ECD business had a contribution of 15% in revenues of the quarter: Shantanu Khosla, Crompton Greaves Consumer Electricals

Shantanu Khosla, Managing Director, Crompton Greaves Consumer Electricals Ltd, in a candid talk with Swati Khandelwal, Zee Business, talks about growth drivers of the business and strategy to increase margins. Edited excerpts: 

Q: Crompton Greaves Consumer Electricals has posted a net profit of 77 crores and revenue has gone up by 9 per cent despite pressures on its lightning division. Let us know about the reasons? Also, let us know about the growth drivers that helped you to increase the business?
A: Electric Consumer Durables (ECD) business has performed well and had a contribution of about 15 per cent in the revenues of the quarter. In fact, ECD is continuing to escalate. In spite of cost and forex pressures, we were able to grow our profits on the ECD business by 100 basis points. So, the growth over there was very strong. 

Our lighting business is driven by the LED business, as it contributes more than 80 per cent to our lighting business, the volume growth was strong as it grew in an access of 20 per cent across all segments. But there was a market erosion due to intense competition. In addition, we also went for a cost reduction by 10-15 per cent of the previous quarter had an impact on revenues and margins of the company. This led to a decline of 400-500 basis points in the lighting division. And we are planning to revive it over the next two quarters and bring it back to double digits. It can be down by going for significant cost deduction mechanism including the in-house manufacturing of the lightning products. 

Q: You informed us about the problems related to lighting business and the way to tackle it. But the fan section has been a consistent contributor to your business. But I would like to know about other segments that can have a positive contribution to your business?
A: ECD business has been growing and we hope that it will continue to grow.

We expect to grow with innovations. For example, in the fan segment that falls in the price bracket of Rs 2000-2500, where new innovations have been introduced like Air 360 fans, which are decorative in nature. This segment of fans has contributed 35 per cent to our revenues in the quarter. 

We eye on the upcoming winter season and for the purpose, we have revamped the geyser segment and have introduced new models in the segment. The new models are better than the previous or existing models. 

Besides, we also aim at growing in the pump segment and have introduced mini Cruz in the segment, which has gone up by 35per cent in terms of volume growth. 

Q: What are your expectations, in terms of numbers, from the air purifiers business, a segment that is new for Crompton as it forayed into the segment in 2017? 
A: Yes, we are into air purifier business and we forayed into the segment in last winters with a superior model and have good expectations from it during the winters. It is very small at present and that's why it will not be able to have any impact on our company. 

Q: Crompton has posted sound results despite input cost pressures. Do you think that the existing pressure can have an impact on your business, if yes, let us know about it? Are you planning to go for some price hikes in the recent future?
A: There has been a price hike in past one month at Crompton. Being a strong brand, Crompton can afford these hikes. 

Q: The current pricing is based on GST rates, which is more than a year old by now. Do you expect that there will be changes in the tax system that can bring some improvements to your sector?
A: I feel, the existing rates are good enough. Everything has been rationalised in the tax system in last one year. 

Q: What are your plans for market shares for different segments like geyser, lighting and fan among others? What is your outlook on them and do you have any plan to improve them? In addition, do you have any plan to improve the margins in every segment?
A: First I would like to talk about the margins. We have three elements in our program and they are continuous cost reduction (an important part of our business), mix (for instance, we promote the premium fans more than the economy ones) and pricing. Implementation of the program helps us to bear with the cost pressures. 
When it comes to market share, we have an objective to grow faster than the market in every segment. This means to increase market share in a sustainable manner. Our Electric Consumer Durables (ECD) business has seen the trend in past 1-1.5 years. We have seen similar growth in the lighting business, in terms of market shares. 

Q: Lets talk about the distribution strategy as Crompton has a small presence in the digital world. Can you let us know about the distribution strategy through the outlets as well as the CapEx that will be used to boost growth and increase the distribution network?
A: We have increased our digital presence but it is a small one. However, our business is dependant on the brick and water as our products talk about certain things like installation and warranty among others. That's why we want to go deep in the distribution system and it will be supported by the distributors, who are being appointed, by providing better services to our retailers and making sure that our products are available and visible. This process will bring good and positive results in terms of our growth.