Havells India Limited

Havells India Limited reported strong revenue growth in the first quarter of FY27, demonstrating resilient demand despite prevailing inflationary pressures and geopolitical uncertainties in West Asia. However, the quarter's profitability was impacted by a significant front-loading of brand-building investments, with advertising spends more than doubling year-on-year. The company undertook calibrated and staggered price hikes across categories to offset raw material inflation, which management believes were successful in maintaining market share.

Consumer categories, including cooling products, held up well and absorbed price hikes, though a delayed summer onset restricted the full benefit for cooling products. The Renewables business showed robust growth and has been established as a separate reporting segment, leveraging sector tailwinds. The switchgear segment experienced a 4% year-on-year sales decline and margin erosion, primarily due to West Asia export disruptions and raw material volatility, but management expects a rebound in Q2. Cable volumes remained largely flat, attributed to raw material volatility and strategic distribution changes, while Lloyd's air conditioner volume growth was in single digits, with higher value growth due to price hikes.

Management confirmed that pricing has stabilized in the lighting segment, with potential for price hikes due to electronics costs. Across categories, average price hikes ranged from 7% to 8%, with some categories like cables seeing 5% to 20% increases due to direct correlation with copper and aluminum prices. The company aims to stabilize contribution margins and expects overall margins to improve in the coming quarters^⏳, particularly in the renewables segment as it shifts towards consumer-side business. Lloyd's contribution margin is also expected to return to double digits outside of non-seasonal quarters.

Havells significantly stepped up its brand-building efforts in Q1 FY27, with advertising spends more than doubling year-on-year. This front-loading of investments, particularly for seasonal products, impacted short-term profitability but is expected to normalize^📎 over the rest of the year. The full-year A&P budget is projected to be between INR700-800 crores, maintaining a long-term average of 2.5% to 3% of revenue, with Lloyd's A&P spend expected to remain elevated for the next couple of years to premiumize the brand and communicate product features.

The company has planned a capital expenditure of approximately INR1,400 crores for FY27. A significant portion, around INR800 crores, is allocated to the cables and wires business for capacity expansion. Additionally, about INR200 crores is earmarked for a new R&D center, with the remaining amount distributed across other businesses. Management indicated that the cables segment is on track with increasing capacities and sales.

Havells has implemented changes in its distribution strategy, focusing on becoming more of a 'sell-out' brand rather than 'sell-in'. This approach aims to improve channel partners' return on capital and ensure healthy inventory levels. While this strategy, combined with raw material volatility, may have impacted sell-in volumes in Q1, particularly for cables, management believes it will lead to sustained growth and market share gains in the long term. The company is confident in its ability to maintain or gain market share across categories.