Key takeaways of the call

Carry forward order book of Electro-Mechanical Projects and Services (EMP) stood at approximately Rs 5000 crore (up from Rs 4850 crore end Dec 17) and of which domestic orders were Rs 3100 crore and International order book was Rs 1900 crore.

EMP domestic order intake in Q3FY19 was Rs 731 crore and that of International was Rs 340 crore. Order flow was driven strongly by electrification and infra projects.

In EMP Segment the company continue to focus on government and government funded projects as well as orders with reasonable assurance of cash flow.

EMP Segment Results was higher by 30% Rs 69 crore on segment revenue of Rs 875 crore (up 16%) with EBIT margin expand by 80 bps to 7.9%. This reflects better quality of orders, efficient execution both in domestic and international business. Segment Revenue of Unitary Cooling Products for Comfort and Commercial use (UCPCCU) for the quarter was down by 3% Rs 526 crore. The increase in input costs along with depreciating currency led to a drop in segment results to Rs 45 crore, a fall of 37%. Segment profit Engineering Products and Services (EPS) was up by 4% to Rs 22 crore on revenue of Rs 83 crore (up 20%) as its EBIT margin decline by 450 bps to 8.5%.

Voltas continued to be the undisputed Market Leader and the No. 1 brand in the room AC segment despite tepid environment. Market share of the company in 9mFY19 was 24%. The industry in 9mFY19 degrew by 4%.

Inventory (Room AC) in the system as end of Dec 2018 was for about 2 months compared to about 2.5 months as end of quarter ended Sep 2018. Expect inventory to come down in Q4FY19.

Inverter ACs now contributes to approx. 40% of our Split AC sales.

Being a customer centric brand, the focus has been on introducing green, environment friendly, better quality and technologically superior products with attractive consumer finance schemes. This has helped the brand remain on top of mind for the customer.

The room AC market continue to be competitive and it is doing what is necessary to hold on and improve its market share.

The company is started construction on its new manufacturing unit in South at Tirupathi in the state of Andhra Pradesh on a land of 65 acres. The new plant will primarily have capability to manufacture AC and other related products. This plant is close proximity to ports in East Coast and gives savings in logistics cost and time.

Customs duty increase is not to impact the company in short term as it is well stocked before of critical products for peak season but a pain in the long term.

Overall margin is expected to be 11% for FY19.

It is making all efforts to recover the Rs 13 crore provisions for contract assets (delays in certification - arising out of liquidation filing by a joint venture partner of main contractor.