Eveready Industries India Limited (531508) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Eveready Industries India Q3 and 9 Months FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and welcome to Eveready Industries India Q3 FY '24 Earnings Conference Call. Today, we are joined by senior members of the management team, including Mr. Suvamoy Saha, Managing Director; and Mr. Bibek Agarwala, Chief Financial Officer. Before we begin the call, let me first share our standard disclaimer. Some of the statements that may be made on today's conference call could be forward-looking in nature, and the actual results could vary from these forward-looking statements. A detailed statement in this regard is available in the press release, which has been circulated to you and also available on the stock exchange website. I would now like to invite Mr. Saha to share his perspectives with you. Thank you, and over to you, sir.

Thank you, Nishid. Ladies and gentlemen, thank you for joining our earnings call today. I'm pleased to share with you our focus areas that have been critical to our journey. Through these opening remarks, I will also seek to bring us some pointers on our model and supplement that with the progress that we are making there on. First and foremost, our commitment to enhancing our brand visibility and engaging with consumers remains unwavering. Secondly, we continue to strengthen our distribution channels to reach markets and customers effectively. Last, but not the least, our investment in human resources continues to be a key item of focus as we prioritize talent development along with our organizational growth plans. These key pillars will continue to drive progress in the coming quarters. Brand Eveready continues to evoke high familiarity and recording the categories where it is present. Our businesses comprising our batteries, flashlights and lighting have benefited from the salience. As a leading consumption products brand, we are consistently working around to maintain visibility through advertising and promotions. This helps us lead the dry cell batteries and flashlights categories. While we are a challenger brand in the lighting category, we believe we have a vast canvas of growth ahead of us. We completed our revamped route-to-market exercise in the last quarter of FY '23, and since then, we have created a lean and modern architecture that is more aligned to today's requirements and our growth aspiration. The larger towns saw a consolidation of distributors, thereby giving the continuing ones greater opportunities to grow meaningfully on the rural side and in smaller towns. We created a super submodel with a super acting as a distributor across a wider net of smaller dealers. This resulted in result -- reducing our distributor strength from a 4,000-plus to just over 1,000. As highlighted in our previous earnings calls, there were challenges emanating from this improvement initially, both from a design perspective as well as execution. We have tried during much of the current year to perfect the process. This has resulted in short-term pains from a growth perspective, but we believe we have overcome most of the issues. We expect the RTM exercise to fully stabilize in the next 1 or 2 quarters and start yielding results. Our journey is being championed by our team members, many of whom have joined us at the leadership levels in the recent past to augment our talent plan. The team believes that the foundation of excellence lies in well-executed processes. Our teams are empowered to not only run processes effectively, but also bring creativity and innovation to the table. It is the synergy of empowered minds and robust processes that will propel us to sustainability. Another aspect of our process is that we are focusing to become self-reliant with our in-house manufacturing, whereby we become truly a Made In India company. More than 95% of our batteries and more than 70% of our flashlights are manufactured in-house. This provides us with complete control on costs and product offering, thereby an ability to solve our consumers as per their requirements. Now I shall turn your attention to the respective segments. First, batteries. Eveready has long enjoyed name ownership of this category. While we have stood strong in the large carbon zinc category, we have only recently begun to create a positive impact in the emerging alkaline space. Our recent alkaline range of Eveready Ultima has met with healthy success and we expect this trend to gain further momentum and for this category to contribute significantly to the growth of the business. We are also ramping up our communication in this space. Overall, the business supports an extensive range of batteries, positioned to benefit from premiumization as well as volume growth from enhanced household consumption and add new devices. The favorable input cost environment is giving us headspace to maintain the tempo of marketing and promotions. In the past, the dry cell industry has found it hard to mount volume growth due to subpar penetration of relevant devices in our homes. Our latest campaigns highlight use of devices like toys as an integral part of learning and leading. Moving along, flashlights has seen a faster-than-anticipated degrowth in the battery-operated segment. However, we are confident that our gains in the rechargeable segment will more than compensate for this loss and provide substantial growth for the overall category. Our design and development team has continued to introduce new SKUs with feature functionality as per market feedback in the rechargeable category. This space is occupied by unorganized players and imports from China. The Eveready range stands for quality at the foremost and we believe in creating products that provide value through features and pricing both. The quarter and the current financial year saw weak consumer demand, particularly in the rural part of the market across most FMCG products. Consequently, this had impact on both battery and flashlight optics, both having seeded ground over last year, in batteries by 2.4% and in flashlights by 3.6% for the year-to-date. It is expected that the forthcoming quarters will see a de-escalation of food price inflation and return to growth for consumer products. However, we managed to retain our market share of batteries at 53.2% as per Nielsen report. I am pleased to report that we have now a full range of products in the lighting category as per the needs of the market. The business boosts a dual distribution setup via the general trade and the electrical channel. This is a vast market and although there are entrenched players, we are confident of making a mark. Our emphasis is now to shift our business salience from basic products to the premium ones. Our emergency lamp being part of the premium range is already one of the leaders in this market category. As already widely reported, the entire lighting market underwent value erosion on account of players passing on cost benefits arising out of manufacturing efficiencies. While the entire market was in the negative territory, we managed a growth of 10.5% for the quarter and 9.2% for the year-to-date. Let me now share some insights on our financial performance during the third quarter. Our top line performance captures the impact of slower rural consumption in batteries and flashlights as well as ongoing value erosion in lighting. This was further impacted due to disruptions faced on account of the new RTM. However, our portfolio of alkaline batteries, rechargeable flashlights and lighting products reported strong volume trajectory, creating the base for sustained games in the coming days. Despite the moderated top line, our EBITDA performance for the quarter stood strong at INR 24.6 crores with a margin of 8.1% and the year-to-date number being at INR 114.8 crores with margin of 11.1%. Performance for both the quarter and the year so far being better than that of the last year. The performance was supported by favorable cost strain in key raw materials, especially in batteries, in addition to stable exchange rates during the quarter. In anticipation of higher A&P spends to accelerate our position in the industry, we undertook several cost initiatives to sustain our margin trajectory. As for the outlook, we seem to be on the anvil of getting back our growth momentum with hopefully the market revising and the challenges of the new RTM being overcome. We believe we have all the elements in place to be able to deliver positive results in the times to come. With that, I conclude my initial remarks here, and we'll now request the moderator to open the forum for question and answer.

[Operator Instructions] The first question is from the line of Mithun Aswath from Kivah Advisors.

Can you hear me, sir?

Yes, yes. Very well.

So just wanted to understand, sir, in terms of the margins for the current quarter, obviously, year-on-year, they have been better -- but quarter-on-quarter, we see some deceleration in terms of the EBITDA performance. Is that mainly because of heightened marketing spend? If you could just maybe throw some color in terms of what we are looking at in that. And also within segments, how much -- how was the volume growth in each of the segments this quarter?

Thank you, Mithun. See, as far as the margin is concerned, it was impacted by a mix of both, the 2 points that you mentioned. One is, as a percentage, we had higher A&P spends and also, obviously, the muted top line, which I have sort of drawn reference to in my remarks earlier. These 2 had an impact on the quarter's margin, which stands at 8.1%. However, if you look at the year for the 9 months, the margin stands at 11.1%. And as we have been guiding, we stay firm on our overall guidance that we will continue at double-digit EBITDA margins.

Right. And each of the segment's growth this quarter on a year-on-year basis, was there -- despite these pressures, was there volume growth in Q3 or in some of the category volume growth was negative?

No, no. As I mentioned, there was a degrowth in both batteries and flashlights, which was at year-to-date, it stands at 2.4% and 3.6%, respectively. But the lighting category, even though, overall market was in the negative we grew by 10.5% during the quarter and 9.5% for the year-to-date.

Got it. And just lastly, wanted to understand, are you -- since now you've got these 3 categories, there was talk about you also trying to look at some adjacencies to the existing businesses. So I just wanted to understand any thoughts there you've got into lighting? Is there anything else that one is looking at for the forthcoming fiscal?

So as we have articulated earlier also for the next 12 to 18 months, our hands are full to be able to exploit these existing 3 categories. Thereafter, the company will certainly look at the 4th or 5th category, but that is beyond at least 1 year, not immediately.

The next question is from the line of Dhruv Jain from AMBIT Capital.

Sir, I have a question on the overall growth side, right? So last 2 quarters, obviously, our numbers from a revenue growth perspective are not being very good. So just wanted a sense that -- and there have been RTM exercises that you've been speaking about. So just wanted a sense that do you think that as an entity Eveready will return back to double-digit growth at least in the next financial year? And I'll talk about another question.

Okay. So we have highlighted even in the earnings call earlier and also today that there are 2 factors which have led to, I would say, the growth not being in the territory that we had been expecting. Actually, in the 9 months, including this quarter, our top line is absolutely flat, correct? Now the 2 reasons. One is, of course, there is a softening of FMCG demand particularly in the rural side, which I had referred to earlier in my remarks and also the RTM issues, which came out. We tried to get the RTM done in a very quick span of time, which did not sort of work out. It required a lot of changes. And as a result, as an when certain I would say, issues came up, we needed to resolve that, and we consciously did that because this was an improvement effect. It was not something that was thrust upon us. It was something that the company spontaneously did, because it meant that in the future of the company would be much better ready to take on the growth momentum. So I would say that this is a temporary pain. Of course, I cannot make comments on how soon the market is going to recover, whether on the lighting side or for that matter the FMCG side. But I can say that the internal issues of RTM are by and large over and we should see in the next 1 or 2 quarters that system working to its perfect efficiency. As for coming back to growth, we certainly will come back to growth in the fourth quarter. Now it would not be obviously a double-digit kind of growth which you asked, whether it is -- but we would certainly look at it the double digit, at least high single digits, even in the way the market is behaving at this point of time and take on from there.

Makes sense sir. Very helpful. And sir, on the flashlight side, I think you also mentioned in your opening remarks with respect to the kind of erosion that you are seeing in the battery operated flashlight. So if you could just give us some color as to where the market stands today? And what's your -- what's the kind of contribution you have with respect to rechargeable flashlight and battery-operated flashlight?

So our estimate, there is no really syndicated data on this. Our estimate is that the market is about INR 1200-odd crores, roughly, of which 1/3 is battery-operated and 2/3 is rechargeable. Now on the battery operated, we already have factored in a 10% degrowth for the market, and we thought that we would also flow with that similar degrowth, because consumer habits are changing, we can do very little on that. And we were quite confident that we would be able to make significant gains in the rechargeable segment and we would by and large be certainly be able to offset the loss made by battery-operated flashlight. And because of the gains that we would make in the rechargeable side, the overall category would gain for us. Unfortunately, the battery-operated category has degrown far faster than what we had thought. In fact, the degrowth for the category in this year has been 20%, really double of what we had thought to be the rate of degrowth. As a result, the category stands flat for the moment for that 2/3 of the market, the rechargeable one, there we are growing quite fast. And hopefully, with everything, all the moving parts that we had this year getting settled, next year we would certainly be able to overcompensate on the loss that we would continue to make on the battery-operated flashlights and the whole category will grow.

Okay, sir. And sir, just a final piece for me just on the bookkeeping side, if you could just give us the revenue split for all the 3 verticals and margins for this quarter? And also, I think if you could just mention what's the share of your premium alkaline battery now in your overall revenue? That will be great, sir.

So alkaline currently is about 5% of the mix. And with regard to the category-wise breakup, YTD, we have batteries at INR 675 crores, flashlights at INR 133 crores and lighting at INR 245 crores, making a total of INR 1,050-odd crores. And as I said, in this, the battery receded by 2.4%, flashlights by 3.6%, lighting grew by 9.4%. And for the respected margins are like this. Battery is going at around 16%, flashlight at 9%. Lighting is still negative 2%.

The next question is from the line of [ Sunil Bhojwani ], who's an individual investor.

In a recent interview to CNBC a couple of months ago, you had given guidance of doubling the revenues in 3 to 4 years. So do we stand by that? And also, what kind of figures or strategies do we have to drive the growth? Which segment out of the 3, according to you will be focused and will be driving the growth fastest?

Okay. So obviously, we had not counted this year to be one where there will be very small growth. We had counted for this year also a higher level of growth, which hasn't happened due to reasons which we have already articulated, and it is known and it is due to a conscious action taken by the company to improve itself. With regard to the growth over a 3 or 4 year horizon, obviously, we would still attempt to grow quite significantly from our current state, whether it would be exactly 2x or 1.9x is somewhat that is a directional guidance. I mean it is not that concrete hard number is being put at this stage. So we remain committed to that growth, we remain guided by that trajectory. Now, as we have said before, batteries would not give very high level of growth. Our best aspiration will be -- it's a very mature category, it is really the one that gives us the biggest amount of profitability, but it could at best grow in the high single digit. We expect a much higher level of growth from flashlights, primarily rechargeable flashlight sort of gaining stronger ground in the mix of battery operated and rechargeable. And of course, we have very high growth aspirations for lighting. And as I said earlier, these 3 categories, we will exploit to the hilt. However, post 1 year to 18 months, the company will obviously also take some other category on to the mix, so that doubling the turnover target can be achieved.

Sir, just a follow-up. On the lighting segment, what -- there is a lot of competitive intensity and your peers are also growing really fast, some of them, especially the unlisted ones. And also regarding the flashlight, do you see such a big addressable market? Or is the underlying industry or the requirements so much that it will grow at such a level to compensate the lesser battery growth?

So let me first talk about the flashlight one. The flashlight on is inundated with unorganized players. We are by and large the only player, and we are the market leader. Only because of our own hesitancy in order to get into the rechargeable segment that we have sort of done a bit of stepping back, which we are now -- we are trying to make goods. So as you know, we would -- see, we are 50% of the battery-operated markets. It will be our aspiration to come nearer that level also in the rechargeable. So the addressable market is INR 1,200 crores, and we are around INR 175-odd crores. So we think that there is a lot of headroom for us to grow there. So we have no really doubt about that. As far as the lighting part is concerned, the market is huge, it's vast, and there are many players. So many players in a market has its pros, also has its cons, the pros is that the entry barrier is simple, which is proved statistically by so many players playing in the market and existing and surviving. The con is, of course, like this has happened this year, that everybody passed on the manufacturing efficiencies to the market, did not retain anything. So all players are under compulsion to pass on the same benefit to the market. So we really think that this is a market which recognizes brands again with [indiscernible] products, reliance plays a strong role. We feel that Eveready with its strong brand and its distribution strength should be able to make a reasonable dent into the market. And this continues to be in a focused growth market for us.

Okay. Noted, sir. And just a small suggestion, sir. If we could kind of release some presentation at least half yearly for the products and developments, that would be really helpful.

Okay. Thank you. That's a very useful suggestion. We will -- we have made a note of this.

[Operator Instructions] The next question is from the line of Khush Gosrani from InCred Asset Management.

Sir, if you could highlight what was the A&P spend for this quarter as a percentage of sales? And for the full year, what it would be for this year and for the next 2 years, how are you planning to decrease these A&P spends?

So this quarter, it was actually the -- as you know, the revenue was subdued. So it is around 12%, and comparable last quarter -- last year, the same quarter was 8%. And on a YTD basis next month -- 9 months. So YTD basis is at 10% compared to the last year of 6%. So as we say that we stay committed to our A&P investment and despite moderated revenue, we continue to our efforts to ensure that the brand recall and introduction of the new categories are on top priority. So we stay committed, and we are continuously investing with a proper focus on the right input and right communication goes to the market.

Sure. Sure. And bit near-term question from my side is, are you seeing any signs post given your RTM changes of market recovery? Of course, the degrowth as sir had highlighted in previous questions is that the degrowth has been much higher than expectations. But in the near term, are you seeing some signs of recovery? Or is this still challenge for the customer and for you as well?

So as Suvamoy has already said that we are looking for in an immediate quarter 4 some sort of bounce back, while it is a matter of another 1 or 2 quarters. But the good part is that we have identified the problem and a lot of work has started on that. Because it's a massive exercise that you try to do in a quarter, actually they may take 2 to 3 quarters. So in the short term, we may see some recovery, but the full consolidation and settlement will take at least the next 1 to 2 quarters, I can say.

Just 2 questions from my side, very quick. One is before the RTM changes, how many distributors we had a super stockist and what are they now? And my last question would be the rural versus urban mix.

Pardon, can you repeat the second question?

So if you could quantify how much will be coming for you, gross sales will be coming from Tier 2, Tier 3 cities and below and from metro cities, do you do such classification? If you could share.

Prior to the RTM, we had about 4,000 plus distributors, which is now down to a little over 1,000. With regard to this -- the split of turnover between metro versus other towns. And I would say that we are uniformly spread. So normally people ask us, rural-urban split, we say it's 50-50. With regard to Tier 1, Tier 2 and metro, I cannot often give you an answer, because it depends on what definition that we give for Tier 1, Tier 2, how many metros do you. But I would say that we are uniformly spread.

Got it, sir.

The point that I want to highlight is there is no specific sector buyers in our sales.

The next question is from the line of [ Vikas Srivastava ] from RBC Financial.

I apologize I have joined late, so this question may have been asked earlier, I wanted to know what the status of the arbitration was? Is the hearing over? And do we have that arbitration award? That was my first question.

So the arbitration hearing currently stands adjourned. So that is at the request of the claimant that they have sought adjournment, so hearings were supposed to have commenced from this week, which has been now put on hold. So we really would like to hear from the claimants. I mean, the person who has sort of made the case and take it there from. At this point, it is suspended.

At this point, sorry, will you repeat that, Mr. Saha?

It is adjourned at this point of time.

And we don't know what the next date of adjournment is. Do we -- are we engaged in some kind of settlement talks with the claimant? Where are we on this? Because if you remember in about 1 year back, you had said that we expect closure by early '24.

There is a development. The reason for their seeking adjournment is that, as you know, the original borrowing from the erstwhile promoter holding companies was from KKR. Now that was taken over by InCred and now it has been taken over by another NBFC company. I don't think that we remember the name. And because that development has happened in the immediate past that the claimant has sought adjournment. So we need to see how it goes. We are at this point of time, really in some kind of suspended animation, you can say.

And therefore, we are -- still the restriction of the high court of raising any fresh capital remains on us.

That is really effectively the only restriction that is on us. Otherwise, business is carrying on in the normal course.

No. My second question, and I'm sorry if I'm asking this question again was on the RTM. Can we comfortably -- I know, RTM and it's it is a dynamic process, but we have started with Bain Capital, we have started the procedure and then it got delayed, the entire RTM infrastructure and systems in place. My question to you was that can we safely say as of 31st December, the initial bit of the route-to-market infrastructure systems, et cetera, which we were hoping that it would be in place, say, by 30th June of 2023. Are we done? Or has it -- will it spillover into the next quarter also?

So the -- as far as putting up of the infrastructure and all the changes that were necessary to be done with this new RTM, got done in the early part of this financial year, March, well before 30th June. What happened was we tried to do it in a very short span of time. And it meant a lot of changes in the channel partners. That led to some disruptions with regard to the partner selected not being up to the mark or us leaving some areas a little vacant. So these are the disruptions which took time for us to sort of grapple with, which we have by and large identified and by 31st December, the question that you asked, the infrastructure was already in place and continues to be in place. Only those gap areas have been addressed and they continue to be addressed, but most of it is over. So in terms of -- can I say that is it 100% perfect? No, not yet. It will take us some more time and as Bibek also said in his response just a couple of minutes back, it will take 1 or 2 more quarters to be fully, I would say, 100% effective, but we are already -- almost there. And you would see us bounce back from the fourth quarter.

Very well. So what you are saying is that while we are not all there, but we are substantially there and the benefits in terms of the sales -- distribution and sales should be visible from the fourth quarter onwards?

With baby steps. I give that caveat. But you -- I said with baby steps, but you got it. You got the spirit of the thing.

Yes. We are almost there, and you're saying that by -- hopefully, by June, the March or June quarter will be all there. As far as the softer part of this RTM changes, et cetera, the infrastructure and hardware and the people and appointments were there. . But the disruptions and the channel partners breaking into the system, et cetera, things should be all settled. Can I comfortably say that things should be all settled by 31st March? Or do you expect that to extend beyond 31st March also?

Maybe a little spillover to the first quarter of this financial year.

Yes. But pretty much you're feeling good about what you have today in terms of RTM structure and you are looking positively in terms of it giving necessary results from the first quarter -- the fourth quarter of this financial year?

Yes, I would say so.

The next question is from the line of [ Dhruv Kashyap ], who is an individual Investor.

Mr. Saha. This is the first investor call that I'm attending, although I've been an investor for some time. So pardon me or bear with me if I'm asking something that's been asked in the last few quarters, but it will just be a healthy refresher for all of us. . So it's a 2-part question, and I'll try to structure it as sensibly as I can where one part of the focus will be more here and now. And the second part will be sort of more crystal ball gazing or more sort of philosophical in its sort of spirit. So the way the business is structured currently there is a battery business where we are the Hindustan lever of batteries, we have more than 50%, 53% market share. And there is only that much headroom left. Then there is a flashlight business where you are right that there's a changeover happening from battery-operated to rechargeable. However, to the layman there is always a bit of a existential question on this flashlight category, because there is always a tendency for other products to sort of take it over like we've seen it in the past. And then there's a lighting business, which is quite cluttered. And hence, my -- I mean, so one is to understand to you that what are really the initiatives rather than sort of juicing out efficiency and RTM and product launches, et cetera, that you've spoken about. And the second part of my question really is that outside of these 3, at a philosophical level, are we seeing that there are some adjacent categories or, for example, at a philosophical level, Eveready is the battery of India and -- or the battery maker of India? And hence, are there adjacencies in batteries itself? So for example, I don't know, I mean, do we go to watch batteries, car batteries, home batteries or any other battery. So is it like more a horizontal extension or a vertical extension? Because as someone who's used Eveready for, I don't know, how many decades now, personally -- and as someone who will be in the market here, I personally feel that Eveready has a unique situation where the share of mind is significantly more in the share of wallet. And that's always a great space to be in as a brand that people think you have a huge monolith of a brand, but actually, the revenues aren't that big. And that's where the opportunity lies, because people already see you as a big brand, but and there is a lot of space to juice it out more, both in its current 3 categories as well as extension to very naturally sensible ones. And so I know it's the longish question, but I conclude by saying that I've been invested in a company for almost 8, 10 years, which does something of a core business, and it saw its -- and it has the same thing that it's got a very good share of mind versus share of wallet. And it saw benefits in getting into appliances, which is adjacencies, it's essentially a kitchen and a home brand company. And ever since it has got into appliances, appliances now become 90% of its business and core is 10% and the company's market value has gone from INR 700 crores, close to INR 5,000 crores. So I'm just trying to understand from you that where will this next sort of exponential rocket come from?

Okay. That's a very, very involved question, I must say and I compliment you for the in depth understanding that you have done on this. . So you are very right. Eveready brand is larger than what we deliver in terms of our top line. You are very correct. And obviously, that provides us with a guidance that we can do more, we can do more with the brand, and we can also do more with the distribution. Now what would be the shape of things to come is something I'll take on a little bit later, but prior to that, let me say that the battery, as you rightly said, it's matured, there is steady retail headroom or head space to go anywhere beyond the 53% of that, as you said, the Unilever like stronghold on the market. Yet, I think the market has, since you have done so much of the deep dive into the category. As you know, the device penetration in the country is of a very low order. So there is a huge potential for the category to grow as and when devices proliferate. With let us say rising income levels of -- so even if we retain that 53% market share, if devices were to go up, like it did at one time we saw [indiscernible] medical devices proliferated during the COVID time or when the remote controls came with every appliance in the households. So if tomorrow, the country was to go over to electronic locks and sensors and stuff like that, there could be a big jump, but that is as and when it comes. The category currently is in a position to deliver a high single-digit growth, which would come out of premiumization and on which the company is really focusing and working over the last, I would say, 12-odd months, we have revamped our premium segment, and we have started communicating quite a lot on that. And so we feel other things remain constant, we should be able to deliver a highly single-digit kind of growth. That is as far as battery is concerned. Flashlight, I beg to differ with you on the category potential. That category is growing. The battery operated one is, of course, degrowing, but the rechargeable one. People used to ask, because you seem to have a lot of knowledge of these categories, I mean, really, I think I appreciate you for that. Earlier this people used to ask us that what would happen when the country, the villages they get electrified. And what would happen to them, we would be at pains to explain to people that listen this is not for indoor lighting, it is for outdoor lighting that people use flashlights. And then electrification happened and then it really spurred usership in household keeping of flashlights increased, because people have, by this time, discovered the charging point. So they like they charge the mobile phone, whatever it is a smartphone or a feature phone, they also like to recharge the flashlight. So in the rural side, where most of our flashlight usage is, there is no replacement for flashlight. It is only -- we see growth in demand. Our problem is we are quite heavily over-indexed on the battery-operated one. So as we -- and that again emanated from the company's hesitancy to go into rechargeable, because it felt that if we ourselves go then what will happen to the battery-operated flashlights. But that is what the consumer prefers. So we have no choice. As we straddle this particular segment, we see potential for a high level of growth. I mean I certainly would think that we can easily look at a mid-teen kind of growth in this segment. With lighting, it's a cluttered market. People are very correct in observing that it is a highly competitive market, but it also provides very low entry barrier. With a brand like Eveready and the distribution like ours we are good to go. We -- and it continues to be a focus area for growth for us. Now coming to the crystal ball gazing. You are very right. We need to sweat the brand a bit more. We need to sweat the distribution system a bit more. Exactly what would be that category I am unable to say. We have lots to do over the next 12 to 18 months and we will keep focusing on our existing businesses. But parallelly, we'll start working in trying to discover what could the adjacent categories be. So that is where we are. I'm sorry that I'm not being able to give you a hard-coded answer with regard to the future category at this point of time.

No, that's perfectly fine, sir. I mean, thanks for that. It's a very exhaustive comprehensive and a very useful insight that you provided. I just wanted to understand more the philosophy in terms of -- as you said that Eveready is an imminently sweatable asset where it could sweat a lot more than right now by the sheer fact that its share of mind is much, much more than a share of wallet. But I was just trying to understand that one way to sort of build adjacencies is to say that, listen, we are the Hindustan Lever of battery and hence, we'll do everything batteries. The other way to do it is that there are adjacencies. And I can think of thousands of successful examples of both. So I think -- I mean, it's really for the team now to start working, because unless you give you a mind to it now, anyway, it's going to take 1 or 2, 3 years of sort of execution to get it sort of delivered. So it's more just for food for thought more than anything else. And lastly, before I sign off, sir, I'll share an experience with you because of what you raised, I don't know if you find it helpful. You mentioned in Eveready that there is an underpenetration of gadgets or devices. For the longest time, I headed ice creams for Unilever, which also depended on refrigeration penetration or freezer penetration, and we found multiple creative ways around it. So that was how in-home ice-cream is consumed, but you build a case for out-of-home consumption where you don't need a refrigerator, then you did home delivery, you tied up with Domino's, like Coke has delivered -- Coke has a line for Domino's, we did ice-cream for Domino. So I'm saying there are thousands of ways to come around this gadget issue. I mean, I sold a category which needs to be at minus 25 degrees to be sold, but there are innovative ways around it where you can't wait for Whirlpool to keep selling more refrigerators. So I'm sure I'm just giving you food for thought, sir, you are an expert of this category. I'm just sharing my experiences to just understand where your mindset is at.

Thank you very much. It has been very insightful. You have given us a lot of food for thought and we appreciate that. Thank you very much for taking the time out and giving your insights to us. Thank you. We'll work on this.

And all the very best for the future, Mr. Saha.

Thank you. Thank you, once again.

The next question is from the line of Vipul Shah who is an individual Investor. Mr. Shah, your line is unmuted. You can please ask your question. As there is no response from the line of the current participant, we'll move on to the next question. The next question is from the line of Mithun Aswath from Kivah Advisors.

Just a follow-up. I just wanted to know what is the breakup of your current flashlight business? How much is it battery and how much is it rechargeable?

70 -- in terms of value, the 70% would be battery operated and the balance will be rechargeable.

Okay. And the rechargeable has grown at what pace in the current year?

It is really growing at a very healthy pace of 50% type of thing, where on the other side, that the battery flashlight operated has 20% degrowth happening.

The next follow-up question is from the line of [ Vikas Srivastava ] from RBC Financial.

Mr. Saha, I'm back to the size of the market in terms of batteries and growth. Now I do hear that we are waiting for some event. Now in a growing economy, the middle class growing, why is it not that there is a good linear growth of battery, which should be normally the case. Is our hypothesis going wrong? Are the new remote, et cetera, also of the rechargeable kind is the battery lies more? Is the technology higher? If you remember a few quarters back, we discussed, and we were feeling very sanguine about the potential of growth of the battery segment as a whole. Let me for a minute assume that our share in the battery market remains what it is. What, in your view is going wrong on the growth, which should normally be linked to the way per capita income and the growth of the middle class in India?

So as we discussed little earlier also, we are holding on to the market share of 53%. As the previous speaker said we are the Unilever of the battery market. We straddle every area of the battery market, and there is nothing that we remain -- we keep unfulfilled. The thing is that the problem that -- and there is nothing that we have done wrong. So I would like to correct that.

No, no, Mr. Saha, I completely agree with you. My question is you -- why isn't the size of the market growing as it is expected to grow. And I'm just asking you. As an investor today, I want Eveready to check all the points and do right. And I also want to understand what in your view is the market why is it not growing the way it should grow, is the question I'm asking you. If the market grows 10%, 15%, 20% per year, stable at [ 53% ] is good enough, it's brilliant.

So let's please now hear me out. So the thing is that the battery market traditionally has had always grown at low single digits. It is not that it has been ever growing at 15% or thereabouts. The reason why the growth rate is low is because unlike other countries, the per capita consumption of batteries in our country is very low, which sells at about 2 per person. Whereas in other countries, even let us say, one of the most developed country, China has a per capita consumption of 10 and America has a part capita consumption of 36. Japan has 27. So the reason is that battery, there is nothing, which requires battery on its own. Battery only is used and consumed when there is a device. The device penetration of our -- in our country is of a very low order. Like, for example, remote controls. Remote control consumes 40% of our batteries, whereas in the U.S. remote controls where every household has more number of remotes, but they only consume 3% batteries. So it is because of the low penetration of devices in Indian households, the battery has really not seen that level of growth, as you very rightly said, with growing income, the country should have seen. So that is where it stands. We have the potential to grow, the market. I'm not talking of ourselves, the market has the potential to grow. A small example like toys. Our the penetration of toys in Indian household is far smaller than what it is in many other countries, countries like Indonesia, which is similar, income levels are not that greatly higher or China. So whereas Indians have taken on to phones, smartphones, feature phones, people have taken on the famously. So that is some of the course of the market, we need to sort of remain with that, but thing that we need to do is to ensure that we remain with the market growth, because at 53%, it is very difficult to grow faster than the market. I mean, this is something...

That was -- I was never raising your question on the size of the market or about market share. I was just wondering why is it not growing? Why is the market is still single digit, because that was what I was just thinking if you have a take or a concern in your mind as to why the market is not growing. I was more on the macro this thing of the market as to why it is not growing fast enough, which we are expecting it to, and we do expect the gap between 2 battery per capita and 10 to fill up at some point or time. My second question was that do you foresee the battery flashlights completely being -- becoming nonmaterial in the next 3, 4 years? That was one question. I'm not asking you for this quarter or next quarter. But how much in terms of -- and for a minute let's forget all the new products you will add that later or they're in the pipeline. My question to you was on the lighting segment, what kind of CAGR internally, are we talking of growing over the next 3 years? And what kind of annual growth are we expecting in volumes in the -- what are we targeting in the chargeable flashlight segment?

So the first question whether battery-operated flashlights will become 0. I would say it will never become 0, but it will become a very small part of the market. . The rechargeable one will continue to grow, because the people have really sort of taken on to it famously with the houses getting electrified, people are sort of using it, because they can then do all their outdoor stuff without having to change batteries now and then. So we have an aspiration for the whole category. I'm not now any longer looking at battery operated and rechargeable. We need to grow that because there is growth in the market. We are looking at -- and as I said somewhere earlier, we have 50% leadership in the battery operated one. We do not see what stops us from becoming a 50% in the overall market, also given the fact that we are the only organized player. The rest are on unorganized local, somebody is doing something in Kolkata, somebody is doing in Mumbai like that, UP. So we see a good potential for us to grow double digit. I would say somewhere closer to mid-teens in the longer term. With regard to lighting, we started off with an aspiration of growing beyond 25%, frankly. I mean even this year, we had taken a target, but the market, the value erosion was so acute, again reflecting the competitive nature of the market. So we did higher volumes, but we ended up doing only 10% in value growth. The market is in the negative territory. So people say, people who are experts in the market, I've spoken to, other lighting industry leaders, they feel that the value erosion should sort of get arrested and then the normal growth of 10% in the lighting market is something which is quite normal. We being a small player, our growth of rate should be higher. It is difficult for us to today predict what would be the exact percentage, because particularly coming off these very high value erosion here. So I do not know whether I have been able to answer your question.

I think my takeaway is what you're telling me is that your aspiration is to grow at about 15% on the flashlight consolidated between chargeable and rechargeable. And while your aspiration initially in the lighting was 25% because of the low base and growth, would you like to put a range of figure what would be a revised aspiration for the next 3 years on the flashlights -- on the lighting?

On the lighting. So we are...

I'm not asking you immediate. There will be...

I understand your query. So we being a small player. We started with very basic products, bulbs, lamps, et cetera. As we are trying to improve our sales, this year we would exceed INR 300 crores in turnover. We are going from bulbs, battens to luminares, to downlighters, panels, et cetera, emergency lamp, which is part of our premium portfolio. With that, we feel our value growth should be far higher than 10%, as we are recording. Even if I say that the market is not going to improve any time soon. So with our progress, our journey from basic products to more evolved products, and we have the portfolio today. It is our -- as we become more experienced in the market, we will keep straddling it and go towards the higher value chain, and that should give us, I would say, a growth which is going to be higher certainly than the [ 10% ] that we logged in this year.

Got it. But would you -- when you say -- are you talking about mid-teens, high teens? What are we talking about?

I would say it is certainly higher than mid-teens.

What are you aspiring for over the next 3 years is my question. I didn't ask you for a quarterly.

I said that we aspired for a 25% growth, but that went a little bit out of the window. We would certainly like to grow beyond 15% to 20% or thereabouts, depending on the market condition, because the value erosion that was there in the market, may disappear tomorrow and then it will give us grounds to grow higher.

The next question is from the line of [ Sunil Bhojwani ], who's an individual investor.

Sir, I just wanted to know that if we supply to any kind of institutions or defense services or forces, defense forces, state or central, there are so many industries mining or like the Army that would require flashlights or maybe even for the lighting segment for street lights, stations, airports? Or have you looked into that?

Okay. So we do supply to institutions like the ones that you mentioned, but there is scope for improvement there. This is one of our focus areas at this point of time. And thanks for once again reminding me of that.

Okay. So is that a considerable portion of the revenues, If you could give a...

At this point, it is not very significant. But it is there, but we need to grow from our current status.

Okay. Okay. And sir, also, in the recent past, we have discontinued some smaller appliances, and we had mentioned in the previous calls that we might look into launching some smaller appliances in the future again. So as to leverage our brand like the other participant said. So are we looking into that in the near future? Or...

We have exited the appliance category. What is happening is you call them appliance or you call them adjacent products, which go into the lighting shops. It is only that like say, for example, a spike buster or a multipoint plug and stuff like that. So things of that nature, which is necessary to complete the range, but we have exited the appliance category altogether.

Okay. So in the near future also, we would not be getting into it or any adjacent products like this, maybe after a year or 2?

The adjacent products should be taken only to serve the needs of the retailer to complete the range, nothing else.

Okay. Okay. For now, we don't have any plans of...

No, no plans.

The next question is from the line of Vipul Shah, who's an Individual Investor.

Can you hear me, sir?

Yes.

Sir, I have a question only in terms of our lighting business is, what is the target market for us for the lighting business? Is it metro or is it a non-metro?

As I mentioned earlier in the call, we are pan-India. We try to focus on metro. We try to focus on smaller towns. We obviously also focus on the rural side, up to a 20,000 population village or town. So there is no specific bias.

Got it. But I come actually from a metro city and in the city, whether it is a lighting product or whether it is an alkaline product, suffice to say that a lot of times or most of the times, we don't see the Eveready brand, although we are patient shareholders, but the products are not visible on the shelf, sir. So that was the reason why I had a question on that.

No, no, I'll answer that question. See, we are a small player in lighting. For us to be available in metro, it takes time. We are a very, very small player. Our market share is currently 2%. So you will only find us in 2%, perhaps if we take that logic. As far as the batteries are concerned, I'm surprised. I mean, if you could -- offline, you can tell us where you did not find the Eveready, because we are 53% of the market. It is inconsiderable that you would not find our presence in the Metro areas. Lighting, I understand because we have a lot of work to do.

Fair enough, sir. I will take this offline. But for sure, you can take it from me that any stores you go in Bombay the prime alkaline product is the biggest competitor and to...

There is nothing wrong in what you say, and I take your point. But our entry -- I do not know whether you heard my opening remarks, we have just now launched our own alkaline in an [ event space ] which is Eveready Ultima, we have done a decent amount of communication, and we have taken placement drives, which have been so far very satisfactory. We started that from September. And I'm surprised. I don't know which metro you live maybe...

Yes, I said Bombay. And frankly, sir.

So which part of Bombay, just out of curiosity?

Sir, in proper Bombay City, South Bombay and to whatever off-line small mom-and-dad stores we go it is very difficult to find the Eveready alkaline product. To my mind, there is a big growth, which is there and it's potentially a great growth driver. It could be, but sadly we couldn't -- can't find the Eveready alkaline anywhere on the shelf. So that was the reason why, sir, question as to where the focus is.

I understand your question and your concern. As I said, that this has been launched from September and so far, the progress has been very good. Like [indiscernible] part of my job to make sure, go visit market and see you know what is available or not available. This Bombay experience if you are speaking in the recent past is a surprise to me. I'll check this out and do -- if you have the time do let us know, which exact part it did not, because there is -- there can always be a gap, which needs to be rectified. I'm for sure, I know that you would have found our Red battery. But alkaline placements, which started from September should also have been in the area where you went to. If you have not found, I'll have to then accept that there is a gap, and that we need to sort of fill up. I'll certainly touch base with my Bombay team.

The next question is from the line of [ Ketan ] who is an individual investor.

This is Ketan here. I just wanted to ask that we see a lot of the torch lights and other equipments, which are now available in solar -- solar rechargeable things. . So does the company have any -- do you see any impact from such kind of devices which are available in the market? And what is their view on this segment? And whether the company also has any plan to go into such kind of segment?

So the company used to have solar-powered lanterns, not flashlights. But we found that the market was inundated with very low quality and low price. We did not feel at that time that there is sufficient traction of the product with the consumers. In the event, we have that technology. In the event we see market is amenable to that, we will do that. But at this point of time, these are basically absolute unorganized players who play in that market.

As there are no further questions from the participants. I would now like to hand the conference over to the management for closing comments.

Okay. Thank you, everyone, for taking out the time to join us on this earnings conference call today. I hope we have adequately answered all your questions. If you still have more queries, please reach out to our Investor Relations team, and we'll be only too happy to address them. We endeavor to interact with you all every quarter through this forum. Thank you once again, and look forward to connecting with you again in the next quarter. Thank you.

On behalf of Eveready Industries India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.