Economic environment
GLOBAL
In the recent past, the world has witnessed several waves of challenges ranging from
the pandemic to the Russia-Ukraine conflict yet the world has emerged even more
resilient._The global economy is facing an extended period of inflation owing to
supply-side disruptions and an increase in energy prices due to the onset of the
Russia-Ukraine war. Central banks across the globe hiked key policy rates to further
curtail demand and tame inflation. The combination of the high cost of living and tighter
financial conditions is exerting significant pressure on the economic outlook.
Global growth moderated from 5.9% in 2021 to 3.4% in 2022. The emerging and developing
economies fared better than the advanced economies. The opening of the Chinese economy
towards the end of the year came as a ray of hope for the world.
Outlook
Uncertainty about the ongoing conflict in Ukraine, its broader consequences and the
recent collapse of banks are key concerns for the global economy._Median income levels are
being significantly reduced due to inflation, currency depreciation and insufficient
investment in human resources in the service industry and the private sector. In addition,
the economic outlook for Emerging_Markets_and Developing Economies (EMDEs) is generally
stronger than that of advanced economies, but it varies greatly across different regions.
Stronger fiscal measures will help to revive the global economy and support the
development agenda. Multilateral cooperation will accelerate the green energy transition
and prevent fragmentation.
INDIA
Indias economy has reached a significant milestone of becoming the fifth-largest
economy in the world. Despite the global headwinds, the Indian economy remained resilient,
largely owing to strong domestic demand, favourable government policies, and continued
private and government investments. The GDP of the country is estimated to have grown by
7.2%, retaining its status as one of the fastest-growing major economies in the world.
Inflation remained a cause of concern and the RBI tightened monetary policy to tame the
surging inflation in the country. The factors which will lead to a healthy growth trend
are full economic reopening in 2022, which is leading to a cyclical recovery in
consumption; pickup in private capex with healthy balance sheets of corporates and
financial sector players; and acceleration in government capex. The agriculture sector is
estimated to grow by 3.5% in FY 2022-23. The Indian agriculture sector has emerged as the
net exporter in recent years with agriculture exports touching US$ 50.2 billion in FY
2022-23. The service sector rebounded in FY 2022-23, registering an estimated growth of
9.1% against 8.4% in FY 2021-22.
The country reported record GST collection during the year under review. The total
gross collection for the year stood at H18.10 lakh crore with an average gross monthly
collection of H1.51 lakh crore. The gross revenues in FY 2022-23 were 22% higher than that
last year.
Source: Economic Survey of India 2022-2023. Source: Ministry of Finance
Outlook
The Economic Survey of India has projected a 6.5% growth rate for the Indian economy
for the FY 2023-24 despite higher interest rates and weaker external demand will continue
to weigh on investment and exports this year for the country owing to resilient domestic
demand. Indias growth potential has become even more significant since the pandemic with
the economy poised for sustained growth and increased job creation which in turn will lead
to a virtuous cycle of more jobs, higher income, higher saving, and higher investment.
Further, the economy is witnessing a resilient job market, especially from the non-IT
sectors, offsetting the slowdown in IT hiring.
The industry is also constantly innovating in terms of product offerings, which is
expected to further fuel the demand for sanitaryware in India in the coming years.
The demand is further expected to increase substantially with the rising investment in
commercial spaces and various projects including airports, hospitals, hotels, and
residential projects. Additionally, the luxury housing segment and hotels are creating a
demand for expensive, high-end sanitaryware products, which is contributing to the revenue
generated by this segment.
FAUCET
The Indian faucet market is valued at_around H12,000+ crore in FY 2022-23, growing by
18-19% over the past few years. The growth is attributed to several factors, including the
rising number of homeowners, increased disposable income, and a growing focus on improving
the aesthetic appeal of bathrooms. Additionally, Indian consumers, particularly those in
the middle and high-income groups, are being influenced by global trends in interior
design and want premium good-looking faucets which are driving the replacement market
demand. The market is also expected to benefit from the introduction of a variety of
products with advanced technologies and sleek designs.
The Indian government has recently allocated a significant amount of funds towards
policies such as ‘Har Ghar Nal Se Jal and ‘Pradhan Mantri Awas Yojana to
provide piped water to rural homes and improve housing conditions. This presents a great
opportunity for the faucet market in India. As the income level of Indians continues to
rise, there will likely be a greater focus on building and improving homes, creating a
promising market for the faucet industry.
TILES
India is the worlds second-largest producer and consumer of ceramic tiles, following
China. The tiles market in India is around H35,000 crore. When it comes to value, the
collective contribution of organised players accounts for approximately 40%, which amounts
to around H14,000 crore. In terms of volume, the market size is approximately 900 million
sq. m. with organised players contributing about 25%, equivalent to around 240 million sq.
m.
Some of the major factors driving demand for ceramic tiles in the country include
expansion in the construction sector with an increase in premium and luxury residential
units, a rise in consumer expenditure, and growing urbanisation in the country.
PLASTIC PIPES AND FITTINGS
The plastic pipes and fittings industry faced significant challenges in the year under
review because of a fall in the PVC raw material prices. But the industry seems
well-positioned to overcome this on the back of raw material prices stability and improved
demand. In addition to it,_government investments in infrastructure, construction,
industrial production, irrigation, and the replacement of ageing pipes are going to boost
sales. The current pipes market in FY 2022-23 is estimated at H22,000 crore.
The future of the Indian plastic pipes market is promising and is expected to reach a
market value of H55,000-60,000 crore by FY 2024-25. Despite the pandemic and fall of PVC
raw material prices in FY 2022-23, the plastic pipes sector in India has been performing
well with a significant increase in the use of CPVC pipes in plumbing and piping
applications in the construction industry._The governments ‘Jal Jeevan Mission
initiative to provide tap water to all rural homes in India will further boost the demand
for PVC pipes and fittings. Indirect policies, such as anti-dumping duties and the
National Infrastructure Pipeline will also benefit the sector. While there are macroscopic
difficulties and uncertainties, such as global trade and supply shortages, the industry is
expected to boom in the coming years.
Business review
Our Building Products Segment comprises sanitaryware, faucets, premium tiles, and
plastic pipes and fittings businesses.
Having an unmatched edge in design and innovation, as well as an extensive distribution
and retail network, has enabled us to fortify our leadership position in the bathroom
segment in India. Our extensive product portfolio spanning a range of price points, helps
us to cater to diverse consumer segments. Our sanitaryware and faucets distribution
network is supported by 525+ brand stores and 31,000+ retail touchpoints nationwide,
complemented by 390+ distributors and a service network of 660+ technicians across 710+
districts to ensure robust after-sales support. These key strengths have given us a
competitive advantage, allowing us to maintain a dominant market position in the industry.
We have a range of premium tiles to tap the growing demand for high-end tiles used in
residences, offices and malls.
BUSINESS HIGHLIGHTS
SANITARYWARE AND FAUCET BUSINESS
Strengthened SKUs and product range
• Launched 30+ new SKUs in sanitaryware and 50+ new SKUs in faucets
• Introduced 27 new SKUs in the shower segment such as shower arms and hand
showers
• 48 SKUs under the Queo F-Forza range were launched in three colours namely Gold,
Rose Gold and Chrome Black
• Two new over counter basins, Ellipse Basin and Easy Clean Basin with self-clean
technology were launched - the first of its kind in India
• Introduced seven new EWC One-piece water closets along with six new EWC wall
mounted water closets
• Launched 3PVD ranges along with new drains and accessories
• Queo contact-free faucets were launched which are activated by water flow and
driven by an integrated infrared sensor technology ensuring maximum hygiene
Expanded distribution and retail presence
• 200+ brand stores across India were added to increase sales from exclusive
channels
• Launched a new Lacasa Store in Kochi
Strategic marketing initiatives
• Created highly experiential display setups for Hi-Aim, Queo WOW, Acetech
Reflect, Queo distributor and product launches, and airport displays
• Launched Shop-in-Shop Modules and product-focused display units to enhance the
customer experience of the products in Tier 2 and 3 towns
• Retail concept design and production of 600+ stores fixtures and 210+ stores
executed under the screen integration project
Engagement programmes with key influencers
• Launched Plumber Loyalty App-Plumber No. 1 with registration soaring high in Q4
with total registered plumbers to the tune of 26,000
TILES
• Introduced 114 New SKUs
• Launched its 1st TVC ‘Go Larger Than Life for extra-large slabs featuring
Tamannaah and Khali in five major languages
• Launched ‘Broken Not Waste a digital campaign, where the brand partnered
with Ashwika Foundation and Delhi Street Art to install mosaics made of broken and old
tiles in Surjit Wasu Memorial School and Harcourt Butler School, Delhi.
PLASTIC PIPES AND FITTINGS
• Commenced commercial production from the second plant in Isnapur, Hyderabad,
helping grow our capacity to 48,000 tonnes per annum
• Forayed into bath fittings (PTMT faucets and other accessories) to provide
customers with a one-stop solution for all their plumbing requirements
• Collaborated with RWC as their exclusive partner for India to introduce and
market multilayer composite pipes and push to connect fittings on joint brand name of
Truflo SharkBite.
Outlook
For our bathware business, we are confident of retaining our market share on the back
of a well-crafted growth strategy that we have adopted. The first is to continue to launch
innovative products across segments and categories. Secondly, we will continue to build
the brand Hindware. Thirdly, to consistently expand our distribution and reach as we
believe there is still significant opportunity in Tier 2 and Tier 3 cities. Our fourth
area of emphasis is on strengthening our luxury brand Queo brand. All these efforts are
underlined by our strong influencer programmes for key stakeholders such as architects and
plumbers, amongst others, and strong 360-degree integrated marketing campaigns for all our
brands.
For our plastic pipes and fittings business, despite the persisting macroeconomic
challenges, we are confident to remain the fastest-growing brand in this segment. Our
focus is to prioritise expansion strategy, including brownfield and greenfield
initiatives, distribution, and sustainable goals to shape our actions across short,
medium, and long terms.
Consumer appliances business
Industry review
For the year under review, the growth of the retail and consumer durables sector was
muted due to inflationary pressures caused by exceptionally high commodity prices,
increased logistics costs, and parts shortages. But the vast untapped market for
appliances, steady growth from Tier 3 cities and beyond, the shift in the way people live
after the COVID-19 pandemic, premiumisation trends, pent-up demand, and policy initiatives
are going to drive the growth of this segment which is expected to reach US$ 21.18 billion
by 2025.
The integration of AI in the consumer appliances and electronics industry has unlocked
a vast range of opportunities, considering the enormous scale of the consumer durable
market. It is projected that the home automation products industry will reach a value of
US$ 8.6 billion by 2027 due to increasing internet penetration, particularly with the rise
of connected home appliances.
Growth drivers
Prudent policy push in key sectors
The Production-Linked Incentive (PLI) scheme, which covers 14 sectors, is expected to
offer several advantages. It will enable domestic manufacturers to enhance their global
competitiveness, attract investments in advanced technology, and integrate India into the
global value chain. Additionally, the scheme is likely to benefit the MSME sector in the
country.
Rise in nuclear families
The market for household consumer durables is being propelled by the rise of
dual-income nuclear families and the impact of women, who seek to make household tasks
less time-consuming and more pleasant.
Convenience of purchase
With many financial institutions offering EMI facilities on consumer appliance
purchases, customers are buying products without worrying about upfront payment.
Rise in household incomes
A recent study conducted by McKinsey suggests that India will experience a significant
rise in the number of high-income households soon. By 2030, India is projected to rank
third in the world, following the US and China in terms of the number of high-income
households.
Changes in consumer behaviour
India is experiencing a growing adoption of smart and interconnected devices,
particularly among the tech-savvy younger generation, who are driving the demand for
tech-led products. With the increasing demand for convenience-led products such as washing
machines, microwaves, vacuum cleaners, dishwashers, and others, the market for household
appliances and consumer electronics is experiencing growth.
Business review
Through our brand Hindware Smart Appliances, we have established ourselves as a
significant player in the consumer appliances industry in India. We offer a wide array of
products which include kitchen appliances such as chimneys, cooktops, dishwashers, sinks,
water purifiers, built-in microwaves and hobs. Furthermore, we have air coolers, ceiling
fans, pedestal fans, and kitchen and furniture fittings, designed to cater to the changing
demands of Indian consumers.
Our strategy is largely focused on devising new innovative launches to strengthen the
current product portfolio, foray into new markets in Tier 2 and Tier 3 cities through our
retail presence and strengthen our omni-channel distribution network for robust growth.
We have also diversified our sourcing within our country and reduced our persistent
reliance on imports.
We have expanded our distribution network and are building our brand through customer
experience which has been a key focus for us. The opening of new kitchen galleries and
customer experience stores, along with a focus on digital channels such as Amazon, are
expected to further strengthen our market presence.
During the year, under the 50:50 joint venture with Groupe Atlantic, we commenced trial
production of heating appliances from our state-of-the-art 5.7-acre manufacturing plant.
BUSINESS HIGHLIGHTS
Addition of a new 5.7-acre plant for production of heating appliances
• Commenced trial production from our state-of-the-art manufacturing plant in
Telangana
Strengthened existing product categories to reach out to a larger audience
Kitchen appliances
• Strengthen the kitchen appliances category with the introduction of a total
number of 53 Chimneys, 45 cooktops, 13 hobs and 1 induction cooktop
• Introduced BLDC motor technology in Chimneys and 4D Flame technology in hobs
Water Purifiers
• Launched Obelius, an under-the-sink water purifier
Cooling Segment
• Two personal air coolers and three desert air coolers in Powerstorm series with
5500 CMM high air delivery were launched. Additionally, introduced a window air cooler.
Heating segment
• Launched portable water heater called Kweik, along with tankless water heaters
called Storm and Whizz. These tankless instant water heaters heat water in just 5 seconds
• Introduced two new models of square mold storage water heaters, namely Hindware
Amelio and Alivio with varying capacities.
Strengthened distribution and retail presence
• Successfully launched 56 kitchen galleries The first ‘Hindware Universe
was launched to meet the growing demand of consumers
• Installed more than 200 Kitchen SIS (Shop-in-Shop) across India
Branding and marketing Initiatives
• Major re-branding exercise was done for a unified one-brand under ‘Hindware
Smart Appliances to leverage Hindwares long legacy
• Launched print and digital campaigns to promote MaxX silence range of chimneys
Outlook
At Hindware Home Innovation Limited, our strategic focus is to be among the top 5
players in the categories in which we are present in the next 5 years. We aim to reach our
goal by continuing to expand our distribution and retail network to service existing
markets, enter newer markets and launch innovative products to add conveniences to our
customers lives.
Retail
Indias furniture market, which was valued at US$ 23.33 billion in FY 2020-21 is
expected to reach US$ 32.75 billion by FY 2026-27. Despite the adverse effects of COVID-19
on offline channels, online channels remained resilient, and they are anticipated to
expand significantly over the next few years. The democratisation of online furniture and
home d?cor categories is indicative of growing consumer comfort with e-commerce shopping.
Notably, there has been an integration of brick-and-mortar with online shopping with
several leading players exploring digitalisation.
Business review
Our retail business segment focuses on providing specialised home interior products
under the brand name ‘EVOK. We sell through various channels such as franchise-based
retail stores, our owned large-format retail stores, and online e-commerce platforms. Our
brand has a robust online presence through our website (www.evok.in) and we also sell our
products on leading multi-brand furniture marketplaces such as Pepperfry, Urban Ladder,
Flipkart, and Amazon. We currently have 34 franchise-based retail stores and operate two
display and sales stores in Delhi and Faridabad, which are Company-owned.
Our products are functional, comfortable, and aesthetically pleasing to cater to the
evolving preferences and lifestyle choices of consumers.
BUSINESS HIGHLIGHTS
• Committed to expanding our physical presence, and as of now, we have
successfully established and are operating over 34 stores
• Emphasised on minimising overheads to achieve higher profitability and moving
from cash burn to cash earn
• Collaborated with Dalmia Group (Hippo Store) as an SIS operation with the first
SIS opening in Noida
Outlook
We will continue to focus on the franchise model to deliver a much better ROI and offer
innovative and practical solutions, making sure our range of furniture is versatile and
practical. Furthermore, we will prioritise profitability improvement by improving
operational efficiency and decreasing costs through various measures we plan to undertake
such as streamlining store operations and minimising waste in the supply chain.
Risk management
In an ever-changing and unpredictable business landscape, it is crucial to establish a
sturdy system that methodically evaluates both external and internal risks to our
enterprise. We at Hindware Home Innovation Limited, implement rigorous measures to
effectively tackle such risks.
The Board of Hindware Home Innovation Limited consistently offers direction and updates
it yearly to enhance the process of identifying potential risks and the subsequent
measures taken to alleviate them.
Risk management overview
Under the Boards oversight, we have an Audit Committee that is accountable for
monitoring the efficacy of our risk management procedure, including detecting emerging
risks.
Key dimensions
• We at Hindware Home Innovation Limited have a robust process that dynamically
incorporates the identified risks. They are then measured and reported against criteria
that are established against set criteria considering the propensity of occurrences and
the prospective impact on the Company.
• To create the Companys risk profile, we conduct a scenario analysis of the
external environment so that strategy, fundamental operations and various other engagement
strategies are formulated while taking into consideration emerging risks.
• The resulting strategies formulated from the intellectual exercise is subjected
to periodic review by the Audit Committee before the final review and approval by the
Board.
• On an annual basis, the Directors conduct a thorough evaluation of the Companys
ability to operate and remain financially stable over the long term. This assessment
considers the major risks that the Company faces, such as changes in market conditions,
regulatory compliance, technological advancements, and financial performance. By
conducting this review, the Directors can identify any potential risks or challenges that
may impact the Companys long-term viability and develop strategies to mitigate or manage
them effectively. This process is an important aspect of ensuring the ongoing success and
sustainability of the Company.
Key risks and their mitigation process
We at Hindware Home Innovation Limited have classified our risks into three categories
namely: external, operational and financial. The mitigation strategy is as follows:
External risk
| Nature |
Key Risks and their Definition |
Mitigation Strategy |
| Economic, political and market risk |
The business may be negatively affected by a decrease in macroeconomic activity,
disturbances in the global market, and geopolitical tensions. Additionally, an increase in
inflation and interest rates could also have an impact on consumer demand. |
Diversification of our business model across multiple segments helps to reduce
dependence on any segment. This approach can provide several advantages, including
survival in fluctuating market conditions, reduced costs, improved efficiency, expanded
customer base, and connecting new opportunities. |
| Competition risk |
Growing competition could impact pricing power and erode profitability |
We are aware of the latest industry trends and consistently implement measures to
enhance our competitive edge. Our focus on research and innovation is unwavering, enabling
us to stay ahead of our competitors and meet the changing demands of our customers.
Moreover, our omnichannel distribution system enables us to cater to a vast consumer base
throughout the country. |
| Consumer risk |
Consumer preferences are always in flux. Failure to adapt to changing consumer
preferences may result in a decreased uptake of products or services. |
To stay current, we rely on our robust customer feedback mechanism to comprehend their
distinct requirements and customise our products accordingly. |
Operational risk
| Nature |
Key risks and their definition |
Mitigation strategy |
| Product quality risk |
The inability to uphold the quality of a product can have negative consequences on
sales, putting the market reputation at risk. |
Our position among the top five brands in numerous categories is evidence of our
dedication to maintaining high-quality standards. We adhere rigorously to stringent
quality regulations. |
| Technology risk |
The Companys competitive advantage may be reduced by the obsolescence of its
technology. |
We maintain a constant focus on global technological advancements and allocate
resources towards acquiring state-of-the-art technology to ensure that we provide
top-quality products. By forging partnerships and alliances with world-renowned technology
pioneers, we can maintain a competitive edge. |
| Employee risk |
Failure to both attract and retain employees has the potential to negatively impact
our strategic goals for growth. |
Our Company creates an environment that supports and promotes equality, allowing our
employees to thrive. We cultivate a culture of continuous learning to aid in the
professional development of our staff as they advance in their careers. |
| Distribution risk |
The evolving purchasing habits of customers have the potential to endanger our
distribution network, which could ultimately impact our profitability. |
Our organisation has taken a comprehensive approach to distribution, by expanding our
reach through both traditional and digital channels. We have embraced digital technologies
and invested in our online presence to ensure that our customers can easily access our
products through multiple digital platforms. At the same time, we recognise the continued
importance of our traditional distribution channels and have made efforts to strengthen
and optimise these methods. This has enabled us to create a seamless omnichannel
distribution system that provides our customers with a convenient and flexible purchasing
experience. |
| Operating efficiency |
Failure to effectively utilise our logistics network, stores, and support units has
the potential to negatively impact our profitability. |
We consistently review and assess the performance of our logistics network,
implementing measures to enhance, automate, and evaluate our processes. Additionally, our
adoption of the franchise store model has resulted in a more efficient and effective
market presence. |
| Cyber security |
The possibility of cyber-attacks poses a threat to the continuity of our operations. |
Significant investments have been made towards the development of a resilient IT
infrastructure, aimed at mitigating any potential cyber security risks and maintaining the
integrity of our organisations data. |
| Business continuity risk |
Unforeseen events such as pandemics or major incidents have the potential to disrupt
our day-to-day operations and cause a ripple effect on our overall performance. |
Following a thorough assessment of the market landscape, our senior management has
taken multiple measures to mitigate the impact of the pandemic. We are continuously
monitoring infection rates and adapting our response strategy to the ever-evolving
situation. |
| Brand legacy |
As our customers interact with our brand through various mediums such as electronic,
print, and social media, any incorrect or misleading perceptions of our Company have the
potential to result in a decline in sales. |
Our Company places great importance on safeguarding the robust brand equity we have
established through the years. To reach a broader audience and effectively convey our
brand message, we utilise both traditional and digital communication channels. |
Financial risk
| Nature |
Key risks and their definition |
Mitigation strategy |
| Credit profile |
The inability to obtain short and long-term working capital at a favourable interest
rate has the potential to hinder our capacity to fulfil our liquidity needs, which could
negatively impact our operations. |
Our Company places a strong emphasis on enhancing our working capital requirements
through the optimisation of our inventory and receivables cycles, as well as extending our
payables cycle. Furthermore, we are actively pursuing initiatives to ensure that our
Company has access to short- and long-term debt at competitive rates and can increase the
maturity of new debts. |
| Credit rating risk |
A reduction in our credit ratings has the potential to impede our ability to secure
additional financing and could negatively impact the interest rates and other commercial
terms associated with such instruments. |
We maintain a consistent record of servicing our debt obligations in a timely manner
and have established a positive reputation with our banks. Our regular engagement with
lenders and rating agencies allows us to cultivate trust in our financial performance. |
| Currency risk |
Profitability may be negatively affected by fluctuations in foreign currency exchange
rates. |
We safeguard our position by implementing appropriate hedging strategies when
necessary. Our investment in forward and options contracts adheres to policies approved by
the Board. |
| Legal risk |
Failure to comply with regulations may result in penalties and damage our reputation. |
We maintain a robust governance framework to ensure adherence to laws, regulations,
and existing rules. Our regular interaction and reporting to regulatory bodies promote
transparency in our policies and decision-making processes. |
Internal control
Our Company is dedicated to maintaining an efficient internal control environment that
provides assurance on the secure and orderly conduct of operations, asset protection,
fraud and error prevention and detection, as well as timely and accurate completion of
accounting records and preparation of reliable financial information. Our internal control
systems are designed to align with the Principles of Governance.
The Audit Committee of the Board of Directors, which includes Independent Directors, is
responsible for reviewing the effectiveness of our Companys internal control systems.
This includes assessing the annual plan, significant audit findings, adequacy of internal
controls, and compliance with accounting policies and regulations.
Internal financial controls
Our internal control framework is aligned with industry-best practices for
organisations that are similar in size, nature, and complexity. We regularly evaluate and
test this framework to identify areas for improvement.
Risk management
Our Company has a comprehensive risk management framework that evaluates and analyses
strategic, operational, financial, and compliance risks. We also monitor the effectiveness
and efficiency of risk mitigation and control measures. To systematically address major
risks identified by our businesses and functions, we continually take necessary mitigating
actions.
Cautionary statement
The Management Discussion and Analysis may contain forward-looking statements that
describe our Companys objectives and predictions in accordance with applicable laws and
regulations. However, actual results may significantly differ from the forward-looking
statements included in this document due to various risks and uncertainties. These risks
and uncertainties may include the impact of economic and political conditions in India,
fluctuations in interest rates, and new regulations and government policies that may
affect our Companys business and its ability to implement future strategies. Our Company
does not assume responsibility for updating these statements.
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