V-Guard Industries Limited (VGUARD) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the WeGuard Q4 NFY26 Earnings Conference Call hosted by Investec Capital Service Private Limited. As a reminder, all participants will be in 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 a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vineet Prasad from Investec Capital. Thank you, and over to you, sir.

Thank you, Yusuf. Good evening, everyone. A warm welcome on behalf of Investec India to Q4 F526 earnings call of VGARD Industries Limited. We have with us the senior management team of VGARD, represented by Mr. Michal Chislapalli, Managing Director, Mr. Ramchandran V, Director and Chief Operating Officer. Mr. Sridarshan Kaswadi, Senior Vice President and Chief Financial Officer. Now, I will hand over the call to the Senior Management for their initial remarks, both which will open the floor for Q&A. Thank you. Over to you, sir.

Thank you, Vineet, and the Invested team for hosting today's call. A very warm welcome to everyone joining us today to discuss the company's operating and financial performance for the fourth quarter of FY26. I trust that all of you have the opportunity to review the investor presentation shared earlier. We delivered a robust performance in Q4 marked by strong growth in both revenue and profitability. On our consolidated revenue for Q4, FI26 stood at 1,755 crore, a worldwide increase of 14.1% for the full year. For the full year, we achieved a top-line growth of 7%, with almost all growth coming from the second half. The electronic segment, comprising of stabilizers, UPA systems, inverters, and batteries, delivered a strong growth of 22.3% YOY. All categories delivered growth during the quarter. The electrical segment, which is our largest revenue contributor and includes wires, pumps, switch gears, and modular switches, registered a YOY growth of 15.9%. In the consumer durable segment, covering fans, water heaters, kitchen appliances, and air coolers, We reported a 4.1% YOY revenue growth. Fans and air coolers witnessed a decline, while water heaters in kitchen categories grew strongly. Sunflame reported a YOY top-line growth of 8.6% in Q4. The slowdown in the CSD business continues, but the non-CSD business grew by about 16%. The GTM integration has been completed, and the business is experiencing strong traction. Sunflame reported. Sorry, yeah. In Q4 Fi26, the revenue from South market grew by 16.2%, while non-South market grew at 11.8% YOY. For the full year, non-South market contribution is at 48%. The gross margin remains healthy. We have maintained gross margins at 35.3% this quarter, which is at similar levels of Q4 of last year. This is on the back of significant improvements. Improvements achieved in the last three to four years. EBITDA, excluding other income for Q4, stood at 171 crore, reflecting a YOY growth of 19.3%. For the full year, we reported the EBITDA of 527 crore, an increase of 2.6%. EBITDA margin for the full year was 8.8% compared to 9.2%. Consolidated PAT for the quarter was 112 crore, up 23% YOY, compared to PAT of 91 crores in the previous year. For the full year, consolidated PAT was 308 crore, lower by 1.7% YOY. In Q3, we recognized an exceptional one-off charge of 22 crores toward gravity and leave encashment arising out of the new labor code. Without this, the impact The underlying path growth for the full year would have been 3.6%. Working capital management continues to be efficient, leading to strong cash flow generation. We have a net cash of 231 crore as on March 2026, as compared to 64 crores in the previous financial year. Considering the financial performance and healthy cash position, the Board of Directors has recommended a final dividend of 150%, equating to 1.5 rupees per equity share. The West Asia war has created challenges in terms of commodity inflation and supply uncertainty. So far, we have navigated these challenges well, which reflects the inherent resilience of the business. We continue to monitor these risks, and we have mechanisms in place to take appropriate and timely actions. Overall, FI26 was a challenging year with the first half experiencing weak summer and tepid demand. The business performed much better in the second half with the momentum. Of Q4 and indications of a supportive summer, we are hopeful for a strong start to FI27. With that, I conclude my opening comments, and I would like to thank Vinit and the team at Interstec for hosting this call, and would like to request the moderator to open the floor for Q&A. Thank you.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Anirinta Joshi from ICHA Securities. Please go ahead.

Yeah, thanks for the opportunity and congrats for a great set of numbers. So, in terms of the price hikes, if you can indicate, because all commodity prices have increased materially, so what will be the price hikes across segments or at the portfolio level aggregate? And have we passed on the entire impact of increasing cost to the consumers, or do we need another range of price height, and what will be the quantum? That is question number one. Question number two, whether the kitchen appliances segment has now really come out of the, in a way, bare face, and now we should see pretty healthy growth in the segment, considering the strong numbers posted by Sunflame also. So, how should we think about for FY27 for kitchen appliances as a category itself? And see, how is the fan market shaping up post-March? Because we had understood that Kerala as a market had seen some amount of softness, Kerala and Karnataka. So, how are we looking at the fan and cooler market post-March? Yeah, thanks.

Yeah, okay, I'll take up the second part, which is on kitchen appliances. So, yes, we do believe that there seems to be some, I think, the improvement in demand for kitchen. So, we are seeing traction, both for Vigard as well as Sunflame. And I think the GT business of Sunflame is growing well. But we have also taken some actions in terms of business integration, which is also helping. So, we have more. Boots on the ground as far as Sunflame is concerned. And now Sunflame has access to all the networks and capabilities of the sales system of Vicar. So that's definitely helping that. But yeah, we do also believe that, you know, kitchen business is slowly coming out of the woods after the lull, which happened post-COVID. The third part also, okay, now I'll go for the first part. So suggestion, price eggs.

Yes, there have been some significant increases in input costs. Across representative categories, we are seeing in a range of somewhere between 8 to 13 percent kind of cost increase. This has happened over a period of time. And what that translates into is, eventually, when the high cost inventory comes in, 13% price high would be required. At the moment, prices are getting passed on. We have probably landed about 75% of what price increases are required so far. And that's something we will have to watch in the future.

So, I think we have landed most of the pricing action, and I think most companies have announced and taken pricing action, and I think the balance, 25% should happen, as and when the high-cost inventory start hitting the, you know, in the month of May and June, is what we feel. The third is on the fan. So the fan business, I think, you know, fan business has degrown in Q4. I think, I don't think it's been Kerala. I think for us, you know, the eastern markets, especially the summer products have not grown in Q4. So the part of that is also pulling down fans. Maybe in the South markets, including Kerala, Sand would have been, you know, a flattish kind of number for Q4. However, April, the summer sales has been reasonably good in South India, but we'll wait and see, you know, what happens for the full quarter. Yeah.

Okay, sure, sir. Very helpful. Just one last question. Vigad has a high revenue salience from the state of Kerala. And post the war in West Asia, we believe some of the remittances, etc. There might be some disturbances to that. So there is possibility of some impact on the overall economy at Kerala level. So how do we see that impacting, let's say, 526-1? Because probably, so far, there was no impact, considering... It's just two months only. So, do you see any impact and what will be the strategy to mitigate the impact easily? Yeah, that's it.

Okay, so far we have not seen any special impact, you know, in Kerala. In fact, the summer in Kerala has been pretty supportive. So, Kerala numbers are pretty good. Kerala today is not that large like it used to be. So, it's about 15-16 odd percent. So, it may not impact the overall company, you know, that much as it used to do earlier. So, so far, we are not seeing an impact. Even when we talk to, you know, real estate companies, they are actually seeing still traction happening because we also will see some improvement in demand because people are evaluating to relocate, you know, the only the earning member staying back in. Those countries and sending their families back home. So all these things are going on. But having said that, Q1 is not about that. Q1 is primarily going to be summer. And Kerala as a state has done well as far as summer is concerned.

Oh, it's awesome. Many thanks. We're here for you.

Thank you. Participants, to ask a question, you may press star and 1. Next question is from the line of Vineet Prasad from Investec. Please go ahead.

Hi, sir. Sir, I have a couple of questions. One is from FY27 perspective. How do you see demand shaping up considering, one, the summer season? Number two, possible inflationary pressures and its impact on consumer sentiments. That's my first question. And second is, from the next couple of years perspective, how do we see margin trending? We've given bulk of the investments in the new capacity is already done. Ramp-up, as we speak, is on its way. So, if demand momentum is conducive, do you think we are heading towards double-digit EBITDA margin for the next year of it?

Yeah, I think if you look at effect 27, you know, we just completed one month, and South India has done well. So, South, the temperatures were warm in most parts, and I think South India, the summer has started. And non-south, it is still, you know, it was raining in many parts of the geography, but non-south also has a longer window, at least till June 30th, so we are expecting the demand to pick up. The expectation and the... Prediction from the IMD as well as SkyMath and other agencies asked for a pretty warm summer. So that is hopeful. And South India, it has already started and the numbers are pretty decent. As far as the medium term is concerned, yes, so if you can see, after even having such an adverse year, we had a very bad Q1 in the first year. We have come back strongly and our RH2, EBITDA is in the region of around 9.5%. So we are already close to double-digit numbers. Yes, there are some concerns because the cost inflation is very high. Across categories, across raw materials, prices have gone up. Even metal, you know, the metal prices are also going up. So, because we have to also understand that West Asia also produces a lot of aluminium. They have a lot of aluminium smelters which are out of action now because of the blockade. So, I think we'll wait and see, but I think the inflationary trend is pretty severe, and it is as bad or little worse than the Ukraine war inflationary trend, what we experienced. But the good news is, this time, you know, we are ahead of the curve in terms of pricing, and if you see, our margins are fairly, you know, protected in Q4, and we hope to do that. But yeah, but in the medium term, I think, yes, so once this is over and the promitual prices come back to normal, we are pretty confident of hitting double-digit EBITDA.

Hello, sorry. Just to follow up to the question, your earlier response, what I understand is, this time around, industry has been a lot more proactive, and markets to that extent could remain resilient. Has there been a case of cross players where most players have taken price increases, or it is us and a couple of maybe the larger ones who have been proactive, or it's the industrial ones?

No, I think we have seen a pretty much broad-based reaction by the industry to increase prices, but in seasonal categories like summer categories, you know, this action is getting delayed. For example, in South India, a lot of this pricing is getting passed on, whereas non-South where summer is yet to start or it's starting slowly, you know, some of it is getting slightly pushed. But I think the intent is pretty strong. We are seeing this across because the quantum… The price increases are high. This is not only about price increase, but in some cases, there is genuine shortage of raw materials. So, we are all scrambling to secure raw material supplies. So, you could see, you know, some of the smaller players not even being able to produce, you know, products. So, we are in a state of supply shock, and that's also another reason why, you know, there is, there has been a very strong... Almost cohesive action by all players to increase prices. And the quantum is very large. So there is no way that almost all the categories, the quantum is so large that you can't absorb the shock.

Understood. Understood. Thank you. Thank you so much. Thank you.

Thank you. Before we move to the next question, a reminder to the participants to ask a question, you may press star and one. Next question is from the line of Rachana Kukreja from S.C.L. Ventures. Please go ahead.

Thank you for the opportunity. My questions are on Sunflame. My first question would be, have we incurred most of the transition and integration-related costs for Sunflame? And going forward, what could be the expected benefits from these initiatives taken?

Okay. Ram, you want to take this?

Sunflame integration. So, I think the Sunflame integration is progressing well. Be, be, you know. In functions like service and quality, we have fairly progressed with integration, and we are seeing results also. There are improvements in cost, and there is improvement in performance and customer satisfaction. In sales, I think, you know, the integration, you know, happened over November, December, and it's still underway. We are seeing early results in terms of being able to, you know, place, you know, sun flame into stronger counters where we enjoy, you know, traditionally good relationships. So I think that's encouraging. On the supply side, you know, in terms of planning, sourcing, this integration has happened over last quarter. In general, of course, there will be some, you know, benefits in indirect costs, warranty charges, and, you know, even, you know, cost of quality. So those are areas where, you know, we expect to see some benefit. The most significant benefit will come from the sales integration, and this is something that we should expect over the next three quarters. And into the subsequent year, because I think the initial benefit will come as we spread the Sunflame into our network. But I think deeper benefits will come from second half of this year, you know, as progressively our NPD pipeline starts to hit the market over the subsequent three or four quarters. So I think progressively we should see better outcomes because the actions are underway, and we are already seeing these benefits in functional domains like service and quality, as I already spoke to you about, or even warehousing and logistics.

Yes. Next question.

Hello.

Yes.

Yes. Sir, I just wanted to know about the initiative taken for the DT and the Ecom channel for Sunclaim.

GT is fundamentally in terms of sales integration and branch integration, sales force integration and branch integration, and integration of sellout management capabilities. That's as far as GT is concerned. E-com integration is fundamentally, you know, so we are having the same team and the same systems driving Sunflame. It's taking longer time because I think, you know, we are also working on the offerings on the platform, and, you know, we had some challenges with listing some categories, you know, voluminous categories. So, GD, I think, you know, we are seeing traction already. I think we had some recent growth for full year and I think Q4 was better and we expect Q1 to be also, you know, reinforcing the direction of growth.

Okay, my second question would be, given that the innovation cycle in the kitchen appliance industry is very fast-paced, and we, too, have, you know, refreshed our portfolio, and the benefit of this portfolio would be, you know, visible after a year. So will we be able to sustain or improve our profit margins? And how is this new portfolio different both in terms of industry-led innovations and our previous portfolio? And how would this redefine our position in the industry?

No, I think, you know, two, three things. One is, you know, as far as our, see, I think, you know, we are refreshing products as we speak. It's just that, you know, the significant part of our refresh will land, you know, towards later half of this year. Yeah. That being said, you know, already, you know, portfolio announcements are happening. Now, there are, you know, multiple layers here. I think, you know, at, you know, one layer is, you know, some of our offerings are dated and, you know, they are being upgraded. Some of it is about, you know, addressing white spaces. Some of it is about, you know, you know, getting the lineup to reflect, you know, emerging technology trends like BLDC. So, these are the kinds of things. So, fundamentally, the addressability of the market, the freshness of the offering, and, you know, wherever, right, particularly, I think, you know, we have fans in CSD, or, you know, we have, what I would say, as... You know, we had gaps in built-in, and, you know, we had gaps in, you know, BLDC-based offerings in HOBs. These are getting addressed, yeah. So I think, you know, as far as the, you know, as I said, you know, right now, this year, you know, you will start to see benefit as we strengthen the reach with the help of our, you know, branch and our sales force, and also as we strengthen the sell-out capability for Sunplane. So that's our focus. I think, you know, the larger benefit of product rollout, you know, will be more visible in second half of this year and also going into next year.

Okay, understood. Thank you.

Thank you. Participants, to join the question queue, you may press star and 1. Next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.

Yeah, thanks for the follow-up. Just two questions. Now, with integration of Sunflam largely done and debt repayment also over, so the cash accumulation should start on the balance sheet. Right. Just some of the capex may take some cash, but still there might be cash accumulation. So what will be the strategy with the cash? Is the management or the company looking at another inorganic growth opportunities or how should we think about that? That is question number one. And question number two. So, we see BLDC as a technology is making rapid inroads, even in kitchen appliances like mixers also. So, how does the management see Sunflame prepared for that kind of product innovation? And overall, how do we see the BLDC fans also, market shares, shaping up for VGARD? Yeah, that's the problem I said.

Yeah, so as far as the cash is concerned, we are done with debt-free payments, and barring CAPEX, we should be having reasonably good free cash flow. We have not taken any call of making any acquisitions or anything like that. If we get an opportunity at a good value, we will look at it, and it will be a case-to-case basis, or nothing to report on that. The other part is on BLDC. I think already, if you look at ceiling fans, VGUARDS, BLDC is contributing roughly 40 odd percent of the ceiling fan sales, which is pretty good. Our growth in BLDC has been very, very good. Our complaint rates, reliability, and offerings are very, very competitive. And we are continuing to launch as we go forward. As far as the BLDZ kitchen is concerned, there are two areas. One is on mixer grinder and second is on chimney. Chimney, I think we have already launched BLDZ chimneys. But in mixer grinder, I think this is a device that is used for half an hour, 40 minutes daily. So it's not a device that is running. Constantly, like a fan or AC or something like that. So, there, I think, you know, we have not yet launched. I think it's more difficult to explain to customers the rationale of, you know, payback when something is running only for half an hour or 45 minutes every day. But in the other two cases, like chimney as well as. You know, to me the running time is longer. It will be a few hours every day. So there seems to be some traction. But I still don't think it will be as much as the fan because in the case of ceiling fans, it's running for almost 8-9 hours a day. I mean, assuming that you're putting fan through the night in your bedroom. And that's the payback hypothesis is very strong there.

Sure, sir. Thank you.

Thank you. Participants, if you wish to join the question queue, you may press star and 1. Next question is from the line of Deepak Lalwani from Unify Capital. Please proceed.

Hello, sir. Thank you for the opportunity and congrats on good set of numbers. Also, I have a few questions on the revenue side. I'll ask all of them together. So firstly, on the electronics division, we've seen good growth this quarter. So if you can break up this into volume and value split. And if you can help us how the secondary growth, that is the channel growth in April has been. That's one. The second question, the doable segment, I understand, has been hit this year because of bad summers. So what is our strategy to revive growth again in this segment so that you can share your product and channel level strategy? And third, so buyers, we understand that the complexity of intensity has increased. And one more big player is entering this segment end of this year. So how should Visa be able to tackle this and be able to grow? And at an overall level, Michal, if you could share what kind of growth rates one should envisage for your company going forward because you've had a bad year and looks like someone has been good and then recovered. So overall, what kind of growth should you aspire?

Yeah, I'll start with the second part. So, if you look at the consumer durable segment, both air coolers and fans have performed badly, especially TPW fans. That's primarily related to a lot of the impact of Q1, where we are extremely poor summer, and TPW is a very, very seasonal business, so if it does not get sold in the summer window, then the inventory typically sits with the trade and continues, so on, so forth. Having said that, and as we speak currently, we are having a shortage of TPW fans because, like I said, the south in the summer has been very decent and sellout has been good. So, that's as far as the consumer durable is concerned. So, I think this year we should have a good growth in consumer durables because of the low base effect. The third part is on wire. Wire is, we are cognizant of the fact that... Large flare is entering. Plus, some of our peer companies from Lighting are also entering wire. So wire competitive intensity is expected to be more than what it was. But it's a very peculiar category. You know, it's a category with low gross margins. And you need a scale of at least 1000 or crores to make money in this business. And there is also fluctuation of raw material prices upwards and downwards. And when it goes downwards, you have to also write off your inventory. So, I think the new players will find it some fine. It will take some time to figure out the mechanics on, you know, how to crack this industry. I don't think it will be, it's not an easy industry to break into. We have also had entrants before who have entered and left. But yes, we are cognizant of this, and we are also taking some measures to strengthen the sales system. On the volume and value growth of electronics, Sudarshan, do we have a number?

Roughly, for Q4? Roughly speaking, about 3% is price growth. The balance is volume.

So, on Q4, about 3% would be, because you have to understand the pricing and the actions would have started. Towards the later part of the quarter.

It's mostly volume growth. It's mostly volume growth. I think price growth is about 4-3%.

Thank you. That was very clear. Mithun, if you could share your view on the overall growth rate of the company for the next year.

So I think as a company, we strive to grow between 10-12% in volume, and there is a 1-2% price growth. You know, culminating into a 15% growth which is what we aim to do. But currently the value, I mean, the price growth could be higher because like I said, we are seeing significant cost inflation. So we will wait and see what happens. But so far we, you know, we are confident of holding our volume growth. So, like I said, if we have a reasonably good summer, the summer category should perform well. We have to also be cognizant that Q1 of last year, that is, FY26, we had a degrowth in some of the summer categories. So, we should have a healthy, you know, volume growth this year because the base is on the lower side.

My next question was on margins. So if you can help me understand, we have been talking about double-digit EBITDA margins, and we have done well on the gross margin side. So for the next year, if you can break this double-digit EBITDA margin, how should we look at it segment-wise? How should it play out in the consumer durables, which has seen a very sharp deterioration in margins? How should we look at the recovery in electronics? And by double digit, are we targeting somewhere around 11-12% or 10% is a broad guidance?

Ideally, this year we would have loved to claim that we will hit 10% EBITDA margin, double digit. But we are going through a fairly significant cost inflationary period. So, things are quite... So, we are probably going to have a prolonged period of high cost going forward. But if it was a normal kind of inflation, we would have been much more confident to say that. So, in this case, we probably would like to... Finish a couple of quarters and then come back and comment on the market, but so far, like I said, we have been proactively, we have been proactive to send this and start pricing actions early, and a lot of our peers, companies have also announced pricing actions as they've come to realize the quantum and size of the price increases are high. Now, I think for a company like us, I think we also need to have a good summer to help us. So, South India is pretty much, we have had a decent start to summer. And if non-South, we also have good traction for summer. I think we should be, you know, confidently hitting that, you know, number. But I wouldn't say 11-12%, I would say at least 10% is what we would like to expect. But we, like I said, inflation is still, you know, something that is...

So what we see this year is that, you know, apart from the summer challenge, like you've controlled your expenses quite well, like the employee cost is flat and the other expenses have not gone up much. So should we see the same trend playing out even in FI 27, which could, you know, buffer, we could provide you some buffer in terms of cost management, etc.

So, yeah, some part of the employee cost is variable pay. So, definitely, you know, as a company, if you don't achieve the, you know, top line and bottom line numbers, the payout, variable payout also comes down. So, that's the, there. We also are not expecting any huge increases in manpower this year. So, like I said, we are on a, we are watchful. We have taken actions to control some cost. And we will, like I said, if we get a good Q1 and good summer, then we would be more confident to spend, you know, in the following quarter. So, that's the way we look at it.

Understood, sir. So, last question. Since you said April was good, any qualitative feedback that you would give us in terms of how the secondaries have been in terms of the growth rate and in terms of the channel demand?

You are also following the same news articles and predictions by the meteorological department as we are. But I can say that South India... Usually, the summer starts early, March-April, and that has been on track, largely. Non-South, it's been a mixed bag. There are rains in some parts of non-South. If you look at non-South, East is a big market for VGAR, so East also has to fire for the company to do well. So, I think we still have time. I think we still have another one and a half months. More than one and a half month left for the quarter. So it will be too early to comment on this. But just keep in mind the base is already on the lower side. Because last year we had a decline in some of the categories.

And sir, how is the channel inventory in all these categories?

Like I said, it is a mixed bag. So if you look at DPWFan, neither we have inventory nor our partners have inventory and we are having stockouts. So, it's a mixed bag. It's not the same for everything. So, certain categories are, you know, we are having, you know, supply challenges. So, like I said, in South India, I don't think there will be any inventory issue with any trade partner. But non-South, the summer is yet to start. So, it will be to, you know, the summer sales are yet to, you know, fully.

Thank you. All the best.

Thank you. Participant, if you wish to join the question queue, you may press star and button. Next question is from the line of Natasha Jain from Phillip Capital. Please go ahead.

Thank you for the opportunity, sir. Two questions. One, broadly across capital, be it your stabilizer, wires, or fans. When I've gone on the ground, what I've understood is there was a lot of inventory that got pushed in 4Q because of cheaper raw material costs and therefore cheaper product sizes. But 1Q has been broadly disappointing in terms of at least start for summer. You yourself pointed east and was also a little bit of flip-flop here and there. And south also, what I've heard is the channel was stocked with inventories for more than what's usually required. So, on this backdrop, while secondaries have moved faster across tooling products, can you throw some light? How is the selling or the primaries happening against the secondaries? And the second question is, if you could also point out, even in case you do channel financing, for which product category?

Okay. So, if you look at fans, the star rating change happened primarily for ceiling fans. So, the sales for ceiling fans was very high in December because all the brands had to sell all the ceiling fans before 31st December, you know, 2025. Because of that, there was a lot of stand inventory as we entered. Okay. Okay. But this doesn't hold true for TPW, because TPW, the star rating norms are yet to start. It's expected to start the next year. Okay. So, when I said that TPW inventory is not there, this is the reason. Ceiling fans, we don't have any inventory issue. There is sufficient inventory with us and with the trade. Also, TPW fans, most of it is made out of plastic. And there is a challenge in procuring that particular type of plastic in India. So, as we understand, this is their reason. Okay, there is a raw material shortage for that particular type of plastic that is most widely used to make TPW funds, and many of the vendors are not having, you know, requisite inventory to make them. So that's the one reason. Channel financing, I think on the whole it's about 10% of the retailers. If you look at the data book, 10% of the retailers.

Retail finance, we don't.

Retail finance, we do channel finance. You're talking about channel finance, right?

Yes, channel finance.

Yeah, yeah. So, channel finance, that's for our primary customer. Yes, our primary customer. Yeah. So, approximately 35% of our business goes through channel financing arrangement. Yeah. It's not category linked. It is customer linked.

So, it is not a category linked. So, it is a customer. So, for example, if you have a distributor for a, you know, bunch of products like water heaters, fans, and... The entire customer is under channel finance. It's not a category thing. It's more of a distributor-level arrangement. And if you look at the entire portfolio of debtors, 35% of the portfolio is under channel finance.

Could you show some color in terms of as a great DHC dealer, distributor facing any problem in terms of working capital management and therefore slower payments to the brand? Is that...

No, I don't think so. In fact, our collections have been pretty strong in the March quarter. We are not facing any. So, we have a pretty strong commercial team, which independent of the sales team actually tracks and manages the, you know, credit limit of each of our customers and decides which customers should be increased credit limit, which customers should reduce, which customers should be So, we don't have this problem, and we also have a... A tool where in which we also are able to see the inventory of our partners, where in which we know whether they are sitting with inventory or they have diverted money from the business and so on and so forth. So as far as VEGA is concerned, we don't have this issue of, you know, so whatever sales we typically do, these are usually real sales. And it's not just, you know, we don't encourage and we don't allow dumping. So we have mechanisms to stop that practice. You know, there is a tendency by sales guys to dump stuff. So we have an independent way to try, you know, make sure that doesn't happen. Yeah.

So, one last question. This is more longer term in nature than your term. So, for the longest time across cooling products, we've been hearing that there will be consolidation, you know, be it cooling on the AC side or coolers or fans, a lot of competition that's coming. And is right now a situation such that, you know, cost has increased multiple times and the price highs are not enough to offset that cost? So, do you think now is the right time when you could see consolidation happening or industries going to remain fragmented and therefore competition probably will be the same in terms of competition?

See, what is happening is the core growth in the country is not that high. So, what is happening is every company in every category is thinking like, okay, maybe if I get into this category, growth will happen. So, that is why you see everyone in the lighting business trying to enter into wires. There are companies which are in the water purification business that have entered into fans. So, I think everyone is entering everything. Okay, so it's not that, you know, and this process has not stopped. You know, it is an ongoing process. It's something that has been going on since 2016-17. So, it's an almost 8-9 year phenomenon. So, we have pegged our growth and we have to grow despite all these macro headwinds and that's what we aim to do. We have done this by integrating our manufacturing. So, for example, from a sourcing company, we are now a completely integrated manufacturing company which allows us to build products which are sufficiently differentiated. So, we are not selling, you know, your me too, you know, economy and sub-economy model kind of products. We want to build and sell, you know, premium and must-each products for which you need to own as much of the supply chain as possible. And that's why we have spent like close to 300, 400 crores last eight years to build, you know, so many plants and to get into the manufacturing. It is an incredibly tough thing to do, but we have done it because this is the only way we can fight this overcrowded market. I don't see it, you know, I don't see consolidation happening, but one thing is sure, when such shocks happen, so when you have an environment where you have to take 15-20% price increases, and when you have an environment where a lot of the raw materials are under shortage or you're not getting raw materials, that's when the better, you know, more organized companies, companies which have better supply chain capabilities will probably do better than, you know, some of the other players. So, that's the broad thing. So, so far, I've not seen any. You know, move for consolidation, but because we are still seeing, you know, everyone trying to get into every other category.

Sir, follow up on that, when you say everyone trying to get into every category, so again, a broader, longer term question. We've seen a lot of brands entering across electrical space, right? Some of your CEOs who were predominantly, say, a fans player have now entered wires, and vice versa, predominantly wire and cable player entered, tried to enter fans markets in the last couple of years. I just want to understand your view, what is the strategy that works here? I mean, is it that people have a fantastic challenge, you can push anything?

No, it is not. So, for example, if you want to profitably build a business, You have to, you know, you have to take 15-20 years, build it SKU by SKU, get into, you know, you can start with sourcing, but I think unless you are really investing in the R&D, unless you are really investing in the manufacturing, I don't think many of these companies have any hope to make money out of it. I mean, they can show revenue, but making money is a different, you know, the top, barring the top four, five. Thank you. Like I said, wire is a completely different category, and when they enter wire, they'll understand that winning in wires is very, very different. The skills required is probably very different from what it requires to win in fans. And similar, a wire company may not be able to be successful in fans. So everyone will not be able to do everything. And we have given up a lot of our, for example, our cost structures, a multi-product company. As a multi-product company, our cost structures are fairly high because we have to carry people for all our categories. And these are some of the trade-offs we do. So, good news is, a company like us, we are more, you know, the risk is very less because all the categories will not get into trouble at the same time. So, we will see lesser, you know, impact on, you know, fluctuations in each category. But I can say that I've seen the cycle. Like, for example, eight years back, every... Everyone wanted to get into kitchen appliances space, and now, you know, we don't have, like, if there is, Everett is out of kitchen, a lot of the other brands that have got into kitchen have got out. So now, only the key core companies are still remaining. So, we'll have a similar kind of a cleanup after four, five years.

Thank you, Mr. Khar. I'm actually on the ground right now to get some channel feedback, and I came across a lot of players who've been keeping a solar inverter, and I got fantastic feedback on the product, and the support from the brand was also very positive. I just wanted to drop that feedback. Thank you so much for being all the way.

Thank you. Participants, if you wish to join the question queue, you may press star and 1. Next question is from the line of Vineet Prasad from Investec. Please go ahead.

Thank you for the opportunity. Just a couple of things. We've realized solar business for you has been growing extremely fast. Can you give some idea about what the size of that business could be, number one? And what I understand is it could be more than 500 crores in terms of top line now. And how do we see it growing? Are there further legs to growth? As in, can it grow in very high double digits for another few years?

So I think, you know, we don't like to give out numbers, but it is not, you know, it has not reached the 500 crores mark. We only entered, I mean, we only ventured into this business fairly recently, like, you know, about three, about 36 months back. But it's growing very fast. If you ask me, this business has potential to become very, very large, but we have been very... So, for example, we are primarily selling solar inverters for residential users and small institutions. So, we have not gotten into the very large institutional orders and such like that because there are associated risks along with it. But we are very confident that pretty soon, maybe in three to four years. This will become one of the largest, larger categories for VEGART, as we have, you know, an inverter battery business today, which is quite large. Similar size, or it can be even more than that. But as of today, we have tried to sell to... Customers, where it is more of a B2C kind of a play, and it is not an institutional sales. I mean, we do institutions, but it's very small. It's mostly residential consumers, where we have equity and where we have pricing power, and where our sales and service network, you know, have a differentiating factor, where instead of institutional sales, where it's the most of a price base. We are very bullish on this category, and we do believe that, and given the recent challenges with fuel and all that, government is under huge pressure to diversify away from fossil fuels in one way or the other, and this has already had good traction in India, and I think it will continue. And one more thing is, I think West Bengal and Tamil Nadu are two markets which were till now not, you know, encouraging this. And I think Tamil Nadu also, the new government policy will be definitely to push for cleaner energy.

Understood, understood. That is helpful, Mathur. And lastly, on the lighting foray, where are we, if you can get some timelines, how are we progressing in terms of product, distribution, sales, any color on that?

It's still a work in progress for us. I think sometime towards, you know, early next quarter, you know, we look forward to, you know, bringing it into market.

Listen, I'll listen. But that's it for me. Thank you so much. Thank you.

Thank you. Next follow-up question is from the line of Deepak Lalwani from Unify Capital. Please go ahead.

Hello. So thank you again. So I just wanted to check, you know, how many ones of inventory of each raw material do we maintain at the factory level? Aluminium, copper, plastic, etc. And this availability issue that you mentioned, so how are we sourcing our materials from different channels, if you could explain? And if there is an issue, if you can, is it a big issue that is, that will not be.

So, I think as far as availability is concerned, it's primarily on the polymer or crude derivatives where there are availability issues. So, for example, our batteries require sulfuric acid. Sulfuric acid is also used for production of pesticides. So, that is a controlled substance now because the government is rationing it. But we are still okay. We have tied up with, you know, tied up and locked up supplies for the next one month or, you know, more than that. The same is the case of certain type of romity. Like I mentioned, TPW fans, there seems to be some shortage. But I think we, as soon as the war broke out, we had set up a war room and we identified these sensitive items very well in advance. And we have gone, and because we are a fairly cash-rich company, we have gone and secured supplies from wherever we could. So we are pretty much okay. I think till end of June, I don't think we will have any issue. And I think largely we should be fine. I mean, there is definite. So, for example, if the demand is 110, the supply will be like 105. So, there will be some bit of shortage here and there. But I think a company like us will be largely okay because we have a diversified supplier base and we have gone and secured supplies for most of our... Thank you. This is a potential issue for many, could be for smaller brands, regional brands, who don't have the kind of clout we have. A company like Vigar will have over its supplies.

Understood. So last question, you mentioned that we've taken a bulk of our price hike. So has there been any resistance that you've seen in demand, that demand is falling off for our categories or any lose-up?

So, with any price hike of this much of a quantum, this is not a natural price hike, right, usual price hike? When retailers are used to it, it's for 2%, 3%. So when it's 10% and 12%, definitely there is going to be some negotiation pushback and all. But like I said, as far as we see it, I think by the time this kind of high cost raw material starts hitting in, we are fairly confident it will get passed on because a lot of it has been accepted. But wherever there are some challenges, for example, if it's a summer category and, you know, it's in a geography where summer has not started yet or there is some rain and suffering, we have given case-to-case, you know, support for our distributors and retailers. But largely, it's looking okay, because I think it's not that, I mean, I don't think any company can absorb the quantum. So, I think everyone has announced, and I think there is definitely an intention to pass on these prices. And like I said, only in cases where the weather is not supporting, only those places we are given case to case. But, you know, largely, it has, you know, been passed on.

Sir, if you can share, what's your raw material mix for the whole company, copper, plastic, and aluminum, roughly?

Copper is the biggest. What is it? Second biggest is aluminum, or steel?

It'll be copper. Yeah, copper will be the largest, followed by polymers, and then... Followed by polymers, then aluminum, then steel. Then steel, yeah. I don't have an exact number for that. Because it's not a single category, right? It's multi. Each category has got a different mix. Sure, understood. But everything has gone up, right? I mean, so it's not that anything has not gone up, right?

Yeah, yeah.

Okay. Got it.

Sure, thanks.

Thank you. Participants, if you wish to ask a question, you may press star and one. Ladies and gentlemen, if you wish to join the question queue, you may press star and one. As there are no further questions from the participants, I now hand the conference over to the management for the closing comments.

Thank you all for taking time to join our next call. I would like to thank Vineet and the team at Investec 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 Investec Capital, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.