Havells India Ltd investors had to contend with a modest earnings performance in the September quarter (Q2FY26). Continued weakness in demand for summer products and other consumer appliances led to a modest 5% year-on-year revenue growth of ₹4,779 crore.
A shorter-than-usual summer in 2025 meant fewer cooling products flying off the shelves. Plus, there was an overhang of higher channel inventory. With a lot of air conditioners, fans and coolers left unsold, growth and margins were dented, and working capital increased. But a relief is that this may be a blip.
According to the management, it has been working closely with dealers to boost offtake, and they expect channel inventories to normalize by the end of Q3FY26.
If one part of Havells kept the lights on (literally) this quarter, it was the cables business. While consumer durables slowed, the cables segment delivered a strong 12.4% year-on-year revenue growth in Q2FY26. This was driven by robust demand for power cables, the management said.
Better yet, contribution margins in cables jumped to 17.7% this quarter from just 12.3% in Q2 last year, boosting overall profitability. Contribution margin is a measure of profitability calculated by subtracting variable costs, such as material costs, manufacturing variables, and direct selling variables, from net revenue.
On the other hand, the electrical consumer durables (ECD) division – fans, small appliances, etc., saw a 2% revenue dip and lower margins at 21% in Q2FY26 versus 23.3% a year ago. The real sore spot, however, was Lloyd-Havells’ air conditioning and TV arm.
Lloyd’s Q2 revenue dropped 18.5% year-on-year, and its contribution margin nearly vanished, down to 1.7% from 14% a year ago. Lloyd’s margins were impacted due to lower revenue and higher consumer offers to clear AC inventory in the weak summer, the management said.
Havells has experienced tougher cycles in the past, and the Q2 pain at Lloyd looks largely seasonal. Management expects a rebound in H2 as inventories normalize and new energy efficiency norms prompt fresh demand.
Margins in focus
Havells continues to spend on marketing, R&D and capacity and the push towards higher-end, higher-margin products is also visible. The share of premium products is increasing in categories like fans, appliances and ACs. Sure, developing premium offerings costs more upfront, but it’s an investment that can pay off with pricing power. Therefore, it should help improve margins in the long term.
However, earnings estimates have been trimmed by various brokerages for now. “Factoring in sub-par Q2 performance, we have cut our revenue estimates by 2/3% and APAT estimates by 6/3% for FY26/27E,” said HDFC Securities report dated 20 October.
So far this calendar year, the Havells India stock has declined 10%, compared to an 8% gain in the Nifty50 index. At FY27 price-to-earnings, the stock is trading at a price-to-earnings ratio of 46 times, showed Bloomberg data. This is not cheap in the current backdrop.
According to Yes Securities, the worst in terms of B2C demand and high channel inventory is behind. Even so, the brokerage has trimmed its revenue expectation, especially for B2C summer products, on poor show in first half of the fiscal year and high channel inventory, resulting in revenue decline for Lloyds in FY26 on extremely strong growth of FY25.
