Symphony Limited ($517385)

Ladies and gentlemen, good day, and welcome to the Symphony Limited Q4 FY '26 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manan Goyal from ICICI Securities. Thank you, and over to you, sir.

Thank you. On behalf of ICICI Securities, we welcome you all to Q4 and FY '26 Results Conference Call of Symphony Limited. Today, we have with us senior management represented by Mr. Achal Bakeri, Chairman and Managing Director; Mr. Nrupesh Shah, Managing Director, Corporate Affairs; Mr. Rajesh Mishra, Chief Growth Officer. Now I hand over the call to the management for their initial comments on the quarterly performance and a small presentation. Then we will open the floor for Q&A session. Thank you, and over to you, sir.

Thank you very much. Good morning, everybody. This is Achal Bakeri, Chairman and Managing Director of Symphony. I welcome you all to this earnings call of Symphony Limited. And as is our custom, my colleague, Nrupesh Shah, Managing Director, Corporate Affairs, will be making a brief presentation, following which we'll take your questions. The customary safe harbor rules apply, and I thank ICICI Securities for hosting this call. Over to Nrupesh Bhai.

Hello. Good morning to everybody. Thanks for joining Symphony's FY '26 Investor Call and Earnings Presentation, coupled with Q4 '26. So we'll take you through performance highlights. Second is Australia reset. U.S. business and the related IPR consolidation. So coming to financials. On a consol basis, for the year FY '26, top line stood at INR 1,131 crores, down by 28% Y-o-Y, leading to PBT of INR 149 crores, down from INR 326 crores. After providing for exceptional onetime impairment provision and net of some of the write-back, the PAT stands at negative INR 141 crores. The capital employed in the core business on a consol basis stands at INR 384 crores. Mainly this capital deployed was in Australia and Australia-related business. and ROCE, which is PBIT divided by capital employed based on monthly average capital employed stands at 34%. Coming to stand-alone performance, Symphony India. Revenue is INR 765 crores, down from INR 1,182 crores. PBT stands at INR 164 crores, down from INR 329 crores and profit after tax after exceptional items stands at INR 166 crores. About exceptional items, we will deal with it later on. And capital employed on the core business that is in Symphony India was INR 78 crores, translating into ROCE percentage of 149. Our total treasury as on 31st March '26 stands at INR 287 crores after remitting and investing INR 165 crores in Australia to repay its long-term and short-term loan, which was converted into equity and now impaired. For quarter 4 FY '26, that is March quarter, on a consolidated basis, revenue is INR 338 crores, down from INR 488 crores. Gross margin percentage, the noteworthy figure -- noteworthy parameter of the profitability is intact. It is 46.4%, in line with previous year. Of course, EBITDA has taken a toll mainly on account of economies of scale and operating leverage and hence, EBITDA percentage stands at 15.5% down from 21.2%. It is also noteworthy that beyond India summer products, so now we have short form it as a BISP portfolio or BISP products, which includes large space ventilated air cooling, tower fan, kitchen fan, water heater, exports from India and sales in the rest of the world. That is the product portfolio not dependent on Indian summer that constituted INR 558 crores of sales out of about INR 1,100 crores plus, that is 49% of FY '26 revenue in a way through partly product diversification and geographical diversification, derisking the business. During the year, IMPCO Mexico registered flattish revenue with overhang of channel inventory. GSK China is doing well, registering decent top line as well as profitability growth. But another important feature is during the year, GSK China, out of its internal accruals and realization from its assets, repaid INR 26 crores of loan to Symphony India and hence, as on March '26, net loan repayable to Symphony India is just INR 4 crores from peak of INR 60 crores plus and this INR 4 crores of loan repayment is expected in next 6 months, whereby GSK China, in line with IMPCO Mexico will be debt-free in terms of the long-term loan. USA business has registered strong momentum despite geopolitical and tariff issues and the profitability on a quarterly and annual basis is intact as it was in pre-tariff, pre-geopolitical turmoil. As far as Climate Technology Australia is concerned, I will come to it later on. And Board of Directors has declared final dividend of INR 5 on a face value of INR 2, amounting to total annual payout of INR 62 crores, almost 60% of annual consolidated PAT in line with our stated payout policy. This payout is despite taking an impairment. Coming to Symphony India, Q4 '26, the revenue stands at INR 199 crores, down from INR 368 crores. March '25 was, of course, high base, but March '25 top line was also on account of huge unbilled advances as on 31st December, so high base and to an extent, extended billing to next quarter. There was until 31st March channel caution because of inventory overhang and bad summer of '25. However, starting from third week of March, especially in South, Western India and part of Central India, there has been decent performance in the month of April so far from those parts. As far as North and East India is concerned, channel inventories to a major extent already rationalized. However, in April as well as until now, there has been some weather disturbances, but it is expected that starting current week, we may witness decent summer. And in the past also, it has happened that especially in these parts, summer sets in from second or third week of May. If so, still, we have 4 to 6 weeks of decent summer sales. And as far as India is concerned, beyond India summer products, revenue registered at INR 192 crores out of stand-alone top line of INR 765 crores, that is slightly above 25% of the top line. Of course, this segment as a whole is already profitability-wise accretive, including EBITDA level as well as PBT level. Export revenue was impacted mainly on account of ongoing Middle East geopolitical headwinds. Coming to Australia reset. Yes. So now I'm dealing with Australia reset U.S. business and on account of that IPR consolidation at a level of Symphony India. So Board of Directors and company have decided to take a balance sheet reset, including impairment in relation to Australia business. So entire equity investment made in Australia worth of INR 350 crores cumulatively, including about INR 299 crores in the current year has been impaired. In other words, now there is nothing more to impair in terms of the equity investment from Symphony India. We have ring-fenced U.S. business by making it a direct subsidiary of Symphony India and Bonnett's equity has been bought over by Symphony India at a valuation of INR 29 crores. In addition to that, some of the IPRs, especially Bonaire brand of Australia is valuable, particularly for U.S. business and other markets. And hence, those IPRs have been also bought over by Symphony India for about INR 23 crores. So company fully recognizes investors' concern about the performance of Australia, its capital efficiency, year after year, the losses it has posed and investors always like to have disciplined capital allocation. And we must accept that our original acquisition thesis of Australia business has not translated into the financial outcome due to external situation and despite making all around turnaround efforts. When Symphony acquired Australia business in 2018, the strategic rationale was in building broader international business. The acquisition provided entry into developed markets such as Australia and U.S.A. and added Established brand portfolio. However, post acquisition, Australia business encountered materially different operating environment with a series of external thoughts. Just within 15 to 16 months post acquisition, we witnessed COVID-related world's longest lockdown for almost 21 months. And hence, we didn't get the time to really integrate and symphonize the business. On top of it, due to changes in local regulation, we had to exit certain products, especially gas-based products, but promptly, we replace them by new set of products, more befitting to local market, coupled with we also reduced the overheads to less than half, also integrated manufacturing facility converted into outsourced business model, also tried best to enhance and expand marketing network. But in a nutshell, despite all that, in last 2 years, Australia business has registered losses of INR 60 crores, including INR 35 crores in FY '26. This is after accounting for decent performance and profitability of U.S.A. business. Hence, to further reduce the financial overhang and carrying risk, Symphony infused INR 165 crores in March in Australia business to repay the long-term loan as well as working capital loan availed by the subsidiary by -- which was by the comfort of and guaranteed by Symphony India. So to that extent, loan has been repaid. Coming to specific impairment, on a stand-alone basis in Symphony India, we have taken an impairment of INR 298 crores in addition to INR 50 crores taken last year. It means entire equity investments totaling INR 348 crores has been impaired. And at the cost of remediation, nothing more to impair or in other words, nothing more to lose. And at a consol level, where technically accounting assets are different. So all put together, the impairment is INR 259 crores, including goodwill is some of the intangible assets and deferred tax. So to that extent, post PBT, PAT is impacted for the quarter and year. The Board of Directors and company has also decided and very importantly and categorically that no further capital investment or allocation will be made to Australia business. So whatever we were to invest, whatever we were to commit, we have done enough. Along with this, we have acquired the shareholding of U.S.A business directly in Symphony India amounting to INR 29 crores and IPR worth of INR 23 crores, totaling INR 52 crores. And this INR 52 crores will be remitted again out of Treasury of India in current week or next week. And from remaining balance outstanding working capital loan, which is guaranteed by Symphony India, these proceeds will be used to repay the working capital loan. And thereafter, these are the financial statements more for your reference, stand-alone as well as consolidated on quarterly and annual basis. Yes, so we can Q&A.

[Operator Instructions] We have the first question from the line of [ Ankur Kumar ] from Alpha Capital.

Sir, you said South, West and Central India have seen decent performance in April, but North has been weak. So can you comment overall company level, how are things? And what percentage of our business comes from the North part?

No. So it's not like every year, North contributes the most or East contributes the most. It varies year after year, depending upon the season. However, despite huge inventory until preseason, in April, there has been a decent uptick in the fresh business in the month of April. And coming to North India, as I said, most of the inventory overhang is done so far despite turbulent season. However, it seems that starting from current week, there may be a decent summer as it was witnessed in some of the past years. If so, I think still we have -- we may have a fairly good summer company as a whole.

Sir, when you say fairly good, can you expect a double-digit type growth, 10%, 15%, 20% growth? How should we look at it?

No, if you can give me for next 2, 3 weeks, what's going to be the precise weather, then I can make some analysis and give that forecast.

Sure, sir. And sir, our company has been quite pioneer in doing buybacks. And now a lot of companies have announced buyback, but we haven't announced any such plans. Our last buyback was in 2024. So any plans on that front?

Yes. So no share buyback as of now. But in a way, we bought back Australia company, we bought back Australian loans, and we bought back U.S.A. company isn't it by doing this balance sheet reset.

But sir, given our stock price is quite low compared to 1, 2 years ago. So any thoughts on share buyback for shareholders?

No, at the right time, Board will consider as always, it was done and irrespective of anything, there has been a decent payout. But of course, at the right time, it can and will happen, again, with change in regulation.

We will take the next question from the line of Vinay Nadkarni from Hathway Investments Private Limited.

I just wanted to know what is the size of your U.S. business in terms of sales and EBITDA and PAT, if you can share that? And what is the loan outstanding?

So size of U.S. business in last 5 years have varied from, if I say in INR, ranging from INR 30 crores to INR 140 crores. In other words, the potential is at least INR 140 crores that is the kind of the sales we achieved. In FY '26, U.S. business sales was about INR 60 crores. And it's -- I don't have the EBITDA margin handy right now, but by and large, it is in line with our domestic business. Of course, that margin gets distributed among 2 or 3 companies. But ultimately, that is the level of EBITDA margin from U.S.A. business.

And what sells most in U.S.A.? And what are the products that you sell there? Is it the same thing that you do in India? Or is there something additional there?

Yes, it is air cooler, mini air cooler.

So some products are [indiscernible] some of the products which are sold in U.S.A., most of the products in terms of value are exported from India and the balance come from our plant in Mexico. But they are all air coolers essentially.

Okay. And this tariff because of your Mexico tariff will not be an issue going forward. Of course, now there is no tariff, but still.

Yes. Fortunately, by the time our products reached the shores of America, even this year, the tariff had come down to whatever, 12% or so. So even from India, it wasn't really material. So -- but yes, and of course, from Mexico, there is no tariff. So all in all, it's become a nonissue at the moment.

Okay. Can you -- I don't remember seeing your slide on the performance of each of your subsidiaries, GSK China and Mexico. Can you just give us the sales and the EBITDA numbers of these 2 companies, the subsidiaries?

Okay. So about IMPCO Mexico, for FY '26, the top line stood at INR 182 crores and EBITDA INR 21 crores. For GSK China, top line was INR 96 crores and EBITDA of INR 8 crores. And for Climate Technology, Australia, Top line was INR 182 crores. And including profit of USA business, the PAT figure I have is negative INR 27 crores because there we had a substantial interest outflow also.

Okay. So now the Citi Australia, so finally, it is done. Now are you closing it down? Or are you still looking for sale of that -- though it is completely marked out of our books, are you looking at monetizing some part of it? Or how -- what exactly is the plan for Citi Australia going forward?

So there, we are to begin with, again, changing the business model to where we will have distributors across the country who will distribute products. At the moment, the subsidiary itself sort of has warehouses and distributes products to various dealers across the country. Instead of that, we will have distributors in key geographies who will invest, buy the products from -- that go anywhere from India or China and warehouse them and then sell to the local dealers. So that is the plan. As far as your specific question about close winding it up or that is something which we are not at the moment considering. At the moment, we are only looking at making the distribution more effective and efficient so that we sort of continue to build on what we have already done without draining resources anymore.

Yes. Because you mentioned that the Board has decided not a single penny more to be given to Citi Australia. Just was wondering how can a loss-making company survive without any funding?

Exactly, exactly. So essentially, the company there will just have the team, which will manage the affairs, whereas the commercial transactions would be entirely between the distributors and our company in China or India, which have been traditionally selling products to the Australian subsidiary.

So what is the fixed cost of Australian subsidiary now in a strip down version for a monthly fixed cost of fee?

As of now, it is how much?

It's about -- as of now, the CODB is about $500,000 to $600,000 per month, which will -- which includes significant warehousing, rental costs and all, which would also further reduce. So we would essentially just have the team and some office space, which will manage the affairs over there. And that's a similar arrangement that we have, say, in Brazil. And so we are basically going to replicate that kind of a model. To continue with the previous question, this $500,000 or $600,000 per month would further go down once the warehousing costs have been eliminated.

[Operator Instructions] We will take the next question from the line of Manan Goyal from ICICI Securities.

So I have one question, like with multiple new entrants aggressively pricing the air coolers. So what's the company's strategy to defend their market share? And are you seeing any average selling price pressure at the trade level?

What was the last part you said, what kind of pressure at the trade level?

Price pressure.

Yes, pricing pressure at the trade level.

So Symphony has always been considered a sort of a premium brand, a mass premium brand, whereas all our other competitors have positioned themselves lower to Symphony for equivalent products. However, we have the widest range of products in the industry. And our products will be sort of positioned as various price points so that we are able to aggressively defend our market share and maybe even grow the market share. So the advantage that we have of our product portfolio is that we are able to sort of have products at the value for the value segment as well as for the premium segment.

Got it. And sir, another question is like the water heater category was launched in FY '26. So what are the revenue numbers in this category so far? And how do you expect the EBITDA margin will become accretive in this category?

So it was a launch year. So the revenue wasn't anything to write home about. But in the coming year, we are sort of going to -- it's a long haul. It's going to be a long process. And in the years to come, we will sort of work our way up the revenue chain.

[indiscernible]

Yes. In last year -- until last year, it was launched in very limited markets. So the market -- the geographical spread will also be wider this year. So the revenue will grow up. The products were very well received, both from customers and channel partners wherever they were sold. So we have a unique product proposition in terms of the hair fall control geyser, which is something which no other competitor in the industry has. So in terms of technology, our product is the most advanced. But at the same time, we have launched value products -- product ranges as well. So we have a whole suite of products from the spa, which is our flagship product to products at value price points.

We will take the next question from the line of [ Heather Kachwala ] from Yes Securities.

Could you also provide the PAT numbers for your subsidiaries?

PAT number for...

The subsidiaries.

Yes subsidiaries.

So for Climate Technology Australia, at a PAT level, it was negative INR 27 crores before exceptional item. For IMPCO Mexico, it is positive INR 6 crores. For GSK China, before exceptional item, it is positive INR 6 crores and post exceptional item, it is INR 49 crores and Symphony Brazil, it is negative INR 3 crores.

And what do you expect the growth like looking forward in these subsidiaries? What would you guide for? How should we look at them?

No. So very clearly, with this Australia reset, balance sheet reset, subsidiaries will incrementally contribute to the profitability. And as you know, in Mexico, in China and in Brazil, we don't have any capital deployment. In fact, in Mexico and China put together, our equity investment is less than INR 5 crores. There is no Symphony outstanding loan to IMPCO Mexico since years and years. And in GSK, which was in excess of INR 60 crores, to be precise, INR 67 crores, now loan outstanding is just INR 4 crores, even that should be repaid. It means not only in terms of the top line and profitability, but even in terms of the overall profitability metrics, it has to be and will be quite capital accretive. In fact, it was Australia, which was a huge and consistent drag and had distorted the picture.

We will take the next follow-up question from the line of Vinay Nadkarni from Hathway Investments Private Limited.

Just 2 questions on the Indian business. When you said overall business was around INR 1,100 crores and INR 558 crores coming from BISP, the balance INR 542 crores, I presume would be from the Indian operations alone. So when I look at how is the EBITDA level playing in these 2 geographies, I mean, these 2 segments?

No, of course, in household residential coolers, it is significantly better. However, in BISP category also, even though we have built and growing it with substantial advertisement and sales promotion expenses in last 3, 4 years, at an EBITDA level, it is in a decent high single-digit margin percentage.

Okay. And you see that growing through operating leverage going forward? Or how exactly will BISP EBITDA margin cross and come closer to your normal EBITDA margins?

No. So for sure, it has the potential to be in line with our air cooler business.

With operating leverage.

And with operating leverage. By the way, as far as our subsidiaries are concerned, particularly IMPCO and even U.S. business as well as China at EBITDA level, if we normalize, they are almost in line with Symphony India business.

Okay. And what is the EBITDA for the air cooler business in India out of the INR 542 crores, roughly?

I don't have [indiscernible] right now, but...

Ballpark...

We have mentioned the gross margin percentage. So gross margin, that is the operating margin percentage on a consolidated basis was about 46% in line with year before despite there has been major turmoils and summer-related disturbances. So neither there has been a pricing pressure. And despite cost pressure, we have due to a variety of strategies and initiatives, maintained that. This is at consol level. As far as on a stand-alone level is concerned, gross margin percentage has taken a heat of about 3%, but still, it's hovering at about 45% plus. As far as EBITDA margin percentage is concerned, certainly, it's linked with operating leverage, and that has taken a hit. On a consol level, it is 15.5% and on a stand-alone level, it is 17%, which year before it's about 27%.

Yes, yes. Just wanted to check out on now the competition in Indian market, how much of gap is there between our pricing and lower-end AC pricing in the market, branded AC?

That is noncomparable product, noncomparable segment. Actually, the cooling capacity of a particular category of AC and air cooler should be compared. But still depending upon the brand, the capital cost difference will be almost 1/4 -- 1/3. Air cooler will be costing 1/4, about 1/3. And when it comes to the electricity consumption, clearly, the saving is more than 90%. So in a way, payback period is 1 to 2 years from electricity saving.

Okay. So basically, you're saying if INR 100 is the AC price of the lower-end branded ACs, your price would be around INR 75.

Ours will be about INR 30 to INR 40. So lower by 10%.

We will take the next question from the line of Shraddha Kapadia from SMIFS Limited.

Sir I just wanted to know the down the year, sales of Q4. You have mentioned for the full year, if you could just help with the Q4 percentage also.

No, you are not clearly audible. If you are using speaker phone, please use the handset.

Is this better? [indiscernible].

Shraddha, your voice is not audible. It is breaking in between.

Down the year portfolio percentage for Q4.

No, no. So we don't have the separate figure for that. But as I said earlier, round the year product portfolio, EBITDA on a stand-alone level as well as console level is high single-digit percentage. This is despite we are intentionally building with a lot of onetime costs, but they are totally booked to P&L, including trade channel-related costs, advertisement sales promotion costs and a variety of other launching costs. But still, it is in high single-digit percentage and has a great potential to be in line with our air cooler category. And in some of the categories, in fact, it has already reached, say, for example, large space ventilator cooling, EBITDA margin percentage now stands even higher than residential air cooler category.

Sure, sure. Also, the other expenses are significantly higher versus the historical levels. So any factors which has led to this high increase? And is it like because of the deleverage? Or how should we look at it going forward? Plus the PVC -- also the PVC increase, which has been witnessed recently, if you could throw some light on that also?

No, there has been huge cost increase undoubtedly. But at least in current quarter, that is June quarter, we have the benefit of old inventory, which was at a lower cost. And overall, it seems that there won't be material impact at least in June quarter at a gross margin percentage. It may be a few points here and there. But as fully new production takes place and starting 1st July, we will be in a position to pass on entire price increase in one way or other way.

Cost increase will be passed on.

Yes.

[Operator Instructions] Thank you very much. Ladies and gentlemen, we will take that as the last question. I now hand the conference to the management for the closing comments. Thank you, and over to you, sir.

Okay. Thank you very much for your participation early this morning, and we look forward to hosting you next quarter. Thank you, and have a great summer. Bye.

Thank you, members of the management. On behalf of ICICI Securities, we conclude the conference call for Symphony Limited. Thank you all for joining us, and you may now disconnect your lines. Thank you.