Havells Aims to Sustain Profitability Amid Market Challenges: A Deep Dive into Their Strategy

Meta Description: Discover how Havells plans to maintain profitability in a challenging market. Explore their strategies in manufacturing, brand building, and premiumization to boost financial performance.

Overview of Havells’ Strategy: A Blueprint for Success

Havells’ management exudes confidence despite industry headwinds, armed with a clear vision for growth across core categories. Their secret sauce? A relentless focus on margin improvement through strategic initiatives. The company is pouring resources into manufacturing, brand building, distribution, talent development, premiumization, and R&D. As the summer season kicks off on a high note, Havells is ready to capitalize on surging demand, particularly through its Lloyd segment, where profitability is set to shine thanks to operational efficiencies and cost controls.

“We’re optimistic about our growth prospects,” a Havells spokesperson shared, reflecting the company’s bullish outlook. With a projected revenue CAGR of 14% over FY25-27, Havells is laying the groundwork for long-term dominance in consumer durables.

RAC Segment: Lloyd Leads with In-House Manufacturing and Premiumization

Havells’ subsidiary, Lloyd, is making waves in the Residential Air Conditioner (RAC) market. By focusing on in-house manufacturing and premiumization, Lloyd has climbed into the top three players in the industry, gaining significant market share. The brand isn’t stopping at air conditioners—washing machines, refrigerators, and televisions now bolster its portfolio, cementing its status as a full-stack consumer durables powerhouse.

This summer, RAC volumes are expected to align with industry growth, with no supply hiccups for compressors. Lloyd’s profitability, which turned positive in Q4FY24, is projected to hold steady in FY25 with an EBIT margin of 0.7%. Innovations like the AI-powered Stunnair range and premium Luxuria ACs—priced 50% higher than standard models—underscore their premiumization push. With manufacturing capacity expanding to 3 million RAC units by Q4FY25, Lloyd is set for a 20% revenue CAGR through FY27.

Cables & Wires Segment: New Capacities Fuel Growth

The cables and wires segment faced a rocky first half of FY25, battered by volatile copper prices that squeezed margins to 8.6% in Q2. But the tide is turning. Stabilizing prices, a recovering housing market, and robust government capex are driving demand. Havells is seizing the moment with two brownfield expansions: a INR3.75 billion upgrade in Alwar, Rajasthan, and a INR4.5 billion boost in Tumkur, Karnataka, both slated for completion by 2026.

These investments mark a shift from years of modest capex, promising a 14% revenue CAGR over FY25-27. As cables now contribute 40% to the segment’s revenue, Havells is wiring up for sustained growth in this critical market.

Switchgear Segment: Positioning for Premium Markets

In the switchgear segment, Havells is playing to its strengths. Domestic switchgear demand is rebounding, fueled by a clever pivot from utility to designer switches. These stylish upgrades, seen as aesthetic must-haves, are shortening replacement cycles and boosting sales. While industrial demand lags, the segment’s revenue mix—40% domestic switchgear, 40% wiring accessories, and 20% industrial switchgear—offers stability.

With premiumization driving the charge, Havells expects a 9% revenue CAGR and EBIT margins climbing to 25% by FY27. It’s a clear signal: Havells is switching gears to capture the premium market.

ECD Segment: Fans Target Double-Digit Growth

Fans remain the heartbeat of Havells’ Electrical Consumer Durables (ECD) segment, contributing 60% of revenue. The company is pushing premiumization with 40 variants of Brushless DC (BLDC) fans, now making up 25% of volumes. Beyond fans, Havells is heating up its water heater lineup and eyeing a top-three spot in kitchen appliances within three years.

Despite margin pressures from brand-building investments, scale is expected to drive recovery. Targeting double-digit growth, Havells anticipates a 15% revenue CAGR and EBIT margins hitting 11% by FY27. The ECD segment is fanning the flames of ambition.

Lighting Business: Shining Bright with Value-Added Products

Havells’ lighting business is split into Consumer and Professional Lighting, both leaning into premiumization to combat LED price erosion. Volume growth stands strong at 15%, with a shift toward value-added products reducing reliance on bulbs to 40% of the mix. Professional lighting, with its higher margins, is thriving on infrastructure projects like the Shri Ram Mandir and National Highways.

Consumer lighting dazzles with premium collections sold through 50+ Home Art Light stores. Havells projects a 6% revenue CAGR and EBIT margins rising to 16.5% by FY27, proving its lighting strategy is anything but dim.

Higher AD and R&D Spends: Building a Brand Powerhouse

Havells is doubling down on brand building with a 21% YoY jump in advertising spend to INR5.3 billion in FY24. Celebrity endorsements—think Vijay Sethupathi in Tamil Nadu and Sourav Ganguly in Eastern India—are boosting regional appeal. Meanwhile, R&D spending soared 26% to INR2.1 billion, fueling innovations like AI-powered ACs and efficient manufacturing.

These investments aren’t just flash—they’re fortifying Havells’ market presence and product quality, setting the stage for sustained financial performance.

Valuation and View: A Balanced Outlook

Havells is on track for a 14% revenue CAGR and a 23% PAT CAGR over FY25-27, with operating margins climbing to 10.6%. Lloyd’s margin expansion and in-house manufacturing gains are key drivers. Trading at 54x FY26 EPS and 44x FY27 EPS, the stock’s valuation is fair, earning a Neutral rating with a target price of INR1,650.

Conclusion: Havells’ Bright Future in Consumer Durables

Havells isn’t just weathering market challenges—it’s rewriting the playbook. With a potent mix of manufacturing muscle, premiumization prowess, and brand-building bravado, the company is poised to sustain profitability and growth. As consumer durables evolve, Havells stands ready to lead the charge. Stay tuned for more updates on this electrifying journey!