Executive Summary:
Crompton Greaves Consumer Electricals (Crompton) is currently at a pivotal inflection point, transitioning from a legacy electrical goods player into a modern, technology-driven consumer durables powerhouse. Despite near-term headwinds driven by unseasonal weather patterns affecting the Electrical Consumer Durables (ECD) segment, the long-term structural story remains intact, underpinned by the “Crompton 2.0” strategy. The company maintains a dominant market leadership in its core categories, holding ~25% market share in fans and ~30% in residential pumps. The investment thesis is bolstered by rapid scaling in new growth engines, specifically the solar pumps and rooftop solar segments, which are projected to contribute significantly to revenue over the next 18-24 months. Furthermore, the turnaround in the Butterfly Gandhimathi (BGAL) subsidiary and stability in the lighting segment suggest that the worst of the margin compression may be behind the company. The valuation is attractive at ~35x FY27E EPS, considering the expected 21% PAT CAGR over FY26-28E.
Financial Performance Review: Q2FY26 Analysis
The second quarter of FY26 presented a mixed bag, largely heavily influenced by external environmental factors. Consolidated revenue for Q2FY26 stood at INR 1,916 crore, a marginal growth of 1.0% YoY. This subdued performance was primarily attributed to a “seasonal overhang,” where the extended monsoon across India softened demand for cooling products, leading to a single-digit de-growth in the Fans segment and a sharp decline in the Large Domestic Appliances (LDA) category, specifically air coolers. However, excluding seasonally impacted portfolios, the underlying health of the business is robust. The Pumps segment delivered mid-teen growth, driven by a stellar 100% YoY growth in solar pumps. Lighting also returned to positive territory with 3.1% YoY growth, signaling price stability after a prolonged period of erosion.
Profitability faced pressure during the quarter, with EBITDA coming in at INR 158-172 crore (varying slightly by brokerage adjustment), reflecting a decline of approximately 22% YoY. The EBITDA margin contracted by 246-270 bps YoY to ~8.3% – 9.0%. These margin headwinds were driven by operational deleverage resulting from lower volumes in high-margin seasonal products like TPW fans and air coolers, combined with commodity inflation where rising raw material costs were not fully passed on during the quarter. Additionally, the company continued its aggressive investment in brand building, with A&SP spend at roughly 4% of revenue to support premiumization. To mitigate these pressures, the company has taken a price hike of 1.4-1.5% across its portfolio in October 2025, which is expected to aid margin recovery in H2FY26.
Table 1: Q2FY26 Financial Snapshot (INR Crore)
| Particulars | Q2FY26 | Q2FY25 | YoY Change (%) | Comments |
| Revenue | 1,916 | 1,896 | +1.0% | Impacted by prolonged monsoon; offset by Pumps/Lighting. |
| EBITDA | 158 | 203 | -22.0% | Hit by deleverage and marketing investments. |
| EBITDA Margin | 8.3% | 10.7% | -246 bps | Input cost inflation; price hikes taken in Oct ’25. |
| PAT (Adj) | 71 | 125 | -43.0% | Lower operating profit flow-through. |
Investment Rationale & Strategic Pillars
The core thesis for Crompton Greaves rests on the successful execution of its “Crompton 2.0” strategy, launched in June 2023. This strategy pivots the company from a focus on cost-leadership to a balanced approach of accelerated growth and premiumization.
A. The Solar Revolution: A New Growth Engine
Crompton has aggressively entered the renewable energy space, creating a new vertical that is rapidly gaining scale. In the Solar Pumps segment, the company has captured 6-8% market share in just two years, with revenue growing 100% YoY in Q2FY26 to approximately INR 92 crore. Simultaneously, the newly entered Solar Rooftops segment has already secured an order book of INR 500 crore (50,000 units) in just one month, including a landmark INR 445 crore order.
Management aims for the combined solar business to contribute INR 2,000 crore in revenue within the next 18-24 months, a diversification that significantly reduces dependency on the seasonal ECD business.
B. Premiumization in Fans
Despite the recent volume dip, the quality of revenue in the Fans segment is improving. The “Nucleus” and “Xtech” technology platforms are driving a shift toward BLDC (Brushless DC) fans. While the overall category struggled, BLDC fans grew over 50% YoY in Q2FY26. Consequently, the share of premium fans has expanded from ~15% three years ago to 25.4% currently, with a target of reaching 40% in the next 2-3 years. Furthermore, the company is well-prepared for the upcoming BEE energy rating changes scheduled for January 1, 2026, with structured programs named “Utkarsh 1 & 2” to manage inventory and ensure compliant production.
C. Turnaround in Butterfly Gandhimathi (BGAL)
The acquisition of Butterfly, initially a drag on margins, is showing clear signs of a turnaround. BGAL reported mid-teen top-line growth in Q2FY26, with EBITDA growing at 21%. Synergies are becoming evident as the integration of the supply chain and “Idea First” premium product launches drive double-digit growth in modern trade and e-commerce channels. Looking ahead, we estimate BGAL to deliver a revenue CAGR of 10% and EBITDA CAGR of 16% over FY26-28E.
D. Lighting: Structural Stabilization
After years of price erosion in the B2C LED market, the segment has stabilized. The portfolio has undergone a significant reorientation, with the mix shifting from low-margin lamps and battens (reduced from 65% to 40-45% of the mix) to higher-margin panels, floodlights, and streetlights. In the B2B space, the company is securing large industrial contracts, such as a major order from JSW Steel and streetlighting projects for Noida International Airport.
Segmental Analysis
Table 2: Segmental Revenue Projections (INR Billion)
| Segment | FY25 (Actual) | FY26E | FY27E | FY28E | CAGR (FY26-28E) |
| ECD (Fans, Pumps, Appliances) | 60.1 | 60.9 | 65.8 | 71.1 | ~8% |
| Lighting | 10.2 | 10.5 | 11.1 | 11.8 | ~6% |
| Butterfly (Kitchen) | 8.3 | 9.3 | 10.2 | 11.2 | ~10% |
| Total Revenue | 78.6 | 80.6 | 87.2 | 94.7 | ~8% |
Electrical Consumer Durables (ECD): This remains the cash cow, contributing the bulk of revenue. While FY26 is expected to be flat due to weather, a recovery is priced in for FY27. The focus is on retaining the #1 position in Fans (25% share) and #1 in Residential Pumps (30% share) while expanding the agricultural pump footprint.
Lighting: The strategy here is “Transformation.” By establishing a separate sales team for B2B and focusing on premium connected lighting in B2C, the company aims to arrest the historical decline. We project margins to stabilize at 12-13%.
New Business (Solar): This is the “Wild Card” that could drive re-rating. With a potential INR 2,000 crore revenue stream emerging essentially from scratch, this segment validates the management’s execution capabilities under Crompton 2.0.
Financial Outlook & Projections (FY26E – FY28E)
Despite the FY26 dip where margins are projected at ~9.7%, we expect EBITDA margins to expand to 10.3% in FY27E and 11.2% in FY28E, resulting in an EBITDA CAGR of 17% over the forecast period. Profit After Tax is expected to grow at a CAGR of 21% over the same period, aided by reduced interest costs from debt repayment and operational leverage. Consequently, Return Ratios such as RoE and RoCE are bottoming out in FY26 at ~11-12% and are projected to improve to 14% (RoE) and 22% (RoIC) by FY28E.
Table 3: Consolidated Financial Estimates (INR Crore)
| Particulars | FY25 (A) | FY26E | FY27E | FY28E |
| Net Sales | 7,864 | 8,158 | 9,129 | 9,467 |
| EBITDA | 888 | 848 | 1,059 | 1,063 |
| EBITDA Margin | 11.3% | 10.4% | 11.6% | 11.2% |
| Adj. Net Profit | 556 | 525 | 675 | 687 |
| EPS (INR) | 8.6 | 8.1 | 10.5 | 10.7 |
| P/E (x) | 32.1 | 35.1 | 26.5 | 23.4 |
Key Risks:
Investors should remain cognizant of several key risks. First, regulatory changes related to the transition to new BEE energy ratings for fans in January 2026 could lead to temporary destocking or margin pressure if old inventory is not cleared efficiently, although management has “Utkarsh” programs in place to mitigate this. Second, the company faces significant weather dependence, as a large portion of revenue (Fans, Coolers) is directly correlated with summer temperatures; poor summers or extended monsoons, as seen in Q2FY26, can significantly dampen sales. Third, raw material volatility remains a threat, where any sharp rise in copper or aluminum prices could hurt margins if price hikes are delayed due to competitive intensity. Finally, competition in the segment is highly intense, with aggressive players like Havells, Orient, and new entrants in the kitchen space vying for market share.
Conclusion:
Crompton Greaves Consumer Electricals is a high-quality franchise currently navigating a transient rough patch caused by weather anomalies. The “Crompton 2.0” strategy is not just corporate-speak but is yielding tangible results in the form of the booming Solar business and the Butterfly turnaround. With a clean balance sheet (Net Cash Positive), strong return ratios (RoCE ~18-20%), and a clear path to double-digit earnings growth post-FY26, the current valuation offers a favorable entry point for long-term investors.