MR. ANIRUDDHA JOSHI – ICICI SECURITIES LIMITED

Ladies and gentlemen, good day and welcome to the Bajaj Electricals Q1 FY27 Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participants' lines will be in listen-only mode and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing “*” then “0” on your touchtone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Aniruddha Joshi from ICICI Securities L imited. Thank you and over to you, sir.

Thanks, Pari. On behalf of ICICI Securities, we welcome you all to Q1 FY27 Results Conference Call of Bajaj Electricals Limited. We have with us today Senior Management represented by Mr. Shekhar Bajaj – Chairman, Mr. Sanjay Sachdeva – Managing Director and CEO, Mr. Vishal Chadha – COO (Consumer Products), Mr. Rajesh Naik – COO (Lighting Solutions), and Ms. Ashween Anand – CFO. Now I hand over the call to the management for initial comments on the quarterly performance and then we will open the floor for question-and -answer session. Thanks and over to you, Shekhar sir.

Thank you. Good evening, ladies and gentlemen. I am Shekhar Bajaj. It is a pleasure to welcome you to our Q1 FY27 Earnings Call. We hope you had an opportunity to review our Financial Results and Earnings Presentation, both of which are now available on the Stock Exchanges . It gives me great pleasure to say that we have started FY27 on an encouraging note. From an industry and macroeconomic perspective, the quarter played out against the backdrop of continued input cost inflation, uneven summer demand across categories and the industry largely seeing calibrated price hikes. Against that environment, our team stayed laser focused on execution, consolidating the channel, driving cost efficiency and strengthening the foundation we built through FY26. The result is visible in our performance this quarter and gives us immense optimism for the road ahead. I am glad to report that this quarter reflects exactly in that direction. We delivered overall revenue growth of 2.3%. However, our EBIT margin improved to 6.6% from 2.5%. I would say that this is a positive step towards implementing our learning through last year's actions. For a company that has stood for 88 years of the Bajaj Group's values, trust, transparency and quiet disciplined execution, I see this quarter as evidence that those values are being reflected in how we run the business today. The Board and I remain confident in the direction we have set and excited about the momentum we are building. With that, I would like to hand over to Mr. Sanjay Sachdeva – our MD and CEO, to take you through the operational and financial performance in detail.

Thank you, Chairman sir and good evening everyone. Thank you for joining the call this late. I am pleased to walk you through our start to Financial Year '27, which reflects good progress. We have started delivering top-line growth with meaningful margin expansion. As the Chairman mentioned, our overall revenue grew by 2.3% year-on-year in Quarter 1, with consumer products growing at 1.7% after a decline for multiple quarters, and lighting solutions grew at 4.4%. Our EBIT margin improved to 6.6%, a meaningful step up that reflects the operating discipline we have been building over the last several quarters. Consumer products ’ return to growth and positive EBIT is a meaningful and positive step for us, especially after the steps we have taken in Financial Year 2026. It gives us more confidence to believe that we are on the right path. For this quarter, consumer products vertical was a story of two halves. While the cooling products contracted, the non-summer products had a meaningful expansion and double-digit growth across categories. Moreover, Morphy Richards also grew double-digit post our acquisition in the last quarter. Our EBIT margin has expanded to 3.9% versus negative 1.7% on a year -to-year basis. This is primarily driven by expansion in our gross margin and efficiency generated on account of operating leverage. We are confident about our trajectory for this business and our focus will be to sustain and improve this momentum. Lighting solutions continue to be the vertical carrying momentum for us. Following a year in which it delivered one of the strongest growth in the industry, a 4.4% growth in this quarter on the top of that stronger base is a credible continuation. The growth was fuelled with double-digit growth in consumer lighting. We remain confident in this business as a structural margin and growth engine, including the new categories we have entered. The 6.6% EBIT margin is very satisfying for us. It reflects that the growth we delivered this quarter was earned through cost discipline, value engineering, and agile pricing, actions that we have taken to offset commodity inflation, even as top-line growth itself remain measured. Our foundation is strong, momentum is building, and opportunities ahead are significant. We are confident in our ability to keep raising the bar by driving innovations, expanding our market shares, strengthening our brands and demand generation to deliver consistent and profitable growth. With that, we are now open to take questions. Thank you.

Thank you very much. We will now begin the question -and-answer session. The first question is from the line of Praveen from PL Capital. Please proceed with your question.

My first question is related to consumer product s. In the press note, you have mentioned that despite a double digit growth in appliances and Morphy Richards, still we see a 2% growth. Has the fans business remained very weak in terms of the volume declining or limited ability to take the price hikes ? or both? How has it been and where do you see the demand , pricing and the margin for this segment to go ahead in the coming quarters?

So, yes, you are right. Fans, as was mentioned in the opening remarks, saw a decline for us. As far as the price increases are concerned, which you mentioned about, we kept pace as far as the commodity inflation was concerned. Going forward, we see improvements in margins. This is essentially because of two reasons. As was mentioned, we are looking at a continued focus on VAVE activities. And the second focus will be to continue in terms of looking at premiumizing our portfolio. Over a period of time, the BLDC contribution has continued to increase and so has the premium contribution. I am happy to say that from a premiumization point of view, our journey is going well. So, going forward, we are far more optimistic as far as the margins are concerned and this business is concerned.

Related to that, sir, you are also highlighting the BLDC contribution will increase. How has been the BLDC as a contribution in the industry, right now because we are hearing from every player that the BLDC contribution is increasing? So, where do you see this BLDC as an industry contribution from right now to the way forward, where we will see this?

So, the estimates which we have on BLDC vary between 30 % to 35%. We are slightly under - indexed versus the industry, but it is growing much faster and we will be in our rightful share as we progress.

And the last question is related to lighting. So, lighting also if I look at, especially on the margin front, we are nearly around a single digit, around 7% odd. So, do you believe this margin trend to improve from here with the B2C or the B2B mix changes and we will expect it to drive these numbers from here?

This is Rajesh this side. And as we mentioned in the last call also, we are continuously chasing the premiumization and the mix change from our low commodity products to more premiumized products. And we are driving that to have at least a trend going towards double digit margin. That is what the journey is, including B2B where we are trying to break the volumes up with contribution of high margin projects to improve this particular margin.

So, in this particular quarter in lighting, we have legacy projects in professional lighting where we are not able to take the prices up because the contracts were signed on the rates before the war. However, commodity prices have gone up. So, we had to take a hit on the margin in professional lighting. So, that is getting reflected in the overall lighting business margin. But we believe in a quarter or two as we exit some of these legacy contracts, we will build back our margins. So, we see it a temporary blip in our margin journey.

So, in a steady state, where do you see this margin to be?

Excuse me? So, once we are off this legacy project, we will go back to double-digit margins in overall lighting.

The next question is from the line of Aniruddha Joshi from ICICI Securit ies. Please proceed with your question.

Sir, two questions. One, in terms of the market shares, can you indicate what will be the, in a way, whether we would have gain or loss or anything that you can share? Also, secondly, Bajaj as a brand has one of the strongest reach in the entire market and one of the best known brand in rural markets too. So, what will be the, in a way, growth in rural markets? And how do you see the market shares in a way panning out in rural markets too?

So, overall share trend is a mixed bag for us. Now, in few categories, we have been growing share or stable. So, we are stable in most of the categories and growing in iron and mixer grinders. The one category which is large where we have, as we explained earlier, we have not done as well as we want to is fans. This is where we are losing share. We know why we are losing share and we have corrective actions in place. So, we intend to claw back on our share loss in next two or three quarters. We do not have any special share report for rural, so very difficult to answer how we are performing there. Needless to mention, if overall shares are either stable or growing for most of the categories, our rural shares, and we are large player in rural, so we should assume that our rural share should be intact.

Surely, sir. Just last question. So, in terms of distribution, what is the current strategy now to focus on numerical reach expansion or to driving the throughput per store? Also, what will be share of e -commerce, modern trade, the alternate channels essentially? And what will be the plans to expand share in these alternate channels too? That's it from my side. Many thanks.

The first part was, what was the first part of the question? Numeric or?

Numeric.

Numeric. So, the focus remains on both. While we have a very large numeric reach, but as we know, market share is measured both in terms of and impacted by both numeric as well as the counter share. So, our focus remains, I mean, we cannot let go of one and focus on another. So, we are focusing on both in a calibrated manner. While numeric reach continues to grow, we are equally mindful about our counter share and the focus is on that also. The second piece was on e-commerce. E -commerce contributes to approximately 15%. And again, depends on quarter -to-quarter, depending on the festive or the sale events, which the e - commerce players do. But on an average, it is around 15%, which is in line with the industry. Alternate business contributes in all put together around 45%. It is a 55-45 kind of a ratio, which take a few percentage points here and there could be 57-43, but broadly it is 55-45. And alternate for us in this quarter has also grown very well. E-commerce has grown in double digits and we have also almost doubled our exports.

The next question is from the line of Achal from Nuvama Institutional Equities. Please proceed with your question.

This is Achal from Nuvama. So, the first question I have, is with respect to the distribution change, what we were undertaking, where are we in terms of that backlog? Is it done and dusted, or is it still going on and how long will it take for us to see a normal growth?

We haven't talked about any distribution change per se, Achal. Our go-to -market continues to remain what it is. If you are alluding to when we took stock correction…

Yes, stock correction. Sorry, yes.

Right. So, sorry for misunderstanding. Yes, we have taken stock correction and it is an ongoing journey. We continue to do whenever it is required in a calibrated manner. But at an overall level, our stocks are in a much healthier position than what they were a quarter or a couple of quarters ago.

And on the GTM, since you thankfully raised that point, earlier we were almost exclusively on the RREP program. And some time back, we kind of started working on direct distribution as well, direct dealers. So, if you could elaborate at this point in time , how it is structured, and do you see any changes to that structure in the next two, three, four years?

So, RREP, I mean, the full form of that essentially is Reach and Range Expansion. So, those are the common things which we continue to drive. It is only the manner in which could differ. So, the bulk of our business still happens through the distributor channel. In certain markets, we have already started kicking off our direct model where it is required. So, we have direct dealers, which we are now reaching out to in parts of South, in parts of West. And going forward, we will probably accelerate, depending on the geography, our direct distribution model.

Sir, my next question I have with respect to the margins, particularly the ECD margins. So , if you could give us some sense, while I understand, obviously, the margins have improved, they will continue to improve. But how long do you think it will take for us to go back to closer to 9%-10% margin what we could have had, say, about seven, eight years ago?

Let me take this, Ashween here. See, our gross margins have improved by 130 bps as a company, and especially in the consumer product segment, it has grown by 220 bps. And this growth is coming from various factors. It is coming from premiumization, it is coming from productivity- led initiatives across better mix management, ROI -led investments, better commercial discipline. So, we believe these current gross margins are sustainable directionally. But quarterly movements will depend on commodity prices, category mix, and competitive intensity. Our focus is to keep improving the quality of the margins. And we do believe with the structural improvements that we have done, we should move in the positive direction.

Any guidance or any thoughts on the normalization of the margins? Will it take a couple of years? Or you think it could be a bit more longer journey?

So, normally, you are talking about here the EBIT bottom line margins or gross margins?

ECD EBIT margins, sir. Because lighting, I think we are good now. Like you have already talked about going to double digits. So, I understand that completely. But I am just curious for the consumer product margins, basically.

So, as we always said, we intend to go to a 10% margin, which I did not know we have six years back. I don't think we ever had it. But we are going to bring to that. I don't know maybe if it was there in the history. But we intend to go to 10% margin, which will be very close to industry leading or close to industry, top end of the margin. So, we believe, as you can see the journey, we have very quickly ramped up our margins. We believe the first set of turnaround in margins will be quick and large. And the second set will be slow and longer because first set of improvement is like low hanging fruits, and you should be able to sort of deliver that quickly. So, answering your question, so we do see our margins for next two years to stabilize between six to 7%. Because we would like to, at the same time, invest a bit more behind our brands. But once we have strengthen ed our brands and the scale is coming, we will then build our margins further. So, if there is a timeline, I will say, certainly not next two years. But after that, you will see steady improvement towards 10%. That is all I can say, whether it will take four years, five years, three years, that depends upon many other factors.

In terms of the competition specifically, are you seeing like competition actually getting more intensified, everybody wants to do everything. And given our positioning at this stage, in terms of the value for money, do you see that the market share improvement is more harder now, to gain back compared to what it would have been, say, two years ago?

So, it's two ways to look at it. When everybody is entering, you can see the kind of growth the market is giving to everybody. So, market will expand when everybody comes. A lot of players come because of the investment because of the innovations, because of the initiatives, because it is still a very underpenetrated categories, most of them. So, coming more players not necessarily means it is not good for the current players. Now, will the market share improve or decline or not is a question of how well you play with your brands, your innovations, technology, go-to -market initiatives. And we believe in that knowledge becomes important. While we have one brand Bajaj, but we have another brand Morphy Richards, which is the right space in terms of when the people premiumize, this is one of the brands which we gain. So, therefore, we do see many levers coming in as we get our act together. And we don't think and that is not our play, that our share will be questioned. So, as I told you, and except for fan, most of the categories, our shares are rather stable or growing, you know. And therefore, while, as I said, competition is heating up, but it is not something which is going to impact us too much in medium to long term.

Sir, I have a couple of more if I may ask with respect to wires contribution, is there any contribution in the current year, in the current quarter, I mean?

So, that will be somet hing we don't tell. All that I can say that in wires , our progress is better than what we were expecting. And that gives us confidence that it can play a significant role moving forward to our business.

And this will be part of the consumer products or the lighting segment?

So, it is part of the lighting segment and including switchgears.

In terms of the net working capital, if you could call out net working capital days, how have they moved from March to June quarter?

So, our working capital position, see, has improved. On the debtors' side, we have improved. On the overall inventories, however, slightly up. And the reason for that is because we have locked ourselves in some good inventories. This is a seasonal period, so we have increased slightly over there. But normally, broadly, it is in the range. And it is largely hovering around between 50-60 days. So, that's the larger trend. And we see some buildup to happen because of the seasonal business. But overall, they are tracking healthy. We are in a space where we are looking at that and monitoring it very closely. But we think that we are building up good inventories.

Any quantification you could give for the OCF during first quarter? Cash flow from operations?

So, see, overall cash flow has been negative. The larger reason for that is because of some of the tax compliances we had to make on the Morphy acquisitions to the TDS, as well as on the GST. So, hence, it has been negative. But other than that, it has largely been healthy. So, if you remove that element out, it has been healthy.

I will fall back in the queue for follow-up.

The next question is from the line of Aditya from AK Investments. Please proceed with your question.

Firstly, great set of numbers. I see management is taking the right steps. So, my first question is related to growth. Where do you see this for couple of years, this year and next year, what kind of growth can we expect in the top line?

So, there is an inflation part of it. So, that is the one which is difficult to guess. But otherwise, you can assume from all the businesses put together, we are looking at between 8% to 10% growth, quarter-on-quarter. That is the number we are looking. This can vary a quarter here and there, but that's a kind of a ballpark number we are targeting. But this is not a forward-looking commitment. But this is the kind of targets which we are looking at. And we are therefore working towards opportunities to deliver these kind of numbers.

8% to 10% growth for two years. That is what we can think.

This is what we think, which industry, look, this assumption is industry will grow 6% -7% minimum. So, it is saying ahead of the industry. Now, if industry grows at 3, it comes down to 5. But we believe industry is attractive and can give you a growth of 6% to 7%.

And also, one question I have, recently, we are hiring a new CGO officer. So, what are the areas are we looking at? I mean, I am asking a little longer -term question for Bajaj Electricals. As a long term, what are the categories are we looking at? I mean, if you think of under your regime, right, I mean, longer term 4 to 5 years, you are coming from a larger size company, and you have joined here in one year, where you are trying to fix things. But what is exciting you here for next 3 to 5 years?

So, you are talking about the new person who has joined?

New person and along with your journey also for 3 to 5 years, why you have taken up this role? I mean, yes.

So, the categories we operate itself is pretty attractive. That gives you enough opportunities, as I told you, penetrations are low, market shares, you are in a good position in market share in most of the categories except for fan. So, you see a long runway even on those in these categories to grow. But apart from that, there are quite a few things which is happening when you look outside, whether it is a infrastructure, which is getting created, which gives you a large amount of opportunities, question of how much you want to grab, including what we are doing in professional lighting, which you have seen, or some of the transformation which is happening outside and few areas which we already talked about. And it is in the public domain like solar, or wires we got into and then cables, which we are seriously looking at. And there are more areas when we see around, and we see that there are possibilities, we as a company to expand. For obvious reason, it is still at a very early stage to share. But this is exactly the job the person who will come will do. And the whole idea is how do we sort of create a company which is of a different kind and a different size, as we see ourselves five years from now. Consumer products will stay and lighting will stay one of the businesses. But our assumption is, it will be beyond that.

So, this will after two years may stabilize, then we will start venturing or the simultaneous project will keep starting? the pilot things?

Difficult to say, but our current assumption is, those will start.

But still on the meaningful way, maybe two years out, we can see in the number, but two years, we can see that 8% to 10% growth, we are looking for, right?

Yes.

Thanks for that.

The next question is from the line of Achal from Nuvama Institutional Equities, please proceed.

Thank you for the follow-up opportunity, sir. Just sorry if I have missed out in the beginning, if you have answered this. In terms of the cost inflation, if you could give us some sense, what is the extent of cost inflation across our key categories like fans, mixies, water heater, and a couple of more. And to what extent have we been able to take price increase and how much more is expected?

See, across the categories, we have seen around, depends on each category, but let us say ranging from 6% to 10%, this is the kind of number we have seen. And where raw material inflation has been significant, we have taken selective price correction depending on category elasticity and competitive intensity. As regards to future, see , the external environment continues to remain volatile. And we will assess the impacts before taking any pricing decisions. But at this point in time, we are assessing, we will have to see how the commodity prices move.

So, between price increase and the savings opportunities we see, at this stage, and things can change, at this stage, we are not seeing major price increase need to meet our margin requirements for the rest of the year at this stage. But things are too volatile. And things may change in two months' time. So, this is the best we can say right now that our now focus is to drive growth, because rest of the levers are in place.

Just a clarification, sir, 6% to 10% is the cost inflation across our key categories, have I understood right? Or that was the price increase you have taken, what was that?

Yes, so, you are right. So, it is as high as 13% in some categories, coolers were the highest in terms of cost, like, yes. So, it is anyway between 6 % to about 11 %-12%. And most of that, between pricing and savings, we have managed to sail through, not everything we have put in price, of course, part has come through savings.

Sir, I don't know if you could comment for each of our key categories, how the growth has been for the category and what is the sense in terms of the volume growth, because we think that the current growth was actually also on a low base. So, if you could give us some sense in terms of how the demand scenario has been and if you could, within that, call out on a key category, like, particularly fans, mixies, water heater, etc.

First, one correction. For us, as you remember, we had done stock corrections in Quarter 3 and Quarter 4, and partly in this quarter, we had a higher base in Quarter 1 and 2, because at that time, we were adding stocks. So, just for your this thing that it was not a low base for us. Number one. Number two is, as we told right in the beginning that fans is one category for some external reason, internal reasons, we could not deliver growth, which is more of operational issues than anything else. And therefore, it was not a growth, which was, we believe is one time, because if you see net of fans, last year, the season was not good. So, net of fans, we had done well last year. So, net of fans is a trend for us. And we are clear, it is the fans we have to sort out.

And the demand scenario in general, in terms of...

Mr. Achal, may we request you to return to the question queue for a follow -up as there are several participants waiting? The next question is from the line of Bharat from Quest Investment Managers. Please proceed with your question.

Sir, I joined little late. So, if you can give some more colour on GTM, which you, at that point I started. So, what exactly are we doing in GTM and how we are expanding the distribution, dealer network and touchpoint and simultaneously for logistics, what we are doing so that we can meet, I mean, grow faster than the industry level?

So, I can comment on the GTM part of it. While we continue to expand distribution, and I had answered that question earlier, in a physical retail environment, we are expanding both our reach through the distributor network and also through direct dealers in a calibrated manner. However, we are also seeing growth. We are talking about consumer reach over here with other channels which are gaining prominence, for example, e-commerce and within that the quick commerce domain also. So, any channel where the consumer is there, we are expanding and reaching out to the consumers.

So, sir, I mean, if you can give some colour, how much of these are coming through whether e- commerce and second is through quick-commerce we are seeing the growth?

Yes. So, e-commerce has shown a double -digit growth in this quarter and its contribution, as I mentioned earlier, varies between 15% to 20%, 15% to 18% broadly, depending on the quarter. Within that, the quick commerce space within e-commerce is growing rapidly and is approximately 8% to 10% of the total e-commerce business. But it is growing rapidly, but it is early days. It is still a relatively smaller business, but we are seeing rapid growth over there.

Sir, if you have to understand these off market and through direct e -commerce or quick commerce, so, is there any pricing difference or how do we make better margin or if you can give some colour directionally and how do we see to, I mean, grab those market, I mean, either e-commerce or quick commerce a better way?

See, each of the channels, whether it is traditional, modern format, e-commerce, quick commerce, etc., they have their own structures, whether it is to do with cost margin structures. And we are in line with how the industry plays it out. Our objective, as I stated earlier, is to reach the consumer in the most efficient manner. And that is where , whenever the consumer is shopping, that is where we are.

Our focus here is get a transaction contribution more than what you get in general trade. And therefore, obviously, we look at each transaction value and net contribution from that value. If you are gaining on that, then it is a good business for us.

Within this GTM, if you can give some colour , which are the geographic part that will , where you see that there is a huge room for us to expand and which we are, I mean, compared to market, we are a little lower level.

So, from a geographical point of view, we are a little weak in the South markets and we are the strongest in East.

Sir, last question from my side. On the fans category, you say that because of unavailability of inventory, growth was a little lower. One of the largest players in fan s also has faced the same problem. So, if you can elaborate, I mean, what are the key challenges that because of which this whole supply chain issue and where are at this stage, is it correcting or what specifically we are doing to improve upon?

So, that was more induced due to external factors like war and we had challenges both in terms of gas shortages and to some extent PCBs.

And how do we, what are we doing to improve upon vis-a-vis industry level?

So, gas is restored. Those issues are behind. And PCBs is now we are working on a little longer time cycles to see that we have enough for our, and then, to be frank, we had not anticipated this kind of demand for BLDC fans and this is where we use PCBs. And therefore, now we are working on different numbers and covering stocks for a longer period of production.

Thank you. Ladies and gentlemen, that was the last question from the participants. I now hand over the conference to management for their closing comments. Over to you, sir.

Thank you very much for all the participants and I am glad that we have been able to turn around and as we mentioned by Sanjay and others that we are looking at similar performance to be continued in future also. So, keeping that in mind, we are looking forward to a very good future for the next few years. The market is good. It is going to be competitive, but that makes it, the market expands actually when there is more competition, more people playing. So, I think we should be happy about that. And we have got a very strong team now. And therefore, I think I am very positive and very optimistic. Thank you.

Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.