Havells India Q4 FY25 earnings call

Havells India reported a decent overall performance in Q4 FY25, characterized by healthy revenue and profit growth. This growth was primarily spearheaded by the large appliances and cables segments. However, the company noted that inflationary pressures continue to impact consumer sentiments, and the persistent volatility in commodity prices remains a significant overhang on overall margins.

The Lloyd brand delivered a robust performance, achieving a positive EBIT of INR 100 crores for the full financial year. This turnaround was driven by strong revenue growth and margin improvement initiatives. Management views Lloyd as a long-term growth engine for Havells and plans to continue investments in brand upliftment, R&D, and new product development, including a new plant for refrigerators. Over 50% of Lloyd's sales are now coming from modern retail channels, indicating a successful shift in distribution strategy.

The cables and wires segment recorded approximately 20% growth in Q4, with nearly half of this growth attributed to value. The business composition remains around 65% wires. While demand for cables continues to be strong, the segment experienced significant fluctuations in raw material prices, particularly copper, over the last 3-4 months, which impacted both pricing and margins. Havells anticipates further industry consolidation towards branded, high-quality products and will continue its investments in brand building and distribution.

Havells maintains a strong position in the residential switchgear business, which accounts for about 75% of its overall switchgear portfolio, and has seen market share gains in this higher-growth sector. The company aims for 38-40% contribution margins in this segment. Conversely, the industrial switchgear segment experienced muted or slower growth throughout the year, particularly after the elections, reflecting broader industrial demand trends.

Havells made a strategic investment of INR 600 crores in a solar panel manufacturer, which has helped build its solar business to INR 400-450 crores over the past 2-3 years, focusing on inverters, modules, and DC switchgears. This investment is aimed at securing supply and establishing a meaningful presence in the consumer-focused (residential, commercial & industrial) solar renewable market. Management expects this segment to grow multifold in the coming years, with a primary focus on faster business growth rather than immediate margin expansion.

Consumer demand remained subdued due to inflationary pressures and cash availability. While recent budget and RBI measures are expected to boost consumption, the summer season experienced a delayed start, particularly impacting cooling product sales (fans, RACs) in Q4 and early April. This led to muted growth in fans and a potential impact on Q1 primary sales for RACs, despite higher primary sales in Q4.

Havells plans a total capital expenditure of INR 2,000 crores over the next two years, which includes investment in a new R&D center. The company anticipates operating leverage to kick in for its core Havells business, aiming to restore normalized margin levels of 13-14.5%. For Lloyd, no significant capex is expected for the next couple of years following the refrigerator investment, with the focus remaining on achieving scale to realize operating leverage.