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Good morning, ladies and gentlemen. Welcome to Orient Electric Limited Q4 FY '22 Earnings Conference Call hosted by Ambit Capital. [Operator Instructions] I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, and over to you, sir.
Thank you. Good morning, everyone. Welcome to Orient Electric's 4Q FY '22 Earnings Call. From the management side today, we have with us Mr. Rakesh Khanna, Managing Director and CEO; and Mr. Saibal Sengupta, the Chief Financial Officer. Thank you, and over to you, sir, for your opening remarks.
Good morning, everyone. This is Rakesh Khanna. Thank you all for joining us for our full year-end and quarter 4 results discussion. I hope everyone is keeping good health. We are not letting our guards down and all precautions are taken to ensure employees are doing. Financial year '22 posed several challenges to the business intermittently due to COVID disruptions and geopolitical disturbances. Despite that, we have managed to navigate through these obstacles. The company delivered an overall resilient performance for the year, financial year '22 and posted an aggregate revenue of 21% year-on-year under challenging demand and operational conditions. As lockdown conceded and vaccinations permuted, people's life started to return to normal gradually. As a result, customer sentiments improved, and we experienced encouraging revival for the demand for electrical durables.
For Q4 financial year 2022, our channel partners producing stock filling of fans and coolers for ongoing summer season fell short of expectations. Negative sentiments arising from Omicron wave caused them to postpone their buying decisions.
On the other hand, our Lighting and Switchgear segment has been performing very well and witnessed good momentum with a double-digit growth, both in top line and bottom line, this segment delivered [ tradeable ] performance. Clearly, our strategic efforts in the recent past are yielding great traction within this segment.
Financial year '22 was another great example showcasing our abilities for leveraging our brand capital and our distribution strength. We are continuously implementing exciting market activation programs and expanding our geographical reach via our vast distribution network. FY '22, further witnessed beginning of full year's footprint into Southern parts of India and the Eastern parts of India.
On the distribution front, we have integrated its digital initiatives into its overall distribution framework, which is increasing the adoption on ground and started giving market insights. The company transitioned its distribution networks for its fan segment in the target markets of Orissa and Bihar with a direct-to-dealer approach from its traditional approach of selling via master distributors. This approach is assisted in increasing Orient's market share in these underpenetrated areas.
The main area of concern for financial year '22 and Q4 was relentless inflation in commodity prices. As you all know, the increase in commodity prices has kept margins under pressure since Q1 financial year '22 and continued until year-end. However, during quarter 4 financial year '22, the company decided on taking aggressive price increases on the back of steep cost increase to protect the gross margins.
Besides the favorable swing in consumer luminance and switches enabled higher gross margins. All this has maintained the overall gross margin of the company and a steady state quarter-on-quarter at around 28%.
While currently raw material prices are holding due to global demand/supply situation, inflation is expected to continue over the medium term. Therefore, gradual price revisions and systematic cost reductions is being actively worked upon to cushion the inflationary impact. The ECD segment, which is home to our appliances and fans business, is a significant purchaser of such affected commodities and was therefore impacted the most.
The Lighting and Switchgear segment. which is less connected with the vagaries of commodities remains minimally impacted. On the expenses front, our other operating costs also saw an upward trend during Q4 and financial year '22. As operations resumed to normal pre-COVID levels, ancillary costs such as distribution, marketing and travel, which were essential to drive business growth, came back into the system.
Looking at our working capital, as of March 31, '22, it has increased by 17 days from a disproportionately eroded base in the previous fiscal year levels. However, due to better working capital management, the working capital base has steadily been improving from 47 days in financial year 2020 to 28 days in financial year 2022. Revenues of stocks in anticipation of seasonal demand, coupled with negative sentiment of price increase and high challenge inventory resulted, in higher year-end inventory.
We expect the overall working capital requirement to continue reducing gradually over the years. The revenue from our Electrical Consumer Durables segment grew overall by an impressive 19% year-on-year for the full financial year 2022 period, even though it dropped by 11% year-on-year in the fourth quarter of financial year 2022. The negative sentiment surrounding the Omicron wave and the Eastern European conflict during the quarter ended March '22 kept the demand for ECD segment until mid-March.
However, secondary sales continued unabated as anticipated, which resulted in inventory drawdown on the distributors front as well as help maintaining market shares. With concerns of Omicron variant reducing, we hope that the quarter 1 would be more optimistic and the demand will pick up.
In ECD segment, exciting new products were introduced by consumer insights. Company expanded the BLDC range banks with models like i-Tome, i-Falcon, Ecotech pro. A new range was introduced in decorative fans portfolio with models like Jazz Art and Falcon [ Tycoon ]. Glass line water heaters and modular metal coolers were introduced in the appliances categories.
Our Lighting and Switchgear business has been picking up very well due to multiple years of strategic efforts. With every passing year, this segment has been increasing the share of the company's total revenue.
For FY '22, I'm pleased to inform that its share in total revenue now stands at 27%. FY '22 for the Lighting and Switchgear business grew impressively. For the quarter, this segment delivered strong growth of 15% Y-o-Y. The B2C segment continued to display encouraging traction led by consumer lamps and luminaries enjoying robust demand from homes, small offices and showrooms.
In the B2B segment, both private and government business inquiries have increased and order bookings have started. Greater attention is being given to the tendered business within the infrastructure sector. Multiple bids have been forecasted by NHAI highways, Street Light National Program, the railway and by the smart cities. The government's push on many of these projects makes the outlook for tender segment of the business look promising.
Furthermore, we are very optimistic about Facade lighting range with proven design in strength and enhanced capability to deliver, which has resulted in prestigious installations like the 4-kilometer long Dwarkadhish bridge, the Bhakra Nangal dam and the Aligarh Smart City.
Besides, during the year, a bouquet of new products were launched, like emergency LED Batten, decorated lights and the Bliss. It is encouraging to see our switchgear business gaining traction and spreading its wings with portfolio expansion and channel expansion into domestic and international markets. Company's new ranges of switches catering to mass premium segment is being well received by channels and consumers alike, and volumes continue to pick up patients manner.
Going forward, the change in product mix, channel mix, gradual price hikes, easing of commodity prices and new product launches should allow us to improve our margins from present levels in the medium term. We have taken our focus projects to speed up Sanchay, which is our cost reduction program for a total cost outing, e-commerce to establish Orient as a front runner in this growing channel and GTM for gaining shares in trade channel.
We prepare ourselves for the coming omnichannel digital future. We are initiating the project of greenfield plant in Hyderabad, which is expected to be commissioned towards the end of financial year '23. This will help us expand our cleaning product portfolio with an ESG division, further improving the quality of our earnings over time.
As I mentioned in my earlier calls, we have continued to invest in our long-term strategic plans, cost control measures, improved efficiency in production, enhancing trade partnerships and empowering channel partners, which will enable us to grow faster than the market.
Most importantly, company continued to reinforce its consumer centricity goals with tangible actions to fold up our business and deliver sustainable growth. This will keep Orient as a highly relevant player in the years to come.
On this note, I hand it back to you.
Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Bhargav Buddhadev from Kotak.
My first question is on Orissa and Bihar.
Sorry to interrupt. Mr. Buddhadev, your audio is sounding very soft. Can you speak a bit louder?
Can you hear me now?
Much better. Thank you. Please proceed.
Sir, my first question is in Orissa and Bihar. We have adopted direct dealer approach. So is it possible to sort of elaborate a bit in terms of key positive trends that we are seeing here and whether this model is replicable in other states?
Good morning, Bhargav. We have taken up these 2 markets for going direct, as I have always maintained that we have a very strong base of master distributors who bring phenomenal strength to us in the states where they have been -- the presence has been since even generations and the kind of relationships that they enjoy is phenomenal.
However, there are states where we have seen that there is under penetration for various reasons. And in these states, we have decided that we will go direct to the market. Both the states are showing very encouraging results. And it's a little early to make statement about how it can finally shape up.
But all I can tell you is that within the last 6 months that we have actively started setting up these states, the results are very, very encouraging, and we are happy with our decision. Going forward, I will not like to make any clear statements about it, but I can assure you that wherever the penetration is low, we will take a view on that, and if required, we will make a complete change in the go-to-market strategy in that state.
Okay. Understood. And my last question is you mentioned market share gains in the southern states in fans. So is it possible to sort of quantify a bit in terms of how has been the market share gains and how has been the increase in the channel footprint? And that would be from my side.
Unfortunately, there is no good syndicated data that I can rely on and make that statement. What I can tell you is that of the total growth that we have achieved, a significant part of the growth has come from South markets.
Okay. Understood. And how has been the increase in the channel footprint in this view?
The channel footprint, Bhargav, earlier also I maintained, that channel footprint we do not measure by the number of retail counters we open because our reach is already very large.
What is important is how many direct number of counters are we now started influencing and how are we ensuring that our influence on the counter is steadily increasing and the direct reach is increasing. So our direct reach is continuously increasing, and we are adding in the range of 10% to 20% in every state in terms of the number of direct reach to the retailers.
The next question is from the line of Renu Baid from IIFL.
Yes. So my first question is to understand broadly should see the headline performance of ECD seems to be much softer than the other players have reported results. And your comments also on the large uptake from channel has not been too encouraging. So if you can give us some inputs in terms of how has the demand panned out in the last 45 days of the summer period, especially April, May, and is the channel inventory as well as the inventory with which the company has been stocking? Has that been eased out?
Also, if you could give us some flavor in terms of overall in the Fan segment, where there has been under recovery on the cost side. What has been the kind of price actions? And by when do we expect to recoup our margins in this portfolio?
Let me answer it in 2 parts, first is the margin and second is the volume. If you would have noticed, we have been able to implement price increases significantly more than the competition during this particular quarter. And we believe that it's important to finally be able to pass on the cost increase to the consumer.
Because from the consumer side, I don't think there is much reluctance considering the fact that it has a small share of the consumer wallet and the consumers' total domestic spend. However, there are competitive pressures which will influence our decision and timing on the price increases.
With that, we have to also see how the lag in price increase with respect to competition happens. We took a lead during quarter 4 in terms of price increase with respect to competition, which is -- we sustained it. We believe going forward in quarter 1, this pressure will ease out and overall price increases will happen in the industry.
However, quarter -- April onwards, we have seen the traction building up much more stronger. And what we also mentioned is the secondary growth, that is the real sale to the consumer. And the real sale to the consumer through our market check has been happening on the basis, and that gives us confidence that it is in the interest of the entire industry that the costs are passed on to the consumer.
So currently, we see a traction building up April, May and the price increases should happen. And also the commodity should start easing, some of the commodities we are also seeing has started easing, but it's still volatile.
Possible to quantify the price hikes that we have taken?
Ms. Renu Baid, may we request that you return to the question queue, there are participants waiting for their turn. The next question is from the line of Praveen Sahay from Edelweiss Financial.
So I'll just follow on the last participant question. Can you able to quantify the price hike in the fan and as well as contribution of a premium fan for a quarter and the year?
So the price hike during the year has been in the range of 15% to 18%, with a cost increase, which has been in the range of 18% to 20%, and that actually tells the difference in the gross margin that has happened.
As of now, we need to increase if we have to go back to our margins, it is very simple that you can -- you understand how much of percentage increase we should get to regain the desired margins that has historically been the Orient and the industry margins.
And premium fan, sir?
The premium fans is again, it's a moving target as to what we decide as a premium and industry is still not with a single definition of premium because most of the industry talks about premium from 2,500 onwards fans or 3,000 onwards fans, whereas as the prices keep on increasing, the categories that start moving into price bank keep on changing and therefore, it prepares the premium is growing.
Actually speaking, the premium is the top end fans, as we define, and we start from our Aero series onwards, which we call the premium fans. That's in the range of 10%.
[Operator Instructions] We'll move on to the next question. That is from the line of Nitin Arora from Axis Bank.
I'm sorry, I'm just trying to add up things here. So what we took a call, what I've been able to understand from your opening remarks, is we took a call of not sacrificing gross margin at different product levels and we increase prices rather than changing for growth at least at the primary level.
Secondary, as you said, the growth was still taking place, which led to the lower inventory in the channel. Is that correct?
Yes, Nitin.
So sir, the external environment in Q1 would not be indifferent, right? I mean, in the medium term, the competitive intensity would be there. And again, if our call is maintaining the gross margin, then you would go for price hike and reduce the inventory part or, let's say, look for a lower volume growth.
So I just wanted to understand, is industry growing very significantly higher? That's where the confidence is coming that things will eventually fall in place from Q1 onwards? If you can help us on the industry growth-wise, even category-wise, like you mentioned about our switchgear or fans and plus the rating change, which is coming up, do you see a prebuy there, that's why the confidence is coming? Just if you can articulate that better, it will be helpful.
Brilliant question, Nitin, I must say. I have confidence in the industry and this space. And this particular industry and space has always shown a lot of wisdom in terms of protecting the margins and the shareholders' belt. And therefore, I'm reasonably confident that in some time, the costs will get passed on and the margins across the industry will come in place.
Yes, you're right, there is always a lag between different players because it's an independent call, and 1 or the other player has to take a lead. But again, if you will see the historical movements, the fact that so much of price increase has happened across the industry, all players have moved with a lag of 1 month, plus or minus. That's what happened, and it will continue to happen.
I don't think that situation will happen where 1 player takes the price increase that everybody doesn't, that's not likely to happen. And our response to the market will also be aligned to how the overall industry is moving. And we will ensure that while we protect our margins, we always keep our eyes on the volume also.
And sir, your comment on the...
Sorry to interrupt Mr. Arora, may we request that you return to the question queue, participants waiting for their turns. We'll move on to the next question. That is from the line of Rahul Gajare from Haitong Securities.
I just have 1 question. Could you discuss your capacity utilization in the fans and the capacity that you will add at your new Hyderabad facility and which are the other products that you planned at a digital facility?
Currently, the capacity utilization is, of course, more than 100%, and we are really stretching on our capacity. We are forced to go outsource some of the fans as of now. The capacity in the new Hyderabad factory will start with at the average level of around 4 lakh fans per month, which will steadily increase.
We will also move the capacities between different factories to ensure that there is the right balance between all the 3 factories, and it will also be catering to the increased demand. We are going to be looking at new models, new lines, a lot of automation, a lot of improvement in quality getting to international levels for the European markets, et cetera, where we need a very high level of finish.
So this new factory is going to be in the direction of future growth.
Okay. And you want to start with 4 lakhs, but what is the peak capacity that you're thinking about?
Rahul, just a small clarification, what Mr. Khanna mentioned just now about the capacity of 4 lakhs. Let me tell you the utilization today, this 100% as is at the peak levels. And you would appreciate that it normally -- the swings in between peak and leans, the lean comes down to 40%, 50% level. And yes, whatever the 4 lakhs per fan is only the starting position. It will always be a graded upstream of capacity building.
And to start with, this is the peak capacity that was referred.
4 lakhs is going to be the capacity?
Yes.
The next question is from the line of Devange [ Nagodya ] from SIMPL.
Also in terms of the distributor revenue that you mentioned of how we have changed it in Orissa and Bihar, I think we had similar issue Gujarat probably 1 or 2 years back. So I'm just trying to understand what is the overall thought process between having a master distributor and doing a go-to market.
I'm not sure which issues you were talking about in Gujarat. Gujarat has been very stable. It has been performing well for us. We have a very strong distributor over there. And during the sad demise of one of our distributors, this distributor was very sports to one of the earlier distributors. And it continues to have a very, very strong relation in the market. So I'm not really sure on this particular aspect you are talking about.
But let me tell you one thing, that whichever market we find that the current distributor is not able to deliver the results that we want, we are open to make a change. We will ensure that we get full penetration in the market as desired. If we get a very strong master distributor, we will take a very strong master distributor, but since these are very, very few people in the market who have that kind of a strength. We are -- we will go direct in the markets where we believe that should be better for the market.
Okay. And I mean, how does -- since you mentioned like underpenetrated area where we are trying to go to market and how would like the margins and working capitals are having a distributor and going directly some direction, if you can give?
Okay. Firstly, it's not going to effect on the working capital. Working capital is likely to remain similar, not much change. In fact, in the new markets, we are entering with far higher discipline because we are starting on a clean slate.
So we are starting with much, much superior discipline. So we believe that our working capital is likely to improve in these markets.
And in terms of market penetration, because we are going directly access to the market and to the retailer is closer that will also, hopefully, help us to build much stronger relation and build the market shares. As I said, the initial 6 months have been very, very encouraging, and we are very happy with the performance in these 2 markets.
Okay. And in terms of margins, let's say, when we are not paying the distributor margin, master distributor margin and the cost for us to actually go and distribute at retail level. So how does that balance happen?
It's likely to remain neutral because with the distributors, they take up a lot of cost, which we will start incurring directly. However, that margin is fair. It's likely to remain neutral, a little plus/minus, we will see how it goes. The idea is not about cutting the cost and cutting corners here or there. The idea is about improving both distribution, improving the spread and reach, the quality of distribution, quality of service. That's why, yes.
If you can just elaborate on the new product launches that you have mentioned, especially in terms of cooler and appliance category. What is the kind of -- what is the strategy on these new launches and the thought process that we have at the moment?
So the ones we have always been known for the innovative launches that we have been bringing. Product portfolio is very important and to constantly keep on exciting the customers with new products, new finish is very, very important. One of the areas where we are working hard to quickly expand the portfolio is in power efficient fans. This is a category which is going to bring phenomenally in some time on both sides, be it in terms of the range, the look from the feel and the performance of these fans.
The market is changing very fast, and this is where we are bringing in very quickly new models. Metal cooling is another area where we are confident that that's going to give us results. And therefore, that's one area where we're trying to bring in more models, although we are being very cautious about slowly bringing in new models and ensuring that they get established well.
Lighting is an area where we're constantly expanding be it in Facade, be it in street light, be it in professional light, we're constantly expanding there.
[Operator Instructions] The next question is from the line of Aakash Javeri from Perpetual Investment Advisors.
In your opening remarks, you mentioned about expanding your BLDC range of fans. And just in the previous participant answer, you mentioned that one big segment for you would be power-efficient fan. So my question was, do you see the fan market turning entirely to BLDC in the coming years?
And a follow-up question to that would be, how has the cost of technology evolved over the last few years for fan? That would be it from my side.
So Aakash, we all know that BEE rating is likely to become mandatory in some time, although government started aggressively, but for some reason, they have been slow. But since the main circular has already come, it's a matter of time that will happen. As the awareness in consumer starts going up, and we also know that consumers are very quickly becoming aware about the environment, about power efficiency, green world, et cetera, et cetera.
So this change is happening and happening at a very fast pace. Therefore, it's important that we expand quickly in this particular segment. How much will shift, it depends on how quickly the cost of BLDC fan keeps on coming down.
A significant part of the BLDC fan cost is in the electronics. Electronics, historically, have always got into cost reduction at a very fast speed as soon as the scale starts building up. And there is a very good chance that the same graph will be seen in this category also and the cost will start coming down. And that's when this thing will happen, but it's a matter of time and difficult to predict how fast that sale will be.
[Operator Instructions] The next question is from the line of Nirav Vasa from Anand Rathi.
So sir, as you inform that the BEE ratings are going to be -- are expected to be applicable in the country very soon. So according to you, what is the significant benefit can -- which can come to the organized players at the cost of unorganized funds? So do you foresee a scenario where in the unorganized market, which is mainly operating on the price and price -- priced lower price bracket, that will be hit hard? Or how do you see this rating change impact on the unorganized players or especially the smaller and local ones?
Slowly, we are saying that the cost gap between the unorganized and the organized is reducing, and that's one of the reasons why organized -- unorganized are finding difficult to stay in the market. The consumer also is becoming more involved in this particular category. There was a time when consumers was not involved in this category, and it was just a product right up to the ceiling and not able to be seen, but now the consumer is more careful.
The ceiling heights are coming down. The fans are more visible, they want right brands, the right -- they want right quality, They are careful about the power consumption. They are careful about the noise and all that quality has to be delivered, an organized player is able to deliver it at much lower cost as compared to unorganized, that's where I think the swing will start happening.
And sir, in the initial launch of BLDC motor fans, according to you, what is the increase in cost of -- cost increase because of this BLDC thing?
So we know that a normal fan when used to cost around INR 1,200, the BLDC fan used to cost to the customer of INR 3,000. So it was more than twice the price.
Today, it has come down to nearly 1.5x the price, and it can steadily come down to 1.2, 1.3x the cost. So that's how it is working.
[Operator Instructions] The next question is from the line of Dhruv Jain from Ambit Capital.
I had a question on lighting. So you mentioned in your investor presentation that lighting business grew by about 10% this quarter. So I just wanted to understand what would be the price hikes that you would have taken? And if you could just break that up into the week's change that could have happened in also the raw materials price hikes?
So Dhruv, in lighting, the price hikes have been fairly nominal, not much of price hike has happened because while the commodity price went up, there were good work done by the team in terms of the circuits and the new technology that comes in helps us to really bring down the cost in the circuits and not much of a price hike had to be taken in lighting.
I'm so sorry, sir, I'm not able to hear you clearly. Hello. Members of the management team, are you able to hear me?
Yes, yes. We can hear you. you're audible.
Dhruv, are you done with the question? The next question is from the line of Amber Singhania from Nippon India AMC.
My question pertains to the BLDC answer which you have done earlier. Just one clarification, the earlier timeline of July '22 for BEE rating, does that mean that, that is not there anymore and it would be a new timeline which will be coming in? That is one.
And secondly, sir, just wanted to understand from the BLDC perspective. How do you see the market panning out in terms of -- do you see that the replacement demand will come in this segment significantly because what I understand, please correct me if I'm wrong, the branch is not a serious energy business. So the incentive for people who are already having fans to replace with the BLDC fans is not significantly higher at this venture. So how do you see that segment panning out? Is there any color from the government side that the government agencies will start replacing faster? Or how things will pan out on that line? So what is your -- if you can share some light on that.
Yes. The -- Amber the first thing is on the government deadline of July not likely to happen because government has to give technically around 6 months' notice. But now since we are late, looks very difficult that July will happen.
However, we are still waiting to hear from the government. Most likely a new timeline will come. That's my personal understanding. The second is fan power business, actually speaking in domestic area, fan is the second biggest power business in houses. It's -- we used to see that it will -- air conditioners, but air conditioner heaters are not as much power efficient because fan runs full time. And that's why it confirms a lot of electricity.
The normal payback of a good power efficient fan is 1, 1.5 year. That's it. So the payback is very fast. Having said that, will everybody replace? Not very likely. Does the induction fan has its own advantage? Yes, they are a lot more rugged in that sense.
But overall, as the awareness starts spreading and as the new generation coming up is more sensitive towards the environment, the swing is happening, the swing will happen. How fast? We all will see.
As far as we is concerned, we are ready with the full BLDC range. We have a very strong induction in our fan range, and we are capable of responding whichever way the market will move.
Okay. And sir, is there any support from the government side or the institution you think might shift faster to BLDC in terms of replacement because they are all old fans in the offices, government offices and all. So is there any support which is committed by the government or given any indication on that line?
Government has always improved the by -- in 15 months, the star guidelines. And in all products, we have seen government has come out with star guidelines and thereafter, leave it to consumer awareness and preference to move into more power-efficient products. And that's what is likely to happen in fans also.
Understood. And sir, just one last thing is the current capacities of the old fans, is it fungible towards BLDC over a period of time when the industry moves faster to the BLDC side? Is it fungible? Or do we need to put up the completely separate capacity for that?
You see, this particular industry is not very capital intensive. So the shifts are not very expensive. It's been fairly we need to shift. So these costs are not huge.
We'll move on to the next question. That is from the line of Balasubramaniam from Arham Capital.
Sir, in terms of market share, you are gaining market share from existing players or like in terms of market growth?
Yes, of course. When we say we're gaining market share, this is from existing players. The market is spread out. We have a large number of existing players in the market. And while you will see that some of the players are becoming stronger and emerging stronger. And some of the players have kind of lost out.
So yes, we are gaining at the cost of existing players. Some of them are unorganized, some of them are organized. It's a mix of both.
Okay, sir. Sir, in terms of price hike, sir, how you are related with your peers, like you said -- you mentioned 15% to 18% of price hike across the product. How you are you relating with your peers?
Sorry, I've not understood your question right. Can you repeat, sir?
Sir, in price hikes, you have mentioned 15% to 18% across the products. How you are related with your peers, how much you like your peers are implemented price hikes?
The peers is also in the similar range. This particular quarter, the peers hike would be much lesser, and that can be seen from the public results where the gross margins have got either hit or got protected. That's where it's a good way to make effect as to how much price hikes have been there by one player and things like that.
So I mentioned the growth, the minimum...
Sir, may we request that you return to the question queue. There are participants waiting. [Operator Instructions] The next question is from the line of Shubham Agarwal from InCred Capital.
So just a small question with respect to the exports. Could you just comment how have the exports being this year in FY '22? And given that you're already operating at 100% capacity more than that, should we expect exports to broadly be stable for FY '23 as well at the same level?
So you have 2 questions. One is about the capacity, the second about the exports. About the capacity, as Saibal clarified, the capacity, when I say 100% plus utilization, it is during the peak time. There are times when the capacity utilization is not 100%.
The second is about the export. We continue to be the largest exporter. There are markets which are doing well for us, and there are markets which have faced headwinds, markets like Sudan, markets like Sri Lanka, they have had few political issues, and we are all aware.
And those are the headwinds. There are markets which are disturbed because of the Eastern Europe disturbance. So that's also 1 of the restrictions. But given all that, we expect the export to remain stable.
The next question is from the line of Naushad Chaudhary from Aditya Birla AMC.
I just wanted to understand, in terms of our long-term growth, generally, if I see in last 2 years from INR 1,600 crores of top line, we have reached around INR 2,500 crores. And from the current base to take you to INR 4,500 crores or INR 5,000 crores of business. What kind of steps the company would need to take in terms of new category, new geography and how -- what do you think, how long will it take to reach to those kind of numbers to us?
Yes, you are right. We are as excited about the future growth, and we have huge plans. Unfortunately, I will not be able to share all the plans with you. It will remain confidential because of the various reasons.
But I can tell you, we are very excited about the journey and we're really positive that the future is very, very good for Orient Electric. I'll tell you a few things, which I have always said. In fans, we are not the #1, and there is no reason why we should not be the best in the market because we have the best manufacturing facility.
We are the largest exporter, which means that we manufacture the best brands at the lowest cost. We have a great brand, a great heritage. We have a fantastic distribution structure. And therefore, our ability to grow and reach to market shares comparable to the leaders is very high, and that growth we should go for.
In Lighting, the size of lighting industry is more than 1.5x that of fans industry, we're fairly small in lighting and there's a phenomenal opportunity to grow there. Switchgear and other access-related products, we are very small here, but it's a fantastic market, and we are gaining phenomenally good traction in this area.
Appliances is very large. E-commerce is coming up at a very fast pace, and that gives a phenomenal opportunity for us to grow at a very high rate. So if I had to look at all the growth opportunities in front of us, it is very exciting. And I find no reason why we should not be reaching these numbers reasonably fast. I will not be able to give you any timelines or any numbers around it, for reasons I stated earlier.
But given our existing categories, you see the reaching INR 4,000 crores, INR 5,000 crores of top line is not a difficult task for us?
I gave you all the mathematics. Just put the mathematics on table and you will find that these numbers are so much achievable. And that's what makes our -- the whole organization so excited about the journey ahead.
Understood. Connected to this question only qualitatively, if you see your next 3, 4 years journey, do you think it can be more exciting than what you have experienced in past 4, 5 years? Or how do you see your next 3, 4 years in terms of your excitement towards the business and growth?
Naushad, our last journey a few years back has been very exciting because that has brought us here. Last 2 years, because of COVID, yes, there has been a very strong headwind.
But as the COVID headwinds go away, we believe that the journey ahead will be very, very exciting.
The next question is from the line of Harsh Dhanuka from Ncubate Capital Partners.
Just one question in terms of the air coolers. How are you seeing the demand and in terms of the inventory, which was a challenge in the kind of channel last year, has those inventory been out? Do you see a normal year for FY '22, '23 in terms of booking for the fixed year?
I'm hopeful, Harsh, the entire trade has actually gone into kind of a shell because after nearly 3 years, the sales -- the summer did not happen well. But this year, as the summer continues to be promising, I expect the sentiment in the trade to return back and the entire booking process to be during the period July onwards for the whole year.
The next question is from the line of Rahul Gajare from Haitong Securities.
I also have a question connected to air cooler. Could you give us a sense on the size of the market, how the shift from unorganized to organized has picked up, which are the brands which have gained market share? And specifically for your company, in ECD, how much is the sales of air cooler contributing? And what is your market share in the air cooler market?
Thanks, Rahul. Very loaded. First thing, I just think I would want to talk about the competition and which player is doing what in this call. But we all are aware that the cooler market is highly polarized in favor of 1 or 2 top leaders who garner a significant share. The rest of the players have not, had started this journey around 3 years back.
But since that time, COVID has been hitting and the entire cooler trade has not really gained traction. We expect the market to start opening up now. And given 1, 2 good summers, the whole landscape can shift significantly in favor of the new players also.
As far as we are concerned, we continue to remain hopeful. We will continue to build on coolers as a business. And this year itself, we're seeing the traction to be coming back. In terms of unorganized, that continues to be in the range of around 75% or so of the market remains unorganized, which also gives us an opportunity that the future for organized players will be good.
However, a lot of work needs to be done in this particular space because it's not easy to compete with unorganized given their cost structure versus organized cost structure and the organized players have to bring the cost down to that unorganized market.
So I think it has its own challenges, but the opportunity is large.
Sir, but in INR 1,800 crores...
The next question is from the line of Nikhil Kale from Axis Capital.
My question is on the fans industry. So fans, sir, I understand that the unorganized market share has now reduced quite a bit, it's close to 15%, 20%. So just wanted to understand that going forward, I guess there will be some shift, but here, I think the larger shift is now done. So growth, I mean, there is definitely kind of intense competition amongst the existing organized players. So do you think that could maybe lead to some margin pressure in the interim?
And also, would it be fair to assume that growth going forward would be more driven by ASP increases on premiumization for larger organized years rather than say a shift from -- more a shift from unorganized players.
Nikhil, I'm afraid your audio was not too very clear. Can we request you to repeat your question a little bit slowly?
Sure. My question was, we understand that the unorganized market in fans is now maybe 15% to 20%. So the larger organized players now have kind of gathered quite a bit of market share. So growth going forward would be largely driven by premiumization and ASP increases. Is that understanding correct?
And also given that the headroom to gain market share from unorganized players has now kind of gone down, would it be fair to assume that even margins could be under pressure given increasing competition?
Nikhil, good questions. First thing, the growth is not going to come at the cost of unorganized player. I think the excitement that I talk about in this case is that the growth will come from the consumers themselves. The reason being the very strong shift in consumer preference, awareness and involvement in this product category.
The replacement cycle, which at one time used to be 25 years or so, today, people are willing to replace the fan every time they are refurbishing the house. It's a huge shift. The kind of the growth in the decorative segment, in the DLBC segment, in the premium segment is disproportionately high. And therefore, I believe that in the coming few years, the growth will continue to be high in fans as a segment.
Okay. And on the margins?
And on the margins, I find no reason for margins to go down because this particular space and the industry has always ensured that the margins for the industry across are protected. There is a competitive pressure, but it has never been at the cost of margins, and I remain very confident about all the industry -- this industry. And therefore, the margin should not get hit.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.
Thank you so much. Thank you Ambit team for organizing this, and I would like to thank all the participants for continuing to show your interest in Orient Electric. I can assure you, on behalf of the entire senior leadership of Orient Electric, that we remain very, very excited and committed towards this business. And we all see a very beautiful future ahead of us.
It's an exciting space. The space of the volume is very fast. It's growing fast, and it poses great and tremendous opportunities in front of us. Thank you once again for keeping faith in us. See you next quarter. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Ambit Capital, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.