Havells' first-half sales rose 26.5%, but its pre-tax profit slipped

Havells India, which makes cables, wires, switchgear and Lloyd air conditioners, described the September 2026 quarter as a strong one, and on its own it was: sales rose 34.6% from a year earlier and profit before tax rose 14.0%. Over the whole first half of the financial year the picture is different. Sales were 26.5% higher than in the same six months a year earlier, yet profit before tax fell 2.3%, to ₹865 crore.

The gap lies in what the extra sales earned. Management said its prices had risen by double-digit percentages across the range over the past year, and by more than 30% in cables and wires, while cable and wire volumes grew at close to double digits. Part of that is arithmetic: when a manufacturer passes rising raw-material costs on to customers, sales climb faster than rupee profit. But margins also fell. Management said contribution margins were softer than a year earlier, mainly in cables, where falling aluminium prices hurt, and Lloyd's stayed subdued; in the first quarter advertising spending more than doubled from a year earlier. The extra ₹2,716 crore of sales added ₹85 crore of operating profit, measured before depreciation, interest and other income, about 3.1% of the increase by Inve's calculation from the filed results. The operating margin slipped to 8.0% from 9.3%.

Further down the income statement, two lines took back more than that gain. Depreciation rose, with fixed assets almost a quarter larger than a year earlier. Other income, which includes interest earned on the company's cash, fell by even more.

Management put the slower growth in last quarter's pre-tax profit down to a one-time gain in other income in the year-ago quarter. The reported figures fit that explanation: other income in the year-ago quarter was above the ₹64-69 crore of the three quarters before it, at a time when the company said lower cash balances were cutting its interest income. Management did not say on the call how large the gain was. Last quarter it fell to about a third of the year-ago figure. A year ago the company itself linked low other income to its planned capital spending.

That capital spending is growing. In July management guided about ₹1,400 crore for this financial year, against ₹1,000 crore in its January guidance. Asked on the latest call whether that estimate, mostly for cables and wires, still stood, management named only its purposes, cables and wires and an R&D centre, and did not change the figure, and said the full cable expansion would be running within 18 months.

Management also gave a yardstick for that money: a return on capital employed close to 23%, which it sees no reason not to improve on within a couple of years. A plain pre-tax version from the filed figures, operating profit after depreciation for the last four quarters divided by average equity and debt, comes to about 19%. That version counts the company's cash and investments as capital, which pulls it down, so the two figures are not directly comparable.

In two divisions the guidance record is mixed. Switchgear, whose sales fell 4% in the quarter before, grew last quarter, as management said in July it would, with contribution margins, what is left after direct costs, back in their usual range. Lloyd's margins stayed subdued. Management again expects improvement to start in the third quarter and carry into the fourth, the same sequence it set out a year earlier, and it declined to give a date for the business to turn profitable.