Havells India Limited (HAVELLS) Q1 FY23 Earnings Concall Transcript

Havells India Limited (NSE: HAVELLS) Q2 FY23 Earnings Concall dated Oct. 20, 2022

Corporate Participants:

Aniruddha Joshi — Moderator

Anil Rai Gupta — Chairman and Managing Director

Unidentified Speaker —

Analysts:

Aditya Bhartia — Investec — Analyst

Sonali Salgaonkar — Jefferies India — Analyst

Charanjit Singh — DSP Mutual Fund — Analyst

Siddhartha Bera — Nomura — Analyst

Atul Tiwari — Citi — Analyst

Pulkit Patni — Goldman Sachs — Analyst

Rahul Agarwal — InCred Capital — Analyst

Shrinidhi Karlekar — HSBC — Analyst

Latika Chopra — J.P. Morgan — Analyst

Chinmay Gandre — Nippon Life Insurance — Analyst

Ashish Jain — Macquarie — Analyst

Manoj Gori — Equirus Securities — Analyst

Rahul Gajare — Haitong Securities — Analyst

Achal Lohade — JM Financial — Analyst

Naveen Trivedi — HDFC Securities — Analyst

Unidentified Participant — — Analyst

Swati Jhunjhunwala — VT Capital — Analyst

Pranjal Garg — ICICI Securities — Analyst

Sujit Jain — ASK — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Havells India Limited Q2 FY 2023 Earnings Conference Call, hosted by ICICI Securities. [Operators Instructions]

I now hand the conference over to Mr. Aniruddha Joshi from ICICI Securities. Thank you, and over to you, sir.

Aniruddha Joshi — Moderator

Yes, thanks Aman. On behalf of ICICI Securities, we welcome you all to Q2 FY 23′ Results Conference Call of Havells India. We have with us the entire senior management of Havells, represented by Mr. Anil Rai Gupta, Chairman and Managing Director; Mr. Rajesh Kumar Gupta, Whole Time Director Finance and Group CFO; Mr. Ameet Kumar Gupta, Whole-Time Director; and Mr. Rajiv Goel, Executive Director. Now, I hand over the call to the management for their initial comments, and then we will open the floor for question and answers. Thanks, and over to you, sir.

Anil Rai Gupta — Chairman and Managing Director

Thank you, Aniruddh. Good morning to all of you and wish you all — wishing you all a very happy Diwali. Hope you have reviewed the results by now. The second quarter saw a decent revenue growth considering the inflationary environment. It’s encouraging that majority of the sales growth was led by volume. Margins in quarter two were impacted by full absorption of high-cost inventory against falling raw material and sales prices. The impact was more pronounced in Cables and Lloyd. While high-cost cable inventory is now exhausted, Lloyd absorption will continue through Q3. We believe that margins have hit the troughs and are expected to improve hereon. Real estate and infra presents a good opportunity. Overall demand outlook remains positive.

Aniruddh, we can now proceed to Q&A.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] Our first question is from the line of Aditya Bhartia from Investec. Please go ahead.

Aditya Bhartia — Investec — Analyst

Hi, good morning, sir. Wish you a very Happy Diwali.

Anil Rai Gupta — Chairman and Managing Director

Thank you.

Aditya Bhartia — Investec — Analyst

Sir, my first question is on the inventory level that we are seeing at the end of Q2. Versus historical levels, it appears to be still fairly high. So, if commodity costs were to continue declining a little, does it mean that the benefit of raw material cost would not be entirely visible in Q3?

Anil Rai Gupta — Chairman and Managing Director

Well, overall inventory levels are higher because of the buildup of the festival season. So primarily, in most of the businesses the production has happened in the second quarter. So these are not old inventory, except in case of [Technical Issues] Lloyd which could not be sold completely because of the lower season in the second quarter. It will be absorbed in the third quarter and eventually this is all the fresh inventory going into the third and fourth quarter.

Aditya Bhartia — Investec — Analyst

Understood, sir. And secondly, sir, how should be really be looking at Lloyd’s profitability from here on? When you say that high-cost inventory would get liquidated by fourth quarter and normalized margins should start coming back, what are the kind of margins that you consider to be normal and do you see it more at the gross margin or contribution margin level or at the EBIT margin level after all the operating leverage?

Anil Rai Gupta — Chairman and Managing Director

I think, overall, Lloyd will a lot focus also on the growth of revenues. So if you would have seen that we have grown more than 50% in the first half and this momentum will continue to be there. We do see a huge opportunity for revenue growth, market share gain, market share gains in air conditioners, but also revenue growth because of the addition of new product categories which are gaining strength in the marketplace. It will have its own journey. So there is a huge opportunity for revenue growth and that focus will continue to be there going into the next financial year as well. So there will be an upward trend.

As I said, the margins in the second quarter were lower because of very — different reasons, but going into the third quarter, practically most of the normalized margins would come back but fourth quarter we should expect normal levels, which should be in the range of about low-double digits contribution margins. However, there will be continued high on the fact how the competition continues to behave. And our first focus will be the market share gains and revenue growth in Lloyd, but also at those levels we do believe that we will be fairly positive on the profitability side also with good advertising inputs.

Aditya Bhartia — Investec — Analyst

Understood, sir. Thank you so much.

Operator

Thank you. Our next question is from the line of Sonali Salgaonkar from Jefferies India. Please go ahead.

Sonali Salgaonkar — Jefferies India — Analyst

Sir, thank you for the opportunity. Sir, my first question is again on Lloyd. You did mention that by Q4 you expect low double-digit contribution margins in Lloyd, but sir could you throw some light on the market share gains that we have had in Lloyd on a year-on-year basis for this Q2 versus the last because we have seen that consistently over the past three quarters you have had a very good revenue growth but margins, unfortunately, are consistently falling?

Anil Rai Gupta — Chairman and Managing Director

Yeah, I think let’s maybe not even look at the quarter-on-quarter kind of revenue share — market share gains, because it’s also difficult in this industry to actually get the exact numbers. So — but overall, we have seen that we have been giving — we have been able to garner a market-leading growth in the last few quarters, so which does give us the impression, and we also believe that we are amongst now in the top-three players in the AC category. And hopefully, we would like to continue that position and continue to grow faster than the market.

Sonali Salgaonkar — Jefferies India — Analyst

Understood. Sir, any price revisions that we have done — any material price revisions which we have done over the past two quarters, especially for Lloyd or any other categories?

Anil Rai Gupta — Chairman and Managing Director

So, Lloyd is undergoing also a transition during the third quarter because in a efficient — sorry, energy efficiency norms will change from January 1. So both in case of fans and ACs, there will be a price hike coming in the third quarter and going into the fourth quarter. So — but that is actually higher-cost products being sold at higher prices in the market.

Sonali Salgaonkar — Jefferies India — Analyst

Understood. Sir, and my second question is, could you throw some light on the festive trends — initial festive trends that you are looking at, especially if you’re seeing anything different in any of the categories?

Anil Rai Gupta — Chairman and Managing Director

I think when we started getting into the festival season, we saw some slowdown in the pickup because I think the trade was actually a bit slow to pick up inventory. But in the last couple of weeks, we have seen some good pickup which is happening, which is also meaning good secondary — secondary sales are happening and we are seeing good primary sales are also happening. So we’ve seen a good uptake in the last couple of weeks. It’s still early days. Let’s see how the third quarter pans out, but it’s a positive outlook.

Sonali Salgaonkar — Jefferies India — Analyst

Sure. Sir, and lastly, capex guidance, that’s it from my side.

Anil Rai Gupta — Chairman and Managing Director

I’m sorry?

Sonali Salgaonkar — Jefferies India — Analyst

Capex — sir, your capex guidance.

Anil Rai Gupta — Chairman and Managing Director

So our water heater plant capacity is now fully online and we hope that the new air conditioning facility would start some production in the fourth quarter as well. So that is on there. And we are also setting up a new facility in Tumkur. So overall, I think in this financial and next year put together, should be anywhere between INR1,000 crores to INR1,200 crores, but some of it — most of it, which will come in this financial year and some of it will be carried over in the next year as well.

Sonali Salgaonkar — Jefferies India — Analyst

So, sir, how much of this INR1,000 crores to INR1,200 crores is already done in FY 2023?

Anil Rai Gupta — Chairman and Managing Director

I think INR165 crores was shown in the numbers which we have sent.

Sonali Salgaonkar — Jefferies India — Analyst

Got it, sir.

Anil Rai Gupta — Chairman and Managing Director

It will be INR700 crores, INR800 crores.

Unidentified Speaker —

Around INR700 crores.

Anil Rai Gupta — Chairman and Managing Director

Around INR700 crores.

Sonali Salgaonkar — Jefferies India — Analyst

INR700 crores? Got it. Thank you, sir.

Operator

Thank you. The next question is from the line of Charanjit Singh from DSP Mutual Fund. Please go ahead.

Charanjit Singh — DSP Mutual Fund — Analyst

Yeah. Hello, sir. Thanks for the opportunity. Sir, I just wanted to check first thing on the ECD segment. There our growth has been muted and margins have also taken a significant hit. So if you can highlight specifically from fans and the appliances segmental perspective how has been the market scenario. And what’s the outlook going forward from growth as well as the margin perspective in the ECD segment?

Anil Rai Gupta — Chairman and Managing Director

I think, specifically, if you look at the ECD segment and fans, we did see some slowdown, primarily because there’s some destocking happening because the trade also wants to clear out their old energy-efficiency norm products. So there will be a little bit of slowdown in fans even in the third quarter. But going forward in the fourth quarter, we should definitely see market coming back. Third quarter is generally a high season for water heaters and appliances which should take care of the growth in ECD in the third quarter as well. Second and third quarter is anyway lower for fans.

Charanjit Singh — DSP Mutual Fund — Analyst

And sir, from profitability perspective, because if I look at the EBIT margins, last two quarters have been severely impacted. This segment used to see somewhere around 17% kind of EBIT margin in couple of quarters we have seen. So here the recovery in the margin how long it could take, sir?

Anil Rai Gupta — Chairman and Managing Director

So because of a complete consumer nature of these products, as the raw material prices went up high, all the prices were not passed on to the market. With the raw material prices now stabilizing, we will continue to see improvement in the contribution margins and the EBIT margins in this category. Now if you’re comparing it with the highest quarters, I think that’s also was a little bit of a — on the other side, there were lower costs associated with that as well. But we will continue to invest in our deeper penetration in the market, as well as advertising.

Charanjit Singh — DSP Mutual Fund — Analyst

Okay. Sir, just last question from my side on the ads. So like you had earlier also highlighted that some of the costs will start normalizing and ad spending is one number which is normalizing. So for the full-year perspective, what’s the kind of ad spending as a percent of sales we should look at and what it could be on a sustainable basis going forward in FY 2024?

Anil Rai Gupta — Chairman and Managing Director

Yeah. So ad spends, we have actually had — continued to normalize ad spends, except the COVID years, we started off last second half and this year with normalized ad spends. And we definitely believe that it will be anywhere between 2.5% to 3% of the non-cable sales. So that will continue to remain.

Charanjit Singh — DSP Mutual Fund — Analyst

Okay, sir. Sir, thanks for taking my questions. That’s all from my side.

Operator

Thank you. Our next question is from the line of Siddhartha Bera from Nomura. Please go ahead.

Siddhartha Bera — Nomura — Analyst

Yeah, sir. Thanks for the opportunity. Sir, my first question is on the price increase you said we will be taking in third quarter in the AC and fans category [Speech Overlap].

Operator

[Technical Issues] Your voice is, yeah, not very good.

Siddhartha Bera — Nomura — Analyst

Okay. Is it better now or still weaker?

Operator

Please use the handset, Siddharth.

Siddhartha Bera — Nomura — Analyst

Sure. Just a second. So I just wanted to check on the price hike side, which you indicated that we will take some in AC and fans in the third quarter. Possible to highlight what will be the quantum for that and [Speech Overlap].

Anil Rai Gupta — Chairman and Managing Director

I could not follow your question, please.

Siddhartha Bera — Nomura — Analyst

So you had stated that we will be taking some price increase in the third quarter in the AC and fans because of the higher costs, so possible to quantify how much will it be and will that be sufficient enough to achieve the double-digit margins along with the contribution margins, along with the lower cost of those things?

Anil Rai Gupta — Chairman and Managing Director

We’re still evaluating the entire impact of that and that will be passed on. Actually, it’s fixed in, in the fourth quarter but the raw materials inventories will start coming in the third quarter. But yes, that will not impact the margins positively or negatively for both the businesses.

Siddhartha Bera — Nomura — Analyst

Okay. And the margin — if I look at contribution margin, which have also declined quarter-on-quarter in quarter two, is there any element of price cuts or discounts also because commodity costs have been largely stable but our contribution margins have dropped. So any other factor here to look at?

Anil Rai Gupta — Chairman and Managing Director

No, it’s primarily the high cost inventory which needs to be looked at.

Siddhartha Bera — Nomura — Analyst

Okay. And sir, lastly, on the wire and cable side, I think last quarter we had seen some bit of channel destocking and this quarter we had reported strong growth. So any impact of the channel inventory build-up which is there, if you can highlight, and whether this growth is sustainable or we should look at a more normalized number?

Anil Rai Gupta — Chairman and Managing Director

Now, this is a more sustainable growth because there were no any major price fluctuations in the current quarter.

Siddhartha Bera — Nomura — Analyst

Okay. Got it, sir. Okay, I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Atul Tiwari from Citi please go-ahead.

Atul Tiwari — Citi — Analyst

Yes sir, thanks a lot for the opportunity and congratulations on continued market share gains in Lloyd. So the question is actually more medium-term. So, obviously, in the AC industry there are other players, MNCs [Technical Issues] Chinese and Japanese and [Speech Overlap].

Operator

Sir, your voice is not clear, request you to please use the handset as well.

Atul Tiwari — Citi — Analyst

Yeah. So sir, this question is on Lloyd. So in the AC industry, obviously the competitive intensity is high with several large players present. So if we still decide to respond, are you okay to continue to operate at negative margins in Lloyd, say, for an extended period of time to win an increased market share?

Operator

Atul, your voice is still not clear. May I request you to use your handset for the next question?

Atul Tiwari — Citi — Analyst

Hello. Sir, is it audible now? Hello?

Operator

Yeah better now.

Atul Tiwari — Citi — Analyst

Yeah. So, sir, the question was on Lloyd. So because obviously the competitive intensity is quite high in AC industry and obviously other players also want to maintain or increase their market share. So are you okay to operate at negative margins for, say, next few years in case other peers also decide to respond?

Anil Rai Gupta — Chairman and Managing Director

No, But, Aditya, you have also seen — Atul, you have also seen that the second quarter negative margins, we’ve enumerated the reasons for that. It’s not the competitive intensity that we’re talking about. So I don’t understand the tenor of your question.

Atul Tiwari — Citi — Analyst

So, sir, basically obviously second quarter margins were very low, because of one-off reason, that I understand, but it was like fourth or fifth quarter when Lloyd has operated at negative EBIT margin. So it was not like the first quarter it was happening, hence the question, that is the intent to kind of gain market share despite negative margins over extended period of time?

Anil Rai Gupta — Chairman and Managing Director

Yeah, so the whole idea is to actually look at the market share gains and for long-term investment in the brand and distribution investment because of, we needed to change the perception of the brand as well as we change the distribution channel. So yes, over the medium period of time that will be the first focus.

Atul Tiwari — Citi — Analyst

Okay sir, great. That gives a lot of clarity. Thank you. Thanks a lot.

Operator

Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.

Pulkit Patni — Goldman Sachs — Analyst

Sir, thank you for taking my question. Again sir, more medium term. I mean we saw this period of COVID where demand went down and then we saw last 12 to 18 months where there’s an element of pent-up and a lot of things happening. Now from here, if you were to look at the next couple of years of demand, any sense you have, given the capacity that we’ve built and we have set up factories, what is the realistic sort of demand that I think as a country some of your segments could deliver? Just some ballpark thoughts about how you are thinking about demand.

Anil Rai Gupta — Chairman and Managing Director

I think, within the last couple of years we’ve seen, post-COVID, let’s look at the industrial and projects segment, things have started actually post-COVID very nicely and just continues to show good growth in the — even till now, because of the high level of focus in the government, now new capex coming up because of the slowdown in capex in the COVID cycle. So things are happening there on that side. We all know that post-COVID, suddenly the real estate demand started doing well. One of the only negative factors, that could be the high interest rate, but still even today the real estate cycle continues to do well.

So I think in the medium term we are quite hopeful because all our products, whether it’s consumer side or industrial side, focus on this, this will be definitely a good run for demand cycle in the coming times. Also the fact that electrification has now reached all the villages, so you’ll see more and more Tier-3 towns and rural areas, their aspirations to buy high-quality products also increasing in the coming time. So I think going forward in the next two or three years, this should all result in a decent growth outlook.

Pulkit Patni — Goldman Sachs — Analyst

I had a follow-up to that. I mean, given the fact that rural has not been doing that well and urban obviously that pent-up part at some stage will start slowing down, I understand the real estate story, still you feel that growth should be — could be decent for us. That’s what I’m trying to get to.

Anil Rai Gupta — Chairman and Managing Director

That’s right. You talked about medium-term that real estate — the rural had slowed down more because of the inflationary pressures. So we do believe once that is taken care of things should come back to normal.

Pulkit Patni — Goldman Sachs — Analyst

Sure sir. Thank you.

Operator

Thank you. Our next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital — Analyst

Good morning. Thanks for the opportunity. Just two questions, sir. Firstly on the fan side, I understand that the channel is not really comfortable with the changes. I think your understanding is still limited more on the B2C side, but the phenomenon should be different between fans price between INR1,800 to let’s say INR2,500 and then something above that. Could you elaborate a bit, like what is the exact concern there? Like, you obviously mentioned that 3Q should still be volatile and fourth quarter would see lot of channel restocking with all the new stuff, new ratings. But just if you could elaborate between segments, between fans like what is exactly the concern there?

Anil Rai Gupta — Chairman and Managing Director

So what do you mean by the concern? So the cost of the product will rise when you make the products with the new BEE norm. Right. So that will have to be passed on to the market. So the channel would definitely destock because we can’t sell the old products after January 1. So they would destock, they try to clear off their inventory and then start buying the new products. So this happens in all the segments of the fans business, not just the lower end of the market

Rahul Agarwal — InCred Capital — Analyst

Sir, my understanding was the production has to stop from Jan 1, not the sales, right? They can still sell in Jan, Feb, the old inventory, is that correct?

Anil Rai Gupta — Chairman and Managing Director

That’s right. So we can’t sell from there on, but channel definitely wants to take a view that they also want to clear their inventory which is the right thing to do actually.

Rahul Agarwal — InCred Capital — Analyst

Okay, got it, got it. So we should see like some pre-buying happening in third quarter and then fourth quarter should have more of new product sales. Is that correct?

Anil Rai Gupta — Chairman and Managing Director

Sorry, I think we were crossing each other. Second and third quarter is not a high season for fans anyway, so generally there are high levels of inventory, you are building up the inventory for the coming season. You also want to not manufacture the entire inventory at higher cost for the fourth quarter. So you also want to push the material in the market, but the channel is also slow in picking up the material. So it’s a combination of many things. So we do see some sort of a slowness in pickup for fans in the third quarter as well.

Rahul Agarwal — InCred Capital — Analyst

Got it sir. And lastly on lighting, any specific reason for lighting EBIT margins coming off Q-o-Q by 200 bps? I thought the segment was relatively doing better in the past six months.

Anil Rai Gupta — Chairman and Managing Director

First of all, we had an accident in the factory in the lighting business. And thankfully it was only half of the factory, we have another factory where the production should have to happen over a period of time. So because of two reasons, one the switching had to happen; and secondly, some amount of outsourcing is also there. So we do see some sort of a pressure on the margins in the lighting business and hopefully, it should be coming back to normal very soon. I mean the good thing is that we have not lost sales in lighting because of the accident.

Rahul Agarwal — InCred Capital — Analyst

Got it sir. That answers my question. Thank you so much and wish you a very Happy Diwali to the Havells team. Thanks.

Anil Rai Gupta — Chairman and Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Shrinidhi from HSBC. Please go ahead.

Shrinidhi Karlekar — HSBC — Analyst

Yeah hi. Thank you for the opportunity. Two questions from my end. Sir, switchgear business revenue growth appears a bit soft, particularly given that you’re highlighting that the real estate cycle seems to be in up-cycle, there seems to be good infrastructure investments. Sir, just wondering what is really happening that the growth is slightly slower than what we can achieve.

Anil Rai Gupta — Chairman and Managing Director

I don’t think there is nothing much to read there. Overall, quarter-on-quarter, things can vary a little bit, but overall if you look at the CAGR, this has probably been a good run for switchgear in the last two years.

Shrinidhi Karlekar — HSBC — Analyst

Okay sir. And sir, second question sir, you’re guiding for a low double-digit contribution margin in Lloyd. Just wondering, does that presume a material fall in commodity prices from the current level or significant product price hikes by the industry as well as Lloyd?

Anil Rai Gupta — Chairman and Managing Director

So I think this is quite a moving thing right now, because we are also going through a transition of the BEE norm. So a lot will depend upon how things pan out in the fourth quarter, but yes, that assumes the present raw material prices.

Shrinidhi Karlekar — HSBC — Analyst

Okay. Thank you answering my questions and all the very best, sir.

Operator

Thank you. Our next question is from the line of Latika Chopra from J.P. Morgan. Please go ahead.

Latika Chopra — J.P. Morgan — Analyst

Yeah, hi. Thanks for the opportunity. I just wanted to understand your comments on demand a little better. It seems B2B demand is where you’re more positive on. On B2C side, you mentioned demand is a little sluggish but stable. Just want to understand this better in terms of, are you commenting this more from a fading of pent-up demand or are you seeing incremental impact of inflation affecting consumer spending? Any color on consumer behavior, particularly on the B2C side that you’re witnessing, even in terms of product mix? If you could elaborate a little better on this. And if you could also share the volume and price differential for the quarterly growth rates for the key segments.

Anil Rai Gupta — Chairman and Managing Director

Okay, I think to your first question, I see this more as a inflationary pressure on the demand rather than a slowing up of the pent-up demand which happened in the past. So as a consumer trend, I would actually say there is not a whole lot of difference which was expected that the consumer will start downtrading or downgrading towards lower quality and lower spec products, it’s actually not happening. Havells is catering to different segments of the market through various brands. So we actually don’t see a major shift happening in the various brands, firstly. The mass premium or the premium category continues to do well. What was the third question, sorry?

Volume growth?

Unidentified Speaker —

So volume growth, overall, we see that almost 80% is from the volume growth rather than value growth. So 14% overall we have done in this quarter, almost 12% is coming out of volume growth.

Latika Chopra — J.P. Morgan — Analyst

Sure. And in a scenario if over the next six months, not getting into the medium-term growth potential, but just looking at the next six to 12 months, if you find that consumer spending is constrained, do you think that industry will be willing to pass on pricing benefits to the consumers to drive market shares or to drive growth? I mean, that in any way constrains the ability to deliver margins, which used to be in the 13%, 14% band in the past, would you be willing to operate at lower operating margins considering market shares and growth is prioritized here?

Anil Rai Gupta — Chairman and Managing Director

Yeah. So, first of all, we do not know what will happen and how the competition will behave. We definitely do — the way we balance the businesses, we do react to how the competition would behave, and also we have a very long-term strategy on where we want to position the brand. So in the past if you’ve seen, in most of the businesses, other than very fluctuating kind of businesses, we have seen a high density in Lloyd, or cables and wires, generally our margins have been quite stable. This was only in the last one year where the fluctuation was extremely unprecedented.

So I don’t see that reducing prices or increasing prices really changes your market share a whole lot there, unless you really have to spend a whole lot of investments, both on brand, distribution and all that. So I think we do expect stability in margins but yes, there is high intensity in the competition, one has to adjust a little bit. That does not really change the profile a whole lot.

Latika Chopra — J.P. Morgan — Analyst

Okay, thank you. And the last question is on Lloyd. Just wanted to understand what is the absolute level of brand spend you make on Lloyd today and what’s the split between air conditioners versus the new segments that you are entering in. And even if the contribution margins move up to double-digit levels, could there be a disproportionate increase in these fans and hence EBITDA margin expansion might not happen at a similar pace?

Anil Rai Gupta — Chairman and Managing Director

Yes. So first part, almost 25% of the ad spends go towards Lloyd. We don’t really differentiate between — within Lloyd between — because we treat it as a brand positioning rather than just product to product at this present moment. There will be spikes for non-AC products during the season time in AC products, but we don’t really distinguish between — within the Lloyd category. Sorry, I missed your second part of your question.

Latika Chopra — J.P. Morgan — Analyst

So just trying to understand, do we expect a disproportionate increase in these spends as you scale up these new categories and — these fans, and hence the operating margin expansion could be a lot more limited versus what you’re seeing at a contribution level?

Anil Rai Gupta — Chairman and Managing Director

I think for Lloyd we are definitely wanting a bit of a long-term play here, where we want to build certain categories, almost like where Havells was about 10 years back. And we do see a huge opportunity where not only the market is very large but also the growth is high, and the discretionary spend of the consumers are increasing and moving towards these products. So there will be a continued investment in the next two or three years on the brand side. And to use your words, yes, there will be a disproportionate investment in the brand building.

Latika Chopra — J.P. Morgan — Analyst

All right, thank you so much.

Operator

Thank you. Next question is from the line of Chinmay Gandre from Reliance Nippon Life Insurance. Please go ahead.

Chinmay Gandre — Nippon Life Insurance — Analyst

Yeah, thanks for taking my question. Sir, my question is basically on fans. So as you did clarify that channels are allowed to sell the current-rating fans post-January 2023 also. So normally, historically, in ACs see when these kind of things happen, normally we have seen that the channel kind of stock the old ratings because they are also cheaper and basically they are allowed to sell. So why that phenomena you don’t expect to repeat in fans, wherein fans, like the channel is kind of destocking versus, say, buying the older inventories?

Anil Rai Gupta — Chairman and Managing Director

So, yes, channel will be allowed to sell, but see, while AC has seen these mini changes very — sort of regularly, for fans it has happened after a long term. So I think that dealer behavior has to — still to be seen. And so I think that’s the reason we are cautious of how the reaction would be, and then that’s why we have mentioned both in Q3 and Q1, I think you need to see how the reaction would be from the channel. Largely, the channel is inclined towards having the new category offhand. Having said that, there could be some stocking activities. And what we are trying to say, please differentiate between fans and fans, that differentiation will continue to remain.

Chinmay Gandre — Nippon Life Insurance — Analyst

Sure. I mean, this thing also happened genset as well. In genset also like we see prebuying but anyways. And secondly, my question is on — so price hikes. So post the new rating, so what could be the quantum of price hikes we would be required to take? And I presume they would be quite different for different rating of fans, right?

Anil Rai Gupta — Chairman and Managing Director

That’s right. That will be there. So I agree, that is still being sort of looked at because it will depend upon a lot of variables. So maybe in Q3 we can be in better position to discuss that.

Chinmay Gandre — Nippon Life Insurance — Analyst

But my — are they going to be quite material to kind of maybe have some impact on demand going into — for Q4 and from there on the quantums are not that quite high?

Anil Rai Gupta — Chairman and Managing Director

Look, quantum — the percentage quantum will depend upon the base price of the fan. Clearly, at the lower priced fan, the impact will be higher than the high-priced fans.

Chinmay Gandre — Nippon Life Insurance — Analyst

Okay sure. Thank you.

Anil Rai Gupta — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.

Ashish Jain — Macquarie — Analyst

Hi sir. Good morning. Sir firstly, you spoke about growth being 80% driven by volumes. Can you give some color on the segment-wise breakup of volume and value growth?

Anil Rai Gupta — Chairman and Managing Director

Ashish, largely it is consistent across. For instance, we can see in Lloyd it will be almost 100% is volume growth. And you are aware that there has not been much pricing revision during this quarter. And that’s what we articulated is an encouraging sign, there’s a volume growth, which is coming back. In last three years, volume growth has been lower because there’s a lot of price hikes. Now, this — probably this quarter, and that’s one of the reasons why margins could have also not been what it has been because you see there has been no — the commodity cost continues to be high, but pricing has not been revised, so now they are falling off. So mostly the growth you see across is led by volume, not by price.

Ashish Jain — Macquarie — Analyst

Okay. And sir, also can you speak about your market share trend in the fans segment, because from what we understand the competitive intensity there has gone up quite materially? So any color on how our market share is shaping up on the fan side?

Anil Rai Gupta — Chairman and Managing Director

I think market share-wise, over the last — again, as I said for the other business, also we have to look at it over a longer period of time. We believe that we have gained market share in fans. And not only, necessarily, from the big brands but also there were a slate of new brands which came up in the last 5 or 7 years which grew at a certain pace — at a very fast pace for a certain level and then eventually we have seen them slowing down. So I think, again, the big brands, the national brands have tended to do better over the last couple of years, especially post COVID. So we do see some consolidation of market shares happening in the fans business.

Ashish Jain — Macquarie — Analyst

Okay. And sir, lastly, just like a few quarters back, at the peak of COVID and then commodity prices, we were also talking about the smaller players being at a relative disadvantage in terms of their ability to manage cost and supply chain. So are they now completely back you think in terms of the business side or — so how is that part of the supply shaping up in your view?

Anil Rai Gupta — Chairman and Managing Director

Yeah. I would say they’re pretty much back to pre-COVID levels.

Ashish Jain — Macquarie — Analyst

And we’re seeing — we’re not seeing that is happening, our market share increase on an incremental basis, right?

Anil Rai Gupta — Chairman and Managing Director

No, it depends upon business to business. As I said, in fans, we are actually seeing the other way around, that we are seeing some consolidation even for the larger players, but overall industry-wise, if you see, certain disruption which happened for many players, it’s now back to normal.

Ashish Jain — Macquarie — Analyst

Okay. Sir, if I may just squeeze in one more question on your switchgear business, what led to the margin contraction on a sequential basis — on a segmental margin basis? Anything related to material cost or is it just quarterly deviation — volatility that is…

Anil Rai Gupta — Chairman and Managing Director

[Speech Overlap] related to product mix.

Ashish Jain — Macquarie — Analyst

Okay. Okay, got it, sir. Thank you so much. And best of luck.

Operator

Thank you. The next question is from the line of Manoj Gori from Equirus Securities. Please go ahead.

Manoj Gori — Equirus Securities — Analyst

Thanks for the opportunity, sir. Sir, I have only one question here. So we are talking about taking some price hikes in Lloyd portfolio during 3Q. What gives you this confidence that the price hikes would be absorbed given that during March to May period where the demand was very strong and even the RM prices were witnessing inflationary trend and at that point of time the price hikes [Speech Overlap].

Anil Rai Gupta — Chairman and Managing Director

Sorry. Just to cut you in the product — the price increases will happen in the fourth quarter.

Manoj Gori — Equirus Securities — Analyst

Okay.

Anil Rai Gupta — Chairman and Managing Director

When the new industrial norms will come in?

Manoj Gori — Equirus Securities — Analyst

Yeah. Okay. So I just wanted to understand, like in the period where the demand was very strong, the price hikes taken by the industry and you were very limited, and given that now, overall, the consumer sentiments are relatively sluggish and demand is weak and the RM prices have also fallen, so what gives you confidence that the channel would be ready to take that incremental price hikes and it should be absorbed in the market?

Anil Rai Gupta — Chairman and Managing Director

I think the confidence is because of the continued change in the brand and the positioning of the brand in the channel also. So we do believe we will be able to extract the cost increase at least from the market and the consumer.

Manoj Gori — Equirus Securities — Analyst

So in this case one can assume that the industry itself, at the industry level also there would be price hikes that one can expect?

Anil Rai Gupta — Chairman and Managing Director

We can expect that. But as you have mentioned only that we really can’t be seeing what the industry will be doing, but we do believe that whatever cost increase is happening, we’ll be able to pass on into the market.

Manoj Gori — Equirus Securities — Analyst

Okay, sir. That was very helpful sir, and wish you a very Happy Diwali.

Anil Rai Gupta — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Rahul Gajare from Haitong Securities. Please go ahead.

Rahul Gajare — Haitong Securities — Analyst

Yeah, hi, good morning everybody. Sir, I have a couple of questions. First, when I look at the overall EBIT margin for the past, maybe, 2 or 3 years, they have been trending downwards. If I were to exclude Lloyd, even then the trend has been pretty much similar. So, there appears to be more broader weakness in profitability across verticals. So in this scenario, besides the price hike, given the BEE norm change, what are the other factors that you are having or looking for in order to aid improvement in overall margin? And we are not talking about Lloyd right now, the other business. That’s the first question.

Anil Rai Gupta — Chairman and Managing Director

Okay. So I think we don’t see it like that because we definitely believe that there are product mix, there are certain products which are growing at a faster pace as compared to maybe the high — very high margin products. Within the businesses also there has been enough focus on getting into newer channels and newer kind of customers, maybe project customers, maybe rural markets where there are higher investments and sales. So we are not deeply concerned by the fact that there is any sort of competitive intensity or positioning change which is happening in the market. So — but we are trying to cater to a larger set of customers which would require initial investments going forward and this will continue in the coming years also.

Rahul Gajare — Haitong Securities — Analyst

Okay. Sir, my second question is, given that we’ve seen slowdown in the channels, have you resorted to lower utilization at your factory to manage the inventory better?

Anil Rai Gupta — Chairman and Managing Director

No, in fact, most of the inventory buildup is happening because of the season. And I don’t see that — we are not actually envisioning that the next couple of quarters will be a slowdown and hence we are putting good inventories for the coming season.

Rahul Gajare — Haitong Securities — Analyst

I have meant more in the first half. So given that there was slowdown that we’ve seen, did you resort to lower utilization at your factories?

Anil Rai Gupta — Chairman and Managing Director

Not really, because the slowdown happened because of the seasonality, and we were building up, whether it’s fans or ACs, we were building up for the season. For example, even for water heaters or appliances.

Rahul Gajare — Haitong Securities — Analyst

Okay. Sir, my last question is again on the capex. I’m actually a little confused, because you did indicate that you’re looking at about INR1,000 crores to INR1,200 crores of capex over the next — between FY 2023 and 2024, of which you’ve already spent closer to INR700 crore in the first half. But when I look at your balance sheet [Speech Overlap].

Anil Rai Gupta — Chairman and Managing Director

INR700 crores for the entire year.

Unidentified Speaker —

Entire year is this.

Rahul Gajare — Haitong Securities — Analyst

Okay. So how much you would have spent on your — in the first half, because I don’t see much movement on your balance sheet on the capex side?

Anil Rai Gupta — Chairman and Managing Director

INR165 crores in the first half.

Rahul Gajare — Haitong Securities — Analyst

Okay, fair enough. I think that’s very helpful. Okay, thank you very much and Happy Diwali.

Anil Rai Gupta — Chairman and Managing Director

Thank you. Happy Diwali.

Operator

Thank you. The next question is from the line of Achal from JM Financial. Please go ahead.

Achal Lohade — JM Financial — Analyst

Yeah, thank you for taking my question, sir. My question pertains to cables and wires. You mentioned that as a broader comment 80% AC volume growth, as a percentage of revenue growth. What I wanted to check, if we look at the revenue growth of 18%, average copper price is down about 10%, you’re talking about 25% or in 20s kind of a volume growth. Is that understanding right? And is it possible to give some more color in terms of, if the mix is changing in favor of cables given the B2B strength you are talking about?

Anil Rai Gupta — Chairman and Managing Director

Sorry, I think there was some brake here, I couldn’t really follow your entire question. Could you please repeat it?

Achal Lohade — JM Financial — Analyst

Sir, my question pertains to cable and wires business. You did indicate the overall volume growth for the company, about 10%. Specifically on cables and wires business, given the fall in the copper price on a Y-o-Y basis, is it fair to say that the volume growth is more than 20% Y-o-Y? Is that a fair assessment? And if yes, also if there is any change in the mix in favor of cables?

Anil Rai Gupta — Chairman and Managing Director

Yeah, so you’re absolutely right. So there was a little bit of dip in the prices here. But if you compare it over the second quarter of last year, not a whole lot of difference. But cables and wires grew by about 18%, so we are actually seeing around — volume growth of around 18% in cables and wires.

Achal Lohade — JM Financial — Analyst

And in terms of the mix, is it in favor of more cables, which is also impacting the — which has impacted the margins for second quarter?

Anil Rai Gupta — Chairman and Managing Director

Yes. So actually wires in this quarter, because of prices coming down, had a little bit of a slowdown. So just a wee bit increase in the cables, but not a whole level.

Achal Lohade — JM Financial — Analyst

Understood. And, sir, one more question, sorry a bit technical. If we see in the June quarter, there was a drop in the copper price and hence the margins got impacted. That inventory got written down already on June 30. What explains the further margin contraction on a Q-o-Q basis?

Anil Rai Gupta — Chairman and Managing Director

No, no, no, inventory does not get written down on June 30, because again, if you know the inventory, how the inventory is valued, it is basically cost of sales price which is lower. So the cost continues to be lower, but, obviously, it has come down from what it was earlier, but you are still holding well you’ve already manufactured. So when you sell, then only you book the differentials. That’s what explains and that’s why we are also clarifying that — see, that stock is almost finished in wire and cables. So now we expect the margins to improve, because now the new inventory which you are getting is at a lower cost.

Achal Lohade — JM Financial — Analyst

Got it. So basically the margin impact is only when it is actually sold or realized and not really about inventory write-down as of June 30 or September?

Anil Rai Gupta — Chairman and Managing Director

No, no. That’s why you should remember, in Q1 commentary also we had mentioned that there will be a ramification in Q2 as well.

Achal Lohade — JM Financial — Analyst

Yes and the same again played out in 3Q when the copper prices further dropped, is that understood?

Anil Rai Gupta — Chairman and Managing Director

Yes. What will happen next, I hope there is some stability in the world, so that nobody can argue right now, but technically if you’re asking me, yes, I think that’s how it works.

Achal Lohade — JM Financial — Analyst

Got it, got it. Sir, one more question I had. Is it possible to quantify — I’m not talking about the Lloyd business but ex of Lloyd, what is the reduction in the cost basket? Is it in teens, is it early teens, mid-teens?

Anil Rai Gupta — Chairman and Managing Director

That we can’t — that we can’t comment upon.

Achal Lohade — JM Financial — Analyst

Okay, okay, because the question is coming from the fact that we are seeing in some of the appliances, there is already a price cut initiated or rather in the form of incentive schemes et cetera in the appliances. So I just thought of checking if that will drive the price reduction even for the categories we are operating in and for us.

Anil Rai Gupta — Chairman and Managing Director

I think let’s wait for Q3 for these questions.

Achal Lohade — JM Financial — Analyst

Understood. Thank you so much for taking.

Operator

Thank you. The next question is from the line of Naveen Trivedi from HDFC Securities. Please go ahead.

Naveen Trivedi — HDFC Securities — Analyst

Yeah. Good morning, everyone. Sir, my first question is, how are you seeing the overall B2B side pickup considering last 2 years we have seen this part of the business was under pressure? So in the context of improving the capex cycle and the overall recovery in the B2B side, any comment on the B2B side recovery and how do we look at the coming quarters?

Anil Rai Gupta — Chairman and Managing Director

Yeah, I think generally we are positive about B2B. It is still a small portion, about — almost about 25%. But we are seeing recovery, cables has been doing okay. Professional luminaires is growing. The other businesses, like [Indecipherable] is also at a decent growth level. So it’s showing positive signs.

Naveen Trivedi — HDFC Securities — Analyst

So are we at a — in a B2B sort of a revenue, are we at — ahead of the pre-COVID level now?

Anil Rai Gupta — Chairman and Managing Director

Yes, definitely, we are ahead of pre-COVID levels.

Naveen Trivedi — HDFC Securities — Analyst

Okay. And secondly, you mentioned about washing machine side, you have seen a good traction. Are we in a position to share some volume number or market share number?

Anil Rai Gupta — Chairman and Managing Director

No.

Naveen Trivedi — HDFC Securities — Analyst

Sure. Thank you so much. And all the best.

Operator

Thank you. The next question is from the line of Amit from Nirvana [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Thank you. Anil ji, hi. Congratulations, first of all, on excellent growth set for first half on a three-year basis across categories. And I hope everybody, especially at the Neemrana [Phonetic] facility is safe and healthy. Sir, I just have one question on the capital allocation. Generally speaking, in cable and wire and electrical segments, we seem to have broadly — have a presence across the basket. But in the Lloyd portfolio, we will have to gradually expand our presence as we ramp up our SKUs across — whether it’s washing machine or other ranges in the white goods basket. So if my assessment is correct, then in the next two to three years more than 50%, 60% of the capital allocation, it will have to be towards Lloyd portfolio, or if you can give some color on the capital allocation, sir, across segments.

Anil Rai Gupta — Chairman and Managing Director

Well, there is no doubt that if not 50%, 60%, there will be a higher level of capital allocation towards manufacturing on the Lloyd portfolio. Pretty much, we’ve completely allocated the air conditioner capacity increase. Washing machine plant is already onboard. The only thing, once the buildup happens for the next category, which is personal grooming, that we can consider getting into the manufacturing in the next 1 to 2 years. So that’s something which we can consider, but we have actually taken the bulk of the — the heavy-weight lifting has already been done, but it will continue in the coming times as well.

Naveen Trivedi — HDFC Securities — Analyst

I think I got it. Thank you, sir. And my best wishes to the entire team.

Operator

Thank you. The next question is from the line of Swati Jhunjhunwala from VT Capital. Please go ahead.

Swati Jhunjhunwala — VT Capital — Analyst

Yes, thank you for taking my question. My first question is your working capital days are currently at 42 days and that is mainly because of the inventory. So what do you think will be the working capital for the second half of this year?

Anil Rai Gupta — Chairman and Managing Director

We expect them to come down with the — especially March is one of the lowest for inventory or working capital days. So third quarter and fourth quarter it should start coming down.

Swati Jhunjhunwala — VT Capital — Analyst

Okay. And secondly, what is the rural contribution to the total revenue?

Anil Rai Gupta — Chairman and Managing Director

It’s only about 5% to 6% of the consumer revenue.

Swati Jhunjhunwala — VT Capital — Analyst

Okay. So like, do you plan to ramp it up, the rural side, or are you more focused on the urban areas?

Anil Rai Gupta — Chairman and Managing Director

No, no. So as I said, different channels are being focused upon and good investments are being made there. So in the rural side that focus will continue. We are reaching quite a decent level of penetration there, but more and more products will now start going through the channel.

Swati Jhunjhunwala — VT Capital — Analyst

All right, thanks.

Anil Rai Gupta — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.

Ashish Jain — Macquarie — Analyst

Hi sir. Sir, I just had a follow-up. Earlier in the call you spoke about lot of more focus on rural and institutional side of the business. So is this like necessarily coming at a lower margin for us, or you think margins are comparable versus our urban or consumer side of the business?

Anil Rai Gupta — Chairman and Managing Director

No. So rural is not coming at a lower margin. Rural is — it’s not necessary that these are lower-priced products. But in the industrial side, quite a sizable part of that is underground cables, which is definitely at a lower margin anyway, so it is definitely contributing lower margins overall as well. But the other businesses, like switchgear and professional luminaires are high- margin businesses.

Ashish Jain — Macquarie — Analyst

Sir, for this quarter, can you break down like the 14% growth into how much was the growth for industrial or institutional business and how much was consumer facing, if possible?

Anil Rai Gupta — Chairman and Managing Director

We are about 25% on the industrial side. About 12% on the consumer side and 17.5% on industrial.

Ashish Jain — Macquarie — Analyst

Okay, got it sir. That’s helpful. Thank you.

Operator

Thank you. The next question is from the line of Rahul Agarwal from InCred Capital. Please go ahead.

Rahul Agarwal — InCred Capital — Analyst

Yeah, hi, sir. Thank you for the follow-up. Sir two questions. First one was to Anil ji. Sir, just utilization of cash, if the company is looking at M&A, what could be areas of interest, like, is there any product gap which you want to fill or would you look at new categories? And if new categories, what could those be?

Anil Rai Gupta — Chairman and Managing Director

So I think our focus will largely be — as we have also articulated in the past, will be homes and consumer. So it could be something on the regional side, it could be something on the electrical side which goes into the homes. So I think that will continue to be sort of — we have to scout for M&A. I think we will look at that. Having said that, we also believe there is a significant opportunity in our existing product categories as well. So while M&A, just to use an often repeated phrase, you see, we will be opportunistic. Frankly, we don’t need M&A to really look for the growth in this current environment. We believe the medium-term outlook is fairly positive for the country and I think we want to focus on leveraging whatever seeding we have done in the past few years. We’re already seeing that they are bearing fruits. I don’t want to get into a few quarters here and there, but medium-term things look very, very confident and positive.

Rahul Agarwal — InCred Capital — Analyst

Sure sir. Sir, actually I was coming from a capital allocation perspective. I mean, I saw that cheaper debt getting repaid, and my sense is internal accrual should be enough for funding capex in this year, next year. Hence my thought was, we obviously have lot of extra cash, and hence I was thinking maybe we could utilize it to fill up something, if there is a gap at all in the existing basket. That was what my intention was.

Anil Rai Gupta — Chairman and Managing Director

Cash allocation cannot be the reason for M&A. I think — so — and they are two independent concepts. So we will see as the time comes. We don’t think we have unsustainable cash levels as of now. You see, we continue to pay 40% payout in terms of the dividend. So I think these things, right now, I think we will not sort of concern us. If the time comes I think we’ll take a judicious decision at that point of time.

Rahul Agarwal — InCred Capital — Analyst

Got it, sir. And secondly, for the new AC capacity, my sense is it’s almost adding 1 million units next year. Obviously, the market size is not growing to that much. Any thoughts on exports here? I mean is that something which is really looked up to or is that an opportunity at all on ACs?

Anil Rai Gupta — Chairman and Managing Director

Definitely. I think the exports in general, and I think you are fully aware that how China Plus One is playing out. Opportunity — in developed market, it takes time to establish the product, their approval process is far longer than other countries. But yes, I think not only ACs, all other product categories we are looking to substantively grow and export and our efforts are dedicated towards that. Coming to this question on ACs, yes, I think export will be a big focus, both from the existing, but actually, this could be more conducive from the new factory, because it’s near the port as well.

Rahul Agarwal — InCred Capital — Analyst

So we could see like 2 lakh, 3 lakh units going out of country from the new unit? Is that possible like next year itself?

Anil Rai Gupta — Chairman and Managing Director

You are just putting another timeline to that, but I think, yes, substantive numbers are possible, why just 2 lakhs, 3 lakhs?

Rahul Agarwal — InCred Capital — Analyst

Okay, sir. Thank you so much. Thank you. Have a good Diwali.

Anil Rai Gupta — Chairman and Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Pranjal Garg from ICICI Securities, please go ahead.

Pranjal Garg — ICICI Securities — Analyst

Yeah. Hi, good morning, sir. Thanks for the opportunity. Sir, one of the competitor tied up with Mahindra Logistics for third-party logistics services sometime back. As the freight cost might be likely impacted due to fuel costs and Havells will also be penetrating deeper in the rural markets. Will we also likely go forward for any such partnership for using third-party logistics to improve the efficiency?

Anil Rai Gupta — Chairman and Managing Director

No, no, these efficiency measures could be third-party logistics, could be independent parties. These are the optionalities we keep reviewing as a business process. So whether we tie up on a national basis or regional basis, these experiments keep happening. So I don’t know that — whether Mahindra would be one or who could be. But yes, these are the things we’d continue to evaluate. These are operational issues.

Pranjal Garg — ICICI Securities — Analyst

Okay. So there’s nothing opaque — certain in our books right now, we can assume that?

Anil Rai Gupta — Chairman and Managing Director

Yes, I think [Speech Overlap] sorry. What is on our books?

Pranjal Garg — ICICI Securities — Analyst

So something that is not in our consideration right now for going to the third-partly logistics?

Anil Rai Gupta — Chairman and Managing Director

I think these are — hundred things are there in the operation configuration. You see that’s something we’re not discussing on the call, what is our operational strategy.

Pranjal Garg — ICICI Securities — Analyst

Okay. Sure sir.

Operator

Thank you. We’ll take the last question from the line of Sujit Jain from ASK. Please go ahead.

Sujit Jain — ASK — Analyst

Yeah. Sir, just to clarify, because during the call I think you’ve spoken twice about this. The price hike in ACs will happen from fourth quarter you said, even now for the second time.

Anil Rai Gupta — Chairman and Managing Director

That’s right.

Sujit Jain — ASK — Analyst

Right. And cable, wire mix, more towards cables in this quarter?

Anil Rai Gupta — Chairman and Managing Director

A little bit, yes, because in wires because there was again fluctuation, prices were coming down. So there was some destocking happening in the wire segment in the second quarter. In fact, if you see the third quarter of last year, there was high amount of stocking, because there was — prices were going up. Actually, in this quarter, we are operating on a very high base of wires. So actually, again, especially in case of cables and wires, one should not be really excited or deflated by the quarterly trend.

Sujit Jain — ASK — Analyst

Right. And the volume growth will be higher than the sales growth Y-o-Y for C&W, which was at 19%, because of the price fall in copper.

Anil Rai Gupta — Chairman and Managing Director

Slightly, because you’re comparing over the last year, not just the sequential. So Y-o-Y, they will be almost the same.

Sujit Jain — ASK — Analyst

Okay. And one last thing about Lloyd’s margins, you said it will improve in Q4, contribution margin double-digit, which means when I look at quarter [Speech Overlap].

Anil Rai Gupta — Chairman and Managing Director

[Speech Overlap] double-digits, because this is a trend which we are seeing, it is upwards. Right? So going forward in the third quarter we definitely see a major improvement coming in. Fourth quarter, we are expecting normalized margins to start coming and which we have been operating at in the past. But as was discussed, there will be a lot of changes in the AC industry in the fourth quarter. So we will play it at that point of time. Definitely, we would like to pass on the entire cost increase in the fourth quarter.

Sujit Jain — ASK — Analyst

I understand that, but then that translates into 4%, 5% kind of EBIT margin.

Anil Rai Gupta — Chairman and Managing Director

Now that’s something which you will have to translate into. I mean, as I’ve said, we will continue to invest in Lloyd for the next 1 or 2 years for gaining market shares, as well as creating a position in the market.

Sujit Jain — ASK — Analyst

Okay. Sure. Thank you.

Operator

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to Mr. Aniruddha Joshi for closing comments. Thank you, and over to you, sir.

Aniruddha Joshi — Moderator

Yeah, thanks Aman. On behalf of ICICI Securities, we thank the management of Havells, as well as all the participants for being on the call and wish you all a very Happy Diwali. Now, I hand over the call to the management for the closing comments. Thanks and over to you sir.

Anil Rai Gupta — Chairman and Managing Director

Thank you very much. Wish you all a very, very Happy Diwali from Havells. Thank you.

Operator

[Operator Closing Remarks]