Symphony Limited (517385) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY '25 Earnings Conference Call of Symphony Limited hosted by YES Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Akash Padia from YES Securities. Thank you, and over to you.

Thank you, Yashashri. So good afternoon, everyone. On behalf of YES Securities, I welcome everyone to Symphony's 3Q and 9 months FY '25 Earnings Conference Call. We have with us the senior management team of Symphony represented by Mr. Achal Bakeri, Chairman and Managing Director; Mr. Rupesh, Managing Director, Corporate Affairs; and Mr. Amit Group CEO and Executive Director. I will now hand over the floor to the management for their opening remarks, along with the presentation, post which we will start the question- session. Over to you...

Thank you, Akash, and thank you very much all participants on the call for being here this afternoon. The customary safe harbor statement applies to whatever we say this afternoon. Now my colleague, Nupesh Shah, will take us through the presentation, post which we will all respond to any queries that you may have. Thank you. Nrupesh?

Welcome to this conference call. So to start with the performance highlights for our stand-alone and consolidated performance. 9 months as a whole, top line is up by 49 percentage while for the quarter, it is [ eluded ] as on 31st December for Q3, and there has been record unbilled advances surpassing domestic sales, which is about INR 150 crores. And primarily, they are meant for 17 new models. So the new models production was and has been slated to start from December, January and current month. So there has been essentially a spillover of sales from December quarter to March quarter to this extent. However, overall end-to-end, as consumer sales happens during summer, there is no business loss. There has been temporary calibration in EBITDA and business PAT mainly because no margin model has been build in December '24 quarter. And in addition to that, there has been water heater launch expenses and also ForEx loss of INR 3.8 crores on a stand-alone basis, while on a consolidated basis, there is a ForEx loss of almost INR 9 crores during the quarter. It is more a emotional loss that is mark-to-market mainly on account of investments made in subsidiary companies. So on a consol basis for 9 months, top line is up by 2 -- so during the quarter, we launched storage water heaters and it's a promising start. It's major USP in terms of prevention of hair loss and much better and positive for [ feet ] coupled with AI features has received very well and acclaimed well. We have launched them in selected states and cities and starting January, it has been launched countrywide through e-commerce and B2C. So as it was conveyed during last quarter, wish to give an update about the legal action taken towards the recovery. And the overview was from Pathway Retail Private Limited, which is based out of Delhi, e-commerce distributor and they were our distributor for 13 years. And for e-commerce, they are distributor for many other consumer-facing companies. So we had carried out forensic check and came out with several irregularities including falsification of the records as well as forgery of government documents, et cetera, and also diversion of funds and hence we initiated stringent criminal proceedings towards -- for him cheating, criminal breach of trust, et cetera under Bharatiya Nyaya Sanhita Act. We have created the right over the immoveable property which are based in Gurugram and Delhi. Eventually they are on their corporate office as well as land parcel and other properties. And residual value of the properties seems to be taking care of our outstanding account of criminal proceedings, their promoter Directors and Ex-Directors, they are arrested and later bail was granted a condition. However, the bail conditions in terms of the repayment have not been honored. And hence recently, we have filed for cancellation of their main application. At the same time, the other three Directors have filed for anticipatory bail and that anticipatory bail has been rejected by honorable court. And in addition to that, as updated earlier, we have also filed the criminal complaint under Section 138 towards the founder of the check. So this is the legal update in terms of the recovery. So we have and we will go all out very aggressively for recovery and do our best. However, as per accounting standard and also on a conservative basis residual outstanding of INR 46 crores from Pathway has been provided for during the quarter as a doubtful debt. This is in addition to earlier provisions made. And this will no way compromise legally or otherwise our recovery from them. So post this incident, we have tightened and implemented stringent credit risk mitigation in terms of the in-depth credit evaluation, party-wise credit limit, we have also taken the credit insurance. Hence across the parties, credit limit has been rationalized. We may also add that we do not give credit as a principle to general trade. It is only to modern retail and regional chain stores or to this e-commerce distributor that we have been given credit. Other than that, in the general trade, which still constitutes the vast majority of our sales, we have an absolute 0 credit policy. That has been the case since the outset of the company -- of our business and that continues till today. And during the quarter, interim dividend of INR 2 per share that is 100% has been announced. This is in addition to buyback of shares as well as earlier interim dividend. All in all, total payout in 9 months amount to about INR 124 crores, that is 92% of the consol profit. Coming to overseas subsidiaries, IMCO Mexico and GSK China, 9 months as a whole have registered decent performance. However, while translating to Indian currency on account of depreciation of Mexican currency during the quarter as well as for 9 months, there is a major difference. About GSK China, it has achieved remarkable turnover and performance for 9 months, the turnover stands at INR 75 crores versus INR 33 crores while PAT stands at INR 10 crores versus INR. This includes its domestic sales and also now we have synergized and complemented international operations. And hence, earlier, IMCO Mexico and Climate Technology were sourcing their products from other suppliers based in China. Now that has been synchronized through the expertise and local presence of GSK China. So its local operations have also turned profitable. And in addition to that, it's also complementing IMCO as well as Climate Technology. And as a result of that, as updated earlier, GSK has repaid the loan in excess of INR 10 crores, resulting into remaining outstanding of INR 50 crores. And there is a clear visibility and path for repayment of this loan in the time to come. And now Symphony Brazil, it's more about our trading subsidiary to take care of regulatory requirement. Otherwise, it's purely exports out of India. But again, on account of ForEx fluctuation, there is a wide variation in terms of INR, even though it has registered huge growth in terms of top line and there are huge prospects and potential. So Climate Technology Australia is not performing well. Its performance currently is in line with earlier years of IMCO and GSK China. Earlier, its first phase of transformation, that is CODB reduction from $15 million to $7.5 million has been already achieved and its business transformation Phase 2 is almost done. We expect the fruits to reap down the line. So, 9 months stand-alone performance as on 31st December, top line is up by 49% at INR 814, EBITDA INR 188 crores versus INR 98 crores, this is up by 91%. And PAT after providing for exceptional item and December quarter specific expenses in all INR 54 crores, it stands at INR 132 crores. mmnnnN Coming to capital employed in trailing 12 months in stand-alone business, capital employed is negative INR 21 crores versus INR 60 crores in earlier year despite increase in sales and performance translating into infinite ROCE. And it is greater on network stands at 24%. Recently, as on 31st December it's INR 488 crores. For the quarter, overall, as I explained earlier, performance is subdued, but mainly speed over to March quarter. And for this quarter the December quarter expenses in all INR 53 crores, which includes provision of doubtful debt of INR 46 crores laesNR3.6roExs INR38roNR crores. EBITDA stands at INR 34 crores after providing for all other expenses, et cetera is negative INR 4 crores EBITDA stands -- coming to consolidated financials. For the first time in 9 months at a consol level, Symphony has crossed revenue of INR 1,000 crores and it stands at INR 1,088 crores, up by 32%. gross margin stands at 50.5 Y-o-Y up by 260 bps. And on a consol basis, capital employed is INR 273 crores, down from INR 305 crores, leading to ROCE for trailing 12 months at 90% on core capital [ inflows ] and the return on net worth is 26% versus 15%. About consol quarterly also, it is almost flattish as explained earlier. So top line leverage stands at INR 242 crores. And at a PAT level, it is negative INR 10 crores while EBITDA is positive INR 35 crores. And for December '24 quarter on a consol basis, EMEA stands at 14.7% with this waterfall chart. So subsidiary-wise financials for 9 months. subsidiaries to be there in the 9 months registered top line of INR 327 crores, up by 10% Y-o-Y. EBITDA is INR 24 crores, up from INR 15 crores while ex ForEx, PAT is INR 8 crores versus negative INR 5 crores. And for the quarter, 4 subsidiaries to business, top line is INR 88 crores while EBITDA is almost 0 and at our packable ex ForEx is negative INR 3 crores, as it can be seen in 9 months, GSK China, in IMPCO Mecixo, and Symphony Brazil held up pretty well. Brazil needs to be seen ex Fox. And in Brazil business, we also make money on exports from India. It is Climate Technology Australia, which is still clearly and we are quite cognizant of its performance as well as concern of the shareholders. And obviously, whatever is based in the interest of shareholders as well as all stakeholders, will fully be done. Coming to outlook. So ahead of summer '25, very robust positive demand and sentiment across the trade channel across the geographies and on top of it, as all of you are aware, considering the major income tax, these given which will be mainly availed by [indiscernible] class of consumers that should further boost our business. And we are quite confident about performance of March '25 quarter. There has been overwhelming response to 17 new range of air coolers and they will be margin acres. The healthy strategic focus and mixed demand from NFS, RCH e-commerce as well as D2C. Thank you. So with this, we can take the questions.

[Operator Instructions] We'll take our first question from the line of Manoj Gori from Equirus Capital.

Yes. So based on your opening remarks, what I understood is optically, this quarter is looking weak on the domestic front. But probably, there will be a lot of spillover into Q4. So probably for the fourth quarter, we should expect normal growth that we would have expected earlier and plus this will lower effect. Is that understanding correct?

That's right.

Yes. And secondly, if I look at the -- some of the other pooling product categories, channel has been going very aggressive. So in fact, in terms of number of days or in terms of absolute volumes, they have been betting on the summer building huge inventories. In anticipation, probably if there is any supply chain disruption for any of the categories. So are we seeing like probably channel going very aggresive as compared to previous historical trends? And accordingly, it should further boost volumes during the quarter.

Certainly, not only the channel but so we've also built out a huge inventory in anticipation of sales in the summer. So yes, all in all, everyone concerned in the business is very upbeat.

Perfect. Good to hear that. Second -- lastly, Nrupesh bhai said like the new models are margin accretive. So looking at the stand-alone gross margins probably there has been minor contraction. So probably there won't be any major contribution from this new models during this current quarter and that we should expect during the fourth quarter.

That's correct. That's correct. Yes. And we, as a company, have a focus when we talk about margin on EBITDA margin. So that doesn't mistake it recover to a gross margin or otherwise because primarily, our focus is on that.

Correct. Understood. And sir, lastly, on the subsidiaries, probably still when we look at the top line performance. So we are still not able to see any meaningful uptick over there. Obviously, you have taken a lot of efforts on CODB, which where we are able to see some benefit taking it. Can you throw some light on these subsidiaries, probably how do we see from next 1 year point of view?

So Manoj, by subsidiaries, I suppose you mean Climate Technologies of Australia because yes, IMCO Mexico and GSK China are already sort of cruising along very well.

Yes.

So as far as Climate Technologies is concerned, there were sort of levers that we were working on. One was how do we reduce the cost of doing business through a transformation of its business, which is outsourcing the manufacturing and cutting down its overheads -- manufacturing-related overheads. That has been by and large achieved. So the manufacturing is at the tail end in Australia. By June, everything would be wrapped up. That's when the lease for our factory also expires and will be done and dusted with any sort of manufacturing in Australia come June. Simultaneously, the other sort of levers that we have been working on is adding new products expanding our product portfolio in Australia because historically, we were selling gas heaters, gas ducted heaters and rooftop mounted air coolers. Now over and above that, we have added high split air conditioners. We have also added reverse cycle ducted air conditioners. -- by reverse cycle, ducted air conditioners, I mean air conditioners, which both cool and heat because remember that Australia is as hot as it gets cold in the winter. It gets very hot in the summer and it also gets cold in the winter. So it requires both sorts of interventions. So we have introduced the complete range of air conditioners. We have also added products like electric panel heaters, fire places, strip heaters, -- we are in the process of adding air purifiers. So we are really increasing the entire portfolio of products that we'll be selling in Australia. And now the introduction of these products is more or less in place. And now scaling up the entire business offering them to the entire geography all over the country, offering them to all customers is a process which is currently underway. But identifying the right products, getting them certified, identifying the suppliers and then getting the product certified, testing, sampling, all that is all done. Now it's just a question of how do we ramp up sales. So the focus here onwards is going to be entirely on the growth of the top line. Whatever had to be done by the Australian team in terms of reduction of the CODB and its manufacturing transformation is almost all done. And like I said, and the focus is now clearly on ramping up sales. So the issue now in Australia is nothing other than top line. As soon as the top line, we are able to crank up the top line, everything else -- all the numbers will immediately fall into place. Exactly what happened in GSK China. Till last year, our turnover was some INR 33 crores and some barely breaking even on a cash basis. And suddenly, as soon as the top line increased to INR 70 crores in 9 months, we are seeing bottom line growth. So the operating leverage has kicked in, in China, and the same thing will happen in Australia. So that is what is currently going on. However, I may also add that as Nupesh bhai mentioned, we are fully -- we fully appreciate the sort of concerns that the market has about this subsidiary and its performance and its consequent impact on the valuations of the company as a whole. And we will certainly take into all that into consideration and chart out the way forward.

We'll take our next question from the line of Pulkit Patni from Goldman Sachs.

Sir, can you highlight in a scenario that there is tariff imposed on Mexico, China, do we get impacted in any way do any of these products directly and directly make their way into the U.S.? We know Australia does supply to U.S. does Mexico also do. If you could just tell us, one, if there is an impact? And second, if there is, how are you looking at navigating the same?

Again, good question, Pulkit. Until about a couple of years ago, 2 summers ago, we used to have very good business in the U.S. We did -- at the peak, we did about $23 million of sales -- of U.S. dollar sales in the U.S. Now for different reasons, that has not happened in the last 2 years, and that also has a telling effect on C Technologies sales. So as of now, our sales from either Australia or Mexico and/or China to the U.S. is fairly low. Whatever the U.S. company sells does come from all of these geographies. But as of now, it's fairly low. So really speaking, the tariff will have no impact on us. In fact, if business -- if there is sales in the U.S., we believe that the tariffs will be passed on to the consumer. If for example, Home Depot sells our product, places orders on us for our product, we would certainly -- they would pay duties or we would add the duties to the price at which we sell to them. So if at all, it will get passed on to the U.S. consumer. As far as we are concerned, really nothing changes.

And sir, if I may flip that more on the positive side that tomorrow in a scenario that China and Mexico have duties, can the Australian subsidiary become more relevant for us from a U.S. export perspective?

Absolutely. Absolutely. Yes, absolutely because there would be no duties from Australia to the U.S. as they currently are not. So absolutely right, yes. So we do have that other avenue of routing product to the U.S. You are absolutely right.

Yes. But on an as-is basis, if duties are put, we don't get hit significantly negatively. That's really what I take away from this.

Absolutely. Certainly not. Although there has -- the impact that this entire turmoil in the U.S. has had on currencies is something what is affecting us indirectly as was explained in the presentation that the Brazilian real is devalued, the Australian peso -- sorry, the Mexican peso is devalued, the Indian rupee has devalued. So whatever impact that has is there. But other than that, directly, the tariff has not hurt us or we don't expect it to hurt us.

Sure. Sir, my second question is, a lot of these EMS companies, which originally used to do air conditioner, et cetera, or now also talking about doing air cooler EMS. Does it in any way play into our strategy of looking at incremental suppliers? Or for us, the business model of sourcing will remain the same the way it has been for years.

Sorry, Pulkit, I was trying to understand what you meant by EMS.

Sir, the likes of EPACK, et cetera, who are now making air coolers for different brands. And as you'd appreciate, multiple brands now want to get into air coolers. I wanted to know if for us from a sourcing perspective, could they be relevant suppliers or we will stick to our existing strategy of sourcing, which is basically we do all the designing and then stick to the few players who do manufacturing for us.

Essentially, we will stick to what we are doing now. But EPACK has also become one of our OEMs, contract manufacturers. So products that we have designed and developed and the molds of which are owned by Symphony, have been given for a few models to EPACK to produce on our behalf. So we will not really just source a product which has not been developed by us and where we see no product differentiation. And where we -- the same product would be hawked to different brand brands is not something -- it's not a direction that we will go into.

We'll take our next question from the line of from Shraddha Kapadia from Share India.

So basically, I wanted to understand if we have taken any price hikes? Or do we expect to take any price hikes in future? So in the current quarter, if we have taken any price hikes and what would be the price hikes considering the season is almost over here?

Yes, yes. So again, good question, Shraddha, as a part of our overall pricing policy, we -- our prices keep on sort of inching up every fortnight beginning July all the way up to the summer season. So that has been part of our -- the long-standing pricing policy. So yes -- and the price what I'm referring to is the price at which Symphony sells to its channel partners. So in the first fortnight of February, the rate that we will offer is not what the channel would get on the 16th of February.

I just have one more question regarding the new 17 air coolers, which we have launched, if you could highlight the new features and how much revenue can we like expect. So majorly it would be the new features, which would be there, if you could highlight the same for the upcoming season?

Yes. That would be a very long story and it's all there in our corporate presentation, which is on our website. So if you care to go through that, that will probably serve you better than me talking to you on the phone.

We'll take our next question from the line of Mayur Parkeria from Wealth Managers India Private Limited.

Sir, actually, yes. Sir, we understand that this event of provision was there and it has happened one-off situation in that way. But my question is slightly a little longish and slightly more strategic. Modern trade as well as e-commerce or even quick-commerce, we -- and this is what other brands and OEMs also have been saying that the working capital or they have a credit period unlike our bargaining capacity in terms of general trade being higher versus in front of them, and it is relatively lower, and hence, the credit periods are also there. And the structural change is that their share in the overall sales is rising in that sense, gradually over multiple years, and it will continue to rise given the consumer behavior and experience on modern trade, e-commerce, quick commerce all put together the new channels. So how would you address this assessment that credit, which has been -- we have always stick to the cash and carry model as far as the general trade is there. But then we are giving credit on the other channels and on one side as a structural impact. And the second is our credit -- our assessment in the credit profile and the measures which you have taken now, where do you think the lapse actually happen in terms of in terms of internal situations, if any, and where did we miss that in that? Because we were supposed to be -- we were -- we have always maintained that we are very strong on that and we have maintained that. So just as a learning curve perspective, where did the internal process missed? And are there any heads which rolled out because of this? Or what kind of measures did we miss on that side? And how do we address the structural issue of credit, which anyways this channel, we will have to continue, sir?

So when it comes to modern trade, you're talking about the likes of Croma or Reliance or Vijay Sales or when it comes to regional chain stores, you are talking about the likes of Bajaj Electronics down in Hyderabad, Aditya Vision in Bihar. And there are several in the South, Tamil Nadu, so on and so forth. There, we have been giving credit. And there, of course, we obviously look at the financials. You can't look at financials of -- no point in looking at the financials of Reliance Retail or Croma. But for all the others, we do keep a look -- eye on the financials of the other parties. As far as this one particular case is concerned, we had been doing business with this distributor for a long time. Initially, it was not on credit, gradually because to sort of increase sales, we began to give -- provide credit. And -- but historically, we kept a close eye on how the sort of the repayment was happening. And -- but in this 1 year, I think I can admit to saying that there was a lapse in judgment. And we should have picked up the signals. People who are at the operating level who do the business should have picked up the signals and been able to sort of tighten the sales. But sometimes in the lure of sales or with the fear of not losing sales, we sometimes tend to overlook some signals which would have been otherwise very evident. And I think this situation has happened. So there's clearly a lapse of judgment. And -- as to your question about heads have rolled or not, no, heads have not rolled. And we believe that the people who have made this sort of who are responsible for this lapsing judgment are wiser now and will -- this will not happen again. And so -- so yes.

Sir, actually INR 45 crores and even earlier what we provide is huge sum in terms of the kind of credit. It's just that, Achal bhai's philosophy of cash and carry. And I remember in your earlier days, you had faced this issue very long time back, 2 decades back or something and that's what made you to stick to cash and carry. And that philosophy, we have always been looking at. And it was -- while we understand it was an event, but coming from Symphony was something which took us too much of a surprise in terms of that. So hope that philosophy -- yes sir.

Yes, Mayur, I entirely agree with you. All in all, it's INR 56 crores plus whatever provisions we have taken earlier. So all in all, it's INR 58 crores. INR 46 crores plus INR 12 crores, so INR 58 crores. It's an enormous amount of money. That is something where for much less back 20 years ago, we became a BIFR company.

Yes. I remember, sir.

So this is an enormous amount of money. And under normal circumstances, you are right. This shouldn't have happened. But like I said, it's a lapsing judgment. And so we are sure that whoever is responsible for this, the people responsible for this are wiser now and will not -- this will not happen again. Heads could have rolled that would have been easy, simple thing to do to sort of also even demonstrate to the market that actions have been taken or to our Board. But we have chosen to sort of chosen the other direction of sort of our people learning from this experience. Very, very expensive learning but learning nonetheless. So we are hoping that this is something which will not happen again. I mean, we are sure. We are sure.

The investor concern is only -- actually our long-term concern only comes because the channel share gradually keeps on rising in terms of modern trade and these. And we are at a stage where the assessment on this itself has gone early stages wrong. So just to ensure and request you to give your personal attention and ensure that processes are well established even while this is a very generalized way to say that there are big players, but there are small and medium modern trade players also which are there and the likes where we faced an issue. So to strengthen and ensure that the processes are well set because the channel will keep on becoming important as we go ahead. So it's not that we cannot serve that channel, but we need to take care. So the second question is on the Climate Technologies...

Sorry, Mayur. So just to add to that. So as we covered in the presentation, it has been placed on the street. So of course, it was a valuable lesson and hence, stringent credit risk mitigation has been implemented, which includes in their credit evaluation, which is much beyond what used to be done earlier. Secondly, now for entire modern trade, credit insurance has been taken. So for the first time, this credit insurance policy has been taken. And wherever required, we have substantially rationalized the credit limit. And of course, many a times, just by knowing the financials, just by knowing the balance sheet, it's like giving a pulse. But as it was mentioned, sometimes there may be a lure of not losing the sales. And in fact, last year, actually, there was a loss of sales because of non-supply. So had it been rationalized to these channels, otherwise also there would not have been a loss of sale. But of course, it's a valuable lesson. And at the same time, as it was conveyed in the presentation, we have taken stringent actions against the modern trade distributor. And by the way, several other consumer-facing companies have also lost the money with them.

Sir, we believe all the actions will be taken. Sir, second, just in...

Also in continuation. In the past, you must have heard of future retail going under and many suppliers having lost money. In our case, we didn't because, again, there were a different set of people involved at that time and who sort of exercised judgment and ensure that we do not lose our shirt. So even though many other companies failed to do that, our team was successful in minimizing our exposure to future retail when it was going under. So it's just a matter of, like I said, it's just a matter of judgment of the people involved.

Yes. Sir, second question on the CT, Australia. If I remember, if my memory serves well, I think this is the first time where we have apart from the other actions, which anyways we are taking for a couple of our strategy Phase I, Phase II, we have mentioned about transforming and all that. But I think I don't -- first time, we have clearly come out with a kind of a state -- or I'll say, an outlook where we are saying that we are ready to open -- we are open to any other options also, which may be possible in the light of the investors' concern on Australia. So just to understand this a little bit better, what are we saying -- are we looking at some strategic kind of initiative apart from the other options, which are there on the table? Is there something more to it to read in your intent and the way we are looking at it because this is a very big -- even if it happens and just to get a more idea on that, sir.

No, Mayur, there is nothing really on the table. I mean, in fact, I'm asking you what do you suggest we should do.

Sir, firstly, it is beyond my paygrade to give a strategic view on something and especially to Mr. Achal who has been...

You are a smart person, I'm sure you can maybe share your thoughts.

Sir, many times we have -- and we have mentioned that our intent has been to focus on return on capital employed and margins very clearly. At a very strategic intent level, I remember, we were talking about this way back when this acquisitions were taken that India is the most promising place as far as ROCE and growth, both were concerned as a combination of that. And -- but we do understand that air cooling Australia was a big market, we wanted to address that and possibly also look at U.S. as a play through Australia, which actually did not materialize over a long period the way we would have thought over it, right? But then apart from the growth, the ROCEs of all developed countries are very, very subpar any which case, right? So that was -- I think that is something which all of -- which needs a very closer look in terms of our intent and how we look at addressing the opportunity because absolute value of sales can come in, but -- and invariably, when, sorry to name, I'm not naming in others, but we have seen experiences whether Tatas have gone through or for a very long period of time, Bharti or Hindal. All of them have gone through where developed countries or global companies are acquired and their ROCEs are significantly lower, and it is very difficult for us to have a cultural map to understand and turn it around in a time period that investor horizons are there any, in fact, at this kind of a situation. So you have been instrumental in turning that around by complete closing the manufacturing operations and normally, these are not possible and easy to do. But then ROCE was one indicator, which actually could have given us a signal whether this was worth doing at that point in time. And now that this has been done, I think, while we are taking all measures at the margin, trying to improve it, I think there is a -- there is still a question which -- so one of the participants asked that does the tariff war opens up opportunity for Australia to turn around. But I still think that one has to look at this not from 1 year, but over a 5, 7, 8 years, can we really add wealth to Symphony parent and then the wealth to the investor will come as a second part. But overall, how does this developed country operations actually fit into that entire efficiency in ROCE, which we already have. It will always dilute our proposition for that. And [Foreign Language] those markets are growing at very high double digits. So we will have to do completely different. We are doing and launching new products there, which has not been our core focus in other markets. So we are doing measures just to turn that around. Is that so much of effort and so much of your time and resources of the company over a long period one can have a look at that. That's just a small suggestion way to look at it.

No, I really appreciate it. Really appreciate your thoughts. Thank you. Thank you very much.

We'll take our next question from the line of [ Vineet Prasad from Investec ].

I just wanted to get a sense around how are we thinking on water heaters business. What has been the initial feedback which we have gained from the market, particularly given this is the peak summer -- peak season for water heaters, how has it done this month? And also, how are we looking at the overall business in terms of whether this business will continue to invest maybe in the near term may be a drag to our profitability. And lastly, what are -- what is the market share target, let's say, we're targeting over a medium term, let's say, 2- to 3-year perspective?

So in terms of the market for water, it's about as big as coolers in value terms. So it's a significant market. It's significantly large category. But we do recognize that there are very, very well established, well entrenched players. So we had to make sure that whatever we offer has a distinct differentiation. And which is why we have developed this Hair Fall Control Geyser and with the AI powered controller. And we believe that these 2 together have a compelling differentiation in the market. When we launched it, it was already well into the cycle, the channel buying cycle and all. So we were sort of fairly late, although the winter hasn't quite set in, but by the time the product was given to the channels, they had already stocked up on other brands. So this really was just more of a trial kind of a year. Now is when -- now going forward is when we would be sort of making sure that all the channel partners stock it for the coming winter, winter of '25, '26. So in reality, the next year, the coming 12 months is what is going to be the key time when this product will sort of demonstrate what it can do. So it's little too early to say anything, but we've had so -- far in whichever markets we've launched and whichever customers have bought are very happy. So the product has certainly lived up to its promise. And now it's just a matter of just doing more of the same across the country.

Understood. Understood. And sir, if you can throw some light on how will be our GTM in this category before the next winter. Will we be selling through dealer network, GT network or at least for the initial couple of years, the focus will remain more on modern trade and e-comm?

Yes. I think initially, it will remain on modern trade and e-com and yes and some large regional chain stores initially.

Okay. Understood. Understood. And sir, just one clarification. We understand some pushout of some sales which did not happen this quarter to the next quarter. So from that perspective, outlook for the next quarter appears robust. But just from a fundamental point of view, are you seeing any change in terms of the way we -- our business model operates wherein we used to sell it evenly throughout the year to channel partners. Is that something what is changing? Should we read into that? Or if it's just a pure push out of sales. And going forward, we should again see a more evenly spread out sales throughout the year.

No, absolutely. In fact, if the new models -- if the production of the new models had happened, has been initiated a couple of months sooner, then their entire sales would have happened in the previous quarter. It's just that people want -- people give us the money. They wanted the product. In fact, as of they are quite impatient to get the new product. But it's just that we had begun the product development a little late and there were some transit issues and there were some reasons of delay beyond our control. And so the manufacturing or the launch -- the production initiation of the production got pushed to the current quarter. But now they are already in production. Most of them couple will begin towards the end of February. But they will all be in production and be sent across to the channel by the end of the quarter. So this is just one of those events. And this happens, this happens. I mean a few years ago, 7, 8 years ago, we had launched a range called the touch range which we had -- which instead of July, we had launched it in -- July is usually when all our new products are unveiled, but this one was unveiled in the month of November. So we had a similar situation. So again, see, up until the temperature picks up, whatever is sold goes to the channel. So there is -- even whether we sell in January or February, there's no loss of sales. It's just a deferment of sales because the eventual customer only buys when the temperature picks up. Hello?

We'll take the next question as line is disconnected. We'll take our next question from the line of Abhishek Ghosh from DSP Mutual Fund.

So just in terms of the loss of sales that we have had in this current quarter, Otherwise, on a steady basis, you would have seen teens kind of a growth, which is what you're kind of looking at would have been possible?

What kind of approach?

Yes, yes, absolutely. So that's what we registered in September quarter, and that is the kind of the collection and unbilled amounts we are sitting on.

Okay. Okay. And sir, just in terms of the channel sentiment, we have almost seen 1/3 of the quarter having gone by. So is the channel sentiment buoyant in terms of stocking up or are there apprehensions about the upcoming season? If you can just help us understand with that.

The channel is very, very upbeat. This year, January, as you all know, has been one of the hottest Januarys in the last 125 years. February also, as we speak, is fairly warm. So the channel is very, very upbeat. They all expect there to be an early summer and a good summer in terms of reasonably high temperatures and consistently high temperatures. So that -- those are all expectations and the channel is all sort of geared up for that.

And in addition to that, as everybody expects, Nirmala Sitharaman has made consumers also very happy especially for our kind of products in addition to good summer. So I think that should also be helpful.

Yes, the higher disposable income, thanks to the tweaking of the tax regime would certainly help us as well as others.

So I think by one statistics, it is said that savings of INR 1 trillion of taxation will increase the consumerism to an extent of INR 3 trillion to INR 5 trillion because it is 3x to 5x. And that helps to consumer-facing companies.

And 18% of that is what goes back as revenue to the...

Correct. Correct. Sir, other thing in terms of the competitive landscape, are you seeing any meaningful changes in your category? Are you seeing new players coming through? Any sense on that?

I don't think there are any players left to come. Whoever had to come is already here or whoever exists is already in the category. So there's almost everybody that you can think of is in this category.

But I was more asking, sir, is anybody exiting now given that...

Exiting. Well, if not exiting people have -- many of them have lost their initial sort of euphoria and passion and all of that. They realize that this is -- grass is always greener on the other side. So that certainly -- that is visible, that is visible. Some of our esteemed partners, again, I can't talk about them in an open call like this, who couldn't just talk about anything other than coolers or Symphony, don't even talk about that anymore. So they are so busy with their other products, and they've realized that this is not as easy as it seems. So yes, so it has certainly been that.

Okay. Okay. And sir, just in terms of stand-alone P&L, there is almost about INR 6.6 crores of onetime this thing because of ForEx loss and water heater launch expenses. And a corresponding number for consol will be about INR 12 crores. Is that the right way to look at it?

That's right.

Okay. And you will see some amount of gross margin improvement as the sale of new models happen. So...

So as we said, rather than gross margin focus is on EBITDA for reasons. So our target is EBITDA, which may be partly through gross margin, partly items in between gross margin to EBITDA. Because gross margin is very high, but if we can't control or manage the items in between, which are substantial, then doesn't lead anywhere.

We'll take our next question from the line of Vinay Nadkarni from Hathway Investments.

Just one question on the volume of procurement for this season. By how much have you increased your procurement levels for this summer for air coolers?

Well, we are sitting on -- we have produced a record number of coolers, already sold quite a record number of coolers and sitting on record in high inventory. So I can't really talk in percentage terms, but it's fairly high, much, much higher than -- what we have sold is higher than already sold before the summer is much higher than any of our competitors. The inventory that we have is more than what most of our competitors would sell in a year. So in every respect, we have gone bullish, and we have gone all out.

Okay. Regarding CT, Australia, you said you are closing down the manufacturing facility there by June. What would be the impact of that on your overhead sales? By how much would they come down? If you can give us some figure on that?

Maybe you joined a little late, but we -- in our presentation, we talked about we have reduced our cost of doing business from AUD 15 million, which it was when we acquired the company to about AUD 7.5 million now. So we are almost there. Maybe a little bit further will be reduced because the process of reducing manufacturing has been going on. We are at -- what we currently doing is very, very small compared to what we were doing earlier. We are occupying very little space. We have very few people just converting the last bit into finished products, the last bit of raw material into finished product. So most of the gains of CODB reduction that we were to -- we had planned on have already been -- have already been received -- realized.

Okay. And then you will be subcontracting it in Australia? Or would you be supplying it from China and India?

Again, like we said before, we will be supplying from -- mainly from China. Our subsidiary in China is going to be supplying to Australia. Some products are already going -- have been going from India to Australia. So it is essentially either China or Australia -- China or India.

Okay. And lastly, what is the percentage of sales that you get from modern trade as compared to for general trade?

Where in China -- in Australia.

In India. Sorry, in India.

In India, well, whatever is the general average for the industry as a whole applies to us.

Next question is from the line of Ashish Shah from Business Match.

I just have one [Technical Difficulty]

We lost his connection. We'll take the next question from [ Vineet Prasad ].

Just my line was disconnected. Just wanted one clarification. Generally, we would have started manufacturing newer models somewhere around September, October. But this time due to various reasons that got pushed to December. Is the understanding right?

Yes, December, January, February, yes.

But generally, in a normal year, not this year, but generally, is it a case where we start manufacturing new models a lot early? Or is it the similar time frame?

No, no, absolutely. Absolutely.

Okay. Okay. So it is just a matter of delay in starting of manufacturing of new products, which is...

Correct. Again, not all new models. We've launched 17 new models, some we were already able to produce and introduce in the previous quarter, some will happen and the balance will happen in the current quarter.

[Operator Instructions] We'll take our next question from the line of [ Ashish Shah from Business Match].

I just have one question, sir, slightly long term on your China subsidiary. So last few years, we obviously struggled in terms of business environment, margins and now things have come on track. So do you have any plans, any thought 2, 3 years out, can this meaningfully scale up from where we are now?

So the China subsidiary serves multiple purposes. One is, of course, it becomes like a production source for Mexico, Brazil, Australia and other geographies. So that's one. Secondly, it also helps the India procurement team which also buys components from China and to get better deals, find other suppliers. So it actually serves multiple purposes. So as -- and of course, over and above that serving the local domestic China market. And -- so yes, this business -- again, it's a very, very low -- the capital employed there is fairly low. So -- and it will certainly grow in the years to come. And that growth will come with -- will come with very low capital employed.

And sir, just continuing to that same -- for the same line of business. Like do you have a plan in place like a strategy in place to grow China business meaningfully?

So on China -- the China business will grow when the other subsidiaries grow. So the focus is not necessarily on growing the China business, the focus is on getting in growing Australia, growing Mexico, growing U.S., growing other geographies and orders from there will flow to China as well as to India. Growing the local China market itself is also a focus area. So I mean growth of the Chinese company will be a consequence of our growth in many other geographies.

We take the next question from the line of Jayesh Gandhi from Harshad H Gandhi Securities.

Am I audible?

Yes.

If I heard you correct, you said that in Australia, you are -- you have introduced air conditioners, air purifiers. Any -- do you have any -- hello, am I audible?

Now you are.

Are you thinking of introducing it in India as well?

No, no, no. So we are introducing these products in Australia because like I said, historically, we were selling cooler, rooftop coolers and ducted heaters in Australia. Because of regulatory reasons, there has been a ban on gas heating in Australia. So we have to exit from that category. And coolers and gas heaters are sold in tandem. So if heaters are not sold, cooler sales, rooftop cooler sales will also reduce. So we have to find a substitute product. And the substitute product is air conditioner which can both cool and heat, because we have the brand and the distribution we've selected -- we've decided to do that. And along with that, these are other complementary products, electric panel heaters, purifiers, et cetera, et cetera, which the channel also -- our research also revealed could have very good prospects and which is why we have got into those. So we have no -- we are really not planning on introducing any of those in the Indian market, at least today, I'll never say never, at least today.

No, I was just wondering because I think we have a far poor air quality than what Australia might be having. So if you are actually thinking of introducing air purifiers in India. Anyways thanks for the answer.

Yes, it could be a good product. But even our air coolers at least in the summer months, our air coolers also filter air. So they are also -- this is also a product which both cleans, filters as well as cools air. So if one is using an air cooler, you really don't even need a purifier.

We'll take our next question from the line of Mayur Parkeria from Wealth Managers India Private Limited.

Sir, just again, a slightly issue, which has been also not played to as well over a long period of time is the commercial and industrial air cooling segment. While in normal season, normal times, we understand that there is no tailwind of the summer. But last year as well as if this year is anything to go by, there is a strong tailwind of the summer itself. And we have, over the past taken multiple efforts as far as sales team initiatives doing a lot of, I would say, distributed through in other programs and everything put together. And there was a time when we used to look at Voltas air conditioning factory was cooled by the Symphony. The outlook for industrial air cooling and even for commercial to that extent was expected to be much larger. And to that -- from that perspective, we have absolutely gone nothing material. We are still sub single digits on the overall revenue side. So over the next 3 years, how do you see this? And why isn't the sales momentum in terms of the summer season of the last 2 years is not -- where -- again, where is the problem coming? Or how do you see market acceptance?

So Mayur, first of all GT has charged. Yes, agreed is that we have not been able to scale this business up. And despite everything that we have done, the issue is not the summer. The issue is not tailwind. The issues of actually educating the market. Maybe Indian factory owners are content with whatever indoor temperature conditions that may exist in their factories. So it's really a question of market education and explaining and convincing people the merits of better thermal comfort, indoor thermal comfort in factories and warehouses. It's just that we've got the product. We have the team. We have everything concerned. But we believe that we are -- despite it being many years of trying and us not having succeeded despite many years of trying, we continue to work at it because we believe that at some point, they'll come at -- we'll reach the tipping point and this thing will begin to roll. There are many other figures, several other examples countries like China, and I've said this many times before. Countries like China, in Southern China, in Guangdong province, which is the manufacturing hub of China and the economy of Guangdong is bigger than the economy of India, the GDP, there every factory is air-cooled, every factory. I mean, if factory is not air cooled, workers refuse to work in that factory. So I believe it's a matter of time that Indian sort of worker becomes demanding that threshold of comfort will be sort of much lower or higher whichever you look at it and there will be a demand for industrial cooling. It's just a matter of time, Mayur, just a matter of time.

I wish you all the best on that. And one small suggestion on the heater side, some of our channels have been talking to the dealers on this side. A.O. Smith as heaters have done really well in terms of product positioning and premiumization. And when we understand why, one of the factors which other heater -- sorry, boilers, sorry, my mistake, apologies...

These are water heaters.

Yes, water heaters, they have. Some of the companies have not been able to do it. Now this because of the pressure problems of water, most people or in housing societies, there is a pressure pump or internal pressure, the kind of pressure which comes through the heaters -- boilers, it becomes very difficult for many of the water boilers to manage that. There A.O. Smith has done a very good job. So just a small feedback in terms of differentiated positioning for you to think on sir.

Excellent. No, very good point, very good point, very good point. No, we have taken care that our products, our heaters can withstand 8 bar of pressure which is what be it in a high-rise building or with a pressure pump. So -- but you're absolutely right. Your market understanding is bang on.

Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to management for closing comments. Over to you, sir.

Thank you very much, everybody, and your questions were also quite insightful and now sort of gave us a lot of food for thought. So we look forward to discussing once again 3 months down the road. Have a great evening. Thank you. Bye-bye.

Thank you. On behalf of Yes Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.