Thank you. On behalf of ICICI Securities, we welcome you all to Q3 and 9-month FY '26 result conference call of Bajaj Electricals Limited.

Today, we have with us senior management represented by Mr. Shekhar Bajaj, Chairman; Mr.

Sanjay Sachdeva, MD & CEO; Mr. Vishal Chadha, COO Consumer Products; Mr.

Rajesh Naik, COO Lighting Solutions; and Mr. Suketu Shah, Finance Controller.

Now, I hand over the call to the management for their initial comments on the quarterly performance. Then we will open the floor for Q&A session.

Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen.

I'm Shekhar Bajaj. Thank you for attending the Q1 earnings call.

We hope you've had a opportunity to review our financial results and earnings presentation, which are available on the stock exchanges. From an industry and macroeconomic perspective, the period began with an encouraging festive momentum and reflected the underlying resilience of the domestic economy, supported by steady GDP growth, and this is reflected in the performance in the Lighting Solutions vertical.

Lighting Solutions vertical delivered a strong performance, achieving revenue growth of 9%, representing a best-in-class revenue growth and margins. While these macroeconomic factors were broadly supportive of industry demand, the company's performance for Consumer Products during the period diverged from the broader market, primarily due to internal actions around inventory normalization undertaken to address channel conditions.

Consumer Products witnessed a decline in revenue of 25% during the quarter, primarily attributable to deliberate channel normalizations undertaken in response to elevated inventory levels across categories. This was a conscious and prudent action aimed to restoring channel health and ensuring alignment with the evolving demand environment, rather than a reflection of any structural weaknesses in the underlying business.

Importantly, these measures have strengthened the quality of our distribution, improved inventory visibility, and positioned the company to participate more sustainably in demand recovery as market conditions normalize. Before I hand it over to Sanjay Sachdeva, I would like to highlight that the fundamental strength of our business remains firmly intact.

Our brands continue to enjoy strong consumer awareness, our market shares across key categories have remained stable, and our distribution reach remains deep. The actions undertaken during the quarter were tactical in nature and do not, in any way, dilute the long-term competitiveness or positioning of our portfolio.

I now hand it over to Sanjay for detailed business and financial highlights. Thank you.

Thank you, Chairman, sir. Good evening, ladies and gentlemen, and thank you for joining our investor call.

As Chairman said, we have delivered mixed performance for this quarter. Let me start with Lighting Solutions.

We have remained open and proactive in expanding our presence within the Lighting Solutions vertical through adjacent and complementary categories. As part of this strategy, we initially entered the switchgear segment in Q2, followed by the announcement of our foray into solar solutions in Q3 and, more recently, the launch of wires this month.

These initiatives are aligned with our objective of building an integrated portfolio, leverage brand strength, distribution reach, and execution capability to drive long-term sustainable growth. This vertical has consistently delivered revenue growth and margins.

Against the H1 revenue growth of 6%, we have accelerated our growth to 9% this quarter, owing to higher mix towards focus categories like ceiling and outdoor lights, which has also helped achieve EBIT of close to 7% versus last year of 2%. This is quite encouraging for us, and we are confident to continue the momentum in the upcoming quarters.

Now, let me talk about Consumer Products. We have embarked on a journey of cultural and structural change in the way we engage with the channel to move to a more balanced approach between demand-led sell-through and a volume-led push.

To embed this approach, it is important to have healthy channel inventory. Over the past few quarters in the investor calls, we have highlighted elevated channel inventory levels as a key operating concern.

As a result of this transition and the corrective actions taken, channel inventory levels are on a path of normalization. There are still certain pockets, especially the summer-related products, where the channel inventory remains high, and we look forward to its normalization as season picks up.

This structural shift to secondary off-take led execution will strengthen our channel health, improve revenue predictability, improve margin quality, enhance working capital efficiency, and flushes out high-cost incremental sales practices, and it positions the company for sustainable demand-led growth. This has started reflecting in stabilization of market shares across all key categories.

The EBIT margins were negative owing to operating deleverage. I would now like to highlight certain operational parameters that have begun to show early signs of improvement.

While the benefits of these initiatives are not immediately visible and will accrue over time, they form a critical part of our broader effort to streamline and strengthen our operations. Logistics, which has been a persistent area of focus for the past two years, is now being addressed with increased rigor.

We have initiated a comprehensive review across key drivers, including overall inventory levels, space optimization, and elimination of high-cost incremental sales practices. Several corrective actions have already been implemented, and we believe we are moving in the right direction.

Post normalization, tangible benefits are expected to be visible in our results. A part of this is already getting reflected in this quarter's cash flow from operations, where we have generated operating cash flow of 211 crores and ended the period with a cash and cash equivalents balance of 620 crores.

This strong liquidity position provide us with adequate financial flexibility to deploy growth capital judiciously while maintaining balance between strength and capital discipline. In parallel, we are undertaking a detailed review of other variable cost elements, such as product demonstration, customer service expenses, and trade schemes, with a clear focus on improving cost efficiency and margin quality.

Additionally, fixed costs, which has expanded over last few years, are now under tighter control. Capital expenditure and innovation investments are also being evaluated more stringently to ensure that growth capital is deployed judiciously and delivers superior returns on investment.

With this, I would like to open the call for questions. Thank you.

Thank you for the opportunity. My first question is on the Consumer Products portfolio.

The top-line growth, as well as margins, the decline has been very severe. Now that all your peer set numbers are out, even if top line has been modest, margin improvement has come through because of winter products, and they are high-margin, and Bajaj is anyway one of the better players when it comes to, say, geysers or room heaters, etc.

Wanted to know why such a sharp decline?

Natasha, Vishal will answer in more detail, one of the things when we are flushing out stocks, while we are not selling to our distributors, but we are running promotions on that stock to move to trade. Part of that will get reflected in the margin drop.

Keep that in mind, and that is one of the drivers of the margin drop. This is temporary, underlying margin will be healthier than what you're seeing, and you will see that improving as we move forward.

Yeah. Natasha, like Sanjay said that we have taken corrections as far as the inventories are concerned.

However, in terms of the secondaries in trade, for example, we have improved actually market share, and our growth has been flat-ish as far as water heaters are concerned. In instant, for example, we have a single high-digit growth.

The tertiary off-take which happen, which are reflective of the market share, clearly indicate that we continue to maintain our strength in this space.

Understood. Sir, can you just deep dive a little bit as to what are these steps that you've taken in terms of inventory normalization, and when will this benefit accrue in the numbers?

The inventory normalization has hit across our trade channel and also in our aggregators which service the e-commerce channel. We are on that journey as was stated in the opening remarks.

We expect the normalization process to continue. In a quarter or so, we should be in a healthy place.

Understood. My second question is on the wires division.

Broadly, can you tell us the strategy here as to will it be completely outsourced, and what are the estimates that we can build in for Bajaj, say, in the medium term, both in terms of top-line contribution from this as well as margins, and will you be selling this from your existing FMEG channel itself?

This is Rajesh here, Lighting Solutions business. Strategy, as of now, is that we introduce considering the strength of our distribution, which is there in the market.

As the channel overlap is there, we feel that it is completely logical to enter into this particular space, which is growing much faster. In that, the strategy on manufacturing or outsourcing, as of now we are exploring that, what is the most beneficial way, and we are just entered into that.

Looking at the current traction, we feel that outlook will be good. As of now, we don't want to project in terms of numbers or revenue which are coming out of that, looking at the forward numbers.

Got it. Just one related question on that.

In terms of wires, a lot of incumbents right now, and some of them, in fact, larger peers are losing market share in this segment, and on top of that, the commodity volatilities are also extremely high. Just want to know, I understand pan-expansion is one of the strategy here and we can leverage our channel reach, but is that the only moat here in this business?

What would lead a dealer to switch from, say, a Polycab or a Havells to a Bajaj?

Again, brand strength which is there, as we are aware of that. The quality what we are going to offer, which comes along with the brand.

The trust which is created, on that basis we are in this particular business, and which is the legacy of brand Bajaj.

When you say quality, sir, you are outsourcing it completely, right?

It's definitely the product which is not complete means it is not off-the-shelf products. We do add in terms of what we are looking for from that particular product before we enter into the category.

Understood, sir. Thank you so much, and all the very best.

Thanks for the opportunity. I just want to understand the thought process behind this channel correction.

What made us took this decision, why we took this decision? First, if we can answer that.

If you look back at the year so far, we have seen that the summer season did not pan out as per the expectations. Owing to that, the channel was carrying a significant amount of inventory.

Now, if you look at our business and the contribution of summer products, which is relatively volatile products like coolers and TPW, etc., our business is almost 20%, 25% contribution typically in a normal year comes from these businesses, which in this year was approximately half of it. Therefore, the channel had been carrying the inventory.

Secondly, the second summer, which typically comes later, also did not pan out. This was impacting both the health of the channel as well as their ability to stock up for relatively faster-moving products.

We, as has been said earlier also, thought it is prudent and judicious to take this correction rather than loading the inventory into the channel more and more. We expect, as it normalizes in the coming days, it will actually be more beneficial for the business and our channel partners.

One thing is, if you look at, we just commented like we have gained market share. Ideally, our position in the channel should have been better versus peer.

Peer have reported relatively better set of numbers on the top-line side. Third, if you look at an air cooler company which has reported their numbers, they have reported, by and large, flat-ish kind of number, and their sole business is air coolers.

On one side we are talking about market share gains, but on the other side we are saying like our channel inventory was higher as compared to peer. Is that the right interpretation?

Then if that's the case, then probably our Q1, Q2 numbers, probably the correction that we took in Q3, that should actually have been more visible in Q1 and Q2 if we would have maintained the normalized levels of inventory.

Like I said, the levels of inventory remained elevated, and the assumption was it would go down. First, the summer did not pan out, and then after that, which is quarter 3, which was about the festive period, we thought it's the right time to normalize this as we move into the next financial year.

Now, as far as competition is concerned, I really can't comment on that, but for us, for example, coolers are down by almost 30% to 40% versus our sales last year. We have been impacted as far as seasonality is concerned.

Right. Sir, one last question if I may.

If I look at the Q3 performance, and somewhere the channel would have normalized in terms of inventory levels, then in this case, I presume like other brands would be having higher inventories in the channel as of now. In this case, is this understanding correct that their market share probably in the coming months and quarters might be at risk?

Because even your retailers and dealers, in fact, they would like to liquidate other brands' inventory first and then probably go for primary billing.

Market shares are reflected by the tertiary off-takes which happen off the shelf. As has been said in the opening remarks, it's about changing the principles of doing business.

It's not about stuffing the channel, but it's about giving the optimal level of inventory and an approach which drives market share and consumer pull. I think the hypothesis that the more you fill in the inventory into the channel, that translates into a higher market share is not necessarily something which we subscribe to.

Sir, somewhere should we expect a normalized performance from fourth quarter onwards, or it will take some time still? Probably it should be more visible during FY '27.

It would be more visible during FY '27. As we said earlier, we are in the path of normalization.

In pockets, there are still some additional corrections which we need to take, and, therefore, by FY '27, should start seeing positive results.

Sure, sir. Thanks for this, and wish you all the best.

Thank you for opportunity. My first question or a clarification is related to as you had mentioned in the opening remarks that the summer product still have a higher inventory.

Is it what you have said? Just clarification.

It is lower than what it was in the beginning of the quarter, and we said that it's in the process of normalization, and it would take probably one more quarter for it to completely normalize. Also, we think is that, because of the bad season, the channel partners are also being cautious in taking stocks at a very, very high level.

It's a mixture of both.

The stock correction has taken in two ways. One way is the ones which are high and are not seasonal, that correction is we are seeing the secondaries much higher than what we are selling to the trade.

Way of doing correction is the summer products, where the usual loading which happens partly in quarter 3 and partly in quarter 4, we'll be more cautiously loading it because we want the stocks to be flushed out, which is already sitting in the channel. That is another way of correcting the stock with the channel.

Right. Got it, sir.

Second question is related to the commodity inflation. Is there any price hike expected from the Bajaj or you had taken to mitigate commodity inflation so far?

Yes, we have already announced a price increase ranging from 2% to 5% with effect from 1st of February.

How much of the commodity inflation is expected to cover with this?

We expect to cover bulk of the commodity inflation with this price increase. Plus, at the same time, we continue to do activities around VA, VE, value engineering, value addition, and as and when we feel it's the right moment, we might decide to pass on some of that benefits to the consumer also.

As of now, the commodity impact, we have neutralized it by and large.

Okay. Next question is related to some time back you had announced for the switchgear.

How is the so far traction from that segment?

This is Rajesh again. When we launched, we had a good response from the trade, who are our current partners as well.

That time we were working on creating the stock, and the stock took a little more time. Secondary has started since last month, and the feedback from the market in terms of quality and other parameters is much encouraging.

We are looking forward for the higher numbers coming through coming quarters.

Now you have a three verticals: switchgear, solar solution, and the wire. Any target the company has set for the next couple of years where to reach?

These are all big categories, and that is where we are trying to test the water and try to see how we can get our share, rightful share, in this particular segment. As of now, we are working on three years plans.

We will not be able to reveal numbers till we finalize that with the board.

Okay. Thank you, sir, and all the best.

Hi, thanks for the opportunity. This might be a repeat question.

Now, the BEE transition happening in 2026, how are the channel distributors reacting this time? Because a similar transition happened during 2023, and that time the industry saw higher inventory levels at the distributor end, which took some time to normalize.

Are distributors now willing to stock, or is there any caution? Do you see any risk of excess inventory related to prolonged winter in the distributor channel for fans?

Like I mentioned during the last call also, we are in a better position to navigate this change this time. Because, firstly, there was already a slightly elevated level of inventory with our partners, we navigated that change well and did not feel the need to put in more stocks as far as fans were concerned.

It's a normal process of channel inventory normalization which we've already talked about earlier. Far, as and when the season progresses, we've also mitigated the cost impact.

Commodity impact is different, but from a design, etc. point of view, we have mitigated that impact, like I said earlier, from a VA, VE point of view.

Going forward, we remain cautiously optimistic that there would not be any resistance from the channel partners or distributors in stocking up. Of course, it is dependent on how the season pans out and how the summers pan out.

Okay. What are the ground level at the channel inventory, how are their sentiments currently, if you could give some color on that as well?

I'm sorry, could you please repeat the question?

Just more on the BEE regulation transition part, how are they reacting to it, if you could give some color on that.

It's a regulation. As far as the partners are concerned, at least on ground, I don't see any massive resistance or problems around it, because it is now the second time which is happening, people are used to this ratcheting happening over a period of time.

Thank you.

Hi. Sir, just two questions.

Firstly, this initiative that we have taken, it's really a good clean-up and hygiene. Should we think like a board-approved process where inventory in the trade beyond a particular duration would be considered to be kind of flushed out this way, or this would be a one-off event, how should we think?

There is no board approval on inventory flush-out, though this was discussed in the previous board meeting, but there is no board approval per se. If you can talk more about exactly what the question is?

No, I was just trying to think through that how in retail also there are some inventory kind of processes in terms of liquidation, etc., which at times are board-approved with respect to beyond a particular timeline, you account for the inventory in particular method. I was just trying to gauge that from either shrinkage or write-off, or just trying to not push more inventory, or is it just one-time clean-up, how we should think?

I think, really two things I'm thinking: maybe it's the earlier inventory levels in the trade would be high, and we decided before the season, we kind of prune it to an optimal level so that the next primary sales for Bajaj becomes much more smoother, cleaner, and ROIs for the trade should improve going ahead. Was that the thought process before when we initiated this process of kind of reducing the primary?

If you are trying to draw a parallel with retail industry, for example, it's apples to oranges, because here we are flushing out our inventory. It is about channel hygiene and the channel partner's inventory.

Now,

we obviously have our own process of looking at whether slow movers, etc., it's a very small part of our overall business, and those are normal practices which we follow as and when we want to liquidate those. That's business as usual.

It is not something what we were alluding to over here. It is not our inventory which is an issue.

It is the inventory with the channel partners and the channel hygiene which we were more focused on.

Got it. Sure, this is helpful.

Can you kind of elaborate, then what were the outstanding or elevated levels in terms of days or categories which had kind of bulked up in the trade, what has it come down now to, and what is like a normal hygiene level as a process going ahead you would want to maintain? Any such maybe quantification would be helpful.

That's it from my side.

Hi, Suketu this side. If I have to elaborate on the number of days, we just want to give you a fact that in Consumer Products, it is down by 30% in terms of number of days.

That's one bit of it. Now, how much inventory we want to carry in the channel, at the same time, what's the healthy is the dynamic number that keeps on changing between the scenario, environment, and the seasonal factors.

While there is no written thumb rule around it, but we are very cautious in the way we want to culturally operate with the channel.

Okay. Sure.

Thank you.

Hi, thank you. Sir, this question is for Mr.

Bajaj. Mr.

Bajaj, over the last several years, you had also embarked upon the RREP expansion program, where the focus was on a pull-based system, and it was followed for some years, and then, from our understanding, it was abandoned. Are we going back to that same philosophy of going back to a pull-based model?

Sort of my question is, why did we abandon that model, and why are we going back to the same model again? That is one.

Secondly, if you look at the business over the last almost more than 10 years, the business has not delivered on its potential, both on the top line and on the margins, especially on the margins. How should we think about the Consumer Products business, let's say, over the next five years, in terms of what it can achieve, both from a top-line and bottom-line perspective?

If Mr. Sachdeva could pitch in, that would be helpful.

Thank you very much. See, I tell you that RREP, which was introduced, was an outstanding thing which we had done, and we had improved our distribution very well.

One thing which we found was that, because of that distribution, it was coming out to be a problem that we were covering all the outlets, around 2 lakh outlets we had covered, but the cost was not working out. Now we are doing RREP, but in a different way.

We are doing it by also having direct dealers, we are also doing a distribution which is like RREP, we don't call it RREP, but a distribution by which we are covering outlets. Now, like for example, if somewhere there's a 10 lakhs sale per year, and somewhere it's only 10,000 sale per year or 1 lakh, earlier we were going to every outlet, a 10 lakh outlet also would be visited every week, and a 1 lakh will be also visited every week.

Now, we are going to do a channel depending on the demand and the possibility, we will increase the movement and visit to that place where there is a 10 lakhs business and relatively less visit to those which is 1 lakh business. Therefore, that is where the change will take place compared to what is being done earlier.

RREP as a procedure was good. What you've been hearing, which is what we've done starting from the last quarter, is that please concentrate on secondary rather than primary.

Therefore, because of that, secondary sales, though we have shown a negative 25% negative growth in Consumer Products, as was mentioned, the market share has not gone down much, because actually we have reduced our inventory level, we have reduced the inventory level of our dealers, as was mentioned by Suketu, has been reduced by almost 30%. Therefore, because of which, their margin will improve.

Because if you keep inventory which you don't need, you're ending up paying carrying cost, godown cost, and all that. We have reduced our inventory to that extent.

Our godown requirement has gone down. Our total carrying cost has gone down.

That's why our cash flow has improved by 210 crore, because we have been able to free our cash, which was dead, either in inventory or in outstanding. Also, at one end, we don't like this type of pressure which comes in because we want to achieve our top line.

Top line is only a transfer from our stock to our distributor stock, which we don't want. We want a secondary sale.

Therefore, the whole emphasis in secondary sales, that is why this correction which is taking place, the normalization which is taking place, will result in long-term margin improvement for dealers, our cost of carrying will come down, and it will be a win-win for all. Does that answer your question?

Yes, it answers the question, Mr. Bajaj, but I only hope that this also leads to sustainable growth and improvement in the profitability of the business.

As the margins in the Consumer Products business have been low single digits, and they've been stuck there for a while. Either the cost structure of the business needs to be reviewed, or we need to have sustainable growth for the business to absorb the higher cost base, I don't know what is being done on that front to achieve sustainable profitability, at least in line with your peers.

You'll see that happening, the improvement you'll see starting with the fourth quarter, but next year should be showing a substantial improvement because all those corrective actions which we are talking about, by doing that, your cost is coming down, and, therefore, your margin obviously improves. My inventory carrying cost goes down, I have already given up lot of our godowns, number of outlets to whom we are selling, keeping inventory is being reduced.

All those areas are being done because we realize what you're saying is correct, that cost has to be kept under control, because margins cannot keep improving by improving selling prices. The margins will only improve by reducing your cost, and that's what our objective is.

You'll see things happening in this quarter also, and coming in the next quarter.

Thank you very much.

Welcome.

Thank you very much, all of you who have joined this conference, and the questions and answers which have been had. We'd like to wish you all the best, and let's hope the next few quarters, you will see some improved results.

Thank you very much. Shekhar Bajaj here, saying goodbye to you.