Ladies and gentlemen, good day, and welcome to the q two FY twenty two earnings conference call of Havas India hosted by HTSC Securities. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to mister Navin Tubeidi from HDFC Securities. Thank you, and over to you, sir.
Yeah. Hi. Good morning, everyone. On behalf of HGSE Securities, I would like to welcome the management of HGSE Limited to discuss the post Fuku f twenty two results. We have with us today the senior management of HGSE India represented by mister Anil, chairman and managing director mister Rajesh Gupta, whole time director finance and group CFO mister Rajiv Goel, executive director and mister Amit Kumar Gupta, whole time director.
I would now hand over the call to the management for their comments. Thank you, and award to you, sir.
Thank you, Navin. Good morning, everyone. Hope you would have reviewed the Q2 results. The company delivered broad based growth across categories. Except for cable, there has been healthy volume growth in each segment.
Real estate upcycle, improved outlook of industrial and infrastructure sector, and consumer optimism will support revenue growth in the upcoming quarters. Despite unprecedented levels of input cost inflation and continued volatility, we are hopeful to improve margins going forward. We may now proceed for Q and A.
Thank you very much. We will now begin the question and answer session. Participants are requested to use handset while asking a question. Anyone who would like to ask a question, you may press star and one at this time. The first question is from the line of Ravi Saminathan from Spark Capital.
Please go ahead.
Hi, sir. My first question is with respect to the volume and value growth breakup. I know multiple products are there, but if you give a rough sense on what has been the kind of value growth and volume growth across each of the categories or at least at a at a company level as a whole. I
would say that, you know, except for cables, there's almost 80% is price led. I think for the rest of the categories, we would say that it's almost 50% price led and 50% volume led. So that's how we would permit. Lighting, there is a more of a volume led growth than a pricing. But overall, other than cables, we can say it's fifty fifty.
Got it, sir. And, I mean, commodity prices continue to rally even over the past few days. Copper, once again, has kept going up. Other commodities are also rallying. So, basically, what is your sense on further price increase?
Are we going to take further price increases going forward to offset for the commodity price increase?
That's right, Ravi. Actually, you know, even in the last few months, you know, it had increased, and there is always a delay in passing on the price increase, especially, for example, in products like air conditioners. The season was not there, so it's a and higher levels of inventory in the industry. So, yes, there will be price increases not only for the past, but as you rightly have have pointed out, that there is continued volatility in raw materials. But then again, you know, we have to take a view of the averaging because we can't take a immediate decision and then replace that.
So we generally take some time to let things stabilize and then pass it on in the market. But as things stand, yes, there could be possibilities of further price increase.
Got it, sir. And my last question is with respect to the two hedge kind of, revenue or demand. So last year, we were sitting on a very high base of on an average 45% growth. This year, second half, are we confident to grow over it, match it, or probably it might even see some decline if you can
give a broad topic on this?
I think there is no doubt that last year was, you know, a time of pent up demand, especially in the what we saw in the third quarter. But I think we are quite enthused by the fact that last year was pure pent up demand coming from the consumer and D and C class towns. Whereas this year, the growth or the demand that we are seeing is across segments and across regions. And what is healthy is that we are seeing good demand coming from the residential sector as well as industrial infrastructure. So this was not the case last year.
The real estate was still under stress. I think real estate has started doing well in the last six to eight months, wherein consumer the industrial interest demand is also picking up. So I think that actually gives us confidence that the next six months could also be a decent growth.
Okay. Will it be able to grow over the last year's pace?
Well, that's only time will tell, but I think at least what we are seeing that the demand pickup is is positive.
Got it, sir. Thanks a lot, sir. Thanks.
Thank you. The next question is from the line of Venu Gopal Gare from Bernstein. Please go ahead.
Hi. Thanks for the opportunity. Two questions from me. First is on Lloyd. Can you describe a bit more on the market conditions and what you see as the drivers for the hypercompetitive environment that you mentioned?
That's my first question.
So I think Lloyd witnessed two years of lockdowns in the high season months. April, March, April, May are the biggest months for air conditioners, and still 70% of sales of were come from air conditioners. So, you know, overall in the system, there was high inventory buildup for the season, which we you know, the industry was not expecting that it will be a lockdown again. So there was high inventory. And when we came out of the lockdowns, you know, the inventory put pressure on the fact that, you know, companies and including loyalty wanted to sell the inventories and lower production also because everybody was stacked with inventory.
So, you know, passing on the entire cost increase became difficulty, and we, the industry is waiting for the right season to come in to pass on the entire cost increase. So that that is what I meant by the fact that there is lag behind cost increase and passing it on to the market.
Got it. The second question is more to more from a perspective of the volume growth, which based on your commentary appears to be As you mentioned, 50% is volume, 50% is, driven by pricing. So it looks like probably 10%, twelve % is a broader volume growth excluding cables, if you were to look at it. Right?
Correct me if that is wrong, but the perspective I wanted to highlight is that, you know, this sort of a demand growth on the volume side, how do you characterize it compared to what used to be, you know, in normal environments? Because to me, it appears that in normal growth environments, you actually tend to see only this much. Right? It is a healthy growth of 10 to 12, but this doesn't sound exceptional growth. So is it a different way that one should look at the growth environment at this juncture?
Well, I think I would term it as exceptional in the sense because, you know, when there is high inflation, you would expect that the demand to be curtailed, and maybe there might be a a degrowth because of high inflation and people would delay their purchases. And so the fact that the demand continues to remain strong is also reflecting the fact that the consumer continues to buy the the real estate buyers, contractors continue to buy even at these prices. So actually, it augurs very well when things stabilize. This we believe that this growth intake or better than this should continue.
Thanks. Thanks a lot.
Thank you. The next question is from the line of Renu Bay from IISM. Please go ahead.
Yeah. Thank you for the opportunity, and good morning, everyone. So my first question is, given that you've highlighted steep inflationary pressures and volumes still being steady, are you seeing any risk with respect to down trading by consumers, especially given these headwinds in the market?
Well, we've not seen that much in that thing. Again, you know, in electrical products in fact, I would argue, you know, that, you know, then when there is high inflation times, there is a shift from an organized sector to organized sector. Because, you know, when people are spending more on an electrical installation in the house, because of the raw material increases, they would want to even, you know, go stretch a bit beyond and go for trusted brands and, you know, high quality products. So we've actually seen that there is, you know, improvement in the kind of purchasing which happens. However, you know, we we are also very of the fact that India is a large country with very varied customers all across regions as well as channels.
And today, I would say that Harvaz is far more balanced in terms of offering different brands and different feature and led products to the consumers, whether it is an affordable for affordable housing or for premium customers. So we have a vast array of products and brands across categories.
Sure. This is where I have the second question linked that last year, we had a reasonable share gain coming in from a shift coming unorganized to organized plus smaller players losing share. Now in the current environment where everything seems to be now getting back to normal, both on supply chain as well as business operations, are we seeing the share gains being sustained? And across some of the key categories, are you seeing any signs of consolidation or market share gains for this trend ring because of some other brands losing out?
Yeah. I think, you know, market share gains and consolidation would continue to happen. In fact, in an inflationary environment, the relative gap between unorganized and organized sector reduces. The other thing is, you know, we've also seen, though we've been able to manage it well, there has been supply chain disruptions, you know. And for organized sector, it is easier to manage as compared to the unorganized sector.
So there are supply chain disruptions and, you know, volatile volatility in the raw material also is managed better by large and organized players. So I would say that, you know, this this shift is is something. And, hopefully, you know, with with the larger part of the wallet share, I think this this shift will continue to happen.
Sure. So the second question is on the ASP spending, which was anyway relatively muted in the last few quarters for Hazel. We have seen further further shrinkage in this quarter. So by when are we expecting to finally revert back to normal A and C spend of at least two and a half percent of revenues? And do you think that shrinking these spend can have medium term implications on growth in a hypercompetitive market?
Yeah. I think the investment for Harvold's brand continues to remain. And, you know, from this year you know, last year was a COVID year. This year from this year, we had decided that we will start investing back into the brand at normalized level. The muted spend in the first quarter first second quarter first half is more because of the timing effect.
We definitely see normalized A and P spends coming in because of the festive season plus the demand for summer products coming in in the next six months. So we will, you know, start seeing coming back to normalize level soon.
Sure. And my last question, if I can ask on Lloyd, where are we in terms of investment in channel distribution for the non RAC portfolio, specifically reps which were launched and washers? And now do we have any medium term target which can be shared in terms of market share, the revenue growth for these categories?
I think we are well positioned. You know, again, you know, any new category requires good amount of time to get deeper into distribution. But we are, you know, moving forward in terms of penetration in in the channel. And if there's good acceptance both in the new models of washing machines as well as the new category of refrigerators, good acceptance from the trade, obviously, you know, the consumer demand has to be generated over a period of time. But we we are quite hopeful that in the coming times, you know, these two categories would become a sizable part of why.
Sure. Thank you, and all the best, sir.
Thank you. The next question is from the line of Nitin Arora from Access Mutual Fund. Please go ahead.
Hi, sir. Thank you so much for taking my question. Sir, sorry, again, you know, drilling more on the demand side because you always give see the very fair outlook on the demand. Now at one end, you know, you are saying the demand outlook is very good because of the real estate part. At the other end, we are saying there is a lead lag in pricing, which you were not able to take some margin should normalize going forward.
Then the demand my first question is when the demand was so strong, what stopped you taking the price hike even in this quarter? And to a the other part of this question is that despite a market share gain from an unorganized, the volume growth is still about 12% because normal growth rate which we used to do pre COVID. So and so, mister, I I just found this statement very contradictory, so just thought we we'll ask you, and I have two more questions after that.
Okay. You know, encouraging question, I would say. I would say that, you know, when we we are not really in a commodity industry where, you raw materials or input costs go up, and the next day, you increase prices. And there is a is a trade in between. There is a expectation of, you know, how the competition is behaving.
And so there is always and this is a, you know, very different times than normal cost increase of 2% to 5%. There is, you know, unprecedented price increases. Copper has grown %. Steel has gone up % in the last one year. So it's it it is never a, you know, time where, you know, things settle down.
So in the trade, acceptance of the product, the pricing, everything has to take time. So there is a lag behind that. And, again, as I said, we can't compare it to to a commodity industry. So brand and distribution industry plays very differently. And, of course, you can say, you know, it's almost like a testing of the both the trade and the consumer that what what is the price elasticity for demand not to, you know, start getting impacted.
So that's something which continues to remain, and there there has that that's the reason for the lag. The the second question, and I think I alluded to a bit before as well, that, despite the fact that there is such high inflation, which has again not been seen in the, I would say, years of or at least my experience, the fact that we see volume growth of normalized times is actually quite a good indication that, you know, the demand is strong. So I would argue that during such an inflation time, the demand would soften both for the consumer as well as for the industrial and residential real estate developers. But the fact that volume growth is continuing, which actually these segments have seen muted growth or even deep growth in the last few years. So there's been in such an inflationary trend, if it is increasing, so it's a very, very good indication for the future.
Got it. And then, generally, with respect to two things, one is this inventory in the channel, how we have placed there. And then we have a sentiment, have a customer sentiment and the details. Is it safe to assume that this quarter was, you know, more of retail lower than the wholesale channel filling was higher? And then, eventually, this quarter seems to be where the company expects the retail finally to start to start picking up.
No. I would not say that this was a quarter of filling up. I would say that the the primary to secondary ratio would be, you know, same. It would not be that this was a time of filling up the trade.
So the inventory, one time, is it still at a very normalized level?
Normalized level. I would say the inventories are at normalized levels.
And just a last question on the Lloyd. You know, Lloyd, you know, there's a there's a comment came by the company in the presentation, the high competitive scenario. Now service industry is being competitive from last ten years. I think next ten years also will be very competitive. But is it more of a quarter phenomena that is still some issue because, you know, we talked about last few years of making up line, supply chain will be very strong, and now we will make more margins.
But when that 3% market share has come to four, five, you know, the growth is becoming difficult for Lloyd in the AC business. So I just wanted to understand more of a quarter phenomena or because this complicated comment will be there for you, sir. Just your case on that, sir. I see. Thank you
very I would say that this is more of the last couple of years of industry as of course because of the lockdowns and, you know, the major season going away for air conditioning industry. So the benefit which should have come because of many decisions by the government, whether it is, you know, in position of ban and imports and all that. That really didn't help us gain any market shares or gain big volumes in this thing. I think we'll have to wait for the next season to actually see the real effects you know, for for Lloyd as a risk for the industry.
I see.
Thank you. The next question is from the line of from Nomura. Please go ahead.
Yeah. Hi. Thanks for the opportunity, sir. I would first continue with the last question on lawyer. Basically, what are your thoughts on medium term?
Like, we understand in the past, there have been some issues because of lockdowns and all. But in general, what is your medium term target of any market share in the IT segment or anything if you can highlight just for us to understand where can Lloyd be, say, three, four years, and what are the steps we plan to do to achieve that?
So I would say that, you know, our our outlook on Lloyd continues to remain extremely strong. You know, we did this acquisition to enter into a high growth industry where Havill's was not here to present. So that continues to remain strong. And the investments that we've made in this indicates the fact that we are quite positive over it in the medium and long term. And the steps that have been taken is, of course, investment in manufacturing, brand and distribution, all three things, those investments continue to remain.
And I would say that our focus in the next few years for Lloyd would be to gain a healthy market share in each product category. I would even say that, you know, this would be, you know, the main, you know, criteria for for Lloyd that in each category, including air conditioners, we would like to see our market share grow in the coming times.
Got it. And even on the margin side, what will be your thought process anyway? Because this segment seems to be the competition remains high, and we do have our benefits of in house plans. But apart from that, what really do you think will help us get the price advantage which can improve margins, or it will be entirely by backward integration according to you?
I would say it will be due to volume buildup and looking at even the export markets. So basically, we will continue to remain competitive in the market as depending upon the competitiveness in the industry. But the real emphasis would be on getting good growth as well as reinvesting back the profits into brand building and distribution penetration.
Got it, sir. Sir, the last last question is on will be on the price hike side. So if you can just broadly indicate to us based on the current commodity prices, what will be the price hike required according to you broadly across segments if you can to sustain our past margins, that will be very helpful.
Thanks a lot.
It'll be very difficult to tell because the price there there is too much volatility in the cost, and we usually wait for some time to see the stability in the price and then take the decision. It'll be difficult for me to answer this question on the call.
Okay, sir. Okay. Thanks a lot.
Thank you. The next question is from the line of Singh from DLC Mutual Fund. Please go ahead.
Hello, sir. Thanks for the opportunity. So my question is basically on Standard and Rio brand. If you can touch upon, you know, how's been their performance and going forward, you know, as we are seeing more penetration into the rural and part of the market, how do you see these brands, you know, more relevant going forward?
Actually, they are quite relevant, in fact, our switchgear category, for our buyers and cables category because, you know, Havel's operates for a different customer segment and, you know, different channel. Standard continues to remain very strongly focused on distribution differentiation by having a different channel for, more contractor based and regional strength. Rio continues to gain from the fact that it is catering to a customer segment, which is for affordable housing. And so I think the brand play or the brand differentiation within the overall HAVELD's portfolio is standing out very well, and we see good growth in these both these brands.
So will you be able to
quantify, like, how large have now a standard and Rio brands become right now?
Not not able to. We actually look at it as a not just as a brand, but within the business category. So it'll be we usually don't give these figures of how these how big these brands are. Because, you know, the the whole idea is to be able to leverage manufacturing capabilities and design capabilities to cater the different segments.
Okay. So the other question is on switchgear category. You know, if you look at two year CAGR, is, you know, shown around 10% growth. And going forward, you know, as you're talking about real estate, on switchgear segments, especially if you can touch on both the residential as well as the industrial side, how that segment will pan out?
I believe that going forward, this will be strong because, you know, as you have seen in the last few years, sales were impacted both for as well as for the industry. So I think, you know, given the fact that the industrial tech cycle is also strong as well as residential pickup is also strong. So I I think you SwitchCare definitely seems to be benefiting from that in the future.
Okay. So lastly, you know, in terms of b to b, b two g side of the businesses, it's been touched on, you know, because in house, maybe we can see significant pickup in the infrastructure related execution. So how does that, you know, lead to this overall growth for us in terms of infrastructure as a segment contributing for us in overall revenue terms? Will you able to quantify? That's my last question.
Yeah. I think we see good traction in both b to b b to g, industrial, infra, all the segments. And also on the property side, we see from the developers as well. So I think as we alluded in the switchgear on the, let's say, lighting side, on the cable side, everywhere, I think we we see good traction. Think that's why we remain confident that growth momentum should continue despite the price headwinds.
Thanks, sir. That's all from my side. Thank you.
Thank you. The next question is from the line of Ankur Sharma from HPSU Standard Life Insurance. Please go ahead.
Yeah. Hi, sir. Good morning, and thanks for your time. First question, you know, on the fans segment, if you could just talk about, you know, what would have been the industry volume growth either in q two or the first half And how our market share would have moved in the client segment?
I believe that our focus on market share gains continues to remain. I would say that here we saw normalization of the inventory levels in the trade and hence not a very high volume growth in terms of fans as as we've already said, you almost 50% is price led growth. So I believe that because of the summer season not being very strong, the trade took time to normalize the inventory levels. And now the inventory buildup will start happening from the third quarter third and fourth quarter.
Okay, fair. And what would be our market share? And any anything on how much you have gained over the last three, six months?
Well, we I don't think we've ever given our market shares, but, you know, Huddl continues to retain leadership position in the premium segment. As you know, Huddl does not operate in the economy segment, which is still about 30%. But our strength in the positioning in the premium segment is extremely strong.
Okay. Fair. So secondly, very strong growth seen on the Lighting side last quarter in Q2. And as you mentioned, it's largely volume led. So is it more of B2B?
Is it the fixtures picking up now as well? What's really driving that? Is it distribution? Just some color what's driving that very strong growth in lighting for us? And do you think it sustains?
So as you know, you know, consumer lighting is actually very innovation and distribution oriented business. So over the last three or four years, there has been three investments in terms of because, you know, as you say, how is this uniquely placed in this industry? Because we are one of the only manufacturers or sellers who manufacture the entire lighting rather depend upon imports or third party manufacturing.
Mhmm.
So Mhmm. You know, there has been heavy focus on innovation. So there have been very good product additions to the consumer lighting. And last two or three years, there's been extreme, you know, rigorous focus on distribution penetration. So our penetration in the distribution, retail outlets is increasing, our extraction from the extraction from the retail outlets is increasing because of innovation.
Our
station in rural is also helping lighting go to these areas. Innovation in products like, you know, inverter bulbs for rural areas and all. So that has helped gain market share in lighting and at a very fast pace. So I think that is the reason for the volume growth in lighting.
Fair. And just the last one on the, you know, the switches, like, you know, where you highlighted a pickup on the real estate side. So just wanted to understand, is this is this more region specific, more, say, around Bangalore driven by IT or some pockets in the metros? Or are you also seeing a very broad based pickup on the real estate side, you know, even in the tier two, tier three kind of markets along with the tier one market? You know?
And therefore, that confidence that this has changed.
Broad based pickup. In fact, as compared to last year, it's more broad based because last year was more two zero two, three zero three. Now it is Yeah. You know, not only in the tier one cities, but also, as you rightly pointed out, in the Mhmm. Urban areas like IT sector.
So, generally, there is a pickup across across the customer segments and the regions.
Understand. Great. That that that answers my question. Thank you so much.
You. The next question is from the line of Sonali Pavrakar from Jefferies India. Please go ahead.
Thank you for the opportunity. So my first question is regarding price hikes. I understand you cannot comment on the quantification of the upcoming price hikes, but could you broadly quantify what has been the YTD price hikes on an average across your portfolio and also how much price hike you took in q two?
It will be difficult for me to get these numbers because, you know, each business deals very differently. So, again, lighting is very, very far removed from switchgear. There's copper steel aluminum. So I I I would don't want to attend this answer in this call.
Got it, sir. So, secondly, on the demand, any thoughts on effective season demand now that Mogratris are behind us and Diwali is in the offing? And also, you mentioned that inventory situation is normal. Would that be true also for the air conditioning?
No. So sorry for, you know, taking your second question. Air conditioners, second and third quarter is the lowest season. So I think, you know, you need to pick up air conditioner. We need to see the demand coming from January on this.
But as far as festive demand is concerned, usually, we've seen that the trade is quite positive at this point of time. And the pickup is strong, so which indicates that the trade is also hopeful as well as the initial signs are positive. So I I do believe that the effective demand will continue to remain strong in the coming days because, you know, the the early indications are are positive.
Got it, sir. And lastly, any updates that you would like to share on the PLI scheme and also if any supply chain issues?
Yes. No, ma'am. We have applied for PLI. I think we are awaiting the sort of regulatory approval for the same. So I think we will update as we receive the same.
What
is the
Sir, have applied for both LED and AC?
Only for air conditioners.
Okay. So the second question is any if any supply chain issues?
No. We are not we are not facing any significant supply chain. I think there are as you know, we are one of the few companies who are very well vertically integrated. Some challenges are there, but I will not say they're disproportionate.
And what is our import content currently?
That that's very low. Almost 90% we do ourselves.
Got it, sir. That's it from my side. Thank you.
Thank you. The next question is from the line of Sudhiri Atifala from Morgan Stanley. Please go ahead.
Yes, sir. Thanks for
the opportunity. My question is on other expenditure. So if I look at other SG and A and it's difficult to kind of compare it as a percentage of revenue because there's high inflation right now. So I look at the absolute numbers, and I know there'll be some expenditure which I am talking outside of ad spends, which would have been cut back. But when I look at ad spend, they are flat on a two year basis, $2.68 crores.
Even though first half versus first half of twenty nineteen, they are down 7%. So what I want to understand is how sustainable these numbers would be, and how should one look at, you know, these numbers going forward? Are there some specific savings that you are driving? That's one. Second, I just wanted your CapEx outlook for three years.
And the third one was around market share for AC. I'm sorry if you've already answered this, but were you in your view, have you maintained market share or have lost a little bit of market share? So those are the three questions.
On the on the advertisement sales function, we have clarified. There is no there is no sort of So
my question was my question was If I look at other expenditures, so after contribution margin and between segment EBIT, if I look at other expenditure, that is flat on a yeah. So that number is flat on a two year CAGR basis on an absolute number. And I know as a percentage, sales are unfair to comment because the inflation two years back was different. So the current run rate on two of $2.68 crores, is that a sustained number?
And have there been some specific savings that will continue from even in, you know, ensuing quarters?
As you remember last year, we had mentioned that, you know, when when COVID happened, we looked at, you know, the good cost, the bad cost. There were certain, you know, sustained cost takeouts which happened. And of course, there is an increase over last year wherein the good costs might have come back, but certain bad costs are out. So yes, what we have seen in the second quarter is sustainable going forward. Certain things, of course, know, we'll continue to increase with our continued investment on manpower.
But otherwise, generally, this is the right SG and A expense for the second quarter. As far as advertising, we've already mentioned that, you know, there is no point in looking over last year or last year because of the timing. The first quarter had IPO in 2019. This quarter was a lockdown. So it's very difficult to compare.
Going forward, we believe that the advertising levels will start coming back to normalized levels.
I the first question CapEx outlook?
I think there was another question.
Yes. CapEx outlook and AC market share on q two. Yeah.
So, again, it can't be
looked at as in one quarter, but generally, in the last one or two years, we've started gaining market share.
Sure. And anything on the CapEx outlook, sir, for this year and following two years?
For this year, we estimate around INR $2.50 crores on a total no, sorry.
INR 300 crores, INR 50 crores.
INR 3 hundred crores to INR $3.50 crores as a total. And next year, they shall be coming back with our revised plan by the end of the fourth quarter.
So one small clarification, and it's the last one. The contribution margin for cables and wires is quite low. And I know because of the commentary that we've made, but what I want to understand is that is the mix more towards cables and hence, it was slightly more difficult to pass it on? Or that is not the reason in this specific quarter for contribution margin to be where it is for cables and wires?
No. You are right. First of all, cables are difficult to pass on because of you know, certain orders already in hand. But the actually, the mix was more towards queue towards buyers in this case. And that's why we believe that it's more for temporary phenomena that, we should start seeing margins improving from here.
The
next question is from the line of Sultia Patni from Goldman Sachs.
Sir, thanks for taking my question. Just one question. Sir, do you think we could be in an inflation spiral where our channel partners are very well informed of where commodity prices are and that there will be price increases attempted. And as a result, they could be consuming more than what they would typically do, in which case, we could probably see some sort of prebuying happening, which could result in some slowdown in the outer quarter. Do you think that is something which is possible?
Because I understand all our channel partners are very well aware of how commodity prices are moving. That's
only question I have.
Again, a very telling question. But I think a lot of price increases happened between the second quarter of last year till about first quarter of this year. And during the last quarter, there have been not I would say there is more normalization of inventory levels. There will always be some prebuying, you know, whenever, you know, there is an expectation. For example, you know, the copper went up again, and there will be some prebuying happening, you know, just just of those events.
But then again, it takes about fifteen, twenty days to start coming back to normalized level. So over a longer period of time, I think, you know, I would say trade is not only smart to pick up, but trade is also, you know, very smart to keep the ROCs intact.
Okay. Got it, sir. That's it. Thank you.
Thank you. The next question is from the line of Latifa Chopra from JPMorgan. Please go ahead. Yes. Hi,
thanks. Only question is on margin outlook. In the beginning of your comments, you had mentioned that you're hopeful to improve margins going forward. Just wanting to check, is this confidence shared on the gross margin levels? And is this driven more by you taking more price hikes going forward?
Or are we looking at any other cost levers here as well? Thank you.
So we believe that, you know, the kind of raw material volatility which has remained, it is not it is it's possible that we have not been able to pass on the entire cost in the last few months, and there will be certain price increases if the raw material continues to remain high. But we are definitely, you know, hoping and viewing that if there is some sort of settlement there, then there could not be any requirement of a price increase, which would bring our margins to a little bit better level than before. Again, as we can't really see quarter on quarter because cables and wires is lower because of, you know, inventory situation, the buying pattern and all that. And I think there, also, we are hopeful that they should, over a period of time, come back to normalized levels.
Sure. Thank you.
Thank you. The next question is from the line of Achal Lohade from JM Financial. Please go ahead.
Yes. Thank you for the opportunity, sir. It was partly addressed. Just wanted to clarify on the margins front. You know?
If you look at in the past, you know, our margin range was between 13 to fourteen, fourteen and a half percent of docking x Lloyd at EBIT level. While if you see currently last five quarters, we've had between 17% to 19% than the last quarter being at 16%. So just wanted to check, when you say that our margins would improve from here on. You know, a, what so part of the margin expansion is obviously to do with the cost control. And given the, you know, and and given the exceptional situation we are in.
But if I were to ask you, sir, in a normalized situation, you know, wouldn't some of these costs come back? So what is the extent of margin improvement would you see from the from the current level?
The margin is you know, again, I would say that I'm a I'm a bit surprised the fact that you, you know, you want to know what is our margin target. There is no margin target. We always want to grow in terms of revenues, and we continue want to continue to invest in brand building and, you know, and we have to continuously look at the competitive position. It's not really, you know, something like a margin target that we have where we want to maintain 15%. If that was the case, then probably when it was going 18%, we should have, you know, curtailed those margins.
That never happens like that. It's all it's all dependent upon the revenue growth, the the kind of investment that you're putting in, the raw material position at that point of time. But, generally, there is a range of margin that the company would like to operate in. And that range is, I would say that, you know, because of the unprecedented cost increases, this has been at a lower level, and it has been at a higher level during the last few quarters. So there been a range, you can imagine, that we would try and remain between this range in the coming quarters.
Got it. Got it. Thank you so much.
Thank you. The next question is from the line of Naval from MK Global. Please go ahead.
Yep. Thank you for the opportunity, sir. My question is on the others category. If I adjust for 01/2022, the segment has been hitting a new base via on Y o Y basis. So if you can share some insights which category or across the categories which are part of this are are you know, is it fighting from all cylinders?
And secondly, what is the margin aspiration also? Because that is now closer to double digits. So are we looking for similar to what we have in ECD category?
So in the other, as you have seen, I think most of the categories are doing well, particularly the motors have been doing pretty well for us. But I think we have always maintained these levels category takes certain years. It should be where they start sort of, you see, showing up both on the revenue growth as well as on the margin. So I believe there is a continuous improvement, which is happening on both discounts in these categories. And I think we believe this can only further improve going forward.
Okay. And second question on Cable and Wires. So the way volume growth has been there across the other categories, now as you mentioned, clearly, there's a strong demand in real estate and construction. So will this category also see now equal contribution coming from volumes as volume growth will will be, like, stronger?
Well, I think we we
hope so, but you you should be aware there has been a unprecedented sort of growth in the pricing in in in this business. So but we do hope because of the fact that which you also outlined that there should be a very decent volume growth in this business as well. So, yes, I think the hope is pretty much on the positive side.
And one last on on Lloyd's, although you have highlighted in detail, how hopeful are you that industry will be able to take a price hike this season because one of the player continues to remain very, very aggressive on pricing and market share gains. So how hopeful are you that the season will be, like, normalized for the industry?
I think we'll continue to be watchful in the industry. You have mentioned about the I think we will take it, actually, as it comes. So I I don't think we we work in absolute. I think we work on that activity, so we'll see as it comes.
Sure. Thank you so much, and all the best.
Thank you. The next question is from the line of Harvinder Flamming from FGY Mutual Fund. Please go ahead.
Thank you for the opportunity. As you highlighted, there has been an unprecedented increase in the prices across categories. So are you actually seeing an impact on the demand? Or are you also seeing any level of down trading because of the price inflation?
I think we we have addressed this question initially, but I think we I think
consumer demand in demand in
general has been very resilient. As somebody asked whether the volume growth looks very sort of normalized, which used to happen earlier. But I don't think in a decade, we have seen such unprecedented sort of increase in the commodity cost. Despite that, if there is a growth in the business and the demand, I think it augurs extremely well. I think as a business, we feel very enthused, and that's the only thing we can say.
You see, we we have we continue to be sort of very positive on how the business should pan out going forward in general for the economy, not just for us as analysts.
Sure thing. Just a last question from my side. Ex of Lloyd's, would it be possible to share the channel mix across the general trade, modern trade, and ecommerce?
No. We do not share these. Thank you.
Sure. Thank you so much for taking the question.
Thank you. The next question sorry. The next question is from the line of Rahul Agarwal from Incred Capital. Please go ahead.
Yeah. Hi. You know, good morning, and thank you for the opportunity. Most questions got answered. Just to clarify one clarification on CapEx.
My sense was we'll you know, we we had a higher plan of about INR 500 crores each year going into this year and next year. It's obviously, you know, you've done lesser INR $1.40 crores in first half. You're guiding for INR 300 crores, 3 50 crores this full year. What would be the revisions like? Essentially, what are the areas where we have basically revised the CapEx?
And related question to that was any update on the AC plant, you know, which we announced in February in the South India?
Actually, because of this COVID related disruption in the first quarter, as you aware, the things have been sort of delayed. So there is not much revision. It's that they got deferred. So I think it is very normal in these situations.
On the
EC plant also, I think there will be update, we have tried for P and A as well. I think there will be update, as we just mentioned earlier, at the end of the fourth quarter. But there has been no significant down revision in terms of our CapEx plan because these are the long term investments, I think, which we continue to do.
Right. Got it. And secondly, just to clarify, obviously, the base is quite high going into second half, and it's both on top line as well as margins. Last year, we did about 15.5%. That's my sense is that's more of a function of a lot of discretionary costs were not actually incurred at that point of time.
So going into second half of this year, you obviously take price hikes, margins can get better on the contribution level. And then there is some amount of ad spend, which will obviously get incurred. But as Mr. Anil said on TV today morning that we're still looking at 14%, fourteen point five % for the full year. Is my understanding correct that we're looking for 14%, fourteen point five for fiscal 'twenty two?
Look, what we can say is we have I must say that, you know, I I don't think I've given guidance on television. So I don't know whether how it was understood, but now, Rajiv, should Yeah. So I think on the revenue side, we continue to remain positive. You see, as the the things are concerned, as you said, discretionary cost, we mentioned earlier on this call, there are there are always a good cost and bad cost. And I think there is no reason why the good cost should not come back.
And I think businesses will not be looked at from what happened in Q3 or Q4. We have investment and the cost incurred for the long term sustainable health of the business. So I think they will continue to be invested irrespective of what impact they could have immediately on a short term margin. So I think you've already articulated that. But all we can say that we are very positive on the growth, and that's something I think what we will definitely target in the revenues.
Got it, sir. Thank you so much, and good to see the working capital normalizing and the free cash flow coming back what happens in first half. Thank you, all the best.
Thank you. Thank
you. The next question is from the line of Rahul Dajray from High Farm. Please go ahead.
Yes. Hi. Good morning. Now my first question is on Lloyd's. You know, I remember in the first quarter, you had indicated, you know, that 27% of Lloyd business came from industrial and intra segment, you know, which is when you had reported contribution margin of of about 2%.
Along with this, you know, you had also indicated, you know, that, you know, you all were in ramp up for other products like refrigerator and washing machine. So my question is, you know, does this high share of 27% of, you know, b two b business has anything to do with the operating performance that we've seen from Lloyd in this quarter? And is it possible you can share the similar number, you know, as to how much was infrastructure and industrial contribution for Lloyd's business? That's my first question.
Oh, Rahul, I don't think we have mentioned about Lloyd. Lloyd does not have this infra segment and all. So I think there's some confusion. This was more for. So I think that's that's not something for for Lloyd's stand alone.
Okay. Because I thought you
Industrial industrial is not a very significant part of Lloyd. The Lloyd is No.
I I think this essentially was toward more from a b to b business. You know, that is when you were indicating, you know, that 27% of this last quarter.
The most will have it. Not not for Lloyd. Okay.
Fair enough. So that on the second question, you know, on PLI, you know, I remember you all you all had indicated earlier, you may not apply for PLI. But, you know, now that you applied, which are the particular component that you are looking at manufacturing?
So that's something we are still applying. We will we will mention then when we get the sort of endorsement from the regulatory authority. And we have never said that we will not apply. It was always there. It is under consideration.
So you see businesses. But, yes, for finished goods, since it is not available, we cannot do that. But there are certain, sort of component which we already do internally and we wanted to bring in house. For those, we have applied. But I think the further details we'll provide once we get the approval.
And the last question is on the container availability. You know, given the supply chain issues that the industry was facing, is the container availability issue behind or even now we are facing container availability as a significant, problem?
Well, I think it it continues to be a challenge, but as you said, we are fairly sort of integrated in house. So for us, the incoming container situation is is much more sort of relieved now than earlier. On the school side, yeah, there are been certain challenges, but those are not very meaningful for the business. So I we could say that these are not very insurmountable issues for us.
Okay. Fine. Fair enough. Thanks. This is very helpful.
Thank you. The next question is from the line of Abhishek Banerjee from UBS. Please go ahead.
Hi, sir. Thanks for the opportunity. A couple of questions from my side. The first one is with regards to ad spend. Again, going down there, just to understand, would you be able to share how ad spend effectiveness has changed over the last couple of years?
I mean, what what has happened to the return on ad spend?
I just can't affect it now. So this is look. What we can claim is that ad spend is shifting more sort of digital than but we continue to present in all the mediums because I don't know. It's difficult to say which is getting irrelevant. So I think our ad spend is now getting more broad based, on the digital channels, the ecommerce channels, on the TV as well as the, you see the print media.
Effectiveness, I think it continues to be there, but, frankly, we do not like to track and claim what percentage would be there and there. And it is more of an investment for us than just a piano item.
Okay, sir. Understood. Now coming to the second part of the question. So what what is I mean, is there any discernible change in consumer behavior that you're seeing with regards to consumers being open to new categories? Because I I did some store visits over the last couple of months, and I saw a lot of new categories in in stores.
Something like a Roomba robot, which cleans rooms and all. So are you seeing anything of that? I mean, is that a countrywide phenomenon, or is it just limited to certain pockets of the country?
Look. Consumer is much more aware than he has been earlier because of his exposure to to the Internet and what he sees on the global basis. So, again, we continue to respect consumer in terms of his choices and and how he wants to upgrade, wants to feel more comfortable, and wants to pick up things which will make his life easier and happier. So I think that this is something evolution which is happening. It's only improving.
And that's where Harvaz is targeting as to how we can come closer to the consumer by putting more and more innovative sort of products for him.
Understood. And, sir, you you mentioned a 10% reliance on products which are not manufactured or you which, I guess, are imported. Now that 10% is in terms of value?
Yes. It may be less than 10 as well. It could be something less 7%.
Understood. That's all from my side. Thank you so much for your time, sir.
Thank you. Ladies and gentlemen, due to time constraint, the first and last question for today, I now hand the conference over to mister Naveen for closing comments.
Yeah. Hi. Thank you everyone for participating this call. We would like to thank the management of Hybels India for giving us this opportunity. Anjit, do you have any closing comments?
No. I think thank you, everybody, and a Caesar's greetings to everybody on this call. Thank you.
Thank you. On behalf of HSBC authorities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.