Anil Rai Gupta, CMD, Havells India, says “Lloyds is improving the margins and that is a sizable part of the overall business. But within Havells, there were massive investments of brand building which will normalise over the next quarter. So we will see improvements in the overall EBITDA margins for the company.”
Given that the company has seen the lowest growth in nearly three years and this has come despite the festive season, what have been some of the challenges and when do you think you will get back to double-digit growth?
Anil Rai Gupta: A few things here. One, I would say that the consumer demand has definitely been a bit sluggish but not only in this quarter, but also the last few quarters. We have seen some revival coming in the second half of the quarter. In fact in December which hopefully should augur well for the coming quarters but also the fact that last year particularly there was a high base, especially for consumer durables. We have also seen deflation in the lighting business, whereas the volume growth is quite healthy. So we believe that this is a little bit structural and topical because of the quarter. But we do believe that in the coming quarters it should be better.

B2C demand continued to remain sluggish at around 70%. Is the recovery in sight? What is the outlook for the summer season?
Anil Rai Gupta: In consumer demand, the B2C segment has seen a little slowish demand. B2B is doing well. Our professional lighting growth, despite the deflation in LED has also grown in double digits. That is healthy growth coming from the B2B segment. You mentioned the coming summer season. We are expecting to have quite a good season because we had unseasonal rains, which meant high inventory into the system, into the channel as well. But with the coming season, we are prepared well. Our distribution campaign, advertising campaigns are all ready, we expect a very good coming season.

The campaigns that you are talking about and the penetration, I just wanted to delve deeper into that. I want to understand how the demand is shaping up from the tier two, tier three cities because, of course, Havells is a well-regarded name when it comes to urban India but what about the other geographies now?
Anil Rai Gupta: Generally speaking, it has been pushed by a lot of public spending, and now we are seeing some revival in the private capex as well. It is all across, and geographically also, it is well spread. Though in consumer demand, we do see that the B and C class towns and in the rural areas things had slowed down more than the urban areas. But again, in the coming summer season, hopefully with inflation under control, things should get better.

Do you see any trend that maybe premium products are doing better than the mass-end products, because that is something that we have been observing across sectors?
Anil Rai Gupta: We have also seen this trend. What generally happens in this situation is there is an expectation that the consumer will down-trade, but that has actually not happened. In fact, the consumer who is able to purchase is actually buying a premium product. But because of the inflationary impact over the last couple of years, there has been some deferred purchases by some segments of the consumers. And as I said, with inflation getting abated, this trend also should start seeing some recovery.

Your cables and wires revenue growth roughly touched 11.5% versus Polycab’s 17%. Why is the growth lagging peers in this particular segment?
Anil Rai Gupta: We are hopeful that we are going to benefit from the higher growth in the infrastructure segment with our new capacities coming up at Tumakuru in Karnataka. Our consumer wire sales which is the B2C and the residential segment is growing very well. That actually augurs well for the coming quarters.

Let’s talk about your Lloyd’s business because the margins continue to be weak there. Any internal target in mind for when it will break-even or at least there will be an improvement in terms of the margins?
Anil Rai Gupta: We already are seeing improvement in the Lloyd margins and, you know, a lot of cost initiatives are going on within the organisation. On the other hand, high growth investments are going on in terms of brand and distribution. So we are seeing improvement in the gross margins for the business. As and when the volumes grow and we start getting benefits of scale, we will start seeing more improvements in the coming times.

What about your EBITDA margins because they have remained in this range of about 9% for the past few quarters. Is the level expected to remain or can we expect double digit margins in FY25?
Anil Rai Gupta: Yes, we do expect that because as Lloyds is improving the margins, that is also a sizable part of the overall business. But within Havells, there were massive investments of brand building which will normalise over the next quarter. So we will see improvements in the overall EBITDA margins for the company.


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