Conference Call with Havells India Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen in to the full earnings transcript.

Call Participants: Mr. Anil Rai Gupta - Chairman and Managing Director, Mr. Rajesh Kumar Gupta - Director (Finance) and Group CFO, Mr. Rajiv Goel - Executive Director

Introductory Remarks from Anil Rai Gupta

Good morning everyone! We hope everyone is safe, secure and healthy. During the current time, safety of all our employees and stakeholders are paramount. We moved to work from home on 21st March, though the activities were disrupted from 15th of March itself. We are cautiously resuming our activities, initiating our factories.

Markets are at a slow pace as customers and dealers are acting with caution. The pick up is relatively better in semi-urban and rural areas as urban areas continue to be challenging owing to the lockdown. We have been in constant communication with our employees and dealers. 

I led a live streaming with our 5,000 employees and 9,000 dealers to apprise them of our offers, protect their interests and well being. Prior to the lockdown, we had sufficient cash balance and we have been regular in paying dues for employee, vendors and all statutory government dues.

The year end incentive schemes for our dealers were also settled and paid on 31st March itself which is highly appreciated by the fraternity. We have further bolstered our cash reserves for further credit lines. Q4 had started on a healthy note with consumer businesses growing in double digits in the first two months. Lloyd had a spectacular growth in January and February and it gained momentum for March closure. 

However, the loss of the last 15 days had a crippling effect at the Q4 performance. Being an year end and a quarter end, the later part of March has a disproportionate effect on the quarter sales constituting as much as 25% of the sales. We feel if disruption had not occurred, we could have grown Q4 at 9%. The external environment continues to be challenging, volatile and evolving. We are responding to the emerging scenario with agility and preparedness. We currently wish that the epidemic is controlled and economic activities resume in a very short period.

The economic activity started on the 4th of May and it's just 7-8 days of economic activities. The urban area is still opening up in a very small way but there is demand coming up from rural and semi urban. There could be a possibility that during the month of April some of the stocks would have depleted in these areas where they would have opened some shops and started selling some materials. Generally speaking, February and March are the months where we start picking up materials for the year end closure. Though, the major sales happened during the last 10 days, but still there is a little bit of higher pick up. 

This was also a special year where in January and February we saw a little bit of more pick up of air conditioners because generally people were expecting that there may be some slowdown in primary sales from companies in the month of March and shortage of supply after China closure.

So, there was enough stock built up at the dealers and in reality, we are also a little bit pleasantly surprised with the start of some activities and primary sales. However, it is restricted to products like fans, air conditioners which are obviously seasonal products and which also shows that the dealers are definitely not picking up for stocking. They have secondary and tertiary sales happening at the counters.

Also, we see pick up in domestic wires sales which also means that maybe in some small towns, some construction activities were continuing during the lockdown as well and hence some requirement of wires are also coming in. 

We also see small product categories like personal grooming is picking up. This is sporadic but because of our distribution in semi urban and rural areas, we have also seen some demand from rural areas for lighting products and fans specially. There is a mix of everything. I would say that the first 7-8 days are a little bit better than what we were expecting. 

During the last 45 days or so, while we were expecting zero to nil collection during this period, we saw collections starting from the first week of April. From the first 7-8 days, the collections were very low from the dealers. I think in our case, we see more responsible activity coming from all sets of dealers rather than just delaying payment.

A mix of many things are timely settlement of their credit notes for the entire year. The fact is that we also have some long term funds available for such times and dealers can use that. We are not facing a problem where the dealers are expecting very long lines of credit from the company. So, when economic activity had started, generally speaking, we were in a much better shape. There is no great expectation of a credit line. Also, I would say that at this point in time, there's not enough requirement for heavy discount as it's mostly pull based sales.