Ladies and gentlemen, good day and welcome to the Havells India Q4 FY25 Earnings Call hosted by DAM Capital Advisors 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 touchstone phone. Please note that this Conference is being recorded. I now hand the Conference over to Ms. Bhoomika Nair. Thank you, and over to you, ma'am.
Yeah. Warm good evening to everyone. On behalf of Dam Capital, I would like to welcome you to the Q4 FY25 earnings call of Havells India Limited. We have the management today being represented by Mr. Anil Rai Gupta, Chairman and Managing Director; Mr. Rajesh Kumar Gupta, Whole Time Director and Group CFO; Mr. Amit Kumar Gupta, Whole Time Director; and Mr. Rajiv Goel, Executive Director. Without any further delay, I'll hand over the floor to Mr. Anil Rai Gupta for his initial remarks, post which we'll open up the floor for Q&A. Thank you, and over to you, sir.
Thank you, Bhoomika. Can you hear me?
Yes.
Yes.
Yes, sir. Please go ahead.
Okay. Good evening, everybody. Thank you for attending the call today. Hope you would have reviewed the results by now. It has been an overall decent performance in quarter four with healthy revenue and profit growth. Large appliances and cables led the revenue growth. However, the inflation pressures persist on the overall consumer sentiments. Generally, margins were maintained by and by, but the continued volatility in commodity prices driven by global uncertainties remained an overhang. The ramp-up of new capacities of cable plant is still underway, though it has already started contributing to the growth. Lloyd has delivered a robust performance with strong revenue growth and margin improvement. The focus now remains on consistent revenue growth along with improving profitability. We can now move to Q&A.
Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 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 comes from the line of Natasha Jain from Phillip Capital. Please go ahead.
Yeah. Thank you for the opportunity. My first question is on cables. If I see that, there is a decline in your contribution margin, both wire and by wire, so given the, and, usually the wire-heavy company, why this decline in contribution margin?
Yeah. Can you repeat the question? There was some echo in between.
Yeah. My question is on the cable side. Now, there is a decline in your contribution margin, both on a YoY and the QoQ. Given that, fourth quarter, the copper prices rose, and usually the price is passed on within a gap of 15 to 20 days, and we are a wire-heavy quarter, why this decline in contribution margin?
You know, as the new capacities for cables are coming up at Tumkur, the cable growth, as well as the volatility in the wire prices, led to a muted growth in the overall domestic power business. The product mix change leads to some variation in the contribution margins, but I do not think that should be taken as a normal level. It always depends upon the product mix in both wire and cable.
Does that answer your question, Natasha? Since there's no response, we'll move on to.
Hello?
Yes, Natasha, please go ahead.
Sorry. Yeah, that answers my question. Can I move to the next question?
Yes, please.
Yes.
Yeah. Your presentation states that there was a moderate ECD growth on account of a mild start to summer season. However, your ACs have done phenomenally well, if I see the top line. Does this mean that there is a combination of low structural demand for fans plus very high competition, or does this mean that there could be a case of high inventory stocking for Lloyd in the channel, not necessarily translating to consumer demand?
Yeah. I think there is no doubt that there has been a delayed summer this time, which is reflective in the growth in the southern markets where summers come early. Even in the northern parts of the country, the summer has been delayed, and hence, you know, last year was a very terrific year for air conditioner growth, and hence there was a positive momentum in building up stocks in the channel in the air conditioner industry. As I said, because the summer was delayed, the other cooling products like fans especially, which are more structural in nature rather than, you know, something like a highly stocking kind of a product, there we saw a muted growth in the fourth quarter.
I would say that, last year, for example, you know, Lloyd was coming up, and hence the growth in the fourth quarter was a bit muted. There is a base effect also in the fourth quarter for Lloyd.
Got it, sir. Just one last question related to that. If it could, because there is a delayed summer, could this mean that there could be price cuts going forward, or there could be distressed selling by the channel for RACs?
It's still to be seen. I mean, there has been some issues in the southern markets because there has been a real delayed summer. I think there is anticipation of, you know, increased summer or a decent summer, at least in the Northern parts of the market. The summer has recently, in the last few days, started setting in. I think there is no panic right now in the market, but definitely it is different than last year.
Got it. Thank you so much, sir. I'll get back in with you.
Thank you. Participants are requested to restrict their questions to two in the interest of time. The next question comes from the line of Rahul Agarwal from Ambit Assets. Please go ahead.
Hi, sir. Good evening, and thank you for the opportunity. First question was on Lloyd. Happy to see a INR 100 crore EBITDA number there for the full year. The press release talked about cost savings and scale benefits, that, you know, those two reasons essentially for the turnaround. Right. Just wanted to know that, you know, in initial commentary, you mentioned that going forward, we'll look at further consistent revenue growth and improving profitability. So that means that these cost savings essentially are suitable, and incrementally, we'll only see increases on margins from here on. Is that understanding correct?
I mean, there has always been, you know, balance between revenue growth, margins, improvement. You know, I've said this before in the various conferences that Lloyd, we are on a long-term journey for a year, and, you know, I don't think we are as set in Lloyd as in case of Havells. I would say that we'll continue to invest in the growth of Lloyd because we see a very large opportunity, and hence you see new plant coming up for refrigerators also. Even within air conditioners, which is still 75-80% of the overall portfolio, there we are more stabilized in terms of market shares. You know, there is ample opportunity to grow there as well. You know, it's not only just price versus revenue.
It's also related to the brand upliftment in terms of the minds of the consumer as well as trade. That is a continuous journey. We have been continually investing in the brand. That investment will continue, but also it could actually lead to, some sort of, premium selling in the category, which, you know, Lloyd spends a lot of money on R&D and developing products which are, technically or, you know, aesthetically better than the competition, which takes time for the consumers to buy in and, you know, hence pay a premium. Our investments will continue, and ensuring that we try and achieve market share growth as well.
Got it, sir. Secondly, on Goldi Solar, just wanted to understand over a longer term, three to five years, how should we look at return on investment, you know, on the INR 600 crore? What is the plan in terms of solar rooftop? Do you see this segment as like a INR 1,000 crore business overall on a 100 basis? Any thoughts, would really help. Thanks.
Yeah. I think overall, in the last two or three years, we have built this business to about a INR 400 crore-INR 450 crore business, primarily based on inverters, solar modules, DC switchgears, and all. I think the way we look at it is that this is an emerging market, you know, with the renewables, is an emerging market, and Havells has a role to play in. Hence we saw an opportunity to grow this business, multifold in the coming years. Now, one of the things to do was whether we should get into manufacturing, which Havells has already been, you know, always been, known for. This is also an industry which is based on scale and continuous technology changes are coming in. Hence a lot and also a lot of global play is also, you know, reflected in this.
Basically, we wanted to cut out the noise and, you know, get associated with, selling what is important for us, you know, being the, space of residential and consumer and, commercial and industrial segment, rather than focus too much on the technology as well as the manufacturing. Hence, you know, the investment, goes there. Our focus would be to expand the business from a consumer side, using this manufacturing base.
This is part of the ECD segment, right? The solar inverters are part of ECD, right? Are they?
No. Right now.
It's part of others.
Right now it's a part of others.
Okay. Going forward, the incremental sales which will, you know, come from this category will be more from others or will be more from DC switchgears or solar cables? How should we look at that?
No. Cables and switchgear will, you know, actually not really be a part of the solar business. That is a sort of an advantage we are getting out of that. Otherwise, solar itself is an INR 400 crore business right now, which has a potential to grow many-fold with the changes which are happening and this investment.
Oh, okay. I get it. Thank you so much. I'll come back in with you. All the best.
Thank you. The next question comes from the line of Aniruddh Joshi from ICICI Securities. Please go ahead.
Yeah, thanks for the opportunity. Question on cable and wire. We have seen two large groups entering, I mean, have announced the plan to enter cable and wire business. I guess eventually the way it is happening in pinch, like, the brand will eventually prevail and not just the pricing extra. Will we see more investment in branding before the two large groups enter the cables and wires, or will we be looking at the situation and then accordingly we will increase the expense, or in a way brand building efforts, on cables and wires? What will be the strategy over here? That is question number one. Question number two, we have seen material benefits coming in the budget.
Is there any incremental change in the strategy to, in a way grab a large share of that additional money which is lying with the investor, with the consumers now? Last question, was there any price hike during the quarter? Yeah. That's it from my side. Thanks.
See, as far as cables and wires are concerned, yes, there are announcements by a couple of majors. I think cables and wires, both as a business, have more potential to have more organized competition than regional or local competition. I think, going forward, this industry can go through a further consolidation towards branded products, branded play, high-quality products. I think we see this as a positive movement. Obviously, on the front end, it takes time to establish a brand and distribution channel. Our investments will continue to be focused towards that, you know, continue to enhance our reach, focus on brand building, technological advancements in products. That is a journey which we are already on. I believe, you know, organized competition will be better for the industry. Sorry, the next question was?
Next question in terms of price hikes and the additional money which has been, means the tax incentives that are.
Yeah. I think.
Given in the budget.
I think over the last few quarters, we have seen that, you know, the consumer demand was a bit subdued, maybe because of the cash available in the consumer's hands. I think the measures which have been taken during the budget and the RBI, that should augur well for consumption in the coming year. Still to be seen, but at least, you know, I think the base is set for this year. Price hikes, you know, we saw a lot of volatility again in the raw material prices in this quarter, especially in copper in the last quarter. I think based on that, we are adjusting our prices up or down. You know, we also have cables and wires where prices sometimes get adjusted down as well. That is a continuous process.
you know, our focus is more on the margins rather than, you know, improving margins through price hikes.
Oh, sure, sir. That's helpful. Thank you.
Thank you.
Thank you. The next question comes from the line of Bhoomika Nair from DAM Capital Advisors Limited. Please go ahead.
Yeah. Thank you, sir. My first question is on the cables and wires segment. You've seen a very strong quarter. If you can just talk about the volume versus the value mix because we've also expanded capacity and benefits of that has also come through. You know, how has that panned out? If you can give some color between cables and wires because I think you also mentioned about industrial segment not being very strong. If you can just comment on that first.
Cables and wires, you know, with a 20% growth, almost half of that is value growth in this quarter. You know, usually our business hovers around 65% wires, and that's continuing. Though there is more value growth in case of wires, as against volume growth, which actually means that there is more volume growth for underground cables as compared to wires.
Okay. Okay. My second question is on the switchgear side. We've seen fairly decent growth, you know, for the quarter, and we've seen margins reviving back to its historical levels in terms of both contribution and the EBITDA levels. Now, would this be something which we should look at a sustainable level, per se as we're going ahead? And, how is the B2B segment kind of performing within this?
Yeah. I think last quarter, I also mentioned that there are certain quarters where there could be aberrations upward or downward. Neither 18-18.5% nor 36% contribution margin was normal, or neither last quarter around 28% segmental margin was normal. We estimate and we have always maintained 38-40% contribution margins in the switchgear business. That is something which we strive for. And, you know, as far as the industrial demand goes, this was muted in the entire year since the elections. It has been muted. We have gained more in the residential segment.
Or the higher cost related to consolidation of the two factories, etc., is now done with, and it will be more normalized from here on?
That's right.
Okay. Okay. Great. I'll come back in with you, sir. Thank you so much.
Thank you. The next question comes from the line of Renu Baid from IIFL Capital. Please go ahead.
Yeah. Good evening and thank you for the opportunity, sir. Sir, the first question is just trying to understand a bit more on the demand side. While much has been spoken about the muted consumer sentiment, in your view, how long do you expect this spell to last? It's been almost over a year now. So based on your experience and your interaction with the general partners, what would be your reading in terms of, when should the market bottom up, bottom out on the B2C side of the business?
I think it's difficult to say because we are experiencing growth, but, you know, unlike in the FMCG where we are not getting growth. But we are experiencing growth, it's just that the growth has slowed down. You know, I would say that with the recent changes in the budget and, you know, hopefully the consumer demand should start picking up. What we are more focused on is, you know, how because of the inflationary pressures, whether the real estate demand will continue at the same pace or not. That's something to be seen. Specifically, if I talk about very, you know, just for the quarter, we see that there is a slow growth in the summer products, especially at the start of April. As I said, it was a delayed summer.
Hopefully it should pan out well in the next, I would say, 75 days of the quarter. You know, it's still to pan out. We have to see that.
Sure. Second would be, in terms of Lloyd, while portfolio has done well strategically, all things have been aligned in terms of market, GTM advertisements, product investments. How do you look at the business profitability now that brand positioning is in place and growth is panning out? Can we now expect the portfolio to deliver mid single digit EBITDA on a sustainable basis, mid to high single digit? Or do you think there could be more headwinds on the way? Also, while there has not been much spoken about the likely shortage of compressors, government wanting to relax the norms there. Do you perceive any potential risk to volume growth in case if summer demand picks up on a stronger note?
No, I think the fear of the shortage of supplies is no more there, especially with the delayed summer when, you know, muted demand in the last one month or so. I think that's not a big part. I think, again, Renu, I don't want to repeat again and again because, you know, Lloyd is something like a growth engine for Havells. Our entire focus would now be on maintaining a decent growth and profitability, coming back to normalized profitability margin levels in Havells. We will, so when you talk about headwinds in Lloyd, I think the major headwind, headwinds are not there. Our cost structures are right in place.
Except the fact that we'll continue to make investments, you know, whether it is CapEx investments or brand investments or distribution investments, we will continue to make, you know, having the right promoters at the right channels. Those investments will continue till they reach a certain scale. That is when the more operating leverage starts coming in, kicking into Lloyd. I do maintain that we are, you know, at product enhancement, CapEx, we'll continue to maintain that investment in Lloyd, which means.
and Lloyd?
You know, we have gone through the pain of low profitability or losses, because of, you know, all this transition. I hope, you know, as long as there are no major headwinds, that is not a concern. You know, I do not think I would be in a position to give some numbers to profitability because we will be continuing investment in Lloyd.
Got it. Lastly, sir, on the recent investment that you've committed for the solar panel manufacturer, when INR 600 crore was the size of the amount, if you can just spend a couple of minutes, trying to give some perspective on what was the kind of background that we have done for this particular manufacturer, the background of the management promoters who are driving the solar panel business. How essential you think, or critical you think was this investment? Without this investment, had our growth plan for rooftop solar would be at risk? What is the stickiness of this kind of CapEx requirement in a third-party vendor?
Yeah. I think second part of the question I'll answer first. Our growth plans would have been under serious challenge had we not made investment either through our own manufacturing or through investment with an existing manufacturer. I've already explained the reasons why we chose to make an investment with an existing supplier of more than 15 years of production of solar panels, which is growing at a fast pace. That made a lot of sense than investing in our own technology because, you know, going forward, there are a lot of government, you know, impetus and push towards Indian-owned manufacturing, both for panels and cells. Hence it was imperative for Havells to start manufacturing.
This is a route that we have taken, and I think, you know, the company has done careful diligence in all aspects of, while making this investment.
If I can ask how large is this business for us currently?
I'm sorry to interrupt, Renu. I would request you to rejoin the queue for any further questions. Thank you.
Sure. Thank you.
A reminder to all participants, in the interest of time, please restrict yourself to two questions. If you have any more questions, kindly rejoin the queue. The next question comes from the line of Achal Lohade from Nuvama Institutional Equities. Please go ahead. Please go ahead, Mr. Achal.
Good evening. Yeah. Good evening, sir. Thank you for the opportunity. Congratulations for the great set of earnings. Two questions. First, on the operating leverage. You know, we have seen that we've made significant investment in terms of the human resource. We have seen that past four quarters, the run rate for the employee cost has been very much stable. My question is, overall, if we were to look at, say, a 10-11% kind of a growth in Havells, ex- Lloyd, do you see, you know, operating leverage kicking in, or you think we will have probably stable margin ex- Lloyd?
I think, we will see some operating leverage coming back in Havells, and that's why there is more confidence on Havells to come back to its normalized margin levels of 13% to 14%, 14.5%. That's what the expectation is. Yes, we will be seeing operating leverage in Havells as well.
Right. Second, you know, with respect to particularly cables, you know, I wanted to check, you know, given the capacity addition by us and the peers, so there are two parts to this question. One is in terms of demand, the inquiries, etc., how, things are, are things improving or stagnant or slowing down in terms of inquiries, order booking, etc.? And B, on the pricing front, do you see any stress, in the cable, pricing?
No, I think cable demand continues to remain strong. It's just that, you know, there is far more fluctuation in the last three or four months in terms of raw material prices, which is affecting, you know, the pricing as well as the margins. Otherwise, demand continues to remain strong.
Understood. Those were my two questions. I'll fall back in the queue. Thank you.
Thank you. The next question comes from the line of Siddhartha Bera from Nomura. Please go ahead.
Yeah. Thanks for the opportunity, sir. Sir, my first question is, on your export strategy. We have been doing a lot of tie-ups in the other markets. Can you just throw some more color about how the export strategy will play out next year? Any percentage, if you can share, what it was for this year and how to look at the next few years?
Yeah. I think the international business, you are aware that, we are focusing, apart from our usual markets, which are, sort of Middle East and South and Africa. A couple of years back, we pivoted more toward developed markets like the U.S., Europe, and Australia. I think they are now, sort of, beginning to bear fruits. They have, I think we see good traction. U.S. now, obviously, is in throes of some bit of a chaos. We do not know how it is panning out. We believe that India should be a beneficiary, see of all this sort of, bilateral trade agreements which they're having not only with the U.S. but other countries as well. Currently we are up to 13.5% of our overall business, in terms of the international.
We believe there is the opportunity in international and the growth which we can achieve in the next two to three years could be pretty sizable. I think that's where the focus is. I think we are ticking the right box with our first consignment to U.S., which India made. AC is also reaching there. I think this should encourage us and give us the aspiration to do bigger in global market, particularly the developed market with something we sort of started just a couple of years back.
Got it, sir. Thanks a lot.
The next question comes from the line of Aditya Bhartia from Investec. Please go ahead.
Hi, good evening, sir. Two questions from my side. One is that when you think about Lloyd, what's the kind of margin level that you think about from the perspective of next two, three years? What is the longer-term trajectory that you see margins following?
I have already explained this, that Lloyd continues to remain as an investment strategy for Havells for high growth. Again, I do not want to say any numbers for the next two to three years.
Sure, sir. My second question is on the switchgear segment. If we look at the three kind of broad pillars of the segment, domestic switchgears, industrial switchgears, and switches, could you kind of guide us as to how the demand trends are in each of these? Is there an area wherein we are seeing market share gain or significant loss?
I think we are, you know, very strong player in the residential switchgear business, which continues to remain about 75% of our overall switchgear business, where over the last couple of years, we have seen market share gains for us. That is the higher-growing sector, where our market shares are, generally small, which is industrial switchgear. There we have seen some reduction, also reduction in the sense that there is some slower growth in this year, especially after the elections.
Sure, sir. And what about switches?
I when I say residential switchgear, I'm including switches in this.
Understood, sir. Thank you so much.
Thank you.
Thank you. The next question comes from the line of Praveen Sahay from PL Capital. Please go ahead.
Yeah. Thank you for the opportunity. Sir, my question related to the Lloyd and the RAC industry as a whole. As you had mentioned, there is a delay in the summer in the pre-season, which impacted the volume for pre-season. Is it also because of a strong buying in the Q4, which is impacting the summer season? Because we are also hearing around 20-30% of a degrowth in the pre-season month in South India. How to look at the way forward for the RAC industry as a whole?
No, I think, when I say that there is a slower growth in the month of March and April, this is more from the secondary sales, the tertiary sales to the consumer that I'm talking about. Yes, there has been, you know, higher primary sales in the fourth quarter, which obviously, if the secondary sales are slow, then the first quarter primary sales will get impacted, which is getting impacted. As I said, it's too early to say, it's, you know, still half of the month, and let's see how the summer pans out in the North.
Okay. Okay. And also related to this, Lloyd, only you had, in the press release, mentioned that the cost-saving initiative and the operating leverage has led to the margin improvement. So, these things with the volume to continue in the way forward, what I believe. Is it right to understand?
Yes.
Okay. Okay. Fine. Last, sir, on the EPD portfolio.
Sorry to interrupt. Those were your two questions.
Okay.
I would request you to fall back in the queue. Thank you.
Okay.
The next question comes from the line of Deepak Gupta from JM Financial Asset Management. Please go ahead.
Good evening, sir. My first question is on Goldi Solar. Sorry to harp on it, but, you know, historically, Havells have always been focused on B2C businesses. Now, with this investment in Gold Solar, are we changing our stance and looking at, investing into B2B businesses in a meaningful manner?
No, I think the business that we are doing in the other segment, which is solar, is more focused on the consumer, which is residential and commercial industrial. We are not in the utility business, and that's why, you know, we have not gone into making huge investments into utility scale of manufacturing for solar panels. The strategy continues to remain more consumer-based.
Sure. My second and the last question is that, should we look at this investment as a financial investment, or would you be looking to increasing your stake in this company in the foreseeable future?
I think, first of all, it's not a financial investment that we're looking at. It's a very strategic investment, and the way we are looking at it is to have a meaningful presence in the solar renewable business and also have supply surety. As I said, it is more versus, more as a decision for make versus buy. And to have a surety on supplies, this is why the investment has been made.
Sure. Thank you.
Thank you.
The next question comes from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hello. Hi. Thank you for the opportunity. I want to know about the lighting business. What sort of delivered volume growth in this business in Q4 and for the entire year?
Hello. Right now, I don't have the numbers. Amit, would you have?
Yeah. It's high single digit.
This is for both Q4 and as well as entire year?
Yeah. It is for Q4.
Understood. Got it. Sir, as you highlighted, the solar business is, you know, INR 400-450 crore. What sort of operating margin are we making in this business, and what sort of plan do we have, let's say, three-four years down the line?
Again, you know, the focus is, first of all, to be a meaningful player in this industry. It is a lower-margin business because we have been completely dependent upon outsourcing. But over a period of time with the strategic partnerships, we will be able to improve margins as well. Now, the main focus is to increase the business at a much faster pace.
Understood. Got it. That's it. Thank you.
Thank you. The next question comes from the line of Chaitanya Devpohar from Patronus PMS. Please go ahead.
Hi, good evening. Thank you for the opportunity. My question is related to the new products that we have launched under the Lloyd, which are refrigerator and the premium air conditioner also. Now, I understand you guys are not giving any, refraining from giving any margin from the Lloyd perspective. What is your ad, ads revenue as related to the revenue, ad spend percentage of revenue? Because with the new products coming in, do we expect the advertisement revenue to increase, and or do you believe that the brand presence that the Lloyd has is enough to keep that product also in the market?
Yeah. I think we believe it is enough because we are anyway investing over a longer period of time, and it is more on the brand rather than just, you know, talking about the product. Within this whole advertising budget as a percentage to revenue, it can vary between product to product over a period of time, depending upon what is needed at that particular time. Otherwise, we believe that this should remain where it is.
Okay. Thank you. My second question will be, on the whole industry perspective. I think, yes, we are hearing that currently, the air conditioner industry is facing somewhat a compressor shortage. Can you just give me the gravity of the current situation of this particular thing? Is it really that concerning? If yes, then how, we as Havells are placed in the industry?
I think for Havells, I would say it is not that much of a concern at the moment.
Okay. Thank you.
Thank you.
Thank you. The next question comes from the line of Nitin Shakdher from Green Capital Single Family Office. Please go ahead.
Hi, good evening. This is Nitin Shakdher from the Green Capital Single Family Office. I just want to understand from the management, is there an opportunity to increase the revenue on the export market of cables and wires in specific when you're facing domestic competition from other players? When you move to a strategy where you increase your export revenue, maybe to countries like the U.S. or China or emerging markets, how does that pan out considering some margins might be, at, I would say, a little bit of a stretch in that sense on incumbent players coming?
You know, I think the cables export and wires export is pretty much already part of the strategy in international markets. That is irrespective of the intensifying competition, as ARG explained in the beginning, that these kind of entry of new players we only brought in and deepened the formalization of the sector. We believe that these two are independent and maybe continuous strategy. It has nothing to do that now we need to accelerate our focus on international because there is a heightened competition. I think India is always a competitive market. Yet, the international strategy is already running, you see, in parallel with the domestic strategy. Our focus on domestic will continue to be very relentless. I think we will do whatever it takes to gain our market share. I think these are not mutually exclusive options.
These are something which run concurrently. Yes, the international business will grow on cable and wire, and the domestic business will also grow in cable and wire.
Yeah, in.
Sorry.
In relation to that, sir, I just wanted to check with you, what is the on-ground feedback from your larger wholesale distributors or wholesalers? How do they look at competition? Is it margins? Is it brand loyalty? Is it that the company needs to increase distribution margins to retain a lot of the distribution force? How does it really pan out? If you can just give us a bit of a color on that.
No, it's everything. Nitin, it's everything. It's not just one thing. This has been built over years. I think people look at the quality. People look at the brand. People look at the consumer pool. Even pricing could be part of that. It's not just one thing which determines and on which the entire ID phrase is built up. The moat is not built on a single thing. There are multiple moats which play out.
And also.
It is not that the competition was not there in this industry.
Also, in case of industrial cables, if you look at it, it's a very long-term thing built on, you know, approvals, getting approvals from various consultants, various government bodies, various corporate sectors. It, as Anil said, takes years to build towards that.
Okay. That's it. Thank you. That's all from my end, and all the best.
Thank you. The next question comes from the line of Amit Mahawar from UBS. Please go ahead.
Yeah. Thank you. Really, congratulations on impressive growth in cable and wire and Lloyd, profitable also. Sir, my question is on switchgears. I'm sorry to harp on this segment. We have a 1,800 crore residential switchgear business and roughly 6,700 crore industrial switchgear business. The entire segment is very dominated by MNCs. We've seen Havells, you know, improving hiring from MNCs and also launching a lot of industrial switchgear range in, you know, in recent period. What is the strategy analogy on switchgear? This business is not growing the way industry has been growing, because of the presence that we have, which is fairly limited. Anything on that part you would want to elaborate on switchgears? Thank you. That's my first question, sir.
Are you talking specifically, Amit, about the industrial switchgear?
Yes, sir.
Okay. Industrial switchgear, yes, I think, you know, Havells' market share has been low. Also, you know, this has taken a bit of a backseat in the last decade or two, in terms of product development, of catching up because, you know, our focus was more on the residential and the consumer side. I think, the last few years, we have invested heavily in terms of building our product portfolio, towards matching up with any competition. I think, as I was talking about the industrial, cables business as well, this is a very long-haul kind of a, you know, market share improvement business. It has lots of barriers to entry, product approvals from various consultants, the government bodies and, you know, so it is not something which can have immediate results.
It is a long haul, but, you know, Havells has decided to be in this industry in a meaningful way over years because it complements very well with our residential switchgear business, both in terms of manufacturing and R&D.
Excellent. Second quick question is on Lloyd. We have to invest on ref also. Without going into numbers, can I say in 2026 and 2027, our profitability ramp-up will be risk irrespective of ref investments? Thank you, sir.
I think, Amit, ref will, you know, right now it is being sourced, and hence, there is, anyway, lack of contribution in the ref business. Going from here, there should be an improvement. Initially, it could be some teething issues, but there should be an improvement once the manufacturing comes.
Yeah. Good luck, sir. Thank you.
Thank you. The next question comes from the line of Girish Achhipalia from Morgan Stanley. Please go ahead.
Yeah. Thanks for the opportunity. I just had a couple of bookkeeping questions and one question on solar. On bookkeeping, can you help us with the Lloyd channel mix currently, and do you expect that to change in the next few years? The second one was on CapEx. If you can help with what you expect to spend in the next one year or two, three years, and if high-level color can be given on segment level? Finally, on solar, one clarification. The investment that is done, wanted to understand, are you not getting volumes, or are you not getting quality volumes, which kind of prompted you for this decision to secure this investment? Thanks.
I think over the last few years, we have seen a movement from the traditional distribution channel in Lloyd towards more organized retail, modern-format retail, regional retailers. That is something which we have seen as a trend. It has happened more in South, and now it is catching up in North and East as well. I think going forward, while the company would strive to be going through the traditional distribution channel also for a deeper penetration into smaller towns, we do see a movement. Today, more than 50% of the sales is coming from the modern channel. That is one. CapEx, if you are specifically asking the question about Lloyd CapEx, I think post the investment in the refrigerator business, we do not anticipate a huge CapEx for the next couple of years.
As far as the solar investment is concerned, there is, there are both, you know, or I would say lack of supplies for not only quality supplies but also supplies itself because of a lot of quality control restrictions and import-based, import restrictions on, which are hitherto easily available. There are restrictions, and hence, both, availability is lacking as well as quality, which is, reflective of the brand of Havells is also, a question mark.
Can you just answer on the broader, company-level CapEx, please? And if any segment-level details can be given? Cables and wires for example.
In particular, we have estimated that over the next two years, there'll be a total of about INR 2,000 crore CapEx. This also includes the new R&D center.
Anything on cable and wire here in particular?
Nothing in particular. This is the total investment.
Okay. Thank you.
Thank you.
Thank you. In the interest of time, we will take one last question. That would be from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead.
Thank you for the opportunity. First question on the demand side, so demand for cables, how the momentum is sustained, and demand for real estate-related products, specifically said wires and switchgears, which is lead indicator, and then which is followed by other categories. That is first on the demand. Second, on Lloyd, now from here on, how should we expect, I mean, say, construct of the growth? Will it be driven by non-AC category? And AC, we have reached a scale, let's say it should be more in line with the market, or we have scope to grow markets in all the categories, including AC? Just if you can deconstruct the growth for Lloyd, and first on the demand for cables and other real estate-related products. Thank you.
Yeah. I think, demand for cables has been, you know, robust, in the last year. And real estate demand also because of, you know, real estate demand in the large metros has been sort of slow, but we are also increasing our market shares in the, Tier 2, Tier 3 towns. That has also helped the, domestic wire business and the switchgear business. As far as Lloyd is concerned, look, you know, while, you know, ACs comprise a large part of the overall sales, and our, endeavor would be to increase the sales of other non-AC products. We also see that there, there is market share potential growth, for air conditioners as well. Still, we are in the, low to mid-teens, and hence, I think there is more potential to grow market shares there as well.
There will be a heightened focus on all four product categories to increase sales in the coming time.
Okay. Thanks a lot for the question.
Thank you. Ladies and gentlemen, that brings us to the end of the question and answer session. I would now like to hand the conference over to Ms. Bhoomika Nair for the closing comments.
Yeah. Thank you, everyone, and all the participants for being on the call, and particularly the management for giving us an opportunity to host the call. Thank you very much, sir, and wish you all the very best.
Thank you. Thank you, everyone.
Thank you. Ladies and gentlemen, on behalf of DAM Capital Advisors Limited, that concludes this conference. You may now disconnect your lines.