Umang, I think the entire solar business is not built in with the thesis of there is a PM KUSUM scheme and that will continue to build this business. This is something similar to EV . You have all seen FAME-I, FAME-II subsidy is now out, but still the busin ess is continuing and probably accelerating in growth. And our hypothesis is that solar pumps will fall in that space. For a player like us who is a market leader in residential, we always said Agri is going to be an area of focus for us. Now solar pumps is helping us to position that pretty well. It is starting with the backing by the government on PM-KUSUM scheme. But even beyond that, the real need for a farmer to have continuity in power is probably the primary reason to transition to a solar pump. And therefore, we don't see this as a sporadic business, and this is something that is sustainable for a longer period of time. Umang Mehta Great, those are my questions. Thank you so much. And all the best. Aniruddha Joshi Yeah, thanks. Next, we have a question from Mr. Viraj Kacharia. Please unmute your line and go ahead with your question. Viraj Kacharia Yeah, just a couple of questions. Most of the questions on Crompton have been answered. Just on Butterfly, you talked about NPD for Crompton. But for Butterfly, how are you going about with NPD and how are you going about measuring the effectiveness and tr acking the efficiency in terms of the new product introductions. Second, largely in terms of the brand positioning and the brand architecture, I think last few calls, you have been talking about the exercise by and large through for Crompton and looking at similar exercise in Butterfly. Can you give some colour, how the brand would be positioned both for Crompton and Butterfly in common markets and both in those region in terms of price points, will it be made premium? Any colour you can give on that? Promeet Ghosh Look Viraj, let me just reiterate and say that you should be able to see some of these things play out fairly soon. One, I'd say watch the space. But if Swetha is willing to give any more. So look, there's a fair amount of activity on the brand as well as on the new product launches at Butterfly. The idea would be that we get those out particularly ahead of the season, because the kitchen appliance season is different from the fans and air cooler season. And it's important to get those out ahead of season. So yes, you should see quite a bit of activity there. You will get clarity on the questions. And needless to say, it's not fair to kind of lay it out just now ahead of the actual launch. Viraj Kacharia Okay. Just two questions there. One is, when we acquired Butterfly which was a brand which was strong in South. So, will there still be opportunities? Will we still be looking at the cross- pollination, is the brand going pan -India and leveraging synergies in network and similarly for Crompton in south? Any colour you can give on that? Promeet Ghosh Yes, firstly, absolutely, Viraj. It is our intent over time to take Butterfly to other parts of India. What you're seeing happen just now is Butterfly focusing on strengthening the core. It's a brand that is very strong in the south, but there are things that we needed to do to ensure that our core was further strengthened, our products were strengthened, our brand has strengthened, and some of those actions you've already seen and you are already seeing the benefits of those. You will see some more of these happen soon enough. But even as we do that, we do see the opportunity of taking Butterfly to other parts of the country and leveraging of that. Viraj Kacharia Okay, I'll come back. Thank you. Aniruddha Joshi Yeah, next question is from the line of Mr. Indrajit Agarwal (CLSA). Please unmute your line and go ahead with the question. Indrajit Agarwal Thanks for the opportunity. I have two questions. First, again, coming back on capex. Crompton historically has enjoyed very high ROCEs and the flexibility of sourcing because of outsourced model. So, with this capex, is the objective to have a better view on sourcing or better returns or both? Promeet Ghosh Both.
Crompton Greaves Consumer Electricals Limited analyst Q&A
Both. Indrajit Agarwal So, this will be ROCE accretive? Promeet Ghosh Yes. Look, at the end of the day again, don't want to get into specifics as yet, but we do think that this investment will generate good ROCE for us. More importantly, this is something that will elevate the Crompton supply chain from new products, new technologies, quality, faster to the market, etc. Let's understand what's happening here. I think you should be able to put together and join the dots. We've announced investments in the next generation of fan platforms. Now you will also see that translating into differentiation into the market. And the investments that we are making, we do think will help us quite a bit in the market. Indrajit Agarwal Sure. Thank you. Secondly, you talked about the unseasonal rain and cooler weather. With that context, how is the trade inventory levels currently? Is it significantly higher than normal seasonality? Or do you think it's something that can be drawn down if things improve in the next couple of months? Promeet Ghosh The trade does stock up ahead of the season. That is obviously a feature of how the market behaves. And if unseasonal rains arrive, then obviously, the trade is holding higher stocks than they would have anticipated at this point in time. Having said that, it is our belief that it's not like the season is gone. It's just that it shifted. And I think we do have to understand that this is not a one-off in the future. It is quite possible that the timings of seasons will move. We've had extended winters, we've had shortened winters, but that's the trade , that you have to have an agile system, growth and your supply chain as well as at the front end to be able to deal with these. And yes, I do think that as the weather gets warmer, this will get addressed. And it is beginning to get warmer in some parts of India. Again, somebody was asking about supply chain earlier and new greenfield, etc. This i s, again, an indication that you need to have an agile system, which is quickly able to pivot as you go forward and everything helps, everything that you can do to get that helps. Aniruddha Joshi Yeah. Next, we have a question from Bhoomika Nair (DAM Capital). Please unmute your line and go ahead with the question. Bhoomika Nair Yeah. Hi, so my first question is on the margins that we are seeing in the Lighting segment, which is driven by an improved mix as you had alluded earlier. Now is this something which is very specific to this quarter where we've seen this sharp jump? Or is this something that we can now start seeing an improvement towards these high double -digit or teen-levels kind of margins?
See, Lighting as a segment, if you look at it, we have been calling out clearly for the last six or seven quarters. Prima facie price decline is not something in our control from an output product perspective. And we have been sharp enough to ensure how do we make some of these products fit-for-purpose. You know that our flagship cost reduction programme, Unnati, is helping us to ensure that both direct and indirect costs, not only at lighting level, but across the organisation has been reduced. Third, our mix is improving compared to where we used to be in our LED bulb led category. We are moving towards panels and ceiling. That is also helping us to move the margin model. Now the idea, as we always talked about as part of the Crompton 2.0 strate gy is not continuously expand the margins. It is also to look at growth. Some part of this margin, we have started to reinvest behind the brand. For Lighting as a category specifically, you saw some of those campaigns that were run during last year. We wil l be accelerating that during the course of this year to ensure that we are able to capture the revenue growth opportunities, too. Promeet Ghosh And by the way, the margin improvement is despite the fact that we've stepped up investments in the brand. This is despite the fact that we've made more investments in the brand. And we will continue to do that. But these are not sudden one-offs that have happened in this quarter too. Fundamentally, in every business, you have to strengthen your profitab ility position so that you can give back. Bhoomika Nair Understood. So basically, the Lighting where there was a lack of growth either in terms of top line or in terms of the margin profile, that is coming back towards a balanced growth. That's the way we should think about it as we move ahead. Promeet Ghosh That's right. Also, I'd say that some of the growth initiatives, which are adjacent to lighting will also now get announced as we get comfortable with the fact that the lighting business is back on track. Bhoomika Nair Sure. My second question is on Butterfly. We've obviously done a very good job. We've seen an improvement in terms of our margin profile and double-digit growth with margins further improving to historical 9%-10%?
I think if you look at it, we called out a strategic road map for Butterfly about a year back, somewhere around last year Q4, where we said the first job that we need to do is get the channel mix right, get the pricing actions right and get some of the go-to-market work started, also get the team in place. And we said that end of Q4, we should be able to arrest the decline and get back to growth path. Phase 1 has been well done, and we are on the right track, and it is moving in the right direction. So, in far as Phase 2 is concerned, which is effective FY26 onwards, we did talk about in the previous question that there is a brand repositioning and a bunch of NPDs that are going to get into the market in a differentiated route. We expect this one to augur or augment the revenue growth. Our endeavour in Butterf ly is to grow the revenue in double -digit and start expanding margins. We are at about 7 -7.5% EBITDA margin. The idea is to take to about 8 -8.5%, but that's also on the back of significant investments will go behind the brand, considering FY26 is going to be a year of relaunch and repositioning. In the medium to long run, in the next three to five years, we expect Butterfly to grow at about mid-teens and reach close to double-digit EBITDA margin. Bhoomika Nair Sure. So that's very helpful. Thank you very much. All the best.
Thank you. Aniruddha Joshi Yeah. Next question we have from Natasha Jain (Phillip Capital). Please unmute your line and go ahead with the question. Natasha Jain Yeah, hi, this is Natasha from PhillipCapital. So, I just have one question. The last time when we had come for the Investor Meet, you had showcased the 5-star induction fan. Now when I went to the channel, I did find your products, but I could not find other 5-star indexed fans in terms of your competitors. I know the season has been lean, but can you just give us a feedback how the channel is accepting that? That's it. Thank you.
So, when we talked about the HS 5 Star, as we said, it's an industry first. The idea is that 5 - star is probably your best energy saving fan under an induction motor, which is similar to BLDC. The market today is positioning this largely towards BLDC as a segment to drive energy efficiency. But considering that one is on an induction motor platform, and one is on electronic platform, the durability and the consumer experience is far better in the induction motor 5-star. So, we have been one of the pioneer to start the initiative towards this. And at a point of time, we expect this to scale up at the industry level also. Natasha Jain That's it. Thank you so much. That's all. Aniruddha Joshi Yeah. Next, we have a question from Ashish Jain (Macquarie). Please unmute your line and go ahead with the question. Ashish Jain Hi, good evening. My first question is on the solar rooftop panel business opportunity that you spoke about. Can you give some more colour on both sourcing and distribution? And at least in the initial period, will it be margin accretive for us given it would be more outsourcing- based business to begin with?
See fundamentally, as we talked about earlier, it's a market size, which is a target addressable market of about Rs. 20,000 -25,000 Cr. From an overall ecosystem perspective, we did do something similar in solar pumps. In about five quarters, we have reached a run rate of almost, say Rs. 240 Cr per annum. And the business is highly profitable and cash accretive as we have seen it time-after-time and multiple tenders that we have participated in solar pumps. Now coming to solar rooftop, one of the fundamental differentiator is going to be having a very strong brand that is going into the household. And many of the Indian households have grown with the brand Crompton. And therefore, that brings in a lot of trust for a consumer to go with a rooftop, which has got Crompton on it. So that's the first reason. Second, our distribution is very strong, both in B2B and B2G. We have got very strong experience that has been built in over a period of time across categories, prima facie led by lighting first, and then we have got this through in solar pumps also. From a sourcing perspective, I don't think so that's a big differentiator. Category after category, we have demonstrated our capabilities to do a very good model of outsourced vendor sourcing at the same point of time, ensuring that the quality and consumer exp erience is not compromised. And equally, when time is required, we have also not shied away getting into in-house. Right now, it's going to be an outsourced business. Brand Crompton is going to play a significant role to make an inroad into this category. And it is a business that will be margin accretive, similar to what we have seen in solar pumps. Ashish Jain Kaleesh, just one clarification, like how much of this business is incentive or tender -based? And how much is government support directly or indirectly driving growth or demand in this sector today?
Yeah. See, as we discussed earlier, we talked about EV , which went through a FAME 1 and FAME 2 and similarly, solar pump, which is going through a PM KUSUM scheme. This is also starting with an initiative from the Government of India, which is a subsidy -driven business. The payback for the consumer is very strong, which is what is driving move towards solar rooftop compared to other modes of electricity. But again, as we have seen in EV and as we would see at a point of time in solar pumps, this would also become mainstream even when the government initiative or subsidy goes away. In the medium-term, we don't see any challenge of a government subsidy going away. As we all know, the initiative was just started in FY24, announced by the Prime Minister. So at least for next four to five years, the subsidy is here to stay. But our hypothesis is that the business will be independent after the subsidy also. Promeet Ghosh Since the question is repeating about how you build up sales in a product like this. Remember that this is a product that the consumer is spending Rs. 1.5 lakhs, Rs. 2 lakhs and the trust is a key part of the element if you want to buy a product like this. And I don't need to tell you that we have a very different consumer brand for that exemplifies trust in home electricals. Also remember that this is bolstered by the fact that on a service, the product should be quickly serviced and so on and so forth. And I think the consumer experience over the last 85 years, together with the capabilities that we have in sourcing and in execution will stand us in good stead. This is a little bit different from the solar pumps business where this is a direct engagement with the consumer. And actually, the cash flow characteristics of this are even better than the solar pumps business, because the money is pretty much paid upfront. Ashish Jain Got it, Promeet. Thank you so much. Aniruddha Joshi Thank you. That was the last question for the day. I thank the management on behalf of ICICI Securities and hand over the call back to the management for closing comments. Thanks, and over to you.
Thank you, guys. Thank you, folks. I think quickly to summarise, we started Crompton 2.0 about two years back. There are four key facets we announced on as part of it. One is on our entire lighting turnaround, which is now complete. The second was getting Butterfly back on track. We are seeing green shoots of that. Third is working on supply chain. We did announce a greenfield project that is going to be coming in very soon. And the fourth is on GTM transformation. That's also another area where we have sta rted work. We will talk about that in detail in the coming quarters. That's all from our end, and thanks a lot. Promeet Ghosh Thank you.