V-Guard Industries Limited (532953) Earnings Call Transcript & Summary

Ram, do you want to take this?

Yes, yes, yes. I think we -- as Mithun said, see, we are not aggressively pushing numbers into trade at this time. We are just feeling whatever demand is coming from the market, yes? And across channel, our inventory is a little lower than desirable in our key markets, yes, particularly south, yes? So that's the situation. Second thing is, yes, we are -- you will generally see a trend in this environment that what I would say as leading brands and brands which withstand depth of distribution will have some advantage over the other brands. That's the second point. The third point we want to make is, by and large, our performance is similar to others. Maybe it's possible -- see, the weightage of e-commerce in some of our newer categories is not comparable as they are slower to enter e-commerce compared to, let's say, a stabilizer or a water heater. So I think whereas in some of the players where you might have sense better demand in kitchen and all, they have a stronger presence in e-commerce. Also, kitchen and all is a category also has a stronger presence in organized retail also, okay? So I think those influences are also there, yes, in the overall number, yes? But I think by and large, we will not be way off.

Okay. Okay. And sir, any other cost-saving initiatives, apart from the employee cost and the advertisement expense?

No. By and large, like anybody and everybody in the marketplace, right, the cost sets are same across companies, yes? And we are focusing on these cost sets, whether it is what, I would say, establishment costs like rent, travel, yes, or whether it is what I would say as people and stuff like that. But there are...

Yes. And anything else which is discretionary in nature is...

So whatever is discretionary in nature, we are tackling, yes?

Okay. And lastly, sir, what would be the CapEx? Any guidance for CapEx to this year?

Sudarshan? This year CapEx?

Yes. See, right now, other than essential CapEx, things are on hold. We've got a couple of plans to finish. There is not too much of outstanding things left other than certain IT, infra and things like that, we don't see much CapEx happening at least.

See, we may have a CapEx for a wire plant, that's about INR 15 crores to INR 20 crores and then probably another INR 10 crores of IT and all that. So maybe INR 30 crores, INR 32 crores -- INR 30 crores, INR 35 crores of CapEx would happen at the max.

The next question is from the line of [ Bhavin A ] from SBI Mutual Fund.

Mithun, just one question from my side. Given the current pandemic what is it that you are doing differently, which will help the company improve more on a structural basis? And if you could -- it'd be interesting if you could talk about the investment that you will be doing in terms of people which would be difficult to hire in other circumstances or the investment in research, development, innovation, will be helpful to know your thoughts on this?

So we were working on a digital workplace as a concept, we have got started from 2 years back. So we started with world-class VC system. We started with a world-class integration of VC system with Teams, Microsoft Teams. Then we invested in something called Degreed which is a learning platform, which can be used for both company-created content and external paid content as the manager, so we shift. So we have invested a lot of tech, not knowing that this pandemic is coming in our way. And now we are actually using a lot of that. We have constant training programs for not only our own employees, but even for key channel partners and their staff on how to sell particular product to customer, technical selling. So we are using this time to beef up those kind of activities because there is absolutely no visibility on when people can go visit the market, whether it's safe to visit the market and all that. So all the work is done over phones and videoconferencing. So I think we will probably accelerate that journey into a digital enterprise a little faster. I mean we had put some milestones, but COVID has forced us to fast track some of those milestones. This is one side. In terms of people hiring, I think from 2015 to 2020, we have hired quite a lot of people, and you will see our ballooning of employee cost that has happened. So I don't think we need to hire any more key resource. Not a lot of people and positions are left to be filled, in my view. There are very few and far between, which when we find the right resource, we will take them on board. The second is on e-commerce. We have -- we started the journey on e-commerce 2 years back, and now we are getting very good traction. Our margins on e-commerce are far superior than what we do in any other channel, and it's growing very, very fast. And we have even launched certain products where e-commerce is the first channel of choice. And we only will launch them in off-line much later. So all these experiments are working well. I will also ask Ram to supplement anymore to these comments.

So actually, we've been having a long-term journey for organizations capability building, yes? Much of the focus in the last 5 years have been on the supply side, yes? And mainly, we've been working on cost. We've been working on in-sourcing manufacturing, yes? And we have also been working on working capital, yes? So that's been our work and there are some proofs related to that, which we should be able to capture over a period of time. But more than the financial benefit or the capability that is getting built, these are also built on robust digital friendly, what I would say, tech ecosystem, yes? So I think that a lot of focus in V-Guard has been on this over the last 5 years, and which I think may be another year or 2, we will continue so that our work on the supply side there will be complete and comprehensive, yes? We have commenced work on the market side, fundamentally, to help us to build leading capability on the market side, where we are trying to embrace the technology into our, what I would say, marketing process, yes? And this work just we started about 6 months back before the lockdown has started. That's something that we will continue over the next 3 to 4 years. These are like long-term journey. And fundamentally, what this journey is doing is helping us to deep rouge our capability, whether it's manufacturing, whether it is products, yes, whether it is go-to-market, yes? It's fundamentally building leading capabilities in this area. And also, what it is doing is, this is all being accompanied with the road map for the enterprise digitization that Mithun was earlier referring to, yes? The near-term benefit of enterprise digitization is basically connecting the organization for employee productivity, which I think we outlined. And the long-term business will be related to some of the areas that I talked about. So we have a pretty robust program. I mean this is a program which has been on for the last 4 to 5 years, and we have a road map for the next 3 to 4 years. And we are busy focusing on that, and we are busy putting that in place.

The next question is from the line of Akshay Bhor from Premji Invest.

I actually wanted to understand a little on the historical performance. If I look at pre-COVID about 4 to 6 quarters, the performance has been slightly tepid, both as compared to your own historical performance and then even with respect to peers as well. And this is in light of very good summers last year should have been favorable to some of the portfolio, and then the winter as well. So I just wanted to understand what is it that is kind of -- how can we attribute this performance to -- what can we attribute? And within that, specifically, is there any component of competitors, new competitors that are coming into -- especially in the Kerala market that you've pointed out some time in the past, any color would be helpful?

So see, what has been happening is, I think, post demon and GST, the market growth had slowed down significantly for all players. So every company in India was getting into every product category. And we also got hit in that mismatch, wherein which maybe 20, 30 brands and the water heater business, which is a INR 1,500-crores category. And then the same thing happened with even stabilizer. I'm told that Philips also now has stabilizers. So people started looking at companies with decent margin and they have started entering categories. I should not be talking about it because we have also entered a different category. But the thing is when everyone in the market tries to enter every category, there is going to be a blood bath. And that you will see not only with us, in time, you will see with other companies as well. So yes, there is a period where we had to show restraint, not react by dropping price and all that. We have lost share also. We have lost revenues also. But our margins are intact. I think after 4, 5 years, many of these people will leave. I mean again, you will hear about many of these companies getting into trouble also. I don't want to specifically name them, but we have some companies who are into batteries that got into kitchen appliances that got into trouble. So stuff like that, it keeps happening. So we can't really stop competition. It's a free country. Anyone can do pretty much anything. So we're not really worried about 1 or 2 quarters. But if you look at last 5 years, we have worked significantly to improve our gross margin. And this has also happened because we gave away -- we chose to do where we will do business. We chose to walk away from categories. So we have shut down a loss-making power cable business that was doing close to INR 90 crores 6 years back. We have shut down agricultural pump business that was doing INR 40 crores 5 years back. So last 5, 6 years, we have also restructured a lot of our portfolio to have a sharper focus. What does it mean is that, yes, year-on-year, you will not see such great revenue growth, but our business is very healthy, and we are more sharper focused. And it gives us bandwidth to go after categories that are of better margin profile. Ram, do you want to supplement to that?

Yes. A couple of things. So I think we have to see the macros also. So if you broadly look at the macros, see, the nominal growth, which used to be at around 14-odd percent, has dropped to about 8% to 9%. That's on one side. On the other side, if you look at the last 4 years, a significant part of this growth has happened on e-commerce and organized trades, yes? I think we have been led to enter e-commerce and organized trades on one side. The other side is, while the nominal growth has almost come down by 40%, the -- and part of the remaining growth has gone into organized trade and e-commerce. In the remaining part of the market, a lot of people have entered, which is what Mithun has been talking about, right? And mainly, we have been focusing on the traditional trade as a company. And we -- if this macro is understood, I think the performance would seem as strong and as good, okay? Because when 30%, 40% of the growth is happening outside the area that you focus, right, and you've not participated in that adequately. Because, as Mithun said, right, last few years, we've been working on building capability, and we are not very happy now that we have the right, what I would say, we are in the right place to scale up. And therefore, because it's required a lot of preparation. So that's one context I would like to bring to your notice, right? Second thing, I would like to say is, we -- post the demon and GST, right, the companies, which were -- we used to be an outsourcing company, yes, most of our business was outsourced. So when we move from outsourcing to manufacturing, right, we -- our competitiveness got impacted to the extent of about 4%. So that was -- the outsourcing gave us the advantage to be able to compete with people who had strong and deep market positions. And this is why you will see now that progressively, in the last 3, 4 years, we have gone in for insourcing manufacturing to the company, yes? So I think this period also a period where we have overcome this challenge where we lost this competitiveness, and we were able to restore our margins and hold and improve our margins in this environment because it meant that relatively, we have to improve our price positioning in the marketplace, yes? And the 4% is a huge, huge impact, yes? That's the second thing. The third thing is, we've been focusing on making sure that we are able to generate and convert our profitability into real cash, yes? And you would see that in our books today. And you will also see that much of the CapEx investment that has happened where we've set up 5, 6 factories over this period -- 4 or 5 factories over this period, and some of them are work in progress, this is the consequence of our ability to generate cash in the business, yes? So our focus has been fundamentally to make our business strong and robust, make sure that we become healthy, and our gross margins are protected and improved. I think we have improved our gross margin to the extent of around 6% to 8% over the last 5 to 6 years. Half of it has gone back into the business in terms of investment, right, to meet the cost on people that we have added and the investment that we have made on the technology side, right? So we are putting money back into the business so that we become strong and we become competitive, yes? So we have invested in manufacturing capability and R&D and product design and development, yes? And the fruit of this will be visible over a period of time, right? So...

This is a very detailed and candid as well. Just a quick one, if I may? On the margin front -- the EBITDA margin front, any aspirations that you have? I've seen -- your gross margins have seen a very smart improvement last year, any targets? And also, if you could indicate what is the price differential in the non-South region now, which you used to indicate earlier, anything on that front would be helpful here?

See, we had earlier stated that we would like to hit 10% and then improve 0.5% EBITDA every year. But this is at a time when sales were at a normal run rate. Today, sales were -- the quarter gone by 60% of what it should have been. So it's very difficult to say that. So the gross margin will get converted in the EBITDA margin the moment sales at 80% to 90% of the usual business, and which I think it has happened in the month of June, and we are hoping that it can happen going forward. That's as far as the EBITDA margin is concerned. What was the second one?

I am trying to understand the pricing differential that you used to talk about in the non-South...

Okay. We now don't have much of a price positioning difference between South and non-South. We have kind of normalized. I would say it's very negligible. Sudarshan, you want to add anything to this?

Yes. The prices of South and non-South more or less are the same. There could be some tactical schemes here and there that we run, but otherwise, there's not much difference that we speak about.

Yes. For example, there are some markets in non-South which mirror our margins in South or probably better in terms gross and EBITDA, yes.

The next question is from the line of Charanjit Singh from DSP Mutual Fund.

Yes. So sir, in terms of -- now you talked about market share changes, which you would have seen over the last couple of months and now also in this recent quarter. So can you highlight any major segments where we would have lost or gained share or region wise, we would have seen the intensity much more significant in any particular product segment? If you can give color on that aspect?

Ram, you want to take this?

No. You mean last couple of quarters? I think nothing particular. I think from time to time, we see aggression in different categories, yes? So we have -- we've seen more intense activity in stabilizer sometime, sometime we are seeing it in water heaters there. But before that, sometime we saw in wires, sometimes it's geographic, yes? But usually, what happens is then, of course, we, of course, try to protect our interest, yes? But in the reply that comes with a lag. So I think these are some major categories that -- which have impact on us and where we have witnessed these kind of issues. And usually it is geographies. I mean in one of his strong pockets, we see this coming up. But it takes -- once we sense that it's getting strong, I think we react and -- but then will lose some time in the process here. But nothing sustainable...

So I think let me answer it in this way. We decided that we will not buy market share by giving discount. So let me put it that way.

So we block -- so what happens is we block. So we will block -- if we find that the action of someone is hurting us, so we will block that in that place, yes? But then in that place, yes, yes.

Okay. And sir, in the last couple of quarters, we have been working on our product portfolio, upgrading it, more feature-rich products and now with the COVID scenario and a lot of fears in terms of down-trading and the kind of sales which are happening, so how do you see the reaction to our product portfolio, which could be more feature-rich and more towards the profitable segments, which we had moved earlier?

So we have completely revamped our NPD process, and we have a very, very clear strategy in place. It follows from the automotive strategy of standardization, simplification and platformization. So the chassis will be the same. The bells and whistles we can add. So if someone doesn't want the bells and whistles, we can remove and sell it at a lower price. So this gives us the flexibility to create a platform and then make it into a super-premium product or a super-economy product as the case maybe.

Okay. And sir, lastly, on the channel mix front, how is our channel mix, e-commerce versus a wholesaler driven or direct distribution, how is the mix? And how do you see now with a lot of technology investments which you have done, do you think that channel mix can change in the favor of e-commerce significantly? And which product segments are you seeing more traction on the e-commerce platforms? And how is the pricing differential in that, yes?

So Ram, you want to take this?

Yes. So I think you can look at it at company level or related category level. I say related category because if you eliminate some categories like wires, switches, switchgears, pumps, right? These are not e-commerce friendly category. But otherwise, at a company level, we would be at maybe 2% to 3%, closer to 3%. And at a related by category level, we'll be about 5% to 6% today, yes? But this is growing fast because the fundamentals are in place, and we have tested that over the last 2 years, yes? And as we are able to bring more offerings in, we expect to see traction. Obviously, the traction will be more in categories where we have historical strength. So typically, you will see a stabilizer or water heater getting a pan or kitchen getting good traction, yes? So I think, obviously, in order of our strength in the different categories, yes?

Okay. And sir, in terms of wholesaler versus retailer?

So we are not generally a wholesale focused. So mainly -- see, mainly, we have been focused on inform category that is distribution, yes? And what we are doing now is -- and we have been able to build the foundation for e-com. And we will be focusing on growing our business in e-com in organized trades. So that's going to be our focus going forward, yes, and we are working towards that, yes? So that's a huge opportunity that's available to us, yes, which we could not participate when the business shift happened about 3 to 4 years back as we took time to build our internal capabilities, yes?

[Operator Instructions] The next question is from the line of Manish Agarwall from Edelweiss.

Just one -- a couple of questions from my end. Firstly, is there some fatigue at the dealer channel level basically where they are not willing to keep high inventories like maybe if they are carrying a 30 to 40 days of inventory, now they were kind of not willing to take more than 15, 20 days of inventory. Are you seeing something like that happening?

Ram, do you want to take this?

Yes. The channel is operating on lower-than-normal inventory because, there is still uncertainty that is visible. So in general, the inventory has come down over a period of time, yes? And the regular stocking that one would typically see is not visible today, right? That's also visible in the -- with which even cash has come back from the market, yes?

Okay. Okay. Sir, is it something to do with any pricing arrangement that channels would have of themselves with...

No, no. I think that they have thinned their inventory, yes, and they have thinned their inventory, probably because the situation is uncertain, right? And so people are, what I would say, not stocking too much. And I think mostly, not just us, but all companies are at this stage, they are more busy feeding demand because I think that if everybody were to push sales, I'm not sure supply will keep pace, okay? If you're looking at -- because the suppliers, all those factories are open, many of them are operating at 50% to 60% manpower is what we are observing. I'm talking about raw material, packaging material and stuff like that. And some of these are periodically going into containment and coming back after a week or a fortnight and stuff like that also. So all these things we are observing. And therefore, what we feel is it will take some more time, before things will normalize. And I think maybe couple of months down the line, we would be in a better position to develop a point of view on this. I think right now, I think people are not -- people are just buying hand to mouth. So what we are observing is, we get more even sale through the month, right? So -- and practically, we are getting flat sales [ everything ] through the month. This is something we've seen before because in the past, it would be more sale towards the month end. But now it's more even right through the month right. And it's a replenishment. There is no urgency to buy on a first or a second or a third or a fourth, right? But typically, what we see is, we see almost the same number running right through the month.

Okay. So the demand pattern has changed -- standard demand pattern has also changed you can say?

No. I think that they are just buying to requirement, right?

Yes. So I think, see, earlier, what was happening was they were having 45 days of inventory and during the month end, they will negotiate and then they will buy more as a bulk volume. But now they're buying 25% each week or 20% each week like that.

The next question is from the line of Prashant Kutty from Sundaram Mutual Fund.

Sir, firstly -- the first question is in terms of -- you just spoke about even before COVID, there was a lot of competition, which kind of entered the market and probably will not want to respond to it. But just want to ask, is the overall landscape itself changing? So because you're also hearing a lot of strong players also entering into a lot of these markets be it appliances market or be it the kitchen appliance offer a matter of switchgears, lighting and so on and so forth. So is the competitive landscape even more severe as compared to what it was thought by you earlier and any changes in strategy which would like to make on account of that?

See, what will happen is when -- like I said, after demon and GST, when there was a crash in the GDP growth rates in the country, every company was not -- the core categories were growing at 4%, 5%. So obviously, it doesn't look nice to show 4%, 5% growth. So everyone decided to get into every category. I -- usually companies give it 5 to 7 years. After making losses for 5 to 7 years, they usually shut it down. So that will start now.

I think also right, I think we could see this -- so from our point of view, right? So we could see this phenomena coming up. So immediately after GST, a couple of things became very clear to us. One is the hyper competition became very clear to us. And the second thing that became clear to us that companies which had sourcing-based model, we are losing advantage, okay? And there are 2 kind of issues that happened for us because invariably we are going to a category, you rely on the capability of a supplier. So we are able to differentiate locking this is weak, okay? And second thing is, of course, as I said, there is -- for us, at least, we could see a clear 3.5% to 4% gross margin erosion -- relative gross margin erosion happening because of GST coming in. Because the larger companies, which were manufacturing, they could have some advantages. And so based on that, we -- about 2 years back, we have reset our strategy, and we are working that path. And I think some part of the dividends you would have seen this year in terms of margin growth, yes? And our priority initially is to be fit for growth. Being fit for growth means making sure that your business has the right margin structure, yes? And is churning sufficient amount of cash so that we can invest back into our business, yes? So that's our focus. And we are running business with that mind. I think that's what Mithun was trying to say earlier, yes?

I was -- one more point to make is, when -- like if you say, if the period of growth, if there is a strong growth happening in the country, it is much more easier to get into a new category and grow than in like in a reflationary kind of an environment, like what it's today. So in a very -- when market is growing at 15%, market leaders may not even notice that their share is getting lost. But whereas when market growth is 5% for you to grow literally someone has to degrow. So that's when the hyper competition starts. So I think now the Indian companies would have realized that it's not easy to enter new categories. It's a long-term haul. So probably the only serious players will remain. Of course, someone will launch and then they will drop price by 20%, 30% and get some share and all that. But then how long you will do this? You'll do it for 3 years, 4 years after that, eventually, you'll have to somehow think about making money out of it, right?

Okay. My second question is, given the current environment, you spoke about, driven channel is probably not really liquid -- well it could be a short term phenomenon, but you said the channel is also being a very more agile in terms of stocking inventory as well. In this period, are we also looking at probably cutting off some of those low-churn products for us or probably any of those-churn categories for us. Anything on the product front, which you're trying to do that probably focus on certain categories and which would they be, if I may ask? So anything on that front, if you could tell us on that?

So see, we did not wait for COVID attack to start doing this. Like I said, we stopped LT cable in 2018. We stopped agriculture from last year. I am -- so we are not afraid to admit mistakes and shut it down because if ROCE for a product is not happening, the strategic value of the product is not there to the company, we will shut it down. We have no problems in disclosing it. We have no problems in taking the hit. We have written off an entire plant of some INR 20 crores, which is LT cable that was done about 3 years back. So as a company, we are not afraid to do these things, and we'll continue to do it, whether there is COVID or no COVID.

The next question is from the line of [ Santosh Yellapu from Ashika Stock Broking ].

I had a couple of questions. First, sir, what are the challenges we see going forward to roll out the new products and also addition of the dealers or distributors across the non-South markets in FY '21 and '22? And the second question is, sir, on the Consumer Durables segment, with just INR 80 crores kind of a top line, we did a segment level loss of almost INR 8 crores, INR 9 crores. This is somewhat a repetition of a mix we have seen in Q1 FY '18, could you throw some colors that despite new breakfast appliance launches, why we saw this kind of a loss?

So first of all, the challenge is, of course, India is whatever said and done, we have video conferencing and all that, but in India, business is still done the old way. They prefer meeting face to face, especially our retailers. They are a specific stereotype that they really believe in meeting face to face. So this as long as this face-to-face meeting and product launch functions and tours and all those don't happen, it is always going to be slightly challenging to go to a new dealer. I mean you can't just call up a new dealer on the phone and say, can you be my dealer, I mean, so that's going to be one task. But however, we hope that there is some vaccine that is coming in our way. And then probably, our sales team can restart travel. We have to also keep in mind that right now, retailers are also scared. They don't want any company representatives coming into their store because if one of the retailers catches this, then he has to also shut down the store and all kinds of stuff happens. So retailers are also very scared to allow company people to come into their stores. So most of the business gets done on salesforce.com and video conferencing and phone calls and all that. So that is definitely one of the challenge. What was the second question?

Sir, consumer durable segment.

Can I take that question. Yes, can I take that question.

Sorry, consumer durables. Ram, do you want to take it?

Yes, yes. See, just -- see, this last quarter, as I said, it's more like 45, 50 days of sales, okay? A mature category where we have higher market share and significant volume to market scale, obviously, the profitability will be better, and you will see a better health even on lower volume, okay? But the -- many of the consumer durable categories, right, either you have a AC -- sorry, you have a water heater, which is not -- which is off-season, okay? Or you had air cooler which was just getting out of season, okay? So that's on one side. And on the other side, you have kitchen and other products, right? These are products that we have entered in the last 3 to 4 years, okay? Obviously, they're going to have fixed up costs associated with the entry into these categories, yes? And therefore, the breakeven point, in this case, will be much, much higher as opposed to breakeven point in a mature company. So as you can see, we've done about 58%, and we've been able to be profitable, yes? But probably, when you will break the number by segment, you will find that maybe the breakeven point in the mature categories is at about 40%, 42%. And the breakeven point in the emerging categories will be about 60%, 70% because they have still not achieved the scale commensurate with the investment that gone in, both at the back end and the front end, in terms of manpower and other resources, by R&D resources. So I think you have to see it in that light, yes? I hope that's clear?

Yes, sir.

Yes. Fine.

The next question is from the line of Achal Lohade from JM Financial.

What I wanted to check was, a, in terms of the festival season now given our product portfolio, so how important is the festival season for us in general, especially for the South market?

See, so this year, Onam will be the first festival. So once Onam is over, we can tell you how it was. See, please understand that these are not normal times. It's kind of like World War is happening or something like that. So people are not really in a mood to go celebrate festivals. I mean people are not in able to get out of their own house, forget festivals. So I don't think they are in a mental frame to really do it, go and splurge money and all that. What people are doing is something is breaking down in the house, they're repairing -- replacing it. We see a lot of demand for TV stabilizers because a lot of TVs getting sold because now TV is the only source of entertainment for every person. We also see that a lot of demand for UPS systems because everyone is working from home, all the schools are studying -- school children are studying from home. So at any cost router should not go up. That's a key -- asked by all households. So if you look at Kerala Onam, I mean the TV sales is one of the biggest ones. And I think Onam TV sales should be decent because -- not because people want to go and buy TV because of Onam, but because TV is the only source of entertainment. So maybe any number of TV is not enough because we are sitting at home all the time, right? So I think though -- I think the behavior will change like that. I think the need -- so what behavior we saw last year in terms of people going and buying stuff on auspicious day and all that will change into a need-based buying. I mean if I need a TV, I'll buy it; if I need a UPS or an inverter, I will buy it; if I need a router, I will buy; if I'm doing some renovation, I will complete it, et cetera, et cetera. It won't be that of because it's Onam, I will go buy some clothes and then I will buy some gifts and all that. I don't know whether that will happen this year, but we will have to wait and see. But definitely, we can see that there is increased demand for televisions. There is increased demand for dish washing appliances, vacuum cleaners, et cetera. So we have stabilizers, dishwashers and microwave ovens. So we expect all these to do well. So that's my primary expectation. Ram, you want to add anything to this?

Yes. I think pretty much what you said. I think my -- I think my sense would be that I think we should not analyze this situation too much because whatever numbers are coming, right, they are a consequence of, what I would say, demand-supply challenges of various companies, yes? They are a consequence of, what I would say, essential purchases being made by people, right? So I think unless the COVID scenario changes, this picture is not going to change. I think our industry is in that way, it looks like we are more fortunate than some other industries that demand has not hit us so hard because we're still able to post lockdown able to do 80%, 85% as you saw in the last 2 months, yes? And we think that we should be able to do that in the coming 2, 3 months for sure, yes? So I think we should not analyze this too much. And I think we should wait and watch, yes? I don't see any companies taking an aggressive posture and making investments because we don't know. Because see, the number of people who are taking calls, right, on how future will be that has increased, right? So see, every district authority is an independent authority and is authorized and empowered to take steps and measures as may be required to safeguard people in that area. So a lot of local decisions are getting made. And so we have -- there is no certainty to say how things will go. Therefore, I would say, I think that we should wait and watch, and I think this is a passing phase, and we should not spend too much time analyzing this because anybody who is making a prediction is speculating, right? And that's what we are observing. Because if you take Kerala, we were in a good shape in Kerala and now look at what's happening, right? The cases are much, much more. And this is in spite and despite best efforts, right? So I think there's a lot of uncertainty still associated with this. And that would be good to watch, yes?

So one more point is, I think the key thing to watch is number of cases per district because definitely, when the cases do drop in a particular district or an area, people do feel confident and they go and spend. So I think the best way to judge how things will go is keep analyzing that, and that is one lens. I don't think festive demand is going to be a key consideration this year. Because see, the festive demand is a hype created by all companies by advertisements. I mean the kind of money, all the durable companies spend during Onam and Diwali, it's huge. I don't know whether this year, they are in a financial position to do that. And even if they do that and after 1 week, they realize the entire country goes to lockdown, what do you do with the money you spent? So these are the questions that are staring us in the face. And then that's why we can't really make an answer now.

Got it. And just the second question, in terms of the inorganic, I know these times are trying times, we've been looking at or considering inorganic opportunity. So given the current context, are you keen on doing or you think this is now kind of pushed by at least couple of years in terms of any acquisition, et cetera?

I wouldn't say a couple of years, but definitely a couple of quarters. I think we have been fortunate to have targets that have been engaging with us. And we have been fortunate to mutually agree to keep it on a deep freezer or a backbone as you call it. I don't think we require 2 years. I think by January, we'll be in a position to better perform.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Hitesh Taunk.

Thank you, Aisha. Thank you, sir, for your comments and insights, sir. Is there any closing remarks, sir? Mithun, sir?

No closing remarks. Thank you, ICICI, for hosting this call. And let's hope that we can overcome this pandemic, and everyone, please stay safe and listen to your local authorities. Thank you.

Thank you, sir.

Thank you.

Thank you. On behalf of ICICI Securities, that concludes today's conference call. Thank you for joining us, and you may now disconnect your lines.