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

Ladies and gentlemen, good day, and welcome to the Hindware Home Innovation Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ronak Osthwal. Thank you, and over to you, sir.

Thank you, Vinit. Good evening, and welcome, everyone. On behalf of Arihant Capital, we invite you to Hindware Home Innovation Limited Quarter 2 and H1 FY '26 Earnings Conference. From the management side, we have Mr. Nirupam Sahay, CEO of Bath and Consumer Appliances business; Mr. Rajesh Pajnoo, CEO of Pipe Business; Mr. Sandeep Sikka, the Group CFO; and Mr. Naveen Malik, CEO and CFO of Hindware Home Innovation Limited. Kindly note that some of the remarks or observations made during today's call might be forward-looking such as financial projections or statements regarding company's plans, objectives, expectations or intentions. The company does not have any obligation to revise these forward-looking statements to reflect any further events or developments. For a comprehensive disclaimer, please refer Slide 2 of results presentation. With that, I would like to hand over the call to the management for their opening remarks, post which we will open for question-answer session. Thank you, and over to you, Mr. Naveen.

Good evening, everyone. This is Naveen Malik, and welcome to Hindware Home Innovation Quarter 2 FY '26 Earnings Call. I will start with a brief summary of our performance for the quarter 2 FY '26. Our business CEOs will then share updates on their respective segments. For H1 FY '26, the company reported consolidated revenue of INR 1,207 crores with an EBITDA of INR 118 crores and a PBT of INR 24 crores before exceptional items. For quarter 2 FY '26, the company reported consolidated revenue of INR 676 crores with an EBITDA of INR 60 crores and a PBT of INR 14 crores before exceptional items. As communicated last quarter, in a strategic move to sharpen our focus on the 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 fitting. Please refer to Note #3 of the 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 you, Nirupam.

Thank you, Naveen, and good evening to everyone. For H1 FY '26, the Bathware business reported revenue of INR 737 crores and EBITDA of INR 86 crores and PBT of INR 31 crores, while in quarter 2 of the financial year '26, it recorded revenue of INR 397 crores, EBITDA of INR 43 crores and PBT of INR 16 crores. Even though the market remains somewhat soft this quarter as well, we continue to be well positioned backed by our strong fundamentals. Hindware's leadership in the market, along with high brand awareness and deep consumer trust continues to drive our growth ambitions. As mentioned in our previous call, we've undertaken a series of focused strategic initiatives in the Bathware segment, refining our go-to-market strategy, driving premiumization across sanitaryware and faucets and implementing a zero-based budgeting approach to further strengthen margins. We also launched our new brand campaign Designed for Sukoon, which has received an excellent response from both consumers and the trade. Together, these initiatives are expected to drive stronger performance and momentum in the second half of the year. We continue to deepen engagement with the influencer community through on-ground programs for our plumber network and building stronger collaborations with architects and India designers. All these actions are helping us to widen our market reach and strengthen brand advocacy. And we'll continue to invest in building our brand and engaging meaningfully with consumers and influencers alike. In line with our premiumization focus, we have introduced a new range of premium faucets with higher average selling prices and stronger margins. This will further enhance our premium positioning and support long-term profitability. Coming to the Hindware Home Innovation Limited, the Consumer Appliances business. H1 revenue stood at INR 155 crores with EBITDA of INR 17 crores and PBT of INR 8 crores before exceptional items, while Q2 revenue was INR 84 crores with EBITDA of INR 7 crores and PBT of INR 3 crores before exceptional items. Our ongoing portfolio rationalization focused on high demand categories like kitchen appliances and water heaters is expected to drive both growth and profitability in the coming quarters. With that, I'll now hand over to Mr. Rajesh Pajnoo to take you through the pipes and fittings business. Over to you, Rajesh.

Thank you, Nirupam. Good evening, everyone, and welcome to our investors call. It is a pleasure to be speaking with you today. For the first half of FY '26, the company reported revenue of INR 315 crores, EBITDA of INR 20 crores and a negative PBT of INR 15 crores. For Q2 FY '26, the company reported revenue of INR 196 crores, EBITDA of INR 12 crores and negative PBT of INR 5 crores. While the overall market environment remains challenging, mainly due to the resin fluctuations and subdued demand, we are taking focused measures to navigate these headwinds effectively. Looking ahead, our focus remains on strengthening performance in the second half of FY '26 through strategic actions, portfolio optimization and operational improvements. On the manufacturing front, trial production has commenced at our Roorkee facility in Uttarakhand with commercial operations expected to begin in H2 FY '26. This expansion will enhance capacity and enable us to serve customers across Northern India more effectively. We are also continuing to expand our product portfolio to meet evolving market needs. Over the past few quarters, we have introduced solutions such as foam core pipes for underground drainage, double-wall corrugated pipes, further broadening our product range to address diverse application needs. At the same time, we are enhancing efficiency across the business, leveraging technology, optimizing resource allocation and strengthening cost management. Alongside this, we are continuing to expand our brand and distribution footprint to deepen market presence and customer engagement. Overall, with capacity expansion, a diversified portfolio and ongoing strategic initiatives, we are well positioned to deliver stronger growth and improved profitability in the second half of FY '26. With that, we are happy to take your questions.

[Operator Instructions] The first question comes from the line of Resha Mehta from GreenEdge Wealth Services.

So, one with...

Resha, you are not audible.

Is it better?

Resha, please unmute your line and speak.

Hello? Am I audible?

We can move to next.

As there is no response from Ms. Resha, the next participant is Aditya from [indiscernible] Securities.

I have 2 questions. So the first one is like the company has demonstrated strong revenue recovery as well and we are noticing a concerning trend in subsequent EBITDA margin compression across some segments. So despite volume growth in Bathware. So I'd like to know, okay, what's the management strategy and underlying drivers of it? And what are you looking for -- like how are you trying to sustain margins going forward?

So as you would have seen, we've delivered a growth in this quarter about 10.1% in Bathware. So the objective that we had of getting back to double-digit growth has been delivered in this quarter. While there's been a marginal decline versus the previous quarter, at an overall level, we are at an 11.6% EBITDA in the business. Going forward, we've taken a price increase across both sanitaryware and faucets effective 1st November. So we expect that to have a positive impact on gross margin. As shared earlier as well, we are also focused on products in the mid-premium and premium segment in terms of new product introductions, which are all going to be at higher gross margins than the existing products that we have. So through the premiumization strategy that we have, we expect a positive impact and the price increase, of course, will have a positive impact. And we are continuing to drive productivity and efficiency in the plants as well to ensure that from a cost perspective as well, we are well in control. So we do expect in the H2 of this year 1% to 2% increase in the EBITDA percentage based on all the actions that we've already taken.

And my next question is like as mentioned, sir, earlier, Hindware is the leading player in the sanitaryware and faucets. So like what is the current market share in sanitaryware and faucets segment? And you recently launched automated toilets systems and all. So like what is the ASP realization trend as well?

So unfortunately, there's no syndicated data required available for the Bathware segment. So unfortunately, accurate data on market share is not available. Having said that, very clearly, in the sanitaryware space, we are a top 3 player. And in the faucet space, again, we are a top 3 player. So I think that's the closest I can get to giving any data because unfortunately, data is not available. However, like I said, we focused extensively on the premium segment over this last few quarters. And we are gaining -- one, I think overall, we are gaining share because the market has been relatively soft. As you've seen, we've grown at 10%. But in the premium segment, with the new product introduction that we've done across sanitaryware and faucets, we've also seen a very good growth at the premium end. So we've definitely gained market share in the premium segment as well.

And sir, lastly, like what percentage of Bathware revenue comes from institutional B2B versus retail channels? Like what is the margin differential?

So the institutional business is roughly about 23% of our sales. It remains between 20% and 25% pretty much in the quarter. There is -- obviously, by the nature of the business, there is a lower gross margin in the institutional business because we are targeting obviously large architects, large builders, large projects, et cetera. So there is a differential, so differential is about roughly about 400 basis points between general trade and the B2B business.

Okay. Sir, one last question. I recently like seeing the balance sheet, Bathware business balance sheet excludes an intercompany loan of INR 98 crores extended by HHIL or Hindware Limited. So what is the rationale of this loan? And what are the terms of interest repayment and so on? Is this loan expected to be canceled or transferred post demerger? Like how does it impact the net debt calculations?

So if you recall, there was a rights issue in the month of December 2024 in the company. And one of the end use, which we had stated that the parent company will give a loan of INR 98 crores to Hindware. This is the same loan. This is an interest-bearing loan. And post demerger, this loan will remain as it is as a loan from the -- post implementation, HHIL Limited to Hindware Limited. And on the due dates, it will get delayed.

The next question comes from the line of Resha Mehta from GreenEdge Wealth Services.

I hope I'm audible now.

Yes, you are audible.

So I'm fairly new to the company. So just looking at the consumer products division, so if you could just call out like apart from chimneys and hobs, are there any other major appliances as a part of this segment? And also what would be our market share in each of the products in this particular category? And also, if I see since FY '23, in the last 3 years, our revenues of this particular segment has come down from INR 500 crores to close to INR 356 crores. So what are the reasons behind this? And how are we trying to fix this?

So we've taken a conscious call where we did our planning for this year. We've taken a conscious call to focus on a few categories. The first is kitchen appliances. The other is water heaters through our joint venture with Group Atlantic called Hintastica Private Limited and coolers only through the e-commerce channel. We took a conscious call to discontinue certain categories that we've been in the past few years. So coolers through the general trade or distribution channel, fans, air purifiers, water purifiers, kitchen fixtures and fittings. So all of those categories, there was a Board resolution, and we basically discontinued those businesses. The idea was to focus very clearly on a few categories and win in them. So let me take kitchen appliances first. So chimneys is by far the largest within -- subcategory within the kitchen appliances category. There, we are a significant player. We are a top 3 player in chimneys with very, very good brand recall, very good customer satisfaction scores, very innovative products, whether it's on low sound or using artificial intelligence. We've got a great portfolio and doing extremely well in chimneys. We are now focusing a lot on cooktops and hobs because we see that as another big opportunity. Then we have kitchen sinks, which again is a big opportunity, both in B2B and B2C. And then we have in-built microwaves and in-built ovens. So there are several categories within kitchen appliances that we plan to focus on and really grow them out. The second is water heaters, where we have an excellent portfolio of products. Group Atlantic is one of the largest in the water heater space globally. We've been partnering with them. So great innovative products across the price ladder. We've got them at different price points, great aesthetics, great design, great technology. So we believe that there's a huge opportunity there for us there as well. And the third is coolers through e-commerce, where it is still a profitable business. Coolers through general trade was not a profitable business. So we decided to continue with that. So these are the 3 things that we will remain focused on. And we believe that by focusing on these categories, we can grow this business to INR 470 crores to INR 500 crore company in the next 2 years. The reason that it come down over the last 2 years is because we got out of a few categories. So some of the categories which are loss-making, we took a conscious call to get them out of. So now in the categories that we're focused on kitchen appliances, water heaters and coolers through e-commerce, that is where we will now grow.

So would it be fair to assume that the journey from INR 500 crores to, say, INR 350 crores, right? So at least that these 3 categories where we are currently focusing on, those would not have degrown like kitchen appliances, water heaters and coolers?

Correct.

So basically, the degrowth is only coming from the discontinued segments. Would that understanding be right?

Correct. The primary degrowth is from the discontinued categories.

And in sinks, what kind of things are we getting into? Like so is it steel sinks, quartz thinks or what kind of sinks?

So they are both handmade as well as machine-made and designer sinks. So basically, any sink that goes into either a kitchen, that is basically what we are focused on because in our Bathware business, we have sinks which go into homes. So in the consumer appliances space, it is largely kitchen sink.

No, no. So my question was whether -- in terms of the material that is used, is it a steel sink or is it a quartz sink or what material is that?

Largely stainless steel. So there's some which are made with slightly different material, but most of the category is stainless steel.

And out of the INR 350 crores revenue last year that we did, bulk of this would be chimneys and hobs. Would that understanding be right?

So in the last year, we also had coolers through the general trade. So that was a fairly large chunk. So this year, despite that base because of the fact that we are growing in kitchen appliances, we are making up for the fact that base that we had a cooler in the general trade. We know because we've discontinued the business to general trade, that base is lying there in the last financial year, and we are not selling through that channel in this year. So all the figures that you see for this year are basically for the categories that I talked about.

And what would be the path to profitability?

Yes. So I think it's fairly clear. Chimneys, for example, is a high gross margin business. So that is the primary driver in kitchen appliances. That is the largest segment in the market, where we are doing extremely well. So that is one thing which is going to ensure that our gross margin remains healthy. Water heaters, again, basically, we've taken a conscious call in terms of our sourcing to make sure that we have products which give us a good gross margin. And because we've got out of loss-making businesses, that itself has a major positive impact. So we remain in all the profitable businesses, and we've got out of all the unprofitable businesses. So I think that was a good strategic call, and that should really help us to move forward. And as we build scale, then clearly, there is operating leverage that we get as well.

So the segment margins for consumer products last year was made up by 10%, so what is it for H1 FY '26? And where do we see that moving ahead?

So in H1 '26, we delivered an EBITDA margin of 11% in HHIL. So we delivered an EBITDA of INR 17 crores, that is 11% and in terms of...

On the consumer products division, right?

Yes. So Hindware Home Innovation is right now on the consumer products division. So it has no other business. It's only the consumer product division.

Yes. So I'm talking about the consumer products business only.

Mr. Nirupam is talking of Hindware Home Innovation Limited as a stand-alone company. The reported EBITDA for the first 6 months is INR 17 crores, which we see last year was on the negative.

Right. And then this basically gets demerged, right? The consumer products division only with these 3 categories, kitchen appliances, water heaters and coolers that get demerged, right?

Yes, correct.

And then how does the leadership change in terms of people, et cetera, if you could comment on that? And do we lose out on any synergies in terms of sourcing or let's say, a few of our other segments?

So the teams are already distinct within the 2 divisions as such. But the overall strategy remains the same because ultimately, we are touching the same market. There may be some sort of an advisory coming from Hindware in terms of the key management heads, which are there because of the synergies between both the -- like we share the warehousing space, we share the aftersales service. That is already being built. When you see the stand-alone results for the first half, that element already exists. So it should not have an impact on the stand-alone operations when you see Hindware per se or the stand-alone operations when you see Hindware Home Innovation Limited.

The next question comes from the line of Harshit Mundra from BOB Capital Markets.

Am I audible?

Yes, Harshit.

So the pipe segment volume declined by 21% in June quarter. And in this quarter, volume has been good and why the margins not decided?

Rajesh?

Yes. See, the volumes actually, if you see we had a very bad first quarter, which was not good for the whole industry, and we were willing to perform. We have come back in the next quarter, that is quarter 2, and we have a volume growth there. But the margins, there is a lot of impact of selling prices in the market because of the lower prices prevailing in the market because of low raw material prices, we have to fight it out in the market. So there have been stress on the price at which we have been selling. So that is why we are seeing an impact that it is almost around that it will marginally increase, but not increased because of the tough competition in the market.

So sir, are we providing any incentive schemes.

Yes. The market when the demand is not there, you have to sell, so you have to sell out a bit from your margins and then see to it that volumes, we will not have net volumes.

Okay. So sir, what is the volume growth and margin guidance for H2?

H2, it would be at the same prices that are prevailing now, it will be approximately 15%.

Okay. So this is volume, right?

Yes.

And sir, margin guidance?

Margin guidance would be around 9%.

And sir, what would be the steady state EBITDA and revenue guidance for the pipe segment?

Revenue, as I said, since we are operating at a price, which is below 6% than the last year's price, so it looks like the revenue beat flattish, unless and until...

Got it. Sir, my next question is on the sale out that is related to the water heater business. So the provision of INR 116 crores would come to Hindware or the demerged entity?

No. Basically, if you see this sale is the sale of asset is not being done in Hindware Home Innovation Limited. It is a sale of an asset in the joint venture company. And the end use of this INR 116 crores will go towards repayment of debt in the joint venture company. And the related corporate guarantee, which the parent which Hindware Home has given that will get extinguished. So this will take off the debt part at the group level, which is there in the form of guarantee. But ultimately, the cash which we generate out of the sale of the assets will be in Hintastica Private Limited and the loans which has been taken in Hintastica, that will be paid off.

Okay. So our debt has increased from INR 695 crores to INR 726 crores in the last 6 months. So is the debt likely to come down? Or how are you looking at the debt for March '26?

So when you do -- when we internally do analysis, why it has increased is primarily on account of increase in number of days of the working capital in the first 6 months, which we feel that we should be able to take off to a level of around 5% to 7%. Right now, we are on average in different businesses around almost 95 days net. And we feel we should be able to bring it down by 5 to 6 days by the end of the year. So part of the debt will get paid off there. Part of the debt we contracted because our new plant in Roorkee is getting commissioned now in -- by end of December. And ultimately, the old loans, we are paying off, we have already paid off INR 60 crores in the first half and balance also we will pay another INR 60 crores. So whatever cash we are generating in the system ultimately goes towards the majority, it goes into the repayment of debt.

Okay. Sir, last 2 questions. So would you please share revenue growth and margin guidance for Bathware for the second half?

Yes. So in the second half, we are expecting early to mid-teen growth in sales and an EBITDA of about 13% to 14%.

Okay. And sir, what would be the steady state EBITDA margin for the Bathware segment for like FY '27, FY '28?

So we expect in the next year, so FY '27 to add 1% to 2% on the EBITDA percentage that we deliver in FY '26.