MR. PROMEET GHOSH – MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER – CROMPTON GREAVES
CONSUMER ELECTRICALS LIMITED
MR. KALEESWARAN ARUNACHALAM – CHIEF FINANCIAL
OFFICER – CROMPTON GREAVES CONSUMER LIMITED
ELECTRICALS LIMITED
Ms. SWETHA SAGAR – CHIEF BUSINESS OFFICER –
BUTTERFLY GANDHIMATHI APPLIANCES LIMITED
MS. NATASHA KEDIA – HEAD – INVESTOR RELATIONS
HOST ANALYST: MR. ANIRUDDHA JOSHI – ICICI SECURITIES
Promeet Ghosh Good evening, everyone and welcome to our Q4 FY25 Earnings Call. I want to thank the team at ICICI Securities for hosting our call. Joining me today are Mr. Kaleeswaran Arunachalam, Ms. Swetha Sagar and Ms. Natasha Kedia. My remarks today track with our Investor Presentation. Beginning with fans, the category was led by robust growth in TPW, strong margin improvement YoY . During the year, as you would have seen, our margins are now back to pre-BEE 1.0 levels. The pricing actions and a slate of new launches has helped us enhance competitiveness. You would have seen that we announced two platforms for the next generation of motor technologies, one for BLDC and the other for induction motors. We have very consciously decided to adopt a Platform -First approach, and that's culminated in the launch of Nucleus and X-Tech. And frankly, it's I think, an important strategic decision, which sets us apart from our peers. It's something that I anticipate will in due course of time over the next few quarters bear significant fruit for us, including as we launch the next generation of BLDC fans, as the industry and we get ready for the next big leap in energy transition. So, our Platform -First strategy, or the kinds of benefits that it offers , greater control over product development, enhanced agility to adapt to evolving consumer needs, improved after -sales service turnaround and builds on deep industry expertise that we have. We have felt for some time, for instance, that industry as a whole needed to further strengthen the reliability of the BLDC products that are available in the market. We went to work kind of developing something that we believe will significantly address those issues so that we are able to fundamentally address the products that we put out and assume over a period of time, the market itself will move to a different traje ctory and that's why Nucleus, which is the advanced in-house BLDC technology, which enhances both performance as well as reliability. Meanwhile, we have also invested again as market leaders, we felt this was important. We have also invested significantly on the induction motor technology, and we're calling this X - Tech. This is a platform which you'll see gradually being rolled out for all our fans. It has already been incorporated in many of our fans, but over a period of time, all our fans will have it. This embodies our commitment to energy efficiency and durability. The hallmark of our products has been durability, and this technology will provide both that as well as exceptional levels of energy efficiency going forward. I do believe this Platform -First approach will materially help us strengthen our leadership position in the future. Now in view of some time ago, you've seen us announce Crompton 2.0 focus on a bunch of areas that you are familiar with. I'm not going to go into Crompton 2.0 strategy. But in view of our confidence of continued revenue growth in the future, volume growth in the future and the growing focus on the next generation of technologies , as we position ourselves, I'm very pleased to announce that the company is very actively exploring the development of a greenfield manufacturing facility. This will involve a proposed investment of about Rs. 350 Cr. We should be in a position in the next few weeks to come back to you with much more details of how, when, where and all of those details, because those are as w e speak being worked upon and tied down. Now needless to say, this is a major strategic initiative, and this will go a long way in overall bolstering the strength of our supply chain and supporting our long-term growth trajectory. We do believe that with this step, we will have the right balance between expanding our in-house capabilities as well as leveraging the trusted and long-term relationships that we enjoy with our vendors. With this state-of-the-art facility, we aim to elevate overall quality, resilience, responsiveness of our supply chain ecosystem, ensuring that we consistently meet and exceed market expectations. There will be a couple of phases in this project and like I said, the first phase is expected to have an outlay of about Rs. 350 Cr. The first phase will primarily focus on fans with plans to upscale going forward, adding other production lines and laying the foundation for sustained innovation and growth in the company in the years ahead . We should be in a position to share more details with you over the next, near-term. Now, a question I get asked very often, what are the new categories that we are going to be entering? How are we expanding the TAM of our products? You are familiar that our approach has always been to announce them, when actually are already entering them or have been on the verge of doing that. Now I'm happy to inform one more category, large category that we are entering as a part of our Crompton 2.0 strategy. We are expanding into the rooftop solar business. Many of you are familiar that the size of opportunity in the solar rooftop business is significant. It's order of magnitude is about Rs. 20,000 Cr. Now needless to say, our approach has been to first build up the capability and give ourselves the confidence that we are able to, when we enter a business, able to execute really well. Now you will be familiar that we did something similar with solar pumps. I'm happy to report that's a business that has scaled up significantly since we entered that area about year and half ago or year and nine months ago. Now this year, that's just gone by, we recorded approximate sales of about Rs. 200 Cr, that has come out of practically three years ago. So, that gives us the confidence that we have both the product capabilities, the supply chain capabilities as well as the execution capabilities to be able to get a ma terial share of the solar rooftop business. I actually anticipate that in the near term, we will also be making further announcements, including in adjacencies of areas that we are already in, but material size TAMs. And we'll keep you posted about some of those in the weeks and months to come. Now as far as our segment performance is concerned, I spoke about fans . Pumps continue to perform very well, bolstered, as you know, both by market share gains in the residential pumps business, as you know, we are market leaders by some distance, and significant growth in the solar pumps business. In Q4 specifically, we won orders from MEDA and MSEDL on the solar pump side. We are now moving ahead into the next level of stepping up our investments in the solar pumps business. We have, in fact, also materially strengthen ed our organisation structure on the solar pump side. Appliances delivered a high-teen growth. As you know, appliances comprise two parts. One part of it is what we call LDA, which is the Large Domestic Appliances, which is the air coolers and water heaters business and separately the kitchen appliances busin ess, which we call SDA. But since we've talked about appliances together previously, I'm going to talk about them together here as well. High -teen growth overall, standout performances in air coolers over 50% growth, mixer grinders again 30%+ growth. Despite a delayed summer, we've actually had pretty good results on the air cooler side. Large Kitchen Appliances clocked a revenue of about Rs. 60 Cr while EBITDA remains negative, losses have continued to narrow, and Crompton is also gaining traction online. And now I think we are apparently ranked third on Amazon. Earlier in the year, about a couple of months ago, we have had a change in the team structure there. I'm happy to report that the changes are helping bolster the trajectory of that business. In our Lighting segment, revenue rose by about 2%, holding steady through the year despite continued pricing pressures. Now this is one of the bright spots again of our business. I remember one and a half years ago, there was a lot of talk about where our lighting business is going, and we have seen the trajectory there change. While the revenue growth this quarter is flat, I'm very glad to say that we have managed to change the product mix in this segment quite a lot, both on adding new products as well as growing our panels business. For the year gone by, the panels business is now for a company which has always been very heavy in lamps and battens, panels are now our largest business, and a large share of business is now contributed by products which are outside of panels, lamps and battens. And in fact, the lighting business is now going to lead the foray into solar rooftops as well as other announcements that we may make in allied areas shortly. Having said that, a little more detail there, B2C segment saw top line growth as well as mix improvement, like I've said. B2B segment, we have been building up our capabilities in street, flood, industrial and indoor areas. As you may recall, we've had gre at strengths in street lighting, and I'm glad to see that we've added other capabilities there. EBIT performance was robust, margins expanded to about 11.8% in FY25 and a sharp rise to 15.9% in Q4 supported by a rich product mix and new product introductions. So again, I keep telling you that we don't want to lose sight of profitability because that's what enables us to go out and get market share gains. That's what allows us to introduce new products. And I think you can see that in play. Moving on to Butterfly, another area where over a period of time we've been asked a bunch of questions about where that is. And similar to lighting, we initially took some time off to get the basics right. And sometimes when you get the basics right, it doesn't look pretty. But when those begin to deliver results, then they look nice. I think you can see some of that happening in Butterfly. The annual revenue was at Rs. 865 Cr. The Q4 FY25 revenue was Rs. 187 Cr, marking a 12% growth YoY . So, you see a return to growth. And that growth has been driven by strong performance in key categories such as mixer grinders, cookers, and wet grinders, all of which had double -digit growth increases. Sequential market share has obviously grown as well. Importantly, the gross margin has improved materially as well. And this has come from efficiency improvements, price increases. Now we've been telling you that this is something that we've been doing. That has meant resetting terms of trade with many of our trading partners, but we've taken the p ain and now you can see some of the benefits, optimisation of input costs and of trade scheme. This is altered in EBITDA margin of 8.6% for Q4 FY25. The business delivered a sharp turnaround in profitability YoY with EBIT rising to Rs. 42 Cr in FY25 and a Q4 swing of Rs. 11 Cr. Pricing actions were implemented across retail, modern trade and exports. Finally, although consumer demand continued to be subdued in Q4, we are quite optimistic about the trajectory that the business is taking and the fact that many of the issues that the business had, we've been able to address. And I can tell you that, our o ptimism of the future is also bolstered by upcoming product launches and efforts that we are making on enhanced channel engagements, which I think you will hear of sooner rather than later. Again, we've invested the time to build the right to win, and I think those will start to show. Irrespective of the macroeconomic situation, weather conditions and forecast, our focus has always been on long -term sustainable growth, and we continue to be disciplined about our execution, responsive in our actions and operations and have continued to b uild a strong innovation pipeline to drive performance, while remaining closely aligned with evolving consumer needs. In terms of overall financial performance, FY25 marks the second consecutive year of double- digit revenue growth, a testament to our continued efforts in line with Crompton 2.0 strategy. Our standalone FY25 revenue grew 10% to Rs. 7,028 Cr led primarily by a robust performance in the ECD segment. In FY25, we achieved the highest-ever standalone EBITDA of Rs. 819 Cr. Our margin profile has strengthened with margins improving to 10.5%, driven by reduced input costs despite higher A&P spends. Encouragingly, our bottom -line growth has outpaced our top-line growth with profit growth of 21% in FY25. Q4 revenue grew by 5% to Rs. 1,879 Cr, reflecting subdued demand conditions, but also underscoring our ability to hold ground even when external tailwinds soften. In Q4, margins held up very well and are at 11.9% with EBIT growing at 8% YoY to Rs. 223 Cr for the quarter. In the ECD segment, which grew 11% in FY25 and 6% YoY in Q4, we saw a solid performance across all subcategories. With this, I'll conclude my remarks for the quarter and the financial year and thank you for your patient listening. I think what we missed is we talked about the revenue growth, but not the consolidated profit growth. The consolidated revenue growth was a lso about 5% and consolidated profit growth is about 28%, I'm sure they have all those details, but I should just mention that. With that rather long opening remarks, I shall pause and take questions. Aniruddha Joshi Thanks. We will begin the question-and-answer session. Those participants who wish to ask the questions, please raise hand and then we will unmute your line. So first, we have a question from Mr. Aditya Bhartia (Investec). Please unmute your line and go ahead with your question. Aditya Bhartia Hi, this is Aditya from Investec. My first question is on the solar rooftop business. You kind of spelled out the overall opportunity size. But just wanted to understand how we are thinking of scaling up in this business. What is the kind of targets that we have set for ourselves? And given that we are a slightly late entrant in this business, what's going to be our competitive edge? Promeet Ghosh Fair point. Firstly, Aditya, you are probably aware that the size of the market is actually larger. But I specifically talked about Rs. 20,000 Cr because that's the segment that we'll be targeting. What we have done so far, is hired the right people, figured out a bunch of detailing about the product and about the execution that is needed in order for us to succeed in the business. Now, the reason I think that we will be able to do a reasonable job of it is, one, brand counts for a lot in this business. And that has been demonstrated to us in the pumps business, combined with the execution capability and the sourcing capability that we brought to the pumps business, which again, were we entered by when lots of other people had already entered. We think a combination of factors, including the fact that it's a consumer product and the Crompton brand is deeply trusted by many, we do think we'll be able to do quite well. I don't want to tell you about specific numbers that we should be able to get, but I think you can already tell from the way that we've done in our pumps business that we should be able to ramp up quite quickly. And we have now a pretty decent team there. Aditya Bhartia Sure. And you spoke about sourcing capability in this business. If you could just kind of explain, what do you really mean by that? What's the advantage that we'll be having over some of our competitors, especially because we have also seen Havells acquiri ng a stake in Goldi Solar? Promeet Ghosh Yeah, I don't want to spell out too much just now, Aditya, if you don't mind. Suffice it to say these are things that we've been working on for a while. We should be competitive in our sense. Aditya Bhartia Perfect. And my second question is on Large Kitchen Appliances business. While it's good to kind of note that EBITDA losses have started coming down, but it seems that revenue number has broadly remained flattish on a YoY basis. So just wanted to understan d what has really been happening around that. What is the longer-term ambition that we have for that particular business? Promeet Ghosh Yes, you're absolutely right. The revenue growth has not been what we anticipated. And hence my remarks earlier about the way that we are approaching this, including changes to the team, etc. Having said that, Aditya, we are very convinced that we actually have a very good product. We actually have a differentiated product offering. And our understanding is that consumers are quite willing to buy our product, and it's a decent-sized TAM out there. What we needed to do is to improve our execution, our targeting, our product mix, and that is what we are working on now. And I think what you will see is both a narrowing of the losses going forward as well as a pickup in the trajectory to what really thi s business deserves. If you recall, we spent a lot of money in innovating and getting the product right. And nobody is probably in a better position to get a product right other than us, because we understand fans and really chimneys are a fan, with electr onics thrown in, which we understand pretty well. As you are probably aware, we are investing a fair amount of money in the kitchen side of the business with tablets and hobs, Swetha is here as well because obviously, both Butterfly as well as the Crompton kitchen products benefit from the investments that we are making. So yes, I do believe that there are good times ahead for this segment. Aditya Bhartia That's helpful. Thank you so much for your answers. Aniruddha Joshi Thank you. Next, we have a question from Mr. Siddhartha Bera (Nomura). Please unmute your line and go ahead with your question. Siddhartha Bera Hi, thanks for the opportunity. First question is on the ECD segment. You did allude to that the demand sentiments were a bit subdued at an industry level in the quarter. So, going ahead, for the coming year, how do you expect the recovery to play out? And given that we had done a couple of premium launches and tiding across segments, was there any contribution from those launches in the Q4? Or should we expect that to be the key driver of growth in the coming year? Promeet Ghosh There was the contribution of some of our new launches in the fan segment. I have to say that because we did a limited launch last quarter. As you ramp up production, it takes some time. So, it's fair to say that the contribution of the new products was fairly limited in the last quarter. You'll begin to see some of the benefits of that this quarter. There is another very big launch, which is happening in fans as we speak. We've launched the Fluido Fan. So, you remember, this is the product which has got a Red Dot award for design. It's a very differentiated looking fan, very differentiated colours. And we do hope that that's something that will also start contributing this quarter. It's fair to say that the weather conditions which are a contributor typically, Q1 tends to be the quarter where the weather is something that helps drive a lot of the growth, that appears delayed. So, we've consistently had rains across the country, particularly in the South, even in the West and East and also in the North. We do believe that things will change going forward, and that will add momentum to the business. Siddhartha Bera Got it. Second question is on the pump side. I mean, you did allude to the fact that last year, we did do a strong solar pump revenue. Now, if I look at the coming year, given that you indicated close to maybe Rs. 25 Cr orders pending, should we expect tha t momentum to sustain what you did in FY25? Or will it depend on the number of number of orders you take now going ahead? Promeet Ghosh Look, I didn't actually talk about the order book actually. But we do think that we should continue to have good momentum in solar pumps. Siddhartha Bera Got it. Thanks a lot. I will come back in the queue. Aniruddha Joshi Thanks. Next, we have questions from Mr. Pulkit Patni (Goldman Sachs). Please unmute your line and go ahead with your question. Pulkit Patni Yeah. Thank you for taking my question. Regarding this capex that you've announced of Rs. 350 Cr in a manufacturing facility, could you give a sense of whether in the first phase, you will only sort of do fans or something else? Because Rs. 350 Cr sounds l ike a pretty big amount for a fan factory. So, is it that the land initially would cost a lot more? Some breakdowns on how this capex in different phases will look like? Promeet Ghosh Okay. So yes, this is initially for fans. Yes, this will in due course also include in the next phase other products. Obviously, the first phase includes the cost of the entire land. So yes, that does get loaded to the first phase. Remember that we are a l arge fans company. So, our requirements are large, and we are getting ever larger. So , I don't know what size of fans capacity you are thinking about, but this is expected to be - if you don't mind since we haven't currently announced, a few I's which have been dotted and T's which have been crossed, I will come back to you with greater details about where, what, how, etc. But yes, this should be a state-of-the-art facility, and this should be something that is pretty well integrated, a nd it should be for a material size of plant. Pulkit Patni Okay. And what is the time period over which we should model this capex in our estimates? Promeet Ghosh Yeah. So, my guess is that we should be producing two to three years is when we should be producing this. I mean, fortunately, as you know, our capital position continues to be quite strong. We are strongly net debt positive company, let me put it this way. So yeah, you should expect that this comes into production about 2.5 years, so to say. Pulkit Patni Great. That's useful. Thank you so much and will wait for more details on this capex later. Thank you. Aniruddha Joshi Yeah, thanks. Next, we have question from Mr. Umang Mehta (Kotak). Please unmute your line and go ahead with the question. Umang Mehta Yes, thanks a lot for the opportunity. The question was again on the capex. If I'm not wrong, I mean, the fans volume growth this year wasn't that high as such. I mean, so would it be fair to assume that you would be in -sourcing most of the incremental pro duction which you do. And effectively, you could basically look to go from 50% outsourced to entirely in -sourcing after, say, three years? Is it the right way to look at it? Promeet Ghosh Not really, Umang. We do expect to have, we are not going to go to a fully in-sourced model. Our own expectations of volume growth imply that we will continue to have a reasonable amount of outsourcing going forward. And what will happen is that the overall quality of our supply chain, I think will improve. But while this year, the volume growth has been modest, but from what we've planned, what we are seeing happen, some of which you may see today, some of which you may not see today, means that we continu e to have a mix of both in - sourcing and outsourcing. Needless to say, what we in-source, there are lots of advantages of in-sourcing. And those will obviously come to us, but it's not that we will be entirely an in - sourced company. Just to add to what Promeet said, Umang, I think two perspectives. One, in a year where you have modest growth at the scale at which we operate, we add about 1 million to 1.5 million fans to the volume, that is the size at which many companies have their t otal fans business. So therefore, we don't build projects like greenfield looking at a quarter or two or a year. It is from a view of next five years, how do we see the demand panning out and how consumer behaviours are going to move towards various aesthetics and technology-driven segment. And from that perspective, we think this is something that we need considering our future projections. Umang Mehta Got it. Very helpful. And the second one was on solar pumps. You did reply to the previous participant partially. But just to understand, do we look at it as an episodic business? Or can we build on the revenue which you already achieved so far. Just asking from a modelling perspective because Rs. 200 Cr, what we are factoring in is the growth on that. So, would that be correct to build or not?