Havells India delivered a soft quarter for Q2FY23 and the pressing point has certainly been the margins. The EBITDA margins came in at 7.8 percent which is much lower than the CNBC-TV18 Poll estimates of 10.9 percent.

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Crucial to note that this is already lower than the 13.8 percent margins clocked in Q2FY22. The company attributed the drag in margins to the full absorption of high-cost inventory against falling raw material prices in Q2FY23. But the silver lining here is expectations for margins to witness an uptick from Q3FY23 onwards.

Havells India is currently witnessing a sluggish, but stable demand for its products. The electrical consumer durables division revenues were impacted on account of short-term destocking in fans led by changes in the energy efficiency norms, which is expected to normalize from Q3FY23 onwards.

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The company has been unsuccessful in passing on the full raw material price rise to consumers in Q2FY23 due to high competitive intensity. Havells India plans to undertake another price hike in Q4FY23 and is confident of such price hikes being well absorbed by the market, so expect normalized margins in H2FY23.

Havells India will continue investing in brand building and hence expect more advertising spending in the following quarters, which is currently at 2 percent of total revenues.

Amidst a sluggish consumer demand environment, the inventory buildup is on a rise for the festival season. The company’s market share in the cables and wires business is 15 percent, while for air conditioners is 12-13 percent.

In H1-FY23, Havells India incurred Rs 165 crore on capex, with a target of Rs 700 crore for FY23. While sitting on a high cash and bank balance of upwards of Rs 1,500 crore, the company is not looking at any inorganic growth in the near future. Also, Havells India shall introduce more products primarily to increase its rural penetration which is currently at 5 percent.

First Published:Oct 20, 2022 7:04 PM IST