Cooler sales in global mkts to push growth: Symphony

Ahmedabad-based air cooler maker Symphony's July-September quarter profit jumped 33 percent to Rs 28.8 crore compared to year-ago period, supported by topline as well as operational performance. Weak monsoon lifted sales volume of the company that resulted strong revenue growth during the quarter.

Achal Bakeri, chairman and MD, Symphony, is confident that the company will be able to maintain the growth momentum in the coming quarters. He says, in the organised market, the company's market share stands at 50 percent. Going ahead, he sees cooler sales in the international markets driving growth in the medium term.

According to him, the strategy of focussing on one product has worked for the company. He does not see Symphony diversifying into other products in the near future.Below is the verbatim transcript of Achal Bakeri’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: In a market where we are seeing a lot of slowdown in other consumer durable names, brands like yours are managing to retain not just market share but also a very good growth momentum. Can you tell us whether you can maintain this 20-25 percent growth that you saw this quarter throughout the year?A: This has been less than our historical compound annual growth rate (CAGR) of the last several quarters. I see no reason why we should not be able to maintain this or do better than this in the quarters to come.Latha: What is your sense of the market itself? Is the market growing or is it just that you are getting more market share?A: The market is growing for sure but within that, our growth rate is higher than the growth rate of the markets. We are gaining market share in a growing market. We are doing both.Latha: Your sense is that you should be able to maintain this 20 percent pro rata growth in the second half and further on as well?A: I wouldn’t say specifically for a quarter or a year or even half a year. Generally speaking we have had a very good CAGR over the last few years. In the quarters to come and in the years to come we should be able to maintain that same sort of CAGR. I wouldn’t comment on any specific quarter or a specific half year.Sonia: One good part that the street has liked about your numbers is the way your realisations per unit has grown quarter after quarter and now you are sitting at almost Rs 6,000 per unit in terms of realisations. Just give us a sense of over the next couple of years whether you can see a lot more because the stock has given great returns but has already priced in a lot of the good news. So, I am trying to understand what the next trigger for the company could be?A: We believe internally that the best of Symphony is yet to come. We believe we have only scratched the surface of the market. The market is an ocean; our market share within the larger market within the total organised and unorganised market is still very small.Within the organised market share our market share is certainly around 50 percent or so which is good. However, if we look at the total market organised and unorganised market put together it is a very small percentage. So, there is a lot to do out there and because of our history of innovation, because of our history of being able to sense what the market needs are and provide them we believe that we should be able to harvest that potential in the times to come.Latha: Will you ever diversify into say air-conditioners or other products?A: I will never say never but we have been there and done that. In the late 90s we had diversified into not only air-conditioners but even water heaters, purifiers, washing machines the whole host of products. That didn’t work very well for us. So, from an approach of multiple products one market we have changed it to one product multiple markets and that has worked for us for the last ten years or so. We believe we will stick to this approach in the foreseeable future.Sonia: You have tried to explore new opportunities especially in industrial cooling segment through IMPCO. What kind of growth have you seen there and what could it be in the next couple of years?A: That is a complete virgin territory within India at least. The concept of cooling industries or warehouses just doesn’t exist. So, what we are going through at the moment is an evangelical phase where we are educating the market as to the solution that we can offer.This is a slow process because you have to educate the market. However, in the long–term this is going to be the growth driver. We have said this before and I will say it again that in the medium-term the growth driver will continue to be coolers for homes within India, in the short-term.In the medium-term, the growth driver would be coolers for homes in the international markets. In the long-term the growth driver would be coolers for commercial and industrial applications within India and in other geographies. So, clearly we have growth drivers for the short, medium and long-term.Sonia: Do you need to make higher amount of investments into the industrial cooling products? Is it a high capex project?A: Not at all because the capex already has been incurred, the product exists in our facility in Mexico. So it is just a matter of bringing them over here. Whatever we need to invest is more in terms of marketing and field sales force and stuff like that. We have to incur next to no capex for that.Besides, ours is a asset light, capex light kind of a business model. So, we would make sure that we don’t have to incur any capex whichever way it goes.Latha: Generally are you producing the capacity. Will you have to increase capacities and capex shortly?A: No, we do have enough capacity for the foreseeable future beside even at our facility in Mexico we are adopting the Indian business model, asset light, outsource manufacturing. So that is going to happen in a phased manner. In fact whatever fixed assets that we even do have now would be scaled down. Even for greater growth Symphony or IMPCO will have to incur no capex.Sonia: You recently acquired the Chinese air cooler brand called MKE as well. That is interesting because you are trying to make inroads into the Chinese market but we have seen lot of slowdown there, so how much potential do you see from that space?A: The brand is Keruilai. The companies name is MKE which will shortly be renamed as SKE, S- standing for Symphony. This is China’s largest air cooler manufacturing company and one of its oldest. Keruilai brand is the only brand which is known within China and outside China.Over the last many years, we came across this brand in different markets that we operate in whether it is Brazil, Saudi Arabia or Egypt or Philippines or Thailand in very diverse market this is the only Chinese brand that we would sort of compete with. When this opportunity came to us few months ago, we sort of looked at it very closely and we finally acquired it in August.We have acquired it for a very good price. We just paid sort of a million and a half RMB which is just about Rs 1.50 crore. So, it is an incredibly good deal for us. Although the Chinese market is facing a slowdown, yet it is a big market for coolers. Moreover this company has historically exported half its product especially to South-East Asia.So, what we expect to gain from this acquisition is access to the Chinese market, access to the South-East Asian market. Besides, this company has excellent R&D facilities and very good testing facilities, the best that I have seen. So, we will have access to their R&D, their new product development capabilities and also access to their products.That company will gain access to Symphony’s products and also our products made in Mexico. So there will be great synergy between China, Mexico and India.Latha: A complaint with your stock would be that it is largely held by the promoters 75 percent about 10-11 percent by institutions so the float is very low. Would you ever look at increasing the float in some way either divesting or issuing more shares?A: We have not looked at that so far we have not had the need to do that either increase the equity or divest. If we were to ever do one of these two, it would only be to sort of have some very good investors, institutional investors in the company.Other than that our business model doesn’t require us to increase equity nor do the promoters need to divest to monetise their investment. So, it would only be, if at all in the future, to bring in some marquee investor or something like that.