Symphony has sufficient cash for expansion: Nrupesh Shah, Executive Director

Nrupesh Shah, Executive Director, Symphony Limited, talks about Q4FY21 numbers, cooler sales and expected performance, Export market and products in pipeline among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Q4FY21 numbers are good and PAT is up by around 60%, EBITDA has doubled on a YoY basis. Is this due to the pent-up demand and do you think that the performance will continue or will be better in the coming quarters or may bear the impact of the second wave of Corona?

A: Our performance at the consolidated level in the March quarter is the highest ever quarterly sales and highest ever profit after tax. A good turnaround has been seen in our significant subsidiary company Climate Technology. And overall, trade sentiments and consumer sentiments have been quite positive almost until one week before. Of course, from the last week because of this COVID impact, the sentiments have taken a hit. There are seven to eight states, where lockdowns and restrictions have been announced that has impacted the sentiments and consumer buying. However, this lockdown is not as stringent as the last year. Secondly, the semi-urban and rural market, as well as e-commerce, is looking promising. If the situation improves in two three weeks then we will have time for consumer off-take and sales in the current quarter. 

Q: It is an important month for cooler sales. So, what is your estimate for on-ground sales in this particular month? Also, update us about the expected performance for the commercial coolers segments?

A:  So far, the April month is going well but as I informed that from the last one week, there has been some impact. Accordingly, from the last one week, the consumer off-take has reduced, especially in the 7-8 states. Going forward, things will depend on the way conditions of COVID and Lockdown emerges. But as I said earlier, if the situation improves after 2-3 weeks then we will be able to make up a lot. But, now, we have to keep the fingers crossed. Secondly, however, we are much better geared unlike June 2020 quarter so certainly, irrespective of anything, June 2021 quarter will not be a washed-out quarter, similar to June 2020 quarter. 

Q: Air Cooler market is turning competitive. What kind of market share gain have you seen in the quarter that ended and how will you beat the competition as many new players are entering into the domain?

A: Many players have entered in the last three-four years. Despite that, Symphony has kept its market share intact. Probably, in the March quarter, our market share would have increased because our complete focus is on the air-coolers. We eat, slip and drink air coolers, whereas, for most of the pears and competitors, the air cooler is a small category out of many products. Based on the focus, we continuously innovate and upgrade the products continuously. We also keep our manufacturing process streamlined, which brings operational efficiency to the system. Plus, our brand pool is very strong and on top of it, almost 50% of our top line is now contributed from our overseas companies in rest of the business. Sales were down in India last year but they went up in the overseas markets. 

Q: What is your outlook on the market performance, export markets and what are the geographies where you will tap in because international markets are performing well then what are your expansion plans? 

A: Especially, based on what we saw in the March quarter, the current year as a whole also Mexico, Australia and the United States are looking quite promising. Symphony India will directly export a lot to those markets in 2021-22. As far as other countries are concerned, by and large, it will remain in the line with the last year. But our export from India will increase a lot in comparison to FY21. Secondly, our substantial international business is generated from the overseas subsidiary companies and COVID impact is not visible there, so we are expecting good growth and performance there. 

Q: Product has always been an important element in your business and you constantly say that you have a focus on innovative products. You have also launched the i-pure series of purifier with air coolers. What kind of product pipeline do you have and how many new products will be brought into the market and in which segment and categories? Also, do you have plans to diversify your product line? 

A: In the last one-and-a-half year or two, we have either launched 30 new models or upgraded the existing models across the range, including the residential range as well as industrial and ducted ranges. The format of many models is quite path-breaking. Secondly, recently and exclusively, we have tied up with Flipkart for online sales and it will also come in other e-commerce platforms soon. We have launched a fan-cum-air-cooler that can be sold around the year and it is quite competitive design-wise, performance-wise and pricing-wise. The models, which were launched last year, were available in the top range and the new model is for the bottom of the market plus it has round the year potential. 

Q: Can you provide us with the detail of planned product launches and the timeline and categories where they will be launched? Also, what is your outlook on the overall margins of the company?

A: At Symphony, innovation is a continuous process. Time-to-time, new models across the range will continue to come but it is difficult to say about in which quarter and in which model and range it will come. But it is a continuous process, whether it is for 2021-22 or beyond that. As far as the margin is concerned, certainly, there is cost pressure. By December 2020, whatever price increase was there either in the raw materials and freights, we were able to contain it through our operating efficiency and value engineering and our gross profit margin was not impacted. But after January 1, 2021, there has been a steep cost increase and based on the same our GP margin and contribution margin has been impacted on the standalone business. Partly, in the current quarter, its impact will be reduced. But down the line, gradually, depending on the situation that evolves, we will decide on the kind of price increase that should be made. 

Q: Can you tell us the kind of price hikes that can be seen in the future. Also, tell us the quantum of price hikes, if there has been any, in the recent past and will the future price hikes will be in line with the proportion in which raw material prices have gone up?

A:  We have not yet taken any special price increase because of a variety of logical reasons. We would have increased the price, but, intentionally have not done it. Secondly, we have yet not decided on when and in what quantum the price increase will be made. Over a period, we will take an appropriate decision on it, which will be in the interest of the business. But, currently, talking about the specific timeline and what will be done is difficult. 

Q: What impact the government’s PLI scheme will have and how will you participate in it and how big is this opportunity for you?

A: We are still studying the scheme but from the initial readings, it seems, by and large, it is not for the air cooler segment. But whenever it will be applicable then certainly our OEMs will manufacture and accordingly we will get its advantage but currently, there is no clarity about the air coolers. 

Q: Can you tell us about the CapEx that you have lined up for FY22 and what is the expansion plans of the company? And are you comfortably positioned to raise it, if yes, how it will be done, i.e. either through internal accruals or you will have to raise it from the market?

A: First and foremost, Symphony’s business model is the asset-light capital-light business model. If you have a look, then last year, i.e. in 2020-21, there has been an increase of just Rs 4 crore in the gross block and account of addition in plant and machinery among others. So, by and large, we will need a similar CapEx this year as well despite the development of many more new models and moulds etc. Secondly, 95% of our PAT is cash profit, thirdly, our treasury is Rs 500 crore plus. So, our cash accruals are much more than enough to take care of this small CapEx. So, there is no question of market borrowing or any other resource mobilization. 

Q: Your trade receivables have increased 33% YoY, any specific reason?

A: There were huge sales in organized retail and e-commerce in the March quarter. And there we are supposed to provide a credit of around 30-45 days but we are not supposed to provide any credit in our traditional retail. So, the receivables have grown according to the sale increase.