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

Ladies and gentlemen, good day, and welcome to the Symphony Limited 2Q FY '26 Earnings Conference Call hosted by Equirus Securities Private Limited. [Operator Instructions] I now hand the conference over to Mr. Manoj Gori from Equirus Securities Private Limited. Thank you, and over to you, sir.

Yes. Thank you, Rituja. Hello, good afternoon, everyone. Welcome to 2Q and H1 of FY '26 Earnings Call of Symphony Limited. From management side today, we have with us Mr. Achal Bakeri, Chairman and Managing Director; Mr. Nrupesh Shah, Managing Director, Corporate Affairs; Mr. Amit Kumar, Executive Director and Group CEO; and Mr. Rajesh Mishra, CEO, International Business. I would now request Mr. Achal sir to start with the opening remarks. And yes, sir, over to you, sir.

Thank you very much, Manoj, and a warm welcome to all the participants to this call of Symphony today. Thank you very much for being here. To begin with, let me be upfront that our performance of last quarter has been very disappointing as much for us -- very much for us and as I'm sure as it is for you. But to put things into perspective, just to sort of set the context, this was -- for the first 6 months, this was still the third highest performance that the company has delivered. And for the previous quarter, which ended in June, it was the second highest in the company's history. Not that it matters as far as all of you are concerned, what really you expect from us is to deliver growth every quarter, quarter-on-quarter and Y-o-Y. So that's our job, and that's what we are supposed to do. But being in a seasonal business, the nature of the beast is such that you are dependent on factors beyond your control. And while we had a phenomenal summer in 2024, the summer was phenomenally bad in 2025. As I'm sure all of you know, the entire industry, the air cooler industry has degrown substantially and the sales of air coolers of all our competitors have also degrown substantially. So our sort of performance is more or less in sync with what's happened at the overall market level. That said, that this is -- I mean the heavens haven't fallen. We are here to make sure that we'll be trying our best to deliver better performance going forward. And we are sure that once -- next summer will not really be as bad as last summer '25, it may not even be as great as the '24 summer. But you should -- even if it's a normal summer, the company should do very well. We do have very high inventory levels in the channel, which is why the performance in the September quarter hasn't been what it should have been. But that inventory should sort of normalize as we get into the season. And the season should fare certainly very well. So essentially, that's what I had wanted to say that while the performance is very disappointing, we shouldn't sort of draw conclusions from it because at the same time, company is also working on other product categories, which are either counter seasonal or year-round products such as our industrial cooler sales or our water heaters, our tower fans, our kitchen coolers, exports from India. So we are working on various other avenues of revenue as well. Agreed that those are yet to be substantial individually. But together, all of them have contributed significantly in the last quarter or have been contributing significantly over the last several quarters. So with that, I think all I would like to say is that we expect good times in the future, while accepting that what we have gone through has been disappointing to put it mildly. Thank you, and I'll hand over to Nrupesh Shah to make a presentation, post which we are all here to address your queries. Thank you.

Thank you, Achal bhai, and good afternoon. So for the quarter, the top line has been INR 155 crores on a stand-alone basis vis-a-vis INR 259 crores for September '24, while EBITDA stood at 27% and profit after tax, INR 28 crores versus INR 67 crores. As Achal bhai mentioned, this is spillover of subdued summer or bad summer of '25 and on top of it, high base of last year. And it is on account of round the year product portfolio, which we have very carefully nurtured and developed over a period of time, which includes large space ventilated air cooling, tower fan, kitchen cooling fans, water heaters and exports from India. In all, it has, to an extent, saved the day as they have contributed about 24 percentage of the top line for the quarter and 26 percentage of the top line in trailing 12 months. And hence, that has led to first 6 months top line, third highest, even though Y-o-Y, there is a major degrowth. So this is based on the compilation of the data we have done for last 11 years, quarterly as well as first 6 months. And in that respect, in the past, we have seen the quarters like this, and we have always rebounded much stronger, much better, and that's what we expect. And a lot of work is being done and in pipeline in that regard. As far as EBITDA margin is concerned, it has declined once and mainly on account of operating deleverage. And we have also launched the product for the mass consumers and mass products. So that has, to an extent, impacted the product mix. We have launched 9 new models of air coolers in Air Force range from 3 to 7 SKUs, and that is targeted towards mass market as well as rural and semi-urban market, while in water heater, total 8 models, 6 storage and 2 instant. Coming to the update about the pathway recovery, which if you recollect, we had completely written off in December '24, about INR 50 crores. So earlier, we received INR 4 crores, INR 4.5 crores. And in October, post 30th September, we have recovered additional INR 4 crores. And all legal steps are being pursued aggressively in addition to creation of charge in our favor on all the valuable real estate hailed by promoters as well as the company. And about interim dividend, it is INR 1 per share, that is 50 percentage and total payout in first 6 months towards that is approx INR 14 crores so about first half of financial year '26, top line is INR 384 crores. About EBITDA, it is INR 50 crores and stand-alone PAT stands at about INR 65 crores, down from INR 136 crores. While capital employed in the core business is INR 16 crores and total treasury as on 30th September stands at INR 577 crores versus INR 685 crores. And this translates into ROCE percentage on the core capital employed in high 4 digit mainly on account of negligible or negative working capital and capital employed during 6 months. About consolidated financials. So that covers continuing operations, that is Symphony India, GSK China and Brazil put together, top line of INR 163 crores, down from INR 289 crores and EBITDA of INR 25 crores, down from INR 76 crores, while PAT on continuing operations stand at INR 25 crores. Coming to operations proposed to discontinue, which includes Climate Technology and IMPCO Mexico, the PAT for the quarter is minus INR 6 crores better than September '24, wherein it was minus INR 14 crores. And all in all, combined PAT, all companies put together is INR 19 crores. So at a consol level for April to September '26, top line stands at INR 414 crores, down from INR 682 crores, EBITDA at INR 50 crores and PAT from continuing operations stands at INR 64 crores, discontinued operations negative INR 3 crores versus positive INR 1 crores. And all put together, consol PAT stands at INR 61 crores. So at a consol level, in the first half, capital employed stands at INR 288 crores versus INR 286 crores, translating into ROCE in the core business of 64% and return on net worth of 17 percentage. Coming to subsidiary financials. about GSK China for the quarter, top line is up from INR 25 crores to INR 30 crores. EBITDA stands at INR 3 crores and PAT at INR 2 crores. We are happy to share that there is a strong growth momentum, and that has been sustaining GSK China and it is advancing towards completely debt-free company very shortly. So about IPR update, which was shared earlier, all in all, about INR 45 crores, INR 22 crores has been already paid off by GSK China from its sale profits to IMPCO Mexico and remaining about INR 23 crores is expected to be received in December quarter. And at the peak, the loan given by Symphony India to GSK China was INR 61 crores, which currently stands about INR 30 crores, and that should be completely paid off in ensuing quarters. About IMPCO Mexico for the quarter, which is nonseasonal quarter as far as air cooler goes, but on account of other products, the top line is up from INR 10 crores to INR 17 crores and EBITDA is minus INR 4 crores, minus INR 5 crores. And as far as Climate Technology is concerned, it continues somewhat growth momentum in line with past 3 quarters, top line is up from INR 30 crores to INR 35 crores and EBITDA losses have reduced from INR 9 crores to INR 7 crores. So that transformation, what we have initiated is completely executed and the focus is on increase in the top line and profitability. So about the strategic outlook and the way forward. On the one hand, we are cementing our core leadership in the air cooling business and on the other hand, strategic resilience beyond seasonality, that is the product selling around the year. So as far as cementing core leadership in air cooling goes, the omnichannel acceleration is going on very well, leveraging digital platforms and alternate channels, not only in sales and marketing, but in various operations. There is a targeted penetration in semi-urban and rural market, coupled with suitable products and dynamic product expansion, including for masses and semi-urban and rural market, including Air Force range of products. While coming to round the year products, we expect that there is a huge potential and growth momentum. So suitable dealer and distribution network, along with omnichannel network is continuously being beef up in that respect, which is not necessarily the same as far as the domestic air coolers are concerned. So that is also adding to the diversification. And we are prioritizing on high-margin growth markets and export-led expansion from India. Thank you.

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

So actually, this is mainly with regards to the inventory. So what is the current inventory holding on the GT and the B2B channel versus the normalized levels? And by how or by when do we expect the full channel to get normalized?

So while the inventory is a little higher than the previous year, but we have to understand that, that is despite a much lower sale from us. So that has caused a sort of -- and there has been a compression in sales at the GT level, which is causing sort of a negative sentiment amongst the players for the moment until the season picks up. And what was your second question?

So when do we expect this to normalize?

So that would get normalized, as I said in my opening remarks, as we get closer into the season.

Okay. Perfect. Sorry?

Yes. That is normal phenomena every year. Otherwise, also during off-season, whatever is the offtake or carry forward of inventory, trade is used to carry forward and stock it until summer starts.

Sure, sir, sure. Also, are the distributors very cautious in taking the orders? And if so, what are the steps that we are taking to rebuild the confidence?

So Shraddha, as we said earlier, there is slightly higher than normal stock at this point in time compared to, let's say, a typical year. So there is some caution in the channel. At the same time, post especially the festive season sales that have happened, the channel we anticipate is getting better. And we see that the buildup to the season going forward should start smoothening the overall channel sentiment.

Sure, sir. Can I ask one more question?

Yes, please.

Yes, sure. So also, how much would be the contribution of our round the year portfolio right now to our revenue?

Yes. So as we mentioned also during the call, I'll repeat, for H1, it was about 26% of the total H1 sales that we have.

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

Sir, as you highlighted, channel inventory is slightly higher than normal. So can you please quantify like normally how many days it is now in terms of Q3 sales? And just a follow-up on this. Is it a fair understanding you mean by the time the season comes, so you mean there will be higher channel inventory maybe possibly by FY '26 end. So your Q3 and Q4 performance still would be impacted by higher channel inventory.

So Keshav, let's say, maybe if I look at last 2 years, typically, the first quarter billing that we do is, give or take, about 20% to 25% of the full year number, which said differently, let's say, end of the Q2, the channel carries about, let's say, anywhere between 25% to 30% of the season sales as part of the inventory. At this point in time, it's slightly higher than that. And typically, starting January to February, this inventory level starts going down because the materials start moving both at the retailer level as well as to some extent to the consumer level.

Also in January, February 2025 were fairly warm. So we had very good sales in those months and tertiary sales of retail sales at the dealer level. And hopefully, the same thing will happen again this year. So by the end of the year, at least the last quarter, the sales should be sort of back on track and so should the inventory.

Got it. Possible to quantify, as you said, 25%, 30% is normal inventory normally at this point of time, but how much is it right now?

Difficult to quantify.

Understood. Got it. As you highlighted, the nonseasonal products like is 26% of your sales like tower fan and others. So how has been the growth in that product portfolio year-on-year?

So there has been a decent growth and almost in line with the business plan. And that consists of tower fan, kitchen fan, large space ventilated cooling, geyser and exports from India. High double digit. Healthy double digit.

Okay. That is good to hear means your cooler is possibly would have declined more than 50%...

Not really. No, no, no. Cooler has not declined more than 50%. Cooler has declined more or less in line with the shrinkage of the industry.

Got it. Got it. One more thing. So your market share according to you has broadly been stable in the H1 FY '26. It hasn't changed, moved much.

Absolutely. The market -- see, for like-to-like, when we talk about the national brands, the organized sector players, our market share has remained the same. Now if people consider a lot of the unorganized sort of smaller brands, then of course, if you increase the denominator, then everybody's market share would decrease, not only Symphony, but even the top 5, 7 players. So if you ignore the long tail of which there are more than 100 players, then our market share has remained the same.

Got it. Any impact of U.S. tariff?

Not much so far because our only competition is with China, and China is worse off than us. So in that sense, it hasn't really impacted us to a great deal at least till now.

Got it. If I see your quarterly results, your rest of world revenue have dropped to INR 20 crores from INR 50 crores year-on-year. What is the reason for such a sharp drop? And lastly, how are the things going on divestment side of the 2 subsidiaries? Any breakthrough? When should we expect it to happen?

Rest of the world?

No. So about drop in subsidiary sales. Last year, we had preponed the sale to Brazil, and that was registered in September quarter. And Brazil is our trading subsidiary. Ideally, Brazil picture should be seen year as a whole because it is quite skewed to 1 quarter or 2 quarters so mainly on account of that. Otherwise, as we saw for the quarter for IMPCO Mexico as well as for GSK China, for the quarter, there has been growth. Of course, for IMPCO Mexico in first quarter, that is in June quarter, there was a degrowth. So 6 months as a whole, one IMPCO and second is Brazil. Yes. And your second question was related to IP transaction. So process is on. Information memorandum has been submitted, and we have received some letters of interest, and they are being suitably dealt with.

Okay. So as you mean by letter of interest, so possibly surely, we have buyers for both the subsidiaries, just possibly the transaction amount, which is possibly where we are stuck over, but buyer is not an issue.

This is a sensitive matter and at this level, it will be too premature to share anything in that respect beyond this. So as and when there is any major development, obviously, we will come out with the necessary updates.

No, no. What I'm trying to understand, I'll just tell you what I'm trying to understand normally what happens at time we want to divest. It just happen that there is no buyer, so it might take years. So the question was more on that side, at least we have interest. So it's just a matter of a couple of quarters, maybe 2 quarters, 4 quarters or 6 quarters. So how are the things looking, the initial signals?

Yes. Quite a few parties have signed the NDA, and we have shared our information memorandum with them. So they are in the process of evaluating and hopefully taking the next steps.

Got it. That is for Mexico and Australia, both.

Both.

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

Sir, a couple of questions. One, when I look at the product mix, obviously, we did launch some of the mass segment products. So probably, is it for the time being and probably in the coming quarters or for the season of next year, we should relatively see a better product mix and probably the product mix should return back to those normalized levels. And accordingly, the gross margins also should come back to normal levels. Is that the right assumption? Or any insight there?

So Manoj, that's an interesting question. And if I were to just delve into this slightly differently, the expanded product portfolio that we are talking about is basically from the perspective of capturing a larger share of the metal market that is slowly converting into plastics. So we are actually trying to gain a chunk of that market. So from an overall top line perspective, this is clearly accretive. If this portfolio becomes a significant share of our total numbers, then at the GM level, maybe there is 1% or 2 point kind of impact. But at the total kind of absolute value level, this is going to be very clearly accretive. So that is the approach that is the sort of thinking with which we are driving this added segment.

So overall, your revenues will be aided by this volume. So this will be over and above your normal performance. And accordingly, typically, gross margins might look a percentage or 200 basis points lower. Is that understanding correct?

That's a possibility. Again, the top of the funnel, for example, even at the top, if you note some of our recent launches, products like Silenzo and Arctic Circle and all, they are at a super premium level. Those are categories that we are trying to build. So depending upon how the balance works out, once the full season is over, we'll have a better picture. So as of now, we are holding our sort of horses on this. We'll have to just see which way the balance sort of turns up finally.

And Manoj, the EBITDA margin percentage is ultimately not merely the function of this. It is also the function of overall economies of scale and top line. Even though something here and there happens at gross margin percentage. Positive or negative.

Yes. Yes. Secondly, my question was on the channel inventory side. Obviously, in the past also, we have seen summers being bad. Probably this year, it was an outlier year and probably one of the rare summers that this industry would have seen. As compared to historical years when the channel used to carry inventories into 2Q and 3Q in terms of the overall channel level, are the inventories even higher than those levels like in the previous -- like this year, it was a bad year. Previously also, we have seen those worst years. So whether the inventory levels in the channel are still higher than that.

So Manoj, at an absolute level, the inventory levels might be closer to what we had, let's say, at the same time last year or maybe slightly here or there. One aspect is because the summer this year was not as great in terms of the morale of the channel for the first few months, it was a distraction, which is what we are addressing now. And hopefully, by end of the current quarter, both the mindset and the numbers will settle closer to their historical kind of means.