Interview with Somany Impresa Group (SHIL)

Our strong distribution network, allows us to localize our services to serve customers not only in big cities, but also the aspirational classes in the smaller towns of India, emphasizes Sandeep Sikka, Group CFO, Somany Impresa Group (SHIL). 

Which business segment finds the most incoming demand during the non-festive season. Can you discuss in brief regarding demand patterns of the consumers during the non-festive season?

Kitchen chimneys, sanitaryware, faucets, and pipes are a few segments that see year-long demand as they are directly related to real estate demand. The rise in disposable income, coupled with the growing willingness to pay for these products is propelling market growth. In addition to it, various campaigns initiated by the Government of India such as Make in India, Digital India as well as Atmanirbhar Bharat among others will further the growth of the Indian economy and businesses.

Brilloca Ltd a wholly-owned subsidiary of the company, has recently proposed to purchase the building products manufacturing business of HSIL in a slump sale for a cash consideration of Rs 630 crore. Can you highlight the key benefits to Brilloca from the proposed transaction?

Over the last few quarters, Brilloca has delivered extremely strong growth, outperforming the sector. The changes in the macro-environment over the last two years have made it imperative for the company to have control over the entire value chain, including manufacturing, supply chain, etc., to sustain this sector outperformance. With this in mind, we believe we must undertake a refreshed business model that includes critical manufacturing, enabling the company to be more agile in its decision making for enhanced market serviceability, aligning its product placement with customer needs. It also helps achieve greater business security, by significantly reducing dependency on third-party vendors. We believe all this translates to a considerably enhanced competitive position for Brilloca.

In addition, Brilloca’s strong balance sheet will support initiatives towards enhancing and expanding its manufacturing facilities. The reduced external dependence will also help minimize related party transactions, compliance, and administrative costs. This transaction will have many financial advantages for SHIL from both, a short-term and long-term perspective. Working capital days, margins and cash flows are expected to improve.

What are your growth levers?

We understand the evolving consumer behaviour and in line with this, offer a well-differentiated as well as a diverse suite of products to cater to their needs across various segments such as consumer appliances, building products (sanitaryware & faucets), along with retail, where we are present. Our uniquely designed differentiated product mix helps us to introduce products that are high on both style and comfort. Our strong distribution network across multiple channels, allows us to localize our services to serve customers among the affluent not only in big cities, but also the aspirational classes in the smaller towns of India. It not only helps us to service existing markets but also reach out to newer markets. Additionally, we are harnessing distinct distribution networks to market newer products and cross-sell to our existing customer base.

The ongoing pandemic only reinforced the importance of being present on online platforms where we already have a significant presence. So, we continued to focus on strengthening our omni-channel presence to increase the overall growth of the businesses as online presence elevates our brand and product visibility, which, in turn, helps our offline partners. Going forward, we will develop a hyperlocal approach by connecting many of our distributors with our B2C e-commerce channel so that offline distributors too can be a part of the growth story created by e-commerce.

What is your earnings outlook for the upcoming quarters?

In the sanitaryware and faucets businesses, we have performed well in a challenging macro environment. In the pipes business, we are the fastest-growing player in the country. The acquisition of the BPD manufacturing undertaking from HSIL will only add to this momentum and enable us to deliver faster and sustained growth.