GLOBAL ECONOMIC REVIEW
Followingaturbulentyearin2022,theglobaleconomy is seen demonstrating signs of
resilience in 2023. The geopolitical tensions caused by the prolonged Russia-Ukraine war,
supply chain disruptions, higher inflation, and tighter monetary conditions derailed the
economic recovery in 2022. The unexpected failures of two specialised regional banks in
the United States in mid-March 2023 have triggered concerns of recession in the world
economy. The International Monetary Fund (IMF) has projected global Gross Domestic Product
(GDP) growth to decline from 3.4% in 2022 to 2.8% in 2023 before rising to 3.0% in 2024.
The economic conditions have started improving since early 2023, supported by the
reopening of the Chinese economy as the country unshackled itself from pandemic-related
restrictions. Advanced economies grew at 2.7% in 2022 and are expected to grow at 1.3% in
2023 and 1.4% in 2024. The Emerging Market and Developing Economies (EMDE) fared better
and grew at 4.0% in 2022. For 2022 and 2023, the emerging economies are expected to grow
at 3.9% and 4.2%, respectively, with China and India leading the growth. (Source: IMF
World Economic Outlook April 2023)
INDIAN ECONOMIC REVIEW
The Indian economy has demonstrated remarkable resilience to external shocks and has
positioned itself among the worlds fastest-growing economies in FY 2022-23. Indias gross
domestic product (GDP) grew by 7.2 per cent in FY 2022-23 as against 9.1% growth recorded
in FY 2021-22.
The IMF projects the Indian economy to grow at 5.9% in FY 2023-24 before rising to 6.3%
in FY 2024-25. The positive growth stems from factors such as strong investment activity
bolstered by the governments push for infrastructure development, rebound in private
consumption, improvement in capacity utilisation, technology-enabled development, and
revival in credit growth. (Source: IMF Report- World Economic Outlook April 2023)
The Reserve Bank of India (RBI) has also increased the repo rate by 250 basis points to
6.50% in FY 2022-23 to control inflation and boost economic growth. Governments
favourable policies such as the production-linked incentives (PLI) schemes and emphasis on
self-reliance will augur well for India in the coming years.
INDUSTRY OVERVIEW & DEVELOPMENTS
Kitchen appliances include devices such as cookers, cooktops, cookware, ovens,
refrigerators, stoves, blenders, dishwashers, food processors, coffee
makers,whichareintendedforutilizationinthekitchen to cook, clean and store food. These
appliances are primarily operated using electricity, cooking fuel, and solar energy. In
addition, they aid in saving time, costs, and energy, and are available in numerous
colors, styles, materials, sizes, and mechanisms. Kitchen appliances find extensive
applications in the residential and commercial sectors across India.
The global kitchen appliances market was valued at US$ 376.22 billion in the year 2021.
With the advancement of technology, the concept of the kitchen has significantly changed,
with a heavy emphasis on improving kitchen efficiency and reducing the amount of time
spent cleaning and cooking. The quick changes in lifestyle have increased the demand for
kitchen appliances that make living more convenient and comfortable.
Domestic kitchen appliances improve the quality of cooking and make food storage safer.
Advanced cooking is becoming increasingly popular, especially in developed economies.
Factors such as rising urbanization, growing population, followed by replacement of ageing
appliances and technological development are factors driving the market growth. Other
contributing factors include globally applicable stringent energy efficiency regulations,
growing popularity of e-commerce website sales for kitchen appliances, increasing
preference for home automation, and continued launches of smart cooking products.
Source: https://www.researchandmarkets.com/
reports/5625018/global-kitchen-appliances-market-2022-edition
The home appliances market in Asia Pacific region is
expectedtoregisteraCAGRofmorethan4%duringthe forecast period, 2021-2026, due to rising
economies and evolving consumer lifestyles. The COVID-19 pandemic has disrupted the global
supply chain of major home appliances and consumer electronic brands. China is one of the
largest consumers and producers of various home appliances and consumer electronics
products. The shutdown of production in China has forced other consumer electronics makers
based in the United States and Europe to temporarily hold the production of the finished
goods leading to an increase in the supply and demand gap.
Technological advancements have led to the development of smart appliances and are
expected to drive market growth. Smart appliances offer advanced features and are more
energy-efficient. The rise in consumer disposable income, high living standards, and the
need for comfort encourage consumers to upgrade their existing appliances to smarter
versions, which is further expected to enhance the market demand. Consumers widely
purchase home appliances as they offer ease, reduce efforts, and save time. Product
innovation, new product development, and integration of numerous value-added features are
further expected to catapult the market demand over the next few years.
The home appliance market offers significant growth opportunities as they are easy to
use and help improve the quality of life. Moreover, the market is beholding new trends in
terms of sustainability and energy efficiency, thereby simplifying several household tasks
while endorsing well-being. High-quality materials and aesthetically pleasing designs
combined with innovative and diverse functionalities offer avenues for market growth.
Source: https://www.mordorintelligence.com/
industry-reports/global-home-appliances-market-industry
Based on the product structure, the market is bifurcated into large, small, and other
categories. The large appliances consist of primarily refrigerators, dishwashers,
microwaves, cooktops, ovens, hobs, and kitchen chimneys. Small appliances include food
processors, mixer grinders, blenders and juicers, coffee machines, kettles, grills, and
fryers. Major factors impacting consumers buying preferences are cost, quality, energy
efficiency, and technological advancements.
Small Cooking Appliances
The global small kitchen appliances market was valued at US$ 16.66 billion in 2021 and
is expected to expand at a CAGR of 4.2% from 2022 to 2028. The growth in the small kitchen
appliances market is attributable to rising nuclearization, rapid urbanization, increasing
penetration of e-commerce channels, growing penetration of branded products, and awareness
about energy-efficient and eco-friendly appliances, and huge technological advancements in
small kitchen appliances. Advancements such as the introduction of smart coffee makers,
air fryers, induction cooktops, and others are boosting the adoption of small kitchen
appliances. Along with that, significant growth in the consumer electronics industry in
emerging economies such as China, India, and others is further expected to provide
significant potential in the near future.
Source: https://www.grandviewresearch.com/
industry-analysis/small-kitchen-appliances-market-report
Others
Increasing awareness of self-cooked meals among the urban youth, higher consumption of
immunity-boosting foods, and growing number of eateries, among others, are the major
demand drivers of non-stick cookware, such as pans, pots, whisks, etc. Rising consumer
preferences for eating outside is paving the way for more eateries and food joints, in
turn generating a high demand for non-stick cookware to serve more customers in a shorter
time period without compromising on quality or presentation.
Growth Drivers and Outlook of Indian Kitchen Appliances Market
The kitchen appliances market is driven by various factors such as the increasing
number of single-person households, rising disposable incomes, increasing number of smart
homes, growing online purchases, and greater penetration of Internet of Things (IoT)
technology in house appliances. The launch of cutting-edge household appliances and the
rising adoption of artificial intelligence and the IoT are driving growth in the global
household appliances market.
The COVID-19 pandemic has had a significant impact on consumer behavior as well as
purchasing trends in the smart kitchen appliances market. The worldwide lockdown that made
millions of people stay at home changed how people interact and live in their houses,
causing them to rearrange their physical areas to accommodate the new functional
requirements and increase demand for kitchen appliances.
The rising need to reduce human intervention and automate cooking has triggered several
innovations in household cooking appliances. Latest technologies are being leveraged into
modern appliances to encourage household consumers to replace their conventional cooking
appliances with modern cooking appliances. Introduction of modular and energy-efficient
kitchen equipment, such as induction cooktops, speed cooking ovens, and dishwashers, is
also contributing to the market growth.
The increased demand for modular kitchens and improving living standards has led to a
rise in the popularity of smart cooktops and cookware in the residential and commercial
sectors. To reduce electricity costs, consumers are choosing energy-efficient kitchen
appliances. Moreover, rising prices of conventional cooking fuel, enhanced safety
features, and wider availability of sensors and bluetooth-enabled connectivity are major
attributes that will propel growth in this segment. The latest trend is smart kitchen
appliances which can be connected to wireless, internet, or bluetooth based devices that
can be controlled remotely. Advancements in technology have led to the introduction of
innovative household cooking products that support connectivity and voice assistants and
feature touch screens and builtin cameras.
There is rising consumer demand for eco-friendly, smart kitchen appliances with a range
of features and functions. With e-commerce platforms improving consumer access to foreign
brands, the adoption of smart kitchen appliances has further increased. Moreover, new
players entering the market are offering competitively priced products that either become
affordable alternatives or viable options for consumers buying smart kitchen appliances
for the first time.
Source: https://www.grandviewresearch.com/
industry-analysis/smart-kitchen-appliances-market
COMPANY OVERVIEW
Stove Kraft Limited (the Company) is amongst Indias leading manufacturers of a wide
range of kitchen appliances and an emerging home solutions brand. With over two decades of
strong presence in the Indian kitchen appliances market, the Company has emerged as one of
the dominant players in the pressure cooker, free-standing hob, non-stick cookware, and
cooktop segments. Headquartered in the outskirts of Bengaluru, Karnataka, the Company has
established a strong pan India presence in 27 states and 5 Union territories. It exports
its products to 14 countries across the globe with 11% of sales generated through exports.
The Company has also established OEM partnerships in the USA and Mexico.
The Company manufactures and sells its products under three prominent brands namely,
Pigeon, Gilma, and BLACK+DECKER, spanning across the value chain. The Company strives to
establish itself as a one-stop shop for all kitchen and home solutions across varied price
points in the value, semi-premium, and premium segments. With over 2 decades of market
presence, the Companys flagship brand, Pigeon has cemented its position in the value
segment and is synonymous with superior quality in the cookware segments. Pigeons strong
reach is attributable to almost a decade of co-branding initiatives with LPG companies
such as Indian Oil Corporation Limited and Hindustan Petroleum Corporation Limited
leveraging their sale and distribution channels.
Gilma brand offers a unique modular kitchen
experienceinthesemi-premiumsegmentsoldthrough exclusively branded outlets owned and
operated by franchisees. The Company has also launched a Gilma specific mobile application
for customers to enable them to raise post sales service requests.
To establish presence in the premium segment, the Company entered into an exclusive
Brand Licensing Agreement with Stanley Black & Decker, Inc. and The Black and Decker
Corporation, for the BLACK+DECKER brand. The Company got the exclusive rights to retail
and provide post-sales services for a wide range of products such as blenders and juicers,
breakfast appliances, small cooking appliances, and small domestic appliances. The Company
has a separate distribution spread across 10 states for Black+Decker.
The Company has expanded its distribution reach to over 82,767 outlets, which is
facilitated by its distribution network consisting of 9 C&F (Clearing and Forwarding)
agents and over 600 distributors. It also has 12 distributors for export products. The
Company has a dedicated service team with full in-house capabilities and provides end
services through its technicians. The Company has built a separate distribution network
for Pigeon, Gilma, Black+Decker and Pigeon LED.
Last year (FY22), the Company through a business transfer agreement acquired the
business of SKAVA Electric Private Limited through a slump sale. This acquisition enabled
the Company to expand its footprint in the low voltage switchgear solutions market like
electrical switches, sockets, distribution boards, switchboards, MCB, bulb holders, and
more. SKAVA has a robust brand recognition and a widespread distribution network in Tier-I
and Tier-II cities in Southern India, which will complement the Companys existing
distribution network.
The Company has implemented BIZOM for real time tracking and capturing movement of its
field sales executives and service engineers. For tracking its secondary and tertiary
sales, the Company utilizes DMS which also helps to maintain inventory level at the
distributors center. The centralized CRM software enables tracking of customer requests,
pre-installation, and post-sales support. In addition, the Company also has a centralized
call center and allocation of service requests to branches based on mapping.
Retail stores
The Company has entered a new distribution channel by establishing direct retail
stores. During FY23, 54 stores were opened and within the next 12-18 months, the Company
plans to inaugurate further 75 to 100 retail stores across the southern states of the
country. These stores will provide a comprehensive range of products, including cookware,
cooktops, small appliances, and LED products sold under the Pigeon brand.
Manufacturing Units
The Company has two manufacturing facilities in Bengaluru, Karnataka and Baddi,
Himachal Pradesh. Both the manufacturing facilities are ISO 9001:2015 certified for
implementing quality management systems.
The Bengaluru facility is an integrated unit comprising multiple manufacturing units
spanning across 46 acres of land. Of this area, 10 acres is available for future
expansion. The Company manufactures various products at this facility including pressure
cookers, non-stick cookware, hard anodised cookware, mixer grinders, induction cooktops,
LPG stove, glass cooktops, IR thermometer, handy vegetable chopper and LED products. For
FY 2022-23, it had an aggregate production capacity of 68Mn units per annum. The facility
is one of the few facilities in the country to have an automated roller coating line for
the manufacture of non-stick cookware.
The Baddi facility has an annual installed capacity of 3 Mn units per annum. The
Company manufactures LPG stoves and glass cooktops at this facility. The Company has set
up additional plants as part of its backward integration strategy. These plants include
manufacturing of glass lid, weight valves, vent tubes and gaskets.
The Company has a dedicated, in-house R&D facility and tie-ups with foreign
companies for technology enablement. Both the manufacturing facilities have a high level
of backward integration with the manufacturing process being independent of third-party
suppliers and OEMs. The facilities are capable of manufacturing components such as
bakelite handles, sheet metal components, moulded parts, die cast parts, moulds, dies and
fixtures in-house for the manufacture of own products. There is relentless focus on
quality with close monitoring and rigorous review at all stages namely, sourcing of raw
materials, product development and manufacturing. The Company has a dedicated sourcing
team and quality assurance team based out of China to ensure highest production quality.
Competitive Strengths
• The Company offers a complete range of kitchen solutions under One Roof catering
to diverse consumer preferences with consistent innovation.
• The Company is backed by a professional management team with a proven track
record and supported by experienced board members.
• The Company undertakes extensive branding and marketing initiatives to
strengthen its market position.
• The Companys manufacturing capabilities are robust, with efficient backward
integration and a focus on quality.
• The Company has a wide and well-connected distribution network, covering
multiple retail channels, and a dedicated after-sales network.
OPERATIONAL REVIEW – OPERATIONAL AND FINANCIAL PERFORMANCE
The Company recorded revenue from operations of 1284 Cr in FY2022-23 compared to
1,136 Crs in FY 2021-22, an increase of 13% led by strong demand for kitchen appliances.
Volume growth was 10% in FY 2022-23 compared to 18% in FY 2021-22 accompanied by 3%
increase in selling price. Offline revenues witnessed strong growth backed by the
contributions from retail touchpoints during the year. FY23 saw no lockdowns on account of
COVID and this saw a shift in the demand from online to offline channels. During the year
Ecommerce channel witnessed a mild degrowth while offline revenues grew at 20%.
The company has consistently improved its product lineup for customers by introducing
various options in cookware, cooktops, and appliances, which have been widely embraced by
the market, resulting in increased revenues. Following its planned strategy, the company
has continuously reduced reliance on imports over time, leading to improved profit margins
and a faster turnover of working capital.
Despite taking price increases, the Company could not adequately align them with the
inflationary pressure experienced in the raw material sector, resulting in a tightening of
profit margins. Additionally, other expenses such as employee costs, marketing and
advertising expenses, and travel expenses witnessed significant increases throughout the
year. Gross margin stood at 32.8% (PY was 31.9%) while EBITDA margin (excluding other
income) stood at 7.7% (PY was 8.3%).
For increasing operational efficiency, the Company is continuously working on backward
integration. The power generation started two years through additional solar panels and
windmill at Chitradurga has reduced power cost by 26% in FY 2022-23 and will continue to
cater to power requirement. It contributes to around 26% of total power requirement of the
Company. The PAT margin stood at 2.8% in FY 2022-23 compared to 4.9% in FY 2021-22. The
ROCE stood at 10% compared to 14.1% in previous year. The Companys net debt as on 31st
March 2023 stood at 232 Crs with working capital of 35 days as compared to 32 days in FY
2021-22. Please refer Note 45, Notes to Financial Statements for more information on other
ratios.
RISK MANAGEMENT
The Company has a robust risk management framework which forms an integral part of the
strategy and planning process. The Company proactively identifies potential risks and
devises action plans to mitigate any such risks which may impact business operations. For
ease of management, risks are broadly classified as transactional, strategic and external.
This classification also helps in adopting the appropriate mitigation approach. To deal
with transactional risks, the Company has devised well-defined processes and internal
controls. Internal and statutory auditors regularly test these processes for
effectiveness. For mitigation of strategic and external risks, the Company undertakes
enhancements to and through business strategy, operations and financial management, and
human resource initiatives.
Designated owners are responsible for respective
mitigationplans.Theymonitorandreviewtheprogress of mitigation measures undertaken. The
Company has constituted a Risk Management Committee in compliance with the SEBI (LODR)
Regulations. The Committee is entrusted with the responsibility of identifying and
undertaking appropriate mitigation measures for various types of external and strategic
risks, as below:
Competition Risk
Given the favourable growth prospects of the kitchen appliances industry, the Company
faces the risk of enhanced competitive pressure from new players as well as existing
players. Any market loss may result in decline in revenues and profitability.
The Company makes use of various sources of distribution, pan India, for its
wide-ranging product assortment. The Company provides superior quality products spanning
across price points from value to premium at competitive prices. Strong focus on
innovation with extensive R&D and periodic launch of new products / variants /
categories not only helps in expanding the customer base but also keeps the existing
customers enthused. The Company works to enhance brand equity through marketing,
advertising and promotion.
Commodity Price Risk
Volatility in the price of key commodities like aluminium, aluminium derivatives,
copper, plastics and steel may lead to increase in inputs costs thereby impacting
profitability.
The Company follows a cost-plus model which enables it to insulate itself from any
volatility in the commodity prices. Most price increases are passed on to the customers
either partially or completely, with quarterly lag. A proficient procurement team keeps a
close watch on the price movement of key commodities to exercise informed sourcing
decisions based on demand and forecast planning. To further mitigate commodity price risk,
the Company continuously works on indigenisation and backward integration of its
facilitates to access critical inputs. This will not only help manage supply chain issues
but also improve cost competitiveness and ensure superior quality.
Interest Rate Risk
The Companys borrowings are priced at floating rate and marginal cost of fund-based
lending rate with banks. Any fluctuation in interest rates thus has a direct impact on
interest costs and profitability.
The Company constantly strives to maintain a healthy debt equity ratio. To mitigate
interest rate risk, the Company tries to maintain a healthy credit rating so as to
facilitate lower borrowing rates or reduced spread on lending rate.
Foreign Exchange Risk and Hedging
The Company enjoys natural hedge to foreign currency for its imports as well as for
exports. With exports on the rise, foreign exchange payable are covered with foreign
exchange earnings to a large extent. For the remaining forex exposure, if any, the Company
closely monitors foreign currency movement and based on the risk assessment, hedges its
position to mitigate forex-related risk.
Credit Risk
The Companys robust credit monitoring policy enables it to filter customers
eligibility for credit based on defined parameters. This helps to mitigate default risk.
In addition, the Company follows a conservative provisioning policy for aged receivables.
The Company is also working on monetising its receivables with ‘without recourse
channel funding programme currently covering e-commerce, exports and significant portion
of general trade.
HUMAN RESOURCES
Stovekraft recognizes the significance of its Human Resources as an Organisation
Specific Critical Success Factor. Our leader has manifested utmost care & concern for
employees as well rewarded the highly committed employees since the inception of the
company in 1999. With 70% of our workforce constituting women employees, Stovekraft has by
design demonstrated Diversity & Inclusion. We have drawn upon the commitment of
employees to progress thus far. However, the company being at the cusp of transformation
recognizes the importance of appropriate structure and competencies to drive Level Next
growth and carve our path to be the best in class Home, Kitchen and Consumer Lighting
solutions provider over the next few years.
We have on boarded a very reputed professional management team consisting of 7 CXOs who
will under the guidance & mentoring of our MD navigate the company in pursuit of our
Purpose "To Provide Quality Products at affordable prices, thereby enhancing the
lives of our Customers" & our vision "To be a leader in the kitchen, home
and consumer lighting solutions in India". CHRO shall in partnership with the Sr
Management team chart the course of the organisation by carefully selecting resources to
improve our Leadership capabilities & beyond, align and integrate people, instill
purpose as well as develop capabilities. We are in the process of establishing
contemporary policies, systems, technology landscape to manage change and put on the
organisation in a higher growth path.
As on March 31, 2023, the Company had a total of 5316 employees.
INTERNAL CONTROLS
The internal financial controls of the Company provide adequate assurance on recording
and providing reliable financial information complying with applicable laws and
regulations, safeguarding assets from unauthorised use ensuring that transactions are
carried out with proper authorisation and approved workflows. The Audit Committee of
Directors approves the audit plan and reviews the internal audits reports on quarterly
basis.
The robustness of the internal control framework is reflected in strong focus on
regular monitoring of process controls and risk management framework, enabling it to keep
tight control over revenue leakages, frauds or other irregularities. The Companys
internal control systems and internal audit are appropriate and relevant in line with the
nature of business and the size of its operations. To maintain proper books of accounts
with integrated transactional controls, the Company uses an effective ERP system, SAP S4
HANA, as a business enabler. To ensure adequate safeguard of sensitive data, the Company
has strong IT systems.
The management keeps close control on the internal control system by regular reviews.
The Company constantly strives to maintain the robustness of its internal control
framework through regular audit and review processes, by the internal auditors, management
and Audit Committee, at regular intervals. An independent internal audit firm conducts
company-wide internal audits. It also helps to keep under check the robustness of the
audit process. Applicable Accounting Standards are strictly followed while recording
transactions. To ensure real-time reporting of key financial metrics, the Company deploys
strong MIS systems
OUTLOOK
The Company remains optimistic about long-term business growth for the home and kitchen
category products. Rising discretionary incomes, growing urbanization, and young
demographics are the key drivers for growth of the home and kitchen products market in
India. Increased internet penetration, growing adoption of e-commerce and influence of
social media channels are also contributing to market growth. Indias urban population is
increasingly seeking technologically advanced kitchen products that are not just
functional tools but a perfect fit for their aspirational lifestyles that make cooking
easy and modular kitchens that make best use of limited space. All these factors augur
well for the Companys home and kitchen appliances products.
The Company intends to expand its channels and products. The government support for
local manufacturing with schemes like Make in India and Vocal for Local reaffirms the
Companys philosophy of making in-house rather than outsourcing. The Company will continue
to invest in adding additional plants for new products and backward integrate components
to enable greater cost and quality advantage.
Cautionary Statement
Statements in the management discussion and analysis report describing the Companys
objectives, projections, estimates and expectations may be "forward-looking
statements" within the meaning of applicable laws and regulations and futuristic in
nature. Actual performance may differ materially from those either expressed or implied.
Such statements represent intentions of the management and the efforts put into releasing
certain goals. The success in realising these depends on various factors both internal and
external. Investors, therefore, are requested to make their own independent judgements
before taking any investment decisions.
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