Key takeaways of the call

Carry forward order book of the Segment stood at Rs 4883 crore (domestic orders Rs 2848 crore; International Rs 2035 crore). The order intake in domestic and international market in Q2FY19 was Rs 630 crore and Rs 460 crore respectively. Out of total order book the share of Rural Electrification was about 35%.

The company though won order in UAE the company continues to follow risk mitigated order booking strategy in the MENA regions given political impasse in Qatar.

In domestic market there is traction in electrification project with the company recently bagging a project in West Bengal. There is number of projects are up for finalization including electrification in domestic market despite private sector capex is still subdued.

Profitability of EMP segment was due to better quality of orders, efficient execution both in domestic and international business with a positive impact of foreign exchange.

Unseasonal rain led weak Q1, subdued Onam festival demand due to floods have depressed the industry growth. The industry has de-grow by 6% in H1FY19.

Voltas continues to sustain its No. 1 position in the Room Air-Conditioner market and has further improved its market share to 25.6% in current quarter as compared to 23.2% in the corresponding quarter last year (in Multi-Brand outlets). The company has ramped up its products, with right products in the energy efficiency Inverter segment which are well received in the market.

Inverter ACs now accounts 40% of Split AC sales of the company. The proportion of inverter AC this year is much higher than last year. With in fixed speed AC, due to change in star rating what the 3 star of last year is much different from what its now both in-terms of product performance and consequently cost.

The company registered a margin of 11% despite all challenging environment due to currency depreciation, excess inventory, input cost increase, customs duty hike. So the first half margin is a good indicator for whole year.

Inventory in the channel is about 2-2.5 months of sales compared to usual 1-1.5 months of inventory at the point of time of the year. Higher inventory across the industry and channel by Q4 the excess inventory will get liquidated.

Current market condition though not conducive for price hike, the company is very alert for any opportunities for price hike even for select models/products.

Imported completely built unit. Import composition importing of compressors and the indoor unit. The impact of customs duty is much lesser than import of completely built unit. The imports will be much higher for Q4 and lower for Q2. The company is trying to minimize the impact of customs duty hike with the company taking steps to shift procurement to domestic sourcing from overseas.

The Artic JV has launched products under Voltas Beko with offerings in refrigerators, washing machine, dish washers, microwave oven etc. The products are currently manufactured overseas the products will eventually will rollout from new plant at Sanand Gujarat.

The quality of the order book is now better than what it used to be and the company is confident of doing an EBIT margin of 7-8% in EMP business in 2 years time.