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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen. Welcome to Voltas Limited Q4 FY '22 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] I now hand the turn the conference over to Mr. Anirudh Joshi from ICICI Securities. Thank you and over to you, sir.
Yes. Thanks, Lisa-Ann. On behalf of ICICI Securities, we welcome you all to Q4 FY '22 results conference call of VOLTAS Ltd. We have with us Mr. Jitender Verma, EVP and Chief Financial Officer; Mr. Manish Desai, Head of Corporate Finance; and Mr. Vaibhav Vora, Manager Corporate Finance. Now I hand over the call to the management for their initial remarks and presentation on Q4 FY '22 performance, and then we will open the floor for question and answer. Thanks and over to you sir.
Thank you, Aniruddha. A warm welcome to everyone, Good morning. For Voltas, the start of quarter 4 was anticipated...
Sorry to interrupt sir, you are sounding a little soft. Can you speak a bit louder?
Hi there, is that better?
Much better sir, thank you.
A very good morning to everyone. For Voltas, the start of quarter 4 was anticipated to give glimmers of prosperity and growth. However, the beginning of new year came up with its own challenges, as India and the world were accelerating vaccination drive to overcome the pandemic, another variant came up as a surprise. They bring the efforts with the apprehension of more severity than earlier variants and cause impact on the economy and health. The extended vaccinations had reduced the impact of this third wave considerably, both on the health and economy across countries. As the economic activities were returning to normalization, the world economy received another jolt caused by geopolitical tension between Russia and Ukraine, causing disturbance in economic activity. The invasion has a spiral impact on the commodity prices. Global economic prospects have worsened amidst disruption in supply chain and due to imposition of various sanctions on Russia. Global economy now is on the edge of uncertainties arising from the ongoing geopolitical conflicts reflected in global commodity prices, including crude prices, differential pace of monetary policy normalization amid persistence of inflation at higher levels globally, supply disruption emanating from China's Zero COVID policy and resultant restrictions on activities will be weighing on prices and growth of this economy. For India, all these factors have caused a speedy economic recovery and caused worry given the elevated global [ effort ]. The balance of payments is also expected to shift given the global monetary policies, especially that of the U.S. Fed. IMF under the unsettling issues have revised its growth forecast downwards from 4.4% to 3.6% for the world, from 9% to 8.2% for India. In the early months of COVID wave, extended winter and increased input costs have impacted financial results during this quarter. Our Unitary Cooling Products segment reported a revenue of INR 1,818 crores, while project business reported a revenue of INR 692 crores, and the Engineering Products segment reported a turnover of INR 124 crores. Our consolidated total income for quarter 4 FY '22 was INR 2,704 crores as against INR 2,683 crores in quarter 4 last year. Profit before tax was INR 247 crores as compared to INR 321 crores in the corresponding quarter last year. Profit after tax was INR 183 crores versus INR 239 crores in the previous years. Earnings per share not annualized for the quarter ended 31st March, 22 was at INR 5.52 against INR 7.18 reported last year. For the year ended 31st March, 2022, the consolidated total income was higher by 5% at INR 8,124 crores as compared to INR 7,745 crores. Profit before tax was at INR ...
Sorry to interrupt sir. This is the operator. Sir, there's a lot of background sound from your line?
Okay. We will be careful. I think there is no sound, unless the line is bad. But let's take another few lines.
Sir, right now, it's much better.
Profit before tax was at INR 697 crores as compared to INR 709 crores in the corresponding period last year. Profit after tax was reported at INR 506 crores as compared to INR 529 crores in the corresponding period last year. EPS for the financial year ended 31st March, 2022 was 15.23 as compared to INR 15.87 last year. The corporate balance sheet continues to remain healthy, with minimal borrowings for our overseas operations. While operational cash flow during the initial part of the year had been relatively weak due to loss of cooling product sales, given the COVID induced lockdown. However, revival of economy thereafter and pent-up demand for the cooling product towards the end of the quarter, helped generate surplus cash on our balance sheet. As at the year-end, cash and cash equivalents in our books stood at INR 2,835 crores, as against INR 2,465 crores in the previous year. You all must have seen a snapshot of our results. So I will not be delving more into those numbers. I'll go segment by segment. For our segment A, UCP segment, quarter 4 and quarter 1 of our financial year are considered to be the strongest quarter for the year because of the seasonality. However, the segment witnessed lockdowns and restrictions for operations since last 2 years. Despite the fact and the hopes that this year would be clear of COVID and the industry will be able to bank on full season. Omicron at the start of the year, dampened the hopes amongst the trade. Extended winters in the initial months of the quarter and increased prices of cooling products, has further impacted sentiments of the channel partners and thereby the primary sales. Under the shadows of dampened demand and high inflation owing to geopolitical conflicts, a start of series of severe summers across length and breadth of the country, brought cooling products in high demand. Riding on this demand, the quarter has seen improved value growth over the previous year, resulting into restricted degrowth for the quarter 4. Unitary Cooling segment reported a revenue of INR 1,818 crores, as against INR 1,655 crores, representing a 10% increase over the corresponding quarter of the previous year. However, divisional bottom line has been impacted amidst increasing input costs, disruptive pricing by the competition and resistance by the trade on price increase. These factors resulted for a decline in segment EBIT by 26% from INR 261 crores to INR 192 crores. Nevertheless, our focus on product placement, [ first ] amongst the channel partners and the value proposition, has helped us register overall volume growth for the full year. Our focus on the inverter subcategory with competitive pricing and larger number of SKUs continue to favor us. Inverter category witnessed a good traction with the customers and now contributes over 70% of all ACs sold by us, compared to 70% for the similar period in the previous year. Voltas continues its leadership in RAC category, the room air conditioner category, with the year-to-date market share of 23.4% as of March '22. To enhance our reach and to provide a customer first experience, experience zone for Voltas and Voltas Beko products has been launched in Mumbai during this quarter. In addition to it, we have continued with our expansion in exclusive brand outlets, which has reached over 200 outlets, and we aim to expand further by additional 50 outlets during the year. These will provide an enriched experience to our consumers with a complete product range, along with attractive and differentiated consumer offer. The commercial refrigeration vertical has delivered yet another year of growth and even surpassed volume of pre-COVID period. Growth in commercial refrigerator products has driven by expansion of command top stores, change in food habits largely driven by beverages and ice stream products in Tier 3 and 4 cities and higher participation from OEM engaged in chocolate beverages and ice cream products. In the air cooler category, limited window of sale and washout of season in the early months of the year, resulted in piling of inventories at the channel partner end. However, our heat rate during quarter 4 has picked up demand for this economically cooling product. The presence in all subcategories of the air cooler, balanced SKUs with competitive consumer pricing and expansion of channel network, has resulted in brands increasing its year-to-date January '22 market share to 12%. We are happy to report that our commercial air conditioning business has done well, even in these uncertain times. Opening of commercial places and focus on retrofit jobs, along with the retention of the customer with attractive after-sale offering has resulted in the overall value growth for the quarter and full year under review. Business took various cost reduction initiatives and value engineering processes to offset increased input costs and thereby mitigated risks, and bit partially on the margin. For our segment B, Electromechanical Projects and Services, the segment revenue for the quarter reduced to INR 692 crores as compared to the previous corresponding quarter of INR 875 crores primarily owing to a low carryforward order book and reaching to the completion stage for major projects during the year. Segment results during the quarter showed a positive momentum. The EBIT percentage to revenue increased from 6.46% to 6.88%. The carryforward order book of this segment stood at [ INR 5,060 ] crores. Over INR 2,000 crores of fresh orders were added across both domestic and international markets. The carryforward order book for domestic projects at INR 3,638 crores contained a bouquet of orders across water, HVAC, rural electrification and Argon [ interactivities ]. The international order book stood at INR 1,722 crores. Better and timely execution of projects, coupled with a healthy project mix, has driven performance of project business during the quarter. The division has not been spared by the increased commodity prices. However, a sensible negotiation with the customer and suppliers have mitigated the impact to a certain extent. The focus on the work certification and collection has improved cash flow and thereby return on capital employed while comparing the previous year. Meanwhile, the increase in global oil prices, lifting of COVID related restrictions and focus of the government on the infrastructure development, should improve business sentiment and open up further opportunities in our operating markets. We will continue with our strategy of picking up healthy orders, which will help in delivering a consistent and sustainable performance at minimal rent. In Segment C, Engineering Products & Services, the segment revenue and results for the quarter were at INR 124 crores and INR 41 crores, respectively. Both our Mozambique and Indian operations have contributed towards improved performance on the back of the revival of the crushing and screening equipment and renewal of the maintenance and repair contracts with customers. Growing yarn exports, high demand for capital machinery, both in spinning and post spinning and a well-defined approach on improving after sales business, resulted in positive performance during the period. Price increased by principal and supply chain-related disruptions continue to pose challenges. Overall, the textile sector is expected to perform better, given the PLI announcement and various other initiatives directed towards growth for this sector. For Voltas Beko, in the short tenure of close to 3 years, the VoltBek brand has crossed an important milestone of 1 million units in the year, and thereby becoming one of the first brands to reach this landmark. Cumulatively, the brand has sold 2 million units, where in the first 1 million units took 2 years, and the next 1 million has been achieved in these 12 months. The product enhancement is based on consumer insights, delivering a quality product at an affordable price. With the objective of localization, manufacturing facility has been expanded to frost-free refrigerator and fully automatic stop loaded washing machine at Sanand factory during the year. The production at the factory has also crossed 1 million units, with better product activity and higher quality. These initiatives of in-house manufacturing, has helped the brand to introduce more customer-centric products, overcome supply chain disruptions, optimizing working capital and other cost savings associated with it. The brand continues its journey towards better market share, and it bodes well for its target of reaching market share of 10% by the year 2025. The recently conducted brand track study shows the improved score in brand awareness amongst consumers and higher recommendation as compared to the few incumbent players in the industry. Lower penetration in the market, strength of the joint venture partners, and accelerated expansion of reach will favor the VoltBek brand, to achieve its twin objectives in a time bound manner. As the outlook goes, hot weather will certainly help the cooling products to have an exponential growth after 2 seasons of washout due to COVID. Amid this positive demand and increased input cost, fragmented market and disruptive pricing by the competition will, of course, have its impact on the margin. However, presence of large number of SKUs in the growing inverter categories, focus on the weak market, improving weighted average distribution and sensible price management shall help the Voltas brand to perform better than industry, and thereby gain the market share. In case of projects business, completion of most of the running projects and internal policy of margin recognition in the initial phase of the project will affect the financials in the near term. However, our completion of business transition of higher allocation towards infrastructure spend in domestic market, and improved opportunities in the overseas market, should help us in overall performance for the year, as we move forward. In difficult times such as these, the resilience of our plant, the strength of our balance sheet, the competitive competence of our time-tested systems and the capability of our people provides a definite measure of confidence. We remain optimistic time. Thanks. I will be ending my introduction at this stage, and pass it on for further question and answers.
[Operator Instructions] The first question is from the line of Bhoomika from DAM Capital.
Sir, just wanted to understand that after a long period of time, we're seeing some market share loss because, as you mentioned in the press release and in your opening remarks that you have a market share of 23.4% as on March '22 versus last year, 25.6%. So what has driven this market share loss in the last 2 months? We understand that there has always been a competitive intensity in the market. But if you can just talk about that? And number 2, if you can talk about the price hikes that we've taken in FY '22 and any further price hike that we've taken in the month of April, May?
Thank you, Bhoomika. I think this -- you're right in assessing that there has been a drop of Voltas market share, and it's very evident. However, in this period, when we look at the months of January, February, March, the summer specifically comes in the market of South zone. And it is also a known fact that for Voltas, our major strengths are in the other zones, though we cover all the national market across the country. And in the southern market, when we look at the price disruption by the other players has contributed in this fall of the market share. And as we would move into the later part of the summer months, the expectations are quite positive that this -- the market share would be maintained. On the price hikes, we have taken price hikes in the month of January in the beginning. However, there is a time lag between our -- the input costs and also for other competitors to take those price hikes. We'll have to further analyze at what level of inventory numbers they were sitting at, when they entered quarter 4, which we will not be able to answer at this moment. And depending on that, some of the players have not taken the price hikes, and that's where we are seeing the disruption to a certain extent. For us, we still continue to see the cost increases, as we are all seeing on the commodity side, which increased our input costs -- and if these costs continue to increase as we go into the month, we will have to go for cost push price increases. Other than that, we don't see any reason. And we -- and whenever there is a decline on the input costs, we would be even willing to go down on the -- to be reasonable and fair to our consumers. So we are being very cautious or rather judicious on that aspect of price increases.
Sir, just a follow-up on this. What would have been the price hike we would have taken in Jan, which got implemented through the quarter or this quarter now? And with this price, and given that the other peers have not increased their prices to a similar level or maybe lower, what is the price gap that is there in the market today between Voltas and some of the other key competitors? I'll let Manish answer that.
Yes. Bhoomika, just to add that if I take the full financial year, with a price hike is the range of 12% to 15%. We can say in terms of the effective utilization, the peers will be close to 1 to 2 months gap before the increased price gets billed to the general partner. Now having said that, the -- knowing the fragmented market, each player is trying to find out a place for this market. to gain and to have the presence over there. And because of which it is extremely difficult to see which market, which players are playing on the price or on the other side. But our analysis says that the -- what Mr. Verma rightly said a few minutes back, the South is where we find some kind of more disruptions, generally because of the early setting of summer over there, where we have lost some of the market share. And to overcome that, we have also done some corrective -- to ensure that we sustain and maintain our leadership in across all regions. So in terms of price gap between us and the competition, I would still say 2% to 2.5% could be the easy [ cakewalk ] if I look some of the selective markets. But to get all India average price and all, knowing the fragmented market and the players work on different strategies, it will be difficult to quantify all that.
[Operator Instructions] The next question is from the line of Vishal Biraia from Max Life.
Yes. Sir, could you elaborate a bit more as to what would be our exit market share in March of '22? And when you say you've taken corrective actions, so what are the corrective are and what -- and how much time do you expect to recoup the market share?
For our exit market share, we are somewhere 20% to 18.5%. But having been losing in the earlier periods of the year, the market share is widely to be reported, 23.4%. And these are the external data being done by the external agencies. And we normally follow that, given the status and the [ one informing the ] agencies carrying out this kind of market share collection of the data. Now having said that, on the cost collections, during the season time, we come out with various schemes and initiatives, directed towards the channel partners and the consumers. And more such action requires, where we are seeing price disruptions or where we are seeing -- thereon where the demand is very high and we manufacture the market is running short of the product. So all in all, there are certain initiatives like aggressive consumer subvention scheme, taking advantage of the lower borrowing cost today, which is proving in the market. You have a subsidized installation scheme directed towards consumers, giving the off-shelf schemes, which are a part of the -- there are various initiatives, I would not like to elaborate more on this front. But there are various tactics and tools the brands are having today on the shop floor, to play around to ensure that the confidence and the shelf life, which we desire to have it along with the channel partner.
Okay. Has there been any change in competitive intensity when you moved to March to April and May? Or does it continue to be as severe as intense strategy -- as within March?
I would say that if I take the summer period, which is Feb to June, knowing the demographies of India, we have early summer, it starts in South, extended to west, east and north. So as we move forward, given our strong presence in the North region, we are hopeful that we will be able to overcome this market share, I would say, metrics and would generate -- I would go back to our old market share kind of leadership, what we used to have. We are still leader in terms of the exit market share. However, the gap has been reduced over the second player, which probably we will catch it up once we complete or exit the season at the end of June-July.
And then just one follow-up on the same point. Some of your peers have focused on mass market products, whereas we may be on the mass premium side. So is it that the down trading in this few months have increased and that has contributed as well the loss of market share for us?
I would say the other way around, given the underpenetrated market, probably the larger and all categories or the all top 8 players are eying for a mass affordable kind of product. You have the premium category and the premium generally categorized as a 5 star, and then you're looking for a higher tonnage, because otherwise, you won't be able to differentiate as such, the normal or the mass product vis-a-vis a premium one. Yes, our focus is also there on increasing our market share on a 2-ton 5-star category, which we are proud to inform that we have done better over there in the last 3 or 4 months' timeframe and increase our subsegment market share over there. More is needed to do that, and we'll be definitely focusing upon that, to improve or to balance the market in terms of premium, as well as the mass products, that are based on the consumer needs.
We'll move on to the next question. That is from the line of Ankur Sharma from HDFC Standard Life Insurance.
Just harping back on the share loss on the AC side. So as you highlighted, it's coming mostly on the southern part of the country, so is it then that you've seen more competition disruptive pricing? Was that the only reason? And you clearly did not want to match those prices? Or was there also some element of supply chain issues from shipments from China et cetera, also kind of hurting your share in the south?
Ankur, if I look, even though when we talk about South, the South comprises of 4 major cities, I would say, in terms of Tamil Nadu, Kerala, forget about -- it's my mistake. Tamil Nadu, Kerala, Karnataka and Andhra Pradesh. We are relatively strong in Andhra Pradesh and Karnataka, where we have seen more disruption is largely in Tamil Nadu and Kerala market, where we have seen this market being largely driven by the organized and the regional retailers, where the ask on the price is generally on a higher side. This is where the -- our deep analysis showing that, some actions which we have taken on this part, or a bit up in the later part of the year -- later part of the quarter. But I'm sure that the [ action ] is working on the ground. But this is the primary reason I can say, otherwise, in case of East and West, we have sustained or we have actually improved our market share over the last comparative period. And in terms of growth, we continued our leadership over there.
And just to add to that, Ankur, is that the supply chain from China didn't have any major impact in the sale of the product. We didn't feel any shortages or anything like that.
Okay. Fair. So I just have a very basic question, because if demand is so strong, we are even talking of stockouts possibly over the next month or so. Why is it becoming so difficult to pass on price hikes? Typically, when demand is so strong and having looked at it largely for the last 14-15 years, typically price hikes are relatively easy to pass, right?
When you look at the competition, the -- by way of the product differentiation, and as you will understand, a 2-ton 5-star market or a 1.5 ton 3 star market, the product differentiation between one brand to the other brand is there, but not a very significant difference. So in that sense, when there is a -- one player, let's say, another competitor who doesn't increase the prices, following the Voltas price increases. At that stage for the consumer, there is a propensity for him to move to the other brands. We are trying to study this more in detail, and that's where we say, that we are taking immediate actions on the ground, to come out of this thing. It's mainly from the price disruption, as it is being seen right now.
To add more to what Mr. Verma said, Ankur, if you have the fragmented markets and the top 20 or top 10 players are eyeing to capture a market size in order to get the leverage on the volume. Obviously, you find that such kind of disruption will take place over there. Some of the brands when we said we have increased market -- the price hike of 12% to 15%, when you see the other brands, we -- they would have gone into a lower price hike. And since the product differentiation is not clearly visible on the shelf of the retailer, it then all depends upon the kind of price competitiveness, which is feeling around in the ground. So these are the obvious reasons, which we are finding it over there. But having said that, we still continue with our policy, with the objective of balancing both margin as well as market share, because we keep saying that the market share you can't bank. But yes, the market share also will give you, in terms of the scale, to leverage some of the costs, on which you can [ tread upon ].
Okay. And so the understanding is correct that this -- as you said, you will take back the lost share by the end of the season, and the corrective action would be mostly by matching price cuts of competition? Is that how we should look at it? Or via incentive, subvention schemes, et cetera, is that the way out? Or help me if I understood this wrong?
Ankur, there are various cards in your hand to play around, depending upon how the market is getting to it. Somewhere we play a price card, somewhere we play a differentiation, somewhere we go for a more consumer-directed initiatives rather directly putting price to the picture. So all these tools are available. And when you are big in the season time, all these tools can be effectively used, to capture whatever you have the objective to [ obtain it ].
The next question is from the line of Atul Tiwari from Citi.
Just another follow-up question on this market share thing. So can you comment who are the big disruptors in the market? I mean, in terms of whether they are domestic players or MNCs or the Chinese players?
We have seen the -- see, generally, the fight takes place between #1 and #2. Obviously, we have seen some of the loss of the market share to LG. And we all know Lloyd became more aggressive in this market. Probably, we don't require to comment anything about the competition. But looking into the volume which they're eyeing too have a capture, because of the new factory setup and all, and we have seen the results, it's publicly out, which they have reported a higher loss. Over these 2 players, we have lost the market share. Coupled with, if I go to the Samsung to a certain extent, they have a very strong corner in the South, where it also helped them to gain market share over Voltas. So these are the 3 key players, I would say, to whom we have lost the market share, as small Hitachi, Daikin, and all remain in the same bandwidth, where they were, a year before.
Okay, sir. And sir, on Voltas Beko, would it be possible to share FY '22 revenue, EBITDA, PAT and the exit market share?
I would say that the -- we can share the data, but knowing the confidentiality and all, we would not like to put it anyway, it will be part of our annual accounts and reports as such. However, let me give you the indications, we are very close to a 4-digit number, as far as the turnover is concerned for the VoltBek. And in terms of the exit market share, we are inching towards -- in case of refrigerator, we are somewhere at 33.5%, and for washing machines, we surpassed 4.
The next question is from the line of Niket Shah from Motilal Oswal Mutual Fund.
Sir, just 2 questions. One is that when you said the competition is very, very high. So for example, if you are selling at INR 100, the competition is selling at what? Is it 5% cheaper? And is it at a price where you can't match it -- in other words, the margins will really collapse. Is that the way to think about?
See, as I said, the -- we are widely spread in terms of the market. You won't find the price hike disruption or the price difference across all brands in some of the markets which are largely mature or which are, I would say, behaving in a proper way. However, in some of the markets, we have seen the difference of almost, and as I said, when I say the difference, you won't be able to get the difference in the average price index, which has been measured in terms of the end consumers. But the specific deals would have been paid out with the channel partner, in order to ensure to get the shelf over there in the counter. So I would say the average price difference will be close to 2.5% to 3%. However, in some of the markets, it may go as high on the 5% side and in some of the markets it may go -- go less than 1%.
Understood. And sir, just to reconfirm what you said earlier, you said that -- is my understanding correct, that we expect our market share to come back to original levels by the end of the first quarter, or you think it will need some more time?
See, when I say we're always optimistic in our approach, and many times, you find us conservative as well, when we give any forward outlook statement. So in our case, we are working -- as I said, we have taken some of the corrective actions. Some of the corrective actions, we cannot do it, knowing the margin and the reasonable share you need to have it in your financials. However, looking into all the positives, we will be able -- we are comfortable or we are looking forward to regain some of the market share, which we lost in the last 2 [ years ]. How much and more, I would not like to quantify as such. We remain conservative and prefer to deliver more, than what we give outlook to the stakeholders.
Got it. Got it. And sir, would it be possible to comment on provisions, because while on one side, there is a significant amount of raw material inflation. But on the other side, this year, summers have been extremely strong. So if you're able to show a disproportionate growth, then some operating leverage should benefit, at [ some sense ]. So how should we think about margins for the next year? That's all from my side.
The chief is -- if still you are facing a gap between your increase in food costs and the price hike which you announced, which means that whatever comes as a volume part, we'll try to mitigate those kind of gap -- or bridging those kind of gaps. So in terms of margin, I'm still -- we are of the view that industry will see some kind of stress on this product front, and it will be difficult to quantify today at what margin and all. But to go back to double digit market for the industry and for people like us, probably, it will take some time. I would not like to quantify the period as such. But as I said, the efforts will be first to tap upon it, but knowing the situation in which the industries and inflation is moving, and having the period of June and July to go hung on the summer, so we have to cautiously watch this position.
The next question is from the line of Renjith from Mahindra Manulife Mutual Fund.
Just wanted to check with you, was there any disruption in terms of supply chain, because we have a lot of imports coming from China. So is -- did you say that there were some issue because of that, or it's largely because of the pricing only we have lost the share?
Renjith, as we have earlier mentioned, on the supply chain front, there were no major disruptions. We had planned for our supplies for the full season. And there is no disruption on that aspect, except for 1 or 2 small -- as like some SKUs, where delay was seen because of Shanghai lockdown and this and that. But majority of the summer was planned much in advance. And we fairly did well.
And Renjith, if you recollect in terms of the import as well, only a few components now are in on an import source, largely every other component have been localized. So on that front also, the mitigation steps which were taken by us, helped us now. As I said, there is some -- we have witnessed some kind of delay, but disruption to assign on the supply chain, probably [indiscernible]. However, let me put a cautious note on that, the -- we have seen a good amount of growth, both in March and April. And I would go with the words of the other industry players as well. If we are seeing in excess of 100% growth for the -- till June and July, probably the industry will have a complete stockout season, because to have continuous growth of 100%, it is like achieving something which has not been [ good here ].
Okay. Sir, if I can ask one more, like what is our strategy now? Like we have seen through this and all this price reception. So if you can share like as Voltas, how are you going to react to the situation, if you can -- whatever you can say?
Renjith, we are not seeing this price disruption for the first time. Some of the brands in the past also have come -- disrupted the price, but it did not continue for long. I'm sure each one of them are looking into the bottom line as well, while furthering the business. So it will automatically get settled over a period of time. And obviously, when I've been a leader in this category, the kind of, as I said, some of the tools which we have, some of the cards which we have in our hands, we will play at appropriate time, to ensure that we remain healthy and leaders, both in margin as well as market share.
The next question is from the line of Ravi Swaminathan from Spark Capital.
Can you give the rough breakup of the UCP segment in terms of revenue between air conditioner and non-air conditioning products like air coolers and other products?
So if you recollect, Ravi, in the year beginning, we have launched a commercial air conditioner through our UPBG business, given the -- planning on the risk and river kind of metric. So that contributes around 17% to 18% on the UCP segment. If I remove that, the balance in the Products segment, we do have close to 80% going towards the air conditioner, commercial refrigerator will have around 15% to 17%, rest is, I would say the air cooler. Air cooler being a low cost item, although it won't contribute significantly to the turnover, but given the advantage on the, I would say, on the pricing side and the cost side, to have a better contribution in the margin. The benefit is also not being witnessed in the current year, because of the pile of inventory at the channel partner end, due to the washout of [ 2 seasons ].
Okay. Okay. And so with respect to margins for the UCP business, you had [ went -- ] comment. So just wanted to reconfirm on that. If you are talking about the 10% to 11% margin we'll be able to maintain in FY '23, or there might be some downside risk to it, because of the raw material inflation we will see?
Ravi, in today's time, it is very difficult to, I would say, the expected increase input costs. Although we have seen softening of the commodity price affected by the lower demand in some of the economies However, we cannot still rule out the disruptions and inflation, which is prevailing in the respective home countries. So it will be difficult to say to give any guidance. But as we said in the past, that we won't like to be a leader only in the market share, but continue our leadership in the margin as well. And that will be the driving factor for us, as we move forward.
Got it, sir. And my last question is with respect to the joint venture with Highly for compressors. Can you talk about that a bit more? And also the CapEx plans that we are going to do this year and next year?
Yes. So if I look from the Highly perspective, although it announced in the silent period, so I could not elaborate more to the investor fraternity. I would say that the highly compressor, the investment which has come -- keeping in mind, I would say it's a strategic decision. The reason behind it is, because we are not expecting to have the product without compressor being there. And compressor is a critical product we all know in the air conditioners, for our category. It has the importance in the refrigerator and the commercial product as well.
So in and all, looking into the availability of the compressor, as well as the criticalness, in terms of having the sales sustainability in this critical component, the decision has been made to invest the backward integration to have the compressor, through a joint venture. And the decision to go for joint venture is largely driven by the technical scheme, and the joint venture partners is among the global leader in manufacturing the compressors, and we have done the partnership with them for inverter-made compression. So we are not looking into fixed market speed compressor, because market is expected to decline, as we progress in the next 1 or 2 years aspect. In terms of the overall CapEx for the plant, both the joint ventures partners put together, we will have investments around INR 250 crores to INR 500 crores, as we -- taken in 2 phases, probably with the capacity of going close to 1 million units in our -- when we complete both the phases.
Got it, sir. And the overall CapEx that we may end up doing over the next 1 to 2 years, including this JV?
I would say that the -- if I take a midterm task of 2 to 3 years, because we committed to the P&I as well, and we are in the process of expansion of manufacturing capacity for both RAC and the CR, Put together, we are not expecting the CapEx cycle go beyond INR 350 crores to INR 400 crores in the near term, if I take 2 to 3 years from now.
That is from the line of...
One sec, I just stand corrected on the other earlier question. Not INR 250 crores to INR 300 crores, it would be INR 450 crores to INR 500 crores, extremely sorry for the same. INR 250 crores is the equity portion. So CapEx will be around INR 450 crores to INR 500 crores in the next 2 to 3 years, but it will take care of our PLA applications, which we did for the backward integration for some of the components. Compressor, which is a joint venture and expansion of the manufacturing or production capacity, for both RAC as well as in the commercial refrigerator.
The next question is from the line of Ashish Jain from Macquarie.
Sir, my first question is, again, on market share. So while you have -- the market share loss is largely in the South, historically, you have said that South is like 20%, 22% of our total revenues. So is it fair to think that the market share loss in South is like disproportionate in the range of 20%, 25% to drive a overall loss of 6, 7 percentage points? Or am I missing something here?
Actually, what happened is if you -- the other part of the country got an extended winter, we all know. We didn't require to switch on the air conditioner in the night, till probably the end of the February. And that point of time, even when we have sought -- when we've seen the contribution of south, which has gone as high as 30%, 35%, primarily because other reasons were not having the need or the hot summer. So that increased contribution, which otherwise would have been standard 20%, 22%, you're right, which has gone as high as 33% to 35%. And that spur probably has resulted some kind of disruptions, which we are seeing in terms of the overall market share among the players over there.
Right, right, right. Now secondly, in terms of window air conditioners, can you just share some data in terms of how much of the industry is window ACs and how much for us is still window ACs? I know it's a pretty small number, but can you just share?
No, I agree with you. Rightly pointed out by you, the share of the window is actually coming down year-on-year. And we touched to around 19%, I would say, for the Voltas, 19%, and 20%, probably we are aligned with the industry as well. So it has come down from once upon time to having 25% in the last year, it dropped to close to 23%, then 21%, and we are now seeing a level of 19%, 20% for the window type air conditioner.
Okay. And do you think the proportion for the industry is also similar at 19%?
Because you can't be too much away from the market because, obviously, you can't be 2x, when the market is X.
The next question is from the line of Sujit Jain from ASK Investment Managers Limited.
Yes. Just for the interest rate, the price increase for RAC segment for the full year FY '22 for Voltas would have been in the range of 12.5% to 13% overall, right?
12% to 15%.
Right. And now that at least one player has spoken about having raised prices in April, at least few players should be on par with Voltas in terms of price increase taken for 15 months?
It is difficult to control the expectations of the move of the other competition. So it is difficult for us to estimate. yes, I know which player you're talking about, which has openly said about price increase. But at the same time, we have to see, has it been rolled out effectively across all markets, because the challenge is what the leaders and the other players are facing, will be faced by them as well, the other players. When you talk about the across-product, across markets increase of 2.5% over the price increase being announced. So as I said in the earlier comment, and Mr. Verma also commented, the effective rollout of the price since you announced, generally takes almost 30 days to 45 days. If I want to go on a pan-India basis across the SKUs, with the price being announced. So that if I look from the quarter end and all, you won't get even advantage of more than 50% of the price being hiked and announced at the beginning of the quarter. But that's a good start, and there's a strategy all players are adopting, including Voltas, when we announced price hike in the earlier period.
The 25.8% market share that you spoke about in the last con call, which is Q3 con call, was for 9 months?
YTD, right.
And this is basically GFK Nielsen data, which is secondary data volume data, only NBOs, not in use, right?
Yes, NBOs. And you know very well how GFK extrapolates the data. But as I said, there's only one agency carrying out such kind of analysis because generally, I don't want to explain the metrogenic -- because of the [ metrology adopted ] by them earlier as well and now. So we are not pinpointing out in terms of the metrology being adopted by them. But generally, when GFK captures the data, they extrapolate based upon the base data over there. And many times, they are not able to collect the data from all retailers across countries. So we take all this data in a good spirit. The reason being is because the market share is not firmly the one which we are looking from this kind of data, which gives a lot of other insights in terms of the strength and weakness of the other brands, including the record average distribution of each brand they are enjoying in a particular market. So when we take this database, we go in a much micro way, in order to find out what are the corrective actions or the need -- the action we require to do it. In some of the markets, which only we have to change or we have to move in terms of the distribution.
This is volume data, right?
These are the volume data. Right, yes.
We'll move on to the next question. That is from the line of Keyur Harish Pandya from ICICI Prudential Life Insurance.
Just want to know on the demand conditions, we are hearing that demand continues to be robust. Now are we as a company and industry, able to source material even at this stage seamlessly, or are there supply issues either at the Voltas end? Probably you mentioned that there is no issue, but -- or at the industrial, which may help us gain market share? And just ancillary question is, are we able to source, say, final product or components locally versus the import for this kind of demand? So basically, just want to understand with robust demand, how is the supply situation, whether it be channel end or at the brand end, for Voltas and for the industry.
So let me answer first the channel 1 gentleman. We all know today, there is a huge demand of the product in the shelf. So basically, the channel partners' inventory will be a hand-to-mouth kind of situation. Probably, they are not carrying even more than 15 to 20 days inventory in their warehouses. But it's our aim, because the continuous engines are coming, and we are seeing a good amount of growth over there. If I look from the Voltas side, obviously, it goes well for the brand manufacturer as well. So our inventory level has also come down drastically. And if I compare with 31st March inventory level, the capital employed, which we are seeing in a statement, and if I take the future consumption in the trend, perhaps the inventory is sufficient for 45 to 60 days. Although the continuous inflow is still coming, because when we project something on the growth side, we plan it over a base year. And here, the base year was 2019, because 2021 has still seen some kind of COVID induced lockdown, and reduced demand for that matter. So industry has projected a good amount of growth, and I go with the projections which all players have laid out. And I said in one of the questions, one of the observation of the answer is, if the demand continues to be more than 100% of the last year, I'm sure that all industry players would result or will go into the stockout situation sooner or later. But till today, what we are seeing in the market, we are adequately covered till June-July.
I would say June, because June is where is the primary...
Understood. Understood sir. And sir, how is the proportion of the import versus domestic supply would have changed this year versus 2 years back or last year, post these restrictions on import of the gas filled AC?
See, most of the components have been localized, wherever we find the ecosystem in place. We all know that the compressor is still one of the components and some of the PCBs of the high denominations, are still getting sourced through import. However, as we move forward, we are expecting that a high amount of localization will take place, to start with motors and the PCBs followed by the compressor. So in terms of the percentage, I would say that, a compressor contributes around 16% to 20% of the BOM. And if I look from the PCBs, which should add further kind of 12% to 13% or 15%. Still that components are largely being sourced through import. Although we have the local arrangement as well. So although their contribution is almost 35% to 40% of the overall BOM, at least 20%, 30% of the requirements are still getting procured locally, where we have some kind of ecosystem available in India.
Ladies and gentlemen, that is the last question. I now hand the conference over to the management for their closing comments.
So yes, thanks all the participants showing interest in Voltas. I'm sure that one hour will not be enough for all the participants, given the anxiety and given the, I would say, the outlook and all. We are open for any question-and-answer sessions, and you can reach out to us, and we'll try to answer it at the earliest. Over to you, sir.
Yes. Thanks for all the questions. I think the timing of this question is very correct, and as we have said that we are taking the corrective actions in the market, we should be coming back with the market share and continue to be the market leader on the market share, as well as on the margins itself, because we have said that it is not possible for all the players -- all the other players to disrupt the prices and continue to make losses for long periods. With that, I really appreciate your time and time thanks for the same. Thank you.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.