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00:00Hello and welcome. You are watching NDTV Profit. I am Mahima Vachrajani. Well, Crompton
00:04Greaves Consumer Electricals Limited came out with their Q1 FI25 numbers. Revenues up
00:1014%, EBITDA up 25%, margins have improved from the 10% mark to 11% mark and net profit
00:17has significantly improved by 25%. But to discuss more about how the quarter has gone
00:22by and what the FI25 looks like for the company, we are joined by Mr. Kaleshwaranachalam, CFO
00:32of Crompton Greaves Consumer Electricals who joins us now. Welcome to the show, sir. My
00:37first question to you is that, you know, good set of numbers. I believe the demand was higher
00:43in the back of the heat wave that we witnessed in the quarter. Give us some color as to how
00:47the quarter has gone by and how do you think FI25 will shape up going forward?
00:52Hi Mahima, good evening. Thank you for the comments. And see to start with, we launched
01:00the Crompton 2.0 strategy about four quarters back and the focus was how do we drive our
01:06business towards focus on growth and drive absolute profits. This meant that we need
01:12to significantly invest behind our brand, bring in meaningful consumer-oriented innovation,
01:19get our go-to-market strategies right and make our supply chain efficient. Also, as
01:24a part of the overall strategy, it is also important we get our execution excellence
01:28right on ground. So what you see as a performance of Q1 is a culmination of many of these things
01:33that has been playing out over the period of last four to five quarters. Obviously,
01:37while the demand was generated due to a better summer and a seasonal impact, it is also important
01:45that you are well poised to capture that opportunity. So the Crompton 2.0 strategy underpinned the
01:51execution excellence and the focus on product, go-to-market and supply chain coupled with
01:57investments in brand helped us to achieve what we have achieved. Now the growth is also
02:01broad-based. We have seen very strong growth in our ECD portfolio, growing at about 21%
02:07across fans, pumps, large appliances, small appliances, so on and so forth. Our lighting
02:14portfolio, which we said in Q4, we will address the decline and then we will start to grow
02:20from there onwards. I'm happy to say that we have grown our lighting portfolio. Now
02:25if I look at this in two parts, our B2B business vertical led by the new enterprise strategy
02:31vertical that we created is helping us to grow that portfolio strongly. B2C, our ceiling,
02:38lights and patents are growing in double digit, which is also part of our lighting premiumization
02:44strategy that we wanted to work upon. Butterfly, some of the corrective actions that we had
02:50to take is work in progress. This includes a lot on the pricing and the channel collection
02:57that we have to do. We said which one will be a part where we will see decline in business
03:03and we should start seeing growth coming back from H2 onwards. But most importantly in Butterfly,
03:08we also wanted to first address the decline in margins. So from a negative margin in Q4,
03:13we have delivered about 5% EBITDA margins as of now. We want to work upon that and improve
03:18as we look forward. Now when we look at the outlook for the full year, as you know, we
03:23don't give forward dividends. But at the same point of time, the underpinning strategy for
03:27Crompton 2.0 is how do we drive Crompton to deliver a robust double digit growth and have a profit
03:32growth that is better than the revenue growth. Now this will be across categories with various
03:37initiatives playing for that. In FANS, we see premiumization as a great opportunity. Our share
03:42of premiumization has moved from 18% to about 25%. We see that in two to three years, we can take
03:48that to 40% to deliver strong growth in FANS. It's also important to note, last year we sold
03:54about 2 crore FANS and that makes us the largest player in the world in FANS category. So there are
04:01individual strategies that we have carved out for each of our verticals to see how do we need to
04:05drive the growth for future. Got it. You know, I just want to understand that your revenue grew
04:10by 14% and you've also said that you undertook some pricing action across categories in the
04:16quarter gone by. So I want to understand that from this 14%, how much of it is value growth
04:20and how much of it is volume growth? Yeah, see, there has been strong volume growth across in Q1.
04:28Pricing growth, we have taken about say 1.5 to 2% price increase in FANS and PUMS. Rest is all
04:35coming through the volume growth both in FANS and PUMS, which is our two large categories. Got it.
04:42And how have the commodity prices been so far in Q1? And going forward, what are you expecting?
04:48How will this impact the margins overall? Because your margins have improved to 11%.
04:52So do you see an upside to these margins going forward or do you expect them to remain at the
04:58same level? See, as we discussed Mahima, I'm not going to give you a forward guidance on the
05:03margins for future. But having said that, let's look at this in two or three parts. One,
05:08you asked about commodity. I think as of now, yes, we did see a shoot up in commodity prices
05:14led by metals in the early part of Q1. We are seeing some softening of commodity prices as we
05:20look at entry into Q2. Let's see how it goes. But there is increase that has happened in
05:26commodities like ABS, etc. Now, this is something that's a reality of this business. The way we
05:32work out is what are the initiatives that we can try to address this. It starts from a very robust
05:38cost program that we have, which all of you know as Monati, that works on an yearly basis. How do
05:43we bring in productivity by driving technical and commercial levers on the business? Similarly,
05:49our mixed improvement, which is focusing on premiumization and higher unit price products
05:54should also help us to improve and sustain margins. The last lever, which we have been now
06:00using consistently for the last four quarters is to take the right amount of pricing actions
06:05across our categories. Now, being a market leader, we think it's our job to ensure that
06:10the category moves in the right direction when the price offering is concerned to the consumer.
06:16So, we would take the price of actions as and when necessary to ensure that the unit economics
06:21of the business is protected. And as you would know, Crompton continues to be a market leader
06:27as far as margin delivery is concerned. We would like to protect that too.
06:31Right. And since you mentioned premiumization strategies, you know,
06:34I want to understand that how much of a growth has come from the premium segment this quarter?
06:40See, it varies from business to business. Very difficult to give you a precise number
06:44as how premium business has grown. But just to give you an indication in terms of our
06:51appliances business, our saliency from premium used to be about say 15 to 16%. Today, it has
06:56moved to about 25% in our geysers and cooler business as of Q1. Our fans premium saliency
07:04used to be about 17, 18% sometime back. We are now close to 25% in Q1. So, we talked about lighting,
07:13ceilings and patterns, right? While bulbs is a category that has been seeing price erosion.
07:18In spite of the price challenges, we have grown our ceiling portfolio by about
07:24mid-teens and early double-digit in patents portfolio. So, across all the portfolios,
07:28we have seen meaningful movement as far as premiumization is concerned.
07:34Okay. And, you know, your butterfly business has seen a revenue growth of 9% QOQ. However,
07:40sequentially it has declined 17%. I'm sorry. Why it has declined 17%? So, you know, I want
07:46to understand that going forward in FY25, when do you expect recovery overall in the
07:54butterfly business? What are the strategies that you are, you know, picking up for the business?
07:59Yeah. See, part one, I think, yes, you are right. Sequentially, the butterfly business has grown.
08:06It is also coming out of its worst quarter of Q4, where it incurred losses. We did say,
08:11we will start making money as we get into Q1 onwards. Q1, we delivered about 5% EBITDA and
08:17we expect that to be improved upon for the later part of the year. But we did also talk about,
08:22it is important that we get fundamentals of the business right, which means that we need to get
08:27our pricing actions corrected. Our product portfolio needs to be right-sized. We need to
08:34ensure that the channel priority is on the key ones, which will help us to deliver sustained
08:39growth over long term. This also meant we have to take pricing actions to ensure that price
08:44parity is maintained across the channels. That is the reason you are seeing a decline in revenue.
08:51We expect H1 to be a decline in revenue. As we move towards H2, we should see the business
08:56delivering revenue growth and start improving margins from where it is today. So, we are seeing
09:02early signals of butterfly moving in the positive direction, but still there is work to be done as
09:08we speak. Got it. And one last quick question, what is the kind of CAPEX that you are planning
09:12for FY25? See, we look at CAPEX between two aspects. One is investing behind innovation
09:19and new product development and second is for the manufacturing capabilities that we need to
09:23invest upon. It tends to be around 100 to 125 crores per year, so far as CAPEX is concerned.
09:30Got it. Well, thank you so much Mr. Arunachalam for taking your time and speaking with us at
09:37NTV Profit. It was a pleasure talking to you. Same here. Thanks a lot, Mahima.