR we can expect in the best scenario, sir?
See if we answer that, it's like a forward-look forecast. So that would not really be right. But if you...
Not the estimate, sir. Not estimate -- not because it's a forward-looking statement. So rough estimate if you can give there.
So if you look at the kind of growth rate that IFB has had and you could go back 6, 7 years, we hear them [ humbly cut it ]. The growth rate on the core category is accelerating because the penetration is increasing and the growth rate from air conditioners will be in addition to that growth rate. So if you put these 2 together, it makes for fairly healthy sales growth potential for IFB. So we wouldn't want to give a specific number to this, but if you look at these 2 indices, you would see a fairly healthy growth rate which we should deliver.
Okay, sir. And what is your margin in e-commerce platform? Is it same as retail or if you can throw some color.
It's -- it's similar. It's similar.
Mr. Mehta, may we request that you return to the question queue for follow-up questions. The next question is from the line of Shrikant, Individual Investor.
I just had one question on the cost opportunity that we were [ depending ] on for the last few quarters, where we were trying to increase the volume of the purchase upon different lines. Because I think they're having same kind of raw material also. Just wanted to understand how is it panning out.
So the material cost took a hit from December to April, where the rise in the commodities and the rise in the electronic purchase rates and freight was just totally out of control. So even though the plans on the material cost in terms of alternate sources, newer designs, all those were basically in place and all are in implementation. But the basic material cost was quite negatively impacted. And we have to wait for this to stabilize because it is still not stable. The steel industry continues to drive inflationary pressure, because they're increasing pricing, even though there doesn't seem to be a logical reason. Plastics have stabilized a little bit. Electronics is still high. So my answer to you is that, yes, all the plans are in implementation, but the basic rise in the commodities has taken away a lot of the positive impact.
The next question is from the line of Pavan Kumar from Ratna Traya Capital.
Sir, I wanted to understand your capital structure better -- sorry your cost structure better. In the sense, post gross margins, how much do you think that -- what part of the absolute cost would be fixed?
See our -- around 25% to 26% of the cost is fixed. Others are variable in nature. I'm talking from the operating expense side.
Okay. And when you are saying 25% to 26%, that is as a proportion of the current revenues?
Yes. No. I am saying suppose operating expense is 100. Out of that, 25% is fixed. 75% is variable.
Okay. So for that 25%, if our scale goes up, we should benefit from the...
Yes. And this is one. The staff cost to a large extent it is maybe 18% variance. That, again, we highlighted with higher volume.
Okay. That is not included in this 25% -- 25%, right?
That I separated operating expenses separately, because there are 3 major items: material, staff cost and the operating expenses.
The next question is from the line of Subham Rajgaria from WestBridge Capital.
My one question was that the commodity prices have increased. So could you give a sense that what's the total cost and increase in the raw material prices? And is there any cost reduction plan, which can be -- which is taking place or you're working on that, if you could give some sense there?
The blended increase in the material cost from, let us say, November, December to April would be around 12% to 13%, driven by commodities, et cetera. This varies from model to model and across categories. And yes, we are working on ideas on how to knock this off.
Got it. And when you say these ideas, will it, like, involve replacement of these commodities from -- with some other commodities or like, could you be able to give us some ideas on the -- are there...
So the ideas are mainly in 2 buckets, alternate sourcing. And the second is value engineering ideas, which were in the pipeline, which we are speeding up, because of the impact of this -- of the commodities.
The next question is from the line of Rusmik Oza from Kotak Securities.
Sir, I had a question on the distribution side. As compared to our peers, how well are we in terms of penetration? One is that. And especially in tier 2, tier 3 cities, how are we placed as compared to peers in terms of distribution? That was the first. And secondly, is there any scope for increasing the distribution penetration materially in the next 2, 3 years, which can have a big jump in the revenue profile?
Okay. So if you look at the category like washers, our weighted distribution is between 85% to 90%. So it is more or less at the benchmark level. If you look at a category like air conditioners, our distribution is still very, very low compared to the industry benchmarks. Our internal target is that as on date, we have a presence across roughly 12,000, 12,500 counters across India. And our internal target is to first increase the extraction from these 12,000, 12,500 counters, and then to look at further expansion. So for this year and next year, I think we have enough to do to get the revenue that we require out of these 12,000, 12,500 counters.
Okay. And beyond this 12,000 then what could be the next step in terms of increasing penetration?
So if you look at air conditioners, then on the strength of that product, we could easily add another 3,000, 3,500 counters. So the figure of 12,000, 12,500 could go to, let's say, 15,500 to 16,000 once the air conditions are fully placed.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Mayank Bhandari for closing comments.
Yes. We thank the management for taking time out and sharing your valuable insights on this call, and we also thank all the participants for their presence. Sir, do we have any closing remarks?
Thank you all very much for participating.
Okay, sir. Thank you.
Ladies and gentlemen, on behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.