Ladies and gentlemen, good day and welcome to Q3 FY 2025 earnings conference call of Symphony Limited hosted by YES Securities. 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 then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aakash Fadia from YES Securities. Thank you, and over to you.
Yeah. Thank you, Yashashri. Good afternoon, everyone. On behalf of YES Securities, I welcome everyone to Symphony's Q3 and nine months FY 2025 earnings conference call. We have with us the senior management team of Symphony represented by Mr. Achal Bakeri, Chairman and Managing Director, Mr. Nrupesh Shah, Managing Director, Corporate Affairs, and Mr. Amit, Group CEO and Executive Director. I will now hand over the floor to the management for their opening remarks along with the presentation, post which we will start the question and answer session. Over to you, sir.
Thank you, Aakash, and thank you very much all participants on the call for being here this afternoon. The customary safe harbor statement applies to whatever we say this afternoon. My colleague, Nrupesh Shah, will take us through the presentation, post which we will all respond to any queries that you may have. Thank you. Nrupesh, right?
Yeah. Welcome to this conference call. To start with the performance highlights for our standalone and consolidated performance. Nine months as a whole, top line is up by 49%, while for the quarter it is muted. As on 31st December for Q3 end, there has been record unbilled advances surpassing even domestic sale which is above INR 150 crore, and primarily they are meant for 17 new models. These new models production was and has been slated to start from December, January and current month. There has been essentially a spillover of sales from December quarter to March quarter to this extent. However, overall end-to-end, as consumer sale happens during summer, there is no business loss.
There has been temporary calibration in EBITDA and business PAT, mainly because low margin models have been built in December 2024 quarter. In addition to that, there has been water heater launch expenses and also Forex loss of INR 3.8 crore on a standalone basis, while on a consolidated basis, there is a Forex loss of almost INR 9 crore during the quarter. It is more a notional loss that is mark to market mainly on account of investments made in subsidiary companies. On a console basis for first nine months, top line is up by 32%. During the quarter we launched storage water heaters and it is a promising start. Its major USP in terms of prevention of hair loss and much better and positive for skin coupled with AI features has received very well and acclaimed well.
We have launched them in selected states and cities and starting January it has been launched countrywide through e-commerce and D2C. As it was conveyed during the last quarter, wish to give an update about the legal action taken towards recovery and the owing was from Pathways Retail Private Limited, which is based out of Delhi, e-commerce distributor, and they were our distributor for 13 years. For e-commerce, they are distributor for many other consumer-facing companies. We had carried out forensic checks and came out with several irregularities, including falsification of the records as well as forgery of government documents, et cetera, and also diversion of funds. Hence we initiated stringent criminal proceedings towards forgery, cheating, criminal breach of trust, et cetera, under Bharatiya Nyaya Sanhita Act , 2023. We have created the right over their immovable property, which are based in Gurugram and Delhi.
Essentially they are on their corporate office as well as land parcel and other properties. Residual value of the properties seems to be taking care of our outstanding. On account of criminal proceedings, their promoter directors and ex-directors were arrested and later bail was granted. It was a conditional bail. However, the bail conditions in terms of the repayment have not been honored, and hence recently we have filed for cancellation of their bail application. At the same time, their other three directors had filed for anticipatory bail, and that anticipatory bail has been rejected by honorable court. In addition to that, as updated earlier, we have also filed the criminal complaint under Section 138 towards the founder of the check. This is the legal update in terms of the recovery.
We have, and we will go all out very aggressively for the recovery and do our best. However, as per accounting standard and also on a conservative basis, residual outstanding of INR 46 crore from Pathways has been provided for during the quarter as a doubtful debt. This is in addition to earlier provisions made. This will in no way compromise, legally or otherwise, our recovery from them. Post this incident, we have tightened and implemented stringent credit risk mitigation in terms of the in-depth credit evaluation, party-wise credit limit. We have also taken the credit insurance and across the parties, credit limit has been also rationalized.
We may also add that we do not give credit as a principle to general trade. It is only to modern retail and the regional chain stores, or to this e-commerce distributor that we have been giving credit. Other than that, in the general trade, which still constitutes the vast majority of our sales, we have an absolute zero-credit policy. That has been the case since the outset of the company, of our business, and that continues till today.
During the quarter, interim dividend of INR 2 per share, that is 100%, has been announced. This is in addition to buyback of shares as well as earlier interim dividend. All in all, total payout in nine months amount to about INR 124 crore, that is 92% of the console profit. Coming to overseas subsidiaries, IMPCO Mexico and GSK China, nine months as a whole, have registered decent performance. However, while translating to Indian currency on account of depreciation of Mexican currency during the quarter, as well as for nine months, there is a major difference. About GSK China, it has achieved remarkable turnover and performance. For nine months, the turnover stands at INR 75 crore versus INR 33 crore, while PAT stands at INR 10 crore versus INR 1 crore.
This includes its domestic sales, and also now we have synergized and complemented international operations, and hence earlier, IMPCO Mexico and Climate Technologies were sourcing their products from other suppliers based in China. Now that has been synchronized through the expertise and local presence of GSK China. So its local operations have also turned profitable, and in addition to that, it is also complementing IMPCO as well as Climate Technologies. As a result of that, as updated earlier, GSK has repaid the loan in excess of INR 10 crore, resulting into remaining outstanding of INR 50 crore. There is a clear visibility and path for repayment of this loan in the time to come. About Symphony Brazil, it is more about our trading subsidy to take care of regulatory requirement. Otherwise, it is purely exports out of India.
But again, on account of Forex fluctuation, there is a wide variation in terms of INR, even though it has registered huge growth in terms of top line, and there are huge prospects and potential. So Climate Technologies Australia is not performing well. Its performance currently is in line with earlier years of IMPCO and GSK China. As conveyed earlier, its first phase of transformation, that is CODB reduction from AUD 15 million to AUD 7.5 million, has been already achieved and its business transformation phase II is almost done. We expect the fruits to yield down the line. So nine months standalone performance as on 31st December , top line is up by 49% at INR 814 crore. EBITDA INR 188 crore versus INR 98 crore, that is up by 91%. PAT, after providing for exceptional item and December quarter specific expenses in all INR 54 crore, it stands at INR 132 crore. Coming to capital employed.
In trailing 12 months in standalone business, capital employed is INR -21 crore versus INR 60 crore in earlier year, despite increase in sales and performance, translating into infinite ROCE. Return on net worth stands at 24%. Treasury as on 31st December is INR 488 crore. For the quarter, overall, as explained earlier, performance is subdued, but mainly spill over to March quarter. For the quarter, at the cost of repetition, there are December quarter specific expenses, in all INR 53 crore, which includes provision for doubtful debt of INR 46 crore, water heater launch expenses of INR 3.6 crore, and Forex loss of INR 3.80 crore, in all INR 54 crore. EBITDA otherwise stands at INR 34 crore, but after providing for all other expenses, et cetera, PAT is INR -4 crore. About EBITDA margin movement, it stands at 18.8% for the quarter. Coming to consolidated financials.
For the first time in nine months at our console level, Symphony has crossed revenue of INR 1,000 crore and it stands at INR 1,088 crore, up by 32%. Its gross margin stands at 50.50%, Y0Y up by 260 basis points. On console basis, December specific expenses stand at INR 59 crore. Additional INR 6 crore on account of Forex loss, which is mark to market, as explained earlier, for Brazil as well as Climate Technologies and IMPCO Mexico. EBITDA stands at INR 211 crore, 19.40%, up by 570 basis points. After providing for all these December specific expenses, PAT stands at INR 134 crore, up by 34%. On a console basis, capital employed is INR 273 crore, down from INR 305 crore, leading to ROCE for trailing 12 months at 90% on core capital employed, and return on net worth is 26% versus 15%. About console quarterly also, it is almost flattish as explained earlier.
At a top-line level, it stands at INR 242 crore, and at a PAT level it is INR -10 crore, while EBITDA is INR +35 crore. For December 2024 quarter, on a console basis, EBITDA stands at 14.7% with this waterfall chart. Subsidiary-wise, financials for nine months. Subsidiaries put together in the nine months registered top line of INR 327 crore, up by 10% YoY. EBITDA is INR 24 crore, up from INR 15 crore, while ex Forex, PAT is INR 8 crore versus INR -5 crore. For the quarter, four subsidiaries put together, top line is INR 88 crore while EBITDA is almost zero. At a PAT level, ex Forex is INR -3 crore. As it can be seen in the nine months, GSK China, IMPCO Mexico, and Symphony Brazil have done pretty well.
Brazil needs to be seen ex Forex, and in Brazil business we also make money on exports from India. It is Climate Technologies Australia, which is still bleeding and we are quite cognizant of its performance as well as concerned of the shareholders. Whatever is best in the interest of shareholders as well as all stakeholders will be done.
Coming to outlook. Ahead of summer 2025, very robust positive demand and sentiment across the trade channel, across the geographies. On top of it, as all of you are aware, considering the major income tax relief given, which will be mainly availed by air cooler class of consumers, that should further boost our business. We are quite confident about performance of March 2025 quarter. There has been overwhelming response to 17 new range of air coolers and they will be margin accretive. There has been strategic focus and decent demand from LFS, RCS, e-commerce as well as D2C. Thank you. With this, we can take the questions.
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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. In order to ensure that management is able to answer queries from all participants, please restrict to two questions at a time. You may join back the queue for follow-up questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Manoj Gori from Equirus Capital. Please go ahead.
Yeah, thanks for the opportunity. Based on your opening remarks, what I understood is optically this quarter is looking weak on the domestic front, but probably there will be a lot of spillover into Q4. Probably for the fourth quarter, we should expect normal growth that we would have expected earlier and plus this spillover effect. Is that understanding correct?
That's right.
Yeah. Secondly, if I look at some of the other cooling product categories, channel has been going very aggressive. In fact, in terms of number of days or in terms of absolute volumes, they have been betting on the summer, building huge inventories, in anticipation probably if there is any supply chain disruption for any of the categories. Are we seeing probably channel going very aggressive as compared to previous historical trends and accordingly, it should further boost volumes during the quarter?
Certainly, not only the channel, but so are we. We have also built a huge inventory in anticipation of good sales in the summer. Yes, all in all everyone concerned in the business is very upbeat.
Correct, sir. Good to hear that. Lastly, Nrupesh just said the new models are margin accretive. Looking at the standalone gross margins probably there has been minor contraction. Probably there won't be any major contribution from these new models during this current quarter and that we should expect during the fourth quarter.
That's correct. Yes.
We as a company have a focus when we talk about margin on EBITDA margin. That's one mistake you got to club between gross margin or otherwise, because primarily our focus is on that.
Correct. Understood. Lastly, on the subsidiaries probably, still when we look at the top-line performance, we are still not able to see any meaningful uptick over there. Obviously, you have taken a lot of efforts on CODB, where we are able to see some benefit kicking in. Can you throw some light on the subsidiaries probably, how do we see from next one year point of view?
Manoj, by subsidiaries I suppose you mean Climate Technologies of Australia because IMPCO Mexico and GSK in China are already sort of cruising along very well.
Yeah.
As far as Climate Technologies is concerned, there were two sort of levers that we were working on. One was how do we reduce the cost of doing business through a transformation of its business which is outsourcing the manufacturing, and cutting down its manufacturing related overheads. That has been by and large achieved. The manufacturing is at the tail end in Australia. by June everything will be wrapped up. That's when the lease for our factory also expires, and we'll be done and dusted with any sort of manufacturing in Australia come June. Simultaneously, the other sort of lever that we have been working on is adding new products to expanding our product portfolio in Australia, because historically, we were selling gas heaters, gas ducted heaters, and rooftop mounted air coolers. Now, over and above that, we have added high wall split air conditioners.
We've also added reverse cycle ducted air conditioners. By reverse cycle ducted air conditioners, I mean air conditioners which both cool and heat. Because remember that Australia is as hot as it gets cold in the winter. It gets very hot in the summer and it also gets cold in the winter. So it requires both sorts of interventions. We have introduced the complete range of air conditioners. We've also added products like electric panel heaters, fireplaces, strip heaters. We are in the process of adding air purifiers. So we are really increasing the entire portfolio of products that we'll be selling in Australia. Now the introduction of these products is more or less in place. Now, scaling up the entire business, offering them to the entire geography all over the country, offering them to all customers is a process which is currently underway.
But identifying the right products, getting them certified, identifying the suppliers, and then getting the product certified, testing, sampling, all that is all done. Now it is just a question of how do we ramp up sales. So the focus here onwards is going to be entirely on the growth of the top line. Whatever had to be done by the Australian team, in terms of reduction of the CODB and its manufacturing transformation is almost all done. And like I said, the focus is now clearly on ramping up sales. So the issue now in Australia is nothing other than top line. As soon as we are able to crank up the top line, everything else, all the numbers will immediately fall into place. Exactly what happened in GSK China. Till last year, our turnover was some INR 33 crore and some barely breaking even on a cash basis.
And suddenly, as soon as the top line increased to INR 70 crore, in nine months, we are seeing bottom line growth. So the operating leverage has kicked in in China, and the same thing will happen in Australia. So that is what is currently going on.
Correct, sir. So thank you, sir, and wish you all the best.
Thank you. However, I may also add that as Nrupesh bhai mentioned, we fully appreciate the sort of concerns that the market has about this subsidiary and its performance and its consequent impact on the valuations of the company as a whole. And we will certainly take all that into consideration and chart out the way forward.
Right, sir. Thank you, sir.
Okay, thank you.
Thank you. We will take our next question from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Sir, thank you for taking my question. Sir, can you highlight in a scenario that there is tariff imposed on Mexico, China, do we get impacted in any way? Do any of these products directly, indirectly make their way into the U.S.? We know Australia does supply to U.S. Does Mexico also do? If you could just tell us, one, if there is an impact, and second, if there is, how are you looking at navigating the same?
Okay, good question, Pulkit. Until about a couple of years ago, two summers ago, we used to have very good business in the U.S. At the peak, we did about $23 million of sales in the U.S. Now, for different reasons, that has not happened in the last two years, and that also has a telling effect on Climate Technologies sales. As of now, our sales from either Australia or Mexico and/or China to the U.S. is fairly low. Whatever the U.S. company sells does come from all of these geographies, but as of now, it is fairly low. Really speaking, the tariff will have no impact on us. In fact, if there is sales in the U.S., we believe that the tariffs will be passed on to the consumer.
If, for example, Home Depot sells our product, places orders on us for our product, they would pay duties or we would add the duties to the price at which we sell to them. So, if at all it will get passed on to the U.S. consumer, as far as we are concerned, really nothing changes.
And sir, if I may flip that more on the positive side, that tomorrow in a scenario that China and Mexico have duties, can the Australian subsidiary become more relevant for us from a U.S. export perspective?
Absolutely. Yes, absolutely. Because there would be no duties from Australia to the U.S. as they currently are not. Absolutely right. Yes. So we do have that other avenue of routing product to the U.S. You are absolutely right.
Yes. But on an as is basis, if duties are put, we do not get hit significantly negatively. That is really what I take away from this.
Absolutely. Certainly not. Although there has the impact that this entire turmoil in the U.S. has had on currencies is something what is affecting us indirectly, as was explained in the presentation, that the Brazilian real has devalued, the Mexican peso has devalued, the Indian rupee has devalued. So whatever impact that has, is there. But other than that, directly the tariff has not hurt us or we do not expect it to hurt us.
Sure. So my second question is, a lot of these EMS companies which originally used to do air conditioner, et cetera, are now also talking about doing air cooler EMS. Does it in any way play into our strategy of looking at incremental suppliers or for us, the business model of sourcing will remain the same the way it has been for years?
Sorry, Pulkit , I am trying to understand what you meant by EMS.
The likes of EPACK, et cetera, who are now making air coolers for different brands. As you would appreciate, multiple brands now want to get into air coolers. I wanted to know if for us from a sourcing perspective, could they be relevant suppliers or we will stick to our existing strategy of sourcing, which is basically we do all the designing and then stick to the few players who do manufacturing for us.
Essentially, we will stick to what we are doing now. EPACK has also become one of our OEMs contract manufacturers. Products that we have designed and developed and the molds of which are owned by Symphony have been given for a few models to EPACK to produce on our behalf. We will not really just source a product which has not been developed by us and where we see no product differentiation, and the same product would be hawked to different brands. It is not a direction that we will go into.
Got it, sir. Very clear. Thank you and good luck for the next quarter.
Thank you.
Thank you. We will take our next question from the line of Shraddha Kapadia from Share India. Please go ahead.
Thank you so much for the opportunity.
Shraddha, can you use your handset mode, please? Your voice is not very clear.
Is this better?
No. Your volume is low. If you can speak a bit louder, that will do.
Hi, is this better?
Yes, Shraddha, go ahead, please.
Yeah. I wanted to understand if we have taken any price hikes or do we expect to take any price hikes in future? So in the current quarter, if we have taken any price hikes, and what will be the price hikes, considering the season is almost over here?
Yeah. So again, good question, Shraddha. As a part of our overall pricing policy, our prices keep on sort of inching up every fortnight, beginning July all the way up to the summer season. That has been part of our longstanding pricing policy. Yes, and the price what I am referring to is the price at which Symphony sells to its channel partners. So, in the first fortnight of February, the rate that we will offer is not what the channel would get on the 16th of February.
Shraddha, does that answer your question?
Yeah. Thank you so much. I just have one more question regarding the new 17 air coolers which we have launched. If you could highlight the new features and how much revenue can we expect? So majorly, it would be the new features which would be there, if you could highlight the same for the upcoming season.
That could be a very long story, and it is all there in our corporate presentation, which is on our website. So if you care to go through that will probably serve you better than me talking to you on the phone.
Okay, sir. Sure. I will do that. Thank you so much.
Thank you.
Thank you.
All the best for the upcoming quarter.
Thank you.
We will take our next question from the line of Mayur Parkeria from Wealth Managers (India) Private Limited. Please go ahead.
Good evening, sir. Good evening to the management team. We understand that this event of provision was there and it has happened one-off situation in that way. My question is slightly little longish and slightly more strategic. Modern trade as well as e-commerce or even quick commerce, and this is what other brands and OEMs also have been saying, that the working capital or they have a credit period unlike our bargaining capacity in terms of general trade being higher versus in front of them it is relatively lower and hence the credit periods are also there. The structural change is that their share in the overall sales is rising in that sense gradually over multiple years and it will continue to rise given the consumer behavior and experience on modern trade, e-commerce, quick commerce, all put together the new channels.
How would you address this assessment that credit which has been, we have always sticked to the cash and carry model as far as the general trade is there, but then we are giving credit on the other channels and on one side as a structural impact and the second is our assessment in the credit profile and the measures which you have taken now, where do you think the lapse actually happened in terms of internal situations, if any? Where did we miss that in that? Because we have always maintained that we are very strong on that and we have maintained that. Just as in learning curve perspective, where did the internal process miss and are there any heads which rolled out because of this?
Or what kind of measures did we miss on that side and how do we address the structural issue of credit which anyways this channel we will have to continue, sir?
When it comes to modern trade you are talking about the likes of Cromā or Reliance or Vijay Sales. Or when it comes to regional chain stores you are talking about the likes of Bajaj Electronics down in Hyderabad or Aditya Vision in Bihar, and there are several in the South, Tamil Nadu and so on and so forth. There, we have been giving credit and there, of course, we've obviously looked at the financials. No point in looking at the financials of Reliance Retail or of Cromā. But for all the others, we do keep a look, eye on the financials of the other parties. As far as this one particular case is concerned, we had been doing business with this distributor for a long time. Initially it was not on credit. Gradually because to sort of increase the sales, we began to provide credit.
But historically, we kept a close eye on how the sort of the repayment was happening. But in this one year, I think I can admit to saying that there was a lapse in judgment and we should have picked up the signals. People who are at the operating level who do the business should have picked up the signals and been able to sort of tighten the sales. But sometimes in the lure of sales or with the fear of not losing sales, they sometimes tend to overlook some signals which would have been otherwise very evident. I think this situation has happened. It is clearly a lapse of judgment. As to your question about heads have rolled or not, no, heads have not rolled.
We believe that the people who are responsible for this lapse in judgment are wiser now and this will not happen again. So, yeah.
Sir, actually INR 45 crore and even earlier what we provided is a huge sum in terms of the kind of credit. It is just that Achal's philosophy of cash and carry. I remember earlier days you had faced this issue very long time back, I think two decades back or something and that what made you to stick to cash and carry and that philosophy we have always been looking at and while we understand it was an event but coming from Symphony was something which took us too much of a surprise in terms of that. So hope-
I-
That philosophy. Yes, sir.
Yes, Mayur, I entirely agree with you. All in all it is INR 46 + crore whatever provisions we have taken earlier. So all in all it is INR 58 crore. INR 46 crore plus INR 12 crore, so INR 58 crore. It is an enormous amount of money. That is something where for much less back 20 years ago, we became a BIFR company.
Yes, sir, I remember sir.
This is an enormous amount of money and under normal circumstances, you are right, this shouldn't have happened. Like I said, it's a lapse in judgment and we are sure that the people responsible for this are wiser now and this will not happen again. Heads could have rolled. That would have been an easy, simple thing to do to sort of also even demonstrate to the market that actions have been taken or to our board. We have chosen the other direction of our people learning from this experience. Very expensive learning, but a learning nonetheless. We are hoping that this is something which should not happen again. I mean, we are sure.
The investor concern is only actually our long-term concern only comes because the channel share gradually keeps on rising in terms of modern trade and these. We are at a stage where the assessment on this itself has gone early stages wrong. Just to ensure and request you to give your personal attention and ensure that processes are well established. Even if, well, it's a very generalized way to say that there are big players, but there are small and medium modern trade players also which are there and the likes where we face an issue.
Sure.
To strengthen and ensure that the processes are well set because the channel will keep on becoming important as we go ahead. It's not that we cannot serve that channel, but we need to take care. The second question is on the Climate Technologies.
Sorry, Mayur. Just to add to that, as we covered in the presentation, it has been placed on the straight. Of course it was a valuable lesson and hence stringent credit risk mitigation has been implemented, which includes in-depth credit evaluation, which is much beyond what used to be done earlier. Secondly, now for entire modern trade, credit insurance has been taken. For the first time, this credit insurance policy has been taken and wherever required, we have substantially rationalized the credit limit. Of course, many a times, just by knowing the financials, just by knowing the balance sheet, it's like giving a pulse. As it was mentioned, sometimes there may be a lure of not losing the sale. In fact, last year, actually, there was a loss of sale because of non-supply.
Had it been rationalized to this channel, otherwise also there would not have been a loss of sales. But of course, it's a valuable lesson. At the same time, as it was conveyed in the presentation, we have taken stringent actions against the modern trade distributor. By the way, several other consumer-facing companies have also lost their money with them.
Sir, we believe with all the actions will be there. Sir, second just in-
Also in continuation, in the past you must have heard of Future Retail going under and many suppliers having lost money. In our case, we didn't because again, there were different set of people involved at that time who sort of exercised judgment and ensured that we do not lose our shirt. Even though many other companies failed to do that, our team was successful in minimizing our exposure to Future Retail when it was going under. Like I said, it's just a matter of judgment of the people involved.
Yes. The second question on the CT Australia, if I remember, if my memory serves well, I think this is the first time where we have, apart from the other actions which anyways we are taking for a couple of years, our strategy phase one, phase two we have mentioned about transforming and all that. First time we have clearly come out with a kind of a statement or I'll say an outlook where we are saying that we are open to any other options also which may be possible in the light of the investors' concern on Australia. Just to understand this a little bit better, are we looking at some strategic kind of initiative apart from the other options which are there on the table? Is there something more to it to read in your intent and the way we are looking at it?
Because this is a very big, even if it happens then, just to get a more idea on that, sir.
No, Mayur, there is nothing really on the table. In fact, I am asking you, what would you suggest we should do?
Sir, firstly, it is beyond my pay grade to give a strategic view onto something and especially to [Mr. Achal Bakeri who]-
No, you are a smart person. I am sure you can maybe share your thoughts.
Sir, many times and we have mentioned that our intent has been to focus on return on capital employed and margins very clearly. At a very strategic intent level, I remember we were talking about this way back when this acquisition was taken that India is the most promising place as far as ROCE and growth both were concerned as a combination of that. We do understand that air pooling Australia was a big market. We wanted to address that and possibly also look at U.S. as a play through Australia, which actually did not materialize over long period the way we would have thought over it, right? Apart from the growth, the ROCEs of all developed countries are very subpar any which case, right?
I think that is something which needs a very closer look in terms of our intent and how we look at addressing the opportunity because absolute value of sales can come in. Sorry to name, I am not naming in others, but we have seen experiences whether Tatas have gone through or for a very long period of time, Bharti or Hindalco, all of them have gone through where developed countries or global companies are acquired and their ROCEs are significantly lower and it is very difficult for us to have a cultural map to understand and turn it around in a time period where investor horizons are there and in fact, at this kind of a situation. You have been instrumental in turning that around by complete closing the manufacturing operations and normally these are not possible and easy to do.
But then, ROCE was one indicator which actually could have given us a signal whether this was worth doing at that point in time. Now that this has been done, I think, while we are taking all measures at the margin, trying to improve it, I think there is still a question which one of the participants asked that does the tariff war open the opportunity for Australia to turn around? I still think that one has to look at this not from one year, but over five, seven, eight years. Can we really add wealth to Symphony parent and then the wealth to the investor will come as a second part. Overall, how does this developed country operations actually fit into that entire efficiency and ROCE which we already have? It will always dilute our proposition for that.
Those markets are growing at very high double digits, so we will have to do completely different. We are doing and launching new products there, which has not been our core focus in other markets. We are doing measures just to turn that around. Is that in so much of effort and so much of your time and resources of the company, over a long period, one can have a look at that. That is just a small way to look at it.
No, really appreciate it. Really appreciate your thoughts. Thank you. Thank you very much.
Thank you and wish you all the best, sir.
Thank you.
Thank you. We will take our next question from the line of Veenit Pasad from Investec. Please go ahead.
Hi. Good evening, sir. Thank you for giving the opportunity. I just wanted to get a sense around how are we thinking on water heaters business, what has been the initial feedback which we've gained from the market, particularly given this is the peak season for water heaters. How has it done this month? How are we looking at the overall business in terms of whether this business will continue to invest maybe in the near term, maybe a drag to our profitability. Lastly, what is the market share target, let's say we're targeting over a medium-term, let's say two to three year perspective.
In terms of the market for water heaters, it's about as big as coolers in value terms. It's a significant market, significantly large category. But we do recognize that there are very well-established, well-entrenched players. So we had to make sure that whatever we offer has a distinct differentiation, which is why we've developed this hair fall control geyser and with the AI-powered controller. We believe that these two together have a compelling differentiation in the market. When we launched it was already well into the cycle, the channel buying cycle and all, so we were sort of fairly late. Although the winter hadn't quite set in, but by the time the product was given to the channel, they had already stocked up on other brands. So this really was just more of a trial kind of a year.
Now going forward is when we would be sort of making sure that all the channel partners stock it for the coming winter, the winter of 2025, 2026. So in reality, the next year, the coming 12 months is what is going to be the key time when this product will sort of demonstrate what it can do. So it's a little too early to say anything, but we've had so far in whichever markets we've launched and whichever customers have bought are very happy. So the product has certainly lived up to its promise, and now it's just a matter of just doing more of the same across the country.
Understood. Sir, if you can throw some light on how will be our GTM in this category. Before the next winter, will we be selling through dealer network, GT network, or at least for the initial couple of years, the focus will remain more on modern trade and e-com?
Yeah, I think initially it will remain on modern trade and e-com and some large regional chain stores, initially.
Understood.
Yes.
Okay, understood. Sir, just one clarification. We understand there was some push out of some sales which did not happen this quarter to the next quarter. From that perspective, outlook for the next quarter appears robust. Just from a fundamental point of view, are you seeing any change in terms of the way our business model operates, wherein we used to sell it evenly throughout the year to channel partners? Is that something what is changing? Should we read into that, or is it just pure push-out of sales? Going forward, we should again see more evenly spread out sales throughout the year.
No, absolutely. In fact, if the production of the new models had been initiated a couple of months sooner, then the entire sales would have happened in the previous quarter. It is just that people gave us the money, they wanted the product. In fact, they were quite impatient to get the new product. It is just that we had begun the product development a little late, and there were some transit issues, and there were some reasons of delay beyond our control. The production initiation of the production got pushed to the current quarter. Now they are already in production, most of them. A couple will begin towards the end of February. They will all be in production and be sent across to the channel by the end of the quarter. This is just one of those events, and this happens.
A few years ago, seven, eight years ago, we had launched a range called the Touch range, which instead of July, we had launched it in. July is usually when all our new products are unveiled, but this one was unveiled in the month of November. So we had a similar situation. Again, see, up until the temperature picks up, whatever is sold goes to the channel. So whether we sell in January or February, there is no loss of sales. It is just the deferment of sales because the eventual customer only buys when the temperature picks up. Hello?
So we will take the next question as line is disconnected.
Okay.
We will take our next question from the line of Abhishek Ghosh from DSP Mutual Fund. Please go ahead.
Yeah. So thanks for the opportunity. So just in terms of the loss of sales that we have had in this current quarter, otherwise, on a steady basis, you would have seen teens kind of a growth, which is what you are kind of looking at would have been possible?
What kind of a growth?
Yes, absolutely. That's what we registered in September quarter, and that is the kind of the collection and unveiled amount we are sitting on.
Okay. And sir, just in terms of the channel sentiment, we have almost seen 1/3 of the quarter having gone by. Is the channel sentiment buoyant in terms of stocking up or are there apprehensions about the upcoming season? If you can just help us understand with that.
No, the channel is very upbeat. This year, January, as we all know, has been one of the hottest Januarys in the last 125 years. February also, as we speak, it's fairly warm. So the channel is very upbeat. They all expect there to be an early summer and a good summer in terms of reasonably high temperatures and consistently high temperatures. So those are all expectations, and the channel is all sort of geared up for that.
In addition to that, as everybody expects, Nirmala Sitharaman has made consumers also very happy, especially for our kind of products, in addition to good summer.
The higher disposable incomes, thanks to the tweaking of the tax regime, will certainly help us as well as others.
By one statistic, it is said that saving of INR 1 trillion of taxation will increase the consumerism to an extent of INR 3 trillion-INR 5 trillion, because it is 3x- 5x, and that helps to consumer-facing companies.
18% of that is what goes back as revenue to us.
Revenue. Yeah, sure.
Correct. So other thing, in terms of the competitive landscape, are you seeing any meaningful changes in your category? Are you seeing new players coming through? Any sense on that?
I don't think there are any new players left to come. Whoever had to come is already here or whoever exists is already in the category. So there's almost everybody that you can think of is in this category.
Yeah, but I was more asking, sir, is anybody exiting now given that?
Exiting? Well, not exiting. Many of them have lost their initial sort of euphoria and passion and all of that. They realized that the grass is always greener on the other side. Certainly, that is visible. Some of our esteemed partners, again, I can't talk about them in an open call like this, who couldn't just talk about anything other than coolers or Symphony, don't even talk about that anymore. They are so busy with their other products, and they've realized that this is not all as easy as it seems. Yes, there's certainly been that.
Okay. Sir, just in terms of standalone P&L, there is almost about INR 6 crore of one-time distinct because of forex loss and water heater launch expenses, and as corresponding number for console will be about INR 12 crore. Is that the right way to look at it?
That's right.
Okay. You will see some amount of gross margin improvement as the sale of new models happen.
Actually, sales rather than gross margin focuses on EBITDA for a few reasons. Our target is EBITDA, which may be partly through gross margin, partly items in between gross margin to EBITDA.
Okay.
Gross margin is very high, but if we cannot control or manage the items in between which are substantial, then it does not lead anywhere.
Got that. Okay, sir. Thank you so much for answering my question. Wish you all the best. Thanks.
Thank you.
Thank you. We will take our next question from the line of Vinay Nadkarni from Hathway Investments. Please go ahead.
Yeah. Good evening. Just one question on the volume of procurement for this season. By how much have you increased your procurement levels for this summer for air coolers?
Well, we are sitting on. We have produced a record number of coolers, already sold quite a record number of coolers and sitting on record in high inventory. So I cannot barely talk in percentage terms, but it is fairly high. What we have sold is higher than already sold before the summer is much higher than any of our competitors. The inventory that we have is more than what most of our competitors would sell in a year. So in every respect, we have gone bullish, and we have gone all out.
Okay. Regarding CT Australia, you said you are closing down the manufacturing facility there by June. What would be the impact of that on your overhead space? By how much would they come down? If you can give us some figure on that.
Maybe you joined a little late, but in our presentation, we talked about how we have reduced our cost of doing business from AUD 15 million, which it was when we acquired the company, to about AUD 7.5 million now. So we are almost there. Maybe a little bit further will be reduced because the process of reducing manufacturing has been going on. What we are currently doing is very, very small compared to what we were doing earlier. We are occupying very little space. We have very few people just converting the last bit into finished product, the last bit of raw material into finished product. So most of the gains of CODB reduction that we had planned on have already been received, realized.
Okay. And then you will be subcontracting it in Australia or would you be supplying it from China and India?
Again, like we said before, we will be supplying mainly from China. Our subsidiary in China is going to be supplying to Australia. Some products have been going from India to Australia. So it is essentially either China or India.
Okay. And lastly, what is the percentage of sales that you get from modern trade as compared to general trade?
Where? In China? In Australia?
In India. Sorry, in India.
In India, well, whatever is the general average for the industry as a whole applies to us.
Okay, fine. Thank you. Thanks a lot. All the best for your next quarter.
Thank you very much. Thank you.
Thank you. Next question is from the line of Ashish Shah from Business Match. Please go ahead.
Hi, good evening, sir. Thank you for allowing me to ask a question. Sir, I just have one-
I am sorry we have lost the-
Sir, voice is breaking.
Sir, we have lost his connection. We will take the next question from Veenit Pasad. Please go ahead.
Thank you. Thank you, sir. My line got disconnected. Just wanted one clarification. Generally, we would have started manufacturing newer models somewhere around September, October. But this time, due to various reasons, that got pushed to December. Is my understanding right?
Yeah. December, January, February. Yes.
No, but generally in a normal year, not this year, but generally, is it a case where we start manufacturing new models a lot early? Or it is-
Absolutely.
It is the similar pattern.
No, no, absolutely.
Okay. So it is just matter of delay in starting of manufacturing of newer products, which is-
Correct. Again, not all new models. We have launched 17 new models. Some we were already able to produce and introduce in the previous quarter. Some will happen and the balance will happen in the current quarter.
Understood. Okay, sir. Thank you. Thank you so much.
Thank you. We request participants to restrict to one question at a time, please. We will take our next question from the line of Ashish Shah from Business Match. Please go ahead.
Hi. Good evening, sir. Thank you for allowing me to ask a question. I just have one question, sir, slightly long-term on your China subsidiary. So, last few years, you obviously struggled in terms of business, environment, margins, and now things have come on track. Do you have any plans, any thoughts two, three years out? Can this meaningfully scale up from where we are now?
The China subsidiary serves multiple purposes. One is, of course, it becomes like a production source for Mexico, Brazil, Australia, and other geographies. That is one. Secondly, it also helps the India procurement team, which also buys components from China and to get better deals, find other suppliers. It actually serves multiple purposes. And of course, over and above that, serving the local domestic China market. Yes, this business, again, the capital employed there is fairly low. It will certainly grow in the years to come. That growth will come with very low capital employed.
Just continuing with the same line of business, do you have a plan in place, like a strategy in place to grow China business meaningfully?
China business will grow when the other subsidiaries grow. The focus is not necessarily on growing the China business. The focus is on growing Australia, growing Mexico, growing U.S., growing other geographies, and orders from there will flow to China as well as to India. Growing the local China market itself is also a focus area. So growth of the Chinese company will be a consequence of our growth in many other geographies.
Okay, sir. Thank you very much and all the best.
Thank you.
Thank you. We take the next question from the line of Jayesh Gandhi from Harshad H Gandhi Securities. Please go ahead. Jayesh?
Hello, am I audible?
Yes. Please go ahead.
If I heard you correct, you said that in Australia you have introduced air conditioners, air purifiers. Do you have any? Hello, am I audible?
Yes, Jayesh.
Now you are.
Are you thinking of introducing it in India as well?
No. We are introducing these products in Australia because, like I said, historically, we were selling coolers, rooftop coolers, and ducted heaters in Australia. Because of regulatory reasons, there has been a ban on gas heating in Australia. We have to exit from that category. Coolers and gas heaters are sold in tandem. If heaters are not sold, cooler sales, rooftop cooler sales will also reduce. We have to find a substitute product, and the substitute product is air conditioner, which can both cool and heat. Because we have the brand and the distribution, we have decided to do that. Along with that, these are other complementary products, electric panel heaters, purifiers, et cetera, which the channel also, our research also revealed could have very good prospects, and which is why we have got into those.
We are really not planning on introducing any of those in the Indian market, at least today. I will never say never. At least today.
No, I was just wondering because I think we have a far poorer air quality than what Australia might be having. If you are actually thinking of introducing air purifiers in India. Anyway-
Yeah.
That is it.
Sure. Yeah, it could be a good product, but even our air coolers, at least in the summer months, our air coolers also filter air. This is also a product which both cleans, filters, as well as cools air. So if one is using an air cooler, you really don't even need a purifier.
Thank you, sir. That's all from my side, and [inaudible] .
Thank you.
Thank you. We'll take our next question from the line of Mayur Parkeria from Wealth Managers (India) Private Limited. Please go ahead.
Thank you, sir, again for taking my question, and I promise this will be a small one rather than a long one.
No problem.
Sir, just again, a slightly issue which has been also not paid to as well over a long period of time is the commercial and industrial air cooling segment. While in normal times we understand that there is no tailwind of the summer, but last year as well as if this year is anything to go by, there is a strong tailwind of the summer itself. We have, over the past, taken multiple efforts as far as sales team initiatives, doing a lot of, I will say, distributor through and other programs and everything put together. There was a time when we used to look at if Voltas' air conditioning factory was cooled by a Symphony.
Yes.
The outlook for industrial air cooling and even for commercial to that extent was expected to be much larger. From that perspective, we have absolutely gone nothing material. We are still sub-single digits on the overall revenue side. Over the next three years, how do you see this and why isn't the sales momentum in terms of the summer seasons of the last two years? Where is the problem coming or how do you see it in market acceptance?
Mayur, first of all, healthy as charged. Yes, agreed that we have not been able to scale this business up. Despite everything that we have done, the issue is not the summer, the issue is not tailwinds, the issue is of actually educating the market. Maybe Indian factory owners are content with whatever indoor temperature conditions that may exist in their factories. It is really a question of market education and explaining and convincing people the merits of better thermal comfort, indoor thermal comfort in factories and warehouses. It is just that. We have got the product, we have the team, we have everything concerned.
But we believe that despite it being many years of trying and us not having succeeded despite many years of trying, we continue to work at it because we believe that at some point, we will reach the tipping point and this thing will begin to roll. There are several other examples. Countries like China, and I have said this many times before, countries like China, in southern China, in Guangdong province, which is the manufacturing hub of China, and the economy of Guangdong is bigger than the economy of India, the GDP. Every factory is air-cooled. Every factory. If a factory is not air-cooled, workers refuse to work in that factory. So I believe it is a matter of time that Indian worker becomes demanding. Their threshold of comfort will be much lower or higher, whichever you look at it, and there will be a demand for industrial cooling.
It is just a matter of time, Mayur. It is just a matter of time.
Sir, wish you all the best on that. One small suggestion on the heater side, some of our channels, as in talking to the dealers on this side, A. O. Smith as heaters have done really well in terms of product positioning and premiumization. When we understand why, one of the factors which other boiler, my apologies.
Heaters. Water heaters.
Water heaters. Some of the companies have not been able to do is, nowadays, because of the pressure problems of water, most people are in housing societies, there is a pressure pump or internal pressure pump. The kind of pressure which comes through the boilers, it becomes very difficult for many of the water boilers to manage that.
Understand. Yeah.
A. O. Smith has done a very good job. Just a small feedback in terms of differentiated positioning for you to think on.
Excellent. No, very good point. Very good point. Very good point. No, we have taken care that our products, our heaters can withstand eight bar of pressure, which would be in a high-rise building or with a pressure pump. But you are absolutely right. Your market understanding is bang on.
Thank you, sir. I wish you all the best.
Thank you, Mayur.
Thank you. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to management for closing comments. Over to you, sir.
Thank you very much, everybody, and your questions were also quite insightful, and now give us a lot of food for thought. We look forward to discussing once again three months down the road. Have a great evening. Thank you. Bye-bye.
Thank you. On behalf of YES Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.