My first question is on the growth, if you can provide some color about how has been the growth or decline in the categories like fans, pumps and SDA in the quarter. And if you look at these categories which are more impacted like the TPW and air coolers, what percentage of our ECD revenue will be reach in the quarter?
We don't give specific details, but I just want to give you a few color on the overall ECD performance. Our ECD business has declined by about 8%. But when we did an industry benchmark, we saw the industry decline at about 11%, and we saw significant progress has been made on market share across all the categories that we are in. A large part of this decline is attributable only to seasonal categories - table pedestal wall packs, air coolers and residential pumps - while solar pumps doubled YoY and SDA continues at 15-18% trajectory.
Given that this unseasonal impact is likely to be restricted only to Q1, are we seeing any green shoots of improvement now as we go ahead into Q2 for these segments? And on fans, we did showcase and launch multiple new categories across induction and BLDC fans - what percentage of the revenues are currently being contributed by these categories and how should we look at the ramp-up?
From a macro perspective, we see that the long-term demand is pretty much intact and positive. The two new launches under the Nucleus platform - Nucleoid plus the other SKUs - are doing extremely well. We have actually not even completed a pan-India launch on that because demand is outweighing supply. We continue to be the number two player in BLDC and endeavor is to become the number one player, with a few more launches planned in subsequent quarters.
On rooftop solar, if you can indicate about the launch?
We are entering this business. Needless to say, we made the announcement after we've done a bunch of work on how we are going to execute, building the team for that, building up the supply chain for that product. As and when we secure orders, we will come back and disclose them to you.
On solar rooftop - any broad aspirational numbers you can share? I know it's early days, but any feelers you've got from your performance?
You have seen the acceleration that we have done in our solar box business - from 1x to 4x in one year, and already that 4x we will be feeding it down pretty early in the year. Probably we didn't have an experience in solar when we started solar pumps - today we have got a library of business execution capabilities that we have built on technology, procurement and SITC. Our aspirations are high and the category size is also pretty high - total addressable market is available here for us to take a meaningful market share and grow.
Just a clarification - fans, what is the extent of decline for the industry and for us broadly?
We don't give specific data. We have gained market share - that's the way we are looking at it. We have gained market share both in TPW and in ceiling fans. We have kept our financial model tight, which is why the material margin has been held up in spite of where the industry has been, and have also been prudent in our overall spending.
In the MOA, you had mentioned a lot of products where you are not in actually, whether it's a drone or several products. So I just wanted to know like because the several products which are mentioned in the future, do you believe want to venture out in such products?
Large durables is not something that we're looking at. Having said that, over a period of time, there are categories that we think there is right to win beyond that. It is not necessary to state that all those categories we will be entering - it is basis a priority, basis unit economics, scalability for us and the right to win. We wouldn't be getting into a category on a participatory basis - the idea is can we become a top 3 player in that.
Is it possible to get to know more about each segment, possibly how much would be the seasonal category in your overall revenue mix?
We don't give a specific impact to that data. It is not a great exercise to only look at what the seasonal demand categories are. The seasonal demand categories are TPW, air coolers and pumps - resi and agricultural pumps. But the kind of season that we have does have an impact on other areas as well - for example, if you are anticipating a great air cooler season and you don't sell as much, the channel does tend to have large quantities of spare constraints, which also has an impact on the rest of their sales.
What is the capex for upcoming one to two years? And the greenfield you are expanding, can you give us some sense on greenfield, when it will commence, what will be the capex outlay?
We have announced that we are going to put up a greenfield unit, which is going to manufacture for India and abroad. Our indicative capex for that unit is about Rs. 350 Cr. That should be spent in about 2-3 years. You will hear soon enough on when we plan to start this.
On the ECD segment - you mentioned that we have seen green shoots in pumps and fans. So is this an industry affair or specific just to Crompton? And if you can help us with the growth that we should be looking at for the remainder of the year for the ECD segment?
We are not going to give you a forward guidance on what for the year is. As to whether this is an industry phenomena or a Crompton phenomena, my sense is that there is some broad-ranging green shoots. How much of that is Crompton special phenomena, frankly within our pocket, I can't really tell you. But my hope and belief is that going forward, it will be a broader phenomenon.
Two questions on solar pumps. Can you share more details regarding the business model, how are we doing the sourcing arrangements? What are the margins in this business? And what are the working capital? Are these numbers closer to what Crompton's consol numbers are? And on rooftop solar, any further progress updates?
We are responsible for the entire product. The installation is executed by a partner of ours - this is the model that we followed for the last two years. In so far as margins are concerned, at the EBIT level, the margins are very similar to the overall margin that Crompton records. Working capital in this business is comparable to the working capital that we have in other businesses, and return on capital in this business is strong.
On the ECD segment - barring fans, your pumps have done very well, appliances have done very well, and appliances is a very high margin business. If I remove those two, the de-growth in fans is sharper when I talk about margins. We've been talking about a lot of new product developments on the BLDC side - these are high margin products and fans is slightly less seasonal. So can you explain is this completely reverse leverage or something else is pulling the growth here downward?
I'm not sure the conclusions you arrived at are robust. The appliances business has good margins, not necessarily better margins than our fans business or our pumps business. The overall movement in margins in fan is very similar to the movement in margin products in our ECD business. In fact, it is not at all particularly impacted. Even the solar pump business is impacted by unseasonal monsoon rains - our own estimate is that on an industry level, solar pumps have at best been flat.
Just last question on fans again - can you call out how's the inventory as of now and any festive feelers in terms of the other appliance category? How are we seeing them and any green shoots on the ground?
The indications are positive. What we've seen so far in this quarter, indications are that we have some green shoots going forward. Yes, there is fans inventory in the channel - it's beginning to clear and that's also hit by some of the green shoots. The channel is the same channel that sells fans, water heaters, air coolers and TPW - when the season doesn't go as anticipated, inventory buildup means the ability of channel partners to invest also gets constrained, so it does tend to impact businesses which are not explicitly seasonal.
Just on Butterfly, you had a slightly slower start, but would you still hold on to your guidance that you look at double-digit growth this year?
Yes, that's what we're looking at Umang. The trajectory is good, while the quarter ended at a single-digit growth, but the exit of the quarter already gave us positive indication towards double-digit growth.
On the new category foray - now we see that you've made some changes in your MOA and a whole host of categories are added there, including large durables. Can we safely assume that large durables is not being considered at this point?
Yes. Large durables is not considered at this point.
Just building on to the solar pumps part - given the PM-KUSUM scheme is ending in March'26, what is your thought process on this particular line of business? What shape and form and size are you looking at? What are the figures you're getting from the government agencies?
Today there is a good amount of pie facilitated by the PM-KUSUM scheme. Even without subsidy, if a farmer trades a diesel pump for a solar pump at an affordable EMI, the payback would be around 2 to 2.5 years. We have already seen how FAME-1 and FAME-2 has played out in EV - even when subsidies are off, the initial trajectory has showed the sector is moving towards EV. Agri market itself will transition into solar - on an annual basis, agri market has got a potential to scale up to USD 4 billion to USD 5 billion, while solar is very small compared to that as an industry size.
If I look at in terms of seasonality, the pumps will see an impact given the rains are abundant. So I presume even agri pumps also takes a hit and so is the case with the residential. Is that understanding right?
Solar pumps even, for example, if you look at industry as a whole at best was flat, but we have doubled our solar business. The weather does play a role in this entire thing. By and large, the impact was significantly higher in air coolers and TPW. If I take air coolers, TPW and to an extent residential pumps, rest of the portfolio at an aggregate level, we have grown the business in Q1 also.
Next question is related to Butterfly. As you had mentioned, the 40 SKUs have been launched and you are focusing on the major 3 categories there. Is there any geographical expansion is also on the card?
Butterfly even today plays outside of South and considerable business does come from outside of South because we are a strong brand, a strong player in e-commerce and e-commerce is available in multiple other places outside of South. Having said that, the new portfolio and the new brand Refresh helps us accelerate our business thought process in non-South as well. We will be looking at increasing our market share and going as per whatever is our milestone that we have laid for ourselves outside of South.
The EBITDA margin guidance which you have given for Butterfly slight improved by 100 bps in this year that still holds after weak Q1?
Yes, that holds.
On the Lighting segment - we have seen good margin recoveries at least in the last 2 quarters. Just wanted to check on the sustainability of this margin profile for the Lighting segment?
The margin improvement is underpinned by improvements in product mix. We have over a period of time told you that we are pivoting away from a B2C product portfolio which is substantially bulb and battery, and we are growing our panels business, our flood lights business and our outdoor lighting business. These segments now account for a large share of business - panels now are the largest segment in our portfolio and these businesses also continue to grow.