Symphony Ltd

We demonstrated resilience during the last few years. We are now placed to capitalise on a period of rejuvenation going ahead.

‘Our sector lives!'

Just three words. But they underline the performance of India's air-cooler sector (and our Company) during the last financial year.

There is a background to this that needs to be explained.

For the last few years, India's air-cooler sector had stagnated. The market did not grow. This transpired for a specific reason: virtually all tertiary across-the- counter sales of residential air-coolers transpire during the summer, even as Symphony sells them to trade partners through the year. This unusual reality provides the sector with a limited tertiary sales window. Each time this limited window is disturbed by external factors, including climatic and Black Swan events like the Covid-19 pandemic, the industry needs to wait for the next window ( the following summer).

The tertiary sales of air-coolers were adversely impacted in 2020 and 2021 due to the pandemic; they were affected by adverse weather conditions in the summer of 2023. However, when this stagnation began to transpire summer after summer, several capital market participants began to ask us this question: ‘Is this the end of the road for India's air-cooler sector?' Others suggested that with the evident onset of global warming more visibly at hand, rising average temperatures, and extending heat waves each successive summer, consumers were more inclined to make the big leap from no residential air-coolers to the ownership of air-conditioners.

At Symphony, we maintained a stoic front. We assured them that growth would return. I am pleased to communicate that the wait is over. Our long-term optimism has been vindicated. During the last financial year, India's air-cooler category reported a sharp double-digit percentage increase in offtake. In the June'2024 quarter that coincided with peak summer, the Company reported a revenue growth of 116% over the corresponding period of the previous year. We believed. We trusted. We were vindicated. Is this category growth an aberration? Can it sustain? How are we responding to this development? What conclusions can be made from this spike? Let me answer the last question first. To say that the Indian air-cooler sector is alive (reflecting the effect of the 2024 summer) would be to put it mildly. The consumer demand during the last financial year has sent out an unmistakable morse to all air-cooler brands and players: that we might have missed something in the last few years that became decisively evident during the last financial year.

That the Indian consumer had decided.

Decided that the air-cooler provides the most cost-effective option in countering the rising secular temperature trend (‘global warming').

Decided that not just one room, but all rooms and exterior living spaces, including balconies and verandas within a home, needed to be cooled.

Decided that the air-cooler is conclusively the most environment-friendly cooling option available.

Decided that the air-cooler is not just a summer reflex action, but a perennial lifestyle necessity. Acknowledged the synergistic coexistence of air-coolers and other cooling appliances, presenting a diversified opportunity within the broader cooling market.

Each time the whispers of a slowing market rippled into our Board room, a message would immediately go out to our research team: ‘Can we accelerate the development of new alternatives?'

This does not mean that the kind of demand trough we saw in the last few years may not recur due to external adversities; it only means that the underlying trend — the silent river under the cosmetic froth — remains positive for now, for the foreseeable future, and for the long term. Moreover, this positive trend is not confined to urban India; it extends significantly to ‘Bharat,' encompassing the nation's diverse rural and semi-urban landscapes.

If there is a second message that I would like to communicate, it would be this: we could have waited for the market to revive and then committed funds for new product development. A typical wait and watch approach.

During the sluggishness of the last few years, we dared to do the opposite. We kept faith. We invested. We differentiated. Each time the whispers of a slowing market rippled into our Board room, a message would immediately go out to our research team: ‘Can we accelerate the development of new alternatives?'

Each time, an analyst hinted that perhaps the best days for the sector were over, a memo would be scribbled to our new product team: ‘Can we redefine the product?' We would not wait for the market to turn; we would provoke it into turning with new products-however arrogant that sounds. We would not wait for the sectorial curve to turn; we would keep enriching the overall price-value proposition before fresh demand emerged — however ambitious that appears.

We would not sit in a corner hoping that more consumers would buy; we would pleasantly surprise with a wider portfolio (and stronger brand) when the curve turned, however far-fetched that seems.

I am pleased that the effect of Symphony's sectoral out-exertion (out performance comes later) became manifest during the year under review. When the sector got going, Symphony climbed into the next orbit. The growth we reported was not limited to climatic arbitrage (temperature rises, income grows). The Company's performance was catalyzed by the tailwind of initiatives to not merely capitalise on an existing market, but to expand it, carve out a larger share of category segments, extend the category to adjacent spaces, and, once this was done, to extend that category to complementary pockets.

We refined. We framed. We repositioned.

The result was that Symphony did more than just sell to an existing market (that would have been like rinsing hands in a gurgling stream): we dug deeper and expanded this market to achieve something more than merely selling for the day. We broad based the platform for the future.

So, what did we do in the last few years — the sluggish ones — that resulted in Symphony deepening its market leadership and continuing to remain the sectoral benchmark in FY 2024-25? One, we introduced new air-cooler products irrespective of whether the market was buoyant or weak. Industry observers questioned us. Why? Why not let existing products run longer? Why widen the portfolio? Why now? This is our answer: the day we stagger the pace in new product development, our primary customer — our trade channel partner — will sense that something has changed in our Company. That primary customer is likely to send out the first signal:

‘Ab pehle jaisa rahaa nahin'.

On the other hand, if we kept surprising this primary customer with new models, we would provide this stakeholder with a wider range from which store revenues would be generated. The trade partner was likely to conclude: ‘Aur bhi ek naya model? Bhai, waah!'

There were other reasons. The Indian consumer is being exposed to a wider range of influences (lifestyle, electronic, and conveniences) that warrant a corresponding re-framing of the air-cooler. The day we stop doing that, based on external reasons, we will have ceased to recognise that even as the market may have slowed temporarily, the consumer continues to evolve perpetually. That could be the kiss of death. And lastly, these dull sales moments tested our capacity to lock the customer for life when most people were playing for the moment.

The result is that when the market turned, as it did in FY 2024-25, we did not just deliver a linearly positive response — sell more of the same, but complemented that with the lateral or sell more of the different. This combination, linear and lateral, was our most effective response to selling in the immediate and creating a revenue platform for the imminent.

Two, that we sold all that we had to a perspiring market is one part of the story; that we were able to sell more of the value-added, sell quicker and sell at terms of trade more favourable to our Company, represented our complete story. So, what did we do differently? In one sentence: we extended every operating frontier during the last financial year.

In the past, we had derived satisfaction from the fact that we were delivering air-coolers to more pin codes than our competitors. We could have been smug with that. We could have waited for incremental demand from these pin codes and serviced it (at the most, we could have attempted to market more value-added air-coolers). We made a decisive change in the way we interpreted desire; we recognised that in the erstwhile approach, the decision to buy across last mile India would entail an eight-day gestation — for the desire to be communicated to the nearest marketing hub (mandi), for the desired model to be procured, and for it to be dispatched.

At Symphony, we dismissed this as boringly routine; we recognised this as systemic under-delivery; if we did this, we would be merely plugging a gap; we would not be transforming desire to delight. So, we went back to our distribution ‘laboratory'; we identified a few select districts where we would address expressed desire (for the air-cooler) with unusual speed. We restructured our supply chain. This is what happened: we succeeded in shrinking product delivery to this last mile — defined as remote pockets of our vast country — to less than a day. That was a 90% increase in our delivery speed (as we see it). That made it an air-cooler ‘just around the corner' (as the consumer now saw it). In a business marked by a combination of impulsive cum intended consumer decision making, this shorter logistical pipeline now helped create a superior proposition.

This shrinking generated several spin offs. Symphony was treating the ‘off the map' customer with the same seriousness accorded to the urban counterpart; Symphony was normalising geographic differences down to a national delivery timing mean; Symphony was deepening its brand recall around a ‘first to deliver' proposition.

One would presume that such an exercise would at best remain academic considering that the size of this last mile market would be moderate at best. Here is the surprise (and it only keeps us grounded as students who do not claim to know everything): the sales growth that the Company reported during the last financial year from these distant frontier pockets was four times the growth speed derived from the rest of India. This market existed; this was a market that no one really cared about. The reason: the conventional classification acting as that misleading indicator: ‘Number of products sold.' At Symphony, the difference that we brought to the table was that we did not perceive this market to be a constant; we saw it as a variable. We said that the market will expand influenced by the speed with which we deliver. If we deliver faster, the market will grow; if we stay within the erstwhile delivery standard, the market will remain the same. From a point where service was seen as an appendage, we made it a sales driver. By introducing the element of speed, we treated desire with corresponding respect: we stoked desire; we seduced desire; we grew the market. The findings from our successful laboratory experiment are now being scaled across our geographic footprint with proven detail. During the current financial year, we expect to scale our last mile coverage. There is a sub-message that I must not miss: we could have remained complacent in addressing a market that could have grown on its own (and responded like a conventional storekeeper – ‘This is what we have, take it or leave it'). We seeded this market with service variables expected to make it grow better. As an aside, I cannot resist mentioning that this recall rubbed off the right way in the select locations in Delhi NCR, Hyderabad, and Bengaluru where one leading Quick Commerce player banked on our responsiveness and included the delivery of our air-coolers as a part of its delivery pitch; needless to say, this again was a first for the air-cooler category. Rather than sit pretty with this ‘compliment', we immediately got our back-end teams to start thinking: ‘How can we, in our standalone capacity, match the Quick Commerce player's accelerated delivery service?' Suddenly, people started talking of the Symphony air-cooler not as much as a product, but as a service. Wow.

Recognising the vast potential of the Indian market — the largest consumer market in the world by headcount, we anticipate a rapid acceleration of this digital first purchasing behaviour.

There was another frontier we pushed during the last financial year: Direct-to-Consumer (D2C) sales. In the past, there was a restricted appreciation of this sales engagement. The general excuses put out were that this was a futuristic format, that India was too conventional to ever become D2C and that Indians treated physical purchase as a family event.

However, something different has happened in the last few years. Following the pandemic, digitalisation has emerged as a way of life. Consumers are more willing to pay online for the purchase of a range of products. This is more than a fleeting preference; it represents a structural shift.

At Symphony, we could have chosen to merely witness the emergence of this structural shift and said that it would not extend to our product category; if people were to pay ~H10,000 for a product, they would like to run their finger on the product before saying ‘Yes'.

We took a differentiated approach. This is what we found: fewer consumers were willing to step out of their comfort zone to drive to locations, park, and buy; they were more willing to trust that a product from an established brand (like ours) would be no different from how it appeared on the internet; they were willing to buy directly from our portal where the product authenticity, pricing, and warranty would be completely kosher. Recognising the vast potential of the Indian market — the largest consumer market in the world by headcount-we anticipate a rapid acceleration of this digital-first purchasing behaviour. Sooner. Not later. Consequently, we are prioritising our D2C strategy to meet this evolving consumer demand, ensuring that we remain at the forefront of this market transformation.

There were other factors behind the decision to widen our direct consumer engagement. By reaching the customer directly, we would begin consumer disintermediation; this one initiative would generate precious information of who was buying what, when and where; this would lead us on to data analytics, the ultimate frontier in a country of 1.45 billion people; the aggregation of a multi-year data lake would lay the foundation for a futuristic company marked by deep learning leading to disproportionate outcomes. While we respect our trade partners for getting us here, we recognised that with the evolving consumer purchasing trends, we needed alternative sales engagements that enhanced consumer convenience. There is just nothing to beat the convenience of a consumer ordering an air-cooler on the mobile phone at breakfast and getting it delivered by lunch. Besides, we also saw the D2C as an effective means to supplement the trade partner's push with a consumer-induced pull, a competitive marketing moat.

When we embarked on this D2C exercise a couple of years ago, we felt that it would, at best, be academic and directional. We could not have been more wrong (still learning, still learning); our D2C portal turned into a virtual brand store; consumers bought off-season (in addition to in-season), some went to a retailer and returned to buy from our site, and — best of all — they bought value-added air-coolers in larger proportions. When we started out, we felt that if this exercise broke even at low volumes in the future, we could label the initiative as ‘pursuable'. We stood educated: during the last financial year, the EBITDA margin generated from our D2C revenues was equal to the margin generated through conventional trade channels; the revenues derived from the former had also achieved critical mass.

During the last financial year, the EBITDA margin generated from D2C revenues was equal to the margin generated through conventional trade channel. The revenues derived from the former had also achieved critical mass.

If one perceives this through the conventional prism of ‘D2C', it may be like missing the woods for the trees. There are larger things at play within Symphony. This play has a lot to do with the exciting ‘D' word: Digitalisation.

Symphony is a technology-driven Company seeking to push multiple frontiers through the prudent use of digitalisation across the breadth of its operations. During the year under review, we accelerated product development using cutting-edge technology; we strategically re-entered the storage water heater market with a suite of innovative products; this reframed the conventional water warming approach towards soft water-induced health (a new technology-driven interpretation of a conventional multi-decade product). We were not launching to merely sell; we were launching to ‘reinvent'.

There were more technology-driven air-cooler launches. The Silenzo air-cooler was a whispering air-cooler (reminds me of the classic David Ogilvy line: ‘At 60 miles per hour, the loudest you can hear is the ticking of the clock'). Besides, we launched the Air Force air-cooler that came closest to the blast of a commercial cooler, directed at carving away market share from the country's unorganised sector. That brings me to an interesting point. In the past, there was a sectorial reconciliation that products from organised brands like ours would be priced higher than unorganised alternatives (and hence uncompetitive). Air Force emerged as a technology-driven gamechanger that addressed the price, value, and aspiration needs of a consumer who conventionally focused only on the unorganised variant. For Symphony, a brand that has been consistently positioned as premium, we are happy to have launched a price warrior that has taken the fight to the opponent's dressing room; in this case, this ‘dressing room' (unorganised sector) comprises 65% of the value of all air-coolers sold in India.

In addition, the Company also entered adjacent product categories (tower fans, kitchen cooling fans, and personal cooling fans) to widen the total addressable market, generate superior economies, seed these categories with institutionalised innovation, provide a superior price-value proposition, and enhance complementary product lines for trade partners. The Company offered sleek tower fans and personal coolers with features like a water/ice chamber, multi-level swing, and dust-filtered honeycomb pads for efficient and clean cooling. This made the product ideal for living room, balcony, bedroom, kitchen, and office applications.

A review of the Company's India operations will not be complete without a mention of a default by our e-commerce distributor. Over the years, Symphony extended credit to modern trade channels (including e-commerce); this was distinct to the approach employed for the general trade channels where the Company operated on a cash-and-carry basis. Our e-commerce distributor defaulted; the Company responded with decisive mitigation actions; it wrote off in accordance with Ind-AS, and continues to pursue recovery through direct and legal means. In parallel, the Company undertook comprehensive overhaul of its credit risk management framework; it deepened credit evaluation, extended credit insurance to cover all modern trade partners, and rationalized in credit limits.

Symphony cemented its respect and position as the world's leading air-cooler Company. The Company enjoyed a prime recall across trade partners the world over, generating the recall that ‘if it is Symphony, it must be the best.'

The Company's consolidated Rest of the World business grew 20% during the last financial year. These Rest of the World revenues comprised 32% of the Company's consolidated revenues during the last financial year.

The highlight of our international operations during the year under review comprised sustained growth by the Mexican subsidiary (with prospects of disproportionate outperformance during the current financial year); the Company's Brazil subsidiary increased its sales over 50% (and is likely to repeat this trend); the Company's Chinese subsidiary reported its first annual profit in 14 years, while more than doubling its revenue; the Australian subsidiary underperformed in FY 2024-25 but a number of concurrent initiatives should graduate the business sooner to a probable break-even. The Company's direct exports from India to pan-global markets grew 83% in FY 2024-25. Symphony deepened its respect and position as the world's leading air-cooler company. The Company enjoyed a prime response across trade partners the world over, generating the recall that ‘If it is Symphony, it must be the best.' In our pursuit of sustainable and profitable growth, we chart new courses, reviewing our strengths with keen resources, striving to elevate shareholder value with every step. Our Board has granted us the wings to explore divesting or monetising our stakes in Climate Technologies (Australia) and IMPCO (Mexico). Though we may part in ownership, their value to us remains strong. Even under new guardians, they might still be partners. Our focus will sharpens on India's fertile ground and vibrant overseas markets across the USA, Brazil, Europe, and the Middle East etc., inspired by their recent robust performance and favorable seasons. This initiative underscores our commitment to prioritise high-growth, high-profitability opportunities with stronger ROCE and enhanced shareholder value.

At Symphony, a deal valued at ~USD 5.2 million (~H44 Crores) flourishes — a harmonious exchange between GSK's ingenuity and IMPCO's promise. GSK, the master of innovation, divested its select technological jewels (technological know-how and nine IPRs), in favour of IMPCO, yet holding onto the essence of residual technological jewels to propel its growth in local and international markets. IMPCO, the new custodian, will embrace these research-led treasures, setting the stage for accelerated growth within its markets. This transaction, like a well-crafted poem, speaks of shared prosperity and the promise of rapid growth.

The Company sustained its commitment to prudent capital allocation and profit distribution. The Board decreed a plan to share the fruits of the Company's performance by distributing at least sixty percent of the consolidated Profit After Tax through dividends and buybacks.

Historically, over the past decade, five years, three years, and even the last year, our generosity exceeded this threshold, allowing shareholders returns to flow like well-aged vintage wine.

We have taken our first steps in transforming from an Indian air-cooler company to a global brand; we are evolving from technology-familiar products to technologically intensive variants; we are not servicing existing consumer needs but seeding new preferences; we are graduating from conventional sales channels to futuristic alternatives; we are challenging our teams to achieve what was once assumed ‘not doable.'

It would be this: we have taken our first steps in transforming from an Indian air-cooler company to a global brand; we are evolving from technology-familiar products to technologically-intensive variants; we are not servicing existing consumer needs but seeding new preferences; we are graduating from conventional sales channels to futuristic alternatives; we are challenging our teams to achieve what was once assumed ‘not doable.'

I have a sneaking feeling and I am going to say it. We may have taken the first step in transforming from an organisation into an institution. We demonstrated resilience during the last few years. We are now placed to capitalise on a period of rejuvenation going ahead.

Warm regards (of the other kind),