V-guard - The passion of our early years and our quest for excellence

The company is growing strongly in both South as well as non-South markets. While it is consolidating its position in the four states of South India, it is aggressively expanding its distribution network and market share in the rest of the states in India. UP and Punjab are the two non-South states where the company is doing very well. The company has opened two new branches in Guwahati and Patna respectively during the first half of the fiscal making it a total of 15 branches in the non-South region. The company’s performance in the second half of the fiscal has historically been better than that logged in the first half. With a strong performance in the first half of the fiscal characterized by increased penetration and growing market share, the company is all set to meet its target of 13% growth in topline for the entire fiscal year.



Please check valuations of cos


  • Good last 3yr 20+ ROE, ROCE
  • Good last 3yr sales and profit grwoth of 40+%
  • Reducing debt
  • FII increasing their stake


  • Valuation no longer cheap at 22 PE, and 8 PB ratio

  • Seems like excessive speculation going on in this counter. poor delivery quantity and poor poor delivery percentage of 20% (high chance of burning your finger at CMP)

  • Promoters have been reducing stake

Without knowing the full story, I would rather be cautious here. We need input on the moat, scope of business, promoters integrity/capability for further analyzing the stock.

I could not resist telling a story here so here goes.

I had two of these 15-20kg stabilizers for my ACs and i used to have to get them repaired every other year. So this summer I got fed up and went looking for new ones so maybe I could stick on the wall and not have to haul 15kg around to the service station every summer.

Logicstat was the best known brand and I came to know the company has shut down. Oh! The dealer tried to sell me the heavy ones telling that v-guard will not work since my ac was not with the light ‘chinese’ compressor and also needed a time delay. I insisted on the light ones but none of the ones he had had a time delay. So I went to the v-guard dealer. He said nothing of this heavy compressor bit is true and even if it is, how do I care - they will fix it for free for three years. It also had an ‘intelligent’ time delay - if the power is off for over 3 min, it comes on instantly else it waits for 3 min - perfect for hot summer nights!

So I bought 2 of those and within a month, the one with the heavy compressor broke down! So I call the service centre ( wow I dont have to go anywhere!) and they come to the house, tell me of some technical problem in it , rubbish this compressor theory, take it away and give me a slip to get a new one from the dealer! The dealer gives me a new one instantly and this one keeps working happily every after ( hopefully)

So I wonder why is everyone not buying v-guard - it’s the best brand, at home service, time delay, very reasonable price etc etc. Then I also think logicstat has also shutdown so why is everyone not buying the v-guard stock??

And then everyone ELSE bought it ;(


Fluctuations in Electronics Division!
Q3/Fy-13 Results out…

Total Income up 41.5% to 349.04 Cr from 246.68 Cr.
EBIDTA up 13.6% to 25.71 Cr from 22.63 Cr.
Net Profit up 23.3% to 15.35 Cr from 12.45 Cr.

EBIDTA margin is 7.4% v/s 9.6% (SQ-12) and 9.2% (DQ-11)
NET Profit margin is 4.4% v/s 5.7% (SQ-12) and 5.1% (DQ-11)

Total Raw material costs as a %ge to Income is 72.5% v/s 73.8% (SQ-12) and 72.7% (DQ-11)
Employee costs to Income is 5% v/s 5.4% (SQ-12) and 5% (DQ-11)
Selling & Distribution expenses to Income is 6.8% v/s 4.2% (SQ-12) and 6% (DQ-11)
Other expenses to Income is 8.4% v/s 7.1% (SQ-12) and 7.2% (DQ-11)

Financial costs to EBIT is 21.6% v/s 15.8% (SQ-12) and 22.7% (DQ-11)
Tax Rate 20.7% v/s 24.8% (SQ-12) and 24.1% (DQ-11)

Selling & Distribution and other expenses hurt EBIDTA.
Financial Costs in absolute remained flat.
Lower tax incidence helped Net profits.

Electronics: Sales up 47.4%, PBIT DOWN 16.4%, margin 8.4% v/s 13.3% (SQ-12) and 14.8% (DQ-11)
Electricals: Sales up 40.9%, PBIT up 37.8%, margin 6.2% v/s 7.4% (SQ-12) and 6.4% (DQ-11)
Others: Sales up 9.5%, PBIT up 61%, margin 10.9% v/s 2.4% (SQ-12) and 7.4% (DQ-11)

9M/Fy-13 v/s 9M/Fy-12:
Total Income up 42% to 981.5 Cr from 691.25 Cr (Fy/11-12: 964.63 Cr)
EBIDTA up 48.7% to 89.98 Cr from 60.5 Cr (Fy/11-12: 93.54 Cr)
Net Profit up 70.6% to 53.98 Cr from 31.63 Cr (Fy/11-12: 50.8 Cr)

Reported 9-month EPS 18.08 v/s 10.6 (Fy/11-12: 17.02)
Recorded TTM diluted EPS: Rs. 24.50

At 03:25 pm on 28/01/2013, stock on BSE trading at Rs. 500.70/- DOWN 2.14%

Conference Call- by Capital Market
V-Guard Industries
Expects household consumption market to continue to grow at a significant pace over the next five years
Mithun Chittilappilly, Managing Director addressed the call.

The company has comprehensive portfolio catering to the mass consumption market

Electronics- Stabilizers, UPS and Digital UPS

Electricals -Pumps, House Wiring and Industrial Cables, Electric Water Heaters, Fans

Other product include Solar Water Heaters, Induction cooktops, Switchgears

Sales grew 43% to Rs 348.11 crore driven by broad-based growth across Electronics and Electricals product categories. Non-south expansion continues at a faster rate (up 47%) contributing to 23% of the total turnover, while it consolidates stronghold in the South market (up 40%).

PAT grew 23% to Rs 15.35 crore.

Electronic segment grew 47% and electrical segment grew 40%.

UPS, electric water heater and wires grew 57%.

Voltage stabilizer grew 22%.

LT cable segment grew by 32%, Pump by 36%, Electric fan by 29% to Rs 13.9 crore, Solar water heater by only 10% due to supply constrains.

Expansion of warehousing facilities/sales offices and accelerated investments in new product development led to profit margins dipping to 7.8% from 9.5% in Q3 FY12.

Profit margins of stabilizer fell from 16.6% to 11.7% largely due to durable sales not picking up at all in the entire quarter. Volume was up mainly due to doling out of excessive discounts.

Consumer durable sales are down due to very weak sentiments, high interest rates and high inflation. The company does not see sentiments improving unless interest rates and inflation fall. The company is depending on summer product sales to drive growth in the coming period.

Expects stabilizers to recover next quarter onwards except for places like Tamil Nadu and Andhra Pradesh.

Wire has grown by 39% to around Rs 100 crore. The company is setting up a new plant which will increase the capacity by 60-70%. Now wire segment is operating at 100% capacity.

In line with its commitment at the beginning of the year, it has continued to make significant investments in market visibility and brand building resulting in increased advertisement expenditure. This quarter, in order to reap the benefit of festive demand, it stepped up the momentum of advertising spend.

Induction cooktops was launched in the Karnataka market this quarter.

It is gross margins of 35-40% in Induction Cooker and Switchgears & DBs.The management is expecting revenues of Rs. 15 crore in each of these segments in FY2013.

Products will be extended into other Southern markets in a phased manner.

The company increased ad expenditure this quarter at 4.5% of revenues (Rs 16 crore) versus 4.1% in Q3 FY12 to capture festive demand.

The total ad expenditure for the year will be at 3.5-4% of the total revenues.

Switchgears and induction cooktops which were launched recently have received a good response and the company will be launching them in other markets in a phased manner. The company also intends to launch Mixer Grinders during the first quarter of the next fiscal year.

Given the strong performance reported thus far the management is confident of achieving topline expectations of over 35% growth for FY2013 at stable margins of 9.5-10%.

The outlook going forward is extremely robust as it derives the benefit of the continuing power deficit in South India as well as the boom in the residential market there. Further, it will obtain operating leverage from investments made in the non-South branches as they gain scale.

The company expects that the household consumption market will continue to grow at a significant pace over the next five years.

The company has invested in a strong distribution network and currently has 28 branches nationwide and over 230 distributors, 2500 channel partners and 13,000 retailers.

It is expanding towards a pan India presence. It has significant investments committed towards aggressive expansion in non-South markets.

The company has invested significantly towards establishing strong dealer network in non-South markets over the last 3 years. Average revenue per branch in non-South markets is substantially lower than that in South markets and this provides significant scope for expansion of business on existing investments.

The company has increased market share across all product lines. It has leadership position in its flagship product, voltage stabilizers, with 20% market share. It is rapidly expanding market share in the non-South markets.

Revenues and PAT have grown at a CAGR of 38% and 37% between FY08-FY12.

It has witnessed significant expansion in return ratios over the last four years; ROE at 24% and ROCE at 21% for FY2012.

The company is seeing strong demand outlook.

Strong demand outlook. It expects the household consumption to grow at a significant pace over the next five years. Continuing power deficit in South India will augment sales of Stabilizers, UPS and Inverters. The company hopes to capitalize on the boom in residential real estate markets in South India.

The management hopes to lower the cash conversion cycle through vendor financing, resulting in significant improvement in working capital. It target is to reduce it by 20 days each year over the next couple of years.

Expects EBIDTA margins to be at 9-9.5% going forward

Saw their latest announcement on employee stock option

_"V-Guard Industries Ltd has informed BSE that the shareholders of the Company by way of postal ballot resolution dated May 14, 2013, approved grant of 11,20,000 stock options to eligible employees and subsequently, Compensation Committee of the Board of Directors of the Company in their meeting held on June 11, 2013, has approved the grant of 9,17,322 Stock Options to eligible employees of the Company, in terms of Employee Stock Option Scheme 2013 (“ESOS - 2013”). The said options carry the right to apply for equivalent number of equity shares of the Company of face value of Rs. 10/- each, the brief terms of which are as under:

1). Vesting: The options shall vest over a period of 3 years and not later than four years on the basis of time and performance.

2). Exercise period: 6 years from the date of vesting of options.

3). Exercise price: Rs. 485/- per share for 7,01,184 number of stock options.

4). Exercise price: Rs. 10/- per share for 2,16,138 number of stock options."

I am trying to understand how do they allow 2,16,138 with exercise price of just Rs 10. Is this common with ESOP? If so who are the beneficiary of this stocks top management?


In many US based companies, it is a general practice to issue RSU (Restricted Stock Unit), which comes at 0 Rs. As a general practice, most of the top level staff have a very high percentage of their salary coming from RSUs. It is not uncommon to give these to every staff in the company, but the largest chunk goes to the top management.

Dear all,

I dont like the valuation given by market to this small and growing company,but still find this one very interesting…

Honest & ethical promoters - Mr.Mithun chittilappilly current MD and son of Joseph chitillappilly (founder) has a vision of making this company in No.1 in india in next 10 years.The way he brought the growth in last 4-5 years is amazing.If the past performance is an indicator of the future,then it will be a compelling buy.

Series of good newses pls check here :


disclosure : Invested from lower levels,will accmulate only after a major correction.



Q1/Fy 13-14 Results out…

Total Income up 28% to 408.16 Cr from 318.98 Cr. Buttttttttt
EBIDTA DOWN 9.7% to 30.94 Cr from 34.28 Cr.
Net Profit too DOWN 14.6% to 17.64 Cr from 20.65 Cr.

EBIDTA margin is 7.6% v/s 5.3% (MQ-13) and 10.8% (JQ-12)
NET Profit margin is 4.3% v/s 2.4% (MQ-13) and 4.5% (JQ-12)

Total Raw material costs as a %ge to Income is 74.2% v/s 75.4% (MQ-13) and 72.2% (JQ-12)
Employee costs to Income is 5.3% v/s 4.8% (MQ-13) and 5% (JQ-12)
Selling & Distribution expenses to Income is 7.6% v/s 8.5% (MQ-13) and 5.5% (JQ-12)
Other expenses to Income is 5.4% v/s 6% (MQ-13) and 6.6% (JQ-12)

Financial costs to EBIT is 19.5% v/s 36.7% (MQ-13) and 14.2% (JQ-12)
Tax Rate 25.5% v/s 21.1% (MQ-13) and 25.1% (JQ-12)

Almost 75% rise in selling & distribution expenses affected EBIDTA and thereafter Net Profit.

Electronics: Sales up 31.1%, PBIT up 3.3%, margin 12.1% v/s 9.4% (MQ-13) and 15.3% (JQ-12)
Electomech: Sales up 24.8%, PBIT DOWN 21%, margin 4.5% v/s 2.6% (MQ-13) and 7.2% (JQ-12)
Others: Sales up 74% But there is a Loss of 1.07 Cr at PBIT.

EPS 5.91 v/s 6.92
TTM Reported EPS 20.06

On 18/07/2013, stock on BSE Closed down 4.3% at Rs. 485/-

As per the latest update:

  • Working capital improved by 15 days from 94 to 76
  • debtor days reduced to 39 from 46
  • creditor days increased to 45 from 37.
  • Co to carry on with vendor financing and bill discounting initiatives and also increase the proportion of channel financing going forward.
  • effected price increase in Digital UPS and Stabilizers.
  • Sales increased 28% YOY showing good traction in non south which now contributes 31% compated to 27%. Co planning to take it 40-50% in the next few years.

All these improved the cash from operation to 57 crores from 14.5 crores.

the company did the rightthing by reducing the debt by utilizing 51 crores. Now debt equity stands at 0.4 which is comfortable.

Working on to become the top player in cables and wires section.

Ad spend raised 85% as planned to get better visibility and brand power. Will reduce in the coming quarters and maintain at 3.5 - 4% of revenue. it was 5.3% for Q1FY14.

Confident of growing 25% with the operating margins at 9-9.5%.

This seems to be a terrific company in the making in the near future.

Can someone throw some light on management quality?. I see that this is being headed by promoter’s son. and the other son is into the amusement park business.(wonder la is one of them) his wife recently started an inner wear company called v creations.

somehow i am not comfortable with this multiple business run by the family and to add to that a PE of 28. I had a small holding. sold off. will look to add only when it becomes very cheap


This family is known for honesty and have never heard about being them corrupt( atleast to my knowledge). The promoterwas the highest tax payer from Keralaeven at a juncture when the turnover****of his company was modest.

Some links which can be helpful about the management:

http://www.indianexpress.com/news/businessman-donates-kidney-to-truck-driver-sets-off-chain-reaction/739139/0 Link: http://www.indianexpress.com/news/businessman-donates-kidney-to-truck-driver-sets-off-chain-reaction/739139/0

(How often have we seen a promoter donating kidney on humanitarian purposes).

http://www.vguard.in/kochouseph-chittilappilly/kidney-donor/humanitarian/ Link: http://www.vguard.in/kochouseph-chittilappilly/kidney-donor/humanitarian/

  • Highest Individual Income Tax Payer from the State 1993 to 1995 from the Government Of India. (This speaks about the transparency).

http://www.kochousephchittilappilly.com/socially-conscious-business-model Link: http://www.kochousephchittilappilly.com/socially-conscious-business-model

(In this video, anybody having job card can load or unload the goods/carriers but when CITU(Trade union) defended this, he initially pleaded and then went on his way to unload and help his workers till the time police arrived) Now how often do you see a CEO working like this taking on the local Trade unions to fight the unjust demand.

Some of his thoughts:

http://www.kochousephchittilappilly.com/view-blog/445/Mal(l)administration/ Link: http://www.kochousephchittilappilly.com/view-blog/445/Mal(l)administration/ (l))administration/)

http://www.kochousephchittilappilly.com/view-blog/441/Fixing_and_the_Gentleman’s_Game/ Link: http://www.kochousephchittilappilly.com/view-blog/441/Fixing_and_the_Gentleman’s_Game/

http://www.kochousephchittilappilly.com/view-blog/71/Rise_India_Rise/ Link: http://www.kochousephchittilappilly.com/view-blog/71/Rise_India_Rise/

Mithun,son of promoter looks after V-guard. Another son looks after wonder la and their mother looks after - V-Creations (Apparel business).

1 Like

thanks a lot krishna for that useful info. good to know that.

(on a valuation basis, this one looks stretched at a PE of 28. i will probably get back in at a pe ~ 20. of late it has become very volatile )



flat growth in sales - 6% at 334 vs 313 cr

NP down 19% - 14.6 vs 17.9 crs

Disappointing results. You are not allowed to de-grow profits especially when you are selling at 25 PE…

@ Krishna- You holding or selling?

Holding it. As stated by management, extended monsoon and improvement in power situation in south along with high base in Q2 has given a subdued performance.

Non south market has grown by 34% which is quite impressive. I would like to see how they are going to perform in the festive season and Q4 which should be better than Q2.

Key Highlights by Capital Market:

The company held its conference call on 23rdOct. 13 and was addressed by Mr Mithun Chittilappilly MD

As per the management, Q2 FY’14 was subdued largely due to seasonal variations and extended monsoon. In FY’13, summer got extended to late Aug, whereas in FY’14, monsoon is almost extended till Oct’13. So while the company got seasonal advantage in Q2 FY’13, the same turned at disadvantage in Q2 FY’14.

Further the improvement in power scenario in Q2 FY’14 on YoY basis in South India, which constitutes about 72% of total market, affected the sales of inverters, which was a high growth driver last quarter.

In Q2 FY’14, the company despite sales growth of 7% YoY, was able to improve its gross margin by 200 bps. However, higher staff costs, advertisement costs and other expenditure, resulted in Ebidta margin at 8.4%.

The Electronics segment, which constitute stabilizers and UPS, which contribute about 25% of total sales in Q2 FY’14, degrew by 18% YoY, Electrical which includes pumps, house wiring cable, electric water heater, fans and others, and contribute about 72% of total sales, grew by about 18%, with electric water heater and house wiring cables delivered a healthy growth, while the solar water heater which constitute about 2.5% of total sales, grew by about 22%.

Non South market sales in H1 FY’14 stood at about Rs 224 crore, grew by about 38% YoY and management expects the sales growth to continue to remain strong in H2 FY’14 as well. Management is very specific in non South market being limited to geographies which are on upwards of North, Punjab, NCR region, West Bengal and North Eastern states, Bihar etc.

Company had incurred about Rs 32 crore of advertisement expenditure total in H1 FY’14 as compared to Rs 18 crore in H1 FY’13. Further it plans to spend about Rs 30 crore in H2 FY’14 as compared to ad expenditure of about Rs 40 crore in H2 FY’13. This together with better economies of scale advantage on higher volumes will ensure better Ebidta margins in H2 FY’14.

Management continues to remain optimistic about H2 with festival season and suppressed demand of H1 FY’14 due to seasonality and extended rainfall, will come back strongly in H2 FY’14. Overall, for FY’14, management expects net sales growth of 20% and Ebidta margin to hover around 9-9.5%.

The company has introduced new products such as Induction Cooker and Switchgears in Kerala and Karnataka market. So far revenue from Induction cooker stood at about Rs 15 crore and that of switchgear is about Rs 12 crore. Products will soon be launched in non South market as well. Mixer grinders were launched in Q2 FY’14 in Kerala to capture the demand during Onam season.

Management does not expect to spend more than Rs 20 crore on capex as most of the capex is done and now only maintenance and warehousing capex is required in FY’14 and most of FY’15 as well.



The company held its conference call on 21stJan’14 and was addressed by Mr. Mithun Chittilappilly MD

Key Highlights by Capital mkt

Non South market sales in Q3 FY’14 stood about 30% of total sales and grew by about 30% as well. The South market which constitutes about 70% degrew by about 8-9% in value terms and by about 13-15% in volume terms. Overall, thus company ended up with flattish kind of sales growth in Q3 FY’14. For Q4 FY’14, management expects about 10-12% sales growth.

In Q3 FY’14, the company was able to improve its gross margin by 100 bps which was largely due to lower Advertisement expenditure YoY. Going forward Ad expenditure will be around 3.5-4% of sales.

The Electronics segment, which constitute stabilizers and UPS, which contribute about 24% of total sales in Q3 FY’14, degrew by 18% YoY, Electrical which includes pumps, house wiring cable, electric water heater, fans and others, and contribute about 72% of total sales, grew by about 8%, with electric water heater and house wiring cables delivered a healthy growth, while the solar water heater which constitute about 4% of total sales, grew by about 30%. The premium variant of the electric water heater segment launched in FY’14 continues to get good response.

As per the management, better power supply in States of Tamil Nadu and Andhra Pradesh together with lower sale of consumer durable products due to weak consumer sentiment, affected the growth of the company. Also due to sand mining ban in many parts of the country, construction activities were also slow leading to lower sale of wire business.

As per the management, the power situation in South India should be temporary phenomena largely due to elections. Also extended monsoon also delayed some of the product sale and affected the demand.

The company has about 15000 dealers, 300 distributors and 3000 channel partners. About 12000 dealers and 150 distributors and about 2000 channel partners are in South India while rests are in Non South Indian markets. Going forward, the sale will be more from channel partners, which will reduce the overall working capital requirements of the company. Also there is tremendous scope to improve the sales from existing dealers and distributors in non-South market as compared to sales from existing dealers and distributors from South market. Also there is scope for improvement of average realization from non south market.

Total market of electric wires will be about Rs 7500 crore of which company has share of about 6%. By year end the company should be able to report about Rs 450-475 crore of electric wires. Polycab has highest market share of 20% followed by Finolex cables of about 12%.

Raw material prices of cooper and other metals were steady and more on downward side. Management expects raw material prices to slightly inch up from March’14 onwards which is general seasonally trend.

The new products introduced last year namely Induction Cooker, Mixer Grinder and Switchgears did well and are expected to post revenue of about Rs 50 crore totally in FY’14.

Lower tax rate during the quarter was as a result of a 200% weightage deduction on R&D and on capital expenditure which the company received the approval from this year and going forward also the deduction will continue.

Overall, management expects about 11-12% growth in FY’14 with Ebidta margin of about 8.5-9%. The management lowered its earlier guidance of about 20% growth in FY’14 largely due to current economic and environmental challenges.

Good company going through a flat period? The promoter has been buying like crazy since the results.