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

Respected Chairman and Board of Directors, first I thank you very much for keeping on Saturday. Market is off. I hope you will continue on Saturday every year. Also I thank company secretary for sending their physical copy of balance sheet and calling me. Again I thanks comapny secretary. Just I want to know, you will be starting your [ showroom ] of your company right? And [indiscernible] more anything by email if you can replace [indiscernible] I am a thankful to you. Thank you, sir.

Thank you, Mr. Bansal. Can I now request Mr. Lekha Shah. Please. Ms. Lekha Shah?

Hello, can you hear me sir?

Sure. We can hear you. Please go ahead.

Thank you, sir. Respected Chairman sir, Board of Directors and my fellow members. Good morning to all of you. Myself, Lekha Shah from Mumbai. First of all, I'm very much thankful to our company secretary, Rashmi ma'am, especially Darpita ma'am for extending very good investor services and also sending me the AGM notice well in time, which is full of knowledge, facts and figures in place. Thank you chairman sir for explaining us well on the company. Congratulations for excellent work sir. I pray to god that he always shower his blessings upon you. Sir, at the outset, I congratulate our chairman and Managing Director for the company receiving various awards and recognition. Sir how many engineers or detail workers employed at our R&D facilities. In this domestic market, what is our company market share in the kitchen application division like LPG stove, mixer, grinder, et cetera. And are we in the top 5 in terms of revenue and brand leader. So sir I hope the company will continue video conference meeting in future. So I strongly and wholeheartedly support all the resolutions for today's meeting and my best wishes our company and its prosperity. Thank you so much, sir.

Thank you Lekha ji. Can I now request Mr. Satish Shah, please. Yes, Mr. Satish Shah?

Hello?

[Foreign Language]

[Foreign Language]

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[Foreign Language] Can I now request Mr. Vinay Bhide please. Mr. Bhide?

Can you hear me. Let me start my video.

Thank you.

Chairman, Mr. Nerurkar; Vice chairman, Mr. Khosla; Executive Director, Mr. Ghosh; directors presented at today's AGM; company executives; shareholders, good morning to you all. It's pleasing to see you, sir, I have been seeing and meeting you since the Tata Steel days sir. Thanks for repeating a steady performance in the past financial year through an integrated annual report. Now I have gone through the report, I should say that the report is as well made as the Crompton reports have been made traditionally. This is what I should say. And I've listed out a few questions and in listing the questions, I have kept in mind what normally directors who would like to share in terms of replies as well as, while I got Mr. Khosla would like to share from the prior experience. So the questions are as follows: In the concluded financial year despite substantial growth in revenues, and EBITDA growth in revenues, EBITDA has remained flat. Further, EBITDA margins and PAT have dropped significantly. Now this is a cause of concern and I was trying to find out the reasons from Page 65 and 130 of the annual report, but I could not find any good reasons. So can you please explain the reasons for the drop in the EBITDA margins as well as the fact and give us comfort that this is a temporary phenomenon, and we will get back to the regular figures this year and years to come. Just 1 point I would like to know. Is it that the Butterfly integration will help in this improvement of these figures? And there is -- as a point of concern on Page 31, I find that the capacity utilization of our products, key products remains in the range of 32% to 39%. So could this be a reason for the performance that we have shown this year? And what is the company's plan to improve these figures in the current year and the years to come. Next point is on Page #60. We are glad to know that the company has won so many awards on various fields. Congrats to that and keep the flag flying. I would also like to mention here that Rashmi Khandelwal and her team took more than adequate efforts to ensure our participation and ensure that we had the necessary documents available with us with the information to participate in this meeting. Finally, I will make 1 point, on Page 61 you have mentioned that the company has -- holds coveted title of India's best managed companies. I will definitely say from the current year's working that our new CFO, Mr. Kaleeswaran and his team have got a job on hand to ensure that we do well. Do not forget the [indiscernible] that the Crompton fans used to have the ad line, which the Crompton used to have in the earlier years, built with care built to last. And I'll close with best wishes in all of the directors and employees, and thank you for giving me an opportunity to speak. Thank you, sir.

Thank you, Mr. Bhide. Thank you for your all the questions, and we'll come back to you. Thank you. Mr. Jaideep Bakshi, please.

Yes. Good noon chairman, vice Chairman, the CFO, and Board of Directors. Myself Jaideep Bakshi, connecting from the city of Kolkata. Thanks to our company secretary, Rashmi madam and her whole team for conducting this video conference in a smooth manner and presenting an annual report, which is well displayed, informative, and descriptive. Sir, thanks for the bigger presentation and your initial speech when you explained our company's position. Sir the revenue from operation has gone up and excellent performance in this difficult scenario and is maintained by the dedication by all involved in our workplace. Thanks again for the dividend you have passed on. Sir, at the inflation impact, how much has it been to our company and our cost control measures. Sir, you have taken pricing actions under Udaan scheme is great. Sir, now there is a increase in the [ nuclear ] [indiscernible], it's a trend now and our users-friendly consumer products will get a boost, I hope so. So what are the steps for regularizing our product lines and adhere to meet the global standards in our different operations. Sir, and plans for expanding the portfolio of offerings to reach more consumers. Sir, in Page 8, you have mentioned about the merger with Butterfly hope it will unlock our potential for them. Hope sir, our multiple marketing and branding campaign gained more foothold and what is the percentage of online business, which has been generated. Sir, finally, a highlight on the capital expenditure plans on the R&D for developing superior new products as consumer prefer branded products. CSR activity has been great as ever. You have spent INR 13.58 crores reaching out to the society in every field. Congrats for maintaining leadership in residential pump category also. Sir, highlight finally on the segment-wise revenue achieved and also the after sales service, which we are providing. And also congrats once again, this 1 is very -- it's mentioned at the -- in Page 59, regarding the 0 accident and the fatalities, which you have maintained in our company, it's a really [ remarkable ] team. And also for the awards which were received in Page 60 and improving our energy efficiency program. And on Page 99, the policy on women employee is also a great thing. It's helping out to the women employee of our company. And personally, I'm also using our products, and I'm really satisfied with the same. Nothing to add more. I have supported the resolutions and hope our company grow under your leadership and trust and goodwill of the investors in bringing out innovative and sustainable solutions and maintain our brand value as always in the future. And sir, one more request continue with this video conference so that we can connect from out stations and if possible if you are arranging a facility visit, kindly inform us. Thank you, sir, and all stay safe.

Thank you, Mr. Bakshi for all your encouraging words. Thank you. Can I now request Mr. Krishnand please. Mr. Krishnand?

Thank you very much. Just to confirm, you're able to hear me?

Yes, please. Yes, please. Go ahead, please.

Thank you. And good day to the Crompton Board and management team. I've actually sent through my questions in advance. But what I would do is I'll kind of rephrase them in short 2 questions instead of the 4 questions which I sent you earlier. The first query is, there has been an erosion in our shareholder value over the last few years, and this has been primarily driven by margin and profitability declines. And I'm assuming that enhancing shareholder value would definitely be a top priority for our Board and the management team. So I'd like to have a view from our Board on the strategy, the road map and the milestones to drive or enhance our shareholder value especially. So I'd like to take us through what is the road map strategy and milestones, especially around expansion of our product range, how do we plan to diversify our product portfolio, including the breadth of our portfolio across price segments and scale. How do we plan to grow our sales and market share? And also how do we plan to grow and expand our margins and free cash flows. And what's the road map for the execution of above metrics. My second query is slightly more -- it's more broad-based. What are some of the current disruptive ideas or trends in our industry or the business, which do you think are very structural in nature and what is the thinking of our Board and management on these trends and the impact on our business over a medium- to longer-term. And related to this query is, how are we preparing or positioning ourselves for this change or disruptive trends if any to defend our existing turf as well as to capitalize on these trends to grow our business, which is structural in nature. And if there is a thinking behind this, what's the road map for this. That's it from my end. Thank you very much.

Thank you. Thank you, Mr. Krishnand. Can I now request Mr. Kirti Shah, to say his points, please, Mr. Kirti Shah.

Good afternoon.

How are you? [Foreign Language]

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[Foreign Language] Can I now request Mr. Gaurav Liladhar Rozatkar, please, Mr. Gaurav.

The speaker shareholder with the said name is not connected in the meeting.

So Mr. Gaurav is not connected?

No, sir. He is not there.

Okay. So we'll go to next one. Mr. Yousuf Rangwala, please?

[Foreign Language]

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[Foreign Language] I received a balance sheet, well on time, well in advance. [Foreign Language] lights, tube lights et cetera -- many products sir. I would like to know, sir, if you give us some 30% discount coupon so that we can enjoy a discount coupon sell. And sir I would like to know Butterfly which I came to know [indiscernible] sir after the Butterfly what shares will we receive in this new company, sir I would like to know? Whether this Butterfly be a -- remain as sister company, whether this company will merge with us? And after the merging, what will be a ratio -- or what will the ratio will receive to us and how many shares will we receive. Point #2, sir, dividend as you've given INR 2 shares, INR 3 dividend. That is a very excellent, very handsome dividend which were you have given Sir, I would like to know -- I'm using your products and everything I'm using sir, but very excellent product of -- product sir. And no complaint regarding product. If you can arrange a factory visit, many years have past you have not arranged a visit. Sir next year, I request you about a physical meet that we can meet you. And thank you very much. Nothing more to add. I end my speech. Thank you very much, all the Board and Director, my fellow shareholders. My name is Yousuf Rangwala speaking from Mumbai. [Foreign Language] Thank you very much sir.

[Foreign Language] Can now I request Mr. Narendra Jhaveri, please?

Hello, are you able to hear?

[Foreign Language]

Sir, I received your annual report, annual report is excellent. There is no doubt about it. But the physical copy of annual report is just reached and dispatched to us 3 or 4 days before the AGM. Is it the right thing? The question is the 21 days advanced notice provision has been deleted from the company law, we would like to know why such a discriminatory statement between the e-shareholder and physical shareholder. This is not the proper sir. Sir coming next to the holding of the AGM through the video conference. Sir, originally, NCS permitted the holding of the AGM through the VC or OEM means as a temporary or short-term solution to tide over the COVID phenomenon. Now the COVID has gone, but by the Ministry of Company Affairs want to perpetuate COVID. See it's a self interest -- conflict of self interest is arising. People wanted physical meeting, management wanted to avoid the shareholders. It's the or the lie? Sir, COVID has gone by, why you want to perpetuate, why Ministry of Corporate Affairs want to perpetuate this COVID through indirect means. This COVID -- VC meeting is 1-to-1 meeting. It's not a general meeting. What is meaning by the Annual General Meeting take the word general. It is not general meeting. It's a 1-to-1 meeting sir. Sense of the house cannot be got through these 1-to-1 meetings. Now there are 200 or 300 were to people attending the ensuing. Now only 10 to 20 people are able to participate and that too, only speakers, how many independent listeners are there? Will you please enlighten to us next time or this time, independent listener. It's a -- this video meeting is like a medicine. One can't leave on the medicine all the life. One has to take with the [indiscernible]. You can't deny the person of [indiscernible] and live only on video concern. So now coming to the court also rejected the video conference. All political parties are also going to physical, school, church, train, everything is going on. Where is a video? Where is the COVID? So please return to physical meetings next year, sir. Sir, coming to the committee. Sir, normally SEBI has suggested 3 committees, Account, Audit, and Nomination Committee. You have 11 committee, this 11 committee is a permanent feature or it's a temporary feature? Some of the meeting -- investment committee, debenture committee, will it remain forever? Now the question of the share out is this, in this 11 committee is a terrible financial burden on the shareholder on the company. Because of that, the earning per share has come down from INR 945 to INR 750. Dividend has remained stagnant. Sir, we would like to know, this will be a permanent feature of 11 committee member -- this 11 committee in remaining, now this occupying the role of the Managing Director and Chief Executive Officers. Sir, you see on the notice convening the meeting of the 14 by -- while recommending the nomination of the -- appointment of the director, Mr. Ghosh, you stated his precious expertise. His rich experience will be beneficial to the company in general management skill and global experience will be immense benefit to the company. So this committee become fifth wheel. Is it not true that only committee member have the expertise and requisite knowledge? Is it wrong to assume that Mr. Ghosh does not have an ability and skill to cope up with the situation that may arises. Why this committee be down on the company, this is too much sir. By paying non-mandatory committee shareholders are -- left nothing for the shareholders sir. The question is this. Sir, coming to the -- your investment and borrowing. Sir investment and borrowing does not make a sense. Sir 1 minute, I can come to the Page 274 and 275 of the physical report. So nearly INR-530-plus-amount-crores invested in a mutual fund and more than that amount is borrowed. Sir investment in mutual fund, tell me how much yield are getting. Can you enlighten us, this mutual fund will be a permanent feature, or it will be wipeout next year. When we are borrowing money outside why you have investment in mutual fund. Mutual fund investment are fluctuating -- yield is fluctuating. It's not a -- they are not manufacturing activity. Their income is derived from the other sources. And that is also not fixed and certain sir. So discontinued investment or reduce the investment in mutual fund in short time sir. Sir now coming to the dispatch of annual -- dispatch of the physical copy of the dividend advice. Sir in the COVID, unfortunately, the dispatch of this dividend advice has been discontinued. You know sir, dividend advice considered a positive important proof -- legal proof for the shareholders. Now if we don't have any legal proof of the holding shares in the Crompton Greaves where we have to go, where my children will go. It is good investment apart from that, it disclosed the number of share I'm holding. It is essential for the filing of the Form 15. It is good for the income tax purpose, for various purpose officially colorful dividend advise is necessary. When you are printing 125 pages for integrated report for enlightening the shareholders with various photos there are now more than 30 full pages photos are there. So what harm is there? How you cannot cope up with the problem of the -- dispatching the physical copy of the dividend advice. I request you, secretary and managing director also, to see, that all the shareholders receive the dividend advice this year also, it may be after 2 months and it's all right sir. Sir regarding Butterfly, we would like to know how much investment this Crompton Greaves has invested in the Butterfly. Sir , how much turnover you have achieved and how many new products you were able to develop during the year sir. We would like to know. Sir, can you tell us positively that next year, you will return with the INR 5 dividend. Thank you sir. Wish you best of luck.

[Foreign Language] I'll now request Mr. Promeet Ghosh to answer all the questions. He should combine whatever are the common questions. Over to you, Promeet. Thank you.

Thank you, Chairman. And firstly, thank you all shareholders for all your kind wishes. And you are very warm welcome to me. I'll try and answer various questions that have been raised. Please bear with me as we go through them 1 by 1 and combining the various questions that have come up while we got -- while we address what everyone's raised. There have been questions about what the road map of the company is, what the strategy of the company is going to be going forward and how we expect to be in dealing with emerging competition. The fundamental pillars of the strategy of the company are to accelerate the growth of the company while preserving healthy margins, and we believe this is something that will deliver strong total shareholder return. The strategy focuses on an enabled and empowered organization, innovation-led meeting of consumer needs enhancing our brand, expanding our product portfolio, supply chain excellence and strengthening our human resources. By implementing this strategy, we aim to grow our business and provide our consumers with the best possible products and services. And we believe this will lead to continued EPS expansion over a period of time, resulting in shareholder value creation. There's been a question about research and development and how many people are employed there. Last year, the company spent INR 77.72 crores on research and development. This includes about INR 48 crores of CapEx and balance about INR 29 crores in operating expenses. Currently, our research and development facility, which is located at Vikhroli employs about 160 people. The details of our R&D are provided on the Page 317 and note 28 of the stand-alone financial accounts. Coming to a few more questions that have been asked. Some questions have been asked about our market share, who our competitors are, and I'll try and address them insofar as our fans market share is concerned, which is one of the major areas that we have products in. Our current market share is approximately about 28%. All our fans now meet the new BE -- BEE norms that the government has introduced. Insofar as pumps is concerned, there are no BEE norms currently. But having said that, our market share in pumps and I'm going to separate the market share between residential pumps and agri pumps because we operate into separate segments is, in residential pumps, it's about 30% in agricultural pumps, it's about 6%. Our competitors in pumps are companies like KBL, KBS -- KSB, Varuna and Aqua. In fans, of course, all of you well know. Our competitors are Bajaj, Usha, Orient, Havells and more recently, a company like Atomberg. There's a question about Chinese competition. Chinese competition in our core products of pumps and fans is currently quite moderate. Insofar as our market share in kitchen appliances is concerned. As you are aware, now we have further expanded our presence in kitchen appliances with the acquisition of Butterfly and our market share in LPG gas stoves, in which Butterfly is a major player is about 15%. Insofar as cookers is concerned, it's about 5%. And so -- and both Butterfly and Crompton both make mixies, our market share combined in that segment is about 10%. So you know we've spent about INR 2,000 crores in purchase of Butterfly last year. And that, of course, part of that was financed through borrowings. Our current shareholding in Butterfly is 75%. Since the question came up about -- while I'm on Butterfly, there's a question here about where we were going with Butterfly when that was going to be merged. As many of you are well aware, we have integrated -- we have started the process of legally integrating Butterfly with Crompton. So we expect that at the end of this financial year, currently, that's the time line we have and we expect -- depends, of course, on courts, but roughly at the end of this financial year, Butterfly will become the Butterfly, if all approvals are obtained, will become a legal part of Crompton. Separately, we have already started the process of operational integration between Butterfly and Crompton. And yes, we do expect that this will further strengthen our Kitchen Appliances business. Butterfly, again, you must be well aware, is not only a leading kitchen brand, but is one of the leading brands in that segment, particularly in South India. We expect with the benefit of the merger that Butterfly products will also be sold in other regions, namely initially in the north and later in the west. And similarly, we will be using some of the strengths that Butterfly has in selling Crompton products into the Southern kitchen market. Now quickly coming to what is, I think, a popular question about whether we should have a virtual meeting or whether we should have a physical meeting. As you can tell, there are differing views amongst the shareholders. Some of them would prefer a virtual meeting and some of them would prefer an online meeting -- a physical meeting. As we come close on next year, we will evaluate which one to go with. But as you are aware, there are benefits to both. Virtual meetings have the benefit of being easier to, of course, organize and time saving, but more importantly, enabling a larger breadth of shareholders from across the country to be able to participate in these proceedings, which they would otherwise miss out on. But -- and whatever cost savings that accrue from this exercise from not having a physical meeting, obviously, go back to shareholders, not to individual shareholders particularly, I think there was a question about whether they can go back to individual shareholders who ask questions. But definitely, the benefits of areas of organization and most particularly cost savings that accrue go back to all the shareholders and help improving their margins. Insofar as particular questions about margins was concerned, I think there was some questions about those, let me quickly address that. there's -- margins have -- margins have somewhat noted come down at the net level. And this is reflective of factors that are pretty much affecting everyone in the segment in the industry, most particularly inflation. As many of you are aware, inflation has -- inflation in commodities has been a significant factor in pushing up costs for all players in the industry, and we are not separate from that. Having said that, there is an additional factor that is impacting net margins for us. And that is, as we said, the interest costs that have accrued to the company on account of its purchase of Butterfly, -- we think Butterfly is a very important strategic investment that the company is making particularly as it looks to expand its presence, which is currently in areas like home electricals and in pumps and in lighting into kitchen appliances. And we do believe that, that investment will pay off well for the company going forward. And therefore, the higher interest cost was well worth making. It's not really comparable. The mutual fund investments where we on a tactical basis, park funds that we may be generating from time to time in our surplus funds and the debt that we were taking, but I can tell you that over the period of next what, about 18 months, next 18 months, all of the debt that has been taken for Butterfly will be fully paid off. And for that, we will be dipping into the cash generation that we make annually. So we are -- so we will, over a period of time, go back to being a low-debt company, which has increased as a consequence of our -- the debt level has increased as a consequence of our acquisition. I think I would have addressed almost every question that came up, and there was some questions about our CSR policy. And insofar as our CSR policy is concerned, we have some very clear programs that we cater to and that is water conservation, children's education and so on and so forth, you must -- you'll be able to find the details of that. in the annual report. One last point that was just addressed, question was asked about the promoter holding in the company. We are one of the unique companies in India, which does not have a promoter. And we're very proud of that and that I think -- so that is reflected in the shareholder pattern disclosure that we make in the stock exchanges. As you would be aware Temasek and Advent were at 1 point in time, both were promoters and PACs over a period of time, they've reduced their share holding and now ceased to be promoters. I suspect I've addressed most of the questions, Mr. Chairman.

Thank you. Thank you, Mr. Ghosh. And most of the questions have been answered. In case any queries or anything are not answered, please send a mail to your favorite Company Secretary, and she will ensure that they are answered. Thank you. With those -- these words, I want to thank all the shareholders for taking the initiative to join this Annual General Meeting through video conferencing mode. I want to thank all our directors who participated in this meeting. I now authorize Mr. Rashmi Khandelwal, Company Secretary, to conduct the voting process and conclude the meeting. The e-voting process will remain open for the next 15 minutes to enable those shareholders to cast their vote, who have not cast their vote to remote e-voting. The remote e-voting results will be declared on or before 24th July 2023, and the same would be uploaded on the website of the stock exchanges, NSDL website and also on the company's website. With your consent, I and all other Board members would like to leave the meeting. I wish all the shareholders and their families healthy and safe future. Can I request Rashmi to conclude the meeting, please. Thank you.

Thank you, sir. I would like to thank all the shareholders, our Chairman, our Director; and my colleagues for your overwhelming support and participation in the meeting through video conferencing. And making this event a successful one. My best wishes to you and your families, stay safe. Thank you very much, and have a good day.

Thank you.

Thank you.