V-Guard Industries

Q1 FY20 Earnings Presentation

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Disclaimer

Certain statements in this communication may be ‘forward looking

statements’ within the meaning of applicable laws and
regulations. These forward-looking statements involve a number
of risks, uncertainties and other factors that could cause actual
results to differ materially from those suggested by the forward-
looking statements. Important developments that could affect the
Company’s operations include changes in the industry structure,
significant changes in political and economic environment in India
and overseas, tax laws, import duties, litigation and labour
relations.

V-Guard Industries Limited (V-Guard) will not be in any way

responsible for any action taken based on such statements and
undertakes no obligation to publicly update these forward-looking
statements to reflect subsequent events or circumstances.
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Table of Contents

MD’s Message 04

Key Highlights 05

Financial Highlights 6-8

Segment-wise/Geographical Breakup of Revenues 9-11

Business Outlook 12

Annexure 13
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Managing Commenting on the performance for Q1 FY20, Mr. Mithun Chittilappilly, Managing Director – V-Guard

Director’s Message Industries Limited said, “We have made a steady start to the year with a top line growth of over 10% and
PAT growth of 52% in Q1 FY20. We are making good progress in the non-South markets, which delivered
14% growth. We plan to extend our new products into some non-South markets during the year, which
contributed 46% to revenues compared to 44% a year ago. South markets recorded a steady growth of 7.1%
during the quarter.
The Electronics and Consumer Durables segments performed well during the quarter under review,
recording strong growth and margin expansion. The Electricals segment was impacted by de-stocking of
wires by the trade on account of the volatility in copper prices. Despite this, we have been able to drive gross
margins expansion of 220 bps YoY to 32.6% while EBITDA margins stood at 11.1% in Q1 FY20 as
compared to 7.8% in Q1 FY19. Ad/promotional spends stood at 4.7% of sales in Q1 FY20 as compared to
6.4% in Q1 FY19 which had some spillover from the brand rejuvenation exercise launched Q4 FY18.
Another key highlight of the quarter has been the working capital efficiency we have been able to drive which
has resulted in robust cash flows to the tune of Rs. 183 crore, higher by 137% as compared to Rs. 77 crore
in Q1 FY19. Our prudent approach and focus on profitable and sustainable growth has resulted in an 11-day
improvement in our working capital cycle, which further strengthened our balance sheet with net cash of Rs.
325 crore.
Overall, we are happy with the progress we are making in our new categories and new markets. As part of
our transformational future-led journey, we are also moving towards becoming a deeper product capability
driven organisation, with innovation, quality and cost efficiency as key levers of competitiveness. Our
enhanced manufacturing strength and brand visibility will also help further scale up our business proposition
and consumer connect. Sustained and focused expansion into the non-South markets, backed by continued
investment in enhancing our organisational capabilities, will further improve our competitive edge.”
 Key Highlights – Q1 FY20
5

• Q1 FY20 revenue up 10.2% YoY to Rs. 699 crore

Revenue growth
of 10.2% YoY in • Led by robust growth of 14% in non-South markets with the extended summer season
Q1 FY20 • Non-South markets accounted for 46% of the net revenue in Q1 FY20 against 44% in Q1 FY19
• Electronics and Consumer Durables segments drove the growth during Q1 FY20 while Electricals Segment was impacted
by trade destocking of wires category caused by downward trend in copper prices

• Gross margins expand 220 bps YoY to 32.6%

EBITDA up 56.1% YoY, • EBITDA margins at 11.1% in Q1 FY20 as compared to 7.8% in Q1 FY19
PAT by 52.5% in Q1 • Ad/promotional spends lower at 4.7% of sales in Q1 FY20 as compared to 6.4% in Q1 FY19; base year had higher spends
FY20 based on some spillover from the brand rejuvenation exercise launched Q4 FY18
• Q1 FY20 PAT of Rs. 53 crore, up 52.5%; PAT margin at 7.5% in Q1 FY20 as against 5.4% in Q1 FY19

Strong cash flow • Strong cash generation continues, CFO at Rs. 183 crore at the end of Q1 FY19 as compared to Rs. 77 crore in Q1 FY19
generation; Balance • Working capital cycle improves by 11 days YoY to 51 days
sheet continues to • Strong return ratios maintained with ROE and ROCE of 19.2% and 22.9% respectively (TTM basis) at the end of Q1 FY20
be strong • Net cash of Rs.325 crore on balance sheet as on 30th June 2019

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P&L Snapshot

P&L Statement Q1 FY20 Q1 FY19 Change Q4 FY 19 FY 19 FY 18 Change

Particulars (Rs. Cr) (Rs. Cr) % (Rs. Cr) (Rs. Cr) (Rs. Cr) %

Net Revenue 699.39 634.89 10.2% 739.69 2,566.44 2,321.27 10.6%

COGS 471.71 441.92 6.7% 471.71 1,799.18 1,624.65 10.7%
Gross Margin 32.6% 30.4% 2.2% 36.2% 29.9% 30.0% -0.1%
EBITDA (excluding other income) 71.12 46.47 53.0% 78.15 219.42 186.96 17.4%
as a % of Net Revenue 10.2% 7.3% 2.8% 10.6% 8.5% 8.1% 0.5%
Other Income (including finance income) 6.45 3.23 99.9% 6.76 18.25 11.11 64.2%
EBITDA after other income 77.57 49.70 56.1% 84.90 237.68 198.07 20.0%
as a % of Net Revenue 11.1% 7.8% 3.3% 11.5% 9.3% 8.5% 0.7%
PBT 69.77 44.22 57.8% 79.13 214.58 177.30 21.0%
as a % of Net Revenue 10.0% 7.0% 3.0% 10.7% 8.4% 7.6% 0.7%
PAT 52.45 34.40 52.5% 59.24 165.52 133.11 24.3%
as a % of Net Revenue 7.5% 5.4% 2.1% 8.0% 6.4% 5.7% 0.7%

Note: Adopted Ind-AS 116 (Leases) from April 1, 2019. The impact on Profit Before Tax is not material.
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Financial Highlights (Q1 FY20 vs Q1 FY19)

Total Income (Rs. Gross Profit

crore) 228
699 193
635

Key ratios (%) Q1 FY20 Q1 FY19

Gross Margin 32.6% 30.4%
10.2% 18.0%
EBITDA Margin (incl other income) 11.1% 7.8%
Q1 FY19 Q1 FY20 Q1 FY19 Q1 FY20
Net Margin 7.5% 5.4%
Ad Exp (incl. promotions)/Total Revenues 4.7% 6.4%
EBITDA (Rs. crore) PAT (Rs. crore)
Employee Cost/ Total Operating Income 8.6% 7.8%
52
78 Other Expenditure/ Total Operating Income 13.8% 15.2%
34
50 Tax rate 24.8% 22.2%
Diluted EPS (Rs.) 1.21 0.79
56.1% 52.5%

Q1 FY19 Q1 FY20 Q4 FY18 Q4 FY19

Financial Highlights – Balance Sheet Perspective 8

Balance Sheet Snapshot (Rs. cr) 30 June 2019 31 Mar 2019 30 June 2018
Net worth 955.2 899.7 791.6
Gross debt 10.0 10.0 11.6
Current Investments 166.6 83.1 145.2
Cash and cash equivalents 168.0 84.3 4.5
Net Cash Position (Rs. crore) 324.6 157.4 136.2
Fixed Assets 268.6 221.2 210.6
Note: Increase in Fixed Assets to the tune of Rs 29.2 crore on account of adopted Ind-AS 116 from April 1, 2019.

Balance Sheet Snapshot (Rs. cr) 30 June 2019 31 Mar 2019 30 June 2018
Debtor (days) 56 66 56
Inventory (days) 61 75 67
Creditor (days) 65 72 61
Working Capital Turnover (days) 51 69 62
RoE* (%) 19.2% 18.4% 18.2%
RoCE* (%) 22.9% 21.3% 22.5%
*Calculations are on a trailing twelve month basis
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 Segment-wise Breakup – Q1 FY20 vs Q1 FY19 9

Q1 FY20 Q1 FY19 YoY growth

Segment Revenue Contribution (%) Contribution (%)
(Rs. Cr) (Rs. Cr) (%)
Electronics 282.8 40% 240.5 38% 17.6%
Electricals 263.2 38% 261.4 41% 0.7%
Consumer Durables 153.4 22% 133.0 21% 15.3%
Grand Total 699.4 100% 634.9 100% 10.2%

Q1 FY20 Q1 FY19 YoY growth

Segment Result Margin (%) Margin (%)
(Rs. Cr) (Rs. Cr) (%)
Electronics 49.6 17.5% 22.4 9.3% 122.0%
Electricals 13.2 5.0% 18.3 7.0% -28.1%
Consumer Durables 6.6 4.3% 3.8 2.9% 72.3%
Grand Total 69.4 9.9% 44.5 7.0% 56.0%

Electronics – Stabilizers, UPS, Solar Inverter; Electricals – Wires, Pumps, Switchgears, Modular Switches; Consumer Durables – Fans, Water Heaters, Kitchen Appliances, Air
Coolers
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Geographical Breakup of Revenues

Q1 FY20 Contributio Q1 FY19 Contributio YoY growth

Region
(Rs. Cr) n (%) (Rs. Cr) n (%) (%)
South 379.8 54.3% 354.6 55.9% 7.1%

Non-South 319.6 45.7% 280.3 44.1% 14.0%

Total Revenue 699.4 100% 634.9 100% 10.2%

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Business Outlook
• The Company is confident of achieving a topline growth of 15% over the next few years driven by expansion into non-South markets and
introduction of new product categories.

• We continue to undertake business strengthening initiatives and putting in place best in class processes and systems to future-proof the
organization. We are focused on putting in place best-in-class processes and systems to future-proof the organization, including
enhancing capabilities in new product development, quality control and salesforce automation.

• The Company envisages adding 3,000-5,000 retailers across the country every year over the next five years with higher addition in the
non-South region.

• Going forward, the Company shall continue to build upon its competitive positioning in the consumer electricals, electronics and durables
industry. The Company will maintain its thrust on advertising and promotions to increase its brand visibility and penetration in the non-
South markets under its new brand identity reflecting the company’s transformation into a leading multi-product, pan-India player in the
Consumer Electricals space.

• Two-thirds of the Company’s distribution network has already been established in the non-South region. This provides significant potential
for revenue growth and operating leverage to expand on existing investments. The Company envisages the non-South markets to
contribute to 50% over the next five years.

• Efforts on innovation, R&D and product development will continue to be made in order to roll out differentiated offerings in a competitive
industry. We have products that are connected, controlled and M2M capable and are bringing capabilities like machine learning as well.
We are also building in auto diagnostics into devices. We are also working on a digital strategy for the company that includes looking at
the predictive maintenance in plants, using Artificial Intelligence. We are focusing on Six Sigma, TPM, lean manufacturing, etc at our nine
plants in India. The manufacturing execution system (MES) acts as an enabler for Industry 4.0, providing real-time factory data.

• The cash positive balance sheet enables us to pursue inorganic opportunities, if valuations favour. We are looking at companies having
product range synergy with V-Guard, providing manufacturing capabilities or strong regional players where V-Guard can expand its
geographic footprint.
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Annexure
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Company Overview
• Electronics – Stabilizers, UPS, Solar Inverter; Electricals – Wires, Pumps, Switchgears,
Comprehensive portfolio catering Modular Switches; Consumer Durables – Fans, Water Heaters, Kitchen Appliances, Air
to the mass consumption market Coolers
• Household consumption market will continue to grow at a significant pace going forward

Invested in a strong distribution • Spread over 31 branches nationwide

network • Network of 40,000+ retailers

• Aggressive ad spends and sales promotions have created a strong equity and brand
Strong Brand Equity recall
• Strong established player in South India with leadership in the Voltage Stabilizer segment

Expanding towards a pan India • Significant investments committed towards aggressive expansion in non-South markets
presence • Increased capacities for house-wiring cables and solar water heaters

Mix of in-house and outsourcing • Follows an asset light model outsourcing ~58% of its products from a range of vendors
production model provides • Tie-ups with SSIs/self-help groups spread across southern India
flexibility • Blended manufacturing policy helps optimize capex and working capital requirements

• Leadership position in its flagship product, voltage stabilizers, with over 51% market share
Increasing market share across all • Successfully gained market share in all of its product categories
product lines • Rapidly expanding market share in the non-South markets
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Production Model

PVC Wires Factory Solar Water Heater Stabilizer Manufacturing

Factory Units
No. of Outsourcing Objectives
Product Location
Units
Own Manufacturing Facilities • Asset light model outsourcing ~58% products
PVC Wiring Cables 2 Coimbatore, Kashipur • Complete control over supply chain ecosystem
Pumps & Motors 1 Coimbatore
• R&D support to vendors’ technical teams
Fans 1 Himachal Pradesh
Water Heater 2 Himachal Pradesh, Sikkim • Quality assurance official posted at vendors’ production units to ensure maintenance
of quality
Solar Water Heaters 1 Perundurai
Stabilizers 2 Sikkim • Owns all its designs and moulds
Outsourced production facilities • Helps procure raw material for the vendors, negotiating price with the supplier
Stabilizers 57 Across India
• Tie-ups with SSIs/self-help groups across Southern India for flagship product,
Pumps 18 “ Stabilizers
Fans 11 “
• Blended manufacturing policy helps optimize capex and working capital
UPS 9 “ requirements
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Financial Highlights (FY14-19)

Revenue EBITDA and EBITDA PAT and PAT Margins

Margins 6.8%
6.0% 6.4%
2,566 9.3% 5.7%
9.9% 10.5%
Rs. crore

2,321
2,114

Rs. crore
4.6%

Rs. crore
8.4% 8.5% 4.1%
1,746 1,862 7.9%
1,518

127 138 185 222 198 238 70 71 112 145 133 166

FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19
Note 1:Please note that that consequent to the introduction of Goods and Service Tax (GST) with effect from July 01, 2017, Central Excise, Value Added Tax (VAT), etc. have been subsumed into GST. In accordance with Indian
Accounting Standard - 18 on Revenue and Schedule III of the Companies Act, 2013, unlike Excise Duties, levies like GST, VAT, etc. are not part of Revenue. Hence, the revenue and growth calculations from FY18 onwards, are
not strictly comparable with prior periods. Note 2: V-Guard underwent brand rejuvenation in Q4 FY18 where significant investments (Rs. 45 crore ATL spends) were made resulting in lower EBITDA & PAT for FY18.

ROE ROCE Net Worth Gross D/E

32.9
29.9
25.9

Rs. crore
25.3
22.2 21.3

22.0 23.5 22.8 0.3

18.7 0.2 0.0 0.0 0.0 0.0
17.7 18.4
318 378 471 634 752 900

FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19

Note 3: V-Guard adopted Ind-AS framework starting FY18. Numbers for FY17 have been reinstated in compliance with Ind-AS to draw meaningful comparison. Prior period numbers are in IGAAP and not comparable.
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Operational Highlights (FY14-19)

Ad & Promo Spends and as a % of

Expanding Geographic Presence Sales
153
30% 33% 33% 35% 37% 39% 135
95
80
60 69
70% 67% 67% 65% 63% 61% 6.6%
4.5% 5.2%
3.9% 4.0% 4.3%

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019
South Non-South Ad Spends % of Sales

In-house Manufacturing vs. Outsourcing

57% 60% 60% 60% 58% 57%

43% 40% 40% 40% 42% 43%

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

In-house Outsourced
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Market Size across Product Segments

Products STABILIZERS PVC WIRES COOKTOPS MOTOR PUMPS

Organized 700.00 5,500.00 420.00 – 450.00 5,500.00
(Rs. Crore)*
Market Size

Unorganize
550.00 4,000.00 180.00 – 200.00 5,000.00
d
Total 1,250.00 9,500.00 600.00 – 650.00 10,500.00

Micro tech, Livguard,

Polycab, Havells, Prestige, Bajaj Electrials,
Bluebird, Capri, Crompton Greaves,
Key Players Finloex, RR Cables, TTK Prestige, Preethi,
Logicstat, Premier, Kirloskar, CRI, Texmo
Anchor Butterfly
Everest
Production
62% Outsourced 100% In-House 100% Outsourced 90% Outsourced
Model
Consumer Durable Consumer Durables / Electrical and hardware
Distribution Electrical and Hardware
stores, Electrical and Kitchen Appliances Stores, Pump and Pipe
Channel Strategy Stores
Hardware Stores stores fittings Stores
*Company estimates FY16
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Market Size across Product Segments

Products WATER HEATERS FANS UPS Digital UPS

(Rs. Crore)*

Organized
Market Size

1,325.00 5,000.00 160.00 4,500.00

Unorganize
700.00 1,500.00 240.00 750.00
d
Total 2,025.00 6,500.00 400.00 5,250.00
A.O. Smith, Racold, Crompton, Usha, Bajaj
Microtek, Luminous, Su-
Key Players Bajaj, Venus, Crompton Electricals, Havells, Numeric, APC, Emerson
Kam, Exide
Greaves, Usha Orient
Production
55% Outsourced 90% Outsourced 100% Outsourced 100% Outsourced
Model
Consumer Durable
Consumer Durable Consumer Durable
Distribution Consumer Durable stores, Electrical and
stores, Electrical and stores , Electrical and
Channel Strategy stores Hardware stores, Battery
Hardware Stores Hardware Stores
Retail stores
*Company estimates FY16
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Market Size across Product Segments

SOLAR WATER
Products SWITCHGEAR GAS STOVES MIXER GRINDERS
HEATER
(Rs. Crore)*

Organized
Market Size

420.00 1,400.00 1,000.00 1,500.00

Unorganize
180.00 600 1,000.00 1,000.00
d
Total 600.00 2,000.00^ 2,000.00 2,500.00

Racold, Emmvee Solar, Butterfly (glass top), Preethi, Bajaj Electricals,

Key Players Havells, Legrand, L&T, ABB
Sudarshan, Supreme Sun Flame (steel) Butterfly, Panasonic
Production
100% In-House 100% Outsourced 100% Outsourced 100% Outsourced
Model
Consumer Durables / Consumer Durables /
Distribution Direct Marketing
Electrical stores Kitchen Appliances Kitchen Appliances
Channel Strategy Channel
stores stores

*Company estimates FY16; ^The market size where V-Guard is present; total domestic switchgear market estimated at Rs. 4,000 crore
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About V-Guard Industries
V-Guard Industries Limited (BSE:532953, NSE: VGUARD) is a Kochi based
company, incepted in 1977 by Kochouseph Chittilapilly to manufacture and
market Voltage stabilizers. The Company has since then established a strong
brand name and aggressively diversified to become a multi-product Company
catering to the Light Electricals sector manufacturing Voltage stabilizers, For further information, please contact:
Invertors & Digital UPS systems, Pumps, House wiring cables, Electric water
heaters, Fans, Solar water heaters and has also recently forayed into Induction Sudarshan Kasturi (Senior VP & CFO)
cooktops, switchgears, modular switches, air coolers and mixer grinders.
V-Guard Industries Limited
V-Guard outsources 60% of its product profile while the rest are manufactured Tel: +91 484 300 5601
in – house while keeping a strong control in designs and quality. It has
manufacturing facilities at Coimbatore (Tamil Nadu), Kashipur (Uttaranchal) Email: sudarshan.kasturi@vguard.in
and Kala Amb (Himachal Pradesh).

V-Guard has been a dominant player in the South market, though the last five
Shiv Muttoo / Varun Divadkar
years have also seen the Company expanding rapidly in the non-South
geographies with their contribution increasing from 5% of total revenues in CDR India
FY08 to around 39% of total revenues in FY19. Significant investments
continue to be made to expand its distributor base in the non-South Tel: +91 22 6645 1207 / 9763702204
geographies, and become a dominant pan-India player. Email: shiv@cdr-india.com / varun@cdr-india.com
V-Guard has a diversified client base and an extensive marketing & distribution
network. Its client base differs from product to product and includes direct
marketing agents, distributors and retailers. The Company today has a strong
network of 31 branches spread across ~40,000+ retailers across the country.
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