Key takeaways of the call

Unitary Cooling Products: Coming off a challenging year, this season started with a nation-wide heat wave and delayed monsoons. Temperatures rose across the length and breadth of the country, benefitting the industry as a whole. While the market grew by a substantial 36% as compared to last year, Voltas grew even stronger as evidenced by the increase in externally reported market shares. Market share of the company for the month of June 2019 was 25.3% and that for Q1FY20 was Rs 24.14%. The company has reduced inventory level substantially.

Inverter now accounts for over 50% of the company's total AC sales volume and the company has become number two player in inverter AC segment.

With the wider range of consumer durable products that are now available via Voltas Beko, the company currently has more than 150 exclusive brand outlets across the country. Commercial refrigeration products and air coolers also witnessed increased traction and healthy growth. These outlets deliver a unique customer walk-through experience, displaying the entire range of Voltas and Voltas Beko products and have seen an increased traction in both enquiries and sales.

Alongside ACs, commercial refrigeration also witnessed better traction and healthy growth in Q1FY20. Voltas's Fresh Air Coolers continued to provide respite in the harsh summers, with the brand gaining more ground and posting a substantial growth coming off a challenging year. The team is driving aggressive growth in these categories as well.

The company has recently launched Air-purifiers with three variants in the current year. Customer response on Products has been encouraging and further product portfolio expansions are planned to tap the potential.

The Unitary cooling EBIT margin in long term will be 11-12% only. Every quarter the company faces different type of competitive pressure that forces the market leader to react. EBIT margin of 13% despite volume growth the season was extremely good.

AC - The company is building back inventory for the ensuing festive season and next summer after substantially reducing it.

Customer wants ample choice/options. In Ac business we have 70-80 SKUs. The company currently has 31 SKUs in refrigerator; 5 SKUs and 12 SKUs in front load and top load Washing machines.

Segment B – Electro-Mechanical Projects and Services

Order backlog of EMP was higher at Rs 4756 crore [International Rs 1852 crore; Domestic Rs 2904 crore] compared to Rs 4623 crore in corresponding previous period. Order inflow in Q1FY20 was Rs 680 crore and of which domestic orders were Rs 450 crore and balance is international.

The Middle Eastern economies are going through turbulent times. Notwithstanding the volatile Oil market, governments in some of the Middle Eastern countries have announced some investments in long term infrastructure projects. Company's strategy in this environment is to look for good quality orders with reasonable margins and commercial terms. Qatar as a market is also seemingly opening up and the company is considering business that meets its risk mitigation criteria. Meanwhile, the challenges faced by a JV partner of the main contractor (Carillion) in Oman continue and the company is watching the situation closely.

In domestic market, few of the orders picked up in the recent past are currently in the early stages of execution and will provide an uptick to earnings in the forward quarters. That apart, some LOIs is in the pipeline which will be announced once finalized.

The RIEL, the subsidiary focused on rural electrification plans to foray into Solar EPC and has recently commenced developing capability to address this market.

Rural Electrification – inverdently lot of slowdown due to elections. Currently doing RE jobs in 4 states. Other opportunities are opening up such as underground cabling and feeder separation. Water is a significant opportunity that is opening up. Government supported or externally funded projects are the targets.

Segment C – Engineering Products and Services – Textile Machinery Division (TMD) and Mining & Construction Equipment Division (M&CE)

The Indian textile industry went through yet another period of turbulence, as China with its significant surplus stock of cotton cut down on yarn imports from India. Many of the spinning mills are cash strapped and have resorted to either full or partial shut-downs. In this environment, orders for new capital machinery are fewer than before. Meanwhile, company's strategic focus on other growth avenues including Post Spinning and the Services & Parts business continues.

The Mining business has continued its good performance in Mozambique, while the India mining story is at an impasse. On the positive side, seeing some pick-up in spending in road construction activity.

Voltas Beko: The company is in the process of setting up an mfg unit in Sanad for refrigerator and washing machines. The plant will commence operations by 2019. Voltas Becko is progressing completely as per plan. Direct cool refrigerator. Increased our distribution and reasonably happy with quality and price.

VRS Scheme – The company have reopened the scheme in Q1FY20 and the number is clearly out there. But could not foresee how many people will take up at close of the scheme.