Eveready Industries India Limited (531508) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Eveready Industries India Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Parth Chauhan from Adfactors PR. Thank you, and over to you, sir.

Good evening, everyone. Thank you, and welcome to Eveready Industries India Limited Q1 FY '27 Earnings Conference Call. We have with us Mr. Anirban Banerjee, Chief Executive Officer; Mr. Bibek Agarwala, Executive Director and Chief Financial Officer; and Mr. Anirban Ghosh, GM, Finance and Head of Investor Relations. Before we proceed with the call, I would like to mention that some of the statements made in this call may be forward-looking in nature and may involve risks and uncertainties that are difficult to predict. The company undertakes no obligation to update any forward-looking statements to reflect developments that occur after the statement is made. Documents related to the company's financial performance, including the investor presentation have been uploaded on the stock exchanges and the company's website. I now hand over the conference call to Mr. Anirban Banerjee for the opening remarks. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us for Eveready Industries earnings call for the first quarter of the financial year 2027. We have already circulated a detailed presentation on the company's performance during the quarter, and I hope you found the information useful. I will highlight only the key points. First, I would like to quickly touch upon the operating environment that we experienced during the period under review. The quarter was characterized by a dynamic operating environment. While consumer demand remained resilient across our key categories, global businesses continue to navigate persistent geopolitical uncertainty, supply chain disruptions and inflationary pressures. Commodity markets remain volatile with currency fluctuations adding further uncertainty to input costs. Despite these macroeconomic headwinds, our focus remained on disciplined execution, prudent price actions and delivering sustainable profitable growth. Zinc prices continued to remain elevated at around $3,500 per ton compared to levels of below $3,000 per ton during a major part of last year. In addition, several key raw materials, including electrolytic manganese dioxide, electrodes, acetylene black and lighting products and components also witnessed inflationary trends. While these factors exerted pressure on our cost structure, our calibrated pricing actions and continued focus on operational efficiencies enabled us to protect our margins and maintain profitability. During quarter 1 FY '27, Eveready delivered another quarter of resilient financial performance, marking its seventh consecutive quarter of year-on-year revenue growth. Revenue for the quarter stood at INR 407.7 crores, registering a growth of 9% year-on-year. EBITDA came in at INR 61.5 crores while maintaining an EBITDA margin of 15.1%. Profit after tax stood at INR 37 crores, representing a growth of 22.3% over the corresponding quarter last year. These results reflect the strength of our business model and our continued focus on profitable growth. Coming to the battery business. The segment delivered another strong quarter, recording 11.9% revenue growth, supported by healthy performance across both alkaline and carbon zinc batteries. Our alkaline battery portfolio continued to be the key growth driver, delivering close to 48% volume growth during the quarter. We also strengthened our position in the premium battery segment with our market share expanding to 18% within the alkaline sector, reflecting results of our premiumization strategy. The category remains a significant long-term opportunity for Eveready, and we remain committed to strengthening our leadership position through investments in manufacturing facilities, innovation and distribution channels. Our carbon zinc battery business also delivered a stable performance, delivering volume growth commensurate to the industry. Through calibrated pricing actions and continued focus on scale efficiencies, we were able to protect profitability while reducing manufacturing costs across our legacy portfolio. An important milestone during the quarter was the commencement of commercial production at our Jammu facility on the 29th of May. The plant strengthens our manufacturing capacity, improves operating leverage and supports expansion of our alkaline battery business. The facility provided us with scale, flexibility and supply chain resilience required to support the next phase of growth. The Jammu facility also opens new opportunities in white labeling and export markets, strengthening our ambition to emerge as a globally competitive manufacturer in the alkaline battery segment. During the quarter, we also witnessed strong growth across our digital channels, particularly through Q-commerce, quick commerce and e-commerce, showcasing changing consumer buying preferences and the strength of our omnichannel distribution strategy. Moving to our flashlight business. The overall demand remained soft due to delayed onset of monsoon, which deferred seasonal demand and resulted in lower volumes of conventional battery-operated flashlight. Overall, the segment revenue declined by 6.7%. Our rechargeable flashlight portfolio remained a key growth driver, delivering over 20% revenue growth during the quarter. Growth was supported by continued product innovation, premium product offerings and increasing consumer adoption of rechargeable solutions. As consumer preferences evolve, rechargeable flashlights continue to offset the structural slowdown in the traditional battery-operated segment. We are also actively working towards expanding the usage of flashlight beyond the traditional rural and seasonal applications by developing products suited for urban consumers and newer everyday use cases, thereby broadening the addressable market for the category. We also introduced our hybrid flashlight, Eveready's first patent-applied flashlight product, which combines the convenience of rechargeable technology with the reliability of conventional batteries. Our lighting business delivered an encouraging quarter, registering healthy 13.7% growth. The business benefited from strong demand across key product categories, while the pricing environment showed signs of stabilization after a prolonged period of price erosion, improving revenue visibility and supporting margin resilience. We also witnessed healthy volume growth in our higher-margin categories, particularly emergency LED bulbs and electrical accessories, reflecting the strength of our product portfolio and market execution. As the lighting industry continues to evolve with increasing adoption of energy-efficient LED solutions, we remain focused on strengthening our portfolio through premium offerings and innovative products. We also continued to expand our presence in adjacent electrical categories with our electrical accessories portfolio gaining momentum, led by the encouraging performance of insulation tapes and the introduction of products such as wires and MCBs. Innovation continues to remain central to Eveready's long-term growth strategy. During the quarter, we launched India's first portable liquid mosquito vaporizer, an innovative mosquito repellant solution featuring a rechargeable battery-powered portable design that enables consumers to carry the liquid vaporizer while traveling or within the rooms and indoor, et cetera. This represents Eveready's first patent-applied innovation in the anti-mosquito liquid vaporizer category and has been launched across select markets. The quarter also saw the launch of a rechargeable flashlight, better known as shore with the feature of an animal alarm for farm protection. The torch is designed to help farmers protect crops from animal intrusion through a powerful combination of light and sound, having a 100 decibel alarm combined with a red UV strobe light. Within our emergency portfolio, the company launched the extra bright emergency LED bulb, offering double the illumination provided by an emergency bulb during a power cut for a superior lighting experience. We also continue to reinforce our leadership as a market leader in the organized mosquito racket category. Looking ahead, we remain optimistic about sustaining our growth momentum through the remainder of the year. Our premiumization strategy continues to gain traction. Investments in manufacturing and innovation are beginning to yield results, and our distribution network continues to expand across both traditional and emerging channels. While commodity prices and currency movements remain key watch areas, we remain committed to taking timely actions to protect profitability while delivering sustainable long-term value creation. Thank you.

[Operator Instructions] Your first question is from the line of Shubham Jain from Counter Cycle.

So my questions are on 2 fronts. Firstly, on the part, our presentation has mentioned that we have currently 58% market share earlier it used to be 50-ish are we gain this market share? And what [indiscernible]...

Shubham, your voice is completely breaking and it is not audible to us.

Am I audible now?

Bit better.

Okay. So my questions are on 2 fronts. Firstly, on the market side. Our market share in the dry segment has grown from 50-ish levels to 58% currently as per the PPT. So I just wanted to understand on whose cost are we earning this? Second would be that Amazon Basic has launched their product SKUs around batteries. So some opinion on that front. Are we facing any competition on that? How large is our e-commerce and that part of portfolio? Second would be on the regulatory side. If you could help us or give an update on the BIS norm and in India, any competition from the Chinese front and the extended producer responsibility side of any cost that we are going to incur or incurring currently?

Shubham, thank you for the question. I think the question is 3 parts. You have a question on market shares. You have a question on BIS. You have -- you would also like to know more about the compliance, et cetera, right? So I'll address the -- from a market share point of view, our growth in market shares typically are coming from the alkaline sector. So when we mentioned that during the call that our alkaline market shares now are hovering around 18% and moving upwards, right? While that being said, our larger market shares are held by the carbon zinc, which are mainly broadly about flattish in nature. And as a result, the more the alkaline continues to grow and the more the salience of the alkaline within our mix also starts increasing, we will -- the overall market shares will also tend to move up in the given future. As far as the BIS is concerned, the BIS on flashlight took the entire of last year to be implemented. So as of today, the on paper implementation is complete. What needs to be seen currently is the absorption and the adoption of the BIS with many of the non-branded organizations within India. And that is a compliance that will need to be driven further. And we are yet to see that being played out in the market. That being said, our flashlights are completely compliant with the BIS norms and all our production facilities are now producing -- geared up and producing only BIS available flashlights.

Shubham, I think what you have referred to one point to just add what Anirban is talking. So you have seen in investor presentation, this 58% market share has been given on the carbon zinc sector, okay? So it is especially for the carbon zinc. Now coming to the -- to point of BIS, what Anirban has said. So we are fully compliant, and we are looking forward that very rigorous implementation of the same. It is just January this year only started. So maybe 2 to 3 quarters, it may take time as we see. With respect to the EPR compliance, we are doing -- we are doing -- there are some operational and with the pricing mechanism, there are some challenges for which we are working with the Ministry of Environment and Climate Change and also the Pollution Control Board.

The next question is from the line of Saloni from Molecule Ventures.

So my first question is regarding the Jammu plant. In the past, we have mentioned that since we used to earlier import and now we will be manufacturing from our own plant, we can expect a higher operating margin. So can you give us the guidance on what kind of OPM will be earning from the alkaline sales earlier versus what we can expect to earn at INR 100 crore level, let's say, in first year and at the peak capacity level at INR 400 crore level?

So just as Anirban mentioned in the call, just end of May, we have done the commercial production of this plant. And as we said that in a very sustainable capacity utilization, at least we are looking for 10% margin increment from our Jammu plant. So this is a year of beginning -- this is the first year like -- so we'll be stabilizing. And -- but when -- after a year and so when fully stabilized, we expect definitely a 10% margin up there.

So when you say the 10% margin increment, you mean 20% operating margins from that plant, right?

No, no. So let's say, a gross margin. When you go for any particular SKU size, what is the margin health of the particular product is the gross margin of the product. So I'm talking about that gross margin of the product will be 10% up.

Okay. And any idea on the operating margin, sir, as and when it scales up and you must have an idea at optimum utilization, some kind of a margin would be expected to earn?

Today, if you see, alkaline is around 6% to 7% of the total portfolio increase -- total portfolio of the company, right? So gradually, as we intend to see more than 50% growth is coming in this category. So you can just calculate that if it is 5%, 6% to 7% of the total portfolio and then 10% on that increase, what bottom line impact will be there.

Okay. Sir, the next question is regarding the cannibalization effect that is happening. So at the end of the day, the customers that we will be targeting for the alkaline product is the same as the carbon product. It's just that the value addition is happening because of the price point being high in the alkaline category, which would lead to some increment in the -- so the sales growth as such is not shifting significantly due to this cannibalization effect. Is the understanding correct?

I'm not sure about the cannibalization effect. That is not something that we are monitoring immediately at the moment. The way the consumers are trading up are to do with devices and batteries come into play when you have devices at home. So what's probably going to happen over the decade is that there will be a lot of trade-up in the kind of devices that you are using. So what used to be at one point in time, a lot of television remotes and clocks or torches at home is giving way to many other devices, including smart remotes, lots of toys, blood pressure machines and optical mouses, et cetera. Many of these devices consume much more power than what a typical zinc battery might throw up. And as a result, while the number of people consuming the batteries might remain similar, the consumption of power per household is likely to go up by the adoption and the increased penetration of many of these high drain devices. And it is in that juncture is where the alkaline chemistry comes in helpful where they will cater to some of these increased demands. And as a result, our understanding of immediate cannibalization may not be correct because only at the saturation of some of these high drain device demand is where there might be a cannibalistic impact. I hope that makes it clear.

Sir, a follow-up on this. Just wanted some clarity. So if you see, we already have a 55%, 58% market share in the existing portfolio, and it has not grown much because we've captured most of the market. And this alkaline product addition, as you said, up to a point will not be a cannibalization effect.

Due to no response, we'll move on to the next participant. The next question is from the line of Saket Kapoor from Kapoor & Company.

Sir, firstly, with respect to the Jammu facility, if you could -- congratulations to the team for commercialization. And if you could just give us our key priorities for the coming 2 years or 3 years on a holistic way, how are we going to sweat this asset, realign the portfolio. And as you have mentioned in the opening remarks on Nanda about the white label activities that also we are contemplating. So just some more color on the same in terms of setting the tone for the Jammu facility.

An interesting question. So the Jammu facility is -- you are right, it is connected to the alkaline chemistry. The alkaline chemistry is, in turn, connected to stronger devices appearing in India. And thus, if I were to take a view over the next decade, as I was mentioning in my earlier answer, the consumers in India will soon or are continuing to trade up many devices. The number of devices per household is slowly going to increase. These devices will consume more energy and power than the earlier devices, which was much more simpler, simple remote or a simple clock compared to a medical device or a computer gadget or a remote control toy or an optical mouse, et cetera. Some of these will consume much more power. And as a result, our estimate is that over the decade, the growth of the alkaline chemistry in batteries is going to be significant already over the last 2 to 3 years. The CAGR of the growth of alkaline is more than 20% by value terms and volume. And thus, it is at that time with a view to the future that we have moved ahead with the Jammu plant, more from localization and setting up for the future the capacity needed to cater to increased devices penetrations in India over the next couple of years, right? Of course, as there is capacity, it will lead to a growing local demand, right, which will be eventually connected to a growing penetration of battery-operated devices in India seeking much more power. It will also be an opportunity to scout and solve for battery white labels across many other countries in the world, which might be seeking to buy it and source it from Asia, et cetera. So India with a plant in Jammu would be a good alternate to scout for many of probably it could be retailers, it could be large institutions wanting alkaline in their own white labels. And that is something that we will also reach out for over a period of time. So between the domestic demand and potential for exporting in white label, the facility is of significance given that it's the only one alkaline facility in India at the moment.

Correct, sir. So sir, again, in terms of -- also congratulation to the team for the EBITDA margin of 15%. And as per your opening remarks, sir, we are confident that these numbers are workable and can be exhibited during the year also. I think so the commodity inflation, the other have now become a part and parcel. So have we aligned our working in a sense that these margins should be -- we can exhibit on a sustained basis going ahead also?

We are in line for trying to carry on what we have delivered. And that is what the aspiration is, and that is what the plans and the discipline is there in order to ensure that we move ahead with a similar kind. Now that being said, I think the extringencies that are happening in the world outside cannot be contained. And thus, we will monitor it on a very short-term basis to keep seeing that what modifications need to be done to ensure that we broadly hit the numbers that we are looking to achieve.

My point was, sir, are there any one-offs for us to factor in going ahead? Or these are purely operational set of numbers that we have exhibited because of the efficiencies and the good work that you have just alluded to?

So you may take it because there is no such one-off or any extra gain is there. So this is purely an operational efficiencies because a lot of calibrated price actions has been considered during the quarter, considering what the price increase. As Anirban mentioned, our key component zinc, which was hovering less than $3,000 during the last whole year, now started exhibiting upwards of $3,500. So that is why one has to get prepared for them along with a very sustainable and profitable growth. And that is the way the team has taken a decision and hence, the result is here.

Sorry to interrupt Mr. Saket, may I request to join the question queue. [Operator Instructions] The next question is from the line of [indiscernible] from Kiva Advisors.

There was some news reports of one of your Japanese competitors potentially having to close their plants in India. I just wanted to understand any update on that? And could that also help you gain market share? That was the first question. The second one was in terms of your expansion into other areas like wires and cables, -- just wanted your thoughts on any specific targets you have in that space? And any market share that you think you can garner there?

So on your first point on the competitor, I think it is speculative in nature for me to comment on it. But in any market, at any point in time, should any brand were to vacate, typically, the other brands would play in to occupy the space. And that is all where I would put it at, given that we have absolutely no idea about what the competitive nature would be. Whatever pans out in the market, we will get automatically played by the brands in the market. As far as the wires and MCBs are concerned, we've had the initial start correct? We are trying to double from what -- where we were there at the close of the last financial year, right? Will that be significant amount of market share? Maybe not. But that is something that we are kind of contemplating to see that whether we can try and clock more than double in this current financial year to see that whether we can start making rounds of the market share by about 1% or 2%. But it would be preliminary given that we have just started about 6 months back.

And what sort of capacity do you have in that space? To what level can we actually go with the current capacity?

The wires are sourced. We don't manufacture them. If you look at many players in the market, there are a few of them who make it themselves, and there are more than a few who source it from the other players. And thus, our entry is dependent on our sourcing. Our sourcing capacities look good enough for 2 to 3x amount of growth than what we are currently doing. So at the moment, it looks okay.

The next question is from the line of Vikash Vasu from RBC.

I wanted to know an update on the GST and for all investors in terms of approvals, the quantum and the taxability as and when the GST subsidy comes? That was my first question. My second question was that are we now in a position to give a 3-year EBITDA or a turnover CAGR forecast? My third question was on -- one of our directors were paid a consulting fees, I believe, a concerned person is now a whole-time director in another Berman company. Are we still paying him that INR 2 crores of consultancy fees? Or is there -- or has that stopped now? Those are my first 3 questions.

Thank you, Vikasji. So with respect to the Jammu incentive, the status remains the same. There is not much movement. So there is no movement has happened on our approval at this point of time, but we are in a very advanced stage of the discussion with the industries department. And so they keep saying that things are moving progressively. But as of now, we have not gotten any formal approval. That is the first with respect to that. Second, as in my last call also, I've spoken about that now this is the time has come up for which you have to give a little bit of long-term things, and I have requested about 2 to 3 quarters' time because you have seen this is a very sustainable 7-quarter growth we have given, and this is one of the highest revenue and operating margin generated quarters. So now the team's confidence is on the up because we do want to give you something which is very calculated planned wave so that the execution is also parallel important. So just request you to bear with us for another 1 or 2 quarters before you give you for the long-term things. With respect to the -- one of the whole-time director remuneration, our NRC and the Board has approved and has seen the commitment of the directors very much to the company. He could adequately devote the time, can give a decision-making guidance and he's a very strategic pivotal person, so he is doing his good contribution to us, and that is why the NRC and Board has approved this compensation.

On the GST, you mentioned, I wanted to...

Sorry to interrupt, Mr. Vikas. May I request you...

Follow-up question, I didn't get an answer. So you just hold on. I wanted to know what exactly is our entitlement? What is the quantum? How is it paid? And how is it taxable? Just a little bit of flavor, what can we expect when it is approved? That was question number one. And b, are we -- Eveready brand, is there any plan to -- any M&A or something to -- now that we have spent so much time on the brand and it's such a strong brand, why are we not exploiting it in a much larger manner?

Okay. So first, like you want to understand what is the scheme, right? I think I have explained last time also, and let me tell you again. So the scheme of the Jammu investment is that whatever the capital investment you do, you get 3x refund in the terms of the GST revenue calculation. This is the incentive scheme, okay? It is on the plant and machinery. So government has in 2021 has come up with some NCSS scheme there in Jammu and on that Jammu that if the company is getting registered in the NCSS, then they are eligible for -- not on the total investment on the plant and machinery investment, which is equivalent to 3x of the plant machinery, eligible plant and machinery in the form of GST, whatever we pay in the state over a period of 10 years. And with respect to the M&A and what is the company, as I told you, this is in our -- this will be a part of our long-term horizon vision, whether we should go on any acquisition or we'll focus on building and investment on our existing core that we are internally deliberating. And when we come up to you in the next 2 to 3 quarters, our long-term firm plan in that it will be incorporated.

I think the capital amount on plant and machinery is about INR 50 crores to INR 75 crores, is my understanding right?

Sir. In Jammu, it will be around INR 90 crores to INR 95 crores will be our plant and machinery.

So we'll be entitled to a INR 300 crore GST subsidy over 10 years as and when it comes.

The next question is from the line of Danish Mistry.

Congratulations on a good set of numbers in these trying times. And I just had 2 questions. The first is that on the Jammu plant, which is there, are we kind of capitalizing some of the start-up expenses? Or is it just already expensed out in the P&L? That's number one, especially as the plant ramps up. You said that you started only on May 29. The second question is more in terms of the Lighting division. After a long time, we've seen price stability in lighting. I just want to know where does it go from here? What are you seeing on the ground? And have we continued to break even in this segment?

So I think 2 parts of your question. One is the preoperative expenses and another is the lighting. So I'll take the first one. So with respect to the preoperative expenses, these are all capitalized, right? As per accounting standard, also any expenses till the time of capitalization. So it is all capitalized. After 29th of May, expenses are being charged to P&L. Anirban, if you would like to on the lighting part?

So on the preoperative part, are we going to -- how will we treat it, sir?