8Good morning, ladies and gentlemen. Welcome to Orient Electric Limited Q4FY22 Earnings Conference Call, hosted by Ambit Capital. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dhruv Jain from Ambit Capital. Thank you, and over to you, sir.
Thank you. Good morning, everyone. Welcome to Orient Electric's Q4 FY22 earnings call. From the management side today we have with us Mr. Rakesh Khanna, Managing Director and CEO, and Mr. Saibal Sengupta, the Chief Financial Officer. Thank you, and over to you, sir, for your opening remarks.
Good morning, everyone. This is Rakesh Khanna. Thank you all for joining us for our full year-end and quarter four's results discussion. I hope everyone is keeping good health. We are not letting our guards down, and all precautions are taken to ensure employee well-being. Financial year 2022 posed several challenges to the business intermittently due to COVID disruptions and geopolitical disturbances. Despite that, we have managed to navigate through these obstacles. The company delivered an overall resilient performance for the year financial year 2022 and posted an aggregate revenue of 21% year-on-year under challenging demand and operational conditions. As lockdowns receded and vaccinations permeated, people's lives started to return to normal gradually. As a result, customer sentiments improved, and we experienced encouraging revival for the demand for electrical durables.
For Q4 financial year 2022, our channel partners' traditional stockpiling of fans and coolers for ongoing summer season fell short of expectations. Negative sentiments arising from Omicron wave caused them to postpone their buying decisions. On the other hand, our lighting and switchgear segment has been performing very well and witnessed good momentum. With a double-digit growth both in top line and bottom line, this segment delivered respectable performance. Clearly, our strategic efforts in the recent past are yielding great traction within this segment. Financial year 2022 was another great example showcasing our abilities for leveraging our brand capital and our distribution strength. We are continuously implementing exciting market activation programs and expanding our geographical reach via our vast distribution network. FY 2022 further witnessed deepening of OE's footprint into southern parts of India and the eastern parts of India.
On the distribution front, we have integrated its digital initiatives into its overall distribution framework, which is increasing adoption on ground and static green marketing sites. The company transitioned its distribution approach for its fan segment in the target markets of Odisha and Bihar with a direct-to-dealer approach from its traditional approach of selling via master distributors. This approach is assisting in increasing Orient's market share in these underpenetrated areas. The main area of concern for financial year 2022 and Q4 was relentless increase in commodity prices. As you all know, the increase in commodity prices has kept margins under pressure since Q1 financial year 2022 and continued until year-end. However, during quarter four financial year 2022, the company decided on taking aggressive price increases on the back of steep cost increase to protect the gross margins. Besides, the favorable swing in consumer luminaires and switches enabled higher gross margins.
All this has maintained the overall gross margin of the company at a steady state quarter-on-quarter at around 38%. Currently, raw material prices are holding due to global demand-supply situation. Inflation is expected to continue over the medium term. Therefore, gradual price revisions and systematic cost reductions is being actively worked upon to cushion the inflationary impact. The ECD segment, which is home to our appliances and fans business, is a significant purchaser of such affected commodities and was therefore impacted the most. The lighting and switchgear segment, which is less connected with the various such commodities, remains minimally impacted. On the expenses front, our other operating costs also saw an upward trend during Q4 and financial year 2022. As operations resumed to normal pre-COVID levels, ancillary costs such as distribution, marketing, and travel, which were essential to drive business growth, came back into the system.
Looking back at our working capital as of 1st March 2022, it has increased by 17 days from a disproportionately eroded base in the previous fiscal year levels. However, due to better working capital management, the working capital base has steadily been improving from 47 days in financial year 2020 to 28 days in financial year 2022. Reductions of stocks in anticipation of seasonal demand, coupled with negative sentiments of price increase and high channel inventory resulted in higher year-end inventory. We expect the overall working capital requirement to continue reducing gradually over the years. The revenue from our Electrical Consumer Durables segment grew overall by an impressive 19% year-on-year for the full financial year 2022 period, even though it dropped by 11% year-on-year in the fourth quarter of financial year 2022.
The negative sentiment surrounding the Omicron wave and the Eastern European conflict during the quarter ended March 2022 kept the demand for ECD segment stagnant until mid-March. However, secondary sales continued unabated as anticipated, which resulted in inventory drawdown on the distributor front as well as helped maintaining market shares. With concerns of Omicron variant receding, we hope that the quarter one would be more optimistic and the demand will pick up. In ECD segment, exciting new products were introduced by consumer insights. Company expanded the BLDC range fans with models like i-Charm, I-Falcon, Ecotech Pro. New range was introduced in decorative fans portfolio with models like Jazz Arc and Falcon Deco. Glassline water heaters and modular magnetic coolers were introduced in the appliances categories. Our lighting and switchgear business has been picking up very well due to multiple years of strategic efforts.
With every passing year, this segment has been increasing the share of the company's total revenue. For FY 2022, I'm pleased to inform that its share in total revenue now stands at 27%. FY 2022 saw the lighting and switchgear business grow impressively. For the quarter, this segment delivered strong growth of 15% YOY. The B2C segment continued to display encouraging traction led by consumer lamps and luminaires, enjoying robust demand from homes, small offices and showrooms. In the B2B segment, both private and government business inquiries have increased and order bookings have started. Greater attention is being given to the tender business within the infrastructure sector. Multiple bids are being sought after by NHAI highways, streetlight national program, the railways, and by the smart cities. The government's push on many of these projects makes the outlook for tender segment of the business look promising.
Furthermore, we are very optimistic about façade lighting range with proven designing strengths and enhanced capability to deliver, which has resulted in prestigious installations like the 4 km long Dwarka Creek Bridge, the Bhakra Nangal Dam, and the Aligarh Smart City. Besides, during the year, a bouquet of new products were launched like emergency LED batten, decorative lights, and others. It is encouraging to see our switchgear business gaining traction and spreading its wings with portfolio expansion and channel expansion into domestic and international markets. Company's new range of switches catering to large premium segment is being well received by channels and consumers alike, and volumes continue to pick up with each month. Going forward, the change in product mix, channel mix, gradual price hikes, easing of commodity prices, and new product launches should allow us to improve our margins from present levels in the medium term.
We have taken up focus projects to speed up Sanchi, which is our cost reduction program, for a total cost outgo, e-commerce to establish Orient as a frontrunner in this growth channel, and GPM for gaining shares in trade channel. We prepare ourselves for the coming omni-channel phygital future. We are initiating the project of greenfield plant in Hyderabad, which is expected to be commissioned towards the end of financial year 2023. This will help us expand our premium product portfolio within ECD division, further improving the quality of our earnings over time.
As I mentioned in my earlier calls, we have continued to invest in our long-term strategic plans, cost control measures, improve efficiency in production, enhancing trade partnerships, and empowering channel partners, which will enable us to grow faster than the market. Most importantly, company continues to reinforce its consumer centricity approach with tangible actions to build up our vision and deliver sustainable growth. This will keep Orient as a highly relevant player in the years to come. On this note, I hand it back to you, Dhruv Jain.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your 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. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to one per participant only. If time permits, you can come back in the question queue for a follow-up question. The first question is on the line of Bhargav Buddhadev from Kotak. Please go ahead.
Yeah. Good morning, team. My first question is on Odisha and Bihar.
Sorry to interrupt. Mr. Buddhadev, your audio is sounding very soft. Can you speak a bit louder?
Yeah. Can you hear me now?
Much better. Thank you. Please proceed.
Yeah. Good morning, team. My first question is, in Odisha and Bihar, we have adopted this direct dealer approach. Is it possible to sort of elaborate a bit in terms of key positive trends that we are seeing here and whether this model is replicable in other states?
Good morning, Bhargav. We have taken up these two markets for going direct. As I have always maintained that we have a very strong base of master distributors who bring phenomenal strength to us in the states where their presence has been since even generations, and the kind of relationships that they enjoy is phenomenal. However, there are states where we have seen that there is under-penetration for various reasons. In these states, we have decided that we will go direct to the market. Both the states are showing very encouraging results. It's a little early to make statement about how it will finally shape up.
All I can tell you is that within the last six months that we have actively started setting up these states, the results are very, very encouraging, and we are happy with our decision. Going forward, I will not like to make any clear statement about it, but I can assure you that wherever the penetration is low, we will take a view on that, and if required, we will make a complete change in the go-to-market strategy in that state.
Okay, understood. My last question is, you mentioned the market share gains in southern states, in fans. Is it possible to sort of quantify a bit in terms of, how has been the market share gains and how has been the increase in the channel footprint? That will be from my side.
Unfortunately, there is no good syndicated data that I can rely on, and make that statement. What I can tell you is that of the total growth that we have achieved, a significant part of the growth has come from south markets.
Okay, understood. How has been the increase in the channel footprint in this region?
The channel footprint, Bhargav, earlier also I maintained that channel footprint we do not measure by the number of, the retail counters we open because our reach is already very large. What is important is how many direct number of counters are we now started influencing and how are we ensuring that our influence on the counter is steadily increasing and the direct reach is increasing. Our direct reach is continuously increasing, and we are adding in the range of 10%-20% in every state in terms of the number of direct reach to the retailers.
Okay, great, sir. Thank you very much, and all the very best.
Thank you, Bhargav.
Thank you. The next question is from the line of Renu Baid from IIFL. Please go ahead.
Yeah. Good morning, everyone, and thanks for the opportunity. My first question is to understand, broadly if we see, the headline performance of APD seems to be much softer than the other players who have reported results. Your comments also on the March update from channel has not been too encouraging. If you can give us some inputs in terms of how has the demand panned out in the last 45 days of the summer period, especially April, May. Is the channel inventory as well as the inventory with which the company has been stocking, has that been eased out?
If you could give us some flavor in terms of overall in the fan segment, where there has been under-recovery on the cost side, what has been the kind of price actions, and by when do we expect to recoup our margins in this portfolio?
Renu, let me answer it in two parts. First is the margin and second is the volume. If you would have noticed, we have been able to implement price increases significantly more than the competition during this particular quarter. We believe that it's important to finally be able to pass on the cost increase to the consumer, because from the consumer side, I don't think there is much reluctance considering the fact that it has a small share of the consumer's wallet and the consumer's total domestic spend. However, there are competitive pressures which will influence our decision and timing on the price increases. With that, we have to also see how the lag in price increase with respect to competition happens. We took a lead during quarter four in terms of price increase with respect to competition.
We sustained it. We believe going forward in quarter one, this pressure will ease out and, overall price increases will happen in the industry. However, April onwards, we are seeing the traction building up much more stronger. What we also measured is the secondary growth. That is the real sale to the consumer. The real sale to the consumer through our market checks has been happening unabated, and that gives us confidence that it is in the interest of the entire industry that the costs are passed on to the consumer. Currently we see a traction building up April, May, and the price increases should happen. Also the commodity should start easing. Some of the commodities we are also seeing have started easing, but it's still volatile.
Possible to quantify the price hikes that we are taking up?
Sir, Ms. Renu, may we request that you return to the question please? There are participants waiting for their turn.
Sorry.
Thank you. The next question is from the line of Praveen Sahay from Edelweiss Financial Services. Please go ahead.
Yeah. Thank you for taking my question. I'll just follow on the last participant question. Can you able to, you know, quantify the price hike in the fan and as well as contribution of a premium fan for a quarter and the year?
The price hike during the year has been in the range of 15%-18%, with a cost increase which has been in the range of 18%-20%. That actually tells the difference in the gross margin that has happened. As of now, we need to increase. If we have to go back to our margins, it is very simple that you understand how much of percentage increase we should get to to regain the desired margins that has historically been the Orient and the industry margins.
Mm-hmm.
Uh-
The premium fans, sir?
The premium fans is again a moving target as to what we decide as a premium, and the industry is still not with a single definition of premium. Because most of the industry talks about premiums of 3,500 onward fans or 3,000 onward fans. Whereas the prices keep on increasing, the categories that start moving into price band keep on changing, and therefore it appears that the premium is growing. Actually speaking, the premium is the top-end fans as we define, and we start from our Aero series onward, which we call the premium fans. That's in the range of 10%.
Okay. Thank you. I'll come back in the queue.
Thank you. Participants, if you have a follow-up question, you may rejoin the queue. Thank you. We'll move on to the next question. That is from the line of Nitin Arora from Axis Capital. Please go ahead.
Hi, sir. Thank you for taking my question. I'm sorry, I'm just trying to add up things here. What I've been able to understand from your opening remarks is we took a call of not sacrificing gross margin at different product levels, and you increase prices rather than chasing for growth, at least at the primary level. Secondary, as you said, the growth was still taking place, which led to the lower inventory in the channel. Is that correct?
Yes, Nitin.
Sir, the external environment in Q1 would not be indifferent, right? I mean, in the medium term, the competitive intensity would be there. Again, if our call is maintaining the gross margin, then you would go for price hike and reduce the inventory part. Or let's say, you know, look for a lower volume growth. I just wanted to understand, is industry growing very significantly higher? That's where the confidence is coming that, you know, things will eventually fall in place from Q1 onwards. If you can help us on the industry growth-wise, even category-wise, like you mentioned about a fridge care, or fans, and plus the rating change which is coming up, do you see a pre-buy there, that's why the confidence is coming? Just if you can articulate that better, it'll be helpful. Thank you, sir.
A brilliant question, Nitin, I must say. I have confidence in the industry and this space, and this particular industry and space has always shown a lot of wisdom in terms of protecting the margins and the shareholders' wealth. And therefore I'm reasonably confident that in some time, the costs will get passed on and the margins across the industry will come in place. Yes, you are right. There is always a lag between different players, because it's an independent call and one or the other player has to take the lead. Again, if you will see the historical movements, the fact that so much of price increase has happened across the industry, all players have moved with a lag of one month plus or minus. That has happened, and it will continue to happen.
I don't think that situation will happen where one player takes the price increase and everybody else doesn't. That's not likely to happen. Our response to the market will also be aligned to how the overall industry is moving. We will ensure that while we protect our margins, we always keep our eyes on the volume also.
Can you comment on the?
Sorry to interrupt, Nitin Arora. Sir, may we request that you return to the question queue? Participants will be done.
Okay.
Thank you. We'll move on to the next question. That is on the line of Rahul Gajare from Haitong Securities. Please go ahead.
Yeah. Hi, good morning, gentlemen. I just have one question. Could you discuss your capacity utilization in the fans and the capacity that you will add at your new Hyderabad facility? Which are the other products that you plan at this new facility? Thanks.
Currently the capacity utilization is of course more than 100% and we are really stretching on our capacity. We are forced to go outsource some of the fans as of now. The capacity in the new Hyderabad factory will start at the average level of around 4 lakh fans per month, which will steadily increase. We will also move the capacities between different factories to ensure that there is a right balance between all the three factories, and it will also be catering to the increased demand.
We are going to be looking at new models, new lines, a lot of automation, a lot of improvement in quality, getting to international levels for the European markets, et cetera, where we need a very high level of finish. This new factory is going to be in the direction of future growth.
Okay. You want to start with 4 lakh, but what is the peak capacity that you are thinking about?
Uh, the...
Rahul, just a small clarification. What Nitin Arora mentioned just now about the capacity of 4 lakhs. Let me tell you the utilization today, this 100% is at the peak levels, and you would appreciate that, it normally swings in between peak and lean. The lean comes down to 40%-50% level. Yes, whatever this 4 lakhs per fan is only the starting position. It will always be a graded upstream of capacity building. To start with, this is the peak of capacity that was offered.
Okay. 4 lakh is going to be the capacity for that?
Yeah.
Okay. Thank you.
Thank you. The next question is on the line of Devansh Nagoria from SiMPL. Please go ahead.
Yeah, sir. Thanks for the opportunity. I think in terms of, I mean, the distributor agreement that you mentioned, of how we have changed it in Odisha and Bihar. I think we had similar issues in Gujarat probably one or two years back. Just trying to understand what is the overall thought process between having a master distributor and doing a go-to-market. Devansh, I'm not sure which issue you are talking about in Gujarat. Gujarat has been very stable. It has been performing well for us. We have a very strong distributor over there. During the sad demise of one of our distributors, the switchover was very smooth to one of the earlier distributors. It continues to have a very strong relation in the market.
I'm not really sure on which particular aspect you are talking about. Let me tell you one thing, that whichever market we find that the current distributor is not able to deliver the results that we want, we are open to make a change. We will ensure that we get full penetration in the market as desired. If we get a very strong master distributor, we will take a very strong master distributor. Since these are very, very few people in the market who have that kind of a strength, we will go direct in the markets where we believe that's better for the market. Okay.
I mean, how does, let's say, since you mentioned largely underpenetrated area is where we are trying to go-to-market, and how would, let's say, margins and working capital fare with having a distributor and going directly? Some direction which you can give. Okay. First thing, it's not going to affect on the working capital. Working capital is likely to remain similar, not much change. In fact, in the new markets, we are entering with far higher discipline because we are starting on a clean slate. We are starting with much, much superior discipline. We believe that our working capital is likely to improve in these markets. Okay.
In terms of market penetration, because we are going direct access to the market, and to the retailers is closer, that will also hopefully help us to build much stronger relation and build market shares. As I said, the initial six months have been very encouraging and we are very happy with the performance in these two markets. Okay. In terms of margin, let's say when we are not paying the distributor margin, master distributor margin and the cost for us to actually go and distribute at retail level. So how does that balance happen? It's likely to remain neutral, because with the distributors, you know, they take up a lot of cost, which we will start incurring directly. However, that margin is saved. It's likely to remain neutral.
A little plus minus, we will see how it goes. Okay. The idea is not about cutting the cost and cutting corners here or there. The idea is about improving the distribution, improving the spread and reach, the quality of distribution, quality of service. That's the idea.
Okay. I think if you can just elaborate on the new product launches that you had mentioned, especially in terms of cooler and appliance category, what is the strategy on these new launches and the thought process that we have at the moment.
The ones we have always been known for the innovative launches that we have been bringing. The product portfolio is very important, and to constantly keep on exciting the customer with new products, new finish is very, very important.
One of the areas where we are working hard to quickly expand the portfolio is in power efficient fans. This is a category which is going to swing phenomenally in some time on both sides, be it in terms of the range, the looks and the feel and the performance of these fans. The market is changing very fast, and this is where we are bringing in very quickly new models. Metal cooler is another area where we are confident that that's going to give us results, and therefore that's one area where we are trying to bring in more models. Although we are being very cautious about slowly bringing in new models and ensuring that they get established well.
Lighting is an area where we are constantly expanding, be it in façade, be it in street light, be it in professional lights. We are constantly expanding there.
Okay. This is it from my side. Thanks a lot.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Aakash Javeri from Perpetual Investment Advisors. Please go ahead.
Hi all. Good morning. Thank you so much for the opportunity. In your opening remarks, you mentioned about, you know, expanding your BLDC range of fans, and just in the previous participant's answer, you mentioned that, one big segment for you would be power efficient fans. My question was that do you see the fan market turning entirely to BLDC in the coming years? The follow-up question to that would be, how has the cost of technology evolved over the last few years for fans? That would be it from my side. Thank you so much.
Aakash, we all know that BEE rating is likely to become mandatory in some time. Although government started aggressively, but for some reason they have been a little slow. But since the main circular has already come, it's a matter of time that will happen. As the awareness in consumers starts going up, and we also know that consumers are very quickly becoming aware about the environment, about power efficiency, green world, et cetera, et cetera. The swing is happening and happening at a very fast pace. Therefore it's important that we expand quickly in this particular segment. How much we will shift, it depends on how quickly the cost of BLDC fan keeps on coming down. A significant part of the BLDC fan cost is in the electronics.
Electronics historically have always got into cost reduction at a very fast speed as soon as the scales start building up. There is a very good chance that the same graph will be seen in this category also, and the cost will start coming down. That's when the swing will happen, but it's a matter of time and difficult to predict how fast that swing will be.
Sure. Thank you so much, sir.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Nirav Vasa from Anand Rathi. Please go ahead.
Hello, sir, and thank you very much for the opportunity. Sir, as you informed that BEE ratings are going to be or expected to be applicable in the country very soon. According to you, what is the significant benefit which can come to the organized players at the cost of unorganized firms? Do you foresee a scenario wherein the unorganized market, which is mainly operating on the lower price bracket, that will be hit hard, or how do you see this rating change impact on the unorganized peers or especially the smaller and local ones? Thank you.
See, slowly we are seeing that the cost gap between the unorganized and the organized is reducing, and that's one of the reasons why organized and unorganized are finding difficult to stay in the market. The consumer also is becoming more involved in this particular category. There was a time when consumers was not involved in this category, and it was just a product right up to the ceiling and not ever to be seen. Now the consumer is more careful. The ceiling heights are coming down. The fans are more visible. They want right brand. They want right quality. They are careful about the power consumption. They are careful about the noise. If all that quality has to be delivered, an organized player is able to deliver it at much lower cost as compared to unorganized.
That's where I think the shift will start happening.
Sir, in the initial launch of BLDC motor fans, according to you, what is the cost increase because of this BLDC thing?
We know that a normal fan then used to cost around INR 1,200. The BLDC fan used to cost the customer INR 2,000, so it was more than twice the price. Today, it has come down to nearly one and a half times the price, and it can steadily come down to 1.2, 1.3 times the cost. That's how it is working.
Thank you, sir.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Dhruv Jain from Ambit Capital. Please go ahead.
Thank you, ma'am. Sir, I had a question on lighting. You mentioned in your investor presentation that the lighting business grew by about 10% this quarter. I just wanted to understand, you know, what would be the price hikes that you would have taken, and if you could just break that up into the, you know, mix change that could have happened and also the raw materials implied to price hikes. Thanks.
Dhruv, in lighting, the price hikes have been fairly nominal. Not much of price hike has happened because, you know, while the commodity price went up, there were good work done by the team in terms of the circuits and the new technology that comes in helps us to really bring down the cost in the circuits. Not much of a price hike had to be taken in lighting.
Last week.
Hello?
Sorry
I'm so sorry, sir. I'm not able to hear you clearly. Hello? Members of the management team, are you able to hear me?
Yes, yes. We can hear you audible.
All right. Dhruv, are you done with your question?
Yes, that's all. Done. Thank you.
Thank you. The next question is on the line of Amber Singhania from Nippon India AMC. Please go ahead.
Yeah. Hi, sir. My question pertains to the BLDC answers which you have done earlier. Just one clarification, the earlier timeline of July 2022 for BEE rating, does that mean that that is not there anymore and it will be a new timeline which will be coming in? That is one. Secondly, sir, just wanted to understand from the BLDC perspective, how do you see the market panning out in terms of do you see that replacement demand will come in this segment significantly? Because what I understand, please correct me if I'm wrong, the fan is not a serious energy guzzler. The incentive for people who are already having fans to replace with a BLDC fan is not significantly higher at this juncture.
How do you see that segment panning out? Is there any color from the government side that the government agencies will start replacing faster or how things will pan out on that front? If you can shed some light on that. Thank you.
Yeah. Amber, the first thing is on the government deadline of July, not likely to happen because government has to give, technically around six months' notice. Now since we are already in May, looks very difficult that July will happen. However, we are still waiting to hear from the government. Most likely a new timeline will come. That's my personal understanding. The second is fan, the power guzzler. Actually speaking, in domestic area, fans is the second biggest power guzzler in houses. It's we used to feel that it's air conditioners, but air conditioners, heaters are not as much power guzzlers because fan runs full time. That's why it consumes a lot of electricity.
The normal payback of a good power efficient fan is 1-1.5 years. That's it. The payback is very fast. Having said that, will everybody replace? Not very likely. Does the induction fan has its own advantage? Yes. They are a lot more rugged inductions. But overall, as the awareness starts spreading and as the new generation coming up is more sensitive towards the environment, the swing is happening, the swing will happen. How fast? We all will see. As far as we are concerned, we are ready with the full BLDC range. We have a very strong induction fan range, and we are capable of responding whichever way the market will move.
Okay. Sir, is there any support from the government side or the institution you think might shift faster to BLDC in terms of replacements, because they are all old fans in the offices, government offices and all. Is there any support which is communicated by the government or given any indication in that line?
Government has always encouraged these by insisting on the STAR guidelines. In all products we have seen government has come out with STAR guidelines, and thereafter leaves it to consumer awareness and preference to move into more power efficient products, and that's what is likely to happen in fans also.
Understood. Sir, just one last thing is, the current capacities of the old fans, is it fungible towards BLDC over a period of time, when the industry moves faster to the BLDC side? Is it fungible or do we need to put up the completely separate capacity for that?
You see, this particular industry is not very capital intensive, so the shifts are not very expensive. They're fairly easy to shift, so these costs are not huge.
Okay. Fine, sir. That's it from my side. Thank you very much.
Thank you. We'll move on to the next question. That is on the line of Balasubramanian from Arihant Capital. Please go ahead.
Good morning, sir. Thank you so much for taking my question. In terms of market share, you're gaining market share from existing players or, like in terms of, market growth?
Yeah, of course. When we say we're gaining market share, this is from existing players. Market is spread out. We have a large number of existing players in the market. While you would see that some of the players are becoming stronger and emerging stronger, and some of the players have kind of lost out. Yes, we are gaining at the cost of existing players. Some of them are unorganized, some of them are organized. It's a mix of all.
Okay, sir. In terms of price hikes, like how you are relative with your peers? Like you said, you have mentioned 15%-18% price hike across the products. How you are relative with your peers?
Sorry, I've not understood the question right. Please, can you repeat?
Sir, in price hikes you have mentioned 15%-18% across the products. How you are relative with your peers? How much, like, your peers are implementing their price hikes?
How is it compared with the peers?
How much is?
You see, the peers is also in the similar range. This particular quarter, the peers' hike will be much lesser, and that can be seen from the published results, where the gross margins have got, either hit or got protected. That's where it's a good way to make a check as to how much price hikes have been there by one player versus the other.
Yes, sir. After you have mentioned like the growth.
Sorry, Mr. Balasubramanian. Sir, may we request that you return to the question queue? There are participants waiting for their turn.
Sorry.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to one per participant only. The next question is on the line. Shubham Agarwal from InCred Capital. Please go ahead.
Hey. Hi. Thank you for taking my question. Just a small question with respect to the exports. Could you just comment how have the exports been this year in FY 2022, and given that you're already operating at 100% capacity or more than that, should we expect exports to broadly be stable for FY 2023 as well at the same level?
You have two questions. One is about the capacity and second about the exports. About the capacity, as Sai has clarified, the capacity when I say 100% plus utilization, it is during the peak time. There are times when the capacity utilization is not 100%. The second is about the export. We continue to be the largest exporter. There are markets which are doing well for us, and there are markets which have faced headwinds. Markets like Sudan, markets like Sri Lanka, they have had geopolitical issues, and we are all aware, and those are the headwinds. There are markets which are disturbed because of the Eastern Europe disturbance, so that's also one of the restrictions. Given all that, we expect the export to remain stable.
Okay, thank you, sir.
Thank you. The next question is on the line of Naushad Chaudhary from Aditya Birla AMC. Please go ahead.
Yeah, hi, thanks for the opportunity. I just wanted to understand, sir, in terms of our long-term growth journey, if I see, in last two years from INR 1,600 crore of top line, we have reached to around INR 2,500 crore. You know, from the current base to, you know, take it to INR 4.5 or 5,000 crore of business, what kind of steps the company would need to take, in terms of new category, new geography? What do you think, how long will it take to, you know, to reach to those kind of numbers, sir?
No, sir. Yes, you are right. We are as excited about the future growth, and we have huge plans. Unfortunately, I will not be able to share all the plans with you, they remain confidential because of the business reasons. I can tell you we are very excited about the journey, and we're very positive that the future is very, very good for Orient Electric. I'll tell you a few things, which I have always said. In fans, we are not the number one, and there is no reason why we should not be the best in the market, because we have the best manufacturing facility. We are the largest exporter, which means that we manufacture the best brands at the lowest cost. We have a great brand, a great heritage.
We have a fantastic distribution structure. Therefore, our ability to grow and reach market shares comparable to the leader is very high, and that growth we should go for. In lighting, the size of lighting industry is more than one and a half times that of fans industry. We're fairly small in lighting, and there's a phenomenal opportunity to grow there. Switches, switchgear and other accessories related products, we are very small here, but it's a fantastic market and we are gaining phenomenally good traction in this area. Appliances is very large. E-commerce is coming up at a very fast pace, and that gives a phenomenal opportunity for us to grow at a very high rate. If I had to look at all the growth opportunities in front of us, it is very exciting.
I find no reason why we should not be reaching these numbers, reasonably fast. I will not be able to give you any timelines or any numbers around it, for reasons I stated earlier.
Given our existing categories, you see, the reaching INR 45,000 crore of top line is not a difficult task for us?
Naushad, I gave you all the mathematics. Just put the mathematics on table and you will find that these numbers are so much achievable. That's what makes our, you know, the whole organization so excited about the journey ahead.
Understood. Connected to this question only, qualitatively, if you see your next three to four years journey, do you think it can be more exciting than what we have experienced in past four to five years? Or, how do you see your next three to four years in terms of your excitement for the business and growth?
Naushad Chaudhary, our last journey few years back has been very exciting because that has brought us here. Last two years because of COVID, yes, there has been a very strong headwind. As COVID headwinds go away, we believe that the journey ahead will be very, very exciting.
Okay. Thank you, and all the best.
Thanks, Naushad Chaudhary.
Thank you. The next question is in the line of Harsh Dhanuka from Ncubate Capital Partners. Please go ahead.
I have just one question in terms of the air coolers. How are you seeing the demand and in terms of the inventory which was a challenge in the, you know, kind of channel last year as well as inventory build, how can we see a normal year for FY 2022-2023 in terms of booking for the next year?
I'm hopeful, Harsh. The entire trade had actually gone into kind of a shell, because after nearly two years, you know, the summer did not happen well. This year, as the summer continues to be promising, I expect the sentiment in the trade to return back and the entire booking process to be good during the period July onwards for the whole year.
Thank you.
Thank you. The next question is in the line of Rahul Gajare from Haitong Securities. Please go ahead.
Sir, thanks for the follow-up. I also have a question connected to air coolers. Could you give us a sense on, you know, the size of the market, how the shift from unorganized to organized has picked up? Which are the brands which have, you know, gained market share? And specifically for your company, you know, in ECD, how much is the sales of air cooler contributing? And what is your market share in the air cooler market? Thank you.
Thanks, Rahul. Very loaded. First thing, I don't think I would want to talk about the competition and which player is doing what in this call. We all are aware that the cooler market is highly polarized in favor of one of two top leaders who garner a significant share. The rest of the players have started this journey around three years back, but since that time, COVID has been hitting and the entire cooler trade has not really gained traction. We expect the market to start opening up now and, given one, two good summers, the whole landscape can shift significantly in favor of the new players also. As far as we are concerned, we continue to remain hopeful.
We will continue to build on coolers as a business. This year itself, we're seeing the traction to be coming back. In terms of unorganized, that continues to be in the range of around 75% or so of the market remains unorganized. Which also gives us an opportunity that the future for organized players will be good. However, a lot of work needs to be done in this particular space because it's not easy to compete with unorganized given their cost structure versus the organized cost structure. The organized players have to bring the cost down to meet that unorganized market. I think it has its own challenges, but the opportunity is vast.
Sir, in INR 1,800 crore of
Hello?
Okay.
Thank you. The next question is from the line of Nikhil Kale from Axis Capital. Please go ahead.
Yeah. Thanks for taking my question. My question is on the fans industry. Fans, we understand that the unorganized market share has now reduced quite a bit. It's maybe close to 15%-20%. Just wanted to understand that going forward, again, there will be some shift, but yeah, I think the larger shift is now done. Growth, I mean, there will, there could be kind of intense competition amongst existing organized players. Do you think that could maybe lead to some margin pressure in the interim? And also, would it be fair to assume that growth going forward will be more driven by ASP increases and premiumization for the larger organized players rather than say a shift from more shift from unorganized players?
Nikhil, I'm afraid your audio was not too very clear. Can we request you to repeat your question a little bit slowly?
Sure. My question was, we understand that the organized, unorganized market in fans is now maybe 15%-20%. The larger organized players now have kind of gathered quite a bit of market share. Growth going forward would be largely driven by premiumization and ASP increases. Is that understanding correct? Given that the headroom to gain market share from unorganized players has now kind of gone down, would it be fair to assume that even margins could be under pressure given increasing competition?
Nikhil, good questions. First thing, the growth is not going to come at the cost of unorganized player. I think the excitement that I talk about in this case is that the growth will come from the consumers themselves. The reason being the very strong shift in consumer preference, awareness, and involvement in this product category. The replacement cycle, which at one time used to be 25 years or so, today people are willing to replace the fan every time they are refurbishing the house. It's a huge shift. The kind of the growth in the decorative segment, in the BLDC segment, in the premium segment is disproportionately high. Therefore, I believe that in the coming few years, the growth will continue to be high in fans as a segment.
Okay, sir. On the margins?
On the margins, I find no reason for margins to go down because this particular space and industry has always ensured that the margins for the industry across are protected. There is a competitive pressure, but it has never been at the cost of margins, and I remain very confident about all the industry, this industry, and therefore the margins should not get hit.
Okay. Thank you.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.
Thank you so much. Thank you and the team for organizing this. I would like to thank all the participants for continuing to show your interest in Orient Electric. I can assure you on behalf of the entire senior leadership of Orient Electric that we remain very, very excited and committed towards this business. We all see a very beautiful future ahead of us. It's an exciting space. The space is evolving very fast. It's growing fast, and it poses great and tremendous opportunities in front of us. Thank you once again for keeping faith in us. See you next quarter. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Ambit Capital, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.