Ladies and gentlemen, good day, and welcome to the V-Guard Industries Q4 FY 2025 Earnings Conference Call hosted by PhillipCapital (India) Private Limited. As a reminder, all participant lines will remain 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 the operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I now hand the conference over to Ms. Natasha Jain from PhillipCapital (India) Private Limited. Thank you, and over to you.
Thank you, Ryan. I'm Natasha Jain. On behalf of PhillipCapital, welcome all of you to the Fourth Quarter FY 2025 Earnings Conference Call of V-Guard Industries Limited. From the management, today we have Mr. Mithun K. Chittilapalli, Managing Director, Mr. Ramachandran V., Director and Chief Operating Officer, and Mr. Sudarshan Kasturi, Senior VP and Chief Financial Officer. I would now request the management to give their opening remarks, post which we shall open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Natasha, and PhillipCapital for hosting today's call. A very warm welcome to everyone joining us today to discuss our company's operating and financial performance for the fourth quarter of FY 2024-2025. I trust that all of you have had the opportunity to review the investor presentation shared earlier. We have delivered a robust performance in Q4, marked by strong growth in both revenue and profitability. Consolidated revenues for Q4 FY 2025 stood at INR 1,538 crore, a year-on-year increase of 14.5%, representing the highest-ever quarterly revenue in our history. The electronic segment, comprising stabilizers, UPS systems, and inverters, continued its strong momentum, recording a growth of 26.3% YoY. The performance builds on the solid start the segment saw earlier in the year. The electrical segment, which remains our largest revenue contributor and includes wires, pumps, switchgears, and modular switches, registered a YoY growth of 14.6%.
In the consumer durable segment, covering fans, water heaters, kitchen appliances, and air coolers, we reported an 11.9% YoY revenue growth, supported by a good start to the summer season and healthy demand for cooling products. Sunflame reported a YoY top-line growth of 24% in Q4. While the kitchen appliance industry continues to face headwinds, this decline also reflects a high base effect from Q4 of the previous financial year. Additionally, the business has been impacted by continuous slowdown in the CSD channel. Integration efforts for the Sunflame business are already underway. Once completed, we expect improved momentum in the general trade, modern trade, and E-Commerce channels. While recovering the CSD channel could take time, we have a clear roadmap of the strategic steps to get the business back on a stronger growth trajectory.
In Q4 FY 2025, revenue from Non-South markets grew by 18.6% YoY, while the South markets grew at 15.3% YoY. For the full year, the Non-South markets contribution reached 47.5%, excluding Sunflame. We have reported a gross margin of 35.5% this quarter, compared to 34.5% in Q4 of last year, an increase of 100 basis points. We have driven a meaningful improvement in gross margin through the year and believe that the margin recovery is largely complete. This recovery has been driven by an increasing share of in-house manufacturing, cost-efficiency initiatives, and a gradual shift towards a more premium product portfolio. We will continue to pursue further incremental gains in the gross margin going ahead. EBITDA, excluding other income for Q4, stood at INR 143 crore, reflecting a YoY growth of 11.9%. For the full year, we reported an EBITDA of INR 513 crore, an increase of 20%.
EBITDA margin was 9.2%, compared to 8.8% in the previous year. Consolidated PAT for the quarter was INR 91 crore, up 20% YoY, compared to PAT of INR 76.2 crore in Q4 of FY 2024. For the full year, consolidated PAT was INR 314 crore, higher by 21.8% YoY. In recognition of the strong performance, the Board of Directors recommended a final dividend of 150% equating to INR 1.5 per equity share. Working capital remains efficient, ensuring strong cash flow generation. We have repaid ahead of time the entire term loan related to the Sunflame acquisition and back to being a debt-free company. Overall, it has been a satisfying quarter and a strong year, marked by strong double-digit growth in both revenues and profitability. This growth has been broad-based, with meaningful contributions from all key segments. We are also progressing on initiatives aimed at structurally enhancing the performance of the Sunflame business.
With that, I conclude my opening comments, and I would like to thank Natasha and the team at PhillipCapital for hosting this call, and we request the moderator to open the floor for Q&A. Thank you.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Rahul Agarwal from Ikigai Asset. Please go ahead.
Yeah, hi. Very good afternoon to all of you, and congratulations for another good quarter. With two questions, essentially, one is the quarter of highest ever for V-Guard, I think, this year. I'm looking at two things: gross margins and working capital. I think in the history of V-Guard, both these numbers look like best ever. Just wanted some outlook on gross margin as well as working capital cycle. How will this shape up over the next two, three years? Obviously, you mentioned that we'll continue to improve this, but my sense is further improvements on gross margin will really need a lot of internal efforts. As well as on working capital, I think we are very tight on receivables now. So just some outlook on this. That's my first question.
Yeah, I think as far as gross margins are concerned, as I mentioned in the opening remark, we are largely back to the pre-COVID levels. I think, of course, some more small improvements in gross margins are possible. I think we will be working on it. But I think largely it has recovered from all the commodity inflation and all that. So as far as working capital is concerned, we may not see a very huge improvement, but some more possibilities are there. Like we had mentioned that we are working on a more premium portfolio in each category, which also should kind of give gross margin a slightly improved trajectory. As far as working capital is concerned, I think, yes, we are at a very good place. I think as far as debtors are concerned, yes, I don't think it can go much lower than this.
But inventory-wise, I think we still have a little bit more inventory than we would like to. So maybe from the inventory side, some more small improvements are possible. But I think even working capital-wise, we are largely in line with whatever has been our steady state.
Got it. Got it. Fair point. And the second question was on alternative energy business across, I mean, you have announced a battery manufacturing CapEx. So just pick on that, why this decision, and what do you see going forward? Something on Gegadyne, if you can explain what's really happening there, and solar rooftops, which is essentially part of electronics. How do you look at these businesses? And any single segment which you think can be like a INR 500 crore top line annually, if you could highlight what could be a potential opportunity across these lines and tops. That's all from my side, thanks.
So the solar rooftop business is growing very strong. It's housed within the electronics. We've had very, very strong growth, although we don't give out product-wise numbers. I think in about four to five years' time, we should hit really good numbers. And I think once it's large enough, we'll start disclosing the numbers. So solar rooftop is something that's doing very well for us. We've always been in the inverter business, but solar rooftop was something that was carved out about four years back. And I think we were right on time to take advantage of all the incentives given by the government. The government is giving a lot of incentives for individual houses moving to rooftops, and that's driving a lot of demand.
I think we still have a lot of headroom because this entire demand is from some seven or eight different states out of the 35 states. On the second thing, sorry, what was the second part of the. On Gegadyne, right?
Gegadyne.
Okay, Ram, you want to take this question on Gegadyne?
Yeah. I think we had invested in Gegadyne to help them to support and establish the technology. I think where Gegadyne is today, about 18-24 months back, they had put up a pilot plant based on the funding that we had extended. They have kind of stabilized to achieve their technology goals. We have validated, and it's working well. So now they are in the course of figuring out how to scale up and how to move forward and how to prepare for a commercial launch. That will be at least another couple of years away because they will have to establish capacity for that. Yes, I think the progress on technology development has been good, and they have met the development objectives for which they were funded.
Got it. Anything on the battery expansion for V-Guard?
Yeah. Mithun, you want to, or shall I?
No, you can. Please, please.
Yeah. So about three years back, we had initiated a project for setting up battery capacity in Hyderabad. And about 18 months back, this capacity was commercialized. And as we sit today, factories are operating on full capacity utilization. The business has been growing in high double digits, and that is warranting further increase in capacity. Together with what I would say, some shortfall or scope for us to feed some of our outsourced revenue through the factories. So I think this plant is expected to come up in the next 18-24 months. And we expect to be able to feed our growth from this plant. This plant may take about another six to nine months to fully stabilize beyond the commercialization date. So we are looking at this capacity coming up two and a half years from now. I mean, getting fully stabilized two and a half years from now.
Yeah, the INR 50 crore can make how much amount of sales? What's the asset on here?
See, we have this investment is purely on machinery. And we are looking at the possibility to install this machinery around our existing facility. In terms of throughput, I think this should give about 300-400 crores of throughput. It should support this investment in net sales terms.
Got it. Thank you so much for answering all the questions. All the best.
Thank you. The next question comes from the line of Naushad Chaudhary from Aditya Birla Mutual Fund. Please go ahead.
Hi. Thanks for the opportunity. Two questions. First, on the Sunflame, sir, I think last quarter also we indicated that the cleanup has been done, and sequentially, we should experience improvement. But this quarter also, we have seen sequential decline in the margin as well as also on the top line. Any sort of clarity? What exactly are we doing here? How should we look at this piece of business?
Yeah, firstly, Q3 is a high quarter compared to Q4 because Q3 is when you have the festival season. And generally, Q3 sales are higher than Q4, so you may not make a sequential comparison. However, that being said, I think compared to last year, our results have already been published, and it is challenged. So notwithstanding that, I mean, the business is under stress. We are okay as far as emerging channels are concerned. We are okay as far as even GT is concerned, in line with the market. I think we have a bit of stress. I think last year, base was high, as Mithun has already explained. And also, we have some stress in the CPC channel. Now, fundamentally, in terms of what we are going to do going forward, I think we are working on business integration of Sunflame with V-Guard, right?
So this is a journey, and I think it will take some more time before the integration is complete. We are also, as we had indicated last quarter, right, working on a project. And more or less, we are at a stage of closure on defining the way forward in terms of the strategy and pathway that we will take to grow the business again. I think that the business integration has taken a bit more time because we had a few challenges. We've had to refresh the product portfolio. Typically, the cycle for product refresh is about. I think we had explained last time also, the cycle for refresh is about 18 months. And we also had the team on board seven or eight months after the integration had happened. So I think those are some of our setup delays which are impacting us.
We remain hopeful that we will be able to get the business back on growth path on the back of improved product offerings and integration of some of our capabilities into Sunflame, particularly in the area of customer service, logistics, and quality. In these three areas, we expect that by September or October, we should be able to fully integrate and extend the similar delivery as what one witnesses in V-Guard. This is a journey. It's taking time and it's taking longer than what we had anticipated.
For FY 2026, on a low base of 25, should we expect growth in this business and margin improvement, or should that remain?
Two questions?
Yeah. We're talking about Sunflame, right?
Yeah. Should we expect growth and margin improvement, or should it remain a pain point for us?
On the GT and E-Commerce side, we are confident that we will see growth. However, on the CSD front, we really can't predict how long whether that slowdown is going to continue or not. But as Ram was saying, most of the business integration efforts are towards strengthening the product backend as well as selling capability and primarily in the GT and e-com channels. So yeah, short answer, growth will depend on how CSD sort of turns up. But on the GT, we are more confident.
GT and e-com would be 50% plus of the overall revenue?
Yeah, about 60%. Yeah.
Okay. And last question on the Gegadyne: how the success of Gegadyne would help our base business if we can run us through what exactly we are thinking, and if this goes well, how it will help in our base business?
Mithun, I'll take this. I think the investment in Gegadyne has been anticipating a shift in battery technology, which we expect to happen, right? I think over a period of time, alternate energy battery costs are coming down, and they are at the TCO level already. I think alternate chemistry batteries are having a better TCO compared to lead-acid batteries. I think as the unit price of the alternate chemistry batteries starts to come down, there will be a shift in the market towards the alternate energy batteries, right? That's the play that in which we are invested in as far as Gegadyne is concerned.
I think, as I already explained earlier, I think it will take a couple of years for the benefit of Gegadyne to materialize because these batteries have to be commercially produced for which a capacity has to be set up. I think the technology targets are met, and we have given them a go-ahead to figure out how to, what I would say, commercialize the battery output, right? So I think that work on that is underway.
Surprisingly, if this goes well three, four years down the line, would this kind of change help the industry to consolidate further? The guys who are ready with the technology and integration should benefit more. How would you be positioned from three, four years' point of view? If you succeed in this, would you have better advantage versus what you are today?
Yeah. So two, three things. So one is that Gegadyne has its own journey, okay? And our business is a small part of Gegadyne's journey and future, right? Because we are basically we have invested in this fundamentally to support our inverter battery business. And also, wherever there is possible to have energy storage integrated with our existing products and categories, yeah? So that's our scope. And so our scope is a narrow part of the overall Gegadyne journey, which has far more significant potential multiple times, yeah? But as far as V-Guard is concerned, our objective is fundamentally centered around the growth for our battery business. And it will help us to obviously grow because it's a differentiated product, right? It doesn't have lithium. It gives a far longer life than even lithium-based batteries. And it is far more stable and safe as a technology.
So I think that it has benefits to help us to be able to price and probably earn a better margin, right, compared to other alternate chemistry. So I think that's how it will benefit V-Guard, yeah? And probably we will have the comfort of having a more stable and reliable battery, which we can launch in the market, yeah?
So do you plan on increasing the stake in this company? And if there's a problem with the commercial plant, how much minimum CapEx would require?
I think that depends on the size of the CapEx, and that also depends on the plans of the promoters of V-Guard Industries. I think the shareholders of V-Guard will take that call in terms of what is the size and what the investment will be, right?
Do they have any exclusive rights with this company?
Yeah, we have exclusive rights for our categories, which is for the inverter battery space and for any potential application for our categories.
Thank you, sir. All the best.
Thank you.
Thank you. The next question comes from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead.
Thank you. Congratulations to the team for great results. I just want to understand from the electronics segment perspective. Stabilizer as a category or electronics segment has grown for the last two, three years in high double digits. In the backdrop of such high base and the recent news of relatively weaker summers, how do you see performance of electronics as well as the ECD, that is, fans and coolers performance in FY 2026? Some thoughts would be useful.
Yeah. So I think this year, April, we had intermittent showers in the South and East part of the country. And summer here has been less warm when we compare with last year. So definitely, sales of cooling products will get impacted, like air conditioning stabilizers, air coolers, fans, pumps, and to some degree, inverters as well. But we are not yet completed, so we still have 45 days to go. I think till June 30th, we have summer in many parts of the country. So we'll wait and see. But yes, so it depends on what will happen in the next 45 days. But some parts of North, etc., are warm. But yes, we have a bigger skew towards South. So there could be some challenge in terms of these categories for South India.
Okay. And in your earlier remarks, when you talked about margin, I mean, in the longer journey of a stable margin or improving margin, do you see this year's margin getting impacted because of either mixed change or negative operating leverage if season is bad?
No, I don't think it will happen.
Basically, you have levers often in South or some other levers or, say, on manufacturing, which would offset the margin contraction.
So I think we are not only dependent on last year. We had a tailwind in first quarter, definitely. But the following quarters, we did not have any support from the summer categories. Definitely, first quarter of last year, we had a very good tailwind from that perspective. So to some degree, we could expect a muted first quarter. But I think for the full year, we don't expect a huge impact because we are also having other categories. And like you said, we also have summer. Still, there is a chance of summer still being warm in the northern part and the other western part of the country, which should support some demand. So I don't think it will have a huge impact. We are quite confident as far as margins are concerned. I don't think we'll have a huge impact.
Understood. So just last question. Some thoughts on how the demand has been for the house wire segment or other categories related to real estate and your Non-South initiatives, any specific regions, focus regions in previous year or since FY 2026? I mean, more detailed or specifics of the Non-South initiatives and Wires demand?
So wires have grown by about 10-odd% in the fourth quarter. There were some challenges for the growth because of reduction in copper prices. There were some fluctuation in copper prices. But in April, we have seen that there has been an increase in copper prices. So I think this quarter, we should do better than previous quarter. The second question is on certain regions. I think today, V-Guard is fairly well diversified with almost every part of the Non-South market almost contributing equally. Of course, the western markets, the east has a slightly higher weightage when you compare in the Non-South. But otherwise, it's pretty much well spread. We have, barring the small states, almost all the large states, we are getting good contribution.
Okay, so thanks a lot and all the best.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question comes from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah, thanks for the opportunity. So now, considering the steep impact on the business of Sunflame, and if I look at the goodwill as well as the intangibles, let's say between the standalone and consolidated balance sheet, so I guess there is INR 700 crores of intangibles. I guess it is primarily linked to Sunflame. So has the management thought about almost 700 crores intangibles, any write-off or revaluation of at least these intangibles?
No, we are required to review carrying value of intangibles on an annual basis. So we have done that. And there is a sort of need for impairment. That is something we will review again next year. So at that time, we'll see.
Okay. Okay. Sure, sir. Understood, and in a way, what are the other ways we are looking at Sunflame? Because the V-Guard part of the business is doing phenomenally well. If we exclude Sunflame part of the business, V-Guard has done wonderfully well, so what are the triggers that we are looking at to, in a way, improve the Sunflame business? Or what can be the, in a way, potential? Because I guess the way Sunflame was doing the business earlier, it was high on trade margins and even dead days, etc., where margins are higher to the trade, so now, since we have changed that proposition, I guess the value proposition for the trade may not be working out the way it was working out earlier, so what can be the potential here or rebranding under it, V-Guard or V-Guard Sunflame or something like that?
So what can be the potential change that we can do or increasing the share of voice materially in that, something like that?
Okay. So there's a couple of things. One is the GT part of Sunflame growing. Sunflame has two main channels, I mean, three, but where the CSD, which is Canteen Stores Department and Defense Canteens, contribute about 35%-40% of Sunflame's revenues. What happened is about one and a half years back, they have added many brands. And even V-Guard was added. For example, V-Guard, which was doing INR 10 crore of business between CPC and CSD, today does close to INR 140 crore of revenue. The same Sunflame team only sells the V-Guard products into CSD. So we have a single team managing it. So in that sense, it has not been a complete issue. So one of the reasons that Sunflame CSD business has come under pressure is CSD, which used to have four or five brands, today is having 12-15 brands in each category.
So they've added a lot of brands, and that has created a lot of problems for them in the sense of a lot of overstocking has happened. Now they are in a course correction mode, and they are only ordering whatever is selling and stuff like that. That is one of the reasons why Sunflame business has got into trouble. The GT has not had any issue. We have not changed much. We are continuing with whatever the earlier promoters were doing. Most of the distributors are continuing for Sunflame. So the GT business has not been much impacted. And CSD margins for Sunflame were higher because the overhead cost for Sunflame for doing CSD was lower. So when there was a drop in the CSD business, it has impacted margins. Ram, you want to add on to this?
Yeah. I think we haven't changed much. Fundamentally, what has happened is it's a small entity. I think they lost about two and a half years in COVID. And then as they came out of COVID, we did the transaction. So three, three and a half years, not much activity on product refresh has happened, right? And after that, our team came on board about eight months later, and they took some time to settle down. And then they have initiated the interventions on refreshing the product portfolio. In the last three, four months, and in the upcoming three, four months, I think most of these SKUs are coming to market. So this is the first issue. Second issue is I think that the service infrastructure has also been a challenge. And we are working on the integration of service with V-Guard.
I mean, V-Guard service or V-Guard quality management systems and V-Guard logistics systems, these are far, far more efficient, and I think those are the areas which will witness changes in the next three to six months, which are beneficial changes. I think the product refresh is an ongoing exercise, and it will happen. Also, what had happened is in E-Commerce, I think that V-Guard goes to E-Commerce directly as a company. Sunflame used to go through intermediaries, and so we are transitioning this. And it has taken us some time to set up the required infrastructure and systems and also to build recommendations before what I would say growth can be triggered. So I think fundamentally now, these areas, organized retail, modern trade, okay, sorry, organized retail, which is E-Commerce plus modern trade, is already integrated now with V-Guard.
As we make the differentiated offerings, then our approach is to have a differentiated SKU. So even in E-Commerce, we are not pushing the button aggressively because the pricing dynamics on E-Commerce is very different from general trade. So a lot of the challenges are fundamentally related to resetting our product portfolio and offerings, right? In the meanwhile, the market had significantly refreshed the portfolio. So the issue is not one of business system or brand. The issue is one of the competitiveness of offerings because of limited product refresh before we took over the business.
Okay. No, sir. So thanks for that elaborate answer. In a way, this CSD, CPC issue is kind of structural. I guess it is with many consumer brands, including Sunflame. So now with so much new brands coming in, plus they are going for inventory correction also.
So do we see the growth rates coming back in a way, means the business recovering back to, let's say, FY 2023, 2024 levels immediately, or it will be a course correction over the next two, three years?
I think our business across the other channels will grow. I think CSD, CPC, we don't have a view at this stage. But I would think that whatever damage has to happen has happened. It should probably be better going forward because I'm sure that they have taken aggressive action. I think it's but natural. The market is limited. So when more brands get in, rediscovery will happen, and some things will move, and some things will not move, and they will correct it. So we do hope that this is what we have to do. And we will do better than where we are today. But this is something that we cannot control. So we don't want to give a point of view on that subject, right, because we don't know how it will evolve.
Okay. So.
But as Mithun said, look, one side we have been hurt. Another side, we have been beneficiary also, right, because we have been able to significantly grow our business because more SKUs we could launch. So on an aggregate, the company has done well. But if one side has benefited, the other side is a bit stressed.
No, no, sir. This is very helpful. Just last question. If we divide the market as per the channels, as per the channels, General Trade, Modern Trade, E-commerce, MFI, and this CSD, CPC, so what will be the share of all the channels for the market or for V-Guard per se? Yeah. That's it from my side. Thank you.
Ram, you want to take this?
Yeah, yeah, yeah. I think it is similar for the. I mean, it's hard to answer this because the portfolio of every company is different. Product portfolio of every company is different. And the share of different channels is also different. But for example, right, if you were to look at the portfolio or the bundle that V-Guard is in terms of categories, right, I think it would be fair to say that, let's say, if we exclude wires, maybe about 40%-50% of the business, 40%-45% of the business may come from non-GT, yeah, which is modern trade, RSS, E-Commerce, and CSD, CPC, right, and MFI and all these things. So GT is now about 55%-60%, right? So I think in electrical categories like wires, switches, and switchgear, I mean, these channels are not that significant in any way.
So it's more or less GT-oriented and V-Guard. Even pumps, right? So I would say wires, switches, switchgear, and pump, it is more or less 98% GT.
Okay. Sure, sir. Many thanks.
Thank you. We take the next question from the line of Natasha Jain from PhillipCapital India Private Limited. Please go ahead.
Yeah. Thank you, sir. I have two questions. One, in terms of other expenses, there is a very sharp increase this quarter. So can you highlight what is that about?
Yeah. One second, so Sudarshan, you want to take this?
Yeah. So other expenses, one of them is about 16% compared to a turnover growth of about 14%. But some portion of it is related to factory expenses. Some manufacturing expenses also get captured under that line. And as new factories come in and they scale up, so that cost goes up. The routine overheads are pretty much normal. So much of it is contributed by factory-related costs and some increase in A&P and volume-related stuff.
Understood. So my next question is on the stabilizer business. So when I was on the ground, I saw certain of your peers, especially Voltas, has also come out with AC stabilizers. And even Everest, pricing of Everest is way cheaper than V-Guard. While V-Guard still remains the leader, I just want to understand from your perspective how you're seeing this competition coming up, especially Voltas, because what I saw later on in the season was Voltas even started giving its stabilizer along with its AC. So any comment on that, sir?
Ram?
Yes. Yeah. Yeah, yeah, yeah. See, these competitors have been around. I mean, they are not new competitors. They have been around for many, many years. And Everest pricing vis-à-vis V-Guard has always remained the way it is presently. It has not got adverse. Yeah. I think that there have been some challenges in the air conditioning industry. And it may be that some of these kind of measures may have been taken up practically, maybe by Voltas or something like that. But generally, yes, we are only around the 55% of the market, 55%-60%. There's the remaining 40%. This keeps changing. Brands come and brands go, and brands become active and brands become slow. I mean, they taper off. But that's what I would like to say. Mithun, you want to add anything more?
No, I think, yeah, I think a lot of air conditioner companies have stabilizers like an accessory. And when I guess maybe the season is slow this year, they must be instead of discounting the product, they may give free accessories. And this is not a new thing. It has been going on for some time. I mean, at least till last 10-15 years, starting with Godrej and all that, we have seen companies launching. Like Ram said, they will launch, and they will sometimes discontinue, sometimes continue. But anyway, we don't hope to own 100% of the market. Like Ram said, we will be at 40-45% of the organized market, and that's comfortable for us.
Understood, sir. Thank you so much.
Thank you. We take the next question from the line of Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Yeah. Good afternoon, sir. Thank you for the opportunity. Congratulations for good numbers. My first question is pertaining to wires. You did mention about 10% growth. Is that the volume growth you talked about, 10% YoY in 4Q?
Okay. We need to come back on that, whether it was a—no, we talked about a 10%.
It's a value growth.
It's a value growth, sales growth.
In 4Q?
Yes, in Q4, yes.
Oh, does that mean the volume was pretty much flattish given the average copper prices were about 10%-12% up YY?
I think price growth was about 8%, and volume growth was 2%, something like that.
Volume growth was about 2%-3%.
Okay. You're saying that one Q it is improving, have I understood right, the volume growth?
Yeah. First quarter, sequentially, we are seeing an improvement because there was an uptick in copper prices in April.
Understood. The second question I had was with respect to pumps business, right?
We're increasing copper business towards the end of March.
We were talking full year numbers until now. Q4, Q4 volume growth is 5%, price growth of 12%.
That was a full year number. Q4 growth is 17%. 5% volume growth and 12% value growth, 12% price growth.
17% revenue growth in cables and wires, have I understood right, for 4Q?
Yes.
Okay. Okay. Understood. The second question I had was with respect to the pumps business. Do we have any exposure in terms of solar pumps? The way we have gotten to solar rooftop, is there any case for solar pumps as well?
So, something that we looked at it, but the go-to-market is through the agricultural department of various states. So we typically don't like dealing with these kind of customers. So we have not got into it, no. We don't do solar pumps.
See, actually, the problem is the channel is very different as far as most of this is agricultural pump. The channel is very, very different from our remaining part of the business, right? And we don't have a pathway. And this space is also highly volatile. The agricultural business, it is very much dependent upon rains. And also, the size and type of pump varies also across, right? So.
Ram, I think, sorry, Ram, you were talking about solar pumps.
No, no. I'm just saying that. See, basically, it's for agricultural application. And yeah, a lot of it either travels through similar channels or it is through government business, right? And yeah, the skills required there, we don't have teams which are focusing on this kind of business, right? So.
It's primarily government tenders, so we are not present in that.
Fair point. Fair point. And just last question with respect to Capex, how do we see current year and over the next couple of years, do we see any substantial step-up and outsourcing mix?
We continue around INR 100 crores per annum. I think we don't expect any major increase from this. In fact, a lot of our plants are up and running, and there are a couple more factories that have to come. And there is, of course, going to be more active investment in molds. I mean, investments in molds have gone up in the last five, six years, and that will continue. And that's going to be a major part of the CapEx.
Got it. Thank you. I wish you all the best, sir. I will call back in the Q. Thank you.
Thank you. The next question comes from the line of Aditya Bhartia from Investec. Please go ahead.
Hi, Mithun. Hi, Ram. My first question is on employee expenses and OpEx expenses.
Aditya, there's an echo coming. Sorry.
Is this better?
Still there.
Okay. Now it's better.
No.
Aditya, do you have two phones connected?
So I was asking about employee expenses and OpEx, which have almost doubled in the last three years. Just wanted to understand, is there an element of factory overheads not being absorbed properly given that we are still in the ramp-up phase? Or is it just a function of us doing more business in-house and therefore gross margins correspondingly increasing, but associated costs not getting recorded in staff expenses and other expenses?
Okay, so I don't think the employee expenses have doubled last.
Not doubled in three years, but again, the published numbers, when we look at it, are showing about a 26%-28% growth. And some of it, rather, the increase is basically because there were some write-backs last year.
Okay. So if you look at Q4, I think there were some write-backs the previous year of ESOP and variable pay.
ESOP and variable pay, some write-backs were there. This year, the full provision is there. But on an average.
So I was looking from a three-year perspective that on a three-year basis, let's say in FY 2022, we used to have roughly INR 270-odd crore of employee expenses, which now are INR 520 crore. Other expenses used to be INR 470-INR 480 crore, which are now almost INR 1,000 crore. So from that perspective, I was saying that is it also because of the change in mix of procurement, wherein we are doing a lot more in-house?
Yes. So if you take employee expenses, the underlying growth rate for the last three years is about 15%-16%, which is really the routine increments and some headcount increases and so on. Yeah. The rest of it is explained by when new factories come out, there are people getting added there.
The other expenditures?
Even people cost.
Even people cost. Similarly, on other expenses, there are manufacturing expenses going in where the new factories start coming in, and then we see that the growth rate is higher. Once all the factories are set up and they've had one full year of operation, then this will start getting into normalized level of growth.
You can say at least maybe if you look at other expenditures and as a percentage of sales, close to 1-1.5% is because of factories.
Okay.
Employee cost is largely okay. Maybe last, I mean, there has been an addition of Sunflame employees into our employees.
Sunflame is an addition that's come in the last three years plus new factories.
Okay. And do you think some of these costs are today not being properly absorbed and there's scope of increasing capacity utilization at facilities and therefore operating leverage benefits should be playing out, or all that has already happened and we are at a reasonable utilization level at our facility?
Factories, so for example, the first factory that was set up in, I mean, the fan factory and the Uttarakhand factory for electronics, they are largely stabilized and delivering the results. Even battery factories when extended started, but the Vapi plant for kitchen is not operating at the full capacity, so there are some factories. Typically, in the first year of operation, you will find that there is under absorption, but it takes about that much time for the factory to stand up and reach its potential.
Sure. So my second question is on the outlook that you gave in the presentation, wherein you've mentioned that there was strong prefilling in the channel in anticipation of a good summer. And at the same time, you also mentioned that you're excited about the new product launches. Just two clarifications on that. Given that summer so far has been weak, does it mean that channel has much more inventory than what is required, excess inventory, and to that extent, primary sales in the next few quarters could be very weak? And the second question is the new product launches that you're speaking about, are these usual product refreshes that you'll be doing, usual product launches that you would be doing, or is there something more to it, maybe a new product category or a complete change in product supply?
So as far as the new product, I think one of the key launches we have had last month was for fans. We have launched a mid-market range of BLDC fans, which comes in various configurations. And I think this segment, as regards, it was slightly less than penetration in BLDC, was slightly less than what we would have liked to be, and this should address that. This launch should do well. I think the initial response has been great. I was there when it was, I mean, when we had the great launch with all the key retailers of the country. So I think whether there is summer or not summer, I think this product would sell. So that's point number one. We are also having a key launch for water heaters going to happen in the next couple of weeks.
That is also addressing the premium end of the water heater market, and that also we are quite excited about. So these new launches should do well because in some sense, they are addressing a new pricing segment where either we were not present or our models were not very desirable. So in that sense, they should do well, whether the summer is good or bad. The second thing is in case of South India, yes, there has been strong pre-season filling, and sell-out has been quite weak. But I think the other parts of the country, there has been reasonably decent summer. So we'll wait and see. We are not yet over in terms of North, at least till June 30th, we typically get sales. So some of this issue is only related to the southern part.
Last year in South India, we had a very, very warm summer.
Understood, sir. That's helpful. Thanks, Mithun. Thanks, Ram.
Thank you. Ladies and gentlemen, we take the last question from the line of Naushad Chaudhary from Aditya Birla Mutual Fund. Please go ahead.
Sorry, I just wanted a clarification on.
I do apologize, Naushad. Your audio is not clear.
Yeah. Hi. Hope it is better now.
Yes. Please.
Just one clarification on FY 2026 outlook as the summer cycle is not doing well. Do we still maintain our 14%-15% top-line growth and consistent EBITDA margin expansion for FY 2026?
So, I think, like we said, we are really looking at one part of the country where summer has been impacted. And there also, we have time till May 30th, but South India typically, I mean, March, April is the peak of summer. But the other parts of the country, the heat is still warm. So we'll wait and see. And like I said, last year, if you look at it, only Q1 was very, very strong. After that, in fact, Q2 and Q3, the performance was not that robust. So we are not sitting on a very high base. So we could have a situation where Q1 growth could be slightly impacted, but for the full year, we should still try and hit that 14%-15% growth. And margins, we are quite confident of maintaining the margins. We are not so far that worried.
Okay. Thank you, sir. All the best.
Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now hand the conference over to the management for their closing comments.
Yeah. Thank you all for taking time out to join our earnings call. I would like to thank Natasha and the team at PhillipCapital for hosting this call. We look forward to interacting with all of you in the next quarter. Thank you.
Thank you. On behalf of PhillipCapital (India) Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.