Orient Electric Limited (ORIENTELEC) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Orient Electric Ltd. Q2 and FI27 earning conference call hosted by Dan Capital Advisors. As a reminder, all participant line will win the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone floor. Please note that this conference is being recorded. I now hand the conference over to Mr. Tanesha from Dam Capital Advisors. Thank you, and over to you, Taneh.

Thank you, Danish. Good afternoon, and welcome to the Orient Electric Q2 FY27 earnings call. Today, we have with us Mr. Ravinder Singh Nagi, Managing Director and CEO, Mr. Arvind Vats, CFO, and Mr. Sambhav Jain, Head Investor Relations. Now, without any further delay, I will hand over the call to the management for opening remarks, post which we will begin the Q&A session. Thank you and over to you, sir.

Thank you, Zanin. Good evening, ladies and gentlemen. Welcome to Orient Electric to discuss the results for the quarter index. Thank you for joining us today. I trust you've had an opportunity to review our financial results and earnings presentation. Let me begin by briefly touching upon the broader operating environment before taking you to our key developments across our businesses. During the quarter, we continue to face persistent commodity inflation, particularly in copper and aluminum. Troubling and movements added further pressure on raw material costs and, in turn, on our gross margins. At the same time, global and geopolitical uncertainties continue to affect supply chain visibility and business planning. To mitigate these pressures, we've taken price increase of 3% to 6% across various categories in quarter two. And another increase of approximately 3% in October in some of the categories and complemented them with improved product mix and productivity initiatives. While input cost inflation has yet not been fully offset, we remain disciplined in our approach, balancing pricing with market comparativeness and sourcing efficiency. Against this backdrop, we're using 25.2% air-on-air during the quarter. Our one-orient and three-fold strategy continue to anchor our growth agenda as we build lighting, wires, switches, and switchgear alongside our established core fans. Premiumization and innovation remain key priorities, enabling us to leverage our existing ecosystem more effectively while keeping consumer needs and disciplined execution at the center of our strategy. The lighting and switchgear business, which delivered a strong performance during the quarter, with revenues growing 25.7 year-on-year to 329 crores. Within lighting, consumer lighting delivered double-digit growth, supported by continued traction and premium, remained consistent at 66% of the room mix, reflecting our continued focus on premiumization and a richer product portfolio, supported by a strong inquiry pipeline and our continued focus on new products. We also are encouraged by the momentum across our other categories. Wires more than doubled air-on-air, while switchgear and switches delivered high double-digit growth. Our electrician engagement programs, along with distribution synergies across categories, are helping us deepen channel reach and capitalize cross-selling opportunities. We continue to focus on quality, dependable service, and a relevant product portfolio to further strengthen retailer confidence. Consumer Durables business, ECD revenue stood at 550 crores, representing an air-on-air growth of 24.9%. Double-digit growth, outperforming the industry and resulting in market share gains. The performance led to market-led and master-distributed-led markets, delivering double-digit growth. Within fans, BLDC continued to see strong traction, growing approximately 26% air on air, supported by both premium and innovation-led launches. 40% of the fan mix, our focus on innovation and premiumization continues to yield encouraging results. With new products contributing more than 30% of the fans' revenue during the quarter, energy-efficient products, differentiated design, and consumer-relevant innovations remain central to our product strategy. Appliances also delivered double-digit growth, led by water heaters and garment care segments. The festive season and the second half of the year, our focus remains on ensuring the right product assortment and availability across channels, while maintaining a measured approach to the broader demand environment. On the distribution front, we continue to scale our direct-to-market model, with further expansion across Madhya Pradesh, Chhattisgarh, and Jharkhand, strengthening our godo market executions for Punjab and Nagpur. Our digital channel also maintained healthy momentum with e-commerce growing by a high double-digit, strengthening our presence across marketplaces. Quick commerce now contributed approximately 15% of our digital revenue and grew by almost 100% air and air, reflecting the evolving consumer-buying landscape. On the brand front, we continue to strengthen visibility across airports, outdoor, and digital media, with a focus on engaging premium audiences and reinforcing our technology-led positioning. We are also strengthening the consumer experience with a deeper, even deeper through Project Sambath, our customer service enhancement initiative, which is helping us sharpen consumer insights and enable faster resolution through AI-led capabilities. 25.2% air-on-air to 879 crores during the quarter. Gross margins stood at 29%, impacted by continued input cost pressures during the quarter. Despite this, EBITDA grew 49.7% air-on-air to 57 crores, expanding by 106 basis points to 6.5%, supported by operating leverage and continued cost optimization. For H1, we have grown by 24.3% with a revenue of Rs. 1829 crores. Gross margin stood at 29.4% for H1, while EBITDA grew by 46.9% year-on-year. EBITDA margin stood at 6.7% for H1, which expanded by 104 basis points, supported by operating leverage. Project Sanjay continued to deliver results, generating savings of approximately 13 crores during the quarter and approximately 23 crores for H1 through focused cost initiatives. More than double to 27 crores during the quarter and 59 crores for H1, again close to 100%. In the capital of 34 days, cash discipline remains a key priority as we balance investments in our portfolio and a continued expansion of our distribution. Over the longer term, trending towards a double-digit EBITDA margin remains our aspiration, supported by mix, improvement, productivity, and sustained cost optimization. Looking ahead, our focus remains on premiumization, innovation, expanding distribution, and strengthening consumer engagement while maintaining disciplined investments across the businesses. As we move through the festive season and the second hour, we remain confident in our outlook, given the brand preference, market share gains, and our refreshed consumer-centric innovative portfolio of products across all three stages of the world. On behalf of the entire Orient Electric family, I would like to wish all of you and your loved ones a very happy Diwali.

QSMLs. A first question comes from the line of Anirudha Joshi with ICC Securities. Please go ahead.

Thanks for the opportunity and congrats team for a great set of numbers in Q2. Sir, two questions from my side. I guess we have taken price eggs in October. So has that led to any inventory of stocking in September month or September quarter per se? Okay. Or is there any one-off performance in the growth which would have led either inventory upstocking or any low base or something like that? So that is question number one. And question number two, how do you see the BLDC fans' business shaping up? Because now, I guess, with another rating change, and again, next rating change in Jan 29, there will be far more focus on BLDC plans. So how is BLDC plans as percent of our total sales, and what will be the plans on driving BLDC sales also? Yeah, that's it from my side. Thanks.

Thank you, Anirudh. And if you look at right from April onwards, there have been very consistent price highs that we've taken. None of these price highs, typically when you would, you know, if I were to go back a couple of days back, each price hike would have a primary upstocking that will happen. So today the trade is also kind of now, I would say literally tired of price hikes, but it is not leading to any abnormal price. It's been consistent with the demand and the pull that we've been able to see, and one of the big things that we've seen across most of our categories is that response to our new products. For fans, we spoke about 30% revenue coming from the new product. But all of our products, as we do a very close tracking or commercialization of these products across categories, I would say the success rate is 90% plus for us. And that is what is giving us market share gains and, you know, helping us. On the base and everything, while, you know, industry had a lower base, we still had a slightly better growth versus industry last year, Q2 also. If anything, from a season upstocking, last year the Diwali was slightly up. Last year, September had a little bit of upstocking. This year, if anything, it split between September and October. So there is no abnormal one-off that we see. On your second question on the BLDC growth, we've been seeing consistent growths for the last eight quarters in BLDC. This quarter, we had 26% growth on BLDC. Almost 30% of our ceiling fund now comes on the BLDC portfolio. And it has happened over a period of understanding closely what a consumer wants from a tech perspective, from a design perspective, solving for those, converting those insights into new products, and ensuring that the core of the BLDC, which is the PCD, the quality is much, much better than what a consumer experiences across the industry and peers. So, we are very confident on our portfolio, our quality, the tech, as well as the design language that the consumers are getting. So, BLDC will continue to grow. The ceiling fan industry, by and large, if we take some of the larger BLDC out, would be in the range of about 17-18% of the ceiling fan. So, we continue to drive this in a big way.

Yeah, sure, sir. This is very helpful, and congrats once again to the team for solid performance. Thank you.

Ladies and gentlemen, anyone who wishes to ask a question may press star and 1. Our next question comes from the line of Balas Subramanian with Arihant Capital. Please go ahead. Hi, Mr. Balas Subramanian. You may please proceed ahead with the question.

Hello. Hello. Good evening, sir. I am Aadipal.

Yes, you are.

Thank you so much for the opportunity. Sir, NPD contributed 30% of the FAMS revenue. I think you rightly mentioned you have a 90% plus success rate, and the focus is on tech and design. Just want to understand what is the R&D spend as a percentage of PCD revenue, especially in the FAMS? How do you measure, like, in the ROE side on innovation-led launches versus the cannibalization risk to existing scales?

So, as we said, you know, there are multiple things that we're doing on the R&D side, and it all starts from, first, changing the core DNA of the organization to be a very consumer-centric, understanding the insights, understanding the consumer needs, and solving for that. And for that, we are strengthening some of our projects and programs like Projects from Guar, which gives us deeper insights into the consumers. We not only go to the consumers, we also go to the influencers and specifiers like architects and interior designers, pick what is the trends happening, and then we convert that into our products. The way we measure our success of products is, what is the reach that particular segment or a particular price bracket if we launch a product? What is the reach that's supposed to happen? And what are the repeats that we get? And then we measure from a third party whether they start coming into our overall market share, and those are the products that we look at, and that's how we define a success there. In terms of our R&D spends, we do about 0.8 to 0.9 of our turnover, and it's far deeper, and we have a design, R&D, a lot of efforts that gets in behind this.

Awesome. And next question, I think we have launched Shield, MCP, and Isolator, as well as the Modular Stitcher. Is that 6K MCB cap is now fully addressed, or its further launches is expected, maybe in this year or next year?

So thanks for picking this up. We've just launched Nixa Shield, which is a 6K. That was a segment which was not being addressed by us, and largely from a B2C side. That's a good segment that's growing faster than the industry, so we've covered that. We are doing phased launches of it, geography-wise, and as we move forward, we will continue to add to it. From an NCB perspective, that's largely covering the segments. So we've got 10K, 6K, and we have a technology advantage, where we had a technology tie-up with ETI of Slovenia, And we have a Eurotech range, which is the upper-end range. So from a range perspective, we've covered it. From a geographical go-to market, it's a phased rollout which is happening. Delhi has happened, UP West has happened, and now you'll see UP and the rest of the places getting covered in the next few months.

Great, sir. Thank you so much. All the best.

Thank you.

Our next question comes from the line of Madhur Rati with counter-cyclical investments. Please go ahead.

Sir, thank you for the opportunity. Sir, firstly, I wanted to understand regarding our operating margins versus some of our competitors like Crompton, Belize, and Surya Roshni who do high single digit to low double digit. So, where does Orient sit? Because we've constantly mentioned that we would like to take it to double digit. So, when can we expect to achieve that?

That's what we always give a guidance saying that double digit is something that we get from a improvement perspective. We've improved in the last two years. Look at only from last year, it's about 104 basis point improvement. If I take a year before, that's about 130 basis points improvement. And typically for us, and for a large part of the industry, quarter two is a little low from a seasonality perspective. If you look at our reserves in quarterly trending, you will see H2 being much better, Q3, Q4 being much better in terms of EBITDA percentages. Our effort is to, you know, had the inflation or this unprecedented inflation not been there, I would have had a very different confident timeline to give you on the double-digit margin. But I see, you know, at some point in the next four or six quarters, at least in H2 onwards, you will see us trending far closer to that. In terms of our percentage improvements, in terms of our absolute EBITDA, absolute PAD growth percentage, we would be far better than most of our peers in that sense.

But, sir, what I'm trying to say, sir, this is always a four to six quarters down the line story. What I understand is that we are not able to achieve this answer. Similarly, our working capital days have increased from closer to like 16-17 days in FY24 to 34 days during this quarter. So, is it that whatever revenue growth is coming, we are giving higher credit terms or terms of trade are getting deteriorated for us versus some of our competitors who operate in a negative working capital scenario? So, I'm not able to understand this. Are revenue growth is coming at a...

No, Madhul, I think that's a wrong inference to take. Look at what we've done in the last three years. We've moved from a MD to a DTM structure, okay? MD, the days of outstanding AR would be very different from when you go to direct to market model. Now that when you're comparing with payers, there are larger things that you need to look at. Look at inventory days. We are in line with the industry number of inventory days. Look at payables. There are large players who are giving payables at 100 days plus. We are far better than. So from our philosophy perspective, we pay our partners and suppliers well in time. And from an overall perspective of days of inventory, we're absolutely in line. There is one part, which is where we've gone and got into newer segments and gone DTM. That's where our days of sales outstanding world ARs moved up, which is where we put some of the programs of channel finance and all, which is work in progress. You should see improvement there. We've moved our working capital 30, 34 days. In the next four to six quarters, it should come back to about 30 days, given the point that we're doing in terms of our channel financing and everything.

Got it. Just one final question from my answer. The cost improvement from Project Sanjay, how much further cost improvement can we expect during H2 of this year?

So last year, we did a full year of about seven. So large part of my accruals start to come in in the H2, and you will see currently we're at about 23 growth. We should cross the last year number in terms of our, because my spend base goes much on the H2, and my accruals start flowing in much better than the H2.

Thank you.

I'm sorry to interrupt, but you may please rejoin the queue. Thank you.

Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participant, we request you to kindly limit your question to two questions only per participant. If you have a follow-up question, you may please rejoin the queue. Thank you. Our next question comes from the line of Naushat Chaudhary with Ajita Billah's Funnel Life Insurance. Please go ahead.

Thank you, sir. Two questions. Firstly, on the growth side, I hope I'm audible.

Yes, you are.

Yes, you are, Master. On the growth side, if I remember it correctly, we have taken roughly 10% to 15% price hike across category, and earlier our aspiration was to have 15% kind of CAGR in three to five years band, but with this price hike and the growth which we have experienced in the last two quarters, Should the expectation for FY27 move in similar line of what we have done in last two quarters? And then thereafter, there should be a 15% kind of expectation.

The numbers don't give you that split of volume value. For the last two quarters, we've been and we look at each category. I think we've had a double-digit growth at an overall volume level also. So it's not just the price growth which is doing. And yes, you're right. We have given a guidance of 15% plus CAGR. Currently, we are at about, for the H1, at about 24.3. As we move forward, we really can't predict the inflation and all, but our entire effort is to make sure that the volume-led growth starts to creep in more as a percentage of our revenue growth. So currently, looking at everything, my guidance would be that we would be more than 15% of Syria. How much more? We don't give a few to this thing, but definitely we can look at a slightly more aggressive number than what we had given earlier.

And on the gross margin, last quarter we indicated with the price hike, which is getting absorbed, we should, you know, quickly come back to 30% or 31, 32% kind of gross margin in immediate quarters. So, should that be an expectation in coming quarters, assuming last quarter would be a half absorption? So, next quarter, on what should we expect that range?

Naushat, when we gave a guidance last quarter, we thought we were, you know, flattening out of the inflation, and we had taken price increases with planned price increases for Q2 also. Unfortunately, as we speak, there is no predictability on the inflation. The controllable factors with us are how fast and how well we can be competitive and yet pass on the prices to whatever And that's what we've been passing on. Except for our emerging categories and all the other categories, we've been ahead of the curve, ahead of our peers in passing on the pricing and being very disciplined in ensuring that those prices are absolutely newly passed on. Our gross margins have come down, and that's largely led by inflation. Our efforts in terms of execution discipline passing on, even if it means slightly ahead of the industry averages, that will continue to happen. We are hoping that the inflation will slow down, if not stop, and that rate of inflation-led pricing that we passed will catch up on the gross margin. My guidance in the long run stays at about 32%, and that's what we are working. What we can mitigate through pricing, we are maximizing I think that is what I can assure everybody on the call.

Great. Thank you, sir. All the best. I'll follow back.

Thank you, Mr. Thank you.

Our next question comes from the line of Tanisha with Dab Capital Advisors. Please go ahead.

Yes, sir. Thank you so much for the opportunity. So my first question is, you know, we spoke about a 3% to 6% price like this quarter as well. So I just wanted to understand right from the beginning of the CY or even FY for that matter, What would be the quantum of price acts which we've taken across our key categories, and how much does that cover as a percentage of the overall inflation? That would be really helpful to sort of understand, you know, how our margins would move going forward.

Question. And we'll have to get into multiple categories to do this. Largely, if we were to speak about it, in quarter one, we had taken in France about close to 9% price increase. In Q1, we've taken about 3% rise and freeze. In appliances, and appliances have various subcategories. I'm giving a broader overall this thing. We've taken about 6% rise and freeze in Q1. We took another about in some categories on an average. We've taken about 3% rise and freeze in Q2 in appliances. This is lighting. We've taken about 6% to 7%. In Q1, we've taken about close to 6%. And we've taken about 2% now in October. Switch here, we took about another 6% in. Surely every increase, although in VIA, since we are a new entrant, versus pair, we are not leading this price increase, but we are following and we are a fast follower on that.

Yes, sir. That's really helpful. If you could just give as a percentage of the overall cost increase, have we covered chunk of it via price hikes, or is there some bit of under-absorption which is yet left?

Yes, if you look at it, and different category-wise, you know, it will range from about 80% on, say, fans and appliances close to about 90%, wires closer to 100%, and the rest of it would be in the range of 80% to 100% of what the inflation led. So there are gaps to be covered. Yes, and that's a comparative intensity that's there in each of the categories, and that's what we've always looked at. How we are also, what doesn't get answered in all this is a large part of that balance to be covered is also being covered through premiumization and a mixed chain. So that's how we are trying to look at the gross margin improvements.

Sure, sir. That's really helpful. And my second question would be, you know, if we can just spend some more time on the DTM strategy, you know, we're almost implementing it across 15 regions of states right now. And how are we sort of, you know, improving our metrics for, you know, the earlier states in terms of market share or in terms of even growth for that matter? And maybe if you could just, you know, touch upon how is DTM margin dilutive or appletive in nature, and why would that be so?

So, I've already, you know, in the previous calls also, I've said, you know, it's never going to be 100% DTM or 100% MD. It's going to be a, you know, balanced approach. We have always looked at from an input perspective, quality of distribution, depth of distribution, quality of infrastructure, relationship. From an output perspective, growth, market share, premiumization. And those are the parameters that we look at when we look at each market. And at a certain point, when we decide on any of the markets, those are the opportunities that we see and feel that we can drive better than the MD in those markets, and that's how we do a transition of those markets. We've done Madhya Pradesh, Shattasgarh, and Jharkhand in this quarter. Just from an output-input perspective, that's what we've been doing in all our DTM markets. From an output perspective, DTM markets are performing well on growth. We are seeing consistent market share gains. We are seeing premiumization improving. We are seeing BLDC growth happening much sharper there, and we are seeing the depth of distribution getting better. Your other question or a sub-question within that was, is it margin-accretive? Because of all the things that we're doing, we, at a margin level, get a better output. And even on the NPD side, while overall 30% of our revenues come from NPD, in these GPM markets, the contribution of NPD is almost about 500 to 600 basis points more.

Thank you so much for the detailed explanation, and I'll come back in the queue. Thank you, sir. Thank you.

Thank you. Our next question comes from the line of Lakshmi Narayana with the Tunga Investments.

Yeah, a few questions. So, what is the B2B mix for H1, and how it compares with last year? My second question is that you have talked about new product growth. I want to understand how the dealership or distribution expansion has led to the growth. I mean, if you just disaggregate the growth, what has actually resulted from the expansion of distribution, and how many touch points you have actually added? And my third question is that we have taken a price hike. I want to understand, I think, your COGS, what is the mix of steel and plastics, and where do you see these higher inflation? And because what we hear, at least in the last one, two quarters, is that there has been a prohibitive increase in steel as well as plastic prices. And it's, I mean, you have tremendously managed the margins. I just would love to hear your perspectives on this.

Yeah, so thanks for your question. So there are three large questions that you've asked. One, how is the B2B mix, and how is it moving up? Our dealership and expansion, growth that is coming from expansion. So let me just start from B2B mix. Overall, as an organization, we are double digit on our, you know, B2B. But when you look at some of the segments like lighting, we are at about 25% of our business coming from B2B. Overall, if you look at from a B2B perspective, The growths for the industry and for us have been slower than what we've seen in the B2C, and that also has an ability to pass on the pricing in B2B is lesser, and all the peers or people who've got a larger share of B2B must be facing this pressure far differently because, you know, you co-do contracts and annual rate contracts at a point where you don't know what's the next. three months or four months inflation would look like. So B2B mix is more or less stable for us, while the growth rates have been slightly better in the B2C side. We continuously keep monitoring our expansion, and especially for our core categories, we've been expanding. So if I were to give you a count on a large base of about a lakh plus direct and indirect The third question was on the inflation from some of the categories like steel, plastic, While I actually look at it from a commodity perspective, there's all commodities that get into a bomb of almost 100% of our products. They've all gone up for the industry, whether it's steel, which is from over 65 to about 80+. Plastics have gone up. Copper is touching a new high every two weeks. Aluminium has gone up and been very volatile. So, for each product, each SKU, the bomb is differently, but it's unfortunate that the inflation is so secular across all commodities that it impacts the entire portfolio for the industry there. Does that answer this question?

Yeah, that answers just one question. I saw that another large company has reported numbers, and they've also reported an increase in margin, and then appliances also, I see it. It seems that the price increase is easily passed to the customer. So, is it a fair assumption that this time price increases are easy to be passed on? Because a couple of years back, there has been difficulty by the industry to pass on price. But I, at least anecdotally as well as numerically, I see that price increase by the consumer durable companies seems to be easily passed on and it is without any effect on the volumes or the value growth. I just want to share your thoughts.

Yeah, so price increase is passed on. I have a little issue with the word easily. So, I don't think so that, you know, it's getting passed on easily because if it was easy, the entire industry would have passed on 100% of it. So, there is a mix that happens. There is this comparative intensity that happens. Obviously, when you pass on the thing, there is one factor which never gets picked up, and maybe in your channel, you would get and pick it up. Most of the categories in FMEG industry or other industries, you would see a share of unorganized players getting more, and that affects the bottom of the pyramid products. And hence, when Orient took that journey of premiumization about three, four years back, it has helped us soften that impact because unorganized segment is growing and the arbitrage, when you keep taking price and fees, starts to become large enough for a consumer to drop an organized brand and take an unorganized local brand. So that's the difficult part, and that's the balancing act that most of the organized players are doing right now. Currently, everybody is forced to pass on the price because the inflation is unprecedented there. So, everybody is passing on, not being able to pass on 100%, and hence, not a fair term of easily, but otherwise, you're using broadly everybody passing on some percentage of the inflation.

Got it, got it, got it. Thank you, sir. I'll come back in queue.

Thank you. Ladies and gentlemen, just a gentle reminder, please limit your question to two questions only per participant. Our next question comes from the line of Nikat Kaur with Dolan Capital. Please go ahead.

Hi, thank you. Thank you for the opportunity. My question is regarding the Hyderabad facility. So, sir, what is the capacity utilization for fans at this facility, and what is the mix of PPW and ceiling fans at Hyderabad facility? And my second question is on why us continues to see strong growth of 2x growth. So, has this category been launched Pan-India? These are my two questions.

Thank you, Nikita. Firstly, I'll take the question on Hyderabad. Hyderabad, you know, as I said, you know, last time also it's about 40% capacity utilization on a single ship. We continue to see that. It will be the higher production cycle that we'll start seeing in Q3, Q4, which is preparedness for the next season. The capacity utilization will improve further there. Currently, we do about 75% TPW and about 20-25% sealing from there. It's largely TPW facilities, but what we are also doing is we are picking up models in its use which do well in South to be produced there so that we save on the logistics. So that's on the Hyderabad side. We've not done a Pan India launch. As I have always maintained that what is our core reason to get into wires and our right to get a placement in an outlet and then a right to be picked up by electrician is that 45% of our fan-selling outlets do sell wires. We have picked up our strong selling markets where our market share is good and preference is high, and those are the markets where we belong. So, largely, north and east is where we've launched. Some spaces or west of the states will also start helping us in building wires much better. So, we're not spreading thin. We're going deeper into the states where we've launched, building a robust, giving electricians a first-hand experience of dealing with the wind, and that's how we'll keep expanding over the next time.

Sure. Thank you, sir.

Thank you. Our next question comes from the line of Yash Jain with Ambit Capital. Please go ahead.

Thank you for the opportunity. Continuing with the last question, is the new facility contributing to margin improvement or are we yet to see the impact from that facility in terms of margins? Can you quantify what will be the kind of margin improvement that we are expecting from that facility?

Taking away the benefit and the utilization going up, we should see about a 20-30 basis point coming from Hyderabad utilization.

Okay, thank you. And another question is on BLDC, we are seeing improvements for your portfolio here, but is the industry growing at that rate or what are we doing differently that is helping us gain significant market share in the space?

I would say that what we've done differently is that we've understood the technology, which is the PCB. 80%, 70% to 80% of the PCBs that get into our PLDC fans is manufactured by my own lighting factories. So that's where we control the quality. We continuously work on improving the output there. We've done a huge amount of consumer studies to understand the design language and what are the needs of the consumer. If you look at some of our recent launches, like AeroSilent, which is a Red Dot Award winner, India's first most silent fan with less than 50 dB. We've done a BLDC fan with Ecotech Volt. That's India's first ceiling fan with a battery backup. We've done a Aero O2, which is India's first oxygen-generating fan. We've done a Harrier wall fan, which is India's first BLDC with a gesture control. With a hand movement, you can switch on, switch off, control the speed. So those are the – and these are coming from a deep consumer insight that we have, coming from our project, Sambha, which is translating into products, which are ahead of the curve of others in the industry, and that's what is giving us the preference at the retail, preference at the consumer's, preference with the specified segments.

Thank you. Thank you. Thank you. Our next question comes from the line of Niraj Jan with BNP Paribas. Please go ahead.

Yes, hi, sir. Thank you for the opportunity. Sir, firstly, if you can just call out the A&P spend in this quarter versus the last quarter.

Typically, our quarter one is slightly higher because of the seasonality and other things. But fair to look at it on an air-on-air perspective, we've spent more than 10% of what we had spent last year on our advertising and marketing spends. Because, sequentially, it may not be a right way to look at it, because quarter one is obviously a heavy fan season.

That's right. And so, secondly, again, just wanted to get more sense on the gross margin side. So, if I look at the nine months, we have taken roughly around 15% to 18% kind of a price hike. Alongside, our BLDC share is increasing, and our premium mix has continued to increase across the categories, Despite that, our gross margins had declined roughly 250 pips over the last two quarters. So, just wanted to get a sense, I mean, is that the competitive intensity has increased because of which it's not actually adding up back to the realization. Otherwise, like it's a sharp gross margin cut for the amount of price we have taken. And then we are also calling out that we have covered almost 80% of the inflation. So, in that case, if you can just help us understand more on why the SHARP 250 gets dropped.

Yeah. Okay, Naraj. So, firstly, you've spoken only about fans. In general, I've spoken about all the other categories. Just the gross margin is also a factor of other factors of mix and everything. There's house wires, switch gears, and those mixes are also changing in our portfolio. But largely, what we also do, and if the underlying question is that are we aggressive and not passing on as the industry is passing on, passing less than that, and that's what is impacting, the answer is no. And what we do is through a third party, we also look at indexing. So we've done that indexing across most of our categories through a third party. We've seen an improvement on indexing. So just to give a little BLDC context, if 100 or if 1 is the average ASP and index of the industry of BLDC, we are at about 1.11. And over the last six quarters, we moved from a 1.04 to a 1.11. That's also a factor of the mix and a higher ASP and a superior premium products that we put. So we measure that also from a perspective that if there is a possibility to get X, we make sure that we're getting X plus and not X minus from the industry on that perspective. Yes, it's a sharp drop of our 250 basis point, but that's not because we've not passed as much as our comparative intensity allows us. We passed on more than that. But still, the inflation has outpaced far higher and far sharper than what we could take as a price increase.

Thank you. Ladies and gentlemen, due to the time constant, that was the last question for today. I now hand the conference over to the management for the closing remarks. Thank you, and over to you, team. Thank you so much, sir. Ladies and gentlemen, on behalf of DAM Capital Advisors, that concludes today's call.

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