Ladies and gentlemen, good day and welcome to V-Guard Q2 and H1 FY2026 earnings conference call, hosted by Axis Capital Limited. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Agarwal from Axis Capital Limited. Thank you, and over to you, sir.
Thanks. Good afternoon, everyone. On behalf of Axis Capital Limited, I welcome you all to V-Guard Industries Limited Q2 FY2026 earnings conference call. Today, we have with us senior management, represented by Mr. Mithun K. Chittilappilly, Managing Director, Mr. Ramachandran V., Director and Chief Operating Officer, and Mr. Sudarshan Kasturi, Senior Vice President and Chief Financial Officer. Without taking much of time, I will hand over the floor to the management for their opening remarks. Post this, we will open the floor for Q&A. Thanks. Over to you, sir. Thank you.
Yeah. Thank you. Good afternoon, everyone, and welcome to this earnings call. On behalf of the team at V-Guard, we would like to convey best wishes for the festive season and wish all of you a prosperous year ahead. I would like to thank Deepak Agarwal and the team at Axis Capital for hosting today's call. We will be discussing the operating and financial performance for the second quarter and half-year of FY2026. I trust that all of you have had the opportunity to review the investor presentation shared earlier. We witnessed a modest inline growth across segments during the second quarter of FY2026 due to headwinds such as higher-than-average rainfall, weak demand, and the GST transition. Consolidated net revenue from operations for the quarter was INR 1,340 crore, an increase of 3.6% over the revenue recorded in the corresponding period of the previous year.
The electronic segment comprising of stabilizers, inverter systems, UPS systems, and solar systems delivered a growth of 5.3% YoY in the second quarter. The prolonged and intense monsoon impacted the demand for stabilizers and inverters. The electrical segment, which remains our largest revenue contributor and includes wires, pumps, switchgears, and modular switches, registered a revenue growth of 4.7%. The consumer durable segment, covering fans, water heaters, kitchen appliances, and air coolers, reported a revenue growth of 1% YoY. Here again, the unseasonal rain impacted demand for fans and air coolers. Sunflame reported top-line growth of 3.4% on a YoY basis in Q2. General trade and modern trade channels delivered growth, while CSD business continued its decline. We believe the progress of the integration and eventual merger of Sunflame will help to accelerate growth and unlock efficiencies. Gross margin continues to be healthy, sustaining the progress made in the recent years.
In Q2, we reported a gross margin of 37.6% compared to 36.2% in Q2 last year, an increase of 140 basis points. On a sequential quarter basis, the gross margin has improved by around 90 basis points, from 36.7% in Q1 FY2026. EBITDA, excluding other income, for Q2 stood at INR 109 crore, declining marginally by about 1% YoY basis. Given the low top-line growth, the EBITDA margin reduced by 40 basis points to 8.1% compared to 8.5% in Q2 of FY2025. Consolidated PAT for the quarter was INR 65 crore compared to INR 63 crore in the same period of last year, an increase of 3%. Reforms introduced as part of GST 2.0 are a welcome step in simplifying the tax structure and boosting consumption. We expect the improvement in demand to start reflecting in the coming quarters. With that, I conclude my opening comments.
I would like to thank Deepak Agarwal and the team at Axis Capital for hosting this call and would like to request the moderator to open the floor for Q&A. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ravi Swaminathan from Avendus Spark. Please go ahead.
Hi, sir. Thanks for taking my question. My first question is with respect to the electronics segment. If you can give more color on the kind of growth that the stabilizer and the inverter segments would have seen. So my question is, would the stabilizer category have seen a decline this quarter because of AC season? AC sales also not doing that great. And any color on how the inverter segment would have grown, including the solar inverter category? And also, in this quarter, the margins in the electronics segment had dipped. Was it purely because of the mix being slightly inferior and lack of operating leverage?
Yeah. As a policy, we don't give out product-wise numbers, but I can definitely say that the stabilizer product as a whole has declined in revenues, largely led by the decline in air conditioning stabilizers. As last year, we had a very good Q1, extremely good Q1, and followed by a good Q2. The inverter and solar business have grown well. The inverter business has grown decently well. Solar business is a new business, so it has grown at a higher rate. So what you see is a blended number. Yes, gross margin difference is mainly due to the product mix. And yes, to some degree, the factories are operating at higher capacity, especially our Pantnagar plant was operating at a higher capacity last year compared to this year. So all this would have played a part.
Understood. And with respect to the backward integration efforts in terms of extending our battery manufacturing facility for the inverters, what is the status of that, and how much margin improvement should we expect for the inverter category because of this? Need not quantify, but you can directionally give an answer also.
Yeah. So I think we have already started the phase one of the battery manufacturing. So I think today our capacity is roughly about 40%-50% of our total sales. The plan is to actually increase capacity and then probably take this to at least 70%-80% over the next two years.
Understood.
I mean, there is already some improvement happened. We had expected, when we had done the investment, we had researched improvement in margins, and they are delivering as per our expectation. With the expansion, we could see some more improvement because of further operating leverage.
Understood. And my second question is with respect to the electrical segment. So essentially, other players in the wires category have seen double-digit growth. And for us, stabilizers is a relatively smaller business, so from a low base, it should be growing. But instead of that, we would have delivered - we have delivered only mid-single-digit growth there. So did the pump category see a decline during this quarter?
Yeah. Ram, you want to take this?
Yeah. So I think basically, as far as the electrical segment is concerned, right, see, I think some of our competitors have definitely grown well. But I think a good part of it has actually come from the cable business, right? So we are basically in the house wiring cable business, right? So domestic house wiring, right? So I think that's one dimension to that. Yeah. Otherwise, yes, I think also this quarter, I think the monsoon has been very, very strong, right? I think we've had the highest monsoon in the last 15 years or so. And this affects construction activity also. It will affect the sellout from the trade also, right? So which is why the electrical category has seen a bit of what I would say lower single-digit kind of a growth here. The pump business has been flat.
Understood. Understood.
The monsoon is good. So water table is good, right? So pump replacements have not happened. So pump is flat for the quarter here. It's not declined.
Understood. Yeah.
Thank you. The next question is from the line of Natasha Jain from PhillipCapital. Please go ahead.
Thank you for the opportunity. Good afternoon, sir. My first question is a follow-up on the last one. So if pumps have been flat and switchgear is pretty much a very small contributor in the electricals overall, so margin improvement has been extremely sharp given top-line has been quite moderate. So any run-off in terms of margin?
No. I think, see, what has happened is we had a quarter where there was a sharp increase in copper prices. So although the wire business growth has been muted, there has been a good improvement in the gross margin for wires because by the time we purchase copper, we process it, and we sell it, the price is going up. So you get that benefit of inventory. We are basically selling inventory produced at lower cost at higher prices. So that effect plays out a little bit.
Okay. Understood. But then if by that logic, if I see fourth quarter of last year, fourth quarter of last year was a super strong quarter, again, mainly because of copper rising. And in that quarter, you grew by 15%, but the margin was still at 11.5%. So would it still be complete?
I think a lot of things are there. There is the timing of the price increases, the quantum of price increases, and all that. I think this quarter, there is. I'm not sure about the velocity, but I think this quarter definitely there was.
See, some normal range of fluctuations will always be there. The electricals, the midpoint margin, we can take it about 10.5%, 1% here and there. Quarter to quarter, we have to expect some variations. Within that, there can be many reasons.
See, it can also happen that, see, the wire business is a commodity business, and prices go up and prices go down. I think maybe last year, factors which would have impacted the wire would have been different, and what would have impacted this year would have been different.
Yeah. So I think primary margin difference is what you are seeing is coming from the wire itself because the other categories are all pretty much in the stable state.
Understood. So that's helpful. And my second question is on Sunflame. Now, if I compared your numbers with peers, definitely we might have underperformed slightly compared to peers. Now, even at that moderate top line, again, margin expansion is sharp even if I take a sequential look at the margins. So assuming even you are indexed to cookware, where there was a GST rate cut, but that's again hardly 10 to 11 days in the quarter. So what, again, has led to such strong improvement in margins in Sunflame?
No, no. Our Sunflame margins are significantly depressed, and they have to only get better over a period of time. I think last year's numbers are not reflective of the long-term margin of Sunflame business, right? So I think Sunflame performance is not extraordinary.
See, last year's numbers were extremely low because of a lot of transition issues and.
Transition cost also.
Cost and everything. So it's slowly coming back to the norm.
So what should we assume a normalized range here going forward for Sunflame?
In this long-term?
Yeah. So I think in two years, we are expecting to hit about 12%. It's our 12% EBITDA, what we should expect in two to three years' time.
Yeah.
It will go up in phases.
Understood. And so just one last question on consumer durables. How has the winter portfolio started picking up?
So just like the factors that are affecting summer products are bad for them, definitely the heating categories like water heaters should do well. We also have a significantly new launch this year that's doing well. So we'll come back and update after Q3. I think the expectation is to have a good sale for water heaters this year.
Any pricing pressure you're seeing on water heaters?
No, water heaters is a very competitive category. It has been competitive for the last six, seven years. There are close to 20, 30 brands, and every year, two, three brands enter. Pretty much anyone in sanitary today is having water heaters. Anyone who's selling tile also will sell water heaters. So there are all kinds of people in the industry today. But we have some differentiated product offerings we have this year, so we should be okay. But yes, it remains ultra-competitive.
Thank you so much, sir. I'm all the way there.
Thank you. The next question is from the line of Shivkumar Prajapati from Ambit Investment Advisors. Please go ahead.
Yeah. Hi, sir. Thanks for having my question. So my first question is, would you be able to give the breakup within this consumer durable segment? I mean, which forms around 30% of our top line. I mean, the breakup between heaters, fans, kitchen appliances, and coolers.
No. As I said before, as a policy, we don't give out category-wise numbers. But I can tell you the bulk of the consumer durable is driven by fans and water heaters. That's the majority.
Understood. And sir, how was the demand for fans during this quarter, or do you see any uptake so far 30 days of this October month?
Yeah. Ram, you want to take this?
Yeah. I think the fan business is still coming out of the challenges of, let's say, strong monsoon and its impact on fan demand. Yeah. So yeah, we continue to remain in a challenging, I think, for us. I think ceiling fans would have been flat to maybe low single-digit growth, and TPW would have been still having double-digit de-growth. Yeah.
Understood, sir. And sir, my next question is on solar pumps. I mean, I believe this pump is really a very small part of our business so far. So just wanted to understand what's your take on this boost that we are seeing in this solar pumps demand these days, and how bullish are we to develop this segment going forward?
V-Guard is not present in the solar pump business. We are in the solar rooftop inverter and panel business. There are two different segments. We are present in the solar water heating business. By next year, we are hoping to enter the solar pump business. We have so far stayed away because it's a government and tendering-based business. It is a large business, and we are exploring opportunities to enter.
Okay. Great, sir. Thank you.
Thank you. The next question is from the line of K eyur Pandya from ICICI Prudential Life Insurance Limited. Please go ahead.
Thank you. Sir, two questions. First, on the electronic side. So in quarter two, which was relatively weaker, we have seen 17% plus kind of margin. And the initiatives that you have taken, whether backward integration or some other efforts, should we assume the annual margins steady-state should be upward of 17%, or what should be the margin range for electronic segment? That is first question.
No. I think electronic segment.
17%-18% is the normative margin for the segment. When you go into H2, there will be other factors. The mix will change and all that. But you can assume 17%-18% range.
It should hover between 17% to 18%.
Okay. Generally, Q4 and Q1 margins are relatively higher. Despite that, we are guiding 17%-18%. Are you keeping some margin of safety, or we should assume 17%-18%?
No. I think, see.
Or there were some one-offs, or I mean, or there were some one-offs in these higher margins.
So if you look at a very long-term number, like five years back, our in-house manufacturing for electronics was close to like 20% odd, and now it has gone to something like 50-60%, or even 60%. So definitely, that backward integration has played a role. The new normative margin is what we are saying could be between 17%-18%. Yeah. The thing is, the mix changes every quarter as well.
Understood. Sir, second question. Lower growth in stabilizers because of the AC. You earlier talked about two important categories for stabilizers are AC and TV. So are you seeing any TV-led demand in stabilizers post-cutting GST rates or even otherwise with normalization in, say, AC inventory or stabilizer inventory? How should we see some normalization or growth, say, over next two quarters or next two, three quarters?
So except AC stabilizers, the stabilizer business has done well. Both refrigerator and television business has done well. The GST cut, that is still very early days because it is effective from 22nd of September. I think this quarter will determine that. But having said that, the weightage of air conditioner stabilizers is very high. It is still a very, very big part of the stabilizer business. So even if the other segment grows, it may not be enough to offset the decline.
Understood. This last question on the CapEx side. So CapEx number for this year or this year and next year and the areas where we are spending CapEx on?
CapEx will be between INR 120-130 crores in the current year and next year. Areas will be there is CapEx going in for a new research and innovation center. There is CapEx going for two factories. Yeah, fan factories this year and maybe battery factory next year. And then balance will be for a lot of it is also going for molds and dies.
Understood, sir. Thanks a lot and all the best. Thank you.
Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. So, as Q2 has been a slightly muted quarter, any change in guidance on the top line growth and margin? What you have given earlier?
So I think when we started the year, we said that we hope to grow by 15% odd, but that definitely looks unlikely. We wouldn't like to give any guidance at this time. We'll wait and see. I think once we finish Q3, we'll have a better sense of how we'll end the year. Definitely, this year has been very, very challenging. And we also have to remember that last year, H1, we had a very high base. We grew by almost 18-odd% in the first half. So we hope to do better in H2. But it's too early to say, too early to call this. So once we complete Q3, we'll say. But definitely, achieving 15% growth this year won't be possible.
Understood. Got it. And sir, in Sunflame, can you give us some sense how each channel have done this time? And lastly, how you see the Sunflame growth going forward and on the margin side?
Ram, you want to take this?
Yeah, yeah. So I think traction on Sunflame is good as far as general trade and modern trade is concerned. Yeah, which is organized retail. So these are good, and I think we are integrating the GTM for general trade as we speak. And I think so it should favorably support Sunflame's. Yeah. I think the challenge on CSD remains as far as we are concerned, and I think it's going to take us some more time before the e-commerce is going to fire for us. Yeah. So that's where we are. So e-commerce and CSD are the two areas that we still have work to do. Yeah. I think e-commerce should, in three to six months' time, pick up. Yeah. Our operating model is slightly different from Sunflame.
So we directly sell on the platforms, and listing the SKUs and getting them through the process is a time-consuming process. And I think things will get better once our foundation that is stabilized as far as e-commerce is concerned. CSD, I think we'll have to wait and watch and see how that entire environment develops. Yeah.
Got it. My last follow-up on this. So what kind of synergy benefit do you expect from Sunflame? What will be the key benefits?
We will not give any quantitative way. We'll talk a little qualitatively. Yeah.
Yeah. So I think mainly synergy will come in areas like customer service, quality, logistics. Yeah. Also, in the front end, right, in terms of go-to-market, where I think we will have significant ability to get Sunflame to reach more counters in south and east. So where we are strong. So I think these are the benefits that we are talking about. And I think maybe in a two to three-year time frame, I think the benefits will also be visible in areas like e-commerce and organized retail, where we have strong strengths. Yeah.
What I'm trying to understand, it's already a wholly owned subsidiary. Anyway, this benefit can be availed earlier also. Are there any major benefits in e-commerce rationalization or marketing funds?
No. We kept the entities separate, and we were running the two businesses separately. And the integration is happening as we speak this year. Yeah. So service integration is complete. We are already seeing some financial benefits there, customer service. Yeah. And integration in other areas is underway as we speak, right? So.
Got it. So will there be any saving in manpower cost and other expenses? Anything on cards?
There will obviously be.
So for example, Sunflame is operating warehouses and all that, which will be eventually merged into V-Guard. So we will save a lot on the backend logistics. We will save a lot on sourcing because instead of an INR 300 crore company, now it will have the might of an INR 6,000 crore company doing the purchases. So those kind of benefits will come. We just don't want to talk about any quantitative numbers as of yet. But definitely, I think that's baked into what Mithun has already said, right, where he said that the Sunflame margin in two to three years will get to 12%, right? Yeah.
Understood. Understood. Got it. Thank you. Perfect.
Thank you. Before we take the next question, a reminder to all, anyone who wishes to ask a question may press star and one on their touch-tone telephone. The next question is from the line of Aniruddha Joshi from ICICI Securities. Please go ahead.
Yeah. Thanks for the opportunity. Sir, two questions. Now, considering the GST cut on stabilizer as well as some of the cooking products like cookware, etc., what will be the overall GST cut? And I guess some of the benefit may get nullified by price hikes in fans when the PE norms change in January. So what will be net-net benefit to us considering both the things? That is question number one. And then secondly, in terms of just need of means, how do we see that whether distribution expansion will also be a key driver for growth? Because I guess we are having fairly high market shares in the key regions in southern India. So what will be the strategy? Because whatever we understand in Maharashtra, for that matter, the market shares are materially lower.
So how do you see the products or the brands are very well-known, but somehow the reach is very limited? So is that missing right now in terms of driving the growth also further? Yeah. Yeah. That's it from my side.
So regarding GST, see, for our categories, we have primarily had GST cut in two areas. One is for battery. Let us say battery has come down from 28%-18%. We have pretty much passed on everything to the consumer as required by the government. The second is on the solar business, which has come down from 12%-5%. And again, everything here also pretty much has been passed on. I don't think because of GST, you will see any benefit. Point number one. Regarding market expansion, Ram, wanted to?
Yeah. So yes, you're right. I think we are underpenetrated in terms of reach in Non-South, including Maharashtra. That's a correct observation. Just for we went out of South into Non-South somewhere around 2009. Yeah. And we are about maybe 15 years outside of South. Yeah. And we have progressively expanded our distribution, and we still look to add about 5,000 partners every year. I think that goal remains. And we look forward. I think right now, the contribution of Non-South to our revenue is roughly in the region of around 50-odd%. And we look to expand this to 60% in another four years' time, which would be roughly about, let's say, about 17, 18 years from the time that we got out of South. Yeah. I think that's a fairly decent achievement. The contribution of Non-South for our portfolio of business is about 63-64%, right?
So we can't hit the 60% contribution unless we are able to achieve a similar reach in Non-South that we have in South. Yeah. So I think we are definitely can do better than what we are doing. But I think that we have made decent progress, and we continue to expand our reach in Non-South market.
Okay. Sir, and just on the fan price hike, how much price hike we may need to take once we move to the new norms in January?
So I think the price hike will basically happen in the one and two-star categories. The current five-star will become four-star. And for new five-star, we'll have to new products will have to be launched. I think the increase is going to happen in the economic segment. And what I am told is it's between 5%-8%. To make it compliant. So the current one-star, we'll have to redesign to add a cost of about 5%-8% to make it one-star in the new regime after January first.
So that's a fairly steep price hike. Do you see?
It is going to be, yeah. It is a steep price hike, and it is going to hit the value segment, so as far as we are concerned, we are not a huge player in the economic segment.
Okay. Sure, sir. So that's very helpful. Many thanks.
Thank you. The next question is from the line of Rahul Aggarwal from IKIGAI Asset . Please go ahead.
Yeah. Hi. Very good evening. Thank you for the opportunity. Mithun, just two questions. Just wanted to get your thoughts on all these new business categories which V-Guard is entering into. Five years out, what kind of potential revenue business do we look for? Solar rooftop pumps? You talked about inverter batteries, of course, is growing faster. Lighting is going to be a new addition. So that's one question. And would those revenue sizes be higher than company-level margins? How do you think about that? And secondly, traditionally, V-Guard has always been a B2C company. Your thoughts on B2B opportunities. Looks like B2C will pick up with improving in macro and income levels and what our government has done. But B2B continues to deliver a lot of growth across other categories. Your thoughts on where can we contribute on? Can we take some share on the B2B side?
So just these two things. Thank you.
Yeah. So I'll answer the first part on the solar. So the solar business is a reasonably new initiative. We started focusing the solar inverter and rooftop panel business. We started about four years back. It's scaling up really fast. Parallelly, the inverter and battery business, which is an older business for V-Guard, we have been able to work on cost improvements by backward integration and making our products more competitive. And that's also delivering growth. I think put together, these both can deliver company average margins. Solar is a new business, and it's also highly competitive. So the business in solar, the margins in solar are slightly lower than the inverter battery compared to the inverter battery segment. But I think that will change. And in solar also, we are right now only selling to the B2C part of solar.
We are not participating in any government tenders and stuff like that. Yeah. So what has happened is last three, four years, government has significantly increased its spending and CapEx. And a lot of it is flowing in through areas like solar, solar pumps, large solar rooftop, and also wires and cables, especially LT, HT and EHV cables, which you are able to see the results for many of our competitors. So Ram, you want to continue?
So a couple of things, right? So I think if you look at the long-term growth in our industry, right, I think we have performed fairly well with comparable peers. I think the challenge has been that those that have participated in the cable industry and the opportunity on the cable side, which has been driven by significant increase in the federal CapEx. So that opportunity has benefited some of these players. And yes, that is B2B. And you're right. I think solar rooftops, solar pumps, and also represent significant B2B-driven opportunities. Our current GTM, right, and our current capabilities are all driven and focused around B2C. Yeah. So that's why we have continued to stay there. We recognize that there are significant opportunities in the B2B space. And this is something that we are internally in a dialogue with.
Yeah, I mean, if we believe that we see, if the product capability is what we share to be able to leverage this, but the GTM capabilities are not present for now. The second point, the question that you talked about is lighting. Yeah. Yes. The lighting space, I think we will obviously be focused on driving a lighting mix, which is healthy and profitable. As you already know, most of our barring one or two categories, most of the categories, we are challengers, right? And we are acutely conscious, and we try to manage our business in a healthy and profitable manner, right? So selling the right product mix is at the heart of how we will run the lighting business, right? So.
Right. So let's say for these all new categories put together, cumulatively five years out, what kind of business can we have? Lighting, solar pumps put together, these are all new categories, right? V-Guard has never done this. Solar rooftop, we already have some revenue. Inverter batteries, we obviously have some kind of run rates. In terms of addressable market, top line, incremental top line, which V-Guard can generate five years out, how much would that be?
See, I think we don't like to give out these kind of numbers. And one problem with this business like solar pump is it's going to be lumpy. It is going to be project to project, tender to tender, state to state. And today, we believe that government is paying up, and there are no bad debts and all that. But we are watching this space closely. So we have always said that we would like to grow 14%-15% annually. And that's what we will look at. And all this will be part of that.
Got it. Right. Thank you so much. And all the best for the rest of the year.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touchstone telephone. The next question is from the line of Nikhat Koor from Dolat Capital. Please go ahead.
Hello. Thank you for taking my question. So sir, we have reached 37.6% gross margin, which is quite healthy. So do we expect further improvement in gross margin from here on?
I think more or less we have completed a lot of our CapEx, which was driving for backward integration and improvement of margin, thereby making us more competitive. I think largely it is done. We are always looking at cost-out projects and cost improvement and all that. But I think from here on, the delta will be very less.
Okay. And for the EBITDA margin, can we assume around 9.5%-10% for FY 2027?
FY20 27? Yes.
Yes.
Yes. We should hope to get a decent top-line growth.
See, actually, if we had a decent top-line growth, we would have been done even better than that, right? So it's basically the summer products have not performed. So there has been a top-line shortfall, right? So the gross margin structure is fine.
Understood. Thank you, sir, and all the best.
Thank you. The next question is from the line of Archit Shah from B&K Securities. Please go ahead.
Thank you for the opportunity, sir. Am I audible?
Yes. Yes, please.
Sir, first question is regarding fans. So we saw good margin improvement at 6.5%, and also we saw growth. And also, one of the competitors who earlier gave results also saw margin improvement and growth. So is there any fundamental change or improvement in demand environment, or let's say on the premium side of the portfolio where you are seeing, or maybe not any? Is it because the festive season was earlier this year, so we are seeing such improvement?
See, the gross margin in the business is only marginally improved, right? See, the increase in overall margin is fundamentally last year, as we said earlier, right? Last year, a lot of transition-related expenses and other activities were involved, and they will get progressively less as we go forward, right?
Okay, so I think now, sequentially, so we should see margin at least at this level or at least keep improving year-over-year, right?
We should, as I think Mithun has already said, right, we will be looking at about 12% in the next two to three years, right? So.
My second question is Gegadyne so any update or progress about how that partnership is going and any I think so that was feeling that it?
Gegadyne is progressing well, and they continue to work on commercializing the technology. Yeah. Gegadyne is working well. Yeah.
I think we would like to.
Yeah. Just one more point. Maybe by Q4 of this year or Q1 of next year, we are looking to launch the V-Guard batteries with V-Guard inverters. Yeah. Yeah. So that will start.
Okay. So.
This process, and I think V-Guard -Ind also has one more customer where they will be starting to sell batteries maybe a couple of months later.
What kind of benefits will that getting Gegadyne battery with V-Guard inverter like? Will it increase realization, or maybe it will be more lucrative and?
I think, look, I think I can tell you about consumer benefit. I think as far as business benefit is concerned, I think it will take some time. We will have to commercialize this. We will have to have the ability to make it on scale and drive it on scale. So I think it may be wiser to answer that in phases and not right now. But I think as far as the consumer benefit is concerned, yes, it will give far superior performance compared to lead acid and probably better performance compared to even lithium. Yeah.
At least basic means those batteries will have better pricing than our traditional batteries, right?
Yeah. They will have a longer life, right? So that the replacement cycles will be longer compared to.
Longer life, less temperature.
Yeah, and safer batteries.
Yeah. Less increase in temperature and much more safer batteries.
Okay. Thank you. That was my question. Thank you, sir.
Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
I said, can you give me some sense how has been what is the summer product mix in each of your segment in this quarter? Because that has been a drag for you. And lastly, on consumer durable margin, which has always been more like a sub 5%. Are there any hopes to improve this margin materially in the next two to three years?
Regarding summer categories, our bulk of our underperformance has come from air conditioner stabilizers, air coolers, and TPW fans. These three categories have not sold much, and we are having a little bit of extra inventory, which within the next two to three quarters should get flushed out. As far as CD is concerned, the largest category within consumer durable is fans. Once we start, we are going to start working on the improvement of margins in fans, and I think EBITDA has improved, but I think further improvements are required. In the next two to three years, we should start to see it go to like the 5%-6% level from the current 1% level.
Got it. Last question from my side. How is the fan channel inventory at Q2 end?
Ceiling fan is fine. Like I said, ceiling fan sales are not that impacted. But TPW, there is huge inventory. There is inventory with trade, and there is inventory with us also. So I think we are, as we speak, slowly clearing out this inventory. But as you can see, our rains have been very heavy in the last six months, seven months. So we are hoping by, I think, Q4, mid of Q4, we should come back to normalized inventory as far as TPW is concerned. Ceiling fan inventory is not very high for us.
Got it. How much is TPW fan mix in overall fan contribution?
So for us, it's about 25%. 25%-30%, depending on the quarter.
Got it. Got it. Thank you. That's it.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touch-tone telephone. The next question is from the line of Tanay Shah from DAM Capital. Please go ahead.
Yeah. Hi. Good evening, sir. Thanks for taking my question. Sir, I just wanted to understand how has the wires and cables performance been for us this quarter, given that we've seen only a 5% growth in the segment. So I just wanted to understand in terms of value, how it's grown, given that copper prices have seen an uptrend this quarter. And if you could just give some split between volume and value for wires and cables, please.
Yeah. So I think the growth that you're seeing has fundamentally come from value growth, and volume growth, I think, has been below last year. That's the first observation. Second observation to tell you, I think this quarter also had a couple of rounds of price increase, and I think we also had some challenges in being able to feed the market towards the end of the quarter. So I think, but then that would not have made a material difference for the quarter, but would definitely have supported the underperformance vis-à-vis last year. Yeah. The main challenge with wire is, see, we only sell house wiring cables, right? Whereas the other companies whose growth you may be able to refer to publicly, yeah, they sell a wide range of cable and wires for a wide range of applications. Yeah.
House wiring cable, also, ours is fundamentally a B2C business, and we don't sell project wires also. Yeah. Or rather, we are insignificant in that space. What that basically means is that in a situation like what we went through, where we had monsoon, which was at a 15-year high, naturally, it affects construction activity and the sellout of cable from retail outlets, right? So that's one of the factors which has put stress on our wire business. Yeah.
Got it. So it's.
Yeah. We are almost entirely selling domestic wires, right, which are sold through retail for domestic consumption. Yeah. Even projects, we don't sell.
Got it. So a couple of factors. One is obviously lower construction activity, and second is just some bit of internal issues on our side in terms of clearing our inventory to our dealer network, because of which we saw a challenge in terms of volume growth, right?
Yeah. We had some stock-out situations because the quantum and the pace of price increases was pretty sharp. Yeah.
Got that, sir. Got that. And secondly, have you seen any sort of, sorry if I've missed this in the start, but have you seen any sort of improvement in stocking for water heaters, etc.?
So typically, Q3 is the biggest quarter. There are various reports which are suggesting that this year we are supposed to have a winter that is colder than last year. If that happens, definitely there will be a lot of sellout. So we are hopeful. But like I said, with these things, you can never predict. It's better to talk about it after it happens rather than trying to predict it. But we are hopeful. Definitely, if there is like a cold wave and stuff like that, definitely it should help water heating part of the business. And we are hopeful of that. I mean, I read some reports suggesting that may happen, but let's see what happens in Q3.
And so just lastly, how has the festive season been for us? How did it go by? And how do we sort of expect demand across our portfolio to sort of scale up now in the second half, right? I just wanted to understand and get some flavor on that from your end.
Ram you want to take, this is . Testing.
No, festive season has been tepid for us. I mean, that's visible in our numbers also. I think what part of it is because of the weather impact and what part of it is related to the festive is a mood question. Because primarily, you will see the reflection of festive for us primarily in kitchen appliances, right? Most of the other categories are connected also. Kerala has done a bit better compared to the other states. If that is any indication, because Kerala's September quarter had the benefit of Onam in August. Yeah. But otherwise, we have not seen any in our categories. It can also be because the trade inventory in many of the summer categories is already high, and they may be running down some of these inventories. So it's a bit difficult to judge at this stage based on this. Yeah.
Okay. Thank you. Thank you so much for answering my question.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touch-tone telephone. The next question is from the line of Prasheel Gandhi from Anand Rathi. Please go ahead.
Hello. Thank you, sir, for the opportunity. I just had one question. Continuing from the previous participant, how should we look at complete kitchen portfolio going ahead, given that kitchen appliances has generally seen a muted demand over the last three, four years? So how should we think of kitchen business?
I think, see, you need to probably see this in the background of two events, right, so if you really look at it in the last five years, the early part of the five-year period was COVID, okay, and in that period, a lot of investment inside the home has happened as people were not stepping out, right, and I think, as all of us know, the kitchen industry was one of the biggest beneficiaries. I think the later part of it, we also need to keep in context the fact that kitchen, right, among all the categories, right, electrical or consumer fast-moving electrical goods, right, kitchen has categories which have the deepest penetration, right?
So a gas stove or a mixer grinder, right, or even cookware has much higher because, see, when you're talking about large consumer durables, we are still talking about penetration to the top 10% or 15% of the households, right? Some of the larger appliances are not even 2%, 3%, or 5%. Cars, again, penetration is very low. But kitchen is an item which has the highest penetration. And you should read this together with what is happening to FMCG companies, right? So this is how we would look at it. Yeah. And I think that you will see a common theme. Categories which are having deep penetration, right, have similarly performed. I've seen challenging performance, right? So that may be an underlying challenge in consumption. Yeah. But hopefully, I think a lot of favorable steps have been taken by the government, right?
I do hope things will get better, right?
Sure, sir. Thank you for the detailed answer. Thank you very much.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touch-tone telephone. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you all for taking time to join our earnings call. I would like to thank Deepak Agarwal and the team at Axis Capital for hosting this call. We look forward to interacting with all of you in the next quarter. Thank you.
Thank you, sir. On behalf of V-Guard, that concludes this conference. Thank you for joining us, and you may now disconnect your.