Crompton Greaves Consumer Electricals Ltd - Annual Report 2023-24 Analysis

Overview #

Detailed Analysis #

This analysis looks into Crompton Greaves Consumer Electricals Limited’s Integrated Annual Report for FY2023-24, covering financial performance, business segments, identified risks, and ESG initiatives.

I. Financial Performance:

FY2023-24 marked a year of robust performance amidst global economic uncertainty. Key financial highlights (Consolidated):

• Revenue from Operations: ₹7,312.81 Crore (10% YoY growth)
• EBITDA: ₹713.69 Crore (3% YoY growth)
• Profit After Tax (PAT): ₹441.78 Crore (3% YoY growth)
• EPS (Basic): ₹6.88
• Return on Capital Employed (ROCE): 26.78%
• Return on Equity (ROE): 15.43%
• Dividend: 150% (₹3 per share)

While absolute profit growth was modest (3%), the report highlights a significant strategic shift towards “profit-led growth” under the Crompton 2.0 strategy. This involved increased investment in brand building, R&D, and talent development, laying the groundwork for accelerated future growth.

Key Financial Metrics (Standalone): The standalone financial statements reflect similar trends but with slightly higher margins compared to consolidated figures.

• Revenue from Operations: ₹6,388.38 Crore
• PAT: ₹466.45 Crore
• Return on Net Worth (RoNW): 15.43% (lower YoY due to increased shareholder funds)

Several key financial ratios are provided in the MDA, including debtor turnover, inventory turnover, interest coverage, current ratio, and debt-equity ratio. These ratios indicate a healthy financial position with improved use and interest coverage, though some ratios (like RoNW) show slight year-on-year decline. The report attributes this to increased investment in growth initiatives.

II. Business Segments:

Crompton operates in many interconnected business segments:

• Electrical Consumer Durables (ECD): This segment experienced industry-leading growth (17% YoY), driven by strong performance in fans, pumps, and small domestic appliances. The report emphasizes a successful premiumization strategy within this segment.

  • Fans: Crompton is the market leader, with significant growth in premium and decorative segments. New product launches focused on BLDC technology and energy efficiency.
  • Pumps: Strong growth in agricultural and residential segments, expansion into solar pumps (PM KUSUM scheme), and introduction of durable models.
  • Large Domestic Appliances (LDA): Growth driven by premiumization and portfolio expansion in water heaters and air coolers.
  • Small Domestic Appliances (SDA): Significant growth, especially online, in mixer grinders, and expansion into other small kitchen appliances.

• Large Kitchen Appliances: This segment showcased exceptional growth (2.3x YoY revenue increase) in built-in kitchen appliances (chimneys, ovens, hobs), fuelled by strategic expansion of Point of Sales (POS) and innovative product launches.

• Lighting: This segment faced challenges due to price erosion in B2C, but B2B experienced growth due to infrastructure projects. The report highlights a renewed focus on portfolio expansion and GTM strategies for future growth. B2C focused on premium lighting and outdoor solutions. B2B secured major infrastructure projects.

• Butterfly Gandhimathi Appliances Limited: This subsidiary, acquired by Crompton, contributes significantly to the kitchen appliances sector, especially in South India. It faced challenges in the corporate channel but showed resilience in retail and e-commerce.

III. Risks:

The annual report identifies many key risks:

• Economic Risks: Macroeconomic uncertainties, volatile commodity prices, and potential slowdown in consumer spending. Mitigation strategies involve cost optimization, diversification, and robust supply chain management.
• Product Risks: Competition, product quality issues, and regulatory changes (BEE and BIS norms). Mitigation involves rigorous quality control, continuous improvement initiatives, and proactive compliance with regulations.
• Brand Risks: Negative consumer feedback, service quality issues, and counterfeit products. Mitigation focuses on enhanced customer service, robust social media monitoring, and legal action against counterfeiting.
• Supply Chain Risks: Disruptions, dependency on single sources, and geopolitical uncertainties. Mitigation emphasizes diversification of sourcing, development of alternate suppliers, and strategic vendor partnerships.
• People Risks: Employee attrition, talent management, and succession planning. Mitigation is being addressed through enhanced employee engagement programs, structured talent development initiatives, and robust leadership development programs.
• IT Risks: Cyber and information security threats, and the growing need to comply with data protection laws. Mitigation involves continuous investment in cybersecurity infrastructure, employee training, and strict data governance.

IV. ESG Initiatives:

Crompton’s ESG performance is a major focus of the report. Key highlights include:

• Energy Efficiency: Significant improvements in energy efficiency across products (fans, water heaters, lighting) resulting in a 17.6% reduction in emissions (manufacturing facilities). The report showcases specific examples of technological advancements that drive energy savings.
• Water Management: Implementation of zero liquid discharge systems in manufacturing facilities and a reduction in water consumption. Water recycling is highlighted as a key achievement.
• Waste Management: Initiatives to minimize waste generation, improve waste segregation, increase recycling and reuse rates. The Company achieved 100% compliance with CPCB plastic waste targets. Extended Producer Responsibility (EPR) compliance is also emphasized.
• Occupational Health and Safety: Zero Lost Time Injury Frequency Rate (LTIFR) in FY2023-24 reflects the Company’s commitment to workplace safety. Various safety programs, regular audits, and training initiatives are described.
• Community Engagement: CSR initiatives focus on water conservation, skill development, community care, and employee engagement. Projects implemented with social impact organizations are detailed, highlighting the number of lives impacted.

The report also introduces an ESG dashboard for better data management and tracking of key sustainability indicators. The Company engaged BDO India LLP to provide independent assurance for BRSR core indicators and limited assurance for non-financial disclosures, enhancing transparency and accountability.

Overall Conclusion:

Crompton Greaves Consumer Electricals Limited’s Integrated Annual Report 2023-24 showcases a year of solid financial performance and notable progress on ESG initiatives. The Crompton 2.0 strategy, the emphasis on premiumization, and the investment in sustainability and talent management are positioning the company for future growth. While certain challenges remain (particularly in the lighting segment and some financial ratios), the report presents a positive outlook, emphasizing the Company’s commitment to sustainability, innovation, and stakeholder value creation. However, the relatively limited disclosure on Scope 3 emissions and the lack of details on LCA require further exploration to fully understand the Company’s complete sustainability footprint.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The values for total assets, current assets, cash and cash equivalents, accounts receivable (trade receivables), and inventory, as reported in Crompton Greaves Consumer Electricals Limited’s Standalone Financial Statements for the year ended March 31, 2024, are:

• Total Assets: ₹5,574.48 Crore
• Current Assets: ₹2,305.90 Crore
• Cash and Cash Equivalents: ₹130.79 Crore
• Accounts Receivable (Trade Receivables): ₹580.12 Crore (current) + ₹12.65 Crore (non-current) = ₹592.77 Crore
• Inventory: ₹698.00 Crore

It is important to note that these are the figures from the standalone financial statements. The consolidated financial statements would include the figures for subsidiary companies, resulting in different totals.

Liability Analysis #

Based on Crompton Greaves Consumer Electricals Limited’s Standalone Financial Statements for the year ended March 31, 2024:

• Total Liabilities: ₹2,369.00 Crore
• Current Liabilities: ₹1,814.87 Crore
• Long-Term Debt: ₹298.97 Crore (This represents the portion of long-term debt not due within one year. The total long-term debt is higher, as evidenced by the redemption of ₹325 Crore in NCDs during the year. The detailed breakdown of debentures is available in Note 12 to the financial statements.)
• Accounts Payable (Trade Payables): ₹1,172.45 Crore (current) + ₹14.03 Crore (non-current) = ₹1,186.48 Crore

Remember that these figures are from the standalone financial statements. The consolidated figures would be different as they include the liabilities of subsidiary companies.

Equity Analysis #

According to Crompton Greaves Consumer Electricals Limited’s Standalone Financial Statements for the year ended March 31, 2024:

• Shareholders’ Equity: ₹3,205.48 Crore
• Retained Earnings: ₹2,638.62 Crore
• Share Capital: ₹128.62 Crore

These figures are from the standalone financial statements. The consolidated financial statements would show different values because they include the equity of subsidiary companies.

Income Statement #

Operating Performance #

Based on Crompton Greaves Consumer Electricals Limited’s Standalone Statement of Profit and Loss for the year ended March 31, 2024:

• Revenue from Operations: ₹6,388.38 Crore
• Cost of Revenue: ₹5,837.68 Crore (This includes cost of materials consumed, purchases of stock-in-trade, and changes in inventories.)
• Gross Profit: ₹550.70 Crore (Revenue - Cost of Revenue)
• Operating Expenses: ₹5,294.95 Crore (This appears to be an error in the report as it is higher than the cost of revenue. The report’s total expenses, including operating and non-operating expenses, are given as ₹5,837.68 Crore. The correct operating expense figure is not directly stated in the report)
• Operating Income: The report does not clearly segregate operating income from profit before exceptional items and tax (₹611.04 crore). To derive the operating income, one would need a more precise breakdown of expenses which is not directly available. There is a discrepancy in the statement that needs clarification.

It’s essential to remember these numbers are from the standalone financial statements. Consolidated figures would be higher and reflect the performance of the subsidiary companies. The discrepancy in the operating expenses needs to be addressed by referring to further clarifying documentation from Crompton or a corrected financial statement.

Bottom Line Metrics #

Using Crompton Greaves Consumer Electricals Limited’s Standalone Statement of Profit and Loss for the year ended March 31, 2024:

• Net Income (Profit for the year): ₹466.45 Crore
• EBITDA: The EBITDA is not explicitly stated in the standalone statement. To calculate it, one would need to add back depreciation and amortization and finance costs to the profit before tax. This calculation is not possible with just the standalone statement.
• Basic EPS: ₹7.29
• Diluted EPS: ₹7.29

Note that these figures are from the standalone financial statements. The consolidated statements would show different values as they include the results of subsidiary companies. Also note that the EBITDA needs further calculation to obtain this metric from the provided data.

Cash Flow #

Cash Flow Components #

According to Crompton Greaves Consumer Electricals Limited’s Standalone Statement of Cash Flows for the year ended March 31, 2024:

• Cash flow from Operating Activities: ₹795.97 Crore
• Cash flow from Investing Activities: ₹(175.59) Crore (negative, indicating net cash outflow)
• Cash flow from Financing Activities: ₹(533.65) Crore (negative, indicating net cash outflow)

These are the standalone cash flow figures. The consolidated statement of cash flows would include cash flows from subsidiary companies, resulting in different amounts.

Cash Flow Metrics #

Crompton Greaves Consumer Electricals Limited’s standalone financial statements do not directly provide a calculation for free cash flow. Free cash flow is typically calculated as operating cash flow less capital expenditures. We have the standalone operating cash flow (₹795.97 Crore), but not the precise standalone capital expenditures. Therefore, a precise free cash flow cannot be determined from the provided data.

From the Standalone Statement of Cash Flows:

• Capital Expenditure: The precise amount isn’t directly given, but is implied within the “Cash flows from investing activities” section. The outflow from investing activities, including capital expenditure, is ₹175.59 Crore. This includes capital expenditure for property, plant and equipment (₹64.48 Crore), purchase of current investments (₹73.04 Crore), and other outflows. To isolate capital expenditure from other investment activities, one would need a more detailed breakdown of the investing activities.

• Dividends Paid: ₹191.90 Crore (This is explicitly stated in the standalone financial statements under appropriations.)

To get a more precise calculation of free cash flow, one needs a more detailed breakdown of the standalone investing cash flows or access to additional financial documents not provided here.

Financial Ratios #

Profitability Ratios #

The standalone financial statements for Crompton Greaves Consumer Electricals Limited for the year ended March 31, 2024, provide some profitability ratios, but not all those requested. We need to calculate some. Here’s what we can determine:

• Gross Profit Margin: This is calculated as Gross Profit / Revenue. Using the standalone figures: (₹550.70 Crore / ₹6,388.38 Crore) * 100% = 8.65%

• Operating Margin: This requires a precise figure for operating income, which isn’t explicitly provided in the standalone statements due to an apparent error. The statement shows the profit before exceptional items and tax (₹611.04 Crore). A precise operating margin calculation is therefore not possible without further details clarifying the expense discrepancy.

• Net Profit Margin: This is calculated as Net Income / Revenue. Using the standalone figures: (₹466.45 Crore / ₹6,388.38 Crore) * 100% = 7.30%

• Return on Equity (ROE): 15.43% (This is explicitly stated in the report.)

• Return on Assets (ROA): This requires Net Income and Average Total Assets. The standalone Net Income is ₹466.45 Crore. To calculate the average total assets, we need the total assets for the beginning and end of the year. This data is included in the Balance Sheet (₹5,145.68 crore and ₹5,574.48 crore respectively), resulting in an average of ₹5,360.08 Crore. Therefore, ROA is calculated as: (₹466.45 Crore / ₹5,360.08 Crore) * 100% = 8.70%

Important Note: These are standalone ratios. The consolidated financial statements would provide different profitability ratios, incorporating the results of subsidiary companies. The operating margin calculation is imprecise due to an apparent error in the standalone financial statement, making it advisable to obtain a clarification from Crompton or consult a corrected financial statement.

Liquidity Ratios #

To calculate these ratios for Crompton Greaves Consumer Electricals Limited as of March 31, 2024, we’ll use the figures from the standalone financial statements:

• Current Ratio: This is calculated as Current Assets / Current Liabilities. Using the standalone figures: ₹2,305.90 Crore / ₹1,814.87 Crore = 1.27

• Quick Ratio (Acid-Test Ratio): This is calculated as (Current Assets - Inventories) / Current Liabilities. Using the standalone figures: (₹2,305.90 Crore - ₹698.00 Crore) / ₹1,814.87 Crore = 0.88

• Cash Ratio: This is calculated as (Cash and Cash Equivalents) / Current Liabilities. Using the standalone figures: ₹130.79 Crore / ₹1,814.87 Crore = 0.07

These are the standalone liquidity ratios. The consolidated ratios would differ due to the inclusion of subsidiary company data. Remember that these ratios offer a snapshot in time and should be interpreted in conjunction with other financial data and industry benchmarks.

Efficiency Ratios #

To calculate these efficiency ratios for Crompton Greaves Consumer Electricals Limited for the year ended March 31, 2024, we’ll use data from the standalone financial statements. Note that precise calculations require average values for assets and inventory; using year-end values provides an approximation.

• Asset Turnover: This ratio measures how efficiently a company uses its assets to generate sales. It’s calculated as Revenue / Average Total Assets. Using year-end values for approximation: ₹6,388.38 Crore / ₹5,574.48 Crore = 1.15

• Inventory Turnover: This shows how many times a company sells and replaces its inventory during a period. It’s calculated as Cost of Goods Sold / Average Inventory. Using year-end values for approximation: ₹5,837.68 Crore / ₹698.00 Crore = 8.39

• Receivables Turnover: This measures how efficiently a company collects its receivables. It’s calculated as Revenue / Average Accounts Receivable. Using year-end values for approximation: ₹6,388.38 Crore / ₹592.77 Crore = 10.78

Important Considerations:

• Average Values: The calculations above use year-end values for assets and inventory as approximations. More accurate results would use average values (beginning-of-year + end-of-year) / 2. The precise beginning-of-year values are not provided in the supplied report, preventing a completely accurate calculation.
• Standalone vs. Consolidated: These are standalone ratios. The consolidated ratios, incorporating data from subsidiaries, would differ.
• Industry Benchmarks: These ratios should always be compared to industry averages and trends to get a complete understanding of the company’s performance relative to its peers.

Therefore, the figures provided above are approximations; more precise calculations require data not readily available in the provided annual report.

Leverage Ratios #

To calculate these use ratios for Crompton Greaves Consumer Electricals Limited as of March 31, 2024, we’ll use data from the standalone financial statements. Note that some precision is lost when using year-end values rather than averages. Also, “total debt” needs clarification because the report doesn’t clearly define or separate all debt components. We will use total borrowings as a proxy for total debt.

• Debt-to-Equity Ratio: This measures the proportion of a company’s financing that comes from debt relative to equity. It’s calculated as Total Debt / Shareholders’ Equity. Using year-end values for total borrowings (₹598.97 Crore): ₹598.97 Crore / ₹3,205.48 Crore = 0.19

• Debt-to-Assets Ratio: This indicates the proportion of a company’s assets financed by debt. It’s calculated as Total Debt / Total Assets. Using year-end values for total borrowings: ₹598.97 Crore / ₹5,574.48 Crore = 0.11

• Interest Coverage Ratio: This measures a company’s ability to pay its interest expenses. It’s calculated as Earnings Before Interest and Taxes (EBIT) / Interest Expense. The standalone statement provides the Profit Before Tax (PBT) of ₹611.04 Crore and Interest Expense of ₹72.77 Crore. We need to add back the interest expense to the PBT to get EBIT which then becomes: (₹611.04 Crore + ₹72.77 Crore) / ₹72.77 Crore = 9.53

Important Considerations:

• Average Values: More precise calculations would use average values for equity and assets (beginning-of-year + end-of-year) / 2. The precise beginning-of-year values are not available in the provided report.
• Definition of Debt: The report uses “borrowings” as a proxy for debt, but it might include other debt components (such as lease liabilities, other payables etc) not explicitly disclosed. A more complete calculation requires a clearer definition of “total debt”.
• Standalone vs. Consolidated: These are standalone use ratios. Consolidated ratios would include the debt of subsidiary companies and therefore, would be different.
• Industry Benchmarks: These ratios should be compared to industry benchmarks to evaluate the Company’s financial risk relative to its peers.

Therefore, the numbers above are reasonable approximations, but more precise calculations require data not readily available in the provided annual report. The definition of total debt needs to be established to calculate this more accurately.

Market Analysis #

Market Metrics #

The annual report does not provide the market capitalization, P/E ratio, P/B ratio, or dividend yield directly. These require information from the stock market (share price and number of outstanding shares) that is not included in the annual report itself.

However, we can calculate the dividend payout ratio using information from the annual report:

• Dividend Payout Ratio: This is calculated as Dividends Paid / Net Income. Using the standalone figures for dividends paid (₹191.90 Crore) and net income (₹466.45 Crore): ₹191.90 Crore / ₹466.45 Crore = 41.14%

To obtain the other market-based ratios, you will need to obtain the following from a financial data provider like Yahoo Finance, Google Finance, or Bloomberg:

• Market Capitalization: This is calculated by multiplying the current market price per share by the total number of outstanding shares.
• Share Price: The current market price of Crompton Greaves Consumer Electricals Limited’s shares.
• Number of Outstanding Shares: The total number of shares currently in circulation.

Once you have the market capitalization and share price, you can calculate:

• P/E Ratio (Price-to-Earnings Ratio): Market Capitalization / Net Income
• P/B Ratio (Price-to-Book Ratio): Market Capitalization / Shareholders’ Equity
• Dividend Yield: (Annual Dividend per Share / Share Price) * 100%

Remember that these market-based ratios are dynamic and change constantly based on market conditions and share price fluctuations. The dividend payout ratio provided is based on standalone data; the consolidated ratio may differ.

Business Analysis #

Segment Analysis #

Crompton Greaves Consumer Electricals Limited’s annual report provides some, but not all, of this detailed segment information. A precise breakdown requires piecing together information from various sections. Here’s a summary, keeping in mind some data points are approximated or estimated based on available information:

It’s essential to note that the report does not consistently provide all the requested metrics (growth rate, market share) for each segment.

Notes:

• Revenue figures are estimates based on the overall revenue and segmental discussions, as a precise breakdown isn’t provided.
• Growth rates are derived from statements within the report, but not all segments specify their growth rates consistently. Significant growth is often mentioned qualitatively, rather than quantitatively.
• Operating margins aren’t clearly given for each segment. The report mentions margin improvements in many segments but avoids explicitly stating the margin percentages.
• Market share data is not explicitly provided across all the segments for the year in question and is mostly stated qualitatively.

To obtain a completely precise picture of Crompton’s segmental performance, one would need to access supplementary financial documents not provided in this annual report.

Risk Management #

Risk Assessment #

The Crompton Greaves Consumer Electricals Limited annual report doesn’t explicitly use a standardized risk matrix (severity/likelihood) for its risk disclosures. However, we can categorize and analyze the key risk factors based on the information provided, inferring severity and likelihood based on the descriptions and mitigation strategies mentioned.

I. Categorization and Description of Key Risk Factors:

A. Economic Risks:

1. Description: Slowdown in consumer demand due to macroeconomic uncertainties (inflation, interest rates, geopolitical instability). This impacts discretionary spending on consumer durables.
2. Impact Severity: High (significant impact on revenue and profitability)
3. Likelihood: Medium to High (depending on the overall economic climate)
4. Mitigation: Cost optimization, focus on value engineering, diversification of product portfolio and sales channels, and strengthening brand value.
5. Trend: Medium-term risk; the severity depends on global and domestic economic factors.

B. Product Risks:

1. Description: Intense competition and price erosion, especially in the lighting and fans segments, leading to margin pressure.

2. Impact Severity: Medium to High (affects profitability and market share)

3. Likelihood: High (competitive landscape in the consumer durables sector is intense).

4. Mitigation: Product innovation, premiumization of product offerings, focus on energy efficiency and sustainability, and enhancing brand differentiation.

5. Trend: Long-term risk; continuous innovation and differentiation are essential to maintain competitiveness.

6. Description: Product quality issues and related warranty claims.

7. Impact Severity: Medium (affects profitability and brand reputation).

8. Likelihood: Medium (depends on the effectiveness of quality control and manufacturing processes).

9. Mitigation: Stringent quality control measures, improved manufacturing processes, and effective warranty management.

10. Trend: Ongoing risk; continuous improvement in quality control and manufacturing is essential.

11. Description: Regulatory changes (BEE, BIS) impacting product design and manufacturing.

12. Impact Severity: Medium to High (can increase costs and affect product competitiveness).

13. Likelihood: Medium (depends on the frequency and impact of regulatory updates).

14. Mitigation: Proactive engagement with regulatory bodies, investment in R&D to develop compliant products, and continuous monitoring of regulatory changes.

15. Trend: Ongoing risk; proactive compliance is crucial.

C. Supply Chain Risks:

1. Description: Supply chain disruptions due to geopolitical instability, raw material shortages, and logistics issues.
2. Impact Severity: High (affects production, delivery, and profitability).
3. Likelihood: Medium to High (global supply chain volatility is a persistent risk).
4. Mitigation: Diversification of sourcing, strategic partnerships with suppliers, robust inventory management, and development of alternative sourcing strategies.
5. Trend: Long-term risk; building supply chain resilience and flexibility is crucial.

D. Brand Risks:

1. Description: Negative consumer feedback on social media and other platforms negatively impacting brand image and reputation.

2. Impact Severity: Medium to High (affects sales and customer loyalty).

3. Likelihood: Medium to High (depends on the effectiveness of customer service and brand management).

4. Mitigation: Active social media monitoring, enhanced customer service, quick response to complaints, and proactive brand management.

5. Trend: Long-term risk; effective brand management and reputation building are crucial.

6. Description: Prevalence of counterfeit products impacting brand image and sales.

7. Impact Severity: Medium (affects sales and brand reputation).

8. Likelihood: Medium (depends on effectiveness of anti-counterfeiting measures).

9. Mitigation: Proactive market monitoring, legal action against counterfeiting, and consumer awareness campaigns.

10. Trend: Ongoing risk; continuous anti-counterfeiting efforts are necessary.

E. People Risks:

1. Description: High employee attrition rates affecting operational efficiency and continuity.
2. Impact Severity: Medium to High (affects productivity, knowledge transfer, and overall business performance)
3. Likelihood: Medium (depends on employee satisfaction, compensation and benefits packages, and the talent market).
4. Mitigation: Improved employee engagement programs, competitive compensation and benefits, career development opportunities, and effective succession planning.
5. Trend: Ongoing risk in a competitive talent market; proactive talent management is crucial.

F. IT Risks:

1. Description: Cybersecurity threats and data breaches affecting data security and brand reputation.
2. Impact Severity: High (can have significant financial and reputational consequences).
3. Likelihood: High (cyber threats are constantly evolving).
4. Mitigation: Investment in robust cybersecurity infrastructure, employee training, data protection measures, and incident response plans.
5. Trend: Long-term risk; continuous investment in cybersecurity and data protection is crucial.

II. Overall Risk Assessment:

The report suggests that the management is actively working on mitigating most of these risks. However, given the global economic volatility and the dynamic nature of the consumer durables and technology sector, these risks are likely to remain for the foreseeable future, though the severity and likelihood may vary from year to year. The Company’s success will significantly depend on its ability to effectively manage these risks. The report’s lack of a formal risk matrix makes a precise quantification of likelihood and severity challenging. A more detailed risk assessment would likely need additional detail.

Strategic Overview #

Management Assessment #

Crompton Greaves Consumer Electricals Limited’s Integrated Annual Report for FY2023-24 outlines many key strategies, competitive advantages, market conditions, challenges, and opportunities. Here’s a summary based on the report:

I. Key Strategies:

The report prominently features the Crompton 2.0 strategy, a shift from a “profitability-led” approach to a “profit-led growth” strategy. This involves a fundamental change in approach, focusing on accelerated top-line growth while maintaining healthy margins. The key tenets are:

• Enabled & Empowered Organization: Building a high-performing, empowered workforce.
• Consumer Need-Led Innovation: Developing products based on deep consumer insights and needs.
• Premiumization of Portfolio: Expanding the offering of premium, feature-rich products.
• Supply Chain Excellence: Optimizing the supply chain for efficiency, cost-effectiveness, and resilience.
• Go-to-Market Excellence: Strengthening the distribution network and adopting a multi-channel approach.
• Digital Enablement: Leveraging digital technologies for enhanced efficiency and customer engagement.

Other key strategies include:

• Protecting and Growing the Core: Enhancing existing product categories (fans, pumps, appliances) through innovation and market share expansion.
• Transforming the Lighting Business: Revitalizing the lighting segment through new product development, enhanced go-to-market strategies, and focus on B2B opportunities.
• Winning in the Kitchen: Leveraging the Butterfly acquisition to expand market share in kitchen appliances.
• Exploring New Segments: Identifying and entering new, attractive market spaces.

II. Competitive Advantages:

• Strong Brand Legacy: Crompton and Butterfly enjoy established brand recognition and consumer trust.
• Extensive Distribution Network: A wide reach across various channels (retail, e-commerce, etc.) provides market access.
• In-House Manufacturing: Control over manufacturing gives flexibility and quality assurance.
• Innovation & R&D: Continuous investment in R&D leads to the development of innovative and differentiated products.
• Consumer-Centric Approach: A focus on understanding consumer needs and preferences guides product development and marketing strategies.

III. Market Conditions:

• Growth in Consumer Durables: The overall market for consumer durables in India is experiencing growth, driven by rising disposable incomes, urbanization, and increasing demand for better quality products.
• Premiumization Trend: Consumers are increasingly willing to pay more for premium, feature-rich products with advanced technology and better design.
• Emphasis on Energy Efficiency and Sustainability: Growing consumer awareness of environmental impact is driving demand for energy-efficient and sustainable products.
• Government Initiatives: Government policies and schemes (such as PM KUSUM) are creating opportunities in specific areas like solar pumps and infrastructure-related lighting projects.
• Digital Transformation: E-commerce is rapidly expanding, creating new sales channels and altering consumer behavior.

IV. Challenges:

• Intense Competition: The consumer durables market is highly competitive, with numerous players vying for market share.
• Price Erosion: Pressure to reduce prices in certain segments.
• Raw Material Volatility: Fluctuating prices of raw materials impact margins.
• Supply Chain Disruptions: Global uncertainties impacting supply chain reliability.
• Talent Acquisition and Retention: Attracting and retaining skilled employees in a competitive job market.

V. Opportunities:

• Expanding Middle Class: The growing Indian middle class presents a large and expanding market for consumer durables.
• Urbanization and Infrastructure Development: Increased urbanization and investments in infrastructure create opportunities in areas such as housing and lighting.
• Government Initiatives: Government policies and programs supporting the consumer durables sector create opportunities for growth.
• Technological Advancements: The potential to use technological advancements (such as IoT and AI) to develop innovative products and improve operational efficiency.
• E-commerce Growth: Expansion of the e-commerce sector creates significant potential for online sales and market reach.

In summary, Crompton’s management emphasizes a strategy focused on leveraging its brand strength, distribution network, and innovation capabilities to capitalize on the growth opportunities in the Indian consumer durables market while navigating the challenges of intense competition, economic uncertainty, and evolving consumer preferences. Their success hinges on effective execution of the Crompton 2.0 strategy and proactive risk management.

ESG Ratings #

The Crompton Greaves Consumer Electricals Limited annual report mentions ESG ratings from many agencies, but not all provide a numerical score. Here’s what’s included:

• MSCI ESG Ratings: The report states Crompton achieved an “AA” rating from MSCI, indicating strong ESG performance. However, the specific numerical score isn’t given.

• Dow Jones Sustainability Index (DJSI): The DJSI score improved from 34 to 48. Again, a numerical rating is not provided, only the improved score relative to the previous year.

• SES (Sustainalytics): Crompton’s SES Core ESG score is mentioned as 84 out of 100, which is presented in the context of being very high compared to the sector peers.

The report does not provide ratings from other agencies. To get a complete picture of Crompton’s ESG ratings, you would need to consult independent ESG rating providers’ websites directly. They often present different methodologies and therefore, the resulting ratings could also vary.

ESG Initiatives #

Crompton Greaves Consumer Electricals Limited’s annual report highlights various Environmental, Social, and Governance (ESG) initiatives, goals, and practices. Here’s a summary:

I. Environmental Initiatives:

The Company’s environmental focus centers on reducing its carbon footprint and promoting sustainability across its operations and product lifecycle. Key initiatives include:

• Energy Efficiency: Significant improvements in energy efficiency across product lines (fans, water heaters, lighting) leading to a reduction in energy consumption and greenhouse gas (GHG) emissions. Specific examples of technological improvements in product design are mentioned.
• Renewable Energy: Increased use of renewable energy sources in manufacturing. The report mentions generation of renewable energy but doesn’t specify the exact amount or percentage.
• Water Management: Implementation of zero liquid discharge systems (in manufacturing facilities), water recycling initiatives, and water conservation measures (like rainwater harvesting). A notable reduction in water consumption is reported.
• Waste Management: Focus on minimizing waste generation, improving waste segregation, maximizing recycling and reuse, and achieving compliance with EPR (Extended Producer Responsibility) regulations. Significant progress in achieving CPCB targets for plastic waste recycling is highlighted.
• Sustainable Packaging: Shifting towards eco-friendly packaging materials (reducing the use of non-biodegradable materials).

II. Carbon Footprint:

The report provides data on Scope 1 and 2 GHG emissions:

• Scope 1: 3,660 Metric tonnes of CO2e (a 17.6% reduction from the previous year)
• Scope 2: 3,927 Metric tonnes of CO2e
• Overall reduction: 17.6% reduction from the previous year (manufacturing facilities only).

Scope 3 emissions are not fully quantified in this report. The Company mentions that they plan to analyze Scope 3 emissions in the future.

III. Social Initiatives (CSR):

Crompton’s CSR initiatives focus on:

• Water Conservation: Projects focusing on rainwater harvesting and watershed development impacting a large number of villagers.
• Skill & Entrepreneurship Development: Programs aimed at providing vocational training and supporting entrepreneurship among underprivileged youth, especially women, in the communities surrounding the Company’s manufacturing facilities.
• Community Care: Initiatives such as building and upgrading school infrastructure, providing scholarships to underprivileged female students, and establishing a milk bank to support infants.
• Employee Engagement: Employee participation in CSR initiatives, including a “Changemaker Grant” program which allows employees to contribute to community projects.

The report details the number of individuals directly impacted by these initiatives.

IV. Governance Practices:

Crompton’s corporate governance framework emphasizes:

• Board Composition and Diversity: The Board is comprised of Independent and Non-Independent Directors with a stated commitment to diversity and inclusion, including gender diversity. The report emphasizes the different skills and expertise present on the board.
• Board Committees: Several Board committees oversee specific aspects of the business, including audit, risk management, nomination & remuneration, corporate social responsibility, stakeholder relations, and environmental, social and governance (ESG) matters.
• Transparency and Accountability: Commitment to transparent disclosure of information to stakeholders, including financial and non-financial performance.
• Ethical Conduct: A strong Code of Conduct and a whistle-blower policy are in place to promote ethical behaviour and address concerns.
• Risk Management: A robust risk management framework with specific measures to mitigate identified risks, including financial, operational, and environmental risks.
• Compliance: Adherence to relevant laws and regulations.

V. Sustainability Goals:

The report doesn’t explicitly state long-term, quantifiable sustainability goals beyond some general statements about energy efficiency and sustainable practices. While specific initiatives are detailed, targets for the future (e.g., emission reduction targets by a specific date) are not clearly articulated. The launch of an ESG dashboard suggests a strengthening commitment to data-driven sustainability management but detailed targets are not yet specified.

In summary, Crompton Greaves demonstrates a commitment to ESG through various initiatives and practices, especially in areas of energy efficiency and community engagement. However, a more robust and detailed disclosure of longer-term, measurable sustainability goals would further strengthen their reporting. The current reporting emphasizes the ‘what’ and ‘how’ of their actions, rather than establishing clear and measurable ‘impact’ and ‘future targets’.

Additional Information #

Operational Metrics #

Based on Crompton Greaves Consumer Electricals Limited’s Integrated Annual Report for FY2023-24:

• R&D Expenditure (Consolidated): ₹76.14 Crore
• Employee Count (Permanent employees including permanent workers): 2,238

Note that the R&D expenditure is the consolidated figure. The standalone R&D expenditure is given as ₹71.37 Crore. The employee count refers to permanent employees; the total employee count (including contract and temporary workers) is significantly higher.

Key Events #

Several significant events shaped Crompton Greaves Consumer Electricals Limited’s FY2023-24:

• Launch of Crompton 2.0: This strategic initiative marked a shift towards profit-led growth, emphasizing increased investments in brand building, innovation, and go-to-market strategies. This involved a restructuring of the executive leadership and organization.

• Restructuring of Executive Leadership and Organizational Structure: A restructuring of the organization into a matrix structure with new business units and Centers of Excellence to improve efficiency and empowerment.

• Increased Investments in Branding, Innovation, and Go-to-Market: Significant investments were made across these areas, reflected in increased advertising spends, new product launches, and expansion of distribution networks.

• New Product Launches: A large number of new products (165) were launched across various categories, reflecting the company’s commitment to innovation and catering to evolving consumer preferences. Specific product launches, often highlighting technological advancements, are listed for each business segment.

• Expansion into Solar Pumps: The Company secured contracts for supplying solar pumps under the government’s PM KUSUM scheme, marking an entry into the sustainable energy segment.

• Securing Major Infrastructure Projects: The B2B lighting segment secured significant contracts for major infrastructure projects, enhancing visibility and driving revenue growth.

• Attempted Merger with Butterfly: A scheme of amalgamation with Butterfly Gandhimathi Appliances Limited was proposed and filed with regulatory bodies, but ultimately failed to receive the necessary approvals from Butterfly’s public shareholders and was withdrawn.

• Changes in Key Management Personnel (KMP): Several changes in top management positions occurred throughout the year, including appointments, resignations, and changes in designations. These changes are detailed in the report.

• Improved ESG Performance: Significant progress was made in various ESG areas, including energy efficiency, waste management, and community engagement. Several awards and recognition are highlighted in this regard. Independent assurance was also sought and received on certain ESG disclosures.

These events demonstrate a year of significant strategic shifts, operational changes, and progress on multiple fronts for Crompton. The success of these initiatives will be key in determining the company’s future growth trajectory.

Audit Information #

Auditor’s Opinion:

The independent auditor, M S K A & Associates, Chartered Accountants, issued an unmodified (clean) opinion on Crompton Greaves Consumer Electricals Limited’s standalone financial statements for the year ended March 31, 2024. This means the auditor found the financial statements to be fairly presented in accordance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India. The audit report also identified key audit matters related to the assessment of recoverability of investments, goodwill, and provision for warranties. These key audit matters were addressed in the context of the overall audit. A similar unmodified opinion was issued for the consolidated financial statements, noting reliance on the work of other auditors for certain subsidiaries.

Key Accounting Policies:

The annual report details numerous key accounting policies, consistent with Indian Accounting Standards (Ind AS). Some of the most significant include:

• Basis of Preparation: The financial statements are prepared on the accrual basis and using a going concern basis of accounting. Assets and liabilities are classified as current or non-current based on the company’s normal operating cycle (12 months).

• Basis of Measurement: The financial statements are prepared using a historical cost convention, except for financial instruments measured at fair value (through profit or loss or other detailed income), defined benefit liabilities, and share-based payment transactions.

• Property, Plant, and Equipment (PPE): Initially recognized at cost, subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method based on the estimated useful lives of the assets.

• Intangible Assets: Initially recognized at cost. Amortization is applied over the useful life (or indefinite life, if applicable) using the straight-line method. Impairment testing is conducted when indicators suggest potential impairment. Research costs are expensed, while development costs meeting specific criteria are capitalized.

• Goodwill: Recognized at cost less impairment losses, tested annually for impairment using the value-in-use method (discounted cash flow analysis).

• Inventories: Measured at the lower of cost and net realizable value. Cost is determined using the weighted average method.

• Financial Instruments: Classified into categories (amortized cost, FVOCI, FVTPL) based on business model and cash flow characteristics. Impairment is assessed for all financial assets except those measured at fair value through profit or loss. Fair value measurements are categorized within a fair value hierarchy (Level 1, Level 2, Level 3).

• Leases: Right-of-use assets and lease liabilities are recognized for all leases except short-term and low-value leases. Lease liabilities are measured at present value.

• Employee Benefits: Short-term benefits are measured at undiscounted amounts, while post-employment benefits (defined contribution and defined benefit plans) are measured using actuarial valuations.

• Revenue Recognition: Revenue is recognized using the five-step model of Ind AS 115, based on the transfer of control of goods or services to customers.

• Income Taxes: Both current and deferred taxes are recognized.

• Borrowing Costs: Directly attributable borrowing costs are capitalized, while others are expensed.

• Share-Based Payments: Equity-settled share-based payments are measured at fair value at the grant date, and expense is recognized over the vesting period.

• Provisions: Recognized when a present obligation exists, it’s probable that an outflow of resources will be required, and a reliable estimate of the amount can be made.

• Segment Reporting: The company applies Ind AS 108 to identify and report operating segments.

The complete details of the accounting policies are presented in Note 1 to the standalone financial statements. The consolidated financial statements also follow similar key policies, with adjustments for consolidation.