Symphony Limited (SYMPHONY.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Symphony Limited's Q1 FY '26 Earnings Conference Call hosted by IIFL Capital Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Renu Baid Pugalia from IIFL Capital Services. Thank you, and over to you, ma'am.

Very good evening, everyone. Today, we have with us the senior team of Symphony for the 1Q FY '26 Earnings Conference Call. The management is represented by Mr. Achal Bakeri, Chairman and Managing Director; Mr. Nrupesh Shah, Managing Director, Corporate Affairs; Mr. Amit Kumar, Group CEO and Executive Director; and Mr. Rajesh Mishra, CEO, International Business. I now hand over the call to Mr. Bakeri for his opening comments. Thereafter, we can proceed with the presentation and the call. Thank you, and over to you, sir.

Thank you very much, Renu. Good afternoon, everybody, and welcome to this earnings call of Symphony. I will be handing over to Mr. Nrupesh Shah, who will take us through a presentation, after which we are all here for the Q&A. The customary safe harbor rules apply. Thank you very much once again.

Thank you, and welcome to Q1 conference call for FY '26. So as everybody knows, summer '25 was a subdued summer that too on a very high base of summer of '24. So like many other summer-related industries or summer-related products, Symphony has been also adversely impacted. The revenue during the quarter on a stand-alone basis stands at INR 229 crores, down from INR 373 crores, while PAT stands at INR 37 crores, down from INR 69 crores. During the quarter, we have succeeded in recovering about INR 5 crores from Pathways, which was written off earlier and shown as an exceptional gain. So as said earlier, revenue is lower on account of shorten and rain disrupted summer. And on top of it, also to keep in mind, in March '25 quarter, we had unprecedented sale and record sales. So in a way, there was also huge preseason stocking as well as sales to an extent because of shorten summer and intermittent rain, even that impacted. However, also wish to highlight that June '25 sales of INR 229 crores is the second highest ever June quarter sales, surpassing sales of earlier based of the summer quarter. And earlier summer quarter base sales was June '22 vis-a-vis that it is higher by 10 percent. And today, Board has approved interim dividend of INR 1 per share, totalling INR 7 crores on top of it as today there was AGM, even final dividend of INR 8 per share in addition to earlier buyback and interim dividend of last year will also be released. So these are the financials for trailing 12 months as many of you wish to like to track for trailing 12 months. So July '24 to June '25, revenue from operations on a stand-alone stand at INR 1,038 crores versus INR 996 crores. EBITDA INR 229 crores, almost flat, while PBT before exceptional item, INR 283 crores, up from INR 275 crores and in terms of the capital efficacy, during trailing 12 months, capital employed in core business was negative by INR 30 crores versus INR 24 crores previous 12 months, translating into ROCE of Infinite and return on net worth stands at 18%. And last year, the total payout was 84%. And over last 10 years, the payout has been in excess of 80% of the profit after tax. And post that, the treasury stands at INR 363 crores as on 30th June. Now consolidated financials. So technically now consolidated financials, we have to present in 2 parts. Part 1 is for continuing operations and Part 2 is for proposed companies which are on block. So this is for Symphony India, GSK China and Brazil. Put together, the turnover is INR 251 crores and PAT is INR 39 crores and PAT margin stands at 15.40 percentage. GSK China continues showing strong growth momentum, having a huge potential. For Brazil, it was a nonseasonal quarter but gearing up for a summer season '25. And for IMPCO Mexico and Symphony AU, that is the companies on block, the sales stand at INR 99 crores, PAT stands at INR 3 crores and the EBITDA margin stands at 12 percentage. So IMPCO Mexico also after 3 consecutive rock-solid years and summer, wherein it registered a Y-o-Y 30 percentage CAGR growth. Just like India, it was a mild summer and hence, the quarter has been impacted and EBITDA margin has been also impacted only and only on account of the operating leverage. While in case of Symphony AU, now our complete asset-light business model is in place. Our factory lease expired in July, and we have not renewed that. And hence, its outsourcing is in Australia, India and China, and it's product and market expansion is on track and on top of it, now it has a product portfolio befitting to the local market. So we believe that henceforth, the benefit of transformation should accrue, and this is second straight quarter of Y-o-Y growth. So as it was conveyed earlier, the status of IPR transactions between GSK and IMPCO. So GSK concluded 9 IPR transaction and technology know-how sale to IMPCO Mexico as mutually beneficial. The total transaction value is USD 5.2 million amounting to INR 44 crores, half of it, that is first tranche of INR 22 crores has been concluded in June quarter and remaining half will be concluded in September '25 quarter in terms of the cash flow. And GSK China has repaid the loan of INR 28 crores to Symphony India, partly out of internal accruals and remaining from sale proceeds of IPR transaction. And now the loan to India outstanding is INR 26 crores versus peak of INR 60 crores in May '24. And that also seems to be fully repaid by end of the year, INR 22 crores mostly in current quarter itself out of the sale proceeds of IPR and remaining from its internal accrual. And henceforth, GSK China will also be in line with Symphony India in terms of the capital efficacy. So during the quarter, we launched new range of air cooler that is Air Force range. It has received very strong traction, fuelling scale-up as well as range expansion from several category of the markets. We have accelerated all-season and counter seasonal product growth, which are in the category of tower and kitchen cooling fans, large space ventilated cooling fans as well as water heaters. It won't be out of place to mention that in trailing 12 months, the sales of this category plus exports from India, that is non-household air cooler products contributed more than 25 percentage of the sales in Symphony India, which used to be less than 10 percentage earlier. And again, it has a huge potential to grow further. We are strengthening our market presence in alternate channels as well as more and more focus on semi-urban as well as rural markets. Thank you. So with this, we are open for question and answer.

[Operator Instructions] The first question is from the line of Siddhant from Goodwill. .

I just wanted to know about the channel inventory and what kind of situation would be there over there end.

That's a pertinent question. Given that till the March quarter, we were placing inventory very aggressively with the channel, the end of the channel inventory at this point in time is higher than what we expect at the end of this summer quarter. That said, we are in the process of collecting the entire data and I'm not at liberty right now to put in the exact numbers at this stage. But it is more than the normal inventory on account of subdued summer. But as you know, we have passed through many such summer in the past. So that is part and parcel of the business, and still we have to overcome and we have to perform.

[Operator Instructions] The next question is from the line of Balasubramanian from Arihant Capital Markets Limited.

On the adjacent category side, LSV, tower fans and water heaters, I think now these are decent double-digit sales. And if you could share what are the growth trends is expected and how will these categories mitigate seasonality risk? And how do we look at impose or specific products going forward? And what kind of new launches in pipeline?

Again, that's a very interesting question. And especially given the way the season panned out, these categories may fit into the…

I'm sorry to interrupt you, sir. Sir, you're sounding a little distant. Can you come closer to the mic and speak please?

Is it any better now?

Yes, sir. Thank you so much.

So these new categories that we are talking about, the tower fan, the kitchen cooling fan, the LSE also for that matter, they have over the last -- if I look at last 3, 4 years, they are clearly giving us a 50-plus percent kind of CAGR to -- and hence, building a key part of the growth portfolio that we are building. Another thing, even after a subdued season like this, these categories, even within this financial year, they have grown by a similar rate versus last year. So in that sense, these are giving us a contra-seasonal portfolio to continue to build on and help make our portfolio more robust. As you already mentioned, we are into double-digit percentages with these products in our total sales portfolio. Going forward, I continue to envisage -- I see them continue to grow at a faster clip compared to the core residential coolers portfolio. I would refrain from sharing numbers at this stage, but clearly, they would be at a faster growth clip compared to the overall company tools.

And again, it won't be out of place to mention that to an extent this category was also a saviour for June quarter despite it was a subdued summer. And as Amit mentioned, this category even in June quarter registered a very robust growth.

Mr. Balasubramanian, do you have further questions sir?

Sir, on the BLDC technology side, BLDC coolers and tower fans, what is the adoption rate and how we are differentiated compared to our competitors in terms of pricing and the cost structure and margin returns?

So this is a range -- the BLDC range of coolers we launched 2 years back. And even in the tower fan, we have BLDC product that has been in the market for more than 1 year. Each of these are priced at, give or take, about 10% to 15% premium over the standard non-BLDC products that we have in similar categories. The adoption has been mixed, I would say, in the tower fan -- it has -- the adoption is better than in the air coolers, but we continue to be keen on building this and we are looking at this as an additional kind of product segment as we go forward.

And unlike other brands were in BLDC fan, despite that top line growth, they keep on registering losses, we are having and we are going to grow with profitability.

Okay, sir. We are targeting exports like doubling exports in maybe in the next 3 years. And because of the current tariff situation? And are we focusing to scaling up in the U.S., especially? And is there any challenges regarding capacity or logistics. And whether -- if you're doing exports, whether these tariff things, we are completely taking care or we are sharing with our customers?

The U.S. tariffs are an evolving situation. Every day, it's something different. So we are not holding our breath about what is going to happen. And in any case, our tariffs on India -- on products from India are lower than on tariffs in China. So that's -- so really speaking, at this point, it doesn't really matter. And whatever has to go for the summer of '25 is already there. And what really matters is what happens in the summer of [indiscernible]. And that's a long way off. So we'll see what happens. We will cross that bridge when we come to.

Okay, sir. Sir, my final question regarding what is the channel inventory level status, sir, in this quarter?

So you probably missed the answer that we gave to the previous question, which was that same question. We -- I mean, there is a significantly high inventory in the channel than it usually is. There is no doubt about that because of the weak summer that we faced. The exact numbers are something which is a different story. But for the purpose of this call, the inventory is high.

[Operator Instructions] The next question is from the line of Shraddha Kapadia from SMIFS.

So basically, my first question is regarding, so Q1 has normally been a seasonally strong quarter for the company, but the revenue fell sharply. So how much of this decline is attributable to weather versus the structural or the competitive factors. Also, if you could help us with the current market share number for the company?

So while the sales has fallen off a cliff as compared to last year, but as was presented in the -- before the QA began, the sales was still higher than any other previous year, so we have to look at it in light of that. The loss of sales is entirely on account of a weak summer because the same has been experienced by product in every -- by all products -- by all industries in all summer categories like air conditioners, fans, coolers, of course, refrigerators and everything associated with it, like stabilizers and batteries and so on and so forth. So it is absolutely a summer-related issue. There is no structural issue whatsoever.

And in terms of market share?

Yes. In terms of the market share, the market share also remains what it was because everyone in the market -- everyone's sales has dropped. So it isn't as if Symphony's sales has dropped more than others. We've been reading the commentary of various other companies. And we also -- we know what -- we have information from the market, everybody's sales has dropped. If probably more than Symphony. So at the end, when we get the market share reports, it might so happen that Symphony's market share may have actually risen.

Okay. Also, sir, if you could help me with the regionalized demand, would that be possible?

I mean the summer was the worst in the South. So I would say that degrowth was the worst in the South. But then it was, I would say, uniformly bad across the rest of the country.

Okay, sir. So have we seen any early recovery post June? And what -- if you could you give a basic outlook for the H2 of the upcoming sector and the winter season?

So Shraddha, this is a category which the end customer only buys in the summer months. So in the current quarter, these are being the monsoon and the sort of the rainy season, there is no consumer sales, there is no tertiary sales that happens in this quarter. What we will sell will be largely to the channel. And because of the high inventory in the channel, which I spoke about a little earlier, that sales will also be subdued. So we do expect some sort of, I would say, tapering off of sales in the current quarter as well compared to the same quarter of the previous year.

So considering the IMPCO and the Australia divestiture is there. So any update on the monetization if you could provide? So last, we knew that the bankers have been appointed, but if you could provide any more update that would be great?

We've had some very good interest as evidenced by companies internationally. So they are still at a very, very early stage of finding the NDA and all of that. So we'll certainly share the news when the time is right, when we're closer to signing a deal.

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

Sir, given that this year, as in the start of the year is already impacted by the seasonal headwind, so what are our plans to scale up the portfolio, both on the export side as well as on the non-air cooler part of the business, both in terms of the industrial air cooling as well as the other products, like fans, et cetera. Any specific initiatives on the GTM trade would be helpful.

Sure. So Renu for the other products as again, was in the presentation, the growth has been significantly higher than for the -- obviously, the other products, the residential product have degrown, but our industrial coolers and our tower fans and our kitchen cooling fans, all the other categories have grown and grown very impressively. And we're continuing to expand the market. Last year, as far as water heaters are concerned, it's another category that we introduced last year, that was only introduced in a very limited geography in a couple of cities in the South. Now we are sort of rolling that out to more cities across the country and as well as to some modern retail stores. So it's going to be a gradual rollout. I think it's only be -- it will only be a year from now that we will have a sort of a pan-India presence in the water heater category. Whereas for all the other categories, tower fans, industrial coolers, we are certainly present across the country. And that has -- those categories have been growing very impressively. So we are sure that, that rate of growth will continue. And again, as was said, they constitute together about 25% -- about 25% of our revenue, and then will keep on growing. So -- and on top of that, of course, exports has also -- has done well and will continue to do well. Exports to third parties as well as to our subsidiaries. So the entire sort of future does not depend only on the sales within India. So there are various other drivers, which will sort of lead us to continued sales.

Got it. Secondly, with respect to capital allocation, do we have a targeted budget in mind that you would like to invest in R&D and product development for these tower fans or the BLDC fans or for that matter, the new portfolio which you are trying to scale up for water heaters there?

Again, good question again. Considering our business model, we do not require much CapEx to grow. Even last year, we've introduced some 17 new models. This year also, there are several models in the pipeline. And the investment that this will all require would be in several crores. I mean we're not talking about the tens of crores, maybe less than INR 10 crores. So the CapEx that is required in our business model for us to grow is nothing significant. It doesn't really impact the numbers one way or the other. So we will continue to invest whatever is required to sort of meet the market requirements and to keep on innovating, to keep on addressing different segments of the market. And so that will just keep on happening as it has been for the last several years.

Sure. And last question, while exports now has been a significant focus for us given that both the Mexican as well as the Australian arm, we are divesting it in the next few quarters. So following the last analyst meet, what would be the updates in terms of targeted investment to increase the direct reach with the channel partners and large distributors in the region and other countries aligned? And does the noise around or the entire confusion around the tariff, non-tariff structure has put these plans on the sidelines? Or are they continue to remain unabated?

So let me answer your second question first. As far as the tariffs are concerned, I mean, they have not impacted our plans in any manner whatsoever. So that has been noise to quote you. Even the tariffs which were announced yesterday on products from India are lower than on the tariffs from China and which is our primary competitor. And as far as the other geographies are concerned, we don't really need to again invest a lot or it really takes in our business model is to have people and invest in their travel. And that is something that we have been doing in any way. So there is nothing exceptionally different that we will do going forward. And even in Mexico and Australia, the 2 geographies that we are divesting from, the 2 companies that we are divesting from, like before, we are not exiting from those geographies. We will probably continue to sell to the same companies even under new management, under new ownership, at least in the foreseeable future. So we don't really expect the divestment to substantially alter our international business numbers.

Got it. So there is a small clarification for these regions, our eventual game plan would be to target supplies to these entities, but under the new ownership rather than reinvesting back in the GTM in those regions or for example, for U.S A. instead of from Australian market? Am I right or it would be a combination of both?

It could be a combination of both. It could be a combination of both. Because for the companies per se, IMPCO and Climate Technologies, it would be like white labeling. We would sell under those brands, Bonaire and the other brands in Mexico, which are owned by those companies. So at the moment, we own the company, so we own the brand. But in the future, when the companies are sold or we won't own those brands, so what we will sell to them will be white labeling. And on top of that, we'll continue to explore opportunities to sell different products, I mean, different models of coolers under the Symphony brand in those same geographies.

[Operator Instructions] The next question is from the line of Keshav Lahoti from HDFC Securities.

I just wanted to get a sense when you think the channel inventory will get normalized? And is it fair to assume channel inventory is possibly at lower level than March?

Yes. By March -- so first of all, yes, your first question answers the second. The channel inventory will only sort of get normalized once tertiary sales begins. And closer to next summer, sales will begin and channel inventory will get normalized. So yes, so that's how it would be. That's how this industry sort of behaves.