IFB Industries – Can it Deliver!

hiteshrandhawa · June 18, 2014, 2:29pm

IFB Industries a Can it Deliver!!!

I had no intentions of starting a thread on IFB Industries. But while reading one of the threads initiated by fellow member aJ2EE Professionala on aSharp Indiaa, I made a mention of IFB Industries and ended up hijacking the thread with few comments on IFB Industries

Hence, thought that let me give birth to a thread on IFB Industries (as couldnat find an existing one at ValuePickr). I have taken the some help from one research report available in the public domain coupled with some secondary research to come up with this thread.

http://www.ifbindustries.com/

Market Cap: 514.60 Crores

Current Price: 124.60**

Promoter Stake: 75%

Background:

**

Promoter Stake: 75%

Background:

**Background:

IFB Industries also known as Indian Fine Blanks Limited started its operations in India in 1974 in collaboration with Hienrich Schmid AG of Switzerland.

Engaged in the manufacture and sale of home appliances and fine blanking components.

Home appliance products include washing machines (the company is majorly known for its Front Load Washing Machines), microwave ovens, domestic and commercial dish washers, dryers, kitchen appliances, and commercial laundry products.

Companyas fine blanking components comprise cushion plates for seat recliners; tongue for seat belt assembly; door latches; gate assembly for gear transmission; gear shift selectors, gear shift interlocks, and gear shifters for transmission; rotor segments for aircrafts; plate valves for compressors; and face comp drives, gears, cam plate assemblies, and sprockets for two wheelers.

Manufacturing facilities in Kolkata, Goa and Bangalore (Some parts imported as well)
80% revenue comes from home appliances and 20% from engg. Division (2014 figures)
Mkt. leader in Frontload Washing Machines with >50% market share (2014 figures)
Mkt. share in the Fully Automatic Washing Machine segment @ 15-17% (April. 2012 figures)
Mkt. share in Microwave Ovens @ 10%, and 3rd largest player after LG and Samsung (April. 2012 figures)
Mkt. share in Dishwashers and Clothes Dryer @ 95% (contribution to total company sales just 7% and are products that are not used much by the Indian middleclass) (April. 2012 figures)

Turnaround:****____

In 2001 the company was declared a sick unit due to mounting losses in the business and very high debt on its books.

In 2009 arrangement reached with Creditors involving interest waiver and the equity infusion by the promoters by the way of preferential allotment, helped the company emerge debt-free by the end of Fin year 2008-09.

Although declared sick IFB Inds. was doing well in terms of Sales and was also working upon Cost Reduction initiatives.

Recent Initiatives:

1). **Increase IFB Points )- **IFB points are franchise run retail stores. The company plans to increase their **IFB points **to increase the sales.

Sales from IFB Points are more profitable compared with sales through retail channels. These IFB points cater to Tier 1,2,3 cities.

As on December 2013 the company had total 481 service franchisees across India and it is expected to cross 500 numbers till the end of first quarter of FY15.

Sale of companyas products through IFB Points stood at 16 per cent in Q2FYa14 compared to 9 per cent in FYa13.

2). Exports Thrust a Focus on increasing sales through exports. It has started exporting to France, and is also in talks to export to Nigeria and Middle East

3). Indigenisation )- Company is also going to be benefited by indigenisation of its top loading washing machines that have been imported till now

4). **_New Launches _**a Launch of Air Conditioners and Refrigerators few quarters back

Positives:

1). Market for Front Load Washing Machines growing at >20% whereas the penetration is low at 7%

2). Mkt. leader in Frontload Washing Machines with >50% market share

3). Strong Brand Name

4). Good Distribution Network(Ask any housewife or even a washing machine salesperson of another company @ good frontload washing machines and more often than not you will get the answer as IFB)

5). Increasing Distribution Network in Tier1,2,3 cities

6). Has diversified into other white goods as well

7). Engg. Division should also do well with the general growth prospects and the outlook on the Automotive sector improving

8). Export plans lined up for white goods

9). Strong B/Sand almost a zero debt company

10). With Cash and Liquid investments of @ Rs.20 Crs. on a Mkt. Cap. of Rs. 500 odd Crs.

11). CAPEX at GOA facility complete which should benefit in future.

Negatives:

1). Company doesnat pay dividends. (Although the Mgmt. had clarified in the below article that they have not been paying dividends to fund expansion plans (Please Note: This article was published in July 2010)

http://www.thehindubusinessline.com/todays-paper/tp-corporate/out-of-bifr-ifb-to-invest-rs-62-cr-in-capacity-expansion/article1000011.ece

2). Company had been debt laden in the past (Although the initiatives taken inspire confidence that it will be careful on debt front in future)

3). Lack of Pricing Power a This can be issue as it operates in a high competition segment which has the presence of deep pocketed MNCs like LG, Samsung, Whirlpool, etc.,. IFB may not be able to match their advertising spends as well. I am not sure about its ability to pass on the rise in the input costs to the customers. (But this existed in the past as well and despite this IFB has been able to maintain its market share and grow. Initiatives mentioned above coupled with the prospects of improving consumer sentiments, would bode well for the company and it should be able to maintain its margins for the next few quarters)

4). Rise in Input Costs a Apart from normal rise in input costs IFB also gets impacted due to depreciating Rupee as it imports some of the parts (indigenisation of its Top Loading Washing Machine as mentioned above would reduce the impact of Rupee depreciation in future and also the Rupee is expected to remain stable at current levels. Plus the thrust on Exports would negate any adverse impact of Rupee depreciation)

5). Higher Inflation a Rise in prices of Food Products, Petrol/Diesel, etc.,. may hamper the consumer spending as household budgets get impacted

6). Lack of basic amenities a The smaller cities/towns are faced with power shortage and water shortage which are essentials to operate washing machines

7). Continuous focus on R&D a This industry requires continuous focus on innovation due to its highly competitive nature and also because of the regular interface of the consumers with the products.

8). **Highly Competitive Industry a __**I need not say much on this J

____

Financial Performance:

The company had taken some Forex loss of @ Rs. 15 Crs. in FY14 as a result of Rupee depreciation. This should not be the case going forward due to stable Rupee.

Financial performance can be viewed in detail at_http://www.screener.in/company/?q=505726_

Iam interested in IFB Industries, as Iprefer Consumption stories with:

1). Good Brand Names,

2). Good Distribution Networks,

3). Good Penetration in Tier 1,2,3 cities,

4). Good Market Share in an Under Penetrated but Growing Segment,

5). **Less Competition **(As mentioned above, that, this unfortunately isnat the case in the industry that IFB operates in, but it has been able to hold its stead till now)

6). Good Pricing Power (Have already covered my reservations above)

7). And above all a GOOD MGMT. (Good Mgmt. is something that I am not sure about as yet, as the past doesnat inspire outright confidence but High Promoter Holding, initiatives taken on the business front, etc.,. enable me to give IFB industries a small allocation in my portfolio).

Please Note:

I am still learning in equity investing and hence would not be able to have an eye for detail like seniors. Hence please view the above post with an eye of a critic.
I am unable to spare time to go through the ARs due to my job and hence I would have definitely missed some primary information contained in the ARs.
The above information is through secondary research and hence request the readers to review and comment if any information is incorrect or has changed.

Discl: I am invested in IFB Industries.

Views Invited.

Surender · June 18, 2014, 3:54pm

MDA section of AR 2012-13, does not instill any confidence to own this business. Lack of pricing power, lack of “must own products”, high competition, Lack of probability of reversion to mean of the share price as CMP is near 52 week high. Also, if market closes for next 10 years or starts it’s journey down wards, I would not be comfortable holding this business.With whatever learning I have had from Valuepickr forums, it’s a “touch me not” trade for me atleast as I do NOT see a good reason that will ensure return of my capital leave aside the return on capital?

P.S : I am too a newbie to equity investing and learn everyday from Valuepickr forums. Thanks to each one of you.

Vivek_6954 · June 18, 2014, 4:44pm

Haven’t studied the co in detail but it’s a very old co n also one of the rare Bengali owned company. Can’t think of other good Bengali owned listed cos other than IFB n may be TIL n EssDee aluminium.

Bijon Nag is a first generation entrepreneur with Fire in Belly to reach so far. Think is also politically connected to Jyoti Basu the erstwhile WB CM n as such got the coveted liquor license in WB thru IFB Agro. Since liquor is a dirty corruption driven state govt controlled business how strong is the group on ethics front. Also how good is the 2nd generation of the co? Are the plants situated in WB so plagued by labour problems, Cholbe Na attitude of workers n also by Mamata the sworn enemy of lefties yet another ultra leftie.

Also what’s so unique abt front loading mc n advantages of it? Why is whirlpool still struggling?

Tolaha · June 18, 2014, 5:27pm

Front loading washing machines consume less water than top loading washing machines but are supposed to clean better (which I guess is due to the additional gravitational pressure!). In western countries, there are more front loading machines sold than top loading ones but the scenario is different in India. A disadvantage of front loaders is that in case of power failures, we cannot open the machine and remove the clothes out.

I used to own shares of IFB industries for a very long time, impressed by its brand value when it came to front loaders. I was pretty sure that India would move towards front loaders as and when the power situation improves and people begin to appreciate its advantages. The IFB front loaders were manufactured using the technical collaboration with Bosch. Years passed by and then there were a huge number of companies selling front loaders while the price of IFB shares didn’t budge much. Even before I had bought the shares I had done some research which said that while the products were good, their after-sales support was disappointing. But the undervaluation was compelling and so I had taken the dip. Eventually sold it off as part of the portfolio ‘shuddhikaran’!

Notes:

1). IFB industries do sell other goods - microwaves, driers, top loaders - under the ‘Home appliances’ division and also have a division involved in ‘fine blanking’ tools.

2). IFB Agro & IFB Automotives are the other companies under the parent group.

3). IFB websites are pretty pretty!

4). At the IFB online store (http://www.ifbappliances.com/), a number of home appliances are listed for sale - Microwaves, Refrigerators, Dishwashers, Purifiers, Chimneys, built-in ovens/hobs and even Modular kitchens. But IIRC, most of these are just outsourced from other manufacturers. Maybe it has changed now, I am not sure.

hiteshrandhawa · June 18, 2014, 8:37pm

@ Vivek)- The home appliances plant is in GOA and not Kolkatta. The home appliances contribute >80% of the revenues, therefore if there are any probs in the Kolkatta plant then I think it will not impact IFB much. Also they could increase the production in Bangalore plant to compensate for any closures in Kolkatta plant (assuming that Bangalore plant would have the capacity to absorb this).

Also, I think that Whirlpool is turning around and they have also taken various cost rationalisation initiatives.

There were multiple reasons 'coz of which Whirlpool and the industry was not doing good.

For e.g.

Whirlpool’s 75% of raw material costs were linked to Dollar and as a result of Rupee depreciation margins took a beating. (This applies to other players as well, although the ratio may be different). But these players have started indigenization of there products to mitigate Forex risks. Add to that the stable/appreciating Rupee which would again be beneficial for these companies.

Demand had gone down in the industry and was flat since last 3 yrs. (But Sales have shown a marginal uptick from April onwards and consumer sentiment seems to be improving or will start improving in the near term).

Increase in excise duty and service tax coupled with rupee depreciation and rising freight costs etc.,. resulted in price rises which also had its impact on the demand.

The decrease in interest rates (whenever it happens) would also be beneficial for the demand due to lower consumer financing rates.

@ Soujanya Raj)- IFB website is pretty pretty for sure Also, one can open the front lid/door of the washing machine and take the clothes out incase of power failure too But it can be done with a time lag of 3-5 mins (I have been using and IFB front load since last 5 years, hence I can confirm this).

You are right that after sales service can be an issue. I have heard this too (Although luckily enough I have personally never experienced any after sales issue and have received prompt service). But a competitor’s employee from the marketing dept. told me that after sales service is an issue with all the manufacturers and hence people prefer IFB 'coz of the Brand as they think that after sales service is not a differentiator as of now.

@ Surinder )- Your view point is valid and I agree with it too to a certain extent and that’s why I have a low allocation towards IFB in my portfolio (one more reason for low allocation is that I think there are better opportunities as well in relative terms where I have more conviction) I am also new to the world of investing and learning and hence may not have all the answers to your concerns but will still try to answer them later so that there are contradictory view points which can lead to constructive discussion.

Tolaha · June 19, 2014, 2:15pm

A oldish report (2012-13) on IFB industries by ‘Katalyst Wealth’, posting a few snippets especially for the one on market share, but it should be much lower now I guess:

http://www.katalystwealth.com/ifb-industries-can-it-unleash-its-brand-power

IFB, in its over 35 years of presence in India has witnessed various ups and downs in its business.**Consider this, on 30th July 2004 the company was declared sick and IDBI Ltd was appointed as the operating agent for the rehabilitation of the company.**Though, the sales of the company grew every year starting 2002, it wasnât able to control its cost and was thus incurring losses at operating levels. Above all, the mounting debt and the inability of the company to pay back resulted in company being declared sick.

However, unlike many other companies which are unable to return to profits once declared sick, IFBs Home appliances division was going strong with improvement in sales volume and cost control at the same time.**Moreover, the Memorandum of Settlement (post sanctioning by BIFR vide order dated 14th Janâ09) with the creditors involving interest waiver and the equity infusion by the promoters by the way of preferential allotment, helped the company emerge debt-free at the end of 31st Marâ09.**Itâs important to note here that at one point of time IFB had more than Rs 500 crore in borrowings.

Coming back to the business of IFB, over the years, the contribution from home appliances has grown multi-fold with home appliances accounting for almost 85% of the revenues of the company for FY 11, while fine blanking division (auto ancillary) accounting for just about 15%.

The IFB brand is synonymous with fully automatic washing machines while it also offers Microwaves, Domestic and Industrial dishwashers, clothes dryers. Recently the company launched fully built up modular kitchens and kitchen equipments such as hobs and chimneys (one of the fastest growing segments, though already very competitive).

**IFB holds ~15% market share in the fully automatic washing machine and 66% market share in the Front-Loading washing machine segment, while in the segment of Microwaves, they are the third largest player after LG and Samsung with a market share of 10%.**In the segments of domestic dishwashers and clothes dryers, IFBs market share is in excess of 95%, though it would be worthwhile to mention here that the combined sales of dishwashers and clothes dryers is still pretty low at ~7% of the sales of IFB. Also, the penetration of dishwashers and clothes dryers is ultra low in India at the moment, on account of availability of cheap labour.

aveekmitra · June 25, 2014, 10:02am

This report I didn’t find in the thread… Here it goes…

http://www.bseindia.com/xml-data/corpfiling/AttachHis/IFB_Industries_Ltd_060614_Rst.pdf

I introduced myself in the Introduction page yesterday and there itself wrote about a stock and that was IFB Ind. which I purchased few months back. I earlier purchased and sold it once Rs. 25 and Rs. 75 respectively. Later it went up to 170 or so.

I didn’t know about this thread …

All +ve and -ve about IFB has been discussed … What I find that with Stability of INR, their trading margin may improve in AC / Refrigerator etc which they import from Turkey. Their leverage with distributor seems high from the WC improvement over the period. Top loader machine also may come sometime soon. New Goa facility can cater to other manufacturer’s OEM and I am told it is quite good. EV / Sales at <0.5 for a Rs. 1000 cr. debt free, FCF generating company is worth delving deeper. I guess if they split the stock or make a capital reduction (like Castrol) some interest may pick up. Return ratios would marginally improve with Capital Reduction. Fine blanking put an icing if auto sector improves. Quality of promoter is reasonably good. But I fail to understand why they don’t start paying dividend.

Biggest negatives are mentioned (fighting LG / Samsung etc) and I guess operational management is not very professional or may be old fashioned (I am not sure) …

In recent times I found few PIPE players are showing interest in this company …

aveekmitra · August 27, 2014, 4:23am

It is update to my above post of 25th June… I think IFB is running ahead of its valuation at a fast pace. …

Their Top Loader Washing machine is expected by festive season… Cash flow is improving and new factory is in full operation.

However, depreciation charge would hit from this quarter and my EPS estimate would be Rs. 12 - 15 for the whole year.

I have reduced by holding by 25% in last two days.

Tolaha · August 29, 2014, 10:06pm

IFB Industries doubling since the first post on this thread about 2 months back. Congratulations HR, Aveek!

You folks have had much better luck with IFB than I had in the many years that I used to hold it! I should probably start a thread on all the shares that I had sold off like Vinati, VST Tillers, Eicher and so on!

hiteshrandhawa · September 6, 2014, 4:41pm

@Tolaha)- If Valuepickr wud have had a ‘like’ option like FB then wud have like your comment Rather than regretting, the ability to laugh off on selling the shares and missing the rally in them is very important in these markets Good sense of humor

I howeverbooked out of IFB yesterday due to the swift run in the same!

Cheers!!!

HR.

maheshkmurthy · January 25, 2018, 9:07pm

Nirmal Bang has come out with a report that is mostly positive.

devarshi84 · September 9, 2018, 5:04am

Recent growth has been tremendous in both sales and stock price. Is IFB prepared to install IOT in their appliances like market leaders LG and Samsung to stay competitive?

Also, how competitive are IFB in exports compared to LG and Samsung in other countries? If not exporting, why?

I have also noticed they have built up a big reserve but not paying dividends. Why? Any acquisition or expansion or diversification planned?

These questions are not answered in their AR.

devarshi84 · October 5, 2018, 5:20pm

I recently read that IFB is supplying to Panasonic. Also, with govt duty on appliance imports, IFB has a lot to benefit.
They also recently purchased Ramsons laundry business.

Why are they still not paying dividend?

bimalb · January 21, 2019, 7:00am

Few of the notes I have taken from Annual report -

Govt has increased import duty which would negatively impact the likes of Blue star, Voltbek, Havells etc and positive for Whirlpool and IFB ind as most of their products are made in India.

Disc - Tracking position

saninv · November 6, 2019, 12:37pm

IFB Industries Q2FY20 Earnings Call Highlights

Participants:

Investec
HDFC
Jefferies
Sunidhi Securities
Westbridge Capital
DSP Mutual Fund
Quest Wealth Management
Invesco
Wealth Management PMS
Anand Rathi
Dalal & Broacha
Haitong Securities
Stewart & Mackertich

Business Overview:

Revenue from operation at Rs 713 crore vs Rs 688 crore YoY
EBITDA at Rs 51 crore vs Rs 43 crore YoY
EBITDA margin at 7.1% vs 6.45% YoY
PAT at Rs 22 crore vs Rs 34 crore YoY

ConCall highlights:

Washer growth was lower during the quarter as company is destocking older stock and introducing new range of products which resulted into some revenue loss
Engineering division reported de-growth in revenue as auto industry facing headwinds
IFB changed the entire range in front load segment and made some minor adjustment for top loader; while for microwave introduced new models and made some price re-positioning
New range of products have better margin than earlier
Company will not be introducing the 6.2 kg model as proposed earlier. The focus will be on profitable growth from the 6.5 kg and higher segment
IFB is committed to achieve double digit EBITDA margin but no timeline given yet; company is hopeful that post the commencement of AC plant margin will improve gradually
The upcoming motor plant will enable the company to localize top loader, front loader and AC motor; in top loader segment IFB is totally dependent on imported motor
Import content will come down from 25-26% to 20% for front loader and from 40% to 25% for top loader post the commencement of motor plant. AC motor is totally imported now which will also be localized
Market share (volume): Front loader- 40%; top loader- 8-9%; microwave- 22-24%; AC- less than 1%; kitchen appliances- 5-7%; industrial product- 35-40% (value)
Company generates 14-15% from online sales and 15% from own stores
IFB has 11,500-12,000 direct and indirect touch points
Market share in AC segment will increase in next 2-3 years
IFB increased top loader price by 5-6%
Company is currently debt free but will take some debt to fund the capex programme
IFB has no plan to enter into lower range of products in near future
IFB currently recruiting counter sales representative and process will be completed by end of December
Working capital cycle will improve post the capex plan as company is currently importing products which will be gradually replaced by own products
Full benefit of the upcoming AC plant will be visible from Q1FY21; AC plant will start operation from January 2020
IFB not moved to new tax regime yet as the company has Rs 15.5 crore MAT credit

Capex:

Full capex for the entire financial year would be around Rs 300 crore. Capex breakup: AC plant – Rs 150 cror; Motor plant- Rs 48 crore; Engineering division- Rs 50 crore and routine capex of Rs 55-60 crore
The initial capacity of AC plant would be around 450,000 units but with minor up-gradation it will increase to 600,000 units; 40% of production for own brand

saninv · February 5, 2020, 9:11am

IFB Industries: Q3FY20 Earnings Call Highlights:

Participants:

Investec
Dalal & Broacha
Ratna Traya Capital
HDFC Securities
Nirmal Bang
Stewart & Mackertich
Lucky Investment

Business Overview:

Revenue for the quarter at Rs 702 crore, up 4.7% YoY
EBITDA margin at 6% vs 5.5% YoY
During Q3FY20 there has been an Exceptional Gain of Rs 12.98 crore from IFBL Group Superannuation Scheme as refund of surplus money
Exception Loss of Rs 11.57 crore during the quarter on account of estimated loss of inventory due to fire
IFB has lodged an insurance claim for the damages

ConCall highlights:

Demand during November and December month was weak but October was good for the overall industry. Whirlpool and Samsung launched 6Kg Top Loader at Rs 13,000-14,000 range in last 2-3 quarters which generated lot of volume. IFB’s top loader price is above Rs 16,000 for 6.5Kg and it is not present in 6Kg category
IFB recently launched 6.5Kg top loader, which is Rs 1,000 – 1,200 lower that the existing range
Earlier IFB had planned to introduce 6.2Kg top loader but dropped that plan as this particular category is not margin accretive
Company were in track to commence production from AC plant by 15th February, but due to coronavirus outbreak there may be a slight delay as there are imports from China
The upcoming AC plant will cater the mass premium segment; 100% will be inerter AC
Final validation for the AC unit got delayed due to “Coronavirus” outbreak as people are not being able to come from China
AC business will be impacted badly as company is totally dependent on China
IFB to achieve 120,000 units in AC sales in FY20
IFB will initially sell 200,000 AC units under the IFB brand and another 300,000 units to others in FY21
Microwaves are completely imported from China and as of now company has inventory which can cater till mid or end of March
Modular kitchen: IFB will add another 5-7 stores in Bangalore and Mumbai in next 2-4 months. Order book pipeline of the three existing stores in Goa, Bangalore and Kolkata is roughly about Rs 4.5 crore
IFB’s existing inventory of AC is sufficient till second week of March, post that inventory will be nil. Fresh inventory is required in first week of March
Company is currently importing compressor from China and will continue to import for the near future
IFB not moved into new tax regime as the company has MAT credit worth of Rs 16.5 crore
Company has introduced new range of microwaves and increased prices which will offset the impact of recent custom duty hike
IFB has lost some market share in microwave to Samsung as the company is focusing to improve the margin in this segment
IFB generates 15% of revenue through IFB points and 15% through e-commerce route

Capex:

Total capex plan for the company is Rs 384 crore. IFB has already done Rs 200 crore till 31st December 2019 and will incur another Rs 100 crore in Q4FY20 and balance would be rolled over to next financial year
IFB’s initial capex plan for AC plant was Rs 140 crore, which has been revised and enhanced to Rs 182 crore, which includes Rs 42 crore for the stamping project and shed extension etc

Rushabh_Doshi · May 15, 2020, 10:34am

Why did the company merge/acquire assets from its private group company? Are there any Corp Governance issues? https://www.bseindia.com/xml-data/corpfiling/AttachHis/8d1cadde-1558-489e-8320-4b76cf18bcbc.pdf

iamket · July 17, 2020, 6:12am

It seems that this tweet is related to IFB.

arjunbadola · December 15, 2020, 3:02am

Hello guys, I have not studied this company just sharing my recently experience which could help some to research further.

Recently my IFB washing machine had a problem so I called over the technician.

He told me I should have not bought this machine and instead have gone for LG, which really surprised me.

He mentioned the noise problem in my machine is very common in IFB machines.

Location: Mumbai

(This is just one little experience I had)

Disclosure: not invested

bhaskarbora67 · June 28, 2021, 1:23pm

Key takeaways of the 4QFY21 conference call hosted by Nirmal Bang sec

 Air-conditioner (AC): AC sales jumped 147% YoY in 4QFY21, driven by robust 178% YoY increase in volume at 50,000 units (vs. 18,000 units YoY). But, volume was lower than the budgeted target of 100,000 units. While AC sales were affected in peak summer months of April-May’21, management expects robust volume once the markets open up in full swing (by July’21) and will be aided by new as well as pent-up demand and increased extraction from sales channels. For FY22E, IFB is targeting volume of 0.5mn units (100% of installed capacity) while it aims to operate at 100% capacity utilization by Nov-Dec’21. Average monthly production is at 40,000 units, which can be further extended based on requirements. IFB will cater to only the premium segment and its models are expensive by Rs3,000-3,500 than peers (had received positive response from the market). While the PLI for AC segment will largely benefit components manufacturing, IFB believes that it would help develop a healthy components eco-system and intends to avail these benefits through investments in its Motors division. IFB is well-equipped for any changes in the energy ratings for RACs as its products were designed and manufactured keeping in mind the implementation of new energy norms. For this category, most of the capex has been capitalized while a minor portion (Rs40mn-Rs50mn) to be capitalized in FY22E. Gross margins can be improved once the company achieves localization of electronic controllers.

 Microwave Ovens: Microwave Ovens category reported robust growth of 119% YoY in 4QFY21, primarily driven by 84% YoY growth in volume at 74,600 (exceeding expected volume of 60,000). IFB continues to have a dominant market share in this category and it aims to launch new models equipped with automation in the upcoming quarters. IFB has witnessed heavy demand in the last two quarters, which it couldn’t fulfill due to product unavailability. Product availability issues are now restored and IFB is expecting healthy volume growth from 2QFY22E, led by fresh and pent-up demand.

 Dishwashers: Dishwasher sales surged by 254% YoY in 4QFY21 on a low base to Rs947.3mn. Volume growth was on account of market reset and restoration of the supply chain. The company expects this run-rate to continue even in 1QFY22. IFB aims to achieve sales volume of more than 0.1mn per annum FY22E onwards with revenue growth guidance in excess of 40%. IFB’s clothes dryer segment also reported a decent growth of 12% YoY in 4QFY21 and the management aims to develop these two categories as major growth drivers going forward.

 Fine Blanking segment’s performance: Fine Blanking segment’s revenue grew by 58% YoY to Rs1.5bn (19% of total company sales). Topline growth was despite loss in sales due to steel shortages, which affected OEM volume and delay in operations shifting from Whitefield to Malur due to COVID-19 restrictions. Higher topline led to 710bps expansion in EBIT margin to 10.6%. Category wise, growth in two-wheelers/four-wheelers was at 29%/21% YoY while commercial vehicles declined by 26% YoY.
Pending price increase from customers amounting to Rs45mn will be collected by July’21.

 Motors: Motors revenue in 4QFY21 stood at Rs121mn (1.5% of total sales), up 5% YoY. This division currently supplies motors to IFB’s Home Appliances segments and other OEMs . The upcoming BLDC motors plant will cater to the requirement of both IFB’s Home Appliances (which will provide 20%-30% energy savings through BLDC motors) and Fine Blanking segments. It will also produce motors for external customers (Hanon Automative, M&M, Subros, Sanden Vikas etc).

 Other key highlights: (1) Working capital position as on FY21: inventories at Rs4.5bn (vs. Rs3.7bn YoY), receivables at Rs2.4bn (vs. Rs1.8bn YoY) and payables stood at Rs6.3bn (vs. Rs4.4bn YoY). Operating cash flow stood at Rs2.9bn in FY21 (vs. Rs1.7bn in FY20). (2) In 4QFY21, IFB undertook blended price hike of 7%-9% (and has covered for raw materials price increases). It would further evaluate the market situation and raw material costs before considering further round of price hikes. (3) Drivers of margin expansion include (a) increased extraction from channels (b) volume growth in Washing Machines segment © achieving localization of electronic segment, further adding to gross margins and (d) scale-up in other high gross margin categories of Dishwashers, Kitchen Appliances and Microwave Ovens. (4) Advertisement spend in FY21 was at 2.03% of topline and is expected to remain at similar levels. (5) IFB points/e-commerce channels/indirect redistribution constitute 13%-14%/14%-15%/~15% of total sales while the rest is contributed by MBOs. Total retail touch points are at 12,000-12,500, which IFB plans to increase by 3,000-3,500 in FY22E once the AC category is fully placed. (6) Capex incurred in FY21 was at Rs1.15bn (Rs440mn for RAC, Rs190mn for Washing Machines and Rs480mn for the Engineering division). Routine capex for FY22E is pegged at Rs170mn (for the Engineering division) and Rs340mn (for Motors). It is yet to decide on the capex for Washing Machines and other appliances. (7) Blended increase in raw material costs was at 12%-13% while IFB’s 25%-26% of total operating cost is fixed in nature.