Ladies and gentlemen, good day and welcome to Orient Electric Q1 FY 2026 earnings conference call hosted by Axis Capital Limited. As a reminder, all participants line will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. Thank you. I now hand over the conference to Mr. Bhavani Kumawat from Axis Capital Limited.
Good evening, everyone. On behalf of Axis Capital, I welcome you all to Orient Electric Q1 FY 2026 earning conference call. Today we have with us management represented by Mr. Ravindra Singh Negi, Managing Director and Chief Executive Officer, Mr. Arvind Vats, CFO and Mr. Sambhav Jain, Head, Investor Relations. We thank Orient Electric management for giving us the opportunity to host the call and would now like to hand over the floor to management for their opening remarks, post which we will open the floor for Q&A. Thanks. Over to the management.
Thank you, Pari, and thank you, Bhavani. Good evening, everyone. A warm welcome to all of you to Orient Electric's Q1 FY 2026 earnings conference call. We hope you have the opportunity to review our financial results and earnings presentation, which are available on the stock exchanges and our company website. Q1 FY 2026 unfolded in a highly dynamic environment. At the start of the quarter, the sentiment across the electrical and consumer durables sector remained cautiously optimistic, underpinned by expectations of a broad-based recovery, infrastructure-led momentum, channel expansion across tier two and tier three markets, and a well-anticipated robust summer seasonal demand. However, the quarter presented notable headwinds for the industry. Contrary to the intense summer of 2024, India experienced relatively mild temperature levels. The phenomena started with the southern states. Then continued across the rest of the country.
Alongside this, the record-breaking rainfall in May in a way ended the summer before it even began. This unexpected climate shift disrupted the seasonal sales cycle and inventory planning across the industry. Additionally, a brief period of market softness was observed during heightened geopolitical tensions, temporarily affecting sentiment and market momentum. Despite these headwinds, Orient Electric demonstrated resilience and agility. We remain focused on agile execution, deepening market penetrations, and aligning our portfolio with evolving consumer preferences. Orient Electric reported a year-on-year growth of 2%, reflecting a tempered performance amid a challenging operating environment, while sustaining its momentum and gross margin expansion, navigating category-specific headwinds. Our continued focus on premiumization, innovation, and channel expansion enabled us to maintain momentum across key segments. We see quarter one as a seasonal impact rather than a structural industry impact.
Customer centricity embedded in our DNA guides our strategy at Orient, from product development to marketing strategies. The company continued its focus on differentiation across the portfolio, increasing accessibility across channels, enhancing customer experience, and building a robust digital strategy to guide consumers through their product research journey, increasing consideration for our brand. Premiumization enabled us to elevate customer value, enhance brand perception, and deeper consumer engagements across our categories. In the lighting segment, we continue to stay focused on to bring more value-added products and our distribution and NPDs continue to reflect that. Our value-added product share to the overall ceiling business has remained consistent at 55%, which is in line with the leading players in the industry. In the fan segment, we launched a premium range of BLDC fans under the Tech Meets Design campaign.
Our BLDC fan sales grew over 50% year -on -year, reflecting our commitment to energy-efficient innovations. Overall, our NPDs in the fan category now contribute more than 20% to primary sales, with our premium mix improving by almost 250 basis points year -on -year, accounting for about 30%-35% of our ceiling fan sales. Our retail experience programs, Mission Orange and Project Spotlight, played a pivotal role in boosting premium product awareness and adoption through an experiential retail push, enabling touch and feel and live demos at retail outlets. Even in our heating appliances category, we've launched new premium square-shaped storage water heaters with better features and warranties, which give uniform brand experience to the customers. We invested significantly in brand building this quarter, especially during high impact period like the IPL season.
These campaigns reimagine fans in the context of modern homes, embracing cutting-edge technology with future-ready features, design, and finishes. Through these campaigns, we've not just showcased our premium BLDC fans differently, but presenting an exciting narrative that captures the evolving preference of new age customers. While these investments have led to some increase in advertising costs, they have laid a strong foundation for a long-term margin expansion and brand equity. We will continue to spend close to 4% or 5% of our revenue to building preferences in our core categories of lighting and fans. Our strategic investments in building emerging categories also continue to demonstrate progress. While there were delays in execution of key infrastructure projects, the lighting B2B business executed several key street lighting and façade projects, such as Chhatrapati Shivaji Maharaj Museum in Maharashtra and Sarnath Temple in U.P.
We continue to witness a healthy pipeline of new inquiries, making us confident to sustain our growth trajectory in this segment. The consumer lighting business witnessed an industry-leading volume growth, aided by new product developments and expansion of distributor partnerships, resulting in market share gains. We also took a price increase during the quarter to pass on the impact of regulatory changes, which increased our costs. Our thirst on mix enhancement continued to yield results with an improved share of value-add products. Switchgears and wires category registered accelerated performance with high double-digit growth in the quarter. Our expansion of distribution network and building the electrician loyalty program continues. Our channel strategy on DTM continues to deliver better results. We added approximately 1,800 new retailers under the DTM network this quarter. Our e-commerce channel continued to see robust traction across categories.
We are now participating in quick commerce platforms, building on customer convenience, which validates our digital-first approach. These trends highlight the importance of channel agility and targeted portfolio interventions to navigate seasonal and category-specific challenges. Overall, the financial performance in the first quarter of FY 2026 reflects both resilience and ongoing execution of our strategic priorities. We closed quarter one with a revenue of INR 769 crore, marking a 2% year-over-year growth. While revenue was below our initial expectations due to weather-related impact, we continued to deliver better versus the broader industry. Our lighting and switchgear delivered approximately 7% growth. B2C lighting continued to outperform the industry with an overall single-digit growth in value and double-digit growth in volumes. Switchgear and wires had a high double-digit growth with lower base. The ECD segment remains stable with revenue at INR 545 crore, despite fan sales getting impacted.
Fans reported a muted single-digit growth and appliances were impacted by more than 40% de-growth in coolers. Water heaters witnessed double-digit growth. Our gross margins remained stable at 32.6%, and we are in the 32%-34% range, reflecting the benefits of channel optimization and a refined product mix. EBITDA stood at INR 46 crore, a 15% year-over-year increase, and the EBITDA margin expanded by 68 basis points to 6%. We remain committed to creating a stronger and relevant brand, and we will continue to spend in the range of 4%-5% of our revenues to build a well-balanced portfolio. As seasonal headwinds begin to ease and our structural growth levers continue to gain traction, we remain confident in our journey towards achieving double-digit EBITDA margins. Project Sanchay, our transformation initiative, remained a key pillar of our cost efficiency strategy.
In quarter one, the program delivered a saving of INR 9 crore, underscoring our focus on disciplined execution and cross-functional synergy. Our working capital days stood at 25 days and our net cash position of INR 72 crore as of quarter one end. Looking ahead, we remain confident about the strategic levers we have put in place with the festive season build-up likely to happen across channels in quarter two and likely improved consumer sentiment and spending. We are optimistic that festive period will give tailwinds to our category. With this, I would like to open the call for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Natasha Jain from PhillipCapital. Please go ahead.
Thank you for the opportunity. It's heartening to see the positive efforts playing out in your numbers, sir, especially in limiting the downside better than peers this time. I have two questions. First, while your EBITDA margin has risen, both your segment EBIT margins have fallen. Can we attribute this cost entirely to unallocated expense? Would that largely be the consultant cost, which was there in the last quarter's base, but absent? Therefore, going forward, can we assume this as the run-rate?
Thank you, Natasha . Yes, I'll look at the EBITDA, and if I look at 6%, firstly, if you look at it year-on-year, that's a 68 basis point improvement. While the segmental results will have some impact because of overall muted sales, especially in the ECD category, and larger than the usual inventories that we carry. Overall, if you look at it from the EBITDA margin perspective, there will always be some hits and some gains. While there is some benefit of consulting that could have come, but there were larger spends on marketing that we've done. I've always given the, last time also, I gave a guidance of saying that in next seven to eight quarters, we too, our efforts are to attempt and get to double-digit EBITDA margins.
Our quarter one and quarter two, which is the H1, sees a little lower than what we see in the H2 margins. If you look at our overall costs and other things, in fact, all the efforts have been put to bring the cost under control. It's a factor of now getting the top line in. We are well into on our journey towards improved margins.
Understood, sir. Thank you for that answer. My second question is on your lighting segment. While year-on-year comparison won't make sense, but on a QoQ basis, your EBITDA margin has improved very sharply. Given 1Q is seasonally a weak quarter, and especially one of your peers who is also into premium lighting, reported margin decline on account of price deflation. Given that you also are exposed to COB and DOB, but your margins are doing way better. Can you tell us how this margin improvement happened, and is it sustainable going forward?
Natasha, I think the hows are slightly strategic in nature, but broadly speaking, our complete effort on getting the premium or a value-add mix better or improved in our categories is what is helping us improve our margins. Secondly, as I said, we were slightly ahead of the curve from some of the other players in terms of passing on the price increase in the market, which happened due to the regulatory changes of RoHS compliance and other things. That helped us cushion any impact on the costs and other things. I would attribute it to that. Broadly, we've been in the same range of 29%-31%, 32% on our margins in the lighting, and I don't see anything structurally changing in the next few quarters, at least from our side. If there is structural changes in industry that happens and if it impacts, that's something different.
Great, sir. Thank you so much. All the very best.
Thank you, Natasha.
Thank you. The next question is from the line of Nirransh Jain from BNP Paribas. Please go ahead.
Yes, hi, sir. Thank you for the opportunity. Sir, my first question is regarding the channel inventory for fans particularly. Is it fair to understand that the channel inventories are often probably industry specifically for the fan category won't be high considering that last quarter also we kind of reviewed that have been a well-penetrated category. We didn't see much of a channel restocking the category like air coolers, where we saw a lot of restocking that happened. Now what is the channel inventory position and is it fair to assume that for fans, we won't see a large inventory build up in the channel for, I presume it's for the industry?
Nirransh, hi. Thanks for the question. I think when I look at it and when we want to look at it overall national perspective, I think it's going to be very difficult to say. There will be pockets where different products have placed differently. There are pockets where rains have come in early, summers have been far weaker, and the product categories that get sold. Let me give you an example of South. South is largely a TPW market. Rains were higher there and much earlier than the usual level. There'll be some bit of channel corrections that would have happened in the TPW category in the South. There'll be some channel corrections that happened in the North and East in the ceiling fan category. Overall, I think channel has corrected its inventory. More importantly, it's not just the fans.
There is this whole commonality of channel between fans and coolers also. Cooler is an inventory which is still there in the trade. I think that has a little bit of impact on the channel inventories. Otherwise, yes, in the fans across the country, in different regions, depending on the category being pushed, there is a little bit of channel inventory that could have got corrected in Q1.
Got it, sir. Sir, my second question is on the fan on the ECD segment again. Did I get that correctly that you took price hikes in the ECD also, or was it only on the lighting segment?
We did take a price increase in fans in April. That was also a large bit of commodity fluctuations that was happening. Given the fact that there were a huge amount of demand-supply gap, I think a lot of corrections or discounting of competitive pressures. That kind of got diluted within the quarter only.
Okay. Sir, just continuing from the previous question, even I was still wondering what explains this sharp [2 30] basis points drop in the ECD margin, because the BLDC fans sales and our premiums have improved to and w e have taken price hikes also. There is the whole like new factory expenses also involved in this quarter . What explains this [230] basis points drop? I think the answer is the discount thing that would have happened later on. Is there anything else?
The other is also, if you look at it from a marketing expense, it's up by almost 60- 70 basis points versus last year. We had invested, I said, typically 4%-5% is what we will do in marketing. This quarter was about 5.5%. We invested anticipating a very strong summer. We were committed to IPL spends, which I think in the long run has done the right thing to the brand equity. It was a good platform to launch a new BLDC range and the campaign, which was far more youthful and a very different campaign this season.
Sure, sir. That's very helpful. Can I ask one more question in the timeline?
Nirransh, maybe you can come back.
Okay, sir. Thank you.
Thank you. Sorry, we can have the next question.
Ladies and gentlemen, please limit to two questions per participant and come back in the queue for a follow-up. Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. Can you give me the exact volume growth in B2B and B2C side of lighting?
Keshav, hi, thanks for the question. Typically, we don't give exact volumes. B2B largely is not a volume game, it's a project game. B2C is where the volumes matter. We've done double-digit growth in the volume side as far as this is concerned to your question. On the line.
Understood, Got it. Broadly, you have given EBITDA margin guidance, double digit for over seven, eight quarter, possibly what sort of margin you are looking for this year and what sort of top-line growth you are looking?
Keshav, we don't give any forward-looking guidance. Just to give a broad distinction, whatever strategies that we put, we should be better than the industry, much ahead of the curve, the growth is also reflecting in some of our market share gains in fans and lighting, which we track through a third party. We don't give a forward guidance like that.
Got it. One last question from my side. As we understand, and you said fan channel inventory has reduced, but possibly still it's elevated. That is a fair understanding. When we expect it to get normalized?
As I said, these are all different nuances of regions. To my understanding, I think it should be at a normalized level, and I think quarter two is a test of that.
Okay. Because of channel inventory, at least volume won't be impacted in Q2 for fans, at least for Orient Electric, right?
Keshav, we'll have to see that and come back. We are very optimistic given the fact that there is festive build-up that will happen in Q2, given the fact that Diwali this time is slightly earlier than the usual. We are optimistic on that.
Understood. Got it. Very well, sir. Thank you so much, sir.
Thank you, Keshav.
Thank you. The next question is from the line of Aditya from Securities Investment Management. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, we have in-sourced the production of PCB, we have backward integrated to producing BLDC motor and with a strong design and customer knowledge. How has the timelines between conceptualization to commercializing a new product reduced over the years? Can we expect the pace of new product innovation increasing going forward as well?
Aditya, hi, thanks for this question. I think what we've done is, there are two parts when we looked at PCB and we got PCB in-house. A, was to own the design and get a better quality, and that we're seeing from our launches that we've done. The second is from a perspective of timelines and all. At least on the BLDC side, we are seeing about 10%-15% reduction in our NPD timelines. We intend to squeeze it further, and as we speak, there are work happening on saying how do we reduce it. The larger thing is that we spend a lot of time looking at what are the consumer issues that we can solve for, and that's what we are obsessed about. We are working at overall timelines. I hope that answers your question, Aditya.
Sure, sir. Understood. Sir, if you look at our annual report, we have talked about improving our service timelines. If you could just help us understand qualitatively what are we doing to improve our servicing capabilities, and how are we placed against competition in this regard? Have we reached their levels or there is still some catching up to do?
There are two things, a couple of things that we've done. The first thing is that, across the markets, we've got almost about 12 states and larger areas which are directly serviced by us now. There are 19,000 out of the possible 19,700 pin codes that we've serviced last year. We've used a lot of digital platforms and we're kind of digitizing using AI bots on our consumer touch points. We measure the 24-hour TATs and we measure the 48-hour TATs. In some of the cities in the peak seasons and category-specific, we also look at 8-hour TAT. Those are things that we've done. I can't share the TAT numbers and other things. Our TATs or turnaround times within those specified has improved dramatically. We've put a lot of efforts to get our digitization and bots put at the customer touch points.
We've also, as management, started a program called Samvad where we listen to consumer voice. That's the core of what we are wanting to build, is a very consumer-centric. We want to understand, hear the voice of the consumer, and that's the large effort that we're doing. Overall, from a service point of view, we've seen sharp improvements. We're getting that feedback also from the consumers, and as we voice the continuous journey that we do. We've put our service partner network is almost 1,000 + service partners, which makes sure that these 19,000 pin codes are adequately serviced and looked at.
Understood. Sir, how do we fare against competition in this regard? Is there still some work to do, or we are on par with them?
Aditya, it'll be unfair for me to comment on it. When I talk about market shares and other things, we don't put it from our perspective. We looked at third-party data. Unfortunately, in the service, there is no third-party data which benchmarks or at least we don't subscribe to these reports which benchmarks us. My feel is that from a consumer, and we look at it from a consumer perspective, my customers seem to be acknowledging the improvement in our service, and that's what we track it.
Got it. I have just two bookkeeping questions. If you could just give me the lighting business, what is the B2B and B2C mix?
Aditya, given the fact that we are restricting to two questions, you can come back to the queue and I'll take more questions from you later.
Sure, sir.
Thank you.
Ladies and gentlemen, please limit to two questions per participant and come back in the queue for a follow-up. Thank you. The next question is from the line of Sonal from Prescient Capital. Please go ahead.
Hi there. This is Sonal from Prescient Capital. I hope I'm audible.
Yes, Sonal, we can hear you.
Sure, sir. Thanks for taking my question. First, I wanted to understand on the ECD business, if we look at the EBIT margins for Q1 2025 and this quarter, could we attribute the reason for a dip in EBIT margin? If you could just qualitatively explain the reason for the dip.
I think I answered this question. I think Keshav spoke, Nirransh, somebody had asked. There were a couple of things. Obviously, there was this inventories which have gone in. There was marketing expenses which have been much higher than the usual. There's almost a 70 basis points extra that we've spent. The top line's not happened the way it was supposed to happen. There are a lot of factors which are there. By and large, as I said, it's largely an external impact, not a structural impact which is going to bring the margins down. Obviously, the other factor was also competitive pricing pressures. While we did take a price increase in April, but the benefits of that got kind of marginalized due to pricing pressures. There were multiple factors. If I were to give you a holistic view, these were the factors which would have impacted.
Is there anything structurally impacting? No. We continue to focus on premiumization. Our NPDs now contribute more than 20% of our business, and structurally, we are on the right direction. It's a blip in the margins, is what I feel. Obviously, one more thing is on the ECD margins, cooler is -40% and above. That's a one-time impact that the industry will go through.
Given demand hopefully recovers, these margins should restore to higher levels as there's nothing structural, essentially.
Yeah, we anticipate that.
Got it. Sir, my second question is with regard to BLDC. As an end user as well as, I think as a shareholder, I think what we've understood is that Orient is actually working very hard to have a good list of products at the entry level as well as the premium level compared to the competition. Not taking names, but where are we in terms of our like-to-like products vis-a-vis other two, three leading players in the BLDC fan? Are we there in terms of product pricing, specifications, or there is some work to be done there? Just wanted to understand that.
One data point that I'll put across is saying we've grown by 50% year-on-year on BLDC, which means there is traction which is coming in. We've launched almost 80% of my new launches are on BLDC. I don't know whether you are an high-end user or not, but I would encourage you to look at some of our new launches, whether it's Aeon VC—
I am. I did, and I served the market last quarter. That's why I was asking this. Yeah, that's why.
I'm sure you will appreciate the new designs and the minimalistic Aeroslim that we've launched. We've catered to all the pricing segments and consumer needs in the BLDC. On top of our designs and aesthetics, we've also said, "Look, fans are an integral part of your design requirement or a lifestyle requirement." We've launched almost 40 colors, and some of them are very nice, well-researched colors, where we've gone to the architects, designers, consumers, and picked it up from there. We continue to do well in this segment, and it's a continuous journey, and you'll see more of it coming from our side.
Got it, sir. All right. Thank you, sir. I'll fall back in the queue. Thank you.
Sonal, thank you for being a loyal Orient customer.
Thank you. Look forward to talking.
Thank you. The next question is from the line of Dhruv Jain from Ambit Capital. Please go ahead.
Hi. Congratulations on good set of numbers in challenging times. My first question is on lighting. In your presentation and Orient has been doing relatively better versus all the peers in terms of lighting growth. Just wanted to understand, and you also mentioned about distribution expansion in lighting. Just wanted to understand where is Orient today relative to the universe of lighting distribution and how much of it is already tapped? What I'm trying to understand is that this market share gain opportunity and this outperformance, how many years can it last for Orient or how many quarters do you think that there's in terms of market share gains in the lighting segment?
Dhruv, thanks for your question. Let me just step back and review in lighting the gains are, it's a combination of things that you do. The first and foremost is how are you understanding and solving consumer need? Second is what are the kind of products, what segments do you use? The third is a combination of technology and IPs that you bring in. The fourth, which supports all of this is accessibility, and which is where the distribution is acting. I think if I were to go by a third party data, we are improving on our numeric distribution, we are improving on our weighted distribution. I think if I were to compare with leaders, I think we still have a distance to go.
Some of the markets in some of the states where we've done well and caught up on our numeric and weighted distribution, there are some regions in the country where we still have work to do. I think that's a task that we've already defined well for ourselves, and we continue to expand on numeric and weighted both. It's a combination of what all that we do and what we bring on to in a holistic manner that will give us the market share gains. While the industry is reeling under the price erosion, we believe that what we have as an approach should help us gain and continue to gain market shares and values there.
Awesome. T ill when do you think that this price erosion will continue? It's been plaguing the industry for quite some time, are you seeing signs of this bottoming anytime soon?
Dhruv, as I said, we took a price increase in May. That has helped us in navigating some of the pricing pressures. How long will it last? As an industry, I was hoping that it should taper down. I think the rate of price erosion will now slow down, and we should see some of the slowdowns to come in. The good part for us is that we are getting volumes, and look at this, if you gain volume, you get market share. When the price erosion slows down, that whole volume -to-value ratios will improve, and that should give us further gains, at least on the value terms. We are optimistic about that.
My second question is on the Hyderabad plant. Obviously, we've made a very large investment there. Just want to understand from a three-year perspective, how much will it add to your resourcing level? If you could just give us the data point in terms of where we are in terms of fans and sourcing, and after the Hyderabad plant is fully scaled up, where Orient's overall fans and sourcing will be, and how much of it can add to margins as well. Thank you so much.
Dhruv, between in-house and outsource, we don't disclose the data point. As I said in the last call also, we've scaled up well. There is this whole ecosystem of our strategic suppliers who've moved with us to Hyderabad. Till last quarter, when we were building up inventories for the season, almost 50% of what TPW was coming from Hyderabad. Industry's had a little bit of slowdown. That's one blip. In the next three years, we put enough capacities to take care of our next three years' requirement to outpace the industry. At our peak capacity, we do see cost benefits to come in, and that'll all start reflecting in our margins. The question is for the industry to start coming back to the volume growth, which got impacted in a season like this.
We are optimistic that season would start building up now, and then there is the ceiling fan ratcheting, which will happen on the 1st of January. That should start seeing some volume growth for the industry.
Great. Thank you so much, and all the best.
Thank you.
Thank you. The next question is from the line of Arshia Khosla from Nirmal Bang Institutional Equities. Please go ahead.
Yeah, hi. Thanks for taking my question. Sir, my question is, in the previous quarter, you had mentioned that you've listed ourselves in the quick commerce platforms. Just wanted to understand what all products are in the quick commerce platforms and are the sales substantial for us?
Arshia, thanks. Yes, we did. Our products are available on quick commerce, both Blinkit, Zepto, and we will also look at other platforms which are coming in. Largely, all products and SKUs which are very intuitive convenience that a consumer would look at it, whether it's a fan in the summer that they want. We add coolers there, we've put freezers there, we've put irons there, we've got lighting products there, we've got wiring accessories there. As we scale up, and I said, we are solving for consumers and consumer convenience. This platform is meant for consumer discovery and convenience. We are participating well there.
Understood, sir. Has it started adding on to our sales as of now?
Yes, it has. Is it very significant in terms of-- If your question is that if it's quite like FMCG and especially the staple, it may not be that for the industry as of now, but we do see this as a platform where consumers will look at some of the categories or some of the products where convenience and here and now is required.
Understood, sir. That's absolutely fine. Thank you.
Thank you, Arshia.
Thank you. The next question is from the line of Shiv kumar Prajapati from Ambit Investment Advisors. Please go ahead.
Yeah, hi. Thanks for having my question. My first question is, given our GTM success in South and upcoming rollout in few more zones, what has been the observed retailer churn rate from competitors, say Crompton or Usha or some other players?
Shiv, thanks for the question. What you don't look at is the churn because most of the retailers are multi-brand outlets. What you look at is the counter share. We are seeing. When I say when I get a better market share, my counter shares go up. We see three parameters when we look at our success and which are lead indicators for our output of market share, MD, WD, and counter share. All three, when we do this, we look at these lead indicators. When these lead indicators' needle starts to move up, we know that the market share will go up. It's not the churn that happens, you get a slightly better counter shares.
Okay. Sir, given this strategy is live in multiple states, how are we measuring our cost to serve or say, order fill rate compared to the legacy model?
Our logistics, when we go direct to a particular market, we put up our logistics support there, we've got our own logistics performance and fill rate measurements, that we track it. In all our markets, whether it's an MD market or a DTM market, our endeavor is to make sure that whether it's the end consumer or the retail, those are serviced well and all our markets, including our MD markets, that's something that they work on.
Okay. Sir, is there any categories that you are considering to exit due to poor scalability or margin dilution?
Not as of now, Shiv. If we ever do, we will let you know.
Sure, sir. Can I fit in another question?
Shiv, you can come back to the queue.
Sure, sir. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Prathamesh Rane from Elara Securities. Please go ahead.
Yeah. Hello, sir. Congratulations for the good quarter despite the challenge. My only question was that, did you witness volume de-growth of 40% in coolers or as an industry perspective you are talking about?
Prathamesh, thanks. As I said, we've looked at, when I say 40% and more, that's the value volume de-growth for us. From an industry perspective also, while I don't have industry, my third-party indications data says that industry would also be in that range. Unlike anything else, this product has a very short consumer offtake window. Practically speaking, six to eight weeks, and that six to eight weeks, unfortunately, got impacted with earlier-than-usual rains across the country.
Got you, sir. Thank you, sir. I'll fall back in the queue.
Thank you. The next question is from the line of Nikhat Koor from Dolat Capital. Please go ahead.
Thank you for taking my question. My question is regarding solar products. Solar products is gaining a lot of traction. Are we looking to enter any solar product category? My second question is regarding the BEE transition. Now that the fans industry will see a BEE transition from 1st January. Are we expecting any kind of disruption or any kind of price increases ahead of the BEE energy change?
Nikhat, thanks. As we speak, we have some of the solar products in our lighting, both from a B2C perspective and from a B2B perspective, we have solar products there. Getting into more solar products, which are from an end consumer perspective, we keep evaluating that. If the question is, are we going to get into solar category? Maybe, maybe not as of now. Your second question was on the ratcheting or the BEE star rating ratcheting, which will happen on 1st of January. We've got five months, we're preparing our complete action plan to make sure that there is no disruption or least disruption that happens. Yes, when the ratcheting happens, which is basically a two star will become one star and a one star will become zero, there will be some price increase or a cost increase that will happen.
It will get passed on to the consumers. There is still four, five months as an industry. Hopefully, because when the first time the star rating happened, we went through a learning. I think those learnings will come handy. As we speak, we are preparing for the ratcheting. That, just to clarify, that's only in the ceiling fan.
Okay, sir. Thank you.
Thank you. The next question is from the line of Niraj Kamtekar from Prospero Tree. Please go ahead.
Hello, sir. Am I audible?
Hello, Niraj. Yes, you are audible.
You mentioned that there is a flat demand in fans due to unseasonal rain. At the same time, the number of new houses are built is going up. Why our sales growth is low and was it because of more competition?
Niraj, you have to understand, there is different segments. There is a new house segment, which is a certain percentage of the industry sales that happens. Then there is replacement, which is renovation-led replacement. That's another percentage of the overall sale. There is a large upgrade slash, genuine requirements happening. That's another segment. Some segments will continue to grow, could be triggered by the housing segment and all. In the housing segment, you also have to see how many houses have got occupied because fans get used when the occupancy levels in a housing sector goes up. That's one factor. Otherwise, overall, some segments or some needs of the consumer will pull it up. There were some seasonal needs which brought it down. There were multiple factors which impacted the industry.
Okay. Now, what steps we have taken to bring down the inventory?
First and the foremost step that we took was to make sure that we don't add to it. We didn't produce once we were very clear that the season is not looking like the way it was supposed and anticipated. We did carry, anticipating a good season. As we speak, there is inventory planning and production planning, which will make sure that in Q2 we normalize our inventory level.
Okay. Thank you.
Thank you, sir. Thank you.
Thank you. Ladies and gentlemen, please limit to one question per participant and come back in a queue for a follow-up. The next question is from the line of Nirransh Jain from BNP Paribas. Please go ahead.
Hi, sir. Thank you for the opportunity again. My question was more from a long-term perspective against the efficiency on the ad spend. You said that you continue to deliver ad spend of 4%-5% of sales. My question has been that we have seen the ad spend growing higher than the top-line growth over the years, and I think that the idea has been that over the years it should ideally drop down as a percentage of sales as the brand gets more recognized and more customer acceptance. How do you look at it in terms of keeping the ad spend at a higher level to drive our sales? In that case, are the endeavors to get to the double-digit margin will keep on getting pushed further? Just wanted your thoughts on this.
Nirransh, hi. Thanks for this question. I think, while we look at double digits, it's an output. You have to look at what are the inputs that we're wanting to trigger. One of the inputs that we've been wanting to trigger is saying, how do we have a balanced portfolio? How do we get some of our other categories to do much better than what they're doing? In that direction, lighting was one of the identified one, and we are seeing the traction happening there. We're wanting to build a brand which is a larger consumer-centric brand and not just fans only. That's where the marketing spends will go to build core categories of lighting, fans, and into some of the new categories that we're pushing our efforts on. Once that happens, as a percentage, it will come down.
Both in the B2B and B2C side, we will remain far more connected as a brand in the minds of the consumer.
Okay, sir. Sir, secondly, I wanted to also check if there will be any slowdown in the B2B lighting specifically in this quarter? I was just finding that we have seen double-digit growth in switchgear wires and then B2C also probably like a low single-digit growth. In that case, we are seeing some moderation on a quarter basis on lighting, especially in the government cadence also was on a higher side. What explains this slight quarter-on-quarter decline? Are we seeing a slowdown in the B2B for us?
There is some slowdown in some of the government-led infrastructure projects, we see it as temporary, I think as I said, there was this temporary sentiment that went down, or there was a little bit of hold during May when there were geopolitical tensions. We do expect these to come back now.
Sure, sir. That's very helpful. Thank you, all the best.
Thank you, Nirransh. Pari, we'll take one more question.
Thank you. The next question is from the line of Shivkumar Prajapati from Ambit Investment Advisors. Please go ahead.
Yeah, thanks for taking my question again. I have a couple of questions. Are we exploring any export opportunities for our new product categories, say, wires and cables or the BLDC fans?
Shiv, yes. At least on the fan side, different categories, including markets where energy-efficient fans are there. As we speak, we do keep exploring markets, we continue to do that. For wires, we are wanting to first build up domestic capabilities, then we look at balance. Switchgear, obviously, we do export some bit, we continue to make our efforts to make sure that some of our switchgears get more traction on the export side.
Okay, got it. Sir, how do we see Orient's position evolving in the next three to five years? Is it as a multi-category volume player or as a high-margin premium brand player?
We've been very consistent in our narrative around the organization saying we are wanting to be a consumer-centric brand which looks at solving consumer problems. Premiumization is a strategy that we're building. We'll have a well-balanced portfolio, and the premiumization effort, which is yielding some results, is giving us the confidence of moving towards a double-digit margin. Are we going to be a value-for-money volume brand? Definitely no.
Okay. Sir, given the emerging categories, say, wires or switchgear at a nascent stage, how do we prioritize our CapEx and the marketing spend across these verticals?
Right now, as I said, our marketing monies are now building two core categories, strengthening our fans category and all the efforts that we're doing on the premiumization on the fan side, then building lighting. While we do this has a one Orient as a mother brand impact, which will have a trickle-down impact on the emerging categories. Emerging categories will have differentiated spends to be done, maybe at the retail visibility. At a due course, when we start seeing volumes there, we will then take it at a larger level.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand over the conference to management for closing comments.
Thank you, everyone. Thank you for your questions. It keeps us on our toes, and thank you for the encouragement. We look forward for some revivals to happen, and we are very optimistic given the fact that there is festive rebound that we hope to see. Thank you so much, Pari and Bhavani, for conducting this. Have a good evening. Thank you so much.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and now you may disconnect your line.