Havells India Ltd:Annual Report 2023-24 Analysis

Havells India Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Havells India Ltd. was established in 1958 by Qimat Rai Gupta in Delhi as a trading business in electrical goods.

Headquarters Location and Global Presence:

The company’s headquarters are located in Noida, Uttar Pradesh, India. Havells has a significant global presence, with manufacturing units in India and across the world and a wide distribution network spanning numerous countries.

Company Vision and Mission:

• Vision: To be a globally respected corporation with a focus on electrical and power distribution equipment.
• Mission: To provide reliable, safe, and energy-efficient solutions that improve people’s lives and contribute to a sustainable future.

Key Milestones in Their Growth Journey:

• 1958: Founded as a trading business.
• 1976: Commenced manufacturing.
• 1996: Established first international manufacturing plant in Faridabad.
• 2007: Acquired Sylvania Lighting (one of the largest acquisition by an Indian company).
• 2010: Forayed into the Lloyd Consumer Durable business.
• 2017: Divested Sylvania Lighting business.
• 2023: Entered the solar water heater segment.

Stock Exchange Listing Details and Market Capitalization:

Havells India Ltd. is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Its market capitalization fluctuates, reflecting market conditions and investor sentiment. Refer to current financial portals for the most up-to-date market capitalization.

Recent Financial Performance Highlights:

Recent financial performance details should be obtained from Havells’ official website, investor relations section, and reputable financial news sources.

Management Team and Leadership Structure:

• Chairman & Managing Director: Mr. Anil Rai Gupta

Any Notable Awards or Recognitions:

Havells has received several awards and recognitions for its business practices, product quality, and sustainability efforts. Specific awards can be found through Havells’ official website and press releases.

Their Products #

Complete Product Portfolio with Categories:

• Cables: Power cables, flexible cables, communication cables
• Lighting: LED lighting, industrial lighting, decorative lighting
• Electrical Consumer Durables: Fans, water heaters, air coolers, small appliances
• Switchgear: MCBs, RCCBs, distribution boards
• Motors: Industrial motors, submersible pumps
• Home Appliances: Air conditioners, refrigerators, washing machines (Lloyd Brand)
• Power Capacitors: APFC panels, capacitors

Flagship or Signature Product Lines:

• Cables
• MCBs (Miniature Circuit Breakers)
• Fans
• LED Lighting
• Air Conditioners (Lloyd Brand)

Key Technological Innovations or Patents:

Havells invests in R&D and has several patents related to their products, including innovations in energy efficiency, smart home solutions, and electrical safety. Check their annual reports and press releases for specifics.

Manufacturing Facilities and Production Capacity:

Havells has state-of-the-art manufacturing facilities in India and abroad. Production capacity varies depending on the product category. Refer to official company documents for detailed information.

Quality Certifications and Standards:

Havells adheres to stringent quality standards and holds certifications such as ISO 9001, ISO 14001, and OHSAS 18001, among others.

Any Unique Selling Propositions or Technological Advantages:

• Wide Product Range: Offers a comprehensive range of electrical and consumer durable products.
• Strong Brand Reputation: Known for reliability, safety, and quality.
• Extensive Distribution Network: Reaches customers across India and globally.
• Technological Innovation: Continuously invests in R&D to develop innovative products.

Recent Product Launches or R&D Initiatives:

Recent product launches and R&D initiatives can be found on Havells’ website and through press releases.

Primary Customers #

Target Industries and Sectors:

• Residential
• Commercial
• Industrial
• Infrastructure
• Government

Geographic Markets (Domestic vs. International):

Havells has a strong presence in the Indian domestic market and is expanding its reach in international markets, including the Middle East, Africa, Latin America, and Southeast Asia.

Major Client Segments (Agricultural, Industrial, Residential, etc.):

• Residential: Homeowners, builders, contractors
• Commercial: Offices, hotels, retail establishments
• Industrial: Factories, manufacturing plants, infrastructure projects
• Agricultural: Farmers, irrigation projects

Distribution Network and Sales Channels:

Havells utilizes a wide distribution network consisting of:

• Authorized dealers and distributors
• Retail outlets
• Online channels
• Project sales

Major Competitors #

Direct Competitors in India and Globally:

• India: Polycab, Crompton Greaves, Bajaj Electricals, Finolex Cables, KEI Industries
• Globally: Siemens, Schneider Electric, Philips Lighting (Signify), Legrand

Competitive Advantages and Disadvantages:

• Advantages: Wide product portfolio, strong brand reputation, extensive distribution network, technological innovation.
• Disadvantages: Intense competition, fluctuating raw material prices, changing consumer preferences.

How They Differentiate From Competitors:

Havells differentiates itself through its comprehensive product range, focus on quality and safety, strong brand reputation, and extensive distribution network.

Industry Challenges and Opportunities:

• Challenges: Intense competition, rising raw material costs, economic slowdown, changing regulatory landscape.
• Opportunities: Growing demand for energy-efficient products, increasing infrastructure development, rising disposable incomes, government initiatives promoting electrification.

Market Positioning Strategy:

Havells positions itself as a premium brand offering high-quality, reliable, and technologically advanced electrical and consumer durable products.

Future Outlook #

Expansion Plans or Growth Strategy:

Havells is focused on expanding its presence in existing markets, entering new geographies, and growing its product portfolio through organic growth and strategic acquisitions.

Upcoming Products or Innovations:

Details regarding upcoming products or innovations can be found on Havells’ website and through press releases.

Sustainability Initiatives or ESG Commitments:

Havells is committed to sustainable business practices and has implemented several initiatives to reduce its environmental impact, promote social responsibility, and ensure ethical governance. Refer to their sustainability reports for details.

Industry Trends Affecting Their Business:

• Increasing adoption of energy-efficient products
• Growing demand for smart home solutions
• Rise of e-commerce
• Government initiatives promoting electrification and infrastructure development

Long-Term Vision and Strategic Goals:

Havells aims to be a globally recognized leader in the electrical and consumer durable industry, providing innovative and sustainable solutions that improve people’s lives.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: Grew 10% in FY 2023-24 (₹18,550 crores) from FY 2022-23 (₹16,868 crores), and 26% from FY 2021-22 (₹13,889 crores).
• EBITDA: Increased to ₹1,845 crores in FY 2023-24, up from ₹1,780 crores in FY 2022-23 and ₹1,757.61 in FY 2021-22.
• EBITDA Margin: Expanded and stood at 9.9% for FY2023-24.
• PAT: Increased by 18% to ₹1,273 crores in FY 2023-24 from ₹1,075 crores in FY 2022-23, and up from ₹1,194.73 crores in FY 2021-22.
• Earnings Per Share (EPS): Increased to ₹20.32 in FY 2023-24 from ₹17.16 in FY 2022-23.
• Capital Expenditure: Increased to ₹713 crore in FY 2023-2024, up from ₹571 in FY 2022-23 and 256 Crore in FY 2021-22.

Business Segment Performance #

• Switchgears: Revenue grew by 5.9% to ₹2,245 crores in FY 2023-24, with segment results at 26.5% contribution margin.
• Cables: Revenue grew by 14.2% to ₹6,318 crores, with contribution margins at 15.0%.
• Lighting and Fixtures: Revenue increased marginally by 1.6% to ₹1,627 crores, with contribution margins at 30.1%.
• Electrical Consumer Durables: Revenue grew modestly by 5.6% to ₹3,482 crores, with contribution margins at 23.5%.
• Lloyd Consumer: Revenue up by 12.4% reaching ₹3,785 crore with contribution margins at 7.9%.
• Others: This segment, including motors, solar, pumps, personal grooming, and water purifiers, grew by 15.1%.

Major Strategic Initiatives and Their Progress #

• Brand Building: Transitioned to a ‘house of brands’ strategy, catering to diverse consumer segments, with sustained investments in brand building enhancing brand resonance.
• Omni-channel Expansion: Increased presence in modern format retail, e-commerce, and quick commerce. Expanded rural reach with over 250 new UTSAV stores, totaling 600+.
• Innovation: Focus on developing innovative products with IoT capabilities and aesthetically unique designs, with expanded R&D facilities.
• Digitisation: Investments across the organization to drive efficiencies. Manufacturing Execution Systems (MES) deployed in various plants to enhance transparency and productivity.
• Manufacturing: Capacity expansion across categories, including new plants in Sri City and Tumkur.
• Talent Investment: Significant investments in human capital, focusing on nurturing internal talent and strategic new additions.
• International Business: New intitiatives were undertaken to increase international business and forming a JV in US for Air conditioner business.

Risk Landscape Changes #

• Identified Risks: Include business disruption due to natural disasters and geopolitical conflicts, geographical and channel concentration, risks related to the Lloyd segment, dependency on single plant locations, meeting emerging consumer trends, brand positioning, social media, customer service, product quality, import dependency, and financial risks (commodity and currency fluctuation).
• Mitigation Strategies: Include rural expansion, diversification of channels, R&D investments, digitisation, supplier relationship management, and cybersecurity measures.

ESG Initiatives and Metrics #

• Environmental: Received ‘Zero Waste to Landfill’ certification across all plants and corporate offices. Renewable energy constitutes 8.4% of total electricity consumed. Diesel consumption reduced by 50%.
• Social: Ongoing mid-day meal initiative in Alwar, Rajasthan, impacting over 95 million students. Collaboration with Plaksha University for educational infrastructure and scholarships. Teacher upskilling program in collaboration with Central Square Foundation (CSF).
• Governance: Consistent recognition by ESG rating agencies such as MSCI, Sustainalytics, and FTSE4Good.

Management Outlook #

• Optimistic about FY 2024-25 due to expectations of a strong summer and robust real estate activity.
• Commitment to leveraging the diverse product portfolio and continued investment in key growth pillars.
• Expectations for Lloyd’s journey and potential in the expanding consumer durables space remain positive.

Detailed Analysis #

Havells India Limited: Segment-Wise Financial Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

( in Crores)

Significant Changes in Major Line Items (>10% YoY) #

• Cables Segment Assets: Increased by 19.82% from FY23 to FY24, from 1,309.14 Cr to 1568.61 Cr.
• Cables Segment Liabilities: Increased by 37.09% from FY23 to FY24, from 859.26 Cr to 1177.92 Cr.
• Unallocable Assets: Increased by 31.59% From 3,332.43 Cr to 4385.66
• Unallocable liabilities Increased by 6.02%
• Others Segment Assets: Increased by 13.83% from FY23 to FY24.

Debt Structure and Maturity Profile #

The company reported no debt. However, It has Lease Liabilities.

The maturity analysis of lease liabilities (undiscounted) is as follows:

As at March 31, 2024

As at March 31, 2023

Off-Balance Sheet Items #

• Contingent liabilities: Claims/Suits filed against the Group not acknowledged as debt: Rs. 6.67 crores (FY24), Rs. 6.83 crores (FY23)
• Disputed tax liabilities: Rs. 110.25 crores (FY24), Rs. 54.74 crores (FY23).
• Havells also has an outstanding export obligation of `236.44 crores, against a duty exemption of 12.56

Havells India Limited - Financial Analysis (FY24) #

Revenue Breakdown by Segment/Geography #

• Switchgears: FY24 revenue of ₹2,245 crores, a 5.9% growth from FY23’s ₹2,120 crores.
• Cables: FY24 revenue of ₹6,318 crores, a 14.2% growth from FY23’s ₹5,533 crores.
• Lighting and Fixtures: FY24 revenue of ₹1,627 crores, a 1.6% growth from FY23’s ₹1,602 crores.
• Electrical Consumer Durables: FY24 revenue of ₹3,482 crores, a 5.6% growth from FY23’s ₹3,296 crores.
• Lloyd Consumer: FY24 revenue of ₹3,785 crores, a 12.4% growth from FY23’s ₹3,369 crores.
• Others: FY24 revenue of ₹1,094 crores, a 15.1% growth from FY23’s ₹950 crores.
• Geographic Breakdown (FY24):
  • India: ₹17,973.28 crores.
  • Outside India: ₹603.23 crores.

Cost Structure Analysis #

• Cost of materials consumed: ₹9,873.77 crores.
• Purchases of Stock-in-trade: ₹2,452.18 crores.
• Employee benefits expense: ₹1,548.51 crores.

Margin Analysis #

• Consolidated net profit margin for FY24: 6.83% (6.34% in FY23).
• Segment-wise Contribution Margins (FY24):
  • Switchgears: 26.5% (26.1% in FY23).
  • Cables: 11.3% (9.5% in FY23).
  • Lighting and Fixtures: 15.2% (15.3% in FY23).
  • Electrical Consumer Durables: 11.1% (12.6% in FY23).
  • Lloyd Consumer: (4.3)% ((6.6)% in FY23).
  • Others: 2.2% (3.5% in FY23).

Operating Leverage #

• Havell’s saw a 10% revenue growth to ₹18,550 crores in FY24 (₹16,868 crores in FY23). Operating profit expanded faster, suggesting positive operating leverage.

Non-Recurring Items #

• FY23 included an exceptional loss due to fire of ₹112.52 crores, offset by an insurance claim receivable of ₹112.52 crores.

EPS Analysis #

• Basic EPS: FY24: ₹20.32 (FY23: ₹17.16).
• Diluted EPS: FY24: ₹20.32 (FY23: ₹17.16).

Havells Financial Analysis: Key Performance Indicators (FY23-FY24) #

Profitability Ratios (3-Year Trends) #

Havells Standalone Data #

• Return on Equity (ROE):
  • FY24: 18.12%
  • FY23: 17.06%
  • FY22: Not Available
• Return on Capital Employed (ROCE):
  • FY24: 19.33%
  • FY23: 18.73%
  • FY22: Not Available
• EBITDA Margin:
  • FY24: 11.3%
  • FY23: 10.5%
  • FY22: Not Available
• Net Profit Margin:
  • FY24: 6.87%
  • FY23: 6.38%
  • FY22: Not Available

Havells Consolidated Data #

• Return on Equity (ROE):
  • FY24: 16.96%
  • FY23: 16.16%
• Earnings Before Interest and Taxes (EBIT):
  • FY24: 11.55%
  • FY23: 10.26%
• EBITDA:
  • FY24: 11.25%
  • FY23: 10.51%

Liquidity Metrics #

Havells Standalone Data #

• Current Ratio:
  • FY24: 1.84
  • FY23: 1.84

Havells Consolidated Data #

• Current Ratio:
  • FY24: 1.84
  • FY23: 1.84

Efficiency Ratios #

Havells Standalone Data #

• Inventory Turnover Ratio:
  • FY24: 5.21
  • FY23: 5.05
• Trade Receivables Turnover Ratio:
  • FY24: 17.40
  • FY23: 19.37

Havells Consolidated Data #

• Inventory Turnover Ratio:
  • FY24: 5.44
  • FY23: 4.55
• Trade Receivables Turnover:
  • FY24: 16
  • FY23: 17.37

Leverage Metrics #

Havells Standalone Data #

• Debt-to-Equity Ratio:
  • FY24: 0.00
  • FY23: 0.00
• Interest Coverage Ratio:
  • FY24: 19.18
  • FY23: 3.00

Havells Consolidated Data #

• Debt-to-Equity Ratio:
  • FY24: 0.00
  • FY23: 0.00

Working Capital Ratios #

Havells Standalone Data #

• Working Capital Management - Inventory Management. FY24 Less Likely, Medium, Rapid FY23 Less Likely, Medium, Slow FY22: Data not Available.

Key Observations #

• Switchgear and Cables segments are the largest revenue contributors, the electrical consumer durables segment shows a reasonable contribution margin.
• The Lloyd Consumer segment has a negative segment result, indicating losses.
• The Company have had no long term borrowings except for lease liability.

Havells India Limited: Segment Performance Analysis (FY 2023-24) #

Revenue and Profitability Metrics with Growth Rates #

• Switchgears: FY 2023-24 revenue: ₹ 2,245 crores (5.9% growth). Segment results: ₹ 596 crores (26.5% margin).
• Cables: FY 2023-24 revenue: ₹ 6,318 crores (14.2% growth). Segment results: ₹ 716 crores (11.3% margin).
• Lighting and Fixtures: FY 2023-24 revenue: ₹ 1,627 crores (1.6% growth). Segment results: ₹ 247 crores (15.2% margin).
• Electrical Consumer Durables: FY 2023-24 revenue: ₹ 3,482 crores (5.6% growth). Segment results: ₹ 387 crores (11.1% margin).
• Lloyd Consumer: FY 2023-24 revenue: ₹ 3,785 crores (12.4% growth). Segment results: ₹ (164) crores (4.3% margin).
• Others: FY 2023-24 revenue: ₹ 1,094 crores (15.1% growth). Includes motors, solar, pumps, personal grooming, and water purifiers.

Market Share and Competitive Position #

• Lloyd: Solidified its position among key players in the Indian air conditioner market.
• Havells: Became the most penetrated FMEG brand in rural markets via the Rural Vistaar initiative.

Key Products/Services Performance #

• Switchgears: Introduced new products like i-Sense and AFDD (Arc Fault Detection Devices) range. Expanded the Signia Smart range.
• Cables: Focused on strengthening position in power cables.
• Lighting and Fixtures: Launched thematic product lines (Johari, Rangmanch, Aakrati, Adaa) and expanded the Nimbus range. Emphasis on Home Art Light stores for premium lighting.
• Electrical Consumer Durables: Key focus on BLDC+ range of fans. Launched new products like Evo Cook Induction, Blaze Dry Iron, and Foodo (MG & Food Processor).
• Lloyd: Launched India’s first Designer AC Stellar & Stylus range and introduced Rapid Cool Technology refrigerators and Novante Fully Automatic Washing Machines.

Geographic Distribution and Market Penetration #

• Rural Expansion: Added 250+ UTSAV stores in rural markets, reaching 600+ total.
• Urban Distribution: Initiative to deepen presence in urban areas, focusing on switches, MCBs, flexible cables, and fans.
• International Business: Expanded International Business and forays into USA.

Segment-wise CAPEX and ROIC #

• Total CAPEX (FY 2023-24): ₹ 713 crores
  • Switchgears: ₹ 54 crores
  • Cables: ₹ 251 crores
  • Lighting and Fixtures: ₹ 109 crores
  • Electrical Consumer Durables: ₹ 65 crores
  • Lloyd Consumer: ₹ 162 crores
  • Others: ₹ 29 crores
  • Common: ₹ 42 crore
• ROIC: Overall company data only, not provided for individual segments.

Operational Efficiency Metrics #

• All plants are certified with ISO 14001, 45001, and 50001.
• Manufacturing Execution Systems (MES): Being deployed across plants.
• Zero Waste to Landfill: All manufacturing plants and corporate offices are certified.
• Customer calls: ~81% of customer calls are resolved within 24 hours and up to 96% are resolved within 72 hours
• Escalations: 99.9% closed within 24 hours.
• Net promoter score: 75

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Brand building investments across traditional and digital media.
  • Omni-channel strategy (modern format retail, e-commerce, quick commerce).
  • Product innovation and R&D expansion.
  • Digitization initiatives across all functions.
  • Capacity expansion (cables plant in Tumkur, EMS facility in Neemrana).
  • International business expansion (US JV for air conditioners).
  • Talent aquisition, upskilling and retention.
• Challenges:
  • Sluggish consumer demand in B2C segments.
  • Price erosion in LED components (lighting segment).
  • Intense competition in consumer durables market.
• Outlook:
  • Expectation of strong summer. Robust real estate activity can drive consumer demand.

Havells India Limited: Segment-Wise Risk Analysis #

Switchgears #

Strategic Risks #

• Severity: Medium
• Likelihood: Likely, due to dependency on government, infrastructure, housing, and power, and increase in geographical & channel concentration.
• Trend: Increasing, due to slower growth of 5.9% in FY24.
• Mitigation Strategies: Focus on expanding into rural markets through “Rural Vistaar” and UTSAV stores, and penetration into emerging channels, such as MFR and e-commerce.
• Potential Financial Impact: Revenue and margin contraction.

Operational Risks #

• Severity: Medium, due to dependency on a single plant location.
• Likelihood: Likely.
• Trend: Stable.
• Mitigation Strategies: Implementation of quality maturity progression, documented process, and IT integration.
• Control Effectiveness: Moderate, needs continued improvement in technology adoption.

Financial Risks #

• Severity: Low.
• Likelihood: Likely.
• Trend: Stable.
• Mitigation Strategies: Commodity price fluctuation, Hedging strategy, and Average pricing model.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Less Likely
• Trend: Stable.
• Mitigation Strategies: Strong focus and management’s “Zero Tolerance” policy and a quarterly review by Internal Audit.

Emerging Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Increasing, lag in meeting emerging consumer trends and dependency on third party for critical technologies.
• Mitigation Strategies: Increased investment in R&D; Focus on innovation.

Cables #

Strategic Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Decreasing, with strong revenue growth of 14.2%
• Mitigation Strategies: Green/field capacity expansion (Tumkur plant).
• Potential Financial Impact: Revenue decrease due to capacity limitations.

Operational Risks #

• Severity: Medium.
• Likelihood: Less Likely.
• Trend: Improving, due to focus on supply chain efficiency, SKU rationalization, and use of advanced forecasting tools.
• Potential Financial Impact: Inventory obsolescence.

Financial Risks #

• Severity: Low.
• Likelihood: Likely.
• Trend: Stable.
• Mitigation Strategies: Price fluctuation managed by long term and short term contracts.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Less Likely
• Trend: Stable.
• Mitigation Strategies: Strong focus and management’s “Zero Tolerance” policy and a quarterly review by Internal Audit.

Emerging Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Increasing, lag in meeting emerging consumer trends and dependency on third party for critical technologies.
• Mitigation Strategies: Increased investment in R&D; Focus on innovation.

Lighting and Fixtures #

Strategic Risks #

• Severity: Medium.
• Likelihood: Likely, due to intense competition and price erosion.
• Trend: Stable, with marginal value growth (1.6%).
• Mitigation Strategies: Diversification from traditional Lighting to Professional and Premium Lighting.

Operational Risks #

• Severity: Medium
• Likelihood: Less Likely.
• Trend: Decreasing.
• Mitigation Strategies: Implementation of robust process control and quality management system.

Financial Risks #

• Severity: Low
• Likelihood: Likely
• Trend: Stable
• Mitigation Strategies: Price erosion mitigated by focusing on volume growth and premium product segments.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Less Likely
• Trend: Stable.
• Mitigation Strategies: Strong focus and management’s “Zero Tolerance” policy and a quarterly review by Internal Audit.

Emerging Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Increasing, lag in meeting emerging consumer trends and dependency on third party for critical technologies.
• Mitigation Strategies: Increased investment in R&D; Focus on innovation.

Electrical Consumer Durables (ECDs) #

Strategic Risks #

• Severity: Medium.
• Likelihood: Likely, impacted by lower consumer demand and unseasonal rains.
• Trend: Stable, with modest revenue growth of 5.6%.
• Mitigation Strategies: Reinforcing the brand and its value proposition.

Operational Risks #

• Severity: Medium.
• Likelihood: Less Likely.
• Trend: Stable.
• Mitigation Strategies: Quality management system in place.

Financial Risks #

• Severity: Low.
• Likelihood: Less Likely.
• Trend: Stable.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Less Likely
• Trend: Stable.
• Mitigation Strategies: Strong focus and management’s “Zero Tolerance” policy and a quarterly review by Internal Audit.

Emerging Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Increasing, lag in meeting emerging consumer trends and dependency on third party for critical technologies.
• Mitigation Strategies: Increased investment in R&D; Focus on innovation.

Lloyd Consumer #

Strategic Risks #

• Severity: High.
• Likelihood: Likely, due to operating losses.
• Trend: Improving, with revenue growth of 12.4%.
• Mitigation Strategies: Capacity expansion, focus on premium product offerings.
• Potential Financial Impact: Negative profitability.

Operational Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Decreasing, with capacity scaling up at Sri City plant.
• Mitigation Strategies: New age Technology implementation.

Financial Risks #

• Severity: High
• Likelihood: Likely
• Trend: Improving, with reduced operating loss.
• Mitigation Strategies: Financial risks are mitigated through operational efficiency.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Less Likely
• Trend: Stable.
• Mitigation Strategies: Strong focus and management’s “Zero Tolerance” policy and a quarterly review by Internal Audit.

Emerging Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Increasing, lag in meeting emerging consumer trends and dependency on third party for critical technologies.
• Mitigation Strategies: Increased investment in R&D; Focus on innovation.

Others #

Strategic Risks #

• Severity: Medium
• Likelihood: Likely, with 15.1% growth
• Trend: Positive, with revenue growth and new category expansion.

Operational Risks #

• Severity: Low
• Likelihood: Less Likely
• Trend: Stable
• Mitigation Strategies: Strong control in place

Financial Risks #

• Severity: Low
• Likelihood: Less Likely
• Trend: Stable.
• Mitigation Strategies: Established financial risk management policy in place.

Compliance/Regulatory Risks #

• Severity: Medium.
• Likelihood: Less Likely
• Trend: Stable.
• Mitigation Strategies: Strong focus and management’s “Zero Tolerance” policy and a quarterly review by Internal Audit.

Emerging Risks #

• Severity: Medium.
• Likelihood: Likely.
• Trend: Increasing, lag in meeting emerging consumer trends and dependency on third party for critical technologies.
• Mitigation Strategies: Increased investment in R&D; Focus on innovation.

Havells India Limited Strategic Analysis #

Long-Term Strategic Goals and Progress: #

• Switchgears: Aims to strengthen market position. Progress: 5.9% revenue growth, new product launches with automation focus.
• Cables: Goal is to capitalize on infrastructure demand. Progress: 14.2% revenue growth, capacity expansion for power cables.
• Lighting and Fixtures: Seeks to maintain leadership through differentiated products. Progress: Steady growth in professional lighting.
• Electrical Consumer Durables (ECDs): Focus on premiumization and market share gains. Progress: Growth of premium products, 5.6% revenue growth.
• Lloyd Consumer: Aims for Lloyd to become a profitable full-stack consumer durable player. Progress: 12.4% revenue growth, margin expansion, in-house manufacturing, and premiumization.
• Others: Continuous investments in seeding and expanding new product categories.

Competitive Advantages and Market Positioning: #

• Switchgears: Strong brand, wide product portfolio, and deep distribution network.
• Cables: Leveraging “Make in India” with in-house manufacturing and wide distribution.
• Lighting and Fixtures: Competitive edge through design, innovation, and a “house of brands” strategy.
• Electrical Consumer Durables: Strong brand, diverse product portfolio, and continuous innovation (BLDC+ fans).
• Lloyd Consumer: Leveraging Havells’ brand, distribution, and increasing in-house manufacturing. Increased penetration in general trade and expanded into modern retail and e-commerce formats.

Innovation Initiatives and R&D Effectiveness: #

• All Segments: Consistently invests over 1% of net sales in R&D, with R&D headcount grown to 700+.
• Switchgears: Focus on automation with solutions like i-Sense and launch of AFDD.
• Lighting and Fixtures: New aesthetically & functionally-unique solutions like Home Art Light stores.
• Electrical Consumer Durables: Focus on BLDC+ fans, incorporating features like “Smart Sense AI” and “Direct Voice Command.”
• Lloyd Consumer: India’s first designer AC range and washing machines were launched.

Management’s Track Record in Execution: #

• Switchgears: Demonstrated resilient performance.
• Cables: Demonstrated consistent, double-digit growth.
• Lighting and Fixtures: Delivered healthy volume growth.
• Electrical Consumer Durables: Positive results in the second half of FY 2024.
• Lloyd Consumer: Increase in revenue and expanded margins, showing execution of strategies.
• Overall: The Company consistently delivers profitable growth and maintains a debt-free status. Consistent ranking in top 10 global companies in electrical equipment sector.

Capital Allocation Strategy: #

• All Segments: Balanced capital allocation, investments are made in brand building, channel expansion, innovation, and talent.
• Manufacturing: Continuous Capital Expenditure of ’ 713 crores in FY 2023-24, focused on in-house manufacturing, including capacity expansion (New plants at Sri City and Tumkur).
• Dividend Payout: Consistent dividend payout record, supported by strong cash flow generation.

Organizational Changes and Their Impact: #

• Talent: Continued investment in human capital, developing leaders from within and focus on placing talent behind emerging categories. Implementation of Employee Ownership Plan (EOP).
• Digitisation: Significant investments towards digitisation.

ESG Framework: Havells Financial Analysis FY 2023-24 #

Environmental Metrics and Targets #

• Havells achieved ‘Zero Waste to Land/fill’ certification across all plants and corporate offices.
• Diesel consumption reduced by 50% from the FY 2012-13 base year (11.15 lakh liters).
• 100% of organic waste disposal has end-user authentication.
• Renewable energy share in total electricity consumption: 8.4%.
• Total solar energy generated: 11,296.60 MWh.
• Total renewable energy consumed: 11,159.29 MWh.
• Total water recycled: 33%.
• Total waste recycled: 49%.
• GHG emissions reduced by 1,989 tCO2e through diesel to PNG transition.
• Energy intensity decreased by 59% relative to the FY 2012-13 baseline.
• 39 energy management initiatives resulted in 902 tCO2e emission reductions.
• Solar power generation capacity: 11.26 MW (33% of total contract demand).
• 45% reduction in Scope 1&2 intensity compared to base year 2012-2013.

Social Responsibility Programs #

• CSR spending: ₹30 crores.
• Mid-day Meal program in Alwar, Rajasthan (70,000 students daily, awarded for 7th consecutive time).
• Free coaching classes for over 900 students.
• Supported the construction of the Havells Research Building at Plaksha University.
• FLN program (Central Square Foundation): Benefited 86,000+ students across 1,700+ schools in Aligarh.
• Project Baala: Impacted over 600,000 women and girls with over 2,800 menstrual hygiene workshops, receiving a National Award for Eminence.
• Over 2.1 million teak trees planted since 2018 (survival rate exceeding 85%).
• Maharath skill development program (ESSCI): Certified 5,000 electricians.
• Junior golf training program (Delhi Golf Club partnership).

Governance Structure and Effectiveness #

• Board of Directors has a Nomination and Remuneration Committee.
• Enterprise Risk Management (ERM) Committee oversees risk management strategy.
• ERM Committee supervises management’s adherence to risk management adequacy.
• Information Security Management System (ISMS) certified with ISO 27001:2022.
• “SATARK” mechanism established for stakeholders to report malpractice.
• Corporate Governance Rating of CG 2+ by CareEdge.

Sustainability Investments and ROI #

• R&D spend: ₹206 crores (over 1% of net sales invested annually).
• 46% of R&D spending on sustainable technologies and products.
• Advertisement and Sales Promotion spend: ₹527 crores (2.8% of revenue).

ESG Ratings and Peer Comparison #

• ‘A’ rating from MSCI ESG Rating & Indices.
• Member of the FTSE4Good Indices family.
• CRISIL rated ‘highest in its sector’ in the Sustainability Yearbook.
• CDP disclosure ratings: ‘B’ for water security (above global and regional averages) and ‘C’ for climate change (global average).
• Ranked 2nd in India’s Most Sustainable Companies in the Capital Goods category by Business World Magazine.

Regulatory Compliance and Future Preparations #

• Compliant with statutory and regulatory provisions (“Zero Tolerance” policy for non-compliance).
• All manufacturing plants are ISO 14001, 45001, and 50001 certified.
• Initiated a Net Zero journey, including Scope 3 emissions inventorisation, aligning with SBTi.
• BRSR core indicators are validated, as per the SEBI mandate.

Financial Outlook and Segment Analysis #

Switchgears #

• Management Guidance and Assumptions: Anticipated demand increase due to new real estate launches.
• Strategic Initiatives: Focus on customer-centric solutions, automation, and new product launches (i-Sense, Adiva, Magnus ranges, Grey Finish in Signia Smart).
• Potential Challenges and Opportunities: Expanding market share in the mid-market segment and leveraging new product introductions.
• Scenario Analysis: Growth linked to real estate sector activity.

Cables #

• Management Guidance and Assumptions: Continued double-digit growth driven by infrastructure demand.
• Strategic Initiatives: Deeper penetration into semi-urban and rural markets using a multi-brand strategy (Havells, Standard, REO).
• Capital Expenditure Plans: Greenfield expansion of power cables capacity in Tumkur, Karnataka, expected in FY 2024-25. ‘251 crores have been for capex in cables in 2024.
• Potential Challenges and Opportunities: Addressing capacity constraints with the new Tumkur plant.
• Scenario Analysis: Growth dependent on government infrastructure spending and private sector manufacturing.

Lighting and Fixtures #

• Management Guidance and Assumptions: Healthy volume growth expected, driven by professional lighting.
• Strategic Initiatives: Focus on customer-centricity and product innovation. Expansion of product lines (Johari, Rangmanch, Aakrati, and Adaa). Investment in Home Art Light brand stores.
• Capital Expenditure Plans: capex of ‘109 crores during FY24.
• Potential Challenges and Opportunities: Addressing price erosion in LED components. Opportunities exist in premium lighting and custom-designed solutions.
• Scenario Analysis: Success dependent on brand strength and product differentiation.

Electrical Consumer Durables (ECDs) #

• Management Guidance and Assumptions: FY 2023-24 was a stabilization year.
• Strategic Initiatives: Focus on premiumization (BLDC and Super premium BLDC+ fans). New product introductions and expansion into kitchen appliances.
• Potential Challenges and Opportunities: Addressing lower consumer demand and weather-related disruptions. Opportunities in premium offerings and emerging channels.
• Scenario Analysis: Dependent on consumer spending and weather patterns.

Lloyd Consumer #

• Management Guidance and Assumptions: Aims for profitable growth.
• Strategic Initiatives: Focus on premiumization through in-house manufacturing, innovative products, and brand investments. Launch of designer AC range. Increased penetration in general trade and expansion into organized retail and e-commerce. Establishment of “Lloyd Gallery” stores.
• Capital Expenditure Plans: Significant past investments in manufacturing facilities. capex of ‘162 crores during FY24.
• Potential Challenges and Opportunities: Scaling up operations and achieving profitability.
• Scenario Analysis: Dependent on brand acceptance, market share growth, and operational efficiencies.

Others #

• Management Guidance and Assumptions: Strategic investment aims to enhance capabilities across Motors, Solar, Pumps, Personal Grooming, and Water Purifier categories.
• Strategic Initiatives: Continued to invest in seeing and expanding new categories.
• Capital Expenditure Plans: capex of ‘29 crore in FY24
• Potential Challenges and Opportunities: Challenges include intensifying competition across segments. Opportunities lie in leveraging the established distribution network and brand to accelerate growth.
• Scenario Analysis: Expansion is dependent on sustained investments, the Company’s performance could be tested with signi/ficant deviations in the strategic investments and the ability to differentiate their product range.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• The auditor’s report contains an unmodified opinion on the standalone and consolidated financial statements.
• No qualifications were reported by the statutory auditors.

Key Accounting Policies #

• The financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) and the Companies Act, 2013.
• The historical cost convention is applied, with certain assets and liabilities measured at fair value.
• Revenue from the sale of goods is recognized when control transfers to the customer.

Internal Control Effectiveness #

• The Company maintains an internal financial control system.
• The auditor’s report expresses an opinion on the adequacy and operating effectiveness of these controls, with reference to the financial statements.
• Management asserts responsibility for establishing and maintaining internal controls.

Regulatory Compliance Status #

• The Company is compliant with applicable Secretarial Standards.
• The Company has complied with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• There were no material fines or non-monetary sanctions for non-compliance with environmental laws and regulations.
• No instances of fraud were reported by the auditors.

Legal Proceedings and Potential Impact #

• There are ongoing legal cases/suits filed against the Company, but the management believes, based on legal advice, that their position will likely be upheld.
• Disputed tax liabilities exist, with amounts deposited under protest.

Related Party Transactions #

• All related party transactions were conducted in accordance with the Companies Act, 2013, and SEBI Listing Regulations.
• A Related Party Transactions Policy is in place and available on the Company’s website.
• The are transactions with related parties are present, including purchases of goods, sale of products and services, commission on sales, and rent/usage charges.

Subsequent Events #

• Between the end of the financial year and the report date, 357,034 equity shares of ₹1 each were approved for grant and vested under the Employee Stock Purchase Schemes.
• Closure of the said JV agreement was done post the balance sheet date on 12 th April, 2024.

Analysis of Accounting Quality #

• There are no indication that previously unrecorded transaction in the books of accounts that have been surrendered or disclosed as income during the year in the tax assessment under the Income Tax Act, 1961.

Regulatory Risk Assessment #

• The primary regulatory risks are related to ongoing tax litigations.
• Compliance with environmental regulations, labor laws, and SEBI regulations is maintained.
• The Company is subject to the “Zero Waste to Land/fill’ certi/fication.