Symphony Ltd

NSE:SYMPHONY

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Q4 and FY '23 Earnings Conference Call of Symphony Limited, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you, and over to you.

[Aniruddha Joshi, analyst]

Yes. Thanks, Yashasri. On behalf of ICICI Securities, we welcome you all to FY '23 and Q4 FY '23 Results Conference Call of Symphony Limited. We have with us senior management, represented by Mr. Achal Bakeri, Chairman and Managing Director; Mr. Nrupesh Shah Executive Director; and Mr. Amit Kumar, Executive Director and Group CEO.

Now I hand over the call to the management for their initial comments, and then we will open the floor for question-and-answer session. Thanks, and over to you, sir.

[Achal Bakeri, executive]

Thank you. A warm welcome to all of you, and good afternoon. We'll -- I'll request my colleague, Nrupesh Shah to take us through the numbers, after which Amit Kumar, myself and Nrupesh bhai, all of us will be here to take any questions that you may have. Thank you.

[Nrupesh Shah, executive]

Yes. Welcome to Q4 and FY '23 conference call. So customary safe harbor statement is applicable. Before we move forward, of course, we must say that for Q4 FY '23 as well as for FY '23, overall, on a consolidated basis, in particular, we haven't performed up to the mark. We will take you through the details.

So in terms of the product range, in terms of the technology, in terms of the product positioning, now Symphony has positioned itself as a thinker of tomorrow. In the interest of time, we are not playing it over here, but we have shared the link, and it may be worth visiting and viewing it. And similarly, this is some interesting Kal Ki Soch.

So during the quarter, we have, for the first time, launched world's first air cooler with BLDC technology. The landmark feature is, it saves 60% power consumption apart from many of the value-added features, and it also saves water and hence having up to 8 hour night sleep mode.

So coming to performance highlights, stand-alone as well as consolidated. We have [ reached our ] highest ever stand-alone and domestic sales, surpassing pre-COVID historical high. In respect of the stand-alone sales, we have surpassed equally high by 24% and [ hardcore ] domestic sales, that is the India market, it is 21% growth. So we have maintained our market leadership with the 50% market share among all national organized players. Also happy to share that in respect of the alternate channel, that is modern trade, consisting of NFS (sic) [ LFS ], RCS, e-commerce, D2C, et cetera, et cetera, continuously it is showing uptrend, and it has contributed now almost 1/3 of the domestic sales, up from 21% in FY '20.

Global headwinds, particularly in United States and Australia, have severely impacted the performance of Climate Technology more so in this quarter and hence, the year [ result ]. However, we believe that and we are very confident that considering the overall potential and series of steps, which we have initiated the medium- to long-term viability and profitability of U.S. business and Australia market and Climate Technology remains intact.

Coming to stand-alone profitability. The gross margin for the year was up by about 3 percentage, that is 47.9%, aided by price hike, softening of input costs. Of course, still they are at a level higher than pre-COVID level and stand-alone EBITDA margin for the year stands at 20%, up by 210 bps, and stand-alone PAT up from INR 111 crores to INR 165 crores, up by 49%. However, consolidated PAT is Y-o-Y lower, down from INR 121 crores to INR 116 crores. And during the year, including interim dividend, final dividend and share buyback of INR 249 crores, including taxes and expenses, the total shareholder payout is INR 284 crores far in excess of consol or stand-alone PAT for the year or cumulative PAT of last 2 years.

Coming to January to March '23 quarterly performance. Again, as far as domestic sales is concerned, we registered 23% growth in domestic sales. I'm differentiating between domestic sales and Symphony stand-alone India. So domestic sales is up by 23% vis-a-vis the historical high, which was in March '22. This is despite unseasonal rains in the month of March. Again, as I said during the year, Climate Technology, Australia and United States, severely impacted the performance for the quarter. Stand-alone gross margin for the quarter stood at 48.9%, up by 600 bps Y-o-Y. The highest March quarter GP margin in last 3 years and stand-alone EBITDA margin percentage stands at 20%, up by 80 bps. The traction in LSV remains quite decent.

Coming to specific financials. Stand-alone revenue from operations up by 38%, INR 885 crores. Gross margin, absolute amount is the highest ever INR 424 crores. And coming to PAT, it is INR 165 crores, up by 39% vis-a-vis FY '22. While the capital employed in the business consisting of investment in fixed assets, working capital, et cetera, based on the monthly average stands at INR 39 crores, translating into return on capital employed of 456%, and as many of you may be aware, we differentiate in terms of the segmentation capital employed, 1 in core business, that is air cooling and appliances in seconds is surplus that is driven, while return on net worth stands at 19%, up by 500 bps. This is the waterfall chart of movement of EBITDA margin percentage from 17.9% to 20%.

Coming to January to March Q4 financials, the revenue from operations on stand-alone down by 5%, INR 239 crores. As I said earlier, domestic sales is up by 23%. However, loss of sales to subsidiary that is to United States has contributed this decline. While gross margin stands at INR 117 crores, up by 8% in absolute amount and profit almost at the same level what it was in FY '22, that is INR 43 crores.

Coming to consolidated financials. Revenue from operations up by 14%, INR 1,184 crores, while PAT stands at INR 116 crores, down from INR 121 crores. And on a consolidated basis, the capital employed stands at INR 304 crores in core capital -- in core business translating into ROCE of 42%. And this is the waterfall of movement of EBITDA margin percentage on a consol basis, FY '22 to FY '23. For Q4 consol financials, revenue from operations stand at INR 308 crores, down by 20%, while PAT stands at INR 16 crores, down by 75%. And EBITDA margin percentage is down by almost 14% at about 7.6%.

Coming to subsidiary rate performance for FY '23. Climate Technology, turnover down by 38% to INR 225 crores, EBITDA at negative 43 and so is PAT negative INR 43 crores. Coming to IMPCO Mexico, INR 117 crores, up by 15%, and PAT at INR 2 crores, while EBITDA at INR 8 crores. And GSK China, INR 32 crores of turnover, down by 14%. However, at EBITDA level, it has broken even mainly because of substantial reduction in CODB.

Coming to outlook. As far as domestic market is concerned as well as for our respective subsidiary, Symphony's [indiscernible] remains on keep on adding and launching market-leading innovative value-added products. We will take calibrated price hike on need base so as to reach to historical high EBITDA percentage. And we expect that softening of material labor and freight costs should also help towards that. We have strategies in place to build on strong FY '23 domestic sales with better margin. As far as curtailment of orders by large retailers in USA and Australia, we believe and we view them as mostly onetime phenomenon mainly because air cooler product categories, unlike most of the appliances don't have much more relation with the economy or inflation or interest rate. Its sole relation is with temperature. And as we are into air cooling, which is environment-friendly product, so we are committed to pursue the growth. It's a sense of responsibility towards the society and environment.

Now coming to some of the specifics of Climate Technology. So on the left-hand side, these are the existing products of Climate Technology. They are ducted products, whether it is in air cooler or heater. Now the market trend is and more and more acceptability is towards Symphony kind of air cooler as well as portable heaters. And as displayed on right-hand side, this is the range of products which we have proposed to launch in current year, and they are new age products having a much better margin profile. And in terms of the transformation, number one, we are revamping the product category completely, reduction in cost of doing the business. So in INR terms, the cost of doing business in '23, '24 will be down by about INR 21 crores for Climate Technology, Australia.

Thank you. So let's open for question-and-answer.

[Operator]

[Operator Instructions] We have a first question from the line of Renu Baid from IIFL Securities.

[Renu Baid, analyst]

[indiscernible] performance this quarter. First question is on the stand-alone business. First, if you look at -- can you elaborate what was the percentage or the revenue loss that you had or revenue which was missed because of change in the weather patterns towards the end of the quarter because sequentially, if we see India our AC sales or air cooler sales are broadly flat on a Q-o-Q basis. So were there any revenue slippages or loss of revenues because of change in weather conditions in your view? And how are you looking at the season given that it's been a pretty patchy summer and unseasonal rain patterns across the board?

[Unknown Executive]

So that's an interesting question. And definitely, while February was building very well for us, March across the country, the season was not as great. So for the quarter, the target that we have set, and we were on the path to achieve, I would say, we lost about 10% of the quarter's target because of the change in weather in March, so to speak.

[Renu Baid, analyst]

And how should we look at April, May, it's been almost over a month a season has gone through. So -- is the current season looking like a washout or any hopes of some damage control that you see possible?

[Unknown Executive]

So as we speak, it's the cautious stance that we have. Obviously, April, the first or the mid part of April was pretty strong, especially in the East and Central India. And there were days we are actually scurrying for inventory, and we were almost on the verge of stock-outs in certain places. But west and north, this season is yet to pick up. We are expecting that somewhere between 10th to 15th of May, the season will pick up, and we'll be able to cover for the loss of momentum in the last week of April. That's the expectation as of now. But a lot remains to be seen over how the weather behaves over the next week or 10 days. In terms of [ readiness ], obviously, we are placed -- we are distributed pretty well across the market. And once the season gains momentum, we are well placed to capture that.

[Renu Baid, analyst]

Right. Because the overlying concern here is, if the inventory with the channel is at relatively elevated levels, then a poor season will indirectly also have implications on the offseason sales that we try and push during the early half of the year. So in your view, is the channel inventory near normal? Or it is at a much higher elevated level given that this year was expected to be a really good summer after a couple of years?

[Unknown Executive]

So for this point of the year -- for this time of the year, I would say the inventories are at a slightly elevated level. At the same time, the season is still a bit ahead of us. We are expecting a delay, but a bit prolonged summer venturing into end of June or early July also. So as of now, I would say, over the next 5 to 6 weeks, we do expect the inventories at the end of the season to come to the normal level.

[Achal Bakeri, executive]

In other words, Renu, it's a little premature to worry about the inventory. So internally, also, we are still sort of quite optimistic that things will recover. We still have pretty -- almost the entire month of May ahead of us. So -- I mean it's -- so we -- like I said, it's a little premature to begin worrying about inventory.

[Renu Baid, analyst]

Got it. Secondly, on the performance, is it possible to share some inputs on the operating performance of subsidiaries because you've just given the annual numbers, but we don't have the 9-month operating performance of subs, so any share, specifically on the CTL, which has seen a very sharp deceleration. And also IMPCO, if we -- if I look at the number base and whatever details I have, while revenues in 4Q were broadly flat, there has been a sharp improvement in profitability in gross margins there. So would it also be attributable to change in the business mix that we were [ towing ] there a bit more of wider bucket of other white good products in that region, if you can elaborate?

[Nrupesh Shah, executive]

Are you referring to financials for Q4 of Climate Technology and IMPCO? That's what you are looking for?

[Renu Baid, analyst]

Yes. Fourth quarter operating performance was 9 -- for the 9 months, you had shared EBITDA for IMPCO, but not for [ CTL ]. So we didn't have that number to compare 9 months fiscal year.

[Nrupesh Shah, executive]

Sure. So right now, we have Q4 FY '23 subsidiary-wise performance. So Climate Technology sales INR 52 crores, [ EBITDA ] negative INR 28 crores, and PAT wise negative INR 25 crores. As far as IMPCO is concerned for the quarter, sales is INR 37 crores, EBITDA of INR 5 crores and PAT is positive INR 2 crores. And GSK, normally this is offseason over there, sales is INR 6 crores and EBITDA is 0, and PBT and PAT is minus INR 2 crore.

[Renu Baid, analyst]

Got it. Got it. Okay. So a lion's share of the slippage in [ CT ] essentially has come in for Q4 [indiscernible].

[Nrupesh Shah, executive]

So basically, the loss of U.S. sales, that is, if we compare Q4 [ '20 ] to Q4 '22, it's in absolute amount about INR 51 crores. That is the amount of the degrowth in U.S.-based sales from Symphony India, and so is in Climate Technology.

[Renu Baid, analyst]

Got it. And on the core India business, how has been the portfolio of the central air cooling solutions doing and any growth numbers or outlook that you would want to add in terms of how the portfolio is ramping up?

[Achal Bakeri, executive]

So that is certainly doing very well in relative terms to what we were doing in that vertical in the previous year. We are not yet sharing specific numbers for that vertical, but it is certainly doing well. Again, and we have spoken about this many times in the past on calls that -- all in all, it hasn't quite lived up to the expectations that we had set for ourselves. So by now, we had originally expected this to be a much larger vertical. But nonetheless, it is growing at a respectable pace.

[Operator]

We have our next question from the line of Rahul Gajare from Haitong Securities.

[Rahul Gajare, analyst]

I'm just building on the earlier question, where I wanted more clarity on the safety performance. Is it possible you could break this between how Australia has done and how U.S. has done, so we understand where is the bigger problem? And what is it that we are specifically doing to basically get around this problem. And these are obviously Q4 financials. How has been the performance or uptick from the dealers who had issue in the month of April.

[Achal Bakeri, executive]

So there are 2 things here. One is -- as far as the U.S. is concerned, it's clearly an issue of a sharp drop in the top line. And in the U.S., we have -- again, this is something which we have said many a times in the past. We have one principal customer, which is the Home Depot and the Home Depot along with -- across the board, all retailers in the U.S. not only for coolers, but for all commodities have sharply curtailed their inventories and purchases this year in anticipation of a recession and a slowdown.

So the same thing has impacted us, and they have almost halved their orders in the current year versus the previous year. And so -- and the summer is yet to come. And despite that, assuming that the summer is going to be -- I mean the recession is going to hit and the sales is going to be poor, they have reduced their inventories and their orders. And -- but we do expect that the summer would be good. And even if it is a normal summer in the U.S., we expect them to run out of inventory. At which point, there will be nothing that we can do. We can't overnight ship coolers from India all the way across to the U.S. So that sales would be lost. But that is an assumption of how that market operates.

As far as Australia is concerned, there too, it is a sharp compression of the drop -- of the top line. And there, it is only because of any anticipation of a recession, where the recession is actually it. And a lot of our coolers go -- as was shown in the presentation, they are installed products, coolers and heaters, which are bought by builders when they build homes and installed and provided along with their homes. Now because of the recession, the post-COVID recession, many builders in Australia are actually going bust. And so far, fortunately, we have not sort of directly been impacted in terms of bad debt. But at least in terms of sales, we have been terribly impacted. So our top line has dropped dramatically because of that.

We -- the corrective action that we are taking is, of course, as was shown in the presentation. And this is something which we have taken not only now, but we began this exercise more than a year ago, was the pivot from installed products to portable products, pivot from gas filed -- gas-powered heaters to electric heaters and a pivot from captive manufacturing to third-party manufacturing or a box in box out kind of a strategy. As far as coolers go, the products will go from India as far as all of the product heaters, air conditioners, they will all come in from China. So there is a fundamental shift in the way -- in the business model and the entire business of Climate Technologies that is underway.

And also, there is a plan to also -- along with this sort of change in business model, will also result in a sharp reduction in the cost of doing business, which will bring down our breakeven point substantially. So we have been -- ever since we have acquired the company, we have been reducing -- working on reducing the cost of doing business. And what it will be a year from now will be about a quarter of what it was when we first acquired the company. So that is the kind of -- and that will have no impact, no telling impact on the top line. In fact, the top line has actually grown. So it's just -- it's a transformation in the way we'll do business in the business model, which is enabling us to do this.

So like, again, Nrupesh bhai mentioned in his presentation, notwithstanding what we have witnessed in the last financial year, we are completely convinced, and we knew it. We have full conviction that there is a very broad silver lining at the end of this -- or around this cloud or light at the end of this tunnel. So we are fairly sort of confident that we will -- this company will turn around, and we'll live up to the expectations that we had when we first acquired it nearly 5.5 years ago.

[Nrupesh Shah, executive]

And coming to specifically about U.S. and Australia performance. So as far as U.S. is concerned for FY '23, despite top line reduced to [ less than ] vis-a-vis FY '22, not only at an EBITDA level, at a net-net profit level after allocating all the expenses, it's fairly profitable. So there is the profitability profile of U.S. business.

[Rahul Gajare, analyst]

Sir, my second question is given that so many builders are going bust in Australia, we don't have any receivable problems. We are not anticipating or even providing for receivable issue.

[Nrupesh Shah, executive]

That's what I said. No, we don't. We've had no bad debt so far, nor do we expect there to be any bad debt going forward.

[Rahul Gajare, analyst]

Sir, on the stand-alone business, given you've had the revenue impacting in this particular quarter mainly because of loss of export revenue. We've seen a very sharp uptick on the gross margin, at almost 49%. So does that mean that exports typically would have -- I mean, have you had exports that would have made this any different? Or this is price hikes or something that has impacted the gross profit over here?

[Achal Bakeri, executive]

So that is a good observation. So the lack of exports has improved the margins because, again, remember, our exports are to a subsidiary. So the margin is divided between the two. Symphony would typically sell to the subsidiary at TP -- at rates which are governed by transfer pricing. So the margins that are retained at Symphony are, of course, much lower. So the lack of export has helped improve our margins. And again, in the past last -- a year ago, we had also conveyed that because of significant exports to subsidiaries, our margins have -- are lower than they usually would have been.

[Nrupesh Shah, executive]

But when it comes to the total margin profile, we need to consider the margin on exports from Symphony India to subsidiaries, margin also being capped by subsidiary. So by the way, as far as U.S. business is concerned, margin in Symphony India and Climate Technology, both put together is even better than our domestic business. So that's how it's supposed to be viewed.

[Operator]

[Operator Instructions] We have our next question from the line of Lokesh Manik from Vallum Capital.

[Lokesh Manik, analyst]

Couple of questions on my end. One is on the gross margin, if I see the difference between consol and stand-alone. So subsidiary has reduced significantly from about 45-odd percent to 32%. So just wanted to understand -- and given that your business model is asset light in nature, most of the costs should be variable in nature. I believe we should not be seeing such a huge drop in profitability. So what is it that has prevented us from passing on the price hikes to customers in the subsidiaries?

[Achal Bakeri, executive]

Are you referring to stand-alone or...

[Lokesh Manik, analyst]

I'm referring to the subsidiaries business. We've recorded about -- if I take the consol and stand-alone difference loss of about INR 40 crores at the EBITDA level. So -- on an annual basis, I'm not talking quarterly. I'm referring to the annual basis, which is quite significant given that we are an asset-light model.

[Achal Bakeri, executive]

Not entirely. In Australia, we don't -- not really entirely asset-light. That is a process that we have set into motion to become some asset light, like I said a little while ago.

[Lokesh Manik, analyst]

Right. Right. No, but we've seen significant reduction on the gross margin front...

[Achal Bakeri, executive]

Yes, that is true because, again, last year, costs were higher, and our selling prices couldn't cover the increase in costs. So there was a sharp reduction in the gross margins of sales within Australia.

[Lokesh Manik, analyst]

Got it. So when do we plan to get back to normal levels in your view? Or as per your clients, business plans?

[Achal Bakeri, executive]

So we -- I mean, as we speak, our margins are better. And we are working on improving them. But we believe that, of course, in the current year, in '23 '24, they should be much better than what they were in '22, '23.

[Lokesh Manik, analyst]

Would we be back pre-COVID level?

[Nrupesh Shah, executive]

As we are shifting the product from [ installed ] or ducted product to stable products, which is in the demand, and they command much better margin, too.

[Lokesh Manik, analyst]

Okay. And these [indiscernible] is going to be exported from India? Or they are manufactured in Australia?

[Achal Bakeri, executive]

So the coolers will go from India, part of the -- from the Symphony range, but other products -- Symphony doesn't manufacture, then Symphony doesn't manufacture heater, panel heaters, [ fireplaces ] or air conditions, those will go from China.

[Lokesh Manik, analyst]

Got it. Got it. Sir, my second question is on the stand-alone business in India, and more to do with the advertising and marketing. So we've had a very impressive track record over the years, especially in the past decades, leaving the last 3, 2, 4 years aside, if I may, where we've seen sort of a reduction in our share of voice, which used to be 60% to 80% that's come down to 40%, 50% And we are also seeing revenue to add expenses reduction from, let's say, 23% to about 15% -- hovering around 15%. So just wanted to understand what has changed out here because we've also gone from a demand pull to a push strategy, and we've gotten into affordable range of products. Has there been also -- can it be also due to a change in the team that has taken place if that may be the case. So just trying to understand what is the reason for this underperformance on the marketing and advertising side?

[Achal Bakeri, executive]

No, on the contrary, our ad spend is much higher than...

[Lokesh Manik, analyst]

In relation to the sales. I'm just talking in relation to the sales.

[Achal Bakeri, executive]

In relation to the sales.

[Nrupesh Shah, executive]

In fact, in relation to sales during FY '23 on stand-alone basis, our advertisement sales promotion stands at about 9%, which historically used to be 6 percentage. And absolute amount, if you see the figure, it's around or in excess of INR 70 crores -- INR 73 crores, which year before our pre-COVID used to be lesser than INR 40 crores.

[Lokesh Manik, analyst]

Right. So we are generating more sales per rupee of ad spend, which is what I'm referring to, and which has come down. So just trying to understand the reasons behind that?

[Achal Bakeri, executive]

In other words, what you are saying is our ad spend as a percentage of sales has gone up?

[Lokesh Manik, analyst]

Yes. inversely, you could say that, correct?

[Achal Bakeri, executive]

Yes. That's what essentially you are saying. That is true, maybe we have spent more on advertising than was needed to or was justified. So that is also something that we are -- we experimented with that last summer. We also had a lot of excess inventory lying with the channel last summer in the quarter of April to June of the last financial year. So -- which also sort of -- to sell, which we had also sort of increase our ad spend. But we are certainly moderating that in the current year. So we will sort of revert back to our historical ad spend as a percentage of sales.

[Lokesh Manik, analyst]

Got it. Sir, there are no -- on the KPI side, there is no really underperformance because those numbers obviously are with the management and not with us. So just to get some clarification that on the KPI side, we are not seeing in terms of ad performance that we are doing on the content that we are releasing and the impact that it has. So there, we are not seeing any underperformance. Just clarification on that.

[Achal Bakeri, executive]

Not really. No, not really.

[Operator]

We have a next question from the line of Smita Mohta from Kredent InfoEdge.

[Smita Mohta, analyst]

Can you hear me, clearly?

[Nrupesh Shah, executive]

Yes, but your voice is slightly breaking.

[Smita Mohta, analyst]

Can you hear me now, properly?

[Nrupesh Shah, executive]

Yes. Better.

[Smita Mohta, analyst]

Okay. So basically, I wanted to know that now your 9-month FY '23 con call, you had referred the volume to be as 25 million coolers sold for 9 months. So I wanted to know the yearly sales for the coolers and your percentage of sales as export market, how much has that dropped compared to the total volume of the sales? And which quarter according to the management is the best quarter for them? Is it this summer, which is heated up? So just wanted answer to these 3 questions.

[Nrupesh Shah, executive]

So 25 million coolers is the cumulative sales with Symphony and subsidiaries put together since inception has achieved. So which is at least 5x to 8x more than any of the competitors or maybe more than the combined organized retailer of India and many other countries. So that is the significance of it. As far as volume for the quarter or year is concerned, due to competitive reasons earlier we used to share, but now we are not sharing because we are the only listed limited company exclusively into air cooler and other figures are not available. So rest of the details are shared, but this is not being shared.

[Smita Mohta, analyst]

Okay. And how much has your export contribution gone down in the total revenue basket, if I may ask?

[Nrupesh Shah, executive]

You mean to say exports from India? Or you mean to say total business...

[Smita Mohta, analyst]

Total business exports in your revenue terms, total revenue terms, consolidated.

[Nrupesh Shah, executive]

For FY '22, it was almost 50%, which includes exports from India and our subsidiaries turnover, while in current year, exports and subsidiaries put together is close to 30%, about 34%, 35%.

[Smita Mohta, analyst]

Okay. So a drop of 15% from compared to last year, right?

[Nrupesh Shah, executive]

That's right.

[Smita Mohta, analyst]

Okay. And which quarter, can you say that it's the best for the coolers of your -- for your business?

[Nrupesh Shah, executive]

As far as Symphony stand-alone is concerned, we do sales around the year with 100% advance when it comes to the domestic trade, that is general trade. Of course, trade has to sit on inventory until secondary sales starts. So we don't have much of the issue in that respect. However, at the consumer level, the best quarter is April to June quarter for Symphony India. Coming to Australia domestic market, it is December to March, and coming to U.S., it's from June to August, September.

[Smita Mohta, analyst]

Okay. Okay. Got it. Can you just define your market share presently?

[Nrupesh Shah, executive]

So Symphony India, our market share is 50% as earlier conveyed in the presentation, and that market share is within organized retailer. And it is vis-a-vis national players heavy [indiscernible] business because otherwise, there are like hundreds and hundreds of brands, but many of them may be regional or in specific district. So in that respect, it is 50% market share.

[Smita Mohta, analyst]

Okay. So as you suggested that the subsidiary export is not happening now because of which your margin has risen. So do you think that this is going to last and you are going to have a good margin there because the subsidiary is not making the sales?

[Achal Bakeri, executive]

What do you think we should be hoping for?

[Smita Mohta, analyst]

That your margins rise, entire business margins.

[Achal Bakeri, executive]

No, no. Good thing that we should also be selling more to our subsidiaries or selling more in overseas markets. So essentially -- so this is a one-off thing. This is an aberration, like I said. Our exports to the U.S. primarily has stopped significantly this year. We are hoping that the business revised in the U.S. and of course, what would be great would be that our margins also remain the same despite an increase in exports. But -- so we'll see. We'll see what happens...

[Nrupesh Shah, executive]

And what matters is the [indiscernible].

[Achal Bakeri, executive]

So we'll see what happens going forward. But essentially, what we are looking for is how do we revise the U.S. business. Now that might have an impact on the margins, but we'll see what happens.

[Smita Mohta, analyst]

Okay. So how soon do you think that your margins can normalize, 1 year or 2 quarters?

[Achal Bakeri, executive]

No, no, no. So first of all, yes, as far as domestic stand-alone business is concerned, our margins -- our present margins -- I mean, our margin going forward should improve. When you couple in exports, then on a stand-alone basis, the margins may be impacted. But then again, you have to look at margins, end-to-end margins because, like I said, when we export to a subsidiary, there is margin retained at both levels. And when we look at end-to-end margins between the 2 at the consolidated level, the margins would be a lot better than on the -- than on a stand-alone basis.

[Operator]

We have our next question from the line of Pulkit Patni from Goldman Sachs.

[Pulkit Patni, analyst]

Sir, this again revolves around Australia. I mean we've had the subsidiary for a while. Last year, we were talking about how higher logistics cost is hurting us on this product. This year, demand has gone down. I just want to understand what is the thought process of the management because I mean you mentioned you're increasingly trying to source products from elsewhere and sell because those are countries where even restructuring or closing down factories has a cost involved. So I mean, what I'm trying to understand is what is sort of the road map for the Australia business, say, over a 2-, 3-year period? Because so far, it seems it's been a disappointment for different reasons in each of the years. So if you could talk about that. And I think INR 21 crores is what you mentioned is the benefit of reduction of cost of doing business. Will that be realized in FY '24 itself? Or is it again a medium-term target?

[Achal Bakeri, executive]

That is something which we expect to realize in '24. And by '25, it would be even more. Okay. Now to come back to your overall question, Pulkit, saying that Australia business has been a disappointment is an understatement. No doubt about it. We did not sort of acquire this company for the performance that we have witnessed so far. There's no doubt about that. There's no arguing there. But again, as far as investors are concerned, it doesn't really matter. But COVID has been an exceptional event. And whether it's in India, where also our logistic costs have gone up, our bill of material has gone up. And that's happened in company after company, category after categories. It's not that we are an exception.

And so in Australia, now the international logistics costs have dropped, but the bill of material cost or the commodity costs are still very elevated. And so are they in India. They may have dropped a little from the peaks, but they're still significantly higher than what they were pre-COVID levels. And then you also referred to the difficulty of restructuring. Very honestly, that is not the case here. We are -- like I said, we are changing our business model entirely. So there will be very little manufacturing, almost no manufacturing that will continue in Australia. We will largely be a box in box out company. I don't want to use the word trading company, which we are not, because we have a brand of our own and the distribution of our own and all of that. But essentially, we will be selling products, which are made either in India or in China. Products that will be sold in Australia will not be manufactured in Australia. And so there is a major change in the entire way we are doing the business that is underway.

[Pulkit Patni, analyst]

Sure, sir. Sir, second question is, I mean, when we look at both Australia and U.S., is it just a function of markets declining or being tough? Or have you also lost market share? Could you share some perspective on that also?

[Achal Bakeri, executive]

No, no. Absolutely not. Absolutely not. As far as the U.S. is concerned, like I said, despite Home Depot have sold very well last year, they just sort of -- this is again, not only in cooler, across the board, across every category, they have cut down their inventories, they've cut down their orders in anticipation of a recession. As far as Australia market -- sales is concerned, like I said, there are these builders going bust and which is why -- and the reason why builders are going up is also really interesting. Most of these builders would have contracted to build homes at the next price before COVID. And then suddenly, everything has gone up still, who would you name it. Every [ old cost ] has gone up, and they are unable to deliver or build at those costs, which they were contracted at. So which is why they are going belly up. And so in Australia, the reason is only that. It's not just us, even our competitors, the whole industry has shrunk as far as the appliance industry is concerned in Australia.

[Operator]

We'll take our last question from the line of Nikhil Gada from Abakkus AMC.

[Nikhil Gada, analyst]

Sir, a couple of questions just purely from the domestic angle. Firstly, could you help us identify how the overall scenario is in north, south, west in terms of how it was in the fourth quarter? And how it is panning out right now in April?

[Unknown Executive]

Right. So Nikhil, the picture is obviously very different in some parts of the country. So maybe I'll pick them one by one. In the [indiscernible] as we speak, most parts of the March of the season has not yet taken off. March was mostly on low key, [indiscernible] had some buildup. But as we speak, it is still not in the regular flow of things in the north. In west, the situation is similar. The business has not taken into full year as of now. And especially the costal parts of Maharashtra and South Gujarat, the season is yet to take shape.

South and east, the picture is slightly different, especially the eastern parts of south and most of Eastern India. The second, third weeks of April saw pretty good heat, and as I mentioned earlier in response to another question, we traded very well in those parts of the country. And there, again, at this point in time, the season is a bit low, but we are getting back to closer to normal temperatures over the next week or so in these parts of the country.

[Nikhil Gada, analyst]

Got it, sir. And sir, just because we are seeing a lot of commentary on El Nino, does it, by any chance, help us have -- is there any past precedence, which sort of guides if El Nino actually happens, does it benefit the cooler company purchases?

[Unknown Executive]

In the past, when we had El Nino year, the summer was prolonged and the summer was warm. This year, while it's an El Nino year, the summer has set in late. What we are hearing and getting to understand is the summer is likely to set late in most parts of the country and likely to continue until late. So that from a weather perspective and heat perspective will be a prolonged summer as we see. So till we are there, it's more of a hope and a prediction than actual materialization on the [indiscernible].

[Nikhil Gada, analyst]

Understood. And sir, lastly, can you call out what kind of domestic growth do you expect for '24? Is it too early to sort of discuss on that?

[Achal Bakeri, executive]

Too early.

[Unknown Executive]

Too early for that, right now, Nikhil.

[Operator]

As there are no further questions, I would now like to hand the conference over to management for closing comments. Over to you, sir.

[Nrupesh Shah, executive]

So thank you all the participants. Thank you, ICICI Securities for hosting this conference call.

[Operator]

On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.