Voltas Limited Q3 FY22 Earnings Conference Call Insights

Key highlights from Voltas Limited (VOLTAS) Q3 FY22 Earnings Concall

Management Update:

• VOLTAS commented that its focus on the inverter subcategory with competitive pricing and larger number of SKUs continue to favor the company.

• Looking ahead at 4Q22, the company remains cautiously optimistic on sales of all cooling products and availability of the complete season period, unlike past 2 years of COVID.

Q&A Highlights:

• Manoj Gori from Equirus Securities asked if the company has taken any price hikes over the last few days, as in Jan and even in February, the secondary as well as the primary continues to remain under pressure for the RAC category. Manish Desai, Head Finance said that primary was low in Jan. due to extended weather situation. On price increase, VOLTAS is not seeing good traction in the secondary market, so it’s difficult to do any price increase.

•  Manoj Gori of Equirus Securities also asked that on the demand front, if there is any change in outlook for the upcoming summer season.  Manish Desai, Head Finance said that once the summer starts the growth could be tremendous. VOLTAS is optimistic that once the complete season is up the demand should be good for the category.

• Praveen Sahay of Edelweiss Financial asked about the volume growth for UCP. Manish Desai, Head Finance replied that VOLTAS has given a value growth of 9%. On secondary, the Oct-Nov data shows the industry has seen a de-growth of close to 5% in terms of volume. However, the VOLTAS de-growth was close to 4%.

• Praveen Sahay of Edelweiss Financial asked if there is any price competition faced for RAC. Manish Desai, Head Finance said everyone is facing pricing pressure, but as a leader VOLTAS has done the price increase across categories and will be doing it on a need basis once there is opportunity to take the lead into that.

• Praveen Sahay of Edelweiss Financial also enquired that on the JV business, VOLTAS is still making losses and by when it will achieve the scale to breakeven.  Manish Desai, Head Finance replied that the company is eyeing to have a breakeven in 2024-2025.

• Rahul Gajare from Haitong Securities queried about the growth the industry and the company has seen region-wise. Manish Desai, Head Finance answered that it is difficult to compare growth over the last year on a volume or a value front. But a pure base of YtoY comparison, then the industry is showing a growth in the range of 35% to 40% over the last year on a YTD basis and retained market share.

• Rahul Gajare from Haitong Securities also asked about the project business and steady decline in backlog over the past two years. Manish Desai, Head Finance answered that there is a reasonable level of delay in awarding the project. And secondly VOLTAS is moving into a period by transferring this project business to 100% subsidiary company, both these factors are affecting in securing a new order book.

• Girish Achhipalia from Morgan Stanley asked about the 3Q22 basket for raw material, if that’s fair representation of costs or if further inflation is seen in 4Q22. Manish Desai, Head Finance said that from a lending cost perspective the cost is still going up, but largely on account of exchange fluctuations and not because of any base commodity price increase. However, in 2Q22 and 3Q22, there has been an increase in price in all categories of raw material, except steel.