Symphony Ltd (NSE: SYMPHONY) FY 2025 Earnings Call dated Feb. 05, 2025
Corporate Participants:
Aakash Fadia — Analyst
Achal Bakeri — Founder, Chairman & Managing Director
Nrupesh Shah — Managing Director, Corporate Affairs
Analysts:
Manoj Gori — Analyst
Pulkit Patni — Analyst
Shraddha Kapadia — Analyst
Mayur Parkeria — Analyst
Veenit Pasad — Analyst
Abhishek Ghosh — Analyst
Vinay Nadkarni — Analyst
Ashish Shah — Analyst
Jayesh Gandhi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Q3 FY ’25 Earnings Conference Call of Symphony Limited hosted by ES Securities. 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Akash from Yes Securities. Thank you and over to you.
Aakash Fadia — Analyst
Yeah. Thank you, Yasha. So good afternoon, everyone. On behalf of YES Securities, I welcome everyone to Symphony’s 3Q and nine months FY ’25 earnings conference Call. We have with us the senior management team of Symphony, represented by Mr Achal Bakeri, Chairman and Managing Director; Mr Rupesh Sheth, Managing Director, Corporate Affairs; and Mr Amit, Group CEO and Executive Director. I will now hand over the floor to the management for their opening remarks, along with the presentation post which we will start the question-and-answer session. Over to you, sir.
Achal Bakeri — Founder, Chairman & Managing Director
Thank you thank you, Akash, and thank you very much all participants on the call for being here this afternoon. The customary Safe-Harbor statement applies to whatever we say this afternoon. Now my colleague, Nupesh Shah will take us through the presentation, post which we will all respond to any queries that you may have. Thank you. Nupesh, bye. Yeah.
Nrupesh Shah — Managing Director, Corporate Affairs
Welcome to this conference call. So to start with the performance highlights for our standalone and consolidated performance, nine months as a whole, top-line is up by 49 percentage, while for the quarter, it is muted as on 31st December for Q3 and there has been record unbilled advances surpassing your domestic sale, which is about INR150 crores and primarily, they are mined for 17 new models. So these new models production was and has been slated to start from December, January and current month. So there has been essentially a spillover of sales from December quarter to March quarter to this extent. However, overall end-to-end, as consumer sale happens during summer, there is no business loss. There has been temporary calibration in EBITDA and business PAT, mainly because low-margin models have been billed in December 24 quarter. And in addition to that, there has been water heater launch expenses and also forex loss of INR3.8 crore on a standalone basis, while on a consolidated basis, there is a ForEx loss of almost INR9 crore during the quarter. It is more a notional loss that is mark-to-market mainly on account of investments made in subsidiary companies. So on a consol basis for first-nine months, top-line is up by 32 percentage. So during the quarter we launched storage water heaters and it’s a promising start its major USD in terms of prevention of hair loss and much better and positive for steel coupled with AI features has received very well and acclaimed well we have launched them in selected states and cities and starting January it has been launched countrywide through e-commerce and D2C so as it was conveyed during the last quarter, I wish to give an update about the legal action taken towards the recovery and the overdue was from Pathway Retail Private Limited, which is based out of Delhi, e-commerce distributor and they were our distributor for 13 years and for e-commerce, the distributor for many other consumer-facing companies. So we had carried out forensic check and came out with several irregularities, including falsification of the rack-offs as well as of government documents, et-cetera and also diversal of fund and hence, we initiated stringent criminal proceedings towards, cheating criminal breach of trust, etc under Act, we have created the right over their property, which are based in Gurugram and Delhi. Essentially they are on their corporate office as well as land parcel and other properties and residual value of the properties seems to be taking care of our outstanding. On account of criminal proceedings, their promoter Directors and ex-directors were arrested and later bill was granted. It was a conditional bill. However, the main conditions in terms of the repayment have not been honored and hence recently we have filed for cancellation of their bail application. At the same time, their other three directors had filed for anticipated rebal and that anticipated rebail has been rejected by Honorable court. And in addition to that, as updated earlier, we have also filed the criminal complaint under Section 138 towards this honor of the chat. So this is the legal update in terms of the recovery. So we have and we will go all-out very aggressively for the recovery and do our best. However, as per accounting standard and also on a conservative basis, outstanding of INR46 crore from pathway has been provided for during the quarter as a doubtful debt this is in addition to earlier provisions made and this will no way compromise legally or otherwise our recovery from them so, post this incident we have tightened and implemented stringent credit risk mitigation in terms of the in-depth credit evaluation, party wise credit limit, we have also taken the credit insurance and across the parties credit limit has been also rationalized
Achal Bakeri — Founder, Chairman & Managing Director
And we may also add that we do not give credit as a principle to general trade. It is only to modern retail and some regional chain stores or to this e-commerce distributor that we have been given credit. Other than that in the general trade, which still constitutes the vast majority of our sales, we have an absolute zero credit policy. That has been the case since the onset — this is the outset of the company of our business and that continues till today.
Nrupesh Shah — Managing Director, Corporate Affairs
And during the quarter, a NTM dividend of INR2 per share, that is 100% has been announced. This is in addition to buyback of shares as well as earlier interim dividend. All-in all, total payout in nine months amount to about INR124 crore, that is 92% of the consol profit. Coming to overseas subsidiaries InCo Mexico and GSK China, nine months as a whole have registered decent performance. However, while translating to Indian currency on account of depreciation of Mexican currency during the quarter as well as for nine months, there is a major difference. About GSK China, it has achieved remarkable turnover and performance for nine months, the turnover stands at INR75 crore versus INR33 crore, while PAT stands at INR10 crore versus INR1 crore. This includes its domestic sales and also now we have synergized and complemented international operations and hence earlier and Climate Technology were sourcing their products from other suppliers based in China. Now that has been synchronized through the expertise and local presence of GSK China. So its local operations have also turned profitable. And in addition to that, it’s also complementing my inco as well as climate technology. And as a result of that, as updated earlier, GSK has repaid the loan in excess of INR10 crores resulting into remaining outstanding of INR50 crores and there is a clear visibility and path for repayment of this loan in the time to come. About Symphony Brazil, it’s more about our trading subsidiary to take care of regulatory requirement. Otherwise it’s purely exports out of India. But again on account of ForEx fluctuation, there is a wide variation in terms of INR, even though it has registered huge growth in terms of top-line and there are huge prospects and potential. So climate Technology Australia is not performing well. Its performance currently is in-line with earlier years of InCo and GSK China. As conveyed earlier, its first phase of transformation that is CODB reduction from $15 million to $7.5 million has been already achieved and its business transformation Phase-2 is almost done. We expect the fruits to-end down the line so 9 months standalone performance as of 31st December top-line is up by 49% at INR814 crore versus INR98 crore that is up by 91% and PAT after providing for exceptional item and December quarter-specific expenses in all INR54 crore, which stands at INR132 crore. Coming to capital employed, in trailing-12 months in standalone business, capital employed is negative INR21 crore versus INR60 crore in earlier year despite increase in sales and performance translating into infinite ROCE and return on-net worth stands at 24 percentage and treasury as on 31st December is INR488 crores. For the quarter, overall, as explained earlier, performance is subdued, but mainly spillover to March quarter. And for the quarter at the cost of reputation, there are December quarter-specific expenses in all INR53 crores, which includes provision for doubtful debt of INR46 crore, water launch expenses of INR3.6 crore and forex loss of INR3.80 crore in all INR54 crore. So EBITDA otherwise stands at INR34 crore, but after providing for all other expenses, etc., PAT is negative INR4 crores. And about EBITDA margin movement, it stands at 18.8% for the quarter. Coming to consolidated financials, for the first time in nine months at our console level, Symphony has crossed revenue of INR1,000 crore and it stands at INR1,088 crore, up by 32 percentage. Its gross margin stands at 50.50 percentage Y-o-Y, up by 260 bps and on console basis, December specific expenses stand at INR59 crore, additional INR6 crore on account of ForEx loss, which is mark-to-market as explained earlier for Brazi as well as Climate Technology and Party Mexico. And EBITDA stands at INR211 crore, 19.40%, up by 570 bps. And after providing for all these December specific expenses, PAT stands at INR134 crore, up by 34%. And on a console basis, capital employed is INR273 crore, down from INR305, leading to ROCE for trailing-12 months at 90 percentage on core capital employ and the return on-net worth is 26% versus 15% about console quarterly also, it is almost flattish as explained earlier. So at a top-line level, it stands at INR242 crores and at a PAT level, it is negative INR10 crore, while EBITDA is positive INR35 crore and for December 24 quarter on a consol basis, EBITDA stands at 14.7% with this waterfall chart. So subsidiary-wise financials for nine months. Our subsidiaries put together in the nine months registered top-line of INR327 crore, up by-10 percentage Y-o-Y. EBITDA is INR24 crore, up from INR15 crore, while ex-ForEx PAT is INR8 crores versus negative INR5 crore. And for the quarter, four subsidiaries put together top-line is INR88 crore while EMEDITDA is almost zero and at a PAT level, ex-Forex is negative INR3 crores. As it can be seen in nine months GSK China in and Symphony Brazil have done pretty well. Brazil needs to be seen ex-ForEx and in Brazil business, we also make money on exports from India. It is climate Technology Australia which is still bleeding and we are quite cognizant of its performance as well as concern of the shareholders and obviously whatever is best-in the interest of shareholders as well as all stakeholders need will be done coming to outlook, so ahead of summer ’25, very robust positive demand and sentiment across the trade channel, across the geographies and on-top of it, as all of you are aware, considering the major income tax belief given which will be mainly available by aircular class of consumers that should further boost our business and we are quite confident about performance of March 25 quarter. There has been overwhelming response to 17 new range of air coolers and they will be margin-accretive. There has been strategic focus and decent demand from NFS, RCS e-commerce as well as D2C. Thank you. With this, we can take the questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press R&1 on the touchdown telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. In order to ensure that management is able to answer queries from all participants, please restrict to two questions at a time. You may join back the queue for follow-up questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles we’ll take our first question from the line of Manoj from Equirus Capital. Please go-ahead.
Manoj Gori
Yeah. Thanks for the opportunity. So based on your opening remarks, what I understood is, optically this quarter is looking weak on the domestic front, but probably there will be a lot of spillover into Q4. So probably for the 4th-quarter, we should expect normal growth that we would have expected earlier and plus this spillover effect. Is that understanding correct?
Nrupesh Shah
That’s right.
Manoj Gori
Yeah. And secondly, if I look at the — some of the other cooling product categories, channel has been going very aggressive. So in fact, in terms of number of days or in terms of absolute volumes, they have been betting on the summer building huge inventories in anticipation probably if there is any supply-chain disruption for any of the category. So are we seeing like probably channel going very aggressive as compared to previous historical trends and accordingly it should — it should further boost volumes during the quarter.
Achal Bakeri
Certainly, not only the channel, but so are we. We’ve also built-up huge inventory in anticipation of good sales in the summer. So yes, all-in all, the — everyone concerned in the business is very upbeat.
Manoj Gori
Correct, sir. Good to hear that. Sir, second — lastly, just said like the new models are margin-accretive. So looking at the standalone gross margins, probably there has been minor contraction. So probably there won’t be any major contribution from this new models during this current quarter and that we should expect during the 4th-quarter.
Nrupesh Shah
That’s correct. That’s correct. Yes. And we as a company have a focus when we talk about margin on EBITDA margin. So I don’t mistake it or club it with gross margin or otherwise, because primarily our focus is on that.
Manoj Gori
Correct, understood. And sir, lastly, on the subsidiaries probably still when we look at the top-line performance. So we are still not able to see any meaningful uptick over there. Obviously, you have taken a lot of efforts on CODB, which where we are able to see some benefit kicking-in. Can you throw some light on the subsidiaries, probably how do we see from next one year point-of-view?
Achal Bakeri
So Manoj, by subsidiaries, I suppose you mean climate technologies of Australia because yeah, and GSK in China are already sort of cruising along very well.
Manoj Gori
Yeah.
Achal Bakeri
So as far as climate technologies is concerned, there were two sort of levers that we were working on. One was how do we reduce the cost of doing business through a transformation of its business — of its business, which is outsourcing the manufacturing and cutting down its — it’s over its manufacturing-related overheads. Now that has been by and large achieved. So the manufacturing is at the tail-end in Australia by June, everything would be wrapped up and that’s when our lease for our factory also expires and will be done and dusted with any sort of manufacturing in Australia come June. And simultaneously, the other sort of lever that we have been working on is adding new products to expanding our product portfolio in Australia because historically, we were selling gas heaters, gas ducted heaters and rooftop mounted air coolers. Now over and above that, we have added high-volt split air-conditioners. We have also added river cycle ducted air-conditioners, river by river cycle, ducted air conditions, I mean air-conditioners which both cool and heat because remember that Australia is as hot as it gets cold in the winter. It gets very hot in the summer and also gets cold in the winter. So it requires both sorts of sort of interventions. So we have introduced a — you know the complete range of air-conditioners. We’ve also added products like electric panel heaters, fireplaces, strip heaters, we are in the process of adding air purifiers. So we are really increasing the entire portfolio of products that we are — we’ll be selling in Australia. And now the introduction of these products is more or less in-place. And now scaling up their the entire business and offering them to the entire geography all over the country, offering them to all the — to all customers is a process which is currently underway. But identifying the right products, getting them certified, identifying the suppliers and then getting the product certified, testing, sampling, all that is all done. Now it’s just a question of how do we ramp-up sales. So the focus here onwards is going to be entirely on the growth of the top-line. Whatever had to be done by the by the Australian team in terms of reduction of the CODB and its manufacturing transformation is almost all done. And like I said, and the focus is now clearly on ramping-up sales. So the issue now in Australia is nothing other than top-line. As soon as the top-line, if we are able to crank up the top-line, everything else — all the numbers will immediately fall into place. Exactly what happened in GSK China. Till last year, our turnover was some INR33 crores and some you know and some barely breaking even on a cash basis. And suddenly, as soon as the top-line increased to INR70 crores in nine months, we are seeing bottom-line growth. So the operating leverage has kicked-in China and the same thing will happen in Australia. So that is what is currently going on. Yeah.
Manoj Gori
Correct, sir. So thank you, sir, and wish you all the best.
Achal Bakeri
Thank you. However, I may also add that as Nupesh mentioned, we are fully — we fully appreciate the sort of concerns that you know the market has about this subsidiary and its performance and its consequent impact on you know, the valuations of the company as a whole. And we will certainly take into all that into consideration and chart out our way forward.
Manoj Gori
Right, sir. Thank you sir.
Achal Bakeri
Okay. Thanks.
Operator
Thank you. We’ll take our next question from the line of Pulkit Patni from Goldman Sachs. Please go-ahead.
Pulkit Patni
Sir, thank you for taking my question. Sir, can you highlight in a scenario that there is tariff imposed on Mexico, China, do we get impacted in any way? Do any of these products directly and directly make their way into the US? We know Australia does supply to US, does Mexico also do. If you could just tell us, one, if there is an impact and second, if there is, how are you looking at navigating the same?
Achal Bakeri
Again, good question,. Until about a couple of years ago, two summers ago, we used to have very good business in the US. We did in — at the peak, we did about $23 million of sales of US dollar sales in the US. Now for different reasons, that has not happened in the last two years and that is also has a telling effect on Cloud Technologies sales. So as of now, our sales from either Australia or Mexico to — and-or China to the US is fairly low. Whatever US — the US company sells thus from you know, all of these geographies but as of now it’s fairly low. So really speaking, the tariff will have no impact on us. In fact, you know if business — if there is sales in the US, we believe that the tariffs will be passed on to the consumer. If, for example, Home Depot sells our product, places orders on us for our product, we would certainly — they would pay duties or we would add the duties to the — to the price at which we sell to them. So if at all, it will get passed on to the US consumer. As far as we are concerned, really nothing changes.
Pulkit Patni
And sir, if I may flip that more on the positive side that tomorrow in a scenario that China and Mexico have duties, can the Australian subsidiary be become more relevant for us from a US export perspective.
Achal Bakeri
Absolutely. Absolutely. Yes, absolutely, because there would be no duties from Australia to the US as they currently are not. So absolutely right, yes. So we do have that other avenue of routing product to the US. You’re absolutely right.
Pulkit Patni
Yes. But on an as-is basis, if duties are put, we don’t get hit significantly negatively. That’s really what I take-away from that.
Achal Bakeri
Absolutely, certainly not. Although there has been the impact that the — this entire turmoil in the US has or has had on currencies is something what is affecting us indirectly as was explained in the presentation that the Brazilian real has devalued, the Australian — sorry, the Mexican presso has devalued, the Indian rupee has devalued. So whatever impact that has you know, is there. But other than that directly, the tariff has not hurt us or we don’t expect it to hurt us?
Pulkit Patni
Sure. Sir, my second question is, you know, a lot of these EMS companies which originally used to do, you know, air-conditioner, etc., are now also talking about doing air cooler EMS. Does it in any way play into our strategy of looking at incremental suppliers or for us, the business model of sourcing will remain the same the way it has been for years
Achal Bakeri
Sorry,. I’m trying to understand what you meant by EMS.
Pulkit Patni
Sir, the likes of EPAC, etc., who are now making air coolers for different brands. And as you would appreciate multiple brands now want to get into air cooler. I wanted to know if for us from a sourcing perspective, could they be relevant suppliers or we will stick to our existing strategy of sourcing, which is basically we do all the designing and then stick to the few players who do manufacturing for us.
Achal Bakeri
Essentially, we will stick to what we are doing now, but you know EPAC has also become one of our OEMs, contract manufacturers. So products that we have designed and developed and molds of which are owned by Symphony and have been given for a few models to EPAC to produce on our behalf. So we will not really just source a product which has not been developed by us and where we see no product differentiation and where we — the same product would be hawked to different brand — brands is not something — it’s not a direction that we will go into.
Pulkit Patni
Got it, sir, very clear. Thank you and good luck for the next quarter.
Achal Bakeri
Thank you.
Operator
Thank you. We’ll take our next question from the line of Kapadia from Share India. Please go-ahead.
Shraddha Kapadia
Thank you so much for the opportunity. MR.
Operator
Do you use your handset mode, please? Your voice is not very clear.
Shraddha Kapadia
Thank you this better
Operator
Volume your volume is low. If you can speak a bit louder, that will do.
Shraddha Kapadia
Hello, is this Petro?,,
Operator
Go-ahead, please.
Shraddha Kapadia
Yeah. So basically, I wanted to understand if we have taken any price hikes or do we expect to take any price hikes in future? So in the current quarter, if we have taken any price hikes and what would be the price hikes considering the season is almost over here. So
Achal Bakeri
Yeah, yeah. So again, good question, Sharda. As a part of our overall pricing policy, we — our prices keep on sort of inching up every fortnight beginning July all the way up to the summer season. So that is — that has been part of our — the long-standing pricing policy. So yes, and the price what I’m referring to is the price at which Symphony sells to its channel partners. So in the first fortnight of February, the rate that we will offer is not what the channel would get on the 16th of February.
Operator
Does that answer your question?
Shraddha Kapadia
Yeah, thank you so much. I just had one more question regarding the new 17 air coolers, which we have launched, if you could highlight the new features and how much revenue can we like expect? So majorly it would be the new features which would be there if you could highlight the same for the upcoming season.
Achal Bakeri
Yeah, that could be a very long-story and it’s all there in our corporate presentation, which is on our website. So if you care to go through that, that will probably serve you better than me talking to you on the phone.
Shraddha Kapadia
Okay, sir. Okay. Sure. I will go back. Thank you so much.
Achal Bakeri
Thank you.
Shraddha Kapadia
And all the best for the upcoming quarter.
Achal Bakeri
Thank you.
Operator
We’ll take our next question from the line of Mayur Parkeria from Wealth Managers India Private Limited. Please go-ahead.
Mayur Parkeria
Good evening, sir. Good evening to the management team. Sir, actually, yeah. Sir, we understand that this event of provision was there and it has happened one-off situation in that way. But my question is slightly little longerish and slightly more strategic. Modern trade as well as e-commerce or even quick commerce, you know we — and this is what other brands and OEMs also have been saying that the working capital or they have a credit period unlike our bargaining capacity in terms of general trade being higher versus in front of them and it is relatively lower and hence the credit periods are also there. And the structural change is that the their share in the overall sales is rising in that sense gradually over multiple years and it will continue to rise given the consumer behavior and experience on modern trade, e-commerce, commerce, all put together the new channels. So how would you address this assessment that credit, which has been — we have always stick to the cash-and-carry model as far as the general trade is there, but then we are giving credit on the other channels and on one-side as a structural impact. And the second is our credit — our assessment in the credit profile and the measures which you have taken now, what — where do you think the lapse actually happened in terms of internal assessment — in terms of internal situations, if any? And where did we miss that in that? Because we were supposed to — we were — we have always maintained that we are very strong on that and we have maintained that. So just as an learning curve perspective, where does the internal process missed and are there any heads which have — which rolled-out because of this or what kind of measures did we miss on that side and how do we address the structural issue of credit, which anyways this channel we will have to continue, sir.
Achal Bakeri
So you know, when it comes to modern trade, you’re talking about the likes of Chroma or Reliance or Vijay sales or when it comes to regional chain stores, you’re talking about the likes of Bajaj Electronics down in Hyderabad, the division in Bihar and there are several in the south Nadu and you know so and so forth there you know we have been giving credit and there of course you know we’ve obviously look at the financials, you can’t look at financials of — no point in looking at the financials of Reliance Retail or Chroma. But for all the others, we do keep a look eye on the financials of the other parties. As far as this one particular case is concerned, we had been doing business with the disk distributor for a long-time. Initially, it was not on credit gradually because to sort of increase sales, we began to give — provide credit and but historically, we kept a close eye on how the sort of the repayment was happening and — but in this one year I think I can — I can admit to saying that there was a lapse in judgment and we should have picked-up the signals, people who are at the operating level who do the business should have picked-up the signals and been able to sort of tighten the sales. But you know, sometimes in the — in the lure of sales or with the fear of not losing sales, the sunsites tend to overlook some signals which would have been otherwise very evident and I think this — so this situation has happened. So it is clearly a lapse of judgment and as to your question about heads have rolled or not, no heads have not rolled and we believe that the people who have made this sort of who are responsible for this lapse in judgment are wiser now and you know will this will not happen again and so yeah
Mayur Parkeria
Sir actually INR45 crores and even earlier what we provide is a huge sum in terms of you know time the kind of a credit. It’s just that you know you know, Achal his philosophy of cash and can I remember in your earlier days, you had faced this issue very long-time back, multi in two decades back or something and that’s what made you to stick to cash-and-carry and that philosophy we have always been looking at and it was a — while we understand it was an even, but you know coming — coming from Symphony was something which took us too much of a surprise in terms of that. So hope — I hope that philosoph yes, sir.
Achal Bakeri
Yes, Moeur, I entirely agree with you. You know, all-in all, it’s 56 plus whatever provisions we have taken earlier. So all-in all, it’s INR58 crores, INR46 plus 12, so INR58 crores. It’s an enormous amount of money and that is something where for much less, back 20 years ago, we became a VIFR company.
Mayur Parkeria
Yeah.
Achal Bakeri
So this is a — an enormous amount of money and under normal circumstances you are right this shouldn’t have happened. But like I said, it’s a it’s a lapsing judgment and and so we are sure that you know whoever is responsible for this, the people responsible for this advisor now and will not this will not happen again heads could have rolled that would have been easy, simple thing to do to sort of also even demonstrate to the market that actions have been taken or to our Board but we have chosen to sort of chosen the you know the other direction of sort of our people learning from this experience, very, very expensive learning, but a learning nonetheless. So we are hoping that this is something which will not happen again. I mean, we are sure. Yes, yes, sure.
Mayur Parkeria
The investor concerns is only actually our long-term concerns only comes because the channel share gradually keeps on rising in terms of modern trade and these. And we are at a stage where the assessment on this itself has gone early stages wrong. So just to ensure and request you to give your personal attention and ensure that processes are well-established even for — even in — while this is a very generalized way to say that there are big, big players, but there are small and medium organization — modern trade players also which are there and the likes where we face an issue. So to strengthen and ensure that the processes are well set because the channel will keep on becoming important as we go-ahead. So it’s not that we cannot serve that channel, but we need to take care. So the second question is on the climate technologies,
Nrupesh Shah
Sorry,. So just to add to that. So as we covered in the presentation, it has been placed on the screen. So of course, it was a valuable lesson and hence, stringent credit risk mitigation has been implemented, which includes in their credit evaluation, which is much beyond what used to be done earlier. Secondly, now for entire modern trade, credit insurance has been taken. So for the first time, this credit insurance policy has been taken. And wherever required, we have substantially rationalized the credit limit. And of course, many times, just by knowing the financials, just by knowing the balance sheet, it’s like giving up pulse. But as it was mentioned, sometimes there may be a law of not losing the sales. And in fact, last year, actually there was a loss of sales because of non-supply. So had it been rationalized to this channel, otherwise also there would not have been a loss of sale. But of course, it’s a valuable. And at the same time, as it was in the presentation, we have taken stringent actions against the modern trade distributor. And by the way, several other consumer-facing companies have also lost the money with them.
Mayur Parkeria
Sir, we believe all the actions will be taken. Sir, second, just
Achal Bakeri
Also in continuation, you know, in the past, you must-have heard of future retail going under and many suppliers having lost a money. In our case, we didn’t because again, there were different set of people involved at that time and who sort of exercised judgment and ensured that we did not lose our shirt. So even though many other companies failed to do that, our team was successful in minimizing our exposure to future retail as when it was going under. So it’s just a matter of like I said, it’s just a matter of judgment, you know of the people in.
Mayur Parkeria
Yes. Second question on the City, Australia. If I remember if my memory serves well, I think this is the first time where we have, you know, apart from the other actions which anyways we are taking for a couple of years — our strategy, Phase-1, Phase-2, we have mentioned about transforming and all that. But I think I don’t — first time we have clearly come out with a kind of a statement or I’ll say an outlook where we are saying that the — we are ready to open — we are open to any other options also, which may be possible in the light of the investors’ concern on Australia. So just to understand this a little bit better, what — what are we saying — are we looking at some strategic kind of initiative apart from the other options which are there on the table? Is there something more — more to it to read in your intent and the way we are looking at it because this is a very big even if it happens and you know, just to get a more idea on that, sir
Nrupesh Shah
No, there is nothing really on the table. I mean in fact I’m asking you what? What do you suggest we should do.
Mayur Parkeria
Sir, firstly, it is — it is beyond my pay grid to give a strategic view on something and specially to Mr Rachal who has been
Nrupesh Shah
Person, I’m sure you can you can maybe you know, share your thoughts.
Mayur Parkeria
Sir, sir, many times in — we have — as we — and we have mentioned that our intent has been to focus on return on capital employed and margins very clearly. At a very strategic intent level, I remember we were talking about this way back when this acquisitions were taken that India is the most promising place as far as ROC and growth both were concerned as a combination of that. And — but we do understand that air-cooling Australia was a big market. We wanted to address that and possibly also look at US as a play through Australia, which actually did not materialize over long period the way we would have thought over it, right? But then apart from the growth, the ROCEs of all developed countries are very, very subpar, any which case, right? So that was — I think that is something which all of — which needs a very closer look in terms of our intent and how we look at addressing the opportunity because absolute value of sales can come in, but — and invariably when — sorry to name, I’m not naming in others, but we have seen experiences whether Tatas have gone through or for a very long period of time, Bharpi or Hindal, all of them have gone through where developed countries or global companies are acquired and their ROCEs are significantly lower and it is very difficult for us to have a cultural map to understand and turn it around in a time period where investor horizons are there and in fact at this kind of a situation. So you have been — you have been instrumental in turning that around by complete — closing the manufacturing operations and normally these are not possible and easy to do. But then was one indicator which actually could have given us a signal whether this was worth doing at that point in time. And now that this has been done, I think while we are taking all measures at the margin, trying to improve it, I think there is a — there is still a question which so one of the participants asked that does the tariff war opens up opportunity for Australia to turn-around. But I still think that one has to look at this not from one year, but over a five, seven, eight years, can we really add wealth to Symphony parent and then the wealth to the investor will come in the second part. But overall, how does this developed country operations actually fit into that entire efficiency and roasts which we already have. It will always dilute our proposition for that. And SRB in AAK, those markets are growing at very-high double-digits. So we will have to do completely different. We are going — we are doing and launching new products there, which has not been our core focus in other markets. So we are doing measures just to turn that around. Is that is so much of effort and so much of your time and resources of the company over a long period, one can have a look at that. That’s just a small suggestion way to look at.
Nrupesh Shah
No, really appreciate it. Really appreciate your thoughts. Thank you. Thank you very much.
Mayur Parkeria
Thank you and wish you all the best, sir.
Nrupesh Shah
Thank you. Thank you.
Operator
Thank you. We’ll take our next question from the line of Vineet Passad from Investec. Please go-ahead.
Veenit Pasad
Hi, hi, good evening, sir. Thank you for giving the opportunity. I just wanted to get a sense around how are we thinking on water heaters business? What has been the initial feedback which we’ve gained from the market, particularly given this is the peak summer — peak season for water heaters, how has this — how has it done this month? And also, how are we looking at the overall business in terms of whether this business will continue to invest maybe in the near-term maybe a drag to our profitability? And lastly, what are — what is the market-share target, let’s say we are targeting over a medium-term, let’s say two to three year perspective? Got it.
Nrupesh Shah
So in terms of the market for water heaters is about as big as coolers in value terms. So it’s a significant market around significantly large category. But we do recognize that there are very, very well-established, well-entrenched players so we had to make sure that whatever we offer has a distinct differentiation and which is why you know we have developed this hairfall control geezer and with the AI-powered controller and we believe that these two together have a compelling differentiation in the market. And when we look — while when we launched it, it was already well into the cycle, the channel buying cycle and also we were sort of fairly late, although the winter hadn’t quite set-in, but by the time the product was given to the channel, they had already stocked up on other brands. So this really was just more of a trial kind of a year. And now is when, you know now going-forward is when we would be sort of making sure that all the channel partners talk it for the coming winter, the winter of ’25, ’25, ’26. So in reality, the next year, the coming 12 months is what is going to be a key time when this product will sort of demonstrate what it can do. So it’s a little too early to say anything, but we’ve had a — so-far in whichever markets we have launched and whichever customers have bought are very happy. So the product has certainly lived up to its promise and now it’s just a matter of just doing more of the same across the country.
Veenit Pasad
Understood, understood. And sir, if you can throw some light on how will be our GTM in this category. Will — before the next winter, will we be selling through dealer network, GT network or at least for the initial couple of years, the focus will remain more on modern trade and e-com.
Nrupesh Shah
Yeah, I think initially it will remain on modern trade and e-com and yeah, and some large regional chain stores. Initially
Veenit Pasad
Understood.
Nrupesh Shah
Yes.
Veenit Pasad
Okay. Understood. Understood. And sir, just one clarification. We understand there’s some push-out of some sales, which did not happen this quarter to the next quarter. So from that perspective, outlook for the next quarter appears robust. But just from a fundamental point-of-view, are you seeing any change in terms of the way we — our business model operates, wherein we used to sell it evenly throughout the year to channel partners. Is that something what is changing? Should we read into that or is it just pure push-out of sales? And going-forward, we should again see more evenly spread-out sales throughout the year.
Nrupesh Shah
No, absolutely. In fact, you know, if the new models — if the production of the new models had happened, had been initiated a couple of months sooner, then their entire sales would have happened in the previous quarter. It’s just that people want — people give us the money, they wanted the product. In fact, as of they were quite impatient to get the new product. But it’s just that we had begun the product development a little late and there were some transit issues and there were some you know some reasons of delay beyond our control. And so the manufacturing of the launch — the production initiation of the production got pushed to the current quarter. But now they are already in-production, most of them, couple will begin towards the end of February, but they will all be in-production and be as sent across to the channel by the end-of-the quarter. So this is just a — this is just one of those events and this happens, this happens. I mean, a few years ago, seven, eight years ago, we had launched a range called the Touch range, which we had — which instead of July, we had launched it in July is usually when all our new products are unveiled, but this one was unveiled in the month of November. So we had a similar situation. So again, see, up until the temperature picks up, whatever is sold is — it goes to the channel. So there is — even if whether we said in January or February, there is no loss of sales. It’s just the deferment of sales because the eventual customer only buys when the temperature picks up hello.
Operator
We’ll take the next question. His line is disconnected. We’ll take our next question from the line of Abhishek Ghosh from DSP Mutual Fund. Please go-ahead.
Abhishek Ghosh
Yeah, hi, sir. Thanks for the opportunity. Sir, just in terms of the loss of sales that we have had in this current quarter, otherwise, on a steady basis, you would have seen teens kind of a growth, which is what you’re kind of looking at would have been possible
Nrupesh Shah
Yes, yes, absolutely. So that’s what we registered in September quarter and that is the kind of the collection and unwilled amount we are sitting on.
Abhishek Ghosh
Okay. Okay. And sir, just in terms of the channel sentiment, we have almost seen 1/3 of the quarter having gone by. So is the channel sentiment buoyant in terms of stocking up or are there, you know apprehensions about the upcoming season, if you can just help us understand with that?
Achal Bakeri
No, the channel is very, very upbeat. This year the January, as you — as we all know has been one of the hottest January in the last 125 years. February also as we speak is fairly warm. So the channel is very, very upbeat. They all expect there to be an early summer and a good summer in terms of reasonably high temperatures and consistently high temperatures. So those are all expectations and the channel is all sort of geared up for that.
Nrupesh Shah
And in addition to that, as everybody expects, Sitar Aman has made consumers also very happy, especially for our kind of products in addition to good summer. So I think that should also be helpful.
Achal Bakeri
Yeah, the higher disposable incomes, thanks to the tweaking of the tax regime would certainly help us as well as others.
Nrupesh Shah
So I think by one strategic city state that saving of INR1 trillion of taxation will increase the consumerism to an extent of INR3 to INR5 trillion because it is 3x to 5x and that helps to consumer-facing companies
Achal Bakeri
And 18% of that is what goes back to the revenue today? Yeah. Sure.
Abhishek Ghosh
Correct. Correct. Sir, other thing in terms of the competitive landscape, are you seeing any meaningful changes in your — in your category? Are you seeing new players coming through? Any sense on that?
Nrupesh Shah
I don’t think there are any players left to come. Whoever had to come is already here or whoever exists is already in the category. So there’s almost everybody that you can think of is in this category.
Abhishek Ghosh
But I was more asking, sir, is anybody exiting now, given that
Nrupesh Shah
Well, if not exiting people have many of them have lost their initial sort of you know euphoria and fashion and all of that, they realize that this is always greener on the other side and so that certainly that is visible, that is visible. Some of our esteem partners, again, I can’t talk about them in an open call like this who couldn’t just talk about anything other than coolers or Symphony. I don’t even talk about that anymore. So they are so busy with their other products and they’ve realized that this is not all as easy as it seems. So yes, so it has certainly been that
Abhishek Ghosh
Okay. Okay. And sir, just in terms of standalone P&L, there is almost about a INR6.6 crores of one-time this thing because of ForEx loss and water heater launch expenses and a corresponding number for consol will be about INR12 crores. Is that the right way to look at it?
Nrupesh Shah
That’s right.
Abhishek Ghosh
Okay. And you will see some amount of gross margin improvement as the sale of new models happened.
Nrupesh Shah
So as we say rather than gross margin focus is on EBITDA that is of reasons. So our target is EBITDA, which may be partly through gross margin, partly items in-between gross margin to EBITDA to EBITDA.
Abhishek Ghosh
Okay. Okay, sir.
Nrupesh Shah
Gross margin is very-high, but if we can’t control or manage the items in-between, which are substantial, then doesn’t lead anywhere.
Abhishek Ghosh
Got that. Okay, sir. Thank you so much for answering my question. Wish you all the best. Thanks.
Operator
Thank you. We’ll take our next question from the line of Minay from Hatway Investments. Please go-ahead.
Vinay Nadkarni
Yeah, good evening. Just one question on the volume of procurement for this season. By how much have you increased your procurement levels for this summer for air coolers?
Achal Bakeri
And will be on — we have produced a record number of coolers, already sold quite a record number of poolers and sitting on record in high inventory. So I can’t barely talk in percentage terms, but it’s fairly high, such much higher than what we have sold is higher than already sold before the summer is much higher than any of our competitors. The inventory that we have is more than what most of our competitors would sell-in a year. So in every respect you know we have gone bullish and we have gone all-out.
Vinay Nadkarni
Okay. Regarding City Australia you said you are closing down the manufacturing facility there by June. What would be the impact of that on your overheads there? By how much would they come down? If you can give us some figure on that?
Achal Bakeri
And maybe you joined a little late, but we — in our presentation, we talked about or we have reduced our cost of doing business from 15 million, which it was when we acquired the company to about 7.5 now. So we are almost there, maybe a little bit — it will be further will be reduced, because the process of reducing manufacturing has been going on. We are at a — what we are currently doing is very, very small compared to what we were doing earlier. We are occupying very little space. We have very few people just converting the last bit into finished product, the last bit of raw-material into finished product. So most of the gains of CODB reduction that we were to — we had planned on have already been — have already been received? Realized.
Vinay Nadkarni
Okay. And then you would be subcontracting it in Australia or would you be supplying it from China and India?
Achal Bakeri
Again, again, like we said before, we will be supplying from mainly from China. Our subsidiary in China is going to be supplying to Australia. Some products are already going — have been going from India to Australia. So it is essentially either China or Australia, China or India.
Vinay Nadkarni
Okay. And lastly, what is the percentage of sales that you get from modern trade as compared to for general trade?
Achal Bakeri
Where in China? In Australia
Vinay Nadkarni
In India — sorry, in India.
Achal Bakeri
In India, well, you know, whatever is the general average for the industry as a whole applies to us.
Vinay Nadkarni
Okay. Fine. Thank you. Thanks a lot. All the best for you next quarter.
Achal Bakeri
Thank you very much. Thank you.
Operator
Thank you. Next question is from the line of Ashish Shah from Business Match. Please go-ahead.
Ashish Shah
Hi, good evening, sir. Thank you for allowing you to ask the question. Sir, I just have one more question.
Operator
I’m sorry, we’ve lost.
Achal Bakeri
Your voice is breaking.
Operator
So we’ve lost this connection. We’ll take the next question from Vineet Passad. Please go-ahead.
Veenit Pasad
Thank you. Thank you, sir. Just my line got disconnected. Just wanted one clarification. Generally, we would have started manufacturing newer models somewhere around September, October, but this time due to various reasons that got pushed to December. Is the understanding right?
Achal Bakeri
Yeah, December, January, February. Yes.
Veenit Pasad
No, but generally in a normal year, not this year, but generally, is it a case where we start manufacturing new models a lot early or it is the similar time?
Achal Bakeri
No, absolutely, absolutely.
Veenit Pasad
Okay. Okay. So it’s just matter of delay in starting of manufacturing of newer products, which is
Achal Bakeri
Correct. Again, not all new models. We have launched 17 new models, some we were already able to produce and introduce in the previous quarter, some will happen and the balance will happen in the current quarter.
Veenit Pasad
Understood. Understood. Okay, sir. Thank you. Thank you so much. Thank you.
Operator
Thank you. I think we request participants to restrict to one question at a time, please. We’ll take our next question from the line of Ashish Shah from Business Match. Please go-ahead.
Ashish Shah
Hi, good evening, sir. Thank you for letting me to ask a question. I just have one question, sir, slightly long-term on your China subsidiary. So last few years you obviously struggled in terms of business, environment, margins and now things have come on-track. So do you have any plans, any thoughts here two, three years out? Can this meaningfully scale-up from where we are now?
Nrupesh Shah
So the China subsidiary serves multiple purposes. One is, of course, you know, it becomes like a production source for Mexico, Brazil, Australia and other geographies. So that’s one. Secondly, it also helps the India procurement team, which also buys components from China and we are to you know get better deals find other suppliers so it actually serves multiple purposes so as you know and of course, over and above that serving the local domestic China market. And so yes, this business, again, it’s a very, very low — the capital employed there is fairly low and so you know, and it will certainly grow in the years to come. And that growth will come with — will come with very low capital employed.
Ashish Shah
Yeah. And sir, just continuing to that same — of the same line-of-business, like do you have a plan in-place, like the strategy in-place to grow China business meaningfully? Or
Nrupesh Shah
China business will grow when all the other subsidiaries grow. So the focus is not necessarily on growing the China business. The focus is on getting on growing Australia or growing Mexico, growing US, growing other geographies and orders from there will flow to China as well as to India. Growing the local China market itself is also a focus area. So I mean, growth of the Chinese company will be a consequence of our growth in many other geographies.
Ashish Shah
Okay, sir. Thank you very much and all the best.
Nrupesh Shah
Thank you.
Operator
Thank you. We take the next question from the line of Jaysh Gandhi from Gandhi Securities. Please go-ahead
Jayesh Gandhi
Hello, am I audible?
Operator
Yes, please go-ahead.
Jayesh Gandhi
If I heard you correct, you said that in Australia you are, you have introduced air-conditioners, air purifiers. Any any do we do you have any audible?
Achal Bakeri
Now you
Jayesh Gandhi
Yeah are you thinking of introducing it in India as well?
Nrupesh Shah
No, no, no, no, no, no, no, no. So we are. We are introducing these products in Australia because, like I said, historically we were selling coolers, rooftop coolers and ducted heaters in Australia. Because of regulatory reasons, there have been a ban or there has been a ban on gas heating in Australia. So we have to exit from that category. And coolers and gas heaters are sold-in tandem. So if heaters are not sold, cooler sales, rooftop cooler sales will also reduce. So we have to — we have to find a substitute product and the substitute product is air-conditioners which can both cool and heat because we have the brand and the distribution, we have select — we have decided to do that. And along with that, these were other complementary products, electric panel heaters, purifiers, etc., et-cetera, which we — which the channel also — our research also revealed could have very good prospects and which is why we have got into those. So we have no — we are really not planning on introducing any of those in the Indian market at least today. I’ll never say never at least today.
Jayesh Gandhi
No, I was just wondering because I think we have a far poor air quality than what Australia might be having. So if you are actually thinking of introducing air aircle fires in India. Anyways, yeah, that’s answer. Okay.
Nrupesh Shah
Yeah, it could be a good product. But even our air coolers at least in the summer months, our air coolers also filter air. So they are also — this is also a product with both clean filters as well as cool air. So if one is using an air pooler, you really don’t even need a purifier.
Jayesh Gandhi
Yeah. Thank you. Thank you, sir. That’s all from my side and good luck for future.
Nrupesh Shah
Thank you.
Operator
Thank you. We’ll take our next question from the line of Mayur Parkedia from Wealth Managers India Private Limited. Please go-ahead.
Mayur Parkeria
Thank you, sir again for taking my questions. And I promise this will be a small one rather than a long one. Sir, just again a slightly issue, which has been also not played to as well over a long period of time is the commercial and industrial air-cooling segment. You know, while in normal season — normal times, we understand that there is no tailwind of the summer, but last year as well as if this year is anything to go by, there is a strong tailwind of the summer itself. And we have over the past taken multiple efforts as far as sales team initiatives doing a lot of you know, I will say distributor through and other — other programs and everything put together and there was a time when we used to look at if Volta’s air-conditioned factory was cooled by a symphony and the outlook for industrial air-cooling and even for commercial to that extent was expected to be much larger. And to that — from that perspective, we have absolutely gone nothing material. We are still sub single-digits on the overall revenue side. So over the next three years, how do you see this and why is in the sales momentum in terms of the summer seasons of the last two years is not — where again, where-is the — where-is the problem coming or how do you see market acceptance?
Nrupesh Shah
So first of all, LT has charged. He has agreed that we have not been able to scale this business up and despite everything that we have done. The issue is not the summer, the issue is not tailwinds, the issues of — of actually educating the market, you know, maybe Indian factory owners are content with whatever indoor temperature conditions may exist in their factories. So it’s really a question of market education and explaining and convincing people the merits of better thermal comfort, indoor thermal comfort in factories and warehouses. It’s just that. We’ve got the product, we have the team, we have everything concerned. But we believe that we are despite it being many years of trying us not having succeeded despite many years of trying, we are — we continue to work at it because we believe that at some point they’ll come at — we will reach the tipping point and this thing will begin to roll. You know there are many other figures — several other examples in countries like China and I’ve said this many times before, countries like China, in southern China, in Guangdong Province, which is the manufacturing hub of China and the economy of Guangdong is bigger than the economy of India, the GDP, you know there every factory is air-cooled. You know every factory. I mean if a factory is not air-cooled, workers refuse to work-in that factory. So it’s — we believe it’s a matter of time that Indian sort of worker becomes demanding their threshold of comfort will be sort of much lower or higher whichever you look at it and you know and there’ll be a demand for industrial cooling. It’s just a matter of time or just a matter of time.
Mayur Parkeria
I sir, wish you all the best on that. And one small suggestion on the heater side, some of our channels have been talking to the dealers on this side, AOSmith as heaters have done really well in terms of product positioning and premiumization. And when we understand why, one of the factors which other heater you know — sorry, boiler — sorry, my apologies.
Nrupesh Shah
Water heaters.
Mayur Parkeria
We have water heaters. They have — some of the companies have not been able to do is nowadays because of the pressure problems of water, most people are in the housing societies, there is a pressure pump or internal pressure. The kind of pressure which comes through the heaters, boilers, it becomes very difficult for many of the water boilers to manage that and has done a very good job. So just a small feedback in terms of differentiated positioning for you to think on.
Achal Bakeri
Excellent. No, very good point, very good point. Very good point. No, we have taken care that our products, our heaters can withstand what eight bar of pressure, which is what a high — which would be in a high-rise building or with a pressure pump. But you’re absolutely right, your market understanding is bang on.
Mayur Parkeria
Thank you, sir and wish you all the best.
Achal Bakeri
Thank you,.
Operator
Thank you. Ladies and gentlemen, we’ll take that as the last question for today. I now hand the conference over to management for closing comments. Over to you, sir.
Nrupesh Shah
Thank you. Thank you very much everybody and your questions were also quite insightful and they now sort of gave us a lot of food for thought. So we look-forward to discussing once again three months down the road. Have a great evening. Thank you. Bye-bye.
Operator
Thank you. On behalf of Yes Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines