Orient Electric Limited — Earnings Release 2021

Oct 23, 2021

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October 23, 2021

Listing Department Department of Corporate Services -Listing National Stock Exchange of India Limited BSE Limited Exchange Plaza, Plot no. C/1, G Block, Phiroze JeeJeebhoy Towers, Bandra-Kurla Complex, Bandra (E), Dalal Street, Mumbai - 400 051 Fort, Mumbai – 400 001 Trading Symbol: ORIENTELEC Scrip Code: 541301

Sub.: Investors’ Release – Un-Audited Financial Results – September 30, 2021

Dear Sir / Madam,

This is in continuation of our earlier letter of today’s date and pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), please find enclosed herewith the copy of Investors’ Release on the Un-Audited Financial Results of the Company for the quarter and half year ended September 30, 2021.

Investors’ Release will also be available on the website of the Company, www.orientelectric.com.

You are requested to take the above enclosed document on your record.

Thanking you,

Yours Sincerely,

For Orient Electric Limited

Hitesh Digitally signed by Kumar Hitesh Jain Kumar Jain Hitesh Kumar Jain Company Secretary Encl.: as above

Orient Electric Limited - a CK Birla Group Company CIN No.: L31100OR2016PLC025892 240, Okhla Industrial Estate, Phase III, New Delhi 110020, India Tel +91 11 40507000 Fax +91 11 40507004 Regd. Office: Unit VIII, Plot No.7, Bhoinagar, Bhubaneswar, Odisha 751012 investor@orientelectric.com www.orientelectric.com

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INVESTOR RELEASE

Q2, Financial Year 2021-22

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Investor Release, Q2 FY 2021-22

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Industry recovers after Covid Wave 2

Cautious covid restrictions, healthcare infra revamps, and accelerated vaccination drive brought down covid-affected cases to instil consumer confidence through the quarter. Channel stocking and good monsoon also supported the demand with pockets of heavy showers and floods, causing some disruption. Generally, home consumption products continued to experience the demand through all the channels. However, end-September encountered slowdown across geographies. Besides, cost pressures induced by hardening of metal and plastics prices and shortage of ICs posed headwinds to maintain profitability throughout the quarter.

Encouraging growth momentum

Channel and pipeline stock availability across all product lines enabled Orient Electric to service the consumer demand on time and get a positive market traction. The distribution outreach focus continued and was supported by DMS/ SFA to drive accelerated growth in select territories. On a follow-through of the lockdown challenges, the company helped the distribution to step up the cash flows and control market exposures. There was no line of sight for easing of prices in metals, plastics, and electronic components. Shortage of ICs heightened during the quarter and is expected to continue in the near term future. Price increases were taken in-quarter to counter the rising input costs. Aggressive cost reduction drives were undertaken across the organisation. Sensing an optimistic outlook, the manufacturing and procurement activities were maintained at normal levels during the quarter to ensure readiness of supplies and part-mitigate the commodity cost pressures.

OEL Revenue grew 37% YoY for the quarter with similar growths across segments from B2C channels and Exports.

Margins remained under pressure with continuing headwinds from commodities

Gross Margin:

Gross margins have improved sequentially by 120 bps over previous quarter with a combined effect of price increase, mix improvements and cost reduction. However, it shrunk 4.8% below last year on an exceptionally higher base due to low-cost inventories carried during H1 last year followed by steep increase in commodity rates over past one year. Also, change in mix YoY for entry level categories, and lower Cooler sale, disproportionately affected the ECD segment, wherein share of business for ECD segment in this quarter was higher from pre-Covid levels. This has caused a dent in the gross margins from the previous two base years. Cost saving initiative through the Sanchay program has helped to offset the steep cost increase impact by over 1% of Costs.

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Investor Release, Q2 FY 2021-22

Expenses:

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Employee Expenses grew 16% YoY during the quarter for higher activity levels over last year, thus engaging more manpower at plants, strengthening key functions, combined with salary increases over an eroded base of last year.

Other Expenses as % to revenue have effectively reduced by 40 bps over last year and by 120 bps over previous quarter but has grown 32% over last year in absolute value. Travel, administrative spends, logistics and distribution expenses, and A&P spends have resumed at normal operating levels post lockdowns.

Finance Cost & Depreciation:

Finance Cost increased by 11% YoY due to higher utilisation of Vendor Financing that supported liquidity of all Vendors and helped in maintaining strong partnerships. Amortisation of Digitisation spends and increased capitalisation are resulting in Depreciation increase.

Working Capital:

Effective Working Capital as on 30[th] Sep’21 has increased by 14 days from last year levels. This was due to planned built-up of Inventory over past 2 quarters, to ensure readiness across all channels and exports for servicing future pent up demand and in anticipation of any supply disruption arising due to Wave 3. This is expected to reduce gradually over the remaining months of the year.

Liquidity:

As a result of the working capital increase, the net cash position has reduced as was indicated earlier and is likely to improve in second half with the reduction of working capital.

Key Results Q2’FY22 (Rs. Cr.)

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Revenue
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17% 594
435 434 37%
19-20 20-21 21-22
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Op. EBITDA PAT
58 7% 62 32 7% 35
13.3% 10.4% 7.5% 5.8%
69%
22 5 168%
5%
1.1%
19-20 20-21 21-22 19-20 20-21 21-22
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Key Ratios Q2’FY22

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ROCE
29.4%
23.2% 21.3%
19-20 20-21 21-22
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Debt-Equity
0.29
0.06
0.04
19-20 20-21 21-22
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Current Ratio
1.54
1.44
1.39
19-20 20-21 21-22
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Growth

2019-20

2020-21 2021-22

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Investor Release, Q2 FY 2021-22

Festival, good monsoon and normalcy raise hope for the coming quarters

While normalcy is setting in across the country with lower Covid positivity and fatality rates, the onset of festivals in Q3 and good monsoons are raising hopes of consistent demand generation and expectations of positive sentiments for the forthcoming summer season. Sporadic Covid positivity spikes are likely to continue with higher tolerance and lower fatality. Commodity cost and availability challenges seem to remain for the rest of the year and needs to be navigated through with multiple actions to protect margins and grow market shares.

Well-rounded performance

All segments performed well during the quarter. Revenue for Q2’FY21 grew 37% YoY with similar range bound growth from every segment. Entry level products and all consumer-facing channels were the top runners. Premium products recorded an upsurge in demand in the quarter. Export markets have also opened up with new orders. Tender business remained quite sluggish.

The segment wise performance for the period ended 30[th] Sep’21 has been as follows:

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Quarter Ended
Rs Cr. Q2 21-22 YOY % Q1 21-22 Q2 20-21
ECD
Revenue 420 37.9% 324 304
PBIT 52 0.8% 23 51
Lighting & Switchgear
Revenue 175 34.9% 98 129
PBIT 28 46.1% 10 19
OEL
Revenue 594 37.0% 422 434
PBT 47 7.5% 7 43
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Investor Release, Q2 FY 2021-22

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Electrical Consumer Durables (ECD):

The strong growth momentum was primarily led by Premium, Economy and portable fans, driving the value share of business. Premium fans continued the streak of high growth in the quarter. Water Heaters and Small Appliances recorded high double-digit growths with a pent-up demand after lockdowns. ECD business grew by 38% in Revenue. This segment was most severely affected by steep price increases in metals and plastics leading to a contraction in margins made up partly with price increases and cost reduction.

Fans

Consumption momentum was good during the quarter, but high price increases acted as a deterrent to the demand towards the end of the quarter. Consequently, there was a spurt in the demand for entry-level economy products. The cost increases along with the mix impacted the gross margins and is likely to continue in the near term, as the outlook for the commodities are not indicating any softening, rather some metal prices are rising even further. Despite the strong headwinds, Fans has grown at par with the entity levels and has seen encouraging export demand apart from good domestic growth across ceiling and portable fans. Brand investments have been initiated both in ATL and BTL spends. The inventory built up was continued for the quarter and resulted in higher working capital by end of the quarter as was planned. This is expected to reduce by Q4’FY22 with onset of season.

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Home Appliances

Water Heaters and Small Appliances led a strong growth for Appliances with pent-up demand and channel fill-up for the season. These categories recorded more than 2x growth over pre-Covid levels in the same quarter. Entry level Glassline Water Heaters and other new products were

introduced to revitalise the portfolio. Sellout was noticeably lower in September and is expected to grow in Q3 aided by festival and season. As indicated, commodity prices and product mix led to a steep cost pressure. Mitigating action plans are being put in place.

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Investor Release, Q2 FY 2021-22

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Lighting & Switchgear

B2C segment drove the business in the quarter with Domestic, home, and small office/showroom segment contributing to increased demand. B2B private and govt. business enquiries have increased, and order input has started. EESL tender business was sluggish with no new tender finalization in the quarter. Acute shortages and steep price increase in critical components like IC, Mosfet & Capacitor, and Aluminum has affected the margins across Industry. Switchgear market maintained its economy focus with new product introductions.

Lighting & Switchgear segment grew around 35% with Consumer business growing at a much faster pace against negative growth of EESL. High margin growth in the segment has been delivered on grounds of favourable mix of consumer businesses and improved sales realisations through price increase.

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Lighting
Consumer Luminaries business experienced very and is successfully building a strong Enquiry bank.
strong traction with above-par growths in the Shortage and unavailability of ICs has rapidly
quarter that was supported by advance planning increased and is getting mitigated through design
of supplies. But increasing cost pressure is posing changes and alternate specifications. Execution of
a challenge to the gross margins being mitigated tender business was still affected partly due to
through price increases. The Professional non-availability of site clearances and absence of
Luminaries business, other than Tender, has now new Tenders. Working Capital was controlled and
started showing growths, though on a lower base, is substantially reduced from last year levels.
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Switchgear
Segment started showing momentum with an
encouraging in-quarter growth leveraging on utilisation
of SFA/ DMS, distribution expansion in B2C and B2B,
improved market hygiene and launch of Stella range in
mass market segment. Execution of new B2B orders has
also started. Advocacy and influencer programs have
been initiated and will be effective from early Q3’FY22.
There has been a sharp reduction of Inventory and
Receivables end-Sep’21 from last year thus reducing the
Working Capital substantially.
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Investor Release, Q2 FY 2021-22

Key developments of the quarter

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SOME NPDs

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Thermo Swift Tankless Water Heaters

Falcon 425 Deco

Stella Modular Switches

COVID Response: With safety and well-being of employees and business partners as top priority, continuous monitoring by the Covid Response Team for all employees is carried out on a daily basis. All eligible employees of the company have been fully vaccinated. All operations across all locations are fully operational strictly abiding by covid appropriate behaviour setup by the company.

CSR Activities:

• Tie-ups with Hospitals for beds at Noida & Faridabad for treatment of underprivileged needy patients.

• Extending the Girl’s School development and support program with Computer Lab and Library at Faridabad.

• Covid Vaccination camps and mask distribution at Faridabad, Noida and Kolkata.

DISCLAIMER: Cautionary statement regarding forward-looking statements

This presentation may contain certain forward-looking statements relating to Orient Electric Limited. (“OEL”, or “Company”) and its future business, development and economic performance. These statements include descriptions regarding the intent, belief or current expectations of the Company, its subsidiaries and associates and their respective directors and officers with respect to the results of operations and financial condition of the Company, subsidiary or associate, as the case may be. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include, but are not limited to (1) competitive pressures; (2) legislative and regulatory developments; (3) global, macroeconomic and political trends; (4) fluctuations in currency exchange rates and general financial market conditions; (5) delay or inability in obtaining approvals from authorities; (6) technical developments; (7) litigation; (8) adverse publicity and news coverage, which could cause actual development and results to differ materially from the statements made in this presentation. Company assumes no obligation to update or alter forward-looking statements whether as a result of new information, future events or otherwise. Any forward-looking statements and projections made by third parties included in this presentation are not adopted by the Company and the Company is not responsible for such third-party statements and projections. This presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this presentation. This presentation may not be all inclusive and may not contain all the information that you may consider material. Any liability in respect of the contents of, or any omission from, this presentation is expressly excluded. This presentation and its contents are confidential and should not be distributed, published or reproduced, in whole or in part, or disclosed by recipients directly or indirectly to any other person.

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