Crompton Greaves Consumer Electricals' stock dipped on November 6 following a weak second quarter show. The company attributed the subdued performance to challenges in the business-to-consumer (B2C) segment leading to price erosion and revenue decline.

Share Market Live

NSE

However, the commercial lighting segment demand is doing well, the company's Chief Financial Officer (CFO) Kaleeswaran Arunachalam pointed out. "The make-to-order (MTO) and make-to-stock (MTS) business for B2B is on track. We have also obtained two prestigious orders recently for working on the Mumbai coastal line and the Noida International Airport. With that, we think lighting B2B businesses are going in the right trajectory.”

Crompton Greaves' revenues rose by around 4.8% in the July-September quarter to ₹1,782 crore. Consolidated net profit was down 23% to ₹97 crore from ₹126 crore a year ago.

Arunachalam said Crompton has strategically restructured its business, carving out the lighting segment from its broader Electrical Consumer Durables (ECD) division. This move comes as the company recognised the unique distribution challenges and opportunities that the lighting segment presents, which are markedly different from those of the ECD sector.

The unit economics and financial model of Crompton’s lighting business has solidified significantly, he noted.

“If you look at our lighting business for Q2, we could expand our EBIT (earnings before interest and tax) margins by about 250-300 basis points and also deliver almost a 20% absolute EBITDA (earnings before interest, tax, depreciation and amortisation) growth over last year, in spite of a softer topline,” he added.

In an interview in August, the electrical company's management said it has identified and is looking to plug crucial gaps in its portfolio that include fans, pumps, and lights. Additionally, the firm will increase the contribution from nascent categories such as small and kitchen appliances.

While the new growth strategy would result in double-digit revenue growth, it could come at the cost of margins in the near term.

Global brokerage firm Nomura said that the execution of these initiatives will be crucial for a re-rating. Nomura maintained the ‘neutral’ rating on the stock with a target price of ₹338 per share.

The company's shares ended a little over 1% down at ₹283 apiece.

(Edited by : Shweta Mungre)

First Published:Nov 6, 2023 5:49 PM IST