Hindware Home Innovation Ltd Q4 FY2024 Concall Summary

Key Takeaways

• Retail business discontinued: The Board has decided to discontinue the loss-making Retail Business and approved the sale or liquidation of its assets, removing a persistent drag on consolidated performance.
• Bathware margins expanded despite headwinds: EBITDA margin rose from 13.9% to 15.4% in FY24, even with one-off cricket marketing spends and subdued demand, and management guides a further 1–2% expansion over 18–24 months.
• Consumer Appliances remains the problem child: The segment posted an EBITDA loss of ₹13 crore for FY24, with gross margins compressing 2–3% YoY; a cost-optimisation-driven turnaround is promised by Q3 FY25.
• Pipes delivered strong volumes, weak mix: Volume grew 15% but CPVC demand was flat for the first time in 20 years, shifting the mix toward lower-value PVC products.
• What to watch next quarter: Whether the equity fundraise takes shape, the promised demand recovery materialises post-elections by mid-Q2, and any early signs of the Consumer Appliances cost reset.

Bathware: Margin Delivery in a Soft Market

• Margin expansion levers: Insourcing of manufacturing is the core driver, with in-house production targeted to rise from 60% in FY24 to 75–80% in FY25, and faucet insourcing from 33–34% to 75–80% over the same period.
• New product engine: New products contributed 18% to FY24 revenue, supporting the premiumisation push even as overall demand stayed muted.
• Demand lag explained: Real estate projects launched during COVID are only now fructifying, but few launches occurred in that period, creating a temporary demand trough that management expects to lift once elections conclude by mid-Q2 FY25.
• Growth anchored to market: The company maintains its guidance to grow at 1.25x to 1.5x of the market, which it sees growing at an 8–10% long-term CAGR.
• Roorkee plant on track: The new Uttarakhand facility will be operational by end of Q3 FY25, with ₹80–90 crore of remaining capex; management expects to reach 70–90% utilisation based on northern demand.

Sudhanshu Pokhriyal: "This expansion occurred even after increased marketing spends on cricket platforms for brand building, such as World Cup and Asia Cup which were like one-offs in this year."

Consumer Appliances: The Turnaround Bet

• Losses driven by weak demand and inflation: Revenue fell to ₹422 crore for FY24 with an EBITDA loss of ₹13 crore; Q4 alone saw revenue of ₹108 crore and an EBITDA loss of ₹7 crore as muted consumer sentiment and headwinds persisted.
• Gross margin under pressure: Gross margins compressed 2–3% YoY, landing in a 28–33% range, though management declined to disclose the exact figure.
• Cost reset underway: Decisions taken in February/March consolidated after-sales service, call centres, warehousing and procurement across the bath and consumer businesses, with manpower and marketing costs also optimised.
• Synergy thesis: Cross-selling at shared dealership counters is the stated opportunity, with Sudhanshu Pokhriyal now leading the integration of the consumer business into the bath division's strengths.
• Long-term margin ambition: Management targets 8–10% EBITDA margin in 3–4 years, contingent on growth returning with healthy margins; no FY25 guidance was given.

Sandeep Sikka: "You will see the growth happening in this business. And as that growth happens, with the healthy margins, I think in the next 3 years, 4 years, we should be touching somewhere around 8% to 10%."

Pipes: Volume Strength, Mix Weakness

• Volume growth of 15% was driven by non-CPVC products, with PVC demand buoyed by government projects like the Jal Jeevan Mission and Har Ghar Jal.
• CPVC stagnation is historic: For the first time in 20 years, CPVC demand did not grow for the industry, with prices stagnant over the last two years; management expects a pickup by end of Q2 FY25.
• Mix shift toward lower-value PVC: The percentage of PVC in the product mix increased relative to CPVC, with a target to bring CPVC back to 45% of the mix next year as housing demand is expected to recover in the second half.
• Product diversification coming: Foam core pipes and inspection chambers are launching soon, and double-wall corrugated pipes will be commissioned around August or September.
• Margin and volume guidance: Management expects volume growth of 15–17% and EBITDA margin expansion of around 1% or more in the coming year.

Rajesh Pajnoo: "Last 20 years, this is the first year where CPVC has not grown for the industry."

Retail Business Exit

• Persistent losses forced the decision: The Retail Business continued to incur losses despite years of effort, operating in a highly competitive market crowded with online furniture players; the Board has approved discontinuation and sale or liquidation of related assets.
• Provisioning largely done: Approximately 90% or more of the ideal business provision has already been taken, with a possibility of some saving or some additional charge upon final eligibility.

Balance Sheet & Fundraising

• Debt levels have risen: Management acknowledged it has not maintained its earlier debt guidance and that debt levels have increased, prompting the Board to authorise exploration of equity fundraising alternatives.
• Equity raise in the works: The Board has given in-principle approval to look at a rights issue or preferential share issuance; the company is in the process of finding consultants, financial intermediaries and lawyers, and expects to go back to the Board in 1–2 months.
• Capex range for FY25: ₹120–140 crore, covering the pipes plant, Roorkee facility completion and distribution development.
• Debt repayment path: All EBITDA not spent on long-term capex will go toward debt reduction, but a firmer plan is promised in a quarter.
• Working capital optimisation: Internal targets include a 10–15% reduction in working capital over the next 12 months and a further 15% inventory optimisation from the March 31, 2024 base.

Sandeep Sikka: "We have not been able to maintain our guidance on the debt level. Debt levels have increased."

Cost & Operating Leverage

• Backend integration underway: Internal studies over the last 6–12 months demonstrated potential to reduce costs by integrating certain backend functions of the bathware and consumer appliance businesses; implementation is in progress.
• China import reduction: The target for FY25 is to cut imports from China to 3% of sourcing, down from current levels, as part of the insourcing push.
• Conservative margin guidance defended: When an analyst suggested the 100 bps margin expansion target looked conservative given insourcing improvements, management replied, "you can call us conservative," and stuck to the same guidance.

Sudhanshu Pokhriyal: "I think we've been maintaining this guidance from the previous year as well. And I mean you can call us conservative. I agree with you. But yes, I would stick to the same guidance at this point in time."

Guidance & Commitments

Key Metrics