Havells India

Havells India faced a challenging Q1 FY26 marked by an unexpected weak summer and subdued consumer demand. This led to a significant decline in revenue from cooling products, particularly ACs, fans, and room coolers, which had a strong base last year. Despite these headwinds, management views these challenges as transitory^📎 and anticipates a rebound in revenue growth and margin improvements in the coming quarters. The company's focus on cost discipline resulted in modest growth in expenses, contributing to better operational efficiency.

The Cables & Wires segment was a strong performer, driven by robust demand from infrastructure and industrial sectors. The segment reported a volume growth of 20-21% and a value growth of 27%. Havells has accelerated its capacity building investments in this segment, committing an additional CAPEX of over ₹340 crores. The company plans to double its underground cable capacities between FY24 and FY27, with a particular focus on medium and high voltage cables, where major buildup is occurring.

The Lloyd brand, particularly ACs, experienced high inventory levels at Havells' end due to continued full-capacity production and weak seasonal demand. However, management expressed confidence that these inventories would readjust fully within the next couple of quarters. While the market remains competitive, Lloyd is focused on margin improvement through internal efficiencies and better price positioning. The ECD segment, including fans and room coolers, also saw a significant decline, attributed to intermittent rains and a structural destruction of seasonal demand for room coolers.

Havells made a strategic investment of ₹600 crores in Goldi Solar during the quarter to accelerate its growth in the renewable sector. This investment aims to leverage Goldi Solar's module manufacturing capabilities and expand Havells' solar portfolio, which was ₹500 crores last year, to an ambitious target of ₹1,000-1,500 crores in the next couple of years. The company views renewables as a significant future growth opportunity, aligning with the 'make-in-India' initiative and building a long-term structural presence in the sector, including backward integration into solar cells and potential future ventures like battery storage.

Havells continues to see faster growth in rural markets compared to urban areas, although rural sales currently constitute a small portion (5-6%) of overall consumer product revenues. The company is expanding its product range and distribution in these markets, including Havells-branded products and soon, Lloyd products. Initiatives include opening fully branded 'Utsav' stores in smaller towns and adding product categories to existing channels, indicating a calibrated strategy for sustainable growth rather than just market dumping.

Despite the challenging quarter, Havells achieved a 160 basis points improvement in gross margin year-on-year, reflecting its focus on cost discipline and operational efficiency. While ECD margins were impacted by product mix and lower summer sales, individual categories within ECD (fans, water heaters, coolers, SDA) showed improvement. The company aims to maintain contribution margins of 14-15% for Cables & Wires and 38-40% for Switchgears, emphasizing premiumization and internal efficiencies across its businesses.