Hindware Home Innovation Limited (HINDWAREAP.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Hindware Home Innovation Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harsh Patak from Emkay Global. Thank you, and over to you, sir.

Thanks, Amsath. Hi. Good afternoon, everyone. On behalf of Emkay Global, I welcome you all to the Q1 FY '26 Earnings Call of Hindware Home Innovation. From the management side, we have Mr. Nirupam Sahay, CEO of Bath Business; Mr. Rajesh Pajnoo, CEO of Pipes Business; Mr. Sandeep Sikka, the Group CFO; and Mr. Naveen Malik, CEO and CFO of Hindware Home Innovation. I'll hand it over to the management for the opening remarks. Over to you, gentlemen.

Good evening, everyone, and welcome to Hindware Home Innovation Q1 FY '26 Earnings Call. Kindly note that some remarks and observations made during today's call might be forward-looking. These may include, but are not limited to, financial projections and statements regarding the company's plans, objectives, expectations or intentions. The company does not have any obligation to revise these forward-looking statements to reflect any future events or developments. For a comprehensive disclaimer, please refer to Slide #2 of the results presentation. I will start with a brief summary of our performance for the quarter 1 FY '26. Our business CEOs will then share updates on their respective segments. For quarter 1 FY '26, the company reported consolidated revenue of INR 531 crores with an EBITDA of INR 58 crores. In a strategic move to sharpen our focus on kitchen appliances segment, including chimneys, hobs and cooktops, the Board has approved the discontinuation of high loss-making product categories such as air coolers, other than through the e-commerce channel, ceiling and other fans, air purifiers, water purifiers and furniture fittings. Please refer to Note # 2 and 3 of published financials for further details. I would now like to hand it over to Mr. Nirupam Sahay to take you through the Bathware and Consumer Appliances business. Over to Nirupam.

Thank you, Naveen. For Q1 FY '26, the Bathware business reported INR 341 crores revenue and INR 43 crores EBITDA. Despite the challenges in the market, we remain well positioned to leverage our strong fundamentals. Hindware's market leadership, supported by higher brand awareness and deep customer trust continue to be key drivers of our growth ambitions. Our Q1 results reflect the early signs of a business in transformation with meaningful initiatives undertaken to improve growth, profitability and margins in the Bathware segment. As shared in our previous call, over the past few months, we have undertaken a comprehensive review of our business model, refining our go-to-market strategy, driving premiumization in sanitaryware and faucets and adopting a zero-based budgeting approach to support margin expansion. These targeted interventions are beginning to yield results. And on the back of this progress, we expect the second half of the financial year to show improved momentum and stronger performance. In Q1, we also deepened our engagement with the influencer community by rolling out on-ground activation programs for the plumber community, while continuing to work closely with architects and interior designers to strengthen our market reach and brand advocacy. Looking ahead, we plan to further invest in brand building to deliver comprehensive 360-degree engagement with both customers and influencers. In line with our premiumization strategy, we will be introducing a range of premium faucets with higher average selling prices and stronger margins, reinforcing our premium portfolio. We are confident that this initiative will, not only strengthen our presence in the premium faucet segment, but also enhance the overall profitability of the business. As we move forward, we remain committed to making disciplined strategic investments in our brands to capture emerging growth opportunities. In our Consumer Appliances business, Q1 revenues came in at INR 71 crores with an EBITDA of INR 10 crores. Over the past months, we have undertaken a rationalization of our portfolio, sharpening our focus on a select set of high-demand categories where we can lead and win. This includes kitchen appliances, which includes chimneys, cooktops, hobs and sinks and water heaters. As part of this rationalization, we have exited low-margin segments such as ceiling and other fans, air purifiers, water purifiers, furniture fittings and air coolers in general trade, while continuing to sell air coolers through e-commerce. Alongside this, we are driving cost efficiencies, maintaining disciplined inventory management and enhancing our aftersales service experience. These initiatives have already started to drive growth in kitchen appliances and are contributing to improved profitability, a positive trend we expect to strengthen in the coming quarters. With that, I hand over to Mr. Rajesh Pajnoo to take you through the Pipes and Fittings business. Over to you, Rajesh.

Thank you, Nirupam. Good afternoon, everyone, and welcome to our investor call. It's a pleasure to be speaking with you today. In Q1 FY '26, we reported revenue of INR 119 crores and an EBITDA of INR 7 crores. Our performance this quarter reflects the on-ground challenges faced during quarter 1. The softness was driven by difficult market conditions, volatility in raw material prices and the early onset of monsoons, which impacted both revenue growth and volumes. In addition, our lower exposure to the agricultural sector, typically a key demand driver in Q1 also contributed to the muted performance. However, we are now seeing early signs of recovery in the current quarter and expect this momentum to translate into a stronger H2 in FY '26 performance. We remain well positioned to capitalize on the recovery and build on these positive trends throughout the rest of the year. In addition, we have commenced trial production of our new facility in Roorkee, Uttarakhand. Commercial production is scheduled to begin in H2 FY '26, which will help us enhance our manufacturing capacity and establish a strong footprint in Northern India. We continue to broaden our product portfolio to tap into emerging market opportunities and deliver greater value. This quarter, we introduced a new range of products from foam core pipes for underground drainage, double-wall corrugated pipes, polypropylene, PPR random plumbing pipes and fittings, strengthening our position across multiple segments. At the same time, we are advancing initiatives across all business functions to optimize resource allocation, leverage technology and improve productivity and cost efficiency. We have also intensified investment in our brand and distribution network to further extend our market presence and deepen penetration. We are confident that these strategic initiatives, combined with capacity expansion and portfolio diversification will drive profitable growth as we move forward. We are now ready to open the floor for your questions.

[Operator Instructions] The first question is from the line of Utkarsh Nopany from BOB Capital.

Sir, my first question is regarding your Bathware segment. So it is good to see we have posted positive revenue growth for the June quarter. But still our Bathware revenue came around INR 341 crores in this June compared to the quarterly run rate of around INR 400 crores in FY '24. So first wanted to know by when we could reach around, say, INR 400 crores quarterly run rate mark number in your viewpoint?

So we expect accelerated growth on the quarterly number from this quarter itself. So quarter 2 onwards, we'll see higher numbers. We've already seen a move to positive growth in quarter 1. We expect acceleration based on all the initiatives that we've taken on distribution and on product and on influencers and on brand building. So all of those have started kicking in. And with continued investment, we expect that to accelerate in the coming quarters itself.

Okay. So, sir, can you just give some sense like maybe in certain fiscal year, can we reach, say, INR 1,600 crores top line in Bathware, which we did in FY '24, maybe in FY '27 or maybe in FY '28? We must be having certain target in our mind to reach that number, what we were doing earlier.

Yes. So we [ reach that ] run rate by quarter 3 and quarter 4 this year itself.

Okay. And sir, on the Bathware margin, if we see it was slightly down on a Y-o-Y basis in the June quarter. And as we have taken a lot of cost rationalization initiatives in the past few quarters, so when we are going to see the benefit from those initiatives? And what is the sustainable margin for this business in your viewpoint?

So the EBITDA margin for the Bathware business is pretty much the same as the last quarter, 12.8% last year and 12.7% this year. At the PBT level, there's an increase from 3.2% to 4.6% in the business. So all the measures that we've taken to drive top line growth, improve margin and control costs, all of them again have started kicking in, in this quarter, and we expect acceleration again going forward. So from the profitability point of view, whether it's the EBITDA or it's the PBT, we expect this to improve in the coming quarters based on all the actions taken on top line as well as bottom line.

And sir, what should be the sustainable margin in your viewpoint for Bathware?

So we expect it to be in the mid-teens.

Okay. Now sir, coming to the Pipe segment. So there has been a steep decline in our pipe volume. So it has degrown by 21% in this June quarter versus low single-digit kind of a volume growth reported by the major listed pipe companies despite we having a very small base. So I wanted to know why there has been such a steep decline for us compared to the competition? And what would be the volume growth and margin guidance for FY '26 for the Pipe segment?

Yes, this would be a valid question and would be there in the minds of everybody. I would like to put it this way. If you see the same year comparison of Q4 with all the competitors, we have done much, much better than others. It was the reason that February and March were peak for us, and we were able to supply a lot of material in the month of March. So what has happened is, there was a steep decline in the raw material prices from April. So 2 reasons. One was the decline in raw material prices and other onset of monsoons at an early stage. And Q1 signifies more towards the agricultural segment where we are not there. So there was a lot of destocking, which happened at the distributors' place. So April and May, mid of May, we could not push the material to the market. And if you see from June onwards, there was a positive correction. And now this quarter, the current quarter, we are doing fantastic. We are there at a volume growth of almost around 35%, strike rate of 35%. We have bounced back. And as regards to your guidance, we would say that the complete year would be somewhere around close to double digits, maybe around 9% to 10% volume guidance.

Okay. And sir, the next question is regarding your Consumer Appliance division. So like we have taken a pretty large exceptional loss in this quarter. So I wanted to know, is it mainly pertaining to the inventory write-off for the discontinued products? And how much inventory we were carrying at the end of June '25?

So these are -- I think if you have gone through the notes to the results, so these are write-offs relating to the businesses. And many of these businesses are seasonal in nature. But over a period of time, we had made investments like in certain product categories, we had our own specific modes linked to our designs like air purifier or water purifier and even part of the category of water on this air coolers. So it's a mix of when we have done all this provisioning. So we have reviewed line-by-line items of elements of fixed assets, elements of inventory. And when you discontinue certain business categories, definitely, the chances of money getting stuck in the trade is also very high. So considering all these things, this provision has been estimated. We are trying to get the best value out of it. The Board has mandated that we should try to get the best out of it. If anything is there as we move forward, so it will be a part of the P&L.

Okay. So sir, for the Consumer Appliance division, the EBITDA margin has improved sharply. Maybe this might be related to this discontinuation of loss-making product category. So do you expect to maintain such high margin going forward? Or is there any one-off in the June quarter number for consumer appliance margin?

If you see the note # 2, there is a one-off item which is relating to -- because when we closed all these categories, we have also downscaled our warehousing space. And if you read the notes to the accounts, INR 6 crores other income is a onetime income, which is relating to the difference between the as per -- this is as per Ind AS, the difference between the value of lease assets and the lease liabilities. So other than this, we feel the momentum on the margin given the fact that we have cut costs in this business also in the past. Now these product categories we have looked at. So the focus now going forward will be on kitchen chimneys and other part. I'll request if Mr. Nirupam can carry this forward.

Yes. So the conscious decision to stay in certain categories and focus and win in them. So in the case of kitchen appliances, primarily chimneys, cooktops, hobs, sinks, the reason for doubling down on that is the fact that we see profitability in that business today. And with all the steps we are taking on the portfolio and our cost, we believe that the gross margins and the profitability overall will keep going up in these businesses. The reason that we've stayed with air coolers and e-commerce, again, is because we believe there is profitability in that part of the business. Coolers in general trade was not profitable. So these are very conscious calls for us to focus on certain categories, win in them in the market while driving profitability as well. So with this mix change and focus on a few categories, we are confident of growing both the top line and bottom line in the coming quarters.

Okay. And sir, lastly, sir, if you can just guide what would be our CapEx guidance for FY '26? And where do we see our net debt at the end of March '26?

So on CapEx, in the Bathware business, it will be roughly between INR 70 crores and INR 80 crores. On the Consumer Appliances business, it will be only about INR 7 crores, INR 8 crores. So that's the CapEx situation.

Okay. And for Pipes business?

For Pipes, it should be somewhere around 15 -- in the range of INR 15 crores to INR 16 crores, INR 17 crores based on the approvals.

Okay. And where do you see, sir, our net debt at the end of March '26?

Given the fact that we don't have a substantial CapEx, the CapEx which got added in last 1 year was primarily on the pipes plant, which is a new pipe plant, which we set up in the state of -- in Roorkee. So given the fact that not much CapEx is there, a little bit from the money which we are generating from our internal accruals that will go towards that. And debt should remain in the range from whatever it is right now with the repayment of about INR 60 crores, INR 70 crores happening in the financial year.

[Operator Instructions] The next question is from the line of Parikshit Gupta from Fair Value Capital.

I have a couple of questions. First, on the Bathware segment. Can you please split the top line between sanitaryware and faucetware and share about the industry situations, respectively?

Yes. So our split is roughly about 62% sanitaryware and 38% faucets. We have a strong focus on growing both sanitaryware and faucets with faucets possibly growing a little faster, and therefore, over a period of time, the share of faucets in the overall sales will go up by the end of this financial year. As I mentioned, there are a whole lot of new product introductions that we're planning in both sanitaryware and faucets, largely aimed at the mass premium and premium segments, so higher average selling prices and higher margins.

Okay. Can you give a rough estimate of the margin profile across different brands, I mean, Hindware Italian and Queo?

So we don't normally share the gross margins across the different brands. Yes. I mean, obviously, we are targeting improvement in gross margin across Hindware, Hindware Italian Collection and Queo. Like I said, the focus is on launching more products in Hindware Italian Collection and Queo because of the reason of higher average selling price and higher margins.

Understood. Second part of the question on Consumer Appliances, please. You mentioned earlier in the previous con call that there might be some new complementary product launches expected. I understand that Inflame was also considering dishwashers some time ago. So, I mean, is there any announcement that you would like to make about any new complementary products here?

Not at this point of time. We'll make the announcement at the time that we are planning to launch a new complementary category. At this point of time, as I mentioned earlier, we are doubling down on your chimneys, cooktops, hobs, sinks. We also have in-built microwaves and ovens. Those are the categories that we'll remain focused on for this financial year at least. And then we'll add on as we see opportunities. But we believe there's a huge opportunity in these categories themselves.

Understood. Now on the Pipes division, please? I think another participant already asked the question about drop in volume and value. Was the drop in value primarily on the account of the agricultural-focused quarter and raw materials price softness? Or were there any competition -- increased competition from the unorganized sector as well, maybe more capacities being added? We understand about the situation with the larger players. So those numbers are handy. However, any other information, if you could please share?

See, it's not about competition because when it comes to our category of selling in the market, our average selling price is almost equivalent to all the large players, more or less the same. So it was basically, as I said, we had a fantastic March. So there was destocking, which was happening at the customer's place. And with this, there was this -- we are not heavily into the agricultural segment because for agricultural segment to sell an agricultural pipe, you need to have manufacturing facilities all around the country as is there with different peers, big peers. So since we are only based out of South, so we couldn't catch that market. As such, as I said, we have -- we'll be starting our -- commercializing our Roorkee plant in H2. So we'll be capitalizing on that. So that was primarily the reason. And as I said that now things have picked up, and we are doing fantastic. We are doing very well this quarter, and we see a comfortable growth in the coming days.

Understood. What was the CPVC share for this quarter? And any plans on doubling down on this particular product segment?

Yes. The CPVC share, as you all know that last 1.5 years, the plumbing market has not been that great. Approximately, ours was last 2, 3 years at 40%. But last year, every major player, if you see, has shown a degrowth in CPVC. It is now almost around 30% to 35%. We are expecting in this year because July has been fantastic for CPVC. We had a market -- we had a share of around 40.5% of CPVC in July. And it's the same way happening now in August also.

This is helpful. Just my last question before I rejoin the queue. About the new products that you mentioned, the foam coat (sic) [ foam core ] pipe, DWC, would the margin profile for these products be at the same levels of our current pipes and pipe segment blended margin or...

Here they are -- as you can say that all these new products, they are niche products. So they are at a comfortable margin compared to CPVC only, not as PVC because everybody is not into these products.

[Operator Instructions] The next question is from the line of Udit Gajiwala from Yes Securities.

Just one question that a peer is now focusing on the more of the B2B segment, the project segment. So what is our sanitaryware, faucets share into the projects, firstly? And what has been the traction for Hindware on those terms?

Yes. So we've had a strong focus on institutional business over the last few quarters. We've grown at 15% in the institutional business in quarter 1. And I think the focus here is on growing in both sanitaryware and faucets. There's a larger opportunity in sanitaryware, but there's also an opportunity in faucets. So we're showing good growth in both sanitaryware and faucets institutional. We'd also set up a team 3 quarters ago, focusing on government, and that is starting to pay off. So basically, we are targeting the government segment as a big potential opportunity. So we're growing every quarter in the government segment. And we continue to build strong relationships with builders and architects across the country. So we see a strong growth momentum in institutional in quarter 1, and we see that momentum continuing through the year.

All right, sir. And in the Pipe segment, our volume decline has been much steeper than the peers. Is it that we are losing some market share into CPVC or the pricing is -- we are not able to have that volume share? And secondly, is there any element of inventory loss for the quarter?

See, this question I have answered twice. The volume declined sharply more than the peers is purely on the basis of -- I again repeat that we had done some good sales in March more than our peers, if you see quarter 4 results. And there was a destocking, which is happening, which happened at April and May. From June onwards, we have started doing well. And as I've said, we have been doing this quarter, Q2 presently, we are at a growth of around 30% in volumes. So there is no way that we have lost any share to the competitor. It's not possible at this moment. And inventory loss is not more. It is just to the tune of maybe maximum INR 1 crores, [ not so than that ]. We're working on less inventories as of today.

[Operator Instructions] The next question is from the line of Nikhil Gada from Abakkus AMC.

Firstly, sir, on the plastic pipe business, you sort of mentioned that we are expecting a volume growth of 9% to 10%, but I'm assuming that our Roorkee plant will also start from second half. So don't you think that, that will also aid volumes?

Yes, Nikhil, definitely, it's going to boost our production capacity there also. What we are talking of presently is, at these types of price -- see, we are also anticipating a price correction. You have a right point. If there is a price correction in -- by the end of Q2, then definitely this volume guideline will go up. But we are being very conservative at this stage because what has happened is, last financial year, quarter 1, we were working at an average price of at INR 85. Now it is INR 74. So we are talking of a volume guideline at these prices. Because once the prices of the raw material are lesser, you'll produce this type of quantity. If the volume -- if the price goes up, then definitely the volume guidelines will change.

Sir, in that case, what kind of revenue guidance can you give, sir?

Revenue is, again, if there is -- it all depends. If there is -- at this moment, if we are talking of current prices, then the revenue guideline would be around 3% to 4%, which is there in the industry. But if the prices go back to normal what they were there last 1.5 years back, then definitely, it will be something touching double-digit. So we put the caveat there, and it depends on what the prices are there, like raw material prices are there in the market.

Understood, sir. And sir, just in terms of the competitive intensity in pipes, I think which has increased significantly in the last 1.5, 2 years. What's your view on that? Are we still facing some heat because of that? Or we are able to navigate and it's not going to be difficult for us to deliver some double-digit growth even in the...

Yes. Nikhil, when we started actually all these, what you are talking about is, yes, there has been a lot of competition because new players have come up in this business. But the level of SKUs which we are working and the new product lines, which we have come -- which we have launched this quarter, last 1, 1.5 months, we don't see any -- because then we are in the category of the right people who are the 3, 4 players of competitors. We don't see any competition from them because then their segment of business would be entirely different because they have not come -- they haven't come up with so much of capacity what we are having today and the product lines we have, like DWC and foam core now down the line 3, 4 months, we'll be delivering fire sprinklers into the market. So these are all niche products and they're mainly there. These people are not there in this market segment.

Understood, sir. And sir, on the margin front in Pipes, so how do we see the margins for FY '26, EBITDA margin?

FY '26 would be somewhere around 9% and 9.5%.

You think that is doable even after what you have seen in 1Q?

Pardon. I didn't get your question.

No. I'm saying after 6% margin that you have seen in 1Q, you still feel that we'll be able to achieve…

Yes, yes, because Q1 is the lowest as far as volume, sales value and EBITDA is concerned, if you see Pipes business, there is a plumbing side of it, Q1 is the lowest part of this business. Almost 65% of the business happens in H2.