Crompton Greaves Consumer Electricals Limited (NSE: CROMPTON) Q3 FY23 Earnings Concall dated Feb. 03, 2023
Corporate Participants:
Shantanu Khosla — Managing Director
Mathew Job — Chief Executive Officer
Kaleeswaran Arunachalam — Chief Financial Officer
Analysts:
Bhoomika Nair — DAM Capital Advisors — Analyst
Ankur Tewari — HDFC Life — Analyst
Saumil Mehta — Kotak — Analyst
Akhilesh Bhandari — ICICI Prudential — Analyst
Kiran Sebastian — Franklin Templeton — Analyst
Charanjit Singh — DSP Mutual Fund — Analyst
Rahul Ranade — Goldman Sachs Asset Management — Analyst
Rakesh Sethia — HDFC Mutual Fund — Analyst
Renu Baid — IIFL — Analyst
Nikunj Gala — Sundaram AMC — Analyst
Keyur Pandya — ICICI Prudential — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 FY ’23 Earnings Conference Call of Crompton Greaves Consumer Electricals Limited hosted by DAM Capital Advisors. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors. Thank you and over to you, ma’am.
Bhoomika Nair — DAM Capital Advisors — Analyst
Thanks, Michelle. Good morning everyone and a warm welcome to the Crompton Greaves Consumer Electrical Limited Q3 FY ’23 earnings call. We have the management today being represented by Mr. Shantanu Khosla, Managing Director; Mr. Mathew Job, Executive Director and CEO; Mr. Rangarajan Shiram, CEO & MD of Butterfly Gandhimathi Appliances, Mr. Kaleeswaran Arunachalam, CFO; and Mr. Yashwant Rege, Vice President, Strategy and Financial Planning.
At this point, I would like to hand over the call to Mr. Khosla for his initial remarks post, which will open up the floor for Q&A. Over to you, sir.
Shantanu Khosla — Managing Director
Thank you. Good morning everyone and, thank you for joining our call and taking the time. We obviously appreciate it. There is no doubt, as you can all see from our official numbers that we released, that this was a challenging quarter for us as a company. Given that, I would really want to touch in my opening remarks, as opposed to the way I normally talk, I would like to dive into a couple of specific areas, because I believe these are the areas which probably, we would like you to fully understand the situation. After that of course, we’re going to questions and be happy to handle any other further questions you have.
The first thing I want to talk about is ECD; and within ECD I think more so fans. We are obviously the market leaders and we have consistently been demonstrating good growth in ECD. But as is evident from the numbers, this is the first time in a quarter, if you ignore the COVID base period stuff that we have declined in revenue. And I did want to spend a couple of minutes explaining that.
This primarily was driven by decline in fans, which has frankly been consistently growing both in revenue and market share for a number of quarters, continuously. As you’re all aware, last quarter was a quarter of transition to the new BEE norms. What we did not do, is we did not overload based on heavy discounting. The channel partners with the non-BEE compliant stock up till December 31st. We actually had managed our production planning, our inventory and our switchover in an extremely efficient manner. And therefore, we were able to completely put into the market and the channel non-compliant stock before December 31st, first without having to resort to extreme discounting to load the trade.
We believe this was the right thing to do. And, we have effectively started selling BEE across our range from BLDC down to one star from the beginning of January itself. Since we don’t have excessively high levels of inventory, especially in the mid and low-mid price categories. We think this is good in the long term as we look ahead going into the summer, because this means that the superior BEE energy saving products across the price pyramid will get into the hands of the consumer earlier. That choice, that approach obviously led to a difference between us and competition performance in terms of growth on the fans business, and since fans is a dominant part of our ECD business, it reflected in the overall ECD business.
The second area I would like to mention is pumps. Like you’re aware, pumps has been performing softly for the last few quarters for us. And we have taken a couple of significant interventions towards the back end of the quarter, which again, going into the summer season, we believe will continue to pay dividends and pay off. The first is, given the nature of our competition, a lot of it regional, a lot of it local, we were facing pricing disadvantage in the marketplace. To be clear, we’re not correcting that by schemes, we’ve gone ahead and made a pricing correction in the marketplace on pumps towards the back end of the quarter, which we believe is going to eliminate this competitive disadvantage.
Secondly, we have revamped our entire range based on the new brand architecture based on consumer needs. Historically, pumps essentially have been differentiated by technical factors such as head, which is height to which water can be pumped by purely technical factors. Based on a lot of consumer understanding, we have come to believe that from a consumer point of view, head is not really the consumer term. What the consumer is interested in is, how fast you fill my tank. So we have revamped our architecture which has been going into market, in the back end and we think that, along with strong marketing support and mass advertising, which we plan over the summer period, should begin to bring back the growth in the pumps business through the season.
The last segment of course is, you know which starts giving us confidence is appliances, which in spite of a general low festive season and the general sluggish demand and macro demand situation, has continued to grow aggressively. This is significantly ahead of what most of our domestic appliance competitors across the board have been growing at and we have now sustained this growth quarter-on-quarter. In fact, our small appliances business in Crompton is now close to INR1000 crores as a segment on an annualized basis, which makes it a strong meaningful player, especially when you add our second brand of Butterfly in the appliance space. So that gives us some confidence that these strategies are in the right direction and sustainable.
The second specific area I would like to address, as we talked is profit. As you’re well aware, we have historically now for quite a few years, been the largest, best performing in terms of absolute margin in our industry and this time obviously, we had meaningful profit decline versus previous quarter. So I did want to touch on that briefly just to explain it and we can talk more as we go into the Q&A on how that happens.
But really if I compare here or there [Phonetic], there were three parts of this. One was obviously a certain amount of profit which was last year ago driven by the fact that the volumes came in lower and that impact stayed out of the gross margin. The second factor is, as you are aware, we have been consistently making investments which we believe are the right investments for the long term. Investments in innovation, our R&D center, investments in capability culture building, training through our organization at every level and every function, investments which we’ve made and we continue to make in our new large appliances business, which is currently tracking very, very much in line with our expectations.
In spite of the challenges of the quarter, we chose not to hold back or pull back on any of those investments. So those incremental investments have flown through and had an impact on the quarter-on-quarter.
The last and final thing was simply, the interest payment which we’re paying on a quarterly basis to as part of the Butterfly acquisition funding. So those are really the three chunks. But, as I was saying as we expect the business to begin to come back through strong marketing initiatives, strong product initiatives and a better situation in terms of improved BEE products getting into the hands of the consumers as we go into the summer, we fully expect the top line to start coming back, looking forward and that [Technical Issues] exactly obviously apart from the interest payment [Phonetic] aspect which will only settle down as we pay down the debt which is again completely on track will begin to restore our market leading and industry-leading margin situation.
A couple of critical and other areas which we’ve been focused on and where I have been investing and continue to invest is our entire go to market. One is of course I talked to talked about our investments in training and capability building, which right now we’re doing on a pan India basis across our sales force. The second one is our continued investments in digitization of the sales force, where we have already taken a number of steps, but we are continuing to drive that to improve quality of calls, inventory management, etc, etc. But beyond this specifically, we have also embarked on a retail transformation program, which completely changes the look and feel of Crompton inside our key retail stores. We have completed about 400 stores of this retail transformation, initially starting with the South in the previous quarter and we will expect to do another 1,100 stores on a Pan India base moving forward. So again as we get into the season and as we get into the summer, we also expect, the retail experience to be significantly transformed.
Our final go to market investments, which we’ve been talking about also continue to deliver results. These are specifically in new channels. As we’ve talked, we have stepped up our investments, our feet on street etc, in what we call the rurban channel, which essentially is small town and large rural areas. This business continues to grow and actually has grown significantly in double digits even in this quarter.
The second critical channel where we continue to get strong growth, is ecommerce, where we’re now, I invite you to go to Amazon and for example just type in ceiling fans or ceiling home fans and they’ll give you a feel of the kind of work which we’ve done in terms of Amazon ratings, in terms of placements, etc. And also of course being competitively priced. This channel is also — continues to give including this quarter, strong double digit growth. So we feel very, very good about it, as we expand more of these investments and capability buildings for the key summer period, we are positive looking forward.
The last thing I’d briefly like to comment on is the Butterfly performance. Again we have released the results and you know it’s like compared to some of our key competitors we have actually — which have declared results in the kitchen area, which showed a decline. Butterfly has actually shown a marginal growth over the quarter in spite of the challenging external environment. We feel very good about the way the integration is going. We are beginning to bring capabilities and a greater focus on product innovation into the market.
For example, we have introduced Superior Pressure Cooker. You know, pressure cookers basically come traditionally into materials, aluminum at the bottom end and stainless steel. We’ve introduced a sandwich, laminate material, which is steel — aluminum, steel and this gives us significant benefit in terms of heat transfer, therefore speed of cooking, [Indecipherable] cooking, less oil required while cooking and, therefore healthier cooking.
So a lot of these initiatives have been going into market over this period. And in fact, we’ve launched about 25 new products across the Butterfly range. Also on Butterfly, we have corrected the significant price disparity which has built up between e-commerce and open trade and made it more rational. This has resulted in stronger growth in open trade and the open trade which after quite a few years is now beginning to grow robustly overall in Butterfly.
The people integration is also working well. Though we continue to run it obviously under Sriram’s leadership currently as an independent operating unit. We have commenced the process of operational integration which we expect to be well progressed in over the next six to nine months. IT systems, financial systems, marketing systems, we’re already getting benefits which are accruing by — for example, combining scale and purchase etc. So we’re very happy it is currently in terms of us as the original recommendation which we had made to our Board of Directors tracking a little ahead of that. So that, we feel good about.
So with that, those overall comments, I won’t just repeat numbers which you folks already have. We’re happy to take on questions.
Questions and Answers:
Operator
Thank you very much, sir. [Operator Instructions] We have the first question from the line of Ankur from HDFC Life. Please go ahead.
Ankur Tewari — HDFC Life — Analyst
Yeah. Hi, good morning. Thanks for your time. Three questions, one, you know on the ECD margins, where we’ve seen this, sharp drop, just trying to understand because as you said, you’ve not tried to push non rated fans at discounts during the quarter, you know, unlike what maybe some of your peers may have done. So my assumption would be that, therefore your fan margins would have held up better and there would have been some benefits of RM prices also kind of coming off from peak levels in Q1. So if you could just help us understand why this — I know, I know you didn’t mention some investment, which you’ve done, but just a little more, how that is working out. And more importantly, when do you see these margins kind of reverting back, into those historical levels?
And second, if you could touch upon your lighting business is well, which continues to struggle over the last few quarters, on the top line, especially when I look at, what your peers have been reporting, so that’s second. And third, if you could also touch upon your pumps business, you did say though that that’s been struggling for some time. So if you could tell us what was the YoY top line gross margins, if you can share for Q3 on pumps, and when do you see industry and yourself starting to grow again? Thanks.
Shantanu Khosla — Managing Director
Let me quickly and, that’s the first one on fans And then, Mathew will take the lighting and the pumps question. First, and please correct me if I’m wrong — if you look at the fans on the gross margin level, gross margin, which really reflects the combination of pricing and manufacturing cost obviously, has held up and has been at historical levels. So all this commodity cost, pricing, balance, cost reduction way back, right, there’s no recovery.
As I mentioned earlier, the difference in the margin both on fans and also on the company is not at that level, it is at the cost below gross margin right. And, as I mentioned, these are one, it simply is the fact that, because the volume for the total company, including fans, right, has declined, we did not start slashing costs. You know, for example, we kept our ad marketing spend in line or slightly above what it was in the previous year, same quarter. We did not hold back our investments in continuing to improve our go to market capability for the long term etc. So it is that bucket of costs, which is dropping if you will, costs below gross margin which is dropping, EBITDA, PBT whichever way you want to look at it.
Now as I said, as we are putting — as the summer comes in, as this sort of inventory stuff in the trade and the pre sales etc equalize going into summer, and as we now believe we have an advantage, because we will get into the hands of the consumer superior products earlier, especially at the mid and low price, which is still a large chunk of the market. As the volumes come back, below gross margin costs will stay, at the same absolute level, or probably come down also a little bit, right, which will sort the margins out.
If the issue was a gross margin then it would be structural, as we’d have to take pricing action, but we don’t see any of that. So that we expect to pretty quickly start recovering and come back to normal.
Mathew Job — Chief Executive Officer
Yeah. On pumps, as you know, obviously the quarter again was tough. We had roughly a 10% decline on pumps. What’s been happening on pumps is, you know we are comparatively much stronger in the residential segment, where we have — the market share is closer to closer to 27%, and we have been seeing in the recent quarters entry of many new competitors, or you know increased activity by competitors who were primarily strong in the other segments like agro, in the residential segment. Overall, this meant that, you know the price differential that that Crompton has been having with many of our competitors has enlarged in the last few quarters. So in the month of — or late in the quarter early December, we have taken some appropriate pricing action. which has given us early results in the month of December. So we think that action what we have taken is, the right one to do.
Second in terms of, also trying to build somewhat of a stronger differentiation for our products, we have done significant level of work in terms of consumer research, and based on the consumer research, we have started to build a new brand architecture, which will help us to command the kind of premiums that we have in the market today.
So I would say host of two significant actions in terms of getting our pumps business back on track. First, adjusted pricing to ensure that the premiums are at the level which the consumer is willing to pay. And second is, to ensure that the consumer is going to — will be willing to continue paying the premium in the future, strengthen our brand offering through bringing to market products that are more sharply differentiated and supported by above the line investments going forward. So that’s what I would say on pumps.
On lighting, we have had a difficult quarter both on B2C and on B2B. To be fair I think the B2C business has been — the market has seen lot of price instability in the quarter and you would have also observed. If you look at some of our competitors, their margins on lighting have also taken a sharp decline. Our focus on the other hand was to ensure that our margins in B2C lightings structurally remains strong, and which is why you would find that the lighting gross margin, especially on the B2C side, has significantly improved from the previous quarter.
In parallel, we have launched a project to ensure that our distribution especially reached — the improvement happens in — for B2C and the current focus is on two regions, and once we make it work in these two regions, we will then roll it out Pan India.
In B2B, I think — especially the government orders have been slow. The B2B trade business remains on the positive growth path. But however, the road lighting business which is the biggest part of our business has had again a tough quarter. We think that B2C lighting business will recover in the next quarter. However, B2B will take a little more time to get back on track. Thank you.
Operator
Thank you, sir. [Operator Instructions]. The next question is from the line of Saumil Mehta from Kotak Life. Please go ahead.
Saumil Mehta — Kotak — Analyst
Yeah, thanks for the opportunity. So my question is now, keeping the [Technical Issues] where obviously there was destocking in fans. But even if I look at the last three or four years, and taking the quarterly seasonality of fans, our growth versus some of the other peers in the industry [Phonetic] has been not so great. In fact, if I look at Havells, they have clearly grown four years higher than us in the last five years. Some of the other three years obviously the journey has been mixed. So can you highlight some specific reasons as to why our performance has been a bit, not up to the mark and any corrective measures we are taking to improve that?
Shantanu Khosla — Managing Director
Got it. Thank you for the question and I think to answer that question, it’s important to just go down one more level of granularity and look at look at the business by category. First, let’s talk ECD. ECD if you look at the fans business across the industry, we have not been underperforming over time in the fans business. If anything, our fans business has been growing on an average faster than the rest of the market, including Havells. And that has been reflected by the fact, that we actually have had consistent market share growth I think for the last 16 quarters.
Second, we in terms of our mix, have a large business in pumps. Pumps, which we count in ECD, if I look at most of the competitors, which are kind of our overall Havells, Orient, etc, right, these folks don’t really have a pumps business. In fact, if you go back in time, Havells did launch pumps quite aggressively, but has largely failed and now they are selling [Phonetic] a few crores a month. That business is inherently slower growing than some other ECD segments over, which we have also demonstrated a lot of growth in.
Finally, you have these small appliances in which — and also for convenience and simplicity, including water heaters. Havells got a lot of ECD growth over time in small appliances growth. If you track back over the last three, four years, including significant growth from personal care, in which we don’t participate. And correct me if I’m wrong, but that sub segment of ECD is probably one of the largest subsegment of Havells ECD, or at least among the large ones, it’s not a small subsegment, and that is a fast growing segment.
Over the — while our business in that segment was relatively a small part. However, over the last three years, smaller though it may be, that has actually also grown faster than most of our competition. In fact, like as I was mentioning now on a run rate basis, our small appliances business which used to be very insignificant, pretty much is business [Phonetic] pumps, right. So that mix factor explains when you add it up total.
Now let me add up one more. I think there is no doubt that we have underachieved in lightning over the last three, four years. No debate. We need to execute our plans better and we need to keep getting more nimble, especially given the rapid innovation and the continuous pricing fluctuations which happen in this market. So there we have underperformed and we need to get it. But ECD, if you break it down in granularity and look like for like, the picture is slightly different.
What we need to do in the future? How do we accelerate the growth, right? I think the first and most important strategic step to accelerate the growth, is the play we have made in kitchen. This is an existing ECD segment, in which the Butterfly brand plays, right? I fully understand obviously right now there are-two independent companies, but we own 75% of it, as in fans [Phonetic] right. So just like for Havells, they had a new business and a whitespace opportunity in let me call it water purifiers personal care, etcetera, we have chosen a big incremental growth area, to come from what is currently one of the largest segments in the business already, but also has probably the greatest growth opportunity.
If I now — as I said today, combine in size our Butterfly small appliances business and our Crompton appliances business, I am already one of the large players in this kitchen space — on a pan India basis with a revenue of call it around INR2000 crores on a run rate basis. There is much more opportunity for growth, so that is the biggest growth play.
Second, we have to fix lighting, right and we need to get lighting going like we had it when we first introduced LED and we moved from 2% share to a 9%, 10% share. We have stagnated to decline since then. So we have to figure out how to fix lighting.
Final incremental growth area which is going to be relatively slow in the beginning, but we’re very happy with it in terms of the consumer feedback, the customer feedback, is large appliances. That is a significant additional play into a whole category, which right now again is not that large today, but is growing well, and we expect this to be a long term growth area. So the incremental that we want to call a whitespace, which we expect as we look out over the next couple of years, to step change our company’s growth, is kitchen with two brands, Crompton and Butterfly. Fix lighting, and get it back on the shared growth path, and large appliances.
There is also of course, as I’ve always maintained, significant growth opportunity which will keep coming and frankly that’s been — continues to be the heartbeat of the company, as we do this whole energy efficiency and technology on fans, because what you see today, which we’re putting in our BEE, is only really BEE phase one, there’s going to be a BEE phase two, a BEE phase three, and technology and energy efficiency will keep improving. But you need to, sort of — I’d urge you to look at this as a total picture as a group right now.
Operator
Thank you, sir. The next question is from the line of Akhilesh Bhandari from ICICI Prudential. Please go ahead.
Akhilesh Bhandari — ICICI Prudential — Analyst
Yeah, yeah. Good morning and thank you for taking my questions. Given that you mentioned in your opening remarks that Crompton hasn’t been heavy-handed in loading the channel with inventory. In your judgment, what would be the difference between Crompton’s non star rated inventory in the market versus some of your closest peers?
Shantanu Khosla — Managing Director
Couple of weeks?
Mathew Job — Chief Executive Officer
Yeah, I think it’s very difficult to give an exact estimate. But I would think that at least three weeks — approximately three weeks extra inventory would have been pushed by competition compared to us. That’s our estimate. And yeah that is the best estimate we have at the moment.
Shantanu Khosla — Managing Director
You know-11 way you can look at this is, if I take Havells fans, Havells actually has three fan brands, right? It’s got Havells, it’s got Reo, and they’ve got Standard. And based on what we understand about the quarter numbers, so it’s obviously our understanding and our projection etc, because it’s not officially released, Havells which is a premium brand, did not have — was not the one that provided the quarterly growth. All the quarterly growth was coming in large percentage growth in Reo and Standard, which is the eco, sub–eco, where there most of this inventory and where potentially the impact of 5%, 6% price increase which will happen with the BEE will be the highest right. So that’s another way which gives us — plus of course we see from the marketplace, as we travel, when the schemes and the discounting started, as some companies started this as far back as — back end of November.
And I think, part of the benefit we had is, we had — because the important thing is, we also ended up with no non-compliant inventory, right? It was all sold and I think the flexibility of manufacturing and the close touch of our operating people, both with the market, the customer and all the way back to the supply chain helps us manage that flexibility.
Operator
Thank you, sir. The next question is from the line of Kiran from Franklin Templeton. Please go ahead.
Kiran Sebastian — Franklin Templeton — Analyst
Yeah. Thank you. You can hear me, right?
Mathew Job — Chief Executive Officer
Yes, yes, please.
Kiran Sebastian — Franklin Templeton — Analyst
Yeah. So I just want to understand this clearly. so you mentioned that, you, you were not aggressive in selling into the channel, but you did not imply there was a destocking, right, it was regular level of selling in, right?
Shantanu Khosla — Managing Director
To be absolutely clear about it, we did towards the back end of December run some schemes on the low and mid end. So even our inventories would have been slightly higher. But competitive programs were much, much deeper in terms of the discounting, began much earlier. And like Matthew said there’s above normal inventory you could take a guess, I would guess somewhere between 2.5 to three weeks. Ours would maybe be about a week or less than a week.
Operator
Thank you, sir. The next question is from the line of Charanjit Singh from DSP Mutual Fund. Please go ahead. Mr. Singh, I have unmuted your line. Kindly proceed with your question.
Charanjit Singh — DSP Mutual Fund — Analyst
Hello. Yes, sir. Sir, am I audible?
Shantanu Khosla — Managing Director
Yes, please.
Charanjit Singh — DSP Mutual Fund — Analyst
Yeah. So first, you know on the fans segment, while you have been, highlighting on a consistent basis that we have been outperforming the market. So if you can give us the numbers for nine months and the last three years CAGR in terms of, how is the market growth and then how is our growth versus the peers, because when we see overall numbers, we don’t see that and get that confidence. That’s on the fan segment.
Secondly, on the lighting side, this issue we had earlier also faced, that, lighting had seen a very high competition. We did some corrective measures in terms of, adding capacities, bringing a lot more in house. We focus on technology. But again this segment is, disappointing. So what are the key initiatives you plan to take, to bring this segment back on track? These are the two questions.
Mathew Job — Chief Executive Officer
On fans, the three-year CAGR has been around 11%. So that is one. Second is, in terms of lighting — in B2C lighting, you’re right, I think there have been phases where we have faced the challenges in terms of slower growth. This is again one quarter in which — while we improved our — while our focus was in ensuring that our structural margins improve on B2C lighting and in parallel we shared as I mentioned, investing on a project to really roll out distribution, because if I look at the last few quarters, our numeric reach except on panels have not really grown. But actually if I look at the numbers for the quarter, we only have reach numbers till November. After a period of time, we start to see our reach numbers grow starting to grow again.
So I’m very confident that that the that the B2C lighting business would start showing positive momentum in the next few quarters, because once we have addressed margin issue structurally through a combination of in housing and finding the right vendor base to do so. So gross margins and B2C lighting are close to their highest ever levels.
Second in terms of distribution, this project is going to take nine months to 12 months to execute across the country, and we really think that that will help you know — start to grow the B2C lighting business again. As I mentioned some time ago, B2B I think is going to take a little bit of time, because we are — compared to many of our competitors in terms of — for the mix of our B2B lighting business, we have a higher exposure to the street lighting business, which has been a little slow in the last few quarters, and we think it will be — take a little more time before that starts to recover. Yeah.
Operator
Thank you, sir. The next question is from the line of Rahul Ranade from Goldman Sachs Asset Management. Please go ahead.
Rahul Ranade — Goldman Sachs Asset Management — Analyst
Hi. Thanks for the opportunity. Just one quick question.
Operator
Mr. Ranade, your volume is too low. Can you please increase the volume a little bit?
Rahul Ranade — Goldman Sachs Asset Management — Analyst
Hello. Am I audible?
Operator
Yes, please proceed.
Rahul Ranade — Goldman Sachs Asset Management — Analyst
Yeah. So just one quick question just to understand. So in your assessment, would we have been worse off had we, you know, resorted to loading the channel in terms of non-BEE rated fans. At an absolute EBIT level for the quarter, would we have been worse off, because only then the strategy makes sense right, otherwise like why would you need to do [Technical Issues]?
Shantanu Khosla — Managing Director
We did not think of this approach on a short term basis. We are better off we believe, because now the Superior product — because the one star product saves 30% versus a non-compliant product. So because we have not put old product excess inventory into the system, our new Superior product will get into the hands of the consumer earlier. They will get used to energy saving fans from Crompton first. Especially at the lower price points, we will be able to start creating marketing awareness of mid-price and low price fans which are now energy saving before other people. So that’s — especially as we’re going into summer. That is the basis on which we took this approach, not a basis of, what’s going to make my number better for a particular quarter.
Operator
Thank you, sir. The next question is from the line of Rakesh from HDFC Mutual Fund. Please go ahead.
Rakesh Sethia — HDFC Mutual Fund — Analyst
Yeah hi. Thank you for the opportunity. I have two questions. How much is the price difference between your star rated and non star rated friends, especially at your largest selling SKU? The reason I’m asking is, given the inventory differential in the channel, I mean what visibility you would have and what kind of growth we should expect in your fans business going forward? Also, are you seeing any increased churn within your organization at the key talent level within each product or business, for example, either in fans or lighting?
Shantanu Khosla — Managing Director
Okay. First on the first one, the steady state price premium is around 5% to 6% on star versus non star, right. In this initial month, we may be discounting that by a point or two, but steady state is about 5% to 6%. When you’re asking about churn, attrition, etc, I’d like to split this into two levels. One level where our entire industry has always had high churn, is at the front end sales level. This is a common industry thing. People come from Havells to Crompton, Crompton to Bajaj and it’s at the lower end. It has picked up, it has gone down a little obviously during COVID, then it picked up after COVID. But it’s now kind of at the same level it has historically been. Obviously that’s an area we’re continuing to work, because we would like to be better on that.
The second is, not well our key manager, but more senior management, has I’m just thinking in my head. So you see, a lot of people have, let me call it, for career opportunities or performance reasons, five to six years is what people tend to spend in an organization. So again, there’s nothing unusual, right. As always, given that we are focused management by objective, we reward performance etc, some amount of the people who move on because they are happy they’ve got better opportunities outside based on their performance and what they have inside. And this has been a continuous process. It’s not that suddenly some something has happened or anything has happened.
Let me take finance for example. This company is eight years old. We had one CFO for seven years and now we’ve got our second year for one year. I know of companies which in the same period had maybe even at three or four CFOs. Let me talk about, sales, sales head, right. Again seven, eight years second sales head. We had one who was Amar, who came in right in the beginning when we created the organization, and now and now I think the last couple of years we’ve had, Sunil. So nothing — because also what’s happening with growth with Butterfly etc [Indecipherable], we’re now able to get good, good opportunities for people. I mean, like Sriram was running fans, now it’s a wonderful opportunity for him in his current role as Managing Director of this independent company. So as long as we’re able — so good performing people who we want to retain, by and large, we’re able to offer growth opportunities and keep them; like Anand Kumar who’s now running our appliances business, he used to be our regional general manager south. Successful five years spent there, and now he has come in the last six months, seven months, the business is doing well and he’s doing great, right.
So not like that. So at the senior level also, I don’t, think it’s anything extraordinary. Yes, frontline sales, it’s an industry challenge. We have to keep working it.
Operator
Thank you, sir. The next question is from the line of Renu Baid from IIFL Securities. Please go ahead.
Renu Baid — IIFL — Analyst
Yeah. Hi, good morning, team. I have one question — and there are multiple, but the key question to ask here is, at the time of Butterfly acquisition, we had guided that, the acquisition will be breakeven in FY ’23, which is the first year of acquisition and we were expecting it to be earnings accretive FY ’24. Given that now we have reduced the stake in Butterfly with 75%, where are we on this journey, both in terms of building on your operation to Crompton and improving the profitability and turnaround of Butterfly, along with the 25%, 30% kind of average CAGR growth that you had suggested then.
Shantanu Khosla — Managing Director
Okay. First, we are still on track for our first year to be neutral. Right., no loss, no gain in in totality, right. Obviously what different accounting things may come in or not, I am not an expert on that. But we are very much on track for it to be neutral.
In terms of how are we versus what I call the booklet and what I call the booklet is the investment recommendation I gave to our Board of Directors recommending the acquisition. We are very much on track on that, also in year one overall if I look, as per our current best estimate on Butterfly for the fiscal, we may be slightly below on revenue and when I say slightly, I mean maybe a point or two nothing beyond that, largely driven by the fact that obviously in this industry. For example, Prestige announced results and it was down 9%, 10% for the quarter. So that difference is largely because of the overall market conditions, especially in the festival, seemed to be a little weak this year, but nothing material. And we are slightly over delivering versus a booklet in terms of synergies and margins.
So net-net we are very much on track and still feel very good about it. The other thing which obviously still doesn’t show up in the numbers, but will begin to show up in the numbers is the product innovation and consumer ideas seem to be a little ahead of our expectations, but that is stuff which will only actualize and commercialize over the next 12, 24 months.
Kaleeswaran Arunachalam — Chief Financial Officer
Just adding to what Shantanu said, so overall if you look at it, Butterfly is poised to deliver PBT close to about say INR100 crores for financial year ’22-’23. And if you also look at it at the time of Butterfly acquisition, we did raise debt of about INR1900 crores, INR500 crores which are sitting in Crompton, of it, INR600 crores will be paid off in March, and a large part of this will also get paid off in FY ’24. So as we move into it, you’ll also see the interest cost declining. You will see the debt coming down and the INR100 crore based on which Butterfly is starting to operate at PBT, will start delivering significant growth and that’s when you see significant EPS accretion happening at the overall level.
Shantanu Khosla — Managing Director
Does that answer the question, Renu?
Operator
Thank you, Sir. The next question is from the line of Nikunj Gala from Sundaram AMC. Please go ahead.
Nikunj Gala — Sundaram AMC — Analyst
Yeah, good morning, everyone. Sir just on the ECD category per share ex of pumps, at the industry level we have seen the last few months, the demand to be, kind of a subdued one. And the sentiments — overall sentiments are lower. So you know, according to you, what are the key reasons here, excluding the regulatory changes which we have seen in the fans, but what are the two or three reasons which you believe are leading to a lower sentiments? Because at some point of time, inflation in the minds of the consumers, should settle down, right. And going forward like you know from the next one year perspective, what are the key variables which you would be tracking which will give you a confidence that the volume growth in the entire category should come back?
Shantanu Khosla — Managing Director
Yeah. first let me take the first part and obviously this is data-based judgment, because there is no perfect answer for this. If you look at the trends, we all tend to endure, tend to talk about value. But since pre COVID time, to today, on an average the fans pricing has probably gone up in the industry about 15%. So volumes have declined for the industry over this period. I don’t think there’s any doubt about that. This decline has probably been more in the mid and below segment than it has been at the premium segment. So based on this we conclude that this obviously is driven by the price increase, which impacts, given the overall economic situation, people with lower affordability more. And therefore the volumes get impacted.
The consumer behavior which we believe happens is, given the nature of a fan, my fan may be squeaking a little bit. Given the overall economic pressures I continue to live with it, even though it’s squeaking. Instead of buying a new INR1500 fan, maybe I go to the nearby workshop and get my fan motor repaired. Behaviors like that are potentially — in this environment, delaying.
The second thing is, we know also if you look at historical data, there is a correlation between housing activity and fans. Now, housing activity. All the data indicates it has been picking up for the last 18 months or so. However the fan comes in, not at the beginning of the housing activity, but at the end of the housing activity. So there’s a lag period, because the fan is bought after you move into the house, or in the process of moving out. So there’s probably about a 24 month lag period. So that gives us some level of optimism that, in the not too distant future, independent of the macros and the GDP and all that stuff, this also should be a tailwind on the fans category to restore volume.
When will the macros, inflation, all this stuff recover? I mean, there are many experts who are predicting many things, right? But the reality is we have to see it happen. The good thing I guess from a value point of view and an inflation point of view though, you said in part from this, but there’s a long term positive.
Because of lower energy consumption, lower energy bills, the ownership of a fan has become cheaper. We may be taking a 6% price increase, but over a two year period you’re paying less. Now we know that that is not the only thing with price, but that’s another tailwind, which, energy efficiency brings in.
Operator
Thank you, sir. The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead.
Keyur Pandya — ICICI Prudential — Analyst
Thank you for the time. So I just want to understand both for fans and Butterfly portfolio, when we are — when we chose not to push fans, and in butterfly when we are focusing on say offline channel. In that context, with both of these initiatives, so should we do — especially in fans, should we reap the benefit say starting Q4, since our inventory may not be inventory of say non rated fans may not be as high as the competition. So basically just want to understand in near term what kind of growth should we expect in fans and Butterfly? And also on the medium term basis for both these categories?
Shantanu Khosla — Managing Director
I think on fans, the benefits will be seen through summer consumption. Summer consumption is a period which is obviously the peak consumption period. But this spills over the second-half of 4Q and the first half of 1Q. That’s when we should start seeing the benefit, because that’s when the consumer is actually getting aware and going and buying these new rated fans. In terms in terms of Butterfly — let me address one bit of your question I got, so let me just address it, which is this ecommerce versus open retail. See — and Sriram jump in if I’ve got any number wrong.
The industry in which Butterfly operates, sales — about 20% to 25% of its revenue comes from ecommerce. Butterfly previously had gone up to a level of 45% of its business coming from ecommerce. And when we acquired and Sriram started operating the business, what we saw was all the growth historically in Butterfly was coming from ecommerce, and the open trade was actually actively declining, not currently but pre Crompton acquisition. As we got into it, we saw that part of the reason for this, was because of a pricing disparity. So you were not actually building more consumption, you were just creating channel shift at a lower price.
So one of the things which Sriram and the team have been doing on butterfly, is correcting this pricing disparity, which has automatically led to more growth coming from the retail channel, as it balances out. We are still overdeveloped versus industry in ecommerce, but we’re not at a crazy 45% right. So now it is much more about getting the right SKUs in, getting the right initiatives in for ecommerce to continue growing that business. So it’s a sort of a one-time channel reset to what it should be. This has also been part of the reason, why overall margin and profitability has gradually kept on ticking up for Butterfly, because we were underpricing in one channel. And this is part of the part which has enabled Sriram to invest in the innovation, to invest in more capability, invest in — for example, better EHS in the factory etc.
Operator
Thank you, sir. Ladies and gentlemen. That was the last question for today. I would now like to hand the conference over to Ms. Bhumika Nair for closing comments. Over to you, Bhoomika.
Bhoomika Nair — DAM Capital Advisors — Analyst
Yes, thank you very much, sir to give us an opportunity to host the call and answering all the questions. Wishing you all the very best. Any closing remarks from your side, sir?
Shantanu Khosla — Managing Director
Yeah, thank you, everyone as always. As always, we probably have not been able to answer all the questions given time restrictions, but please feel free to contact us. We’re all available at any point in time, Kalees, [Indecipherable] and myself, Mathew and our objective is always to give you the best understanding of our business as we can. Thank you so much and take care.
Operator
[Operator Closing Remarks]