Whirlpool of India Ltd

NSE:WHIRLPOOL

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the earnings conference call of Whirlpool of India Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Roopali Singh, Company's Secretary. Thank you, and over to you, ma'am.

[Roopali Singh, executive]

Thank you. Good evening, ladies and gentlemen. A very warm welcome to the company's financial year '24, '25 quarter 1 first earnings call. Today, I have with me Mr. Narasimhan Eswar, our Managing Director; Mr. Aditya Jain, the Chief Financial Officer. A presentation on the business as well as the financials has been updated on the company and the stock exchange website. You may please refer to the same during the presentation.

Before we move forward, I would like to inform you that there is a portioner statement in the presentation. Can you take note of the contents of the same.

With that, I would now hand it over to Mr. Narasimhan Eswar for an update on the business.

[Narasimhan Eswar, executive]

Thank you, Roopali, and a very warm welcome to all of you, ladies and gentlemen. I'm Narasimhan, and I will take the first 20, 25 minutes to walk through the business overview and our strategic imperatives and our progress on that. I then hand over to my colleague, Aditya Jain, who's the CFO, to talk about the financial performance, after which, we will take questions, of course.

Next slide, please. We are now on Slide #6, which is a business overview. If you can move to Slide #6, basically, India, we've called out before is a strategic focus for the Whirlpool Corporation globally. A couple of things. Basically, the value creation opportunity for Whirlpool and for all other appliance manufacturers in India is huge. And the reason is, obviously, the market GDP growth that we are seeing, also combined with the fact that appliance penetration is quite low. So you're talking about refrigerators mid-30s, washers mid-teens, air conditioners less than 10%. And you've got a growing affluent demographic, which, as we know, the booming upper middle class and the middle class in India.

So therefore, the opportunity for the durables business itself is very significant. Then the question comes as to whether Whirlpool has the right to succeed. Well, Whirlpool has got a track record of value creation in this country and talk about 4 very critical things that it has, as I've said before, Whirlpool has played a pioneering role in Indian durables industry and has been associated with several industry first. I'll cover these later.

Whirlpool is a very well-reputed brand with great integrity on quality and performance, straddling geography. So for example, northeast, west, south, all regions Whirlpool is strong and economic strata. So Whirlpool has got products and consumers in not just the premium end, but the popular end as well, the mass market as well, where it's got its strength. And as India comes back stronger in the mass market as it is in the premium market today, Whirlpool will be very much there to reap the benefits of that across strata.

Whirlpool also got a diverse product portfolio, as you know. We continue to innovate on premium product segments across categories. This is particularly important, because we are not just innovating on premium segments and frost free or on top loaders or front loaders, you will see later in the presentation, we are innovating very much on semi-automatic washing machines premium as well as premium segment in the DC, the direct cool refrigerators as well. And we've got a very strong manufacturing footprint. Refrigerators and washers being made in multiple factories in Faridabad, in Pune and in Puducherry in India.

And last but not the least, we've got a powerful pan-India sales distribution and service network. And we've also got excellent relations with our customers, combined with strong investments in building retail and creating demand. So those are the reasons why India is a great market, which you very well know and why Whirlpool, we believe has got a tremendous reason to succeed in India. And therefore, India is a big strategic focus for the Whirlpool Corporation.

Moving on, let's take a look at the growth and profitability record of Whirlpool. So very simply, I'd like to call it out as a set of 2 big kind of intervals and then latest year. So from 2008 to -- 2008, '09 to 2019, '20, Whirlpool had a revenue CAGR of 12% and a PBT CAGR of 20%. Those are numbers I would take any day of the week on a going basis, but then from '19, '20 onwards, we had a tougher time where results -- the revenues were not really growing significantly, and the profits came down as well. What actually happened was obviously, COVID was a major factor. You also have significant competitive industry coming in, and you had significant regulatory changes. Now all of these when the regulatory changes came, commodity cost increases. So all of these basically hit the revenue as well as the profits.

Now what happened in '23, '24 in the year just finished. Very simply, in '23, '24, the revenue grew by about 2%. And our profits basically stated about close to 4%, 3.9% as opposed to 4% of last year. So that would look on the face of it like not a lot of progress.

But if I walk you to the next slide, Slide #8. Really, this '23, '24 financial year was basically a tale of 2 halves. In the first half of the year, as you can see on the left-hand side, the revenue growth year-on-year was 10%. In the first half of the year, we were down minus 4%. And this is basically driven by price adjustments that we needed to make strategically in the January, April period and regulatory costs that were going up, which hit the profit. The second half of the year, we've actually grown revenue by 10%. So we've grown double digits in the second half of the year for us, leading to a yearly result of about 2%. So it is actually a tale of 2 halves from a revenue point of view.

How does it look from a gross margin point of view? Gross margin in the first part of the year grew by about 60 basis points from 27.5% to 28.1%. And in the second half of the year went from 27.8% to 30.0%, which is a 220 basis points growth. Now that was driven by a lot of cost productivity actions. We call this P4G, profitability for growth, really coming into action in a significant way, a very, very deliberate strategy and plan that we do now and we will keep doing into the future.

As a result, our profit, which in the first half of the year was 3.4% of sales, which was actually minus 29% versus the previous year, same time period. In the second half, the profits grew by 58% versus the previous year with a PBT percent going up to 4.5%. So the full year revenue growth and profits have actually benefited from the positive momentum in the second half of 2024.

Now all that's well and good, but how are we doing in April to June. So really, if you go to Slide #9, we are happy that we're sustaining the momentum through April and June. Revenue growth of stand-alone business is 24% versus last year. PBT growth is 128% versus last year. So we are very happy that our strategy of profitable market growth -- market share growth is clearly working.

What I think makes us happiest is that we've had strong share gain in triple digits basis points versus last year in both refrigerators and washers. So it's not one or the other. Both refrigerators and washers, we've had very strong share gain in triple digits basis points. We were also helped by not just the market share growth, but also a strong growth in the refrigerated industry.

So after a long period, April, May, June has been a period in which the refrigerator industry actually grew strong double digits. Washers didn't, but that's fair, because both the refrigerators and the AC market really grew massively. And we are much more, say, present than refrigerators and -- which are much smaller share in air conditioners. So our benefit really was from the reg market growth. Washers market growth was not really. So a combination of share gains in refs and washers and strong growth in ref and AC is what actually got us those results.

As you can see, we were able to grow the market share profitably, which, as I explained to you last time, is always the impact. The results have actually come based on a very, very disciplined ROI-based investment strategy. So we are calculating what we do, what we put in and what we get out of things basically quite rigorously. And that is the basis on which we invest. And we've called out very clearly, we've identified for ourselves what are the growth levers? What is the magnitude of the growth lever, what is the momentum of that growth lever? How much runway does the growth lever have? And therefore, how long can we keep focusing on it. Where we are confident about the growth levers for all these factors mentioned, we invest fearlessly. Where we are not very sure, we make sure that we learn and we assess the ROI before we roll it out. So that is basically the strategy that we're following.

If you look at the profitability, it's not just coming from our top line growth, but it's also coming from significant gross margin and bottom line improvement, which comes from the productivity of growth program, which is a cost takeout program that leads to the gross margin improvement. We're also quite happy that not only the sales and the profits are growing in the right direction, but operationally, we've also been able to make sure that we focus on inventory, receivables and payables as well, with the result that our cash position is at about INR 485 crores that we've generated. So we're quite happy about that as well.

So these are the numbers presented for you. Revenue is at INR 2,384 crores, year-on-year change 24%, driven by strong market share improvement in ref and washers versus last year and a strong double-digit growth in refs, as well as in air conditioner industry. Both the refrigerators and the washers business have grown by high double digits for us, which I think is the other notable part. So we are not counting only on the market growth, as I said many times before, we are counting on growing to share.

EBITDA and PBT improvement is being driven by the volume growth, which obviously helps in our industry a lot, but also by a lot of cost productivity actions across every line of the P&L in this P4G program that leads to better margins and improved mix. We've also focused on driving the mix a lot, whether it be through our marketing strategies or it be through incentivization of the sales force incentives, and that seems to be working well as well. So though we've had the price impacts and the regulatory impacts, these things are helping us get to a better position. And cash flow obviously derives from a strong EBITDA, but also a significant improvement in working capital that we've been able to drive.

Next slide, please. If I go to Slide 11. This is the one that I'm -- I think as a team, we are happiest about, and we really hope we can keep this up. So I think this is going to be the cornerstone. If we can keep this up, this will be a wonderful story for us.

Just walk you through October '22 to March '23. So there's a chronological time line that explains what has happened to our business. October '22 to March '23, the market was growing mid-single digits. We had a significant problem because our volume market share was declining quite substantially, triple-digit bps. It was impacted a lot by several issues, competition, et cetera, but the biggest one was price index challenges. So we corrected this price index challenge around Jan to April of 2024 -- sorry, 2023. And we also introduced the new direct cool ranges in Jan to March 2023. Despite that, the volume market share, though it improved, it was still declining versus a year ago.

If you go to April to September, which is the next time period, the market was actually flat. What we were able to do is really step up our focus on execution of marketing, execution of supply chain, execution of sales. And we also introduced the frost-free ranges fully in our stores. And these were these incredible ranges where we have between the 265 liters and the 360 liters, we've got claims like converts from freeze to fridge in just 22 minutes, which is best in class claim in the market. So completely new technology that we brought in. And there was an improvement in the market share versus the previous trend, but we were still kind of slightly declining versus a year ago.

October '23 to December '23, that quarter, the market itself grew by very low single digits, but we had deployed some incremental retail executives in the field. They had come of age, in a matter of speaking in terms of their experience and so on and so forth. And we started the mix drive in right earnest, along with some tests that we were doing in certain areas, and we started seeing the market share grow versus the year ago.

Jan to March ''24 was a period of significant consolidation of market share growth, continuing on the growth momentum, though the market was flat, they had a significant impact of all our ROI-based investments, new products, but also our execution of step-ups. And therefore, you can see that volume market share increasing year-on-year quite significantly. And now we're talking both refrigerators and washers.

And lastly, April to May '24, the market itself finally grew double digits, which was very welcome. But at the same time, the full effect of our retail executives that we've added across time the new products that we brought in, the clear focus on mix drive, the change of the sales force incentive plan and many, many other changes that we've done, including major programs, the customers and so on and so forth has led to that triple-digit growth in basis points in market share for both refs and for washers.

So if I can move on very quickly to Elica. Elica continues to do well. We've increased our ownership in Elica, as you know, from 49% to 87% in 2021. very strong capabilities in local manufacturing. And Elica, I would call as a pioneer or an innovator in this space in terms of coming up with real quality products, great technology, good distribution, good brand awareness, but still opportunities to grow in both distribution and brand awareness, which augurs well because this market is also a very low penetration market. And we believe that Elica is going to be a great long-term play here. We've also established Whirlpool as a mass premium cooking brand, along with Elica.

If you look at our revenues and margins, the growth has been pretty significant across the last 3 years, double-digit CAGR with the strong margins. Obviously, the margins operate between 13.5% to about 17.5%, 17.5% being the peak in 2024. But I would expect on a going basis, the margins will be more between the 15% to 16% kind of range, as we seek to invest to drive this wonderful business.

Next, please. So I move on now to the strategic imperatives that we have. So what are the strategies that we are following as an imperative to drive our business. And there are 5 basically. And I've spoken to you about this inspiring consumers and generations of consumers with our brands. Second is winning with product leadership. The third is building a competitive and resilient supply chain. The fourth, my favorite, excellence in execution. And the fifth is growing our consumer direct business.

So let's take a look at it one by one. So if you look at our next slide, please, Slide #15, inspiring with our brands. If you look at our history, inspiring consumers with our brands. Whirlpool, as you know, was the first to introduce pedestals in DC in this country, which is now a significant proportion of the entire DC business, not just Whirlpool's business. Whirlpool was the first to bring in auto defrost technology and still remains the largest by far player of auto-defrost in the country.

Whirlpool was one of the early pioneers in CFM and colors and finishes basically. But it's not just DC. Whirlpool was the first to bring in the 3 door refrigerators into India with the Protton series, which continues to do very well. It also brought in the Platina range, which is dark interiors. And in washers, Whirlpool introduced not just the incredible Bloomwash 360, which is our top, let's say, most premium top loader but also the first top loading heater in the country, which we now have across quite a bit of our top load range. So in a sense, this is what I told you about earlier, Whirlpool is a pioneer in the India durables industry in inspiring trust for consumers with our brands.

Now how are we actually bringing it to life now going to the next slide, we are very, very proud and happy to work with one of the great Indian companies, a company that I've always admired Unilever. We have announced a strategic collaboration on the 12th of June that we do with Unilever. So Whirlpool and HUL have decided to collaborate and enhance the Indian consumers laundry experience.

And the whole logic is a very, very simple logic, which is penetration is a massive opportunity for washing machines in this country, and penetration is also a massive opportunity for liquid detergents and washing machines in this country. That is, in a sense, the opportunity that we see this opportunity can take several forms. At this point in time, we made a grand start with a joint media campaign, TV and digital, which is a co-branded campaign between Whirlpool and Surf Excel. I apologize, I'm not able to play this for you, because it's an audio call, but I think the link has been sent along with the video, which you can look at leisure. It's an advert that we really love. And I'm sure the Unilever guys like it as well.

My father who lives in Chennai has reported seeing it several times. He's my people leaders, literally, he monitors and then let's me know every time he sees the ad. And I believe that he's seen it a reasonable number of times.

We also are doing -- sorry, can you just go back, please? We're also doing sampling and OnPack endorsement on both the machines as well as the products of Unilever Surf Excel, which is the brand -- Surf Excel Matic, which is the brand that we're working with. So at this point in time, it's media, it's sampling, it's OnPack endorsement and plenty of opportunity to do much more in this area to drive penetration in washing machines and in liquid detergents.

Next slide, please. But that's not all. We are taking inspiring trust at the next level, because we just said we've got amazing products on both semi-automatic as well as front load, and we've got opportunities to improve our market share in both these places. We took a look at these products and said, we are so confident of these products. Let's put our money where our mouth is.

So we have moved first from offering 2 years of modernity, comprehensive warranty of semiautomatic machines from 2 years to 4 years in January this year. So on every semi-automatic washing machine that we make and sell in India, we basically give 4 years warranty of Whirlpool. And following the success of that program, we've offered a 5-year comprehensive warranty on our front load fully automatic washers. This is the new line that we set up in 2022, which is doing very well, and the products are fantastic. So we say, all right, so let's offer that trust to the consumers to say, this is how confident we are in our product that we are willing to give you 5 years of comprehensive warranty. And that is something that we did from, I think, April this year. So those 2 are in the market, and we look forward to significant and continued growth from these.

If I move on to the next one, which is product leadership. We've done some new product launches we are very, very proud of. Now both these product launches have been done in the space of the last 12 to 14 months, basically. So that's been great work by the team to bring commercial innovation to market so quickly. The first one is the DC glass or the direct cool refrigerators, the single door refrigerators, the glass door range, as you can see fantastic new designs, they look stunning in the store. And right now, we are not able to produce enough to meet the demand. And so I hope that continues, and we hope to continue gaining the benefits from this, but also able to provide the products wherever it's needed by the consumers. So this is the first one.

And then moving on, this is something that we are inordinately proud of. semi-automatic washing machines is one thing that everybody would think the only way to kind of grow this business is just bringing in more capacity, 7 kg to 8 kg, to 9 kg, to 10 kg, to 11kg, yes, that's one way, and we'll follow that as well. But what we've done is we've bought in a premium offering into semi-automatic washing machines. By looking at the single biggest pain point for semi-automatic washing machine users, which is detergent patches, if you see the left side of the screen, on the blue shirt, you see those patches. This says without Dynamix. That's the kind of patch that you can get as a consumer when detergent and water don't mix properly in semiautomatic washing machine.

But what we've been able to do is come up with a technology called the Dynamix technology, where hydrodynamic fills in a compartment, mix the detergent with water, ensuring no detergent coagulation and offering an incredible experience, right? Zero detergent patches, zero, okay? We are incredibly proud of this initiative that we brought to market. And this has just hit the market a couple of months ago, and we look forward to driving this really hard.

Let's move on please. The next slide, Slide #20. Elica continues to dazzle with its innovative ranges. The one on the left is a particular favorite line. The auto sense chimneys that we brought in with the brushless DC motors, see the insight here, again, the consumer insight here, inspiring trust we talked about, consumer insight here is that when you've got a chimney, you often, and I'm sure you've experienced it yourself at home, you often forget to turn on the chimney when you're cooking, and so you end up having this smoke in the room for about 15 minutes and then you switch it on, but by then your eyes are watering.

Look at these incredible auto sense chimneys, what they do is there's a thermal sensor that as soon as the flame comes on, it detects the flame and it comes on automatically. Now that's a great consumer benefit. And on the right-hand side, you see the Hexa Ind Lotus series of hobs, there are triple burners here, and these have a heat shields. So if you see those shields that you can see on the screen, that avoids your knobs from heating. Just imagine, such thoughtfulness that's gone into the design of these products, heavy-duty burners and obviously, looking incredibly world-class design. So that's on that.

We move on to the next Slide #21. We talk about excellence in execution. Like I said, you can do a lot of strategy, but if your execution is not brilliant, then the consumer doesn't get to see your strategy. We are focusing on with respect to sales and service, winning every day in every store with every consumer. How do we do that? We have brought in much stronger visibility which we track of our premium lines and our new ranges that we bring into the market, focusing more on premium.

Second, we make sure that we get our pricing strategy right, especially on the premium lines, where there's an opportunity for us to grow much, much more. We've got great products, maybe not enough market share compared to our popular rates, and therefore, a great opportunity. We have really got much stronger sales and service execution including, like I mentioned, incentive plans, that drive premiumization, that drives the right mix, that drives value at the consumer level, basically at the market level.

And then we also leverage our great customer relationships that we built up over 3 decades round after round of management has basically engaged with our customer partners to develop great relationships and we leverage that as well. And of course, we continue to drive e-commerce marketing.

If I look at the service part, it's a very good story. As you can see from the graph there, the NPS or the Net Promoter Score that we get, which is basically consumer score rating us on how they felt about the installation of the servicing. The scores continue to go up quite strongly, and we do that through a variety of things. We've got differentiated call centers. We've got dedicated desks for premium customers for the top 20 cities. We've got escalation desks. We use technology like WhatsApp, APIs, video calling, et cetera to service the consumer. And we've also got in our service centers that we set up in 2022 that not only drive an excellent service experience, but actually are financially viable.

So all in all, from a service and the sales point of view, we are happy with the progress that we're making. We need to do much more of this, but we have you with the progress that we're making.

Next slide, please. Slide #22, where I'm coming to the end of my piece is basically 2 big things to highlight on the supply excellence program. First of all, we're very, very proud that all our 3 manufacturing sites Puducherry, Pune and Faridabad have achieved the bronze in world-class manufacturing, which, as you know, is not a very easy thing to do. Very, very proud of that.

And the other thing is that I mentioned probably about 6 or 7 times in this call, the P4G cost leadership program that we do across all lines with the P&L, productivity to growth. So the whole idea is save money across all lines of the P&L, put some into the bottom line, put some back into the business to drive marketing and sales so that you can drive the volume. And there's a significant step-up that we've done on that. I would say that's very, very important, especially given that going forward, there are going to be commodity headwinds that we know. There are going to be ocean freight headwinds that are already happening, which the whole industry is suffering from. And these challenges are going to be ahead of us from a cost point of view. But we continue to drive our P4G program, because that's a way for us a little bit of an antidote to these kind of issues.

So with that, I'm going to hand over to Aditya, the CFO, for the financial performance.

[Aditya Jain, executive]

Thank you, Mr. Eswar. Again, a warm welcome to everybody on the call. I'm on Slide 24, and I'll talk about the financial performance of Whirlpool of India. This slide talks about the stand-alone results for full year '23, '24. We delivered a top line of INR 6,333 crores. Our full year revenue was up 2%. This was despite the industry was soft amid weak summers, especially on the refs side of the business. And in the second half, our revenue was up by 10%, which was driven by market share led growth, which was in turn driven by stronger execution and the effects of product upgrades and innovation. This was in contrast to a first half decline in revenue of 4%.

If you just look at from the 2 core categories for ourselves, the refrigerators grew in low single digits and the washers from a full year point of view grew in double digits.

Coming to profits. The EBITDA, we delivered an EBITDA of INR 312 crores, at 4.9%. EBITDA grew by 4.6% on a Y-o-Y basis. And on profit before tax -- before exceptional items, we delivered a profit of INR 250 crores at 3.9%. Actually, we arrested the 3 years decline in profit. So over the last 3 years, because of cord competition and cost, we saw a decline in profit, but this was the year we saw that arrest, we arrested the decline and the profits grew marginally by 1% year-over-year.

Just to give a little bit of color on the profits. The profits in the first half were impacted by the price adjustments, which we are forced to take to character competitiveness in the marketplace and the significant impact of regulatory cost changes which happened, which impacted our costs. However, in the second half, because of the significant volume growth and the cost productivity actions, which we took also helped by the softening of the commodity prices and all the actions, which is the ROI based investment, which Mr. Eswar spoke about, and the focus on driving mix had led to a 58% growth in profit in the back half of the year, ultimately leading to a full year profit growth of 1.4%.

On the cash side, we generated INR 535 crores of cash in full year '23, '24. Cash was driven by, obviously, EBITDA as well as the improvement in working capital. Improvement in working capital was led predominantly by the inventory management. There was an organization-wide effort to improve the quality of inventories and reduce slow-moving, nonmoving and obsolete stock which was basically a paid inventory for us. And as a result of which we saw an improvement in working capital and hence, the cash generation.

On Slide 25, this is the -- this slide talks about the financials on a consolidated basis. The difference versus last slide and this slide is about the Elica performance. On a full year basis, we delivered a revenue of INR 6,830 crores. Our revenue was up 2.4%. We already spoke about stand-alone business. On the cooking side, Elica grew revenue in high single digits. So Elica revenue grew by about 8%.

On profit side, on a consolidated basis, the highlight is that we grew profits in high single digits. Both EBITDA and PBT grew by about 8.8% and 9.8%. And Elica continues its good strength on profitability and the profit for Elica business grew 40% Y-o-Y. And on a consolidated basis, we generated INR 610 crores of cash, again, driven by EBITDA and strong working capital improvement versus last year.

Moving to Slide 26. This talks about the quarter 1 financial performance, while Mr. Eswar spoke about the stand-alone performance. So hence, I'm covering the consolidated performance, which includes Elica. From a top line point of view, we delivered revenue of INR 2,497 crores. I'm happy to state that this is the highest ever revenue we have clogged in any quarter in the financial year, and this is a growth of 22.5% versus last year. This revenue growth was driven by strong market share improvement on the back of various actions we've taken around the strategic imperatives, also helped by the double-digit growth in refrigerators as well as the air con industry. A point worth highlighting both refrigerators and washers grew in high double digit for us.

EBITDA, we delivered a consolidated EBITDA of INR 211 crores at 8.4%. EBITDA grew by 71% last year, and there was an improvement of 230 basis points. And profit came in at INR 196 crores, that was almost double versus last year, and PBT percentage was 7.8%, an improvement of 300 basis points versus last year.

A little bit color on profitability. So both EBITDA and profit improvement were driven, a, by the strong volume growth, we saw a 22.5% growth in top line, which automatically translates to a significant improvement in DCM, fixed cost remaining flat, so everything flows in the bottom line, plus a significant improvement also came from the cost productivity actions. A lot of work happened on the commercial negotiation and technical productivity to the market forces of commodities or flattish versus last year. But called internal efforts on cost and the P4G actions led to the margins improvement, coupled with the entire focus on driving mix of high DCM and premium portfolio of the business, and this has helped us offset the pricing challenges and the regulatory cost impacts, which we had.

On the cash side, on a consolidated basis, that remains a good story. The efforts on managing working capital inventory and the accounts receivable remains. And in this quarter, we have generated healthy -- on a consolidated basis, a cash of INR 491 crores, which is significantly higher than last year.

With this, I've covered the financial performance, and I pass it back to Ms. Roopali.

[Roopali Singh, executive]

Thank you, Aditya. I would take an opportunity to thank both Mr. Eswar and Mr. Jain for such a detailed presentation. I would now hand the proceedings back to the moderator to open up the Q&A session.

[Operator]

[Operator Instructions] The first question comes from the line of Aniruddha Joshi from ICICI Securities.

[Aniruddha Joshi, analyst]

Two questions from my side. In the previous conference call, you had indicated a revenue guidance in high single digits, but now we have seen very strong performance in quarter 1. So will there be any change in the guidance? And if you can indicate the revised guidance that you are looking at? That is question number one.

And then question number 2 is, while the company has gained market share, is there any strategy with which the company is working in terms of gaining market share, for example, 1% market share gain each year or market share gains in premium end of the market? Or anything that you would like to elaborate? And what will be the key triggers to drive the market share growth? Is it the distribution in your regions or gaining market share in the existing regions itself or launch of new products or in a way, price cuts or aggressive ad spend? So just wanted to more clarification and data on this from you. That's it from my side. And congrats for great set of numbers.

[Narasimhan Eswar, executive]

Thank you. Thank you, Anirudh. Much appreciate. I kind of knew this question would come. Well, I would say that we are not giving any guidance, et cetera, for the full year. What I can assure you is that investors with us, I mean, I can assure you that we are putting in every effort to make sure that we try to meet your expectations. That's about the maximum guidance I can give. We -- as you know, we are a listed company here, a listed company in the U.S. So I don't want to talk too much about the guidance that we've not given elsewhere.

So we've done -- I think we've had a very good first quarter. Everything depends -- the growth actually for the year depends on a couple of things with respect to the revenue, right? First, it depends on the market, which is very difficult to predict what happens to the market. Second is your market share. So those are the 2 things that basically help to go towards your in organic business growth.

While market is very difficult to predict what will happen or not happen, our focus will be to try to keep our market share strong, because at the end of the day, profitable market share growth is actually what, as I said last time, is what we want to focus on. So growing market share but growing profits at the same time. The intent is not to grow the market share and drop the profits because that's not a sustainable model in our view.

Now the second part of the question, I can answer in a little bit more detail, which is how do we look at gaining market share. What are the triggers to driving the market share. So firstly, the key for me would be to drive market share profitably, which basically means if I grow revenue, ideally, I should be growing profits ahead of revenue. That is the intent. There could be quarters in which we are not able to do that, but the intent would be to do that all the time, right? That is -- that's what I would say a good company does.

There are many triggers as I think you know much better than me. The -- obviously, new products and innovation is obviously one great trigger. The right pricing for the right product is another trigger. All of the sales fundamentals and execution, you called about distribution being available in more stores, but you can also imagine extraction, which is basically taking out more volume from the same store from the same number of displays that you have in the store. So your display share is also a driver. Your different categories can be drivers. Some categories growing faster than the others, the lower penetrated categories, which have momentum growing faster than the other, can also be something that grows.

Within this, obviously, we try to drive our premium market share harder than our, let's say, popular for lack of a better word market share, the entry-level products. But of course, sometimes the season is great. The entry-level market share will go up. So that's okay. So long as your premium market shares are going in the right direction that you wanted to, there are times given the Indian market where the entry-level segment really grows very well and being a leading player, your market share grows faster, you will end up with an entry market share grows faster than your premium market share. We are okay with that. So long as we're growing in premium.

So our strategy would be exactly what you called out, which is driving all these levers, having a very clear idea of which we lever to use when, having a very clear focus on return on investment in each of these levers because as you can imagine, I only detail some of the sales and marketing levers, there are many of them, right? So we are trying our level best to do this in a scientific and rational way so that we can always try to get to our goal of profitable market share. I hope I answered your question.

[Aniruddha Joshi, analyst]

Yes. Just last question, and then I will come back in the queue. We are seeing e-commerce is becoming a very major force in the entire consumption basket, especially in white goods and durables also. Now with ONDC platform also becoming a bit bigger. So in next 10 years, this will be likely to be a major driving force in the entire distribution. So what are the strategies of Whirlpool in this entire thing? And what are the market shares in e-commerce platform compared to, let's say, GT or MT, means I don't want the exact number, but are they higher, materially higher or lower or materially lower? Anything directionally would be very helpful. That's it.

[Narasimhan Eswar, executive]

No. Thanks a lot, Anirudh. So to answer your question on e-commerce, well, we -- obviously, we are present on all the things that we mentioned. We are present on the key e-commerce platforms. We're also present on ONDC since the end of last year. Like you rightly say, it is growing and it will continue to grow on a going basis. I think the way we look at this is that we don't want to favor any one segment or platform at all. These are just different ways of reaching our consumers, right? And we also include in this our own D2C business, as you recall. We've called that out also as a strategic focus going forward. And that's something that we'll continue to introduce going forward as well. We already have a D2C website and a platform.

So to answer your question, yes, very much e-commerce is part of the plan. We have no, let's say, aim to grossly drive one channel versus the other, absolutely not. We plan to basically drive all the channels with respect to the financial return that we get out of the channel and also the long-term ability for that channel to kind of contribute to the industry and contribute to our growth, right? So that is the basis on which we make our investments, and we continue to make investments in both e-commerce and in D2C including ONDC. Now that's the first part of your question.

In the second part of the question, the market shares are kind of pretty much, much of a muchness. It's very difficult for me to give you exact idea. The reason is because the numbers are slightly different across different. But I would say it's more or less in the same ballpark. So it's not like we're massively below in one versus the other. It's more or less in the same ballpark between e-commerce and traditional trade, which also shows that, like I told you before, this brand straddle geographic strata, it straddles premium and popular. It straddles different channels, it does pretty well across the board.

[Operator]

The next question comes from the line of Priyank Chheda from Vallum Capital.

[Priyank Chheda, analyst]

Congratulations for the great set of numbers. Sir, my question is on the gross margin, particularly for the June quarter, which you saw, which is seasonally strong for refrigerator, but we have seen seasonally slightly lower than what we see for the rest of the 9 months. So is refrigerator a lower-margin business versus washer on a relative basis? If yes, then why? B, how should we think when it comes to the full year gross margins after all the price corrections that we have taken vendor negotiations are getting initiated? So where should we end gross margins for the full year? And on the P4G program, if you can talk if there are additional savings less below gross margin, which is trade, employment, employee cost or advertisements, is there anything that we should think we should approve in this year below gross margin as a savings? That's from my side, first question.

[Aditya Jain, executive]

Yes. Thanks, Priyank. This is Aditya. And I will pick up this question. First thing I just want to say that because a listed company, and we are not giving short-term guidances so I won't exactly be able to tell you like how will my full year gross margin will look like, et cetera, et cetera. Having said that, to your question on whether refs versus washers, the margins are significantly different. So not significantly different. Both of them are ballpark in the same range. So it is not that one is significantly better than the others.

In this quarter, we've seen a year-over-year improvement in gross margins predominantly coming from the benefit of the productivity actions. And hence, you see roughly 1.5 to 2 percentage points improvement coming from the material cost line. So as we've explained, we have a very structured P4G program, there are teams, both on commercial negotiation sides and the technical side who work on driving those productivity initiatives for us to deliver those cost savings apart from whatever happens on the commodity side in the market.

To your points on line items below material cost, which is your employee cost and all other expenses. We also have a P4G program in which we capture the indirect costs. So while material cost is a direct cost, but we also capture indirect cost and the teams are working on it. The idea is not here to cut the cost, but you open cost optimization as a principle that how can we get more from the same level of costs or how can we do the same level of work at a lower cost principle. So there are -- teams are working on each of the line items, but then material cost being the significant part of the P&L and roughly 70% of the cost of material cost of the entire panel, hence, that's where you'll see the biggest amount of productivity, which is reflected in the P&L.

[Priyank Chheda, analyst]

Perfect. Perfect. Coming to the season, which is for the washers, if you can elaborate overall strategy for the season, which has already started, how do you see industry growth panning out given the strong monsoons? And we are slightly weak on the front load side as far as the whole category goes. So how are you bridging the overall portfolio, making the overall portfolio ready for -- to gain the maximum out of the current ongoing season? And if you can also elaborate on this washers as the category, which I've seen solid competition coming up from the entry-level peers like Voltas Beko, how is the overall competitive intensity panning out for you, particularly for the washers?

[Narasimhan Eswar, executive]

That's a great question. I'll try to answer it as best as I can without revealing too much because, as you can imagine, we are a listed company and some of our competitors are not. So I would be absolutely loath to give out any information that coul prejudice us in the marketplace. How do I see the washer season coming through, very frankly, like I said right at the beginning, very difficult to predict. I wish I could predict it, and I could share that with you, because it would be helpful for me as well. But it's very, very difficult to predict how the washer season could be. I think the summer season was better than what anybody expected. The best of the best did not expect this good a summer season, especially for air conditioners.

And so I am only hoping that the washer season is good. But to be honest, what -- like I said, what we focus on is trying to focus on market share so that we can be sure if your market share grows, you can be sure of at least some of your growth. If you're counting on market growth, that can be in the short run, a little bit of a misleading thing, because if it doesn't come, then you are in soup. So everything that we do is based on trying to drive market share, like I said profitably. So we basically got 3 businesses, which is our front load business, our top load business and our semi-automatic washing machine business.

So I think you talked about competition. I'm not going to go into which brands and so on and so forth. But yes, it is quite competitive, and that's great, because it's good for the consumers when it's competitive. We welcome that competition. It's very inspiring for us. So we have special plans for the washer season. You will see it in the market. We have already taken some actions. Actually, to be honest, I don't want to say it on the call. But if you actually make some inquiries in the market, you will already know, actions we've taken on semi-automatic, you will know the actions.

For example, I already spoke to you about one thing on front loading that you asked about, that we've actually gone to a 5-year comprehensive warranty on the front load washing machines. So fantastic new products with a 5-year front load washing machine. If you look at our top load business, which is basically the top load vertical access machines. We've just got advertising on after many years with the Unilever, Whirlpool ad. If you see that ad, what you will see that what is featured in that ad, what is the Bloomwash series, which is our flagship product in top loaders.

And in semiautomatic washing machines, which has historically been a big, say, success for us, but of late has been something in which we've had some challenges in share. We have taken a couple of steps we have taken some corrections in pricing. That should help us through the season. And the second thing that we've done is we've launched the Dynamix detergent dispenser in the semi-automatic machines, which is the premium end of semiautomatic machine.

So all in all, more to come, but I think we have a decent plan for the washer season. For us, the critical thing is we're not so bothered about other people. We just want to do what we need to do, which is grow our market share profitably. And that's basically our focus.

[Priyank Chheda, analyst]

Perfect. So just the last question on the market share gains. The 3 levers which you have alluded to which is additional brand promoters, second is new product launches and third is mix. Would it be by any chance possible to break down the contribution from the each of the 3 levers, which are contributing to the market share gains? And as a result, most likely the Koreans would have lost market share, even the last share that they would have. Any reason would you like to ascribe why such that is happening in your industry? That will be my last question.

[Narasimhan Eswar, executive]

Sure. I think, to be honest, we can't really give that breakup because like I said, that would literally serve the answers up to everybody on a platter, and it's taken us a lot of hard work to figure this out. So unfortunately, I can't give more color on what contributes how much. Needless to say, it's not just these 3, there's a lot more actually, which I haven't detailed out. There's a huge amount of work. If you remember, I also talked about the sales incentive structure. There are -- it's not just stuff that costs money. It's also how we use the stuff like what Aditya was saying. The incentive structure is another big thing. There are several things that we've done, whether it's display shares, whether it's distribution, whether it's extraction.

So there's a lot of work that's gone in. It's not only these 3 levers. These are 3 of the levers, which are a little prominent, but there are many others that have led to this. So I think the combination of these things done the right way with the right investment behind each. That's what we need to get right to get profitable market share growth basically.

And as far as other players are concerned, I think, look, I mean let's be honest, it's not a one-way street for anybody. I think we've seen years in which our market share has gone down. I think those numbers I shared with you in the beginning. That was the same company. And does it mean it can never happen again? Yes, it can happen again. We are paranoid about making sure that it doesn't happen again. But this is a competitive market, and people take competitive actions. All we can do is focus on what we need to do. We are really not desperately focused on others.

We look at competition, what they do in the market to understand what they're doing and to understand the impact of what they're doing surely through the market shares, but we spend a lot more time on making sure that we are running the race we need to do, if that makes sense. That way, we can be sure of ourselves rather than looking over our shoulder at somebody or looking ahead at somebody and saying, how do I catch up? I think these need to pace ourselves and just do it right, that's all.

[Operator]

The next question comes from the line of Ravi Swaminathan from Avendus.

[Ravi Swaminathan, analyst]

Congrats on a good set of numbers. I know this quarter had been good because of the strong summer season. But in general, the demand environment, especially post COVID had been slightly soft. If you could give some commentary on the demand scenario on a normalized basis. How it is on a pan-India level? Probably, if you can give a commentary on how rural is, urban is, that will be great.

[Narasimhan Eswar, executive]

It's a great question. So I think this is actually the, I'd say, one of the trickier questions to answer. What has actually happened that we can see post COVID is that there was a big bump post COVID, basically, when people came back to the market. There was a massive, I would say, a significant market growth. We're talking about 20% odd growth basically. Unfortunately, we couldn't participate in that growth for various reasons at that point in time. But then what's happened post COVID is we see on an ongoing basis is outside of these big spikes, the market growth has been a little subdued, okay, to be honest. And the reason that's happening is because what we can see for sure is that the premium segment of the market has certainly been growing really fast.

But the belly of the market, the entry level of the market, that has not been doing massively in the last few years, right? Now I do believe that -- and of course, I'm not economist at all, by any stretch of imagination. But I do believe that kind of having the GDP growth that we have, the trickle down should happen. I do believe that post COVID consumers were spending on a lot of things that they didn't spend on during COVID. If you look at house prices, they went up so much, basically, extraordinarily. Rentals went up extraordinarily. Travel, we all know how brilliant travel was. People only get a certain amount of money every year. So you get INR 100 last year. Next year, you get INR 110, INR 109 salary increase. You choose where you put the extra INR 9, because the INR 100 is already accounted for.

Now I do believe that a lot of people in the last 3 years put their money in a lot more travel wanting to see the world, want to look at different places, almost catch up on all the stuff that they didn't do. So there was a significant increase in travel, as you know, from the reported figures. Hotel costs went up because of the travel. So all of these were inflationary in nature. And I think durables really didn't get the full benefit of this growth. Now I am hoping, being an optimist, that at some point in time, hopefully, that is from next year onwards, but we never know that this growth comes back and we start growing at least at the rate at which normally the country would be expected to grow, a country like India with its kind of growth would be expected to grow. So I think that is the one thing.

And the second thing is the other thing that usually drives growth in inflation. So the inflation in this industry typically has not been very good at all in the last few years, driven by intense competition, and I'm sure by decisions that different companies are making on their own. So there are 2 components to it, therefore. One is the volume growth and the second is the value growth on top of the volume growth. The value growth has been very muted, only driven by premiumization, more or less, I mean, predominantly, and the volume growth has not been that great in the entry and the mid level. Basically, it's been much one of the premium segment.

But I do believe that in a country like India with the kind of population that has, the rate at which the middle class is growing, some of the lovely announcements that have been made with respect to the number of houses that will be built going forward, et cetera, when you build a house, the house will hopefully need a refrigerator at a minimum, maybe it needs a washing machine, some of the houses, maybe some of them need air conditioners surely. So I am hoping that these things are actually going to start contributing to the growth, not just at the top end of the market, but in the belly of the market as well.

[Ravi Swaminathan, analyst]

Understood, sir. And my second question is with respect to pricing. We know it's a very competitive market. It has been competitive, it is competitive and likely to be competitive. But some factors like pricing probably would be at the margin. So at the margin, have things improved over the probably last couple of years or is it at the same level or has it worsened? So the elbow room for you to increase prices in your products, has it improved?

[Narasimhan Eswar, executive]

I would say what we are very clear about is that it's a very competitive market, like you said. In this category because the cost of the product is very high, the price impact is quite significant. I think we've openly discussed that basically and talked about how that affected when we were at a price premium versus, say, competition, how it affected our market shares and so on and so forth.

So I would say it is market-determined. If there are opportunities in the market to take pricing, I think companies will take them, and everybody takes it independently. In the absence of any companies taking our pricing, obviously, the value of the market would continue to be depressed. So it's a very difficult one to predict or plan for. Obviously, the one variable in this is commodity prices, ocean freight, all these costs going up. So just common sense says that at some point in time, that should be something that we look at basically. And I'm sure everybody will do their own mathematics on the topic.

[Ravi Swaminathan, analyst]

Understood. And my last question is with respect to the premium products. You had mentioned that the premium products have grown faster than the entry-level products. So the percentage of shares would have obviously gone up over the past few years. I mean, if you can share the number of what is the premium product share, say, double door refrigerator in the overall mix and automatic washing machine in the overall mix? And how we can read over a 3, 4-year period?

[Narasimhan Eswar, executive]

Yes. Sure. We don't give out the share data by segment or so on and so forth. It's just something that we don't do. But I can kind of tell you that our -- typically, our shares are higher on the entry level historically than they are in the premium level. And therefore, the -- I'd say the room for us to grow in premium is more. And so what we try to do is make sure that we get a certain amount of growth in the premium segment. Like I said before, there are sometimes when the entry level actually grows faster because the market is faster and we are quite strong in entry. So we end up getting a higher growth there. But strategically, we'd like to see the premium shares growing ahead of any on a going basis on an absolute percentage basis point growth year-on-year.

So for example, if you're -- I'm just making up numbers, if your premium share is 12% and your regular share is -- or the entry level share is, say, 15%, right? You'd like the higher percentage of growth on your premium shares than on your entry share, so that your financials were got better, your mix is better. Obviously, the more premium products that you have, the more you can drive them, the better off you are as a company from many points of view. And so that's what we really try to focus on. Unfortunately, numbers, percentages, et cetera, we are not able to give out.

[Operator]

The next question is from the line of Amit Mahawar from UBS.

[Amit Mahawar, analyst]

First of all, congratulations on achieving a lot of operational turnaround, if I can call it, since you joined at a very difficult time and it's reflecting also in the cash flows, not only in the P&L. My first question is more on if you see what you've done in the last couple of quarters, a lot of representation, which was missing for Whirlpool in the trade channels, right? You have more people on floor, shop floor to market, Whirlpool products. You've actually expanded the SKUs both in ref and washing machine across 4, 5 categories. Can you just help us understand, sir, what is the -- which are the segments where you've gained more market share in ref? It seems it's more in DC versus FF. Can you just help us qualitative understand the change in market share across categories in both the key categories of ref and washing machines?

[Narasimhan Eswar, executive]

Yes. I think -- thank you, Amit. Look, I think you know more than me. So you're right, pretty much everything you said is right. We have done a lot, to be honest, Amit, on a lot of areas, because execution was something that we were very keen to get right. Like I said before, strategies are great. But if you want to execute them in the market, then they are meaningless to the consumer. We have invested a lot in trade channels, basically, as you talked about people on the shop floor, explaining our products to the consumer, which we see actually as a way of marketing. So we have done that.

We have done a huge amount of training for them. We have made sure that they are kind of comfortable with not just the products, but the proud ambassadors of the products. We have brought in new products. Just to give you a couple of examples, the DC, we brought in 5 Star after a couple of years, basically. We've brought in the 5 Stars doing very well. We brought in the frost free range, we brought in the 3 star after quite some time. So that's been doing very well as well.

Like we just talked to you now, we got in the glass doors into DC that we never had before, which is quite a cool thing because a brand like Whirlpool bring in glass doors, it's wonderful. And it's like -- I talked across some time in the market to Bangladesh to basically see in pretty much the whole market there is in glass doors. So glass door is a wonderful thing that we brought in here as well. So we've brought in a lot of new products, but that's not all. We've done a lot of executional change in a lot of areas. And therefore, I think focusing on that and driving that is what we really are clear about.

And like I said, we put down so many different things, basically. And we say, okay, which ones -- what are the kind of bullets that we have for each of these? So obviously, a direct -- I mean, I'm sure she know about this, but our direct cool performance has been very -- we're very happy with that. And frankly, our interest will be to make sure we continue with that kind of growth. I don't want to say too much, but if you see the shares, you'll figure out what I'm talking about.

The direct cool refrigerators business, we've had some very good success. We started seeing the turnaround on frost free as well. But I think for us to kind of even think that whatever share increase we've got is ours to keep. That would be folly. It is a very, very hard fought battle. And it's got great respective competitors, who I genuinely respect. And therefore, I think we've got to be on our toes all the time.

And in washers, for example, we had very, very good success in our top loading washer business. But we -- I'm pretty sure that we will try to bring that success to bear in our front-loading washers business as well, where our share opportunity, as you know, we've been active for the last 2 years. Others have been active for more than a decade. So in front loaders, we have a tremendous opportunity to grow the business. And we will absolutely focus on trying to do that.

So for me, there is a lot of opportunity that we have, basically. Obviously, the key is to invest in areas that can give you a return. So that we can focus on profitable market share growth. But I must say that you pretty much answered your question.

[Amit Mahawar, analyst]

Second question is a lot of low-hanging fruit is what you seemingly have achieved during the course of broadly achieving it. But you also have some of the tough competition now in Beko, which was non-existent when the last big management team had happened. And I'm not worried about competition for Whirlpool, maybe Whirlpool and Beko as a strong player will lift the category and cut down the tail. Do you think for you in the next 3 years, say, by '26, '27, the SKUs that you track and then you plan in the market for these 2 categories, you'll be able to cut down the gap vis-a-vis, say, if you compare with LG, Samsung, particularly if I can name them? Do you think that's a very strong and important target for you?

And in that category, when you do that, it needs a lot of innovation, which anyway, you're trying to drive. So any color about how the SKUs across key categories will move in the next 2, 3 years? I understand the limitation with which you can answer this, but anything incremental is helpful, plus the factory setup you have now, we have much and much less imports now, so something around that.

[Narasimhan Eswar, executive]

Sure. I think it's a very good question actually, and I was expecting this question. I think it's a very good comment that you make, and it's a very fair thing to say that there are low-hanging fruits. But to be honest with you, what we've tried to do, Amit, is we have tried to figure out all the fruits, okay? Some of them are low hanging, some of them are medium hanging and some of them are high hanging. So the critical thing that we've tried to do is figure out where are these fruits? How big are the fruits? What is the momentum of these routes, okay? How big is the runway for these groups. That's what I was trying to explain at the beginning. So what we've tried to do is come up with a menu of things that we could potentially invest in. And what returns could that get?

And so in a way, while this is a bit theoretical, but you have to invest money according to a certain theory. So we worked that piece out. Obviously, it's not an exact science. But we worked that piece out to say, what should we be doing at what point in time. So I think we are not counting on any low-hanging fruits. Obviously, if they are there, we'll plug them, but we are not counting on low-hanging fruits to basically drive success going forward.

Now I think the question that you were asking me, basically, if I can reframe it to say, what is the ambition that we have. I will not state a specific number or something. But to be honest, I think you play games or you play in arenas or battles with only one intent, to win. So that's what we want to do. We want to win. And we know that it's a long, hard road to win eventually. And we got to win year after year, quarter after quarter, month after month, week after week, day after day. That's how you win in the long run. In the battle, sometimes you lose, sometimes you win. But if you win much more often than you lose, that's how you get to your goal.

So our intent is, like I said, very simply to drive profitable market growth through identified levers, which we are fairly clear on, which we track and measure with discipline financially, that we try to execute as a team. And I think what I'm happy about is that the entire team is basically thinking that way, whether you talk to the leadership team here or you talk to people who are executing in the field, we're all kind of trying to think in the same way. We're not perfect at all, nowhere near that, but we are trying really hard.

And I think the intent will be only one which is profitable market growth, sensible market growth, but market share growth, but continuously. And so whatever market growth comes on top of the market share growth for me is like, wow, that's bonus basically. But your salary is market share, your bonus is market growth. That's the way we like to look at it. And we like to invest it in sensible ways. I think if you have an open mind and if the organization is harnessed properly, there are so many opportunities that can be leveraged.

In fact, just to give you a small example of how the organization is working now, the idea to do a consumer promo on the front-load washer machine, actually came from a sales team in Hyderabad. It does not come from the central office. So it doesn't mean the central office doesn't give ideas. They give a lot of ideas, which are implemented. But we are very proud of the fact that ideas are coming from the ground up basically, and we are implementing those, and we implement them fast. And if we see the proof, then we go really quickly. So I think we have a lot of stuff to do. A lot of baggage to overcome, but it's a very interesting fight, and we are happy to be in this fight.

[Operator]

The next question is from the line of Umang Mehta from Kotak Securities.

[Umang Mehta, analyst]

Sir, just wanted to understand for this low double-digit growth that market did in first quarter, what would have been the growth for economy end, so basically the direct cool range. Any sense around that?

[Narasimhan Eswar, executive]

Yes. I think most of the growth, as I'm sure you know, the most of the growth actually in the first quarter actually came from refrigerators. So not most of the growth, all of the growth between refrigerators and washers came from refrigerators. So refrigerators had a very strong growth pattern. Both the direct cool range and the frost-free range actually grew quite significantly, strong double digits.

[Umang Mehta, analyst]

Understood. And the second question was again on gross margins. So while I understand on a Y-o-Y basis, the reasons that you explained. On a Q-o-Q basis, is there a mix element at play for the contraction? Just -- that was my last question.

[Aditya Jain, executive]

Not a significant one which will impact the Q-on-Q margin. So mix, as I explained earlier that the margins between ref and washers is not significantly different. So that is something which doesn't impact the margins, the mix -- not a significant impact on margins.

[Umang Mehta, analyst]

Then what was the -- I mean there's a substantial contraction on a Q-o-Q basis. So I just wasn't able to understand the reason behind that.

[Aditya Jain, executive]

So what really happens in April to June quarter is, a, your mix of the products, for example, AC becomes significantly higher which has a relatively lower margin compared to our core T2 product. So that is one factor which impacts quarter-on-quarter margin. And the second factor is about the summer. For example, there are a lot of promotional schemes which are run in summer, which is not there in your Jan to March quarter. So because of these 2 reasons, you see that sequentially, you see your gross margins could be a little lower in quarter 2 versus quarter 1. So those are the 2 big reasons which impacts your sequential margins.

[Operator]

The next question comes from the line of Rahul Agarwal from Ikigai Asset Managers.

[Rahul Agarwal, analyst]

Compliments on not only 1Q, but what the team has achieved over the last 12 months, it's really commendable. The first question initially was on the import content, my sense is just wanted to know how much are we importing right now from a material perspective, both for Whirlpool and Elica? And where are we right now? And what kind of changes -- should we expect any changes over there? That's the first question.

[Narasimhan Eswar, executive]

Okay. So you're talking about finished goods, right? So most of our -- almost all of our business is basically made locally. Refrigerators, washers, air conditioners, everything is made locally. There's a very small -- extremely small proportion of business that's imported I think over time, the intent will be to make everything in India. I think that's the intent very frankly, that the country has overall as a country, and that's the intent that we would have as well pass down on a lot of supply chain inefficiencies and complexities and so on and so forth. But obviously, all of that localization whether it be on finished goods or on components, it's going to depend a lot on, a, readiness of the local market, which is very, very, very depending on what the situation is, depends on the regulatory kind of rules and regulations that come in about what should be done by when. And also depends a lot on the competitive environment with respect to cost quality between local producers and international producers, right?

So there's a lot of factors that go into this. Without going into the details because I cannot share with you, unfortunately, again, because we're a publicly listed company. I cannot share that information in detail. But what I can do is tell you that as a team, we've put down all of the stuff, and then we prioritize what should be done by when. That piece of work has been done, and we're working on it, all of them as you can imagine, fairly complex projects. And we're working on those projects to make those come through. I think it will take a few years because there's a lot of, let's say, a lot of things to be done before everything can be done locally. As you can imagine, in every industry is the same story. And certainly, we are no exception as an industry.

So we also closely work with industry bodies to make sure that the opportunity of making here versus the cost of making here as well as the regulatory requirements, all of those are basically managed in such a way that has become viable for the industry and not unviable. I think that's the key really.

[Rahul Agarwal, analyst]

Just a follow-up on this. So in terms of -- I was actually referring to components also, like how much are you importing right now? What's our import content?

[Narasimhan Eswar, executive]

Yes. So that is something that we will not be able to speak about, to be honest with you, because we don't share that information publicly. We haven't shared it and we don't plan to share publicly as well. But it's something that, to be honest, pretty much if you know the industry number, it's pretty much in the same range, more or less, there will be 1 or 2 players who are more localized. There will be 1 or 2 players who are less localized, but quite a few of the payers will be right in the middle.

[Rahul Agarwal, analyst]

Got it. Your second question was, of course, we have done enough to recover back to what positions we are right now. But in terms of your team, where will you be spending your time on over the next 12 months in terms of the top 3, 4 challenges in your mind, which are still a gap or a challenge that you see and we'll spend time on?

[Narasimhan Eswar, executive]

Yes. I think, basically, if I look at what do us, what do we as a team basically spend time on. I think the first thing that we spend time on is very frankly, profitable market share. how do we basically secure market share and continue to grow market share, but how do we do that profitably, right? So that's the first big one because it's a very competitive marketplace, very, very good competition, very tough competition. People -- nobody wants to kind of take a step backward in this game. So the first thing that we look at is profitable market share.

Then, we basically look at working on our own cost programs, basically, which is absolutely crucial. So first is to drive the revenue. Second is to make sure that we're working on costs. We are always conscious that there are headwinds that come. Sometimes the headwinds are very, very strong. I would say right now with all of the stuff that's happening on ocean freight and commodities, et cetera, it is harder headwind than has been done in the past, and it's true not only for us, it's true for entire India. It's actually true for the whole world as well. So commodity headwinds are quite significant.

Competition, I think, is the other one. But like I said, what we do is we understand what they're doing in the marketplace based on their actions in the marketplace. And we figure out if we need to adjust our strategies or not. The other thing that really is very critical for us is to make sure that we have a very clear vision, we have very clear strategic imperatives. All the people in our organization are aligned to the strategic imperatives, and we march to the same drumbeat. So making sure that the organization is marching to the same drumbeat and everybody is seeing the same song is an extremely important thing for the leadership team, which is what we force on.

[Rahul Agarwal, analyst]

Got it. I really appreciate to hold this call. I think as a shareholder, just request that if we have this periodical discussions, it really helps to understand the business better. So hope to meet on future calls as well.

[Operator]

The next question is from the line of Shrinidhi Karlekar from HSBC.

[Shrinidhi Karlekar, analyst]

Just a couple of clarification. Did you mention that both economy range as well as premium range of product did excellent for the refrigerator category in Q1 and you have had gains in both direct cool as well as frost free subcategories?

[Narasimhan Eswar, executive]

Yes, please. So when you say economy and premium, you're talking about direct cool and frost free, I presume. Because the way we kind of look at it is within direct cool, we look at entry, middle and high kind of thing, right? So I think if you're asking did the direct cool business as well as the frost free business do well in the first quarter, the answer is yes, both did well, from an industry point of view.

[Shrinidhi Karlekar, analyst]

Okay. And within the DC as well, did entry also did well?

[Narasimhan Eswar, executive]

Yes, yes, because I mean, it was a very hot summer, as you can imagine. So entry from a market point of view, also did reasonably well. What I think is also -- so all the segments actually grew as far as refrigerator is concerned entry, mid and premium across DC, direct cool as well as frost free. So all of those segments grew, yes.

[Shrinidhi Karlekar, analyst]

And sir, the share gains you have had in both DC as well as frost free?

[Narasimhan Eswar, executive]

Yes. Yes. I will not be able to share the details. But yes, we've had -- obviously, there are differential. Our share gains in DC have been more than frost free, but both have grown, but we had some very good success in DC.

[Shrinidhi Karlekar, analyst]

Great. And just second question I had that is what we are seeing is that channel mix is shifting in India. It is moving more from general trade to e-commerce and modern format retailers. How do you see this as a -- do you see it as a headwind to the profitability industry and therefore for the company like Whirlpool and creates a lot of channel? Or do you think it doesn't really change much from the profitability of the industry perspective?

[Narasimhan Eswar, executive]

That's a fantastic question, actually, honestly. You're right, there is that kind of a shift. But I think first, I think based on all the experience that we've seen across the world, not only in this industry but also in FMCG that I worked for many years, it's not going to be a complete shift with nothing happening in traditional trade. That's never going to be the case in a country like India. You're always going to have a traditional trade business, purely because of scale and a lot of other reasons, right? So you will always have the traditional trade business in India, and it will always be a reasonable chunk of the total business, firstly.

So I think while on the one hand, margins can be affected by shifting to more organized trade for obvious reasons, the other advantage that you have is because you are displaying and you're driving the visibility and you're providing a nice environment to shop in, et cetera, et cetera, propensity you increase your basket also increases. So I think to be honest, the way I look at it is India is an amazing story going forward because if you grow at a GDP growth of about 7% to 8% a year, hopefully, even more going forward, with the real rate of growth being that nominal you add on top of that, you're looking at a business that is going to -- I mean, a country that's going to grow GDP significantly. It's hopefully going to double its per capita 2030.

And then you're talking about a lot of people coming into the purchasing space. okay? So the belly of the market, if I can call it that, is going to become bigger and bigger, right? And when the belly becomes bigger and bigger, there is more and more opportunity. So imagine today, so it's not a zero-sum game. That's the point I'm trying to make. It is not a zero-sum game. That is the beauty of India, right?

So I am super happy that e-commerce grows and modern trade grows and traditional trade grows, because all of them will grow. And the reason I'm saying that is because, again, I want to reemphasize, India is not a zero-sum game. It is not a -- I will only grow by 3%. So if you grow, I've got to degrow. Not at all. There's space for everybody to grow in this amazing place. And it is not the case for the next 5 years, in my view, the next case for the next 30 years, probably, right? So at least in my lifetime, and I'm sure you are much younger than I am, but in both of those times, we don't have to worry about lack of growth.

So I think the propensity where refrigerators are selling mid-30s in penetration, refrigerators can go up to mid-60s, mid-70s, right? Washing machines are mid-teens. Washing machines can comfortably go up to mid-30s without a doubt. ACs are less than 10%. Why can't they go up to 50%? So the point I'm trying to make is in modern trade on e-commerce or whatever, you have a basket, a bigger basket, because you have more space, you have more people blah, blah, blah. And so therefore, whatever you lose in a percentage you might make up in an absolute.

So I think the beauty of India is that one doesn't have to worry so much about it. Of course, year-on-year, you're going to manage your P&L, absolutely. But in the long run, this is going to be a great story for the durables industry.

[Shrinidhi Karlekar, analyst]

One more, if I may ask. So if you look at your margins have improved quite sharply, but they continue to be like good 5%, 6% lower than what we used to do before COVID. So just wondering, do you think that margins are structurally going down? Some of the players in the air conditioner industry do call it out that structurally margins in India probably have gone down. So I want to hear your perspective, is there a possibility like structurally you can go back to the margin you have had before COVID, which in first quarter was typically 14% to 15%?

[Narasimhan Eswar, executive]

Yes. So I would -- to be honest, it's very difficult to predict. But what I can tell you is that the market is much more competitive than it was pre-COVID, all right? Much more competitive -- somebody on the call also has mentioned about very strong pricing action being taken by different people, et cetera. From our point of view, we are very clear that the long-term guidance that we have given is high single-digit profit margins. That's what we have given. And we absolutely stick only with that. And that's the long-term guidance. That's not tomorrow morning's guidance. It's a long-term guidance.

And the reason we are saying that is because we recognize that the market is a lot more competitive than it was in 2018. 2018, 2019, you had people exiting the market. Today, you have people entering the market. Everybody wants to come into India and grow the business in India, right? Every global CEO has declared India as their most important growth market, right? So this is just the reality. This is a fact of our great country. And so everybody will want to come and everybody will own market share. That means there will be pressure on profits and margins and so on and so forth.

And therefore, I think having massive margins probably is not very likely. At some point in time, I can tell you that when all the regulatory pressures as well have gone because keep in mind that when you have regulatory changes every 2, 3 years or 3 to 4 years, that also brings in a significant amount of cost into all players. Nobody is an exception to this, okay? So you've got competitive pressures, you've got regulatory pressures. All of these will impact people's margins. And therefore, I think steady progress year-on-year is the best thing to look forward to. We have called out high single digit in the long term, and that's what I think we can aspire to.

[Roopali Singh, executive]

Moderator, we are already over time. We'll take one last question before concluding the call today, please.

[Operator]

Certainly, ma'am. We have the last question from the line of Nirransh Jain from BNP Paribas.

[Nirransh Jain, analyst]

Congratulations on a good set of numbers. Sir, firstly, I wanted to check on the working capital. So if I'm not wrong, like we are a company that is already operating at close to nil working capital days for over the years. But what we have seen in this result also like we are able to generate a very strong cash flow because of continued improvement. So I just wanted to check, I mean, what -- like do we have scope for further improvement in the working capital and directionally being target for how much working capital days can go to?

And secondly, I have a question on the discounting part. So we have seen a consistent increase in the discounting over the past few years. But now considering that we have taken a significant price correction realigned our strategy in line with our competitors. So can we expect some moderation in the part of the discounting? So those were my 2 questions.

[Aditya Jain, executive]

I take the question on working capital. So our improvement in working capital right now has been driven more by inventories. What we've done, as I said in earlier part of my performance and results that as an organization wide, we have been looking on improving the quality of the inventories and hence, there is significant effort went behind liquidity slow moving, non-moving inventories. Now given the levels we are at currently inventory, is there a further optimization possible? Yes, you can always look at opportunities, but are the big opportunities available probably do unless significantly improve your capacities, for example, and then you say that you have significantly increased capacity, then you can work on a significant lower inventory. So that's one.

On the receivables side, again, it's a published number, the days you operate at -- we operate at pretty healthy days. And the third lever on working capital is accounts payable. So have we reached the end of it? Obviously, no. We will keep looking at opportunities to improve working capital across all the 3 levers between AP, AR and inventory. What are we targeting? Again, it's a matter of guidance again, and we don't disclose the exact numbers, but then opportunities will always be there in various areas as we look at each and every nook and corner of our business.

On the discounting side, I just want to give you a perspective of the numbers. If you look at published numbers on the balance sheet, year-over-year, not seen an increase in discounting percentage. It's more or less the flattish. If you look at the discounts of the DPI as a percentage of revenue, you've not seen any change on those numbers. Pricing is a factor of more consumer and competition led. So that will keep calibrating between what's happening in the market and what market can absorb, but the intent would be to hold the discounts flat to where we are largely.

[Roopali Singh, executive]

Thank you, Mr. Eswar and Mr. Jain for today's session. And thank you, ladies and gentlemen, for joining us today. With that, I hand it over to the moderator to close out the session.

[Operator]

Thank you. On behalf of Whirlpool of India Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.