Voltas Ltd
NSE:VOLTAS
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Voltas Ltd
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Good afternoon, everyone. On behalf of HDFC Securities, I would like to welcome the management of Voltas Limited to discuss the [indiscernible] results. We have with us today the senior management of Voltas -- represented by Mr. Anil George, Deputy MD and CFO; Mr. Manish Desai, Head Corporate, Finance; Mr. Vaibhav Vora, Manager, Corporate Finance. I would now hand over the call to the management for their comments. Thank you, and over to you, sir.
Good evening to all of you. Welcome to the Voltas Q3 post-results call. To start with, I'll give you a brief on the results and followed by the question and answers, as we do it every time. To start with, the trade policy concerns and the geopolitical tensions continue to weigh on a global economic activity, especially in manufacturing and the trade in the second half of calendar year 2019. Intense social unrest in some countries pose a new challenges, as did weather-related disaster from hurricanes in the Caribbean to the bushfires in Australia. Not to mention the simultaneous floods and the drought in various parts of the African expanse.The year 2020 begin with escalated global pressures, given the unrest between U.S., Iran and the rapid spread of coronavirus threatening to impact industries across nations which are dependent on the imports from China. As a case in point, the total value of India-China trade is alone estimated at substantial of [indiscernible] [ 87 billion ] with electronic items close to 24% thereof. Expected sluggishness in the China offtake of commodities have also begun to reflect in a lower price of oil, copper, et cetera.The impact of depressed oil prices may in due course have a bearing on our Middle East economies.Not surprisingly, the latest IMF report suggests that the global economy is in the slowdown mode. The growth for FY '19 downgraded to 2.9% and debt of FY '20 to 3.3%, the slowest pace since the global financial crisis. The downward revision in the growth also reflects the slower economic activity in a handful of emerging market economies, including India.Back home, a sector-specific weakness in automobile, consumer durable, real estate and banking and political tensions on this implementation of CAA, et cetera, continue to overshadow growth. Leading indicators point towards a waning customer demand [ accompanied ] by a slower trade offtake, lower capacity utilization and drop in private capital formation and household savings rate.At the same time, the rise in unemployment levels, a general reduction in corporate earnings and declining [indiscernible] of the tax collections and GDP growth are worrisome. Set against this complex backdrop of slowing economy, Budget 2020 has unfortunately been perceived as rather incremental, falling short of the transformational road map as expected.Set against this backdrop, the consolidated total income for the quarter ended 31st December 2019 was at INR 1,547 crores, at par with the corresponding quarter last year, although a segment composition was different with much stronger play by the AC vertical. Profit before tax was higher by 10% at INR 119 crores as compared to INR 109 crores in the previous year. Profit after tax was even higher by 13% at INR 88 crores, reflecting the net impact of reduction in corporate tax rate. Earnings per share at a face value per share of INR 1, not annualized as of 31st December 2019, was also higher at INR 2.63 as compared to INR 2.45 last year.The balance sheet as of 31 December remains healthy with strong results, adequate cash and minimal borrowings. We present [ a snapshot, ] a snippet of the division financials for the quarter 3 FY '20 over FY '19. Segment A, Unitary Cooling, has recorded a turnover of INR 601 crores over INR 526 crores last year. Segment B, Engineering Projects, INR 808 crores against INR 875 crores last year. And Segment C, Engineering Products, INR 83 crores similar over a period of last year.On the EBIT side, Unitary Cooling has recorded a EBIT of INR 61 crores over INR 45 crores last year. Engineering projects has EBIT of INR 37 crores over INR 69 crores. And Engineering Products, INR 23 crores over INR 22 crores last year. In terms of the margin, Unitary Cooling product -- EBIT margin has improved from 9% to 10% of current year. Engineering Projects has recorded a margin of 5% over 8% last year. And Segment C, Engineering Products, has a constant margin of 28% over -- 28% in the current quarter. Capital employed, Segment A has a capital employed of INR 307 crores over INR 775 crores, substantial improvement in the working capital. Segment B, Engineering Projects, has a working capital -- capital employed of INR 1,213 crores and Segment C has a working capital of INR 85 crores.Now I'll go to the specifics of the segments to give you some inside highlights what happened in quarter 3. Given our seasonality factors, the UCP business was traditionally slow in quarter 3. That said, Voltas has successfully improved its performance across all product vectors. The turnover has grown by 14%, while bottom line has accelerated even further by 36%. This is a consistent result of driving better product mix, together with our penchant for cost efficiencies. Improved margins have not come at the cost of market shares. We are happy to report a YTD market share of 24.3% at multi-brand outlets. This share reflects the anticipated acceleration of the inverter air conditioner, which now accounts for 43% of our AC -- total AC sales. Intensity of the competition in the overall market has multiplied with more than 20 producers chasing the under-penetrated market with enticing consumer offers, including heavily discounted prices.Our strategy remains steadfast, offering best-in-class value for money, convenience products with improving reach across the length and breadth of India. Earlier this year, the air cooler was carved out as separate product vertical. The increased focus is now yielding dividends in terms of the higher growth. We've grown almost 135% over previous year, a better profitability and sustained market share. We have secured a market share of 11.2% as of exit November. The commercial refrigerator vertical segment has also grown on a widening basis and shows promising to the future.The rapid spread of the coronavirus returns to disrupt a component supply chain from China, and the situation is being closely monitored on a continuous basis. While we are adequately covered for the quarter 4, certain alternate sources of supply can and will be pressed into action. Meanwhile, the budget has increased custom duty on few components, the impact of which is expected to be appropriately passed on to the ultimate consumers.I'll now move to the Segment B, which is Electro-Mechanical Projects and Services. Segment revenue for the quarter was INR 808 crores as compared to INR 875 crores in the corresponding quarter last year. Segment result was also lower at INR 37 crores, reflecting our broader concerns in the project segment, mainly a slow pace of project execution coupled with delayed collection of receivables as an offshoot of well-known environmental strengths.Carry forward order book value of those segments stood higher at INR 7,024 crores, including major orders booked in the water as compared to INR 4,994 crores last year.International operations. The total order book for the international operations business as on December 31, 2019 was around INR 2,715 crores. Given the risk related diligence exercise, the fresh orders were limited to around INR 170 crores during the quarter. As reported earlier, in respect of the projects where Carillion is the main contractor, we continue to face the challenges of delayed receivables. In general, there is a tendency to delay a certification across the Middle East and the volatility of the oil prices have further streamed liquidity. Meanwhile, the leadership transition to Sultan Haitham bin Tariq Al Said in Oman has been smooth, with no evident disruption of the earlier investment policies.I'll turn to our Domestic Projects. The Domestic Projects have successfully enhanced its order book to around INR 4,300 crores, having booked INR 1,077 crores of the orders during the quarter. This includes prestigious water projects under RWSS in Orissa apart from the sections of the Mumbai Metro. Excess capacity, liquidity concerns and a muted view of the future growth seem to be a major impediment in jump-starting private sector funds -- private sector spends. In fact, year-on-year, the gross fixed capital formation as a percentage to GDP, is reported to have declined to 28%, although the India rank in ease of doing business has improved to number 63 on a global scale.While the company has continued to focus on government, government-funded projects in the interim, change of administration post-election in certain states have contributed to delays.Turn to our Segment C, which is Engineering Products & Services. Segment revenue and results for the quarter were at INR 83 crores and INR 23 crores, largely similar to the previous year's performance. This is despite the significant headwinds faced by the textile industry, partly compensated by our focus on after sales business in both spinning and post spinning segments.In Mining & Construction Equipment, we have experienced -- we have expanded our Mozambique operations to the addition of further maintenance contracts. Although some policy pronouncements have been made, we are yet to evidence a proper comeback of the mining-led opportunities in [ India ]. On Voltas Beko, as part of the Make-in-India initiative, the Voltas Beko commenced a production at a stage (sic) [state] of the art manufacturing facility spread over 60 acres at Sanand near Ahmedabad in India. The factory will roll out home appliances like refrigerators and washing machines and will scale up the annual production capacity of about 2.5 million units in due course from a current capacity of 1 million units. The expansion of trade reach, leveraging the distribution strength of Voltas, bodes well for the future. We have in this short period of time, progressed well, garnering market share gains in both washing machines and refrigerator categories. The ability of the entire range of products, including direct cool refrigerators, will help optimize throughput from the 4,000-plus touch points currently available apart from securing accelerated growth.To sum up, truth be told, most industries face substantial challenges in the near-term future, exposed as they are to the environmental headwinds and the economic implications of a possible spread of disease. Within this context, Voltas will diligently strive to continue our growth momentum in a profitable and sustainable manner. We remain cautiously optimistic on this. This is over from my side, Naveen, on a brief of the quarter 3 insights. We can -- over to the question-and-answer from the -- from over there.
[Operator Instructions] Our first question is from the line of Renjith Sivaram from ICICI Securities.
Congrats on good set of numbers, given the environment. So for this, if you can...
Can you speak a little louder?
Yes. Sir, can you help us, how much is the room AC growth in that 14% of UCP growth?
The total air conditioners itself, we have sold something like 268,000 air conditioners in the first 9 months of this year. Yes. And that represents a 35% growth.
Okay. And for this quarter?
I don't want to get into such minor numbers, really. What I can -- what I've shared with you is the market share. I can share with you the overall [ -- this thing ]. And if you subscribe to GFK Nielsen, you can see what the third party's numbers are. Yes.
So how do you see the full year in terms of growth for the industry?
It is Dependent on how strong the upcoming season is going to be because you do know that quarter 4 is generally a very strong quarter and the selling in for the season happens in quarter 4.
So we are just 1.5 months away. So what is the feeling that you're getting in terms of...
We do not give forward guidance, yes. You have our past to refer to in terms of how well we have been doing, and I suggest that you use that as a point of reference.
And any pricing action that we are seeing for us or in the market? We hear a lot of MNC competitors have reduced their prices, trying to increase the market share. So what will be our reaction to such kind of...
As you've seen, we have maintained our market share. And very importantly, we have also maintained our margins. That should indicate to you at a broad level that we have not reduced price, but we have sustained our brand equity and grown thereon. As a market leader, we will be very sensitive and careful about reducing price when -- especially in this environment where we have had several things such as, for example, the budget impact of AC compressors going up from 10% to 12.5%, motors moving from 7.5% to 10%, et cetera. So it will be our intention to make sure that the business goes forward in not just a profitable, but in a sustainable way. And we will not do that by unduly cutting prices, despite whatever the competition may provide us.
[Operator Instructions] Our next question is from the line of Bhoomika Nair from IDFC Securities.
Sir, just wanted to get some more color related to this whole coronavirus issue, in terms of what is our percentage of imports in the UCPL segment? What kind of [indiscernible] do we have on books? Is it only limited to compressors? Or is it also -- would the impact be felt on certain IDUs as well?
As far as the coronavirus is concerned, I think I have already commented in the write-up that we are fairly well covered as far as the quarter 4 is concerned. So I don't think we have -- we are facing any kind of a short-term issue, okay? The second part of it is that almost everyone in the market goes back to China for procurement, and this includes also a substantial portion of what LG does or a [ Daikin ] does. So I think we also have an option to go to Korea or to Thailand to [ sold ] some of our products, which is something that we can do. At the moment, we are watching the situation carefully, and we don't really have a very large concern right now. We are anyway carefully looking at various alternatives, and we will do what is required to keep our business afloat. Please be rest assured.
[ Okay ], sir. The other question is related to the EMP segment. I understand there is a lot of volatility, which the segment typically goes through the quarter. Anything specific which has happened in this quarter, which has pulled down the margins quite sharply versus our average run rate of 7% plus?
Actually, what happens in the EMP, as I've always repeatedly said, time and again, is that you cannot really make out, in terms of a single quarter, what happens, et cetera. You have to look at it as an overall percentage basis. Yes. And when we did not have a very strong order book going into this year and what then happens is that when we do get into the initial kind of construction activity or the project activity up to 20%, there is no specific margin that we take. It's only after 20% that you will start [ taking ] in. The second part of it is that, depending upon the money that we receive or don't receive, we have a policy of taking provisions. Yes. And that is a percentage of provisions, for example, outstanding over 1 year, et cetera. So on that basis, the provision might be high, but that does not necessarily mean that the money cannot come back at some point of time. Yes. So it is accumulation of all of these things, and you have to look at it from a point of view of other businesses also in -- within the industry, where there is a great amount of stress in terms of liquidity, in terms of cash achieved. As of the moment, we are still running at around 7%, or 6.6% to be more exact, in terms of the 9 months YTD.
Understood, sir. So we'll be looking in the 7% number as a more sustainable?
The quarter 4, I cannot give you a commitment on that, depending upon what it is, but it is not as if there is some big elephant in the room, okay? The normal run in the middle of the business will have to take place, and if the environment improves and if people are able to pay and the projects move at a good pace, we will certainly do much better.
Our next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
A couple of questions. One, you mentioned your growth -- market share in coolers have risen considerably. If you can help us, the measures undertaken? And what is it that we should be looking at as a [ sustainable ] market share from here on?
If this is for UPBG, we -- what -- our ambition is, of course, to be able to grow the market share as much as possible. Yes. Having said that, when we say that in this country, 1 out of every 4 ACs that are sold bears the Voltas name, it is a little high market share, as you can understand. And to be able to grow that is quite a struggle. And the second aspect is really that we have a great amount of competition. And why that competition is, as you well know, that the AC penetration in India, for example, is only 5% as against what could be compared in China at around 80-plus percentage. That means that there is up to -- there's lots of market growth that is possible. The second issue is that, over the past 7 years, we have been doing -- not only growing our market share, we have also been able to maintain our margins. Therefore, it does seem like an attractive business to anyone looking at it from outside. Having said that, we have faced competition before, and we will generously protect our market share.
Sorry, sir. My question was on the cooler segment, sir.
Yes. Coolers. Okay, I did not get that. On the coolers, the market share is roughly -- we are #3 in the market share. We are about 11.9% for the month of [ November exit ].
So the question was, what are the measures undertaken to where we have been able to increase our market share and...
[indiscernible] judicious pricing, great quality, number of SKUs.
Understand. The second question was on the commercial side. You mentioned that the commercial side also has grown pretty healthy. If you can give some color on the growth during the third quarter or 9 months? And what is surprising to us is the underlying environment is challenging, especially the real estate segment. So how have we been able to outgrow the market?
No. But we are not saying that we have actually outgrown the market. It has been growing. Yes. And it is growing reasonably well in line because commercial is not just what is -- the wide range of commercial includes things like Visicooler, things like water coolers, B2B kind of businesses, all of those kind of things which have come down, but it's still growing because there is an expansion that is happening. Yes. Also, when we talk in terms of CR products, there are products that are being put into the retail shops for various kinds of cooling necessities for deep freezers, et cetera, et cetera.
We'll take our next question from the line of Rahul Gajare from Haitong Securities.
Sir, I've got 2 questions. The first one is on the AC side. Now on the AC, now you did indicate that you have got inventory for -- to tide over Q4. But assuming that factories in China, while they are certainly not starting in February, but if they were to start by March, typically, how much of a lead time for you from ordering -- placing an order to having the air conditioner compressor delivered to you? Typically, what is the lead time for you?
Literally, what happens, Rahul, is we -- as per the information, what we received, the factory is about to start [ any which way ] by the third week of February. Having said that, the lead time -- they are almost ready with the output. Since -- because of this outbreak, they are unable to align with the shippers over there. So if I -- to give you the lead time to put right now the situation from where to come to India, it will be somewhere around close to 15 to 20 days, [ not ] more than that. The transit time which you require and the shippers would have to arrange for it, nothing else.
Okay. So if it is a 15- to 20-day lead time, I think things should not be a problem, given the fact that we are prepared for the fourth quarter?
But only the 2 increments are there. One is the factory to open so that workers can go and resume the factory. And thereafter, the cargo should be made available, for which we all are being ganged up to do it.
Rahul, honestly speaking, no one can really read how much the -- this is going to disrupt life. Yes. So it is something that we all have to watch and make alternate plans. So if you ask us, do we have some alternate plans or are we thinking seriously about what might happen 3, 4 months down the line, in case the China is not supplying? The answer is yes. Our thoughts are there because, as a market leader, we would like to protect our volumes first and foremost. So we will do that. But to -- specifically in terms of what will happen, we really don't know because this is not a normal business situation. It's like a war-like situation, right? So we have to watch and wait and see how it really operates.
Okay. Fair. And my second question is on the project business. Now while the macro scenario is fairly weak, but we've done pretty well in terms of bringing up order backlog to almost INR 7,000-odd crores. I think in the last 12 years, this is the highest order backlog that we have seen in this business. Now this is basically getting supported by the domestic front. Do you see that this -- the continuous improvement in this order backlog is possible in terms of the pipeline that you would have bid for right now?
Do not want to take the order book up beyond a certain point, yes. We -- what we always try to see is that we should be able to get a 10%, 15% growth in business by virtue of the order book that we have. But what also happens is that if the economy is not supporting, then growing the order book and not being able to collect cash becomes a big problem. Because in the project business, as I've repeatedly said, the proof of the pudding is in terms of hearing the loud clink of the coil and the can. So till we get cash, projects don't become profitable. So I don't want to be taking projects over and over again, [indiscernible] be a certain amount of -- once we come to what we see as our capability in terms of doing it and we are able to get into that, we will kind of moderate it to only go for the high-quality orders that we are able to see. For example, like in international this time, we have only picked up about INR 150 crores, INR 170 crores of order book. And that is because -- not because there are no orders available, but because we go through a very strict diligence pattern of making sure that we only take things where the risk is suitably mitigated. So that's the way that we will conduct our business. So I'm not looking at an explosive growth of order book without keeping a sharp eye on the bottom line.
Our next question is from the line of Atul Tiwari from Citigroup.
Sir, again, a bit on the AC supplies from China. So can you throw some light, where are your suppliers located? They are near the coast? Or they are in the inland China? Any kind of color? This was [indiscernible] how difficult it is?
We buy air conditioners from the major suppliers, and the major suppliers are well known. Yes. The [indiscernible] of the world and all of those people, yes. Now we -- I think if the country itself is [ a long lockdown ], it becomes a very different situation. It doesn't matter whether we are near the coast or whatever it is because it's not as if like a shipload of containers containing ACs can get out of China if there's a lockdown. So again, the situation has to be read and has to be carefully assessed, but this is not just a problem for our electronics or the ACs. The thing, it's a problem -- it will even affect your toy manufacturers, come to [indiscernible] talk about that. So we just -- we need to watch and, at the same time, be able to make alternate plans and try and see how to protect our markets. And that's what we're doing.
Our next question is from the line of Sandeep Tulsiyan from JM Financial.
Sir, the first question is pertaining to the room AC segment. Number one is, given the margin performance is better than the 9-month period, would you want to revise your annual guidance of 11% upwards here? And also a related question to that is, there was a 50,000 unit order from EESL that we had. Has there -- that been completely -- has it been completed? And is that what has led to this higher volume growth that we see?
Firstly, in terms of the margin guidance, on a very general basis, we have said that we will try, despite all the competition, to keep it at a range of around 11% plus for the year. That's the kind of guidance that I can give. Generally, in a quarter when the volumes of the air conditioners or the products sold are higher, it helps to absorb the fixed costs better, and therefore, the margins pick up. And we are very happy that, in Q3 also, we have been able to get a decent margin of 10% plus, even though the volumes have not been particularly great in this quarter. So as we go to Q4, when we sell more, it will help to pick up the margins. I don't want to be speculating on the margins, but I would say that it's our ambition and intention to keep it on a 11-plus basis.Moving to your next question in terms of EESL. Yes, we did have an order of about 50,000 units from EESL. The supplies are continuing. It is not as such that it is a one big block that's come in, et cetera, because they also have to get their act together. And it's a very slow ramp up that is happening there. Yes. So if in fact -- I think it's not a very large, significant percentage of the 50,000 that's actually gone into the market. They have to bring all of that together.
Understood. Sir, second question is pertaining to the market share that we have in South India you were highlighting a couple of con call back that there was some specific measure that you've undertaken to increase your share over there. If you could just update us on these measures, where they are? In which stages? And has there been any improvement in market share in the last 2, 3 quarters?
We have improved our market share. In fact, I'm happy to say that we have moved our market shares up by about 120 basis points in the south specifically. Yes. And the reason why I might have commented on the south is because we were looking at putting up a factory in Southern India so that we can service our quality conscious and high band, more premium looking customers in the southern part of the country better. So we are focusing on south. The largest market is, of course, the north, which occupies almost about 40% of our sales; followed by the west and the south in equal measure of about 22%, 23%; and then the east is a smaller market. And in all these markets, we are getting very good traction. And we -- as you know, we focus on distribution and making sure that our products are available all across India where -- without any problem.
We'll take our next question from the line of Aditya Bhartia from Investec.
Sir, you spoke about competitive intensity in this space. Just wanted to understand if we have seen this kind of competition in the last 5 or 6 years? Or do you think this is much more intense than what we have seen historically? And a related question is that, in the last few conference calls, you have spoken about protecting market shares at all costs, while this time around, you appear to be more focused on margins. So has anything changed in that equation?
I wonder how you got that impression because I've been saying that we are trying to balance and that will always be our approach. Sometimes what you need to do is that -- what I might have said at some point of time is that we have sufficient margins to be able to put some of that values to be able to protect our market share, if the need does arise. But so far, we seem to be managing all right. As far as the intensity of competition is concerned, yes, we are facing very fierce competition. People who had exited the AC market at one point of time, like Samsung, are reentering. People who had exited the market in terms of windows are now realizing that what we felt some 6 years back, saying that this would be a continued phenomenon for quite some time, they have also realized the truth and they are coming back into windows. So yes, competition is intense and will be intense. But the story is also that the penetration is very, very low. It's just 5%, as I keep repeating. There is ample space for everyone, and we are very happy if more and more consumers start to buy ACs and we know how to sell our ACs once the customer walks in through the door.
On the next question, I just wanted to know about the execution rate in the EMP segment. You indicated that there could have been some quarter-specific factors, such as new state governments getting formed. In that context, is it fair to assume that execution pace should pick up in the next few quarters? Especially now that we have...
It should pick up, and we certainly hope that. And also, secondly, we also hope that they will start releasing money also because normally, when a government changes, there is a great amount of the slowness as far as the old projects are concerned, and that is something that we have to live with in this country. But Voltas, being what it is and doing the work that it is currently doing, hopes to be able to overcome these kind of issues. We see them more as temporary, but not necessarily long term.
We'll take our next question from the line of Pulkit Patni from Goldman Sachs.
Sir, my first question is on the projects business. This is one of the highest order books that we've had in the past. The peak revenue we've done in this segment is about INR 3,700 crores, which we did last year. I'm just trying to understand, from a INR 7,000 crore order book, do we have institutional capability to grow this revenue number significantly? Because you did mention in one of your comments that we will not want to grow it beyond a point. So color on that would be helpful.
As in -- you see -- you're right. There's a peak kind of an order book, and we have got INR 3,700 crores was atop this thing. We don't have a problem in peaking it up by 30%, 40%. It shouldn't be a problem. But what happens in India as compared to, let us say, the Middle East, is in India, the project sizes are small. And so you have -- if you have INR 100 crore, INR 100 crore, INR 100 crore all spread all over the place, it becomes a little difficult to actually control and manage it efficiently. So one of our expectations is that we want to go for slightly higher, bigger kind of projects in the Indian environment so that we can concentrate and manages more -- the resources more successfully. Yes. At this point of time, what we would be looking for is something like 2- to 2.5-year kind of a cover is what we would be looking at, at a comfortable turnover in and around the sites that you have talked about.
Understood, sir. That is useful. Sir, my second question is on this Carillion order, what exactly is the status? And when we look at the margins that you're reporting right now in this segment, I'm assuming that does include cost and revenue being equal in that particular order. Some information...
In a particular order, no. The Carillion order is something that has been done. Completed. Yes. We also have the certification with us. But because of the bankruptcy of Carillion and the local partner in the country has taken it, they confirmed to us that they have every intention to pay the money, but they also need revenues coming in and -- which is coming in from their own service income, other things. And so it probably takes a little more time before they are actually able to pay us. In the meantime, what happens is that we have certain internal guidelines in terms of all providing for amounts which are outstanding beyond the period, and that is something that we will do as a matter of process. So Carillion is not a case of 20% -- no, it's not a new order at all. Carillion went belly up, I think, about 2 years, 2.5 years back.
Okay. So there's no recognition of revenue or cost on that front? It's only the receivable part that you are...
[ We have that ] for receivables.
We will take our next question from the line of Shrinidhi Karlekar from HSBC.
Sir, during the press release on this Voltas Beko plant commissioning, the number that was quoted was that the company is on track to sell 0.5 million units this financial year. So I just wanted to know how this number compares with your internal targets? And this number looks quite impressive. So just color on how Voltas Beko is doing? That's my first question.
Voltas Beko itself -- as the products go, we have sold a fair number, almost about [ 2 lakh and 20,000 ] plus units we have sold in the first 9 months, okay? And now that is a composition of refrigerators, washing machines, microwaves, dishwashers, all of these things put together. What you're probably referring to is the fact that we did not have one important part of that -- the product category, which is the direct cool refrigerators, which incidentally sells about 80% of the volume of the total refrigerator market that you find in India. So that was the context, and for putting up the factory because we could not be importing air from various places, overseas and selling direct cool at a relatively economical price. So we have set up this factory. It is -- it has a capacity of about 1 million units, and we will be able to scale it up in due course to about 2.5 million. And we're very happy with the factory. It's really stayed apart. It is -- we are very thankful to our Turkish partners for the kind of technology that we have -- that they've brought into place. It is quite automated, and it will be a successful manufacturing unit.
Fair enough, sir. Just wondering, sir, is that 0.5 million number -- I just want to -- is that largely a correct number? Because you said to [ 2 lakh 21,000 ] 9 months...
What is this 0.5 million that you're referring to? Because it depends on the context. So I'm not able to link that up rightly, yes? So in terms of the overall numbers, I can tell you that we will be on track. There will not be any problem. We were a little delayed with the factory in terms because we were very particular about making it world class, which is what we have done. And now it will be fully available, and we will ramp it up as much as possible, very quickly.
Fair enough, sir. And the second one, if I may, sir. So generally, you give how industry has done in terms of secondary volume [ than ] how Voltas have done. Would it be possible to give those numbers?
I can tell you that the industry has performed according to what we know from a third party source. Yes. Industry has grown by about 29-odd percent and Voltas is, of course, grown by about 35%.
This is a 9-month number, we are talking, right?
There is no much sense in talking about the Q3 numbers because they are very low volume, yes.
Our next question is from the line of Girish Achhipalia from Morgan Stanley.
Sir, just a couple of questions. One on the AC business, you said that we are looking at alternate channels for procuring raw material supplies. Just want to understand how costly versus China are they at current point in time? And secondly, a factual question on Voltbek. Can you help us with the 9-month revenue and PAT contribution?
I will not be able to -- the second question, I don't want to be getting into specific revenues and PAT. As you know, there is a single line consolidation that takes place. So if you look at our accounts also, where you see the profit, [ it's so ] exciting, it's [ line number 4 or what ]. You could see the profit before share and/or joint venture listing. You would see that the total -- the share of profit, it has come down. The loss incurred is INR 19 crores as compared to INR 31 crores in the previous comparable quarter. So that's the direction we are going in, and Voltas Beko is a substantial part of that. Yes. That's one. The second part of it is that in terms of alternate channels, while we are exploring, there is a process of negotiation that goes on. And when we call in, in terms of volumes, in terms of quality, et cetera, because Chinese quality, we never had any problem with it. We have been buying it for quite some time, and we know the manufacturers thoroughly. So when you go to, say, Korean manufacturers or Thailand manufacturers, first and foremost, we will not sacrifice quality of our machines. So -- and if there is -- there will be some price negotiation, and it is too early to really call that. But we have -- the good news is that we have sufficient margins to be able to take care of certain ups and downs in the business.
Our next question is from the line of Nirav Vasa from Anand Rathi.
My first question pertains to the CapEx number and the CapEx plant -- the Tirupati plant that we were in process. So would it be possible for you to share the CapEx number that can be for FY '20? And the status of the Tirupati plant?
As far as CapEx is concerned, for the Tirupati plant, we have gone a little slow on it, mainly because of, again, there was -- been some changes in the environment, as you're aware of and certain things that had changed in the overall composition. So we are evaluating it. We have not moved forcibly on that. In the meantime, we are picking up the kind of volume that we need to manufacture from our existing plant. And as and when we take that decision, we will go forward swiftly.
And so the CapEx that we -- CapEx plan that we have for '20 and what amount has been incurred till date?
Let me just say at this particular point of time that if we set up our factory in the south, which we certainly intend to do, the CapEx would be of the order of about INR 200 crores.
Sir, my second question pertains to our air-conditioning business. Sir, in that business, we were in process of launching certain niche products which are technologically very superior. So any update on that?
What do you mean by niche product? The only big-ticket niche product that has been in the market for some time is inverter. And in that inverter, as I have mentioned in the circulation document that has been circulated, we have made a fair amount of success in this, and it's almost about 43% of the current AC sales. So that's one thing. Apart from that, there are always matters that -- things that come up in terms of -- with air filter, et cetera, et cetera, all of those kinds of things. I would not necessarily call it niche products. We are -- as a company, we are concentrated in the mid-market segment. And our strategy and our vision has always been to offer best-in-class value for money, convenience products with improving reach across the length and breadth of the country. So that's, in a substance, what we do. So we do look at niche products, but I'm not particularly clear about what you're referring to in specific, if it's not the inverters. Air purifiers is something that we've already gotten, and we are dealing with that.
Sir, basically I was referring to IoT-based air conditioners and 7-star air...
That is part of this thing. It is not -- we have an Alexa-empowered air conditioner. We have -- we are looking at putting in chips to read the performance of various equipment. There is research going on, on a global basis in terms of whether something can be done on a solar basis, et cetera, but nothing has been -- of the later variety, nothing has been commercialized so far.
Sir, my last question pertains to the order inflow that we have received. Specifically, I'm referring to the order inflow that we have received pertaining to water-based projects. Would it be possible for you to share some color on it with regards to the kind of margin profile and working capital requirement is there in those projects?
I won't be able to get into those details because now you're asking for a very -- very internal matters, which normally no business would say. All that I can tell you is that if we have bid -- when we will bid for those projects, depending upon the risk profile, we make sure that there is sufficient margin and sufficient contingency to make sure that, on execution, we are able to deliver a good -- at least an 8% kind of a margin. Now between the time that we take the project and the time that we execute and the time that we get the money, there would be delays, there would be various things. There might also be opportunities to improve the billing. So it is a lot of ups and downs that finally get benefit in the project. But as of now, we feel reasonably confident that we will make good margins on that without too much of capital intensity tied in.
Our next question is from the line of Kunal Sheth from B&K Securities.
Sir, most of my questions have been answered. Again, a small question on the water project. Sir, what is the execution cycle for these projects? And what exactly is the [indiscernible] that we have received?
The -- it has -- the RWSS is rural water sanitation and sewage projects. So each project has things to do with the -- making the water potable, making it to be -- the sewage suitable to be discharged into water. It's a variety of various things that go into it. Yes. And it's a fairly large project and the -- and it is funded by government stroke, external bodies as well.
And sir, how big is this opportunity in terms of size for us?
See, opportunity, I mean, there are a number of things, starting right from the Namami Gange kind of project. There has been lots of -- water is becoming very critical. And as I think I mentioned to some other people some time back, maybe in a conference call, is that India is blessed with a huge coast line and there is a lot of opportunity for gradually getting into desalination, water supply, all of that. Then the government is also thinking about -- just as we have -- we are doing work in rural electrification where at least a single bulb should be there in every house and every village and every part of the country. They are also thinking in terms of the next phase, where they want to be able to put water lines that reach every house. So I think there's a lot of opportunity, but equally it's not an easy business to do because you sometimes have right of way, sometimes you have various other influences and political issues which need to be managed. So we need to be careful. We need to go to areas where we are fairly sure that the administration will support us very strongly in making sure that we are able to do our job without other issues.
Our next question is from the line of [ Pranav Mashruwala ] from [ Finwest Advisors ].
I just wanted to know that -- how is the situation on this textile machinery side, where we have got the agency from LMW?
In terms of textile machinery, it is largely a cyclical business. And I think it is well known that spinning has been in some amount of difficulty and the problem started right from the demonetization and then the GST and the lack of adequate finance that -- availability to many of the textile manufacturers. And at this point of time, many of the textile units are not fully utilized, except for those big-ticket ones. So by and large, what happens is that the sentiment is not looking very positive. Having said that, I'd like to quickly add that the cycle, in our estimation, seems to be slowly beginning to turn with a new crop coming in and the differential between cotton and yarn growing to -- into a positive level where it becomes -- makes more sense for spinners to get into the act. And at the same time, there has been increased competition. People who are manufacturing machinery abroad and selling it and -- people like Rieter and Trutzschler, et cetera have set up [ operations ] in India, so that's the competition. But our partner is strong. I think very high quality. Very, very professionally oriented. And I think that this is a temporary phase. And as we go forward, we will be able to see that once the cycle lifts, we will be back on track. Incidentally, our market share of LMW is close to about 53%, 54%, which is quite good. As we said, there is some drop has happened after Rieter and Trutzschler [indiscernible] into the market.
Right. Right. Now, sir, if the Indian demand for yarn does not increase, do you think yarn could be exported to countries like China and others where probably some spindleage addition could take place?
There was a talk for that. But what really happens is the -- it is not a long-term kind of a situation that one is talking about. It's more a tactical advantage at that particular point in time, what is the kind of yarn that they are holding at what price? And what is it that we are able to send from here at -- so it's a little complex, I think. One -- the unfortunate thing is that in the budget also, we are not seeing a very strong support for the textile business as a whole, albeit it's one of the biggest employers in the Indian environment.
That's right. That's right. Now, sir, as far as Beko is concerned, do we see it turning the cycle?
Sorry? Beko?
Yes.
I didn't get that question. As far as Beko is concerned, do you think...?
Yes. Do you think that the cycle will turn up for the company? Because I think it has been incurring losses.
No. [ We said that ] it's a very budgeted loss. You see, when we start a manufacturing unit and when we get in, it takes quite some time before you can pick up the critical mass. We are on the right direction, and I'm fairly confident that, come year '24, '25, which is what is asked per our budget, Voltas Beko will break even and will also be able to get at a 10% market share, which we have been talking about.
Okay. So have we set up the 1 million unit facility in Sanand, which you were planning?
No, no. We have just started [ for it ]. In fact, the factory was inaugurated on January 30. Just a few days ago, 2 weeks back.
Okay. That was only for the air conditioners, right?
No, no. Beko is a joint venture with our partner Arcelik in Turkey, which manufactures refrigerators, washing machines and sells dishwashers, the other kitchen appliances like microwaves, et cetera. So that is something outside the AC business. AC business continues to remain with the Voltas -- mother company, Voltas.
Okay. So in Beko, you don't have any air conditioners?
No. We don't have any.
Okay. So in the Sanand manufacturing facility which we have set up, which are the -- I mean, which are the equipment we will be starting manufacturing?
In the Beko factory, we will be manufacturing refrigerators and washing machines, initially to start with. We have sufficient amount of land, so we can scale up as and when the market responds favorably.
Our next question is from the line of Renjith Sivaram from ICICI Securities.
All my answers have been questioned.
Our next question is from the line of from Hitesh Taunk from ICICIdirect.
Sir, you mentioned around 43% of total AC, or is the inverter AC during the quarter -- during the YTD. So what was the same proportion last year, sir?
When you really look at it, it was -- it hadn't actually taken off so very substantially. So if you look at a 9-month period, for us, we sold something like about 35%, 36% of inverter ACs in the previous year as compared to 43%, 44% at currently.
Okay. Great. And sir, my last question is that since most of the consumer durable companies have sighted a reason that there was a slowdown in the demand front, I just wanted to know whether in this 1.5 month, have you seen a secondary sales growth in the AC segment?
Secondary sales is just -- we are just getting into the season now. People are -- the primary thing is what is happening in substantial portion now because people -- we are looking at the summer season coming up. So what happens is that come January, February, we've got -- just applied to the trade and the trade starts and the consumers start picking it up as and when the weather takes -- picked up from March, April and May and all that are good sights.
Okay. My last question pertains to the tax rate, sir. If you can guide some tax rate for the '20 and '21?
Tax rates for imports? Tax rates for the company? Or what?
Tax rate -- corporate tax rate for company level, sir?
It will be in and around about 26.7% as of this quarter.
Our next question is from the line of Shreyas Bhukhanwala from Canara Robeco.
Sir, 2 questions. One is, how much amount is receivable from Carillion order?
I'm hesitant to go into these kind of fine details, boss. These are [ -- this thing ], let me just tell you that there are -- it also means that there is another party on the other side with data. So I don't want to be really discussing that. But when I -- the fact that I'm mentioning it is because of the fact that it is a well-known problem, and you would probably know that we had qualified our -- or put a note to the accounts about 2.5 years back, and then they started paying the money, and then again there was a certain amount of this thing. We think that we'll be able to get the money, but it will probably take a little time. And in the meantime, according to the need of the accounting policies that we have, we might need to get -- keep providing and, as and when it comes in, we will write it back.
Sure, sure. Secondly, on the project business, so our capital employed, if I see, has been on the higher side over the last 2 quarters. So I do understand that is because of the lower slowdown in receivables as well. So are the things changing there? And secondly, if that gets prolonged, like the receivables -- we don't get it on time. So can that impact our execution for next year?
In terms of the money flow, there are a couple of things. One is that most of the government orders in -- they are willing to give you a mobilization advance, okay? But that mobilization advance comes with an interest tag, and that interest tag is costly to us. And when we have money in our own coffers, we don't necessarily want to take up the mobilization advance and provide a guarantee against that. So if I were to conduct this business in a different way, then I can actually -- based on the order book that I have, I can actually set off quite a bit in terms of advance receipt. That's not something that I'm doing because, at the end of the day, we are in the business of making sure that the shareholder returns are protected. And it doesn't always -- it's not always wise to be taking that once and paying interest for that when you have money that you can invest by yourself. So that's also part of the reason why you see the capital intensity going up a little bit.
Sure, sure. But are we seeing some improvement in terms of collection?
Difficult to call it at this point of time. I think the hope is certainly there that we should see an improvement. But as I said, there are sometimes the governments change, sometimes then the whole thing goes through a very detailed process again. It becomes a bit strenuous at that point of time. But hopefully, I think both private as well as government should find better liquidity in the days ahead.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the floor back to Mr. Naveen Trivedi for closing comments. Over to you, sir.
Yes. Thank you, everyone, for participating in this call. We would like to thank the management for -- of Voltas for giving us this opportunity. Sir, do you have any closing comments?
Yes. I just want to thank -- I understand that there are 100-plus people who have been on the lines, and I thank you for the questions. As usual, the questions are brilliant and it comes from a knowledge as a company. Thank you for your support. We hope to be able to do as well as possible. And I also realize and recognize that the -- all the questions might not have been fully answered. So if there is something that is left out on your mind, please feel free to contact my colleagues, Manish Desai or Vaibhav Vora, and they will get back to you with the data. Thank you once again so very much.