CROMPTONNSEQ2 FY2023November 1, 2022

Crompton Greaves Consumer Electricals Limited

7,436words
57turns
9analyst exchanges
5executives
Management on call
Aniruddha Joshi
ICICI SECURITIES LTD
Shantanu Khosla
MANAGING DIRECTOR – CROMPTON GREAVES CONSUMER ELECTRICALS LIMITED
Rangarajan R. Sriram
MANAGING DIRECTOR
Kaleeswaran Arunachalam
CHIEF
Yeshwant Rege
VICE PRESIDENT, STRATEGY
Key numbers — 40 extracted
23%
e variations in the base period. Moving on. The consolidated quarter 2 revenue for the group grew 23%, representing a 3-year CAGR of 17%. Stand-alone revenue for Crompton declined by 3.8%. However, t
17%
ving on. The consolidated quarter 2 revenue for the group grew 23%, representing a 3-year CAGR of 17%. Stand-alone revenue for Crompton declined by 3.8%. However, this represented a 3-year CAGR of 7%
3.8%
e group grew 23%, representing a 3-year CAGR of 17%. Stand-alone revenue for Crompton declined by 3.8%. However, this represented a 3-year CAGR of 7% to 8%. Stand-alone Crompton business grew a health
7%
7%. Stand-alone revenue for Crompton declined by 3.8%. However, this represented a 3-year CAGR of 7% to 8%. Stand-alone Crompton business grew a healthy 21% in half 1 of this year. ECD revenue con
8%
and-alone revenue for Crompton declined by 3.8%. However, this represented a 3-year CAGR of 7% to 8%. Stand-alone Crompton business grew a healthy 21% in half 1 of this year. ECD revenue contribut
21%
However, this represented a 3-year CAGR of 7% to 8%. Stand-alone Crompton business grew a healthy 21% in half 1 of this year. ECD revenue contribution is in excess of INR 1,000 crores, it is INR 1,
INR 1,000 crore
on business grew a healthy 21% in half 1 of this year. ECD revenue contribution is in excess of INR 1,000 crores, it is INR 1,062 crores. Fans business did decline for the quarter. However, as I mentioned earl
INR 1,062 crore
hy 21% in half 1 of this year. ECD revenue contribution is in excess of INR 1,000 crores, it is INR 1,062 crores. Fans business did decline for the quarter. However, as I mentioned earlier, if you look at it f
10%
lightly longer perspective, the 3-year CAGR for the Fans business over this quarter was a healthy 10%. As you are aware, given seasonality and very high inflation, our Pumps business
20%
shoots of recovery there, especially this quarter in the specialty pumps business, which grew by 20%. The Appliance segment continued, albeit of a small base to really have consistent strong growth.
12%
tent strong growth. And even in this quarter, with the high base last year, delivered a growth of 12%. More importantly, it had a 3-year CAGR of 27%. This has been driven by a continuous program, whi
27%
ith the high base last year, delivered a growth of 12%. More importantly, it had a 3-year CAGR of 27%. This has been driven by a continuous program, which is now stretching over a couple of years of
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Guidance — 20 items
Shantanu Khosla
opening
“The one context I would like to provide before I talk the specific numbers is, given all the variations in the base period because of COVID, high levels in the previous base quarter due to the COVID, post-COVID, pre-buying, etc., we do think that it is important as you look at the results, you look in the context of both, the overall Half 1 performance and also a more longer-term 3-year CAGR as we try and assess the performance given the variations in the base period.”
Shantanu Khosla
opening
“The consolidated quarter 2 revenue for the group grew 23%, representing a 3-year CAGR of 17%.”
Shantanu Khosla
opening
“However, this represented a 3-year CAGR of 7% to 8%.”
Shantanu Khosla
opening
“However, as I mentioned earlier, if you look at it from a slightly longer perspective, the 3-year CAGR for the Fans business over this quarter was a healthy 10%.”
Shantanu Khosla
opening
“More importantly, it had a 3-year CAGR of 27%.”
Shantanu Khosla
opening
“In Q2 specifically, we kicked off our in-store retail transformation project to improve overall consumer experience and Crompton brand experience in stores.”
Shantanu Khosla
opening
“Our inventory and our debtor days continue to be on track and on target.”
Shantanu Khosla
qa
“So cost savings will be generated, we are already seeing good initial progress on that, but that will be used to invest in the business.”
Shantanu Khosla
qa
“As that happens, automatically, the bottom line margins we expect to come back to historical levels.”
Siddhartha Bera
qa
“And in the second half, do you expect some recovery on the revenue side for the ECD or it may take longer for us to see that book coming back?”
Risks & concerns — 9 flagged
Fans business did decline for the quarter.
— Shantanu Khosla
This business has continued to be a challenge due to the rapid decline of the conventional lighting business, which declined by 35%.
— Shantanu Khosla
This renewed approach had delivered double-digit growth in retail during the quarter across all three categories- the mixer, stoves, and pressure cookers.
— Shantanu Khosla
As in Q2, we have seen an impact on the ECD side from both destocking as well as weak growth.
— Siddhartha Bera
As we then move into the summer season, currently looking forward, it is very difficult to predict.
— Shantanu Khosla
Pumps, like I said, has been a challenge over the last 18 months, as you have seen in totality, part of it is because, obviously, because the season, the monsoon, this affects pumps, but part of it is also because of the fact that pumps is probably a more price-sensitive segment for us.
— Shantanu Khosla
On this drag, obviously, we don't have any plans.
— Shantanu Khosla
And B, in terms of the conventional business, while other companies are already down to some 5%, what is driving this slower decline in case of conventional business given the cost reductions in the LED, we have seen until in the last four, five years?
— Achalkumar Lohade
Front-end synergies, not just cross-selling, but importantly, how do we use the combined capability of the go-to- markets of the two organizations to get greater success in Butterfly weak areas such as the North, etc.
— Shantanu Khosla
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Q&A — 9 exchanges
Q
My first question is on Butterfly. If you can help us understand, last quarter, we had taken some price corrections as well, but looking ahead in this quarter, when we saw gross margins are broadly flattish on a sequential basis. So if you can help us understand how do we look at the gross margin improvement going ahead in line with pricing changes and portfolio mix change? And also an update on how has been the broad revenue mix across the end channels?
Shantanu Khosla
Let me take the first one in terms of how we are thinking of margins in Butterfly, and then I'll pass it over to Sriram to talk to your second part, which is how we are looking at revenue mix across channels. See, on the first part, Renu, we have had already, in our first couple of quarters a significant improvement from the traditional levels at the EBITDA level, which is from 8%, now being at about 11% for the last two quarters. We do believe that we are now confident about the base level of EBITDA margins being at 10%, and now we will continue to work over time and see how much closer we ca
Q
Sir, my question is on the near term festive demand. As in Q2, we have seen an impact on the ECD side from both destocking as well as weak growth. Any sense you can give us on how the festive has gone? And in the second half, do you expect some recovery on the revenue side for the ECD or it may take longer for us to see that book coming back?
Shantanu Khosla
Two things, I'll just separate my response into two separate parts, because our ECD business is really never been festival seasonal business. That has been more driven by seasonality and summer seasonality. So let me respond to the festival question because a better way to look at the festival question is really to look at how the Butterfly business trends, because the Butterfly business is definitely a Diwali seasonality business, as you can look at from the past trends. Now as we look at the Butterfly business right now, as we are moving in through the early days of this Diwali period in Oct
Q
The question is regarding, so first, I think you well described the uncertainty on the refined portfolio. So what has been the demand situation ex-fan in ECD segment, namely other appliances, pumps, and the upcoming season of water heaters? It is first. And second is lighting. If you can just break up how lighting is doing into various segments? And what steps are we taking to turn around the slowing core part of the portfolio in the lighting?
Shantanu Khosla
First, let me talk about what we call the appliance business, in our non-fans. Now the appliance business really consists of three sub segments- geysers, coolers, and kitchen appliances of either styles. Firstly, if you look at the simple numbers. Either by each independent segment or a totality adding them up, that is also very strong. The quarterly growth for small appliances was 12% in spite of the high base period, and the CAGR was, I think, about 26%. So the numbers are strong, and this is kind of consistent across all three segments. Now that being said, obviously, coolers is very small
Q
One is with respect to the lighting business. You just elaborated on that. Can you help us understand, earlier we did talk that the project business was driving growth earlier? So can you help us, what was the mix in terms of this project and the retail or non-project business in this quarter and, say, two years ago? And B, in terms of the conventional business, while other companies are already down to some 5%, what is driving this slower decline in case of conventional business given the cost reductions in the LED, we have seen until in the last four, five years?
Yeshwant Rege
First part of your question was on the project. I think you referred more to EESL. So now obviously, EESL business has tapered down to zero levels. And two years back, this business used to be approximately 10% of our overall Lighting business. And so that is now going out even out of the base, which is year-on-year slowly. So in coming quarters, we will obviously not have EESL in the base as well. Second part of your question was on conventional. So yes, it has been steadily declining. This business as we mentioned earlier, used to be in salience of slow double digit. It is now at about 8% of
Q
A couple of questions. First is on the data point. Could you help us with the growth rate in this quarter as well as first half for fans, pumps? Second is when we look at the related party section, the top management compensation has seen a significant increase. And it is now almost 30% of total employee and 20% of the EBITDA. When we look at your peers, I mean, our revenues in the conventional business, which is like-for-like is down versus high teens growth for others. So if you could just help us what explains the increase in the compensation for top management? These are my two questions.
Shantanu Khosla
I am not sure I got your second question because there has been no significant change. That is a related party. So what is happening to Butterfly related party and executive compensation there? No, this is pertaining to the compensation for MD and CEO and CFO. We can check, but here what I think it is.– Let me take me, for example. It is probably the same story for Matthew and Sandeep. I exercised a certain amount of my options in the previous period. Because some of them were going to lapse. Now, in the period when you exercise your options, the gain I get as an individual is added to my comp
Q
I have two questions. First question directed to Mr. Sriram. Could you help us understand qualitatively what are the synergies and what are the steps that we are taking for integrating Butterfly with Crompton in terms of revenue synergies, cost synergies as well as in-house production versus outsourcing? And my second question is if you could help us understand the segment-wise market share across the key segments where we are right now and where we were about two to three years back. And within fans, we would appreciate if we could also get the market share of premium fans. And lastly just on
Shantanu Khosla
If you don't mind, the specific data questions which you asked, if after this call, you just connect with Yeshwant, he'll give it. That might be quicker, easier. Sonali, I will connect offline. Sure, on the synergy part, just to remind you, it's just the second quarter that we passed and then our objective first is just to make sure we had a smooth transition and then run the business so that there is a stability in the organization. But in the period, we also chart out the plan and then how are we actually going to integrate and using what the components, variants, etc. But what we have done
Q
Sir, first is on the Lighting side, you touched about on the competition getting more aggressive. So this is either imports or domestic, if you can give more insights onto that. And conventional lighting as a percentage of the overall market, now what is the percentage because that market had been significantly shrinking but we are still highlighting as a percentage, maybe 10% is there for us as a business. So when do you see that reducing to 0 level? And the next question is in terms of fans, as the rating change stabilizes, do you think that larger players like Crompton have an edge to gain
Shantanu Khosla
Yes, let me take the second one first. As a market leader, a technology change is definitely an opportunity for us. I think as you importantly pointed out, especially in the mid and lower mid- end, because BEE is about much more than just BLDC, which tends to be, by its very nature at the premium end. So BLDC will give you the 5-star rating. But a large percentage of the actual market will remain in 1, 2, 3 and 4 star ratings. And the ability to develop modified induction motors at an appropriate cost, which can meet those rating regulations is the critical opportunity. Because as you can imag
Q
Again as always, thank you very much, I hope we were able to address your needs. As always, if we could not make the time to get to all of your questions, please feel free to call us up. We are more than happy to spend time. Our objective in these calls is always to help you all better understand how we are thinking about our business, right? So thank you all very much. I wish you all the very best for a happy New Year. Thank you.
Management
Q
crompton.investorrelations@crompton.co.in
Registered Address
Tower 3, 1st Floor, East Wing, Equinox Business Park, LBS Marg, Kurla (West), Mumbai, Maharashtra, 400070 Website: www.crompton.co.in CIN: L31900MH2015PLC262254
Speaking time
Shantanu Khosla
20
Moderator
10
Yeshwant Rege
4
Sonali Salgaonkar
4
Renu Baid
3
Siddhartha Bera
3
Rangarajan Sriram
2
Achalkumar Lohade
2
Bhavin Vithlani
2
Charanjit Singh
2
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Opening remarks
Aniruddha Joshi
Yes. Thanks, Michelle. On behalf of ICICI Securities, we welcome you all to Q2 FY '23 Results Conference Call of Crompton Greaves Consumer Electricals. We have with us Senior Management represented by Mr. Shantanu Khosla, Managing Director, Mr. Rangarajan Sriram, Managing Director of Butterfly Gandhimathi Appliances Limited, Mr. Kaleeswaran Arunachalam, CFO, and Mr. Yeshwant Rege, Vice President, Strategy and Financial Planning. Now I hand over the call to the management for initial comments, and then we will open the floor for question-and-answer-session. Thanks and over to you, sir.
Shantanu Khosla
Thank you, Aniruddha. Good morning, everyone, and I wish you all and your families a very- very Happy Diwali. We have today out here, myself first Shantanu and Yeshwant, but I'd also like to introduce Mr. Kaleeswaran, who is our new CFO, who came in about three months ago, after an extremely successful stint in Eicher. We also have joining the call today Sriram who, as most of you would be aware, used to run the Fans business in Crompton, and is now assigned as Managing Director of Butterfly Gandhimathi. Unfortunately, Matthew could not join us today because he's traveling overseas. Getting right into it and talking about the overall performance. The one context I would like to provide before I talk the specific numbers is, given all the variations in the base period because of COVID, high levels in the previous base quarter due to the COVID, post-COVID, pre-buying, etc., we do think that it is important as you look at the results, you look in the context of both, the overall Half 1 pe
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