Eveready Industries India Ltd (EVEREADY) Q3 FY23 Earnings Concall Transcript

Eveready Industries India Ltd (NSE:EVEREADY) Q3 FY23 Earnings Concall dated Feb. 09, 2023.

Corporate Participants:

Siddharth Rangnekar — Eveready Industries India Ltd

Suvamoy Saha — Managing Director

Bibek Agarwala — Chief Financial Officer

Analysts:

Dhruv Jain — Ambit capital — Analyst

Darshan Jhaveri — Crown capital — Analyst

Aditya Makharia — HDFC Securities — Analyst

Ritesh Poladia — Girik Capital — Analyst

Mithun Aswath — Kivah Advisors — Analyst

Mehul Savla — RW Equities — Analyst

Rupen Masalia — R&A Associates — Analyst

Saket Kapoor — Kapoor Company — Analyst

Kunal Jain — Chase Securities — Analyst

Presentation:

Operator

Ladies and gentleman, good day, and welcome to the Eveready Industries Limited Q3 FY ’23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you. And over to you, sir.

Siddharth Rangnekar — Eveready Industries India Ltd

Thank you, Linda. Good afternoon, everyone and welcome to Eveready Industries India Quarter Three FY ’23 Earnings Conference Call Today we are joined by senior members of the management team, including Mr. Suvamoy Saha, Managing Director, Mr. Bibek Agarwala, CFO and Mr. Indranil Roy Chowdhury, Senior VP Finance and Accounts.

Before we commence, let me share disclaimer. Some of the statements made on today’s call could be forward looking in nature, and actual results could vary from these forward looking statements. A detailed disclosure in this regard is available in the press release document, which has been circulated to you also available on the Stock Exchange website.

I would now like to invite Mr. Saha, to share his perspectives with you. Thank you. And over to you, sir.

Suvamoy Saha — Managing Director

Thank you, Siddharth. Good afternoon, and welcome to our Q3 earnings call. I hope all of you have had a good start to the New Year. My agenda today shall be to cover the various aspects of our business while touching upon the dynamics of operations for the period ended December 2022.

Since we last connected, Eveready has made notable progress in focusing on our core strengths and tapping into niche underserved segments. The tempo of activity is visible, and every product launch is backed by commensurate activation, consumers are taking notice. And this is evident from the gains we have made in market share in our core business of batteries, where the brand is synonymous with the statement.Our market share in batteries jumped 170 bps over the preceding quarter to stand at 54.5%, the highest level as far as one can see in the past. The brand remains a huge advantage for us and the team is skillfully utilizing its power and potential to plan growth across businesses.

The ubiquity of our brand is achieved through an expanding reach across 4 million outlets, about just under a foot of which is our direct reach, the segments in which we operate for seamless availability of products. And our system is honed to achieve just that.As we seek to drive penetration in newer categories in each of the segments. Our teams are modernizing our approach and infrastructure. We have to be nimble to respond to consumer requirements and market dynamics in order to maintain our leadership position.The new drive to contemporize our distribution and making it more efficient is being given to a new route to market initiative. The implementation of this is entailing changed work processes, involving internal organization, as well as with our channel partners.

In order to implement the new RPM successfully, we consciously moderated our growth targets for the quarter. Ignoring the discontinued segment of appliances, standard of growth during the quarter was at 5.3%. Though this was trending at 15% by the end of the [Indecipherable].Our RPM implementation is now close to completion, and we shall revert to the higher level of growth in the foreseeable future. We are moving levers to back every product initiative with clear communication and requisites promotional collateral, consistent with sustainable leading brand franchise. There is active emphasis on revitalizing our route to market such that we leave no market segments and niche content. I will turn my attention to the respective segments of the businesses, commencing with types.

Our battery markets remained flat during the third quarter, reflecting sluggishness in demand, particularly in the rural part of the market. We managed to grow by 8.6%, which was primarily due to premium efficiency.As already mentioned, our value market share stood at 54.5% during quarter three, a clear evidence of our distinct leadership position in the market. However, we remain under index, in some geography as well as in certain segments of the market, which provides us with room to grow, despite our strong position in the market. Growth during the year-to-date, stood at 11.5%.

We didn’t flashlights as communicated earlier, the Battery Operated segment is showing decline, due at a lower rate of around 10%. Still we are holding on to our market leadership position in this segment, we are roughly under index in the fast growing market of rechargeable flashlights, as the company did not address this market value.From the time we recognize this area as a major growth driving opportunity, we have made good progress with building up an adequate portfolio of products. Our product launches during the quarter, found enthusiastic traction in the market. This segment which is primarily comprised of unorganized unbranded products will continue to be an area of interest for growth and building to a leadership position.

Simultaneously, we are stepping up our efforts in the Battery Operated category as well, so that the portfolio remains contemporary. Quality and feature functionality use our life motive and the places and that places are favorably to drive the segments upwards, and hopefully arise any product life.Then my attention to lighting now, our teams are pushing out an extensive lineup of products here, effectively making use a growing presence of the brand in the electrical outlet channel. Eveready Lighting products have the dual advantage of being available extensively across the general trade channel, and now also in the electrical shops.

We are making good inroads across smaller towns and cities, and at the same time, owning our plants that into the larger metro locations, and modern street avenues, more deeply. This segment will see commensurate impact in a few quarters.Our teams are developing products in-house and getting them produced under stringent operating checks, in order to achieve the quality that the brand stands for. I will now briefly cover, the developments during the quarter, ended December 2022.Revenues from operations mainly for Q3 at INR330.4 crores, which translates to 5.3% growth for the quarter ignoring the discontinued business home appliances. For the nine month period, the revenue from operations was at INR1041.6 crores at a growth of 11.7% for continuing businesses.

These achievements is on the back of premiumization of product portfolio, combined with steady realization gains, which was further aided by focused marketing campaigns around communication and investment in branding and promotion.As consumption gathers momentum, we’ve got the matrix. Our EBITDA standing at INR24 crores with EBITDA margin of 7.3%, it was mainly impacted by the movement in foreign exchange rates, continued inflation in key raw materials, higher advertising and promotion space, as well as investments made in consultancy services with a view to improve our future operations. For the nine month period, EBITDA to debt INR109.1 crores at a margin of 10.5%. Towards the end of the quarter, there was a definite softening of key raw material prices and this will result in margin improvement in the ensuing period.

However, investment initiatives, which I touched upon earlier will continue at the same pace for the remainder of the financial year. With a clear focus on achievable milestones, our initiatives to drive a market relevant portfolio, that by sustained all round communication in our business is beginning to get results. And at the consumer demand plays back, where we believe Eveready will be a big beneficiary on account of its strong brand and distribution.As the economy growth within the country that really catches up. It shall support us as we operate in segments straddling both urban and rural centers. As I’ve shared in the past interactions, some of the improvement initiatives will have an impact on the margins in the short term, our teams are harder to work to enhance productivity from the system wherever possible peers will see a much stronger EIN, with extended leadership in its segments of choice, underlying by profitable growth.

I just drove to the close of my remarks and wish to request the moderator to open the forum to queries from the participants. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line through Dhruv Jain from Ambit capital. Please go ahead.

Dhruv Jain — Ambit capital — Analyst

Hi, sir. Thank you for taking my questions. I have two questions. One —

Operator

Sorry to interrupt sir. Dhruv, we are not — we cant hear you clearly, are you on a speaker?

Dhruv Jain — Ambit capital — Analyst

Can you hear me now?

Operator

Yeah. This is better. Thank you.

Dhruv Jain — Ambit capital — Analyst

Yeah. Hi, sir. Thank you for taking my questions. Sir, I have two questions. One was that we’ve seen a sharp for jumping other expenses this quarter. So you mentioned, you’ve taken, there has been an impact of consultancy services in this quarter. But if you could just quantify, the number there, and if there are any additional low growth expense that you’ve made, which you think will normalize going forward.

Suvamoy Saha — Managing Director

So you said, two questions. Is that the only question, Dhruv?

Dhruv Jain — Ambit capital — Analyst

No. I have another question.

Suvamoy Saha — Managing Director

So you want me to answer this, first?

Dhruv Jain — Ambit capital — Analyst

Yes.

Suvamoy Saha — Managing Director

Yeah. Okay. So, Dhruv, you know, as I highlighted, our main additional expenses over the quarter in the preceding years, has been in advertising, and as I also indicated on the consultancy services that we have leveled off. So basically, between the two of them that total quantum of EMP with the consultancy service would be in the range of close to INR20 crores.

Dhruv Jain — Ambit capital — Analyst

Okay, sir. Thank you. That’s helpful. And sir, the other question, if you could just give us some — and in your opening remarks, also you mentioned that you’ve gained market share in the battery space, So — but growth has slowed down because you’re taking some — you’re doing some GTL [Phonetic] changes. So, growth in the other pieces is not being attractive, encouraging or — and if you could just, give the split of the three segments, what will the revenue and the revenue growth have.

Suvamoy Saha — Managing Director

Okay. So, Dhruv, it is like this, as you’re aware, in the first half of this year, we were growing at around 10% to 15% of people disregard the discontinued business. Now, in this quarter was the time when we started initiating implementation activities on the new routes to market which entailed a lot of change not only internally as well as externally.

Now, when the organization both internal and external was undergoing such a massive change, it was necessary for us to sort of — slightly slow down on the growth target, so, that the implementation would go successfully, the change has to be internalized by all concerned stakeholders. So, that is the only reason why we had — however, despite all that, batteries grew by a 9%, which was, I think, extremely sort of pleasing given the context of the overall market not having grown, we also sort of arrested the decline of the overall flashlights segment, because, what we continue to loss on the battery operated one, we made up with the new launches that we did on the rechargeable side.

So, I think overall, given all the changes that took place, I will say that quarter went off in a very satisfactory manner, if at all, I would say you are an lighting expert through you know, the lighting industry has not had a good quarter overall. And the same was the case with us we ended with a flat quarter. That flat quarter, was perhaps a little more in our case attributable to the new route to market, the changes that we had initiated and we do not see any challenge to that and we will shortly revert to our overall the growth targets that we have taken on for our sales. For the year, the lighting market — lighting segment has grown at 24%. And we see no reason why we cannot jump back to that level of growth in the interim quarters.

Dhruv Jain — Ambit capital — Analyst

Thank you, sir. Very helpful.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Darshan Jhaveri from Crown capital. Please go ahead.

Darshan Jhaveri — Crown capital — Analyst

Hello, good evening, sir. Thank you so much for taking my question. I hope I’m audible?

Suvamoy Saha — Managing Director

Yes, Darshan. Please go ahead.

Darshan Jhaveri — Crown capital — Analyst

Sir, I had one question I would have regarding all our three regions. So our breakup of our revenue and EBITDA for the quarter three would be very helpful. And the other thing I wanted to ask you for quarter four, we are still, having our consultancy and marketing expenses, so far, what is the outlook that you would have for, FY ’24 and beyond, like, our growth trajectory, as well as our margin profile? What are we seeing? Those will be those two questions. Thank you so much.

Suvamoy Saha — Managing Director

So, Darshan let me take your last part first, and then I’ll come back to your initial part of the question. Okay. So, as I said that for the year-to-date, our growth is at 11.7%, that — on the back of a much slower growth in quarter three, which were for assignable reasons, which I explained just a little while back. We hope to end the year in I would say, higher than our current year-to-date growth of 12%. So, that is where we are sort of talking about. And in the foreseeable future, we should be able to push that up to mid to mid-teens level of growth and that is where we stand currently, right. And I would see that these quarters moderation on the group target was something that we consciously did, and it was not sort of brought upon to us kind of in a default situation.

With regard to the category wise split, the total quarter was INR330, of which battery was about INR220 crore, I’m giving you very broad numbers.

Darshan Jhaveri — Crown capital — Analyst

Yeah, yeah, yeah. That’s okay.

Suvamoy Saha — Managing Director

So, about two — it was about INR230 crores to be sort of more precise. The flashlight segment was about INR35 odd crores and lighting was INR70.

Darshan Jhaveri — Crown capital — Analyst

Okay, sir. So, sir, how does our margin profile differ in each segment. I think batteries.

Suvamoy Saha — Managing Director

I will tell you. I got you I sorry, I did missed out answering this question. So at the end of this three quarters, which stand at around 10.5% EBITDA percentage, right. And we think we will be slightly short of 10%, because, as I mentioned, we will continue to invest in communication, and we will continue to invest for the remainder of the period in the consultancy exercise that we have already — we have undertaken. So, given that these extensions will continue, we have — I would say somewhat of ambitious target in terms of communication for the quarter. So, we would be perhaps, go up little short of 10% That is where we will end by year.

Darshan Jhaveri — Crown capital — Analyst

Yes, sir. And so, I understand that, we are investing in our growth in Q3 and Q4 and that’s a very commendable thing. So, how would that — when would that all our effort get reflected like from FY ’24, we’ll start seeing margins and growth or it might be a bit longer process, some rough timeline that we are envisioning for ourselves, or any other target for FY ’25 or something like that, that would help?

Suvamoy Saha — Managing Director

So Darshan it is like this. There are two absolutely well articulated initiatives we have taken one is engaging the consumer and number two is sort of improving our distribution efficiency by designing a new route to market. Now, that route to market has explained a little while back impacted, changes internally as well as in our external channel partners. Now, that interactivity is going to be completed and totally concluded by the end of this financial year. So, by March that distribution VP is going to be completely ready and so we will be ready to fire on all cylinders from first of April, okay.

Now similarly we have also engaged in consumer engagement program. Now, that is something you know, we are doing our bit. Now when that could kick in in terms of you know, more activation from the consumer side is something that it takes time. It is not that, I spend money on advertising dollars today and tomorrow itself I start getting the results. But are you say that — are you just go by my immediate history. We started our consumer activation from the last quarter. And we have immediately seen our market share jump. So, let us say — and that to in a market, which did not grow, was stagnant. And despite having shares above 50%, we managed to improve our market share by nearly two percentage points.

So if I go by that, I don’t know whether that would be replicated. But I would you say that next year onwards, we should get the full benefit of distribution, as well as a very significant part of the consumer activation program.

Darshan Jhaveri — Crown capital — Analyst

Okay. Thank you so much. That helps a lot. So just a question, so that I think previously we had stated that we can go from figure double our revenue in the next three years. So that would largely be our major goal, right sir?

Suvamoy Saha — Managing Director

So we had — what we had articulated is that based on our FY ’22 turnover, our ambition was to go, which was about INR1,170-odd crores, even if we ignore the discontinued business, our — starts to grew from there in four years time to a double of that size. We still would try to which is the target and given our next attempt, and I would say that the team is quite confident about that.

Darshan Jhaveri — Crown capital — Analyst

Okay. That helps me a lot. And thank you so much for answering all the questions.

Suvamoy Saha — Managing Director

Thanks Darshan [Phonetic]. Thanks for your interest.

Operator

Thank you. [Operator Instructions] The next question is from the line of other Aditya Makharia from HDFC Securities. Please go ahead.

Aditya Makharia — HDFC Securities — Analyst

Yes. Hi, sir. Just wanted to know, there was a filing done by you all that the proceedings are with KKR. If I understand correctly, earlier, you all weren’t a related party. But now, they have said the arbitrator has ruled that we are a related party along with the Williamson Magor Group. So just can you give us a broad sense that is this something which is a new development? And how does that going forward impact our any plans for capital raising? Thank you.

Suvamoy Saha — Managing Director

So I will really give you only a broad response, because I’m not a legal expert, the position like this, that when the case came upon us, I mean, that embargo of restricting us from capital raise and sale of non-core assets, etc came we had fought the case on the basis that we were not party to any of that. We were not party to the agreement. We were not party to anything, right. So, it will be to arbitration, as per the terms of the pre-agreement, and we also sort of objected to the jurisdiction being applied to us.

So, the arbitrators have come to the conclusion, or let us say, decision, that we are part of the arbitration and we are part of the case. So, we have to see to the end of the situation. So that we have to go through with this process of arbitration till the matter is concluded. In the meanwhile, in the more relevant parties, let us take that it takes our timeframe, I think that time given formally is January 2024.

So, in the timeframe, what happens to the company with regard to its own operation? As I had indicated earlier that the company has sufficient operating cash flow to take care of it all day-to-day needs, it has the cash flow to honor its commitments towards banks. So, there is crisis that, that company has to immediately go for a capital raise or has to sell a non-core assets to fund its operations. The operations are self-sustaining and so we don’t see any concern in this regard. And in any case, with the company now having gone to a new promoter, the banks are only also more willing to sort of lend support to us. So, even if there is there are some temporary needs, there are a number of people who are willing to, sort of, partners in the in that requirement? I hope I’ve been able to answer your query.

Aditya Makharia — HDFC Securities — Analyst

Yes. So, just one more small follow-up. So, I believe that there’s a game of INR100 crore or INR150-odd crore something to that amount, which KKR has put on us. So, have we shown that as a contingent liability or we are not providing for that amount as of now?

Suvamoy Saha — Managing Director

No, obviously that I think you’re misinformed. There has been no claim on the company so far. So, basically, there is of course, an amount which holding company owes to KKR, but so far, there has been no claim on the company. Nothing has been quantified. We have just been made a party, whereby we have been restricted to raise capital or sale of non-core assets, nothing beyond this.

Aditya Makharia — HDFC Securities — Analyst

Okay. Got it. Thank you, sir. And wish you all the best.

Suvamoy Saha — Managing Director

Thank you, Aditya.

Operator

Thank you. Our next question is from the line of Ritesh Poladia from Girik Capital. Please go ahead.

Ritesh Poladia — Girik Capital — Analyst

Thanks for the opportunity sir. Sir, battery revenue is approximately 70% of business

Suvamoy Saha — Managing Director

Ritesh, you’re getting a little garbled, could you come closer to your phone or something?

Operator

Ritesh, are you still there?

Ritesh Poladia — Girik Capital — Analyst

Yes, is this fine? Hello?

Operator

Management team, are you able to hear Ritesh?

Suvamoy Saha — Managing Director

Yes. Let’s hear him out.

Ritesh Poladia — Girik Capital — Analyst

Am I audible now sir?

Suvamoy Saha — Managing Director

Yes, yes, you are.

Ritesh Poladia — Girik Capital — Analyst

Yes. Sir, as I was saying battery is about 70% of our business and definitely there is some market share gain, but it would mirror on industry growth. Can you give us some idea of how the industry is growing and which part of the industry is showing higher growth?

Suvamoy Saha — Managing Director

So, we are talking about batteries. As I had highlighted earlier in my opening remarks, the market did not grow during this quarter. In fact, volumes had some decline value growth was stagnant. We grew by about 9% during the quarter because we did better than the market and it was on the back of some premium migration efforts that we could sort of succeed in doing. So, the market is not grow, make a very straight and simple answer to your query, the market did not grow during the quarter. But we hope that that only indicate the sluggishness and we indicate the inflationary impact that consumers feel particularly in the rural segment, and we feel that our things are easing out, the market should revert to its normal level of growth.

Ritesh Poladia — Girik Capital — Analyst

Since a market grows, like 10%, your growth could be 50% higher than that?

Suvamoy Saha — Managing Director

See, it is very difficult to put on mathematics like that. When the market was zero growth, we grew nearly 10%, right. Let us just put that as a historical perspective and our aim will always be there to grow faster than the market.

Ritesh Poladia — Girik Capital — Analyst

Okay. Regarding from flashlight and specifically on rechargeable battery side, as you said, you are under penetrated. So, what’s the status over there and by when you think that your product profile will match the consumer needs?

Suvamoy Saha — Managing Director

So, at this point of time, Ritesh, we already have, over the last couple of quarters — and — which I have been also highlighting during the earnings call, we have been working on completely revamping that product portfolio and I am happy to say that we are nearly there. I would say 90% of the portfolio is complete. The value still 10%, 15%, would get complete in this quarter.

So, I would say, effective 1 of April, we need to fire on all cylinders. We have the best product. And in this category, our brand is the strongest. Our distribution is the — it may seem a little boastful, but it is the best in this segment. So nothing is going to stop us.

Ritesh Poladia — Girik Capital — Analyst

Sure, sir. On lighting, the revenue is about INR70 crore. Sir, if you can give us some idea, how much would it be own manufacturing and how much would be trading in this?

Suvamoy Saha — Managing Director

Ritesh, actually 30% of that came from our own manufacture. When I say own manufacture, it is a contracted manufacturer who only exclusively does it for us under our supervision. Batteries we outsource from the likes of Dixon [Phonetic], RK, etcetera, the big manufacturers of the lighting industry.

Ritesh Poladia — Girik Capital — Analyst

Okay. So, you would be more on contract manufacturing in lighting and even in flashlight also that assumption holds true?

Suvamoy Saha — Managing Director

No. For flashlights, we manufacture 100% of our flashlights. Except for a module here and there. We are 100% manufacturing it ourselves. With regard to the lighting segment, yes, 30% is contracted manufacturer, exclusively — exclusive to us.

In the future we will have to review whether we want to carry on with the situation, or we want to get into our own manufactures, but that is the other thins.

Ritesh Poladia — Girik Capital — Analyst

Again on lighting business, sir, clearly you are not present in the entire market spectrum. And it’s a long haul game. So, by when we can have a good presence in lighting or say, a double digit market share?

Suvamoy Saha — Managing Director

Well, Ritesh, can you just help me understand your question a little better that, what do you mean by our not being present in the entire spectrum?

Ritesh Poladia — Girik Capital — Analyst

Sir, I believe you would be present in tube lights and bulbs, but not in luminaries, right?

Suvamoy Saha — Managing Director

Okay. So on that perspective. So, let me tell you, just like we did our portfolio revamp on flashlights we have done the same for lighting. We have now a very, very reasonable and adequate range addressing both lamps as well as luminaires. Now, of course, historically, we have been a lamp selling company. So, you know our turnover is heavily skewed towards lamps, but with the new portfolio having come in place, it will be our endeavor to rectify that skew. So, in the coming year, we are going to take targets whereby the intricacies of our sales will be more on the luminaire side to bring up appropriate balance like any other lighting, established lighting.

Ritesh Poladia — Girik Capital — Analyst

Sure sir. And on market share, what can be a reasonable expectation?

Suvamoy Saha — Managing Director

For lighting?

Ritesh Poladia — Girik Capital — Analyst

Yes sir.

Suvamoy Saha — Managing Director

Lighting, we are too small Ritesh. I know we are about 300 plus crores in a market which is 13,000 crores. We are very, very small. So, at this point of time, instead of market share, we are looking at by what percentage we can grow our business.

Ritesh Poladia — Girik Capital — Analyst

Can we have this business growing say 2x in two years?

Suvamoy Saha — Managing Director

In two years?

Ritesh Poladia — Girik Capital — Analyst

Yes.

Suvamoy Saha — Managing Director

So, I don’t know whether two years or it is going to be two and a half years, but certainly 2x is something which is extremely tangible as a target for us.

Ritesh Poladia — Girik Capital — Analyst

Is there any differentiation in the lighting business for Eveready as a brand or we are banking more as a product or whether we are banking more on brand?

Suvamoy Saha — Managing Director

So, ultimately, most of the products are pretty similar, I mean, that is a fact of life. It is a play of brand and distribution, whether you are available, when the consumer goods, whether he accepts your brand, whether your pricing is right. So, that is the market game, but on the back end, we are [Technical Issues] for this product. That is the promise of our brand, dependability, reliability, power, these are some of our key values that we stand for. So at the backend, we are — we work very hard to make sure that those things are given to the consumer.

Now, obviously, we are a small player, but we have advantage having access to in a general trade. We have now started booking our footprint in the electrical outlets. So, we are confident that you know when the consumer goes, we — and we would also communicate like we are started communicating on batteries, we will also communicate on lighting. So, when the consumer goes to the shop, we aspire to be the product of his choice.

Ritesh Poladia — Girik Capital — Analyst

So this is very helpful. Then last one lighting, of this 300 Crore business, any color on region wise, where you would be — there you would be more stronger than the other regions?

Suvamoy Saha — Managing Director

No, Ritesh. I mean, we are uniform. I mean, our footprint is all across. And it follows the demographic pattern of the country. So I usually say that, we are sort of what index team? No, of course, there will be pockets where we would not be as strong as race. But overall, I would say that we are uniform from the spread.

Ritesh Poladia — Girik Capital — Analyst

It’s good to hear. Thanks a lot, sir.

Suvamoy Saha — Managing Director

Thank you, Ritesh. Thanks for your interest.

Operator

Thank you. Our next question is from line of Mithun Aswath from Kivah Advisors. Please go ahead.

Mithun Aswath — Kivah Advisors — Analyst

Hello?

Suvamoy Saha — Managing Director

Yes.

Mithun Aswath — Kivah Advisors — Analyst

Yes, hi. Sorry. I just wanted to understand this new distribution strategy that you’re working on. I just wanted to understand what include the Intel. And at the end of this strategy, would this help you in turn improve your working capital or is it also to drive sales better? So, I just wanted to understand, is it only for the batteries or would it Intel, Sprite and see other businesses?

Suvamoy Saha — Managing Director

This is for all our categories. This is not something which is only specific to any particular category and basic focus is that we would like to work with — see, that company has growth aspirations. Now, that growth aspiration can only be actualized if my channel partner also participates in that growth, right, which means he has to bring additional capital etc., etc. He should be able to earn good profit. He should be able to rotate goods quick. So, the entire emphasis on our new route to market is hinging on these few factors that whether he’s been able to bring the additional capital that is necessary to fuel growth, can he rotate?

Is he smart in supply chain? That is something that while we do from the company side, whether he can also supply to the market in an effective and efficient manner, so that he can rotate things faster, the secondaries keep track better, etc., etc. So, it is really sort of really looking at the whole process of how do we make things efficient. The accent is not so much on cost savings. The accent is more on how we can make this distribution really the engine for our growth that we aspire for.

Mithun Aswath — Kivah Advisors — Analyst

Understand. But at the same time, do you think this will become — this distribution to spread out or would there be.

Suvamoy Saha — Managing Director

I have understood your question, let me answer. So, basically, see, we have a footprint of our products in four million outlets of which sort of one million which service directly, correct? Now, we have today no aspiration at this point, as I speak, to increase that outlet reach. Only thing is that what we are trying to do is that we think for the size of our business today and for the next year at least that outlet reach is adequate. What we want to do is that that outlet reach should happen in a more efficient manner and should happen in a growth accurately manner. That is all.

Mithun Aswath — Kivah Advisors — Analyst

Understood, Sir. And when you think we will start seeing the benefits of this? Will it be from the quarter one of next year or it could take maybe a few quarters for us to start seeing the.

Suvamoy Saha — Managing Director

The team feels confident that it should be from quarter one.

Mithun Aswath — Kivah Advisors — Analyst

Okay. Excellent, Sir.

Suvamoy Saha — Managing Director

Thank you.

Mithun Aswath — Kivah Advisors — Analyst

Thank you, Sir.

Operator

Thank you. We will take our next question from the line of Mehul Savla from RW Equities. Please go ahead.

Mehul Savla — RW Equities — Analyst

Hello? Can you hear me, Sir.

Suvamoy Saha — Managing Director

Yes, Mehul go ahead.

Mehul Savla — RW Equities — Analyst

Yes. So first of all, Sir, it was very heartening to see the full page ad on Times of India for the AAA batteries two days ago. So is this now part of a sustainable strategy? Or is it like just to get the initial interest in the segment?

Suvamoy Saha — Managing Director

No, Mehul. I mean, I have been articulating this time and again. This is an activity that we will make sustainable, we’ll be there right through the years. I mean, it is happened to us that you saw that advertisement, but we were also present on air, on TV, on digital. We — ads on batteries and we — you see us all the time now.

Mehul Savla — RW Equities — Analyst

Yeah, yeah. So, I think visibility has been there, I think it was just the buy three get one.

Suvamoy Saha — Managing Director

That was just a consumer activation program that we undertook.

Mehul Savla — RW Equities — Analyst

Yeah. Okay, okay. All right. And second, is just more specific question on this consultant related expenses, like marketing we understand it’s a long-term investment, and we’ll continue through the — this year, this quarter, next year, but the consultant-related expenses, is it possible to quantify that this quarter than last quarter, I mean, how much total we will be spending, or is it non-recurring?

Suvamoy Saha — Managing Director

So this is really for a short period of time, and this route-to-market exercise that we have undertaken, it is all with the help of our consultants, because we needed bandwidth at this point of time. So it is costing us something like about, maybe 1.5% of our turnover for the current year. And if consultation agreements are, of course, are very limited time, and till the company needs to be properly advised. So, that is where it stands.

Mehul Savla — RW Equities — Analyst

Yeah, yeah. So I think it’s a great move. And I think it really adds definitely a lot of value from the strategy point of view. I’m just saying that it will get — the expensing will get done in this Q4, I mean, FY ’24, there will not be further provisioning for this segment.

Suvamoy Saha — Managing Director

Maybe marginal. Really very, very marginal.

Mehul Savla — RW Equities — Analyst

Okay, okay. All right. Thank you very much. All the best.

Suvamoy Saha — Managing Director

Thank you.

Operator

Thank you. Our next question is from line of Rupen Masalia from R&A Associates. Please go ahead.

Rupen Masalia — R&A Associates — Analyst

Yeah, thanks for the opportunity. Sir, my question is pertaining to battery business, basically, just wanted to know, like, our market share is 54.5% at the end of Q3. So, is it predominantly in zinc carbon battery, or total — including alkaline batteries. So if you can throw some light on that, and that’s part one.

Suvamoy Saha — Managing Director

So, shall I first answer that question?

Rupen Masalia — R&A Associates — Analyst

That’s better sir.

Suvamoy Saha — Managing Director

So these 54.5% is for the whole market, which is the data that A.C. Nielsen throws out. So this is for the whole market, which comprises of both, carbon zinc as well as alkaline.

Rupen Masalia — R&A Associates — Analyst

Okay, okay, okay. So, and basically, I think, in the last call, you alluded that our market share is relatively lower in premium alkaline batteries. So if you can throw some more light on what strategies we are going to adopt going forward to increase our market share and since we have started on premium migration journey, so in the light of that, if you can elaborate us?

Suvamoy Saha — Managing Director

So we have been a bit intense in the alkaline market, not lit intense, really, we got there, but the company did not focus too much on the alkaline batteries, I’m not alkaline, I mean, the consumer doesn’t understand alkaline or carbon zinc, you say the higher priced batteries. So this is an effort that we have, sort of, undertaken from the last few quarters, and we are systematically sort of trying to, you know, make ourselves more meaningful in that higher premium segment of the market. So which is going to be a bit of — of an effort that needs to be sustained over a period of time, but we are completely sworn to it. So hopefully, you know, as we speak, quarter-by-quarter, you will see us improving in that front.

Rupen Masalia — R&A Associates — Analyst

Okay, Okay. Okay. And overall battery industry, how do you see it growing going forward in the time to come maybe say over next three years, four years, five years?

Suvamoy Saha — Managing Director

So, you know, if I go by the immediate past, the picture is not that rosy. But you know, you must also sort of you understand that we have gone through a very bad inflation cycle and you know, demand slowed down for every conceivable commodity, every conceivable product category. So, you know, where does the headroom lie for battery group.

The headroom lies in the fact that we are one of the doing battery consuming countries in the world. The country has not yet seen many of the devices which are prevalent in the rest of the world. Just to give you an idea, you know, our batteries which have been consumed by the various devices, the one which is the most predominant one is the remote control that consumes something like 40% of all batteries, which are sold in the market. Correct?

Now, in the U.S., that same number is only 3%, which indicates the kinds of headroom that is there for other devices to come into the market and — penetrate into households, which has not happened like for example, very important battery consuming devices are toy. Now in India the toy penetration is low. Government is putting a lot of emphasis on improving the toy market.

So, you know, these are things you know, I — it would be very difficult for me to say, you know, when Indians would start using electric razors. They will start using electric toothbrush. They would use electronics safes [phonetic]. It is very hard for me to really speculate on that, but I know that India will one day hit it. So whether that’s going to happen in next year or three years down the road, very hard to say. So I would say overall, there is a very good case for growth for batteries. But if we go by the immediate past its seems a little flattish.

Rupen Masalia — R&A Associates — Analyst

Okay, Okay, that’s really helpful, sir. That’s it from my side and all the very best for future.

Suvamoy Saha — Managing Director

Thank you very much.

Operator

Thank you. Our next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Saket Kapoor — Kapoor Company — Analyst

Yes. Namaskar, sir. Thank you for giving the opportunity.

Suvamoy Saha — Managing Director

[Foreign Speech]

Saket Kapoor — Kapoor Company — Analyst

Yes, sir. Namaskar, sir. Can you hear me now?

Suvamoy Saha — Managing Director

Namaskar.

Saket Kapoor — Kapoor Company — Analyst

Yeah. Sir, firstly, sir if you could explain me, sir what was the change in the product mix if you go on a Q-on-Q basis for September to December as you have mentioned that we have gone for some premiumization so if you could give some more color and..

Suvamoy Saha — Managing Director

So premiumization is you know, as I will just explain you to the previous speaker. Our premiumization have been getting higher volumes from the premier mineral battery market and that is how our value moved up.

Saket Kapoor — Kapoor Company — Analyst

Got it. So any more colors — how to differentiate between what was earlier and what’s currently today by any value you want have?

Suvamoy Saha — Managing Director

The alkaline — alkaline portfolio of Eveready was relatively smaller and will grow — with the passing time it could only grow. So as a result, you know, because we were under in this in the premium side, you’ll see value growth.

Saket Kapoor — Kapoor Company — Analyst

Okay. Maybe I will take it offline but sir, what explain then this 10% reduction in the revenue and you mentioned about Forex impact also negatively impacting the bottom line? So what was the Forex impact for this quarter and nine months?

Suvamoy Saha — Managing Director

The Forex impact, I think it should be about — Forex impact it still should have been about 2%, which we’ll see roughly about INR20 odd crores.

Saket Kapoor — Kapoor Company — Analyst

INR20 odd crores? So that translates into direct hit to the bottom line?

Suvamoy Saha — Managing Director

Absolutely.

Saket Kapoor — Kapoor Company — Analyst

Okay. So — and the rupee depreciation still unaffected currently. So.

Suvamoy Saha — Managing Director

So we have got stabilized at the 8250. Now what has happened is, so you know, it is not going anywhere, anymore southwards. Now, the only thing is that the raw material prices, the basic raw material prices have started sort of becoming more favorable. So hopefully, in the coming times, we should see to sort of get better margin for ourselves and that is what we are assuming something again goes wrong because commodities are not really in our hands.

Saket Kapoor — Kapoor Company — Analyst

Sir, if you take the RM basket, just then that is because — what should be the constituent in percentage terms?

Suvamoy Saha — Managing Director

Sorry, come again?

Saket Kapoor — Kapoor Company — Analyst

I want the breakup of the raw material market, sir. What are the key constituent of the team?

Suvamoy Saha — Managing Director

So, you know, I would say that the key constituents I’ll tell you, if you want further details, you write to our investor cell, they will be only to pleased to give you but the main constituents are zinc, very pure form of manganese dioxide known as EMD,battery chemical called acetylene black, ammonium chloride, then, you know, steel thin plate.

Saket Kapoor — Kapoor Company — Analyst

And all are imported — all the components are.

Suvamoy Saha — Managing Director

Like for example, zinc is completely local, but it is dollar denominated. All the products are dollar denominated.

Saket Kapoor — Kapoor Company — Analyst

Dollar denominated, right sir. So if I look at the — yes, sir, two line items, I have more query, if we were speaking about the employees benefit expenses, sir. So what should likely be the absolute number, sir? I think the currently as a percentage of sales — what kind of — what kind of employee costs on an annual basis are you looking?

Suvamoy Saha — Managing Director

Currently, we spend at about 10.5%. And we are trying to — that I think he’s a little over index and we are trying to improve on that.

Saket Kapoor — Kapoor Company — Analyst

What are the targets here, sir when you are looking.

Suvamoy Saha — Managing Director

We will certainly like to come down under 10%.

Saket Kapoor — Kapoor Company — Analyst

Under 10%. Yes, sir. Go ahead, sir.

Suvamoy Saha — Managing Director

It should happen next year, hopefully.

Saket Kapoor — Kapoor Company — Analyst

Okay. And on the other expenses line item sir, what has led to the increase even on the lower revenue?

Suvamoy Saha — Managing Director

We have explained to one of the previous speakers. It is a combination of EMP and, you know, the consultancy investment that we have made.

Saket Kapoor — Kapoor Company — Analyst

Okay. To do what the — the payment you are making to gain capital the agency that you have hired.

Suvamoy Saha — Managing Director

They are our consulting partner.

Saket Kapoor — Kapoor Company — Analyst

Okay. So, sir, when are the fruits being delivered? Whatever we are spending today, be useful for the next financial year would be the one where we will be seeing the same. And what kind of — sir, what kind of normalized margins can we look for a business of that battery?

Suvamoy Saha — Managing Director

I would say the sustainable margin the company will target is about meeting electrics EBITDA.

Saket Kapoor — Kapoor Company — Analyst

And these are blended margins or on all segments of the –?

Suvamoy Saha — Managing Director

All segments taken together yeah.

Saket Kapoor — Kapoor Company — Analyst

And when are we going to see those reflecting on the numbers?

Suvamoy Saha — Managing Director

Let’s see. Let’s hope that it happens next year, itself.

Saket Kapoor — Kapoor Company — Analyst

Right, sir. So one request sir, the ForEx impact should be articulated even in your press release. So that will give a fair assumption of how the performance had been. That could have been very helpful that ForEx number being mentioned in the press release or your financial review part.

Suvamoy Saha — Managing Director

Okay. I’m taking a note of that.

Saket Kapoor — Kapoor Company — Analyst

Yeah. You already mentioned the advert movement, but that’s a substantial one to the profitability.

Suvamoy Saha — Managing Director

Okay. Thank you. I’ll take a note of that.

Saket Kapoor — Kapoor Company — Analyst

Yeah. Thank you, sir.

Suvamoy Saha — Managing Director

Thank you, Sachin. Thank you.

Operator

Thank you. Our next question is from the line of Kunal Jain from Chase Securities. Please go ahead.

Kunal Jain — Chase Securities — Analyst

Hello, good afternoon, sir and thank you for the opportunity. I think previously you had alluded regarding how the battery consumption trend in India and US is different. So, I just had some question on battery. So, it is slightly more of a longer term picture from a longer term perspective. So, say beyond four, five years, how do you see the segment grew? For example, today we see a lot of remote control devices is being linked to your mobile phone or something like that. So say smart AC, Smart TV. So today, if we have 40% of our consumption coming from remote, how do you see that make change over 5 to 10 years? And any reading material you would think would be helpful for us please do recommend, sir.

Suvamoy Saha — Managing Director

So as I explained a little while back, the edge devices come and devices like electric toothbrush, electric razor, smart remotes, optical mouse, etc, etc, electronic safe, electronic lock as these sensors, as these devices come, battery consumption would get go towards these segments as a result, while the remote consumption of batteries will not come down but in the percentage in the relative percentage it will come down. That is how it has happened, even, countries which are far richer, relatively more developed than us.

Kunal Jain — Chase Securities — Analyst

Got it sir. And sir one more question on lighting segment, you have already spoken about how lighting as a segment, we’re seeing some impact in terms of demand slowdown. And that is what our competition has also spoken about. And some competition has taken increasing advertising spend while margins have contracted for them. How do you see that same thing play out for us over the next two, three years, you think we’ll have some advantage because we have a lower base?

Suvamoy Saha — Managing Director

So yeah, number one is, of course, we are operating — growing out of a much lower pace, plus, we have really not tapped into our distribution strength, which is going to happen, we have not even scratched the surface on that, plus, we will be, I would say, hopefully intelligently communicating. So based on all these, I don’t see the challenge in our growth of in lighting to be of the same order as that of a much more evolved player. So I would say, you got it, right. I mean, we are coming off of small base, so our growth trajectory is going to be far steeper.

Kunal Jain — Chase Securities — Analyst

Got it, got it. And sir, last two bookkeeping questions. One would be what would be our debt level, I think last quarter, it was INR345 crores or something.

Bibek Agarwala — Chief Financial Officer

We ended the quarter at about INR365-odd crores.

Kunal Jain — Chase Securities — Analyst

Beside the net debt. And if you could just help us with the EBITDA breakup for our three segments?

Bibek Agarwala — Chief Financial Officer

So our EBITDA for the three segments were like this, battery was about closer to INR20-odd crores, flashlight, about INR4-odd crores, and the lighting was flat, meaning breakeven.

Kunal Jain — Chase Securities — Analyst

Okay, sir. Thank you. Thank you so much.

Operator

Thank you. Ladies and gentlemen, we take that as a last question. I now hand the floor back to the management for closing comments, over to you sir.

Suvamoy Saha — Managing Director

Okay. Thank you, everyone, for taking out the time to join us on our quarterly earnings conference call. I hope we have addressed all your queries. If you still have any more questions, please feel free to reach out to our Investor Relations team. And we will be only too happy to address them. Thank you once again, and we look forward to connecting again in the next quarter. Thank you.

Operator

Thank you, members of the management. Ladies and gentlemen, on behalf of Eveready Industries Limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.