Ladies and gentlemen, good day and welcome to Bajaj Electricals Limited Q4 and FY 2024 earnings conference call hosted by Ambit Capital. As a reminder, all participant lines will be in 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 touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, and over to you, sir.
Thank you. Hello, everyone. Welcome to Bajaj Electricals 4Q FY 2024 earnings call. From the management side today we have with us Mr. Anuj Poddar, Managing Director and Chief Executive Officer, and Mr. EC Prasad, Chief Financial Officer of the company. Thank you, and over to you, sir, for your opening remarks.
Thank you, Dhruv. Good afternoon, everyone. This is Anuj Poddar. I would like to start by acknowledging that we would have liked to have had a better quarter than we have ended up having. That said, I will just call out some of the challenges and some of what has gone well for us. In terms of challenges, our consumer products business has faced the impact of weak demand, particularly in kitchen appliances. So appliances have slowed us down as well as general trade we witnessed weakness in demand. I would also say that part of that is due to the fact that our dependence and contribution from rural markets, as well as our dependence on non-premium segments, is much higher than competition. What is working well and continues to work well for us is our growth in alternate channels. Across all the sub-segments there we have had double-digit growth.
We have seen growth in the fans business, our coolers business and Morphy Richards also in the last couple of quarters, we have been witnessing growth in our sales there. Our lighting business, I believe, continues to do well. While we see a certain contraction in the revenues, that is largely because of LED price erosion in consumer lighting. And in the case of professional lighting, the base effect was high. Last year, Q4, we had a high base. That said, to me, overall performance in lighting business is satisfactory and our margins there are actually continuing to strengthen and therefore you see the EBIT performance in the lighting business is good. The underlying trends in the lighting business in this quarter has also been good and therefore we are confident about the year ahead as well.
What stands out for us in this quarter, despite the pressures on the profitability, on cash flow working capital balance sheet, we have done extremely well. We have added cash flow from operations or rather generated cash flow from operations of about INR 147 crores in this quarter, demonstrating our intent to maintain a healthy grip on the operational part of the business here. I will just call out the two main drivers or drags on our CP margin performance. One is the discounting that both competition industry and we had to resort to, particularly in a weak demand situation. This is partly accentuated in our case because as you know, we have been churning out our product portfolio from phasing out old products into new products. A fair amount of the old products, because they are getting phased out, have been heavily discounted by us.
The second area, which we hope to solve as we go forward, is logistics that we have spoken about in the past. That remains a bit of a drag for us, and that will continue to impact our operational performance. But we are working to address that. The last point I will make, while these are Q4 numbers, I will call out that April has turned out much better. We witnessed growth, top line growth in April, both for our consumer business as well as lighting business. Fingers crossed, but clearly Q1 looks much better than Q4 has been. With that, I will hand it back to Ambit. Thank you. We can start the Q&A.
Okay, sir. 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 question queue, you may press star and two. Participants are requested to use handset while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Natasha Jain from Nirmal Bang. Please go ahead.
Thank you for the opportunity. My first question is on the consumer product segment. Your presentation mentioned growth in fans. Assuming at least 60% of your top line in CP comes from fans, yet we saw operating deleverage play out. Firstly, I want to understand if you can tell us the volume growth in premium and non-premium fans and also the value-wide split between premium and non-premium. Second related question is, were we able to take any price hike? Also if you can throw a little more light as to how massive channel discounting has been despite pickup in growth, both at industry and Bajaj Electricals level. This is my first question on the CP side.
Sir, we are not able to hear you.
Well, I am sorry I was on mute. Natasha, I will try and answer your question. Let me know if I missed anything out. Firstly, fans for us at Bajaj Electricals has not been above 50%, or I think you mentioned 60%. Fans for us is 40% contribution range. So we remain largely an appliance-driven company. In terms of volume growth, premium, non-premium, both have been in the single digits. That said, our non-premium has grown faster this quarter, so our share of non-premium, which is everything excluding premium, is about 70%, because of higher growth in the non-premium for us this quarter. In terms of price increase, like I called out in opening comments, rather than price increase, I think we have been impacted by fair amount of discounting in order to, given the demand situation.
We have not had a price increase in Q4, but we have taken a price increase effective 16th May, so that comes into play later this week.
Understood. Sir, my second question is on the lighting side. Your presentation mentioned that there was EBIT margin improvements mainly on the back of gross margin improvements. On that, two questions. First, can you give a split between your consumer and professional lighting? Also, if you can quantify volume growth between the two, and if we were able to take price hikes in the CL, and is that a reason why EBIT margin could have taken hit?
Natasha, CL is consumer lighting is about 35%, professional lighting is about 65%. We've not had a volume growth in CL. The decline that you're seeing in revenues pretty much approximates the price erosion, volumes being relatively flat. In PL, in professional lighting, quite honestly, we don't look at in volume terms, because given the nature of products and services, solutions business also, there, volumes don't have a direct bearing.
Sir, but were there price hikes? I mean, is that applicable in this segment or how should we read the gross margin?
I'll answer differently. Firstly, if you see in industry commentary also that you've had fair amount of LED price erosion in consumer lighting through all of this year. So there haven't been price hikes, rather than there's been a downward pressure on pricing. That said, my sense is sometime in Q1, as soon as May or June, we should see the price bottom out because a lot of the price erosion was coming because of DOB technology. That is already now stabilized. So I don't see any further price erosion because of that. So prices should flatten out. And going forward, volumes of normal growth should come back into consumer lighting also, both for us and for industry.
Understood. Sir, I have couple of more questions. I'll get back in the queue. Thank you.
You are welcome. Thank you.
Thank you. Next question is from the line of Rahul Gajare from Haitong Securities. Please go ahead. We have been disconnected from Mr. Gajare. Next question is from the line of Praveen Sahay from PL India . Please go ahead.
Yeah. Thank you for taking my question. Sir, my question is related to the consumer products segment. As you have mentioned that the fan and the [inaudible]. Can you give some more color on the fan growth? How is that? Single digit, double digit, how you are seeing? I can understand that 70% contribution is in non-premium, but how is the growth path in core segment?
Praveen, your voice is not very clear, but I will answer what I heard. Our growth for fans for us has been in the single digits, both in premium and the non-premium segment. Mind you, only part I will add is that we have had some more launches towards the absolute end of the quarter. Some of that pickup is happening. It happened in the last 15 days of March, but also now happening in April. The one example I will mention there is a small motor BLDC fan. That is a segment we were absent in. That is something we launched towards the end of the quarter, and we continue to do well in April. I am confident that our growth in fans during this year will pick up further.
And there is no price hike so far?
Price hikes now are coming to force from 16th May. We've rolled that out in the announcement and from 16th May.
How is the, sorry, sir. How is the Morphy Richards growth?
Morphy Richards is high single digits. I think it's the second or third quarter in a row that we are back to growth in Morphy Richards . That is happening both on volumes, but also expansion of portfolio in Morphy Richards .
Lastly, sir, can you give a AMP spend for the quarter and the year?
3%. Both the year and the quarter is at 3%, yeah.
Thank you, sir. I will come in next year.
Thank you.
Thank you. Next question is from the line of Anirudh Agarwal from ValueQuest Investment Advisors. Please go ahead.
Yeah, thanks for the opportunity. Anuj, the first question was on the appliances business, right? Appliances for us continues to be fairly weak. Obviously, the industry context is what it is. But you mentioned that April you have seen growth in the consumer business. Are we also seeing some sort of revival in appliances now on this base, or is it largely still led by fans?
I think on the appliances call out, it is kitchen appliances that has been dragging us down through last year as well as in Q4. In fact, coolers grew in Q4 also. Coolers by the time of Q1 actually, we pretty much stocked out. That is true for most of the leading top four brands in coolers have stocked out. That is the level of demand. We got back some supplies from May, but in general, coolers are in short supply, so that continues to grow. The growth that we are seeing in Q1 is led by fans. Coolers, to the extent stocks available. And some, I would not say bounce back in kitchen appliances, but at least the downfall is slightly arrested over there.
Understood.
Sorry, good to add to that, Morphy continues to do well in Q1, April so far also.
Right. Got it. On gross margins, Anuj Poddar, obviously there is some extent of additional discounting. Any quantification of this? On a normalized basis, assuming that you would not have to resort to this additional discounting, let's say whenever overall macros improve from here, what is the sort of gross margins that the business can deliver in that context?
Anirudh, I am a little, what should I say, apprehensive of giving that number, but I will still give it to you to let you understand the level of discounting impact we are facing. It is almost through various means, the discounting is as high as 5%-6% across different product categories that is happening. How much of that can be pulled back when? That part I would not want to hazard a guess. But some of that is what we are pulling back through the 16th May that we have spoken about, is I think 6% is very high. We are willing to take a relook at how we drive that. I think that is hurting our margin, and I am not sure the demand elasticity is that high in this.
We will take a bet that we will take a price hike and in fact, hopefully not have an adverse volume impact on that. But not all of the 6% can be rolled back right now.
Right. This 6% would be largely primary or a mix of primary and secondary? How would that be?
For me, firstly, it is direct impact to me. So 6% is impact on me. But the way that those discounts are seen, the structure, some of it is contingent on secondary sales or secondary volumes. But I am talking about impact on us, therefore financially it is a full impact on us.
Got it. Last question from me was on overall expenses. Both on employee costs this quarter, we have seen a reduction. What sort of range should we consider for employee costs going ahead? On the other expenses front, what sort of elasticity do you see on other expenses? This year, despite top-line growth, other expenses have remained fairly elevated. But in a scenario where top line starts growing meaningfully, hopefully that is soon, what sort of elasticity would you see on other expenses? How much operating leverage would we get in that case?
Anirudh, first on employee costs, you are seeing a little correction this quarter because of true-up of certain provisions. We had higher provisions that we have true-upped a little bit. Also, particularly with the variables and incentives, given the performance, we had an opportunity to relook at that. That said, I think you have a Q4 figure, the same Q4 figure of last year on employee costs in the investor deck. I think from a future extrapolation, it will be somewhere between these two figures. We will remain optimal on employee cost. Our annual salary hike comes into play in July. That is when you will see a normalized inflationary impact on employee costs. But we are continuing to focus with our digitalization, et cetera, remaining a lean company, lean team. On other expenses, I think both ways we are kind of fixed.
This is the level of other expenses that we think we would operate at, which means as our volumes or value of sales grows, that should translate to operating leverage for us. We do not see other expenses going up in variable sense.
Got it. Perfect. Final question, Anuj. Versus the plan that you had laid out sometime back, any structural changes or anything that you would want to revisit as part of that plan?
I don't know what you're alluding to, but two or three things that I see that should add to delta to us. Consumer lighting is where I think we are very early stages. I am confident that this year we will see good growth in consumer lighting. Number two, logistics remains something quite, I will accept that we've not improved fast enough. I wanted to see improvement by now on logistics cost. I think we may be a few months away from that, which recently given this, we reviewed. We may bring in some other external consulting intervention logistics because we want to see improvement in that much faster. I think there's at least 2%- 2.5% sitting just in logistics. To me, the three levers of performance that should drive improvement in the coming year, one is consumer lighting. Secondly, logistics, once we start getting that right.
And third is operating leverage on the consumer products business itself. The operating leverage, I would include reversal of some of this discounting.
Understood. Perfect. Thanks a lot and all the best.
Thank you.
Thank you. Next question is from the line of Rahul Gajare from Haitong Securities. Please go ahead.
Yeah. Hi, Anuj. Sorry, I got disconnected last time. Hello?
Hi, Rahul. Please go ahead. Yes.
Yeah, hi. There is always a strategy where one would either go for growth or one would go for margin. You did indicate that 40% of your business approximately is about fans. How much is the growth that you've done in the fans business in this particular quarter? Can you spell that out?
In terms of growth, we've grown in single digits in fans. Like I said, it's about 40%+ is the contribution of fans to our total revenues in [audio distortion].
Okay.
Some of our fan launches were slightly delayed, so have come in in March. We've seen the benefit continue into April also. Like an example we've shown in the deck also, small motor BLDC fan, et cetera. As you know, this has been part of the narrative we've had, as Bajaj continues to upgrade or fill in the white spaces in our fans portfolio, including premium fans, BLDC, now the small motor, decorative fans, et cetera. That is continuing to add, and we'll continue to see growth in that. The second piece I'll call out there, we've got some reference to the Nex. Nex, we continue to launch New trends. We've continued to pick up in the run rate of Nex. We've got more expansion happening in terms of offline stores. If you go, you'll start seeing visibility of Nex trends in the stores.
Offline trade also, we've got more direct dealers and distributors appointed for Nex. You should see a pickup this year also for online sales of Nex. I think between Nex trends overall and Bajaj [inaudible] trends, FY 2025 should see faster growth for us.
Okay. If you were to choose between growth and margin, which direction are you likely to go for? Because in this particular quarter, we have seen, in fact even through the year, that we have actually got hurt on both growth and margin. Because if there is a lot of discounting, typically, at least the growth number should have been much higher than what it has come through.
I agree with you, Rahul. That is a fair question. I think we did not try to choose one or the other. In hindsight, it looks like this is how it has transpired. If you listen, one thing we track is a two-year, we have got a two-year graph on our margins and decline in margins. I will give you these drop margins.
Do not take it at quarter level, but if you look at an annualized basis, our margin decline has been slightly better than some of competition. That said, I think this discounting has not helped us adequately in terms of growth, so now we are re-looking at that, which is why I am calling out this price hike from 16th May. We will now try and see if we take a price hike, maybe we will not see an adverse impact on volume. So that is the current thinking.
We will try and flip it around the other way.
Okay. Now that one of the reasons for lower profitability has been new product launches. Are we done broadly with all the product launches that we had to, or there is still more gaps to be filled?
No, there's a lot more. I would say the next two years we will continue to see. We've always said that right now we're seeing enough. We are starting to see all the new products that we've spoken about, but it's not a one-time exercise, it's a two, three exercise. We will continue to see that over the next two years. That does not mean it will be adverse for the next two years. That simply means as we get to a tipping point over the next 12, 18 months, our pricing power will improve. Right now, we are only seeing the cost side of that, but not seeing the gains of that. In the next 12, 18 months, we should start seeing the gains of that in terms of us being able to price ourselves upwards.
Okay. I think that's pretty much all that I've got. Thank you very much and all the very best.
Thank you, Rahul.
Thank you. Next question is from the line of Manoj Gori from Equirus Capital. Please go ahead.
Yeah, thanks for the opportunity. My question is, if you look at over last three, four years, we have been taking many initiatives, and probably we have revisited some of the strategies like product launches, logistic. We revisited the Morphy Richards. Probably where are we placed? How long will it take to probably finalize strategies on most of the categories, and when should we expect to see some benefit? If any color, probably it would be very difficult to give a specific number, but any color that would be helpful.
Manoj, good question. I will put it this way. I think strategically we are very much not just on plan, but doing well. It's operationally or execution-wise that we're not fully on pace with what we wanted. When I say strategically or in terms of the brand architecture, how the brands have spoken on new product launches and the features of the new products that we've been showcasing as well as design. If you go out, do channel checks, et cetera, you will hear positive feedback on that. I think that is important. For us, where that is coming through in a measurable way, though we don't publish that, is brand scores. Our brand has significantly improved over the last two, three years across product categories and across the brands that we have. Really on quality metrics, we've seen significant improvement.
When I say this, it's all measurable metrics that we are tracking on quality. In terms of product, new product launches, product and brand, strategically, we are doing well. On Morphy Richards, it's taken us some time, but the last two, three quarters, we're starting to see the traction on Morphy Richards also, both in terms of category expansion and revenue growth. Operationally or execution-wise, where I'm saying we've been slightly weaker and not delivered to what we aspired for, has been particularly aspects around logistics and logistics cum inventory and making sure the right product is available in the right part of geography. I think that is where we've been behind the curve. I won't go back into history and amend our logistics experience, and subsequently that we've taken it in-house last year. We've not managed to improve either the way we wanted.
That said, like I said in opening comments, we are revisiting that. We might bring in an external intervention or for consulting to get that right this year if we've not managed to get that right on its own. That to me remains the one point which we need to solve for and address because I think not just logistic as a cost, but its impact on sales boost is also to us very important.
Right, sir. Secondly, if you look at probably from March onwards, we have started seeing some positive growth momentum. Is it broad-based rural versus urban, premium versus non-premium, or probably any light on that?
I will just call it out saying, we have seen growth in April, I have told you. It is after many months that we have seen sales growth. In fact, it is almost sort of very early double digits growth, but I do not want to extrapolate that for the full quarter. But the fact that even in a month we have got a double-digit growth, that is positive news from our perspective. Given our contribution mix from rural sector, while we have not cut that because there is always a margin of error in that, but it has happened because it is both across rural as well as urban, across their price points. So I will just leave it at that right now.
Right, sir. Sir, last question on kitchen appliances. Obviously, we have gone through a very tough time at the industry level over last few quarters. Do you see things probably have bottomed out, probably further decline should not be visible for the industry and for Bajaj Electricals in specific?
I would put it this way, Manoj, that if I had to pick between kitchen appliances, fans, coolers, even water heaters for coming segment, I would think fans, coolers, water heaters will be my growth drivers more than kitchen appliances will be, at least for the next couple of quarters. That said, this festive is what I am banking on. Kitchen appliances have been subdued for a while. So by festive, hopefully, kitchen appliances should also come up and pick up pace.
Got it, sir. Thanks. Wish you all the best.
Thank you, Manoj.
Thank you. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. Next question is from the line of Natasha Jain from Nirmal Bang. Please go ahead.
Yeah. Thank you for the opportunity again. My question is, you've mentioned in your CP that GT channel grew by 3% versus all other channels grew by strong double digits, and yet we saw a top line compress of 8%. Can you tell me what is the revenue contribution from different channels and also what is the rural versus urban mix?
Natasha, firstly, you are right in the math. That is why the 3% rather than double digits. The reason it does not add up to 8% is because at channel level we track and get gross sales data. The overall we are reporting from accounting at net sales, so that is why it causes a certain discrepancy. Number two, in terms of contribution. GT is at about 62%, which means the balance adds up to about 38%. In terms of rural, urban, that part we do not publish here.
Understood. Thank you.
Thank you.
A reminder to all participants, you may press star and one to ask questions. Next question is from the line of Manoj Gori from Equirus Capital. Please go ahead.
One question which I missed, probably on the EPR side, any cost that we recognize during the quarter and probably how should we look at in the coming years? Probably what should be the calculation, and then probably as a percentage of sales or probably as a percentage of volumes, how should we look at?
Yeah. Cost for the current year was about INR 9 crores, and we expect it to be about INR 12 crores next year.
And sir, some of the competitors have also highlighted that could be passed on. Should it be assumed that industries would be passing it on, especially when you look at the price hikes have been very difficult?
My view on that, Manoj, is pass on or not is on a holistic basis, not a line wise thing. I do think as an industry we are guilty of not having passed on overall costs, whether it was star rating impact on fans or overall commodity impact or the CPI. Cumulatively, we have not passed on adequately to the market. I believe that is a defensive strategy we should have. In our usual case, we prefer to pass it on but have to match competition. But now we have taken a call, at least like I said, from me, we will now take a worse situation and try and pass on more costs there.
Thank you. Thank you, sir.
Thank you. Next question is from the line of Hardik Rawat from IIFL Securities. Please go ahead.
Thanks for the opportunity. My questions are broadly answered. Just wanted to understand one thing. You mentioned that the board has approved a proposal to raise up to INR 500 crores through NCDs. Just wanted to understand what this raise would be for.
That's an enabling resolution that we have taken so that if some opportunities comes up for an inorganic sort of a deal, then we have the money in place. Nothing planned as of now, but that's just enabling a resolution.
All right. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. Next question is from the line of Amit Kumar, undetermined investment. Please go ahead.
Yeah. Thank you so much. I think one question. I am just sort of trying to reconcile the broad macro data with what is happening in the industry. Last year we had almost, in fact even better than expected. Expectation was 6%, 7%. We are definitely ending up with 7%+ , actually closer to 7.5% kind of GDP growth. This is a category which is still not, I mean, whether it is kitchen appliances or other appliances, so to speak. The category is not sort of fully penetrated. There is so much of opportunity in rural areas and bottom of the pyramid population as well. Then we are looking at a situation where at the industry level, growth has been so disappointing last few years. So we have seen that in a few other consumer categories also, FMCG, et cetera, at the beginning of the year.
Even in the second of the year, FMCD seems to have recovered. I think in sense, what is really going on? There is obviously that unorganized to organized shift opportunity also available, smaller regional brands shifting to a Bajaj or some of the other brands and then premiumization. The whole of last year has been pretty disappointing from a macro perspective and from a demand perspective itself. Especially in light of the kind of GDP growth numbers that we are seeing basically. [inaudible], do you have any thoughts on what is going on during the year?
Amit, this is a question better for some economists. We are lay people here. That said, I will give you a certain couple of pointers or hints to where to look at this. If you look at the Q3 GDP data, it was about 8%, if I remember correct, 8.2% something. But the private expenditure growth, consumption expenditure growth in that was at 3- odd% . So a delta of almost 5% was a historical high delta between GDP growth and private consumption expenditure, which is not usual. You probably have a couple of percentage points gap between these two. What that also shows is a lot of the GDP currently is being driven by infra CapEx rather than actual consumer expenditure and consumption. That is point one.
Point two, reasons for this, or maybe before that, to your point on it seems to be a broad trend across consumption sectors, not just our sector but also FMCG. I can agree with you. In that, like you said, Q4 FMCD has shown growth. I think it is very early stages, not been very strong growth.
I will not call out any company names. But there is some positive commentary on that in FMCD, including couple of weeks ago what Nielsen mentioned, maybe Q1 we will see some growth in FMCD, including rural bounce back as well. I would be very happy to see that because I think us as FMEG or FMCD, typically have a lag of one to two quarters from FMCD. Once that happens, we would hopefully follow suit on that. Amit, the third point that I would point you towards is keep watching interest rates and inflation.
As that cools off, particularly interest rates cools off, I think that should be a big trigger for consumption expenditure to come back. I think that is something holding people back right now. Sorry, just one fourth point I am slipping in. The government, I would like to believe, is cognizant of this. There is enough chatter. There was some chatter around this year's interim budget, but since that is just a word of account. Maybe in the July budget, they will take some planned intervention to boost consumer sentiment. I think there are easy ways and means to do that without impacting fiscal deficit.
Okay. There is no sort of specific driver for this segment, which is the appliances and durables sort of segment, which is sort of keeping things muted. Nothing negative?
No, nothing negative to this segment. I think it's a proxy or marker of overall consumption sentiment right now. I do remain bullish that will turn around. For whatever it's worth, like I told you, in April, we've seen growth. Maybe part of that is with the good monsoon outlook, maybe demand that's been subdued for a while, at some point, low base effect will kick in. Statistically, many of these things will play out, but directionally, I think we should not be too far out from consumption expenditure coming back into play in one form or the other. Just on the other point that I mentioned that right now GDP is being driven by infra and CapEx cycles. That also has finally had to percolate down to consumption expenditure. That usually has a lag, so it's normal case consumption expenditure doesn't pick up.
Then this infra CapEx percolation down to people's hands and spending that automatically will also come into play.
Understood. Thank you. That's it for me.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. Next question is from the line of Dhruv Jain from Ambit Capital. Please go ahead.
I had a question on the CapEx. You have done about INR 130 odd crores of CapEx in FY 2024. Just wanted to understand what is the direction in terms of CapEx intensity should we look at it from FY 2025 and FY 2026 perspective? Any specific category that you are looking to invest a lot more on from in-house capability perspective?
Yeah. Dhruv, most of these CapEx were looking to the new products that we invested on, especially in form of the tools and molds, et cetera. As Anuj mentioned, this would continue for another two years, so we can expect a similar sort of a CapEx levels for the next two years.
Thank you.
If I could just add to that, Dhruv, one second. In terms of capacity, otherwise, we are not looking at some big bang, large scale factories, but our capacity across most of products, our fans, our mixers, water heaters, lighting has continued to increase over these last couple of years. That is through smaller CapEx interventions that we are continually making.
Okay. Just had a question on the new products. So you have been driving this new product initiative for some time now. If you could just throw some light on, as a percentage of sales, what could be the contribution and any direction that we should think about it? If you could just give some data around margins, what could be the kind of margin differential between these two?
Dhruv, sorry, we do not disclose our contribution from new product development. That said, obviously, we track it internally. So that has had a steady state growth over the last two years. We used to do that as part of our own board meeting also today, but it is not data that we publish.
Okay. Thanks so much.
Thank you.
Thank you. Next question is from the line of Praveen Sahay from PL India. Please go ahead.
Yeah. Thank you for the follow-up. Sir, can you give the CapEx number for this financial year? Also, as you are explaining about the plant expansion, can you give some color on the in-house manufacturing contribution right now and the way forward?
The CapEx spend for the year is at INR 124 crores, and the in-house manufacturing is about 20%.
INR 124 crore for FY 2024?
Four, yeah.
How is the plan for?
Next year will be similar levels. It will be in the range of about INR 150 odd crores. Similar levels.
Okay.
Next two years will be similar level.
Okay. And the in-house, as you mentioned, at 20%, is there any material change you are expecting in the coming couple of years?
I give an indication, last two years has gone from 17% to 19% to 20%. I think this year it should go up to 22% or 23%. So that's the kind of incremental that is going to happen. But what's happening is qualitatively, the more high-end stuff has been coming in, and the lower-end commoditizing is being getting pushed out. And second part I'll add to that, all of this tool molds that we talk about, that CapEx is not restricted to our plant. So that is where we have greater control over. A lot of that is placed at the third-party manufacturers also.
Okay. Because earlier, if I remember, you had guided for a 25% or to reach by 2025, and that will also improve your bit of a margin profile. So that is why just a query on the in-house, how this 20% will go forward.
I will comment, and I do not remember what exactly you might have heard me say in the past. But I have always said we do not have a target number. That might be where we end up with, but that is not a goal by itself. But the quality of that is important.
So what we do in-house and what we do outside, that is important. Secondly, the ROE or ROC is important to us calculating your EBIT margin. To connect what I said earlier also, we are also investing in the quality of manufacturing and our control on the production cycle at third-party manufacturers. So increasingly, all the tools, molds, dies, et cetera, third-party manufacturers are also increasingly owned by us. So to us, they are not really white label services, but our contract manufacturing and our IP, our product, our control over the production and quality over there.
So to us, that is how we are looking at manufacturing.
Okay. And great, sir. Also, if you can give some numbers on how the distributor count has increased by end of FY 2024.
Sorry, Praveen Sahay, can you repeat? I did not hear this.
Distributor count, how is that at the end of FY 2024?
It is 749 right now.
Okay.
Last year in March 2023, it was 660. This year, March 2024, we exited at 749.
Right. Thank you.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. As there are no further questions, I would now like to hand the conference over to management for closing comments.
Thank you. I will just thank everyone once again for attending this. I reiterate what we said. We have had a mixed quarter. We would have liked it to have been better. We have had some shortcomings, particularly on the CP business led by appliances and general trade. But at the same time, there are other positives in terms of our lighting business, alternate channels, coolers, and some growth in fans and Morphy Richards also. April has started off better for us. We remain positive for the year ahead. Thank you.
Thank you. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.