V-Guard Industries (NSE:VGUARD) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the VGUARD Industries Limited Q2 FY 'twenty seven Earnings Conference Call hosted by Ashika Institutional Equities. 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 miss with Ashika Institutional Equities. Thank you, and over to you, ma'am. Yes. Thanks,. On behalf of Ashtaka Institutional Equities, we welcome you all to q two FY twenty seven results conference call of VGUARD Industries Limited.

0:51 We have with us today the senior management represented by mister, managing director, mister, director and CEO COO, and mister, senior vice president and CFO. Now I hand over the call to management for initial comments on the quarterly performance, and then we will open the floor for Q and A session. Thanks, and over to you, Mitra, sir. Yes. Thank you, Ashiya and team at Ashita for hosting today's call. A very warm welcome to everyone joining to discuss our company's operating and financial performance for the second quarter of FY twenty twenty seven. I trust that all of you have the opportunity to review the investments we have shared earlier.

1:37 We are pleased to report another quarter of strong and consistent performance with all business segments achieving strong growth, supported by a combination pricing action and volume expansion across most product categories. The performance reflects the underlying resilience of our business and brand, focused execution and supportive market conditions. In Q2 FY twenty twenty seven, consolidated net revenue from operations stood at crores, higher by 2% Y o Y for the half year. Consolidated net revenue from operations stood at INR 3,664 crores, higher by 30.5%. The Electronics segment comprising of stabilizers, U. K. Systems, inverters and batteries and solar panel systems reported particularly strong at 60% Y o Y in Q2, with all major product categories contributing positively.

2:37 Solar power products led growth with digital and battery also contributing very strongly. The electrical segment, which remains our largest revenue contributor and includes wires, pumps, switches, switches, a revenue growth of 41.2% Y o Y in Q2. While the growth in wires was mainly price driven, there have been healthy volume growth in Power and Switchgear. In the Consumer Durable segment covering ceiling fans, water heaters, kitchen appliances and air coolers, we reported a revenue growth of 20% Y o Y. The momentum in induction cooker continued into this quarter was accompanied by a healthy demand across broader kitchen appliances portfolio.

3:22 Fan and water heaters also registered. Sunflame reported a revenue growth of 20.5% Y o Y in Q2, building upon the positive momentum witnessed in the first quarter. With the functional integration of Sunflame, our initiatives to strengthen the product portfolio and expand market presence are beginning to translate into improved business performance. The actions in CSB entail longer lead times, which have impacted Central margin. Gross margin stood at 34.6% in Q2 compared to 37.6% in the corresponding quarter of the last financial year and 36.9% in Q1 FY twenty twenty seven. The moderation was primarily due to higher input costs along with some impact coming from changes in product mix. We continue to closely monitor input cost movements and remain focused on supply continuity while taking appropriate measures to protect our margins.

4:24 EBITDA, excluding other income for Q2 stood at INR168 crore, reflecting a YOO of INR3.7 percent. EBITDA margin was at 9.1% in Q2 this year compared to 8.1% in Q2 of last year. Consolidated PAT for the quarter was INR 110 crores, up 71% Y o Y compared to PAT of INR 65 crores in the previous year. We continue to monitor the geopolitical situation and will take appropriate measures necessary to protect supplies and margins. We are hopeful to deliver a healthy growth in the upcoming quarters as well. With that, I conclude my opening comments. I would like to thank Ashiya and the team at Ashika for hosting this call and would like to request the moderator to open the floor for Q and A. Thank you. Thank you very much.

5:14 We will now begin with the question and answer If you wish to remove yourself from the question queue, you may press star and then 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then 1. Our first question coming from the line of Rahul Agarwal with Ikigai Asset. Congratulations for the good result.

6:02 Vitan, just wanted to understand on this segment one electronics growth, right? Some topics qualitatively on the solar, nonsolar, everything for the how is that being? And incrementally, how should we appreciate about the solar overall growth for fiscal twenty twenty seven and the balanced EBITDA growth for the full year? Some qualitative comments will really help. So I think it's not only the solar power system, but also the inverter and battery business. Both of them have grown well. Qualitatively, solar is a new category. So they are growing at a much faster pace. It's a category we are seeding. So we are in the right now, we are mainly selling this product in Southern markets and we are entering Northern market and some of the Eastern markets soon.

6:54 So we are very bullish on this category. There is a lot of government subsidies and government push to move a lot of the residential energy consumption to solar. And it looks like it is the whole ecosystem is evolving quite well. Apart from that, the inverter and battery business also did well because we had power cuts in this current year because of huge increases in power requirement and power outages in various parts of the country. Got it. So, like if you have to split out solar and non solar, is there a base revenue of 440,000?

7:41 We won't be giving any numbers for solar. We won't be giving any product guidance. Understand. I understand. And just secondly, just a follow-up from a ROCE perspective on the solar business again, like from a margin and working capital perspective, does it change anything for VGUARD or is it similar in line with the company averages? No, I think our solar business is not a B2B business. So we are selling our products our solar products are mainly from three kilowatt 75% of our sales are three kilowatt to 10 kilowatt, and it is going to residential households. We are primarily selling it to system integrators who go and set up these things in the rooftops of houses. So we are not supplying to government or independent power producers or large consumers. So there is no working capital difference.

8:38 So, yes, so in that sense, is not much difference in terms of working capital and stuff. It is pretty much similar to the rest of the company. Got it. And just on Electrical, you said Cable and Wire was largely pricing led. Any numbers on the volume growth side for Cable and Wire? Think Cable volumes volume is flat. I think it's probably flat. Almost all of it has come from pricing growth, which is close to... 40%. Close to 40%. Right. And similarly for ECD, any comments on variable? See, I think excluding cable and wire, I think the volume growth is about the pricing growth of the one minute I'll just comment. Yes.

9:26 Yes, excluding wires, overall, all other categories put together, 10% is price growth, 25% is volume growth. Got it, Dom. Thank you so much. All the best. Thanks. Thank you. Before we take the next question, a reminder to all the participants, you may press star and then one to ask a question. Your next question comes from the line of Sameer Gupta with IIFL Capital. Please go ahead. Hi, good evening sir and thanks for taking my question. Just wanted to understand, I understand you don't want to divulge any information on the revenue aspect, but when you look at the solar part within the electronics portfolio, we're seeing a lot of players having entered and primarily supplying to the solar rooftop tailwind via system integrators.

10:26 Now some of them are branding it with the end product and some of them are just supplying components to the overall assembly of the solar rooftop. Just... But my broader question here is is, like, what is the right to win of VGUARD and these other players who have entered, let's say, more power oriented company like Tata Power or Nadani or Navarre, which are the larger players here? And is this tailwind today more driven by there is a very high demand and supply yet to catch up or it is here to stay? Ram, you want to take this? Yes. I think a couple of things. See, one is as far as the Electronics segment is concerned, we have broad based growth across all categories and which is strong. That is the first part of it, right?

11:19 Coming to the Rooftop business, we are still in very nascent stage of the journey in this business, okay? This business is closely associated then with our inverter battery business, okay? And therefore, is the reason why we have looked at this opportunity. The capabilities we have built for that business are relevant for this business, and that's what gives us the right to win. And compared to a lot of people who are just buying and trading, we have deeper understanding and expertise both in electronics and in power storage, okay, which is why we have entered this place. And our play will be shaped by this outlook, right, in terms of how we will move forward, how we will position, yes? Now what we are doing in this space is still emerging and developing and will play out over some time, yes?

12:13 But it's going to be fundamentally rooted and built around and our right to win and our right to compete will be built around the capabilities, the infrastructure and the investments that we have already made in our electronics vertical and also in the GTM side, yes. So does the consumer know that it's a VGUARD inverter or a VGUARD battery or a VGUARD solar panel the rooftop that is Okay. Of course. Of course. Are not this is not just buying from somewhere and taking it to a truck and supplying. Right? So this is a complete solution where there is panel which is, you know, which is branded as Zigaat. There is inverters, which are branded as Zigaat.

13:01 There are distribution boards and boxes, which are also branded. We only don't make the brackets and all that because it's customized. And the SI does the job. And we also we have the this model of selling through system integrators for solar water heater for the last twenty two years. So we have been in this business for a long time, much before it became fashion. Got it. And are we doing any manufacturing here or at this point, you're just Not outsourcing yet, not yet. But Not that's what I said, right, see, we are still nascent in this business and we are working on various dimensions in this space, right. So that will pan out and play out as we move forward, yes.

13:47 And last question here, what are the kind of margins we are making here? Is it similar to the overall category or materially lower at this point? I think it's too premature for us to discuss about margins at this stage in the journey. Sure. No worries. I'll come back in the queue for follow ups. Thanks and all the best. Our next question comes from the line of Keshav Lahoti with HDFC Securities. Please go ahead. Hi. Thank you for the opportunity. So congratulations on strong set of number. I want to understand one thing. If I see your growth for this quarter, South growth was 51% was...

14:35 While North was 23%. There is a, you know, huge disparity of growth in both the region. Why is that so? And how will be the trend going forward? Yeah. So there are two reasons. One is that in the current financial year, the South India experienced extremely strong and continuous and extended summer. So we exited Q1 with very low inventory in our channel. Whereas in Northern and Eastern markets, there were intermittent rainfall and actually the summer product sales were not that great. This is the primary reason. The other reason is, like I said, this is a solar power system is a new category. So we are more we are present in more markets in South than non South.

15:22 So a little bit of that is also there. Both these reasons are playing a part. Understood. Can you give I know you don't want to detail, but can you give some idea how big is the solar power business right now for you? I think we already answered this question. I think let me put it like this, right? It is yet not very large for us, right? So we are in very early stages of it. And yes, I mean, when you do work growth numbers, it does add something to our overall growth. But I think it would be good for us to talk about it maybe a year down the line, right, when our capabilities, capacities fall in place, right? Got it. One last question from my side.

16:11 As you highlighted, you have taken 10% price hike blended excluding wires. Can you give some sense? Is it the 10% all across product or is it different product wise? And whether you have any plan to take price hike from October? And lastly, how much of the cost inflation you have passed on? Okay. So I'll just come back to the first part. So I think we are as we stand today, we have a 2% to 3% gap in pricing that is yet to be passed through. And our gross margin impact is also somewhere around that range. But this is a continuously evolving scenario. So but I think we are in the process of now taking our the current round of price hikes across categories. And we are very clear that we will take pricing because the quantum of price increases that happened in the last nine, ten months is too high for any player to it will be foolish for any player to absorb. So definitely, we'll be taking, and we are focused on running a healthy business.

17:16 The first part of the question was on what was the range of price increases, yes, it varies a bit according to the category, but largely between 612% price increases have that's what we have seen across different categories. Got it. Got it. Okay. Just one more question from my side. How has the stabilizer in inverter market grown in this quarter? What would be the industry growth and how VTAC might have done in this category in this We have had strong growth in both the categories. Yes. So the inverter and battery business has grown better than stabilizer business. Like I said, we had some tailwind from power outages in many parts of the country with there is a slight mismatch of supply and demand and overall power situation in the country. So that way, it has helped. But even stabilizer business has grown. Again, stabilizer business primarily driven by air condition stabilizer sales. Because like I said, even in Q2, the weather was fairly warm in southern part of the country.

18:24 Got it. This is helpful. Thank you so much. Thank you. The next question comes from the line of Naushal Chaudhry with Advaita Birla Sun Life Asset Management Company Limited. Please go ahead. Thank you, and congrats on good set of numbers. First, on the gross margin, the debt in this quarter, we think is temporary and should eventually come back to our expired number of around 3536, or should should it remain like this for next quarter?

19:10 Sorry to interrupt. No, sir. There is a lot of background noise coming from your side if you can get somewhere quiet. Yeah. I'm muted. Yeah. So see, last quarter, I think our GAAP margin gap because of was about 3% compared to our plan. Out of that, 1% was mix and typically, the mix is relatively less favorable in quarter two versus quarter one historically also. The 2% was the lag in pricing transmission, right? Even as we are taking action to cover those gaps, further increases in input costs have happened in September and October also.

19:55 So this quarter, we will be landing price increases in the market, right, to neutralize this impact. It is depending on the geopolitical environment, there could be further movements in commodity. And if that happens favorable or unfavorable, therefore, that will be a continuous action. I think it just so happens that because of the magnitude of price increases and the frequency of increases are large. So some there is some lag in the transmission, yes. I'm not sure. So meaning there is no or not much pressure on the raw material side.

20:43 And if it remains at current market price, should we expect improvement in the gross margin? No, no, no. As we stand today, we have still a gap of 3% to 4%. So we need to take at a minimum 3% to 4% to cover the gap as on yesterday. And as we speak, some materials are still going up and down. So we'll wait and see what happens. So it's an evolving situation. And second, on the demand side, how is the channel inventory currently for you? And what is the expectation for the coming summer season and for the festive season? So channel inventory is normal, right? So as you can see from our numbers, the velocity underlying growth has been good across all our categories.

21:38 And so we so I would say the channel inventory is normalized. We don't see pressure anywhere at this point in time. And I think, say, the summer upcoming summer, I think, sell in is yet to happen. Typically, it starts towards maybe last week of December or in the month. Diwali is yet to come in. So I think October, November is going to be this month and next month is going to be Diwali, And that's what we are preparing for. And as of now, we are seeing good uptake and we feel confident to be able to deliver or sustain growth momentum in the upcoming quarters, right, sir.

22:25 All right, sir. Thank you. All the best. Thank you. The next question comes from the line of Vinit Prasad with Investec. Please go ahead. Hi. Good afternoon, sir. So just continuing the previous participant's question on demand. Now this quarter, we saw 20% plus sort of volume growth ex of wires. Now when you mentioned that you're fairly confident of demand momentum sustaining, would it be safe to assume we will still be in and around that volume growth number even for the second half of the year? Or would it be a case given such sharp price increases, there could be some hit on demand and volume growth should be much lower than what we've seen in Q2?

23:23 There are different segments, and different segments can behave differently, okay? So broadly, you can classify this into three parts. There is the wire business, right? And the offtake there will also be influenced by commodity movement because there can be upstocking or downstocking that can happen vis a vis how commodity copper is behaving, right? Then the other segment is consumer durable. Here, we are watchful. Presently, as Nitin was already saying, right, because of a good summer, we are seeing extended demand in the summer categories, which has benefited us this last quarter and looks like it will benefit us also this quarter, yes. As far as the remainder part of the portfolio is concerned, I think that will continue to grow, yes. Yes. So I think as far as volume growth is concerned, last year, H1, we had a very low base.

24:21 H2, we grew better. So in that sense, there will be some moderation in volume growth. H2 growth will be lower, but we still expect good growth. Yes. H2 growth will be lower than H1, but revenue wise sorry, volume wise, maybe it will be like mid teens or something like that. Understood. Understood. So my second question is that happening, which is why we are saying we remain optimistic that we should be able to deliver or sustain our growth, right, in the upcoming quarters. Fair, fair, fair, fair. So my second question is on Consumer Durable ECD segment margins.

25:06 Now it's been two consecutive quarters where we have seen a reasonable improvement in terms of our Consumer Durable margins. For the first half, it's up 400 bps. For this quarter itself, it's up 300 bps. So should we assume that worst in terms of ECD margins is behind us, and we should be building in from here on as far as margin is concerned and better utilization at our plants, all the CapEx investments we have done, operating leverage benefits will flow in continue to flow in from here on? The reason last year, consumer durables margins had a it was we had a new launch in water heater segment. So there was additional A and P spend for Q2.

25:57 So it looked low, but otherwise, that's a base effect issue. So I think, yes, current margins, we should be able to maintain, is what I Fair enough. Fair enough. And sir, my last question is on Sunflame. Again, we are seeing some bit of demand revival along with benefits of integration playing out. Is it safe to assume that bulk of the work on the integration, Sunflame integration is done and we should be seeing a fairly healthy growth coming in from Sunflame as we expect synergies with VGUARD brand? So I think yes, I think there is the work on product, right, that is underway.

26:49 I think some of the I think the basic challenge for Sunflame has been that the product pipeline and the product refresh was not in place, right? And this has impacted us. But I think the NPD refresh is landing and it is partly landed and there is more to come over the next six to twelve months. And that should help the business to sustain a stronger growth momentum compared to historical past. Fair enough. Sir, last one more question, if I may. We were to launch lighting early this quarter. Has that happened? Which are the areas which are the geographies where we have launched? What will be our GTM strategy there?

27:40 Any comments on that would be helpful. Thank you. Yes. I think the lighting launch in the market is not more than three to four months old. And so we have still been able to land only maybe 40%, 50% of the SKUs that we want to bring to market. The initial launch is focused on a few districts in a couple of states. So I would say that it will be somewhere around April or May, what we are targeting to make sure that our product portfolio is complete, and we are able to expand our offerings even within South to a wider portfolio of markets. So it's a gradual calibrated increase as we increase in reach and distribution as we make sure that our product portfolio expansion is in place. Sometimes we have to fine tune offerings based on local market requirements.

28:40 And also making sure that our supply chain is stabilizing again. So I would say at this stage, is more in like test market and market development stage, right? Understood. Thank you so much, sir. Thank you. Thank you. Your next question comes from the line of mister with Nuwama Institutional Equities. Please go ahead. Yeah. Good afternoon, sir. Thank you for the opportunity. My questions were, one, you know, in terms of the demand, you did talk about, you know, the extended summer, particularly in South. But in general, how the demand scenario is in particularly in tier three, four, five towns?

29:36 And given the drought kind of situation this year, how do you see that playing out? Is that a concern? Or given the product, given the offerings, etcetera, are fairly clear that you're looking at a mid teens kind of a volume growth? See, typically, VGUARD tends to do well when there is very little rain. So that has been our experience because we have products like pumps and motors where the demand actually kicks in a lot when the water table goes down. Lack of rains and higher temperatures means more power cuts, inverter and battery sales goes up, more sale of air conditioners to stabilizers. So generally, we are our demand drivers are like lack of rain or less rain and hotter climate.

30:29 So to that extent, the tailwind is bigger than the headwinds. Got it. Secondly, if you could give us some sense in terms of the A and P spend, you know, for the quarter. You mentioned that 2Q FY 'twenty six had a little higher spend on the water heater launch. So the spending was higher. If you could help us the No. See, think overall A and P expense may remain overall A and P spends may have not gone up or come down. But what I'm saying is last year, the A and P spend in Q2, I think it happened for water heater. So the consumer durable margins had looked quite low, and we are seeing a huge improvement.

31:19 This year, the A and P spend has gone to some other category, maybe in some other buckets. So I hope you understand. Yes. So, it's affected with the allocation depending on Yes. So, for example, when we do an ad for water heaters, it will get booked in the consumer durables segment. If you do an ad for inverters, it will get booked in the electronics segment. The average in the quarter, the percentage of spends nothing much has gone up. Think we are at almost the same level of 2.1% or 2.2%. 2.3%. 2.3% of revenue, which is broadly in line with what we're seeing. I think also, depending on which category we spend, sometimes the timing of that will fall on in one category or the other category. So that's I mean, one quarter or the other quarter also, right? So I mean, these are the two factors involved here.

32:12 Got it. And just last question, in terms of the product introduction, is there anything more in pipeline? Or what we are currently talking about? Are those the ones we will probably look at over the next one, two years? No. I think there is no completely new category or something. But like if you look at kitchen, there are some extensions happening like in terms of air fryers and those kind of things. But they are part of the larger kitchen portfolio. They may not be very large categories. But significantly large category would be definitely lighting, and we are hoping to start with a decent revenue numbers starting from Q1 of next year.

33:01 And the other one, we have discussed in-depth, which is solar power system. Fair point. Thank you. I'll follow-up. Thank you so much. Thank you. Your next question comes from the line of Lakshmi Narayanan with Tungai Investments. Please go ahead. Yeah. No. Thank you. I just want to touch upon Sorry to interrupt, sir. You're sounding quite muffled. Yeah. Is it better now? Slightly better, sir. Yeah. So my question is that on the consumer durables, what kind of NPD you actually target and where are we now? And what kind of innovations you have done? And second, on the consumer durables, I also see that we have launched a water purifier.

33:54 So I just want to understand what has been the traction in in that particular business? And the third is that as an industry, how things are moving towards ecommerce? And what is your take on the industry sales via, I mean consumer durable sales via e commerce and where do you stand under index or over index there? Let me start with NPD, yes. Typically, we target to deliver about 21, 22% of, let's say, non wire revenue through NPD. When we say that, we take first twelve months sale as the NPD contribution for that year sale.

34:48 This number may vary between 18% to 23%, 24% from year to year depending on the product road map. That's, I think, as far as LPD is concerned. Some years maybe on the higher side of 24%, some years maybe on the lower side of 18, depends on which category and what products we are refreshing. Second question on water purifier. Yes, I think we have been in water purifier for a couple of years now, trying to sell online. And we have perfected now our customer service network and product portfolio.

35:33 And we plan to now focus expanding the offering, right? So the initial focus has been on e commerce because it is something that is easy to manage, and it gives us a good opportunity understand the category and to build the capabilities. The third question was regarding what's our outlook on e commerce. I think e commerce, yes, we are under indexed compared to e commerce contribution for the industry. We are under indexed. It's a conscious choice because going for it is conflicting the trade part. E commerce demand environment has not been observed to be great. I think at an aggregate level, e commerce has been probably flat to single digit growth is what we understand for the portfolio of products that we are in.

36:34 Probably also, I think with the buildup in quick commerce, I'm sure the investments from the big platforms will also be getting refocused, right, and which may also probably be impacting their ability to aggressively grow that channel, right. Got it. And if you can give broad mix of your channel in terms of modern retail or B2B or general trade? No, in income, general trade will be about 70% of our revenue and maybe modern trade, e commerce and canteen stores maybe about 30% of our revenue.

37:20 Okay. On the sunflame product portfolio, what are the things that are actually you talked about new product refresh, etcetera, which sub segments actually drove growth for us and which and then which segment you actually launched new products? So I think right now the big challenge for Sunflame, there are two challenges for Sunflame. I think one is the last five, six last five months, right, because of the issue in Middle East, right, the demand in the short term has shifted from gas out to induction. The induction portfolio is inside VGUARD, whereas Sunflame is strongly dependent on gas stove.

38:05 So gas stove sales have been flat. So obviously ex of gas stove, the categories are growing and that's how strongly and that's how you are seeing that 20% plus growth in Sunflame. So that gives you a sense of where the growth is coming from, yes. And which new products you talked about product refresh in Sunflame, which products you have launched and what are the Yes, yes. Just to give you an idea, right, so the big challenge, you see, Sunflame was firm which was dependent on few people, right, in terms of how the business was driven. I think the transaction concluded a year after COVID. And I think the couple of years of COVID, and they don't have bandwidth also. The year of the transaction also, I think these three, four years and the one year post transaction, this period of four years, right, kitchen business sees a high rate of product refresh.

39:03 Every two, three years, product portfolio is refreshed, right? So this gap in product refresh, which has happened due to COVID and probably due to the enterprise being busy with the transaction readiness and the transaction execution and the securing control by us, right? So that period was the period that was impacted. And then subsequently, we have set up our PRN. The refresh is touching practically the entire portfolio of Sunflame, which is not specific to one or the other category because the entire range had got dated. So, Sunflame is primarily large category for Sunflame is gas stove, chimney and built in. These are the three large segments. Then just one last question on the ceiling fans. We had new products in the VLEC and remote control side, etcetera. Can you just help me understand in ceiling fans, what is the mix of premium and VLDC?

40:04 And how what this segment has actually outgrown for us in the first half? So I think, BLDC is of course driving the growth in fan, just as for the industry and similarly for us, yes. And BLDC share is also decent, maybe upwards of maybe 35%, 40%. So that's in terms of that. And most of our product work is fundamentally happening on VLDC, right. Got it. Got it. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, we request you to limit questions to two each per participant, and rejoin the queue for any further questions.

41:02 Our next question comes from the line of Deepak Kalwani with Unifi Capital. Please go ahead. Hi, sir. Thank you for the opportunity. So for the solar rooftop business, can you just highlight, you know, our supply chain and the procurement that we do? Where is it from currently across the, you know, the bill of materials like cells, modules, etcetera, and the inverter battery as well. Also, in in the states that we are present in, I'm sure that there is competition from the likes of the big players like Tata Power and Fujima. So how do we really compete with them? That's the next question. And, sir, this this business is predicated on the government policy, which gets over this year. So how should we view the growth of solar rooftops in say 'twenty eight, 'twenty nine?

41:58 So let me start with the last part of it first. So as we understand the I think the government has set targets in this area. And maybe the nature of the offerings will change. I mean, you might go to storage plus generation as opposed to generation today. So maybe probably the portfolio will change where you will probably have a hybrid inverter and maybe a battery storage system also going along with the panel, which will actually become more favorable for people who are having capability and expertise in these domains. So this is how we see.

42:46 So the second part is, see, VGUARD as a brand has strong brand equity, yes, in the energy storage and the electrical space, right? So we have very strong recognition. I mean, we across our portfolio, we reach more households than any of the names that you talked about, right, from an offering standpoint. It's just that, yes, we have come in later in the business and we should be able to and it will obviously take us some time. But I think the familiarity for the trade and the channel with VGUARD as a brand is very, very strong. And internally, we have the required capabilities to drive and grow these businesses, right? Now coming to the supply chain, right, our supply chain is as I said, right, our business is fairly nascent.

43:39 And our supply chain is still forming and it is also evolving, yes. It may be good to talk about these things maybe a few quarters down the line, right, when this takes shape and form and we are able to comment we are able to give a response, which is more sustainable, yes, from a long term standpoint. Okay. Sure. Got it. And sir, you mentioned about mid teen volume growth that you're witnessing. Probably that is because of the near term somewhat. But structurally, looks like we got gaining market share, and that's been a long term trend. So if you can explain the drivers that you have exercised over the last three, four years or a few quarters in the near term, that will be useful, and that is one. And as you do so, sir, your EBITDA margins are still hovering in the nine to 10% bracket. So, you know, which is a function of commodity product mix, A and P and OpEx. So as you grow much larger in size, how confident are you to get benefits of operating leverage and go to a 12%, 13% sort of EBITDA range for your company? Yes, yes. So look, I think we as a company are still in so I

45:10 think we need to understand, right? You should not be looking at us as a company driving efficiency, right? We are continuously investing on building our capability and expanding our portfolio. So building capability means that we are working at what is required by us three to four years or five years from now. And we are working on those areas, right? That's building capability, right? Investing we are also diversifying across categories, right? So some of the money that we make has to go into these new areas, right? Putting up teams, setting up internal capabilities, right, all of this is also going to dilute. So I think finally, when you are seeing an aggregate number, right, you are seeing an aggregate number, which is a balance of our investment for tomorrow and what we are doing to drive our today's categories, right? So if you strip these two apart, then you will probably see the improvement in the operating leverage, right? But we are in this business not just for this year, right? So we are in the business for long term.

46:18 And we have got to where we have got to. If you go back ten years back and where we are today, we have got here because we have made these investments to build that future. And similarly, we will make balanced investments to build our future for the next five to ten years, right? But all of these new categories, I mean, are getting into SPS, we are getting into lighting, batteries, all of this is going to require future investments, right? So and presently, it will get charged into the P and L, yes. Okay. And the other part of it is that you need to recognize, as we already acknowledged, right, our pricing transformation is also lagging. So I think if the markets were stable, right, then probably you would see a more healthier margin than what you're seeing today. I think the way I would ask you to look at us is look at us and look at peers and what has happened to margins over a period of time.

47:18 So we have held our margins, and we have sustained investment in future growth of the business. It. Thanks. The best. Thank you. Your next follow-up question comes from the line of Nausha Chaudhry with Aditya Billas and Life Asset Management Company Limited. Please go ahead. Yes. Hi. Two follow ups. First, coming back on the margin. So as we are taking the strategic decision from to increase our insourcing, have invested in the on the manufacturing and which is we were expecting to enter double digit by FY 'twenty eight at EBITDA level. So with all these investment and initiation of new categories, should we still expect a double digit kind of EBITDA margin from the company FY 2028 onwards?

48:20 So if you look at our actual numbers, are very close to 9.5% to 10% EBITDA, right? So we are on course, even in this year. Sure. On the R and D and innovation on our new innovation center, Can you share your thought process in terms of what are the activities we do there and what kind of expectations you have from that infra? And how should it strengthen your business today versus two, three years down the line if it achieves what you aspire to from that center? So see, the innovation center right now is primarily focused strengthening and building our electronic capability, right, which is a big part of what is happening in that innovation center, although some other categories have also moved.

49:21 Not all categories have moved there. The innovation center is also helping us to strengthen product reliability because we are also doing work in terms of strengthening assessing and strengthening portfolio reliability across the company. Mainly, the purpose of setting up the innovation center, right, is to expand the capabilities, right, and provide space for our R and D teams to engage with consumers and bring consumer insight into the product development process, right. As you will see, we are further expanding into a number of categories, right?

50:10 And the role of electronics, right, is significantly going to expand, right, with the newer categories that we just discussed, including lighting. So it is fundamentally taking into account the needs of these areas. And this is what I was saying. We put up the R and D center probably about three years back or four years back, right? It is an investment for what is going to come now in the next two three, four years. So some of the earlier questions that were being asked, right? So as a business, we have to invest in today and we have to also invest in tomorrow. And our portfolio creation is still underway, yes? So I think that's fundamentally the objective there.

50:58 I think we also have, what I would say, a group working out of Kochi, right, which is working on a long range innovation, right, where they are working on products, which will have a development cycle of five years, right? So this is also something which is being fulfilled. Although maybe these two capabilities are spread across multiple campuses. And in terms of absolute or percentage of revenue, which we spend on R and D, how has that moved for you in last one or two years? And what is the rate currently? And how many people you have in all these activities?

51:50 I may not be able to readily give you a number on this because it is spread across many pockets. We are not presently today tracking that as a number. I mean, we are doing what needs to be done to move forward because So what is classified as R and D expenditure is there are certain specific things under DSIR and all that, but the actual number of engineers working is far higher. But we don't I mean, so we don't really have the data, but like what is classified as R and D is, you know, according to the accounting standard and stuff like that. So there's only certain type of things that is classified, but actually people are working on R and D, product development innovation may be higher.

52:35 Yes, significant part of the organization is dedicated towards product capability, right? So but I think we have not been tracking the number like that. We're just doing what is required to be done to deliver our product road map and to deliver product capability. Don't have a number readily to share with you. Sure, sure, sir. Thank you. Thank you. Your next question comes from the line of with Capital. Please go ahead. Hi. Thank you for the opportunity. Sir, my question is on the electronics segment. So what has led to the sharp three eighty bps decline in electronics margin sequentially in quarter two?

53:26 That is the mix. Right? So there may be there are two things. I think there is pricing transmission because just as there are price increases on other categories, there are price increases in the electronic components also. In that, then there are some categories which are in season and there are some categories which are out of season, right? And when a category is out of season, it takes a bit more time to transmit the price increase. There is a lag on the portfolio. There is also a lag in the electronics category. And there may be some mix because compared to last year to this year, we have sold rooftops and the margin structure of a rooftop versus the other products in the electronic segmentation is slightly different. The combination of these two is the impact that you're seeing.

54:14 Okay. And what would be the sustainable margins in electronics around 18% to 18.5%? About 16, 17% is okay. 18 can be in a good year. 18 in a good year, 16 to 17 in a normal year. Okay. Okay. Thank you. Thank you. Your next follow-up question comes from the line of Mr. Achal Dohade with NuvaMa Institutional Equities. Please go ahead. Yes. Thank you for the follow-up opportunity, sir. Two quick questions. First, on wires. Given we have the new entrant actually launched last month, how do you see in terms of the wires growth, so margins for us in terms of the pockets where we could be at risk?

55:08 Any color on that would be of great. So I think the new launch is very recent. From what we can gather, not a very significant or substantial portion of materials have reached to a significant number of outlets. So this is still very early days. I think we'll have to give them give it maybe a couple of quarters before we can comment. As of now, we can say that there is absolutely no impact because it's still like there is no we are not seeing much activity on the retail. I mean, there is no product in the market yet. Or it's there, but it's very far and few in between. Yes. So I think although there was some big bang launch, the actual getting the product manufactured and getting into the trade part will take more time is what we have.

56:06 Got it. Secondly, any update on the G. V. Nine in terms of the any benefit out of the investment? How do you see that playing out, especially when there is a scale up in the battery and the energy? So Giga nine is focusing on commercializing the technology into product. And they have now picked up, I think, maybe three odd customers. And they are building, what I would say, the customer franchise, right, with those three customers. That's where VGUARDINE is today. Any purchases we have from VGUARDINE?

56:52 Not yet. We might have made some small purchases or we may be in the course of making some small purchases as we speak. I don't know the exact situation right now. May not be material as of now, but I think maybe a few months down the line, there could be some volumes coming in. It. Meaning they are in the course of a meeting or they would have just met our first pilot orders? Got it. Got it. Thank you so much, Thank you. The next follow-up question comes from the line of Lakshmi Narayanan with Donga Investors. Please go ahead. You. I just want to understand how your distribution channel expansion has been in the first half when compared to the last half across segments? I think, see, typically, we target to add 3,000 to 5,000 customers every year. And I think we are on course with that process, right?

57:54 There are two types of things we do. One is, of course, to add these new customers and the other is to add more categories with some of the existing customers. These are the two. Got it. It. Think another just an observation is that a couple of years back to now, there are again proliferation of too many brands and I see that people who are used to stock predominantly these are. So also given large and space for various other products. And in this kind of scenario, I mean, how how are you making your products stand out? Because, you know, the quality of products are always at the stake there. It's always there in the... And and everyone came there.

58:41 So what was that that you have done? How do you have... You know, anything you have done that you like to highlight in the last See, there's always gonna be... Yeah. So India is an extremely large market. And if you look at the universe of number of shops or trade channels we have to serve, it's close to 200,000. And we are at about 100,000 or a little more than 100,000. So we have a lot of room to grow. And it doesn't matter, some people will come, some people will go. How we look at it, how have we grown vis a vis our peers, and we are definitely growing faster. So that should give you some indication. Got it. Got it. Thank you.

59:29 Thank you. Our next question comes from the line of Ravindra Nath Nath with Nirmal Bank. Please go ahead. Mr. Rabindranath Nayak, your line is unmuted. Please proceed with your question. Okay. Thank you. Sir, thank you for the opportunity. Sir, the Electronics segment, we grew this quarter by 60%. So whether the both segment, either inverter, stabilizer growth similarly or it is the stabilizer has grown faster than the inverter? I think the solar power and inverter battery business has grown quite well. The stabilizer growth is slightly lower in that mix.

1:00:23 Okay. If I understand correctly, inverter is actually pan India and will start... Sorry, stabilizer is pan India and the inverter is confined to the South market as of now. Right? No. No. Think only solar power system, we are selling mostly in South. The other two electronic categories are pretty much pan and tail. Okay. Okay. And sir, you mentioned that the price around 2% to 3% price rise is expected. So if the demand is good, then electronics must have, you know, passed on majority of the price rise. And electrical ledger, as I said, they're up already the volume has increased by flat and also the prices we have taken a price hike so that we have 41% and they didn't come from price side. So probably the consumer delivery is actually lacking in the...

1:01:12 I don't know, some sort of price rise. Right? It is... Is it the right understanding? To an extent, yeah. There is the the the the quantum of price increase, we have to take in consumer durables is slightly higher than in the other two segments, which is right. But even that, we have to be passed on. It is not that because that category is also took a lot of price increases in Q1. But Q2 is being an off season and all that. If you look at fans, it's an off season in Q2. So there has been some delay in increasing in prices, but I think the price increasing activity is again going to pick up in the current couple of months? So Q1, we landed the pricing very aggressively and probably ahead of the market.

1:02:02 And I think Q2 maybe we have been a bit slower because in some ways, it did slightly impact our growth in some categories, right? So Q2, we were slower. So there is a lag in transmission, and we will be looking to address it in quarter three. Okay. Okay. Then if in the second half of where if you take a price increase and because a lot of people have actually taken the price increase. So can we reach around that double digit margin in the second half? I think as Mithun already said, we are almost there even in the first half. I mean, H1, we should be between, I think, 9.6%, 9.7% to 10%. We are already there. Yes. Okay.

1:02:47 Okay. So then we can Just one point, right. See, you please don't only look at quarter to quarter margin. Typically, quarter two will have a lower margin than quarter one because quarter two mix is different from quarter one. Stabilizer sales are lower, right, and some of the high margin category sales are lower in quarter two compared to quarter one. So for us, right, it is normal margin. It's normal for quarter two to be lower than quarter one. Quarter three and quarter four progressively it will get better and that's the normal mix of margin for the company. Okay. Thanks. And lastly sir, what is the CapEx plan for this year and the total CapEx for this year, full year? This year CapEx will be in the region of 150 INR 150 crores.

1:03:39 Okay, sir. Thank you and all the best, sir. Thank you. Thank you. Ladies and gentlemen, we will take that as the last question for today. I now hand the conference over to the management for closing comments. Over to you. Thank you, Ashika and team for hosting this call, and thank you all for your patience listening. Thank you. On behalf of Ashika Institutional Equities, that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines. Thank you.