Crompton Greaves Consumer Electricals Limited (CROMPTON.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Crompton Greaves Consumer Electricals Limited Q1 FY '26 Investor Conference Call hosted by Axis Capital Limited. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhiwani Kumar from Axis Capital Limited. Thank you, and over to you.

Yes. Thanks, Nirav. Good evening, everyone. On behalf of Axis Capital, I welcome you all to Crompton Greaves Consumer Electricals Limited Q1 FY '26 Investor Conference Call. Today, we have with us management represented by Mr. Promeet Ghosh, Managing Director and Chief Executive Officer; Mr. Kaleeswaran Arunachalam, Chief Financial Officer; Ms. Swetha Sagar, Chief Business Officer, Butterfly Gandiiappliances; Ms. Natasha Kedia, Head Investor Relations and Corporate Communication. We thank Crompton for giving us the opportunity to host the call and would now like to hand over the floor to MD for his opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir.

Good evening, everyone. Thank you for joining this call. And thank you, Axis Capital for hosting this call. My colleagues on the table have already been introduced by Axis, and I'm sure you're familiar with [indiscernible] let me quickly jump into the quarterly earnings.

Sorry to interrupt you. You're sounding a little feeble.

[indiscernible] You can't hear me?

This is better. I think you talk a little louder...

All right. I do have a [indiscernible] guys. So sorry, can have it. But I will try and speak up. Okay. So before I dive into the details of the financial performance and the business performance this quarter, there are a few highlights that I do want to talk about. the theme of the Q1 results, we believe reflects our continuing resilience and agility. We do believe that our performance is ahead of the industry in various categories. And we know that we have recorded market share gains on a year-on-year basis. Our high-growth categories, solar pumps and small domestic appliances led the way with SDA growing not only faster than the industry, but also a strong double-digit numbers. Significantly, our solar pumps business also demonstrated a very strong growth momentum. We, earlier in the quarter, secured the largest ever single order of INR 101 crores in solar pumps from the Maharashtra Energy Development Agency, demonstrating the continued strength of our position in solar pumps. In the back to growth categories, areas that we've been focusing on over the last few quarters, lighting remained stable despite headwinds from continuing pricing pressures. revenue was flat, while Butterfly grew in line with the market and expanded its market share in core categories. We also have a bunch of businesses which have high exposure to season. These are categories like TPW, residential agri pumps and air coolers. While the industry saw a sharp slowdown. We also saw a slowdown due to the shorter than usual summer season and erratic monsoon pattern. However, the company performed relatively better we believe gained market share. Despite the challenging environment on an overall basis, we have held on to our material margins. I'd also like to highlight 2 major strategic priorities that are shaping Cromwell's future. First, we have embarked on a transformational journey, building on our go-to-market strengths. The focus is on expanding reach, improving counter share and enhancing consumer advocacy powered by stronger sales fundamentals, digital enablement and capacity development. All of you know that our products both impact and are impacted by the environment. Climate change is altering demand patterns and driving changes in consumer behavior. At the same time, we are mindful of the environmental impact of our products. As an industry leader, we are committed to delivering products that not only meet but also anticipate evolving consumer preferences. We see sustainability not just as a responsibility, but also as a driver of smarter choices, sharper innovation, product differentiation and consumer affinity. Doing good in business and doing well for shareholders is inextricably linked to also doing well for the environment. Importantly, we have both the scale and the capabilities of being able to offer sustainable products at affordable price points to consumers. We believe this is a major differentiator. Accordingly, we are today announcing ambitious sustainability goals, reflecting our commitment to responsible growth. By 2035, we are committing to reducing our Scope 1 and 2 greenhouse gas emissions by 50%. Additionally, we are also committing to reduce by 60% the emission intensity per unit of sales of our product by 2035, most particularly in our highest selling category, the fans category. With that, let me get into the nuts and bolts of how we performed the last quarter. As you are all aware, weather-related disruptions clearly had an impact on the industry as they had. Our revenue this quarter on a stand-alone basis stood at INR 1,819 crores. Material margins remained healthy, reflecting sound financial management and adaptability in a demanding environment. EBIT came in at INR 155 crores and EBIT margin at 8.5%. This quarter, we also became a 0 debt company, having fully repaid the last loan that we had of a INR 300 crore NCD. We, of course, remain a healthy net cash positive company. This underscores our commitment to financial discipline and long-term value creation. Our PAT for this quarter was INR 125 crores with PAT margin at 6.9%. Moving on to business specifics. In the fans category, performance was subdued, largely because of seasonal disruptions. However, our -- we had a series of innovation-led launches. These included Fluido, [indiscernible] and nucleoloid. These not only resonated well with consumers, but strengthened our premium portfolio and brand position. While the ceiling fans category witnessed a downturn, we do believe that we did better than the industry, leading to market share gains. The EPW fans and air coolers businesses, both highly exposed to weather, witnessed a decline on line with industry levels. In pumps, the business continued to see very strong momentum in the solar pumps segment. Our business has doubled over a similar period since last year. We successfully executed orders and we have materially grown our order pipeline even apart from the order that we have publicly disclosed of about INR 101 crores, which is the largest order we ever got. Agri pumps and residential pumps both, of course, get impacted by unseasonal rains. Having said that, we do believe that we are performing well in these segments compared to industry. In appliances, the small domestic appliances business delivered strong double-digit growth, as I mentioned earlier. This is a business that has been demonstrating strong double-digit growth quarter-on-quarter for the last several quarters, and that has sustained in this quarter as well. The growth was underpinned by demand for our mixer grinders as well as for our induction cooktops. In large domestic appliances, we introduced an industry first 2,000 TDRS certified anti-scaling technology in water heaters, backed by a whole lot of innovation work that we've done to come out with this product. While the air coolers business, again, this was the high season for air coolers and like everyone else, we similarly had -- the business was impacted. Large kitchen appliances recorded a sales of INR 15 crores and seems to have added and seems to be getting strong resonance with consumers in the cook top segment, which has been added a slew of products being added to our cooktop range, and that's doing very well. We have also broadened our chimney range in the large kitchen appliances business. On to lighting. Industry-wide price erosion persists. Despite this, revenue was stable at INR 232 crores. Remember, this is pure lighting products that we have currently in our portfolio. The standout this quarter was a sharp improvement in profitability. EBIT rose 41% Y-o-Y to INR 21 crores with margins expanding 370 basis points to 12.6%. This is the result of our continued focus on improving product mix as well as operating efficiencies in our lighting business. Our B2B lighting business was a key driver this quarter, delivering double-digit volume growth led by commercial, flood, high mask and poles categories. We also secured several project wins in the industrial segment, which contributed meaningfully to the performance. In the B2C segment, outdoor and decorative lighting witnessed traction as we continue to pivot towards higher-value designer-led design-led offerings. Moving on to Butterfly. We have an exciting update. This quarter, we unveiled a refreshed brand positioning for Butterfly. As you know, Butterfly has been through a continued transformational trajectory, and this is the latest update on that trajectory. We unveiled a new brand positioning, which is built around the philosophy of celebrating change. You've probably seen the new Butterfly brand logo, which talks about this. This positioning is designed to resonate with evolving consumer aspirations and is supported importantly by a series of innovative product launches under the Idea's first series with over 40 SKUs being introduced aimed at strengthening Butterfly's premium and differentiated portfolio. Butterfly's growth revival continues. Its growth trajectory is in line with the industry. Revenue rose 3% to INR 187 crores, and there was strong traction in mixer grinders, glass tubes and pressure cookers, all of which are the core business of Butterfly. In each one of these core categories, Butterfly gained share. EBITDA grew 39%, reflecting the product mix and operational efficiencies. Overall, our kitchen portfolio, which includes Butterfly, SDA and large kitchen appliances performed very well this quarter. We continue to harness our brand equity and innovation capabilities to drive differentiation across categories. Our consumer-centric design approach backed by in-house R&D and marketing excellence has enabled us to launch high-impact products that address evolving consumer preferences and also reinforce our leadership in key segments. With that, I will conclude my remarks. I assume you have also seen the presentation that has been put up on our website. There is also a press release that and all of us here are happy to address questions that many of you have. [Operator Instructions]

[Operator Instructions] First question is from line of from Sidharth Siddhartha Bera.

Yes. This is Siddhartha from Nomura. Sir, my first question is on the growth, if you can provide some color about how has been the growth or decline in the categories like fans, pumps and SDA in the quarter. And if you look at these categories which are more impacted like the CPW and air coolers, what percentage of our [indiscernible] will be in the quarter?

Siddharth, if I understand your volume was a little feeble. If I understand the question, you wanted to know how the individual segments under ECD has performed and within this, how the seasonal categories performed. Is that right?

Yes.

So one, as you know, we don't give specific details, but I just want to give you a few color on the overall ECD performance. Our ECD business has declined by about 8%. But when we did an industry benchmark, we saw the industry decline at about 11%. And then we collaborated with that, we saw significant progress has been made on market share across all the categories that we are in. Now individually, if you look at it, a large part of this decline is attributable only to seasonal categories. Seasonal categories, I mean here would include table pedestal wall packs air coolers and residential pumps. These are the categories that is impacted by the decline. If you look at our growth categories, which is solar pumps, we have doubled our business year-on-year. Our SDA business, which we have been investing over a period of time, continues to grow at healthy double-digit growth. It has got a trajectory of growing at about 15% to 18%, and we are continuing on that. Our back-to-growth categories, which are 2 focus areas that we called out earlier, lighting is ahead of the industry growth and Butterfly is continuing to grow back on the growth track for the last 2 quarters. So fundamentally, the quarter 1 performance is largely impacted by seasonal businesses and significant amount of this decline is attributed to TPW and [indiscernible] coolers. Now TPW and [indiscernible] coolers also, if you look at industry benchmark, we have gained market share in both the categories, which means that our performance is superior compared to where the industry delivered for Q1.

Understood, sir. So second question is, again, I mean, if we go ahead, given that this unseasonal impact is likely to be restricted only to quarter 1, are we seeing any green shoots of improvement now as we go ahead into quarter 2 for these segments? And second, again, is on this fan, we did showcase and launch multiple new categories across industrial and BLDC fans. So how -- what percentage of the revenues are currently being contributed by these categories? And how should we look at the ramp-up going ahead for these categories?

Yes. So let me take this into 2 or 3 buckets. From a macro perspective, we see that the long-term demand is pretty much intact, and we see the long-term demand is positive. And across categories, we believe there is right to grow for us on various initiatives that we have been discussing in the past. On top of it, we have also talked about a few new categories that we are entering, one of them being solar rooftop that we announced in last quarter. You will also see progress update on this as we move forward in the coming quarters. Now within the segments that you talked about, particularly you wanted to know about fans and some of the new category announcements or subcategory announcements that we made and the new platforms. We are very pleased to share with you that the 2 new launches that we have made on PLDC under the Nucleus platform, Nucleoid plus the other SKUs doing extremely well. We are actually not even completed a pan-India launch on that because demand is outweighing supply. We are trying to see how do we cater to the demand as we move forward. It is doing very well. And as you would know, we continue to be the #2 player in BLDC and endeavor is to become the #1 player in BLDC. And these launches are pretty much supporting us. And there are a few more launches planned in the subsequent quarters within BLDC to strengthen our portfolio presence and drive on the BLDC category growth and further gain market share.

To answer your question, Siddharth, I suspect this is a question that come repeatedly. I'll say people are -- the indications from the market are positive.

Next question is from the line of Aniruddha Joshi.

Anirudh Joshi from ICICI Securities. Sir, 2 questions on solar pumps. Congrats for the great set of numbers. In terms of if you can share more details regarding the business model, how are we doing the sourcing arrangements? Again, what are the margins in this business? And again, what are the working capital? Are these numbers closer to what Crompton consol numbers are? And secondly, in terms of rooftop solar, which you alluded to in earlier quarter that entry -- we are being entering in rooftop solar. So any further progress updates if you want to share on that?

The way that we work on our solar rooftop business is that [indiscernible] the entire product, we are responsible for. We have a partner who executes on our behalf and also helps source consumer orders once the government has chosen us as a bidder. This is the approach that we've been taking since we launched this product about 2 years ago. It's working very well for us. As far as margins are concerned, our EBIT margins...

Sorry, sir, but voice is a bit feeble.

Okay. All right. Okay. I will maybe know you can -- there's nothing to pull because it's up there. Yes. So -- like maybe I'll repeat. We are responsible for the entire product. The installation is executed by a partner of ours, okay? This is the model that we followed, one partner. This is the model that we followed for the last 2 years, Insofar. As far as margins are concerned, at the EBIT level, the margins are very similar to the overall margin that Crompton records. And working capital in this business is what should I say, is comparable to the working capital that we have in other businesses. Return on capital in this business is strong. Right? I should clarify here that the way that we've been going about our business is that even as we ramp up our position in this, we've obviously also simultaneously been careful about how we ensure that we [indiscernible] the essence of the business and the business fundamentals remain very robust.

Okay. Sure, sir. And on rooftop solar, if you can indicate about the launch and...

Yes. So you will -- I think as we said, we are entering this business. Needless to say, we made the announcement after we've done a bunch of work on how we are going to execute building the team for that [indiscernible] up the supply chain for that product. As and when we secure orders, we will come back and disclose them to you.

We have next question from Aditya Bhartia [indiscernible] . We take the next question from Natasha Jain.

Am I audible?

Yes, Natasha, go ahead.

Sir, my first question is on the ECD segment. Now barring fans, your pumps, you said have done very well. Appliances have done very well. And I presume appliances, again, is a very high-margin business here. Then if I remove those 2, the -- probably the degrowth in terms of fans is sharper when I talk about margins. Now that number, when I compare to your peers, I think probably we have underperformed some peers given that all the peers' numbers are out. So if you could -- we've been talking about a lot of new product developments on the BLDC side. These are high-margin products. And then fans comparatively is slightly less seasonal than other product categories. So that BLDC should have probably saved our margins a little more. So can you explain is this completely reverse leverage or something else is kind of pulling the growth here downwards?

No, actually, Natasha, I'm not sure the conclusions you arrived that are robust, right? Insofar, let's take each one of these in turn. You said that the appliances business has strong margins. The answer is that it has good margins, not necessarily better margins than our fans business or our comms business, right? Overall, our -- the movement in margins in fans is very similar to the movement in margins in the products in our ECD business. In fact, it is not at all particularly impacted. Insofar as each one of these businesses is concerned, there are seasonal products and nonseasonal products. In the fans business, there is the ceiling fans business, which is more replacement and therefore, less seasonal, but seasonal nevertheless. Having said that, there is the TPW part of the business, which is very seasonal. So a significant portion of our annual TPW sales happen in the first quarter. In seeing fans also, the first quarter is the best quarter helped by the fact that replacements happen most particularly when the weather is warm. Now insofar as our pumps business is concerned, again, pumps is related to water scarcity. We have 3 segments that we are in. There is solar pumps, there is residential pumps and agri pumps. Both resi and agri are impacted by weather, not in this case by hot weather, but by extensive rains, right? In fact, you would have noticed that even the solar pump business is impacted by unseasonal monsoon rains. So our own estimate is that the solar pump business has at best on an industry level been flat. Our performance is a different matter, right? So I would certainly not attribute -- make the attributions that you are making, Natasha.

Fair enough, sir. I appreciate your detailed answer on that. It helps in terms of understanding a little further. Just last question on fans again. I mean, can you call out how is the inventory as of now? And any festive feelers in terms of the other appliance category, how are we seeing them? And any green shoots on now? That's it.

So I'll go back to saying what I said earlier in so far as the indication. Yes, the indications are positive. What we've seen so far in this quarter, indications are that we'll have some green shoots going forward. The second question that you said was inventory. there is fans inventory in the channel. It's beginning to clear, and that's also helped by some of the green shoots that we are seeing. What happens -- what tends to happen, I do want to clarify this. And sometimes I think we underestimate, the channel is the same channel. Sometimes the channel is the channel which sells fans, it also sells water heaters, it also sells air coolers. It helps sell TPW. Occasionally, there is overlap with other products as well. And when the season doesn't go off as well as was anticipated, then inventory buildup means that the ability of the channel partners to invest also gets constrained. So it does tend to impact businesses which are not explicitly seasonal.

Next question is from the line of Umang Mehta from Kotak.

Sir, just on Butterfly, we had a slightly slower start, but would you still hold on to your guidance that you look at double-digit growth this year? That's the first question.

Yes, that's what we're looking at Umang. The trajectory is good, while the quarter ended at a single-digit growth, but the exit of the quarter already gave us positive indication towards double-digit growth.

Understood. That's helpful. The second one was on the new category foray. So we see that you've made some changes in your MOA and a whole host of categories are added there, including large durables. I mean just from -- while obviously, you can't share which categories they are, but can we safely assume that large durables is not being considered at this point?

Yes. Large durables is not considered at this point.

And just the third one was on solar rooftop. Any broad aspirational numbers you can share? I mean I know it's early days, but any feelers you've got from your performance.

See the way I would like to put it across is you have seen the acceleration that we have done in our solar box business. 1x to 4x in 1 year. And already that 4x, we will being it down pretty early in the year as we look at the current financial year. That's the kind of scale that we have. Probably we didn't have an experience in solar when we started solar pumps. Today, we have got a library of business execution capabilities that we have built both on the technology side, procurement side and on SIC. So our aspirations are high. And the category size is also pretty high. Total addressable market is available here for us to take a meaningful market share and grow.

Next question is from the line of Achal Lohade from Nuvama.