#1V-Guard Industries Q4 FY2019 Earnings Presentation V-GUARD ooo C#2Disclaimer Certain statements in this communication may be 'forward looking statements' within the meaning of applicable laws and regulations. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Important developments that could affect the Company's operations include changes in the industry structure, significant changes in political and economic environment in India and overseas, tax laws, import duties, litigation and labour relations. V-Guard Industries Limited (V-Guard) will not be in any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. V-GUARD 2#3Table of Contents MD's Message 04 Key Highlights 05 Financial Highlights 6-8 Segment-wise/Geographical Breakup of Revenues 9-11 Business Outlook 12 Annexure 13 V-GUARD 3#4A Managing Director's Message V-GUARD Commenting on the performance for Q4 & FY19, Mr. Mithun Chittilappilly, Managing Director - V-Guard Industries Limited said, "We have delivered a growth of 12% (GST-adjusted), EBITDA growth of 20% and PAT growth of 24% for full year FY19, despite the challenges faced during the quarter in terms of unfavourable weather conditions, floods in Kerala during Onam and volatility in commodity and currency. The growth was driven by Water Heater, Fan and Wires segments. Our emerging product categories of Switchgears, Modular Switches, Kitchen Appliances and Air Coolers continue to witness strong traction and have contributed Rs 180 crore to the top-line. Modular Switches were launched in some of the non-South markets while Air Coolers were rolled out to more South and non-South markets in Q4 FY19. Non-south markets continue to make steady progress recording a growth of 15.3% in FY19 and contributing 39% of the total revenue as compared to 37% a year ago. Growth in non-South markets in Q4 was impacted by the delayed onset of summer. We continue to invest in growing our presence further and envisage 50% contribution from this business over the next 4-5 years. South markets saw a strong recovery in second half of the year, recording a robust growth of over 16% in Q4. Overall growth in Q4 came in at 12.3% driven by Wires, Modular Switches, Switchgears and Kitchen Appliances segments. During the quarter, we were able to land some pricing actions to bring margins back on track to 11.5% in Q4, resulting in our highest ever quarterly PAT of Rs. 59 crore, up 115%. Our prudent approach and focus on profitable and sustainable growth has resulted in strong cash flow generation to the tune of Rs. 152 crore in FY19. The Board has recommended dividend of Rs 0.80 per equity share for FY19. We continue to invest towards enhancing organisational capabilities and improving our competitiveness in the market. Efforts on innovation, R&D and product development will continue to be made in order to roll out differentiated offerings and drive profitable and sustainable growth. Further, our strong balance sheet provides a platform to pursue inorganic opportunities, if a favourable opportunity comes our way."#5Key Highlights - Q4 & FY19 • Q4 revenue up 12.3% YoY to Rs. 740 crore Revenue growth of 12.3% YoY in Q4 • Strong recovery in South markets with revenue growth of 16.3% FY19 • Non-South markets grew 6.3% YoY impacted by the delayed onset of summer in Q4 FY19 • Q4 revenues were driven by Wires, Modular Switches & Switch gear and Kitchen appliances segments • Full year growth for FY19 stood at around 12% (GST adjusted) 5 V-GUARD • EBITDA up 106.1% YoY, PAT by 114.8% in Q4 FY19 Ad/promotional spends at 4.6% of sales in Q4 FY19 as compared to 9.7% in Q4 FY18 on the back of the brand rejuvenation exercise launched last Q4 • EBITDA margins at 11.5% in Q4 FY19 as compared to 6.3% in Q4 FY18 • Q4 PAT of Rs. 59 crore, up 114.8%; Full year PAT at Rs. 166 crore, up 24.4% • Balance sheet Strong cash generation continues, CFO at Rs. 152 crore in FY19 as compared to Rs. 55 crore in FY18 • continues to be strong Strong return ratios maintained with ROE and ROCE of 18.4% and 21.3% respectively (TTM basis) at the end of Q4 FY19 Fund Raising • Net cash of Rs. 157 crore on balance sheet as on 31st March 2019 • Board of Directors has recommended a final Dividend of Rs 0.80 per equity share for FY19 • Board of Directors has approved the proposal of raising of funds by way of issue of secured or unsecured redeemable non-convertible debentures, in one or more tranches on private placement basis, within the existing approved limit of borrowings of Rs.750 crore • To pursue inorganic opportunities that support long term growth objectives#6Financial Highlights (Q4 FY19 vs Q4 FY18) Total Income (Rs. crore) 659 Q4 FY18 12.3% 740 Gross Profit 219 193 Q4 FY19 Q4 FY18 EBITDA (Rs. crore) 41 Q4 FY18 106.1% 85 13.5% V-GUARD Key ratios (%) Q4 FY19 Q4 FY18 Gross Margin 29.6% 29.3% EBITDA Margin 11.5% 6.3% Q4 FY19 Net Margin 8.0% 4.2% Ad Exp (incl. promotions)/Total Revenues 4.6% 9.7% 59 Employee Cost/ Total Operating Income 7.1% 6.4% Other Expenditure/ Total Operating Income 11.9% 17.1% Tax rate 25.1% 22.9% Diluted EPS (Rs.) 1.37 0.64 PAT (Rs. crore) 28 Q4 FY19 Q4 FY18 114.8% Q4 FY19 6#7Financial Highlights (FY19 vs FY18) Total Income (Rs. crore) 2,321 2,566 FY18 10.6% Gross Profit 767 697 FY19 FY18 EBITDA (Rs. crore) 198 FY18 20.0% V-GUARD Key ratios (%) FY19 FY18 Gross Margin 29.9% 30.0% 10.1% EBITDA Margin 9.3% 8.5% FY19 Net Margin 6.4% 5.7% Ad Exp (incl. promotions)/Total Revenues 5.2% 6.6% PAT (Rs. crore) 166 Employee Cost/ Total Operating Income 7.9% 7.3% Other Expenditure/ Total Operating Income 13.5% 14.6% Tax rate 22.9% 24.9% Diluted EPS (Rs.) 3.82 3.08 238 133 FY19 FY18 24.4% FY19#8Financial Highlights - Balance Sheet Perspective Balance Sheet Snapshot (Rs. cr) 31 Mar 2019 31 Dec 2018 31 Mar 2018 Net worth 899.7 837.5 751.6 Gross debt 10.0 10.0 2.4 Current Investments 83.1 157.1 75.2 Cash and cash equivalents 84.3 55.8 4.7 Net Cash Position (Rs. crore) 157.4 202.9 77.5 Fixed Assets 221.2 218.4 208.1 Balance Sheet Snapshot (Rs. cr) 31 Mar 2019 31 Dec 2018 31 Mar 2018 Debtor (days) 66 46 70 Inventory (days) 75 72 70 Creditor (days) 72 64 74 Working Capital Turnover (days) 69 55 66 RoE* (%) 18.4% 16.0% 17.7% ROCE* (%) 21.3% 18.6% 22.2% *Calculations are on a trailing twelve month basis V-GUARD 8#9Segment-wise Breakup of Revenues - Q4 FY19 vs Q4 FY18 V-GUARD Q4 FY19 Contribution Q4 FY18 Contribution Products (Rs. Cr) (%) (Rs. Cr) (%) YoY growth (%) Electronics Electricals Consumer Durables Grand Total 205.5 28% 207.7 32% -1.1% 355.2 48% 294.6 45% 20.6% 179.0 24% 156.3 24% 14.5% 739.7 100% 658.6 100% 12.3% Q4 FY19 Contribution Q4 FY18 Contribution YoY growth Products (Rs. Cr) (%) (Rs. Cr) (%) (%) Stabilizers 123.9 17% 120.5 18% 2.9% UPS (Digital + Standalone) 81.5 11% 87.2 13% -6.5% Pumps 88.2 12% 87.2 13% 1.1% Wires 236.9 32% 189.8 29% 24.8% Water Heaters (Electric + Solar) 49.7 7% 43.7 7% 13.8% Fans 102.4 14% 94.8 14% 8.0% Kitchen Appliances 20.0 3% 14.1 2% 41.7% Switchgears & Modular Switches 30.1 4% 17.5 3% 72.2% Air Coolers 6.9 GRAND TOTAL 739.7 1% 100.0% 3.7 1% 87% 658.5 100.0% 12% Electronics - Stabilizers, UPS, Solar Inverter; Electricals - Wires, Pumps, Switchgears, Modular Switches; Consumer Durables - Fans, Water Heaters, Kitchen Appliances, Air Coolers 9#10Segment-wise Breakup of Revenues - FY19 vs FY18 10 V-GUARD FY19 Contribution FY18 Contribution YoY growth Products (Rs. Cr) (%) (Rs. Cr) (%) (%) Electronics 759.9 30% 729.2 31% 4.2% Electricals 1128.6 44% 1017.1 44% 11.0% Consumer Durables 677.9 26% 575.0 25% 17.9% Grand Total 2,566.4 100% 2,321.3 100% 10.6% FY19 Contribution FY18 Contribution YoY growth Products (Rs. Cr) (%) (Rs. Cr) (%) (%) Stabilizers 448.5 17% 443.2 19% 1.2% UPS (Digital + Standalone) 311.4 12% 286.0 12% 8.9% Pumps 275.2 11% 275.4 12% -0.1% Wires 765.6 30% 688.6 30% 11.2% Water Heaters (Electric + Solar) 324.5 13% 284.5 12% 14.0% Fans 259.5 10% 228.4 10% 13.6% Kitchen Appliances 81.4 3% 58.4 3% 39.4% Switchgears & Modular Switches 87.8 3% 53.1 2% 65.3% Air Coolers GRAND TOTAL 12.6 2,566.4 0% 3.7 0% 240.8% 100.0% 2,321.3 100.0% 10.6% Electronics - Stabilizers, UPS, Solar Inverter; Electricals - Wires, Pumps, Switchgears, Modular Switches; Consumer Durables - Fans, Water Heaters, Kitchen Appliances, Air Coolers Note 1: Consequent to the introduction of GST w.e.f. July 01, 2017, Central Excise, Value Added Tax (VAT), etc. have been subsumed into GST. Unlike Excise Duties, levies like GST, VAT, etc. are not part of Revenue. The YoY growth calculations appearing in this section, are not strictly comparable with prior periods.#11Geographical Breakup of Revenues Q4 FY19 Contribution Q4 FY18 Contribution YoY growth Region (Rs. Cr) (%) (Rs. Cr) (%) (%) South 464.0 63% 399.1 61% 16.3% Non-South 275.7 37% 259.5 39% 6.3% Total Revenue 739.7 100% 658.6 100% 12.3% FY19 Contribution FY18 Contribution YoY growth Region (Rs. Cr) (%) (Rs. Cr) (%) (%) South 1,576.1 61% 1,462.8 63% 7.7% Non-South 990.3 39% 858.8 37% 15.3% Total Revenue 2,566.4 100% 2,321.6 100% 10.5% 11 V-GUARD#12Business Outlook V-GUARD The Company is confident of achieving a topline growth of 15% over the next few years driven by expansion into non-South markets and introduction of new product categories. We continue to undertake business strengthening initiatives and putting in place best in class processes and systems to future-proof the organization. We are focused on putting in place best-in-class processes and systems to future-proof the organization, including enhancing capabilities in new product development, quality control and salesforce automation. The Company envisages adding 3,000-5,000 retailers across the country every year over the next five years with higher addition in the non-South region. Going forward, the Company shall continue to build upon its competitive positioning in the consumer electricals, electronics and durables industry. The Company will maintain its thrust on advertising and promotions to increase its brand visibility and penetration in the non-South markets under its new brand identity reflecting the company's transformation into a leading multi-product, pan-India player in the Consumer Electricals space. Two-thirds of the Company's distribution network has already been established in the non-South region. This provides significant potential for revenue growth and operating leverage to expand on existing investments. The Company envisages the non-South markets to contribute to 50% over the next five years. Efforts on innovation, R&D and product development will continue to be made in order to roll out differentiated offerings in a competitive industry. We have products that are connected, controlled and M2M capable and are bringing capabilities like machine learning as well. We are also building in auto diagnostics into devices. We are also working on a digital strategy for the company that includes looking at the predictive maintenance in plants, using Artificial Intelligence. We are focusing on Six Sigma, TPM, lean manufacturing, etc at our 10 plants in India. The manufacturing execution system (MES) acts as an enabler for Industry 4.0, providing real-time factory data. The cash positive balance sheet enables us to pursue inorganic opportunities, if valuations favour. We are looking at companies having product range synergy with V-Guard, providing manufacturing capabilities or strong regional players where V-Guard can expand its geographic footprint. 12#13Annexure MUT (U 000 V GUARD 13#14Company Overview Comprehensive portfolio catering to the mass consumption market ⚫ Electronics - Stabilizers, UPS, Solar Inverter; Electricals - Wires, Pumps, Switchgears, Modular Switches; Consumer Durables - Fans, Water Heaters, Kitchen Appliances, Air Coolers ⚫ Household consumption market will continue to grow at a significant pace going forward Invested in a strong distribution network Strong Brand Equity • . Spread over 30 branches nationwide Network of 30,000+ retailers . Aggressive ad spends and sales promotions have created a strong equity and brand recall Strong established player in South India with leadership in the Voltage Stabilizer segment Expanding towards a pan India presence • Significant investments committed towards aggressive expansion in non-South markets • Increased capacities for house-wiring cables and solar water heaters Mix of in-house and outsourcing production model provides flexibility Increasing market share across all product lines • Follows an asset light model outsourcing ~58% of its products from a range of vendors Tie-ups with SSIs/self-help groups spread across southern India . • Blended manufacturing policy helps optimize capex and working capital requirements Leadership position in its flagship product, voltage stabilizers, with over 51% market share Successfully gained market share in all of its product categories Rapidly expanding market share in the non-South markets V-GUARD 14#15Production Model 15 V-GUARD PVC Wires Factory Product No. of Units Location Own Manufacturing Facilities • Solar Water Heater Factory Outsourcing Objectives Asset light model outsourcing ~58% products Stabilizer Manufacturing Units PVC Wiring Cables 2 Coimbatore, Kashipur • Pumps & Motors 1 Coimbatore Complete control over supply chain ecosystem Fans 1 Himachal Pradesh • R&D support to vendors' technical teams Water Heater 2 Himachal Pradesh, Sikkim • Solar Water Heaters 1 Perundurai Quality assurance official posted at vendors' production units to ensure maintenance of quality Stabilizers 2 Sikkim Stabilizers Pumps Fans Outsourced production facilities 57 Across India 18 66 11 66 UPS 9 66 • Owns all its designs and moulds • Helps procure raw material for the vendors, negotiating price with the supplier • • Tie-ups with SSIs/self-help groups across Southern India for flagship product, Stabilizers Blended manufacturing policy helps optimize capex and working capital requirements#16Rs. crore Financial Highlights (FY14-19) Revenue 2,566 2,321 2,114 1,746 1,862 ,518 Rs. crore EBITDA and EBITDA Margins 9.3% 9.9% 10.5% 8.4% 8.5% 7.9% Rs. crore V-GUARD PAT and PAT Margins 6.8% 6.4% 6.0% 5.7% 4.6% 4.1% FY14 FY15 FY16 FY17 FY18 FY19 127 138 185 222 198 238 FY14 FY15 FY16 FY17 FY18 FY19 70 71 112 145 133 166 FY14 FY15 FY16 FY17 FY18 FY19 Note 1:Please note that that consequent to the introduction of Goods and Service Tax (GST) with effect from July 01, 2017, Central Excise, Value Added Tax (VAT), etc. have been subsumed into GST. In accordance with Indian Accounting Standard - 18 on Revenue and Schedule III of the Companies Act, 2013, unlike Excise Duties, levies like GST, VAT, etc. are not part of Revenue. Hence, the revenue and growth calculations for FY18, are not strictly comparable with FY17 and prior periods. Note 2: V- Guard underwent brand rejuvenation in Q4 FY18 where significant investments (Rs. 45 crore ATL spends) were made resulting in lower EBITDA and PAT for FY18. --ROCE Net Worth -Gross D/E ROE 32.9 29.9 25.3 25.9 22.2 21.3 22.0 23.5 22.8 18.7 17.7 18.4 FY14 FY15 FY16 FY17 FY18 FY19 Rs. crore Note 3: V-Guard adopted Ind-AS framework starting FY18. Numbers for FY17 have been reinstated in compliance with Ind-AS to draw meaningful comparison. Prior period numbers are in IGAAP and not comparable. 0.3 0.2 0.0 0.0 0.0 0.0 318 378 471 634 752 900 FY14 FY15 FY 16 FY17 FY18 FY19 16#17Operational Highlights (FY14-19) Expanding Geographic Presence 30% 33% 33% 35% 37% 39% 17 V-GUARD Ad & Promo Spends and as a % of Sales 153 135 95 80 69 60 70% 67% 67% 65% 63% 61% 6.6% 3.9% 4.0% 4.3% 4.5% 5.2% FY2014 FY2015 FY2016 ■South FY2017 FY2018 FY2019 ■Non-South FY2014 FY2015 FY2016 FY 2017 FY2018 FY2019 Ad Spends % of Sales In-house Manufacturing vs. Outsourcing 57% 60% 60% 60% 58% 57% 43% 40% 40% 40% 42% 43% FY2014 FY2015 FY2016 In-house FY2017 Outsourced FY2018 FY2019#18Market Size across Product Segments Products STABILIZERS PVC WIRES COOKTOPS V-GUARD h MOTOR PUMPS 5,500.00 Market Size (Rs. Crore)* Organized Unorganized Total Key Players Production Model Distribution Channel Strategy *Company estimates FY16 700.00 550.00 1,250.00 Micro tech, Livguard, Bluebird, Capri, Logicstat, Premier, Everest 62% Outsourced Consumer Durable stores, Electrical and Hardware Stores 420.00 450.00 5,500.00 4,000.00 180.00 200.00 5,000.00 9,500.00 Polycab, Havells, Finloex, RR Cables, Anchor 100% In-House Electrical and Hardware Stores 600.00 650.00 - Prestige, Bajaj Electrials, TTK Prestige, Preethi, Butterfly 100% Outsourced Consumer Durables / Kitchen Appliances stores 10,500.00 Crompton Greaves, Kirloskar, CRI, Texmo 90% Outsourced Electrical and hardware Stores, Pump and Pipe fittings Stores 18#19Market Size across Product Segments V-GUARD Products Market Size (Rs. Crore)* Organized Unorganized Total Key Players Production Model Distribution Channel Strategy *Company estimates FY16 WATER HEATERS FANS UPS Digital UPS 1,325.00 5,000.00 160.00 700.00 1,500.00 240.00 4,500.00 750.00 2,025.00 A.O. Smith, Racold, Bajaj, Venus, Crompton Greaves, Usha 55% Outsourced Consumer Durable stores, Electrical and Hardware Stores 6,500.00 400.00 Crompton, Usha, Bajaj Electricals, Havells, Orient Numeric, APC, Emerson 90% Outsourced Consumer Durable stores, Electrical and Hardware Stores 100% Outsourced Consumer Durable stores 5,250.00 Microtek, Luminous, Su-Kam, Exide 100% Outsourced Consumer Durable stores, Electrical and Hardware stores, Battery Retail stores 19#20Market Size across Product Segments V-GUARD 20 0 Products Market Size (Rs. Crore)* SOLAR WATER HEATER SWITCHGEAR GAS STOVES MIXER GRINDERS Organized 420.00 1,400.00 1,500.00 Unorganized Total Key Players Production Model 180.00 600.00 Racold, Emmvee Solar, Sudarshan, Supreme 100% In-House 600 2,000.00^ Havells, Legrand, L&T, ABB 100% Outsourced 1,000.00 1,000.00 2,000.00 Butterfly (glass top), Sun Flame (steel) 100% Outsourced Distribution Channel Strategy Direct Marketing Channel Electrical stores Consumer Durables / Kitchen Appliances stores 1,000.00 2,500.00 Preethi, Bajaj Electricals, Butterfly, Panasonic 100% Outsourced Consumer Durables / Kitchen Appliances stores *Company estimates FY16; ^The market size where V-Guard is present; total domestic switchgear market estimated at Rs. 4,000 crore#21About V-Guard Industries 21 V-GUARD V-Guard Industries Limited (BSE:532953, NSE: VGUARD) is a Kochi based company, incepted in 1977 by Kochouseph Chittilapilly to manufacture and market Voltage stabilizers. The Company has since then established a strong brand name and aggressively diversified to become a multi-product Company catering to the Light Electricals sector manufacturing Voltage stabilizers, Invertors & Digital UPS systems, Pumps, House wiring cables, Electric water heaters, Fans, Solar water heaters and has also recently forayed into Induction cooktops, switchgears and mixer grinders. V-Guard outsources 60% of its product profile while the rest are manufactured in - house while keeping a strong control in designs and quality. It has manufacturing facilities at Coimbatore (Tamil Nadu), Kashipur (Uttaranchal) and Kala Amb (Himachal Pradesh). V-Guard has been a dominant player in the South market, though the last five years have also seen the Company expanding rapidly in the non-South geographies with their contribution increasing from 5% of total revenues in FY08 to around 33% of total revenues in FY15. Significant investments continue to be made to expand its distributor base in the non-South geographies, and become a dominant pan-India player. V-Guard has a diversified client base and an extensive marketing & distribution network. Its client base differs from product to product and includes direct marketing agents, distributors and retailers. The Company today has a strong network of 29 branches, 624 distributors, 5,562 channel partners and ~25,000+ retailers across the country. For further information, please contact: Sudarshan Kasturi (Senior VP & Chief Financial Officer) V-Guard Industries Limited Tel: +91 484 300 5601 Email: [email protected] Shiv Muttoo / Varun Divadkar CDR India Tel: +91 22 6645 1207/9763702204 Email: [email protected]/[email protected]#22V-GUARD THANK YOU