Crompton Greaves Consumer Electricals Limited

Crompton Greaves Consumer Electricals Limited reported a strong Q4 FY26 with consolidated revenue growing 11% YoY to ₹2,283 crores. The company achieved a Q4 EBITDA of ₹271 crores, resulting in margins of 11.9%. EBIT margins improved significantly from 6.8% in H1 to approximately 10% by the end of Q4, driven by operating leverage, premiumization, targeted pricing actions, and sustained cost optimization efforts. The second half of the fiscal year demonstrated robust performance, recovering from earlier challenges.

The Electrical Consumer Durables (ECD) segment grew 10%, while the lighting business achieved an industry-leading growth of 14%. The BLDC fan portfolio showed strong momentum, growing over 30%, bolstered by new product introductions. Small Domestic Appliances (SDA) experienced 'even stronger numbers' growth, supported by new offerings like infrared cooktops and air fryers. In Large Domestic Appliances (LDA), water heaters recorded double-digit growth and market share gains, although air coolers faced inventory challenges. Agricultural and Speciality pumps grew in the teens, with solar pumps demonstrating 'very significant growth' over the previous year's ₹200 crores.

Crompton launched a new premium product line named 'Crompton Rhion', which will integrate cutting-edge technology and design, including the Large Kitchen Appliance business. The company also introduced 'Crompton Armor' wires, initially available in South India with plans for a national rollout. The solar rooftop business has secured an order book of approximately ₹500 crores, representing about 38,000 units, and has already executed 5,000 homes. The company aims to build a ₹2,000 crore solar portfolio within the next 3-4 years.

The Butterfly business delivered a 17% revenue growth in Q4 FY26, maintaining steady EBIT margins and becoming cash flow positive with ₹170 crores in cash. Management highlighted significant efforts in turning around Butterfly, including clearing historical issues, resetting terms of trade, and building it into a robust business. An impairment was taken on Butterfly's holding value to align with its business value, impacting ROCE and asset turnover, but without affecting cash flows. The focus for the upcoming year is on expanding Butterfly's traction in non-South markets.

The company faced persistent cost inflation and availability issues, particularly due to geopolitical events. In response, Crompton implemented price increases, including a 7-8% hike in fans, which were ahead of competitors. These actions, combined with ongoing cost optimization initiatives under the 'Unnati' program, contributed to the improvement in EBIT margins. Management is closely monitoring the situation with a dedicated 'war room' and expects margins to recover as market turbulence subsides. The company also maintains an annual R&D and innovation spend of approximately ₹100 crores.

FY26 was characterized by challenging market conditions, including muted demand and unseasonal weather patterns. Despite this, Crompton focused on gaining market share across various categories such as fans, water heaters, and agricultural pumps. Management expressed hope that competitors would follow their lead in price increases to offset inflation, rather than engaging in price wars. An analyst raised concerns about potential payment delays in the value chain from contractors and builders, but management indicated their exposure in this area is small and has not yet significantly impacted their collections.