Crompton Greaves Consumer Electricals Ltd

NSE:CROMPTON

Earnings Call Transcript

[Kunal Sheth, analyst]

Yes, I -- good evening, ladies and gentlemen, and welcome to the Crompton Greaves Consumer Electricals Limited Q3 FY '25 earnings call. Today, we have with us from the management of Crompton Greaves Consumer Electricals, Mr. Promeet Ghosh, Managing Director and Chief Executive Officer; Mr. Kaleeswaran Arunachalam, Chief Financial Officer; Ms. Swetha Sagar, Chief Business Officer, Butterfly Gandhimathi Appliances Limited; and Ms. Natasha Kedia, Head, Investor Relations. Thank you for giving us this opportunity. And sir, may I request you to give us some opening remarks. Post which we will open the floor for Q&A session. [Operator Instructions] Thank you, sir. Over to you, sir.

[Promeet Ghosh, executive]

Thanks. Thank you, everyone, and welcome virtually to the new Crompton office as you have -- okay. Welcome to the new Crompton office virtually, hopefully we'll be able to welcome you here physically in the not so distant future. And with that, we've already been introduced to Kaleesh, Swetha, and Natasha, as you already know them quite well. I will jump straight into my opening remarks on the performance this quarter.

Before I get into the performance of this quarter, I also want to tell you that as you are aware, we embarked on Crompton 2.0 about 18 months ago. And while we have periodically communicated that there is various activities and actions that we are taking as a part of Crompton 2.0, what we are beginning to do from this quarter is to start to bring you in, give you a sneak peak, if you will, about what those activities are actually resulting in and what differences that those are making to the business. And hopefully, those will be of interest to you as well. Some of this -- actually, we are also going to do a public launch on. So -- but I'll come to all of that in a short while.

Firstly, let's quickly talk about the performance and results. On the stand-alone performance, I'll remind you that in the backdrop that we are currently operating in, consumer sentiment has been subdued. And during this period, we have been very focused on sustainably and consistently enhancing both our revenue growth as well as our absolute profit trajectory. This is not -- this should not be news to you, this is something that from time to time I have talked about. But this is clearly coming through this quarter as well. As demonstrated, we have -- we are taking a comprehensive approach to managing operations, remaining disciplined and mindful of strategic decisions as well as tactically exploiting market opportunities while being firmly committed to our long-term goals.

This quarter, I'm happy to share that Crompton continues to deliver robust growth. Revenue growth remained steady, complemented by margin expansion and higher growth in profits. The company recorded a standalone revenue of INR 5,150 crores in -- for the quarter -- for the year ended December 2024, which is an increase of 12.5% year-on-year. EBIT for the 9-month period surged 23%. And overall, for this period, there was a margin expansion of 9.9%. In Q3 alone, revenue grew by 6% and EBIT grew by 15% Y-o-Y, with a margin of 9.7%, up 70 basis points.

In this period, ECD margins improved by 160 basis points on the back of in a very -- in a quarter, like I said earlier, where there have been subdued demand, very disciplined pricing keeping in view our long-term objectives as well as very focused actions on pricing -- on cost optimization. Insofar as lighting is concerned, there too, excluding EBIT -- excluding stepped up A&P spend, our margins expanded by 1.5% and after factoring expanded the A&P spend, our margins remained flat.

Now, let me get into each segment that we operate in, fans, a business in which we are market leaders by some distance. Despite the off-season, the business recorded a mid single-digit growth led by TPW fans. Efforts to expand placements across 500 plus key retailers continued and calibrated pricing actions were implemented in key premium models. To strengthen their position new products focusing on aesthetics, style were introduced such as Luxian Cairo and Festo. With the summer season approaching, the focus remains on accenting premiumization and deepening channel partner engagement. In essence, our emphasis has been a lot on building the enablers for the business in what has been an off-season quarter.

In pumps, we grew 19% Y-o-Y, which was driven again by successful execution and ramp up in our solar pump business. We continue to innovate and also launch products such as SWJ Dura, Win Dura with enhanced performance and durability to strengthen our portfolio. I might add that both -- in both these launches, we have been met with good success. In the appliances business, which, as you know, comprises 2 parts, the LDA and SDA. We have seen strong momentum both in small domestic appliances as well as in air coolers. While air coolers achieved -- and this is an off-season for air coolers, we have achieved in air coolers the highest ever preseason growth, while demand for water heaters was impacted because some of the sales, because of regulatory reasons as you are aware, were preponed in the previous quarter. Which also -- and to an extent, also impacted by a delayed onset of winter.

Mixer grinders sold 46% during this quarter, Y-o-Y, fueled by robust demand and the successful introduction of higher wattage mixers, grinders and also nutri-blenders. Now I have said this before, I want to emphasize to you again that we find that combining Butterfly and Crompton by numbers, we are already, we believe, the largest mixer grinder company in the country. That is no mean feat and it is credit to our kitchen appliances business, both in Butterfly as well as SDA that we've managed to hit this mark, especially in our businesses where leadership makes a difference, right? So -- and large kitchen appliances reported a revenue of about INR 14 crores. And we've there been in a journey of consistently reducing EBITDA losses, and that's been the trajectory here. That's a business that we continue to invest in.

Overall, in ECD, we witnessed steady performance across key segments, along with continued investments in premiumization, innovation and GTM expansion. Now I will shortly talk about it and give you a little bit of a glimpse of what these are translating into, but more of that later. While external challenges affected some categories, strategic initiatives remain on track to drive long-term sustainable growth.

Turning to our lighting business. We remain focused on reviving its growth trajectory. And I think you are consistently seeing improving trend, a very discernible improving trend in our lighting business. This quarter, our growth accelerated to 3% Y-o-Y, up from about 1% Y-o-Y Q3 FY 2024, right? Growth -- this, we believe, is industry-leading growth, especially in the context of the price erosion that this business continues to see. You will -- particularly the growth numbers, we don't disclose exactly the growth numbers. If you carve out the fact that these numbers are on the back of CFL numbers, which are in the base, the growth would be materially higher, and that also gives us comfort that we are doing very well in this industry, not only on growth, but also on profitability.

B2C growth was primarily driven by battens, outdoor and accessories. Additionally, the expansion of our product range contributed to a higher share of revenue from new launches. I've said before, because of our focus on panels, panels is now the largest -- single largest segment in our B2C portfolio, which is an important change given both the speed at which that business is growing and the margins that, that business has. In B2B, we saw strong growth in LED industrial and commercial categories. We've historically been strong in street lighting. What you're now seeing is industrial and commercial revenue streams also ramp up and start to contribute to the B2B growth. Notably, we have secured a large number of orders despite a slowdown in tendering and partially that's been impacted, as you are aware, with the election cycles in various parts of the country. It's worth mentioning, as I've already said now, that despite materially stepped up A&P spends, lighting profitability remains intact.

Now I told you earlier that I'd give you a sneak peek into the Crompton 2.0 outcomes. From time to time, we will do this and give you a glimpse. In particular, I want to alert you, we could not talk about it before. but there is going to be a public launch very soon of strides that we've made in innovation in fans. You will appreciate that I can't tell you much more just now, but just wait about a week or 1.5 weeks, and we'll give you the full details. But we've been talking time and again about the investments that we've been making in innovation and time has come for us to reveal that we have now developed both fully indigenously the next generation platform for BLDC as well as the next-generation platform for induction fans.

Now it is our expectation that for next several years, these platforms will drive several product launches, not only over the next several years, but you will probably see a spate of product launches to bolster our position in the very near future as well, just ahead of the coming season. So I'll leave it at that. Some of the things that have also already happened, those I can tell you, and these should give you a sense of what's coming. We have already launched India's first high-speed 5-star induction fan, which is the HS Duro which uses some of the technologies that we've been developing for a while, and now you'll see the next level of it.

We've also launched, insofar as energy efficiency is concerned, the #1 energy-efficient appliance, water heater appliance previously, Arno Neo being awarded by the President of India and also keeping in view the increasing demand -- consumer demand for products which have both the felicity of having a remote in hand, which is mobile, but also having a regulator because you lose the remote and it's not as easy as it might seem technically. We have launched Regmote previously for our Energion Groove. Now that's something again that we will continue to build on.

Just to give you -- just to remind you that this is -- you've already seen the cost of this being incurred. So from 2021 when our R&D spend used to be about 0.5% of revenue, they've stepped up to 1.5% last year. You will continue to see a similar trajectory in FY '25. Obviously, these -- we disclose these only on an annual basis. But just to give you a sense of the amount of effort that's going into this, right? We've also, by the way, increased since 2021, the size of our team by 3x, right?

Now the other sneak peek, I've shared from time to time that we are focused on embedding digitization in our operations. Our digital portal for dealers has now been running for some months. I'm delighted to say that, that has substantively changed, significantly changed the kind of illaqueate with which we are able to set schemes with our dealers, also, of course, to keep them informed also to digitally monitor our schemes, all of which now have been put into one single digital platform. So there's -- we are already beginning to see quite an improvement in the channel partner experience. Needless to say, this is early days, and you'll further see improvements on this, but I'm quite happy to tell you about some of the changes that have already happened.

Another area of embedding digitization is actually aftersales service. We have -- about a few weeks ago, we've now started a process of real-time monitoring of consumer service, their satisfaction levels, addressing their concerns. Within a few weeks, the number of calls that we've addressed is already up to about 50,000 -- 55,000 calls that we've addressed. And we are rapidly increasing this. You will be reminded that this is a -- Crompton has been in this business, not only as a leader, but has been a leader for very many years. We've been in this business for 85 years. And this is one of the connects that we have with our consumers, which is a massive benefit in terms of an established base. So we expect that we will continue to ramp this up.

I'll remind you that we address something like 35 lakh customer calls every year. And as we go forward and digitize their experience, that will also enable us -- that's only 1 year, right? As we go forward, that will enable us to leverage that massive scale better, right? Okay. A very few, quick words on the budget. The solid -- I was asked to make a few points about what we thought of the budget, not really for me to say, but very quick points. Clearly, a strong long-term approach that the government continues to demonstrate. There's CapEx orientation as well as pragmatism and flexibility. And we do believe that many of the measures that the government, particularly the tax measures that the government has taken, will help in lifting the consumer sentiment, which, as we've said earlier, was -- we've seen that being a little bit subdued, so very timely.

And we do hope and believe that this will add substantively to the disposable incomes of people and therefore, boost spends, particularly in the durable goods segment, which tends to be a discretionary segment very often and therefore, materially helped by increased disposable incomes. Lastly, I want to just flag a few things. As you know, and you would have seen earlier when we are coming up with the next generation of energy-efficient fans. We are working very closely on driving responsible behavior on the part of the company on significantly stepping up our ESG efforts. And we have -- we are now ranked -- I'm delighted to say we are now ranked #4 globally amongst consumer electricals companies, #4 globally by DJSI on ESG parameters. Our ESG score has improved materially, it's now at 62, come up from about...

[Kaleeswaran Arunachalam, executive]

34.

[Promeet Ghosh, executive]

34 last year and before that.

[Kaleeswaran Arunachalam, executive]

9.

[Promeet Ghosh, executive]

Yes. So in 2 years, our ESG score -- guys, what happened? Okay. On ESG score in 2 years alone on DJSI, our score has gone from 9 to 62. We've also been recognized by S&P and their yearbook, ESG yearbook has just come out, and we are ranked, I believe, third in the -- in our category by S&P Global, right?

Moving on to Butterfly performance, and Swetha is here with me. As you know, Swetha has been hard at work. And we are seeing some green shoots there in line what we've been guiding the market at. There's -- again, the efforts that we've been making at getting -- at setting the -- resetting the terms of trade, the pricing, the channel mix, et cetera, et cetera, the efforts are visible. The green shoots are there. So the revenue decline in Butterfly has now been more or less arrested this quarter, and there has been a significant improvement in EBITDA margin by about 600 points. And this is a result of many of the things that we've talked about. So EBITDA margins down at about 7.2%. And there's also -- this is being driven both by gross margin expansion and calibrated actions on pricing and product mix. With that, I will pause, and we'll take questions.

[Kunal Sheth, analyst]

[Operator Instructions] The first question is from Aniruddha Joshi.

[Aniruddha Joshi, analyst]

Yes. Aniruddha Joshi from ICICI Securities here. Sir, on Butterfly, we have seen super recovery in the business. So what are the 2, 3 things that are working? Because we have seen other kitchen appliances companies reporting quite muted set of numbers in South India. So what has really worked for us? And should we expect that going ahead, this should be a -- the recovery should continue in coming quarters also? That is question one now. Secondly, you indicated TPW fans are doing well. So what will be the contribution as of now? And how it had changed over, let's say, past 2, 3 years and how we should see it changing over next 2 to 3 years also? And last question from my side. We have seen MFI channel has seen a massive weakness, and it is also highlighted by some of the players. So what is current contribution of Crompton from that channel? And how -- do we see any impact on that for the company?

[Promeet Ghosh, executive]

Aniruddha, if you guys don't mind, I'll request people to keep their questions to 1, maximum 2 and -- just so that we give everybody a chance. Very quickly, MFI, I'll start with the last one first because that's the easiest. The MFI channel indeed has been very -- and it is quite small currently because it's fallen quite a bit. It's only recently, I'd say, that we are seeing some initial signs that MFI demand might be recovering but it's quite small and has fallen quite a bit from the numbers earlier. And you are all aware of why that happened. It's also rural itself, the demand has not been very strong, but this, in particular, has been quite weak. Insofar as -- I don't know if we disclose TPW shares.

[Kaleeswaran Arunachalam, executive]

We don't disclose.

[Promeet Ghosh, executive]

Yes. So Aniruddha, what I can tell you is TPW, as you have rightly noted, TPW demand has been robust. It has been robust for us over the last at least 4 quarters and has been faster than ceiling fans is my take. It is my expectation that this segment will continue to grow very well. Now remember one thing, and I keep getting thrown this number that ceiling fans, there is very high penetration. So ceiling fans, there is high penetration. But the demand for ceiling fans, I hope after some of this recent weakness goes away, is going to get driven by a few things. One, the replacement cycle for ceiling fans is getting shorter, right? Insofar as TPW is concerned, the penetration is very low, right, very low.

And as we get warmer summers and warmer winters even and sometimes delayed winters, this is a business that we expect strong growth in. So that's what I'd say. Insofar as Butterfly is concerned, absolutely, our expectation is that the trajectory in Butterfly will continue. I can't say we are there yet. And maybe, Swetha, you want to quickly talk through a few of the things that have happened, which distinguish you from how the rest of the business is concerned. But I just want to say this, look, what we said before about Butterfly is that we want to go back and reset and strengthen the fundamentals, right? And that's the trajectory that we've been on. Some of the benefits of this, you will see last quarter, and I'm quite sure that these continue to come. But yes.

[Swetha Sagar, executive]

Just the top 3 things like what Promeet just said, just summarizing it. I think the first thing, I think it's channel parity, looking at channel parity is one of the key things that helped us to stay where we are. The second thing is focusing on core. When we say core, both from a category and a market point of view, I think we had strong focus in terms of getting our core right. And the third one is optimized sourcing, and wherever it was required, we resource the system and we resource the system from a consumer point of view. So those are fundamentally the 3 things that we continue to work on, and I think the results are getting to show right now.

[Promeet Ghosh, executive]

But still very much work in progress, I want to say. Okay. All right. Next.

[Kunal Sheth, analyst]

We have next question from Manoj Gori.

[Manoj Gori, analyst]

Manoj Gori here from Equirus Securities. So I have 2 questions. One, if I look at recently, one of the peer has indicated that B2B lighting is likely probably going through some price erosion. How do you see this? And what's your understanding on this? And second, you highlighted about strong inventory buildup for air coolers for upcoming summer. How are we seeing channel inventory for fans in the initial months? And what's your industry outlook for CY '25 growth for fans versus CY '24 volumes, and this is for the industry.

[Promeet Ghosh, executive]

Last quarter B2B lighting. Yes. B2B lighting, yes, the outlook has been tepid and the order flow has been reflecting that. From our perspective, what we have been doing is that we have been expanding the areas that we've been playing in, in B2B to help us get past this. As you know, we have strong positions in certain segments, particularly street lighting. This is the reason I told you earlier that we've expanded our position also in commercial as well as industrial. So yes, so it's been a competitive segment in the last few months. I have to say that we are optimistic that there is going to be improvement in this segment as we go forward because some of the initial signs of that are there.

[Manoj Gori, analyst]

Sir, my question was more on the price erosion side. Are we seeing any price erosion into B2B lighting?

[Kaleeswaran Arunachalam, executive]

So I think, Manoj, B2B lighting is a tender-dependent business. So it is about for participating in the tender, how do you get yourself equipped enough. And from our perspective, we have a unit economics that we have been stating in the past. While the price is led by what is the base price that the competition wants to quote, whether they want to take a margin erosion or not is very different. It will be difficult for us to comment on what is the strategy that others have been following. From our perspective, we have a base margin with which we want to operate. And if that is going to give us scale and operating leverage, we can look at bringing that down. So that's how we are looking at B2B lighting in terms of pricing because as you know, that's a tender-driven business. Now in terms of B2C, that's a price erosion that has been continuing. But as you could see, our performance continues to be very strong. Probably the industry-leading growth for second consecutive quarter is what we are seeing in B2C lighting.

[Manoj Gori, analyst]

Right.

[Promeet Ghosh, executive]

Yes, quickly, and just moving on, guys, so we don't keep going back and forth. Just so we're clear guys, B2B businesses, since there are no standard products, it's tough to talk about pricing. There's margins, but pricing is a relative concept, and we've told you how we are dealing with our margins. Insofar as air coolers are concerned, I think there's -- like we already said, clearly, people are beginning to see Crompton as being an important player in the air coolers segment. And that is, I think, the reason that it's translating into strong demand for us, particularly in a product where up until quite recently, we didn't have any position at all.

It's quite -- and you remember that last year, when there was quite a warm summer, we disclosed that we were not able to, in fact, supply to all the demand that got generated. And that's one of the reasons that I think the channel is also open to buying from us earlier, and we are also getting ready earlier in the cycle. Insofar as the fans business is concerned, yes, we are optimistic that with a bunch of -- with the budget, with -- even last year, as you remember, the first quarter was quite warm. So it depends a little bit on how warm the coming months are. But we do believe that there will be reasonable strength in the fans market going forward.

[Kunal Sheth, analyst]

The next question is from Aditya Bhartia.

[Aditya Bhartia, analyst]

Sir, my first question is on the pumps business, wherein we continue to see fairly strong growth. Just want to understand how much of that is driven by agri pumps and what proportion of pumps revenues would be coming from agri pumps now?

[Kaleeswaran Arunachalam, executive]

So Aditya, we don't disclose segment-wise business of resi, agri and other segments. But I just want to give you a broad print in terms of how our pumps plus solar is behaving. Our pumps portfolio, non-solar is growing at the industry pace. And probably in residential, we believe we are marginally gaining share also. Solar, I think as we speak, we have already executed INR 200 crores of business cumulative from last year to now. We started late last year and up to now INR 200 crores has been executed. We see the prospects to be very positive on this as we look at the future also. As we cross each quarter, we'll keep updating as to how is that moving and how is the pipeline coming through. But that seems to be pretty exciting in terms of where it is.

[Aditya Bhartia, analyst]

Sure, sir. And in terms of pricing that we see in solar agri pumps, the pricing is not a concern. We get to have decent margins in that segment?

[Kaleeswaran Arunachalam, executive]

Yes. Neither the pricing or the margin is a concern in this business.

[Aditya Bhartia, analyst]

Sure. And this particular quarter, we saw other income reducing a little versus, let's say, last quarter. So what would be the reason for that?

[Kaleeswaran Arunachalam, executive]

So you may have to see this along with finance cost. As you look at last year, our -- we had a debt in the books for the Butterfly acquisition that happened. As of now, the data has been pared down. So we have only INR 300 crores of debt left. So cash has been used to pay off the debt, and that's why you see the reduction in finance cost and reduction in other income also.

[Kunal Sheth, analyst]

We have the next question from [ Naushad ].

[Unknown Analyst]

I hope I'm audible. First, on the lighting and Butterfly business, if I look at these 2 pieces of businesses, lighting, we have been working on the R&D, shifting the portfolio, exiting a few conventional products. And same was the case in Butterfly, we were correcting fundamentals from last 2 years. For both the businesses, do you think the fundamental corrections or portfolio corrections, which was required as over now? And from here onwards, should we expect growth from these 2 businesses? And if yes, what kind of growth one should expect from both the businesses?

[Kaleeswaran Arunachalam, executive]

[ Naushad ], we don't give future outlook of growth. As you know, we don't make forward-looking statements. But having said that, let me start with lighting. I think the promise that we made on lighting is, first, we will arrest decline and we will grow. As we speak, we do believe we are probably growing at an industry-leading rate in B2C. So already whatever fundamental corrections that we need to take in lighting business has been completed and business is moving in line with the category performance or ahead of the category performance.

There is also keeping in mind the margin has been improving. So it is not that you're leading or growing at the industry pace, we have kept the margin profile also intact, if not improving, apart from investing on the brand towards the marketing spends that we have talked about earlier. Now as of Butterfly is concerned, what we said is there would be a decline in H1, and we would arrest the decline in Q3 and start growing from Q4. So it is still work in progress, but the trajectory is moving in line with what we said. We've already demonstrated this in lighting. We expect the same to come through in Butterfly also.

[Promeet Ghosh, executive]

Actually, maybe I'll tell them something that we hinted at publicly earlier. some benefits that you're seeing come through and will continue to come through in the future are not only at the front end, but also in the back end. Now over the last 2 quarters, we have consolidated manufacturing operations, both at Crompton as well as at Butterfly. So 4 manufacturing plants have been consolidated into larger ones with not only improved cost metrics, but also enhanced production capacity. So for instance, you may have gauged this what's going on behind the scenes when we announced that we had increased our production capacity at Baddi by about 50% and also increased our backward integration there. And that's all of this -- we have manufacturing facilities for lighting, for fans, et cetera. Some of them are being consolidated. And in some, what used to be produced earlier is now a different product is being produced depending on what we can cost effectively produce. So I mean, needless to say, there is stuff that's happening in the front end as well as in the back end.

[Unknown Analyst]

Interesting, sir. So for these initiatives do you think...

[Kaleeswaran Arunachalam, executive]

[ Naushad ], allow us to pass this through the other question because people are on queue, if you could come back.

[Unknown Analyst]

Sure, I'll come back in the queue.

[Kaleeswaran Arunachalam, executive]

Thank you.

[Kunal Sheth, analyst]

We have the next question from Umang Mehta.

[Umang Mehta, analyst]

Just on fans last quarter, you had highlighted that some competitors were holding back on pricing. Just wanted to know if there's any update on how the competitive situation is in fans?

[Promeet Ghosh, executive]

Yes, let me talk about myself, right, and then you can gauge. Look, we are in the business of being disciplined in the market, right? And you can see that come through consistently. It's -- we do believe that, that is the trick to being -- to gaining market share and doing well on profitability, right? Yes, it's true that some of our competitors haven't been as disciplined as we have been. And I think you can also see that, that is showing in their margins, right? Now particularly in a nonseasonal quarter, I can understand that there has been some pressure somewhere to be able to shore up volumes. We are not in that game. We'd much rather be consistent instead focusing on strengthening our business.

We've actually -- by the way, I had mentioned this in my opening remarks, continue to invest heavily in enabling our front end, right, in terms of POS displays. You will see this come through the investments that we've made in innovation, you will see what that's doing to this fairly material launches ahead of the next quarter working through the next generation of technology platforms. So yes, I never want -- like to talk poorly of our competitors, but I can tell you this is what we are doing, invest in the business, right? Be very focused on ensuring that you continue to drive cost optimization, do what you're doing better, right? And that is what is going to hold us in stead going forward, right?

[Umang Mehta, analyst]

Sur, sir, sorry, I was not able to unmute. That was reassuring. Just a second question, if you could share the current order book on solar pumps, if at all, you are willing to share.

[Kaleeswaran Arunachalam, executive]

Umang, we don't disclose the order books. As the quarters pass by, we will let you know as to how we're progressing on solar. As we said, we see that as probably a potentially materially larger business, and we are moving it for us. And the book building has also been progressing.

[Promeet Ghosh, executive]

We expect -- continue to expect robust growth in the business, I think as far as we can go, right?

[Kunal Sheth, analyst]

The next question is from Bhoomika.

[Bhoomika Nair, analyst]

Sir, just wanted to understand on Butterfly. Swetha spoke about channel parity and we've arrested the decline now. Going ahead, how are you seeing the growth panning out in terms of demand, market share growth? And with the kind of optimization of resources, which you said there was consolidation in the manufacturing. Do we see double-digit margins coming back into Butterfly into the next year or it's going to take much longer than that? What's the outlook on this, sir?

[Kaleeswaran Arunachalam, executive]

Again, Bhoomika, I think we wouldn't be giving a forward-looking statement here. But I just want to give you a few indicators of how are we thinking and Swetha can add in. See, fundamentally, at scale, Kitchen has been a double-digit margin business for every player. And when I say scale, I'm not talking about something very large from where we are, potentially, if we have to grow at a reasonably good rate ahead of the industry, double-digit margins do come in. But our approach to Butterfly is a calibrated step by step one. We said this earlier, we said we will first get the decline to be arrested, which has been completed in Q3, get the business back to growth. Get into decent single-digit margins, arrest the negative profitability that we had last year. So all this work has been completed. As we approach into next year, we think the business is poised to take a double-digit revenue growth. At scale, operating leverage will play out because it's a high operating leverage business. Anything that...?

[Promeet Ghosh, executive]

I just want to remind you of something that I told you earlier, we are now playing on not just the scale of Butterfly, but Crompton plus Butterfly. So I've said before that, for instance, Crompton is now outsourcing some of its mixer purchases to Butterfly. Again, this is -- so there's a broader scale statement that's happening here. And the fact that we are now the largest mixer-grinder company in the country making a difference.

[Bhoomika Nair, analyst]

Sure, sir. Sir, the other aspect is on demand for fans, we're getting into the summer season shortly, how are you seeing the stocking going on with dealers? And how -- and you also spoke about TPW where we're looking at a strong growth. If you can just talk about how large is the market, what is our market share out there? That would be really helpful.

[Kaleeswaran Arunachalam, executive]

[ We don't share ] specific market share numbers, but I can tell you the category is roughly about 25% will be TPW. And maybe if you include Domex and others, it could be slightly more than that. Fans, if you look at it, we would divide this into 3 parts. We see premium fans growing at double digit. We are also seeing BLDC growing at a very fast clip, upwards of 20%. And we do see TPW also growing in double digit. The entry-level fans, I think the regulatory requirements coming in probably gives us an advantage considering the scale at which we operate to grow that profitably also and gain further market share from where we are depending upon how the regulatory changes pan out 1 year down the line.

So overall, from an industry perspective, we think fans category is moving in the right direction for us as a business. Internally to Crompton, I think we talked about the platform change that Promeet was hinting in earlier. There are a lot of exciting products that are going to come in, watch out for it. Maybe in a couple of weeks, we'll talk in detail where we will have a media release on how are we going to leverage platforms and how do we see BLDC and induction as a dual engine platform to drive growth in fans.

[Kunal Sheth, analyst]

We have the next question from Natasha.

[Natasha Jain, analyst]

Congratulations on a good set of numbers. Sir, my first question is on TPW. I apologize if the question sounds very basic, but I just want to understand, you mentioned that TPW has very low penetration, while that's agreed upon. I want to understand the rationale, if somebody has a ceiling fan already in their house, why would they want to shift to a TPW? What extra addition does it give? That's my first question.

[Promeet Ghosh, executive]

You tell me, why do you see a proliferation of TPWs not only in India but globally. TPW is a -- tends to be a personal fan. A ceiling fan is for a room, a TPW typically is for one person. As temperatures rise, not only people who have a ceiling fan, people who have an AC and people who have an air cooler want to enhance the cooling experience by having a TPW, right? So if you go to offices now, actually, in the rest of the world, you will actually see, right, every person having a personal fan next to him on his desk, right? And this is something that I assume you're aware of. Even when you have an AC, combining an AC with a fan significantly enhances the cooling experience, right? You know this right? So we are seeing TPWs get taken up in offices and homes and factories and shops, everywhere.

[Kaleeswaran Arunachalam, executive]

But fundamentally, if you look at it to what Promeet said, you also have portability that comes in TPW. So I can move between rooms. That's much easier. Also, TPW gives you a direct flow, the personal cooling aspect that Promeet was talking about. If I need a targeted direct flow, it helps me to ensure that, that is something that I can have in addition to a ceiling fan that I have in the same location. And this considering...

[Promeet Ghosh, executive]

Not only ceiling fan also AC.

[Kaleeswaran Arunachalam, executive]

Right, right, also AC, yes. So with the kind of global warming we see, India and outside, we expect this trend to only accelerate.

[Natasha Jain, analyst]

Understood, sir. And my second and last question is you mentioned that you're coming up with a next-generation BLDC category and induction fans. Just want to understand, is there any difference between this and the one that's already in the market? And is there any patent that we have? Or are the margins better than the already BLDC fans in the market?

[Promeet Ghosh, executive]

Yes. I mean, as you might imagine, there are several interesting points that we will disclose shortly about the improvements, not only about fans that we currently own, but also a trajectory of fans that we will then unveil over a period of time. These are changes, improvements in technology, all of which have been indigenously in-house developed. And needless to say, we have privileged technology there. And I want to emphasize this that we are arguably -- we haven't heard anything to the contrary, we are arguably the largest ceiling fan company in the world. Bulk of our production, of course, is induction motors. We'll continue to not only draw on the strengths that induction motors have, namely durability, namely a domestic supply chain, namely years and years of proven experience, but also be able to produce progressively energy-efficient fans. So I'll leave it here. Yes, a lot of the technology that we've been doing is privileged.

[Kunal Sheth, analyst]

Sir, that was the last question. Thank you so much for hosting this call and giving us this opportunity to host it. Sir, any closing remarks that you would like to make?

[Promeet Ghosh, executive]

Not really. I think we've spoken at some length about what -- not only how we are doing, but I do want to start this process of -- and this is the first time that we are doing it, it's also there in the presentation that we've uploaded. Going forward, we do want to give people a sneak peek about outcomes that are coming out of Crompton 2.0, which pertain not only to revenues and profits, but also to the various enablers which go on to generating not only revenues and profits today but in the future. And needless to say, as you have any further questions, please feel free to reach out to Natasha, Kaleesh and Swetha or I. And thank you very much for joining. And like I said, hopefully, we will do this the next time in our new office. As you are probably aware, we've moved into a new office, which is -- looks a little bit different from what we used to have earlier. When we say we want to be a place that our people enjoy working in, I hope you get a sense of it.

[Kunal Sheth, analyst]

Thank you. Thank you so much. Looking forward to seeing your new office, sir. Thank you. Thank you, Crompton team. Thank you, participants.

[Kaleeswaran Arunachalam, executive]

Thank you, Kunal.

[Promeet Ghosh, executive]

Thank you.