Bajaj Electricals Limited (500031) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of Bajaj Electricals, hosted by Ambit Capital. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, and over to you, sir.

Thank you. Hello, everyone. Welcome to the 2Q FY '22 Earnings Call of Bajaj Electricals Limited. From the management side today, we have with us Mr. Anuj Poddar, the Executive Director of the company; and Mr. E.C. Prasad, Chief Financial Officer of the company. Thank you, and over to you, sir, for your opening remarks.

Okay. Thank you, Dhruv. This is Anuj Poddar. Good evening, everyone, and thank you for joining us. Before I talk about our quarter performance, I'd also like to point out that we've also prepared and shared an investor presentation this quarter based on the feedback that some of you have been sharing with us. So I presume many of you already have got access to that. Those who don't, please make sure you get access to that, so that shares some insights beyond the balance sheet, which typically many of you look for. With that, let me just quickly give some opening comments on the quarter performance. As we all know, it is a very tough environment, particularly because of the cost side pressure with the commodity cost increases in such an environment. I'm very pleased with our quarterly performance. Our Consumer business has demonstrated very strong growth, like almost industry-leading growth. And we've also kept pace on the margins. So our margins are nearly flat compared to last year. We now dropped margins despite the pressures on commodity because we made up to many other cost initiatives. I'll be happy to talk about that later. Overall, therefore, our Consumer business is up 31% on revenue and 22% on consumer EBIT. EPC has seen a shrinkage in total revenues. But as you know, we've been sharing for a while, it's not that is a planned reduction on the billing because we've been selective of new contracts and order book. So our revenue mix between consumer and EPC continues to be in the right direction. It will be like it, until I think the current quarter revenue makes about 79% to 80% in favor of consumer. EPC continues to have a small loss, but if we continue to look at that sequentially, that loss remain contained to a small figure. In this quarter, Y-on-Y loss figure for EPC seems to show against the profit last year. But may I remind you, last year Q2 had some onetime reversals and gains in the EPC business, which is why the Y-on-Y comparison on EPC bottom line is looking slightly weak. Moving on, finance costs are coming down, PBT has improved, PAT continues to improve. Last 2 points are noted on the balance sheet side. As always, we've remained very focused on improving our balance sheet. Our cash from operations in this quarter has been INR 476 crores. Part of this has been due to vendor financing that we've introduced, about INR 300 crores comes from that, but over INR 150 crores to INR 170 crores comes from actual business operations. All of this cash, almost entirely will be used to repay debt. So we've had a debt reduction of INR 419 crores this quarter, which has significantly brought down that debt, including debt that we had acquired from Starlite. So in all of these parameters, [indiscernible], we remain consistent on our trajectory, strategically that we pointing out, both in consumer, better risk management on EPC, maintaining margins in Consumer business despite all the external challenges, which is delivering better operational performance and continue to do better and improved balance sheet every quarter. Thank you for that. With that, I'll pass it on back to the moderator for questions.

[Operator Instructions]. The first question is from the line of Renu Baid from IIFL.

Congratulations on the results. I had 2 questions. My first question is on the demand outlook. What would be your input in terms of how is the festive season offtake? And post-festive season, have you seen the broad demand momentum continuing, the strong double-digit growth that we have seen YTD in terms of performance across segments and categories, specifically appliances?

Sure. So good evening, Renu, thank you. As you see in this quarter, we delivered good growth, which is obviously a function of market demand. But I would also say that the demand, having said that, is not as buoyant as it was last year post the COVID in terms of outset. By that, what I mean is that last year we were struggling to service demand and supply to demand. I think this year, we added a spice to create the demand and create that, which we managed to do. So I would think it's a little harder demand to create. That said, we are seeing growth over the previous year. Even in festive, we've seen a little mix September end, which is post Ganesh Chaturthi, et cetera, we saw a certain dip in the demand, but we started picking up towards second half of October. Part of it could be a strike for a short period, et cetera. But that's why it's a little early to see how to pay out. I would want to wait till November end to see, how much of that will bounce back to what level. But overall, I remain optimistic. I think some of this is also a reaction to inflation and price increases. But as people start to become more sanguine about that and accept that, I think, we will start seeing demand from that. One last point I'll make on this, I think there's a certain level of apprehension on the third wave that may be impacting sentiment slightly. And nobody say whether third wave will happen or not medically, but I think in terms of economic disruption of any third wave will be minimal this time. I do not expect any significant disruption, and that apprehension passes away or goes away. I do believe that sentiment will continue to improve in next 3, 4 months. We should start seeing good demand trends continue.

Right. Because my question was from the perspective that last year, we had a very strong pent-up, so definitely catching up on the volumes is simply a challenge. So even if there is this average 15% price hike that we have taken across segments and categories. So even if that delivers growth, that could be reasonably commendable. So do you at least see volumes being catch up to the previous year levels? Or the volume growth itself could be -- or coming back to the same level of volume itself would be a challenge in the second half?

So we had to wait and see. Q3 last year was a high base for the industry, et cetera, but some of that high base also tempered from stock out. So I think somewhere there may be a compensating effect. So I do think volume is rolled out and therefore, price increase should help deliver the overall revenue growth.

Sure. Sorry, in the presentation, you have highlighted that there has been market share gains witnessed across fans, appliances categories. So will it be possible for you to quantify in terms of over the last 12 or 18 months? What is the quantum of market share gains that Bajaj Electricals have seen across some of the key consumer-facing segments and categories?

So we do have certain data. But like I've shared in the past, there's 2 or 3 sets of data that tend to have a certain amount of divergence. So rather than pay attention to the absolute numbers, you look at the trend line in each of these 2 or 3 sources of data that we track. All of them are showing market share gains to us. But the other property I use, if you just look at our growth in the business in this quarter or over the last 1, 2 years, as you said, that is not the pace at which industry is going like that. The industry, I mean the overall industry for 3 or 4 years are all gaining market shares, the cost of overall industry. In a particular quarter, including this quarter, it will be also at the top of it almost 3 or 4 years. But I don't expect that we'll be #1 amongst all the players every quarter, but I do believe all of us are gaining market share from the longer term.

Sure. And lastly, if we see the consumers movement that you have shown in the presentation, so of that almost INR 674 crores on the power distribution side, how has been now your exposure towards UP? And do you believe ahead of election, one can expect the payment or lease of retention to accelerate from that particular state?

So there, broadly, from what I remember, about 400-plus out of the 670 would be UP, both UP and non-UP are coming down. So to look at that trajectory of total receivables is because both of them continue to collect. But I would love to say last year this [indiscernible] and actually 6 months ago, I expected INR 674 crores to be lower because in terms of what is due, what is the movement on the ground, we expect more money to have come in sooner. But ultimately, that's the reality of building on the B2G business, where there are time line challenges on becoming the money, but we remain confident every month we will recover. Even this month, which you saw in this quarter, Q3 also, of course, we had more recovery. We will share that at the end of Q3. So both are directionally moving well, and we are continuing to recover both in UP and non-UP. And the sizable visibility of that recovery continues also. And by sizable I mean in terms of numerical value also, we had visibility and good recovery is continuing.

Right. But overall, sir, I appreciate the extremely informative and detailed presentation that you've put across. We hope this should be continued on a going concern basis thereafter.

Yes. I will do that every quarter. And I think the feedback we've taken from all of you, to have a presentation, but then we wanted to also make sure we make it beautiful for all of you.

[Operator Instructions]. The next question is from the line of [ Nitin Gandoria ] from AlfAccurate.

Congratulations for a great set of numbers. Just wanted to understand on the consumer segment margin part. So FY '21, our margins were around 9.8%. So -- and this year, we saw a dip in margin led by [ RM ]. So on a going-ahead basis, how do you see the consumer certain margin and our guidance of improving margin by 100 basis points every year? So can we see 11% kind of margin in FY '23 and then 12% kind of in '24, something of that trajectory?

So Nitin, 2 points. According to me, our consumer margins last year, Q2 was 10.7% and this year is 10%. I don't know stand-alone, but I have not been tracking stand-alone. So are we talking the same numbers?

I was saying FY '21 full year stand-alone?

Full year it is 9.6%. Yes, okay. The only thing I would say is full year in a COVID year in Q1 last year distorted, the sales distorted, not as compared to 3 quarters or the quarter-on-quarter because otherwise there is a lot of distortion coming in. That's point one. Point two, before I answer the full year number, this quarter also we had 10%, and that is after taking INR 7 crore additional overhead allocation, et cetera. If not there, you would be at 10.7% in this quarter itself, okay. Point 2 is this is after absorbing the impact of commodity costs, which have impacted gross margin that we made up for that through other cost optimization if there is an improvements in our productivity and performance. We expect to continue to do that. Number three, to your question on a full year basis, we've guided 1% expansion every year since the last 2, 3 years. But you must also appreciate that we are well ahead of the curve on that. So you'll have to give us some space and watch on how we manage that. If I keep saying don't hold that excess against that. It will remain due to a larger guidance, and we will hope to keep doing that. I think we are ahead of the guidance, give us some leeway to also catch us in the [Technical Difficulty]

Okay. Okay. And lastly, on the EPC segment, so this year -- this quarter also we have seen continued loss. And you had guided that by FY '22 end we'll be ending with near-0 kind of number. So are we on track for the EPC loss becoming 0? And how do you see this panning out?

Yes. I would get hold to that guidance that beyond this year, we should not see any losses from EPC. I would like to say that beyond this quarter, we would not, but there has been a great way to [indiscernible] mandate from the UP project [indiscernible], which was expected to start in Q1, but now we have seen certain billing margins coming. We were waiting for Phase 3 work to get [indiscernible] allotted or quantified for the UP, but company will better clarity, but I would yet hold through to my guidance that beyond this year we should not have losses from EPC.

[Operator Instructions]. The next question is from the line of [ Mukesh Badani ] from Kotak Securities.

Sir, I wanted to ask that in terms of the margin guidance, now since we are opening up, so apart from the cost pressure, we'll have some employee costs as in we have some hiring of talent, we have some traveling costs, some branding costs will be there, some A&P cost will be also were, which was not done at COVID times. So what hit on the margins will which costs have? What is the sales mix shift in terms of the actual realization of the company from last year to this year as I am trying to assess whether we are able to sell higher-margin items out of our total portfolio of items or not? And any new high margin category, which we are going to enter in the future or not? That's all.

So Mukesh, thank you. Firstly, on your first question, we continue to invest in employees in terms of, for example, R&D or the specialist employee base that we add in. We've been doing that over the last 2 years. We will continue to do that because we believe that is a payoff. So we will not shy away from that. But despite that, if you look at our trend lines on employee cost as a percent of sales in a metric, you'll see that it is continuing to improve, so that shall continue to improve. Point 3, there are certain one-off costs and employee costs that continue to come. In this quarter, we've had certain exits from factory labor, et cetera, for which we had one-off payoffs and compensation that is also mentioned and quantified in the investor presentation. And some of those actions, activity will continue as the organization needs continue to evolve. So we will continue to do that also. Lastly, on your other cost items such as travel, et cetera, these have already started coming in Q2. Also, they have come in Q3. They will continue. Our advertising -- publicity costs have been picking up. If I talk about this quarter, compared to Q2 last year, it was about 2% A&P spend, this quarter was about 2.3%. But may I also remind you that Q3 typically has a maximum ad spend because that's our big season in festive corporate sector. So you will see a sequential rise in Q3. So these are all costs that we'll not shy in. These are productive costs that actually add value to the top line and bottom line of the business. But our endeavor is to despite the [indiscernible] keep absorbing the costs and find other avenues to optimize, which is what we've been delivering. So we hope to deliver margins despite these investments in costs. One last point I would share with you on in terms of employee costs, this year, our increment has happened in October. So we will see impact of the employee increment from October, which is in Q3, but I think we will get absorbed that in our margins. Coming to sales mix, some of our growth that we see has happened because of sales mix improvement, both in terms of premiumization of different mix of products, if you look at mixer grinders. Premiumization doesn't actually plot [indiscernible] product categories is more expensive, but also upgrading [indiscernible] everything for mixer, for example, 1,000 watt mixer. In fans, we are launching more products in premium fans, which used to be completely absent earlier. Also if you look at our Morphy Richards portfolio that had not been growing for the past few years, but this year, we're seeing good growth, including this quarter, which I think is about 36% growth. So that is also delivering growth. That said, the premiumization strategy is not at the cost of our larger portfolio, so we are as much focusing on our overall portfolio. So we expect to drive growth across all of them. In terms of market offtake, I'm not personally seeing a greater affinity of demand on this segment versus the other, either geographically, that is urban versus rural, or premium selling more than, we don't want to make such. I am seeing that being friendly, universal and democratic in terms of how the trends are across these different segments and geographies.

So what about any high-margin categories are going to enter or the existing category only new high-margin products will be launched?

So there's no new category right now that we have to talk about.

Okay. Okay. And sir, just one last question. In terms of the demand trend, you just touched upon the demand for premium items and demand for our popular category items. So are we seeing any shift in trends right now in the urban landscape?

No, we are not seeing that. Yes, our growth of revenues from premium is in percentage term higher, but that's also because we launched some more product there and we had some white spaces there. So if I strip it off that, I'm not seeing a trend where one or that segment is outscoring the others.

[Operator Instructions]. The next question is from the line of Mayank Bhandari from Nirmal Bang.

Sir, my first question is regarding your working capital release. You have highlighted that INR 300 crores is due to the vendor financing in Q2. So sir, I mean, how is the working capital situation change because of this? Has your receivable portion gone down? Or is the creditor portion has gone up? Like I cannot see it in the balance sheet, if you can help me understand that.

No. Mayank, your first question is, has the receivables gone down?

Because of vendor financing, how is the receivable -- has the receivable portion changed because of vendor financing?

No, the receivables portion has not changed. What has happened is if you operate at a 30 days credit with our vendor, which you have taken that up to 120 days and help them with a vendor finance with the understanding that the interest will be [indiscernible]. And this all [indiscernible] product, so it doesn't get reflected as a borrowing in our books record. It's a vendor line of credit that we have created for them and taken up the vendor credits from 30 days to 120 days.

So it does not impact the balance sheet then?

So I think it frees up cash for us, right? And the cash is to repay debt, to brought down debt.

Okay. Okay. Sir, what is -- the second question is...

It's in the form of cash, which is on the balance sheet, right.

Okay, fine point. Got it. Sir, second question is, can you give the breakdown of INR 603 crores of appliances in Q2 FY '22, maybe rough estimate? Which are the negative appliances in that?

So we don't break that down within appliances, but of course, the kitchen appliances are the dominant share in that for us. In kitchen appliances again, mixer grinders, et cetera. In the full Q2, Q3, particularly other domestic appliances, such as water heaters, et cetera, start kicking in also strong.

Okay, okay. And then lastly, what would have been our market share in fans by now?

So we are #5 rank there. I think our rank has not changed, but overall, our share has increased. If I put that, I think overall fans industry has grown at about 9-odd percent, and we'll grow at 13%. So that's a proxy for market share, too.

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

Anuj, this is basically very impressive performance, especially the balance sheet and on you can see some...

Amit, sorry to interrupt, your voice is not very clear. Can you repeat.

1 minute. Am I clear now?

Much better. Thank you. Amit?

So it seems like we lost the connection for the current participant. [Operator Instructions]. The next question is from the line of Yash Kothari from Citrus Advisors.

Firstly, very good results. PPT was also very informative. So my first question is, any sort of demand outlook for the Consumer Products? And then how do you see the whole consumer electrical industry growing and the outlook for the company's Consumer Products division growth?

So Yash, thank you. And I just -- I answered partly in response to it earlier on. I think it's been a mixed trend of demand in terms of EBITDA completely universal, flying off the shelves, demand bounced back like it was last year in Q2, Q3 now, which means we're having to fight for the demand and create that demand, make sure we're getting the demand our way, which we delivered in Q2. We hope to do that in Q3 also. At the same time, I remain optimistic. I think it's partly sentiment driven. Sentiment both a certain apprehension around third wave of COVID and a little reaction to inflation and cost increases. I think next 1 or 2 months, both of these aspects should start settling in, and therefore, the sentiment should continue to improve. So if you look at it on a full year basis, I do think we will have a good demand trend ahead of us.

Okay. And any price hikes that you intend to take for any of the segments on the product?

Yes. So we've taken 3 to 4 rounds of price hikes in this calendar year. We do expect to take one more on the price side before the end of the calendar year. So whether in November or December, we are deciding that right now.

The next question is from the line of Rakesh Roy from Indsec Securities.

So sir, my first question regarding, sir, in Q2, sir, how is the demand scenario in the rural and other markets, especially Tier 1 and Tier 2 City, sir?

So Rakesh, last year, rural was outgrowing urban, was not impacted by COVID. This year, we see demand in rural being almost same as urban, which means a growth both going in tandem. We did see a little more, if I say, impact in rural in the initial months, but that is catching up, but it is not outgrowing urban right now.

Okay, sir. The next question is, sir, sir, any new product launch in near future, sir, or this segment, sir?

Sorry, any new product in?

Any new product launch, sir, in Q4, Q3, sir, or next year, sir?

So if you see in our investor presentation, we shared our recent launches. Future launches as and when we do, we announce that, but we don't announce that in advance. We will keep launching every quarter new products, and we do it. Actually, I don't mind mentioning 2 of them because that's not covered in the deck, but we launched that in this quarter, which is on water heater. Water heater, we playing on safety, so that's a key concern from our marketing side. So we've launched 2 new water heaters. The campaign is on air right now. One is on child safety to prevent heating and the other on auto shutoff to prevent energy loss and overheating of the water heater. So these two already launched, but we continue to have more new launches.

Yes. Any plan to launch new premium fan in Q4, or from Q1 new season starts?

Yes. So we will be doing that in the coming couple of quarters.

[Operator Instructions]. The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.

Yes. Congratulations for a very good sort of performance and a very detailed presentation. Sir, my first question is that in your receivable stable, I see about INR 674 crores from power distribution. So assuming the entire amount gets cashed in, will there be a provision write-back as well because we will have provided on this amount as well?

We can answer that [indiscernible] this is net of all provisions.

So this is net of the provisions, our provision for bad and doubtful debt stands at INR 147 crores. So the INR 674 crores that you are referring to for PD is the net of all the provisions that we are making.

Okay. Okay. Understood. And my second question is in extension of Mayank's question. So when I look at your cash flow statement, there is a mention of INR 300 crores vendor financing. The acceptances, shouldn't that have gone up by INR 300 crores ideally?

It's a part of other financial liabilities.

So in the cash flow statement, we can see that, is it?

Not in the cash flow statement [Technical Difficulty]

Sir ideally, ideally you are -- if you are mentioning a release of INR 300-odd crores working capital. It is funded release right? It's not release from your operations. You borrowed money to pay your creditor. So ideally it should get reflected in your cash flow statement.

Okay. [indiscernible] we have the numbers. If there is another question, we'll come back to this, sir.

No problem. I'm done from my side.

1 second, we can go back and answer the last question, Bhargav's question. Yes, if you can pull out the cash flow.

So if you can pull out the cash flow, it's a part of that increase in trade [indiscernible] provision employee benefit other financial liabilities.

It's a part of that.

[indiscernible].

[Operator Instructions]. The next question is from the line of Koundinya Nimmagadda from JM Financial.

Can you quantify the extent of price hike that you took in the calendar year. You said that you took out [indiscernible]. Can you quantify them? And also in what categories is it significant?

It has been across categories. To just generalize, to give you a range, it's been between 12% to 15% across the categories, in about 3 to 4 rounds.

Understood. And you did allude to the side that you're planning more price hikes in November and December and at the same time, you also confirm that. I mean at least you may have passed a comment that price hikes may have an impact on demand. So how do you -- I mean, how do you try to streamline between these, balance between these two? And what's your outlook on that?

Yes. So of course, that's what we have to do, always keep trying to have a good judgment on demand elasticity, our margins versus total takeoffs and operating leverage on that. We do think we need to take one more price hike, most likely in this quarter. That will not be across all categories, but that'll be across about 70% to 80% of our product portfolio. Timing of that, in that quantum of debt, we will decide closer to the timing of the December hike.

Sure, sir. Sir, can you comment a little bit about how the water heaters in this market is faring in the current season? And also how is the competitive intensity like?

So on the competitive intensity, I will tell you, there's never an easy day across all our product categories in the FMEG since the last 4 or 6, 8 quarters that I've been seeing it. Competitive intensity has only been increasing. So that remains. So that is not something we are scared of. We continue to deal with that on ongoing basis. Water heater is no exception, but we've been leaders. Last year also was very competitive, but we did very well in water heaters, and I believe that should continue this year also. We are just at the start of the water heater season right now. And winter is just starting to kick in. So we are starting to see the initial kind of demand on water heater and room heaters also...

The reason I'm asking the question -- sir, the reason I am specifically asking about water heaters is because one of your competitors mentioned that because more players that have air coolers, also have water heaters as an alternate category. And with 2 consequent years of lockdown in summer season, the competitive intensity has gone up in water heater, thereby it is taking place to take priority. So I was just trying to understand from that perspective, if that has heightened it further.

But actually, if you see the leading players in air coolers are not necessarily leaders in the water heaters. So they are not -- while it's seen as a alternative thing, I think we have 2 separate set of investors in market share affecting order in both of these industries. And I don't think there's a direct correlation between air cooler and water heater performance. Having said that, yes, to your point, water heater has its share of competition, both new and established players coming in, but that is something we remain conscious of and determined to continue to maintain our leadership in that. We will win that. Last year was no different. This year will be no different.

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

Anuj, I just have one question. So if you see the categories that we have in terms of appliance, we still have a good headroom to cover in terms of total market size, if you see, which is more than maybe $2 billion alone in kitchen. So in terms of capital allocation, how should we think about it in the next 2, 3 years? Will we focus more on the current categories, where we will have revenue market share? Or we will focus on some new categories altogether? So if you can help around capital allocation? Because balance sheet-wise, it seems you are seemingly on track, well on track if you see last couple of quarters. But in terms of next 3 to 5 years, we will still generate a lot of cash. So just wanted that color on capital allocation.

Amit, to answer the product question separately from a capital allocation question, and I've said this in the past that we will not diversify into categories for the sake of diversified in terms of what is [ established and looking good ] because anything we diversify into, we have to believe that we will be the player -- we will be in the top 3 players. We had a competitive [indiscernible] make sure we remain or become top 3 player in there. Number two, my criteria there is we will not compromise on strong double-digit growth. We've demonstrated without any diversification over the last 8-10 quarters we continue to deliver strong double-digit growth in our consumer business. So that is something we're committed to. So where does that growth come from? Does it come from increasing market share in our existing categories? Does it come from adding certain white space in terms of segments within the category? Does it come from certain geographies, which were traditionally rich that we can focus on? Does it come from adjacent categories? Or does it come from new categories. To me, these are all the 4 or 5 dimensions on this double-digit growth comes from. All of these, I would actually focus on this exact sequence that I mentioned, that unless I think the first 2, 3 fold dimensions are driving strong growth are not there, I would want to focus on that rather than be distracted the new category for the sake of it because I believe there is enough room to grow in this. That said, we are not -- what do I say? We don't have any emerging new categories, but that has to cross our filter of making sure we are leader for the long run. After 2 or 3 years, we don't want to become or remain [indiscernible] in a category that we are in today. Linking this to a question on capital allocation, I think, like you said, our valuation given the trajectory that we are on, we will, in another 2 to 3 months from now, flip over to having surplus capital. And we do have a certain intent in [indiscernible] and how we will continue to use that capital traditionally [indiscernible] back. Our competitive advantage, again, that there will not be new categories. So [indiscernible] any way to use that capital to add value to us and drive stronger growth rate that we are at right now.

The next question is from the line of [ Nitin Gandoria ] from AlfAccurate Advisors.

Anuj, so firstly, I wanted to understand within our Consumer Segment, so in the key product markets, like lighting, fan, within appliances also key product categories, what would be our market standing, market position in terms of, say, if you have the market share numbers on hand or a market ranking? And how has it improved over last 1 year?

So market share can [indiscernible]. So appliances that we are #1 if you take it across the board. And within that many of the subsegments, we are #1, okay? And like I said earlier, we are probably #5. Lighting is a very commoditized multiple here, but I think they're close to #5. And the way we see lighting in what we're reporting is slightly different from others because I think that we see in the consumer lighting, many other [indiscernible] if we add our segment [indiscernible] lighting jump, that's an entity B2C [indiscernible].

Okay. And within appliances, we would be about...

I actually [indiscernible] points. I think what is becoming more and more commoditized or crowded or fragmented is the B2C of consumer lighting, but the B2B, B2G project lighting is a far more specialist [indiscernible]. And that's why we have been growing share and expect to continue to focus. So we expect more and more margins also to come from that side of the business.

Okay. Okay. And within appliances, what are -- if you can segment what are the major categories, where we are leaders? Mixer, I know [indiscernible]. Any other categories where we are positioned well?

So the 3 largest categories, where we're #1 is mixer-grinder, followed by water heaters, followed by [indiscernible].

Okay. And has there been any impacts from competitors entering into each of the category or adjacent categories over last 1 year, heightened competition? Has there been any impact for us or do you see going ahead any of this?

Yes. So there has been impact. Clearly, we've seen competition in 3 -- over the last 2 years in appliances, but we've been seeing that consistently over the many years. So I don't think last few years is unique in terms of other players, who have been coming in previous year or last few years, we are -- so there's also a certain amount of churn in that. But that said, competitive intensity is very high. But the number that we're doing despite that or factoring that in, we remain confident of holding a leadership in appliances.

Okay. Okay. And so we had a policy of outsourced manufacturing. Most of our manufacturing is outsourced. So given going ahead, we'll be having surplus capital in hand, so within -- for the categories that we have marketed, are we looking to add manufacturing capabilities to have more cost control or any of these things?

So I don't think structurally it will change. We'll continue to have a mix of outsource, which will remain the majority of outsourcing and we will add in our manufacturing. But if you look at our overall revenue growth over the last couple of years, including this quarter, it's in the back of further capacity increase that we have done in-house as well as further portions from outside. So while they -- we are not shifting from outsourcing out, we have actually been consistent, adding capacity now across fan and appliances. Lighting is the only area where we've not been adding capacity in-house. In terms of going forward also, our decision on adding manufacturing will not be driven by capital, that can be driven by what is the cost of quality [indiscernible] we take advantage of doing that. [indiscernible] will be available,[indiscernible] today available for that, but it will be driven more by operational considerations.

Okay. So currently, our in-house versus outsourced mix would be [indiscernible] versus last 2 years?

Broadly about 18% is in-house and 50 plus is outside. [indiscernible] quarter-on-quarter based on which product to seasonality.

Okay. Okay. And just lastly, on the distribution part, so we have the largest distribution footprint in India amongst all consumer companies. So are we looking to increase our distribution footprint? What is it currently in terms of retail touch points or pin code covered? And is there any scope to expand this further?

So if you keep on [indiscernible] that, the total number of retail is closer to about 2.3 lakhs right now. But our focus is not to expand that footprint as much as to increase our counters share [indiscernible]. We are very good, but we are not monetizing that reach very much. So that's what we will be. Number two, within that also, given our urban-rural mix, I think our marginal potential to grow urban much greater than rural competition. So our focus on growing our urban share is higher than many other players. Number three, within this, we are looking at more from a geographical perspective, where are we weaker and we do have pockets in that we're trying to fix. In terms of your point on pin codes, et cetera, I just think in terms of servicing [indiscernible]. We service about 16,000 pin codes. I don't remember off hand on the pin code we sell-through, but I don't think that will be less, but will be higher than this.

Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments. Over to you, sir.

Thank you. So once again, I wrap up with a similar to what I said in opening remarks, it has been a tough environment, but we're happy to have delivered strong numbers in despite a tough environment. This is again a function of the new Bajaj Electricals that we've been building out, which is a far more resilient, agile and dynamic organization and more competitive. And that said, our financial metrics continue to improve, like we've been saying, held on to margins despite pressures on cost by actually improving other productivity efficiency items, we will continue to do that. And on a balance sheet and other perspective, we remain on track to actually continue and enhance. Lastly, on EPC business, again, our trajectory there continues. I'm confident that beyond this year, we should not have losses in the EPC business. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Ambit Capital, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.