Crompton Greaves Consumer Electricals Limited (NSE: CROMPTON) Q4 2025 Earnings Call dated May. 15, 2025
Corporate Participants:
Unidentified Speaker
Promeet Ghosh — Managing Director & Chief Executive Officer
Kaleeswaran Arunachalam — Group Chief Financial Officer & Head of Strategy
Natasha Kedia — Head of Investor Relations
Swetha Sagar — Chief Business Officer
Analysts:
Unidentified Participant
Aniruddha Joshi — Analyst
Aditya Bhartia — Analyst
Siddhartha Bera — Analyst
Pulkit Patni — Analyst
Umang Mehta — Analyst
Viraj Kacharia — Analyst
Indrajit Agarwal — Analyst
Bhoomika Nair — Analyst
Natasha Jain — Analyst
Ashish Jain — Analyst
Presentation:
Aniruddha Joshi — Analyst
Behalf of ICICI securities, we welcome you all to Q4FY25 results conference call of Crompton Consumer. Crompton Greaves Consumer Electricals. We have with us today the senior management represented by Mr. Promit Ghosh, Managing Director and Chief Chief Executive Officer. Mr. Kaliswaran Arunachalam, Chief Financial Officer. Ms. Sweta Sagar, Chief Business Officer, Butterfly Gandhimati Appliances Ltd. And Ms. Natasha Kedia, Head of Investor Relations. Now I hand over the call to the management for initial comments on the quarterly as well as annual performance. And then we will open the floor for question and answer session. Thanks. And over to you.
Promeet Ghosh — Managing Director & Chief Executive Officer
Hello everyone. Thanks for joining us. The second call we’re doing from this room which is our new office. I hope many of you have had the opportunity of visiting us here. If not look forward to seeing you here. But let me get. Let me kick off the earnings call. Firstly, quickly introducing the people around the table. Kish, who you know sh. Shweta, who I assume you know as well as Natasha. Right. Okay. So firstly you. I assume you’ve also looked at the press release we’ve made as well as the. The investor deck which has been uploaded, right?
Natasha Kedia — Head of Investor Relations
Yeah, it has.
Promeet Ghosh — Managing Director & Chief Executive Officer
That’s been uploaded. Right. So beginning with fans, the category was led by robust growth in tpw, strong margin improvement during the year. As you would have seen, we. Our margins are now back to pre B 1.0 levels. Pricing actions and a spate of new launches has helped us enhance competitiveness. You would have seen that we announced two platforms for the next generation of motor technologies. One for BLDC and the other for Induction motors. We have very consciously decided to adopt a platform first approach and that’s culminated in the launch of Nucleus and Xtech. And frankly it’s I think the important strategic decision which sets us apart from our peers.
It’s something that I anticipate will in due course of time over the next few quarters bear significant fruit for us including as we launch the next generation of VLDC fans including as the industry and we get ready for the next big leap in energy transition. So the really our platform first strategy or the kinds of benefits that it offers. Greater control over product development, enhanced agility to adapt to evolving consumer needs, improved after sales service turnaround and builds on deep industry expertise that we have. We have felt for some time, for instance that industry as a whole needed to further strengthen the reliability of the BLDC products that were that are available in the market.
And we went to work and developing something that we believe will significantly address those issues so that we are able to fundamentally, you know, that we put, you know, that we put out and assume over a period of time the market itself will move to a different trajectory. And that’s why Nucleus, which is the advanced in house BDC technology which enhances both performance as well as reliability. Meanwhile, we’ve also invested again as market leaders, we felt this was important. Also invested significantly on the induction motor technology and we calling this Extech. This is a platform which you’ll see for gradually being rolled out for all our fans.
It has already been incorporated in many of our fans but over a period of time all our fans will have it. This embodies our commitment to energy efficiency and durability. The hallmark of our products has been durability and this technology will provide both that as well as exceptional levels of energy efficiency going forward. You know, I do believe this platform first approach will materially help us strengthen our leadership position in the future. Now. In view of our, you know, some time ago you’ve seen US announce Crompton 2.0 focus on a bunch of areas that you are familiar with. So I’m not going to go into Compton 2.0 strategy but in view of our confidence of continued revenue growth, growth in the future, volume growth in the future and the growing focus on the next generation of technologies as we position ourselves, I am very pleased to announce that the company is very actively exploring the development of a greenfield manufacturing facility. This will involve a proposed investment of about 350 crores. We should be in a position in the next few weeks to come back to you with much more details of how, when, where and all of those details because those are as we speak being worked upon and tied down.
Now needless to say, this is a major strategic initiative and this is going a long way in overall bolstering the strength of our supply chain and supporting our long term growth trajectory. We do believe that with this step we will have the right balance between expanding our in house capabilities as well as leveraging off the trusted and long term relationships that we enjoy with our vendors. With this state of the art facility, we aim to elevate overall quality, resilience, responsiveness of our supply chain ecosystem, ensuring that we consistently meet and exceed market expectations. There will be a couple of phases in this project and like I said, the first phase is expected to have an outlay of about 350 crores.
This will the first phase will primarily focus on fans with plans to upscale going forward, adding other production lines and laying the foundation for sustained innovation and growth in the company in the years ahead. And like I said, we should be in a position to share more details with you over the next near term. Now further, and this is a question I get asked very often, what are the new categories that we are going to be entering? How are we expanding the TAM of our products? You are familiar that our approach has always been to announce them when we actually are already entering them or have are on the verge of doing that.
Now I’m happy to inform one more category, large category that we are entering as a part of our Crompton 2.0 strategy. We are expanding into the rooftop solar business. Many of you are familiar that the size of opportunity in the solar rooftop business is significant. It’s order of magnitude about 20,000 crores. Now needless to say, our approach has been to first build up the capability and give ourselves the confidence that we are able to when we enter a business able to execute really well. Now you will be familiar that we similarly did something similar with solar pumps.
And I am happy to report that that’s a business that has scaled up significantly since we entered that area about a year and a half ago or here nine months ago. Now this year, in the year that has gone by now we recorded approximate sales of over 200 crores. Now that should tell you that’s come out of practically zero three years ago. So that gives us, you know, the confidence that we have both the product capabilities, the supply chain capabilities as well as the execution capabilities to be able to get a material share of the solar rooftop business.
I actually anticipate that in the near term we will also be making further announcements including in adjacencies of areas that we are already in but material size dams and you know, we’ll keep you posted about some of those, you know, in the weeks and months to come. Now as far as our segment performance is concerned, I spoke about fans. Pumps continue to perform very well bolstered as you know, both by market share gains in the Residential pumps business where as you know we are market leaders by some distance and the significant growth in the solar pumps business in Q4 specifically we won orders from Meda and MSEDL from the on the solar pump side we are now moving ahead into the next level of stepping up our investments in the solar pumps business.
We have in fact you know also materially strengthening our organization structure on the solar pump side. Now appliances appliances delivered a high teens growth. As you know, appliances comprises two parts. It’s one part of it is what we call lda which is the large domestic appliances which is the, which is the air coolers and the water heaters business. It’s separately the kitchen appliances business which we call sda. But since we’ve talked about appliances together previously, I’m going to talk about them together here as well. High teen growth standout performances and air coolers 50 plus percent growth.
Mixer grinders again 30 plus percent growth. And despite a delayed summer, you know we’ve we’ve actually had pretty good results on the air cooler side. Large domestic appliances, large kitchen appliances clocked revenue of about 60 crores. While EBITDA remains negative. Losses have continued to narrow and Crompton is also gaining traction online and now I think we are apparently third on Amazon. Earlier in the year, about a couple of months ago we have had a change in the team structure there and I and I’m happy to report that the changes are helping, you know, bolster the trajectory of that business.
In our lighting segment revenue rose to by about 2%. They’re holding steady through the year despite continued pricing pressures. Now this is one of the bright spots again of our business for you know I remember one and a half years ago there was a lot of talk about where our lighting business is going and you know we have seen the trajectory there change and while the revenue growth this quarter is 2%, I am very glad to say that we have managed to change the product mix in this segment quite, I have to say quite a lot both on adding new products as well as growing our panels business.
This for the year gone by. The panels business is now for a company which has always been very heavy in lamps and battens. Panels is now our largest business and a pretty large share of business is now contributed by outside by products which are outside of panels, lamps and patterns. And in fact the lighting business is now going to lead the foray into the solar rooftops as well as well as other announcements that we may make in allied areas shortly. Right before the having said that a little more detail there. B2C segments or top line growth as well as mix improvement.
Like I’ve said, B2B segment. We have been building up our capabilities in street flood, industrial and indoor areas as you may recall we are, we’ve earlier been a kind of a street. We’ve had great strengths in street lighting and I’m glad to see that we’ve added other capabilities there. EBIT performance was robust. Margins expanded from to about 11.8% in FY23 and a sharp rise to 15.9% in the lighting supported by a rich product mix and new product introductions. So again I keep telling you that we don’t want to lose sight of profitability because that’s what enables us to go out and get market share gains.
That’s what allows us to introduce new products and I think you can see that in play. Moving on to Butterfly, another area where I think people have and Shweta smiling here over a period of time we’ve been asked a bunch of questions about where that is and similar to lighting we initially took some time off to get the basics right and sometimes when you get the basics right it doesn’t look pretty. But when, when those begin to deliver results then they took nice. So I think you can see some of that happening in Butterfly. The annual revenue was at 865 crores.
The Q4 revenue is 187 crores marking a 12% growth YoY so you see a return to growth and that growth has been driven by strong performance in key categories such as mixer grinders, cookers and wet grinders all of which had double digit growth increases. Sequential market share has obviously grown as well. Importantly the gross margin has improved materially as well and this has come from efficiency increase, efficiency improvements, price increases. Now we’ve been telling you that this is something that we’ve been doing that’s mean that has meant resetting terms of trade with many of our trading partners.
But we’ve taken the pain and now you can see some of the benefits. Optimization of input costs and of trade scheme. This resulted in ebitda margin of 8.6% for Q4FY25. The business delivered a sharp turnaround in profitability. Y O Y with ebit rising to 42 crores in FY25 and a Q4 swing of Rupees 11 crores. Pricing actions were implemented across retail, modern trade and exports. Finally, although consumer demand continued to be, I have to say subdued in Q4 we are quite optimistic about the trajectory that the business is taking. And the fact that many of the issues that the business had been able to address and I, I, I can tell you that our optimism of the future is also bolstered by upcoming product launches and you know, efforts that we are making on enhanced channel engagements, which I think you will hear of sooner rather than later.
Again, we’ve invested the time to build the right to win and I think those will start to show Irrespective of the macroeconomic situation, weather conditions and forecasts, our focus has always been on long term sustainable growth and we continue to be disciplined about our execution and responsive in our actions and operations and have continued to build a strong innovation pipeline to drive performance while remaining closely aligned with evolving consumer needs. In terms of Overall financial performance, FY25 marks the second consecutive year of double digit revenue growth, a testament to our continued efforts in line with Crompton 2.0 strategy.
Our standalone FY25 revenue group 10% to 7028 crores, led primarily by a robust performance in the ECT segment. In FY25 we achieved the highest ever standalone EBITDA of 819 crores. Our margin profile has strengthened with margins improving to 10.5% driven by reduced input costs despite higher A and P spends. Encouragingly, our bottom line growth has outpaced our top line growth with profit growth of 21% in in FY25 Q4 revenue revenue grew by 5% to 1879 crores, reflecting subdued demand conditions but also underscoring our ability to hold ground even with external tail even when external tailwinds soften.
In Q4 margins held up very well and are at 11.9% with EBIT. EBIT growing at 8% YoY to 22,223crores for the quarter in the ECD segment which grew 11% in FY25 and 6% YoY in Q4. We saw a solid performance across all subcategories. With this, I’ll conclude my remarks for the quarter and the financial year and thank you for your patient listening. I think what we missed is we talked about the revenue growth but not the not the consolidated profit growth. Right? What’s a consolidated profit growth? 28 28%. Okay. Yeah, so a consolidated revenue growth is also about 5% and consolidated profit growth is about 28%.
I’m sure they have all those details, but I should just mention that with that rather long opening remarks, I shall pause and take questions.
Questions and Answers:
operator
Yeah. Thanks sir. So now we will begin the question and answer session. Those participants who wish to Ask the questions. Please raise hand and then we will unmute your line. So first we have question from Mr. Aditya Bhartia. Please unmute your line and go ahead with your question.
Aniruddha Joshi
Yes Aditya, please introduce yourself.
Aditya Bhartia
Hi sir, this is Aditya from Investec. My first question is on the solar rooftop business. You kind of spelled out the overall opportunity size. Just wanted to understand how we thinking of scaling up in the business and what is.
Swetha Sagar
Sorry, Aditya is not audible anymore.
Aditya Bhartia
Hello, can you hear me?
Swetha Sagar
Yeah, this is better.
Aditya Bhartia
So I was just asking that you’ve spelled out the overall opportunity size but just wanted to understand how we are thinking of scaling up in this business. What are the kind of targets that we have set for ourselves. And given that we are a slightly late entrant in this business what’s going to be our competitive edge?
Promeet Ghosh
Fair point. Firstly, you know Aditya, you are probably aware that the size of the market is actually larger. But you know I. I specifically talked about 20,000 crores because that’s the segment that we’ll be. We’ll be targeting. We. What we have done so far is h. The right people figured out a bunch of detailing about how we, you know, about the product and about the execution that is needed in order for us to succeed in the business. Now the reason I think that we. We’ll be able to do a reasonable job of it is one, you know, brand counts for a lot in this business.
And that has been demonstrated to us in the pumps business combined with the execution capability and the sourcing capability that we brought to the, to the pumps business which again we were entrant while lots of other people had already entered. We think, you know, a combination of factors including the, the fact that it’s a consumer product and the Crompton brand deeply trusted by many. We do think we’ll be able to do quite well. I don’t want to tell you about specific numbers that we should be able to get but you know, I think you can all already tell from the way that we’ve done in our pumps business that we should be able to ramp up quite quickly.
And we have now a pretty decent team there.
Aditya Bhartia
Sure, sir. And you spoke about sourcing capability in this business. If you could just kind of explain what do you really mean by that? What’s the advantage that we’ll be having. Over some of our competitors? Especially because we have also seen Havils acquiring a stake in Burdi Solo.
Promeet Ghosh
Yeah, I don’t want to spell out too much just now, Aditya. If you don’t mind suffice it to say these are things that we’ve been working on for a while and so yeah, we should be competitive is our sense. Perfect.
Aditya Bhartia
Perfect. And my second question is on large kitchen appliances business. While it’s good to kind of note that EBITDA losses have started coming down but it seems that revenue number has broadly remained flattish on a year on year basis. So just wanted to understand what has really been happening around that. What is the longer term ambition that we have for that particular business?
Promeet Ghosh
Yeah, so you’re absolutely right. The revenue growth has not been what we anticipated and hence the, I mean hence my remarks earlier about the way that we are approaching this, including changes, the team, etc. Having said that Aditya, we are very convinced that we actually have a very good product. We actually have a differentiated product offering and our understanding is that consumers are quite willing to, you know, buy our product and it’s a decent sized tam out there. What we needed to do is to improve our execution, our targeting, our product mix and that is what we are working on now.
And I think what you will see is both a narrowing of the losses going forward as well as a pickup in the trajectory to what really this business deserves. You know, we, we, we. If you, if you recall, we’d spend a lot of money in innovating and getting the product right. And nobody is probably in a better position to get a product right other than us because we understand fans and really chimneys are a fan. Right. With electronics thrown in, which we understand pretty well. So, and there are, as you are probably aware, we are investing a fair amount of money in the kitchen side of the business with tablets, with Hobs, with and Shweta is here as well because obviously both Butterfly as well as the Crompton Kitchen products benefit from the investments that we are making.
So yeah, we, we are. I, I do believe that there are good times ahead for the segment.
Aditya Bhartia
That’s helpful sir. Thank you. Thank you so much for your answers.
operator
Yeah, thank you. Next we have question from Mr. Siddharth Bera. Please unmute your line and go ahead with your question.
Siddhartha Bera
Thanks for the opportunity sir. First question is. Sorry sir, I, I wasn’t. Sorry. Thanks for the opportunity, sir. First question is on the ECD segment, you did allude to that the demand sentiments were a bit subdued at an industry level in the quarter. So going ahead for the coming year, how do you expect the recovery to play out? And given that we had done a couple of premium launches and across segments, was there any contribution from those Launches in the, in the quarter four or should we expect that to be the key driver of growth in the coming year?
Promeet Ghosh
There was a, there was, you know, the contribution of some of our new launches in the fan segment. I have to say that because we did a limited launch last quarter as you wrap up production it takes some time. So we, so it’s fair to say that the contribution of the new products was fairly limited in the last quarter. So you’ll begin to see some of the benefits of that. This quarter there is another very big launch which is happening in fans as we speak. We’ve launched the Fluido fan now. So you guys, so as remember this is the product which has got a red dot award for design.
It’s a very differentiated looking fan, very differentiated colors and you know we do hope that that’s something that will also start contributing this, this quarter. It’s fair to say that the weather conditions which are a contributor typically Q1 tends to be the quarter where the weather is a, you know, is something that helps drive a lot of the growth that appears delayed. Right. So we’ve had consistently had rains across the country, particularly in the south, even in the west and east and also in the north. So it’s, we do believe that things will, you know, change going forward and that will add momentum to the, to the business.
Siddhartha Bera
Got it sir. So second question is on the pump side. I mean you did allude to the fact that last year we did do a strong solar pump revenues. Now if I look at the coming year, given that you indicated close to maybe 25 close orders pending. So should we expect that that momentum sustains what you did in FY25 or it will depend on the number of amount of orders you take. Now going ahead.
Promeet Ghosh
Look, the order book, I didn’t actually talk about the order book actually but you know we, we, I do think that we should continue to have good momentum in solar pumps.
Siddhartha Bera
Got it sir. Thanks sir. I’ll come back in the queue.
operator
Thanks. Next we have questions from Mr. Pulkit Patni. Please unmute your line and go ahead with your question.
Pulkit Patni
Yeah, hi, thank you for taking my question regarding this capex that you’ve announced of 350 crore in a manufacturing facility. Could you give a sense of, you know, whether in the first phase you will only sort of do fans or something else? Because 350 crores sounds like a pretty big amount for a fan factory. So is it that the land initially would cost a lot more? Some breakdown on you know, how this capex in different phases will look like.
Promeet Ghosh
Okay, so yes, this is initially for fans. Yes, this will in due course also include in the next phase other products. Obviously the first phase includes the cost of the entire land. So yes, that does get loaded on the first phase. Remember that we are a large fans company so our requirements are large and they are getting ever larger. So I don’t know what size of fans capacity you are thinking about but this is expected to be. If you don’t mind, you know, since we haven’t currently announced a few, a few eyes which have been dotted and T’s which are being crossed, I will come back to you with bigger, greater details about where, what, how, etc.
But yes, this should be a state of the art facility. This should be something that is pretty well integrated and it should be for a material size of plot.
Pulkit Patni
Okay, and what is the time period over which we should model this capex in our, in our estimates?
Promeet Ghosh
Yeah, so you know my guess is that we should be you know, producing. Yeah. Two to three years is when we should be producing this. I mean fortunately as you know our capital position continues to be quite strong. We are, we are a strongly cash positive company, net debt positive company. Let me put it this way. So yeah, we should, you should expect that this comes in to. Comes into production about two and a half years so to say.
Pulkit Patni
Great, that’s useful. Thank you so much. And we’ll wait for more details on this capex later. Thank you.
operator
Yeah, thanks. Next we have question from Mr. Umang Mehta. Please unmute your line and go ahead with the question.
Umang Mehta
Yeah, am I audible?
Swetha Sagar
We can hear you.
Umang Mehta
Yes, thanks a lot for the opportunity. The question was again on the capex if I’m not wrong. I mean the fans volume growth this year wasn’t that high as such. I mean so would it be fair to assume that you’d be insourcing most of the incremental production which you do do and effectively you could basically look to go from 50% outsourced to entirely insourcing after say three years. Is it the right way to look at it?
Promeet Ghosh
Not really. We do expect to have. We, we are not going to go to a fully insourced model. Our own expectations of volume growth imply that we will continue to have a reasonable amount of outsourcing going forward and what will happen is that the overall quality of our supply chain I think will improve. But you know we. While this year the fans growth has been. Volume growth has been modest but we are from, from what we’ve planned, what we are seeing happen. Some of which you may see today, some of which you may not see today means that we will actually have continue to have a mix of both insourcing and outsourcing.
Needless to say what we insource there are lots of advantages of insourcing and those will obviously come to us. But I it’s not that we will be entirely an insourced company.
Kaleeswaran Arunachalam
Just to add to what Promethean said Umang, I think two perspectives. One, in a year where you have modest growth at the scale at which we operate, we add about 1 to 1.5 million fans to the volume that is the size at which many companies have their total fans business. So therefore we don’t build projects like Greenfield looking at a quarter or two or a year it is from a view of next five years how do we see the demand panning out and how does consumer behaviors are going to move towards various aesthetics and technology driven segment.
And from that perspective we think this is something that we need considering our future projections.
Umang Mehta
Got it. Very helpful. And the second one was on solar pumps. You did reply to the previous participant partially. But just to understand do we look at it as a episodic business or can we build on the revenue which you already achieved so far? Just asking from modeling perspective because 200 crore what we are factoring in is the growth on that. So would that be correct to build or not?
Kaleeswaran Arunachalam
I think the entire solar business is not built in with the thesis of there is a PM Kusum scheme and that will continue to build this business. This is something similar to ev you have all seen Fame one, fame two, subsidy is now out but still the business is continuing and probably accelerating in growth. And our hypothesis is that solar pumps will fall in that space. For a player like us who’s a market leader in residential we always said agri is going to be an area of focus for us. Now solar pumps is helping us to position that pretty well.
It is starting with the backing by the government on PM Kusumsky but even beyond that the real need for a farmer to have continuity in power is probably the primary reason to reason to transition to a solar pump. And therefore we don’t see this as a sporadic business and this is something that is sustainable for a longer period of time.
Umang Mehta
Great. These are the right questions. Thank you so much and all the best.
operator
Yeah, thanks. Next we have question from Mr. Viraj Kacharya. Please unmute your line and go to the question.
Viraj Kacharia
Hello. Hello. Yeah, yeah, just couple of questions. See most of the questions on CHROMTON have been answered just on Butterfly. Just trying to. You talked about NPD for Crompton, but for Butterfly how are you going about with NPD and you know how you going about measuring the effectiveness and tracking the efficiency in terms of the new product introductions. That is one second is largely in terms of the brand positioning and the brand architecture. So if you can just. I think last few calls you have been talking about the exercise by and large through for Crown Time and us looking at similar exercise and Butterfly.
So can you give some color? How is the brand position, how would the brand would be positioned both for Crompton and Butterfly in common markets and both in those region. And in terms of price points, will it be a mid premium? Any color you can give on that.
Promeet Ghosh
You want to take a shot at what you’re doing with. You know look Viraj, what I, what I. Let me just reiterate and say that you, you, you should be able to see some of these things play out fairly soon. So one I’d say watch the space but if there’s, if Shweta is willing to give any more. Yeah. So look there, there’s, there, there’s. There’s a fair amount of activity on the brand as well as on the new product launches at a Butterfly. And you know the idea would be that we get those out particularly ahead of the season.
Right. Because this is the, the, the kitchen appliance season is different from the, the fans and air cooler season. Right. And it’s important to get those out ahead of season. So yes, you should see some activity, quite a bit of activity there and you will get you, you will get clarity on the questions that you are and needless to say, you know, it’s not fair to kind of lay it out just now ahead of the actual launch.
Viraj Kacharia
Okay, just two questions. One is, you know, so when we acquired Butterfly was a brand which was strong in south. So will there be still be opportunities? Will they, will we still be looking into the cross pollination in terms of the brand going pan India and leveraging, you know, synergies, you know, network and similarly for Quantum and South. Any, any color you can give on that password.
Promeet Ghosh
You want to take that? Okay, if you, if you wish, I’ll. Yeah, firstly, absolutely. Viraj. It is our intent over time to take Butterfly to other parts of India. What you’re seeing happen just now is Butterfly focusing on strengthening the core. It’s a brand that is very strong in the south. But there are actually there are things that we needed to do to ensure that Our core was further strengthened, our products were strengthened, our brand is strengthened. And some of those actions you’ve already seen and you are already seeing the benefits of those. You will see some more of these happen soon enough.
But even as we do that, the, you know, we do see the opportunity of taking Butterfly to other parts of the country and leveraging of that.
Viraj Kacharia
Okay, I’ll come back. Thank you. Thank you.
operator
Yeah. Next we have a question from Mr. Parag Thakkar. Please unmute your line and go ahead with the question. You’re on mute.
Swetha Sagar
I think we can go to the next question.
operator
Yeah, next question is from line of Mr. Indrajit Agarwal. Please unmute your line and go ahead with the question.
Indrajit Agarwal
Hi, can you hear me?
Promeet Ghosh
Yeah.
Indrajit Agarwal
All right, thanks for the opportunity. I have two questions. First, again, coming back on CapEx, Crompton historically has enjoyed very high ROCs and the flexibility of sourcing because of outsourced model. So with this Capex is the objective to have a better view on sourcing or better returns or both?
Kaleeswaran Arunachalam
Both.
Indrajit Agarwal
So this will be ROC accretive.
Promeet Ghosh
Yeah. All right, look, at the end of the day, I again don’t want to get into specifics as yet, but we do think that this investment will generate good ROC for us. More importantly, this is something that will elevate the Crompton supply chain from, from new products, new technologies, quality faster to the market, etc. So let’s understand what’s happening here. There is, I think you should be able to put together and join the dots. We’ve announced investments in the next generation of fan platforms right now. You will also see that translating into differentiation into the market.
And the investments that we are making, we do think will help us quite a bit in the market.
Indrajit Agarwal
Thank you. Secondly on. You talked about the unseasonal rain and cooler weather. With that context, how is the inventory trade, inventory levels currently, Is it significantly higher than normal seasonality or do you think it’s something that can be drawn down if things improve in the next couple of months?
Promeet Ghosh
You know, it’s the, the trade does stock up ahead of the season. Right. That is obviously a feature of how the market behaves. And if the, you know, if the, if unseasonal rains arrive, then you know, obviously the trade is holding higher stocks than they would have anticipated at this point in time. Having said that, you know, it is our belief that it’s not like the season is gone, it’s just that it shifted. And I think we do have to understand that this is not a One off in the future it is quite possible that the season timings of seasons will move right.
We’ve had extended winters, we’ve had shortened winters, but that’s the trait that you have to have an agile system both at your supply chain as well as at the front end to be able to deal with these. And yes, I do think that, you know, as the weather gets warmer this will get addressed and it is beginning to get warmer in some parts of India again. You know, somebody was asking about supply chain earlier and new green field, etc. This is, this is again indication that you need to have as you know, an agile system which is quickly able to pivot as you go forward and everything helps.
Everything that you could do to get that helps.
Indrajit Agarwal
Sure. Thank you so much.
operator
Yeah. Next we have question from Bhumika Nair. Please unmute your line and go ahead with the question.
Bhoomika Nair
Yeah. Hi. So my first question is on the margins that we’re seeing in the lighting segment which is driven by an improved mix as you alluded earlier. Now is this something which is very specific to this quarter where we’ve seen this sharp jump or is this something that we can now start seeing an improvement towards these high double digit or teen levels kind of margins?
Kaleeswaran Arunachalam
Lighting as a segment, if you look at it, we have been calling out clearly for the last six or seven quarters. Prima facie price decline is not something in our control from an output product perspective. And we have been sharp enough to ensure how do we make some of these products fit for purpose? You know that our flagship cost reduction program, UNATI is helping us to ensure that both direct and indirect cost, not only at lighting level but across the organization has been reduced. Third, our mix is improving compared to where we used to be in our LED bulb LED category.
We are moving towards panels and ceiling that is also helping us to move the margin model. Now the idea as we always talked about as part of the Crompton 2.0 strategy is not continuously expand the margins. It is also to look at growth. Some part of this margin we have started to reinvest behind the brand for lighting as a category specifically you saw some of those campaigns that were run during last year. We will be accelerating that during the course of this year to ensure that we are able to capture the revenue growth opportunities to too.
Promeet Ghosh
Yeah. And by the way, the margin improvement is despite the fact that we’ve stepped up investments in the brand. Right. So if I remember correctly, we used to be you. Whatever. We, we, rather than get into details, we. This is despite the Fact that we’ve made more investments in the brand and we will continue to do that. But these are not sudden one offs that have happened in any in this quarter. No, fundamentally in every business you have to strengthen your, you know, profitability position so that you can give back.
Bhoomika Nair
So basically the lighting where there was a lack of growth either in terms of top line or in terms of the margin profile, now that is coming back towards the balance growth. That’s the way we should think about it as we move on.
Kaleeswaran Arunachalam
That’s right, that’s right.
Promeet Ghosh
With also I’d say that some of the growth initiatives which are adjacent to lighting will also now get announced. As you know, we get comfortable with the fact that we have the. That the lighting business is back on track.
Bhoomika Nair
Sure. So my second question is on Butterfly. You know we’ve obviously done a very good job. We’ve seen an improvement in terms of margin profile and.
Promeet Ghosh
I can’t hear you.
Bhoomika Nair
Again, double digit growth with margins further improving to our historical 9, 10%.
Kaleeswaran Arunachalam
I think if you look at it, we called out a strategic roadmap for Butterfly about a year back, somewhere around last year, Q4 where we said the first job that we need to do is get the channel mix right, get the pricing actions right and get some of the go to market work started. Also get the team in place. And we said that end of Q4 we should be able to arrest the decline and get back to growth path. So phase one has been well done and we are on the right track and it is moving in the right direction.
So in far as phase two is concerned, which is effective FY26 onwards, we did talk about in the previous question that there is a brand repositioning and a bunch of NPDs that are going to get into the market in a differentiated route. We expect this one to augur or augment the revenue growth. Our endeavor in Butterfly is to grow the revenue in double digit and start expanding margins. So we are at about 7, 7.5% EBITDA margin. The idea is to take to about 8, 8.5% but that’s also on the back of significant investments will go behind the brand.
Considering FY26 is going to be a year of relaunch and repositioning in a medium to long run. In the next three to five years we expect Butterfly to grow about mid teens and reach close to double digit EBITDA margin.
Bhoomika Nair
That’s very helpful. Thank you very much and all the best.
Promeet Ghosh
Thank you.
operator
Thanks. We have next question from Achal Lohade. Please Unmute your line and go ahead with the question.
Swetha Sagar
You can take the next question please.
operator
Yeah, next question we have from Pranay Shah. Please unmute your line and go ahead with the question.
Natasha Jain
Yeah, hi, this is Natasha from Philip Capital. Sorry. So sir, I just have one question. The last time when we had come for the investor meet, you had showcased the induction fan, the five star induction fan. Now when I went to the channel I did find your products. I could not find other five star indexed fans in terms of your competitors. I know the season has been lean but can you just give us a feedback how the channel is accepting that? That’s it, thank you.
Kaleeswaran Arunachalam
So when we Talked about the HS5 star, as we said it’s an industry first. The idea is that there are two kinds of five star is probably your best energy saving fan under an induction motor which is similar to bldc. The market today is positioning this largely towards BLDC as a segment to drive energy efficiency. But considering that one is on an induction motor platform and one is on electronic platform platform, the durability and the consumer experience is far better in induction motor five star. So we have been one of the pioneer to start the initiative towards this and at a point of time we expect this to scale up at the industry level also.
Natasha Jain
Thank you so much. That’s all.
operator
Yeah. Next we have question from Achal Lohardi. Please unmute your line and go ahead with the question. Next we have question from assist Jane. Please unmute your line and go ahead with the question.
Ashish Jain
Hi sir, good evening. So my first question is on the solar rooftop panel, you know, business opportunity that you spoke about. Can you give some more color on, you know, on both sourcing and distribution and at least in the initial period, you know, will it be margin accretive for us given it would be more outsourcing based business?
Kaleeswaran Arunachalam
Begin with fundamentally as we talked about earlier, it’s a market size which is a target addressable market of about 20,25,000 crore. From an overall ecosystem perspective. We did do something similar in solar pumps. In about five quarters we have reached a run rate of almost say 240 crores per annum. And the business is highly profitable and cash accretive as we have seen it time after time and multiple tenders that we have participated in solar pumps. Now coming to solar rooftop one of the fundamental differentiator is going to be having a very, very strong brand that is going into the household and many of the Indian households have grown with the brand Crompton and therefore that brings in a Lot of trust for a consumer to go with a rooftop which has got Crompton on it.
So that’s the first reason. Second is our distribution is very, very strong. Both in B2B and B2G we’ve got very strong experience that has been built in over a period of time across categories, prima facie led by lighting first. And then we have got this through in solar pumps also from a sourcing perspective, I don’t think so. That’s a big differentiator. Category after category. We have demonstrated our capabilities to do a very good model of outsourced vendor sourcing at the same point of time ensuring that the quality and consumer experience is not compromised. And equally when time is required, we have also not shied away to getting into in house.
Right now it’s going to be an outsourced business. Brant Compton is going to play a significant role to make an inroad into this category. And it is a business that will be margin accretive similar to what we have seen in solar pumps.
Ashish Jain
Just one clarification, like how much of this business is incentive or tender based and how much is government support directly or indirectly driving growth or demand in this sector today?
Kaleeswaran Arunachalam
Yeah, see as we discussed earlier, we talked about EV which went through a FAME 1 and FAME 2 and similarly solar pump which is going through a PM Kusum scheme. This is also starting with an initiative from the Government of India which is a subsidy driven business. The payback for the consumer is very, very strong which is what is driving move towards a solar rooftop compared to other modes of electricity. But again as we have seen in EV and as we would see at a point of time in solar pumps, this would also become mainstream.
Even when the dormant initiative or subsidy goes away in the medium term we don’t see any challenge of a government subsidy going away. As we all know, the initiative was just started in FY24 announced by the Prime Minister. So at least for next four to five years the subsidy is here to stay. But our hypothesis is that the business will be independent after the subsidy. Also.
Promeet Ghosh
You know, we keep getting, since the question is repeating about how you build up sales in a product like this, remember that this is a product that, you know, the consumer is spending one and a half, two lakhs. And you know, the trust is a key part of that, you know, key part of the element if you want to buy a product like this. And I don’t need to tell you that, you know, we have a very different consumer brand for that, for that exemplifies trust in home electricals. Also, remember that this is bolstered by the fact that, you know, on a service, you know, the product should be quickly serviced and so on and so forth.
And I think the consumer experience over the last 85 years together with the capabilities that we have in sourcing and in execution will stand us in good stand. This is little bit different from the solar pumps business where there is a, you know, this is a direct engagement with the, with the consumer. And actually the cash flow characteristics of this are even better than the solar pumps business because the money is pretty much paid up front.
Ashish Jain
Got it from me. Thank you so much.
operator
Thank you. That was the last question for the day. I thank the management on behalf of ICICI securities and hand over the call back to the management for closing comments. Thanks and over to you, sir.
Kaleeswaran Arunachalam
Thank you guys. Thank you. Folks, I think quickly to summarize, we started Compton 2.0 about two years back. There are four key facets we announced as part of it. One is on our entire lighting turnaround, which is now complete. The second was getting butterfly back on track. We are seeing green shoots of that. Third is working on supply chain. We did announce a greenfield project that is going to be coming in very, very soon. And the fourth is on GDM transformation. That’s also another area where we have started work. We will talk about that in detail in the coming quarters.
That’s all from our end and thanks a lot.
Promeet Ghosh
Thank you.