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Ladies and gentlemen, good day, and welcome to the Crompton Greaves Consumer Q1 FY '19 Earnings Conference Call hosted by Motilal Oswal Securities. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Ankur Sharma from Motilal Oswal Securities. Thank you, and over to you, sir.
Yes. Thanks, Janice. Good afternoon, ladies and gentlemen, and welcome to the Q1 FY '19 post-results earnings call of Crompton Greaves Consumer Electricals. With us today from the management team, we have Mr. Shantanu Khosla, Managing Director; Mr. Mathew Job, Chief Executive Officer; Mr. Sandeep Batra, Chief Financial Officer; and Mr. Yeshwant Rege, VP, Strategy and Financial Planning. We shall begin with the opening remarks from Mr. Khosla and then open the floor to a Q&A session. Over to you, sir.
Thank you, Ankur. Good afternoon, everyone, and thank you for joining in. This is Shantanu from our offices in Mumbai. Before I start, I just wanted to make 2 clarifications, like reminders. The first is, all the growth numbers I will talk in these opening remarks are growth adjusted for GST accounting as we've been doing in the previous quarter. And the second I'd just like to remind everyone, though, I guess, you're all aware, that previously was base period was relatively lower base because of the GST transition. With that, let me dive straight into my opening comments. Total sales for the quarter was INR 12,004 crores, a growth of 20% in revenue, which actually represents a record sales quarter for our company. It is the first time ever that we have sold more than INR 1,200 crores in a quarter. Profit performance was also strong, where we delivered about a 30% growth in our PAT and our margin increased from previous year and previous period. Moving on to provide some color really around our segment performances. Let me start with the ECD segment. Our ECD segment performed strongly over the past quarter with a segment value growth of 23%. This growth was driven by our core Fans business. In Fans, as you know, we introduced a new innovative Air 360 initiative, and this, though early days have got up to a nice strong start. In fact, even in this initial period, about 10% to 11% of the total Fans growth was contributed by this new initiative. And what we call the mass premium segment in which this initiative sits, that Fans itself from about INR 1,600 to INR 2,200, grew by 31%. Obviously, this initiative is still in early days and we believe it still has a lot of headroom to grow just like our anti-dust last year. But we're quite happy with the performance so far, especially with the way we've been building awareness and trial with the advertising, which we invested in and our strong distribution and field promotional activities behind this very innovative launch. The second cost segment, obviously, is pumps. Pumps also had an extremely strong quarter, and it really was driven by volume growth, where our pumps volume grew at around 30% in the last quarter both -- supported by both strong performance in domestic as well as our CE agricultural pump segment. Within the pumps, the real success continues to be, as we talked in the previous quarter, our new innovation of Crest Mini, which offered people who need a relatively lower head, a great value proposition, and that continues to drive the business, though we see opportunity to keep driving this further as we move forward. Finally, on our ECD business, as you're aware, we did talk about starting to bring in focus on our cooler business, and over time our geyser business as 2 key new areas. Now of course, in our cooler business, it's still very early and one of our major innovation has only really gone into a test area, but as we are bringing in more focus in spite of, as I'm sure you're all aware, extremely diverse market conditions in the cooler category over this summer, over the last quarter, we began to see initial green shoots of good results with our cooler business growing 21% in this quarter. Moving on to provide some color on our second segment -- key segment, Lighting. Lighting has, if you look at the overall numbers, which I'm sure you have, total value growth in Lighting was 9%, which is somewhat lower than the 20-plus percent rate, which we have been growing this in the past. Now just to unpeel this onion, the first thing is EESL, obviously has a bit of lumpiness in when we get the orders. So this particular quarter, our EESL business was very, very low. And if you net out for EESL, our business in Lighting actually grew 15%, 16% over the quarter. Within that also, I think as you're aware, we have been focusing for the last couple of years on -- single-mindedly on our LED business because we believe that, that is the route to winning and that's the route to the future. And this focus has been one of the reasons we believe for our strong growth, which has taken us to #2 position in Lighting. Our LED business over the past quarter grew about 40% in value terms. Obviously, with the ongoing drive for rotor in volume turns it was even higher. Really what has happened is though LED now contributes close to 80% of the total business, this quarter we saw a greater acceleration in the decay of the non-LED business, which declined by 30%. We believe that one of the reasons that this -- that traditional Lighting business deceleration has picked up is really because of the price erosion on LED because now, frankly, LED is in general cheaper than CFL in the marketplace. So that's how the overall 9% sort of gets build up. But the key metric really is, 78% of our business, which is LED, which is our focus area continues to grow robustly in value and even faster in volume, and we continue to believe that as long as we keep doing this, while focusing on innovation and cost reduction to ensure that our margin structure stays strong, we will continue to win in the Lighting business moving forward.Finally, I'd just like to make a couple of comments on our go-to-market since we talked it last quarter. We continue to focus on improving, significantly stepping up the quality, coverage and the technology backbone of our go-to-market program. Now this is still, of course, again early days, but it's beginning to show positive signs of working as we had anticipated. As you're aware, the 2 regions where we were really working this was one was the West, and then subsequently, we've had begun working it in the North. In the West, after we did go through some turbulence, we are now seeing healthy growth this quarter on our total business in the West, where we have the most advanced in terms of our pilots on our new go-to-market. Even the North, which is a more challenging market given this very strong wholesale and trading bias, we have now seen that the market have stabilized. We are not seeing declines anymore in the North. In fact, in the previous -- in this fourth quarter under discussion, the market has begin -- our business is beginning to grow in the North also, though still slower than what it's growing in the rest of the regions. Though as the program kicks up, we hope to see this continued improvement coming through there also. Finally on go-to-market, obviously, one of the keys is moving our focus away from primary to secondary sales, building a data platform and that progresses well also. We now have about 300 of our direct key customers, whose data is connected into our SAP system. Therefore, we are fully able to analyze, assess, make sure they have the right product available, make sure we can develop the right programs. This is, of course, is an ongoing program, but I just wanted to report back on where we were. Next overall, we think that we had a pretty solid quarter. We've seen strong growth coming in our core ECD business. Our market share on Fans, we continue to consolidate our leadership positions. In the most recent quarter, our share has grown by another 1 point. Our core pumps business also continues to be growing at industry-leading rates. Coolers, we're beginning to see initial signs of small green shoots , obviously, there's still a lot of work to be done. And the LED focus, the cost focus and building stronger prospective systems and innovation on Lighting continues to seem to be the right way to go and is driving business, where as I mentioned, our LED business this quarter grew 40% in value terms. With that, I'd like now to pause, so we have enough time for any questions or clarifications any of you may have. As always, we'll try and cover as many as we can. If there is anything, which is left out, please don't hesitate to contact us after this meeting. We're happy to talk more. My request is, if you could sort of just limit yourself each person to one question, and thus make it go more efficiently. Thank you.
[Operator Instructions] We'll take the first question from the line of Arnab Mitra from Crédit Suisse.
My first -- my question is predominantly on the consumer deliverables business. So you seem to be reasonably satisfied with the pickup there. However, as you know, there is a very important base effect in this quarter, which was a pre-GST quarter. And if I remember correctly, there was an 8%, 9% decline in the last year's 1Q. So adjusted for that decline, do you see this as still a good growth because -- or is it largely driven by base effect and we will see growth come off very sharply as the base normalizes going ahead?
Well, obviously, Arnab, there is a base effect. There is no doubt about it, which was created by the transition in June last year. That being said, as -- our approach to benchmarking what should be our top line performance is really all based on our original goal of growing share. What we aspire to is to make sure we're growing at a rate which is faster than market, and therefore results in meaningful share growth on a sustained basis. The fact of the matter remains, especially on the Fans business, not the total ECD business, but the Fans business, we still see a market and market growth based on retail audit data, which is muted. As I mentioned earlier, part of the Fans market growth is a function of housing starts, which is correlated to. So whenever housing starts pick up, we expect the market growth to pick up. For us, there are 2 really top line revenue objectives, which sort of are independent of market growth. Number one, make sure we grow strong enough to gain share. Number two, make sure, especially in Fans, we're continuing to improve our mix, which would make -- given that we're relatively underdeveloped and are in the higher price segments of the market. Even this quarter, we have clearly been growing share as per the retail audit data. And this quarter also, we are continuing to improve mix in Fans with value growth ahead of volume growth.
Okay. Sir, there's one follow-up on this. Just to confirm, would you...
Sorry to interrupt, but I caution you to please ask a question please and a follow-up, [indiscernible]. We'll take the next question from the line of Venkatesh from Citibank.
Sir, this is kind of a similar question to what Arnab asked. I mean, if I actually look at your numbers and I go back in time and see your first quarter FY '17 profits, the number was almost INR 93.5 crores. Now do you think on an average, the business has been growing 10%, 11%, plus every quarter there has been some amount of margin expansion. Now if first quarter FY '18 had not been a pre-GST quarter and you have delivered at least 15% growth, the first quarter FY '18 number would've been closer to almost INR 104 crores or so. Now ideally in that quarter, I remember you telling that you've lost around INR 125 crores to INR 150 crores of sales because of destocking. So if I assume that you doing that -- those destocking [ last year ] we grew to 10%, 15% of profit this year. Then the profit number this year should have been closer to almost INR 120 crores. So -- and the number has been around INR 104 crores. So can we say that this entire theme, the fact that the profit number is not INR 120 crores can be attributed to the fact that the Lighting business has not grown commensurate and also the margins have contracted, while you would attribute some element of that to the consumer durables segment also?
Let me address it with the last point you raised. If you look back over our performance over the few previous quarters, really what was happening was our Lighting business was growing low 20%. Our ECD business was growing 10% and then you were sort of getting the company average. I think the difference is what's happened this time, especially for the ECD business, and I think it's driven largely by the innovations in both Fans and pumps plus our go-to-market work, is what you're seeing is the ECD business growth rates and margin has significantly improved versus trend. The Lighting, I think, is a specific issue, which we believe is something, which we can resolve and that is driven by the fact that while the LED business is continuing to grow, it is being dragged down by 2 factors in this period, EESL being close to 0, and also the fact that we do have a conventional business which is declining fast. So it's good if you look at the strength by conventional would be true, try look at them separately by category as opposed to clubbing it all together.
We'll take the next question from the line of Aditya Bhartia from Investec Capital.
Sir, you mentioned that retail audit data on the ECD side is speaking about muted growth for the market, but for the last several quarters when we look at some of the listed peers, you have been growing at a fairly brisk pace. So how should we reconcile this? Is it that investing in retail planning has started rising after GST implementation?
Well, there's 2 clarifications or one clarification. This data is not with regard to ECD. This data, for retail audit, is with regards to Fans, right? And I think, as we look at the business, we need to recognize that different companies have different things at ECD, right? It's not necessary that the total ECD number is exactly the same as the total Fans number. That's the first thing. So the Fans trend, as we look at and what we understand from our vendors of the retail audit, who also supply the same data to other key competitors for Fans, is the trends of that data being reasonably consistent with the company sales, over time, not necessarily on a month-to-month basis. But I think what is important to realize is, ECD is not Fans. Either is it for us, nor is it for everyone else. For us, yes, for most people Fans is a reasonable part of ECD, but it's definitely not all.
We'll take the next question from the line of Renu Baid from IIFL.
One question from my end. If you can help us understand the theme more on the GTM. It is mentioned broadly with respect to the Western and Northern market? But how would this look in terms of coverage of the key towns that we are? And how are we expecting it to spread across over the next 12, 18 months at least for the first level of GTM across the ECD segment? And along with this is advertisement spent number for the quarter? That's it from my side.
Okay, that -- sorry, Renu what else for the quarter?
The advertisement spent for the quarter? Yes, actually that was the second question.
Okay, no problem. As far as the go-to-market expansion goes, within the next 12 to 18 months, we would expect to cover about 75% to 80% of our existing business. Now to give you a reference of how much is in the program already this quarter. West, where we've started before the North. The North one is still very preliminary. In the West, currently about 25 -- 20% to 25% of our business in the West is under this model. And what we are seeing as we run the pilots is, areas which are under this model are growing significantly ahead of areas which are not under this model. In terms of advertising -- advertising spend in the quarter was INR 24 crores.
Sure. Sure. But yes, including that of the 10% to 15% growth will be sustained even as the GTM is rolled out in India in the next 12, 18 months.
That is definitely our objective. And like I said, the way we're approaching this is to make -- is wherever you implement this, there is a speed to 6 months sort of dip and then pick up, so which is why we're going sequentially so we manage the total company business.
We take the next question from the line of Gunjan Prithyani from JPMorgan.
I just had follow up on the Lighting business. This EESL business seems to be negligible for the peers as well this quarter. It's just that EESL is no longer interfering on the Lighting because the purpose of driving down the prices and the penetration is largely achieved? And also, how long do you think this price erosion will still to continue in this segment because it's been almost 2.5 years now?
Okay. On the -- Mathew, answer it rather.
I think, of course, in the last quarter we provided the EESL procurements for the extent of information that we have has been much lower than the previous quarters. Having said that, even with LED bulbs, which is what we've started with first, there is still significant tenders that have been focused by EESL, which has to be supplied over the next 6 to 9 months. So I think that while overall volumes have dropped, it does not come to a complete standstill, and we expect to see some EESL -- significantly a lot of EESL activity in Lighting to continue for the next year to a couple of years. That is our expectation.
On the price erosion, what happened is the price erosion happened on bulbs. The price erosion began relatively later on bottles and panels. And what we're seeing now is also the relatively -- the price erosion also happening in the B2B segment. Now that being said, the price erosion is being, at least by us, matched by corresponding cost savings and cost reduction. Even in this quarter, where there was further price erosion, our LED gross margins actually went up slightly. So the only answer to when will price erosion stop, price erosion will stop when all costs have been eliminated. If you were to ask me to make a guess, and it is no more than a guess, I would think it would continue for the next 12, 18 months at least.
[Operator Instructions] We'll take the next question from the line of from Inderjeet Singh from Macquarie.
In the context of we talking about the 10% to 15% kind of growth, so how do you see the new products that we -- that you took on a bid to introduce them, are they kind of playing a role into our top line growth, would that be additional? Or do you think we would need to kind of get these coolers and alternators and other products to achieve that number?
First, the initiatives on our existing business, we expect that to be a key contributor to our continuous growth on our core businesses as exactly they've been in the past. Anti-dust was a key contributor to our Fans growth. Air 360 is already contributing to our Fans growth. Crest Mini has been a key contributor to our growth. Similarly, innovations on Lighting. The purely incremental, which we do not have today, will be the innovations as we bring and expand them in segments such as coolers and geysers, that will drive incremental growth on top.
We take the next question from the line of Pulkit Patni from Goldman Sachs.
Sir, you spoke about the cooler business basically 20% for you. I understand this is your base effect, but I just wanted to understand our strategy in this particular segment given that we are almost at the end of the summer season. So what are we looking at doing in the cooler business for the rest of the year? And any other product introduction that is being planned for the rest of the year, which could contribute to the ECD business for us?
Well, I can't talk specifics on planned introductions. Let me say simply that, yes, we do have planned introductions, which will help us continue to grow and accelerate growth. Obviously, coolers, referring to the first part of your question, the season is over. So really the focus on coolers and the programs to really accelerate coolers will begin as we get into next summer. Getting into winter, obviously, the focus on the market growth and the opportunity is in the geyser segment.
And the geyser segment now we are ready to sort of compete or you think -- coming -- when we get into the winter this time around, our product portfolio, et cetera, we are fully equipped to take on the competition?
We believe so.
We take the next question from the line of Balwindar Singh from Canara HSBC.
Could you talk about a bit about your pumps business, because couple of quarters back you had lost some market share because of competition in the lower price point. So how are you positioning now after the launch of the Crest Mini? And what is the kind of market share that you have improved?
Over the last 2 quarters, including this quarter, we have significantly accelerated our growth in pumps. A large part of this acceleration in growth has come behind a very successful introduction of the Crest Mini. We are continuing to drive Crest Mini because there are still lots of opportunities in terms of further growing awareness, drive and distribution. As we look at the reported numbers of pump competitors, clearly, we are one of -- we are growing significantly faster than most of our competition over the last 2 quarters. Importantly, this growth in Crest will be driven by Crest Mini. It's also profitable growth. So while it is lower priced, we have engineered and designed this product for the appropriate performance. So we are not compromising on profitability growth as we are getting the top line growth on pumps.
We'll take the next question from the line of Abhineet Anand from SBICAP Securities.
Just on Fans, what's the proportion of premium Fans on the overall Fans as of now?
About 20%. But -- in this, I just want to make one point so again because different people use different clarifications. We have defined premium Fans as Fans which is INR 2,200 and more expensive. Now there is also another segment below that, let me call this mass premium, which is about INR 1,500, INR 1,600 to INR 2,200. Air 360 actually falls in this segment. Growth of this second segment also leads to improvement in mix because it is moving people up from the mid-to-low tier in Fans which cost a little under INR 2,000. So both these segments are important, and our mix improvement is coming from disproportionate growth in both these segments.
We'll take the next question from the line of Naveen Trivedi from HDFC Securities.
Sir, if you can tell, you and Havells, both are gaining market share in the Fans segment, is it possible for you to share, which all brands are using the share during the last few quarters? And the second question is, if you can share how much this mass premium, the price footfall, INR 1,500 to INR 2,200, how much that contributes to you?
Sure. Okay. On your first one, unfortunately, I cannot share because that is proprietary information, which we had purchased from the retail audit agency and they own the information. So you will have to contact them and ask them if they're willing to share their data with you. On your second question, the -- that mass segment contributes...
60% to 65%
It's about 60% for us; 60% of our business.
We take the next question from the line of Achal Lohade from JM Financial.
About the segmentation of the Fan industry...
Excuse me, sir. So sorry to interrupt, requesting you to please use the handset mode as your audio is not very audible.
Yes. Is it audible now?
Yes. Go ahead, please.
Okay. Sir, what I wanted to ask is, as you said about 20% of our Fans business from premium and about 60% from mass premium, how would that segmentation at the industry level according to your estimates are?
Our estimate is in the -- is for the market as a whole, what we call the mass premium would be about 50%, and the premium would be anywhere between 10% to 12%.
Understood. And just one data point question, I see your legal and professional charges of about INR 55 crores in FY '18 in the annual report and about INR 53 crores in the last year FY '17. Could you please elaborate? Is it pertaining to ESOP cost or something else?
No. ESOP cost is shown as part of manpower cost. Legal and professional, some would be legal fees and some of it is whatever consultants that we use that is clubbed under legal and professional.
So for example, we've been having a project for the last 18 months, working closely with BCG to help work our entire cost-reduction program. So those kinds of costs would be included here.
So would they sustain like in the coming year? Or that could see a reduction in FY '19 and '20?
So I think given the kind of initiatives that we have underway, at least for next 12 to 18 months we'll see visibility of similar costs.
We'll take the next question from the line of [ Chetan Wadia from BGI ].
Sir, my question is on the Lighting business. I mean, this has been a growth year for most of the competitive segment. So how do we differentiate product difference in terms of durability and in terms of pricing? First. Secondly, what's your advertising budget for FY '19 and what would be the target spending for that? And among -- including Lighting, what will be the revenue contribution from the new products for the FY '19 in terms of percentage?
Okay. Advertising budget...
Total cost.
Okay. So total marketing spend would be about INR 100 crores across the company. Second is, what was the first question was? Lighting. How are we going to differentiate? Okay. Okay. We are going to differentiate in Lighting by identifying -- just like we've done in Fans, by identifying consumer meaningful needs, developing innovations which better meet those needs. Like I said before, really what we've been doing up till now is sort of establishing the base on LED. Now we have got a program and over time you will see them revealed in the marketplace of meaningful innovative products. For example, this month itself, we are introducing the first 5-star LED bulbs, okay? So similarly there will be a number of initiatives, but that's the way we plan to differentiate ourselves. The second way we plan to differentiate ourselves is with leveraging our go-to-market program, superior in-store availability built up over time. We do not plan to differentiate ourselves by saying we're going to be the cheapest price bulb, no. That is not our intention, that is not what Crompton stands for.
We'll take the next question from the line of Harshit Kapadia from Elara Capital.
I just have 1 question. We have seen the last 2 innovations that you did, Air 360 as well as Mini Crest (sic) [ Crest Mini ] was largely in mass segment. So is it a fair understanding that more innovation that you we will be doing across the categories will be largely towards mass segment? Or will you also have more focus on premium segment? Of course, that should drive your margins, is my understanding.
Well, our focus will be, let me say mass premium. We do not want to do a lot of innovation in very niche segments because I don't believe that will actually drive margin because you end up with fairly really small volumes, nor do we want to do a lot of innovations at the low end of the market. So the best way to think of where we'll do our innovation is quite frankly, even anti-dust is in the top half of the market, not in the top 2% of the market.
We'll take the next question from the line of Shrinidhi Karlekar from HSBC Mutual Funds.
I think it is my line. Am I audible?
Yes. Yes.
Sir, this is Shrinidhi from HSBC. Sir, my question is really on the Fans segment growth. So if you leave apart the weak summer season part and just look at the demand coming from new housing segment. Has that changed for positively or is it unchanged if you compare a year ago? I just want to know that.
I think, largely it is unchanged because I think our growth is coming from: one, share gain; and two, improving mix.
We'll take the next question from the line of Niket Shah from Motilal Oswal Securities.
This is Niket here from mutual fund team. I have 2 questions. One is on the digitization part, how are you using that in your business, and what kind of benefits are you seeing, whether it's to do with your sales force or communicating with your dealer distribution channel? And within Lighting, what kind of mix do we have as far as fixture is concerned because there is substantial margin difference between you and your competition. So if you can just help me understand that.
Okay. On digitization, there are few areas that we have chosen to really focus on digitization at this stage. Our first focus on digitization is our entire go-to-market, and we are fully engaged in driving that. There are a number of levels in which we're doing that. One is, as I had mentioned earlier in my opening remarks, driving up data connect between our e-customers and us, so we can actually monitor and analyze and plan on the basis of secondary sales. The second part of this with our customers is to establish and expand the dealer portal, which improves the ability of our customers to communicate with us. The third is really sales -- frontline sales force, which improves the ability of our frontline distributor salespeople to deliver high quality calls with strong productivity in store. This is a program, which we are implementing step-by-step. Obviously, it doesn't happen overnight. The second big area, which we are working on digitization is our entire product supply area to make sure that we automate and systematize that from, literally, the customer shelf back to our vendor. The third big area, which we are working on digitization at this stage is our entire people management, making sure that all our people processes, career development, training, appraisals, successor planning is all managed on the digital platform and linked. So these are the 3 big areas, which we're working now. It's a lot of work, and it's not an overnight program. But each step of the program will give us gains, and we believe that once this is built and fully operational, will be completely different level of capability across the board as an organization.
I think with respect to your question on Lighting, out of -- now, let's take LED Lighting, out of LED Lighting 70% of our sales is LED fixtures, I think, you need to be a little careful while comparing the margin structures of different organizations of Lighting because some companies report EESL separately, some will club it along with the total. Then there is a completely different -- the mix situation in terms of LED Lighting versus the conventional Lighting companies like Crompton have significantly large conventional Lighting base, which is growing quickly not only in terms of top line growth, but losing profitability. So I think, if I look at the LED business per se, I think, and if you see the last 2 quarters, actually we have been improving our profitability on a conventional basis.
We'll take the next question from the line of Ansuman Deb from ICICI Securities.
Sir, you mentioned about the retail penetration in the West, the figure around 20% to 25% as of now. Could you share a similar number for North? And incrementally what has been the gain in this region compared to Q4? In the last Q4, you had some impact of GTM in our results. So what has been incremental market share on the GTM from Q4 to Q1 if you can share that?
Firstly, in the North, it is only just beginning. We're in the process of appointing distributors, training distributors, putting the system. So it's relatively earlier days in the North. Secondly, the West was declining, and now it's growing in line with our other strong retailers. The North was declining. It is now growing slightly.
We'll take the next question from the line of Arnab Mitra from Crédit Suisse.
Shantanu, just on the GTM chain, change, again, just for my clarity, so what you're saying is that you've covered small parts of -- some part of that early in North. However, you did say that the growth has improved versus last quarter. So -- if so much of the balance to do is left, would that disruption actually not again happen in the next 2 to 3 quarters ? Would we have phase and things improve, and again, there is a dip because of destocking as you roll out the pilots into different areas of these regions?
We will try -- at least our objective is to try and manage it in a way where we balance. So we don't go too broad. So we act one point in time. That's part of our principles of sort of the schedule of expansion.
Sure. But then last quarter, the impact in the North was so substantial despite it being in a very small part of the North. I mean, I'm just trying to reconcile those 2 things.
Now what happened in the North is -- and before you establish the GTM, you have to make sure that you begin to establish price transparency and consistent pricing. You can't do that only in pockets. You have to -- it's like what we did on South in Lighting 2 years ago. So North, because of the nature of the region, is relatively more or was relatively more creating wholesale-dependent. Therefore, the short-term impact on the North are beginning to establish these transparent consistent pricing was more. Now as the work begins of building the distributors capabilities, you'll start getting the positive.
We'll take the next question from the line of Nishit Jalan from Kotak Securities.
Sir, my question is, one, on the Lighting segment, is there any sort of seasonality, because if I look at last 2, 3 years the reported numbers that we have, first quarter the margin always tends to come down. So just wanted to understand that. And secondly, A&P target is only about INR 100 crores. If I look at your annual report last year, your A&P spend was about INR 106 crores. So are you looking at a flattish sort of a budget on the A&P side despite looking at top line growth?
Yes, more or less, plus-minus a few crores, this way, that way. Now that being said, the way we hope to achieve that is to get a little more efficient on the fee part because as we get more data and as we get a better understanding for the systems, we start spending more money behind programs which we know are more effective in terms of returns.
We'll take the next question from the line of Niket Shah from Motilal Oswal Securities.
Just wanted to know you mentioned earlier that in areas that you -- with the go-to-market strategy, you saw a bit of various solid growth coming back. Can you quantify areas where these have kind maybe got stabilized? What is the kind of growth that you're seeing on a Y-o-Y basis?
If you take an example for where we started first, which was Lighting itself, we started 18 months ago. We saw a dip of about 0.25% and then we had growth in excess of 20% a year later. So while we were already playing on exactly the same in market, I mean, even with -- what Shantanu said in West where we have implemented the go-to-market in the 25% of the region, the growth has been significantly better than the rest, which, of course, the first 3 months kind of a period where you have a little bit of a pain.
It is 20% on lower bids or it's on a like-for-like basis?
Because you know the -- I think a year to 18 months later, so obviously all the low base effect has gone by that time. So we have seen that kind of growth.
See it's difficult to put a hard number, and that's because the actual incremental will vary based on the category, based on the specific distributors capability, based on the development in that particular town or city. But I don't think we have any doubt that improving our service and coverage of retailers will add incremental business. It happens whenever you do that and not half a point kind of thing, meaningful increase.
We'll take the next question from the line of Bhargav Buddhadev from AMBIT Capital.
Just wanted to check one thing that since the time when we have launched GTM, there is a sort of increase in capital employed [indiscernible] in the ECD business, which, as on March '18, you can then increase your [indiscernible] but in 1Q, we see sort of capital employed in the ECD business very much grew, any particular reason for this?
Bhargav, this is Sandeep here. The capital employed as you have rightly observed has gone up, but that has no connection with the GTM initiative. What we have done is that we've got a fair amount of surplus cash. So we use that surplus cash to tactically pay some of our rental bills in advance, wherein the kind of discounts that we have got on the early payments are much higher than what we would've got had we invested that cash in debt fund. So it's a simple arbitrage that we have done. And that surplus cash that we would've had would have shown on unallocable capital employed. But when you use that to do reduce your creditors, the capital employed in segment could go up. So it's a simple financial arbitrage.
We'll take the next question from the line of Mohit Pandey from Citigroup.
Sir, my question is something like this, in the context of the GTM program, how has your relationship with wholesalers, and say, dealers changed over the -- since the program has been launched? Is it that the latter has become much more important than the former now, say, compared to when the program was not launched?
No. And very -- just no. I just want to make sure I want to clarify one thing, so there's no misunderstanding. Doing a GTM program does not mean wholesalers are not important. Wholesalers will stay, and they will always be a critical channel. If I go back to my old FMCG business, even with a wonderful coverage and distributors that FMCG companies have, the large -- a very large percentage of business goes through wholesale. What is the change in relationship with all our customers, distributors, large retailers or wholesalers is, we want to move from a transactional relationship to a more long-term partnership kind of relationship where there is value both for us and there is value for the channel partner. That is the basic philosophical, if you will, transition. The wholesaler has a critical role even for a company, for example, like Hindustan Lever, 30% to 40% of its business goes through wholesalers. The reason the wholesaler has a critical role is, in a country like India, there will always be a large amount of small retail stores where it is more efficient for the supply to go through the wholesaler than it is for the supply to go through a distributor. What this does is -- what it does though is the wholesaler who is bargaining on price, so he can move goods from Delhi to Vijayawada, which is simply high target has happening, but not in the interest of any customer or any consumer. But very clear though, wholesale is an important channel with a critical role, just like modern trade is an important channel with a critical role.
We will take the next question from the line of Ansuman Deb of ICICI Securities.
I had one question -- a particular question on GTM. So if I remember, we were planning to implement, at least, in the first phase of GTM by Q4 FY '19. So is the time line remains the same or the next 12 to 18 months implies that it would go to maybe FY '20? And also in Lighting, by when we will have almost 90% to 95% kind of an LED, if you can share that?
Okay. On the first, we haven't really changed our time-- target time, it is 12 to 18 months. We would like a large percentage of our business to be covered in the new model. But to be clear, I think, states will be criteria driven more than time driven, a quarter this way that way is not that important as making sure we have the right and robust network. When will we move now from 78% LED to 90% LED, well, I think we moved from 65% to 78% in 12 months, so let's say, another 12 to 18 months.
We'll take the next question from the line of Naveen Trivedi from HDFC Securities.
Sir, can you share the like-to-like Lighting EBIT margin for the quarter?
Lighting -- which period to which period?
The Q1 FY '19 versus Q1 FY '18, it's like this quarter we couldn't have the EESL numbers. So can you give the EESL number?
The group -- the EESL.
We don't have the numbers without EESL. We have the top line number without EESL. But the EBIT margin, we don't track at customer level. So overall numbers are there. Last year it was 8.6% and now it is 6.7%.
Ladies and gentlemen, that seem to be the last question for today. I would now like to hand the conference over to the management for their closing comments.
Thank you, again, for the interest in joining the call. Hopefully, we were able to help and clarify, but -- because like I have always said, it's our intention to be as transparent as we can and make sure you understand the business to whatever level you need to. If you have any more questions, please don't hesitate. We are available. Just contact via phone at any time and we are more than happy to talk more. Thanks so much.
Thank you very much. Ladies and gentlemen, on behalf of Motilal Oswal Securities, we conclude today's conference. Thank you all for joining us. You may disconnect your lines now.