Daybreak - The price Havells paid to become a household name

Episode Date: November 25, 2025

Eight years ago, Havells acquired Lloyd to become a household name in consumer electronics. Today, that dream has become its biggest headache.Lloyd's revenue dropped 18% in the September quarter. Warehouses are jammed with unsold air conditioners after an unusually short summer. And, in January, new energy-efficiency rules will make clearing old stock costlier.Despite tripling revenue, Lloyd's operating margins collapsed from 17% to -7% in four years. Lloyd has consumed over 3,000 crore rupees in capital—more than all other Havells verticals combined. Yet it remains India's third-largest AC brand, exactly where it was when Havells bought it. Where does the company stand right now?Tune in.Take this survey to share your best prompt.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, before we get into the episode, here's a quick update. I have some great news for all premium subscribers of the Ken. You can now listen to all of our Paywold podcast directly on Spotify. By the way, we at the Ken are the first organization in India to launch our premium shows on Spotify. And unlocking them is super easy. Open any logged episode of one of the Ken's podcasts on Spotify. Tap the lock icon, link your Ken Premium account, and that's the same. It takes about 30 seconds, maybe 20 if you're a pro-tapper.

After that, the entire library opens up to you. Two by two, zero shot, first principles, 90,000 hours, make India competitive again, everything. And if you want a step-by-step guide of how to do this, check out the link to a guide in the show notes below. Now, back to the episode. Eight years ago, Anil Rai Gupta had a dream. He is a managing director of Havels, an electrical. products maker. And he wanted to get the company into every Indian household. This was why Havel's acquired Lloyd, a consumer durables brand. In the September quarter,

though, Havel's revenue grew by only 5%. The culprit behind this tiny jump? Lloyd. It makes up about a quarter of Havel's revenue, but its sales drop by nearly 20%. Currently, Lloyd's warehouses are filled to the brim with unsold air conditioners. This is after an unusually short summer left units gathering dust. It only gets worse from here. The Bureau of Energy Efficiency, or BEE, has new energy efficiency rules kicking in in January 26. So, the pressure to clear out old stock before the rules take effect

is going to drive up costs. This drag isn't exactly new. Over the past five years, Havel's shares have risen at just over half the rate of the BSE Consumer Dureables Index. It didn't start this way. For a few years after the acquisition, Lloyd delivered. It brought scale, brand recognition, and a foothold in India's fast-growing AC market. Revenues doubled to more than 20,000 crore rupees in just six years. But that growth came at a steep cost. Lloyd relied heavily on discounts for consumers and incentives for distributors.

This was confirmed by multiple dealerships across Delhi, Uttaradesh and Haryana. Soon, Lloyd became a cash-heavy unit. Its operating margin collapsed from nearly 20% to about minus 7% in just four years. Operating margins, by the way, is the share of a company's revenue that's left after paying for its daily running costs. And this has kept Havel's overall profitability under continuous pressure. Meanwhile, competitors like Blue Star and Voltars were growing quite sustainably while keeping their margins in check. So here's the irony. In India's price-sensitive consumer electronics market, Lloyd is the third largest air-conditional brand.

But it already held that position when Havels bought it. And since then, as of March 2025, the capital Havels has spent on Lloyd has ballooned to over 3,000 crore rupees. That's actually more than all other Havel's verticals combined. Still, Lloyd has ended up exactly where it started. What could be behind this lack of profitability is the depreciation of Lloyd's fixed assets. And in the process of this depreciation, its margins have been left vulnerable to every little shift in temperature or regulation. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Rachel Vergeese, and

Every day of the week, my co-host, Snigda Sharma and I, will bring you one new story that is worth understanding and worth your time. Today is Wednesday, the 26th of November. The inventory pile-up for Lloyd started early this fiscal year. Anil Rae Gupta, the managing director we mentioned earlier, addressed this in an earnings call last month. He said that this was the reason why production levels of AC units were scaled down. So here's what happened. In July, the Bureau of Energy Efficiency published up to... regulations for labeling appliances, including air conditioners.

These rules take effect in January 2026. Companies won't be able to sell old rated ACs to distributors after that. This made Lloyd's average number of days to clear inventory increased by nearly 10 days. But here's the thing. Revision to energy efficiency rules happen periodically. Consumer durable companies know this well. So how did Lloyd end up with a load of old rated stock. The BEE announced the latest rating renewals last year. They were supposed to kick in

from January this year. But the industry demanded a year's extension to manage inventory and align production standards. An unexpectedly weak sales season, though, wasn't something they could predict. Beyond the week summer, the GST rate cut in September delayed demand. The rate dropped by 10%. And this weighed down Lloyd's AC business and led to higher than usual inventory levels. In fact, Havel's inventory in the September quarter hit nearly 5,000 crore rupees across segments. That's at least 20% higher than six months ago. Its competitor, Blue Star, noted in their earnings call that all players are carrying inventory. They said they would have preferred the time it takes to sell inventory to be 35 to 40 days.

But unfortunately, it's more than 60 days now. Still, the company has seen a steady growth in its operating margin. On the other hand, Volta's did take a slight profitability hit, though it wasn't as bad as Lloyd's. In Lloyd's case, the company actually burned cash for three years before they finally turned a corner. The inventory mess has impacted volumes across the industry as well, except for hire, which saw 5% growth. All others saw volumes drop by almost 15 to 30% compared to the year before. This includes LG, Lloyd, Blue Star and Volta's. Havel seems optimistic though.

They expect inventory within factories to return to normal by December. But a large dealer in Uttapradesh says that this happens often when the company dumps inventory on distributors and resorts to steep discounting. That also resulted in a 10% increase in the company's working capital costs in the June 2022 quarter. This was because they were relabelling goods and aligning with new manufacturing protocols that came with a revised energy rating. But that wasn't how Havill saw things playing out. Stay tuned. I'm pausing this episode to ask you a very quick question. What's your best AI prompt? One you're actually kind of proud of. It saves you time and it does exactly what you needed to do. Why do we ask? Well, let's be honest. There's a learning curve with AI and most of us are still figuring it out. So we are running a short survey to

ask you to share your tried and tested hacks. You share your prompt, you get a chance to be featured in one of our episodes, and you get to hear from others like you. All the productive, efficient folks out there who are making AI work for them. The link is in the show notes. It will take you just five minutes. We can't wait to hear from you. Now back to the episode. Havels acquired Lloyd in 2017 for 1600 cro rupees. Back then, Havels had big dreams. The plan was to cement itself as a go-to for everything consumer electronics. A former Lloyd employee told the Ken that the company wanted to provide everything from wires to appliances to someone who's building a new home. To make that happen, the company went on an aggressive spending spree.

In FY23 alone, it spent about 400 crore rupees on building an AC plant in Andhra Pradesh. Later, in mid-20204, it spent 60 crore rupees to increase capacity at this facility, and built another one in Rajasthan. The company also splurged on advertising. It ran campaigns during the IPL or Indian Premier League and roped in high-profile actors. In FY25 alone, it spent over 600 crore rupees on ads. That's over 60% more than before the pandemic.

The result, Lloyd expanded. Its revenue nearly tripled to over 5,000 crore rupees in just six years by FY25. But that came at the cost of margins. Lloyd also went the extra mile for its dealer network. A former employee claimed the company would ensure dealers' spouses had enough money in their bank accounts to feel financially secure. This was a way for the company to deepen relationships with these dealers. The ex-employee added that Lloyd is probably the only manufacturer offering medical insurance to large dealers. These perks go above and beyond the routine incentives like,

foreign trips or big commissions. Lloyd was also among the most aggressive companies in terms of dealer outreach. It pushed products at discounted rates and incentivized wholesalers heavily until about two to three years ago. This strategy worked. Havels almost doubled its dealer network across segments to about 20,000 between FY22 and FY25. Still, Lloyd's market share in the AC space is quite low. under 10% in fact, behind Volta's and Blue Star. But it remains an important mid-premium brand.

Its air conditioners cost at least 15 to 20% less than its peers. And although the company returned to profitability in FY25, Lloyd's turnaround remains fragile, and growth assumptions are cautious. A Delhi-based wholesaler told us that the company has dialed back its aggressive dealer outreach compared to the previous years. The impact of that shift may yet show up in numbers. Still, there's potential. Lloyd's brand recognition in the AC market could help Havels grow its other product lines.

Lloyd also makes washing machines, refrigerators and televisions. Though its penetration in these segments remains much lower than in air conditioners. So the challenge for Lloyd right now is to clear out its old stock and transition to the new energy efficiency regime without burning massive amounts of cash. The clock is ticking. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription offers daily long-form feature stories, newsletters and a whole bunch of premium podcasts. To subscribe, head to the Ken.com and click on the red subscribe button on the top of the Ken website.

Today's episode was hosted and produced by my colleague Rachel Vargis and edited by J.