Q1 21/22

Aug 9, 2021

Quarterly report

Ladies and gentlemen, good day, and welcome to the Valtas Limited Q1 FY 'twenty two Earnings Conference Call hosted by HDFC Securities Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Naveen Trivedi from HDFC Securities Limited. Thank you, and over to you, sir. Yes. Hi. Good afternoon, everyone. On behalf of HDFC Securities, I would like to welcome the management of Voltas Limited to discuss the post 1Q F 'twenty two results. We have with us today the senior management of Voltas represented by Mr. Jitender Verma, EVP and CFO Mr. Manish Desai at Corporate Finance Mr. Vebhav Ora, Manager, Corporate Finance. I would now hand over the call to the management for their comments. Thank you and over to you, sir. Hi, good afternoon everyone. I hope I'm audible for everyone. So on behalf of Vultrase, we'd like to present to you the analysis of results for quarter ended thirtieth June twenty twenty one, which is the quarter one for financial year 2022. As we were ending the quarter four twenty twenty one, on the lower base of the previous year, economics and corporates alike projected for robust growth given the visibility of multiple green shoots in forthcoming quarters. However, exactly at the same time, the pandemic re erupted like a tsunami wave in several countries across the globe. Pace of vaccinations assisted in controlling the casualty. The anticipated growth in recoveries does not seem to be a surety even in geographies where infections seem to be under control. To add fuel to the pandemic growth, the commodity prices have seen unabated increase quarter on quarter, which is causing inflation inching towards pre pandemic level. In addition, the container freight rates have been have seen a sharp escalation amid the global trade disruptions, widening supply demand gap owing to pandemic. Considering the above facts, the global economy is projected to grow at the rate of 6% in 2021 and an estimated 4.9% in 2022. However, prospects for emerging markets and developing economies have been downgraded for 2021, especially for Asia, amid the severity of second wave impacting the economic recovery. Back home in India, impact of second COVID wave was more severe and resulted in loss of life and slowed down the economic activities at unprecedented levels. Consequences of the same have been witnessed in the fall of PMI and rising of inflation given the supply chain disruption and cost increases. Unlike the nationwide lockdown imposed by the center in previous year, continuation of business activity this year was governed by the states given the spread of the virus. These regional lockdowns had mixed impact to demand and supply of consumer durables. Optimism was evident across equity markets in contrast to real economy, and Sensate touched new highs supported by significant FII flows and a growing number of retail participants. In this overall context, we at Voltas continued our journey and reported a 39% growth revenue from operations at INR1767 crores as compared to previous quarter. The profit before tax saw even a higher growth over 56% from INR108 crores to INR168 crores in current quarter. Non annualized EPS for a face value per share of INR1 for the quarter was consequently higher at INR3.68 ahead of the previous year at INR2.45. Snapshot of our results this quarter show segment A unitary cooling quarter one at INR963 crores, segment B engineering projects at INR688 crores, segment C engineering Products at INR115 crores for a total income from operations of INR1767 crores. The profit before tax for segment A Unit three Cooling INR118 crores, segment B engineering projects, INR31 crores, segment C engineering products at INR38 crores, and allocated of INR18 crores, contributing to profit before tax of INR168 crores. In our segment A unitary cooling products, limited operational hours and days imposed as part of regional lockdowns by various states and local authorities throughout the quarter took a stroll on the consumer durables industry as a whole, especially for cooling products market. During the period that has traditionally been the peak season for sales. Quick and nimble to respond, aided by strong 22,000 touch points across the country, Team Voltaz grabbed the opportunity and managed to grow even in such unprecedented times. Meanwhile, patchy summers in South And East regions continued to be a challenge, but robust sales in North And Central regions helped balance the performance. Focus on the inverter subcategory with competitive pricing and larger number of SKUs yielded a favorable outcome. Inverter sales growth was 18%, well ahead of the previous year. Overall, in the AC segment, Voltas continues to retain undisputed leadership with an exit June market share of 26.7% at multi brand outlets. Continued leverage with trade and distribution, contribution from exports, healthier model mix from B2B accounts helped a stellar growth in the commercial refrigeration vertical in quarter one. Launch of new SKUs, increased number of touch points and acceptance of products resulted in higher growth in the current quarter despite availability of limited time window of sales for air cooler category. Effective first April twenty twenty one, the group has reorganized the reporting of commercial air conditioning and customer care business from segment B, electromechanical projects and services to segment A, under unitary cooling products for comfort and commercial use to align with the business objectives of the company. Commercial air conditioning business includes sales of VRF systems, chillers, ducted units, vapor absorption machines, etcetera, and customer care and retrofit business. Performance from this vertical also improved during the quarter. With this restatement, all product sales will henceforth be reported under segment eight, unitary cooling products for comfort and commercial use. Better product mix coupled with planned procurement of inventories helped to partially mitigate the increased cost of commodity prices and higher logistics costs. We have continued with various cost austerity measures. However, certain customer centric sales promotional expenses were incurred during the quarter, leading to higher selling and distribution expenses. As a result, turnover grew about 19% in current quarter and the segment EBIT was INR118 crores as compared to INR114 crores in the previous year. For segment B, which is electromechanical projects and services, construction activities were allowed in the current quarter, unlike national lockdown in previous year. This provided relatively easier access to the project sites, resulting in higher progress in execution of projects in both domestic and international markets, leading to a 67% growth in segment revenue for the quarter to INR688 crores as compared to the previous corresponding quarter of INR412 crores. Progress of the projects and a centrally driven focus on the collection helped to restrict ECL provisions, resulting in improvement in segment profit of INR31 crores as compared to loss of INR44 crores in previous year. That said, weakened sentiment of delayed announcement of CapEx plans by potential clients across the operational geographies coupled with diligent choice of orders has actually translated into subdued, but high quality order booking during the quarter. Nevertheless, total carryforward order book at INR 6,149 crores as at thirtieth June twenty twenty one provides an adequate level of forward revenue visibility. The carry forward order book for domestic projects at Rs. Crores contained a mix of orders across water, HVAC, rural electrification, solar and urban infra activities. The international order book of INR2447 crores represented MEP work mainly in UAE and Qatar. Segment C, that is Engineering Products and Services. Segment revenue and results for the quarter were at INR115 crores and INR38 crores, depicting growth of 14293%, respectively. Both Mozambique and India operations have contributed to this performance backed by renewal of the contracts as well as strong order book for crushing and screening equipment. After sales support and renewed demand for capital machinery, both in spinning and post spinning, has contributed significantly to the bottom line for this vertical. Announcement of much awaited PLI scheme will further boost the sentiments for capital machinery industry. However, supply chain disruption may pose some inherent challenges. Volta's Backhoe. Production at our Sanant factory surpassed milestone of five lakh units since its opening, and cumulative sales since inception crossed 1,000,000 units. VOLTBAC products continue to be accepted well in the market, and we are happy to witness significant demand pull from the trade. We are also happy to inform that Worldpac's market share in the highly competitive segment of refrigerators and washing machines has improved to 3.12.7% year to date, respectively. In terms of distribution, billing points have been scaled up to exceed 1,200 in numbers. Accelerated opening of exclusive brand shops and experience zones, along with cost effective digital marketing, should help in increasing reach and augmenting brand visibility. Distribution and other synergies with Voltas continue to be aggressively leveraged to achieve the overall objective of breakeven and the targeted market share. Outlook. Although quarter two is a lean period for cooling products, start of festival period may witness a spurt in demand. It will be however interesting to see the impact of myriad of factors such as anticipated third COVID wave, pace of vaccination and opening up of economy at large. We continue with our sharper focus on working capital management and conservation of cash while remaining cautiously optimistic. Thank you for my presentation. We can take up the question and answers once the host is ready with that. Thank you very much. We will now begin the question and answer session. Session. The first question is from the line of Ravi Swaminathan from Spark Capital. Please go ahead. Sir, thanks a lot for taking my question. My first question is with respect to the reorganization of the reporting of commercial air conditioning segment. So what kind of revenue which got reported from the electromechanical project segment to the UCP segment? And what kind of profitability was there for that revenue? Ravi, this is Thank you. Yeah. Ravi, can you hear me? Yeah. Yes, sir. I'm able to hear you. Yeah. Ravi, this is Manish over here. Yes. In terms of the CAC, we would not like to give specific numbers. But in terms of the overall contribution, it is marginal. If I look from the profitability perspective, it is slightly lower than what we have in UPG. But since our focus is there to improve on our CAC side, gradually, we may see that the on a EBIT margin perspective as well, we are seeing a good amount of improvement. Okay. And my second question is with respect to the you had mentioned about some customer centric spend, which we had done. So if you can tell what is that and once again if you can quantify that will be great. Ravi, this is Jitender. In terms of the customer centric sales promotion activity, first I'd like to mention to you that last year when the national lockdown happened, that happened all across and no activities, nothing was allowed to be done. So therefore, the expenses at that time did not happen or occur. However, in this quarter, the lockdown was sporadic, regional. And I think we all remember that the IPL itself had also started in the beginning for some days. So keeping in mind that certain expenses related to advertising, related to product promotion, we had already started those activities and those expenses were spent. And therefore, when you compare from previous quarter to this quarter, there is an additional spend in this quarter. And as a policy, we I cannot disclose the number of that spend because we do not provide numbers for how much we have spent on advertisements and stuff like that. I hope I have answered. Got it, sir. And my final question is with respect to price increases, have we done with the price increases to compensate for the input cost increase or is there some more on cards? Thanks. As far as the price increases are concerned, I would say this is an ongoing dynamic process. Commodity costs increases, which have happened in the past, have actually necessitated an increase in our prices across products. We also have to watch the competition, though we continue to maintain our leadership position. So I wouldn't say that there is a kind of a full stop on anything. I mean, it's a dynamic market. We have to wait and watch at all given times. And we will take the approach, which is most judicious for the optimum profitability and also keeping in mind the steps taken by the competition and the acceptance by the customers. What kind of pricing you would have taken in EAC, sir, past six months? Any rough sense? If I want to talk about the price increase, there is what Mr. Vermaat at least said there is a time lag impact between the cost and the price hike. The judicious call being taken looking to dynamic demographics and the dynamics of the market, including the competition. General price increase, what we have taken in the current year, if I look into the current year, will range anywhere between 8% to 10%. So that's where it stands. The some of the hike will be across the market and some of the price hike will be specific to their SKUs and specific to the graph in the markets where we feel that we can expect or we can pass on the increased cost today. Got it. Thanks. Thank you. The next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead. Hi, sir. Thanks for taking my question. And I'm sorry, I'm just harping back on the same reorganization of the commercial revenue commercial AC revenue in the UCP segment. Sir, when you have given your numbers, restating q four and q one, there is a difference of restated numbers and the numbers which were earlier given. And it's about closer to 218 for q four and hundred and 4 crores on the revenue in the q one last year, '21. And similarly, on the EBIT level, there is a difference of 36 crores and 4 and a half crores on the EBIT side. So, you know, I understand you said it's minimal, but it'll be really great if you can throw some light, you know, what's the kind of size of revenue this business is for us, and what was the rationale of this move? That'll be really helpful because it's still on a quarterly basis looking at heavy numbers. So that'll be really helpful, sir. Ratin, if I look from the see, let me talk about the business first. So we have clearly specified the kind of products we are selling under the commercial condition, which includes the VRF duct tape and other stuff. In terms of the overall revenue, I can say that if I were to merge both the businesses, the CAC business will contribute anywhere between 10% to 15% on the overall turnover side. And if I look from the EBIT result perspective, our contribution will not be so high because we are in the process of strengthening the business to a a larger extent, both in terms of the revenue as well as on the result to revenue percentage. Having said that, if I look the rationale behind it is, as you all know that we have executed the business transfer agreement to transfer the domestic project business to the universal over there. Originally, the project business and the CAC business is working closely on that. Now the CAC business itself is going into expansion to adaptable and all, which clearly classify under the cooling product segment. So that was the precise reason why we have decided that we should reorganize or rereporting the numbers to a cooling product because if I look from the customer profile or the review or the kind of mechanism in which we are looking at both the businesses are almost identical, and we are trying to leverage the sourcing as well as the distribution strength for the CAC business as well. Thanks for answering that. And then lastly, on the UCP side, just your take on given that we have further increased our market share, just your take on the inventory positioning of the market, our inventory and how you are looking the secondary sales moving forward? Just the take on that will be really helpful. Thank you, sir. If I look from the our inventory perspective, it is almost comparable to what we have seen in the quarter one last year because both quarters have actually impacted because of the pandemic. Absolute value wise, it will be a difference of hardly anything if I compare if I were to compare with the last quarter actual numbers. I look from the channel partner perspective, there's a sea change over there. In the last quarter, what we have seen is that nobody has witnessed pandemic to such a great extent. So when trade was not prepared to have a balance in their act. However, in the second wave, they have actually, I can say, balanced their working capital management and the stuff and largely the offtake from them on a deal basis, how the secondary is taking place. So in a way, if I look from the general partner perspective, they are very well prepared and managed to have inventory in their shop floors based upon the requirement of regional underlying demand. From the company perspective, yes, the manufacturers and we were expecting some kind of growth over Q1 last year. And to that extent, some higher value of inventory being kept with us by the manufacturer. But anyway, this all inventories what we have in the form of raw material, which should help us going forward if we are seeing the same rebound of demand what we have seen in the last quarter, so the last year for the rest of the year. Got it. Thank you so much. I'll come back in the queue. You. The next question is from the line of Ankur Sharma from HDFC Standard Life Insurance. Please go ahead. Yeah. Hi, sir. Good afternoon. Two questions from my side. One, if you could help us understand the, you know, this impact of the rating change, I believe, which happens end of this year. So so what could be the kind of price increase that you would have to again take, you know, force this rating changes? And more importantly, would you expect a pre buy which typically happens in the December quarter? If I look from the rating change perspective, the if you recollect, the ratings should have been changed from the current year, which is January 2021. So because of the pandemic situation, some of key manufacturers have represented to the ministry and requested for some more time. Now in this year also, the industry faced with the COVID two wave and similar request being made to the industry to defer this increase rating increase or rating change from January 2022 to a different to a longer period. We are hopeful of listening our request by the ministry because pandemic situation is being widely known to all, And you cannot have a rating change when the manufacturers is albeit all industry players are carrying with them some kind of inventors which will undergo a change if this rating exercise or rating design been exercised by them. So are hopeful that it will be done and the progress is good, I can say on that front. If at all, it is getting changed, if you have to go up on a change basis, the cost increase will be somewhere around, I can say, one or 2% at the most on the product cost. Knowing that the demand for four and five star actually picking up nowadays, knowing the kind of advantage what they get it in terms of largely the inverter categories. Okay. Perfect. And my second question, sir, would be on the room AC industry volumes for FY 2022. A, as the market leader, how do you see that kind of shaping up? And do you believe we could maybe match up by 20 levels of volumes, you know, given the way we are? And, you know, so so just trying to get a sense how how are things being post the opening up, you know, and therefore, how do you see the entire year shaping up in terms of volumes? Obviously, value wise, it'll be better because of the price hike, but just trying to understand from a volume volume perspective. That's all. If I if I give you a perception of the idea about the volume, the industry, as you all know, has grown in the March 21, and that the growth is close to 30%. If I look the fallback on this current quarter and if I more go with the two months comparative because April was worst out last year. And this year, we have seen the May postponing some kind of shot over there. So industry growth is not there to a great extent. However, we are attributing these factors to a pandemic situations whereby the second COVID wave was more severe in terms of for lossing losing of lives and losing of jobs and other stuff in this way. So this is a temporary phase we are seeing there because the economy once grows and bounce back. And looking into the per capita income range, which we all are, I think the millennial population with us and the kind of penetration we have on core is a good opportunity, a big opportunity for this category to grow. However, we expect that the what we have perceived at the start of the year 2021 financial year on a growth of going back to the twenty nineteen-twenty twenty level, Looks like twenty twenty one-twenty twenty two to achieve that level will be a difficult task. However, to see some kind of growth over 2021 is possible because we have seen we are entering now into a phase two seasons. Things are settling up. We have a trait of the third COVID wave, which other countries will start witnessing into it. But if I look into the overall vaccination program and the kind of care that the government is pursuing on that matter, we should not see a high fatalities on a COVID-three wave and things should go normalize as we move forward. Okay. Okay. Thank you. And Akhul, one more thing, in fact, somebody asked about the retail change price increase, cost increase. It was not 1% or 2%, it will be somewhere around 3% to 4% of the product cost. I stand corrected on that. Okay. All right. Thank you. The next question is from the line of Paranjit Sevaram from ICICI Securities. Please go ahead. Hello, am I audible? Yes, you are audible. Yes, congrats on good performance and one of the pandemic scenarios. So in this whole context, when I look at your other expenditure, there has been an increase even in a sequential basis, 214 crores. So what are connected to this increase in other expenditures? Ranjit, you know very well, we are in the seasonality of the business. And if I look from the the one category which is UPVG, which is the larger, I can say, driven by the seasonal literature, you'll find that the expenditure, like what mister Verma explained in terms of the sales, brand promotion expenses, we have the consumer subvention scheme and the aggressive brand rollout scheme which we carried out among the shop with the channel partners has resulted into some kind of increase. Over and above, since my volume is also growing, the variable cost related to it will also have seen some kind of increase over there. So these are the things contributing to us on a sequential basis, the higher o and d expenditure. Okay. If I rephrase it, it is largely due towards this branding and some kind of a discount kind of incentive if you have to pay that as you have I'll I'll put largely a sales and marketing expenses, something related to my consumer centric, even what I can say about consumer suspension expenses because we have seen a good amount of volume coming under the consumer suspension scheme in the current quarter compared to the last compared to the last quarter of the similarly of the preceding of the previous year. And third thing is since my volume is growing, some of the expenses which are directly related to my volume will also see a spot over there. And furthermore, one more aspect of inventory or a logistic cost, which you have all seen on a hike of your continuous increase of the oil, which has also contributed to some extent. Okay. And do do we expect this to stabilize going forward or is it kind of will it be there for a couple of quarters now? Ranjit, it's a seasonality in nature. So definitely, quarter two generally for pulling products is a lead period. However, since we are entering into festive season, some of the expenditure on sales and marketing will certainly be there, and we may come up with some kind of a criticism from the consumer perspective because we are reasonably sure that if we give ample opportunities to the consumers to make them walk with the shop floor, it will certainly be on the secondary at the at the general partners end. So some of the expenses will certainly be there. However, we need to wait and watch. I won't be able to quantify the amount, but, obviously, it will be slightly moderated over the seasonality period over the season period. Okay. And secondly, on this, your engineering product, we are hearing a very good uptick in textile and the cycle has turned around. So do you foresee this growth, the momentum to continue and like will that be because we are also there in the not only in the spin, even in the viewing segment. So will it be a very really great time for us or is it like in the ground state things are taking time? Ranjit, we see that there has been an effort from the government also to help push in this sector of textile machinery. And therefore, there is a PLI scheme also helping the textile machinery users. We can expect that this impetus to the growth will continue in quarters to come. Of course, it is a competitive market where the supply of machinery is from various suppliers and also that how the positioning of our textile producers vis a vis other countries takes place. So I would say that on a positive note, yes, we expect this sector to grow. But at the same time, many other things have to fall in place. We'll have to see the policies of the government, how they go ahead on that, yes. Thank you. Mr. Shivranam, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Cherenjit Singh from DSP Mutual Fund. Please go ahead. Hello, sir. Thanks for the opportunity. So my question is one on the Roomycin segment, you talked about that we had built up the inventory. And lot of companies are talking about, you know, maybe the pent up demand may not come up in this time change like we saw last year. So what kind of, you know, inventory level liquidation, how much time it might take? That's my first question. And secondly, on the market share front, you know, if you can highlight the changes among the larger peers, how the market share could have moved in the room AC space. Is there, you know, any major loss of market share by any particular, you know, other larger players? And if we have gained, we would have gained from which, you know, players we believe. Yeah. That's my first question. Okay. If I if I want to give the time period to require or liquidate the inventory, I said, Charengi, that the larger inventory what we have, and I'm sure with all the manufacturers, are in the form of raw materials. So we are, I can say, won't settle with this kind of inventory. Second thing is it may turn out to be a blazing in disguise because, you know, very well the commodity price are inching up quarter on quarter. So some many times, your old inventory may give you some kind of helping hand when you like to leverage on your sourcing cost and try to moderate the price hike to the end consumer. I won't say that we will utilize this opportunity to moderate the price hike. But the question that is that if I have a raw material, I can convert easily into the fixed or the complete unit by seeing the demand how it is shaping up. Demand may not come up, what you rightly said, the general feeling in the market is if the third COVID year is going to hit, it may impact the overall demand. However, we need to be optimistic and seeing the past trend what we have seen. The underlying situation has not undergone a major change. People are working from home. The summer is harsh. We have seen how the temperature was running north during the our entire country with the May and June period, and it was, you know, window available for us to see. Second summer is also expected to be going to be harsh. Country goes to second summer by October between the August, September till November end. So these are the I can say a possible opportunities out there for us to push or to, you know, agree with the demand from the consumer perspective. If I want to give you a time frame, it is difficult to give time frame for it, but the kind of inventory we have and if I do a sale, exactly what I've done in the last year is a big zero growth. We are not expecting this inventory even last even beyond October or I mean November for that matter. However, if you are seeing the growth, certainly definitely the liquidation will much faster than what we are talking about currently. If I look from the market share perspective, yes, the major gain I can say we have done it from the LG. Among the other players, we have not seen any much changes in the ranking of the competition. However, to a certain extent, we have seen that Daikin and Hitachi and Lloyd also increased their market share a bit. However, Samsung has received, I can say, has slowed down on this trajectory of the gaining market share. But the point of loss is not so high. It is ranging between 100 to 100 basis points over there. So thanks for that answer. Just one more question from my side on the project business. So this time, we saw that the projects overall were not impacted significantly because manpower, so they were at the site level in the other center contractors. So for your project, will you please can highlight, you know, how do you see the trajectory going forward in terms of execution on both domestic as well as on the international side? Since since the second wave under the COVID two wave, the construction activity being allowed to operate, but we did face it is wrong to say that we didn't face any challenge, although the activity was allowed as a normal activity because we have seen some kind of migration of the labor force and because that productivity got impacted. But see, in an oral summary, it is better than what we have seen the quarter one last year. As you all know, the quarter two and quarter three onwards, we started getting normalized as far as the workforce and the productivity and access to the project side is concerned. This year, we have to work upon on a quarter two, quarter '3 on execution of the project what we have in our hand. We are expecting that it should work in a normal way unless until COVID-nineteen turns out to be a much harsher than what we have seen so far in the COVID-two and COVID-one wave. Giving aside those factors, we are not seeing any kind of challenges as far as the future execution is concerned. The we are geared up in terms of attending those deadlines, which are there on the project specific, both for domestic and international. We may see some kind of subdued as far as the order inflow is concerned because the governments are now busy in handling those dynamics. So fewer fewer and more lesser number of projects are getting announced, but we are also following very cautious approach towards it in order to ensure that whatever is picked up will turn out to be a healthy and profitable one on a profitable on a sustainable basis. Okay, sir. Thanks for taking the questions. That's all from me. Thank you. The next question is from the line of Bhavin Vetlani from SBI Mutual Fund. Please go ahead. Thank you for the opportunity. The first question is on the inventory. Previous year, you mentioned that inventory levels were about INR 1,000 odd crores. If you could help us with the number this year, it will be useful. The second one is on the A and P spend for the year as a whole on a sustainable basis. What is the level as a percentage of sales that is more sustainable and that we should be expecting? Bhavin, if I want to see 2Q numbers, I would not like to speak to anyone of them because number has no meaning on the M and A side. If you are seeing the good quarter's growth in the coming year, which is rest of the year for the quarter to quarter, then I have given answer on my earlier question, that I can if we are seeing zero growth, even then the liquidity can the inventory can be liquidated by October, November. If you are seeing the growth, the liquidation is much faster. So probably would like to stick to that rather than the absolute numbers to receive the investment there. And if I could give you a second answer, the question answer the second on the A and P side, generally, if you see in the past, in a good, healthy, profitable year, our brand promotion expenses are in the range of three to 3.5% of the revenue. Probably, it is very premature to say how much it will be there for 2122 because larger part of the spend, which we do out of that 4%, the three and a half percent, what I told you, it is in the first quarter. The first quarter is already over now. We are looking into quarter two and quarter three, which is also driven by the fifteenth period. But our spend, anyway, traditionally, is lower and not so great during this quarter to quarter three. Fortunately, we have the IPO getting resumed in the September, October month as the schedule has been allotted to us. That coincides with the good amount of festival like Diwali, Dushera and all. We may see some kind of spend, but overall, I won't see that spend touching to a 3% to 5%, three point five % to 4% of the overall turnover. We have to see how the thing is shaping up, but it will certainly remain low till I can till we can see the volume is coming up by early quarter four. Sure. And the last part is on the profitability front. You've been beating our longer term guidance on the unitary cooling. Would you like to increase our longer term sustainable guidance on the margins given the changes that we have seen on the policy front and the taxation front? See, probably, Vavin, what we look into what could be a sustainable margin for this category. And we believe that in this in addition to the market share, what we have with the relationship with market share, we have a substantial leadership on the margin trajectory as well when I compare with our competition as such. And what we keep on saying that we love to increase our margin, but it should not become a counterproductive or I can say a counter generative order to sustain or in order to further expand our business. Definitely, if you have any more margin, we would like to put back into a brand visibility, r and d, and coming out the innovative products, or I can say giving ammunition to the consumers to spread or to make aware or to fulfill or I can separate it more into this category. And that's why we said we like to maintain our trajectory between 11 to 12%. And we always believe that doing something more than what we said turns out to be better or wants out to be better, rather be highly optimistic and then if it is not sustainable, it will not yield the desired result. Sure. Yes. Thank you so much for taking my questions. Thank you. The next question is from the line of Sheena Barbosa from TRP. Please go ahead. Yes, hi. I think your question largely answered, but I just wanted to understand the impact on the margins. I guess you're saying most of the impact was on the higher sales and promotion rather than commodity costs. It looks like you have passed through a large amount of the commodity cost impact through higher pricing. Sheena, it would be wrong to say that the commodity price increase will largely pass on to the consumers. Mister Jitinder Verma has clarified that there is a timely impact. It's a dynamic situation because we have to get and watch the competition as well. One advantage I can see about the carrying the old inventory with us, when I say old, because you are seeing the commodity price increase happening quarter on quarter. So something which I procured even in December and something which I'm going to place new order in March, definitely, if my December inventory is getting on this quarter, I'll be more at an advantage's position compared to any other brand who is now sourcing in February and selling in the same quarter or the next quarter. So in that sense, we have some advantage with us on a commodity cost price. However, yes, we have impact on the margin, but in a limited way on account of the commodity price and largely attributable towards the marketing and the other expenses spent, which we explained to the as answer to the other questions. However, going forward, if we are not seeing any, I can say, a stock gap or a soft kind of on a commodity price. Every subsequent purchase will come on a higher price and that will be true for all the competitors, all the players in the industry will not be unique to Voltage. And we can see that some kind of higher impact can be felt in the overall margin attributed towards the commodity price hike. Got it, got it. But in general from here as volumes increase, you should see some operating leverage as well that would help your margins, right? Much how much how much you can operate in terms of the scale? If if if copper price and aluminum price are increasing 15% to 18% quarter on quarter, I'm not talking about year on year. We we stopped tracking year on year now because it is no billing over there. So we track now on a quarter on quarter, and the days are not far off, then we could check month on month because we start procuring for the next season, then what we require monthly into it. So if you look from a 15% increase quarter on quarter, how much leverage you're going to achieve on a volume on a scale basis? It has to pass on. There is no, I can say, a second thought among all the industry players in terms of what kind of price I can need to give. It's all up to time and who's taking lead in this aspect. And, certainly, what has been leading this category? I'm not saying that we'll do it at the cost of a market share or the cost of a margin. But there are certain things to follow, which is required to be followed. And as a leader in the industry, only we may be the first one to announce the second price hike or a subsequent price hike in the following quarters. Got it. Thank you very much. Thank you. Ladies and gentlemen, please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the question queue. Next question is from the line of Gopal Lavender from SBI Life Insurance. Please go ahead. Hi, sir. Thanks for the opportunity. And my question is that what would have been the Mr. Lavender, sorry to interrupt you. We can't hear your audio, sir. Please increase your Is better? Yes. Better. Thank you. Sir, what would have been the volume growth in the q one for the industry and for Voltas? If I look from the industry perspective, Gopal, in fact, the third agency is also now collecting the data based upon the call compared to what kind of field survey they used to carry out earlier. The in fact, the current quarter is not compared with the last quarter because you had the April completely washout and data was not available in the last quarter. And if I look from the rest of the period compared to the current quarter, The growth is muted even the industry has not seen a growth of more than one or 2%. But we are reeling this data because we have to put April nearly in the last year and some kind of volume attributable to April in the current year. So we are awaiting those clarity on the data. But otherwise, if I look to like like comparison between May and June, because that's what the comparable period, the the growth is absolutely muted, which is even less than, I can say, one and a half percent or 3%. Okay. And if I just ask you the growth in the North and South? In fact, Gopal, we are difficult in getting the data on a all India basis. So region wise, it's creating more kind of difficulty from the channel or a third party agency perspective. However, we are seeing if I were to see if I were to map my sales or the Valtar sales to the region wise, we will see that the North actually has done better much better, I can say, compared to to the last year. And followed by, I can say, central, west, east, and south. Okay. Sure, sir. And the second question is on this see see, a lot of inventories in the system with the other players also. Are you seeing any aggressive liquidation in the month of July or in the coming months, which are leading us also putting lower prices and all? Sorry, I didn't get your question, Gopal. What are saying? My question is that are you seeing any aggressive liquidation of inventory by the competition? See, we have seen some kind of aggression in the last quarter as well which passed by quarter one because those who are carrying a high amount of inventory suddenly will try to liquidate aggressively the market. But this we are in the industry used to this kind of price disruption because we know in a long term it is difficult to follow. You may find some kind of price deficient by price disruption by one of two brands, But largely, probably, the industry players have been aligned in order to, I can say, taking steps towards how to regulate the marketing and that will be. Sure, sir. And the last question is on this, regarding this rating changes and all and this current commodity inflation, all these putting together like it's amount to around 15% to 18% increase in the, you know, price of an AC. In such a inflationary environment, how do you see the customers' reactions on the, you know, demand? See, what will happen, chief, is the if there's a need of the product, inflation will not play, I can say, a very critic or I can say deterrent for that matter. We are selling the automobile. We have seen none of the industry which has not witnessed the price hike in the last one year on any of the account, maybe commodity, maybe inflation, maybe a general price increase were trying to figure out. But still we are seeing some of the recovery or maybe some of the better recovery took place on those industry players. Because what is driving is the need of the product. And the need of the product for air conditioner is a comfort and convenient during the summertime. And when your larger population is working till today from home to a great extent. So we are hopeful that if the need is there, the district can align to ensure that the consumers will not be resilient as far as the escalation is concerned. When I say like this, the objective is to build some kind of promotional scheme along with the product via extended warranty or be going aggressive consumer submission scheme whereby I say, boss, if my 30,000 product now become 33,000 because it is price high, I'm giving you instead of six months to pay and giving you nine months to pay now without any additional cost to you. So then those kind of consumer submission also plays a larger role as one of the promotional tool to the consumers in order to mitigate their upfront outflow. So there are various ways, Chief, in which we can still work around. However, if I if you have to look from the demand perspective, we are reasonably sure that the demand is going to be there for this category considering the penetration level and the comfort and convenience what people are looking for. Sure, sir. Thank you. Thank you. The next question is from the line of Siddhartha Bera from Nomura. Please go ahead. Yes. Hi, sir. Thanks for the opportunity. Sir, my question is on the VOLTAGE BECCO part of the business. We have seen sequentially, we have been doing well on the market share side. So would it be possible to share some more color on probably the revenue trends on how they have moved quarter on quarter because losses have gone up? Is it purely because of operating leverage or particular reason? So just some thoughts on that. Okay, Sudhak. So see, I and we keep on saying that for Worldpac, the market growth and all the factors are not that kind of relevant because we are very still in niche here as far as the category penetration or category outlook is concerned. So for us, the revenue growth is much, much higher than the industry growth, what we have seen or the growth. Probably industry would have de grown in the last same thing that we see. The growth would have been muted. We are yet to get the data on that front. But as far as work that is concerned, there is no looking back on the volume side. The volume is good. Similar to the spend on the advisements and promotion what we carried out for the Vultas, we have to do much at a higher level for World Bank as well because World Bank is a missing category that require more kind of brand awareness. So some of the expenses towards sales marketing has resulted into a slightly higher losses and some kind of discounts also what we have given our offering on our product resulted into a, I can say, higher losses what we observed in the accounts. But otherwise, revenue wise, it's we won't be able to quantify right now because what we said is let me achieve the 10% target and then we talk about the official numbers to pull out. But that's what we have to say, Siddharth, on this. Okay, sir. Thanks a lot. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Navin Trivedi for closing comments. Yes. Thank you, everyone, for participating in this call. We would like to thank the management of Altas Limited for giving us this opportunity. Sir, do you have any closing comments? Naveen, and thank you everyone. Thanks Manish for taking all the answers. From our side, Voltaz, we would like to thank everyone and on the projections for quarter two, we are looking forward to the season, which is normally a lean period. However, there is a small brief second summer and we expect that to be playing on the positive side. And as a market leader, we are looking at things positively. Thanks once again, everyone, for your time. Thank you. Thank you. Ladies and gentlemen, on behalf of HDFC Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thanks. Thanks a Bye bye.