Orient Electric Limited (ORIENTELEC) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Orient Electric Limited Q1FY27 on its conference call. As a reminder, all participant lines 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 10-0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavanika Mavad from Access Capital. Thank you and over to you, sir.

Yeah, thank you, Sruti. Good evening, everyone. On behalf of Access Capital Limited, I welcome you all to Orient Electric's Q1-F527 Arvin Conference Hall. From the management side, we have with us Mr. Ravindra Singh Nagy, Managing Director and Chief Executive Officer. Mr. Arvin was. Chief Financial Officer and Mr. Sambhav Jain, Head of Investor Relations. Sir, thank you so much for giving us the opportunity to host the call and many congratulations on great set of numbers. Now, I'd like to hand over the call to Nikita for his opening remarks. Thanks, and over to you, sir.

Thank you, Bhavani. Good evening, everyone, and a warm welcome to Orient Electrics Q1 FY27 Earnings Conference Call. Thank you for joining us today. We hope you've had the opportunity to review our financial results and earnings presentation, which are available on the stock exchanges and on our company website. I will begin by outlining the operating context for the quarter, followed by our performance highlights. Quarter 1 unfolded against a constructive demand backdrop. After a subdued summer last year, cooling-led demand revived strongly this season, picking up from mid-April and remaining robust through May, with some moderations towards the end of the quarter, aided by a healthy liquidity and steady discretionary spending. At the same time, operating environment stayed dynamic. Persistent commodity inflation, particularly copper and aluminum, increase in minimum wages, inflating labor costs and their availability, alongside rising fuel costs, import delays and broader geopolitical uncertainty, kept the supply chains and input costs under pressure, driving broad-based cost increases across the sector. We manage these dynamics proactively while staying focused on disciplined execution. Despite the challenging environment, Orient Electric delivered a strong performance with a revenue growth of 23.5% air-on-air and continued expansion in profitability. This was supported by broad-based momentum across the portfolio and a strong seasonal recovery in our core categories. This performance reflects the disciplined execution of our One Orient approach anchored in our three-world strategy. which focuses on multiple growth avenues while extracting synergies from our established ecosystem, underpinned by premiumization, innovation, diversification, and operational discipline. Importantly, our emerging growth engines continue to scale, improving the quality and resilience of growth across lighting, switchgear, and buyers portfolio. Lighting in Sydney remained a structural growth engine, delivering 25.4% year-on-year revenue growth, driven by its distribution expansion, portfolio premiumization, and steady market share gains in consumer lighting. The consumer lighting business grew in high double digits with a meaningful improvement in volume-to-value conversion. Our share of high-value looms expanded to 60%, up 500 basis points versus last year. Lighting continues to gain traction, aided by execution of key street lighting and facade projects, and we continue to see healthy project inquiry pipeline. Our emerging growth engines, switch gears, switches, and wires, continue to be a good And they are running it. to leverage our fans and lighting distribution ecosystem for In the E-C-D segment, revenue grew by 22.7% year-on-year to 6.69% growth, led by a strong summer and deeper penetration in both our DTM and MD markets. Fans delivered high double-digit growth, outperforming pairs in the back of our distribution strategy, and continued focus on premiumization and product development. Our BLDC portfolio grew 36% air-on-air, while new product launches contributed 30% of fan revenue this quarter. Our overall premium mix increased to 36% of domestic fan revenue. Our appliances portfolio sustained its upward trajectory with strong traction in heating and garment care categories, delivering double-digit growth. Premiumization and innovation-led launches remained a core pillar of our flow. During the peak summer season, we anchored our fans' campaign on India's first innovation narrative, led by Aero O2, India's first oxygen-enriching ceiling fan, along with our Aero Silent and Ecotech World launches. This innovation focus earned strong external recognition also, with Orient Electric winning three Red Dot Design Awards. We continue to expand our direct-to-market footprint, adding approximately 3,600 new retailers under the DTM network this quarter. On the service, Samwat platform, along with AI-led capabilities, continued to improve the service delivery experience through deeper consumer insights and faster issue resolution. Our e-com business scaled, delivering double-digit growth, supported by a stronger assortment and healthy consumer traction. Our export business also grew by double-digit, expanding deeper into international markets. Operational discipline remained central to our approach. In the context of commodity inflation, we implemented calibrated price actions during the quarter across all segments and categories. Our project fundshare program continued to deliver tangible benefits, translating into 10 crores of cost-saving in Q1. Gross margin for the quarter moderated to 29.8%, impacted by commodity price inflation. Despite this pressure, our operating leverage and disciplined cost management helped us deliver an improvement in EBITDA margin to 7%, an improvement of 102 basis points air-on-air. PBT after exceptional item was a 42.5 crores. We closed the quarter with working capital days at 25 days and a net cash position of 133 growth, reflecting continued balance sheet discipline. Looking ahead, we remain confident in the momentum of our growth story, anchored in the One Orient approach and our three-wall strategy. We will keep pushing all the levers of our diversification engines – lighting, switch gear, and wires – to steadily raise the contribution of our non-fan categories while accelerating premiumization and innovation-led launches across BLDC fans, high-value looms, and appliances. Building distribution as a sustained, competitive moat remains central. Through DTM expansion, our fast-growing e-com and quick-com presence and a stronger service and digital ecosystem. With our consumer-led thinking getting deeply rooted in our ways of working, we are confident that we will continue to improve our brand value proposition and enhance our customer preference. With the festive build-up ahead, improving consumer sentiment and the normalization of channel inventory, we remain confident of delivering mark-to-market better performance. With these remarks, I would like to open the floor now for your questions. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ravi. You may proceed, sir.

Hi, sir. Thanks a lot for taking my question, and congrats on a good set of numbers. First question is with respect to the growth in the ECD business. We would have seen a 22-23% kind of growth, especially for key categories like finance, etc. What would have been the price increase quotient that would have been there in this growth number? And how much more price increase that we would need to take to offset the raw metal price inflation. And if we can, we will be able to take it.

Thank you, Ravi, for your question. I think we've seen a very healthy growth in our ECD business. And this is not just in fans, but across all different categories in appliances also. The key question is, is this growth largely led by price increase, commodity increase led, or this is volume? As I said, we've had a volume value growth. Across all categories that we've had. So that's the confidence that we've seen from the market on our new products and on all the launches that we've done. We've taken price increases. In fact, we've been competitive, slightly ahead of the peers in terms of taking price increases, not only in terms of the timing of our price increases, but also in the quantum of price increases. If you look at it from last year, December, and, you know, it's the commodity of this quarter, but previous quarter was commodity plus me ratcheting. We've taken price increases from December to June six times. If you look at sequentially, from a quarter on quarter, sequentially, we've added about close to about 10% plus price increase in France. Okay. and get the The commodities are fluctuating. LME goes up and down. So we will keep taking calibrated reactions to it. Even in the appliances side, we've taken a very high single-digit price and fee. Thank you. Categories we've taken. Got it, sir.

And my sister here. Yeah, yes, sir. Very clear. And the second question is with respect to BLDC fans. So, that segment has been seeing very strong growth. And I think this quarter, we have seen 35-36% growth. How do you see this particular category within the entire fans category spanning out in terms of their mix as a percentage of the overall fan industry? And from an Orion perspective, what are we doing different in the BLDC space? And in terms of manufacturing, we saw the outsourcing of these fans. How do we think about it for BLDC fans? And overall, our BLDC fans, are they more profitable than the induction motor-based fans? And over the past few years, this proportion would have definitely increased for us, but still the margin for the ECD business has been reimbombed. So, when can we start seeing the overall ECD business margins improving?

So, Ravi, I think a lot of questions that you've asked, and I think largely on the BLDC category, yes, there is a growing consumer preference for tech. There are brands who've played on tech, and there are brands who've played on design. As a strategy, Orient is, and I can very confidently say, we've played both on tech and design. So, we've looked at, understood the consumer. So, our PLDC growth was 36%, and this is on the back of last year, we were at about 40-45% growth that we've had in the PLDC, and this segment continues to grow. To our ceiling fan business, now this is almost close to about 27% to 30%, and I see this segment to outpace the induction. Obviously, and these are all premium, they are ASP of $2,500 plus. We've looked at a larger share of profitability also coming from it, and the solution that we give to the consumers is... the quality of product that we have. Our core of the BLDC is the PCB. Our PCBs are in-house designed. All our BLDC portfolio is in-house, where we have stringent quality controls and processes that we have. So we see a great response to it. And we've looked at the solving consumer ...problems, like... Noise is one of the big, you know, issues that the consumers say. RBLDC, which is a great-looking aerosilent, which is a minimalistic and a middleistic, you know, design that we can say. And it's a different design language, which has been really appreciated. First, India's first front-to-hour, less than 50 dB sound. So all these things that we're doing, from a profitability perspective, yes, we see...

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

Yeah, thanks. Thanks for the opportunity and really a stellar set of numbers. So, congrats to entirety. Sir, two questions from my side. Is there any inventory of that? So, zero quarter for the inventory, trade inventory was largely normal and this is the primary sales are largely equal to the consumer of tech for the quarter. That is question number one. And question number two, if you can indicate the performance. In some of the D2C markets versus the non-D2C markets. So, how is growth different and revenue breakup in these two different individual properties DTM as well non-D2C markets for us. The last question, BLDC Maxx products are growing pretty rapidly, plus we are seeing new formats are also coming, like Carbon has introduced a blade-less ceiling fans also, and at least... Whatever checks we do, based on that, there is some acceptance for that product also. So, do you see similar segments becoming bigger or the regular induction-based filling may continue to pull the rooms at least one next to four years? Yeah, that is the question.

So, thank you, Anurud. I think there was a little bit of clipping in your... But I've got your questions. Your big first question is saying, did we build up an inventory and largely did we do push sales or did we do a pull-based sales? I think if you look at it, this was a season, and I started the call saying, look, this season was much better than last year. It built up around mid of April. Throughout May, it was... And in some of the markets where we are strong, we saw a slightly longer spell of heat. So it's been a very balanced, secondary, primary-based quarter. We've seen volume growth. We've seen all our new NPDs, and we measure our commercialization of our NPDs. And we look at repeat orders from that perspective. So there was no inventory buildup that we did that was largely secondary, primary led. So that's on the first question. Well, as I said, you know, it's been a very secular growth across channels, across categories, across subcategories, and that's been the hallmark for this quarter, that every part of the business grew recently. Well, that's the same reflection we had. Both in the DTM and in the market. So, we don't give the breakup and other things, Anirudh, you are aware of it. But just to tell you, both the markets grew, held the double digit, and we've seen volume growth also across different markets. Yes, BLDC remains core to our growth, to our premiumization strategy, to our tech and design platform that we've taken. And yes, we keep looking at all the different opportunities that the consumer has. One of the things that we also look at is solving the core need of a consumer, which is... Not just the air delivery, but the actual air through and the feel that the consumer gets under the fan. So those are things that we do, but we take your feedback, we take your point that you measured, and we're keeping our watch on all possible adjacencies and sub-segments that could come up.

Sure, sir. That's helpful. Last question from my side. The commodity prices have been extremely volatile. So, post-war, there was, in a way, increase plus the INR depreciated. Post the ceasefire, there was some softening of commodities, and again in past a week or 10 days, we have seen some increase in the commodity prices. So while there has been some rounds of price hikes in fans, one, to pass on some commodities, and secondly, to in a way take care of additional costs post BEE. So, is there any incremental price hike required or as of now, most of the costs are fully passed on? So, that is question one. And lastly, how should we look at the margins for? This year, while I understand that it's not possible to give the guidance, but any range that if you would like to indicate compared to last year, where should we see the margins? Operating leverage will play out this year due to strong growth. So any indications on the cost and the price and the margins? That will be very helpful. Thank you.

So, multiple questions rolled into one. Let me just start by saying you said post-war. So, there is no post-war. The war is still on. So, I think commodity prices have been fluctuating up and down. We're keeping a close watch on it. So, I don't think so as an industry. Industry was able to pass on whatever was required to be passed on to the consumers in terms of inflation. And it is not very easy to also pass on because it's not just one commodity link, but there are other multiple factors. Your freight and forwarding charges went up. The moment you sell down your, you know, the dollar, rupee. Ratios have held up. You look at different commodities which were not usually handling, impacting, like paints and all, those are going up. The minimum wages have gone up. So it's been a barrage of commodity increase across all elements that has gone up. We've been mitigating with each price or commodity hit that we've got. We've been mitigating it, and that's what is reflecting in our gross margin. Moving forward, I had already given a guidance of saying ideally we would like to be in the 32% to 34% gross margin range, but it all depends, and this is on a BAU condition, but the times that we're dealing in or right now managing the business, They are extremely volatile. So to give guidance on the gross margin would be difficult because none of us can predict what could be the inflationary trends on the commodity that could go. But from our side, as a strategy, we will be competitive. We will pass on the prices as required. And it's not just passing everything to the consumer. We have to create a value proposition for the consumer, and hence the premiumization story kicks in for times like this very well for us. So we'll do everything there, but what is controllable in our hand is maybe not the variable cost inputs, but the fixed costs, and we've been very prudent on that. So those are the actions that we will continue to do to make sure that... So we deliver, if not on the gross margin, but on the EBITDA margins. We've seen improvement in the EBITDA margins for the last three quarters. We've been upward trajectory of 7% plus. Quarter 4 was obviously 8.2. And we've been now 100 basis point improvement versus last year, in spite of the fact that we've had extreme unforeseen commodity increases. The focus remains on getting the bottom line as well as being competitive and driving the sector growth across different segments that we are now dealing in.

Okay, sure, sir. This is very, very helpful. Many thanks. Thank you.

Thank you. The next question is from the line of Dhruv J.N. from Ambed Capital. Please proceed.

Hi, Ravi. Thanks a lot for the opportunity and congratulations on very good numbers in the circumstances that we live in. So my first question was on, you know, on, you know, an extension of the point that you were just mentioning right now, which is where you've been trying to drive, you know, operating leverage to your fixed cost prudency, right? Just want to understand, you know, incrementally, how should we see that kind of building up? Do you think that you have more levers or, you know, I'm just thinking, you know, incrementally, that number should maybe grow at, say, 5% or 6%? Because, you know, last three or four quarters, we've not seen that number go up, but I'm guessing business will require, you know, investment. So, just your thoughts there.

So, Dhruv, thanks. And I think, you know, we've been maintaining and saying, look, the investments in terms of resources and I'm saying human capital and our people cost that we've done, we have done ahead of the curve investment in the last two years. And this is why we were setting up our emerging businesses teams. So, switch gears, switch gears, wires, we put in. We were expanding into DTM businesses. We were, you know, getting into those markets. So those are investments that we had done ahead of this curve. None of our fixed cost expense in terms of whether it's... CAPEX required for new products and whether it's CAPEX required for our maintenance and capacity enhancements or automation at our plants, those are some things that we are spending the way which is required. And you see in terms of our new product launches, 30% of our business and finance comes from new products. We get about 15% in lighting from new products, and you'll see that in the wires and switch gears also, which are relatively new businesses that we're scaling up. So, in terms of doing the right cost inputs, we will continue to do this. What we are also doing is we are doing a very tighter cost prudence, but we are not, you know, necessarily cutting what is required for the business to grow. So, if the concern is saying, are we going to squeeze the future growth cost inputs, the answer is no, we are not going to do this. So we had invested slightly ahead of the curve. We are now seeing and driving productivity and those investments to start giving us operating leverage.

Very much. My second question is on buyers, right? So we've seen that you've got about 2x growth in this quarter, and even in the past quarter, you've done that. Now, I just want to understand how many states. Have you sort of targeted and, you know, what's the target there in terms of, say, a revenue number or a market share number over the next two or three years?

So, on the wires business, you know the immense opportunity that's available right now, given the fact that there is huge infrastructure growth that's happening, there is huge affordable housing that's happening, there is huge tier two expansion that's happening. We are largely, we are only in the house wires category right now. We don't look at that business right now from a market share perspective. We look at it from a run rate perspective, and while we share the numbers on Aeronauts, but for us, it's a daily run rate business that needs to keep going up. We focus and our right to win or right to enter and do well in this category stems from the fact that. 45% of the large fan dealers do wires also, and we are leveraging our distribution strength there. Currently, we are driving this leverager across sell, while two different teams do that, in our strong markets. And that's largely in the north and east that we're doing. We're slowly and slowly expanding the footprint. As of now, we've not taken wild span India. We will first get strong in our stronger markets and then expand. And that's been the strategy around this.

And, you know, just a question slightly, say, from a three-year perspective. You know, now, incrementally, you've been here for the last two years now. Incrementally, how should we look at Orient from a three-year view, right, in the sense that what is the top-line growth ambition that you have? And also, I remember you talking about reaching double-digit margins in eight quarters, about two quarters or so back. Where are you in terms of that progress? I understand that this war has been out of the box, but just from a clear perspective, how should we look at growth? And if you could spell out which category would rise or be the key to growth driver for you incrementally. Thank you so much and all the best.

So, Dhruv, I think what we've said was saying, look, the first milestone is to, you know, cross the 5,000 crores, and for that, we need to do faster than the market growth, and largely, we were talking about a CAGR of about 14% to 15%. Last year has been extremely bad. First, H1 was very muted for the industry, but our mark-to-market performance was much better. H2 is where we saw double-digit growth happening, and, you know, quarter one we've had good double-digit growth, high double-digit growth. First primary task is to maintain this momentum and keep growing, and from that perspective, there is not a single one that I can say, oh, this will grow and this will not grow. For us, it's very important that the core categories deliver the objective of growth and margins, and the emerging categories deliver the objective of operating leverage to come in from a high growth pattern. And that's been our strategy. That's what we've been doing. You know, as I said, you know, first step was to get the gross margins in, and that's where we said, you know, our complete prudence on getting the cost structures right in terms of right product, right buying, right manufacturing. But some of the things that we've seen in the last four months in terms of inflationary prices, this is something that all of us never saw even during the COVID time. It's been extremely volatile, unpredictable. And something that you can only react to and not proactively manage. So that's something that has come out of the blue and hit the gross margin aspiration that we have. But nevertheless, in spite of that, if you see in the last three quarters, we've improved our EBITDA margins, 7, 8.2, and now 7, which is 102 basis points improvement over last year. On an air-on-air basis, the three-year journey has been from a 5.3 to a 6.6 to a 6.9. So you're continuously seeing an improvement happening. Those are the operating leverages that will kick in, and we've discussed one-on-one also on what are the levers and the structures that we're doing to improve. So, that's something that we are very confident that we'll keep improving on it. The pace of improvement will have one factor of these inflationary trends, which could delay it, but it's not if we will do double-digit, it's then only about when we'll do double-digit, given this. So, we are committed on our... Path to double-digit, we are committed on our path of mark-to-market better performance, and which we've been doing for the last eight, ten quarters, and we are committed to our CAGR being healthy, healthy double-digit. Trust that answers your question, Jay.

Oh, it does. No, no. Thank you so much, and all the rest of us.

Thank you, Roo.

Thank you. Before we take the next question, we would like to remind participants that you may press star and 1 to ask a question. Participants who wish to ask a question may press star and 1 at this time. The next question is from the line of Keshav from HDFC Securities. Please proceed.

Hello. Hi. Congratulations on strong set of numbers. Firstly, just want to understand out of the cost inflation as of, as of, you know, today, how much has been passed on? And secondly, as I understand, you indicated you have taken a calibrated price hike in this quarter. So possibly fair to assume, possibly Q2 gross margin will be better than Q1.

Keshav, I thank you. As I said, you know, we've taken calibrated cost price increases. Yes, the inflation has been much higher than what increases we've taken. We've taken slightly higher than the industry. And this has still not impacted our market-to-market performance or competitiveness. So, yes, our endeavor is to make sure that if there are more inflationary pressures that come in, we'll pass on consumers without losing the competitive intensity, but also there are a lot of actions that we're doing in terms of productivity, in terms of VAV, in terms of other things to ensure that we mitigate and these are part of our very structured Sanchai program that we run. There are a lot of ideas which have gone, and we've had accruals of 10 crores in quarter one, and we see more accruals to come in Q2. We remain committed to come back closer to us, 32 to 34 percent of gross margin. Quarter two, you know, we were hoping that the inflationary pressures would either stay at the same level or go down. We have seen some reversals in the last few days. We should keep in a close watch and then we'll take a calibrated action on it.

Understood. Got it. And secondly, we can see, you know, your other expense number for this quarter is, you know, in fact, lower than Q1 FY25 also. So what is the reason for the thing? Is it some cut in ad spend or what could be the reason?

No. So in terms of, since we're talking absolute numbers, our marketing budget or spends have been exactly the same in terms of. Thank you. We use it, and things like we've taken airports, we've taken right media for our premium products. So in terms of value, we've not cut down our marketing. In terms of as a percentage, last year we were at about 5.5, this year we were at about 4.5, and we've always maintained that, you know, we will be in this range of 4.4 to 4.5, because we're building up different categories, we're building up. A stronger association with non-fans category in the minds of the consumer, so we continue to spend that time.

One last question from my side. In the last six, seven months, what has been the price height across each of your key categories?

As I said, you know, we've taken six price increases in France from December to June. High double digits, 15, 16% prices that we've taken. Appliances, if you look at it, about four times we've taken price increases. And we're talking about Sealoom. Lighting, you know, we've taken closer to a 10% price increase in the last five months, six months. Switchgear was high double digit. And wires, you know, with a lag of 15 days, every time the LME goes up, with a lag of 15 days, the industry and us, we've been passing on the price increase. So it's been, you know, taken. It's just that every time you take a price increase, there's something else that happens which forces you to come back to the drawing board and take a price increase, and that lead lag effect impacts the gross margin. So, we're keeping a close watch. You don't want to lose the traction of demand, and you don't want to squeeze the demand by increasing the prices too much or lose competitiveness, and that's a balance that we continue to do while looking at the other programs that we run under Sanjay to bring non-price increase benefits to the...

Got it. Okay. Thank you. Thank you.

The next question is from the line of Natasha Jayan from Philippe Capital. Please proceed.

Thank you so much. Congratulations, sir, on a great set of numbers. I have one question on the export side. So could you give us an update as to what's happening there, given that our Hyderabad plant was made in a way that we would be more export compliant? And a follow-up question there. Could you also talk about the TPW market outside of India? Like this summer, especially, we saw a lot of European countries struggling in terms of heat, and there was no AC duct. So TPW fan, I think, did a lot of rounds there. And what is our cost competitiveness between us and China?

Yeah, so, Natasha, thanks. We've had a double-digit growth in our exports business, and largely, you know, we've looked at Africa markets while Middle East got impacted. We've looked at SAAC countries. So, those are the ones where we've been able to, you know, do this. Obviously, Hyderabad remains a very core part of it. And for getting Hyderabad plant, and so there are different countries, especially our countries, who come and certify your plant. So all those processes have happened in the last two, three quarters, and we're seeing traction there. Yes, Europe remains a great opportunity, and I think the government is also pushing while they said on the AC manufacturers and all, but… Infrastructurally, those markets are built for TPW fans and tower fans. Currently, our cost structures are, and when I say, I would say for India and India, I would take the liberty of saying on behalf of the industry also, we are not very competitive versus China. In terms of quality, in terms of performance, we are not just above the Chinese products. And hence, at some point of time, while the European customers looked at TPW only as a three-week, four-week, and hence they were not worried about the performance and the quality. I hope that Shift will happen because this three-week, four-week window is now extending to about 10 weeks, 12 weeks for them. So we are trying to make that pitch and pushing our products there. Hopefully, before the next season, we should get some foothold in the European market also.

Thank you so much, sir. That's helpful, and all the very best.

Thank you, Dr. Thank you. The next question is from the line of Chirag, from MS Capital. Please, Matthew.

Hi. Thank you so much for the opportunity, Tim, and congratulations for continued execution over the last couple of quarters. Two questions from my side. One, just a bookkeeping. For the last seven or nine quarters, I guess, the podcast was very, very important, but this quarter, you see, there's a bit of an update. I think, is this largely with the... The minimum wage increases that you spoke about, and is this line item more or less kind of done from the perspective of operating leverage, since it was controlled for a long period of time, from here onwards, is it more reasonable to expect a normalized kind of growth in this?

Sorry, Cherag, there was a little bit of issue in your quality of call. Can you come again on the question?

Sure. Hi. Am I audible now, Sinigil?

Yeah, yeah, yeah, you're audible now.

Perfect. So, two questions. One, just on the employee cost side, last eight odd quarters, it was pretty range-bound, but this quarter we've seen a little bit of an uptick. Is this largely related to the minimum wage increases that you spoke about, and is it fair to assume that this, you know, cost element has kind of tapped out on the operating leverage it can provide, or is there still room here?

So, you know, if you look at it, The employee cost benefit has gone up by about 10.7%, but that's one way to look at it. The other way to look at it is saying, what's it as a percentage of my sale? And that's where the flow down to my EBITDA is going to happen. Last year, we were at about 9.9%, and this year, we were at about 8.9%. Last quarter, we were at about 8.3%. So we've now come below 9% as percentage of our top line. Yes, the 10.7 has a wage impact of the sudden increase in the minimum wages that's happened. We're taking our actions. We're taking our – so some of the actions that we're putting in terms of automating our plants, automating processes there, looking at more studies and other things. Those are actions that are now getting executed. Will it immediately give me a benefit in quarter two? Maybe no, but yes, in a long-term basis, we are taking actions on it, and I think it will be range-bound in terms of, and I would be more interested in saying, look at it as a percentage of sales, and that's where the operating leverage will come. And obviously, there is a little bit of scope in terms of how do we automate our processes at the manufacturing and mitigate this impact of labor cost.

Understood. Very clear. Second question, just on switch gears and wires, that segment has obviously done very well, but I just wanted to understand if there's a difference in sort of emphasis or focus between switch gears, switches, and wires. Just back of the envelope, if wires are doubling for the last four, five odd quarters, it seems like then switches and switch gears would probably be going more closer to high single digits or very early double digits. Is that broadly close enough as an estimate? And then is there a difference in focus between these two subcademy for the company or not really?

No, I think, you know, and I've always said that, you know, we are now increasingly becoming a consumer thinking company. The consumer interface for our wires is very different from a consumer interface for our switches and a consumer interface for our... Switchgear. So, Switches is all about getting the fit, feel, finish, design, technology, understanding consumers. So, those are things that we're doing, and a huge focus from a design perspective is being done there. Switchgear is all about getting the right tech to give the right. Thank you. In wire side, there's a huge focus in terms of getting the distribution and go to market right. Core being understanding the influences and riding that wave with the electricians. So there is enough and more focus being done. The lead lag effect of this is very different. So you're right, our switchgear and switches is growing by, you know, double digits. While Wires is grown by 2x3x. But we look at all three businesses with equal amount of attention. We're solving for different things in different businesses. And hence, you will see a little lead lag in terms of all three coming to a certain level of growth. But this remains as a key emerging business for us.

Understood. Very clear. Thank you so much for the opportunity.

Thank you. Before we take the next question, we would like to remind participants starting to press star and one to ask a question. The next question is from the line of Nikhat Kaur from Dollars Capital. Please proceed.

Thank you and congrats on a great set of numbers. So my question is on the lighting segment. So lighting, although we've seen a strong growth of 25%, the margin decline has been went to 40 bits on a wire-on-wire basis. So why is that? That's the first question. Second is on the B2C lighting, which has seen a high double-digit growth. So how was the growth in the B2B segment of lighting?

Yeah, so, okay, so two things, you know, the lighting and switchgear business put together has grown by 25.4. My B2C lighting has grown up by high double digit. My B2B pilum side has grown by high single digit. It's on the tender business that we've had a little bit of degrowth, and that's a conscious decision because of the risk profiling and the kind of projects that we wanted to pick. So those are the breakup of my lighting business. But from a margin-bip perspective, it's been a little bit of lead lag in terms of commodity prices going up versus our ability to pass on the price. So literally, we've taken twice in April and June. But both the times, I think we've been a lag of about two to three weeks, and that's impacted the margin, but we've taken whatever requires to be done. If there are more to be done, we'll take those. So that's what is it. It's structurally, I think, that remains a good, high contribution margin, high gross margin business for us. And we look at the loom part of it, which is high value business. Very differently, and we've been driving it much, much strongly than the industry. So structurally, I think everything is right. It's just that the lead line effect in terms of our ability to pass on the cost increases, because March onwards, the cost and fees happened suddenly, whereas by the time we took the price and fees, it was mid and the third week of April. Costs increased again in May and June, and we were able to pass on by the first week of June. So that's been those impacts in the business. But structurally, I think on the B2C side, I can be very confident that we've done better than mark-to-market performance. And this is not only for this portal, for about the past 10-12 portals. Much sharper, much better than the industry. While the industry was going through, price erosions had declined. We were the only ones who were. We continue to focus on lighting, and that's been a second pillar where I would say we've demonstrated a little bit of success. You know, we're building up the emerging categories also on a similar line.

Okay, and one question on the price increase which we have taken in France, more than 10% price increase. So, has Orient taken more price increase than what the industry has taken?

If you do a channel check, you will understand that, yes, we've been ahead of others to take price increase. Like most of the leading brands have not taken price increase in June. We were the only ones who've taken. Some of the startup brands have taken almost half of what we've taken, and yet we've taken the value proposition through our new product launches well to the consumers. We've taken innovation to the next level for the consumers, and that's where we've been able to drive both volume and value in quarter one and fast.

Okay, so thank you and all the best.

Thank you.

Thank you. As there are no further questions, I would now like to hand the conference over to the management for the closing comments. Over to you, sir.

Thank you, everyone, for joining in the call, and I know it's likely late in the day. I promise next time onwards we'll try and make it earlier. But thank you for your encouraging words and sharp questions which keeps us on our toes. So thank you and look forward to meeting some of you soon.

Thank you. On behalf of AccessCapital, this concludes this conference. Thank you for joining us, and you may now disconnect your line.