Voltas Ltd
NSE:VOLTAS
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 |
820.4
1 932
|
| 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.
This alert will be permanently deleted.
Voltas Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day and welcome to the Q1 FY '23 Investor Conference Call of Voltas Limited, hosted by HDFC Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Naveen Trivedi from HDFC Securities. Thank you, and over to you, sir.
Yes. Good afternoon, everyone. On behalf of HDFC Securities, I would like to welcome the management of Voltas Limited to discuss the post 1Q FY '23 results.
We have with us today the senior management of Voltas represented by Mr. Jitender Verma, EVP and CFO; Mr. Manish Desai, Head of Corporate Finance; Mr. Vaibhav Vora, Managing Corporate Finance.
Now, I would like to hand over the call to the management for their comments. Thank you and over to you, sir.
Thank you, Naveen, and a very warm welcome to everyone. Good afternoon.
For discussing the Voltas results, we would go back a few days when the calendar year started. It started with a lot of positive momentum after continuous lockdowns and [ infancies ] caused by COVID. However, multiple headwinds, such as pressure on account of elevated commodity and crude oil prices, higher-than-anticipated inflation worldwide, especially in the United States, and major European economies and other geographical factors such as a worse-than-anticipated slowdown in China, reflecting COVID-19 outbreaks and lockdowns and continued negative spillovers from the war in Ukraine impacted the sentiments across. Additional pain to financial conditions was also caused due to steep interest rates hikes undertaken by major central banks to help ease the inflation pressures.
Back home in India, similar to global economy, end of quarter 4 gave rise to a series of green shoots on account of stronger GST collections and PMI numbers, elevated consumer discretionary spends on vehicle sales, rising exports, et cetera. However, the trends didn't seem to last long as the good news was followed by widening of current account and trade account deficit, rising inflation and monetary tightening policies adopted by RBI, which dampened consumer sentiments.
Although on a positive note, IMF still, in its recent forecast, projected the GDP growth of India to remain stronger for balanced part of the fiscal year on the expectation of a positive recovery and controlled inflation as compared to rest of the economies.
In above backdrop for Voltas, the quarter was both exciting and challenging. On one hand, our top line was helped by full season period of hot weather, which supported our Unitary Cooling Products business. However, on the other side, cost overruns along with liquidity constraints impacted results in the Project segment.
For the quarter ended June 2022, Unitary Cooling Products reported a revenue of INR 2,162 crores. Our engineering project business reported revenue of INR 455 crores and the Engineering Products segment reported a turnover of INR 124 crores.
Voltas' consolidated total income for Q1 FY '23 was INR 2,795 crores, as against INR 1,860 crores in previous year same quarter, resulting in top line growth of 50%.
Profit before tax was INR 160 crores as compared to INR 160 crores in the corresponding quarter last year. PAT, that's profit after tax, was INR 110 crores versus INR 122 crores in the previous year.
Earnings per share not annualized for the quarter ended 30th June 2022 was at INR 3.29 against INR 3.68 reported last year for the face value per share of INR 1.
We continue to further strengthen our balance sheet with minimal borrowings, which remain mainly for our overseas operations.
A snapshot of our fourth quarterly results, you have all seen, and we'll go to the Segment A, Unitary Cooling Products. The Unitary Cooling Products industry witnessed a full period of seasonal sale after 2 years of washouts due to COVID. Being a leader in the industry, we not only participated, but we led this growth in the market by our presence and registered the lead by recouping the market share after a small bump in the end of the previous year.
Capitalizing on the demand from a heat wave and on the strength of our extended dealer relationships in quarter 1 FY '23, the segment has registered a stellar volume growth by 111% as compared to quarter 1 FY '22. The quarter also witnessed and reaffirmed the trust of the consumers in Voltas brand, resulting in regaining the market share of 24.1% for June 2022 exit in the overall AC market, which is a 950 bps lead over the nearest competitor.
Our focus on the Inverter subcategory, with competitive pricing and larger number of SKUs, helped us to continue with our growth trajectory. Inverter category witnessed a good traction with the customers, and its contribution in split AC segment saw an increase from 70% in quarter 1 FY '22 to 82% in this quarter, quarter 1 FY '23. We are happy to inform that -- along with our leadership position in overall AC category, we now also lead the inverter AC market share at 21.8% as of June '22, ahead by almost 300 basis points over the nearest competitor.
In spite of having started on a positive note, unprecedented and incessant rains in certain parts of the country and early monsoon starting from South dampened demand in secondary market for later parts in the quarter. This, in combination with the fear of rising inflation, brought about a cut in the discretionary spend by the consumers. The results of UCP business also were impacted on account of high procurement cost of the inventory sold during the season, disruptive pricing by the competition and a normalized advertisement spend in this quarter after minimal advertisement spend in the last year due to COVID.
We would like to inform that BEE Star Labeling has been made effective by the government from first July 2022, and Voltas has taken all relevant steps with regards to the table change.
The Commercial Refrigeration vertical continues to deliver yet another period of impressive growth. The growth in CR products was driven by demand of beverages and ice cream products in summer by mom-and-pop stores and expansion in trade sales. Unlike previous few quarters, we witnessed a turnaround in our air cooler sales for the industry as well as for Voltas. Overall, weather conditions boosted secondary sales, and in turn, primary sales resulted in growth over the previous year.
We are also happy to report that our Commercial Air Conditioning business also registered substantial growth. Sale of light commercial air conditioning, packaged air conditioners and ducted split units drove the growth in this turnover. Business continued to take various cost reduction initiatives and value engineering processes to offset increased input cost and thereby, mitigated the risk, albeit partially on the margin.
For the quarter ended June 2022, the UCP segment registered 125% growth in turnover from INR 963 crores to INR 2,162 crores. The segment reported INR 166 crores in quarter 1 FY '23. Earnings before interest and taxes, EBIT, as compared to INR 118 crores in Q1 FY '22, a growth of 41%.
Segment B, Electro-Mechanical Projects and Services. Segment revenue for the quarter was INR 455 crores as compared to the previous corresponding quarter of INR 688 crores, primarily owing to a low carryforward order book and most of the projects reaching to the completion stage during the quarter. The segment has reported a loss of INR 12 crores on account of cost overruns and conservative provisions, affecting results for the current quarter.
For Domestic Projects business, the orders booked were higher at INR 225 crores as compared to INR 58 crore in similar period previous year. The buildup of contingency, owing to the project extension and possible cost escalations in few projects, have impacted the overall profitability of this segment.
The judicious approach followed by the management towards order booking has resulted in us retaining few but healthy orders in NEP. However, going forward, with the revised hopes on public and private capital expenditure, we expect an increase in healthy order booking for the current financial year.
In the Middle East, most of the big ticket and running projects are closer to the completion stage. Further, the new projects are under an early stage or nascent stage, wherein, margin recognition will accrue later following the internal margin recognition policy.
During the quarter, we continued to witness delay in work certification, deferral of payments by clients owing to liquidity constraints. This has resulted in some conservative provisions affecting results for the current quarter. We remain conscious of the risks entailed and remain suitably cautious and vigilant in accepting new orders in the GCC region.
Over INR 660 crores of fresh orders were added across both domestic and international markets. The carryforward order book for domestic projects now stand at INR 3,597 crores containing orders across water, HVAC, rural electrification and urban infra activities. The international order book as at end of quarter 1 FY '23 is INR 2,214 crores. Total carryforward order book of the segment stood at INR 5,811 crores.
Meanwhile, the increase in global oil price and opening of the economy, along with focus of the government on the infrastructure development, is expected to improve business sentiment and open up further opportunities in our operating markets. We will continue with our strategy of picking up healthy orders which shall help in delivering a consistent and sustainable performance going forward with minimal risk.
Segment C, Engineering Products & Services. Segment revenue and results continue to report improved performance for the quarter over corresponding quarter of previous year. Segment revenue was INR 124 crores and EBIT was INR 51 crores, respectively. During the quarter, performance of both Mozambique and Indian operations were satisfactory. Increase in export duty fines in the iron ore market marginally impacted demand for the capital equipment. Nevertheless, vertical continued to maintain consistency in its performance.
High demand for capital machinery in textile industry, both in spinning and post-spinning, and a well-defined approach on improving aftersales business helped achieve a significant growth by Textile Machinery division, albeit price increase by principal and supply chain-related disruptions continue to pose some challenges in the interim period. However, in the long run, the PLI benefits announced by the government and an opportunity of expansion in the export market should bode well for the textile sector.
Voltas Beko. Voltas Beko continues its journey towards growth during the quarter. The brand, Voltas Beko and trade acceptance of [ holdback ] product enhance the overall performance of this joint venture. The strength of Voltas distribution has been leveraged to increase touch points for the brand sequentially. The in-house manufacturing of products has helped the brand to introduce more customer-centric and value for money products with high quality and comfort.
The value engineering across all product categories, along with healthy product mix, has resulted in the improvement of gross margin, and thereby containing losses despite increased input cost and a higher advertisement spend compared to previous year. Lower penetration, consumers' reference towards premiumization and a technological advanced product are expected the brand to further strengthen its presence in this competitive market.
Outlook for the period of July to September, that is the quarter 2 FY '23, is usually a lean period for cooling products. However, the start of festival period may witness a spurt in demand. It will be interesting to see the impact of myriad of factors such as inflation, movement in crude oil prices, rupee behavior and geopolitical challenges.
As far as previously-informed businesses -- business transition is concerned, we would now like to inform that all the conditions precedent for a consummation of business transfer agreement have been fulfilled and a closing date of 1 August 2022 has been finalized as the effective date for the transfer of MEP, Mining & Construction Equipment and Textile Machinery businesses to Voltas' wholly-owned subsidiary, Universal MEP Projects & Engineering Services Limited, or UMPESL in short.
Government has remained optimistic in meeting its CapEx commitment for FY '23. Positive sentiment and a resolution of prequalification after the transition of the business will help us regain momentum in project business to overcome some possible teething issues, which may arise in the initial period of business transition.
In general, to conclude, we anticipate a pickup in the pace of overall economic activity, and Voltas would seize the opportunity to continue with growth momentum.
Thank you. We can open for question-answer session.
We will now begin the question-and-answer session. [Operator Instructions]
The first question is from the line of Naval Seth from Emkay Global.
I have 2 questions.
First, on your market share. So congratulations on steady improvement there. Can you please highlight the way you had stated in the last earning call that market share loss was in South? So this recovery has been happening in South, or we have incrementally gained share in the other regions? That is first question.
Second, on competitive intensity. Can you share your thoughts there? And with commodity prices cooling off, how far are we from normalization of margins? Yes, these are my 2 questions.
Thanks for your questions.
In market share, as we had explained, it was kind of a blip. And we have continued -- and as we had previously also mentioned that with the start of summer, North would be the major thrust area as it has always been in the -- in this season. So both North and South and other regions played part in continuing to increase this growth in the market share over the 3 months of the quarter.
On the other side, your question was on the softening of commodity prices. We have, based on our contracts and the inventories in hand, we are discussing and we have discussed new contracts with suppliers. And we would see -- we would start to see the impact of those positive changes in the -- starting, I would say, more likely from quarter 3. That would be the right assessment at this stage. And we have to continuously keep watching this space, how much of the changes are being passed on by the vendors to their constituents.
We have already seen the copper prices have started coming down. We have yet to see on the plastics. And all those discussions are going on, but the major cost is on that. So we would see the impacts coming in from quarter 3.
Naval, just to add what Mr. Verma said, if you recollect our call in quarter 4, we have attributed a loss of market share for 2 primary reasons. One is obviously South, and second thing is some kind of a supply chain disruption resulting into some of the product portfolio, which we could not meet as for the demands of channel partners. So those corrections we carried out in -- by mid-March itself, although reports are all have come later.
So that helped us not only to recover our loss position in South, but to have a position well prepared for the other reasons as well whether season -- across all countries fared well in this regard or regions.
Sure. And your comments on competitive intensity right now, how it is compared to what it was in peak of the season?
Competitive intensity, Naval, almost remained same. There is no change in any of the laddering of the competition side. Lloyd was occupying up our position in March quarter, and they're still having the third position in the month of -- at the end of the June as well.
On the laddering side, I would say that the gap between us and the nearest competitor, LG, has widened to 950 basis points, if I take the overall AC position. The good aspect is we were trailing to LG in the inverter category, being their -- they started their portfolio early to the market expectations. At the end of the June, we have gained our leadership there as well, with the gap of 300 basis points.
Going forward, our endeavor is to ensure that we maintain or we increase those spread -- or the basis points difference over the competitor and go back to our earlier market share, what we used to have in the range of 25% to 25.5%.
The next question is from the line of Ankur Sharma from HDFC Life Insurance.
First question, again, on the margins in the UCP segment. So clearly, now that we also have the B norms coming in, I remember there was another 2%, 3% kind of hike needed July onwards to kind of cover that. And if I understand correctly, during Q1, there really hasn't been any price hike despite the pressures on the RM side.
So just trying to understand, how do we now kind of get back to that double-digit margins in the UCP segment? Will it be only because of RM prices correcting over the next few quarters? Or do you believe you and the industry also needs to take price hikes, and clearly being the market leader, you lead that? So just trying to understand how the margins for the industry as a whole move from there on? Because margins of your every player has kind of been hurt.
Ankur, if I look from the margin perspective, if you recollect that in the quarter 4 call, we have a briefed the investors that we had an exit of 10.5% in March quarter. And knowing that the advertisement expenditure is going to be on a higher side in the quarter 1 because that's a season period, where we do a higher or larger part of the sales and marketing campaign. So -- and we do incur a 3 -- close to 3% of revenue into the advisement campaign. So knowing that fact, we believe that, yes, the price increase also not taken place in the quarter 1 of the current year, although it was a good time backed by the heat waves. Season was doing good.
Sale was -- the secondary was, I would say, in a much -- on a much larger -- on a traction basis. However, the competitive scenario and looking into the regional distribution. To our reading, all competitors have withheld increase in the prices, and nobody has thought to pass on this increase input cost to the consumers.
Given this current stalemate, okay, the B table also got upgraded or updated on the 1st July, resulting into some kind of incremental cost. Given that the quarter 2 is generally a lean period, the inventories will be there at both retailers as well as at the manufacturer, and we won't see any further price hike by any of the competitor in the near future. However, beginning quarter 3 when the dealers start moving into some of the primary building up the inventory, we may look into passing off some of the increase input cost and we may initiate the process being leader in this category and what we have demonstrated earlier as well when we started doing this price hike.
Okay. Perfect.
So basically, industry profitability is not kind of going to change structurally, right? So -- so basically, we do get back to our...
Structurally -- yes. Structurally, there is no change. Only our worry -- I would not say worry, but the -- looking into the market scenario, if the commodity price continues to head towards southwards and we get some kind of cost advantage in procurement, what Mr. Verma rightly said in earlier question, that possibility is there from our procurement starting from quarter 3 onwards.
However, it all depends upon how the competitions and the market is going to behave. If we are not passing on this increase -- the input cost benefit to the end consumers, probably we can see a recovery of the margin for the entire industry, and obviously, for Voltas as well. But if so, the competition -- and a need to pass on this increased benefit or the cost benefit to the customer, probably the margin will remain in the trajectory what we are seeing today, for the industry as well as in the long term for Voltas as well.
Okay. And just quickly, sir, on Beko...
Mr. Sharma, I request you to rejoin the queue please for your follow up question. [Operator Instructions]
The next question is from the line of Charanjit Singh from DSP Mutual Fund.
Okay. Sir, on the...
Mr. Singh, your audio is too low. I would request you to come closer to your -- I mean, put your handset closer...
Is it audible now?
Yes, please go ahead.
Okay. Sir, one thing is, in terms of our price laddering versus the other players in the industry, as you mentioned that in Q1, we didn't take the price hike. But what would be the gap now between maybe Lloyd, Samsung, LG versus Voltas in the key models? That's my first question.
So Charanjit, in fact, if price remains same, which was there in quarter 4 as well. Because we have not seeing a price increase, either a further discounting by any of the players to a great extent. You may find some kind of regional balancing of the price and other structure depending upon the demand supply and availability of the skills. So the laddering remain same, which was there in quarter 4 and the quarter 1 as well.
Obviously, Lloyd being low on the price contract. Samsung, actually in the quarter, has lost the market share compared to what they were in March. So obviously, the -- either a price or the balancing of the regional demand probably creating some kind of issues at their end. We got the June data just a few days back, so further deep analysis of the same is on the process.
But our overall view really says that the landscape or the -- I would say, the laddering of the price has not gone into a significant change between any of the players because the market dynamics almost remain same. We are a competitor or we are -- I would say, looking into the demand supply condition as well.
Okay.
Sir, in terms of our sourcing right now, if you can touch upon -- for the room AC side, how we are managing the sourcing? And in terms of the inventory levels in the channel and our side, how has those positioned at this point of time?
So if I look from the sourcing side, what we keep on saying that we are now looking more of the localized kind of product wherein the IDUs and ODUs to a larger extent, gets manufactured within India through our OEM support and some of by getting our own investments in the molds.
As far as the -- I missed out your second question. What was your second question?
Inventory.
About inventory levels, Charanjit, if I look, yes if I look from the market perspective, it would not be more than 30 to 40 days as such because any which way where the season is coming to an end, the channel partner also balances its inventory in such a way that they want to require to carry for a longer period of time.
So -- at the company level, the inventory would be slightly higher to take care of the B table change requirement, which has come from 1st July, to ensure that we can supply a new energy-rated machines immediately in the market on becoming this perspective.
Okay. Sir, what would be the number for us in terms of the inventory level?
Inventory level, it will be somewhere around close to INR 1,000 crores what we have. But as I said, largely will be of the raw material, the lower -- the small portion will be on the finished goods side.
The next question is from the line of Sujit Jain from ASK Investment Managers Private Limited.
What would be the advertisement promotion spend in UCP division this quarter versus Q4 as a percentage of sales?
See, Sujit, if I look from quarter 1 to quarter 1, I would say practically, there is no comparison because quarter 4 is when we see a March period to start the advertisement. And you know very well this time, IPL also getting start in the first week of April, which got the larger traction among the consumers and good platform for the manufacturers to have the ATL spend to be paired out.
So if I look from that percentage to revenue quarter 4, it will be in a decimal. And generally, what happens is the larger part when we have annual budget on the market spend. 75% of the spend takes place in the quarter 1 given the seasonality of the product. So if I compare to a revenue only for the quarter 1, it will go as high as 3%, 3.5% of the revenue. But if I take on an annualized basis, we normally spend in the range of 2.8% to 3% on the overall -- on the spend side.
Right. And have you done this table change in terms of pricing action? What kind of price action we would have taken as an industry, and Voltas as the leader?
So if I look from the pricing perspective, obviously, the table change will increase the input cost or increase the price of the machine. Our reading says anything between 1.8% to 2.3% depending upon tonnage and the stars which you're looking for.
In terms of the pricing, obviously, when the season is not there in the quarter 2, the price increase will be moderated as we move forward to the demand. We are seeing the demand is going to pick up. So at least I can say the effective price rollout to the market will be probably in the mid of the quarter 2 or maybe in the latter part of the quarter 2 as such.
To that extent, the margins would have looked higher, right, if we have taken this at the beginning of the season during Q1? Margins would have been 9.7...
From the margin perspective, there are many ifs and buts, gentlemen. And we could not do a price increase given that we were anyway on a higher trajectory and the overall price increase, which we announced over category. We have to balance it out in terms of the regional, in terms of the channel ask and in terms of looking to what secondary traction is from the consumer side.
So all this judicious call being taken when we look into the margin versus the market share for that matter. We are not there for market shares we keep on seeing. But at the same time, we cannot be out of the price to the market to remain only a good brand to have it, but the traction of the secondary is not there for the brand as a channel partner.
And in fact, it will lose out the confidence of the channel partner because today, if I'm -- if out of 4, 1 machine is getting sold of Voltas, the shelf life of our Voltas product on the retail shop is minimal compared to any other brand. By not having the attractive schemes or the aggressive sell-off his working capital, his investment, the brand goes up. So all these factors entering goes into a detail, I would say, in a much more detailed calculation or detailed study before we do any act on this part.
Having said that, some kind of price adjustments is given across regions. But when we are talking about price increase over year, we are talking about across all markets, across all SKUs. It has not taken place in quarter 4 -- quarter 1. But some price adjustments where we find a good amount of demand to recover something over there that keeps on happening across all regions and across on our channel mix as well.
The next question is from the line of Siddhartha Bera from Nomura Holdings.
Sir, first question is on the -- again, the margin side. So you highlighted that obviously ad spends and all have gone up in the quarter. So how will be the gross margins if you look at the AC business on a quarter-on-quarter basis?
So Siddharth, if I -- if you see our quarter 4 and quarter 1, the margin decreased around 330 basis points. And that's what I've explained towards this spend on the advertisement. So in a way, indirectly, the gross margin remained almost intact between the quarter 4 and the quarter 1. And this amount of spend on the advisement actually resulted into a slight dip, I would say a dip in our EBIT margin. And probably this you may see across all brands because this is a good time to have those advisement spend given that the season was on our side. As well as the manufacturers were getting to the complete season period after 2 years work out.
Understood. And in terms of going ahead, so now we are at 24.1%. And as you highlighted, that we will just have to look forward to a 25%-plus market share for the year. So going ahead, how will it -- what was your strategy to sort of take it up? Will it be pricing as a catalyst or the combination, as you said, that is very aggressive? And then how do we plan to sort of work on the market share gains, keeping margins probably better?
Siddharth, being a leader in this category, probably as a brand, we have to take a balanced view both between the margin as well as the market share. In the last quarter itself, we have given some kind of trajectory through which we are going to increase our market share month-on-month. Probably we delivered based upon the commitment, what we have given to the investors in terms of how much gain we are expecting by June. When we're talking about 2025, '25 and close to it, we are looking into trajectory by July, August to achieve those yardstick.
In terms of the catalyst, I would say that there is no significant division compared to what we used to follow. The only issue was having on the supply chain disruptions and all, which has been captured, which has been addressed now satisfactorily. So looking into the market dynamics and competitions and all, we play our cards to ensure that we remain healthy both on market share as well on margin.
Got it, sir. Sir, lastly, on Voltas Beko, if you can highlight on the market share side how we have been? And losses have kept on sort of steady at throughout INR 30 crores plus level. So when can we see some sort of improvement on the profitability side for the Beko?
Siddharth, if I look from the bottom line or top line of the holdback, the advertisement expenditure a fact, which is relevant to Voltas is true for VoltBek as well. VoltBek also has incurred a good amount of advertisement expenditure in the current quarter given the complete season for the appreciative availability of the brand.
And despite this expenditure, we have contained the loss, which means we are recovering on the gross margin steadily in this category and across all product categories because not only one category can deliver those kind of improvements.
Having seen this, we are -- what we prepared for ourself for the year '22, '23 looks promising as of now. Although market has turned to a muted kind of demand immediately after the May end. However, the -- unlike air conditioner, appliance categories goes well during festival time as well. So we're hopeful that the recovery will be there in the subsequent period, which at least ensure the volume will be there on the VoltBek side to deliver probably a consistent performance on the bottom line as we move forward for the rest of the year.
As far as market share is concerned, market share almost remained same, what we had in the month of March. Probably, we can see more traction as we move forward. 3 months will not give significant -- for a brand like VoltBek, will not give significant leeway or will be catching up on the market share side. But on an annualized basis, we may find at least we are gaining on that front as well.
The next question is from the line of Bhoomika Nair from DAM Capital.
Yes, sir. Sir, just wanted to understand what is the status of our JV with Highly and the South plant as well? And if you can also touch upon the current import content that we have for our total requirement in the RAC segment?
Our Highly JV, as we know that -- it's with a country bordering with our Indian border, so there it needs to go for approval to many departments within the government. And we are pushing for that, and we're waiting on that. So there may be certain issues which we would come to know once they are communicated to us. Yes.
And the South plant and the import content?
Sorry. Would you repeat your question, Bhoomika.
Bhoomika, you're sounding too low on the audio.
Yes. Your voice is...
Is it better? Sorry, is it better?
Yes.
Yes.
Yes. So if you can just also talk about the status of our South plant, the land acquisition, the CapEx that we're talking about et cetera, and also what is the current import content?
Bhoomika, just to continue on the first part of the question on the -- Highly JV this thing, I mean I said that we are waiting for the answers from the government. But given the current political dispensation, it's like looking like it's on a slow track.
So keeping that in mind, we are going ahead with our Chennai operations. We have acquired the land in the industrial zone, and the processes are starting as we speak. We should hear towards the end of, I would say, '23 or the third quarter of the year '24 of the financial year '24 about the start of production there. Though, every effort will be made to make that much faster than that.
Sure.
Sir, my second question is on the E&P side. We've seen a loss in this quarter because of the provisions and things. Can we talk about what is the one-time provision and ECL loss that we've accounted for in this current quarter? And will it be recurring into the second quarter? And what kind of level of margins do we see rebounding into the second half as the benefit of the lower raw materials kick in?
Bhoomika, if I look from the E&P perspective, we talk about the -- there are 2 aspects or there are 2 things which happened and resulting into a loss for the E&P segment. One is we actually build up the contingency in some of the projects, given that the kind of cost escalations and the extension of time, which we are running into.
Now the question comes, should we get the extended time from the customer? In that case, this contingency will act as a buffer. And probably, at the end of the project, we may try to or we may release some of the contingency, the situation arise favorably as well. However, given the fact that the extension of time actually took place compared to where we were supposed to deliver, we have to make those provisions. So I would say you can say about the exception, but you can take it as a kind of things which may happen in some of the projects, which crosses the deadline in terms of delivering on the project side.
In terms of the provisions, I would say that delinquency has created this kind of situation, but we were not expecting to have it -- this item appearing in the quarter 2. Because it is related to 1 or 2 projects, only not happening to the entire market as such or entire operating areas where we are doing it our business. But we have to be very watchful in these situations.
To give you an answer in a one sentence is, as we keep on saying that project business should not be seen on a quarterly basis, we have to have the annualized one. And we still believe that on an annualized basis will remain -- will come out to be the positive. The margin, percentage-wise, we also try to go for a 4.5% to 5%, what we used to say. But whatever we can do best probably we should be able to deliver on that front.
The next question is from the line of Girish from Morgan Stanley.
Just 2 questions.
On commercial AC and refrigerator, if you can highlight the growth that we've seen on a Y-o-Y basis? And second was just CapEx outlook for fiscal '23 and fiscal '24, please?
One second. You're talking about the commercial refrigerator, right? Because I misunderstood on the home refrigeration as well.
No. Commercial AC and commercial refrigeration, both.
Commercial AC and commercial refrigeration, okay.
If I look from the commercial refrigeration perspective, we are -- if I look from -- in fact, the growth is over '21 as well as '20, if I look into the -- as a product category. And to give you a perspective in the percentage terms, it is somewhere around -- just a minute, I'll open the data and give it to you first.
Or maybe if you can see a percentage of sales, whatever is convenient.
Percentage of sale in the composition remains almost same. There is no much change between, I would say, in terms of the overall percentage each product is contributing to the overall segment sale.
If I look from the volume perspective, the commercial refrigerator has grown almost 138% over the FY '21 volume. And if I look to the FY '20, although it's supposed to be a normal year scored a 20% growth over there. So commercial refrigerator has actually seen a consistent growth, largely backed by the expansion of the market and finding place in the mom-and-pop Kirana store, expanding to a tier 3 and tier 4 cities as well, because the product categories are expanding those regions like your ice creams, chocolates and other stuff.
If I look from the commercial air conditioner perspective, you recollect that this industry work on an overall tonnage basis, because that's where the commercial AC termed as. And if I look from the overall growth, the turnover has seen a growth of almost 50% over the last year.
And CapEx outlook, sir?
CapEx outlook. If I look for the next 2 years, because you asked for '23, '24, probably we'll be looking towards or close to INR 400 crores to INR 450 crores to put out on a capital side. This will include our expansion of manufacturing facility for both air condition, commercial refrigerator, and something to work on a PLI for which we make an application. We got a sanction also, in other main application.
Except the compressor, which is still, Mr. Verma actually said, it is still under the consideration stage.
Sir, Beko any CapEx has been thought through in this number, or that will be separate?
We have not included the Beko expansion.
This is what I have said...
For Voltas.
Is only for Voltas, Girish.
[Operator Instructions]
The next question is from the line of Sandeep Tulsiyan from JM Financial.
Yes. The first question what I have is pertaining to the primary and secondary volume growth, it's a good share. And secondly, you always, obviously given at 111%, but versus FY '20 normalized summer, what was the primary volume growth and as well as the secondary volume growth distributed for the current quarter, please?
So Sandeep, if I look from the -- I would give more firm answer on the primary side. On the secondary side, I could give the numbers because the growth, you know very well it is not measurable because last year was COVID lockdown. April, May, was generally on a Delta wave. So the operation was also not on an equivalent mode. So I view more on the primary side, and I can give you secondary side, what we have seen month-on-month growth in terms of the secondary side, the secondary one.
If you look from the primary side, if I compare in your question whether we have gone to a level of pre-COVID, I would say that when the -- in the month of April, the entire industry was expecting that we will grow almost 20% to 25% over even FY '19, '20 volume, which believes to be a good year or a normal year.
However, we all know after the May 15 or May 20th, the demand actually started muting it out, resulting into, I would say, a 10% degrowth on the FY '19, '20 volume. We are yet to get the industry data, but it cannot be so different.
And therefore, our over -- reading says, the industry is also having a degrowth of almost 10% to 12% if we compare with FY '19, '20 volume. However, in the FY '22, it's -- every manufacturer or within industry showing more than 100% growth in primary as well as in secondary as well. The secondary growth would have been more than 200%, given the April, May last year was under the Delta wave.
Given the secondary numbers, obviously, the secondary in the initial month of summer will be much on a higher side. We have seen almost 1.3 million units are getting done in April. We have seen almost close to 1 million units getting in May and close to 7.5 lakh units going into June. If I look from the March also, March was also in excess of around 1 million. And that's where the trend looks like, and it is generally the same if I look from the seasonality period. The moment you come to the June and July, the secondary starts getting fitted upon on a reducing side.
Understood. And...
And Sandeep, is all the MBO data. And this too secondary, which has been published by GFK to which we are relying up on the market and other stuff.
Okay. So this is the secondary data, I thought you'll send the primary data on this front?
Primary, I told you about it. FY '19/'20, we have degrowth of close to 10%.
And actually would have declined. That's right, because would a lost share overlapping from 24%?
The loss share was only in March. So if I take the quarter 1 end and all, people are comparing quarter 1 over here to quarter 1 of '19/'20. And that's where industry even would have seen. And [ RBI ] -- can give a larger degrowth than us because we have gained the market share during quarter 1 time.
So history would have been degrown to the tune of 15% to 20%, but we have to watch the data based upon what kind of information is flowing around.
Understood. Just one number clarification...
Sir, I would request you to rejoin the queue, please.
The next question is from the line of Rahul Gajare from Haitong Securities.
Now, most of my questions are answered. I just want to understand, how is restructuring going to change the way we do business? You are moving -- this is into a subsidiary or wholly-owned subsidiary, how is this going to change?
So if I look from the -- Rahul, I understand you are talking about the way in which we're going to do the business or the presentation of the accounts?
No, I'm actually trying to see on both the front. And actually, it's more important to see how the business is going to shape up rather than from an accounting perspective because ultimately, this is a wholly-owned subsidiary. And this...
So Rahul to answer that, sorry I'm cutting because we have a last question to take it up just. So that's why I'm cutting down in between.
If I look from the presentation or the financial perspective, the consolidation accounts will not see any change compared to where we are today. However, if I look to the stand-alone, the seller will go into a major change, whereby, the stand-alone account now onwards from second quarter, will demonstrate -- will just have only the UPBG as a product business, and international project business being part of the standard account. So this is from the presentation of the financials perspective.
If I look from how the business is going to work differently. Rahul, if you recollect the entire objective of during this or going for this restructuring or a business transition is to have an equal focus on both the businesses. The current -- if the management bandwidth time is largely getting put into the product business, that doesn't mean we do not have a focus on the projects. However, the kind of potential what we are seeing in the near future for the projects given the capital commitment or the infrastructure commitment from the local government as well as on the middle east part of the country.
And our strong belief is that if the equal management time being put on both the businesses, both business have a potential to deliver much more than where we are today. So that's what the objective with which the business transition being paid out. And you can see the results as we move forward in this direction in the next 1 or maybe in the next 18 to 24 months timeframe.
Sir, but you will still have the international project business sitting in the stand-alone, so you'll have to segment any which way. So in terms of -- ultimately, do you intend to move the international business also into that subsidiary so that you have only consumer products business sitting in the stand-alone? Is that...
Rahul, there are lot of plans are underway, and probably we'll keep the investors updated about the same when we are coming closer to it.
Michelle, we can take only the last question now. It's already 4:55.
Sure, sir.
This would be the last question for today, which is from the line of Abhijit Akella from Kotak Securities.
Sir, just the one question from my side on VoltBek. If you could share some numbers on the growth rate that you've seen so far and what you expect for the full year FY '23?
And with regard to the target market share we've articulated in the past of 10% by 2025, whether you think you are on track broadly to get there?
So if I -- Abhijit, if I look from the -- I can give you the growth percentage and all. But as you said that the VoltBek will obviously have a higher growth than the industry. The turnover growth is closer to 50%, if I look from the VoltBek side.
And in terms of the market share, I've just answered to one of the observation that we remain almost at the March level where we are -- where we were. If I look from the 2025, we are still committed to get into a 10% market share by 2025. And our promise is based upon the progress the brand is doing now. In a shorter span of time with a complete product category in which we have today with a more in-house manufacturing moving in, we'll be able to deliver the customer-centric product in a much faster way compared to the earlier, the import sourced based model.
So all these initiatives should definitely help us in reaching out those market share expectations. Although you know very well in this entire plant, we have lost 2 critical years which has actually impacted the volume for VoltBek, but we are still hopeful that we'll be able to make this objective by 2025 by accelerating our, I would say, the efforts in these directions.
As that was the last question for today. I would now like to hand over the conference to Mr. Naveen Trivedi for closing comments.
Yes, thank you, everyone, for participating in this call. We would like to thank the management of Voltas Limited for giving us this opportunity.
Sir, do you have any closing comments?
Naveen, we would like to thank your team and the analysts for asking relevant questions and bearing with us for this time shortages, the shortage of time. So we're still available for answering any questions on e-mail. So you can send us the questions on our reported e-mail.
And as we know that once the second quarter, the first quarter is gone, this second quarter is a kind of a low season. And then we get into the festival season. It would be interesting to see how the inflation and consumer demand play out in this sector. And then we remain with that growth outlook and product innovation, which should help us being at the top of the mind of the people, something like an India AC.
And with that, I would say, we'd like to close the call. Thank you. Thank you, everyone.
Thank you.
On behalf of HDFC Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.