V-Guard Industries (NSE:VGUARD) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the VGUARD Q1 FY 'twenty seven 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. Please note that this conference is being recorded. I now hand the conference over to mister Joshi. Over to you, sir. Yeah. Thanks, Ananya. On behalf of ICICI Securities, we welcome you all to q one FY twenty seven results conference call of VGUARD Industries Limited.

0:47 We have with us today senior management represented by mister Nitun k Chitilapilli, managing director, mister Ramachandran, director and COO, and mister Sudarshan Kasturi, senior vice president and CFO. Now I hand over the call to the management for initial comments on the quarterly performance, and then we will open the floor for question and answer session. Thanks, and over to you, sir. Thank you, Anurudha and team at ICHA Securities for hosting today's call. A warm welcome to everyone joining us to discuss our company's operating and financial performance for the first quarter of FY twenty twenty seven. I trust all of you had the opportunity to review the investor presentation shared earlier.

1:33 We started FY twenty twenty seven on a strong performance in the first quarter with all business segments reporting double digit growth. Consolidated revenue for Q1 FY 'twenty seven stood at INR1810 crores, representing a Y o Y growth of 23.5%. The quarter benefited from a more favorable summer season compared to the last year's Q1. Despite supply chain disruptions and commodity cost pressures arising from the West Asia conflict, we delivered robust growth while maintaining healthy gross margin through proactive pricing actions, disciplined cost management and the inherent resilience of our business model and brand. The Electronics segment comprising of Stabilizers, UPS Systems and Solar Power Systems reported a strong growth of 22.8% Y o Y, with all major product categories contributing positively to the quarter.

2:28 The Electrical segment registered a revenue growth of 27.7 Y o Y, while growth was aided by higher copper prices, while switchgear modular switches and pumps delivered robust volume growth. In the Consumer Durable segment, covering fans, water heaters, kitchen appliances and air coolers, we reported a revenue growth of 19.2% Y o Y. While there was a significant spike in induction cooktops in the quarter, the broader kitchen portfolio, appliances portfolio also delivered a healthy growth. The other categories also did well, resulting in a well balanced performance in the segment. Sunflame reported revenue growth of 18.3% Y o Y in Q1. Over the past two years, we have focused on product quality, customer service and people capabilities. Functional integration is complete and we now have embarked on a sales acceleration program. We are beginning to see the benefits in this improved business momentum.

3:21 From a geographical perspective, the revenues from South market grew by 36.7% Y o Y, while the non South market grew by 12%. The difference in growth largely reflects the variations in the summer season across the various regions in the country. The gross margin remained healthy at 36.9, in line with the corresponding quarter of the previous year despite higher input costs during the period. The stability in margins reflects our ability to respond swiftly through calibrated pricing actions while continuing to benefit from structural improvements from our manufacturing footprint and product mix achieved over the past few years. EBITDA, excluding other income for Q1, stood at INR 191 crore, reflecting a Y o Y growth of 54.5%.

4:06 EBITDA margin was at 10.5% compared with 8.4% in Q1 of previous year. Consolidated pad for the quarter was INR130 crore, up 76% Y o Y compared to INR74 crore in Q1 FY twenty twenty six. Cash flow was strong with the net cash position at INR $6.70 crores compared to INR 155 crores a year ago. While working capital improvements were particularly favorable this quarter, we remain focused on disciplined working capital management on a sustainable basis. We will continue to monitor the geopolitical situation and will take appropriate action necessary to protect supplies and margins. We are hopeful that the growth momentum will sustain in the upcoming quarters as well. With that, I conclude my opening remarks. I would like to thank Anuruddha and the team at ICH Securities for hosting this call. I would like to request the moderator to open the floor for Q and A.

5:03 Thank you. Thank you very much. We will now begin with the question and answer session. The first question is from the line of Sameer Gupta from IIFL Capital. Please go ahead.

5:49 Hi, sir. Good afternoon. Congrats on a good set of numbers and thanks for taking my question. Two questions from my side. First question, could you just elaborate on the kind of inflation in the RM basket and the consequent price hikes taken? If you could also break them down into how much is already there in the reported quarter and how much would be at an exit level? Also, you could spell out the quantum of price hikes and volume growth from a agreement perspective? That would be my first question, sir. Yes. So I think if you look at the pricing action, think almost we'd say maybe 80%, 85% of the pricing actions are complete. A lot of the raw materials have kind of stabilized that means that they have stopped going up or they have started to normalize.

6:39 Some of the commodities are remaining at the elevated level. So that's where as we are right now. If you divide this 20% to 23% between price and volume, price growth is about 14% and volume growth will be about 9%. This is for a blended weighted average. And does the quantum of pricing would be similar across these segments or I would say the electricals will be higher? Ram, you want to take this? No, I think the it will vary, right? It will vary depending on the category. It is higher in some and lower in some as far as the growth is concerned. Quite a wide range, I will say, it's almost from 5% to 30%.

7:29 About 17%, 18%, 5% to 18%, yes. Got it. Got it. No worries, sir. Second question is around the gross margin. Now you have taken price hikes, there is a RM inflation, but the gross margin is still flattish on a Y o Y basis. Would it imply that one, we have passed on large part of the commodity cost inflation in 1Q itself or we might have still consumed some lower cost inventory and some bit of margin pressure is yet to be seen in the P and L? No, I think largely it is pass through. Like I said, almost 75%, 80% we have passed through. Of course, do have raw materials and all that, but a lot of the inflation has happened during the month of March. So we are now if you look at June, we would have consumed everything.

8:19 So it's largely true. And like I said, it's fluctuating. It's not like like I said, some raw material prices have eased, some have continued to stay elevated and some are going up as well. So it's still a mixed bag. But as we stand today, we are in a pretty comfortable position. It doesn't look like a lot more increases are warranted. Some product segments, we are still required to take some more actions and that will probably happen in the next in the current quarter. Got it. And when you say that 75% to 80% is pass through, so the balance or it would have still resulted in a GM contraction, but it has not resulted is because of your own efficiencies and manufacturing. Yeah. So I think so it's a moving thing, So as we will have raw materials procured at various rates, it's a moving target, right?

9:14 And these like let me put it that way, all the larger categories were largely fine. Some of the smaller categories, we still have some pricing actions to take, but that may not impact an overall gross margin. We as we stand today, we are hoping to hold this gross margin, yes. It, sir. That's all from me. Thanks and all the best. I'll come back in the queue for any follow ups. Thank you. The next question comes from the line of Rahul Singh from VGI Asset. Yes. Hi. Good afternoon, Mahkur. Thank you so much. Is the voice echoing? Yes, we can hear you. Yes, we can hear you. Okay, perfect. Thank you so much for the opportunity and congratulations for a good quarter.

10:03 Sir, three questions. Firstly, on the South India growth, you commented that largely because of summer variations across the country, if you could elaborate more on that, a bit of state level discussion might help. Second question was on ECD. You mentioned on your opening commentary that ECD across segments is being okay. If you just comment on fans versus what other categories actually contributed here. I understand kitchen is obviously had abnormal demand this quarter, but we just elaborate on that a bit. And third is on the balance sheet. The creditor number looks very high to me. If you could please explain that. Those were my three questions. Thank you. Okay. So we don't give a statewide number, but we can say that the summer in South India was fairly good in almost all the states. Okay?

10:54 If you go to the other parts, Western India also experienced a decent summer. Both North and East, it was disturbed. North was highly disturbed. So if you ask me like South is the best followed by West, then East and then last place. The North was the most impacted. North our summer products did not take off because it was raining, there were multiple interruptions for the summer. So that is as far as the various difference between the zones. That is one part. The second is on the ECD. ECD, I think fan has also grown. It has not grown exponentially high, but it has done reasonably well. So in fan, we experienced a good demand for pedestal TPW fans in South India. And unfortunately, we were caught off guard by the demand because the summer was very strong.

11:54 And we getting into April, we were not having adequate inventory. So we did lose out on some sales. Sealing funds did okay, okay, because like there was star rating change in January, also a lot of sales have happened in November, December before the star rating. So the channel also was having a lot of inventory. But overall channel has done reasonably well. Kitchen has done well, it's not only induction, the others have also done well. Where we have not done that well is air coolers, primarily because of two reasons. Like we said, we were very we did increase prices, but we found that certain players in the market had not increased prices or delayed prices and all that. So there was some market share loss in air coolers. But I think most of the issue was contributed by the fact that for us, India is the main Northern zone is the main contributor for air coolers and Northern zone did not really take off for air coolers. The last part, Sudhish, you want to take it? On the creditors part, yes, so we usually import a portion of our copper purchases where we pay in advance, okay.

13:09 This quarter, we only bought from domestic suppliers who give us credit. So it's a sort of one off. I think our purchase mix was like maybe eighty-twenty, where 80% was domestic and 20% were imports or even seventy-thirty. But now it is like 90 five-five, there's hardly any imports because there are some supply from West Asia who could not supply because of the war. And even the other Asian countries also we do not low. Shipping High rates and volatile and all that. We are finding it difficult to get ships and all that stuff. So the domestic suppliers give us credit, whereas all the others are paid on LC and stuff like that.

13:55 So that's one of the main reason the payables have gone up. So these payables are going to be like similarly for the full year or we'll see this again going back to seventy days kind of? It's sort of unusually good this quarter. We'll come back to normative levels or maybe slight improvement. Got it, Sudhashar. Thank you so much, Amitav and team. All the best. Thank you. The next question is from the line of Aditya Bhatia from Investec India. My first question is on the I think as of now, we are mainly focusing on solar inverter.

14:47 Wanted to understand how big could solar rooftop of pumps be for us? And what is the strategy behind the larger solar piece? What kind of growth are we anticipating over the next three, four years? And how large could this portfolio be today? So we are not going to give out any specific numbers on any categories, but I'll ask Ram to answer this in as a qualitative way as possible. Yes. So basically, we are just about eighteen months into this category, okay? And mainly, we are focusing on the domestic part of the market, which is mostly B2C. And we are focusing on rooftop and next generation battery. I think that's still to come though, yes, and we will be launching that in the next two, three months, yes.

15:39 So this is the space that we are going to play. Yes, I think this space is going to grow fast in the coming period. And hopefully, we also look to gain advantage out of that, yes. Sure. And as of now, it's all B2C and nothing is tender driven, yes, B2C. If I understand it correct? We have a small part, which is going into the solar pump business, but that is maybe like INR couple of crores Q1. So it is a very the solar pump business, we've just started supplying to Maharashtra state government. And that's a B2G business, but that's very small and that's also new. We just started it like three months back or something like that. So but yes, bulk of the sales will continue to be B2C where we are supplying rooftop solutions, solar rooftop solutions for residential customers mainly and for small offices, SME also we will be supplying.

16:43 We will be going to supply to large, very large institutions in that sense. Understood, sir. And sir, my second question is on Southern India outpacing Non South and this I think the fourth consecutive quarter wherein this has happened. Would you attribute that largely to weather? Or is there something else that's playing a part as well, given that we already have a fairly high market share in South and still we are kind of growing fairly fast over there? Ram, you want to take this? Yes, yes, yes. I think currently, our view is this is due to weather. See, two things have happened this quarter. One is we have been given the uncertainty prevailing and the significant increase in input costs, we've been aggressive in pricing transmission.

17:35 And probably also in non South markets, we have landed pricing corrections ahead of some of our competitors. Obviously, we have much stronger brand equity in South. So it was easier to transmit, sustain and make sure that also deliver the business interest, right? That's one part of it. Second part of it is certainly the as far as East is concerned and North is concerned, we have seen a significant impact because of season. It started last year. I mean last year was I mean, year before last, for example, if you look at I mean, we had extraordinary growth in some of these markets, yes. And therefore, last year, when the summer was not good, it's reflected in the performance in these two regions, yes. So that's, I think, how I would put it.

18:32 Some of these regions, particularly East and is also impacted because of monsoon. Last year, the monsoon was also quite aggressive there, yes? So all these factors have impacted our business in the East. I think although East has recovered significantly subsequently, but it has still, as Nitun said, in terms of order of performance, it was still number three and the North has been quite strong. Mainly, we have been impacted. And if you look at I mean, don't share our category wise numbers. But if you were to look at the category wise numbers, you will find that the impact is straight on categories which are seasonal.

19:19 Understood, sir. Helpful. Thank you so much. You. The next question is from the line of Sonali Salogar from Jefferies. Please go ahead. Thank you for the opportunity. So my first question is regarding the CapEx. Do we retain the CapEx guidance of about 2 to 2,500,000,000 per annum? Or are we looking into new categories or adding on to CapEx in new categories? CapEx, sorry. CapEx, 2,500,000,000 unlikely. It won't be that high. 150 crores, 170 crores is okay. Yes. Maybe for the next two years, it will be an average of INR 150 crores each.

20:06 Yes, 150 crores to INR 170 crores each. Understood. So my second question is regarding cables and wires division, particularly in wires. Two questions here. Firstly, this quarter's growth, could you help us understand how much was volume led, particularly in wires? And how much was value led? And secondly, one of the key competitors, a new entrant, is thinking of launching their Vios around the festive season. So any thoughts on that, any channel feedback on that? So as far as VIAZ is concerned, there has been significant price increase. So volume growth is very minimal. It's hardly any, I would say. Because of the quantum is so large that we believe that some customers have decided to postpone because we're talking about a huge increase in the price. So there we believe there has been some deferment or postponement and all that because of quantum of sales quantum of price increases is very high.

21:09 But value growth is there obviously because of price growth. And we have also held margins reasonably well in that segment. So that way it's fine. As far as the new entrant is concerned, Ram, you want to take this? Yes. I think yes, there have been a number of entrants. I mean, there are a number of companies which have gotten to wire or which have become more aggressive in this category over a period of time. I think the competitive intensity is going to remain high in this category. But we remain focused on making sure that our interests are protected and we have necessary contingency plans in place to protect our business interest, yes. I think the retail wire business is not going to be easy. It's going to take time to build equity and brand awareness.

22:00 And there is not enough room in this category for physical distribution. So working the last mile and building business is going to be harder here. And the role of influencer is also going to be significant. So we have necessary interventions in place to protect our business interest. But I think what basically will happen is with more players coming in, some impact will be there on the unorganized sector. And maybe a portion of the maybe companies may grow slightly lower than market growth, maybe by 1% or 2% or something like that. I don't see a very significant impact beyond that, at least not in the first one or two years.

22:51 Understood. And on guidance, I generally understand you gave a medium term guidance, but given the very strong performance in Q1, would you want to guess on the FY twenty twenty seven guidance, either in terms of sales growth or the margins? See, we have always said we will grow by 15%, but obviously, this year we have some price growth as well. So it can be higher. So we will take a call because things are still volatile. We don't know the commodity prices, some are going up, some are coming back to normal and all that. But definitely it will be more than 15%, but I don't want to give out any specific numbers, but this year maybe we may do a bit more than 15%.

23:39 But definitely our longer term 15% is something that we hope to grow. While retaining our 9% EBITDA margin, right? Yes. Yes. Nine to 10% EBITDA margin we should be maintaining, yes. Got it, sir. Thank you and all the best to the team. Thank you. The next question is from the line of Mr. Achal Lohari from Nuwama Institutional Equities. Please go ahead. Yes. Good afternoon, team. Thank you for the opportunity. Congratulations for good set of numbers. Nitin, the question I had in mind first was, you know, in terms of... If I look back last fifteen, seventeen years, you know, we have extended geographies, categories. Now from here on, how do we see that journey? Will this be more geographical and more deeper penetration in wallet share gain? Or we could look at any category which could add substantial growth to our overall number?

24:41 No. It'll be a mix of both. I mean, like, so at any given point of time, we are incubating two or three categories. So if you ask me, a lot of our categories we were incubating like fans, inverter battery, kitchen to some degree, they've all started to become mature and we have built a very strong back end that is R and D, manufacturing and new product development team. We also have a fairly decent marketing and sales team. So those kind of categories are now slowly moving to autopilot kind of mode, where our bandwidth is not required so much. So then when we have so when we have bandwidth, then we will try to again incubate categories. So we have talked about solar, which is something that we are incubating now.

25:32 Lighting is something that we are launching in this financial year. So I think with lighting, we have completed almost all the large categories. Now I don't know whether we'll keep looking at adjacencies. Solar is something that you asked me ten years back, solar rooftop was there, but it was not expected to be such a large category. So sometimes these kind of opportunities do come up. So it's very difficult to say. But broadly speaking, yes, it will be a mix of both. I think geographical so if you look at ideally, if you look at the kind of penetration, depth we have of distribution itself, that's something we would like to replicate in the other markets. And some market is happening and some other market is slow to start, but it's getting there. So it will be a mix of both.

26:20 And of course, I think if you ask me, there is no one answer like that, but yes, like solar definitely is an opportunity. We were already doing inverter battery business for ages. So when this came up, it became it was very easy for us to get into it in a way because we understood this product better than most of most companies in India. And we understand electronics better than most companies in India. So when those opportunities come up, we'll definitely get into it. Lighting was mostly a portfolio issue because we had a of distributors that are forced to take competitor brands or lighting company brands or local regional lighting company brands because we were not offering lighting. So it was creating a it was more of a portfolio issue. And again, took it up when we had we have enough bandwidth on our hands.

27:12 So we'll see. I mean, if something new comes up adjacent, we will look at it. Just a comment on the battery energy storage front, with the battery thing, does that complete? Does that help? And what could be the opportunity or the market size according to you at this stage? So there are two parts. One is the solar rooftop business and the other one is the within that, a new part will be also best, which is a battery energy storage system. This solar rooftop market is something that the government has put in lot of incentives so that customers get a good payback.

27:58 Someone is investing X. They are getting they are able to recoup their investment in three to four years time. And that's why you see a lot of the customers buying this and moving at least part of their energy requirements from grid to their rooftop. That is something that is new in terms of as an industry, they're starting. And the incentive system and all that, they have not we've not started to they have not spelled it out yet, but definitely battery storage is going to be the next big thing. This can be huge because they're talking about an average price of between INR 1.5 to INR 2 lakh per house.

28:45 So the value is very high for a rooftop system. So even if you do 100,000 customers, we are looking at close to, I don't know 100 crores or something like that. So what I'm saying is this is a very large opportunity. And even now, as we speak, only maybe eight states in India are properly implementing this, few of the South states and some of the VGP rule states. So we still have a large part of the country where the solar rooftop is yet to even start in a meaningful way. So I think the government is on the job. And the recent changes of government in both West Bengal and Tamil Nadu will definitely increase the scope of this because these two states were very small adopters.

29:32 So we'll see. Mean, so it can be very large. What I'm saying is its potential of this is quite large and it's a win win like the government is able to move a part of its power to distribute renewable energy. Customer is paying lower price. Of course, the carrier electricity boards will lose some most some of the high paying customers, which I think government will have to find a way to compensate them. Got it. Just another question on Sunclave. In terms of the growth, it looks good 18%, but it's on a low base. So the challenges what we faced after the acquisition, are we done with that? How do you see the growth playing out from here on?

30:21 Yes. I'll just say, just one thing about Sunflame is, Sunflame has a big presence in gas stove and not a very large presence in induction cooktop. So it's very unfortunate that Sunflame was not able to take advantage of this whole gas shortage thingy like what VGUARD was able to do, which is VGUARD is quite large in the induction cooktops. Ram, you want to take the rest? Yes, yes. I think we are on course as we guided earlier. I think is more or less behind us now. And we as I told you earlier also, Q2 onwards, we are expecting to have the NPD impact being rolled out. Yes. So we have focused interventions now. So over the next six to twelve months, we are working on improving our reach across general trade and organized retail. So I think we should start to see better growth. And I think we are already seeing that last quarter that we have done better compared to previous year. I think some challenges are there, fundamentally related to pricing transmission and all that, which is slower. But I think the upcoming quarter, we should be able to complete the pricing transmission for kitchen categories, particularly sunflakes. Yes.

31:45 Got it. This is very helpful. If I may ask one last question. In terms of category presence, if you could just talk about categories where we are among top three players or the market leaders, please? Ram, do you want to take this? Yes. So I think see, I think beyond stabilizer, we I would rather say that beyond stabilizer, I think we have a decent presence in water heater. We should be in the top three there. We should be in the top four in domestic wires, yes. So these are categories that we are particularly strong on, right, in terms of market presence. In domestic pumps also, I think we have a decent presence here. So these are categories where we have top three or top four positions here.

32:37 Got it, sir. Thank you so much for the answer. Thank you. Thank you. The next question is from the line of Kiyur Pandya from ICICI Prudential Life Insurance Limited. Please go ahead. Thank you. Sir, my question is on Electronics and Electrical segment. If you can just throw some light on how solar has grown versus sell business of UPS or in order of inventory have grown or stabilized. So stabilized UPS and solar, you can segregate growth and at the same time in the electrical house, your buyers have grown in the rest of their portfolio. And the purpose is that, I mean, both are at the different stage of, say, growth journey, and thereby growth opportunities may be very different. So just wanted to understand, say, and x wire within electrical and inverter and x inverter in electronic?

33:44 No. As a matter of policy, we don't give out category wise numbers. But definitely, if you qualitatively, I'll answer the solar rooftop business is growing much faster because it's also on a smaller base. If you look at the electrical basket, wire is the largest category in that electrical basket. And wire growth has been higher because of very high price growth. So these are the I can answer this question, but we don't give out category wise numbers or margins. Fair enough. So fair enough. Basically, even say, X wire as a portfolio is also growing in double digits. Yes, yes. So we have a high double digit growth in X wires in the Electrical segment. We also have strong growth in inverter batteries also in the packaging. Yes. So yes, like apart from wires and solar, the other businesses have also grown. But these guys would have these two would have grown larger than average.

34:49 Understood. And just lastly on Sunflame, you mentioned integration is complete and focus on growth. Now with growth, how should we think of profitability as well as we get some operating leverage? I mean, it has been challenged both on the growth and margin side. If you can just share more on Sunflare, what are say one year or two year target we should keep in mind? Yes. Ram, you want take this? So I think our initial focus will be to get the volume growth going, yes. And that's going to be our number one priority. I think the margin growth will also depend on pricing transmission. I think the price increases, as you all are aware, has been significant.

35:37 And some of the channels like CSD and all, there is a longer lead time for pricing transmission. Some of the categories also in kitchen, the transmission of pricing in general trade has been slower, particularly in Non South. So I think the margin recovery will be more gradual compared to the top line recovery, yes. So that's how I would put it. Yes, of course, we would like to restore what I would say is the financial health of Sunflame, yes, to what it was pre acquisition. And that's our plan from a three to five year standpoint. And we expect to scale VGUARD and SANPLAY KITCHEN business to be a significant business, yes, probably in four digits.

36:27 Understood. Thanks a lot. All the best. Thank you. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, The next question is from the line of Deepak Lalwani from Unifi Capital. So my first question is on the gross margin. You've done a good work by passing on prices. But our gross margin profile is still stronger than all the peers. So do you think there's a risk from competition? Or are we going to take any steps to change market share in order to reduce our gross margin going forward? So that is one.

37:20 And sir, on the cost side, our employee cost and other expenses cost count has almost doubled in the last five years, and we've not gotten the benefit of the higher gross margins in the EBITDA profile yet. So how should we look at the cost base for the company going forward? Have you built out the cost that is needed for manufacturing for sales over the last five years? And should we expect the benefit out of it in the next coming few years? If you can guide us on the cost profile and the margin profile of the company in the future. Ram, you want take this? Yes, yes. I think the margin profile is a function of category mix and greater insourcing. So as we move from an outsourced product into own manufacturing, I think the gross margin improves.

38:14 So I think that's basically what has been driving our gross margin improvement and we are now at closer to sixty percent sixty five odd percent manufactured product from sorry, yes, I think slightly more than 65% as far as the own manufacturing is concerned. So that's what has driven that. I think we I don't see this at risk. I think, in fact, we are aggressively continuing efforts to, what I would say, improve our conversion cost efficiency on the manufacturing side. And also, we are focused on improving sourcing benefits. So I think these two should be able to offset any inflation and any pricing challenges that may come up over a period of time. On the cost side, I think the significant increase in cost is certainly observed.

39:12 It's also related to VGUARD shifting from sourcing to manufacturing. Some of it is that is, I think, one key lever in that. The other part also is that we have been building out the organization, both in terms of technology, systems, processes and enterprise capability to scale VGUARD into a large player in our domain. And towards that, significant investments have been made and continue to be made. We are also getting into multiple categories, right? And as we get into each of these categories over a period of time, we have to support these categories with the right organization and right capability. So we've been through an extended investment phase.

39:58 Probably the investment phase will last another two, three years before it will plateau because now we've just got into the renewable space and we also got into lighting. We are also strengthening our innovation capability. So some of there are some of the areas which we are still building out. Yes, I think we are now pretty much progressed in terms of our investments in capability, which should stand us in good stead in the long term. Understood. That was good. And sir, second question was on the volume growth. We did about 9% in this quarter, which is good. But sir, this is coming on a low base.

40:43 So do you how should we think about the volume growth over a long term perspective? From a category perspective, if you can highlight what the volume growth that you see for the category? Because see, most of our categories, what we reckon is that the penetration levels are reaching to a higher level. So from a category growth perspective, you can highlight. And also from a market share, distribution, property expansion perspective, how much can VGUARD get to? And 15% that we're targeting, how much volume growth can come in that 15% that you're targeting, considering the category and VGUARD efforts in volume growth?

41:30 Typically, this is a very unusual four, five months where we had significant inflation. Like for example, the kind of pricing increase we have taken in the last four, five months is not something that we have taken even when the Ukraine war has happened because the cost inflation was that the shock was that high. In that environment delivering a 9% volume growth is good considering that only one fourth of the country received a report of weather, whereas the bulk of the country was impacted in terms of rains and all that. So that's one thing. And we also have to see what are the how the our peer companies have performed as well.

42:18 So you'll understand in terms of market share and all that what has happened. So that's one thing. Second thing is when we say 15% growth, we typically only talk of price growth, we only expect about 2% to 3%, because every year we don't expect 11% or 12% pricing growth because that's unheard of. Usually our the usual inflation, if you remove wires, which is largely inflated in nature or deflated in nature because of copper prices. But even copper has been range bound for a long time. This is partly been driven by the AI mania and all that, some of the commodities have been driven up because of that. Otherwise, 2% to 3% price growth and about 12% volume growth is what we should do.

43:04 Having said that, this year it's only 9% because like I said, this is a very unusual time where we have huge price increases. So it is very natural for some customers to down trade. It is very natural for customers to postpone, especially in wires, I think, some people building something, constructing something, they it has been a huge shock and I think I would not be surprised if some people have postponed their choice to construct and all that, wait for things to settle down a little bit. So in a normal environment, yes, we should grow at 10 to 12% volume growth and 2% to 3% price growth. The next question is from the line of Nishad Chaudhry from Aditya Birla, Sun Life Insurance Please go ahead.

44:04 Hi. Thank you for the opportunity, and congrats on a good set of number. From the point of view, when last industry would have taken this kind of price hike across the basket in the last ten, twenty years of journey? Sorry, can you repeat the question? The price hike which this time industry has experienced, when last this will have been experienced? Don't like it. That's what I meant, right? I don't know. Ram, I don't think we have experienced... Is the president for this, Vuta. Yes, yes. That's what I said like... We're talking about mid teens, right? So at a portfolio level, which is Yes. Like a 12% to 14% price increase over four months is unheard of, at least since 2016, I've been here. And even for many even for Ram, we have not seen because this kind of a shock Like a shock, yes.

45:07 And given this kind of price hike, shouldn't the aspiration of double digit EBITDA margin should be earlier than what initially we had envisaged? No. Anyway, have delivered double digit EBITDA margin this quarter. Let's wait and see what happens in the following quarters. But yes, we are we should be okay this year in terms of margins is what we see. Okay. And similarly on the growth side, we have touched upon it, it could be slightly higher than 15 of our aspiration. But given the price hike, and it seems looking at the volume growth, consumers are accepting it. Shouldn't this year at least your growth would be much should be much higher than the long term range of 15% CAGR?

46:01 That's what I'm saying. So we let's not I mean, it's difficult to say what will be the CAGR growth. But for this year, I've already indicated the growth will be more than 15%. Okay. Last on the GigaDyne startup, if you could update at what stage it is and what exactly is happening? Okay. Ram, you want to take this, GIGALINE? So yes, GIGALINE has now moved to commercializing, and it is exploring opportunity to make batteries in India. They have started commercial supplies to some small customers. And I think the they have moved from R and D to commercialization, right, over the last, I would say, 08/09 And anything would come to our portfolio from that start up or would it completely be a separate entity and you would be an equity investor there? No, that entity will have its own plans. And yes, I think we will also be sourcing batteries and from them and what I would say, offering them to the market, yes. Because the scope of what they make has applications across multiple industries. And our go to market is fundamentally focused on consumer homes, yes. So I think that's where we will focus on.

47:31 I think but the entity has its own wider and just beyond the domestic applications, right, including auto and many other sectors. All right, sir. All the best. Thank you so much. Thank you. Thank you. The next question is from the line of Natasha Jant from Philip Capital. Please go ahead. Thank you. Good afternoon, gentlemen. First question on kitchen appliances. So you've mentioned in your opening commentary that apart from induction also, the portfolio has grown double digits. So could you throw some color as to how kitchen appliances in this segment is doing? This industry has been marred with very, very low growth for the past couple of quarters. So are you seeing green shoots across the category?

48:22 And has the down trading stopped or meaningfully stopped, rather? Yes. Ram, you want take this? Yes, yes. I think kitchen in general has performed well in this quarter. I think we had seen some uptick in kitchen last quarter also. Think so it's now five, six months that kitchen is trending well. We have done well in kitchen particularly the VGUARD portfolio because with the integration of VGUARD and Sunflin, there is also new energy in the VGUARD side of business. So I think so that's really what has happened. It does look like the there is a dynamism coming back into the kitchen space again, yes?

49:11 But there is also going to be significant price inflation, and we'll have to wait to see how that will impact going forward, right? But right now, it looks like it's pretty encouraging, yes. Understood. And the second question is on the electronics portfolio. So your margin guidance for the long term, I remember in the previous conference call has been mentioned around 18% to 18.5%. You've consistently beaten that on a couple of quarter basis. So any upward revision here or we still maintain that long term guidance? You're talking about the margins for Electronics portfolio? Segment margins. If you just keep a stick to that. All right. Okay. Thank you so much, sir.

50:00 Thank you. The next question is from the line of Sameer Gupta from IIFL Capital. Please go ahead. Hi, sir, and thanks for the follow-up. More on a strategic point of view. So I'm just looking at the wires portfolio, and this is across the industry. So quantum of pricing is high this quarter and volume is negligible. That has been the case for almost all other players, those who have reported. I just wanted to understand from a broad strategy point of view, why not use this opportunity to gain market share maybe by not passing the full quantum of pricing? Maybe aim at retaining absolute profit per kilometer or something rather than percentage margin. And this I'm seeing over years, not just this quarter. So any thoughts you can give on this piece? Yes. The wire business is a fairly commodities business. It's not a business where you can differentiate your wire on a design, on material, finish anything. I mean, it's a very tightly controlled thing. You have to produce a product which is passing all the specifications and passing all the tests.

51:14 Okay. So it's a more a utilitarian product and thereby the margins also in their business is very low. So the problem with this price war is that you will start it, but you won't be able to end it. Fair, sir. That's all. Thanks for taking the Yes. Will be a lose lose for all. Yes. The last question is from the line of Niket Gur from Dollar Capital. Please go ahead. Thank you for the opportunity, and congrats on a good set of numbers. So in this quarter, our ad spend was 2.2% versus 3% in quarter one FY twenty six. So for FY twenty seven, how much expense should we estimate?

52:00 So we will be at two and a half percent. I think what happened this time was that, you know, this war broke out in end of Feb and beginning of March. So as we were preparing to start the year, we were not sure what will happen. We had concerns. We even had concerns on whether we will be able to produce certain products because there were concerns on availability of gas in our factories, both for production as well as for cooking food for our factory employees who are working in shifts. So there were all these kind of concerns. So our priority was not to we were not sure what will happen. And I was we were looking at the kind of quantum of price hikes, and we were not confident that the industry will take it, to be honest. But fortunately for us, I think the industry and consumers have taken it because it's not that anyone could control it.

52:57 So we are in an okay place. But for the full year, we will have we'll be at about 2.5% of ad spend. Last year, we didn't have such uncertainty, so we actually spent. And one more thing is the revenue growth was also aided by price growth. So this I mean like I said, when you do our annual I mean like when we do our planning for a quarter, all these things were not known sitting in March. But one thing was known is there is going to be significant price inflation. And we thought there could be a demand problem. We were not sure. And the second thing was we could even have a supply problem. So because of all this, we are not confident to spend, but we have started to spend from May 15 or so onwards, we have started to spend. So we will hit that 2.5% spend for the full year.

53:50 And also we budget on our budgets are done on 15% growth, right? So with that 24 Yes. Percent our advertisement budgets are fixed looking at the January prices, whereas the prices are significantly more up from there. We do not revise it obviously for because of all the uncertainties I talked about. Nikhat, does that answer your question? Thank you. Yeah. Thank you. That was the last question for today. I now hand the conference over to the management for closing remarks. Over to you.

54:44 Thank you all for taking time to join our earnings call. I would like to thank and the team at ICIC Securities for hosting this call. We would look forward to interacting with all of you in the next quarter. Thank you. Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.