Research report – Educational Purpose only

Equity Research Report – Havells India Limited

About the Company

Recommendation xxx
Havells India Limited ("the company") is a public limited Company domiciled in India
and incorporated on August 08, 1983. The Company is consumer electrical/electronic CMP (Feb 01, 24) 1,315
and power distribution equipment manufacturer having 6 major product categories- Target Price xxx
Switchgear, Wire & Cables, Lighting & fixtures, Electrical consumer durables (Fans,
water heaters, Air purifiers etc), Lloyd consumer (ACs, Washing machines, Key Stock Data
Refrigerators etc) and Others (Personal grooming products, Motors, Solar panel etc). NSE Code HAVELLS
The first large-scale manufacturing unit was set up in Alwar, Rajasthan in the year No. of shares (cr.) 63
1996 for manufacturing Cables. Now Havells has 15 manufacturing units and 90% of M Cap (cr.) 82,386
the products sold are being manufactured in-house. In-house manufacturing gives 52 Week High/ Low 1,472/ 1,128
the company full control over the supply chain, remain lean in terms of inventories
and flexibility to customise products as per diverse customer requirements especially Source: Screener.in
for B2B customers.
The products are exported to almost 70+ countries. The revenue from outside India Stock Performance (%)
Period 3M 6M 12M
remains at 3-4 % of the total revenue. The total supplier base is 1,231 as on March
31, 2023. The company procures approximately 75-80 % from domestic suppliers. The Absolute (%) 6.0 (0.5) 12.1

number of employees in the company are 6,822 as on March 31, 2023 up from 5,970 Relative (%) (9.1) (11.2) (9.9)
as on March 31, 2022. Source: Yahoo Finance

Expanding capacity & geographies

In FY 22-23, there were several products launched & upgraded by the company and
Shareholding Pattern (%)
one big capacity expansion took place.
Dec-23 Sep-23
Manufacturing base increased by adding Lloyd AC plant in Sri City, Andhra Pradesh, Promoters 59.43 59.43
India. The new plant is expected to double the AC production capacity to 20 lacs FIIs 23.96 24.19
units up from 10 lacs units which could impact revenue by 2700 to 3000 crores
DIIs 10 9.38
which provide a huge opportunity for the company to gain market share and be
amongst the top players in AC category. Total market for AC is approx. 1 crore units Public 6.5 6.9
which is increasing as per management. Government 0.11 0.1

Source: Screener.in
In underground cable which constitute 40% of cables & wire segment (33% of
company’s total revenue), there is capacity constrained till next year i.e. till their
new greenfield Cable and Wire plant get commissioned and start supply by end of Rs. (Cr.) FY23 A FY24 E FY25 E
this FY 24. Revenue 16,911 19,036 21,492

Company is expanding its rural footprint - Distributor presence in 3,000 towns Y-o-Y 21.3% 12.6% 12.90%
Growth
(10,000-50,000 population) covering 42,000+ retail points through Rural Vistaar
EBITDA 1,615 1,805 2,038
initiative. Presence in towns with <10,000 population through 400+ Havells UTSAV
EBITDA 9.6% 9.5% 9.5%
exclusive store in FY 2022-23, which is targeted to be increased to 2,000 by FY Margin
2023-24 about 5% to 6% of our consumer product sales come from rural sales. PAT 1,072 1,224 1,425
Y-o-Y 6.3% 6.4% 6.6%
Recent quarter highlights Growth
P/E 69.5 60.8 52.2
In quarter ended Dec 2023, Havells International Inc. - a WOS of Havells India
Limited and Havells HVAC LLC, a subsidiary of Havells International Inc. were EV/EBITDA 45.8 40.8 36.3
incorporated in USA with plans to distribute HVAC in the US market. ROE 17.0 15.8 16.5

The revenue in Q3 23-24 achieved a 7% increase on y-o-y basis with major increase Source: Company Analysis
coming from cables segment ~ 11%. The majority contributor to revenue remains
the cables and wires segment with 36% of total revenue this quarter which
highlights its ability to grow further once the capacity constrained is removed. Prepared by: Vaibhav Sharma

There was reduction in the segment results on y-o-y of 4 % primarily due to 39% yoy
increase in advertisement & promotion expense.
1
 Economy

Global Economy and its impact on the company

Global growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with the 2024 forecast 0.2 percentage point higher
than that in the October 2023 World Economic Outlook (WEO) on account of greater-than-expected resilience in the United
States and several large emerging market and developing economies, as well as fiscal support in China.
Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary
policy. Global headline inflation is expected to fall to 5.8 percent in 2024 and to 4.4 percent in 2025, with the 2025 forecast
revised down.
For the company, disruptions in the global supply chain with the
geopolitical disturbances led to steep run-up in commodity prices.
Copper Price ($/MT)
The impact of the same was witnessed on the Company margins as 12,000
the entire cost escalation could not be passed on to the customers. 10,000
FY23 profit was at INR 1,072 crores as against INR 1,196 crores in 8,000
FY22. Profit margin was at 6.3% in FY23 as against 8.6% in FY22. 6,000
4,000
Major commodity used in manufacturing are Aluminium and 2,000
copper which constitute close to 45-50% of cost of raw material -
consumed.

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23
In FY23 the copper price touched all time high crossing $
10,000/MT in April 2022 and remained volatile in the range of $ Source: Federal Reserve Bank of St. Louis
10,000 - 7,600 /MT. Post Apr 23, prices have shown less volatility
and it is in range of $ 8,000 - 9,000/ mt. Aluminium Price ($/mt)
Similarly, the aluminium price touched all time high reaching $ 4,000
3500/MT in March 2022 and remained quite volatile in the range of 3,500
$ 3500 - 2300 /MT. Post Apr 23, price has come down and it is 3,000
2,500
hovering around $ 2,250/ MT.
2,000
After a high inflation period of 7% in 2021 and 6.5% in 2022 it is 1,500
expected to come down to near 3% by the end of 2023. Further, 1,000
the US Federal Reserve have kept the fed funds rate steady 500
-
at 5.25%-5.5% for a fourth consecutive meeting in January 2024, in
Apr-17
Apr-14

Apr-15

Apr-16

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23
line with expectations but indicated 75bps cuts in 2024.
“Lower inflation rate coupled with expected low interest rate Source: Federal Reserve Bank of St. Louis
environment in the US would be on the positive side for the
company's newly incorporated US subsidiaries.”
Source: IMF, Annual Report, Company Analysis, balance money trading economics

Indian Economy and its impact on the company

The last FY i.e. 22-23 witnessed a mixed operating environment as it
Private Consumption % of Nominal GDP
had a healthy business outlook while at the same time faced
66 challenges around commodity price fluctuations, rupee depreciation
64
and accelerated inflation rates.
62
60 In the backdrop of global challenges, India continued its strong
58 growth with a rebound in private consumption and increase in
56 government capital expenditure. The Private consumption in India
54 has been in the range of 58% to 64% as % of nominal GDP which
52
makes it the largest component of GDP. Further the household
Jul-21

Jul-22

Jul-23
Apr-21

Apr-22

Apr-23
Jan-21

Jan-22

Oct-22

Jan-23
Oct-20

Oct-21

expenditure is expected to increase to $ 3 trillion by 2027.

“The company's B2C business accounts for 70 to 75 % of the entire
Private Consumption as % of Nominal GDP
business.”
Source: CNBC
2
 Economy

Quarter-wise India’s Real GDP Growth Rates (%) for For faster growth to meet the target of $5 trillion economy by 2025,
FY 2018-19 to FY 2023-24 (Q2) (Constant Prices) more supply-side reforms are needed. Creating new and upgrading
existing infrastructure will be key to raising India’s competitiveness
Base Year 2011-12
and achieving this target. It will specially be critical for the success of
30% ‘Make in India’ program as manufacturing competitiveness critically
20%
depends on infrastructure. The supply additions through
infrastructure development boost short-term as well as the
10% potential rate of GDP growth.
0%
To ramp the virtuous cycle of Investment and job creation the
-10% budget took the lead by steeply increasing the capital expenditure
outlay by 11.11% in 2024-25 to 11.11 lakh crore. In 2023-24, it was
-20%
increased by 37.4 % to Rs.10 lakh crore over Rs. 7.28 lakh crore in
-30% 2022-23.
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
Under the National Infrastructure Pipeline (NIP) for FY 2020-25,
18-19 19-20 20-21 21-22 22-23 23-24
projects worth Rs. 102 lakh crore (US$ 1.3 trillion) are currently at
Source: Ministry of Statistics and Programme Implementation
different stages of implementation to develop world class
infrastructure.
Breakup of the NIP (Rs. Lakh crores)
Production-linked incentives (PLI) scheme is announced in 14
Others 6.03 sectors with a total outlay of 1.97 lacs crore to augment the growth
Health 1.69 of infrastructure sector. In it, there is an outlay of INR 6,238 crore
Petroleum Natural Gas 1.95 (USD 851 million) for white goods (Air Conditioners, LED lights etc.).
Industrial Corridors 2.99
Digital Infra 3.20 “Scheme for white good products has a direct impact on the company’s AC
Drinking Water 3.62 and LED segment”.
Rural Infra 4.11
Irrigation 7.73 Real estate in India has grown steadily over the last few years,
Renewable Energy 9.30 driven by factors such as rapid urbanization, infrastructure
Conventional Power 11.76 improvements, favourable demographics, and government policies
Railways 13.69 geared towards growth. With economic growth projected at 7%,
Urban and Housing 16.29 India has a solid foundation for the upcoming fiscal year. India’s top
Roads 19.64 8 property markets have registered a 5% growth in annual sales at
over 3.29 lakh apartments in 2023. Mumbai region registered the
Source: Department of Economic Affairs (DEA)
highest sales of 86,871 units demonstrating a 2% growth, while
Kolkata witnessed the highest home sales growth, in terms of
PLI Budget Outlay ($ US Billions)
percentage, at 16% followed by Ahmedabad at 15% while Pune
Drones and Drone Components 0.02 grew at 13%.
Advanced Chemistry Cell 2.40 Source: DEA, India brand equity foundation, ET, CNBC
High efficiency solar PV modules 0.60 PIB.GOV.IN
Textile Products 1.40
Food Products 1.50
White Goods (ACs and LEDs) 0.80
Electronic/Technology Products 1.00
Telecom & Networking Products 1.60
Specialty Steel 0.80
Pharmaceuticals Drugs 2.00
Automobiles and Auto
Medical Devices 0.50 7.60
Drug Intermediaries 0.90
Mobile Manufacturing 4.90

Source: PIB.GOV.IN

3
 Fast Moving Electrical Goods (FMEG) Industry

The Company operates in Fast-Moving Electrical Goods (FMEG) industry which is a rapidly growing sector that deals with the
production and distribution of electrical appliances and equipment. The industry is characterized by short product life cycles,
intricate supply chains, unpredictable demand, and tight profit margins. This sector, like many others, is witnessing a progressive
evolution, driven by smart consumers and globalisation. Brands are now increasingly looking at providing the ultimate
convenient experience through smart devices to their patrons.

Domestic electrical equipment market is expected to grow at an annual rate of 12 per cent to reach USD 72 billion by 2025. In
India, the wire and cable market comprise nearly 40 per cent of the electrical industry, in there, organised players command a
lion's share of the market, at roughly 70%, while unorganised players largely dominate the rural geographies. The Indian
switchgear market is expected to register a CAGR of more than 7% over the next 5 years. The appliances market is projected to
reach a value of USD 33.50 billion by 2028 and the Indian Room Air Conditioner Market is expected to reach USD 7 billion by
2027-28, with a CAGR of ~15%.
Source: Springer, Business World, ET, Mordor Intelligence, Statista, Blue weave consulting

Growth Drivers Declining rural population

Electricals and consumer durables categories are still under 95 75
penetrated and poised for strong growth on the back of 90 70
increasing urbanisation and personal disposable income. There 85
80 65
has been an increase in urbanisation as evident by the declining
75 60
rural population as % of total population in India. Rural
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-22
population has declined from being 70% of total population in
2007 to 64% in 2022.
Rural Population (in cr) % of Total Population
The Private final consumption expenditure has been on an Source: Macrotrends
increasing trend from $ 1.21 Trillion in 17-18 to $ 1.98 Trillion in
22-23. Further in FY 22 and FY 23, there has been a y-o-y increase Private final consumption expenditure PFCE ($ Trillion)
of 17% and 16% respectively. 2.50
2.00
Government efforts towards enhanced power availability is
1.50 16%
continually increasing electrification in semi-urban and rural
areas, along with stable electricity supply in urban areas. 1.00 -2% 17%
12% 9%
Electricity access in India has reached almost all the population 0.50
and now the company with deeper penetration will be able to 0.00
take most of the market share especially in the rural India. FY18 FY19 FY20 FY21 FY22 FY23
Source: Economic Survey 2022-23 Statistical Appendixs

India electricity access (% of population)

99.6 The government’s strong focus on infrastructure expansion
100 including highway, railway modernisation and airport additions is
98 95.7 95.9 96.5
96
expected to create demand for electrical goods. In cable -
94 91.8 Increased government spending and focus on infrastructure
92 89.6 development, educational institutes, health institutes, expansion
90 of 5G network etc.
88
86 A large portion of the consumer electrical market continues to
84 be unorganised. However, increasing brand awareness,
2016 2017 2018 2019 2020 2021
formalisation and aspirations, can accelerate the shift in
Source: Macrotrends consumer preference from unorganised to organised
The penetration of the internet in urban, semi-urban as well as rural areas will continue to contribute to the growth of the
consumer electronics and appliance industry. With an increase in the number of working women and the rise of nuclear families,
household incomes have increased. It has not only necessitated the use of user-friendly consumer durable products, but have
also created awareness of innovative products that add convenience to life.
Source: Annual Report, Macrotrends, Annual Report - Crompton

4
 Fast Moving Electrical Goods (FMEG) Industry
Suppliers: The total supplier base of Havells is 1,231 as on March 31, 2023. The company procures approximately 75-80 % from
domestic suppliers. Since supplier base is large, there is less reliance on a few suppliers. However, the margins remain tied to
price of input materials such as copper and aluminium.

Customers: Currently, about 5% to 6% of its consumer product sales come from rural sales and going forward, the basic strategy
of the company is to continue to increase penetration and add product categories in the electrical segment.

Existing competition & New entrants: There is hypercompetition mixed with irrational market behaviour and increased
competitive intensity could cause value erosion for the industry as a whole especially with the entry of new disruptive players
with access to low-cost capital and extended ability to sustain losses to capture market share.
Source: Annual Report, Earnings Calls

Havells vs Peers – Revenue (Rs. crores) & Operating Margin comparison – Havells’ Segment-wise
Wires & Cables Electrical consumable durables
14,000 20% 5,000 25%
12,000
15% 4,000 20%
10,000
8,000 3,000 15%
10%
6,000
2,000 10%
4,000 5%
2,000 1,000 5%
- 0%
- 0%
FY 20 FY 21 FY 22 FY 23
FY 20 FY 21 FY 22 FY 23
Polycab Kei cables Finolex Cables
Crompton Bajaj electrical Orient Electric
Havells Polycab Kei cables
Havells Crompton Bajaj electrical
Finolex Cables Havells
Orient Electric Havells

Lightings Switchgear
2,000 20% 4,000 30%
1,500 15% 3,000 20%
1,000 10% 10%
2,000
500 5% 0%
1,000 -10%
- 0%
FY 20 FY 21 FY 22 FY 23 - -20%
FY 20 FY 21 FY 22 FY 23
Crompton Bajaj electrical Orient Electric
ABB Schneider CG Power Havells
Havells Crompton Bajaj electrical
ABB Schneider CG Power Havells
Orient Electric Havells

Lloyd - AC, Refrigerators etc.

10,000 20%
8,000 15%
10%
6,000
5%
4,000
0%
2,000 -5%
- -10%
FY 20 FY 21 FY 22 FY 23

Hitachi Voltas Blue Star Havells

Hitachi Voltas Blue Star Havells
Source: AR of respective companies, Screener

Note: There is only one major segment in Hitachi, Schneider and Blue Star hence that is considered for comparison. 5
 Management Analysis
Composition of the Board of Directors of Havells (excluding Independent Directors)
S No Name Post Academic & Professional Qualification Expertise & Skills Board Meetings &
AGM attended
(FY 23)
1 Anil Rai Chief Anil Rai Gupta is the Chairman & Managing Director of Havells India Strategic Marketing, 6 out of 6
Gupta Executive Limited. He joined Havells in 1992, under the mentorship of his father, Brand
Officer Late Shri Qimat Rai Gupta. transformation and
Graduated in economics from Sri Ram College of Commerce, Delhi Finance
University after which he did his MBA from Wake Forest University,
North Carolina. He has also been deemed with the honorary Degree of
Doctorate by his alma mater (WKU).
He has been consecutively honoured with ‘CEO of the Year –
Consumer Durable Category’ 2020 & 2019 by Business Today,
‘Entrepreneur of the Year’ 2019 by Forbes magazine, ‘Good Corporate
Citizen 2019 for Social Welfare’ by PHD Chamber of Commerce.
2 Ameet Whole-time Ameet Kumar Gupta has completed BE (Electronics & Communication) Business 6 out of 6
Kumar Director from DU, MBA (Marketing & Finance) from Wake Forest University, development,
Gupta North Carolina, USA spearheading new
Associated with the QRG group for over 2 decades and is actively projects.
involved in new business development activities along with Shri Anil
Rai Gupta.
3 Rajesh Whole-time Rajesh Kumar Gupta is a Chartered Accountant with rich experience in Finance and allied 6 out of 6
Kumar Director finance and allied fields. He is the Whole-time Director (Finance) and fields,
Gupta Group CFO of Havells India Limited and has been long associated with standardization of
the QRG group since the beginning of his career, played a systems and
multidimensional role in creating the culture, systems and processes processes across
across the organization. the organization

4 Siddhartha Whole-time Siddhartha Pandit has been heading the Legal Department of the Contract Drafting & 6 out of 6
Pandit Director Company since 2015. Completed LEP (Leadership Excellence Program) Negotiations,
from Harvard Business School and BA LLB from Delhi University. Litigation
Worked with Max India, Samsung, Ciena, Carrier and Tower Vision. In Management,
his last assignment, he was associated with Indus Towers as VP - Legal Dispute Resolution,
M&A Statutory
Compliances,
Intellectual
Property Rights
(IPR) etc
5 Surjit Non- Surjit Kumar Gupta has done F.Sc. from Punjab University and holds a Technical planning 6 out of 6
Kumar executive Diploma in Mechanical Engineering from State Board of Technical and foreign
Gupta Non- Education, Punjab. He is an esteemed member of the Promoter Group alliances
Independent and is one of the First Directors of the Company. He has been on the
Director Board of Directors since incorporation on 8th August, 1983.

6 T.V. Non- T.V. Mohandas Pai holds a bachelor’s degree in commerce as a IT reforms, Human 6 out of 6
Mohandas executive University Rank Holder from St. Joseph’s College of Commerce, Resources,
Pai Non- Bangalore, a bachelor’s degree in law (LLB) from Bangalore University Education &
Independent and is a Fellow Member of the Institute of Chartered Accountants of Research, Social
Director India as an All-India Rank Holder. Reforms and
He is currently the Chairman of Aarin Capital, Chairman of Manipal betterment of the
Global Education, Member of the Boards of Havells India and the nation in areas of
Institute of Public Enterprises, Member of the Board of Governors of Trade and Industry
the National Investment and Infrastructure Fund (NIIF), Governing
Council Member of the Centre for Advanced Financial Research and
Learning (CAFRAL) promoted by the Reserve Bank of India (RBI),
Chairman of the Regulatory and Financial Technology Committee of
the Securities and Exchange Board of India (“SEBI”).
He was awarded the Padma Shri award by the President of India in
2015.He was previously a Board Member and the Chief Financial
Officer (CFO) of Infosys over a span of 17 years.
7 Puneet Non- Puneet Bhatia has completed B.Com. (H) from SRCC and MBA from Strategic private 5 out of 6
Bhatia executive IIM-Calcutta. He is the Co-Managing Partner for TPG Capital Asia and equity investment
Non- the head of TPG Capital India. He has created and led over fifteen and Business
Independent transactions for TPG Capital in India including Matrix Laboratories, Management
Director Vishal Retail.

Source: Annual Report 6

 Management Analysis

Composition of the Independent Directors

S No Name Academic & Professional Qualification Expertise & Skills Board Meetings
& AGM attended
(FY 23)
1 Jalaj Jalaj Ashwin Dani has done chemical engineering from USA. Shri Dani also holds Supply Chain, 6 out of 6
Ashwin Certificate for participation in the Advanced Management Program conducted by Human Resources,
Dani INSEAD, Fontainebleau, Paris. He has spent over 2 decades in various capacities with Corporate Quality
Asian Paints, a leading paint company in India with presence in 19 countries across the and Safety
globe. He was the President of Indian Paints Association (IPA) for 2015-17 and has Functions,
been chairing the Paints and Coatings Sector Skill Council (PCSC) from its inception Advanced
2015. Management and
Skill Development
2 Upendra Upendra Kumar Sinha is an IAS officer-1976 batch. He holds an M.Sc. and LLB degree. Asset Management, 6 out of 6
Kumar He is the former Chairman, SEBI. Prior to this, Shri Sinha was Chairman and Managing Securities Laws,
Sinha Director of UTI Asset Management Company Ltd. and Chairman of Association of Corporate
Mutual Funds in India. He was Joint Secretary (Banking) and Joint Secretary (Capital Governance,
Markets), Ministry of Finance, GoI. Shri U K Sinha was the Chairman of the Working Banking, Finance,
Group on Foreign Investment in India formed by the GoI. He was responsible for Foreign Investment,
drafting the SEBI (Amendment) Act, 2002, UTI (Repeal) Act, 2002, the Securities Law Corporate Bond
Amendment Act, 2004 and the PFRDA Bill, 2005. Management and
Investor Protection.
3 Subhash S. Mr. Subhash S Mundra has done B.Com., M.Com. and is a Fellow Indian Institute of Banking, Risk 5 out of 6
Mundra Banking & Finance, D. Phil (HonorisCausa) Management,
He retired as Deputy Governor of Reserve Bank of India on 30th July 2017 after Corporate
completing a stint of three years. Prior to that, the last position held by him was as Governance,
Chairman and Managing Director of Bank of Baroda from where he superannuated in Operations and
July 2014. In his banking career spanning over four decades, Mr. Mundra held several Process
important positions including that of Executive Director of Union Bank of India, Chief Optimization
Executive of Bank of Baroda (European Operations) amongst others.

4 B. Prasada B. Prasada Rao is a Mechanical Engineering Graduate from Jawaharlal Nehru Corporate 6 out of 6
Rao Technological University, Kakinada, Post Graduate in Industrial Engineering from NITIE, Management,
Mumbai Planning &
He served as the Chairman and Managing Director (CMD) of Bharat Heavy Electricals Development
Limited, India till 31st December 2015. Post retirement from BHEL, he has taken up the activity, Capacity &
responsibility as Managing Director of Steag Energy Services India, a 100% owned Capability building.
subsidiary of Steag Energy Services Germany.
5 Vivek Vivek Mehra has completed B. Com (Hons) from SRCC, DU and is a Chartered Tax and Regulatory 6 out of 6
Mehra Accountant. reforms, Cross-
He is a well-respected senior Chartered Accountant with an illustrious professional border Investments
career spanning over 40 years and experience spanning across sectors in Tax and and Transaction
Regulatory domains of Merger & Acquisition specializing in Cross-border Investment Structuring
and Transaction Structuring.
He has held various leadership roles till April 2017 in PWC as Partner/ Executive
Director. He was the founder and national leader for PwC Regulatory and M&A
Practices and has been elected on PwC Governance Oversight Board for two
consecutive terms.
6 Namrata Namrata Kaul completed B. Com (H) from Lady Shree Ram college, MBA from IIM Banking & Finance, 5 out of 6
Kaul (Ahmadabad) and is a Chevening scholar, London School of Economics Treasury
She is a career banker with extensive experience of over 30 years across Treasury, Operations, Debt
Corporate Banking, Debt Capital markets and corporate finance in India and UK. As Capital Market &
Managing Director at Deutsche Bank AG, Smt. Kaul led the Corporate Bank practice as Corporate Finance,
its India Head Risk and Credit
Management, Social
development.

7 Ashish Ashish Bharat Ram has a Degree in Economics from Delhi University and an MBA from Strategic Planning, 6 out of 6
Bharat The Johnson Graduate School of Management, Cornell University. Entrepreneurial and
Ram He took over as MD of SRF Ltd. in January 2007. Prior to joining SRF Ltd. in 1994, he Commercial
had successful stints at American Express Bank, Toyota Motor Corporation, Japan and Acumen, Brand
DCM Toyota handling a variety of functions that included Sales, Strategy, Marketing, Building and M&A.
TQM, among others.

Source: Annual Report

7
 Management Analysis & Shareholding

Commentary
The management of the company has vast experience in the fields such as business development, finance, legal, foreign
alliances, IT, strategic marketing etc. with the current chairman and managing director - Anil Rai Gupta joining the company in
1992 and assuming the current position in 2014 after the demise of his father Qimat Rai Gupta who established the Havells
brand in 1970's. The CFO of the group - Rajesh Kumar Gupta joined the company in 1982 and assumed the current position in
1992 and the other 2 promoters of the company - Ameet Kumar Gupta, the cousin of Anil Rai Gupta has over 2 decades of
experience working for Havells and Surjit Kumar Gupta, brother-in-law of Late Qimat Rai Gupta has been on the board since
1983.

The independent directors come from varied fields ranging from banking, finance, engineering, advocate, business
administration etc and are highly experienced. They all bring their unique expertise and knowledge for the betterment in the
decision making for the company. Based on internet search, no adverse news or prominent political connections were found
with regards to the directors of the company.

Management remuneration trajectory vis-a-vis Revenue & Profit Remuneration Ratio (ex. commission)

Particulars FY 20 FY 21 FY 22 FY 23
Anil Rai Gupta (MD)
Revenue YoY (%) -6% 11% 33% 21%
74
Profit before tax YoY (%) -21% 59% 12% -10%
Profit after tax YoY (%) -6% 42% 15% -10% Rajesh Kumar Gupta (WTD)
66
Remuneration (excluding Commission)
Anil Rai Gupta * 12% 2% 13% 11% Ameet Kumar Gupta (WTD)
Ameet Kumar Gupta ** 11% 3% 14% 11% 29
Rajesh Kumar Gupta ** 7% 7% 12% 11% Siddhartha Pandit (WTD)
Siddhartha Pandit # 26% 8% 9%
11

* Entitled to Commission @ 1.25% of the profit before tax

** Entitled to Commission @ 0.50% of the profit before tax
# Mr. Siddhartha Pandit was appointed as a Whole-time Director w.e.f. 29-05-2019 Source: Annual Report

Source: Annual Report, Company Analysis

Shareholding Pattern Q-o-Q Shareholders holding >1% as on March 31, 2023

70%
60%
Promoters - 59.45 %
50%
40%
30% Nalanda India Equity Fund Limited - 5.27 %
20%
10%
Life Insurance Corporation of India - 3.71 %
0%
Jul-23
Jul-21

Jul-22
May-21

Nov-21
Jan-22

May-22

Nov-22

May-23

Nov-23
Mar-21

Sep-21

Mar-22

Sep-22

Jan-23
Mar-23

Sep-23

Government Pension Fund Global - 1.91 %

Promoters FIIs DIIs Public Source: Annual Report

The 3 promoters of the company have highest shareholding between 59-

59-60% over the quarters
Followed by FPI between 23-27%.
DII and Public shareholding remain between 6-10% over the quarters
Source: Screener.in

8
 Financial Analysis
Revenue – 6 Operating Segments
Wires & cables remains the most revenue generating segment covering approximately 32% of the total revenue. It has grown
with a CAGR of 15.5% from FY 18 to FY 23. Wires contributes around 60% and cables 40% of sales in this category. Cables
demand is led by strong industrial and infrastructure demand. Although, in underground cable, the company has mentioned
capacity constrained till next year 2024 i.e. till their new facility comes up in Tumkur, Karnataka which will increase the cable
capacity by 25% leading to increase in share in revenue from this segment.
The ECD segment which covers around 21% revenue has provided a CAGR of 16.2% from 2018 to 2023. This category is
dominated by Fans comprising 60-65% of ECD products. Home improvement, shift of demand from unorganised to organised
players, real estate development are a few growth drivers. Further from January 2023, new and important requirement regarding
mandatory ratings for Fans has come from Bureau
of Energy Efficiency which will positively affect the Segment wise revenue (Rs. crores)
energy consumption that could in turn lead to 6,000
consolidation in branded products. Havells has a 5,000
strong market share in premium fans which it is 4,000
striving to improve with newly launched Premium 3,000
BLDC fans. 2,000
1,000
Lloyd consumer segment (dominated by A.C. ~ 70-
-
75%) has surpassed the ECD segment in respect of
FY 18 FY 19 FY 20 FY 21 FY 22 FY 23
sales with INR 3,400 cr. for FY 23. The CAGR is 19
% for the last 5 years. The Lloyd sales are expected Switchgear Wires & Cables
to increase further on account of opening up of Lighting and fixtures Electrical consumer durables (ECD)
new facility in Andhra Pradesh which would Lloyd Consumer Others
double the capacity to 20 lacs units. Lloyd is
evolving as a mass premium brand in the consumer durables market positioning itself in top 3-4 in the industry. This has been
brought about through innovative and aggressive brand-building initiatives.
Fourth most revenue generating segment is Switchgear accounting for on average 14% of total revenue with a CAGR of 8.5%.
Switchgear has been the spearhead product for the export markets. Real estate upcycles, increase in Capex and Exports are the
growth drivers for this category. Further, in the for last 2-3 years, the CAGR has been around 20%. Continuous infra development
and electrification would further enhance it.
Then there is Lighting & Fixtures and others covering 10% and 5% of total revenue respectively. Consumer lightings contributes
to around 60-65% of revenue in this category. Improvement in Rural electrification, increase in number of light points per home
and premiumisation have been the growth drivers for consumer lighting business.
Total Sales (Rs. crores) The revenue from operations increased from INR 8,232 cr. in FY18 to
16,901 cr. in FY23 representing a CAGR of 15.47 %. The last 2 FY has
20,000
been comparatively commending where revenue grew by 33% ~
15,000 FY22 and 21% in FY23 after the sales were hit by Covid in earlier
years. Even though the company exports the products to 70+
16,415

10,000
13,423
10,058

countries, the share of outside India revenue remains at around 3-4%

9,707
8,000

9,079

5,000
232

327

328

390

504

486

per year of the total. During the past years, the company has
- invested heavily on HR resources, products, and channels to achieve
FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 the accelerated growth in International Business and currently
In India Outside India
developing a road map to enter the developed markets including
Quarter wise Sales comparison (Rs. crores) Europe, US and Australia.
6,000 Q2 are generally less as compared to rest of the quarters as in Q1
sales are impacted due to summer products such as A.C.s and Fans.
4,000
Festive season drives the Q3 sales. In Q4, Sales are impacted by new
4,859
4,834

4,426
4,414
4,245

4,128
3,900

year, FY end discount, onset of summer season. Further the demand

3,680

3,664
3,238
2,610

2,000
for B2B is affected by infrastructure/ construction activities,
- inflationary condition in the economy etc.
Q1 Q2 Q3 Q4 Source: Annual Report, Earnings calls, Company Analysis
2023-24 2022-23 2021-22
9
 Financial Analysis

Gross Profit
GP Margin
Gross profit increased from 3,176 in FY 2018 to 5,205 in FY 23
6,000
witnessing a CAGR of 10.4% driven by revenue growth of 38% 38% 38% 38% 31%
5,000 32%
CAGR 15% in the same period. Gross profit margin witnessed
4,000
a fall of 6-7% in FY 22 and FY 23 as compared with earlier

5,205
3,000

4,516
years which had a GP Margin of around 38 %.

3,968
3,791

3,607
3,176
2,000
The reason is due to sharp increase in prices of key raw 1,000
materials such as Copper, Aluminium, chemicals, plastic etc. -
FY 18 FY 19 FY 20 FY 21 FY 22 FY 23
The average global price of copper from FY 18 to FY 21 has
Gross Profit (Rs. crore) Gross Profit Margin
been $ 5,800 - 6,800 MT and in FY 22 and FY 23, it is around
Source: Annual Report
$ 8,500 - 9,500 MT representing an increase of 40-45%. The
average global price of Aluminium from FY 18 to FY 21 has
Quarter wise GP Margin
been $ 1,800 - 2,000 MT and in FY 22 and FY 23, it is around
$ 2,500 - 2,700 MT representing an increase of 35-40%. 1,600
31% 33% 33% 33%
Due to hypercompetitive market, there were input cost 1,400 30% 30%
29% 29%
which could not be passed on to the customers in few
products like A.C and there was some lag as well in passing 1,200

1,458

1,457
1,450
1,362

1,287
1,284

1,231
the same in products like Fans, wires & cables to the

1,140
1,000
customers.
Source: Annual Report, Company Analysis, Federal Reserve Bank of St. Louis 800

EBITDA Margin GP (Rs. crore) GP Margin

15% 13% Source: Screener.in
2,000 10%
13% 12%
11%
1,500
1,763

1,000
1,615
1,572

EBITDA
1,184
1,043

1,029

500
EBITDA increased from 1,043 in FY 18 to 1,615 in FY 23
- witnessing a CAGR of 9.1% which is almost in line with the
FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 CAGR of Gross Profit of 10.4 %
EBITDA (Rs. crore) EBITDA Margin It is to be noted that even though the GP Margin reduced
Source: Annual Report
from 38% to 31% from FY18 to FY 23, the EBITDA margin did
not witness such a sharp fall due to cost optimization and
operating leverage.
Quarter wise EBITDA Margin
12% 11% The company's EBITDA margin used to be in range of 11-13%
550 10% 10%
10% till FY 20 and was increased to 15% in FY 21 on account of the
500 9% 8%
8%
450 company curtailing its non-essential opex.
400
527
520

350 However, the incessant input price increase reduced the

440
424

402

300 EBITDA margin to 13% in FY 22 and 10% in FY 23.

373
361

286

250 Source: Annual Report, Company Analysis

200

EBITDA (Rs. crore) EBITDA Margin

Source: Screener.in
10
 Financial Analysis
Trade Receivables Trade Receivables Days
The debtor turnover ratio of the company remains 1,200 19
17
between 19-27 times. The debtor days remains in the 1,000 14
13 13
range of 13-19 days which is significantly lower than its 800
600
peers that is about 70 days implying company is able to

974
766
400

564
collect cash from its debtors quickly as compared it its peer.

407

242
200
Source: Annual Report, Company Analysis, Screener.in -
FY 19 FY 20 FY 21 FY 22 FY 23

Trade Receivables (Rs. crore) Days receivables (DSO)

Trade Payables Days Source: Annual Report, Company Analysis
93 93
3,000 85
2,500
77 78 Trade Payables
2,000
The payable turnover ratio of the company remains between
2,643

1,500
2,380

3.9 - 4.6 times. The payable days remains in the range of 77 to

1,597
1,560

1,000
1,414

500 93 days which is comparatively quite lower than its peer ~ 123
- days implying company is able to pay cash to its creditors
FY 19 FY 20 FY 21 FY 22 FY 23 quickly as compared it its peers.
Source: Annual Report, Company Analysis, Screener.in
Trade Payables (Rs. crore) Days payables (DPO)
Source: Annual Report, Company Analysis
Inventory days
4,000
Inventory 119 126
108
104
3,000 103
The inventory turnover ratio of the company remains

3,709
2,000

2,968
between 3 - 3.5 times which is lower than its peer which is
2,620
1,919

1,872

about 5 times. The inventory days remains in the range of 1,000

103 to 126 days. In March, the company usually builds on -
inventory for the summer season for A.C.s, Fans etc. FY 19 FY 20 FY 21 FY 22 FY 23

Source: Annual Report, Company Analysis, Screener.in Inventories (Rs. crore) Days inventory (DIO)

Source: Annual Report, Company Analysis

PPE & Intangible assets PPE

The company is growing its PPE by 12.4% from FY 18 to 23. 3,000 583
The depreciation to PPE ratio remains quite constant through 509
2,500 365
459 188
the past years in between 9- 11 % indicating that the
2,000
company is making regular addition in its PPE. The net capex
1,500
2,391

came down in the covid hit year and from there it has picked
2,078
1,982

1,947
1,666

strong momentum. The company had a total of 14 1,000

manufacturing units and in FY 22, it expanded its 500
manufacturing base with the addition of Lloyd AC plant in Sri -
City, Andhra Pradesh, India which will have capacity of 10 FY 19 FY 20 FY 21 FY 22 FY 23
lacs units. In 2024, the company will come up with their new
Net PPE (Rs. crore) Net Capex (Rs. crore)
plant in Tumkur, Karnataka that will increase the cable
manufacturing capacity by 25 %. Source: Annual Report, Company Analysis

In Intangible assets, the company has Goodwill ~ 310 cr. and Trademarks ~ 1,029 cr. acquired on acquisition of Lloyd
business on which it is not charging any amortization considering it has an indefinite useful life. The amount 1,339
constitute 14% of total assets and 49% of non-current assets.
Source: Annual Report, Company Analysis, Earnings calls
11
 Income Statement – Actual & Forecasted

Particulars FY 18 A FY 19 A FY 20 A FY 21 A FY 22 A FY 23 A FY 24 F FY 25 F FY 26 F FY 27 F FY 28 F
Revenue from operations 8,269 10,073 9,440 10,457 13,938 16,911 19,036 21,492 24,255 27,402 30,991
Cost of goods sold (5,093) (6,283) (5,833) (6,490) (9,422) (11,705) (13,177) (14,877) (16,789) (18,968) (21,452)

Gross Profit 3,176 3,791 3,607 3,968 4,516 5,205 5,859 6,616 7,466 8,435 9,539
Operating expenses (2,133) (2,607) (2,578) (2,396) (2,754) (3,590) (4,054) (4,578) (5,166) (5,836) (6,601)

EBITDA 1,043 1,184 1,029 1,572 1,763 1,615 1,805 2,038 2,300 2,598 2,939
Depreciation and amortization (140) (153) (218) (249) (261) (296) (303) (337) (373) (415) (470)

EBIT 903 1,032 811 1,323 1,502 1,319 1,502 1,701 1,927 2,183 2,468
Finance costs (25) (16) (20) (73) (53) (34) (34) (34) (34) (34) (34)
Other Income 118 129 113 187 158 162 185 257 301 352 410

Profit before tax 996 1,144 904 1,438 1,607 1,447 1,653 1,925 2,195 2,502 2,845
Tax Expense (304) (358) (169) (393) (410) (375) (429) (499) (569) (649) (738)
Tax rate 31% 31% 19% 27% 26% 26% 26% 26% 26% 26% 26%

Profit after tax 692 786 736 1,044 1,196 1,072 1,224 1,425 1,625 1,853 2,107

Major Assumptions

For Revenue - In Switchgear segment- Growth for next 2 FY is taken at 10% which is the average growth for past 5 years and at 7% for the next 3 years considering the growth of the
Indian switchgear market ~ 7%. In Wires & cables, Growth for next 2 FY is taken at 10% which is 7% less than average growth for past 5 years since wires & cables has a high base and
also there is a capacity constraint reported on 40% of this segment and at 15% for the next 3 years keeping in mind removal of capacity constraint via new plant and the growth of the
wire & cable industry at a CAGR 15%. In Lightings & Fixtures, growth is considered at 8% for all FYs based on average growth for past 5 years even though the market is expected to grow
at 12% considering no further increase in market share as industry is hypercompetitive and 10% for Electrical consumer durables (ECD) which is in line with expected market growth. In
Lloyd, growth for next 2 FY is taken at 20% which is the average growth for past 5 years and at 15% for the next 3 years considering the growth of the AC market ~ 15%.
Cost of goods sold is taken at the previous year rate. Opex is taken as previous year rate as % of revenue. Other income is mainly consisting of interest received on deposits hence
calculated as % of cash and other bank balance.

12
 Balance Sheet – Actual & Forecasted

Particulars FY 18 A FY 19 A FY 20 A FY 21 A FY 22 A FY 23 A FY 24 F FY 25 F FY 26 F FY 27 F FY 28 F
Non-current assets
Net PPE 1,332 1,666 1,982 1,947 2,078 2,391 2,657 2,943 3,250 3,577 3,923
Goodwill & Other Intangibles 1,511 1,495 1,453 1,433 1,413 1,396 1,377 1,364 1,360 1,363 1,365
Other Non-Current Assets 58 168 157 151 426 304 328 370 418 472 534
Total non-current assets 2,900 3,328 3,593 3,532 3,917 4,091 4,362 4,678 5,028 5,412 5,822
Current assets
Inventories 1,633 1,919 1,872 2,620 2,968 3,709 4,049 4,571 5,159 5,828 6,591
Investment - - - 306 153 181 181 181 181 181 181
Trade Receivables 328 407 242 564 766 974 794 896 1,012 1,143 1,293
Cash & Other bank balance 1,562 1,311 1,133 1,653 2,548 1,870 2,607 3,053 3,566 4,160 4,851
Other Current Assets 184 207 235 178 171 333 370 418 471 533 602
Total current assets 3,707 3,844 3,481 5,320 6,607 7,066 8,001 9,119 10,389 11,844 13,518
Total assets 6,607 7,172 7,073 8,852 10,523 11,157 12,363 13,797 15,417 17,256 19,340
EQUITY AND LIABILITIES
Equity
Equity share capital 63 63 63 63 63 63 63 63 63 63 63
Other equity 3,674 4,155 4,249 5,114 5,940 6,563 7,271 8,102 9,044 10,111 11,315
Total equity 3,737 4,218 4,312 5,176 6,003 6,625 7,333 8,165 9,107 10,174 11,378
Non-current liabilities
Borrowings 81 41 - 394 273 - - - - - -
Deferred tax liabilities (Net) 212 320 287 339 351 362 362 362 362 362 362
Other non-current liabilities 48 54 148 166 264 335 259 292 329 372 421
Total non-current liabilities 341 415 435 899 887 696 620 653 691 734 782
Current liabilities
Borrowings 7 - - - 123 - - - - - -
Trade Payables 1,640 1,560 1,414 1,597 2,380 2,643 3,077 3,475 3,921 4,430 5,010
Other current liabilities 883 980 913 1,180 1,130 1,192 1,333 1,504 1,698 1,918 2,169
Total current liabilities 2,530 2,540 2,327 2,777 3,633 3,836 4,410 4,979 5,619 6,348 7,180
Total liabilities 2,871 2,954 2,762 3,676 4,520 4,532 5,030 5,632 6,310 7,082 7,962
Total equity and liabilities 6,607 7,172 7,073 8,852 10,523 11,157 12,363 13,797 15,417 17,256 19,340
Major Assumptions

Capex is considered as past 5 years average % of PPE spent by the company and depreciated considering average life of capex as 15 years. Goodwill and Trademark are not amortized
as it is considered having indefinite useful life. Inventory, Trade payable and Trade receivable are projected as per the past 5 years average days inventory, days payable and days
receivable. Other liabilities and other assets are projected as per the past year trend as % of revenue from operations.
13
 Cash Flow Statement – Forecasted

Particulars FY 22 FY 23 FY 24 F FY 25 F FY 26 F FY 27 F FY 28 F

Profit before tax 1,607 1,447 1,653 1,925 2,195 2,502 2,845
Tax expense (410) (375) (429) (499) (569) (649) (738)
Tax rate 26% 26% 26% 26% 26% 26% 26%
Adj. for Non cash & non-operating
Add-back D&A 261 296 303 337 373 415 470
Add-back Finance cost 53 34 34 34 34 34 34
Subtract Other income (158) (162) (185) (257) (301) (352) (410)
Adj. for working capital
Inventories (348) (741) (340) (522) (588) (669) (763)
Trade Receivables (203) (208) 180 (102) (115) (131) (150)
Trade Payables 783 263 434 397 447 509 580
Other current assets 7 (162) (37) (48) (54) (61) (70)
Other current liabilities (50) 62 140 172 193 220 251

Cash flow - Operating Activities 1,542 455 1,753 1,435 1,614 1,817 2,049
Investment in Capex (371) (592) (550) (610) (675) (745) (818)
Other Investments (net) (121) 94 (23) (42) (48) (54) (62)
Other Income 158 162 185 257 301 352 410

Cash flow - Investing Activities (335) (336) (389) (395) (421) (447) (470)
Borrowings 2 (396) - - - - -
Other liabilities 110 82 (76) 33 38 43 49
Outflow from Other Equity (370) (449) (517) (594) (683) (786) (903)
Finance costs (53) (34) (34) (34) (34) (34) (34)

Cash flow - Financing Activities (312) (797) (627) (594) (679) (777) (888)

Net cash flow 895 (678) 737 445 513 593 691
Add Opening cash 1,653 2,548 1,870 2,607 3,053 3,566 4,160
Closing cash 2,548 1,870 2,607 3,053 3,566 4,160 4,851

Major Assumptions

Dividend is considered on the basis of past year dividend paid with an increase of 15% thereafter which is in line with the average
growth in profit after tax in the forecasted period.

14
 Ratio Analysis
Liquidity Ratios

Ratios FY 18 FY 19 FY 20 FY 21 FY 22 FY 23
Current Ratio 1.47 1.51 1.50 1.92 1.82 1.84
Quick ratio 0.82 0.76 0.69 0.97 1.00 0.88

Analysis

The company's current ratio has improved in the last 3 years and is approximately 1.8x which is slightly lower than its peer of
2.20x. In current assets, inventory and Cash & other bank balance form majority, accounting for 50% and 35% on average as also
evident by quick ratio which falls by 0.8x on average when inventory is excluded. In current liabilities, trade payables form 65%
of total on average. In recent years, the quick ratio is moving towards 1x which is a healthy sign for the company that provide
more strength to settle short term payables by using cash and trade receivables. However, it remains below average of its peer
which is 1.55x.
Source: Annual Report, Company Analysis, Screener.in

Solvency Ratios

Ratios FY 18 FY 19 FY 20 FY 21 FY 22 FY 23
Debt Equity ratio 0.02 0.01 0.03 0.10 0.10 0.03
Interest coverage ratio 36 63 41 18 28 39

Analysis

The company is financed by equity and there is negligible reliance on debt money as evident by very low debt equity ratio and
high interest coverage ratio which is same as its competitors’ company as evident by their low debt equity ratio and high
interest coverage ~ 0.31x and 7.38x respectively.
Source: Annual Report, Company Analysis, Screener.in

Valuation Ratios

Ratios FY 18 FY 19 FY 20 FY 21 FY 22 FY 23
EV/ EBITDA 29 40 28 42 41 46
P/E 44 61 40 63 61 69
P/S 4 5 3 6 5 4
EPS 11 13 12 17 19 17

Analysis

Havells seems more expensive compared to its peers in terms of EV/EBITDA, P/E, and EPS ratio on the basis of FY 23 numbers
which are 42, 59 and 21 of its peers respectively.
Source: Annual Report, Company Analysis, Screener.in

15
 Ratio Analysis
Profitability Ratios

Ratios FY 18 FY 19 FY 20 FY 21 FY 22 FY 23
Gross Profit Margin 38% 38% 38% 38% 32% 31%
Operating Profit Margin 13% 12% 11% 15% 13% 10%
Net Profit Margin 8% 8% 8% 10% 9% 6%
Return on capital employed 26% 19% 27% 25% 20%
Return on Fixed Assets 69% 44% 67% 75% 59%

Analysis

GP margin used to be 38% till FY21 then it decreased by 6-7% due to increase in input cost - copper, Aluminium, chemical,
plastic material etc. Copper and aluminium prices increase approximately 40% in the said period.

OP margin took a spike in FY 21 when the company optimised its cost and eliminated the non-essential opex and then it
decreased in FY 22 and 23 due to effect of reduced GP margin. Margin of its peer company's remains same as Havells i.e. 10%

NP margin used to be between 8-10% however in FY 23 it was reduced to 6% due to reduction in Net profit by 10% on y-o-y
basis owing some part of it to increased input cost compared to last year and other to increase in opex ~ Travel & conveyance by
86%, Advertisement & Promotion by 77%, Freight by 27% and Product warranties & after sale service by 38%. NP margin of
peers also remains at 6%.

ROCE increased by 8% in FY21 reaching its peak ~ 27% and from there it took a dive down quite sharply in next 2 years owing to
the fact that the company was not able to grow profit on higher base consisting of mainly shareholder's equity. ROCE of its peer
is 24% which is higher than Havells.

In FY 20 and FY 23, Return on fixed asset depicts a slowdown owing to both reduction in profit and major capex done by the
company on y-o-y basis, in rest of the FY, the company is able to generate handsome return on its fixed assets.
Source: Annual Report, Company Analysis, Screener.in

Du Pont Analysis

Ratios FY 19 FY 20 FY 21 FY 22 FY 23
Return on Equity 20% 17% 22% 21% 17%

Net Profit Margin 8% 8% 10% 9% 6%

Total Asset Turnover 1.5 1.3 1.3 1.4 1.6
Leverage 1.7 1.7 1.7 1.7 1.7

Analysis

The ROE of the company is primarily affected by the net profit variation over the years. The leverage has remained constant and
hence does lead to variation in ROE. The decreasing trend from FY 21 till FY 23 from 22% to 17% is due to reducing NP margin
from 10% to 6% which is offset by some points through better efficiency of total assets. ROE of peer is 18% which is similar to
our company.
Source: Annual Report, Company Analysis, Screener.in

Note: In peers, average of Hitachi, Voltas, Blue star, ABB, Schneider, CG Power, Crompton, Bajaj electric, Orient electric, Polycab,
Kei Cables and Finolex Cables are considered for ratios.
16
 Other Quantitative Metrics

R&D spend (Rs. crores) The company is spending on research & development for safer,
smarter and sustainable product on the basis of consumer
FY 18 58 needs, premiumisation and differentiation.
FY 19 79 As on March 31, 2023, there are in total 4 R&D centres and 21
FY 20 102 patents held by the company.
Source: Annual Report
FY 21 96

FY 22 110

FY 23 163

Source: Annual Report

There is steady growth in distributors/ dealers network Dealers (Numbers)

vertically and horizontally, the company also expanded FY 18 10,900
their presence in emerging channels. E-commerce channel
FY 19 11,700
grew with a strong product portfolio. Modern Format Retail
(MFR) continues to emerge as a key channel with FY 20 12,450
expanding shelf space at the counters. With emerging rural FY 21 14,270
opportunity, the company is cementing its position of most FY 22 14,000
penetrated FMEG brand in rural markets.
FY 23 17,000
Source: Annual Report

Source: Annual Report

Misc. expenses (% of total expense) Misc. expense as % of total expense remains at 1-2% which is a
2% 2% healthy sign for the company implying there is no major hidden
2%
2% expense on the income statement.
2%
1%
Source: Annual Report, Company Analysis

34 36
29 27 28 30

FY 23 FY 22 FY 21 FY 20 FY 19 FY 18
Mis. Expense (Rs. crores) % of total other expense
Source: Annual Report, Company Analysis

Advertisement & Promotion expense as % of total expense Promotion expenses (% of total expense)
remain at a high percentage which is healthy and necessary 22% 21%
practice considering the presence of significant no. of 19% 19%
competitors in the industry and making the brand visible to 14%
the customers.
9%
437
Source: Annual Report, Company Analysis 384
321 308
247
133

FY 23 FY 22 FY 21 FY 20 FY 19 FY 18
Advertisement & Promotion (Rs. crores)
% of total other expense
Source: Annual Report, Company Analysis
17
Related Party (RP) Ratios

Sales to RP as % of total Purchases from RP as % of total

10 20
0% 1%
8
15
6
10
4
0% 5 0%
2 0%
0% 0% 0% 0%
0% 0% 0%
- -
FY 23 FY 22 FY 21 FY 20 FY 19 FY 18 FY 23 FY 22 FY 21 FY 20 FY 19 FY 18

Sale of products (RP) (Rs. crores) Purchase of goods and stores & spares (RP) (Rs. crores)
% of total Revenue % of Purchase of traded goods

Source: Company Analysis Source: Company Analysis

The company generates almost all of its revenue The purchases are made from other than related
from sales from outside parties. as evident by parties as evident by very meagre related party
negligible sales to related parties purchases.

Commission on Sales to RP as % of total Rent/Usage expense to RP as % of total rent

expense
69% 71%
76%
110%
91%

67% 60% 32%

31%
83
69 18% 20%
56 15%

13 14 9 30 27 21 23 23 19

FY 23 FY 22 FY 21 FY 20 FY 19 FY 18 FY 23 FY 22 FY 21 FY 20 FY 19 FY 18

Commission on sales (RP) (Rs. crores) Rent/Usage Charges Paid (RP) (Rs. crores)
% of Total Commission on sales % of Total rent expense

Source: Company Analysis Source: Company Analysis

Commission on sales to related parties have Rent/Usage charges paid to related parties have
increased significantly in the last 3 FYs to around increased in the recent FYs and form majority of
70% as % of total commission on sales expense. total rent expense.

Note: In FY 22, the % is more than 100%. In

denominator, total rent expense is considered as
per Annual Report and in numerator, total
rent/Usage charges are considered as per related
party note as coming in Annual Report.

18
 DCF Valuation

Rs. in crores FY 24 FY 25 FY 26 FY 27 FY 28 Terminal Value

Operating cash flow 1,753 1,435 1,614 1,817 2,049
Investment in Capex (550) (610) (675) (745) (818)
Free cash flow to equity 1,203 825 939 1,072 1,231 29,288
PV of cash flows 1,089 676 697 720 749
PV of Terminal value 16,129

Equity Value 20,059

No. of shares (in cr.) 62.65
Equity Value/ share 320

Input for DCF Valuation

Risk free rate 7.05% 10 Year Govt. Bond Yield

Beta 0.56 Yahoo Finance

Market return 13.13% Past 20 Years Nifty 50 Return

Market risk premium 6.08% Market return - Risk free rate

Perpetual growth 6.00% Projected between the inflation range in India ~4-6% and GDP growth 7%.

Cost of Equity 10.45% Risk free rate + Beta * (Market risk premium)

19
 Analyst Coverage

Date Research Entity Target Price at Reco Rating Type

27-Jan-24 HDFC Securities 1500 1290.35 Accumulate
25-Jan-24 HDFC Securities 1500 1290.35 Accumulate
25-Jan-24 BOB Capital Markets Ltd. 1600 1290.35 Buy
25-Jan-24 Keynote Capitals Ltd 1512 1290.35 Buy
24-Jan-24 BOB Capital Markets Ltd. 1600 1305.6 Buy
01-Nov-23 Geojit BNP Paribas 1424 1240.75 Buy
21-Oct-23 HDFC Securities 1450 1292.95 Accumulate
20-Oct-23 Keynote Capitals Ltd 1552 1292.95 Buy
20-Oct-23 BOB Capital Markets Ltd. 1600 1292.95 Buy
20-Oct-23 Prabhudas Lilladhar 1538 1292.95 Accumulate
20-Oct-23 ICICI Securities Limited 1600 1362.7 Buy
27-Sep-23 Prabhudas Lilladhar 1538 1406.65 Accumulate
28-Jul-23 Geojit BNP Paribas 1470 1325.1 Buy
21-Jul-23 HDFC Securities 1450 1303.25 Accumulate
21-Jul-23 Prabhudas Lilladhar 1460 1303.25 Buy
21-Jul-23 ICICI Securities Limited 1600 1348.05 Buy
21-Jul-23 Keynote Capitals Ltd 1501 1303.25 Buy
20-Jul-23 BOB Capital Markets Ltd. 1600 1348.05 Buy
20-Jul-23 Motilal Oswal 1580 1348.05 Buy
18-Jul-23 Motilal Oswal 1580 1334.4 Buy

Source: Trendlyne

Disclaimer:
This report is made only for educational purpose and is not intended as an offer to sell or solicitation for the purchase
or sale of any financial instrument. The information used in the report is gathered from the publicly available sources
and it is believed to be reliable and the author does not warrant its completeness or accuracy. Investments in
securities market are subject to market risks, read all the related documents carefully before investing. Author is not a
SEBI registered investment analyst and Investment advice should always be sought from a qualified investment adviser
before any investment is made.

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