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

Ladies and gentlemen, good day, and welcome to the Crompton Greaves Consumer Electricals Conference Call to discuss the change in directorate hosted by Batlivala & Karani Securities India Pvt. Ltd. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Kunal Sheth from Batlivala & Karani Securities India Pvt. Ltd. Thank you, and over to you, sir.

Thank you, Vikram. And I would like to welcome the management of Crompton Greaves Consumer Electricals Limited on the call. From the management, we have today Mr. Shantanu Khosla, the Managing Director; Mr. Mathew Job, the Chief Executive Officer; Mr. Kaleeswaran Arunachalam, Chief Financial Officer; and Mr. Promeet Ghosh, Executive Director and newly appointed MD & CEO with effect from 1st May. Mr. Shantanu, I'll request you to please give us some opening remarks, post which we will open the floor for Q&A. Over to you, sir.

Thank you so much. Good afternoon, everyone. This is Shantanu here on this side, with me, I have Mathew, Kalees, and Promeet. I appreciate you all dialing in, and I thought we would take the opportunity to provide some color on the management changes, which were announced by our Board yesterday evening and obviously also to give you all an opportunity to ask any questions, which may be in your heads. Like you're all aware, the Board resolved to appoint me as Executive Vice Chairman for a period of 1 year from May 2023, until April 2024, and thereafter, Non-Executive Chairman. And Promeet has been appointed as the company's new Managing Director and CEO with effect May 1, 2023. Now first and most importantly, I want to clarify that this is not a sudden appointment. As most of you are aware, I have about a couple of years left in my term. And as per best practices of really all the all the best-run Boards, our NRC has been thinking and working about the succession plan. So it is done and confirmed in sufficient time and have been working on this for the past few months to identify who is the right person to lead Crompton as we look forward to a continuing extremely healthy future. As for best practices, selection panel of the Board examined a number of candidates, both internal candidates and also external candidates. Some of the criteria that the NRC was looking at was an ability to balance long and short-term goals, lead and operate in a fast evolving kind of consumer durable industry, which is very importantly moving towards greater and greater technology-led products, with sustainability becoming mainstream and more and more important. This would call for innovation-led product portfolios, investment behind brand and R&D, and ability to nurture and room people with the right capabilities and drive a performance-based culture. It was not just the depth of industry understanding, which is important to the NRC. But importantly, a breadth of a wider exposure to broader trends, which emerge as the world in front of us changes faster and faster. Based on these kind of criteria, the NRC finally selected through a search process, Promeet as the most suitable candidate and decided to appoint him as the company's new Managing Director and CEO. With a view to easing and simplifying operations, and frankly, this has always been the long-term plan as part of my succession, we would collapse the MD & CEO role into a single individual. Promeet, as we shared earlier in the press release, et cetera, he has a Bachelor of Engineering from the of National Institute of Technology of Trichy and an MBA from IIM, Calcutta. He's been an investment banker for 2 decades and served as a Director on boards of various companies across sectors like Schneider, Fullerton, et cetera. He also worked at DSP Merrill Lynch for 18 years and helped built its M&A franchise, after which he was [ Advisory Director ] of Temasek, India. Very, very importantly, Promeet has been very closely involved with Crompton from its inception in 2016, first, as a Promoter Director and subsequently as a Nonindependent Director when Temasek sold out its stake. Promeet, therefore, has been very closely involved and participated in the development of our programs and strategies and investments throughout this period and has an in depth knowledge of the business, the key drivers and also importantly, the people and organizations through this period of time that he has been closely involved in the Crompton business. For myself, I think it's important to clarify to everyone that, in many ways, I may have been redesignated, but my actual work and role of this period largely remains unchanged. Mathew was the CEO in the past, and I used to provide him support, guidance and input. In exactly the same way, as Executive Vice Chairman, I will continue to provide exactly the same kind of support, guidance and input as Promeet transitions into his new role and continues to develop plans for the organization and business. So I am very much here for this 1-year period, which currently, the Board judges. It's efficient to ensure that the company is on the right growth path and the organization is healthy and strong and, importantly, future ready. In many ways, doing pretty much the same work that I do today in unchanged manner. When the Board came to this decision in terms of who is the best candidate to take over as MD and CEO is, Mathew indicated that it was, therefore, his choice and his desire to leave the company because, obviously, Mathew, like any of us has his own career expirations, and he is -- he chose to move on to pursue his career options in other places, organizations or businesses. Mathew will continue to be with us through notice period of a few months and will be of critical help in ensuring the smooth transition of the operations of the business to Promeet as we move forward over and above my presence and guidance also. I personally and the company owes a huge debt to Mathew. Mathew has been with Crompton since its inception, and his leadership has played a key role in transforming this company into one of the leading players in the industry. I personally thank him, the Board thanks him and the entire organization thanks him for his valuable contribution in helping the company reach the fantastic level it's already reached since its inception. As I mentioned, Mathew will continue to be actively engaged for the next 3 months in facilitating the transition and ensuring that current programs, plans go on without a hitch. I would also like to mention that as I have talked in the previous quarters, we stay focused on our priorities to take this company to the next level. We are continuing to work on strengthening the market position in the present, while also ensuring that we make the investments to create the capabilities that will put us in the best position to win the future -- as the future markets and products involve. Like I have mentioned before, we continue, and I know Promeet is fully supportive of this because, frankly, as I mentioned, he as part of the job built strategy over the years, but he will continue to invest and build our investments in brand building and advertising spend, R&D, as we have done so significantly over the last couple of years, and also continue to invest as we have done in our go-to-market excellence and manufacturing excellence programs. As I mentioned over the last couple of quarters in our various conversations, these steps that we've been taking in the near term on pumps, on our approach to the BEE transition in fans, and obviously, our standout performance in domestic appliances, has begun to show some promising early results. Obviously, given this quiet period. I cannot talk more about them, but once our results are released in the beginning of next month -- in the middle, sorry, of next month, I'd be happy to talk more about it. But we continue our strategies. We continue to focus on building the organization and capabilities to deliver against these strategies. We continue to invest in the right drivers that we believe are correct to build this in the long term. And Promeet, I, along with the rest of the management team and the organization, will continue to stay focused on delivering results which meets ours, and hopefully, your expectations. With that, I'd just like to pause and open it up to any questions that you may have.

[Operator Instructions] we will take our first question from the line of Baidik Sarkar from Unifi Capital.

Promeet, You've been with [ Crompton ] since it's inception, right? And I take it that you're well aware of the systemic issues surrounding growth rates from a relative industry perspective. So my question to you is, what is your assessment of how long you feel it'll take you to fix issues that we'll see as perhaps witness growth rates that are domineering and top quartile in the industry? And within that, if you could list out your top areas, you see that may be needed fixing across go-to-market, people, process, what is your assessment as the top priority over the next few days?

Yes, sure. Let me give you my short and the long perspectives of it. As you heard Shantanu speak, there are a number of initiatives that we are in the process of rolling out, which means greater [indiscernible] sales, greater focus on building up the brand, and, in some cases, price action. And I suspect the actions that we are taking in the market will start showing up in our results fairly soon. Insofar as the broader perspective is concerned, and insofar as the ambition of taking Crompton to the next level, that's a very important objective that the Board has, the management has and frankly I -- where that is the class of -- where I see the company going over the next several years, there is a bunch of initiatives that I expect us to take in terms of not only brand building, but embedding into that brand important elements of sustainability, which has become a huge area that I think we can drop it off. Embedding -- taking not only innovation that we've -- we are doing, but ensuring that the back end of the innovation delivers the product to the market in a timely manner in terms of making our manufacturing agile and so on and so forth. But suffice it to say that I'm truly excited by the initiatives that I think we can take. In -- I hope to kind of lay these out in considerably more detail to the investors, let's say, 3, 4 months down the line. But obviously, a lot of thought is already going into it. I'd say also that we've -- in the first several years of our evolution, as you are all well aware, we've done stellar work in terms of margins at the gross margin level. I suspect that there is work now to be done beyond that level. And I think those will start showing up in due course in the profits of the company.

Promeet, if I could just squeeze in one comment from you. Is that acceptance at your level that our growth rate is perhaps thought indicators of what the strength of our franchise should indicate? We've lagged quartile 1 growth rates. I mean, is there a very basic acceptance of that factor? Because everything else that you do drive and lead will frankly be a reflection of that, right?

Let me take that for Promeet and then he can answer. I think the very clear answer is yes and we've talked that. And over the last couple of quarters, one of the things that we've talked in the context of this is how we need to rebalance top line versus bottom line growth. And instead of just looking at bottom line from a percentage margin point of view, start looking at it from an absolute profit point of view. I think I have mentioned before in the relatively recent past that if I see impact over the last 7 years when we set out our objectives, we have underdelivered on our top line objective and overdelivered on our bottom line objective. So we have already begun, and I think I talked this maybe 2 quarters ago to create some amount of rebalancing and make sure that we are investing, for example, more in advertising, more in our R&D center, more capital investments to soar up our manufacturing and what Promeet said the back end of the innovation, right? So there's a complete recognition. But beyond the recognition, I think, there's already actions, which we have been taking and will continue to take. And I'm confident under Promeet's leadership with his background, we will identify even more such opportunities to drive growth. So for example, some of the actions, which we took over the last 3, 4 months, which have delivered wonderful outcomes on rebalancing our margin versus top line on pumps. I think we will continue to keep working that balance.

I mean, look, as Shantanu said, the plain truth is that we can do better. And that is the reason why you see the various elements of strategy that are being laid out and which I think you will see, will be laid out in considerably more detail as we go.

We'll take the next question from the line of Renu Baid from IIFL Securities.

My first question is if you look at the consumer electricals or FMCG market is reasonably bottom-up-driven trade channel driven. So Promeet, from your perspective, what kind of challenges do you foresee in terms of readjusting from a macro top-down, strategy-driven approach to a bottom-up, channel partner driven approach to stay connected with the market, and also address some of the issues that we've seen over the last couple of quarters of attrition at the mid-level sales marketing team there? That's the first question.

Sure. Your question, I don't think it's a choice. You have to, I think, balance both, and you cannot be doing just one or the other. Insofar, as the business going forward is concerned, clearly, both the elements have to come into play. One, of course, the work that we do with our channel partners on an everyday basis, but also making sure that we have the product, the innovation, the supply chain for delivering the kind of products that we think consumers want and will play not only today, but putting in place the ability to deliver them in the next several years anticipating what they want. So it's not going to be one or the other. Insofar as attrition is concerned, that's an area that we are focused on and hope to deliver -- hope to address as we -- over the next year- on-year term. It's -- let me clear so far as the attrition is concerned, attrition is also a characteristic of the industry. It's not something that any of the companies, whether in consumer durables or any other consumer companies is free of. But having said that, the attrition level is still higher than we'd like them to be, and that's something that we will address.

Sure. Secondly, in terms of, I mean, while Shantanu has highlighted a few things on the business strategies, changes that you've undertaken in the last couple of quarters. Any particular update that you would like to share specifically in the Lightings, Pumps where you had significant headwinds over the last couple of years. And fans also are now moving more toward a volume-driven approach [ against your ] gross margin strategy earlier?

Renu, I guess, you are aware we are in a quiet period, so I can't really comment on current business trends. I will commit to covering these things in detail when we talk our results. But at this point in time, suffice to say, I think, when I spoke to some of few folks in the middle of last quarter, I had indicated that some trends we were seeing early signs of. I can say that we are continuing to see those kinds of trends.

Sure. [indiscernible] I would say our best wishes to Mathew, for his new endeavors and all the best Promeet for your new role.

Thank you for showing up.

We take the next question from the line of Charanjit Singh from DSP Mutual Fund.

I have 2 questions. One, when you had started the process of selecting the candidates, what are the kind of weightages which you have given to different factors, specifically the industry experience, how critical it was when selecting the new CEO. Secondly, if Promeet was already part of the Board and have been there in the company since the inception, why the strategy which Promeet would have brought into the picture was not getting implemented and you are showing a very muted growth rate and all these issues which are continuing in terms of focus on profitability versus top line? Yes, these are the 2 questions.

I can't comment on specific percentage, weightages because this was done by the NRC and the Board. But what I can tell you is all the key factors, which I talked about, capability, knowledge of businesses, I mean, Promeet has industry experience from his -- from 8 years connection with Crompton but he also has some amount of industry experience as part of Temasek, work they did with Schneider, et cetera, right? So there are a host of attributes, which I mentioned in my opening remarks. And all I can tell you, the process was in depth. The process was objective. It was a process which is considered to be a standard, best-in-class process, which is why necessarily, it looked at both internal and external candidates. And we also have a Board which is -- and the members of this committee who're vastly experienced and extremely successful professionals in various industries in their own right, right? So that's really all I can comment on that. I can't really get into specific weightages. On your second question, I guess, yes. But I think what we need to recognize is there is, of course, always a difference between an Independent Director or just a director role and an executive role. I don't think -- I think what Promeet is going to bring to the party, frankly, and this is very good, and I've seen it over my experience as many times, apart from anything else, a fresh pair of eyes. And fresh pair of eyes can bring a huge amount of value. And how we -- specifically, I think -- I can talk about this personally. Some areas where I know Promeet has got outstanding expertise in terms of future trends on sustainability, et cetera, and how you build that into the value propositions of the company. Well, to be honest, Promeet has been pushing Mathew and me to get more active impact for the last 2, 3 years, right? But as management, we've always got other things to do. So I think that sort of action. And now we're seeing, for example, sustainability as we get more and more electronics, as we get more and more plastic, extended producer stuff is now coming into play, energy saving is becoming a business idea. So these kind of things, I personally have great hope that these capabilities, which are also part of the capabilities I'm sure the NRP looked at, will help us accelerate growth. Importantly, both the current and get our future ready 5 years from now, 3 years from now. Promeet?

Yes. Yes. I think that's the critical word, Shantanu, getting future-ready. So I think we are going into a period where we have to kind of -- we can't think of the consumer durables business as a linear business with a set of actors and a set of influences. In business after business, there are -- there is a multitude of factors which are coming into play outside because your go-to-market is going to change over a period of time, what product is going from being a product to being a gadget with the embedding of plastics in electronics. The number of people who are going to be competing, who are not regular players alone, but newer players who are continually getting added to this space. But IoT is a big area. Now all of these will start to play out over the next 5 years, but we have to build the capability to be able to not only compete effectively, but win in the market today. We have to start doing that today. So I mean, look because I was in the Board, I was in the part of many of these conversations because I recluse myself. But I know what the Board told me later on, which is that we were looking for someone with both the breadth of vision as well as the depth of understanding. Fortunately, I had -- haven't been exposed to a number of these companies fairly deeply in my goal as an investor, starting from early stage companies, technology companies, companies which are disrupting the supply chain companies, who are disrupting the go-to-market and so on and so forth, fortunately they felt that I had that skill set. So we'll -- hopefully, that will help take Crompton to the next level, which I have to say with the strength that we had...

The only other thing I'd add to this conversation is we must not forget that over these years, we have built a very strong set of capabilities among our leadership team. And all of them have got deep understanding of their categories, their technologies, their markets, right? We have people like Sriram and Sachin or [ Anand ] who runs Appliances Business. Sanjeev, who some of you may have met in -- who's leading our R&D and Innovation Program. So it is -- so there is existing depth of category knowledge and category and market understanding when you look at this entire leadership group. Because I know one other thing Promeet believes in is, it is a key, and it is how you get this team to bring their capabilities together to win, which is the most important. It's not only, and never is just one individual. So we are the individuals who sort of sit in front of you and talk to you.

We have unmatched understanding of Consumer Durables business -- in our Consumer Durables business. And there are a bunch of evolving influences. And hopefully, we'll be able to put all of that together with the team to build a robust business, which hopefully is a very competitive company in the future.

Yes. Sorry for that long jumping into the long-winded answer. Next question please.

[Operator Instructions] We take the next question from the line of Nitin Arora from Axis Mutual Funds.

The first question, as you talked about the IoT, the sustainability, I'm sure competition is doing that as well. They are quite ahead. But going back, Promeet, as you were part of the Board, the first question is, I'm sorry, I might be repeating that question because there are too many guidelines got announced about rebalancing growth versus profitability, which we've been talking about 5 years and 5 years we're selling pumps and fans eventually. So the question here is, what do you think is your priority right now for the next 2 to 3 years? Is market share gain is the priority, which will, again, come at certain cost? Nobody -- because given what's the tailwind in the industry right now from last 4, 5 years, there's been no growth barring the 2 years of COVID, and I'm sure you must be knowing it. What is your immediate priority? Market share gain is one where you believe that the priority is to grow fast than the market, is that one? Or you think gross margin -- not leaving gross margin for the product, which has been the previous thesis of this company, is that still remains in the overall scheme of things? That's my first. I have another question I'll ask after that.

Yes. So clearly, we've addressed this, I think, a few times already. Our strategy is clearly evolving away from preserving gross margins alone, and therefore, you will see us being profit led rather than profit margin led. Obviously, that should translate into volume growth for us. And that should be combined, I think, with, as we've already said, an incremental focus on bringing innovative products to the market, and also A&P spend as well as price actions we are assuming.

We take the next question from the line of Vaibhavi Kamat from UTI AMC. We lost the line of Vaibhavi. We take next question from the line [indiscernible].

I guess, appreciate that it's good to hear from both Promeet and Shantanu yourself. I was hoping to hear from Mathew as well and do some talking work, if there's no time for that or if it's not around that, but I think it will be quite good for shareholders to overhear from him. My question is really around the capability that you talked about. And I think it's quite key as you are trying to execute you on the strategy on what you described as the strategy evolving and very competitive landscape, it's all the changes. And the assumption high so this will be quite good to get some assurance on that one, how do you intend to retain talent? Do you have the right talent? Yes, I think if you could just go a bit more into that, that would be good. I appreciate ask and answer as well, but I see more details around this would be quite helpful to us.

Yes. I think -- this is Mathew. I think some of this we briefly answered in some of our previous -- not today, but in some of our previous interactions. I think, #1, we have crafted a new purpose for the company, which centers around improving lives of consumers by offering sustainable and innovative solutions. And I think one part of that, like we mentioned before, is actually creating what we briefly also mentioned is Crompton 2.0. Okay, we basically have 2 parts of it, how do we reconfigure the organizational structure to be able to bring innovations to the market much faster than we have done in the past, that's one. Second, I think in terms of improving sales effectiveness, I think also, it will eventually impact attrition because usually the attrition tends to be high when we are not able to really deliver the kind of growth we aspire to deliver. So 2 things we have been planning to do to fix that. One, improve innovation, which would mean it will be more and more consumer products. And number 2, improve sales effectiveness in terms of implementation. And that also, effects, like we briefly touched upon last time, is going to have to do with some level of restructuring in the way we go to market and the way our sales organization is structured. Obviously, we do not have the time to deal with it in more depth today. I think Promeet has, over the last -- time he has been on the Board and also in the last couple of weeks we've engaged intensively on contributing in building what I call it strategy 2.0. And I think that will play out in the next few weeks and months. And that I think will eventually help deliver both, increased innovation, which will definitely lead to improved sales growth, and also improve the go-to-market implementation, which we believe will also help bring attrition down over time.

Only one more thing, leg of that program, I'll add to what Mathew said is we've got a number of programs and projects ongoing, which are focused on digitization, automation. Essentially, all of them aimed to take the time people spend in nonvalue-added work, work which they do not -- which does not make them -- feel engaged. We take more of it and get it digitized and get it automated. So we have a number of projects ongoing in those areas also, which we believe will help.

We take the next question from the line of Sonali Salgaonkar from Jefferies.

I have just one question with respect to Promeet. Promeet, congratulations on your new role. You have a very rich experience in investment banking and private equity. Which are the preliminary steps you propose to either execute by your transition into this role of MD and CEO of a consumer brand because this essentially is quite different, as I understand that as compared to what you did earlier?

Actually, just -- thank you, Sonali. Just to be clear, what is -- what you call a classical private equity investor. I led the [indiscernible] team on the ground. What [indiscernible] is a government owned entity, which is a long-term investor in equity. So actually quite different from private equity. We typically get in trade with companies and assess what are going to be their long-term value drivers as we obviously invested in those companies for a long time. In some of these companies, Temasek takes a position of significant influence. And as you heard, Crompton was one of them, there are a whole bunch of other companies that similarly were placed. Generally, specifically what I did at was to be on the Board or whatever format of engagement the company is required in seeing through that the scaling up and seeing through that transformation. And as you might imagine, that kind of engagement is a little bit different from just being on the board. It's actually also true of Crompton where, for the first several years, Advent and Temasek were promoters and persons acting and concerned the level of engagement that one had in the company during that period of time is certainly considerable. And it entailed in what we kind of came out with the industry-leading margins and great market solution, et cetera. Over the last couple of years, it's been much more of just position because we stopped -- we stepped back from being promoters and so on and so forth. Now insofar as the immediate priorities are concerned, I think, one key priority for me is, as you know, we invested consistently in the innovation vertical, we've spent money. We've got a fantastic team now, and then we've got a steady pipeline of products. Now in order to be able to make the best of it, what also needs to happen is that the back end needs to be completely streamlined so that we can take our new products, manufacture them either internally or externally at the cost that we want them, at the places that we want them and have them delivered. And I just said, since you're asking me for one key priority, I suspect you'll find that as an area that's going to take up a considerable amount of my time. And I suspect that as that happens, you'll see -- then you'll see that playing out in the market. So that's -- if you wanted my topmost priority, that's what it's going to be.

We take the next question from the line of Pulkit Patni from Goldman Sachs.

If you could talk about, Promeet, what will be the KPI for you in terms of performance? And would the share price performance also form part of that? That would be question number one for me.

Yes, absolutely.

Promeet -- currently, the proposal on Promeet's KPIs are exactly the same as what my KPI is worth and will also continue to be the, what we call, TSR, which is basically based on relative share performance versus the basket of shares forms a significant part of that. Also, our relative performance, one of the differences in the way our Board does it is, our variable pay is not based only versus targets. 50% is based on performance versus budget and 50% is based on performance on key parameters of top line growth, profit growth and cash growth versus competition.

Yes.

So I may achieve budget, but if I am below, for example, Havells, then I do not get -- I get less of a payout.

Actually, one more element there Shantanu. So yes, firstly, my KPIs are hugely aligned to what we do in the market and share price performance. In addition, there's an element that the Board insists I have because they will assess over time to time how much progress we are making in getting the company future ready, right? So how much -- this is not only what we are doing in the short term, but what we are doing to make sure that, in the medium term and in the long term, we continue to have, perhaps, an even better market position than we have today.

We take the next question from the line of Rahul Gajare from Haitong Securities.

And Shantanu, I would like to thank you and Mathew for steering the company for the past many years. But I'm a little surprised to overhear that both of you are leaving key roles when integration of Butterfly is currently underway. Post the Butterfly transaction, all the top 3 people, including the CFO have left. Now this has been one of the areas of concern with a lot of investors. So I would request you to throw some light on this aspect.

First, again, to clarify, I am not going anywhere, right? I continue to be an employee of Crompton Consumer. My designation has now become Vice Chairman, but like I mentioned my roles and responsibilities stay almost identical in the -- to help Promeet the way I used to help Mathew. Specifically, however, since you mentioned Butterfly. One of the specific areas which Promeet and the Board have called out for me to make sure I spend sufficient time, especially to help Promeet do the transition is the entire process of merger and integration of Butterfly and Crompton. So I will stay even more actively involved in that particular area. And as you're aware, we have submitted a proposal for merger, and we are actively working both the operational merger aspects and the legal merger aspects which -- to get us there. We are commencing, which we've not done up till now, our first pilots in Delhi and Mumbai starting in this current quarter of a combined go-to-market to drive the combined kitchen appliance business, which we believe is going to be the future model to maximize synergies. In terms of people, which you ask, see, the reality is -- you're probably aware is that most of the leadership positions of the erstwhile Butterfly Gandhimathi were filled by the promoter family, and the promoter family all left. So we have been gradually filling up, both from inside Butterfly, also by seconding appropriate people from Crompton. And finally, by recruiting where we have to from outside to ensure that we've got a strong, capable leadership team. Currently, I think we've probably got one key position, which is still vacant, which we're looking to fill. But otherwise, we are pretty much in place with a strong leadership team across functions for Butterfly under Sriram's leadership.

We'll take the next question from the line of Latika Chopra from JPMorgan.

One question. Could you share if there any other key managerial people in the top or mid-level who have seen changes in the recent past? What I'm just trying to understand is do you sense there is a shortage of operational experience particularly on the sales distribution part? And how do you intend to fill these gaps?

Okay. There are 2 things. One is, as Mathew briefly mentioned earlier, currently, we're working along with Promeet to see what is the best way, especially looking at the future of the amalgamated companies to structure our sales forces so we get the right focus. So that is what which is ongoing. And that may result in some changes in roles of individuals, et cetera. The second thing to ensure continuity is, like, I mentioned, Mathew will be here, right, for the next 3 months. And he is the one who's really going to take the lead over these 3 months in designing this -- the specifics of the new structure, obviously, with Promeet's input and my input. But Mathew is the one really be -- has already done a lot of work in that area, and we will begin to execute that over this period. So we've actually got now a good set of regional managers in place across the 4 regions. We've also got some good capability, which we're comfortable with in terms of our specific channels, rurban, e-commerce, all of which have been giving us disproportionate growth. Yes, there is no doubt, like someone mentioned and Promeet said, that we have some challenges in attrition, but they're more at the lower level and the frontline sales where we are doing a number of programs, including capability building, et cetera, et cetera, to bring that all down.

I just want to say that I know a couple of exits that have been talked about. Just to be completely clear, they are in ordinary course of business. They are entirely unrelated to the realignment of leadership that the Board announced yesterday. As you might imagine, Crompton is a place where a lot of companies look to hire from and occasionally, those offers are very interesting for our people to take. But there is absolutely no connection whatsoever between any exits that they have begun. Those are only 1 or 2 that have happened over the last couple of months with this leadership realignment.

So I just want to add one point, this is Mathew. I think we also had a chat on this before. Over the last 6 months or so, we have, as a company, been working on what we call Crompton 2.0. And one of the key elements of that is trying to improve the go-to-market implementation, okay? And obviously, this -- we speak about the exit. Obviously, while preparing Crompton 2.0, we have a fairly good handle on who is going to man what position in the new setup. And I think we -- myself along with Promeet as Shantanu mentioned, will ensure that these changes are implemented and in place before the transition is completed between me and Promeet. So that I think will give us a fairly comfortable landing place because we are currently to the preselling season, and we have also planned the execution of the restructuring in a way that we only start to act on those as the peak season starts to wind up. So we have -- I think we have all the reasonably well thought of.

We will take the next question from the line of Bhavin Vithlani from SBI Mutual Funds.

So the question is on the quality of the product and increasing from our interactions with channels, which will kind -- the voice of -- the quality issues at Crompton has been increasing very significantly and maybe some of our peer sets have also been spoken about, 20%, 25% rejection rate in the water heaters in the current season and brand being your key moat as the quality issues impacts that moat very significantly. Can you talk about it? And how do you plan to correct it?

Again, because I don't want to get too much into other aspects of the business given the time we're talking, suffice to say the headline is that quality is a major priority for us. We are investing significant amounts in terms of capability, both in our company and vendors. It is true that we had some initial quality challenges, especially in initially on BLDC fans. However, we worked very closely and actively both with our own people and also [ Igarashi ] who are a key vendor for our BLDC motors. And our current data indicates that there has been a significant improvement on the BLDC quality, and it is very much meeting quality standards of Crompton which after all is -- absolutely critical to us because one of the strongest equity Crompton as a brand is trustworthy and quality. So it remains a focus -- big progress will be made. This comes back also, I think, to something which Promeet is going to help us with as we think of being future ready. As technologies change, as Promeet was talking about, it's not just about the innovation and the R&D lab, but also the back-end innovation, quality is very much part of that whole program.

I'd say that manufacturing processes, back-end, supply chain, these are clearly areas that you will find considerable reference to as we come back to the investors in the next few months with a fully fleshed-out plan that's very high on our agenda. And not only quality, but I think, as we've said earlier, as we move beyond margin -- gross margins to driving efficiencies between gross margin and EBITDA, I suspect you'll see a lot of -- lot more clarity on improvements that we expect to meet there.

We'll take the next question from the line of Venkatesh Balasubramaniam from Axis Capital.

I had a very, very specific question. It is about what is -- what exactly was the role of Shantanu earlier? And what was the role of Mathew? And what will be the role of Shantanu and what will be the role of Promeet going forward? And possibly instead of talking generally, if you could take one very simple example and possibly highlight it, like, for example, fans is a very important category for you. It's almost 40% to 50% of your sales before you acquired Butterfly. Now as we were going into the energy transition, I set you would have had to take a call that should you be gradually starting to cut prices of the 0-rated fans and move it into your distribution channel from your second quarter? Or would you suddenly cut prices at -- to a larger extent and pass it on to your channel in the first quarter. Somebody like Bajaj Electricals did the second thing, which is in the third quarter, they cut prices very large -- in a very big fashion and they showed very good sales growth. Now obviously, you also would have had to take a strategic decision in the fans business. Now this decision is taken by who? Is it taken by the franchise? Was it taken by Mathew? Or is it taken by Shantanu? And there is a difference of opinion whose decision finally counts? See I'm asking this question specifically because...

I got it. I'll try and answer the specific question, okay? To be clear, the way we were operating over the last few years, maybe not necessarily year 1 but definitely by year 6 and 7 was the final decision was Mathew's. In fact, there have been many cases where Mathew and I may have had a discussion. And if we don't come out with the same agreement on the point of view, it would be -- I would very clearly say, Mathew, it's your call, okay? So the -- if the decision was a slightly lower level decision and not of such huge importance for the company overall, it would have been the fan's PL Head's decision. In this case, I would have discussed it. I'd have presented my point of view. I will talk about why I think my point of view is better. Now, in your specific example, it so happened that we all thought that the same thing was the right thing to do. So there was no difference in opinion. But there have been cases, right? So towards the end, the last couple of years, pretty much since Mathew became a member of the Board, the decision was Mathew's. The accountability was joint. Similarly, as we begin with Promeet over this period, and that's what I mean by my role in many ways doesn't change, I'm there as an enabler. I'm there as a facilitator. If there is something specific, for example, Promeet has got too much on his plate, I'll tell him, why don't you just handle this," right? I'll handle that. But otherwise, it's input, it's projection is bringing the history and bringing my perspective, but the decision will be Promeet's. And that is what I meant by it has not changed dramatically except for what the titles are.

We'll take the next question from the line of Anirudh Joshi from ICICI Securities.

Just one direct question to Mathew. Can he indicate, if possible, that why he is leaving, let's say, so suddenly and -- what is the better opportunity if you can [indiscernible]?

Shantanu also mentioned it briefly on the call. Basically, I am leaving now because I feel my career aspirations will not be fulfilled in Crompton any longer. That was the reason I decided to leave. Where I'm going to land up is still -- I should be able to share maybe at a later date. But my reason to leave is only that my career aspiration, whatever I wanted to become and do could not be fulfilled in Crompton that's why I decided to leave at this point of time. There is no other reason.

And as Shantanu had indicated earlier, this is not something which is a sudden one. It's been something that's been planned over a period of time. It's one of the process that Shantanu briefed.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd now like to hand the conference over to the management for closing comments. Over to you, sir.

Thank you. So thank you all. I appreciate you coming. I hope we've been able to address some of the questions concerns you've had. Obviously, it's well possible that we couldn't address every question. So if any of you have any more questions then reach out to us, happy to -- more than happy as always to answer. And as always, this is an ongoing dialogue. And our only intention of the dialogue is to help you better understand what is our thinking about the business and organization. So thank you very much, and I wish you all the best.

Thank you.

Thank you very much, sir. Thank you. Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.