Symphony Limited (517385) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Call of Symphony, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Naval Seth of Emkay Global. Thank you, and over to you, sir.

Thank you. Good evening, everyone. I would like to welcome the management and thank them for giving us this opportunity. We have with us today Mr. Achal Bakeri, Chairman and Managing Director; Mr. Nrupesh Shah, Executive Director; Mr. Bhadresh Mehta, Global CFO; and Mr. Milind Kotecha, IR and Treasury. I would now hand over the call to the management for their opening remarks. Over to you, gentlemen.

Thank you. This is Achal Bakeri here. Good afternoon, and welcome to all the participants. We really appreciate your being here and your interest and participation in this call. I'll request my colleague, Nrupesh Shah, the Executive Director, Corporate Affairs, to take us through the results. After that, both of us -- all of us will respond to the Q&A. Over to you, Nrupesh Bhai. Thank you.

Yes. Thank you, Achal Bhai. Welcome all the participants to December quarter Q3 and YTD financial review. Usual disclaimer statement applies. To start with, we'll take you through some major financials for the quarter and 9 months, stand-alone as well as consol. So for the December quarter, on a stand-alone basis, revenue from operations stand at INR 124 crores versus INR 207 crores in December '19, that is a down by about 40%. While on a consol basis, for 9 months, it stands at INR 561 crores versus INR 854 crores, down by about 34%. On a stand-alone basis, gross profit margin stands slightly in excess of 49%. In fact, 1% improvement Y-o-Y as well Q-to-Q. EBITDA margin percentage is at about 34% versus 30% in September quarter, that is improvement of almost 4% Q-to-Q. At PAT level, it stands at about INR 35 crore versus INR 27 crore in September quarter and INR 58 crore in December '19. And PAT percentage stands at 26%, about 3.5% improvement Q-to-Q and almost in line with December '19 quarter. And on a consol basis, PAT stands at about INR 44 crore for 9 months versus INR 142 crore. In terms of the capital employed, for the quarter, on a stand-alone basis, it is negative by INR 3 crore, again proving the efficacy of the asset-light, capital-light business model. And treasury stands at that about INR 557 crore. In terms of the PBIT percentage on capital employed on a stand-alone basis for the quarter, it is infinite, in line with December '19 quarter and also September '20 quarter, while on a consol basis, it stands at about 144% for the quarter. In terms of the revenue breakup, for 9 months, about INR 257 crore has been generated from domestic sales, while INR 304 crore from rest of the world, including sales by subsidiaries and exports from India. So almost 60% of the sales has been generated from rest of the world. And happy to inform that despite COVID-19 challenges, despite challenging summer and lockdown, on a consol basis, there is a reduction in the inventory from INR 105 to INR 99 crore, while on a stand-alone basis, it stands at INR 36 crore. So there is absolutely no overstocking at the level of the company. In fact, in some of the models, considering the collection we received during the quarter, there has been a stock out position. Coming to subsidiary company-specific details. In Symphony AU, that is Climate Technology, for 9 months, the top line is up by 1%. However, profitability is impacted on account of higher input costs, local purchases instead of imports and increased freight costs and also the labor cost. But now considering various initiatives, which we had initiated in the past, in March quarter, it seems to be a turnaround quarter in terms of the business model, of rationalization as well as revenue optimization. For IMPCO Mexico, sales is impacted during 9 months due to COVID. However, there is an improvement in gross profit margin percentage as well as contribution margin percentage on account of various initiatives. About GSK China, again, sales is impacted due to COVID, but there has been improvement in gross profit margin percentage as well as contribution margin percentage. As of now, we are witnessing very strong trade sentiments across the market, including rural as well as semi-urban demand. In fact, in December quarter, Y-o-Y, the trade collection was higher than December '19, and it was more than our own internal estimate and expectation. And on account of higher collection and also due to certain supply chain and production constraints, there has been good amount of unbilled sales, which we will bill in current month and current quarter. There has been substantial increase in input costs, mainly plastic as well as metal. However, as mentioned earlier, there has been a slight improvement in the gross profit margin percentage, and we are confident to maintain it on account of launch a series of new models during the year as well as last year, good model mix and also on account of operating efficiency as well as cost rationalization and also some price increase across the board. So with this, we open the floor for question answer. Thank you.

[Operator Instructions] The first question is from the line of Manoj Gori from Equirus Securities.

Sir, couple of things you highlighted that there would be some -- there was some unbilled sales that would be accounting...

Sorry to interrupt, sir. Sir, we're not able to hear you clearly. Can you use the handset mode while speaking?

Yes. Is it better now?

Much better.

So you indicated that there was some sales which would be accounted during the current month and next month. But just wanted to understand like whether there was any pre-buying that could have been possible during the current quarter, given that there are risks for the price increases, and many of the other categories did witness some pre-buying, especially in the cooling product categories. So any light on that?

Are you referring to prebuying that could have happened in the -- before December?

December quarter. Yes.

Well, not much because our price increase indication was given very late. So it wouldn't have really affected our booking in December. And the price increases have been basically made effective 1st January. And it was not declared beforehand that we are going to be doing that. So it couldn't have been significant. Most of the collection had come much before that, orders had come much before that.

Okay. Sir, if you can quantify, what would have been the blended pricing that we would have taken?

What would have been the?

Blended pricing...

Blended price increase.

Well, blended price increase, again, it varies from model to model, again. And we would not really like to get into that for competitive reasons. So that is something which is -- it varies, it varies.

Right. Sir, on subsidiary part, if you look at, obviously, the sales have improved on a Y-o-Y basis. But again, when we look at the EBITDA level, there was some pressure and especially even on the gross margin front. So can you throw some light on that? And what would be the future outlook on the same?

I think Nrupesh Bhai already explained. Maybe Nrupesh Bhai, you can reiterate?

Sure. So EBITDA margin percentage for subsidiaries, one in Climate Technology, and secondly in IMPCO, have been impacted, especially in Climate Technology, one on account of local buying instead of imports, also substantial increase in the freight costs and labor costs on account of COVID-19. But now we have resolved those issues. And on account of various initiatives, starting March '21 quarter itself, we should reap the benefits, and we are expecting March '21 quarter to be a turnaround quarter for Climate Technology. As far as IMPCO Mexico is concerned, gross profit margin percentage and contribution margin percentage has seen an improvement. However, there has been provision for the bad debt of about INR 7.30 crore because one of the large organized retailer went bankrupt due to COVID. And hence, EBITDA has taken a hit over there.

The next question is from the line of Manish Agarwall from Edelweiss Broking Limited.

Sir, 2 questions from my end. Firstly, on the domestic inventory side. If I remember correctly, last quarter, we had mentioned that around 40% of sales is with channel. So basically, we mentioned that our inventory is almost -- has been drawn down quite a lot. So any commentary on what would be the trade channel inventory as of our domestic market? And sir, the second question is on the gross margins for Climate Technology. So you definitely mentioned about the issues about the import restrictions and everything, which is impacting the gross margin. So sir, has the import restriction been eased out there or so that we can expect the gross margin going back to the earlier levels? Or it will be just something like an internal value engineering in the near term?

So as far as Climate Technology is concerned, it was more about import -- availability of imports because of supply chain issues. There were no freight coming in or rather no containers coming in from China. Everything was locked. So we had to either air freight components or buy them locally at several x the cost. So that was that. And the other question was about the -- the other -- first question was, sorry -- the inventory. Correct. The inventory is -- will not have -- been liquidated by now. That will start happening sometime from next month end and onwards because the summer has not arrived yet and consumer offtake of coolers has not begun yet. So inventory, in fact, would have increased because of the additional sales or purchases from the company by the dealers.

But to give a different perspective in respect of inventory, of course, as on 30th June, that is end of the season, trade was left with 40%, 45% of inventory. But as there has been a reduced offtake by the trade during September and December quarter, so if we compare the total trade inventory as on 31st December or estimated trade inventory as on 31st January '21, Y-o-Y, it will be in line with or slightly less than what it was as on January '20 or even January '19. Because earlier years also trade used to leave during September and December quarter. So end season trade inventory is more than offset by the reduced offtake by the trade during these 2 quarters.

We'll move on to the next question, that is from the line of [ Unkar ] from [ Shri Consultancy ].

Yes. And you have been seeing that instead of rising sales from your subsidiaries, there has been quite a lot of pressure on your consolidated profit and loss statement, and stand-alone has been better. So what do you think about the performance of the subsidiaries going forward?

Nrupesh Bhai?

Yes. So we already answered that. So one was a major question mark on Climate Technology, but starting this March '21 quarter itself, one is further improvement in top line as well as substantial improvement in bill of material and various other costs, we will witness the improvement. And in fact, March '21 quarter itself is expected to be a turnaround quarter. Not only that, on account of Climate Technology, we have got a market access to U.S. as well as Australia, and larger shipments are expected to materialize from Symphony India to both U.S. as well as Australia. We have already the confirmed order. In fact, some of those were expected to be billed in December quarter, but due to nonavailability of containers, we could not bill. But in current quarter, they will be billed.

Yes. what about the rest of the subsidiaries? Do you think...

Also, in continuation, I think we must also recognize that there will be margin that Symphony India will retain on all the business that it sells -- all the coolers or export that it does to its subsidiaries. So that margin would not have been generated if the subsidiary did not exist. So while we look at the subsidiary's performance on a stand-alone basis, in reality, we have to look at the whole thing in totality. As we had explained once in our -- I think in our previous -- one of our previous quarter conference calls, that our subsidiary in Mexico, which we had acquired about 11 years ago for a little over INR 3 crores, has over the last 11 years, given us a cumulative -- total net profit after tax of over INR 100 crores or INR 111 crores INR, to be precise, and generated turnover also of about $110 million in the last 11 years. So now this profit I'm talking about is the end-to-end profit. Now had this company not existed, this profit would not have also existed. So we have to recognize that there is margin that Symphony retains. So as Nrupesh Bhai said, what we are -- these acquisitions have provided us access to those markets. And so there is a margin that Symphony retains and then sales to the subsidiary, which in turn sells in their local market. Taking about the other subsidiary -- yes. Carry on Nrupesh Bhai.

Yes. So about other subsidiary for IMPCO as well as GSK, as I said earlier, Y-o-Y, there is a degrowth in top line on account of COVID. However, we have succeeded in improving the gross profit as well as contribution margin percentage. And in IMPCO, we would have been positive had it not been the provision for the bad debt. In GSK China, the year has not been good. And in fact, last year itself, that is in '19, '20, we have already made the provision for impairment of equity as well as goodwill. However, down the line, we are optimistic, not only financially, but there are many, many strategic benefits due to China presence.

In fact, even if you consider the trajectory before COVID hit, up to 2019 -- March '19, the whole situation was very different. In '19, we had -- our sales had begun to improve over '18. '18 was higher than '17. We had broken even on a cash basis in 2019. Had COVID-19 not hit, by '20, we would have had higher sales and certainly had turned the profit, and so too in '21. But -- so the direction was already there towards higher sales and profitability in China. But because of COVID, the curve changed once again. And of course, in Mexico, we have already explained that it was primarily because of one company going bankrupt -- one major customer going bankrupt. Otherwise, the company would have still had a small profit. And on top of that, of course, the net margins that Symphony has retained in India for the exports that it has done to Mexico.

Okay. The second question is on, what has been the performance currently? And what would be the performance going forward for the industrial segment? And just to add to that, what would be -- what you would be doing in terms of the cash which you have currently?

Okay. For the industrial segment, again, we are not disclosing the information separately about what is the sales. But it is not a significant sales, is what I can tell you. But last year, we had launched -- we had introduced the Made in India range. Before that, we were importing from our subsidiary in China and Mexico, but it was only last year that we began introducing in India. And it was supposed to have been its sort of breakout here. But again, because of COVID, the whole thing got pushed back. And in the current summer, we will be launching a marketing campaign for the industrial and commercial coolers. And with that situation, should be significantly different. But even now what we are witnessing is a significant change in the direction. And sales of these coolers is much better than it was in the previous years. It's a matter of accelerating that trend, which we will be attempting to do with our marketing campaign. And about cash, we have declared a small dividend, which you may have seen. Of course, we will continue to sort of pay dividends. Other than that, we have no other plans. We have no acquisition plans. We don't even wish to acquire any -- make any acquisitions in the foreseeable future. So apart from dividend, there will be no other avenue for deploying the cash. And our business model, as you would know, is such that it doesn't really require us -- a significant CapEx for us to grow.

So in between, there were some -- yes, please.

It carries the stated payout policy of 50% of the PAT and that will be maintained, as it has been in the past.

Okay. Just, as because there were some talks earlier regarding buyback and all, which you had talked about.

Yes. So in '19/'20, as such, we had passed enabling resolution of buyback. However, later on, income tax laws changed. So instead of buyback, in March '20, we declared special dividend. And I think the payout was in excess of INR 100 crore. So instead of buyback, we paid out through special dividend in March '20.

Yes. So the resolution for buyback is out of the way now. It's not there?

Down the line, we may consider. Because, again, they have changed the income tax laws. So now ultimately, it's a question of the payout in the form of dividend or buyback or combination of both. So we are not rolling out. Ultimately, that will be 50% payout.

We'll move on to the next question, that is from the line of Achal Lohade from JM Financial.

My question was, in terms of the demand scenario, if you could comment. I don't know if you've already covered that aspect. But how are you looking at in terms of the demand? Because in one of the remarks, you said the -- you have faced certain stock-outs in certain models. So I just wanted to understand in terms of the demand, if one has to take a perspective for next -- for this season, how do you look at this situation? Not compared to last year because last year, we had kind of a harrow washout. But if I compare from a 2-year perspective, sir?

So the demand, I would say, is fairly robust. The interest is -- the sentiment is very, very buoyant amongst our retail, among our channel partners. In fact, not only the channel partners, even at the end consumer level right after Diwali during the period, the wedding season, there was very, very good sales in certain pockets, running into several thousands of coolers in certain pockets, specifically for the wedding despite it was -- despite the fact that it was peak winter. So the sentiment is very buoyant. The demand is very robust. So at that level, we see no cause for concern. In fact, we are quite optimistic and very positive about the way things are unfolding. And so going forward, and there are also indications of an early summer, it's expected that February should be a fairly hot month. So we are really poised to sort of harness, whatever the market has in store for us.

Right. And in terms of the supply chain, are you -- like, how much of the sales is actually in-house? I would imagine bulk of it is actually outsourced. So could you please comment in terms of the mix? And any issues you faced in terms of supply chain? And are you also seeing your competitors in the organized as well as unorganized facing supply chain issues?

So first of all, all our manufacturing -- there's no manufacturing that happens in-house. It's 100% third party manufacturing. And yes, we have witnessed supply chain disruptions and first because of COVID during those months, then, of course, subsequently, even our imports are constrained by supply chain issues. Internally, too, availability has been an issue. Exports has been an issue. Many of our shipments, which were supposed to happen in December have been deferred, are going now. So there have been huge supply chain disruption not only in India, but across the world, and that's affected us as well. Then to top it all, you had the farmer's agitation, which also choked all the supplies going in and out of NCR. And a majority of our local purchasing or sourcing happens in the NCR region. So there have been -- everything that could go wrong in the supply chain perspective has gone wrong, not only for Symphony, but for the entire industry. But our people had been resourceful and have been managing to the best possible. And we have not really, I would say, allowed much of, I would say, loss of sales. Maybe some has deferred -- the sales has deferred. It's happening now, but that has really not led to any loss of sales.

How much would be the deferred...

Yes. So the year as a whole for March '21, whatever issues were there on account of supply chain or even delayed billing, that will be taken care. And year, as a whole, we don't expect any loss of sales on account of them.

Moreover, most of the other players in this industry, they begin their manufacturing much, much later around now or around December, January, whereas we keep on manufacturing around the year. So we -- to that extent, too, we have been able to prime the channel as well as we have been able to do it in previous years. And that same may not be true for other players in the industry.

Understood. How much of our products are imported from China. What is the mix?

No, no, no, the products are not imported, some components are imported, some components.

Some components are imported. Understood.

But even for those Chinese imported components, we have made the standby arrangement and that too at competitive costs to procure locally.

Correct.

Not only that, even for supplies to Australia, starting next year, some of the local production that is in Australia, what they used to procure or they used to procure from China, for that also, we have organized outsourcing from India. And starting next year, even for Climate Technology, there will be substantial supplies from India which will not only improve supply chain, but will also should substantially add to the exports from Symphony India and also add to the profitability. And it is likely to be in terms of the profitability margin in line with our domestic sales and also exports to rest of the world.

The next question is from the line of [ Simran Bhatia ] from S&P Global.

Sir, I just want to ask because some of the questions have already been answered earlier. I was seeing your EBITDA margin trend, so I just want to ask that when we can see, means or a sort of upside in the EBITDA margins from the days of 19%, at least, which we used to enjoy earlier, not beyond that, but at least close to 18%, 17%? Any time line? Or these margins have been bottomed out? Or it's still to be, means or it will remain flat going forward?

See, EBITDA margin is purely a function of what is gross profit margin percentage or contribution percentage and a function of the top line. So on a stand-alone basis, as far as contribution margin percentage or gross profit margin percentage is concerned, despite COVID-19 challenges, despite end of season inventory lying with the trade, we have not only maintained, but we have slightly improved the gross profit margin percentage. And that too, in current quarter, there has been production for which there has been substantial higher input costs. So after accounting for that, we have maintained that. About reduced EBITDA, again for the quarter, EBITDA percentage margin is in line with the last year. However, it could have been even better, had we maintained the top line. So it is the function of -- about the improved sales, which should happen down the line. And as far as subsidiaries and leading to overall consol gross profit margin percentage, as we said earlier, in Climate Technology, this March '21 is going to be a turnaround quarter. And hence, it should improve starting March '21 itself.

Great, great. And sir, the demand which we are seeing in the market, what's your sense is that, it is more of a pent-up demand going on or sort of -- it's actually -- it's a robust demand we can see going forward based on the cash flows of the consumers? Or is it just a pent-up or it's just a transitory, it means it's just for a short time? Means, what's the sense is in the market? Because in the newspapers, we are seeing the different articles day by day. Sometimes it is good, sometimes it's bad. So it keeps on fluctuating from the past 5, 6 months. So what's the sense there that the -- means about this demand by the consumers?

So as far as secondary...

Yes. Go ahead. Go ahead, Nrupesh Bhai. Complete.

Yes. So as far as customer sales or secondary sales is concerned for air coolers, most of the sales happened during the summer. So to what extent there will be pent-up demand, we will come to know starting next month. However, trade sentiments across the geographies are quite robust and quite confident. And hence, in December quarter, unlike earlier 2 quarters, there has been also robust collection. And current trends as well as the estimates seem to be quite positive.

And if we talk about the overall sentiment, not only coolers, but the general sentiment, then it is, I would say, very buoyant. And it doesn't appear to be transitory. It appears to be stemming from a certain, I would say, confidence in the present and in the future. So I would say that overall, the economy, I think, is doing very well at the grassroots level, at least. We do not know what gets reflected eventually in the numbers for the country. But the overall sentiment is, I would say, fairly buoyant. Great, sir. Great. It's a great thing to listen from your end.

The next question is from the line of Ronak Vora from AUM Advisors.

It's been a good quarter, and the recovery has been pretty good. So can we say in the quarter 4, the sales have actually beaten down what we were in March of '19? Hello?

Yes. So...

Could you repeat the question? We did not quite get it.

Sir, what I'm trying to understand is, can we say that in the coming 2 quarters, which are our main quarters, say, the March and the June quarter, can we say that we will be down the previous high levels of March of '19, like the ones that we had in FY '19?

Yes, go ahead, Nrupesh Bhai. You were answering.

No. So right now, all indications are very positive. It should be certainly better than March '20. On a consol basis, to give a precise comparison vis-à-vis March '19, it is slightly premature, but we are quite optimistic.

Okay. And from when do we see all our subsidiaries, say, IMPCO, GSK and Climate Technologies to be at least contributing to the bottom line of the company because that is where we are really facing issues in the past 3 years?

So about IMPCO, it is already contributing to the profitability since many, many years, not only on stand-alone basis of IMPCO, but as Achal Bhai earlier explained, on account of exports from Symphony India to IMPCO, there is a substantial profitability Symphony India also. Current year also, had it not been the provision for write-off, it would have been profitable despite degrowth. So that is as far as IMPCO is concerned. GSK last year and current year, certainly, there has been an impact of COVID as well as China-U.S. trade war. However, we have taken certain measures and if normalcy restores, hopefully next year, it should at least break even and about Climate Technology, Australia, we have already shared that in March '21 itself, we expect it to be a turnaround quarter in terms of the profitability as well as top line.

Okay. Can you...

The numbers of the last year, even the Climate Technologies -- had done much better. Were it not for COVID, it would not have been a drain on Symphony's resources or it would have contributed to the Symphony bottom line as well in the current year.

The next question is from the line of Renu Baid from IIFL.

Yes. I have 2 questions. So my first question is, if you can -- have to quantify what was the value of deferred sales, both in the domestic market due to stock-outs and in the export market because of unavailability of containers there. So what could be the value of deferred sales dipping from 3Q to 4Q?

We won't like to disclose the exact amount, but it will be into high double-digit percentage of the sales we have billed.

Sure. The second question would be, in general, what we have seen as a trend in the last 6 months, most of the market leaders or brands with strong presence have gained market share, either from smaller regional brands or unorganized players, given that cooler as a category itself has almost 65% unorganized market. So what would be the expectations? a, there is a base effect here, the season and pre-buying was -- as in the -- off seasonal stocking of fairly weak. So when we look at the 2021 season, what are the expectations? Can we expect a significantly better than usual offtake because of potential market share gains from unorganized players? What would be your on-ground report in terms of status of some of -- many of these players who have been operating in the sector?

It's a good question. We believe that not only the unorganized players, but even many of the organized sector players have supply chain issues. And some of the smaller organized sector players have, even, I would say, close to folding up, shutting their doors. So this has -- this will lead to consolidation. And we should be the biggest beneficiaries of that when the season arrives. So -- and also, like I said before, our manufacturing has been going on since July -- since the unlock. And whereas for most of the other players in the category, they really -- they begin only production only very late just before the summer. So they don't have access to the components that are required at the moment. Everything is in short supply, and everything is very, very expensive. So we had the benefit of manufacturing early at lower costs, which our -- other players in the industry, whether it's organized or unorganized, will not enjoy. So sum total of all of that, it appears as if that by the time the season comes, we should be in a much better position than others.

Sure. And on the supply chain aspect, because if I remember, we import -- we used to import a significant share of the electronic components from China, maybe pumps as well. So as Nrupesh Bhai had mentioned, have you now fully localized or identified local vendors for these electronic complements? And you think this transition might retain or might sustain for longer? Or is this more of a transitory arrangement until the time we have the import restrictions or the international headwinds in terms of supply chain?

No, this is more of a long-term initiative. So this is not only to tide over the immediate supply chain issues. But this is part of our long-term sort of strategy to hedge our bets and not only rely on import sources. So for all the key components, we are also developing and already have developed alternate sources within the country.

And Renu, in terms of the quality, also in terms of the quantum, and importantly, even in terms of the cost, we have workout such that it is going to be equally competitive. And not only for Symphony India, but as we shared earlier, even for Climate Technology Australia, starting next year there, part of the sourcing, which used to happen from Australia as well as China, it will be replaced from Symphony India. So in a way, we are becoming and will become more atmanirbhar.

No. I'm sorry, the CT's sourcing will change to Symphony India? Or sourcing of supplier based out of India?

Yes. But it will be billed from Symphony India, that will be a top line in Symphony India. And on that top line, we expect margin to be in line with our exports to rest of the world.

Even for components which are going to ...

We will not be supplying only components. I think that's what you are thinking, Renu. We will be...

No, no, no. But sir, just what I'm trying to clarify is, a, we were anyway planning to supply our room air coolers to Australia. So that is known and established.

Which we are already doing. We've already begun.

Correct. Yes. So the point I'm trying to clarify is the supply chain localization, which we have done in India versus China, those supply chain components also will be billed in the books of Symphony India and loaded with margins to CT in Australia? Or they would just the component sourcing system...

No, no, no. We will not be supplying components from India to Australia. We will be supplying complete products from Symphony India as far as coolers go. For heater products, we will be supplying locally made components, but those were basically never made in China. They were -- basically, the manufacturing from Australia is being offshored and brought to India. So as a result of that, we will be supplying certain metal components from India with a margin.

And those -- that manufacturing will be done through our vendor base in India?

Correct, correct, correct.

Okay. Got it. Clarified. And...

So that vendor base has been already identified and organized end-to-end.

Got it. Right, right, right. So this clarifies. Because the product range of India and CTL are different. So I was just wondering how it offset. And lastly, sir, as in, you did share the broad comments for all the 3 internationals. In any way, can you share at least a 9-month headline numbers for all the 3 subsidiaries?

Renu, it will be unfair because we are publishing standalone and consolidated financials, but we gave a broad outline. So it will be unfair to share selectively. Certainly, by March '21, for every subsidiary company wise, there will be detailed financial breakup.

The next question is from the line of [ Vidhi Dedhia ] from [ Radian Securities ].

Hello? Am I audible?

Yes. Vidhi, go ahead.

Yes. Pardon my ignorance, sir, but just from a layman perspective, as an end user customer, could you help me draw the difference between an air cooler and an air conditioner. Why would one choose an air cooler over an air conditioner?

Okay. So for -- one would choose an air cooler over an air conditioner for, I would say, broadly 3, 4 reasons. One is that it is -- it consumes far less electricity than an air conditioner does for -- to cool the same amount of space. Number two, it also costs less to cool the same amount -- I mean the capital or the CapEx is also lower for a like-to-like comparison product. Number three, it is portable. Number four, especially in these times when we are encouraged to keep our doors and windows open and live in ventilated spaces, you can't do that in an air conditioner, whereas you can do it in an air cooler. And number five, especially in dry climate, like, let's say, the interiors of Maharashtra, the entire Vidharbha belt or the entire Central India, the Gangetic Belt, Rajasthan, UP, all of those are dry and hot places. There, an air cooler, in fact, provides much better comfort than an air conditioner does. Because air conditioner, in fact, drains out whatever little humidity exists in the ambient conditions whereas an air cooler actually adds a little humidity, which feels very good onto the skin.

Right, sir. That was very helpful and my second question is, do we see any structural shift from air conditioners to air coolers because of the above mentioned the reasons? Is that happening? I mean do you see that happening?

No. Neither air conditioners nor air coolers are recent sort of innovation. They've all been around for 50, 100 years. So there is a distinct, I would say, requirement for whether it's all 3 cooling devices, whether it's a fan or a cooler or an air conditioner. So there are homes, which will have -- most homes will have fans in every room, they will have air conditioners in a few rooms, and maybe air coolers in some of the other rooms. Sometimes air conditioners and air coolers are used in the same room. They'll use the air cooler during the day and maybe the air conditioner at night. So they coexist. So there is -- really speaking, they are -- they serve to some extent, different requirements and they fulfill different requirements. So it isn't -- they are not strictly interchangeable. So they all have a market and a customer base of their own.

And Vidhi, in respect of the runway for air cooler or the potential, existing penetration of air cooler is about 11%; air conditioner is about 6%. So for air cooler demand, one is the replacement market of air cooler itself; and secondly, about 80% of the households are having fan or no cooling device at all. So there is also a graduation, which happens.

From a fan to a cooler.

The next question is from the line of Hussain Kagzi from AMBIT Capital.

I had one. So firstly, I wanted to get a sense with regards to the industrial category. So you have said that, that's fine like, you wouldn't -- it's quite small right now. But where do we see this category being 5 years down the line? I mean do we have any specific plans with regards to this segment even in terms of size?

Yes. Well, it's difficult to predict what's going to -- how this is going to grow and unfold. But we are convinced that the market is huge, the market is much bigger than coolers for -- the market for household coolers. And the reason why we believe that is that if you look at it, there are far number -- far more number of spaces, whether it is industrial or commercial spaces in the country, which don't have any form of cooling. Then there are spaces which have any -- that have cooling. So the market, theoretically, at least, is far, far bigger than what it could be for household coolers. The question is -- and that is also the case in many other countries, including a country like China or Vietnam. Unfortunately, so far, the concept, is still a matter of selling the concept in the country and educating the users about the availability of this form of cooling. So we are sort of at the stage where we still have to sort of evangelize the concept. And that's what we've been doing for a while. And we haven't really spent big bucks on it so far, but we intend to do that going forward, now that we have local manufacturing, and we know that our supply chain should be able to cope with whatever demand is generated. So we are -- to cut a long story short, we believe that the market is enormous and which is why we are committed to it, which is why we have invested in product and all of that and creating the distribution for that. So we have the building blocks in place. And what is -- what we're going to be doing next is investing in the marketing and in consumer education.

That explains it well. And I just wanted to get a sense with regard to our manufacturing -- I know it's contract manufacturing, but pardon my ignorance here. So I just wanted to understand that even though you said that because despite raw material price hike, we'll be able to maintain the gross margin by taking -- by launching because of certain product hike, but still: a, one is we -- like any fluctuation in the prices is borne by us and not the contract manufacturers...

You're not clear. Your voice is cracking. Would you mind repeating your question, maybe speaking a little different way?

Yes. Am I clearly audible now?

Better now.

Yes. So I just wanted to know, is -- whether any price fluctuation, is this borne by us or is the contract manufacturer for the price fluctuations of raw materials? And second question was with regards to our debtor days. So I mean how much is the outstanding debtor days for the dealers that we provide the material to?

So the -- again, the thing was not very clear, but I think -- and I think I've got it. I'll try and answer it. The cost increases have not been on account of the outsourced manufacturers, but on account of the raw material increases and increase in the logistic costs. So was that your question? Does that answer your question?

Yes, yes. That answers my question.

The line for the participant has dropped off. We'll move on to the next question, that is from the line of Manjeet Buaria from Solidarity Investment Managers.

The first question was, just trying to triangulate the market size of air coolers, using the data points you've discussed on previous calls. If I take FY'18 as a good year in the [Technical Difficulty], roughly INR 700 crore kind of stand-alone sales as a starting point, is it fair to assume that given we are 50% of the organized market, and the organized market is 50% of overall market, the industry would be closer to INR 2,800 crores?

That should be -- in value terms, yes, yes, that should be about INR 3,500 crores is what we believe. Because it's not exactly 50% of the total market in terms of value; it is, in fact, a little less than that. So about INR 3,500 crores is what we estimate. Now nobody knows for sure exactly how much it is, yes, but that's about our estimate.

Right, sir. And then I have 2 follow-up questions linked to this point then. As you mentioned, this industry has been around for so many decades, right, and so have things like fans and ACs been around now. AC is kind of a multiple size of what we are today as an industry, right? AC probably would be north of INR 10,000 crores or INR 12,000 crores for sure. So -- and fans obviously is much larger because it's kind of...

Not in value terms -- not in volume terms. Volume terms, air conditioners are less than air coolers sold in the country.

I get that, sir. I get that. But I was trying to understand because then given air coolers are so much affordable, right, why didn't they pick up much faster, right, despite being around for so long? The industry sir, it seems to be very small, despite it being around for so long, right, around INR 3,000 crores, INR 3,500 crores for activity like this.

Well, it's a function of the economy to a great extent. And if you look at it, the penetration of air coolers is very low in our country. And that the same is true for most other categories in our country. The penetration is very, very low. And as the income will rise, as disposable incomes increase, as aspirations increase, as propensity to spend increases, people's standard of living changes. So people will keep on buying, whether it's an air cooler or an air conditioner or whatever other product. These are all products which are either lifestyle products or products which serve a need. So people who were earlier content with living or sleeping in a hot room will gradually say, we don't want to, we need some sort of cooling device. So it's a matter of changing habits as times go by.

Comfort value and utility value.

Right, sir. Right. Sir, so basically, this -- on this point, you're deviating a bit more. So effectively, I understand it's a habit change and probably, as you said, linked to incomes which people make, you need to be at certain economic level, then is it fair to assume as an industry, this is probably something which will grow at 10%, 12% kind of rate over longest periods of time given that's how incomes probably will spend up over time? And at least for the next 4, 5 years, that should be the long-term industry growth range?

For the total industry, but you have to recognize that of the total industry, about only about 75% is still dominated by the organized sector -- unorganized sector. So -- the share of the organized sector would grow disproportionate to the overall size of the industry.

I understand that, sir. I was just asking that, as in overall, would the assumption be roughly that the industry as a whole probably would be more like 10%, 12% growth industry? And I understand we'll gain share, so we'll grow much faster.

No. But in the -- if you look at historical, the thing, it has been growing at about 15%, 20%. There have been times when it has grown even higher. It is more linked -- also linked to the summer and the season.

Right. Okay, okay. Okay, sir. I'll just get on to the next question. When you mentioned the penetration of fans in the country, air coolers in the country, ACs in the country, I was just wondering whether that's the right way to look because fans would be there even in very cold regions as a basic kind of room infrastructure and also be there in very humid regions, where air coolers don't really work well. So is that a like-for-like comparison when we look at penetration? Or should we adjust for the penetration number accordingly when we make a relative comparison?

So see, fan is, like you rightly said, a fan is part of your standard fixture of most homes and every room. But coolers are like air conditioners. People will use them where you -- where a fan is not enough, where you need cooling. See, a fan at the end of the day is just -- it's not reducing the temperature, it is only churning the air, whereas an air cooler or an air conditioner actually reduces temperature. So they will be found in homes which are areas which are hot, and even not only dry because even in a place like Bombay, we sell significantly high quantities of air coolers, or a Chennai, or a Kerala or a Goa. So it isn't that the sales of air coolers is restricted to dry areas. Dry areas have much bigger markets, but even relatively humid areas also have significant sales of coolers. We sell coolers even in countries like Sri Lanka or the Philippines, which are islands and humid.

Okay, sir. Sir, one final question was the industrial and commercial air cooling side. Is it possible to give a sense on what are typical order sizes in this segment? When you take on a project, is there a rough -- is there a trend which you have seen in the past?

No. First of all, we don't take projects. We are -- we produce the cooler, and we sell to our channel partners who, in turn execute projects. So if you -- in your office in Bombay, if your management decides to say, move to a new office and air condition the whole office, it is not as if a Daikin, or a Mitsubishi or a Carrier is going to come and do the execution themselves. It will be some installation partner, some channel partner who will do the installation, buy the coolers or the air conditioners from the company and invoice to the client, to the customer. So the same thing happens in our case. So we sell our product...

Sir, I'm going to interrupt you here. I'm very sorry about this. I framed the question wrong, right? I guessed where you come from -- what I meant to ask was for any project, right, where our coolers go, is there a typical size in industrial and commercial air cooling? Or just to get a sense of how this scales, sir?

Okay, fine. So it can be as small as INR 1 lakh or INR 1.20 lakh and be as high as INR 2.5 crores, INR 3 crores -- INR 3.5 crores.

Right. So basically, sir, where I was trying to understand because for us in the past, you have indicated, obviously, over a period of time, right, it's still early days, but this is a category which can be as big as you know, probably our residential air cooling. And when I think about that from the ticket sizes, which you have just mentioned on a project, it seems like you'll have to do almost 600 -- kind of 600, 700 projects a year in terms to hit that number. Is that a fair assumption?

That's a fair assumption, that's a fair assumption, yes.

And sir, typically in India, how many such projects which are addressable for us as the customer base takes place today just to get a sense of this overall market?

Sorry, sorry?

So today in India, how many such projects are -- typically, how many such projects take place in a year, I just want to understand what percent of the overall projects we will be [Technical Difficulty] 600, 700 projects a year?

No, we don't do projects, like I said. So we have no idea about where they are going. So we don't know how many projects are being done. We only know how many coolers are being sold to our channel partners.

So we basically have to sell for around 600 to 700 projects in that to hit 600, 700. Very clear, sir. This was very helpful.

We'll move on to the next question, that is from the line of Naveen Trivedi from HDFC Securities.

Sir, you had mentioned that new products will be launched close to the season time. So there -- is there any update on the same?

That's happening, that's happening.

Okay. Maybe if you can just give us some sense about, is it happening in the premium side or mass premium side or tentative sort of a price point?

I wouldn't want to get into that.

Fair point. Fair point. Just lastly, on the export side, since like lots of cross-selling opportunities have been emerging for our export business, but if I look at the last 2, 3 years, our annual export sales is close to INR 55 crores, INR 60-odd crores. So can we expect that over the next 2 to 3 years' time frame, this number can become a significant number?

This, in the next 2-, 3-year time frame, we expect this number to be significantly higher in multiples of this, not just percentage, but in multiples of this once all the Australia and the U.S. business kicks in.

The next question is from the line of Hiren Trivedi from Axis Securities.

Just wanted one small question on the top line for FY '21. So you had earlier indicated that in some previous call that it would be probably similar to FY '19. So does that still hold good? Or is there some improvement over and above that? And secondly, how would you see the growth for FY '22 with the expected normalcy returning in the business? And lastly, what would be your sales on the -- online sales out of the total sales?

Nrupesh Bhai?

No, I didn't exactly get your question.

Yes, sir, I was asking about the FY '21 top line. So in previous calls, you had indicated that it would be similar to somewhere in what had been achieved in FY '19. So does that still hold good? Or is there some improvement over and above that? And secondly, how would you see the growth for FY '22 as a whole with the expected normalcy returning in the business? So would it be, as indicated in the previous question that your coolers industry is growing at around, say, 15% to 20%, so would you be within that kind of growth for FY '22? And lastly, the online sales, what is the percentage of online sales that you're currently having?

So for March '21, on a consol basis, it should be, by and large, in line with FY '19, that is number one. As far as '21, '22 is concerned, subject to reasonable summer, we do expect quite decent growth on stand-alone as well as consol basis by maintaining the current level of profitability margin. And of course, in terms of EBITDA margin percentage as scale increase, it should improve. And for March '21 quarter, as we said earlier, on stand-alone as well as on a consol basis, we do expect a significant traction and much better quarter. We expect the quarter to be almost normal in terms of the business.

Right sir, and what about the online sales, that initiative that you had started...

So our organized retail sales or large-format retail sales, which includes online sales, is about 15%. But we won't like to give the breakup between the large organized retail versus e-commerce. But certainly, it is getting a traction. And year-by-year, it is registering very healthy growth.

The next question is from the line of Rahul from Haitong Securities.

So I've got a couple of questions. You did indicate inventory levels are better and now more manageable. Is it possible you could highlight the advances received till December? And how does it compare to the same period last year in value terms? Is that something that you can comment on?

So about absolute amount of advances we received during the off season, we don't disclose or share with. What is reported is the amount billed or sold, which is already reflected in our financials. However, to give some broader idea, in December '20 quarter, the overall trade collection has been almost comparable to December '19 quarter.

Okay. The collection was similar to last year?

That's right.

Sir, my second question is, in the consumer durable appliances, there has been a steady shift that we have seen from unorganized to organized. Given high share of unorganized players in the coolers industry, have you seen similar shift in air cooler, especially in the backdrop of events like supply chain disruption, which is slightly difficult for unorganized players to manage compared to a large player like Symphony to manage?

So irrespective of these reasons, there has been a continued shift from unorganized to organized. Say, about 7, 8 years before, volume-wise, organized industry was contributing 10% to 15% of the total volume and unorganized about 85%. Now it stands at about 30%, 70%. Even the industry itself has grown substantially. So on account of increased aspirational level, rising income, more and more awareness, availability of the product even in rural and semi-urban market, there has been a shift. And the reasons what you mentioned or even earlier shared, I think they should further add to shift from unorganized to organized.

Sir, my last question is, Mexico has been a great example of generating tremendous value for the stakeholders. You set up a subsidiary in Brazil. Can you throw some light on the opportunity there, the size of the market, competitive intensity? Some thoughts on how will you want to take the Brazil market?

Brazil, did you say Brazil market?

Yes.

Okay. So it's a fairly large market. And -- but Brazil has -- is a very complicated market to operate in. So the typical export model did not work for us, which we tried for many years. So that did not give us -- we were not able to scale up in the typical export model in Brazil because of various tax and those kinds of complications, which is why we have established a subsidiary, which imports from India and then distributes locally because we believe that the market is substantial. And we are importing coolers into Brazil, both from India and from China, some of the industrial coolers from China, some of the household coolers and commercial coolers from India. And it's a large country and one of the -- and the largest economy in Latin America. So we believe that over time, we should be able to develop it into a significant business. And it has been one of our larger export markets even from India. But like I said, the potential is much higher, and we felt that by having feet on the ground, we can scale up much sooner, which is why we did that.

With a small base, we already broken even.

Yes.

The next question is from the line of [ Ankit from Chipcom Ventures ].

Sir, just a confusion, which I want a clarification on. Sir, you mentioned that the current quarter, that is Q4 FY '21, so your revenues would be better than Q4 FY '20 on a stand-alone basis?

No, we haven't said that, have we? Nrupesh Bhai, please go ahead.

No, we haven't quantified the number. But as we say, considering the overall sentiment traction and kind of the trade interest, we are quite optimistic.

Okay. And sir, assuming that the season is normal, so is it fair to assume for us that next year would be better than FY '20?

Next year will be better than FY '20? Yes, you can assume that.

On a stand-alone basis, on a stand-alone basis?

On a stand-alone basis, yes, it will be safe to assume that. It should be at least equal to FY '20.

Okay. Okay. At those levels, I mean, will we be back to those 30% kind of margins that we used to do at EBITDA level?

Absolutely, absolutely. Because our EBITDA, as Nrupesh Bhai explained before, is a function of the top line. Nothing else has changed.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.

Nrupesh Bhai?

Thank you, all the participants for sparing your valuable time, and thanks to Emkay for hosting this conference call. Stay safe. Thank you.

Bye-bye.

Thank you. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.