V-Guard Industries Limited (VGUARD.NS) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to V-Guard Industries Limited Q1 FY '26 Earnings Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Arshia Khosla from Nirmal Bang Institutional Equities. Thank you, and over to you, ma'am.

Thank you, Palak, I, Arshia Khosla. on behalf of Nirmal Bang Institutional Equities, welcome all of you for the first quarter FY '26 earnings call for V-Guard Industries Limited. From the management today, we have Mr. Mithun Chittilappilly, Managing Director; Mr. Ramachandran V, Director and Chief Operating Officer; and Mr. Sudarshan Kasturi, Senior VP and Chief Financial Officer. I would now request the management to give their opening remarks, post which we shall open the floor for Q&A. Thank you and over to you, sir.

Thank you, Arshia, and the team at Nirmal Bang for hosting today's call. A very warm welcome to everyone joining us to discuss our company's operating and financial performance for the first quarter of FY '25, '26. I trust that all of you have had the opportunity to review the investor presentation we had shared earlier. Top line growth for the first quarter FY '26 was subdued due to weak summer season and the high base of last year. Consolidated net revenue from operations for the quarter is INR 1,466 crores, a marginal decline of 0.7% over the revenue recorded in the corresponding period of the previous financial year. The Electronics segment comprising of stabilizers, inverter systems, U.K. systems and solar systems delivered moderate revenue growth at 4.5% Y-o-Y in the first quarter. Demand for stabilizers was subdued in line with the overall demand trends for cooling products. But this is offset by good growth for products in the other products within the segment. The Electrical segment, which remains our largest revenue contributor that includes wires, pumps, switchgear and modular switches, registered a Y-o-Y growth of 7.6%. Hence, the performance was steady, both from a top line and margin perspective. In the Consumer Durables segment, covering fans, water heaters, kitchen appliances and air coolers, we reported a revenue growth of 16.3% Y-o-Y. Growth was impacted by early onset of monsoon, which curtailed the summer season and caused a sharp drop in demand for cooling products. Sunflame reported top line degrowth of negative 5.4% on a Y-o-Y basis in Q1. There has been some improvement in light of interventions undertaken earlier. And the business has done well in general trade, but continues to face softness in the CSD can. We have also initiated actions to merge Sunflame operations with V-Guard, which will fast track a realization of this industry benefits. Since the merger is with the wholly owned subsidiary, there will be not -- there will not be any share exchange ratio or change in the shareholding pattern of the company. In Q1 FY '26, revenues from non-sub markets grew by 2.1% Y-o-Y now contributing 52.3% of the total revenues, while South market degrew by negative 3.3% Y-o-Y. Our strong market, that is the Southern and Eastern regions were relatively more impacted by the weak summer. We reported a gross margin of 36.7% this quarter compared to 36.6% in Q1 last year on a sequential basis. The gross margin improvement by around 110 basis points from 35.5% in Q4 FY '25. As we had indicated last quarter, margin refer is nearly complete, and we are back to the pre-COVID margin level. EBITDA excluding other income for Q1 stood at INR 124 crores, declining 20.7% on a Y-o-Y basis. The EBITDA margin was 8.4%, a reduction of 210 basis points from 10.5% recorded in Q1 FY '25. Consolidated profit after tax for the quarter was INR 74 crores compared to INR 99 crores in the same period last year. The decline is due to the operating deleverage on account of flattish revenues. We expect the demand to normalize in the coming quarters and continue to invest in brand building and capacity enhancement. With that, I conclude my opening comments, I would like to thank Arshia and the team at Nirmal Bang for hosting this call, and I would like to request the moderator to open the floor for Q&A.

[Operator Instructions] The first question is from the line of Rahul Agarwal from Ikigai Asset.

This is Rahul from Ikigai Asset. Mithun, 3 questions. Firstly, your entry into lighting, just to understand what are you thinking about it? What are the products -- which segment are we tracking about? Second question was on ECD. I understand fans and coolers would have seen a very large impact. But when I look at the company history, first quarter has never been -- never saw EBIT loss, right, except if I remove the COVID period '21, '22. So is it more of a function of -- I understand operating deal, but because of newer plants, is there more OpEx sitting there, which is why this is impacted or the ad expenses, which have been a bit higher Y-o-Y, is that impacted for a specific campaign? And thirdly, some comments on inverter sales and wires, that would help.

Yes. So I'll start with the lighting. So as you know that we are having a portfolio of categories in the electrical space, and lighting is the largest subsegment within the electrical space. I mean lighting and wires are the 2 large categories. And we were present in wires and fans, which are the 2 other large segments, but lighting was absent. And we have been getting a lot of feedback from the channel that there is a huge white space, then we are not present and this is creating some gap in the product portfolio. So this is point number one. Point number two is we are already having a very, very good network of electrical retailers across the country. A good part of the 100,000 retailers we have is from the Electrical segment. And Lighting has almost 95% overlap with the wires retailers. So this is the second point that we have the channel. So I think it's also -- now we believe that we are having enough bandwidth to start creating a new category. And this is the thought behind it. Ram, do you want to add anything about this Lighting?

No, as you already said, I think it's mainly been under a bit of pressure from our trade partners to expand our portfolio and to include lighting because this company is the boutique of offerings on the electrical side, and that has been the primary driver for that. And it is to complete our basket of operating system. And there is a lot of synergies, both on channel side and even on the GTM side. So the effort required for us to get into lighting is very, very minimal, and the best would be decided to go.

Yes. On the ECD side, the ECD has got fans and air coolers. Within France, there is a segment called TPW. TPW business has significantly been lower and so has been air cooler. So I think both these have pulled out a good percentage. As far as loss is concerned, we don't think it's a huge issue. It is a transient issue. And yes, there would be some advertisement expenditure that was booked in both fans and air cooler. So it is very much possible that is also one of the reasons that we are hitting a loss. But I think this time, we had extremely cool summer. So last year, we had a very, very massively hot summer, which propel demand for a lot of categories, especially cooling products. This year, we had the reverse where we hardly had any kind of summer, especially in the southern part of the country and the eastern part. So these 2 being our core markets, we faced that headwinds. Wire has done well, why is that done well because there is a favorable raw material price situation where in which there was some step-by-step increases of copper prices over the quarter, which meant the demand situation was good. We were also having inventory to supply. So wire, in fact, has done well. Switchgears also has done well. They have also grown well. That's not because of any price increase. So just so you get, I think we have made some corrections in the team and channel and all that, and that's beginning to deliver fruit. So that's a summary, as question is concerned.

Just a follow-up. So on lighting, what kind of products are we talking about? And is it -- we're also going to get into manufacturing of this?

No. Initially, we are not looking at manufacturing. I think with regard to most of our categories, we have entered and seeded by the outsourcing model. Initially, we will not be manufactured, but I think once we get a certain scale, definitely, we will look at manufacturing and bringing in efficiency. We are looking at the consumer part of the lighting and the residential part of the lighting. So this is the initial focus. Anything that is going into consumer and residential lighting is what we would look at.

Got it. And a follow-up on ECD, then maybe I'll back in the queue was the primary sales for fourth quarter very high and hence -- channel inventory was high and hence, our performance on fan coolers was a bit subdued versus peers because when I benchmark other listed companies, it looks like our growth is much higher. Any thoughts on this?

So I think it's more than preselling it. It's more of a geographical issue. So South India has a much higher share of TPW sales in summer than other parts of the country. And Maghar is one of the largest seller of TPW fans in South India. So for us, more -- it's quarter to more with -- rather than selling it in March, most of the degrowth has become -- come from the TPW segment. In fact, the ceiling fan sales have not grown much. The second is air cooler. Air cooler also, there is -- beyond a point, we are not able to sell the product because we sell on advance. So we sell with a similar kind of terms at the market leader, which is an advanced payment. So even in air coolers, there is no question of channel being staffed too much because the credit partners have to pay advance. So hope it's clear.

The next question is from the line of Aniruddha Joshi from ICICI Securities.

Two questions. So now we are merging the acquired entity with ourselves. So what are the synergy benefits by merging the kitchen appliances business? I guess most of the operational synergy benefits are already there, but still, there will be some benefits in terms of reduction in the number of invoices or double billing to the trade, et cetera. So what are the total synergy benefits that we can look at? That is question number one. And question number two, in case of lighting, no, obviously, this segment, we have seen the technology changes are so ramping that even most of the larger players are also finding it difficult to generate value. So what will be regards right to win in this segment? This obviously, we have the brand as well as the distribution network also -- but what will be the focus area, I mean, whether it will be B2C more, B2B more and even the distribution network for many players is also separate from the ECD or rest of the distribution networks. So how are we thinking on these lines?

Yes. I think fundamentally, it's -- we're going to be leveraging the brand and the channel and our channel relationships. I think that's going to be our fundamental focus. I think initially, our strong focus is going to be in our core markets, which is South primarily had to start with, which is where we will focus already, and we are pretty confident that we can get some good and quick allegiance in that area. Yes, I think there are challenges. There are different challenges with different categories, I think the challenges with lighting are different in nature from other categories. But I think as an organization over a period of time, we have significantly matured and both our sourcing capability and development capability. And we have very strong electronics capability in the company also. And so we are pretty confident that we can navigate this. Of course, there will be a learning period as with any business, and there will be a learning curve that we will observe in our case also. So I think that is on lighting and the question on Sunflame. So I think more than synergy benefit, right? So it is a question of bringing recapability into Sunflame for driving growth in Sunflame. Initially, Sunflame is a small MBP, which was managed by the promoter. When it cleanly started, it was run in a very, very agile manner, and we had challenges to quickly move in our capabilities before understanding the business. I think that we've taken 18, 24 months to understand the business, and we are now moving fast with the quick integration. To give you an idea, I mean, synergy benefits, financial benefits apart, I mean, that's not the focus of why we are doing this. I think I'll give you some sense of -- for example, we have in about -- I think it's about 70 days, right? We have integrated the customer service nationally. And the -- what I would say, call resolution, right, rates, 24-hour call resolution rates have gone up to almost 60%. And this will progressively get better. So that's one example, yes. So we just want to bring the functional sense of V-Guard to Sunflame, which we believe will significantly empower Sunflame growth. That, of course, includes also our channel partners. And our business system, right? We have a very strong nationwide sales infrastructure and a very aggressive stage infrastructure, which is extremely capable to scale up businesses in shorter period of time, yes. So I think thus far, we have been seeking a Sunflame from V-Guard's capabilites. This is what will happen to Sunflame. Our capabilities in growing faster, primarily our focus is going to be on R&D and NPD and go-to-market. So we believe we should be able to significantly strengthen Sunflame going forward.

Okay. Sure. Sir, this is very helpful. Just one last thing. Will Sunflame be rebranded under V-Guard umbrella? I mean like Sunflame by V-Guard or V-Guard...

I think we -- I think as we have said the last time in the previous call, right? So we have something -- we have a project for the long-term strategy for Sunflame, yes. I think once we conclude that, I mean, maybe you'll have a point of view in maybe a couple of months on that side. So we will come back. I think we haven't made a determination in terms of how we will treat that. But of course, I mean the moment there is integration of Sunflame and V-Guard. V-Guard's name will be carried by every country in fact, as we manufacture it. But that part, how to position Sunflame whether as a sub-brand or as an independent brand, I think there is work happening in that area. We are doing some work with consumers and we are also internally doing some work to understand what are the best way to go forward. We have some proposals and point of view, we have not prompted it up yet.

Okay. Sir, just one bookkeeping question. Lighting, are you looking at any revenue targets, let's say, over the next 2 years or 3 years?

No, we wouldn't like to give out any projections as of now. We will update in the next call. I don't think we'll be giving more projections anyway. But our first 6 months to 12 months, we'll be setting up capability and systems and then only we will look at launching.

The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance.

Sir, first, on the lighting side. So you talked about the synergies of, say, cross-selling GTM distribution, et cetera. In general, we are seeing that because of the price deflation, I mean, very few brands have been able to grow their lighting sales in terms of value and also a lot of competition from the smaller brands value conscious brands. So any specific reason? I mean, from that perspective, why you would want to enter the segment where growth is not there either because of the I mean, technology change or price cuts, but the value growth has not been there? That is first point. Second question, on the overall margin side, I can see -- I mean, the employee costs have grown at a faster pace than you earlier explained that as you grow in-house manufacturing. I mean some of the overheads move in-house. So if I look at slightly longer-term data, your EBIT margins, EBIT margins are more or less similar? So your gross margin has gone up, but depreciation, employee costs and overheads have also gone up and EBIT margin are more or less in the range of 7.5%. So just to understand, are we yet to see any benefits of in-house manufacturing or why they are not yet visible since that EBIT level margins are more or less similar levels? These 2 are the questions, and then we'll get back in the queue.

Yes. So regarding the second part, which is EBIT margins, I've said this in earlier calls. So if you look at 2019, our larger 2 competitors, they used to have EBITDA of about 14%. Today, both of them are whereas we are still having a similar EBITDA of about 9% to 10%. So you can see that the competition intensity, competitive intensity in the sector has gone up and margins have come down for most companies whereas we have maintained margins if we look at last 6 years. So that's -- I hope that answers your second point. The first point is on lighting, Ram, you want to take this?

Yes. I think -- yes, I think you're right. I think the lighting as a sector has not seen value growth, yes. and fundamentally because of price erosion. And that part is true. But I think that every business has a different dynamic and a different challenge. So I think -- and that needs to be managed independently and separately and appropriately. Fundamentally, yes, not having lighting and having lighting has its own advantages and disadvantages as part of playing the portfolio. But I think it's important because we have partners and our partners have businesses, right? And there's -- we have a gap in our portfolio, right? And we believe that incrementally for us, right, at least for the next 7, 8 years, I think this is not going to be a challenge. And although it can be a challenge for an incumbent player who's been in the industry for many years, right? The other part of it is also that, yes, I mean, even though there is not value growth, but I think that these businesses are profitable. And they are able to do that by managing different cost elements differently. So I think at least for us, I mean, next 7, 8 years, I don't see this question being a challenge for us, while it may be challenge for the industry, yes. But I think what it will do, it will strengthen our partner capability, yes. And it will help us to, what I would say, expand our network faster and it will also help existing categories to travel more deeper and wider. I think in the past, we had multiple challenges. But we believe many of our challenges for some of the categories that we had integrated in the past slowly and progressively getting out of the way. And we now have room to master and support one more category.

Understood, sir. Sir, just one small question on the electronics side. So relatively weaker quarter. And despite that, you have maintained and margins up of 19%. So barring for seasonality versus Q1, Q2, Q3, which are relatively smaller, should we assume that, I mean, annualized margin of higher than 18%, 19% are sustainable margins? You have earlier talked about some steady initiatives as well. So in that backdrop, what are the sustainable margins in Electronic?

Yes. Sudarshan, do you want to take this?

Yes. Okay. On Electronics, yes, I mean the stabilizers did see a decline in line with air conditioner and cooling branches. But then that was made up by a strong performance in other products. The inverter battery business did well, solar did well, so that's sort of made up. Margin wise, it's been good, but I don't think we should take 18%, 19% as a steady state margin. So there are some quarters where we get better margins than usual. Something like 17% should be okay.

No, sir, on an annual basis?

Yes, yes. So 19% is a bit -- it's a good number for that category. That may not remain at that level all the time.

The next question is from the line of Raman from Sequent Investments.

I just wanted to understand that Q1 has been -- there has been a degrowth in Q1, which you already said in your previous call. Can we -- the original guidance of 14% to 15% revenue growth, is it still doable? And with respect to the margin, can we expect margin to improve going forward?

So I think how we look at it is when we have a good year, we -- like last year, we grew by about 17%-odd. So in a challenging year, the growth could come 12% to 13%. So I think about 11% to 12% -- 11% to 13% is what we'll be aiming for this current financial year because, as you know, first quarter has been extremely challenging. So what happens with that is almost 60% of our products, 55% to 60% of our products are dependent on summer. So when you start with a very, very adverse weather. It is very discussed these categories should then perform until Q4. So Q4 will determine now how the growth will shape out. But typically, we have seen that good years -- as we have a good year, we'll grow at 17% and a challenging year at 11% to 12%. So that's what this year looks like.

And sir, on the margins part?

Margins, I think we should be between 8.5% to 9.5% in this financial year. So let's see how it goes.

And sir, my next question is with respect to the Lighting segment, you did like earlier further also service than there has been value degrowth. So I just wanted to understand how much value creation do you think this segment will do in terms of your entire business?

So I think when we did some research on the industry, we found that players like Signify, which is the largest player with trade brand, Philip's, Havells, Crompton and Surya Roshni. All these 4 players are making healthy EBIT margins in the business. Now the question is on the value growth. We found that there are subsegments which are growing, for example, downlighters and premium architecture right lighting for residential is growing whereas the growth in land, et cetera, may be slightly plateaued. So there are some segments which are growing. It's not that like the entire industry is degrowing. And the third thing is we are present in categories like solar roof where there is a value degrowth of 20%, 25% every year for the last 3 years. So it's not something that cannot be managed. It is something like Ram said, every category has its own challenges. We don't foresee any growth challenges in the first 7, 8 days. But once we become larger, we'll have to see. But I don't think that this category will remain like this forever. I think there are some tailwinds, especially on people migrating from tubes and lamps to more expensive luminaries as the houses become more premium and as people start to spend more on interiors. This is something that is ongoing. So I think within this particular lighting as a very large category, I think it's close to or something like that. If you look at the entire lighting in the country, including institutional and all that. So this is -- there are subsegments within the lighting, I think at that is growing. So yes, there are the lamp. The prices of lamps, the LED lamps are coming down, primarily due to efficiency in design of the PCB boards and all that. But I think -- I don't think it will keep going on every year. I think a lot of the value decline is -- were probably close to the bottom as far as that is concerned. But we are more interested to sell a bouquet of products, not just lamps, it will make sure that we make money.

And sir, my final question is with respect to the factories -- Indian factories for in-house manufacturing coming. So what is the current percentage of in-house manufacturing? And when will the new factories be coming to online?

So currently, we're at 65%. We have 1 factory, which is 1 more plant for fans, which is undergoing development. We expect that to be operational in 18 months' time. That will make table, pedestal, wall fans and some -- and ceiling fans as well have all the both TPW as well as ceiling fans. And yes, we are also setting up one more -- that is more of an expansion of the existing battery unit. That, I think, will take about 24 months time.

The next question is from the line of Sonali Salgaonkar from Jefferies India.

Sir, I again have question on fans. Sir, correct me if I'm wrong, but is fans as seasonal product or it is all the year around product. So I was just trying to understand it better. Why would unseasonal rains are disrupted summer lead to such a big decline in the sales and also a negative EBIT?

Okay. So I think in fans, we have 3 categories: ceiling fans, TPW and exhaust. The ceiling fan business is pretty much throughout the year kind of sales. But there are -- there will be maybe like a 10%, 20% variation between in-season and off season. But the TPW business, which is the -- especially the pedestal fans, it is an extremely -- pedestal fan is the largest part of TPW and is an extremely seasonal business because what happens, especially in South India, where especially markets like Andhra, Telangana, Tamil Nadu, even Kerala, it gets so hot that the ceiling fan is not able to really cool because it's really, really hot. So people put a second fan in the bedroom, which can force air from the side through the windows, which is cooler than the roof which is already hot. So a lot of the purchase fans, at least in South India and East end goes for this reason and they are extremely seasonal. So I hope this is clear. So if you look at the pan-India sales, 70% is ceiling and 30% is TPW whereas if you look at South India for us, this drops down to almost 60-40. So in South India, the share of TPW sales is high. And V-Guard traditionally has been more stronger in TPW. Of course, recently, we are also getting good traction in feeling. So please understand that you will find that players with South still will have this kind of a challenge. And secondly, there is one more category with air coolers. So air cooler is also our large, it's about INR 140-odd crores. So a large decline in air coolers also brings down the continue durable sales in first quarter and air cooler is also a high gross margin category for us.

Just one more point I want to add, right. See, this year, last year, the summer was exceptionally strong. And this year's rains have been exceptionally heavy, and I was just looking at some long period average data the initial months that I saw or long period average is nationally almost in double digits and more, yes. And in fact, in the southern states, it's more than 30% up. And we are a company besides what Mithun talked about, we are a company which is over indexed in terms of sales in South and East, right, which have received very, very early days. So the pressure is further getting amplified in our numbers, yes. But as Mithun has already said, ceiling fan sales are flat for us, and the drop is in this particular category because Southern market has been very, very heavy rain.

Understood. Sir, so would you ascribe that majority of -- or rather the main reason for the drop in your EBIT margin is because of loss of operating leverage are the general volumes? Or is there any further reason to that?

I think it's majorly operating leverage. There would be some A&P expenditure on fan and air cooler that would have happened. But I think it's mostly operating levels.

Sir, your A&P spend as per your presentation are almost flattish year-on-year. So your overall is 3%...

Similarly, it may not be spent on the same categories, right? So there could be changes within the category here.

Understood. Got it. Sir, just one last question from my side about the merger of Sunflame. Sir, you did mention certain points on that, but exactly what is the difference post-merger versus being a 100% subsidiary, wherein we are expecting a faster piece of synergies right now?

Yes. Ram, do you want to take this?

Yes, yes. Sonali, I explained this earlier, right? So let me again explain to you the same -- I mean clarify the same observation. See, for example, earlier, Sunflame and V-Guard used to operate as separate entities. The operational bandwidth inside Sunflame works very, very narrow. So it was very difficult for us to replicate our understanding and know how to run some processes systems more efficiently than the way that it is running at Sunflame. So that was the reason, initially, we wanted to keep these 2 separate so that we are able to preserve the agility. We are a much larger company work through multiple functions, right? And it would have been very difficult to integrate Sunflame at that stage. But after about 18 to 24 months, the knowledge is in place. And we got internal stakeholders have understanding and exposure to Sunflame. And we have, as part of our integration projects defined governance framework. We are able to move fast. Now what difference will it make I think as I explained to you, giving an example of service earlier in about -- it's about 70 days now since the systems are coming together. They have come together progressively. We are now -- we have completed the service integration. We expect in 3 months, right, to reach a similar level of customer service that turnaround time. Same is the thing with quality, the kind of systems that we have in managing quality and the kind of process we have for qualifying vendors, right? All of this is very different, right? And -- so default activities and capabilities will close, yes. We have maybe 1,500-odd feet on fleet, we have 1 lakh-plus customers. Many of them are in kitchen. Now it's a lot more easier for us, right, to land the Sunflame offering into many of our customers and channels. If it is managed throughout the same sales system, right? So these are the kind of advantages that we will get. So I think it's fundamentally going to make Sunflame stronger in its ability to realize outcomes, positive outcomes, right, be it on service, be it on quality, be on MPB, or be it on sales, yes?

The next question is from the line of Shivkumar Prajapati from AMBIT Investment Advisors.

My first question is regarding the competition density versus the rising private label players, say, Amazon B? And what differentiates regards products in price-sensitive markets?

So I think the hyper competition today is among our various brands. I don't think private label is such a big worry, at least in India. What we're seeing is even in globally, private label usually works in categories which are -- can't be differentiated like chips or flower or food products and stuff like that or something like generic items like maybe lamp and those kind of things, bulb or something like that. But as long as there is design involved as soon as there is features involved private label usually don't have a ton because they are not coming -- they're not having that kind of sophisticated capability to make products. So for example, if you asked me, V-Guard has about 4,000 SKUs today. I don't know any retailer who has the wherewithal to even manage an additional 500 scale. So that is the kind of variety that brands offer vis-a-vis a private label. So we have seen that the larger chains, they have time and time and again try to do this, but it has not really made any much then, as you would have seen, right. I mean there was a time when Big Bazaar brought out a lot of private labels. The reliance keeps trying to do it so. It happens, but I don't think in our kind of categories, it has really made much of a dent asset. So the hyper competition is between existing players getting into adjacent categories. It is also certain new brands that are coming up are disrupting the existing categories, maybe using new lines of sales like D2C or e-commerce and stuff like that. So I wouldn't say private label, but definitely competitive intensity is up. It's primarily also because many companies are not growing and they are thinking that the grass is greener around the other side and in new categories. So that's the thing. I think we have also seen a lot of exists for the last 1 or 2 years, we've seen many companies refocusing or removing themselves from the marketplace. So I think it's a natural process of cleansing. I think whenever we have something like a slowdown and stuff like that or COVID also was a big shock. Whenever we have these kind of shocks, people tend to exit and go back to their core because they have to protect their core business.

Understood, sir. And sir, would you please be able to help me with 2 data points. Number one is now like more than 50% of our revenues from non-South market. So how many states will be contributing around INR 500 crores plus of top line for the full year? And going forward, what do you see like, which reason or state will be able to touch this market?

So I think we don't like to give out these numbers, but we have to understand that we also are in a country where you have something like Maharashtra, which is like almost 10%, 15% of India's GDP and then you also have small states. So we have big states and small states. And we have states which are geographically larger. So like UP is a very large state. It's a large contributor to the GDP, but it was also very large. So we require more than multiple branches. In fact, we have 3 branches in UP. Whereas in a state like Kelara, we're able to manage with them. So I don't think it's right. I think we are slowly getting indexed to how the national market is indexed. I think earlier, we had a very, very high South SKU. Now it has dropped below 15%. I think we are -- I think East has done well for us and the other markets are also responding. So I think within the -- with the passage of time, we will hit that 65% of sales from the non-South markets, we are quite confident of that trajectory.

Got it, sir. And sir, is there any way or metric that you was track for productivity of active dealer in south versus non-top region, something like average revenue per dealer?

See, again, it's not very easy just to see, we are not dealing with homogeneous crowd. For example, we will have a wire dealer who will be doing INR 1 crore a month, whereas will be very hard to find a guy selling switches for about INR 1 crore. So it's not very, very -- I mean, it's not very easy to do that. Ram, any -- you want to talk a little bit about our sales?

Yes, yes. I think Mithun saying is correct, right? I think it's very difficult to have a thumb rule. But there are 2 issues with that. And at least as far as regard is concerned, our GTM is category-based rather than company based. So we might have like many times, partners are doing switchgear, for example, right? And they may not -- they may or may not be doing other product categories of V-Guard. So some of those kind of challenges we have. So I think that may not be the right metric to look at as far as V-Guard is concerned. Also, again, as Mithun talked about, there are large states and there are smaller states. There are states by town class. I mean there are cities by town class. And also our entry into different states or even in different geographies is at different stages. So even as we speak, there are new markets we are entering, right, because we still have a lot of room to cover in non-South. So I think it's a bit hard to measure major -- so we don't try to measure on that attribute. So we don't have a perspective like that for this season.

So I think how we like to do is that more than in average revenue per dealer. We look at maybe average revenue per sales executive and those kind of metrics, that makes more sense. And in that sense, we will -- we find that Eastern markets since are quite close to the maturity as similar to our South market. And the other 2 zones are slightly behind in that sense. Other than that, it's very difficult. I mean, it's going to be very, very difficult to have a single view to see whether -- so what we look at is counter share, for example, if a retailer is selling 100 units and expect between 3 or 4 brands. There, we look at what was our ability to gain more share. This is 1 part. Second is on influencers. So for example, electrician, plumber, other kind of influencers. We also try to see how many of them we are able to cover in each zone. And again, it's very difficult because we don't have the market data. We are not sure that if someone asks you how many electricians in Columbus are there in India, you will get five different answers. So this is the kind of issue we are having. But if you look at the maturity wise, we would say the eastern markets we are almost there in terms of the maturity in terms of the average throughput per employee and those kind of metrics. The other 2 markets are slightly behind.

The next question is from the line of [ Diviya Asia ] from Equirus Securities.

Sir, Manoj Gori here from Equirus. I have one question. See, if we look at the Electronics segment, where we have reported 5% growth. So my question here is, if you look at your comment also sounded like South and East were very much impacted because of the poor season this year. And we have a lot of exposure to stabilizers [indiscernible] less this year, the power shortages of power that were relatively lower. So in fact, that would have impacted us UPS and business as well. Can you throw some like the quality of this 5% growth given the current environment?

No. I think stabilizers sale is directly linked to weather and the other one is linked to the occurrence of power cuts. So they may not -- yes, you're right, it should go hand-in-hand, but I can tell you that we have had severe power outages in the southern part of the country because of very, very strong winds and rains. So it may not be right to correlate, but we are seeing a healthy demand for inverters and batteries, and we are also seeing very good demand for solar stock. So that is kind of offset. And we also have to understand that air conditioner stabilizer is about 50% of the total sale of stabilizers or 50% or 55% of current. It is not 100%. So the decline of whatever happens in that stabilizer to overall stabilizer may not -- it will be half of that. So that is also one reason. It's not like 100% or we sell as air conditioning.

Yes. One more point. Actually, what has happened is we have gone deeper into the value chain in inverter factory, right? So consequently, our competitiveness in that category has improved, right? So that is also aiding the business on top of what Mithun has talked about, right?

The next question is from the line of Abhijit Mitra from Aionios Alpha Investment Management.

So regarding with Southern state of announcements, coming on capacity cuts on your sales modules. I mean, what do you think can be the supply chain impact for inverters and batteries? And how do you think this will sort of impact an organized sector in this space? Any thoughts on this?

So you're talking about the solar TV model, right?

Yes, yes. Not only -- I mean, all sorts of sales, even or lithium carbonate, which goes into batteries, they are talking of fast and all.

So I think definitely is a supply demand issue. So we'll wait and see. So for example, if suddenly U.S. is going to ban or slap antidumping duty for Indian PV manufacturers or cell manufacturers, definitely, that would mean lower prices in India because so far, we were not able to because India has a huge and import duty against China. So the Indian players were protected and they were enjoying better prices and stuff like that. So we'll wait and see. Regardless of that, there has been a decrease in prices year-on-year. So because there is obviously a lot of supply and also the technology is getting better. In terms of lithium, I think I'll ask a Ram. Ram, do you want to comment on this?

Yes. I think yes, what you're saying is correct. There is a lot of uncertainty around this entire space. Naturally, I mean, right now, we know lithium is the primary, what I would say, alternate energy chemistry although we have investment in a company called [indiscernible], which does not have lithium in it but they are still not at commercial stage. So I think, yes, I think it is going to be a big challenge for expanding energy storage. But we'll see, I think this is more I mean this is -- again, there has been a lot of uncertainty around some of these things, right? And I think what part of what is happening is basically about negotiating better outcomes for each other and what part is about protecting and guarding, I think we'll have to wait and see. I would say right now is [ uncertain ]. We would be speculating an outcome ahead of something that is firmly announced, right? So -- but yes, I mean, that naturally will be challenged. I think on the battery part, definitely, it will be a significant challenge, right?

And for inverters and batteries, I mean, what percentage of your -- I mean, chance would be enforced from China as of now? I mean, are there in direct imports from China, which you'd be doing now?

Only the solar inverter is imported. So solar business is about 20% of the overall inverter business. Only that is important. The rest of the products are all made in India. Only these small, that is up to 10KVA, a lot of inverters are imported. The rest of the products in the large solar inverters and the regular inverters are all made in India.

Okay. So you are importing the entire box, you're not importing to a PCB or NPCB separately?

So no one is -- there is no technology in India that is available for small inverters that is up to [indiscernible]. Almost 99% is imported.

String and are all imported essentially.

Anyway, electronics, everything and anything is imported. So whether it's China, Taiwan or Singapore or South Korea, electronics are anyway imported unless [indiscernible].

The next question is from the line of Anshul Jethi from LKP Securities Limited.

Yes. So most of my questions have been answered. Just one last question. Just going through your segmental reporting in Electronics segment, there has been a decrease in the assets part. So has there been a significant reclassification in the assets? Or any major asset being divested?

One minute. So I think it's just normal business radiation.

No major divestment, right?

No.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Yes. So I think we can close today's call. Thank you all for taking time to join our earnings call. I would like to thank Arshia and the team at Nirmal Bang for hosting this call. We look forward to interacting with all of you in the next quarter. Thank you.

Thank you, sir. On behalf of Nirmal Bang Institutional Equities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.