Symphony turns around Mexican subsidiary; bets on industrial cooling

Impco adds 18% to parent's top line; 65% of its sales come from centralised & heavy-duty air coolers

Leading air cooler maker Symphony Ltd has managed to turn around its Mexican subsidiary Impco, a company it had acquired in 2009 to get into the industrial cooler business, a segment on which it bets heavily at the moment. Besides, losses at its Chinese subsidiary Guangdong Symphony Keruilai Air Coolers (GSK) have also been halved.

As such, revenues from overseas markets were Rs 171.16 crore for FY17, up 39 per cent. ICICI Securities expects export volumes for Symphony to grow at 27 per cent CAGR between FY15 ti FY19, while the domestic volumes would grow at 19 per cent CAGR from FY17 to FY19.

Impco clocked a turnover of Rs 87 crore in FY17 and its profit after tax was around Rs 5-6 crore. While this is marginally less than the previous year, sources in the company said that the 2015-16 figures included proceeds from sale of non-core assets. The turnaround in a true sense has thus been achieved this year, the source added.

Impco's performance during 2015-16 was hit by a delayed summer, which led to a decline in sales. In addition, political disturbance in some exporting countries affected overall volume offtake. As a result, even service centre sales got affected to some extent.

ICICI Securities, expected that the margin profile of Impco is expected to increase further on the back of Symphony's strategy to make Impco an asset light company.

Achal Bakeri, chairman and managing director of Symphony Ltd explained, "We initiated Project Renovaccion to transpose Symphony's asset-light and capital-light business model (product outsourcing, divested surplus land,buildings, plants, business relocated). This helped to unlock resources. Loans and advances granted by Symphony India and its Singapore-based subsidiary have been completely repaid with interest, making Impco self-sufficient. The business has since been turned around with a decent cash profit and moderate profit after tax."

Currently, Impco contributes around 18 per cent to the consolidated topline with a major chunk of revenues (65 per cent of overall sales) coming from centralised and heavy-duty air coolers and the remaining (around 35 per cent of sales) from room coolers. At present, the company serves markets like the US, India, Iraq and some of the Middle East countries.

The ICICI Securities report points out that Symphony started leveraging the enduring relationships established by Impco with large format stores like Wal-Mart, Sears, Home Depot, Lowes, Famsa and Costco, among others, to widen its presence in North, South and Central America.

Bakeri said that the Impco acquisition not only gave Symphony access to the North American markets, but also entry into an industrial or centralised air coolers segment in which prior to Impco acquisition, Symphony was not present at all. The company has created a separate business vertical as 'centralised air cooling systems' which is growing rapidly in India, Bakeri informed.

Symphony is the first in India's organised sector to launch industrial air coolers. ICICI Securities report said, "The company has executed orders for some renowned brands namely Asian Paints, DHL, Dixon Technologies, Swaminarayan Temple, Iskcon Temple, Marico, Tractor India and Shivam Auto Tech (part of Hero Group). Symphony received its first order from Indian Railways to install air coolers in waiting rooms of Kota and Godhra railway stations."

As for the GSK subsidiary in China (with a turnover of around Rs 51 crore in FY17), the losses have have been halved. Bakeri said when it had acquired GSK in January 2016, they had factored that the business would lose money for the next few years. "We moderated operating losses in 2016-17; we expect the business to turn cash- positive across the foreseeable future (in line with with the estimate at the time of acquisition)."

On the domestic front, Symphony plans deeper penetration and grow its dealer network to 40,000 dealers. It is currently the market leader with a 50 per cent market share. Currently, the air cooler industry is largely dominated by the unorganised segment(around 70-80 per cent volume market share).

The company invested Rs 41 crore in brand building in 2016-17. This was 32 per cent higher than the previous year 2015-16 figure. It launched a TVC 'Garmi ko karo Symphony!'.

The domestic air cooler industry is estimated to grow at around 21 per cent CAGR between FY15-FY25.