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 Voltas Limited Q3 FY '22 Earnings Conference Call hosted by HDFC Securities. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Naveen Trivedi from HDFC Securities. Thank you, and over to you, sir.
Yes. Thank you, Sandy. Good afternoon, everyone. On behalf of HDFC Securities, I would like to welcome the management of Voltas Limited to discuss the post 3Q F'22 results. We have with us today the senior management of Voltas represented by Mr. Jitender Verma, EVP and CFO; Mr. Manish Desai, Head Corporate Finance; and Mr. Vaibhav Vora, Manager, Corporate Finance. I would now hand over the call to Mr. Jitender, sir. Over to you, sir.
Thank you, Naveen, and a very good afternoon to all the participants. We started the quarter 3 with the optimism of festival season. However, the subsequent news of the highly contagious Omicron variant spread jitters across the world. On one hand, while post-crisis recovery seems to be robust, but on the other hand, it continued to remain uneven due to the renewed concerns about the evolving virus dynamics. Rising energy prices and supply chain disruptions resulted in higher inflation than anticipated in both the advanced and the developing economies. Taking cognizance of the same, IMF now anticipates global growth to be lower from 5.9% in current year 2021 to 4.4% in current year 2022.Slight disruptions also continued in the quarter. In China, disruptions from COVID outbreaks, interruptions to industrial production from power outages, closure of various industries [indiscernible] stricter norms by the local government to protect environment protocol and congestion as some of the ports resulted in input cost escalations. This led to nonfulfillment of contracts by some suppliers.Order conditions are being tightened globally. In United States, with price and wage pressures broadening and inflation at peak, the Federal Reserve decided to accelerate tapering of asset purchases and signal that it will raise rates in 2022.On the other hand, fear of Russia border conflict intensification has affected oil prices, which has crossed USD 90 per barrel adding to the high inflation.India has not remained untouched from these global events. Prospects for India seem more optimistic with IMF raising growth forecast of the country to 9%. Central Bank's accumulative stand and higher direct and indirect tax collections point towards economic recovery. However, at the same time, the increased WPI index reflects difficulty of the manufacturers to pass on the increased input costs to the end consumer. The reliable data indicates growth in top line in general. However, margin has witnessed a decline across all sectors.In this overall context, we reported a mixed bag of results for the current quarter. Unitary Cooling Products segment reported a revenue of INR 1,094 crores while Project business reported revenue of INR 554 crores and Engineering Product reported a turnover of INR 125 crores. Our consolidated total income for quarter 3 FY '22 was INR 1,822 crores as against INR 2,046 crores in quarter 3 FY '21.Profit before tax was INR 139 crores as compared to INR 166 crores in the corresponding quarter last year. Profit after tax was INR 97 crores versus INR 128 crores in the previous year. Earnings per share not annualized for the quarter ended 31st December 2021 was at INR 2.90 against INR 3.87, which was registered last year.For the 9 months ended 31st December 2021, the consolidated total income was higher by 27% at INR 5,420 crores as compared to INR 5,061 crores. PBT was higher by 16% at INR 450 crores as compared to INR 388 crores in the corresponding period last year. Profit after tax was higher at 11% at INR 323 crores as compared to INR 290 crores in the corresponding period last year. EPS not annualized for the 9 months ended 31st December 2021 was INR 9.71 as compared to INR 8.69 last year.A snapshot of our results have already been given in our investor presentation -- in our press release, so I will not go through the numbers in more details on that. However, in our segment businesses for our Segment A, the Unitary Cooling Products, UCP business witnessed a tepid demand post the festive season on a higher base of corresponding quarter last year. Fear of lockdown amidst the highly contagious Omicron virus made the channel partners cautious enough not to stock high levels of inventory. Unitary Cooling segment reported a revenue of INR 1,094 crores as against INR 1,003 crores, representing a 9% increase over the corresponding quarter of the previous year.However, divisional bottom line declined by 17% from INR 123 crores to INR 102 crores amidst increasing input costs, disruptive pricing by the competition and resistance by the trade on price increase, given generally a low offtake volume quarter. Nevertheless, our focus on product placement, trust amongst the channel partners and value proposition has helped us register a lower volume degrowth as compared to the industry in general. Our focus on the inverter subcategory with competitive pricing and larger number of SKUs continue to favor us. Inverter category witnessed a good traction with the customers and now contributes over 65% of all ACs sold compared to 60% for the similar period in the previous year.In terms of the overall AC market, we continue to retain our undisputed leadership with a year-to-date market share of 25.8% at multi-brand outlets. As concerns on global warming from increased energy consumption is growing, protecting and preserving our environment continues to form a prominent part of Voltas' commitment to sustainability. We are happy to report that Voltas has once again won the prestigious National Energy Conservation Award, outperforming other brands in fixed speed and variable speed AC categories. It may be noted that Voltas has won this National Energy Conservation Award for the fifth time, a testimony to our leadership in technology as well.The commercial refrigeration vertical has delivered a positive performance in Q3 by registering a reasonable growth in volume. Growth in commercial refrigerator products was driven by expansion in trade sales, exports and higher participation from OEM. In Air Cooler category, the lockdown disrupted the limited seasonal window available for secondary sales even in the current year. This resulted in trade reporting a substantial level of inventory impacting family sales in this category.As the second preferred brand in the country, we command a market share of 12.5% in air cooler category. We are happy to report that commercial air conditioning business has done well even in these uncertain times. Government, pharma and health care-related orders for VRF and other categories, along with increase in demand for light commercial air conditioning in financial services and food industries has driven the growth in this product category.We continue to receive O&M contracts in many metro and infrastructure projects. Retrofit bookings have been -- have seen a spurt in high-growth segments through repeat customers. Looking ahead and in the broader context of the commodity price increase and enhanced supply chain costs, the further price increase across all product categories is inevitable, which should support better margins.Segment B, Electro-Mechanical Projects and Services. Segment revenue for the quarter reduced to INR 554 crores as compared to the previous corresponding quarter of INR 847 crores, primarily owing to a low carryforward order book. However, segment results showed a positive growth from INR 14 crores to INR 36 crores. Carryforward order book of the segment stood at INR 5,600 crores as compared to INR 7,076 crores last year. Over INR 400 crores of fresh orders were added across both domestic and international markets. The carryforward order book for domestic projects stands at INR 3,327 crores contained a bouquet of orders across water, HVAC, rural electrification and urban infra activities. The international order book stood at INR 2,273 crores.Better and timely execution of projects, availability of sites and a healthy project mix has driven Projects business during the quarter. However, since most of the big-sized projects are approaching completion and new projects being at nascent stage at both domestic and international levels resulted in an apparent regrowth of revenue. An increase in commodity prices seems to impact the project cost budgets. However, a sensible negotiation both with the customer and suppliers helps in mitigating the risk. Meanwhile, the increase in global oil price and lifting of COVID-related restrictions should improve business sentiment and open up further opportunities in our operating markets.As always, we will continue to follow a cautious approach while bidding for fresh orders. Adding to our technical execution credentials, Voltas was recently recognized as one of the HVAC Power 25 list in the Middle East for our international project business. On the domestic front, delay in fulfillment of CapEx commitment by center and state has led to a low order booking. However, we remain optimistic with an allocation of higher amount towards infrastructure and we recently unwind union budget to boost the investments in the necessary and much awaited infrastructure activities. Segment C, Engineering Products and Services. Segment revenue and results for the quarter were at INR 125 crores and INR 40 crores, respectively. Both Mozambique and India, operations have contributed towards improved performance on the back of the revival of the crushing and screening equipment and renewal of the maintenance and repair contracts marked with the customer. Growing yarn exports, demand for capital machinery, both in spinning and post spinning, contributed significantly to this vertical. While announcement of product linked incentive PLI scheme for textile sector will help the industry on a long-term basis. However, price increases by principals and supply chain-related disruptions may pose some interim challenges. Voltas Beko. Lower seasonal demand and trade sentiment to go slow on the inventory front given uncertainty of the COVID-induced restrictions resulted in lower volumes sold. The manufacturing of frost-free refrigerator has commenced at [indiscernible]. We have also added a production line for fully automatic washing machine. This initiative of in-house manufacturing shall help the brand to introduce more customer-centric products, helping them optimizing the working capital and other cost savings associated with it.The recent external study conducted by VoltBek points out that VoltBek products carry a good brand recommendation with the customers among the established players within the segment. On back of the stronger acceptance of its product by the customers, VoltBek has registered a market share of 2.8% and 3.4% in refrigerator and washing machine category, respectively. VoltBek will continue to leverage synergy of the distribution capabilities and other strengths of Voltas to optimize the benefits across value chains.Other matters and outlook. Looking ahead at quarter 4 FY '22, which marks the beginning of the summer season, sales for all cooling products and availability of the complete season period, unlike past 2 years of COVID, we remain cautiously optimistic. Budgetary boost given to the infrastructure sector by the center may help us in building a strong order book as with higher vaccination rates, the unwinding of supply bottlenecks and policy choices may remain influential factors for revival. In general, we anticipate pickup in pace of activity, which can reasonably be expected over the coming quarters, and Voltas would continue this growth momentum. Thank you.
[Operator Instructions]The first question is from the line of Siddhartha Bera from Nomura.
The inventory and the demand, which you are taking us in the current quarter, what will be the inventory levels and outlook?
So Siddhartha, is this the only question -- Manish, over here. Is this the only question? You have a second question as well?
So second question will be only for the pricing side, you mentioned that there were some resistance in talking on the prices. In the last quarter, I think we indicated we had taken up prices by about 3%. So was that [indiscernible] and any further price increases which have happened in the current quarter that will be permitted?
See, Siddhartha, let me answer the sequence you asked the questions. In terms of the inventory days, as we said in our opening remarks that the trade has become more cautious while keeping the higher inventory level at their end, which means our anticipation is that the inventory days with the traders are over anywhere between 30 to 45 days. And largely, it is driven by the last 2 season experience on the COVID outbreak and the kind of uncertainty is what you have seen among the trades or I can say in terms of the secondary sales.I hope that the Omicron variant has come to at rest. And all the governments or the old state governments are opening up or are using the restrictions in a phased manner, which should bode well for the cooling product categories, which is starting this season period as early as now mid of the February month. So that's why we have put our outlook that everything goes well, and we are not encountering with any under COVID mutant. Probably this is the first year where we are going to see a complete season period available for our cooling product categories which should bode well for the industry.On the second question on the pricing side, I would say that whatever steps the brand manufacturers are doing, the increased cost is taking the one or maybe a larger step in terms of increasing the input costs. Sequentially, as well, we have not seen any of the commodities has come down on a pricing front, except steel which has some kind of moderate decrease over the last quarter. Having said that, all costs which are coming up of the additional, I would say, the inputs, which we are rating it on a regular basis for preparing ourself for season are coming at a higher cost.So in a way, if I -- even though the price increase, which we did so far, on a year-on-year basis, falling short in terms of the increase input cost. As we all know, the demand after festive versus and actually has come down. And the quarter 3, generally, if you go on a regular period is not so strong in terms of the volume and all. It was not fertile to have the price increase or think about the price increase again. Having said that, we'll be cautiously looking into the market and the demand supply gap in order to take the necessary call in this regard during the quarter 4.
Yes, sir. But looking at the current commodity prices, will it be possible to indicate how much prices you lead to further take to achieve the targeted margins of, say, 12% to 13% on an annual basis?
Siddhartha, if somebody can say that the commodity price will not go further up from this moment, I can easily calculate on excel sheet and can tell you about what price increase we need to do to go back to our margin trajectory. We all know it is practically difficult for any of the brand to do so. So we'll be doing the casual increase in a phased manner so as not to disturb the demand as well as to gain the advantage in terms of passing off some of the costs to the end consumer.
The next question is from the line of Manoj -- Sandeep Tulsiyan from JM Financial.
First question is pertaining to the UCP segment. If you can give some more color in terms of growth rates between how your B2B commercial air conditioning business had grown and B2C business -- at what pace that has grown? And within B2C, if you can also give some more color on RAC growth and commercial RF growth on a year-on-year basis, please?
So Sandeep, if I look from the growth perspective, we generally look from both primary as well as secondary perspective. As you know, we do not have a confirmed data on the commercial air conditioner side from the third-party source. It is difficult to see that or give any kind of objective numbers in terms of growth or degrowth for the sector or for the Volta [indiscernible]. However, we are seeing a good amount of demand coming up from the small institutions. As Mr. Verma said in his opening remarks, the schooling institutions, 4 outlets and small restaurants are seeing good amount of light air conditioner or commercial condition requirements. So overall, the business has registered a 9% growth together, the RAC and the CAC. We would not -- given the competitive scenario, we would not like to give any further breakup into this. But broadly, I said last year -- or last time that the CAC contributing around 20% of the overall RAC business of what we are reporting it and rest goes into the air conditioner and the commercial refrigerator, the air cooler category of the UCP segment.
Got it. Second -- no worries. Second question is on the PLI investment, where we have committed INR 100 crores for the 3 equipment which was mentioned, if you can give any -- how this will change your in-sourcing component, was it outsourcing where it is currently? And within outsourcing, how much is domestical imports? And one clarification, is this entire order book pertaining to E&P segment? Or there is a component of CAC also most within that?
The order book, what we reported is for the E&P segments only, comprising of both domestic and the international project operations. As far as the PLI is concerned, as we said in our last call that the PLI is -- we are putting that per application for some of the components, like cross-flow front and the back and the heat exchanges, all of it's some kind of plastic-molded components. We are -- the way which we are planning this expansion of this or I can say backward integration, it will be coming in a phased manner, which means that we will be having a source both coming from our backward integration as well as from the supplier from whom we are sourcing currently.In terms of the heat exchanges, largely is being sourced domestically, and it will continue to have it so even though with the backward integration. However, the absolute volume may go down because our factories backward integration will contribute some of our requirements, whether the equity -- whether need is adjusted to the plant where we are going to have this manufacturing. But complete outsourcing will not be stopped or will not be discontinued because the capacity with which we are coming up certainly will fall short of the total requirements, which we are in for in our RAC business.
The next question is from the line of Manoj Gori from Equirus Securities.
So my question is given that the channel techs suggest like Jan and even so far in February, the secondary as well as the primary continues to remain under pressure for the RAC category. Like have we taken any price hikes over the last few days, just to get a broad sense on the pricing action?
Let me give you an answer on the -- why the time remains so low in January -- or in the month of January. This is partly because of the extended, I would say, with a situation which we -- entire country is going through it. We have seen that there was an extended winter across all parts of the country because the temperature is still holding around much comfortable level than the person required to go to for air conditioning requirement.I'm sure if I look into the weather forecast, we are looking for a slightly high temperature compared to the last year as far as summer season is concerned. And that's why we said if weather is supporting us and we have not come across or coming across the another variant of the COVID, probably this entire season period should work well and better for the industry as such.In terms of the price increase, as I said, till the time we are not seeing a good traction in the secondary market, it is difficult to do any price increase because this will remain on a piece of paper. And therefore, as I said, we are cautiously monitoring the market, demand supply, how it is shaping up before we announce or before we carry out effectively any price increase. In terms of communication with freight partners, we have been continuously in touch with them on the need of increasing the price and which we'll continue to do so. How in terms of the effective price increase, probably, as I said, it's a continuous kind of exercise, but more effectively be done across markets shortly once we see the demand is coming back to us.
Sir, my second question would be on the demand front, given that there has been a bit of slowdown in the consumer purchases, obviously, since the third quarter itself, like how do we look at the upcoming summer season? Is there any change in outlook to your internal targets like how the summer could pan out, whether the pent-up demand, which we have lost over 2 years should kick in, Industry should witness huge volumes during the upcoming summer? Any outlook on that? That would be my last question, sir.
Manoj, considering the penetration level at which this category -- all these cooling categories are, we are reasonably sure that once we enter into the summer and the weather supports us -- this category. The growth could be a tremendous over the past 2 years because the product category didn't see a full-fledged kind of summer season for the last 2 years under the outcome of the COVID.In terms of why the demand is slow in the initial period, obviously, the penetration level at which we are operating it, it means the first users are going to be more in the market. And then that will get -- that can only happen once we see temperature is rising and people require a need of air conditioner. So we are very much optimistic that once we have the complete season and the summer which we -- the weather forecast is projecting currently, this should bode well for the category as such.
The next question is from the line of Praveen Sahay from Edelweiss Financial.
Sir, my first question is, sir, is it possible to say the volume growth for the UCP? And is there any price competition also you are facing in the market for RAC?
See, we have given the value growth of 9%, as we've said, if I want to give you a secondary data because that is more will be driven towards the indication in terms of how the primary moves. The October number data for the quarter because December is still expected to have it. The industry has shown -- has resulted -- our industry has seen a degrowth of close to 5% in terms of the volume term. However, if I look from the same second data, the Voltas' degrowth was close to 4%, which means continuing our practice, we are doing reasonably better than the industry as such. In terms of your second question, it was price, right?
Yes, sir. Price like cost credit pricing, how is the scenario in the market? Do you think...
I would say that the kind of pinch which we are facing as a manufacturer, probably the other brand manufacturers are also facing the same because we -- considering the larger volume, the brand Voltas has to be much competitive positions in order to sourcing the supply of the components or sourcing the components compared to any other brand. However, we have seen that the -- none of the brand has passed on the entire cost -- increased input cost to the consumer. In fact, we have seen from the past record, there was a time lag between when we have announced a price increase compared to the other brands which have done fairly in the market.So there are many brands that we normally won't talk much about the competition because it is their own strategy. and the declared results are in front of all of you because I don't want to see required to go and name the company, over the results are available today in the market -- so in the financial world. So considering that, it looks like everyone is facing the pressure. But as a leader, we have done the price increase across the categories, and we'll be doing it on a need basis once we see opportunity to take the lead in to that. And I'm sure that competition will also follow but with some kind of time lag continuing with the past practice of past trend..
Okay. Sir, on the JV business, you are still making losses. Can you give any indication like when you will believe the JV will achieve the scale to break even?
If I recollect and what we always give a direction to the investors, that we'll be -- we are in to have a breakeven in a '24, '25, which means we are at least 2 years away or we have a 2 years time frame in order to turnaround. And we are reasonably confident that we'll be able to achieve those breakeven as far as our strategic objectives of the year 2024, '25.Pandemic has created some kind of disruption or some kind of delay in our plan. However, we are reasonably confident that we'll overcome those constraints. And we're still -- we have not revised our guidelines, and we are still looking for a breakeven by '24, '25 at a better level.
The next question is from the line of Rahul Gajare from Haitong Securities.
Could you throw some light on the growth that the industry and the company has seen on region-wise, how -- which regions have done well for the company in terms of growth? That is the first question.
Okay. Rahul, if I give region-wise, in fact, it is difficult or even more difficult to compare the growth over the last year, if I were to take only volume or a value front. The reasoning is because 2 peers are not actually comparable. If I look from the first period or first year of -- a year before the country has seen an intense amount of lockdown for close to 60 to 75 days. However, in the current year, that lockdown player is hovering between 30 to 45 days based upon the state election guidelines followed during that period of time. So that's why when we see our data, we are getting a little bit confused in terms of interpretation, what should we do or what should we take as a base. But if I take a pure base of year-to-year comparison, can the industry is showing a growth in the range of 34 -- 35% to 40% over the last year on a YTD basis. And obviously, we have retained our market share. So definitely, we have done better than the industry aspect as such.However, in terms of the primary growth and degrowth, as I said, it won't matter much because it is of no use to dump the material with the channel partners in the secondary is not happening. So we'll be definitely following close to the market move. Already, did not have slightly done better, followed by East and South also coming up aggressively and West is catching up in the order of, I would say, a growth trajectory for that matter.
You think North is then better for you or the industry?.
As I said, industry data is giving a contract review. But overall, it looks like North has done better compared to the last year and catching up by the South thereafter.
Sir, my second question is on the project business. I understand Voltas has been very selective on new orders, but there has been a steady decline in the backlog over the past 2 years. Could you please highlight what exactly is happening in this segment? Is it more competition or lower inquiries? I mean what is really happening that how does that actually coming?
See, I would say that in terms of the order book, there are 2 reasons, which can attributed towards it. One is, there is a reasonable amount of delay at the center in a state level in order to awarding the project. At the same time, as you all know, we are moving into a transition period by transferring this project business to 100% subsidiary company, both that factors actually impacting or having impact or affecting the securing a new order book.Having said that, we have seen that state and central governments are now aggressively looking for announcing the order book, we have seen some kind of traction coming into this. And hopefully, so we are coming closer to the transition as well. All this will go well with the, I would say, a clarity in terms of the winning the customer contract as well when we are negotiating with them. So all this should go well when we look for building up the order book in the coming years, and this should give enough confidence or enough visibility on the revenue for the segment to grow.
The next question is from the line of Girish Achhipalia from Morgan Stanley.
The quarter 3 run rate of raw material cost inflation -- quarter 3 basket that you have for raw material right now, is that a fair representation where the costs are right now? Or have you seen further inflation in quarter 4?
Quarter 4, we have seen, Girish, only the 1 month, which is January and February is 15 days have gone. If I look from the lending cost perspective, the cost is still going up, but largely on account of the exchange fluctuations and not because of any base commodity price increase. However, if I look sequentially between quarter 2 and quarter 3, yes, we have seen increase in almost all categories of raw material, which we are looking into it or which we are procuring or which we are sourcing it for this category to be there.Except steel, which has seen some kind of, I would say, a stay for on that, but we have to see how these things will shape out because demand domestically as well as internationally, will go up to build up the necessary infrastructure, which we are end up to do it. So steel and all communities to be vouched closely on that front. But as I said, the inflation in the commodity has not come down, and we are seeing some of the other kind of inflationary impact in all the commodities.
The next question is from the line of Naval Seth from Emkay Global.
I have a couple of questions. First, do we have any inventory gain on account of low price inventory in the last quarter? And if yes, can you quantify that as well?Second, Manish, as you have been highlighting about price increases getting delayed, so is it fair to assume or what I have kind of interpreted that it is not because of competitive intensity, it is because of demand, which is lower, which is restricting industry to take price hike. Is that fair?And third question is that by when we are expecting the transfer of our project business to the subsidiary. What is -- where is the process right now, and how much time we are expecting?
Okay. So Naval, sorry, since you raised 3 questions, I missed out your first question what it was. So Naval, in fact, even you see into our working capital or the kind of capital employed that we have in the business. we have never kept the inventory for a period of 1 year. It was on a credit level for some period of time. So at that point of time, we took an advantage of the average holding of inventory cost. However, now all the materials which are getting inverted from the quarter 2 onwards are coming on incremental order of what we face with the suppliers.As we've given comments in our outlook in the opening remarks, a lot of disruptions in the supply chain, actually putting a lot of pressure on the increased cost and which is making it difficult for the suppliers with whom we contracted the material to supply at the order price. All this is giving a kind of inflationary or an increase input scenario on each of the further inwards which we are taking into it.We may get some kind of advantage when I bundled out between the quarter 2 inwards vis-a-vis a quarter 3 inwards and how it will move to a subsequent period. But it will still -- if I compare on a Y-o-Y basis, it will still be going or giving a higher kind of increased input cost compared to what we were getting in the earlier years. So that's the answer of -- so there's no inventory gain as such. All gains are periodically approving it and getting accounted in terms of declaring the results. But on a Y-o-Y basis, till we I'm not getting or not seeing any hold or any kind of stability on the commodity side, probably this trend will continue because we are preparing now for the season. So definitely the more important categories or the commodities or the material will flow in the quarters -- in the quarter 4.Now having said that, your second question was in terms of when we are transferring the project business, as I said to my earlier remarks, to Rahul, that almost looks like by 31st March, we'll be able to complete the entire transition post the -- transition-related block and hopeful to transfer this business to 100% subsidiary company effective 1st April 2022.
And on the second question on price increase, so it is demand and not competitive intensity, which is delaying the ...
I would say both because if the demand is there, which means the customers are coming in, and I keep on saying that if out of 4 machines, 1 machine is getting sold by Voltas, none of the retailers will have afford or will have a situation of not keeping the Voltas material on the shelf. Everyone would like to have Voltas brand being put up on the shelf.So having said that, once I see the demand, it becomes a favorable factor for me to increase the price. Competition, as I said, they always do a time lag. When we announce a price increase, they will be doing subsequently at a later period of time. But being a leader, we believe that it's our a reasonable course to do so, and we will definitely be doing so in the future when we get an opportunity.
The next question is from the line of Pulkit Patni from Goldman Sachs.
Just one question, you made the statement that the project business is also not being able to win orders because of this transition of business being moved to subsidiary. I don't understand this. Effectively, it's still a subsidiary of Voltas. Even it gets transferred later on, it will be to probably a group company. So I don't understand why the order wins are getting impacted. Is it employee morale or something in that business? Or -- because that does have an impact on how we should look at the order win and the profitability of the business for the next few quarters. So if you could just clarify what you meant by not winning orders because of it's moving to a subsidiary?
I said when it is moving to a subsidiary, I don't say projects are not getting winning on that account because there is a delay over there, what will happen -- what is happening on it is, we are there, we are bidding for infrastructure projects. When you go for infrastructure projects, it require a prequalification, qualifying yourself to a work experience to do on those kinds of projects. As you know, 3 sectors are coming up on those project sites aggressively. They are the water, electrical and the modern infra and as a modern infra is like your airport, your metros and all such kind of infrastructure, which is getting developed.In all these contracts, when we do it with the governments or to a main contractor, they require a certainty in terms of who is going to execute the project. And furthermore, whoever is doing it carries a requisite a prequalification or not. On both the fronts, we have -- when we build for the contract, we have said it's a 100% subsidiary contract. Today, they are bidding for it.However, sooner or later this project business is going to get transferred to it. So it will have both technical, financial and all other capabilities in order to execute this project. Some of the customers may listen to it, and we have on diagram, we won the project. We won some of the contracts. We said we are closer to almost INR 200 crores worth of contract we took on INR 160 crores, INR 180 crores on domestic front and put together INR 400 crores of contract we won in this current period. But some of the customers may not be openly looking into it, and they'll say "boss, I'll give you this once you are actually comparing the transition". So it's a mixed situation on that front, Pulkit, which is creating some kind of, I would say, a temporary blockage in getting new orders. But we are -- as I said, we are reasonably sure in the next 2 months, the transition will complete and all other things like prequalification, PQ, and all will get transferred to a subsidiary company, and we should be able to go back on our order trajectory of winning the orders and building up the strong order book policy.
Got it, sir. So this is very clear. Just 1 more bookkeeping question. What exactly had been the order inflow in the quarter, if you could split in domestic and international?
So domestically, we are at INR 165 crores and rest all our international total, we have secured INR 400 crores order.
The next question is from the line of Sanjay Awatramani from Envision Capital.
Sir, are there any margin guidance, can you provide as we see that the prices are rising and we are facing some difficulties in increasing the prices and which will be seen in coming months or coming quarters, I would say, but then there would be some margin guidance access that we would be able to maintain. If you can highlight something on that, sir?
Sanjay, are you looking for a margin guidance of product business or a project business or on Voltas business?
Sir, overall. I would say overall margins.
Yes. So overall margins, in fact, if you see the current year, where we are better to do in our project business given that the kind of project mix which are flowing through and the execution capabilities which we are going to demonstrate. In terms of the product business, just because of the volume degrowth in this recent period of time because of the COVID situations and this increase input cost has impacted the margin, I would say, percentage to the results, at the same time, the other income because it consists of the other segment as well, which is Segment C has seen well, both in terms of revenue as well as on the margin. Interest income has fallen short because we all know the AGF come down, and that continues to do so on this something we are seeing a policy direction from our Central Bank on increasing intels over there.So all in all, I would say that probably we would like to continue, like to maintain the current trajectory in which we are operating through, although we are -- I would not read the word bullish, but we are optimistic about the margin on the product business side, because sooner or later, we should be able to pass on a substantial amount of increased input cost to the end consumers. And once we do so, we will come back to the double digit, which anyway we are there today, but at some kind of suppressed level to go bounce back to the trajectory, which we're enjoying earlier.So this is why I would say that probably the 2 quarters, we are seeing that we should hold back on the product side. and should start, I mean, margin coming back to the trajectory, which we always used to have in the range of 11.5% to 12%. In case of project business, probably we remain where we are, probably we try to improve upon it, but the uncertainties and execution largely depends upon the external factors, but we would not like to go below 4.5% to 5% where we reach currently on a YTD basis.So that's where, I would say, Sanjiv, on the kind of overall outlook, although we are seeing that we are made many uncertainties around us, but we are reasonably confident everything works well or what we are anticipated to move should result into this kind of project -- this kind of overall margin.
Okay. This was very clear. And one last question on any CapEx plans for FY '22, if you can provide some guidance on that.
FY '23 because FY '22 is about to end now in the next 2 months.
Yes, FY '23, right? .
So obviously, following in line with the PLI, which we talk about we applied for a lower intent with the high investments. We have to -- we'll be -- we are trying to carry out a CapEx outflow of INR 100 crores, INR 125 crores on a PLI front. At the same time, we are augmenting our manufacturing facility for a commercial refrigerator as well as for the air conditioner, which will take away, which will require us to put another around INR 100 crores to INR 150 crores over there. So all in all, we are eying for a close to INR 250 crores to INR 300 crores in the next 18 to 20 months for the cases which I just talked a bit a minute ago.
The next question is from the line of Ranjit from Mahindra Manulife Fund.
Sir, we have heard that July, the new energy transition is going to happen. So in that context, just wanted to check if some of the competitors are planning to launch their new labeling products on February itself. So what will be our strategy? Because I think post July, we won't be able to manufacture the newer -- the older table products. So just wanted to check what will be our strategy in that?
Definitely, we will not be falling back if I look from the competition side. We will take a lead into this kind of aspect. So obviously, we are also going to have those kind of star leveling products be there. But what is happening is that 1st July, which you are talking about, we all need to see how the things are getting panned-out because the season for we are optimistic to have the good and full season over there. But for any reason, the season is not falling in line with expectations, then in those cases, only the industry may again approach the ministry in order to give a further extension.Just recall the entire discussion on this front, the industry has requested for a 1-year deferment on the energy table. However, the industry or the ministry has given a grant of 6 months with a promise that they will live the position in the next 6 months down the line. Any upgraded products which we would try to sell will have an impact on the cost. At the same time, the industry, the manufacturers are trying to pass on the incremental cost as well. So if we're doing both the fronts together, I'm sure that the price increase for the consumer will be in -- suitable for that matter.So I believe that we will also come out with the new labeling kind of product, but in a limited way and will collaborate in such a way that it won't impact the demand. At the same time, we can easily migrate to the new table from 1st July when the situation becomes mandatory to do so.
So then there can be a lot of happening before for the season. So the restriction is only in production, right? There is no restriction in terms of sales?
Yes, because some of the inventories were still live with the channel partners now. It will always be there. So we always say that manufacture will be start because unless until it won't -- the inventory won't exhaust at the channel partner level, those inventories we keep selling to the end consumers.
Okay. So probably 4Q can see a [indiscernible] impact because of this?
It all depends upon, as I said, Shiva, the best thing is to look into how the season is going to go. As I said in our opening remarks, we are looking into a complete season period unlike past 2 years where we have some kind of restrictions or limitations. So if that's so, the '22, '23, we should see a bump of growth for this industry and which will take care of all past issues, which we are facing on this industry front.
The next question is from the line of Gopal Nawandhar from SBI Mutual Fund.
Just on this cost inflation and all, so if I understand it right, generally, for the supply confusion, it's already tied up, say, 2 quarters this season. Is that understanding right? And on that front, whatever like the cost inflation would have been there in the Q3 already like locked in for the period?
Gopal, actually, I could not get your question. So what you are saying, in fact, your voice also becomes -- mumble in between. Gopal, I could not get your questions.
Yes, I'll just repeat it. Is it better?
Yes, it's better.
Yes, yes. So what I wanted to ask you, Manish, is that, generally, the understanding is that for the season, the supplies are tied up 2 quarters back. So in terms of cost inflation all, is it right to assume that whatever cost inflation we have seen in the Q3 is being locked for the season?
Gopal, toward the supply has also been made based upon the contractual terms. In our opening remark, we clearly said having seen a continuous increase in the commodity price, the suppliers are finding difficult to honor the contract or to honor the supply at a contracted rate. And that's why it is coming 2 and 4 kind of situation whereby they have to come back and we have to agree on our incremental price on a mutually agreed terms and conditions. So that's why I said it is difficult to say how much my cost increase has gone up and how much I need to go compensate. Because every week or every 15 days, I'm getting some kind of inward supply. Some of the cases, it is coming at the same price, some other cases, it's coming at an incremental price.So it is difficult to judge, but that's what dynamic situation which we are. And we are taking cognizance of the situation of the segment, doing the corrective actions on the further value chain as well.
Sure, sure. And the second question is on the project business. Despite having such a strong order book, the execution has been slipping for last 2, 3 quarters. Any particular reason would you set to this?
I would say...
There are large or -- sorry.
Gopal, I would feel that the execution in this current year is much better than compared to the last year where we have seen many kind of immobility and the restrictions impacting the -- even access to the project side. So this year, in terms of the accessibility and the discussion actually went well or worked in our favor so far. What is impacting us is the project mix, which is going through it. At the one hand, we are having a limited amount of order inflow coming to us for the reasons I have already explained in my call. Second thing is some of the projects which we are running into last 15 to 18 months are coming to an end. So all this project mix creates some kind of revenue impact, and that's what we are seeing currently.However, in terms of the bottom line, you all are seeing that. It is our approach of taking, I would say, selective project and in a risk-mitigated way, helping out in terms of improving our bottom line. As I said, we're in the project business, we are cautiously optimistic to see that whether we should continue this trend because any change or any limitation on their ground, be a project site or the liquidity or a certification or any kind of work on the customer side may have an impact on the overall bottom line of the project in the project business.
Okay. Because, see, in the last 2 quarters, you've seen almost...
[Operator Instructions] In interest of time, we'll take the last question, which is from the line of Sujit Jain from ASK Investment Managers.
Yes. Manish, the other significant listed companies spoke about 25% value growth for the industry for Q3 FY '22. And we are at close to 9% increase value growth Y-o-Y. Does that mean that we would have lost the market share?
If I look from the 25% value growth in terms of the Y-o-Y, I would say that the product mix, which is probably giving some kind of flip to it. However, the generally primary also grows based upon the secondary. We cannot have a primary subsection which is not moving and the secondary is moving on the other direction. We have to watch and we have to get the further clarity on this 25% value growth because for the quarter, if I see the industry actually has degrowth. And for the year, I've clearly said the industry has done a growth of in excess of 35%. If 35% of growth in terms of the volume, value growth cannot be at 25% in the first stage. And the industry is -- and the quarter is concerned, then quarter has shown a degrowth over last year compared to the -- sorry, degrowth of the last year when I compare to the previous year.
So you're saying Q3 FY '22, there's a degrowth in terms of value in primary Y-o-Y?
I'm saying secondary when I said 5% degrowth for the industry. I'm talking because the secondary data is more validated chief because that is being conducted by a third party independently. So although we didn't have a December data, so I clearly said in my -- 1 of the answer to the call or the question that for October, November put together, we are seeing the industry has seen a degrowth of minus 5% in volume terms and minus 4% Voltas has seen the degrowth in this period.
Okay. And will terms of what it would have been in your opinion in Q3 FY '22 for the industry?
See, we are not taking the value term as such because, as I said, we have not seen any kind of premiumization in this category as such, except the inverter category and some of the 5-star product but that if I take the inverter, which is there last year as well and the 5-star for the industry as such is contributing in the range of between 20% to 25% and because of which we now go into more into volume terms and not value terms.
Thank you. In the interest of time, I would now like to hand the conference over to management for closing comments.
So Manish, thanks for taking up the answers. And we like to thank all the participants for their questions.
And again, to add to Mr. Verma, if anything, any questions we may not have answered, me and Vaibhav, you can write to us and we'll be responding to you as early as possible. Thank you, and I wish all of you a good evening. And happy Valentine's day to all of you.
Thank you. On behalf of HDFC Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.