Symphony

Limited
A Compelling Investment Opportunity in
Worlds Largest Air Cooler Selling Brand

January 2014

Private and Conden.al



ExecuDve Summary: Symphony Limited (1/2)
The world largest air cooler company
Enjoys 50% market share in India's branded cooler market. Sold 575,000 coolers in FY13.
The purchase price of a cooler is less than half the price of an AC. Running costs are 10% that of ACs.
Owns and control 100% of US based Impco (acquired in 2011), a pioneer in industrial coolers.
Industrial coolers are ideal in applica.ons where extreme heat is encountered or in large facili.es where refrigerated air is
considered expensive or infeasible.

India is a hot country where most factories dont have air cooling, and air condi.oning is too expensive to install
Highly protable company with a solid balance sheet
Pre-tax ROE of 98% in FY13 aYer adjus.ng for surplus cash
Asset light model based on outsourced produc.on
Nega.ve working capital demonstrates signicant power over suppliers and customers
Debt free balance sheet
Surplus cash and current investments of INR 1,348million as on June 2013
MulDple sources of Moat
Strong brands- which have become synonymous with air cooler to millions in India
Wide distribu.on network spread across 4,500+ ci.es/towns , 750+ distributors and 16,000+ dealers across India. Also, has presence
in 60 countries

Large scale provides low cost advantage and enables to oer wide product range
Access to proprietary technology : 8 patents, 49 designs, 108 trademarks and 7 copyrights

Private and Conden.al



ExecuDve Summary: Symphony Limited (2/2)
Huge untapped growth potenDal in all segments (residenDal, commercial and industrial)
Addressable market in India: 132 million households living in hot and dry part of India. 11 million in moderate clima.c region.
Only 12 million households have coolers.
Exis.ng coolers need replacement every 4 years or so.
Currently, the Indian air- cooler industry is growing at 20% per annum; the organized segment is growing faster at 25% per annum
The industrial and heavy duty air coolers industry in India (es.mated at ~ INR 70 billion opportunity) is at a nascent stage of growth
and is gaining increasing importance as corporates are looking to create a congenial working environment.

Huge synergy potenDal with Mexican acquisiDon

Symphony plans to supply cheap residen.al air coolers to Impco which can then sell them to US and Mexican markets through its
distribu.on channel which include Walmart, Costco, Sears, etc.

Impco has provided Symphony access to proprietary patented technology in industrial coolers . Symphony has started installing
these coolers in hot workplace seings in India including factories and warehouses

Excellent management team

Important lessons learnt from past mistakes made before 2005 enabled company to move away from:
Doing many things in a mediocre way to becoming really good at one thing (cooling);
Manufacturing (which is capital intensive ac.vity) to outsourced produc.on (which is asset light); and
Using debt for expansion to becoming debt free
ARracDve valuaDon
Despite huge value crea.on (market cap has grown over 480 .mes in the last 10 years), the stock is s.ll selling for less than 13 .mes
pre-tax earnings (TTM Mul.ple).

Current market value is very low in rela.on to poten.al future value given the high protability and scalability of the business model
Private and Conden.al


Worlds Largest Air Cooler Selling Brand
Overview

Revenue Growth

Symphony Ltd (Symphony) is one of the leading players

(INR Million)

in the air cooler industry with ~50% market share in the

organized segment.
Headquartered in Ahmedabad, Gujarat
Has asset-light business model with in-house product
development, design and marke.ng func.ons and
assembly of products is outsourced.
Products include air coolers for residen.al, commercial
and industrial applica.ons
23 plas.c and 64 metal air cooler models for
diverse residen.al, commercial and industrial
applica.ons
Went public in 1994, and have current market
capitaliza.on of INR 14,639 million (as of Jan 23, 2014)
(CMP: INR 419)
Company has emerged from a restructuring as it shiYed
focus on other segments like AC, washing machines and
suered huge losses
Acquired Mexico based Impco for INR 35 million which
gives access to overseas LATAM, North American
customers

R
32% CAG

1,283

FY 09

2,986

3,197

FY 11

FY 12

FY 13

27

25

25

FY 11

FY 12

FY 13

1,941

FY 10

EBITDA Margins
(In %)
33

FY 09

Pre-tax ROE

30

FY 10

FY 10
100%

FY 11
68%

FY 12
67%

FY 13
98%

Excellent pre-tax return on invested capital over the

last four years

Private and Conden.al

3,947


SegmentaDon and PosiDoning
PosiDoning between AC and fan, product aordability USP of air cooler industry

A"rac&ve price and cooling features of air

cooler to a"ract more middle/lower
income group

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Strong Brands
Over the years, Symphony has been able to create a strong brand name, which has become synonymous with air cooler to
millions in India
Symphony is Indias leading evapora.ve air cooler manufacturer with market share of 50% (value terms) in the organised
product category.
With its focus on R&D and innova.ons, Symphony constantly evolves its products to enhance design, technology and post
sales services. The company has launched more than one new model annually for six years.
Symphony has created the largest basket of 23 plas.c and 64 metal air cooler models for diverse residen.al, commercial
and industrial applica.ons

Company has consistently invested in brand building through adverDsing campaigns

4.7%
178

5.0%
4.0%

4.2%

4.4%

123
3.2%

3.0%

200
150

3.7%
115

100
2.0%

54

60
50

1.0%
0.0%

0
FY 09

FY 10

Ad Expense (INR million)

Private and Conden.al

FY 11

FY 12

FY 13

Ad expense as percentage of Sales (%)


Wide Spread DistribuDon Network
Global Network

Presence in 60 countries
Oces in US, Mexico & India
Sales team in 15 countries across

Europe, Americas, Asia and Africa

Present in key retailers like
Walmart, Lowes, Carrefour, Singer,
Sears, Costco, Home Depot etc.
Network in India

4,500+ ci.es/towns
750+ distributors
16,000+ dealers across India
Symphony has strengthened its distribu.on network and expects to scale from approximately 16,400 outlets as on June

30, 2013 to 40,000+ over the medium term across Indias rural and semi-urban markets.
The company completely operates through an asset light model wherein it outsource manufacturing of air coolers to eight
exclusive vendors (total annual capacity ~1 million unit) in India and uses the cash and carry model.
Symphony acquired Mexico based Impco to diversify into various geographies and get the opportunity of cross selling
products by leveraging an established dealers network.
It has also established a full edged export unit in Gujarat (SEZ, Surat) with an installed capacity of 200,000 units p.a.
Private and Conden.al


Company Milestone

Private and Conden.al


AcquisiDon of IMPCO, Mexico
AcquisiDon of Mexico based Impco
In order to expand business in developed na.ons, Symphony acquired a 100% stake in Mexico based Impco S.DE.R.L. DE.
C.V. (Impco) with an investment of ~ INR 35 million
Currently, Impco contributes ~18% to the consolidated topline with a majority of the revenue (65% of overall sales)
coming from centralized and heavy duty air coolers and the remaining (~35% of sales) coming from room coolers.
Currently, Impco serves markets like the US, India, Iraq and some of the Middle East countries.
Symphony started leveraging the enduring rela.onships 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

Synergies for Symphony to create market for industrial coolers in India

Symphony plans to supply cheap residen.al air coolers to Impco which can then sell them to US and Mexican markets

through its distribu.on channel which include Walmart, Costco, Sears, etc.
Impco has provided Symphony access to proprietary patented technology in industrial coolers . Symphony has started
installing these coolers in hot workplace seings in India including factories and warehouses

Private and Conden.al


Business Model
Asset Light Business Model with No Debt

Cash and Carry Model

Symphony operates on a cash and carry model

Asset light business model - outsources

with almost 95% of domes.c sales on advance

payment terms with dealers and distributors
with the remaining (i.e. 5%) through large
format stores.
In the interna.onal business, about 40% is
through large format stores while 60% is
through dealers and distributors
On the supplier front, the company receives
credit limit in the range of 30-75 days.
Cash and carry model and higher supplier days
help the company to maintain lower working
capital requirements throughout the season

manufacturing of air coolers to eight exclusive

vendors (total annual capacity ~10 lakh unit) in
India
However, the company retains the rights for
product development, design and marke.ng
func.on to maintain the exclusivity of products
and technologies of Symphony from its
vendors.
This model helps the company to concentrate
on its core competence i.e. innova.on in
product development and feature evalua.on

Excellent pre-tax return on

invested capital over the last
Pre-tax ROE
four years

Private and Conden.al

10

FY 10
100%

FY 11
68%

FY 12
67%

FY 13
98%


Business Model
Symphony Limited
Revenue FY13: INR 3,776 million

18%

82%

ResidenDal Segment
Revenue FY13: INR 3,083 million

Industrial Segment: North America

Revenue FY13: INR 693 million

89%

INDIA
Revenue FY13: INR 2,730 million

11%

Rest of World
Revenue FY13: INR 353 million

ResidenDal Range

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Industrial and Commercial Range

11


ResidenDal Segment : Highlights FY 2013
Product Development
Sold 574,750 units in 2012-13 against 495,849 units in 2011-12 a 16% growth
Introduced new i-series models with unique features
Dura pump technology resul.ng in longer pump life
Empty water tank alarm to no.fy whenever water tank is empty
System restore func.on (the cooler will restart with the same seings and func.on aYer any power outage is
restored)
Feather-touch digital control panel
Upgraded six models with novel cool ow dispenser oering beuer cooling eciency

DistribuDon Network
Increased our distribu.on network from 14,000 dealers (June 30, 2012) to 16,400 dealers (June 30, 2013)

Global footprint
Widened the global footprint by establishing a presence in Ecuador, Bolivia, Armenia, Kazakhstan and Mauri.us
Finalised a large distributor in Pakistan for focused market development
Tied up with prominent large format stores in various na.ons for strengthening our global presence

Private and Conden.al

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Industrial Segment: Highlights FY 2013
Business Development
Completed 109 installa.ons against 56 installa.ons in 2011-12
Penetrated some new industrial segments, namely paints, logis.cs and moulding industries 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)
Received the rst order from Indian Railways to install air coolers in wai.ng rooms of Kota and Godhra railway sta.ons
Received a repeat order from Patanjali Yogpeeth
DistribuDon network
Increased the dealer base from about 15 dealers as on June 30, 2012 to 44 dealers as on June 30, 2013
Worlds Largest Air Cooling Project: Executed by IMPCO, Mexico

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Indian Air Cooler Market(1/3)
The highly fragmented Indian air cooler industry is es.mated at INR 20 billion with approximately 50% of the business
contributed by un-organized players and organized players contribu.ng the remaining 50% to the industry. These
organized players include Symhony, Kenstar, Bajaj, Usha, Orient Fans and Havells.

Total Market Size: INR 20 billion

Air Cooler Market Share (FY 12)

5%

Un-
organized
Market
50%

Currently, the Indian air- cooler

industry is growing at 20% per

annum; the organized segment is
growing faster at 25% per
annum.

15%

Organized
Market
50%

50%
30%
Symphony

Kenstar

Bajaj Electricals

Others

Industrial Air Cooler Segment

The industrial and heavy duty air coolers industry in India (es.mated at ~ INR 70 billion opportunity) is at a nascent stage
of growth.
Symphony is the only branded player
Poten.al clients include mainly factories, godowns, commercial space and large residen.al houses.

Private and Conden.al Not for Circula.on

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Indian Air Cooler Market(2/3)
Key Demand Drivers of Air Cooler Market in India

In India, especially among the mid-income groups, there is a huge demand of air coolers, especially
for the cost of ownership: an air condi.oner costs between INR 23,000 to INR 35,000 whereas
branded air coolers (like Symphony) cost between INR 4,500 to INR 17,000.
Besides, air coolers consume 90% less electricity compared to air condi.oners a cri.cal factor in
swaying the decision in favor of the coolers.
Air cooler (Symphony
Jumbo)

Air condiDoner
(1.5 tonne)

Growing Middle
Class and
Increasing
UrbanizaDon

Apart from lower xed cost and lower

opera.ng cost, the other advantages of

air cooler over AC are that they are eco
friendly and portable.

Private and Conden.al Not for Circula.on

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Indian Air Cooler Market(3/3)
Key Demand Drivers of Air Cooler Market in India
Rising disposable income would
provide more room for expenditure in
discre.onary items
Growth in Middle
Class Income and
DiscreDonary
Expenses will Fuel
the Demand of Air
Coolers

Global Warming

With rising average temperatures (Indias mean temperature increased from 18.7C in 1973 to
23.2C in 2012), air cooler market is expected to grow

Industrial cooling is gaining increasing importance as corporates are looking to create a congenial
Increasing
demand for
industrial air
cooling globally

working environment
For certain factories, centralized cooling becomes mandatory due to opera.onal process or
product characteris.cs like tex.le applica.ons, certain dyes, chemicals, etc.
In factories that house large boilers, large furnaces and other equipment, that generate lot of heat,
air cooling emerges as the only cooling solu.on in these areas.
Also nd applica.on in warehouses that need to store material at controlled temperatures

Private and Conden.al Not for Circula.on

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Management Has Learnt Important Lessons from Its Past Mistakes
So while we were engaged in videa0ng how to restructure the Company, one of the many responses was a small idea, which
suggested Be"er to generate a lower return with a lower capital outlay and no debt than a higher return with a larger
capital outlay but a liberal quantum of debt Company Annual Report FY 2012

Pre-2000, posiDoning was :

Many products One market
In INR million
Revenues
EBITDA
PBT
PAT

Post 2005, posiDoning is One

Product Many Markets with
complete range of ResidenDal
and Industrial Air Cooling
SoluDons

FY 04
248
4
(18)
(18)

FY 13
3,947
959
913
602

2%
-7%

24%
15%

EBITDA Margin
PAT Margin

Market Cap
31 11,018
EPS
(1) 17.2
Dividend Pay-out Ratio ( %) -
38
Networth
Debt
Debt to Equity(x)

(72) 2,001
172 -
(2)
0.0

Private and Conden.al Not for Circula.on

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Important lessons learnt from past mistakes

made before 2005 enabled company to move

away from:
Doing many things in a mediocre way to
becoming really good at one thing
(cooling);
Manufacturing (which is capital intensive
ac.vity) to outsourced produc.on (which is
asset light); and
Using debt for expansion to becoming debt
free


Symphonys Track Record of Growth and Protability
In INR million

FY 09

FY 10

FY 11

FY 12

FY 13

CAGR

Units Sold ('000)

Implied Realization rate

262 421 501 496 575

4,894 4,605 5,958 6,448 6,868

22%
9%

Revenues
EBITDA
PBT
PAT

1,283 1,941 2,986 3,197

406 569 772 789
590 551 756 733
433 370 512 531

32%
24%

EBITDA Margin
PAT Margin

32%
34%

29%
19%

26%
17%

25%
17%

3,947
959
913
602

Networth
Debt
Debt to Equity(x)

515 864 1,303 1,670 2,001

3 1 2 74 -
0.0
0.0
0.0
0.0
0.0

Pre-tax ROIC

n.a.

100%

68%

67%

volumes
Increasing
realiza.on rate
over the years

Revenues grew at
CAGR of 32%

9%

Strong PAT margin

24%
15%

Market Cap
385 3,481 7,597 6,879 11,018
EPS
12.4 10.6 14.6 15.2 17.2
Dividend Pay-out Ratio (%)
2
5
14
36
38

Strong growth in

of over 15%

131%
9%

Debt Free company

Excellent returns

over last ve years

98%

Despite huge value crea.on (market cap has grown over 480 .mes in the last 10 years), the stock is s.ll selling for less than 13 .mes pre-tax
earnings (TTM Mul.ple).

Private and Conden.al Not for Circula.on

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Thank You

Private and Conden.al Not for Circula.on

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