Symphony Limited (517385) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Symphony Limited Investor Meet. [Operator Instructions] [Audio Gap] Equirus Securities. Thank you, and over to you sir.

Thank you. We welcome you all to Q2 FY '22 results earnings call of IFB Industries (sic) [ Symphony Limited ] We thank the management for giving us this opportunity to host the call. We have with us management team represented by Mr. Achal Bakeri, MD and CEO; Mr. Nrupesh Shah, Executive Director. And sir, I'd now hand over the call to you for your opening remarks, post which, we can take questions from the participants. Over to you, sir.

All right. Thank you very much, Manoj. A warm welcome to all participants to this afternoon's conference call. Thank you for your presence and thank you for your time. This is Achal Bakeri. I'm the Chairman and Managing Director. With me are Mr. Nrupesh Shah, the Executive Director, Corporate Affairs; Mr. Amit Kumar, Group CEO and Executive Director; Girish Thakkar, the Group CFO; and Deval Shah from Investor Relations; and the rest of the team. I request Nrupesh bhai to explain the financial performance to everyone, post which, we are all standing by for the Q&A. Thank you. Nrupesh bhai, over to you.

Yes. Welcome to Q2 FY '22 Symphony standalone and consol performance. So we will take you through brief VC presentation. So there is the customary safe harbor statement. So as most of you know, Symphony has a portfolio of 7 global brands with the flagship brand of Symphony. So to talk about last quarter and first 6 months' performance. As shared earlier and as all of you know, unfortunately, second wave of COVID-19 again struck during summer of '21, which happens to be the peak customer sales for Symphony India and back-to-back second summer really impacted the performance. And on account of that, there has been a large trade inventory. However, as you would have observed, despite massive increase in input costs as well as freight costs, not only on a standalone basis, but also on a consol basis, for September quarter as well as June quarter, we have very well maintained our gross profit margin percentage in the vicinity of 48%. And in fact, on a consol level, gross profit margin has improved by 2 percentage. And this has happened on account of continuous and vigorous value engineering, cost rationalization and also selective price increase. But in a way, by having minimal price increase [ and ] maintaining the gross profit margin, we are maintaining our overall competitive edge. Starting last quarter, we have intensified our focus on industrial and commercial air cooler by really grouping into large space ventilating cooler. And there are some slides to come, and I will deal with it later on. It's not merely a change of terminology, but many initiatives have been already taken under that. Also starting April '20, we were first company in air cooler industry and probably the first-ever company in consumer [ durable ] company in the country, whereby on account of stringent lockdown, just in about fortnight, we had initiated D2C, which further grew in summer of '21. And now we have re-energized our focus on D2C and also creating a separate team and also very able functional head has been also appointed. As you would have seen in consol performance, unlike first half of 2021, there is a dramatic improvement in Climate Technology as well as IMPCO performance. Of course, GSK China is still drag on overall performance. And on account of improved performance in first half, of course, below normal year, and also decent amount of treasury, the Board of Directors have announced 100% interim dividend that is INR 2 per share vis-a-vis INR 1, that is 50%, in 2021 first half. As far as the outlook is concerned, we are cautiously optimistic for ensuing quarters as well as the summer. Probably, worst maybe behind Symphony, and this is on account of series of initiatives which we have taken during the last 18 months. So in a way, during that slack period, whether in terms of the new product development, value engineering, substantially improving the trade network, and also it seems that festival and Diwali season are likely to be much better, and that should improve the trade and consumer sentiments, and it may be also helpful to clear the trade inventory. We are penetrating more and more into semi-urban and rural markets. And despite massive increase in input costs, unless some further major accidents take place, we are reasonably confident to maintain the gross profit margin percentage on stand-alone basis as well as consolidated basis. However, as it is known, domestic and especially international logistic continues to be a major constraint. So despite we are sitting on large orders from U.S., we are keeping the finger crossed in that respect. However, our major export orders, especially to subsidiary company and rest of the places, by and large are on FOB basis. So starting September quarter, there is a large space ventilation cooling division converted from industrial and commercial segment, and it is the concept of not only air cooling, but also ventilation. So this is the only cooling appliance which serves both the objective. And we have also enhanced the product range, and now we have a complete range in the sense it mix with the model availability and demand, offices, shops to mid-sized and large-sized factories as well as warehouses and many other applications. We have launched 2 new models mainly to cater 200 to 400 square feet and 300 to 800 square feet ventilated space. So our cooling campaign in the space [Audio Gap] So even though there is not a huge turnover from this space, however, in terms of number of installation in last 7 years, the cumulative installations have increased from just about 100 to 3,400 across the segments. These are 2 new launches in last quarter. Also, many, many accessories of centralized [ and ducted ] air cooling now we have standardized, which will facilitate in terms of installation, service after sales as well as availability and also improving the performance. And with this, there is a complete [ product ] portfolio in the category. And these are some of the global as well as domestic customers where we have provided the solution. So as talked earlier, we do have dedicated D2C brand store, and it goes much beyond just creating the website and selling under D2C. Coming to quarterly financials. So for the quarter, on a consolidated basis, top line stands at INR 229 crores. That is the growth of about 15% vis-a-vis last year. Of course, the base was low. And coming to EBITDA, it is up from INR 35 crores to INR 48 crores, and profit after sales is almost double from INR 15 crores to INR 30 crores. And coming to stand-alone performance, the standalone top line stands at about INR 149 crores versus INR 120 crores, registering the growth of 24%; while profit after tax has grown lower than top line growth, that is 17%, up from INR 27 crores to INR 32 crores. And gross profit margin percentage stands at about 45% on a consol basis. This is on a consol basis the highest, while on a stand-alone basis, it is very much in line with June quarter, that is summer season when our realization is the highest and also in line with the first 6 months of last year, that is 48%. While EBITDA margin stands at 21% on a consol basis and on a stand-alone basis it is 29%. So this is about half yearly performance. Stand-alone top line grew from INR 170 crores to INR 262 crores, while PAT has grown from INR 28 crores to INR 39 crores. And consolidated top line grew from INR 361 crores to INR 467 crores, up by about 27%; and PAT has increased from INR 17 crores to INR 36 crores. While gross margin percentage on a standalone basis stands at about 48% for the 6 months, and on a consol basis, it is about 44%, up by 2 percentage. So this is the geographical breakup of the sales within the country and the rest of the world. [Audio Gap] and treasury stands at about INR 638 crores, excluding equity investments and loans and advances to subsidiaries. Thank you.

Sir, shall we open up for questions, sir?

Yes.

Yes.

[Operator Instructions] The first question is from the line of Kunal Sharma from SMC Private Wealth.

Am I audible, sir?

Yes.

A couple of questions I have. So firstly, I just wanted to ask, we are keeping increasing our international business, and now we are contributing more than 50% and the domestic business is going down to 48%. So are we now focusing on the international business? Or where we would like to revenue contribution from the international business to 52%?

No. So of course, now international business contributes about 50%, but it is because our stand-alone business is down. Not only last year, but current year also on account of COVID during summer, there has been a de-growth. However, on account of 3 major acquisitions and also growth of Climate Technology, certainly, international business will keep on contributing in the range of 40% to 50%. Importantly, now we are also driving international business profitably, which was not the case earlier.

Okay. Okay. So like in the domestic, like we are actually reducing the dependency on the domestic market. So are we facing any competition or losing the market share on the domestic market? Or is there any clear opportunity...

No, we are not reducing the dependence on the domestic market. That is not a conscious thing. We are just expanding our sales in every market across the world where we can. The way we view this is the world is one market. The opportunity exists almost everywhere across the world. We happen to be in India, and India is just one more market out of more than 200 across the world. So it isn't as if we are reducing our dependence on India and increasing our focus on international business. Our perspective has always been very global in this category. We are a specialist. We believe that we are a single sort of technology company, but operating in multiple markets, India being one of them. So as we expand more into other markets, it is just a mathematical outcome that the percentage of sales in India would appear to be lower, although -- even if the sales in India in absolute numbers increases.

And in a way, by adopting this strategy, we are de-risking the business in terms of the geographical diversification and hence seasonality. And more and more, India is becoming a manufacturing hub for our international subsidiaries also. So as we successfully did for IMPCO Mexico starting last year, substantial manufacturing for Climate Technology Australia as well as United States market is happening from India.

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

Am I audible?

Renu Baid -- yes, you are.

So my few questions here. First is, essentially on business, if you can help us understand, the pickup has been reasonable, but when we look at the core business, can you help us understand how has been the response from the dealer network in terms of your annual [ order ] addition activities. What is the quantum of Y-o-Y growth, in case if I missed in the opening remarks? And given that this year, there seems to be more back-ended purchases from your channel partners, what is the broad expectation that cheer of the festive demand that we have seen should continue for the core summer season in the domestic market as well?

No, so certainly, dealers and distributors are sitting on inventory, but through a variety of sales and marketing initiatives, we are doing their handholding. So even though in the quarter or in first 6 months, there is a de-growth. But in September quarter, our market share in terms of the collection would be more than 80%. That's number one. Number two, as far as enhancing the dealer and distribution network, that is a continuous exercise. But especially in last 2 years, there has been a substantial focus in terms of the rural and semi-urban market, coupled with e-commerce and D2C.

Okay. So broadly, the kind of growth that we have seen in the current quarter should be sustainable for the second half of the year, which should see more seasonal revenues picking up for us?

That's what the current visibility is.

Sure. Sir, secondly, if we check, last time, you had mentioned that we are expecting to see increased component sourcing and supplies from India for CTL. But if you look at the exports or the revenues from rest of world for the current quarter in standalone accounts is barely INR 1 crore, and it's lower Y-o-Y basis. So is there a timing mismatch in terms of supply chain component shipments from India? Or there is something else to this?

No. No, absolutely. So they are more skewed towards December and March quarter. So not only we will see decent numbers in December and March quarter in respect of exports from India, but Y-o-Y, we expect major growth [ in ] performance in that respect.

Okay.

So what you said is right, it is a timing issue.

Got it. And lastly, if you can also share some of the comments on the performance of key subsidiaries. I'm not sure if those numbers was shared at the start of the call, I missed them. How have been the individual performance of key subsidiaries, CTL, IMPCO and China, at least on a half yearly basis, if we have those numbers to be shared?

Sure.

At revenue, EBITDA and PBT or PAT level?

Yes. So this question was expected from Renu. So we have this time kept the figures handy. So for Climate Technology on a half yearly basis, turnover-wise, it is INR 131 crores versus INR 130 crore last year first 6 months. Gross margin-wise, it is INR 52 crore versus INR 43 crore. And coming to EBITDA, it is positive INR 6 crore versus negative INR 10 crores. And at a PBT level, it is minus INR 4 crores versus minus INR 21 crores in April to September '20. And at a cash level, it is positive by about INR 5 crores. So coming to IMPCO Mexico...

And on Climate Technologies, this is despite the fact there has been a very sharp increase in input costs and more importantly, our freight costs from -- whether from China or from India. So which has -- our -- I mean, at the beginning of the year, as per our budget, the bottom line performance would have been far superior than this. I mean it has been much better than what it was last year, but it was supposed to be even better. But much of those sort of expected gains were wiped out by the increase in logistic costs and input costs.

And also stringent lockdown in Australia and still there is no de-growth of Y-o-Y.

So as you may have read, Melbourne had seen the world's longest locked down with 262 days and that and the State of Victoria being a major market has just opened up. In fact, where our factories in the State of South Australia, in a city called [indiscernible]. As we speak, there is no transborder movement between the states. So despite all these challenges, our team over there has managed to generate the sales that it has. We have also, I think, done very well in the U.S. That has also helped. But going forward, the U.S. is also -- in the next 6 months, you will see significant uptick in sales to the U.S.

Got it.

And coming to IMPCO, it is INR 58 crores of top line versus INR 44 crore of previous year and EBITDA of INR 8 crore versus 0. Of course, previous year in IMPCO, there was onetime write-off of one of the large organized retailer. So after absorbing that amount and translating into PAT of INR 5 crores versus INR 2 crore last year. And as I said earlier, GSK China is overall a drag on the performance. Sales for the 6 months is INR 22 crores, in line with the previous year, about INR 23 crores. And about the PAT, it is negative INR 5 crores versus negative INR 3 crores. Anything else, Renu?

The line for Renu Baid has dropped. We take our next question from the line of Rishi Maheshwari from AKSA Capital.

So you mentioned about Diwali season expected to be much better, and that will help you clear your trade inventory. Is it possible to highlight what is the number of inventory -- now what is the number days of inventory that you're holding by the end of September? And how much you think Diwali is around the corner? So as I would believe that you would have already been seeing this inventory getting cleared up. If you can -- you partly mentioned this in the last response, if you can highlight more on that, just to understand on the domestic front, what is the scenario over the demand that you've been seeing prior the Diwali sale.

No, no. So we didn't say that because of robust festive or Diwali season, inventory will be cleared. Of course, somewhat retail sales happens during September and October months on account of temperature in excess of 35 degree in many parts of the country. But what we said was, across the consumer durable and appliances into which most of our distributors and dealers deal with, they are witnessing robust demand despite price increase. And hence, overall sentiments and confidence has improved dramatically, which we believe, along with other reasons, may down the line drive the performance and also the demand.

So what he means is demand for other products. Coolers are a seasonal product, they get largely sold in the summer months. It is during the Diwali times that general consumer electronics and other white goods, large appliances, et cetera, get sold. So what we are witnessing is sort of very good demand for such other products, which in turn helps the distributors and the channels cash flow, which would sort of help in improving their sentiments.

Got it. Got it. Sir, another question was on one of your products, very well advertised, the one that was wall mounted cooler. How has that picked up? And you think that has the potential to eat up into the AC market, the air conditioner market as well? If you can highlight some data points over there, it will very helpful for us to understand how has that picked up.

Yes. We -- 3, 4 years ago, when we introduced that product, we had very different expectations from that product. But what has happened is that although the product performs very well, it is the -- because it looks like an air conditioner, the consumer also expects it to cool like an air conditioner, unfortunately. Although, it cools like any other cooler does, but because it is expected to -- because when it looks like an air condition and people expect it to cool like an air conditioner, there is a bit of a, I would say, mismatch between performance and reality. So the product has not done as well as we had hoped it would. And moreover, we have thereafter launched many other new models, which have seen a very robust demand, and that has overshadowed the sales of this model.

Sure. My last question is, is there any other adjacencies that you are targeting in the electronic goods, white goods or anything else that is there in the fray which you'd like to apprise us of?

As such, we are always constantly exploring opportunities. And so far, we have not yet sort of made up our minds to jump into anything. We'll never say never. But so far, we have not. But as and when we do, we will -- you will be the first to know.

The next question is from Nitin Arora from Axis Mutual Fund.

Sir, just one clarification, when you said 80%...

Nitin, your voice is very faint. Can you come closer to the microphone?

Yes. So the question was that when you said that 80% we have the market share in terms of new collection. I mean what I understood, you're saying that in the industry, if advances would have come at INR 100, INR 80 is what you have got and remaining INR 20 is what other players have got. Is that the right way to look at it?

That's right.

Okay. And can you tell us how the advances really moved up for you? So that's on the incremental. But overall, if I look at from -- because Q3, Q4 and Q2, Q3 is an important for advances. So versus, let's say, FY '19 Q2 levels versus, let's say, in last year, are the advances have moved up for you?

Vis-a-vis last year, it has moved up. But vis-a-vis normal year, that is '19, '20, certainly, there is a de-growth, which is also reflected in September quarterly stand-alone performance.

Okay. And sir, when you say about clearing of the inventory, eventually, season also will come towards Q4. Do you see even yourself growing versus last year in Q3, Q4? Or it will be a struggle given what the inventory we have until the season comes up, which is in Q4 end? So the question is that in the next 1 or 2 quarters, do you really expect to see a growth for yourself? Or it will only we will be seeing that how much the season goes and then the growth will start coming?

So in Q3 and Q4, we expect decent growth. One, as far as December quarter is concerned, sales in domestic market may be marginally higher than December '20, but we expect to register major international sales on account of robust demand in U.S. and elsewhere. However, as we shared earlier, gross profit margin percentage in Symphony India for domestic sales will be in line with what we have registered so far, however, sales to our subsidiaries that is being shared by Symphony India and overseas subsidiary. So if we combine it on a stand-alone basis, gross profit margin percentage will be adjusted to that extent. Coming to Q4, as it happened last year, we expect closer to the season, barring some major accident, there will be much better trade confidence. And in some parts of the country, even season would have commenced. And in addition to that, with the large-format stores or our D2C also contributes good amount of sales in quarter 4. So we reasonably feel at this point of time, even though March '21 quarter was the record quarter in terms of the sales and also consol performance, there is a good potential to register a growth over it.

Okay.

And also as you know, we have grown in the first 2 quarters over the corresponding period of last year. So we expect to sort of maintain that momentum in the [ quarters ] to come. So all in all, we will certainly end the year in March '22 with significant growth over March '21, although we may still be not on par with March '20.

Got it. Got it. And just last thing, because of the supply chain and [ freight ] cost, the impact [indiscernible]...

Your voice is breaking. Nitin, you are not...

Am I audible?

Yes, slightly better.

Yes. Sir, I just wondered, sir, is it possible [indiscernible]...

Nitin...

Sir, this is the operator. I'm sorry to interrupt, sir, your voice is breaking. It's not very clear.

All right. I'll come back in the queue for the questions.

The next question is from Pulkit Patni from Goldman Sachs.

Sir, am I audible?

Yes.

Okay. Sir, my first question is more on technology. Is there any technology in works that can help us in the near future or say medium term use more waste water, et cetera, into this whole cooling process? I'm coming more from the environment point of view, because today we require freshwater in water coolers, anything that is in the works which could be say a product of the future? Any sense on that would be helpful. That's my question number one.

So it's not necessarily in terms of the kind of water that we could use. But in every other way, our product is environmentally friendly product. It is a green product. First of all, it consumes far less energy than conventional air conditioners do for equivalent cooling. Secondly, the kind of materials that we use are also recyclable, 100% recyclable. The manufacturing processes that are also used are also environmentally friendly. So we have, no, I would say, wastewater discharge or affluent discharge. So whether it's the manufacturing process, the materials used, the energy that is consumed, all through the entire chain, the product is extremely green and environmentally friendly, and that is how [ we do ] it across the world. There are, in fact, in the West, there are some green websites, which sell coolers, including Symphony, because of its green credentials. So but the kind of water that can be used is a different -- I mean, one could use recycled water. Question is of, how does a family or a house owner sort of pipe that or bring that water. So that's a -- so the greater challenge is that which as a company we can't solve for the consumer. But otherwise, yes, I mean, conceivably, wastewater from, let's say, a water purifier, which is otherwise discharged in the drain, could be used to -- for evaporation.

Understood. Sir, my second question is, if we look at the general awareness, it seems that focus on green and clean is a lot more with institutions and companies relative to what it is with individuals. So would it be fair to assume that over the next few years, if I look at growth of our personal cooling product business versus, say, the institutional business, our institutional business can actually grow at a much, much faster pace as more of the corporates, et cetera, look at cooling solutions through a company like yours versus air conditioning? Again, it's more like a medium-term question, if you could address.

No, you're absolutely right. We believe that going forward, the potential for industrial and commercial coolers is immense and could be much larger than that for residential coolers, mainly because there are many industrial and cooling -- sorry, industrial and commercial spaces which have no form of cooling whatsoever, number one. Number two, many such places cannot be air conditioned in the conventional way. So the only opportunity that exists to cool such spaces is by means of air cooling. So we do not necessarily sort of compete with air conditioners. Our contention is that whatever cannot be air conditioned can be air cooled, and spaces which cannot be air conditioned are far greater in number and area than spaces which can be a condition.

And in that respect, as we show in the presentation, now in centralized [ and ducted ] category, the concept of open ventilation. So there are many shops, many offices and some of the industrial establishment where there is an open ventilation and air conditions simply cannot work or not practical. And now considering the complete range of models in that category, it should serve well. And secondly, even in residential and household category, there is a class of consumer who prefer environmentally friendly cooling appliance, especially in U.S. and some Middle East countries, and they are also the consumers.

To add to that, Pulkit, like you said, on the industrial and commercial cooling side, especially for organizations which are looking at reducing their GHG footprint, we are working on getting air cooling proposition which can reduce the Scope 2 and get kind of GHG calculations for such organizations. So that's the value proposition we are offering. And we are also looking at getting into the initiatives like Count Us In, which will help us become more sort of attractive to end users who are looking at those initiatives and they can consider our products.

The next question is from the line of Aditya Bhartia from Investec.

My first question is on Bharat range of coolers, which you had introduced some time back. I just want to understand how are they different from our conventional range and how has the response been to that product category so far.

So Bharat range consists of the models which has better saleability in the rural and semi-urban area. Secondly, their price point is different. So in terms of affordability, it suits. And thirdly, having different dealer and distributor network meant for that. Of course, it was to yield a good result in summer of '21. But again, on account of COVID, we haven't -- it hasn't yielded major result. But in the time to come, we are reasonably optimistic. So it is not only in terms of the product, but the kind of [ shot ] of different sub-verticals which we have created, including manpower, it has a good potential and promising.

And sir, why necessarily are we going for a different distribution network for this product?

So Aditya, the target consumer for this product is partly geographically at a different point. And the places at which the consumer will access the product are also slightly different from the traditional network that we have gone through. And that's where the channel that we are developing, it's not necessarily different, but tactically, on the ground in rural and semi-urban, we are finding that it's more effective to go through a different set of distributors with depth on the -- in the hinterland kind of.

Understood, sir. That's helpful. And sir, on our D2C foray, what are the kind of investments that we have made so far? And what is the kind of capability building that has taken place?

So there is not much of CapEx that we have had to incur. It's more of overheads and some sort of expense in terms of tech support. So that's nothing significant. In terms of capability that we are building, I mean, this is a very, very scalable sort of sort of a vertical. So a lot of it, we should rely a lot on third-party service providers. So from a few thousand to a few lakh coolers, anything can be serviced through the process that we have developed.

And in the initial stage, as D2C business model is, there may be substantial revenue expenses. So apart from variable cost, also per unit sales and marketing costs, but all will be expensed out.

Sure. And we'll just be involved in generating the leads and the local dealer would be servicing that demand? Or we would be doing it end-to-end?

No, we are looking at various models. We're looking at various models. What you suggested is being one of them, but we are looking at various models.

Understood, sir. Understood, sir. As of now, it's fair to assume that it would not have scaled up significantly. We are keeping our options open. And maybe in the next season, we'll get greater clarity on this aspect. Is that a fair assumption?

That is well said, yes.

The next question is from [ Omkar Kulkarni ] from [ Shri Consultancy ].

Given the way the real estate industry has grown, is there any way your company can benefit from this as the tiles and other companies regarding this sectors are getting benefited?

Will you please repeat the question?

As the real estate industry in the -- hello?

Yes, go ahead.

Am I audible?

Yes, yes, go ahead.

Yes. As the real industry in the country has started reviving, the ceramics and other tiles and other companies are getting benefited from this. So is there any way your company is getting benefited out of this from the real estate revival?

It is not a direct correlation with housing starts and home building. But indirectly, certainly, as more people move into new homes, they will buy more appliances of all kinds, including air coolers. So indirectly, for sure, we would stand to gain. Although, it is not something which is used as part of the building construction process like tiles or pipes or wires are.

Okay. The second question is regarding the cash balance you are setting, how is the plan to use that? Earlier, there were talks about buybacks and all that stuff.

So buyback is also something on the cards. We are not ruling that out. It is all part of our overall shareholder reward policy. Whether it is buybacks or dividends, one way or the other, we are committed to a long-term shareholder reward policy of 50% payout.

No. But the buyback has been on the cards from few year, I guess.

Yes, yes, yes. So -- but we have been giving...

What is stopping you from doing it?

What is stopping us from doing a buyback? Well, we are paying dividends. It is just a -- buyback is a very onerous process. So -- and so the -- and the benefits are there, but not a huge lot. So we're just looking at an opportune time.

The next question is from Renu Baid from IIFL Securities.

Am I audible, sir?

Yes.

Yes. So my first question, again, sir, here given that the sales for us typically tend to skew in the second half of the financial year based on the timing of the season, how well are we stocked for key electronic components and products to avoid any potential supply chain shocks when the season demand actually picks?

Good question. So we are fairly well covered. However, we have both electronics and nonelectronic models in our range. So in the very worst case, it isn't as if we would be stuck without any product to sell because we can always sort of promote our nonelectronic models. So the option exists of doing that. So we are not really extremely sort of concerned about it. Although, like I said, we have covered whatever we need. But in the event that the sales is far greater than what we expect and [indiscernible] supply, then obviously, we will sort of start pushing the nonelectronic models.

And again, to de-risk it earlier some of those items which we used to import from China and elsewhere, one, on account of supply chain and logistic costs and earlier because of the COVID, many of those items we have developed local sourcing.

Got it. Secondly, on the commodity side, given that commodities have started to look up again, both in terms of plastic as well as the other metal side. And we tend to take advantages and prebook the revenues, at least bulk of them. So are we seeing as an -- a, how are we managing the risk with respect to margins here? And to what extent are we covered on the cost side to offset any potential further inflationary headwinds in the next 6 months by the time the deliveries and dispatches are due?

Again, you want to answer this?

Sure. Sure. So...

Especially for Symphony, given that we tend to -- the pricing tend to be fixed up at the start of the year of the season when we take up orders. You usually refrain from changing pricing during the year or during the season.

That is true. That is true.

Right. And yet last year, when numbers moved substantially, we took that call of increasing the prices a bit. So Renu, that's absolutely right, that's a situation. If the situation demands it, absolutely, we do have the option of raising the prices, like we did in early 2021. Though it's not the norm that we follow it, but if it's absolutely essential, we do that. At the same time, this year, when we have looked at our prices, we have taken a modest price increase anticipating some pressures on the cost side. So this mix of a modest increase in our prices and reserving the step of raising them further, possibly in future, if required, is the mix we'll play with as we go forward.

And Renu, so far, whatever has been the price increase, it is not in proportion to the cost increase in last 9 months or 15 months. It is much lower than that. So in a way, if really required, we have that room. And in that respect, as you will appreciate, we are better placed.

Sure. And last question is now that the CapEx cycle or investments from private sector has definitely [ to ] pick up, where are we seeing the key headline numbers for our industrial and commercial air cooling business? As in we were -- the segment has been in the incubation stage for the last 2 years now. But from hereon, if we see clearly, demand showing a big hockey stick improvement. In the next 3 years, would you have certain numbers which you can share in terms of your targets to drive growth in this portfolio?

So first of all, you have been kind by saying it's been in incubation for 2 years. It's been in incubation for a lot longer than that, unfortunately. But internally, yes, our plans are very ambitious. And until 2 years ago, we were dependent on imports. We were importing the product from China, from our factory in China and our factory in Mexico. And we always had demand-supply mismatches and our costs were higher because of additional freight and import duties, which is why we developed the range in India. That range was developed just 2 years ago. And soon after that range was introduced or rolled out, we have had this entire COVID thing. So the range has never really sort of received an opportunity to sort of prove what it can do. But I mean, in a normal world, we feel that we should be able to sort of scale this business up significantly. Now we have the local manufacturing, and everything is under our control. We also have a significant, I would say, competitive advantage because some of the other players are bringing in product from China, which is prohibitively expensive now. So we believe that we are sort of on the cusp of a significant growth or that sort of hockey stick that you spoke about. But again, time will tell.

The next question is from Devanshu Sampat from YSIL.

Sir, can you hear me?

Yes.

Yes. So 2 questions from my end. So one is sort of like a big picture question. The 2 small acquisitions that we made in Mexico and China largely gave us access to select technology, while Climate Technologies sort of helped us with a broader aim of entering a new geography, de-risking the India business and as well as entering the U.S. market. So if you were to find acquisition opportunities at your desired valuations, which area do you think the company needs to build up more? Are we looking at more on the tech side? Or are we still -- we'd like to focus more on getting more access in into select geographies? So what is your thought over here?

Geographies, essentially geographies. Even the Mexican one give us access to the Mexican market, and at that time, even the U.S. market. So certainly, it is geographies that we are looking at, not as much technology. And although we are fairly present in most sort of major markets in the world, but if we were to wish for some sort of great opportunity to come along, we would wish that it comes along from Latin America or from Europe -- and from Europe.

Okay. Okay. And the last question for my end. Can you give a sense of how different is the working capital dynamics for the commercial and industrial business compared to your legacy residential cooler business?

No different. It's all cash and carry. We, in fact, I would say, may be even better because we really don't carry large inventory. And it is -- we don't give credit because we do not sell directly to the end user, to corporates. It is -- our product is sold through a set of sales and service dealers or dealers who, in turn, may extend credit to a corporate client. But as far as the company is concerned, it sells on a cash-and-carry basis to a set of dealers.

The next question is from Ankit Babel from Subhkam Ventures.

Sir, my question is again on the growth in the stand-alone business. Now since the basis have been totally distorted due to COVID, can you help us with giving a broad range of revenue you see in FY '22, I mean, like between INR 600 crores to INR 650 crores or INR 650 crores to INR 700 crores, just to remove any confusion?

In fact, if we give a number, we might add to the confusion. So we would rather sort of not give any numbers now. And we never have in the past. That has always been our practice. We've never really given any sort of forward-looking statements and forecasts.

Okay. And sir, again, assuming no further lockdowns or accidents, do you feel that the trade level inventory will get normalized in the coming 2 quarters, and we'll start FY '23 on a normal base of inventory in trade channel? I'm talking about the stand-alone business only.

Yes. No, it will largely get consumed or washed out in the first quarter of the new year, because that's the summer quarter, April to June, which is when the retail sales takes place. So it's only in the summer that the inventory can get sold.

Except large-format stores because they are sitting on clean slate. And hence, they may give a good momentum in Q4 that is March quarter.

Okay. Okay. I understand, sir, you don't give any forward-looking guidance. But just for my understanding, again, historically, you have always mentioned that you aspire to grow at around 20% on a CAGR basis. Now again, the basis have been distorted. So next year, should we look at a -- should we consider FY '20 as a base for growth?

No. For -- yes, yes, absolutely. Internally, too, we consider only FY '20. '21 and '22 are for us like a bad dream. So '20 internally, too, we sort of benchmark ourselves against '19,'20, which is what we consider to be "a normal year."

Okay. And what kind of price hikes you have taken in the, say, last 6 to 12 months on an average?

Well, varying from, I would say, anywhere between 8% to 10%. Nothing great, nowhere close to what the cost increases have been because we have sort of managed to offset the cost increases through value engineering. So we have just sort of put into effect, depending on the model, not more than 10% and in some cases, none at all, of a price increase.

So in that case, once -- if there is any reduction in the raw material prices, any cooling off of in the prices, structurally, your stand-alone margins can be like more than 30% also?

Very good point. Very good point. That is what we believe will happen. Yes.

So very much feasible.

The next question is from [ Shivaji Mehta ], an individual investor.

Am I audible?

Yes, go ahead.

Sir, you had mentioned that the international sales will keep increasing as a percentage of top line going ahead. So does this mean that the growth going ahead will come at the cost of margins as the international business is lower in margins? Or is there an element of transfer pricing, which could probably keep the margins at the same level going ahead?

So there certainly is an element of transfer pricing, no doubt about that as far as subsidiaries are concerned. As far as sales to third parties are concerned internationally, of course, the margins are normal margins. But the subsidiaries generally are operating at lower margins than Symphony standalone does. But what we are looking at is not the percentage, but the absolute number or the absolute total value, rupees, dollars, whatever currency you want to use it, of profits. So the terms -- in terms of percentage points, it may sort of slide down a bit as the international sales increases or our subsidiary sales grows. But as long as the absolute sort of profits grow, that is really what matters to us.

And ultimately, return on capital employed, not only on a stand-alone basis, but on a consol basis. So that matters the most.

Absolutely. So also, any vision or any kind of a guidance, say, 3, 4 or 5 years out for the international business now that they're getting synergies? And also, once the logistics issues, et cetera, are behind us, any target margins from the current levels for the international business that you would have in mind?

If you can be patient and wait for a year more, we will have much better visibility because the [indiscernible] past has [indiscernible] that all our projections, all our expectations have all gone out of the window. So let the world stabilize, let the dust settle, and we will all know what the future holds for us. At this moment in time, your guess is as good as ours.

Sure. Sir, and finally, my last question, sir, any vision for the industrial cooler business in terms of top line for the next 4 to 5 years?

Like I said a little while ago to the previous person who asked sort of a similar question, the potential for industrial coolers, we believe, is huge. It's much greater than that for residential coolers because it's, first of all, a high-ticket item. Secondly, in residential, you also have an option -- I mean, an option of air conditioning. In industrial situations, that option doesn't exist. So one has to either live without any form of cooling device or use coolers. I don't think there is a third choice in most situations. So we believe that long term that this -- the potential for this category or that vertical is far greater than that for residential coolers. But we really do not know what kind of number to project. It could be much more than what we expect or not. So really, we really are unable to sort of give you a specific number.

Sure. And also, is there an element of maintenance fees once -- as one say you install the cooler, do you get a certain percentage, which can carry on much longer? Is that there?

That is a model that we are currently working on, something like an annuity model. Let's see how it sort of -- yes, go ahead.

So there is a different model that we are working on possibly, which would be a annuity model. At the same time, for even the CapEx model, there are AMCs that most of our customers go for. So the answer, I mean, in one word is, yes. For all the sales we make, there is some kind of continuous revenue that comes in.

Thank you. That was the last participant in the queue. We'll take a few questions we've received on text. The first question is from Lakshminarayanan KG from ICICI Prudential Asset Management. We've received a couple of questions. The questions are, what is freight and forwarding charges for standalone for the first half 2022 and for H1 '21? Second question is, outlook for employee expenses for FY '22 versus FY '21 in standalone? Third question, ad spend budget for the year FY '22 in standalone? And the fourth question is, what is the cost savings that will come due to shifting manufacturing to India?

Very honestly, we will be unable to answer any of those 4 questions for competitive reasons. I mean we have all those numbers, but we would not be able to sort of give that level of detail.

Thank you. The next question is from [ Mandar Pendse ], an investor. The question is, can you please quantify sales volume for the industry during H1 and your market share? In consumer durables or FMCG industry, there is a clear trend of shift from unorganized to organized, pronounced even during -- even more during COVID. India being a hot country and global warming only increases temperature in India.

So overall, our market share has been in the vicinity of about 50% in terms of value. And there has not been a significant change in that over the years. It might be a couple of percentage here or there, depending on the year. But by and large, it has been in the vicinity of 50% in terms of value. And so that sort of answers this question, doesn't it?

Yes.

All right.

That was the last question. Ladies and gentlemen, I would now like to hand the conference over to Mr. Manoj Gori for closing comments.

Yes. Thank you. We thank the management of Symphony Limited for taking time out and sharing their valuable insights on the call. And we also thank all the participants for the presence. Sir, do you have any closing remarks?

Yes. So thank you very much to all participants and Equirus for hosting this conference call and wishing all of you happy Diwali and great and safe new year.

You may also wish us very well for the summer to come. Thank you.

Ladies and gentlemen, on behalf of Equirus Securities, that concludes this conference. We thank you very much for your participation, and you may now click on the Exit Meeting to disconnect. Thank you.