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Transcription modifiée de la conférence téléphonique ou présentation des résultats de VGUA.NS 28-20 juillet: 10 GMT


24 août 2020 (Thomson StreetEvents) – Transcription modifiée de la conférence téléphonique ou de la présentation des résultats V Guard Industries Ltd Mardi 28 juillet 2020 à 10h00 GMT

* Mithun K. Chittilappilly

V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment

Batlivala & Karani Securities India Pvt. Ltd., Département de recherche – Analyste de recherche

Sundaram Asset Management Company Ltd. – analyste de recherche

Mesdames et Messieurs, bon après-midi et bienvenue à la conférence téléphonique sur les résultats de V-Guard Industries Q1 FY ’21, organisée par ICICI Securities. (Instructions pour l’opérateur) Veuillez noter que la conférence est en cours d’enregistrement. Je cède la conférence à M. Hitesh Taunk. Merci et monsieur.

Merci, Aisha. Bonne journée à tous ceux qui sont présents dans cette invitation. ICICI Securities vous souhaite la bienvenue à l’appel V-Guard pour Q1 FY ’21. Aujourd’hui, de l’administration, nous accueillons M. Mithun Chittilappilly, Ph.D. Med. M. Ramachandran, administrateur et chef de l’exploitation; M. Sudarshan Kasturi, vice-président principal et directeur financier. Je distribue maintenant une invitation à la direction pour ses mots d’introduction, après quoi vous pourrez poser une question aux participants. Monsieur, Monsieur.

Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [3]

Merci, Hitesh et ICICI Securities d’avoir accueilli cet appel. Un accueil très chaleureux à toutes les personnes présentes et merci de vous joindre à nous aujourd’hui pour discuter des opérations opérationnelles et financières de notre société pour le premier trimestre clos le 30 juin 2020. Au cours du premier trimestre de la 21e année, les revenus ont été réduits de 42% par rapport à l’année précédente 406 crores INR. Les marchés non sudistes ont chuté de 47%, tandis que le sud a chuté de 38%. Les marchés non méridionaux ont eu un impact plus important en raison des temps d’arrêt prolongés, tandis que l’ouverture dans le sud a progressivement amélioré la demande dans des pays tels que le Karnataka et le Kerala. De même, dans les trois segments de produits touchés trimestriellement marqués par différentes phases de verrouillage et de perturbation. Bien que les produits électriques aient eu le moins d’impact, le segment de l’électronique a enregistré une baisse plus forte en raison de sa connexion à des appareils plus gros, enregistrant une forte demande et une saison estivale comme AC. Les marges brutes ont diminué de 334 points de base sur un an à 29,2%, passant à une baisse de l’utilisation des capacités et de la combinaison de produits. Cependant, la marge brute s’est améliorée chaque mois suivant et est revenue au niveau normatif en juin. La marge d’EBITDA pour le trimestre était de 2,2% contre 10,2% en glissement annuel en raison de la baisse du chiffre d’affaires. Le bénéfice après impôts au cours du trimestre a diminué de 3,6 couronnes INR. La marge PAT a diminué à 0,9% contre 7,5% au premier trimestre de l’année dernière. Bien que ces numéros de titre indiquent l’impact de la pandémie COVID-19 conformément aux lignes attendues, nous pensons que le travail a montré une forte résilience – une forte résilience en cette période extrêmement exigeante. Nous avons mis en place des mesures de maîtrise des coûts, qui compenseront en partie l’impact des pertes de trafic. Le fonds de roulement s’est constamment amélioré car les stocks disponibles sont utilisés pour générer des revenus. Les recouvrements ont été solides et nous avons pu réduire le nombre de jours pour les débiteurs, ce qui s’est traduit par une production totale de liquidités de 215 couronnes au cours du trimestre. Même avant la pandémie COVID-19, il y avait une faiblesse de la demande des consommateurs en raison de conditions de liquidités étroites et de dépenses discrétionnaires réduites. L’exercice 21 s’est ouvert dans des circonstances difficiles, mais nous pensons que la situation est de retour – à mesure que la situation redevient normale, nous disposons du cadre nécessaire pour relancer la croissance en nous développant davantage sur les marchés extérieurs au Sud, en introduisant des produits nouveaux et innovants et en introduisant des catégories de produits supplémentaires. Nous avons introduit les meilleurs processus et systèmes pour prouver l’organisation à l’avenir et créer un cadre pour une croissance séculaire. Nous continuerons de miser sur notre position concurrentielle dans le secteur de l’électricité grand public – l’électronique et l’industrie de consommation durable pour créer de la valeur pour toutes les parties prenantes. Sur cette note, je tiens à vous remercier une fois de plus pour votre participation et je voudrais donner la parole au modérateur pour des questions et réponses. Je vous remercie.

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Questions et réponses

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Opérateur [1]

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Merci beaucoup. Nous allons maintenant commencer une session de questions et réponses. (Instructions pour l’opérateur)

(difficultés techniques)

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Hitesh Taunk, ICICIdirect.com, Département de recherche – Analyste [2]

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Bonjour.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [3]

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Bonjour.

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Hitesh Taunk, ICICIdirect.com, Département de recherche – Analyste [4]

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Oui, Mithun.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [5]

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Oui. Je veux dire – je ne sais pas ce qui se passe. Et nous resterons.

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Hitesh Taunk, ICICIdirect.com, Département de recherche – Analyste [6]

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Oui. Ouais, tu n’entends rien, n’est-ce pas?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [7]

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Je pense que nous sommes sans appel, je veux dire, peut-être. Je ne sais pas que nous allons juste garder et voir, laissez-les appeler.

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Opérateur [8]

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(silencieux) est votre ligne en mode conversation.

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Analyste non identifié, [9]

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Bonjour? Bonjour Monsieur.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [10]

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Oui. Oui s’il vous plaît.

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Analyste non identifié, [11]

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Oui oui. Monsieur, je voulais juste vous parler. Quelle est la différence de la demande du métro et non du métro entre les produits? Et la deuxième question concerne la demande de juillet, comment est-elle payée?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [12]

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Ram, allez-vous prendre celui-ci?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [13]

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Oui. Je pense que les non-métros étaient meilleurs que les métros. Je pense que les métros sont touchés pour diverses raisons. Je veux dire, c’est la première question. Les non-métros étaient meilleurs que les métros. De plus, je pense que la première partie de la fermeture, les non-métros, a fonctionné de manière formelle, informelle et cela semble basé sur le niveau d’inventaire et la part que nous pourrions remarquer, oui?

Juillet arrive. Je pense que juillet est comparable à juin, en fait un peu mieux. Mais ce qui s’est passé, c’est après le 12 ou le 13, exactement, de nombreuses zones se sont verrouillées. Par exemple, disons environ 75%, 76% des points de vente que nous desservons sont ouverts au début du mois, et cela a chuté à environ 55%, 54% autour du 17, 18, oui? Et cela s’est rétabli entre le 23 et le 24, à quelque chose de similaire, je dirais, plus proche de 70%, oui? Cela s’est essentiellement produit parce que de nombreux endroits ont été progressivement ajoutés à la serrure, non? Comme le Karnataka qui est donné à titre d’exemple ou certaines parties du Maharashtra. C’est donc une situation très dynamique. Et même les chiffres des ventes changent de semaine en semaine et de mois en mois, oui?

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Analyste non identifié, [14]

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Je comprends, monsieur. Et pour ce qui est du prix, disons, en gros, nous avons vu les coûts des employés baisser d’environ 10%. Alors est-ce – est-ce une réduction de salaire ou quelque chose comme ce que nous avons donné aux employés ou – et comment pouvons-nous examiner les coûts des employés pour l’année?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [15]

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Sudarshan – oui, Sudarshan, tu veux faire ça?

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Sudarshan Kasturi, V-Guard Industries Limited – Vice-président principal et directeur financier [16]

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Oui, Mithun. Oui, nous n’avons pas eu recours à des réductions de salaire ou quoi que ce soit. Nous disons, les employés permanents et les contractuels. Encore une fois, je veux dire, tout au long de l’année, cet appel durera peut-être 6 ou 8 mois. Pour l’instant, nous avons gardé la croissance. Il n’y a donc pas eu d’augmentation des coûts, donc l’appartement est. Nous réexaminerons la situation plus tard et verrons si nous donnerons un supplément ou non. Nous saurons donc.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [17]

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La réduction pourrait se produire parce que nous ne payons pas de salaire variable, parce que nos objectifs ne sont pas atteints.

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Analyste non identifié, [18]

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Je comprends, monsieur. Je l’ai eu Je l’ai Et quant au coût de la publicité, quelle est la probabilité qu’elle disparaisse? Nous dépensons généralement environ 3%, 4% de la ligne supérieure, donc?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [19]

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Vous voyez, cette entreprise n’est pas revenue à la normale. Même aujourd’hui, comme Ram l’a mentionné, nous ne servons que 70% de nos clients. Lorsque l’entreprise reviendra à la normale, nous l’examinerons. Mais jusqu’à présent, nous n’avons pas l’intention de dépenser de l’argent – je veux dire, c’est l’effet minimal, comme vous pouvez le voir, des dépenses publicitaires. Et je suppose que ce sera une stratégie très similaire que tous les pairs ont adoptée.

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [20]

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Encore un point. L’offre est également très dynamique, non? Ainsi, différentes zones se retrouvent dans des zones de rétention pour différents fournisseurs ou sources d’approvisionnement. La fréquentation est également mince et faible, généralement entre 50% et 70% dans ces endroits. Je pense donc que les détaillants auront besoin d’un peu plus de temps avant de posséder un sac à main, car l’approvisionnement doit également être simplifié.

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Analyste non identifié, [21]

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Je comprends, monsieur. Et ma dernière question concerne les prix des produits de base et ensuite l’atténuation. Est-ce que ce sera un gros avantage pour nous en termes de marge brute et tout cela?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [22]

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Je ne pense pas que les prix des matières premières se soient adoucis. En particulier, si vous demandez que le cuivre s’est fissuré de près, je ne sais pas, certains annulent le chiffre, mais une augmentation d’environ 20% du cuivre s’est produite. Les prix du plastique ont chuté. Mais malheureusement, lorsque les prix étaient les plus bas, nous n’avons rien pu acheter à cause de la serrure. Sudarshan, expliquerez-vous cela?

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Sudarshan Kasturi, V-Guard Industries Limited – Vice-président principal et directeur financier [23]

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(inaudible) les prix du cuivre ont augmenté et ces types se reflètent dans le prix de vente du produit que nous voyons dans ce qui suit. D’accord. Sinon, il n’y a pas beaucoup d’impact, car les autres matériaux n’ont pas trop d’impact.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [24]

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Nous n’avons pas constaté de baisse importante des prix des biens par rapport à janvier ou février dans les autres matières.

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Opérateur [25]

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(Instructions pour l’opérateur) La question suivante provient de la ligne Renu Baid de IIFL.

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Renu Baid, IIFL Research – Vice-président [26]

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Juste pour comprendre quelque chose de plus sur l’inventaire, vous avez mentionné que l’entreprise l’utilisait beaucoup pour l’inventaire, qui devait générer des revenus. Alors, qu’en sera-t-il de l’inventaire des partenaires sur la chaîne? Et avons-nous vu les partenaires de distribution recommencer à créer des actions? Ou restent-ils encore un peu plus tendance avant le stockage?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [27]

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Ram, allez-vous prendre ça?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [28]

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Oui. Oui. Les partenaires de distribution aujourd’hui, je pense, les stocks, que dirais-je, les stocks se sont normalisés, je dirais, un peu plus bas que la normale. Je pense qu’en moyenne, ce que nous examinons réduirait l’inventaire à environ 30 jours, y compris – nous regardons le nôtre – je parle de la liste globale des chaînes, qui est un peu inférieure à la normale, car elle comprend les canaux directs et indirects. Eh bien oui, il y a – ils sont plus minces qu’ils ne le seraient avant. Mais je pense que c’est ainsi qu’ils travaillent maintenant par rapport à la façon dont ils travaillaient auparavant.

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Renu Baid, IIFL Research – Vice-président [29]

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Bien sûr. Monsieur, sur la base des charges que vous avez du marché en termes de modes de consommation, quelles sont les attentes pour nous de revenir à des taux normalisés de 100% par rapport au passé? Ou la période des fêtes devrait-elle être le prochain catalyseur de la demande? Ou pensez-vous que les tendances de la demande ont eu un impact beaucoup plus significatif dans une perspective à moyen terme?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [30]

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Vous voyez, je pense que nous sommes dans une situation où nous ne pouvons pas le prédire. Veuillez comprendre qu’il s’agit d’un problème de santé. Donc, sans solution sanitaire, ni moi, ni Ram, ni Sudarshan ne pourront vraiment vous répondre. En effet, cela dépend du moment où le pays parviendra à surmonter cette crise et un par un, les marchés pourront s’ouvrir complètement.

Chaque jour est un cas différent dans chaque district. Donc, dans ce sens, il est très volatil. Il est donc très difficile de faire une quelconque prédiction. Ram, si tu veux ajouter quelque chose à ça?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [31]

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Non. Je voulais juste dire la même chose. Par exemple, nous avons commencé ce mois-ci et nous avons estimé que tout irait bien. Et puis – un par un, le verrou a commencé à être annoncé, et le nombre de points de vente que nous avons mis en place – que nous pouvions fournir a été réduit de 30%, n’est-ce pas? Et puis maintenant on regarde du 23 au 24, les barres reviennent, non? Et nous pouvons voir la conséquence directement dans les chiffres à venir, oui? Donc je pense …

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Renu Baid, IIFL Research – Vice-président [32]

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Donc, ce que j’essayais également de demander, c’est que probablement dans les prochains mois ou à la fin du deuxième trimestre, la situation se normalisera …

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [33]

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Non. C’est ce que Mithun a dit. C’est ce que disait Mithun, n’est-ce pas? Vous voyez, tout dépend parce que l’image de l’offre et de la demande change de temps en temps, car parfois ce n’est pas seulement une question de demande, non? C’est aussi une question d’offres.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [34]

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Donc, je pense que comme vous l’ajoutez, vous voyez que le Kerala avait le meilleur moyen de gérer le COVID au début de cette pandémie, d’accord? Mais nous touchons actuellement 1 000 à 1 500 cas par jour. Cela signifie qu’aucun État ne peut gérer cela efficacement. Ainsi, chaque fois que les cas augmentent, ils les verrouillent et recommencent à partir de 0. Donc, ce processus se répétera encore et encore jusqu’à ce que nous obtenions le vaccin. C’est ce que je pense. Nous ne pouvons donc pas vraiment dire quand nous reviendrons à 100%.

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Renu Baid, IIFL Research – Vice-président [35]

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Bien sûr. Mais en général, quelle a été la rétroaction ou les intrants concernant le modèle de demande, à la fois des ventes secondaires et tertiaires? Ont-ils aussi bougé en ligne? Ou comment est-ce?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [36]

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Oui. Donc, où que vous soyez – regardez là où les marchés sont ouverts et où les cas sont relativement moins élevés et où les gens se sentent relativement en sécurité pour sortir, les ventes se produisent. Donc ça existe définitivement. Nous ne pouvons pas vraiment diviser cela entre ce qu’est la demande pour les personnes installées et quelle est la demande réelle, d’accord? C’est un schisme qu’aucun de nous n’a. Mais nous pouvons affirmer avec certitude que 70 à 80% des ventes de l’année dernière devraient avoir lieu à condition qu’il n’y ait pas de blocage dans tout le pays. Nous croyons en cela. Certainement, donc c’est un grand nombre, je peux le dire.

Il peut être augmenté, à condition qu’il n’y ait pas de verrous localisés et autres choses similaires. C’est vraiment difficile à dire. Je veux dire, nous ne pouvons vraiment pas vous donner de conseils. Telle est la vérité honnête.

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Renu Baid, IIFL Research – Vice-président [37]

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Bien sûr. Monsieur, j’ai encore quelques questions. Je serai de retour en ligne.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [38]

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Oui.

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Opérateur [39]

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La question suivante vient de la ligne Sonali Salgaonkar de Jefferies India.

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Sonali Salgaonkar, Jefferies LLC, Division de la recherche – Capital analytique [40]

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Monsieur, ma première question concerne la combinaison de produits défavorable que vous avez mentionnée dans votre présentation. Souhaitez-vous ajouter une autre couleur à propos des appareils qui ont eu le plus grand impact sur notre marge brute?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [41]

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Donc, si vous regardez le travail avec le stabilisateur, cela affecte le plus, car au premier trimestre, nous vendons généralement des stabilisateurs de climatisation, et ce n’est pas tout à fait arrivé. Ils ont donc été les plus touchés, et c’est un produit avec une marge brute plus élevée. Donc, cela a définitivement réduit la marge brute totale de l’entreprise. C’est l’une des plus grandes influences.

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Sonali Salgaonkar, Jefferies LLC, Division de la recherche – Capital analytique [42]

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Comprendre. Ma deuxième question est, pour autant que je sache, qu’il y a beaucoup d’incertitude dans la demande globale et le scénario commercial. Mais quelle marge brute d’EBITDA souhaitez-vous indiquer à quoi nous devons nous attendre pour l’exercice fiscal 21? Une fourchette, étant donné que le premier trimestre était assez inférieur à celui que nous enregistrons généralement?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [43]

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Voir. Je pense que nous avons vu que dans la présentation des analystes, nous avons donné la marge brute mensuelle pour avril, mai et juin. Cela vous donne une certaine couleur qu’un tel revenu en juin, comme nous l’avons fait, cette marge brute est possible. C’est tout ce que je peux dire à partir de maintenant. Sudarshan, voulez-vous ajouter quelque chose à cela?

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Sudarshan Kasturi, V-Guard Industries Limited – Vice-président principal et directeur financier [44]

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Oui. C’est tout. Je pense que si vous pouviez vendre peut-être 80 à 90% l’an dernier, les marges ressembleraient à cela. C’est le mieux que l’on puisse dire.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [45]

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Donc, je pense que si vous étiez même 80 à 90% l’année dernière, nous pourrions atteindre 9% à 10% – entre 8% et 10% de marge d’EBITDA, n’est-ce pas?

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Sudarshan Kasturi, V-Guard Industries Limited – Vice-président principal et directeur financier [46]

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Oui. Quelque chose comme ca. Oui.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [47]

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Quelque chose comme ca. Mais c’est tout ce que nous pouvons dire.

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Sonali Salgaonkar, Jefferies LLC, Division de la recherche – Capital analytique [48]

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Comprendre. Monsieur, dans nos usines en ce moment, quelle utilité mettons-nous à jour?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [49]

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Ram, tu veux prendre ça?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [50]

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Oui. Oui, je pense que les usines de filerie fonctionnent à plein régime. Les catégories électriques sont donc très demandées, n’est-ce pas, comme je pense que Mithun l’a souligné dans sa déclaration. L’utilisation de la capacité est donc très bonne, n’est-ce pas? Et dans d’autres cas, l’utilisation est conforme aux exigences commerciales habituelles à ce stade, car ce que nous faisions au départ, nous nous sommes concentrés sur les 2 premiers mois – nous assurer que nous collectons tous les fonds et que notre situation financière s’améliore. Donc, je dirais que nous nous sommes concentrés en mai et juin principalement sur les collections et que nous avons réussi à nous rendre dans un endroit raisonnablement décent. Donc – et nous nous concentrons principalement sur l’utilisation de l’inventaire disponible. Et nos usines ont commencé vers la mi-juin, interdisant les usines de fil de fer.

Donc ce que je dirais, juin, juillet, leur balade devrait bien se passer. Cela ne devrait pas être un problème, non?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [51]

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Nous nous approvisionnons donc essentiellement avec toute demande qui existe. Nous ne produirons pas et ne forcerons pas l’équipe de vente à vendre. C’est ce que je pense être l’essentiel.

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Opérateur [52]

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(Instructions pour l’opérateur) La question suivante provient de la ligne Achal Lohade de JM Financial.

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [53]

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Oui. Ma première question portait sur – en ce qui concerne les tendances de la demande, voyez-vous une baisse du commerce, à la fois dans l’industrie et dans nos produits? Et deuxièmement, voyez-vous des perturbations dans l’industrie désorganisée?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [54]

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Ainsi, à partir de maintenant, nous ne pouvons pas obtenir de tendances claires concernant la baisse des échanges. Comme Ram l’a mentionné, l’un des produits qui se vend très bien était les fils, pour lesquels nous n’avons que 1 ou 2 SKU en termes de positionnement de prix. Eh bien, vraiment, nous ne pouvons pas mesurer cela. Nous n’avons pas vu qu’un produit premium n’est pas vendu et un produit non premium. Nous ne voyons pas une telle tendance. Les ventes sont laïques en ce sens.

Je pense que nous devons comprendre que ce qui se passe actuellement, c’est le retrait de la demande. Cela signifie en fait que les détaillants et les distributeurs nous invitent à stocker, puis nous nous rassemblons. Nous ne poussons rien dans le tuyau ou le canal. Donc ce en quoi nous croyons, ce que nous fournissons est un peu comme une exigence normative. C’est la première partie de la question. Donc non, nous n’avons encore aucune preuve de trading. Qu’y avait-il d’autre?

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [55]

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Compte tenu de l’industrie désorganisée?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [56]

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Oui. Dans le cas des fils et des câbles, nous pensons clairement qu’il existe une industrie désorganisée. Et définitivement, désormais toutes les marques en bénéficient. Oui. Les preuves sont là. Oui.

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [57]

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Et dans d’autres catégories de produits, monsieur?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [58]

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Non. Il n’y a pas de preuve.

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [59]

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Il n’y a pas de preuve. J’ai compris Et le deuxième problème concernait les débiteurs, je vois qu’en Q-o-Q nous avons vu une réduction des stocks. Pouvez-vous nous aider à financer la chaîne, qui existe depuis mars 20. Et en juin 20, pouvez-vous nous aider?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [60]

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Sudarshan?

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Sudarshan Kasturi, V-Guard Industries Limited – Vice-président principal et directeur financier [61]

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Entre mars et juin, il n’y a pas beaucoup de différence. C’est à peu près pareil.

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [62]

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Pouvez-vous nous aider avec la quantité, monsieur?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [63]

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La réduction des débiteurs est une réelle réduction des débiteurs, non pas à cause du financement de la chaîne si c’est ce que c’est.

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [64]

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C’est vrai. C’est vrai. C’est vrai. Mais …

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [65]

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Je pense que c’est vraiment une réduction des débiteurs.

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [66]

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Bien sûr. Bien sûr. Pouvez-vous donner une quantité, quel est le financement restant de la chaîne à partir de juin?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [67]

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Extraordinaire?

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Achal Lohade, JM Financial Securities Limited, Division de la recherche – VP [68]

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Financement des canaux effectué du 31 au 30 juin?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [69]

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Quel est le livre de financement total des canaux?

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Sudarshan Kasturi, V-Guard Industries Limited – Vice-président principal et directeur financier [70]

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Le montant total sera d’environ 80 INR ou 90 couronnes.

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Opérateur [71]

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La question suivante vient de la ligne Mayank Bhandari de B&K Securities.

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Mayank Bhandari, Batlivala et Karani Securities India Pvt. Ltd., Département de recherche – Analyste de recherche [72]

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Oui. Monsieur, je voulais comprendre, en particulier les produits durables. Comment la croissance des différentes catégories, telles que les ventilateurs, les appareils de cuisine, s’est-elle produite? Et étant donné que nous avons une base faible, la croissance semble – je veux dire, c’est une augmentation assez forte étant donné que d’autres concurrents ont donné de bons commentaires en termes d’appareils de cuisine, de refroidisseurs d’air et de ventilateurs?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [73]

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Ram, tu veux prendre ça?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [74]

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Oui oui oui. Je pense – comme Mithun l’a dit, vous voyez, pour le moment, nous ne poussons pas agressivement les numéros dans le magasin. Nous sentons seulement quelle que soit la demande du marché, n’est-ce pas? Et sur les canaux, notre inventaire est un peu inférieur à ce qui est souhaitable sur nos marchés clés, oui, surtout dans le sud, oui? Voilà donc la situation.

L’autre chose est, oui, nous sommes – vous verrez généralement une tendance dans cet environnement que ce que je dirais en tant que marques leaders et marques qui résistent à la profondeur de la distribution aura un certain avantage sur les autres marques. C’est un autre point.

Le troisième point que nous voulons souligner est que notre performance est très similaire aux autres. C’est peut-être possible – regardez, la pondération du commerce électronique dans certaines de nos nouvelles catégories n’est pas comparable car elles entrent dans le commerce électronique plus lentement que, par exemple, un stabilisateur ou un chauffe-eau. Je pense donc que si avec certains acteurs où vous avez peut-être une meilleure demande dans la cuisine et tout le monde, ils ont une présence plus forte dans le commerce électronique.

De plus, la cuisine et tout ce qui est une catégorie, elle a aussi une présence plus forte dans le commerce organisé, d’accord? Donc, je pense que ces influences sont également présentes, oui, au total, oui? Mais je ne pense pas que nous réussirons dans une large mesure.

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Mayank Bhandari, Batlivala et Karani Securities India Pvt. Ltd., Département de recherche – Analyste de recherche [75]

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D’accord. D’accord. Et monsieur, d’autres initiatives de réduction des coûts autres que les frais de personnel et les frais de publicité?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [76]

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Non. En général, comme tout le monde et tout sur le marché, non, les ensembles de coûts sont les mêmes pour les entreprises, non? Et nous nous concentrons sur ces ensembles de coûts, que ce soit ce que je dirais, les coûts de démarrage comme le loyer, les voyages, que ce soit ou non ce que je dirais en tant que personne, etc. Mais il y a …

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Mayank Bhandari, Batlivala et Karani Securities India Pvt. Ltd., Département de recherche – Analyste de recherche [77]

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Oui. Et tout ce qui est de nature discrétionnaire …

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [78]

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Alors, de quoi nous traitons-nous par nature discrétionnaire, oui?

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Mayank Bhandari, Batlivala et Karani Securities India Pvt. Ltd., Département de recherche – Analyste de recherche [79]

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D’accord. Et enfin, que seraient les CapEx? Avez-vous des instructions pour CapEx d’ici cette année?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [80]

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Sudarshan? Cette année CapEx?

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Sudarshan Kasturi, V-Guard Industries Limited – Vice-président principal et directeur financier [81]

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Oui. Vous voyez, en ce moment, à part les CapEx essentiels, les choses sont en veille. Nous avons plusieurs plans à terminer. Il ne reste pas trop de choses extraordinaires, à part certaines choses informatiques, infrarouges et similaires, du moins nous ne voyons pas de CapEx se produire.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [82]

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Vous voyez, peut-être avons-nous des CapEx pour l’usine de production de fil, environ 15 couronnes INR pour 20 couronnes INR, puis probablement 10 couronnes INR supplémentaires et tout ça. Alors peut-être 30 crores INR, 32 crores INR – 30 crores INR, 35 crores INR CapEx se produit au maximum.

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Opérateur [83]

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La question suivante provient de la ligne Bhavin A du fonds commun de placement SBI.

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Analyste non identifié, [84]

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Mithun, juste une question de ma part. Compte tenu de la pandémie actuelle, que faites-vous différemment pour aider l’entreprise à s’améliorer structurellement davantage? Et si vous le pouvez – il serait intéressant de parler de l’investissement que vous allez investir dans des personnes qui seront difficiles à embaucher dans d’autres circonstances ou qui investiront dans la recherche, le développement, l’innovation vous seront utiles, connaissez-vous ce que vous pensez de cela?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD et PDG [85]

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Nous avons donc travaillé dans l’espace de travail numérique en tant que concept, nous avons commencé il y a 2 ans. Nous avons donc commencé avec un système de WC de classe mondiale. Nous avons commencé par intégrer un système de WC de classe mondiale avec des équipes, Microsoft Teams. Ensuite, nous avons investi dans quelque chose appelé Degreed, qui est une plate-forme d’apprentissage, qui en tant que gestionnaire peut être utilisée pour le contenu créé dans l’entreprise, ainsi que pour le contenu payant externe, alors nous passons à autre chose. Nous avons donc investi beaucoup de technologie, sans savoir que cette pandémie allait arriver. Et maintenant, nous en utilisons beaucoup.

Nous avons des programmes de formation continue non seulement pour nos propres employés, mais même pour les principaux partenaires de distribution et leur personnel sur la façon de vendre un produit particulier à un client, les ventes techniques. Nous profitons donc de ce moment pour améliorer ces activités car il n’y a pas de visibilité absolue lorsque les gens peuvent visiter le marché, s’il est sûr de visiter le marché et tout le reste. Donc tout le travail se fait par téléphone et par vidéoconférence.

Je pense donc que nous allons probablement accélérer un peu plus vite cette voie vers l’entreprise numérique. Je veux dire, nous avons fixé des jalons, mais COVID nous a obligés à suivre rapidement certains de ces jalons. C’est un côté.

Quand il s’agit d’embaucher des gens, je pense que nous avons embauché beaucoup de gens de 2015 à 2020 et vous verrez nos coûts d’employés grimper. Je ne pense donc pas que nous devions engager davantage de ressources clés. À mon avis, il n’y a pas beaucoup de personnes et de postes à pourvoir. Il y a très peu de choses entre les deux, et lorsque nous trouverons la bonne ressource, nous en tiendrons compte.

Le deuxième est le commerce électronique. Nous avons commencé notre aventure dans le commerce électronique il y a deux ans, et maintenant nous obtenons une très bonne traction. Nos marges sur le commerce électronique sont bien plus élevées que celles que nous faisons sur n’importe quel autre canal et augmentent très, très rapidement. Et nous avons même lancé certains produits pour lesquels le commerce électronique est le premier canal de choix. Et nous ne les lancerons hors ligne que beaucoup plus tard.

Donc, toutes ces expériences fonctionnent bien. Je demanderai également à Rama de compléter davantage ces commentaires.

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, responsable de la responsabilité commerciale et directeur à tout moment [86]

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So actually, we’ve been having a long-term journey for organizations capability building, yes? Much of the focus in the last 5 years have been on the supply side, yes? And mainly, we’ve been working on cost. We’ve been working on in-sourcing manufacturing, yes? And we have also been working on working capital, yes? So that’s been our work and there are some proofs related to that, which we should be able to capture over a period of time. But more than the financial benefit or the capability that is getting built, these are also built on robust digital friendly, what I would say, tech ecosystem, yes? So I think that a lot of focus in V-Guard has been on this over the last 5 years, and which I think may be another year or 2, we will continue so that our work on the supply side there will be complete and comprehensive, yes?

We have commenced work on the market side, fundamentally, to help us to build leading capability on the market side, where we are trying to embrace the technology into our, what I would say, marketing process, yes? And this work just we started about 6 months back before the lockdown has started. That’s something that we will continue over the next 3 to 4 years. These are like long-term journey. And fundamentally, what this journey is doing is helping us to deep rouge our capability, whether it’s manufacturing, whether it is products, yes, whether it is go-to-market, yes? It’s fundamentally building leading capabilities in this area.

And also, what it is doing is, this is all being accompanied with the road map for the enterprise digitization that Mithun was earlier referring to, yes? The near-term benefit of enterprise digitization is basically connecting the organization for employee productivity, which I think we outlined. And the long-term business will be related to some of the areas that I talked about.

So we have a pretty robust program. I mean this is a program which has been on for the last 4 to 5 years, and we have a road map for the next 3 to 4 years. And we are busy focusing on that, and we are busy putting that in place.

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Opérateur [87]

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The next question is from the line of Akshay Bhor from Premji Invest.

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Akshay Bhor, [88]

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I actually wanted to understand a little on the historical performance. If I look at pre-COVID about 4 to 6 quarters, the performance has been slightly tepid, both as compared to your own historical performance and then even with respect to peers as well. And this is in light of very good summers last year should have been favorable to some of the portfolio, and then the winter as well. So I just wanted to understand what is it that is kind of — how can we attribute this performance to — what can we attribute?

And within that, specifically, is there any component of competitors, new competitors that are coming into — especially in the Kerala market that you’ve pointed out some time in the past, any color would be helpful?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [89]

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So see, what has been happening is, I think, post demon and GST, the market growth had slowed down significantly for all players. So every company in India was getting into every product category. And we also got hit in that mismatch, wherein which maybe 20, 30 brands and the water heater business, which is a INR 1,500-crores category. And then the same thing happened with even stabilizer. I’m told that Philips also now has stabilizers. So people started looking at companies with decent margin and they have started entering categories. I should not be talking about it because we have also entered a different category.

But the thing is when everyone in the market tries to enter every category, there is going to be a blood bath. And that you will see not only with us, in time, you will see with other companies as well. So yes, there is a period where we had to show restraint, not react by dropping price and all that. We have lost share also. We have lost revenues also. But our margins are intact.

I think after 4, 5 years, many of these people will leave. I mean, again, you will hear about many of these companies getting into trouble also. I don’t want to specifically name them, but we have some companies who are into batteries that got into kitchen appliances that got into trouble. So stuff like that, it keeps happening. So we can’t really stop competition. It’s a free country. Anyone can do pretty much anything.

So we’re not really worried about 1 or 2 quarters. But if you look at last 5 years, we have worked significantly to improve our gross margin. And this has also happened because we gave away — we chose to do where we will do business. We chose to walk away from categories. So we have shut down a loss-making power cable business that was doing close to INR 90 crores 6 years back. We have shut down agricultural pump business that was doing INR 40 crores 5 years back. So last 5, 6 years, we have also restructured a lot of our portfolio to have a sharper focus. What does it mean is that, yes, year-on-year, you will not see such great revenue growth, but our business is very healthy, and we are more sharper focused. And it gives us bandwidth to go after categories that are of better margin profile.

Ram, do you want to supplement to that?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [90]

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Oui. A couple of things. So I think we have to see the macros also. So if you broadly look at the macros, see, the nominal growth, which used to be at around 14-odd percent, has dropped to about 8% to 9%. That’s on one side. On the other side, if you look at the last 4 years, a significant part of this growth has happened on e-commerce and organized trades, yes?

I think we have been led to enter e-commerce and organized trades on one side. The other side is, while the nominal growth has almost come down by 40%, the — and part of the remaining growth has gone into organized trade and e-commerce. In the remaining part of the market, a lot of people have entered, which is what Mithun has been talking about, right? And mainly, we have been focusing on the traditional trade as a company. And we — if this macro is understood, I think the performance would seem as strong and as good, okay? Because when 30%, 40% of the growth is happening outside the area that you focus, right, and you’ve not participated in that adequately. Because, as Mithun said, right, last few years, we’ve been working on building capability, and we are not very happy now that we have the right, what I would say, we are in the right place to scale up. And therefore, because it’s required a lot of preparation.

So that’s one context I would like to bring to your notice, right? Second thing, I would like to say is, we — post the demon and GST, right, the companies, which were — we used to be an outsourcing company, yes, most of our business was outsourced. So when we move from outsourcing to manufacturing, right, we — our competitiveness got impacted to the extent of about 4%. So that was — the outsourcing gave us the advantage to be able to compete with people who had strong and deep market positions. And this is why you will see now that progressively, in the last 3, 4 years, we have gone in for insourcing manufacturing to the company, yes?

So I think this period also a period where we have overcome this challenge where we lost this competitiveness, and we were able to restore our margins and hold and improve our margins in this environment because it meant that relatively, we have to improve our price positioning in the marketplace, yes? And the 4% is a huge, huge impact, yes?

That’s the second thing. The third thing is, we’ve been focusing on making sure that we are able to generate and convert our profitability into real cash, yes? And you would see that in our books today. And you will also see that much of the CapEx investment that has happened where we’ve set up 5, 6 factories over this period — 4 or 5 factories over this period, and some of them are work in progress, this is the consequence of our ability to generate cash in the business, yes? So our focus has been fundamentally to make our business strong and robust, make sure that we become healthy, and our gross margins are protected and improved.

I think we have improved our gross margin to the extent of around 6% to 8% over the last 5 to 6 years. Half of it has gone back into the business in terms of investment, right, to meet the cost on people that we have added and the investment that we have made on the technology side, right? So we are putting money back into the business so that we become strong and we become competitive, yes? So we have invested in manufacturing capability and R&D and product design and development, yes? And the fruit of this will be visible over a period of time, right? So…

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Akshay Bhor, [91]

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This is a very detailed and candid as well. Just a quick one, if I may? On the margin front — the EBITDA margin front, any aspirations that you have? I’ve seen — your gross margins have seen a very smart improvement last year, any targets? And also, if you could indicate what is the price differential in the non-South region now, which you used to indicate earlier, anything on that front would be helpful here?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [92]

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See, we had earlier stated that we would like to hit 10% and then improve 0.5% EBITDA every year. But this is at a time when sales were at a normal run rate. Today, sales were — the quarter gone by 60% of what it should have been. So it’s very difficult to say that. So the gross margin will get converted in the EBITDA margin the moment sales at 80% to 90% of the usual business, and which I think it has happened in the month of June, and we are hoping that it can happen going forward.

That’s as far as the EBITDA margin is concerned. What was the second one?

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Akshay Bhor, [93]

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I am trying to understand the pricing differential that you used to talk about in the non-South…

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [94]

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D’accord. We now don’t have much of a price positioning difference between South and non-South. We have kind of normalized. I would say it’s very negligible. Sudarshan, you want to add anything to this?

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Sudarshan Kasturi, V-Guard Industries Limited – Senior VP & CFO [95]

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Oui. The prices of South and non-South more or less are the same. There could be some tactical schemes here and there that we run, but otherwise, there’s not much difference that we speak about.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [96]

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Oui. For example, there are some markets in non-South which mirror our margins in South or probably better in terms gross and EBITDA, yes.

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Opérateur [97]

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The next question is from the line of Charanjit Singh from DSP Mutual Fund.

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Charanjit Singh, [98]

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Oui. So sir, in terms of — now you talked about market share changes, which you would have seen over the last couple of months and now also in this recent quarter. So can you highlight any major segments where we would have lost or gained share or region wise, we would have seen the intensity much more significant in any particular product segment? If you can give color on that aspect?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [99]

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Ram, you want to take this?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [100]

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No. You mean last couple of quarters? I think nothing particular. I think from time to time, we see aggression in different categories, yes? So we have — we’ve seen more intense activity in stabilizer sometime, sometime we are seeing it in water heaters there. But before that, sometime we saw in wires, sometimes it’s geographic, yes? But usually, what happens is then, of course, we, of course, try to protect our interest, yes? But in the reply that comes with a lag.

So I think these are some major categories that — which have impact on us and where we have witnessed these kind of issues. And usually it is geographies. I mean, in one of his strong pockets, we see this coming up. But it takes — once we sense that it’s getting strong, I think we react and — but then will lose some time in the process here. But nothing sustainable…

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [101]

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So I think let me answer it in this way. We decided that we will not buy market share by giving discount. So let me put it that way.

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [102]

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So we block — so what happens is we block. So we will block — if we find that the action of someone is hurting us, so we will block that in that place, yes? But then in that place, yes, yes.

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Charanjit Singh, [103]

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D’accord. And sir, in the last couple of quarters, we have been working on our product portfolio, upgrading it, more feature-rich products and now with the COVID scenario and a lot of fears in terms of down-trading and the kind of sales which are happening, so how do you see the reaction to our product portfolio, which could be more feature-rich and more towards the profitable segments, which we had moved earlier?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [104]

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So we have completely revamped our NPD process, and we have a very, very clear strategy in place. It follows from the automotive strategy of standardization, simplification and platformization. So the chassis will be the same. The bells and whistles we can add. So if someone doesn’t want the bells and whistles, we can remove and sell it at a lower price. So this gives us the flexibility to create a platform and then make it into a super-premium product or a super-economy product as the case maybe.

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Charanjit Singh, [105]

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D’accord. And sir, lastly, on the channel mix front, how is our channel mix, e-commerce versus a wholesaler driven or direct distribution, how is the mix? And how do you see now with a lot of technology investments which you have done, do you think that channel mix can change in the favor of e-commerce significantly? And which product segments are you seeing more traction on the e-commerce platforms? And how is the pricing differential in that, yes?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [106]

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So Ram, you want to take this?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [107]

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Oui. So I think you can look at it at company level or related category level. I say related category because if you eliminate some categories like wires, switches, switchgears, pumps, right? These are not e-commerce friendly category. But otherwise, at a company level, we would be at maybe 2% to 3%, closer to 3%. And at a related by category level, we’ll be about 5% to 6% today, yes? But this is growing fast because the fundamentals are in place, and we have tested that over the last 2 years, yes?

And as we are able to bring more offerings in, we expect to see traction. Obviously, the traction will be more in categories where we have historical strength. So typically, you will see a stabilizer or water heater getting a pan or kitchen getting good traction, yes? So I think, obviously, in order of our strength in the different categories, yes?

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Charanjit Singh, [108]

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D’accord. And sir, in terms of wholesaler versus retailer?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [109]

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So we are not generally a wholesale focused. So mainly — see, mainly, we have been focused on inform category that is distribution, yes? And what we are doing now is — and we have been able to build the foundation for e-com. And we will be focusing on growing our business in e-com in organized trades. So that’s going to be our focus going forward, yes, and we are working towards that, yes? So that’s a huge opportunity that’s available to us, yes, which we could not participate when the business shift happened about 3 to 4 years back as we took time to build our internal capabilities, yes?

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Opérateur [110]

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(Operator Instructions) The next question is from the line of Manish Agarwall from Edelweiss.

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Manish Agarwall, Edelweiss Securities Ltd., Research Division – Analyst [111]

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Just one — a couple of questions from my end. Firstly, is there some fatigue at the dealer channel level basically where they are not willing to keep high inventories like maybe if they are carrying a 30 to 40 days of inventory, now they were kind of not willing to take more than 15, 20 days of inventory. Are you seeing something like that happening?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [112]

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Ram, do you want to take this?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [113]

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Oui. The channel is operating on lower-than-normal inventory because, there is still uncertainty that is visible. So in general, the inventory has come down over a period of time, yes? And the regular stocking that one would typically see is not visible today, right? That’s also visible in the — with which even cash has come back from the market, yes?

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Manish Agarwall, Edelweiss Securities Ltd., Research Division – Analyst [114]

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D’accord. D’accord. Sir, is it something to do with any pricing arrangement that channels would have of themselves with…

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [115]

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Ne ne. I think that they have thinned their inventory, yes, and they have thinned their inventory, probably because the situation is uncertain, right? And so people are, what I would say, not stocking too much. And I think mostly, not just us, but all companies are at this stage, they are more busy feeding demand because I think that if everybody were to push sales, I’m not sure supply will keep pace, okay? If you’re looking at — because the suppliers, all those factories are open, many of them are operating at 50% to 60% manpower is what we are observing. I’m talking about raw material, packaging material and stuff like that. And some of these are periodically going into containment and coming back after a week or a fortnight and stuff like that also.

So all these things we are observing. And therefore, what we feel is it will take some more time, before things will normalize. And I think maybe couple of months down the line, we would be in a better position to develop a point of view on this. I think right now, I think people are not — people are just buying hand to mouth. So what we are observing is, we get more even sale through the month, right? So — and practically, we are getting flat sales [everything] through the month. This is something we’ve seen before because in the past, it would be more sale towards the month end. But now it’s more even right through the month right.

And it’s a replenishment. There is no urgency to buy on a first or a second or a third or a fourth, right? But typically, what we see is, we see almost the same number running right through the month.

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Manish Agarwall, Edelweiss Securities Ltd., Research Division – Analyst [116]

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D’accord. So the demand pattern has changed — standard demand pattern has also changed you can say?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [117]

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No. I think that they are just buying to requirement, right?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [118]

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Oui. So I think, see, earlier, what was happening was they were having 45 days of inventory and during the month end, they will negotiate and then they will buy more as a bulk volume. But now they’re buying 25% each week or 20% each week like that.

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Opérateur [119]

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The next question is from the line of Prashant Kutty from Sundaram Mutual Fund.

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Prashant Kutty, Sundaram Asset Management Company Ltd. – Research Analyst [120]

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Sir, firstly — the first question is in terms of — you just spoke about even before COVID, there was a lot of competition, which kind of entered the market and probably will not want to respond to it. But just want to ask, is the overall landscape itself changing? So because you’re also hearing a lot of strong players also entering into a lot of these markets be it appliances market or be it the kitchen appliance offer a matter of switchgears, lighting and so on and so forth. So is the competitive landscape even more severe as compared to what it was thought by you earlier and any changes in strategy which would like to make on account of that?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [121]

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See, what will happen is when — like I said, after demon and GST, when there was a crash in the GDP growth rates in the country, every company was not — the core categories were growing at 4%, 5%. So obviously, it doesn’t look nice to show 4%, 5% growth. So everyone decided to get into every category. I — usually companies give it 5 to 7 years. After making losses for 5 to 7 years, they usually shut it down. So that will start now.

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [122]

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I think also right, I think we could see this — so from our point of view, right? So we could see this phenomena coming up. So immediately after GST, a couple of things became very clear to us. One is the hyper competition became very clear to us. And the second thing that became clear to us that companies which had sourcing-based model, we are losing advantage, okay? And there are 2 kind of issues that happened for us because invariably we are going to a category, you rely on the capability of a supplier. So we are able to differentiate locking this is weak, okay?

And second thing is, of course, as I said, there is — for us, at least, we could see a clear 3.5% to 4% gross margin erosion — relative gross margin erosion happening because of GST coming in. Because the larger companies, which were manufacturing, they could have some advantages.

And so based on that, we — about 2 years back, we have reset our strategy, and we are working that path. And I think some part of the dividends you would have seen this year in terms of margin growth, yes? And our priority initially is to be fit for growth. Being fit for growth means making sure that your business has the right margin structure, yes? And is churning sufficient amount of cash so that we can invest back into our business, yes? So that’s our focus. And we are running business with that mind. I think that’s what Mithun was trying to say earlier, yes?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [123]

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I was — one more point to make is, when — like if you say, if the period of growth, if there is a strong growth happening in the country, it is much more easier to get into a new category and grow than in like in a reflationary kind of an environment, like what it’s today. So in a very — when market is growing at 15%, market leaders may not even notice that their share is getting lost. But whereas when market growth is 5% for you to grow literally someone has to degrow. So that’s when the hyper competition starts.

So I think now the Indian companies would have realized that it’s not easy to enter new categories. It’s a long-term haul. So probably the only serious players will remain. Of course, someone will launch and then they will drop price by 20%, 30% and get some share and all that. But then how long you will do this? You’ll do it for 3 years, 4 years after that, eventually, you’ll have to somehow think about making money out of it, right?

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Prashant Kutty, Sundaram Asset Management Company Ltd. – Research Analyst [124]

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D’accord. My second question is, given the current environment, you spoke about, driven channel is probably not really liquid — well it could be a short term phenomenon, but you said the channel is also being a very more agile in terms of stocking inventory as well. In this period, are we also looking at probably cutting off some of those low-churn products for us or probably any of those-churn categories for us. Anything on the product front, which you’re trying to do that probably focus on certain categories and which would they be, if I may ask? So anything on that front, if you could tell us on that?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [125]

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So see, we did not wait for COVID attack to start doing this. Like I said, we stopped LT cable in 2018. We stopped agriculture from last year. I am — so we are not afraid to admit mistakes and shut it down because if ROCE for a product is not happening, the strategic value of the product is not there to the company, we will shut it down. We have no problems in disclosing it. We have no problems in taking the hit. We have written off an entire plant of some INR 20 crores, which is LT cable that was done about 3 years back. So as a company, we are not afraid to do these things, and we’ll continue to do it, whether there is COVID or no COVID.

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Opérateur [126]

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The next question is from the line of Santosh Yellapu from Ashika Stock Broking.

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Unidentified Analyst, [127]

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I had a couple of questions. First, sir, what are the challenges we see going forward to roll out the new products and also addition of the dealers or distributors across the non-South markets in FY ’21 and ’22?

And the second question is, sir, on the Consumer Durables segment, with just INR 80 crores kind of a top line, we did a segment level loss of almost INR 8 crores, INR 9 crores. This is somewhat a repetition of a mix we have seen in Q1 FY ’18, could you throw some colors that despite new breakfast appliance launches, why we saw this kind of a loss?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [128]

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So first of all, the challenge is, of course, India is whatever said and done, we have video conferencing and all that, but in India, business is still done the old way. They prefer meeting face to face, especially our retailers. They are a specific stereotype that they really believe in meeting face to face. So this as long as this face-to-face meeting and product launch functions and tours and all those don’t happen, it is always going to be slightly challenging to go to a new dealer.

I mean you can’t just call up a new dealer on the phone and say, can you be my dealer, I mean, so that’s going to be one task. But however, we hope that there is some vaccine that is coming in our way. And then probably, our sales team can restart travel.

We have to also keep in mind that right now, retailers are also scared. They don’t want any company representatives coming into their store because if one of the retailers catches this, then he has to also shut down the store and all kinds of stuff happens. So retailers are also very scared to allow company people to come into their stores. So most of the business gets done on salesforce.com and video conferencing and phone calls and all that.

So that is definitely one of the challenge. What was the second question?

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Unidentified Analyst, [129]

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Sir, consumer durable segment.

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [130]

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Can I take that question. Yes, can I take that question.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [131]

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Sorry, consumer durables. Ram, do you want to take it?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [132]

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Yes, yes. See, just — see, this last quarter, as I said, it’s more like 45, 50 days of sales, okay? A mature category where we have higher market share and significant volume to market scale, obviously, the profitability will be better, and you will see a better health even on lower volume, okay? But the — many of the consumer durable categories, right, either you have a AC — sorry, you have a water heater, which is not — which is off-season, okay? Or you had air cooler which was just getting out of season, okay? So that’s on one side. And on the other side, you have kitchen and other products, right? These are products that we have entered in the last 3 to 4 years, okay? Obviously, they’re going to have fixed up costs associated with the entry into these categories, yes? And therefore, the breakeven point, in this case, will be much, much higher as opposed to breakeven point in a mature company. So as you can see, we’ve done about 58%, and we’ve been able to be profitable, yes?

But probably, when you will break the number by segment, you will find that maybe the breakeven point in the mature categories is at about 40%, 42%. And the breakeven point in the emerging categories will be about 60%, 70% because they have still not achieved the scale commensurate with the investment that gone in, both at the back end and the front end, in terms of manpower and other resources, by R&D resources. So I think you have to see it in that light, yes? I hope that’s clear?

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Unidentified Analyst, [133]

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Yes, sir.

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [134]

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Oui. Fine.

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Opérateur [135]

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The next question is from the line of Achal Lohade from JM Financial.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division – VP [136]

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What I wanted to check was, a, in terms of the festival season now given our product portfolio, so how important is the festival season for us in general, especially for the South market?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [137]

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See, so this year, Onam will be the first festival. So once Onam is over, we can tell you how it was. See, please understand that these are not normal times. It’s kind of like World War is happening or something like that. So people are not really in a mood to go celebrate festivals. I mean people are not in able to get out of their own house, forget festivals. So I don’t think they are in a mental frame to really do it, go and splurge money and all that. What people are doing is something is breaking down in the house, they’re repairing — replacing it.

We see a lot of demand for TV stabilizers because a lot of TVs getting sold because now TV is the only source of entertainment for every person. We also see that a lot of demand for UPS systems because everyone is working from home, all the schools are studying — school children are studying from home. So at any cost router should not go up. That’s a key — asked by all households. So if you look at Kerala Onam, I mean the TV sales is one of the biggest ones. And I think Onam TV sales should be decent because — not because people want to go and buy TV because of Onam, but because TV is the only source of entertainment. So maybe any number of TV is not enough because we are sitting at home all the time, right?

So I think though — I think the behavior will change like that. I think the need — so what behavior we saw last year in terms of people going and buying stuff on auspicious day and all that will change into a need-based buying. I mean, if I need a TV, I’ll buy it; if I need a UPS or an inverter, I will buy it; if I need a router, I will buy; if I’m doing some renovation, I will complete it, et cetera, et cetera. It won’t be that of because it’s Onam, I will go buy some clothes and then I will buy some gifts and all that. I don’t know whether that will happen this year, but we will have to wait and see.

But definitely, we can see that there is increased demand for televisions. There is increased demand for dish washing appliances, vacuum cleaners, et cetera. So we have stabilizers, dishwashers and microwave ovens. So we expect all these to do well. So that’s my primary expectation.

Ram, you want to add anything to this?

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Ramachandran Venkataraman, V-Guard Industries Limited – COO, Business Responsibility Head & Whole Time Director [138]

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Oui. I think pretty much what you said. I think my — I think my sense would be that I think we should not analyze this situation too much because whatever numbers are coming, right, they are a consequence of, what I would say, demand-supply challenges of various companies, yes? They are a consequence of, what I would say, essential purchases being made by people, right? So I think unless the COVID scenario changes, this picture is not going to change. I think our industry is in that way, it looks like we are more fortunate than some other industries that demand has not hit us so hard because we’re still able to post lockdown able to do 80%, 85% as you saw in the last 2 months, yes? And we think that we should be able to do that in the coming 2, 3 months for sure, yes?

So I think we should not analyze this too much. And I think we should wait and watch, yes? I don’t see any companies taking an aggressive posture and making investments because we don’t know. Because see, the number of people who are taking calls, right, on how future will be that has increased, right? So see, every district authority is an independent authority and is authorized and empowered to take steps and measures as may be required to safeguard people in that area. So a lot of local decisions are getting made. And so we have — there is no certainty to say how things will go. Therefore, I would say, I think that we should wait and watch, and I think this is a passing phase, and we should not spend too much time analyzing this because anybody who is making a prediction is speculating, right? And that’s what we are observing.

Because if you take Kerala, we were in a good shape in Kerala and now look at what’s happening, right? The cases are much, much more. And this is in spite and despite best efforts, right? So I think there’s a lot of uncertainty still associated with this. And that would be good to watch, yes?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [139]

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So one more point is, I think the key thing to watch is number of cases per district because definitely, when the cases do drop in a particular district or an area, people do feel confident and they go and spend. So I think the best way to judge how things will go is keep analyzing that, and that is one lens. I don’t think festive demand is going to be a key consideration this year. Because see, the festive demand is a hype created by all companies by advertisements. I mean the kind of money, all the durable companies spend during Onam and Diwali, it’s huge. I don’t know whether this year, they are in a financial position to do that. And even if they do that and after 1 week, they realize the entire country goes to lockdown, what do you do with the money you spent? So these are the questions that are staring us in the face. And then that’s why we can’t really make an answer now.

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Achal Lohade, JM Financial Institutional Securities Limited, Research Division – VP [140]

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Shvatio sam And just the second question, in terms of the inorganic, I know these times are trying times, we’ve been looking at or considering inorganic opportunity. So given the current context, are you keen on doing or you think this is now kind of pushed by at least couple of years in terms of any acquisition, et cetera?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [141]

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I wouldn’t say a couple of years, but definitely a couple of quarters. I think we have been fortunate to have targets that have been engaging with us. And we have been fortunate to mutually agree to keep it on a deep freezer or a backbone as you call it. I don’t think we require 2 years. I think by January, we’ll be in a position to better perform.

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Opérateur [142]

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(Operator Instructions) As there are no further questions, I would now like to hand the conference over to Mr. Hitesh Taunk.

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Hitesh Taunk, ICICIdirect.com, Research Division – Analyst [143]

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Thank you, Aisha. Thank you, sir, for your comments and insights, sir. Is there any closing remarks, sir? Mithun, sir?

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [144]

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No closing remarks. Thank you, ICICI, for hosting this call. And let’s hope that we can overcome this pandemic, and everyone, please stay safe and listen to your local authorities. Je vous remercie.

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Hitesh Taunk, ICICIdirect.com, Research Division – Analyst [145]

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Thank you, sir.

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Mithun K. Chittilappilly, V-Guard Industries Limited – MD & Executive Director [146]

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Je vous remercie.

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Opérateur [147]

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Je vous remercie. On behalf of ICICI Securities, that concludes today’s conference call. Thank you for joining us, and you may now disconnect your lines.



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