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V-Guard Industries Ltd Management Discussions

343.15
(-4.38%)
Feb 13, 2025|03:31:07 PM

V-Guard Industries Ltd Share Price Management Discussions

1. Economic Review & Outlook

In the prevailing global economic milieu, the concept of resilience is widely discussed, yet formidable challenges persist. Geopolitical tensions, financial volatility and enduring inflationary pressures cast a pall over economic prospects. Notably, in February 2024, there was a marked increase in both the global supply chain pressures index (GSCPI) and the geopolitical risks index. These escalations were driven by a multitude of factors, including heightened cyber threats, the protracted conflict in the Middle East, notably the Gaza crisis and the looming spectre of heightened US-China tensions, particularly concerning Taiwan. Furthermore, disruptions in a pivotal global trade artery due to conflicts in the Red Sea precipitated a significant upsurge in container shipping costs, further complicating matters. Concurrently, consumer confidence waned in the US and the UK, juxtaposed with improved sentiments in the Eurozone, while central banks globally grappled with the intricate task of managing expectations regarding policy easing. Against this backdrop, geopolitical risks epitomized by conflicts such as the Israel-Hamas war, Iran-Israel conflicts and the ongoing Russia- Ukraine discord, assume paramount importance, shaping corporate and governmental strategies on supply chain and energy security. Such uncertainties reverberate throughout the economic fabric, potentially exerting profound effects on food prices, global trade and inflationary dynamics.

Global economic growth remains steady, projected at 3.2% for both 2024 and 2025, with a slight upward revision for 2024. Median headline inflation is expected to decline from 2.8% in 2024 to 2.4% in 2025, signalling a soft landing. Despite progress, many economies are yet to reach their target inflation rates. Nonetheless, economic activity continues to grow steadily, defying earlier concerns of stagflation and recession.

In late 2023, headline inflation approached prepandemic levels in most economies. Advanced economies saw inflation drop to 2.3% in Q4 2023 from a peak of 9.5% in Q2 2022, while emerging markets witnessed a decline to 9.9% from 13.7%.

However, the majority of economies are still striving to meet their inflation targets, underscoring the resilience of the global economic landscape.

Looking ahead, global headline inflation is anticipated to decrease from 6.8% in 2023 to 5.9% in 2024 and further to 4.5% in 2025. Advanced economies are expected to return to their inflation targets sooner than emerging markets and developing economies, reflecting divergent inflationary.

Indias domestic economic activity remains robust, buoyed by strong domestic demand and enhanced macroeconomic fundamentals. Financial markets are flourishing in response to these developments, with stocks experiencing a vigorous bull market driven by a broad-based boom. While large caps are performing well, mid and small caps are surging even faster, indicative of a growing equity culture. The share of foreign investors in the Indian stock market has decreased to its lowest level in a decade, reflecting increased buying by domestic institutions, including mutual funds.

As per the press release by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, Government of India, real gross domestic product (GDP) has been estimated to grow by around 8% in FY24 as compared to the growth rate of 7% in FY23. Strong investment activity underpins this growth, with projections for real GDP growth in coming years.

Economic expansion in 2023-24, propelled by growth in manufacturing and services sectors, is reflected in the increase in Gross Value Added (GVA) by 6.9%, signalling a positive economic outlook with increased production, employment and income generation.

Inflation projection remains at 5.4% for 20232024, with the Monetary Policy Committee (MPC) emphasizing the need for active disinflationary measures to anchor inflation expectations. Despite external headwinds, domestic economic activity shows resilience.

Private final consumption expenditure (PFCE), the main driver of aggregate demand, has improved, supported by steady urban consumption and rising income levels in the informal sector. High frequency indicators of urban demand show sustained expansion, with robust growth in domestic air passenger traffic, passenger vehicle sales and household credit. Buoyant demand conditions are also reflected in Purchasing Managers Indices (PMI), indicating optimism about near-term prospects.

The Indian Rupee (INR) is appreciating and ranks among the least volatile currencies, bolstered by increased foreign direct investment (FDI).

Indias attractiveness for global investment is underscored by its large market, skilled workforce and technological innovation. The industrial sector, particularly manufacturing, has witnessed significant growth, attracting interest from global tech leaders. Sector-specific incentives and supportive policies, along with investments in logistics and infrastructure, further enhance Indias economic prospects.

2. Sector Overview

The Consumer Durables Industry in India is experiencing significant growth, as highlighted by the Indian Brand Equity Foundation (IBEF), report from December 2023. According to the report, Indias Consumer Electronics and Appliances Industry is on track to become the fifth-largest, globally by 2025, with a predicted market size of nearly US$ 17.93 billion by the same year. This growth is fuelled by a range of factors, including rising disposable incomes, discretionary spending, rural demand expansion and Government initiatives such as the National Policy of Electronics 2019 (NPE 2019).

The demand for consumer electronics and electrical segments is primarily influenced by factors like construction activity, power availability, consumer credit, and weather patterns. Additionally, Government reforms like the Goods and Services Tax (GST) and the Make in India initiative are expected to drive a shift from unorganized to organized players in the market. According to the IBEF - Consumer Durables, December 2023 report, non-metro markets are emerging as significant growth drivers, showing rapid consumption growth and potential for new business centres.

There is an increasing preference for premium consumer durables products, particularly in urban areas. This trend is driven by a significant rise in discretionary income and easy financing schemes which have led to shortened product replacement cycles and evolving lifestyles where consumer durables like ACs and LCD TVs are perceived as utility items rather than luxury possessions. The television industry, for instance, was expected to reach Rs 1,227.34 billion (US$ 17.56 billion) by FY22, with anticipated TV production in India growing to US$ 10.22 billion by FY26.

Importantly, the Consumer Durables Industry is attracting global attention, with 100% foreign direct investment (FDI) allowed in electronics hardware manufacturing. This has led to substantial FDI inflows, totalling US$ 4.42 billion between April 2000 and September 2023 according to the IBEF report. Moreover, the Consumer Durables Industry faces growing competition as both domestic and international players vie for market dominance. To stay competitive, companies are adopting advanced technologies like artificial intelligence and automation to streamline production and cut costs.

Government support and initiatives play a crucial role in driving growth in the Consumer Durables Industry. Schemes like Make in India, Ujala, Atmanirbhar Bharat Abhiyaan, and Production Linked Incentive (PLI) Scheme for White Goods aim to promote domestic manufacturing and boost growth. Additionally, the shared economy model is gaining traction, with rentals of home appliances growing in urban areas, supported by some startups offering rental services.

The focus on energy efficiency is another significant aspect of the industrys growth trajectory. Energy efficiency schemes and programs have led to substantial energy and monetary savings, as highlighted by the Ministry of Powers report on the Impact of Energy Efficiency Measures, 202223. The industrys commitment to sustainability is further underscored by initiatives such as the S&L Scheme for appliances, resulting in electricity savings of 81.64 BU and monetary savings of Rs 54,323.65 crore. Similarly, the UJALA scheme for LED lamps led to electricity savings of 176.19 BU, resulting in monetary savings of Rs 70,476 crore for the year 2022-23. These initiatives underscore the industrys steadfast commitment to sustainability by significantly reducing electricity consumption.

In conclusion, the Consumer Durables Industry in India is poised for continued growth and innovation, driven by evolving consumer preferences, technological advancements, Government support and a focus on energy efficiency. With favourable market dynamics and proactive initiatives, the industry is well-positioned to maintain its upward trajectory and compete globally.

3. Review of Operations Financial Performance (FY 2019-24)

Key Ratios (%) FY24 FY23
Gross Margin 33.6% 30.1%
EBITDA Margin 8.8% 7.8%
Net Margin 5.3% 4.6%
Ad Expenditure (incl. promotions)/Total Revenues 2.6% 2.2%
Employee Cost/Total Operating Income 8.3% 7.3%
Other Expenditure/Total Operating Income 16.5% 15.0%
Tax Rate 24.2% 26.1%
Diluted EPS (Rs) 5.88 4.35

 

Balance Sheet Snapshot (Rs cr) 31 Mar 2024 31 Mar 2023 31 Mar 2022
Net Worth 1,814.22 1,607.62 1,406.96
Gross Debt 291.03 419.61 11.79
Current Investments 30.17 0.12 -
Cash and cash equivalents 57.37 66.87 61.27
Net Cash Position (203.49) (352.62) 49.48
Fixed Assets 1,116.81 1,019.67 475.99

 

Balance Sheet Snapshot 31 Mar 2024 31 Mar 2023 31 Mar 2022
Debtor (days) 44 50 50
Inventory (days) 92 97 130
Creditor (days) 62 62 69
Working Capital Turnover (days) 74 85 111
RoE (%) 14.2% 11.8% 16.2%
RoCE(%) 15.7% 12.0% 20.5%

 

S. No. Particulars UOM 2023-24 2022-23
1 Debtors Turnover Times 8.4 7.9
2 Inventory Turnover Times 4.1 3.5
3 Interest Coverage Ratio Ratio 8.7 15.8
4 Current Ratio Ratio 1.6 1.8
5 Debt Equity Ratio Ratio 0.2 0.3
6 Operating Margin i.e. EBITDA % 8.8% 7.8%
7 Net Profit Margin % 5.3% 4.6%
8 Return on Net Worth % 14.2% 11.8%

Note: Explanation if difference is more than 25%

Interest coverage ratio has reduced from last year as the interest on borrowing for acquisition of Sunflame Enterprises Pvt Ltd. (Sunflame) was only for part of the year in FY23 as compared to FY24 where it is for the full year.

Debt equity ratio has improved compared to last year mainly due to repayment of working capital borrowings in FY24.

4. Dividend

The Companys Board has recommended final dividend of Rs 1.40 per share. This translates to a payout for the Financial Year 2023-24 ~ Rs 60.81 crore (Rs 56.36 crore in 2022-23). The dividend payout, for the year under review is ~ 24%.

The Company believes in maintaining a fair balance between dividend distribution and cash retention that may be required for future growth, synergistic acquisitions, meeting unforeseen contingencies and maintaining a healthy balance sheet position.

5. Segment-wise Review

Products FY24 (Rs Cr) Contribution (%) FY23 (Rs Cr) Contribution (%) YoY Growth (%)
Electronics 1,165.20 24.0% 994.30 24.1% 17.2%
Electricals 1,973.07 40.6% 1,799.38 43.6% 9.7%
Consumer Durables 1,444.28 29.7% 1,276.61 30.9% 13.1%
Sunflame 274.12 5.7% 56.90 1.4%
Grand Total 4,856.67 100.0% 4,127.19 100.0% 17.7%

Electronics

The Electronics segment encompasses Voltage Stabilizers, Digital UPS Systems (including Inverter Batteries) and Solar Power Systems. These categories are significantly influenced by the availability and quality of power supply across the country, as well as the sales of consumer electronics such as air conditioners, refrigerators and televisions. Stabilizers and Digital UPS Systems, in particular, exhibit seasonality, experiencing heightened demand during the summer season.

During the fiscal year, the segment recorded a revenue of Rs 1,165.20 crore, marking a 17.2% increase from the Rs 994.30 crore reported in FY23. The segment margin improved to 14.1% from 13.2% in FY23, aided by a decline in commodity costs and benefits associated with the scale up of its state-of-the-art manufacturing facility for Stabilizer and Digital UPS at Pantnagar. The Inverter Batteries factory started commercial production towards the end of FY24 and is expected to scale up and deliver benefits in the coming years.

Stabilizers represent a cornerstone category for V-Guard where the Company holds a dominant position as market leader and competitors are primarily regional players with limited market reach. Manufacturing facilities in Sikkim and Pantnagar (the first factory established under V-Guard Consumer Products Ltd., VCPL) cater to diverse product offerings in this category, including stabilizers tailored for air conditioners, LED TVs, refrigerators, treadmills and washing machines.

With burgeoning consumption demand of consumer durables and the prevailing under-penetration of white goods, this product category is poised for sustained growth trajectory in the coming years.

The Digital UPS Systems (including Inverter Batteries) category has the potential to become a

significant driver of future growth for V-Guard with a market characterised by limited penetration, frequent power outages and energy deficits. Recognising the significance of the premium segment as a pivotal growth driver for the category, the Company has invested in a state-of-the-art manufacturing facility as well as enhanced product offerings to meet the demands of its discerning customers. The Company has also invested in strategic interventions for the category with an aim to accelerate sales by fortifying its market presence and pursuing new avenues for expansion within this segment along with improvement in margins through various front-end and back-end initiatives.

I n line with this strategy, the Company has set up a Battery manufacturing facility in Hyderabad under its wholly-owned subsidiary V-Guard Consumer Products Ltd. (VCPL). The unit commenced commercial productions towards end of FY24. It is gradually ramping up capacity utilisation and is expected to fully utilise its capacity by next year.

The Company has invested in Gegadyne Energy Labs Private Limited (GEL), which is an innovative deep- tech energy storage startup in alternative battery technology, headquartered in Mumbai. Its focus lies in developing energy storage solutions that offer enhanced battery performance across critical parameters such as total cost of ownership (TCO), lifecycle, reduced recharge time, battery safety and lower maintenance costs.

GEL has made significant progress towards achieving both technical and commercial milestones. Advancements in technology development have been notable, transitioning from basic laboratory scale to a pilot plant level. The next generation battery technology is expected to find applications in V-Guard products which will help deliver superior product performance.

Recognising the potential for future growth, the Company has invested an additional amount of Rs 20 crore in GEL in FY24. This funding is earmarked for scaling up the pilot plant operations, product specifications improvement and groundwork & runway for Series B Investment. The Company conducted a revaluation of its stake in GEL in accordance with Accounting Standards which resulted in a fair-value gain of Rs 17.14 crore in FY24.

The Company stands poised to capitalise on the burgeoning opportunities within this segment, driven by the continued expansion of rural markets, the ongoing electrification of previously underserved villages, escalating demand for reliable power supply and the surge in demand in the premium and midpremium segment.

The Company offers Solar Power Systems, both on- grid and off-grid, which align with Government of Indias drive towards clean solar energy. The Minister of Finance has stressed on rooftop solarisation enabling 1 crore households to obtain up to 300 units of free electricity, per month (GOI, Interim Budget Speech - FY 2024-25, February 2024). V-Guard is well-positioned to benefit from the growing focus on rooftop solarisation with relevant product offerings aligning with Government incentives and stands to attract consumers looking to leverage these schemes, potentially leading to increased demand and market share for the Company.

Electricals

The Electricals segment comprises Wires, Pumps, Modular Switches and Switchgears. This segment is the largest contributor to the revenue of V-Guard. In FY24, segment revenues were at Rs 1,973.07 crore as compared to Rs 1,799.38 crore in FY23. The contribution to revenues stood at 40.6% vs. 43.6% in the previous year. The demand for the segment is largely dependent on the construction activity, weather conditions, water tables and consumer spending patterns. Segment margins for the fiscal year stood at 8.6% as compared to 7.7% in FY23, recovering largely due to softening of the commodity prices and targeted pricing actions.

The Wires category is the largest contributor to the revenues of the Company. The Company mainly operates in house wiring cables segment where demand is driven by electrification of houses and the growth in the real estate sector.

V-Guard has strategically located manufacturing facilities in Coimbatore (Tamil Nadu) and Kashipur (Uttarakhand). Its operational dynamics are closely intertwined with copper prices, the primary raw material. This correlation prompts a dynamic inventory management approach of up-stocking or de-stocking.

The Company had invested in capacity expansion for the category in earlier years and has sufficient capacity to meet the demand for the next few years. Outlook for the category remains optimistic, fuelled by expectations of heightened construction activities in near future.

Residential Pumps is another large category in Electricals segment. Demand for this category is predominantly seasonal, with the summer season significantly impacting the water table and thus driving sales. The Pump industry is largely controlled by local and regional brands nationwide where consumers have limited awareness and rely heavily on retailers or plumbers when making purchasing decisions. During the year, the Company witnessed revival in demand for domestic pumps owing to below normal rainfall during the monsoon and post monsoon period.

Switches and Switchgears are key priority growth categories for the Company. These categories naturally benefit from synergies with the wires business which helps in driving growth efficiently.

In FY23, V-Guard had acquired and merged Simon Electric Pvt Ltd (SEPL), a subsidiary of the global conglomerate Simon Group headquartered in Spain. In FY24, SEPL has seamlessly integrated into V-Guards operations, with most backend processes aligned and the entire SEPL team becoming part of V-Guard. The Company maintains its original Go-to-market (GTM) approach, which will expand the categorys reach. Leveraging SEPLs world-class manufacturing and quality systems, existing SEPLs switches platforms, Simon brand license agreement as well as the technology collaboration agreement (with Simon Global), V-Guard aims to tap into the additional segments of the Switches market. The Company is actively pursuing growth strategies to capitalise on the synergistic benefits.

V-Guard has also invested in Guts Electro-Mech Ltd. (Hyderabad), a wholly-owned subsidiary which

is in the business of manufacturing and supply of switchgear products like Miniature Circuit Breaker (MCB) and Residual Current Circuit Breaker (RCCB) which are electrical protection devices.

Above strategic investments further enhance the Companys ability to deliver innovative products in these high growth segments.

Consumer Durables

The Consumer Durables segment comprises Fans, Water Heaters, Air Coolers and Kitchen Appliances. In FY24, its revenue stood at Rs 1,444.28 crore as compared to Rs 1,276.61 crore in FY23, depicting a growth of 13.1%. The overall contribution to revenue was 29.7% vs. 30.9% as seen in FY23.

Margins for the segment improved sequentially from 0.6% in FY23 to 1.2% in FY24 with softening of commodity prices. Further improvement is however expected as the segment scales up and delivers operating leverage.

V-Guards Fans category offers a diverse range of products, including ceiling, table, pedestal and wall fans (TPW), blending innovation with aesthetics. With a focus on consistent new launches, the brand remains at the forefront of providing stylish, functional and technologically advanced solutions.

The Company seamlessly transitioned to BEE-rated ceiling fans last year, introducing star-rated fans including BLDC models which deliver significant savings in power cost for consumers. Some of the recent launches like the premium Insight-G BLDC ceiling fans have been well received by customers thereby catapulting the Company to the list of leading players in the fan industry. With a state-of-the-art manufacturing facility for ceiling fans located in Roorkee focussing on premium offerings, the Company is poised for further expansion in the premium segment of the fan category riding on the increased demand for premium products which is expected to drive growth in both revenue and margins.

The Company has reduced its dependence on imports for TPW models over the last few years by developing required vendor base locally thereby reducing risks related to supply disruptions. The Company is also in the process of setting up its own TPW Fans unit in Hyderabad which will manufacture premium models of TPW fans.

V-Guard now has a competitive edge in terms of its finish, quality and cost in case of ceiling fans, especially in its premium and innovative offerings.

V-Guard is a prominent player in the Water Heater category, offering electric, solar water heaters and heat pumps. The Company has a wide range of product offerings across the spectrum from economy range to high-end electric water heater. The Company also is a leading player in solar water heaters and offers products for residential as well as institutional use.

With manufacturing facilities in Kala Amb (Himachal Pradesh), Sikkim and Perundurai (Tamil Nadu), V-Guard possesses robust in-house production capabilities and capacity. This infrastructure positions the company well for sustained growth, leveraging technological advancements to offer well-crafted products at competitive pricing.

I nitiatives are underway to bolster the product line further, with a strategic emphasis on leadership in premium offerings to discerning, after consumers while enhancing the margins and market position.

The Air Coolers category offers a diverse range of products including desert, window-fitted, personal and room coolers. With its focus on providing efficient and affordable cooling solutions for homes and offices, this category presents a promising growth opportunity for V-Guard. The Company continues to invest in the category, churning out new models and designs year after year, and is therefore poised to capitalise on the expanding market for air coolers in the country.

The Kitchen Appliances category includes mixer- grinders, gas cooktops, induction cooktops, rice cookers, water purifiers and breakfast appliances, among others.

The manufacturing facility in Vapi, for Mixer Grinders and Gas Stoves, under its wholly-owned subsidiary V-Guard Consumer Products Ltd. (VCPL), started commercial production towards the end of FY24. Ramp-up of the facility will help the Company by bringing down the overall product cost, better control over quality and reduction in time to market for new models. This is expected to help grow the business much faster and improve profitability.

With the enthusiastic consumer response to V-Guards recent product launches and synergies from Sunflame Enterprises Private Ltd., this category is well positioned to deliver robust growth in the coming years.

Water Purifiers are sold exclusively through e-commerce channel currently. The category has quickly shown good progress, leveraging on its superior quality offerings and competitive pricing with the V-Guard brand. The Company plans to refine the product portfolio further by continuously gathering feedback from the established channels and consumer base and eventually expanding into organised retail.

Sunflame

V-Guard completed acquisition of 100% stake in Sunflame Enterprises Private Ltd. (Sunflame) on January 12, 2023 for a total consideration of Rs 680.33 crore. Sunflame brand has a rich legacy in the Kitchen and Small Domestic Appliances industry and its portfolio includes Gas Cooktops, Chimneys, Induction Cooktops, Hobs, Cookers, Cookware and Other Home and Small Appliances. Sunflame has a manufacturing facility in Faridabad, Haryana which manufactures Gas Cooktops, Chimneys, Induction Cooktops, OTGs and Cooking Range.

Business integration efforts progressed swiftly over FY24 starting with setting up a professional and experienced leadership team at Sunflame. It is presently focussing on enhancing its presence in E-commerce, Modern Trade (MT) and Regional Speciality Stores (RSS) outlets apart from its evolved CSD/CPC channels. Sunflame is in the process of expansion into the southern as well as eastern markets. Leveraging on V-Guards existing e-commerce expertise, it has shown good results with initial launches on e-commerce platforms. Teams have also been established for MT and RSS channel where we expect quick traction and scale up. Additionally, a new team has been mobilized to focus on expanding sale of Sunflame products in Southern and Eastern India, building further on V-Guards strong distribution network.

In FY24, the Company also undertook the finance and IT integration for Sunflame, while alongside renewing the portfolio, aligning the distribution channels and implementing necessary technology interventions. V-Guard has prioritised the enhancement of customer

service function as well as the integration of other backend functions like sourcing, procurement and logistics.

During the year, the Kitchen Appliances sector faced industry-wide challenges with subdued demand and the same is reflecting in the performance of key industry players. Sunflame was also impacted by this slowdown in demand for the initial part of the year, but gradually picked up in second half ending with a healthy growth in the fourth quarter of FY24 over last year.

Margins for Sunflame continue to remain healthy and cash flows continue to be robust.

V-Guard has initiated a strategic intervention to develop a new integrated operating model, focusing on streamlining back-end operations while maintaining agility and improving quality and efficiency in the Go-To-Market (GTM) approach. This project is slated for completion in FY25.

6. Financial Performance

The year was marked by subdued demand for most of the period. However, we witnessed some resurgence in demand towards the end of FY24.

Revenue for the year was at Rs 4,856.67 crore vs. Rs 4,127.19 crore in the prior Financial Year. An increase of 17.7% YoY. The Electronics, Electricals and Consumer Durables segments depicted a growth of 17.2%, 9.7% and 13.1% YoY, respectively. Sunflame also registered a revenue growth, albeit on a low base, with revenue at Rs 274.12 crore.

Contribution to revenues from the Non-South markets stood at 45.8% vs. 45.2% in FY23, at Rs 2,097.72 crore. Contribution to revenues from the South markets stood at 54.2% vs. 54.8% in FY23, at Rs 2,484.83 crore. These numbers are excluding the contributions from Sunflame.

Margins improved sequentially over the last year, helped by softening of commodity prices and pricing actions in certain categories. Gross margins for the year stood at 33.6% vs. 30.1% in FY23, an expansion of 350 bps YoY.

In the fiscal year, advertising and promotional (A&P) spends returned to normative levels of 2.6% compared to 2.2% in FY23. EBITDA margins for FY24 stood at 8.8%, representing a growth of 100 bps from 7.8% in FY23.

PBT for the year stood at Rs 340.32 crore compared to Rs 255.74 crore in FY23, a growth of 33.07%. PAT for FY24 stood at Rs 257.58 crore, a growth of 36.2% over Rs 189.05 in FY23.

The Company generated cash flow from operations amounting to Rs 392.74 crore in FY24 as compared to Rs 423.81 crore in FY23. As of March 31, 2024, net debt stands at Rs 203.49 crore, compared to a net debt of Rs 352.62 crore on March 31, 2023. The reduction in net debt is primarily attributed to the repayment of working capital borrowings during the Financial Year. Repayment of long-term debt related to Sunflame acquisition has commenced from April 2024.

In line with its unwavering commitment to sustained long-term growth, the Company continues to invest in augmenting capacity by investing in new factories and expansion of existing facilities. The Company anticipates further enhancement in its revenue and margins as these manufacturing facilities gain scale in the years to come.

Note: Financial performance detailed above is based on consolidated financial statements

7. Outlook

V-Guard, with its roots tracing back to 1977, boasts decades of experience and presence in the industry, exemplifying acumen, an established infrastructure, a top-tier talent pool at all levels, robust R&D and extensive channel and vendor networks. This rich legacy of innovation and excellence has enabled it to establish a nationwide presence with strong brand recognition, offering best-in-class products and services through a vast distributor and ASP network.

The Company is steadfast in its commitment to innovation and excellence, continuously striving to craft and deliver groundbreaking products that captivate consumers with enriching experiences. Aligned with this ethos, V-Guard is dedicated to making strategic investments in emerging opportunities to drive future growth.

V-Guard prioritises investing in its people. This includes nurturing talent, upgrading skills and enhancing workforce engagement for a safe, healthy and equitable working environment.

V-Guards business excellence is driven by its manufacturing prowess, evident in its state-of-the-

art manufacturing units which contribute ~65% to revenues as of the fiscal year 2023-24. The Company endeavours to scale its manufacturing capabilities with efforts centred around enhancing customer experience across all touchpoints, online and offline.

With its plants located strategically across the country, the Company continues its journey towards better diversification and market expansion, particularly in the Non-South markets.

The Companys future-oriented strategy focuses on seizing emerging opportunities across business segments, leveraging technology and data analytics to understand consumer preferences and behaviour, for more targeted marketing campaigns to drive stronger brand affinity.

Looking ahead, V-Guard is poised for continued growth and success. The Companys robust cash flow generation and high credit ratings underscore its financial strength and stability, providing a solid foundation for future endeavours. With recently launched facilities in Hyderabad for Inverter Batteries and in Vapi for Kitchen Appliances, we anticipate significant ramp-up in production in the coming years. Moreover, targeted initiatives in Sunflame Enterprises Private Ltd. are expected to further drive margins and scale up operations. In line with our commitment to expand market presence, we are intensifying efforts to enhance visibility and retail footprint. To facilitate these objectives, the Company targets an annual capex of 100 crore.

The Companys strategy includes adding ~3,000 to 4,000 new retailers annually, coupled with sales acceleration initiatives across various product categories. The total number of dealer-retailer touchpoints as of FY24 are ~1 lakh. Through increased investment in advertising and promotion (A&P), as well as bolstering its workforce, particularly in emerging product segments, such as Consumer Durables, it aims to solidify its position and capitalise on new opportunities in the retail landscape.

V-Guard strives to emerge as Indias foremost brand of choice, esteemed and trusted across diverse market segments. With an unwavering dedication to delivering unparalleled consumer satisfaction and driving sustainable, profitable growth, the Company remains steadfast in its mission to maximise value for its shareholders.

8. Strengths and Opportunities Strengths

• The Company has invested significantly in building its brand equity over the past decade, which has led to high brand recall and enabled entry into new business & product categories.

• Consumer centric organization with emphasis on after-sales service, quality, innovation, R&D and new product development.

• Strong pan-India footprint with investments in a well-entrenched distribution network spread across ~ 1,00,000 retail touch points.

• Comprehensive and diversified product portfolio across fast growing categories in the consumer electricals, electronics and durables space, catering to the mass consumption market in India.

• Strong execution track record and demonstrated ability to grow competitively and profitability.

• Experienced management team with strong understanding of the business complexities.

• Over the years, the Company has increased its in-house manufacturing and lessened its dependence on imports and outsourcing.

Opportunities

Strong macro and demographic drivers: The

industry will continue to see a strong uptrend in the medium to long-term driven by macroeconomic and industry factors like increasing disposable incomes, increased ease of availability of finance, low product penetration levels, growing middle class, premiumization in metros and urban towns, and increasing distribution reach by companies in tier II and tier III cities as well. In addition, the governments push for housing for all, increasing availability of

electricity and infrastructure development augur well for long term growth prospects of the sector.

Expansion into Non-South markets: Non-South markets account for 45.8% of the Companys current revenues providing significant scope to expand and gain market share.

Shift from unorganized to organized: The Company is present in key product categories having significant market sizes. Increasing formalization of the market presents an opportunity for organized players to benefit-especially market leaders, with established brands and entrenched manufacturing and distribution capabilities.

E-Commerce: E-Commerce presents a significant growth opportunity since most of the high growth categories for the Company have a large share of revenue coming from e-commerce platforms. The Company continues to invest in expanding its footprint in e-commerce channel and expects to see healthy growth in the coming years.

Replacement demand: Shortening renovation cycles across segments due to rising disposable incomes, changing preferences of middle class and Companys focus on technology and innovation are supporting strong replacement demand, contemporary product offering backed by strong product refresh capability offer potential to gain from this trend.

9. Enterprise Risk Management

A strong governance structure has been put in place where the Risk Management Committee of the Board oversees the adequacy and effectiveness of the Risk Management Framework. It incorporates leading risk management standards and practices to identify, assess, prioritize, manage and report risks.

The key risks identified and its mitigation plan are as follows:

Key Risks Risk Statement Mitigation Plan
Emerging channels The channel landscape is fast changing with multiple trade formats and inadequate presence in certain emerging channels; hence the need arises to focus on Go-To-Market, customer management & trade terms capabilities. Channel-centric focused organizational structure and agile operating model.
• Robust insights mechanism and digital marketing capabilities.
• Established SCM, Service & Sell-out systems.
• Key Account Management and retail marketing capabilities. Differentiated GTM Model (sell-out) & exclusive products
Impact of digitization Advent of digitization may bring about very significant changes to business model, including disruption in sales and distribution, fundamental process changes and shift in consumer behavior and products. • Investing in capabilities required to scale up e-commerce operations.
• Smart products roadmap to drive digital product plans.
• Processes around digital content and digital customer acquisition.
• Digitally driven Sell-out system and next-generation supply chain capabilities.
• Enterprise analytics for better visibility and collaboration.
Hypercompetition in Cost of doing business is rising and growth is impacted due to traditional electrical players expanding focus to adjacent categories, slew of e-Com players leveraging vendor ecosystem, consolidation of companies and MNCs shifting focus on Indian FMCE market. • Adoption of digital Product Life Cycle Management for faster time to market.
marketplace • Product value chain to enhance product differentiation.
• Consumer-centric long term NPD pipeline.
• Building sell-out management capability.
Margin Commodity price volatility, delayed pricing actions, dependency on trading operations can impact margins. • Velocity of pass-through and timely pricing actions.
recovery • Monitoring of commodity price movements and market price tracking mechanism.
• In-house manufacturing of established products through organic and inorganic routes.
• Value engineering initiatives for cost reductions.
Information security Due to the increased threat of cyber security incidents globally, IT downtime and data loss can adversely impact business operations. • Robust Information Security Management Systems corresponding to global standards and industry benchmarks.
• Disaster Recovery Plan for critical applications.
• Building awareness among users.
• Cyber threats are mitigated by deploying advanced systems, tools, and processes.
Environment, Social and Impact on business continuity and reputation due to Environmental & Social incidents and noncompliance of regulations. • Transitioning to low-carbon operations to address climate-related risk by:
Governance • Integrating renewable energy options.
• Water conservation projects.
• Encouraging circular waste management practices.
• Well-established Environment, Health, and Safety compliance framework.
• CSR initiatives to cater to the needs of the communities.
• Multi-tier governance mechanism to consider the aspects beyond compliance.
Supply Security External and internal factors can lead to supply disruption, impacting sales. • Reducing dependency on imports through in-house manufacturing and developing domestic alternatives.
• With the help of R&D, continuously developing alternate make, designs and models.
• Using advanced tools for forecast and inventory management.
Inadequate Talent Non-availability of people with appropriate skills for evolving business requirements and growth. • Locational flexibility supported by collaborative platforms and technology to attract talent.
Pipeline • Customized product and business-specific learning modules.
Focused employee value propositions.

10. Human Resources

Over the last year, HR has taken various initiatives for employee benefit and retention. During the year, your Company continued with succession planning & risk mitigation programme for critical senior leadership positions and continues with strategic initiatives for career development for high potential managers and creation of a talent pool.

Continuing with retaining and attracting talent pool, your Company continued with its ESOP plan and granted options as per ESOS 2013 to 10 employees during the year. The ESOS 2013 covers ~ 80 employees as on March 31, 2024.

The relationship of your Company with employees has been cordial during the year.

As on March 31, 2024, the total number of employees of the Company is 3,006 against 2,647 on March 31, 2023.

11. Audit & Internal Control System

The Company has Internal Control Systems commensurate with the nature of its business, size and complexities which is integrated with Company policies, defined Standard Operating Procedures across processes and approved Delegation of Authority Matrix. The key objective of the internal control systems is to manage business risks, enhance shareholder value and safeguarding of the assets.

Cross-functional internal audits are conducted at all locations to ensure that high standards of Internal Controls are maintained. It provides reasonable assurance on the internal control environment and non-occurrence of material misstatement or loss. Every quarter, Audit Committee reviews the adequacy and effectiveness of internal control system and monitors the implementation of audit recommendations.

The Company has a robust Internal Financial Controls monitoring framework. The Company continuously monitors process changes and updates the Risk and Control Matrices (RCMs) along with identification of process automation opportunities and enhanced management monitoring mechanisms to strengthen the control environment. Key controls across processes were evaluated during the year to provide assurance regarding compliance with the existing policies and significant operating procedures, and no significant weaknesses/deviations were noted in effectiveness of the controls. Further, the Statutory Auditors of the Company also conducted audit of the Internal Financial Controls over Financial Reporting of the Company as on March 31, 2024, and issued their report which forms part of the Independent Auditors report.

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