The Indian household air-cooler market is estimated at 7-8 mln units, with 25% share held by organized players, valued at roughly 20 bln rupees. Of this, Symphony Ltd holds a market share of 45%.
However, delay in the summer season the past two years has led the company to look at commercial and industrial coolers new avenues for growth.
The company is also mulling a buyback to reward its shareholders, who have seen its share price fall from 2,209 rupees in January 2018 to a low of 815 rupees in October the same year, a level last seen in December 2014.
“Best to share it (cash) with the shareholders, instead of retaining it…buyback is most likely that would happen,” Achal Bakeri, chairman and managing director of Symphony Ltd, told Cogencis in an interview.
Following are the edited excerpts of the interaction with Bakeri:
Q: Analysts predict 27% growth for you by 2022, even when your net profit has been down 36-49% the last three quarters. How do you see this scenario?
A: This is by no means the worst we have seen. We were bankrupt in 2002 and almost ceased to be a company. But we survived. This (the fall in net profit the last three quarters) is an aberration, which certainly caught us unawares. We saw a summer like this in 1996, when we had a huge amount of inventory. But we were a small company then.
This year too inventory has built up due to a bad summer. Lot of material did not move in the first quarter and the hangover can still be felt. If all goes well, April onwards, the summer should strike with its normal intensity and things would be back to normal.
Q: What gives you confidence of better times ahead?
A: We make coolers for homes, which has been our mainstay all these years. For a few years now, we have been importing industrial coolers from our subsidiary in Mexico. We will now be producing them in India by 2019-20.
For last couple of years, we have also been bringing in a small quantity of commercial coolers, which is a large portable cooler, from our China facility. We have begun to develop that range locally and unveiled that range through a soft launch a fortnight ago at a trade fair in New Delhi.
So we now have two more cylinders–commercial and industrial coolers–that are firing our engine. This will gain momentum.
Q: What kind of numbers are you looking at?
A: Though I will not put a number to it, I have always maintained that our historical CAGR of 25% can be extrapolated into the future.
Q: How would air coolers compete with air-conditioners?
A: Air conditioners are mostly used by households but not for commercial or industrial purposes. Other than the pharmaceutical sector or where you need controlled temperature, nobody uses air-conditioners. There too, they are large and static. Our air coolers are mobile and their operational cost much less.
We also have 31 years of innovation. We have built coolers that look like an air-conditioner, with in-built air purifier, mosquito repellent, and activated by voice command…We have coolers for every need. We have also developed a solar-powered cooler in our China unit.
Q: Which regions are you doing best in India? Is it more urban or semi-urban and rural?
A: Historically, north India is where coolers were sold. We also introduced coolers in the South, and even in the East and North East. Over the years, these markets have picked up, but North remains the biggest market in the country. In terms of rural or urban markets, the top eight metros account for about 40% of our business.
Q: How about online business?
A: It doesn’t contribute a whole lot as yet. But online and modern retail together contribute about 15%. This has been steadily growing, more than the growth of traditional trade.
Q: You have plants globally and presence in 60 countries. However, you do not have anything other than coolers to offer. Are you looking to diversify?
A: In the past we ventured into a dozen different products. We got into making heaters, washing machines, air-conditioners, water purifiers etc. After all that, we came to the conclusion that air coolers work best for us. So we exited all the other products and are now the world’s largest air cooler manufacturing company.
All our subsidiaries in US, Mexico, China and Australia too are primarily air cooler companies. We don’t intend to foray into any other category.
Q: Are you planning any acquisitions?
A: We are not planning any acquisitions, as the one in Australia (Climate Technologies for around 2 bln rupees in June 2018) was relatively recent and a large one by our standards.
Q: Are you comfortable with the cash on your books?
A: We are a debt-free company. Had it not been for a bad year, our cash position would have been higher. In any case, we need not invest a huge amount to keep growing. That is why we disburse a fair degree of retained earnings as a dividend. We see it best to share it with shareholders than retain it.
We have scaled down our dividend (due to dividend tax) and buyback is most likely that would happen, maybe the next financial year, or thereafter. We have not talked about it as yet.
There is a lot involved in buybacks and it is limited to 25% of your net worth. So you can’t do it every year. We would like to do a significant buyback. So we are sort of waiting for our net worth to grow.―Cogencis