Q1 2027 PG Electroplast Ltd Earnings Call

August 7, 2026

Speaker #1: Ladies and gentlemen, good day and welcome to the PG Electroplast Q1 FY27 earnings conference call, hosted by Axis Capital. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Operator: Ladies and gentlemen, good day and welcome to PG Electroplast Q1 FY27 earnings conference call hosted by Axis Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. This presentation has been prepared for informational purposes only. This presentation does not constitute a prospectus, offering circular or offering memorandum and is not an offer or initiation to buy or sell any security, nor shall part or all of this presentation form the basis to be relied on in connection with any contract or investment decisions in any securities.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.

Operator: Please note that this conference is being recorded. This presentation has been prepared for informational purposes only. This presentation does not constitute a prospectus, offering circular or offering memorandum and is not an offer or initiation to buy or sell any security, nor shall part or all of this presentation form the basis to be relied on in connection with any contract or investment decisions in any securities.

Speaker #1: This presentation has been prepared for informational purposes only. This presentation does not constitute a prospectus, offering circular, or offering memorandum, and is not an offer or invitation to buy or sell any security.

Speaker #1: Nor shall part or all of this presentation form the basis to be relied on in connection with any contract or investment decisions in any securities.

Speaker #1: This presentation contains forward-looking statements based on the currently held beliefs of the management of the company, which are expressed in good faith and, in management's opinion, are reasonable.

Operator: This presentation contains forward-looking statements based on the currently held beliefs of the management of the company, which are expressed in good faith and in the management's opinion, are reasonable. The forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, financial conditions, or performance or achievements of the company or industry to differ materially from forward-looking statements. I now hand the conference over to Mr. Nikhil Kandoi from Axis Capital. Thank you, and over to you, sir.

Speaker #1: The forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, financial conditions, performance, or achievements of the company or industry to differ materially from the forward-looking statements.

Speaker #1: I now hand the conference over to Mr. Nikhil Kandoy from Axis Capital. Thank you, and over to you, sir.

Speaker #2: Thank you, Hugo. Good morning, everyone. On behalf of Axis Capital, I welcome you all to the PG Electroplast Q1 FY27 earnings conference call. Today, we have with us senior management represented by Mr. Vishal Gupta, Managing Director, Finance; Mr. Vikas Gupta, Managing Director, Operations; and Mr. Pramud Gupta, Chief Financial Officer.

Nikhil Kandoi: Thank you, Huda. Good morning, everyone. On behalf of Axis Capital, I welcome you all to PG Electroplast Q1 FY27 Earnings Conference Call. Today, we have with us senior management represented by Mr. Vishal Gupta, Managing Director of Finance, Mr. Vikas Gupta, Managing Director of Operations, and Mr. Pramod Gupta, Chief Financial Officer. Without taking much time, I hand off the floor to the management for the opening remarks, after which we will open the floor for Q&A. Thank you, and over to you, sir.

Speaker #2: Without taking much of your time, I hand over the floor to the management for the opening remarks, after which we will open the floor for Q&A.

Speaker #2: Thank you, and over to you, sir.

Speaker #3: Thank you, Nikhil, and good morning, everyone. Thank you for joining the PG Electroplast Q1 FY27 earnings call. I'm Vishal Gupta, and I'm joined by Mr. Vikas Gupta, our MD - Operations, and Mr. Pramud Gupta, our CFO.

Vishal Gupta: Thank you, Nikhil, and good morning, everyone. Thank you for joining PG Electroplast's Q1 FY27 earnings call. I am Vishal Gupta, and I am joined by Mr. Vikas Gupta, our MD of Operations, and Mr. Pramod Gupta, our CFO. We are pleased to start this financial year on a strong note. The season progressed smoothly. Demand played out broadly in line with our expectations, and our teams executed well across the board. Consolidated revenues crossed INR 2,000 crores for the first time in the company's history, and the room AC and washing machine verticals posted their highest-ever quarter sales. Growth this year came from a combination of volume and price. We saw double-digit volume growth and a similar quantum of ASP increase as commodity costs and rupee depreciation got passed through to our customers. Our order book remains healthy across all product lines.

Speaker #3: We are pleased to start this financial year on a strong note; the season progressed smoothly. Demand played out broadly in line with our expectations.

Speaker #3: And our teams executed well across the board. Consolidated revenues crossed ₹2,000 crore for the first time in the company's history, and the room AC and washing machine verticals posted their highest-ever quarterly sales.

Speaker #3: Growth this year came from a combination of volume and price. We saw double-digit volume growth and a similar quantum of ASP increase, as commodity costs and rupee depreciation costs were passed through to our customers.

Vishal Gupta: Growth this year came from a combination of volume and price. We saw double-digit volume growth and a similar quantum of ASP increase as commodity costs and rupee depreciation got passed through to our customers. Our order book remains healthy across all product lines. I will now let Pramodji take you through the numbers in detail. Then I will come back to cover our capacity roadmap and a few operating priorities for this year. Pramodji?

Speaker #3: Our order book remains healthy across all product lines. I will now let Pramudji take you through the numbers in detail, and then I will come back to cover our capacity roadmap and a few operating priorities for this year.

Vishal Gupta: I will now let Pramodji take you through the numbers in detail. Then I will come back to cover our capacity roadmap and a few operating priorities for this year. Pramodji?

Speaker #3: Pramudji, thank you.

Pramod Gupta: Thank you, Vishalji. Good morning, everyone. As all of you would have seen, the numbers consolidated revenues for the quarter was INR 2,034 crore, up 35.2% YoY. EBITDA came in at INR 156.2 crore versus INR 139.4 crore last year, with a growth of 12.1% and EBITDA margin of 7.7%. Net profit was INR 75.3 crore versus INR 66.7 crore, which was up 12.9% YoY. Product business was a key contributor to the growth, and it contributed 80% of sales, growing 40.7% YoY. Within that, AC grew 38.1% to INR 1,401 crore. Washing machine grew 67.2% to INR 211 crore, and coolers grew 3.4% to almost INR 19 crore. Electronic business has grown 6.3% YoY and contributed 5.3% of the revenues. Plastic molding and component contributed INR 294.6 crore and was up 7% YoY.

Speaker #2: Vishal ji, good morning everyone. As all of you would have seen, the consolidated revenues for the quarter were ₹2,034 crores, up 35.2% year over year.

Speaker #2: EBITDA came in at ₹156.2 crores versus ₹139.4 crores last year, with a growth of 12.1% and an EBITDA margin of 7.7%. Net profit was ₹75.3 crores versus ₹66.7 crores, which was up 12.9% year-over-year.

Speaker #2: Product business was the key contributor to the growth and it contributed 80% of sales, growing 40.7% year-over-year. Within that, AC grew 38.1% to ₹1,401 crore.

Speaker #2: Washing machines grew 67.2% to ₹211 crore, and coolers grew 3.4% to almost ₹19 crore. The electronics business has grown 6.3% year over year and contributed 5.3% of the revenues.

Pramod Gupta: Washing machine grew 67.2% to INR 211 crore, and coolers grew 3.4% to almost INR 19 crore. Electronic business has grown 6.3% YoY and contributed 5.3% of the revenues. Plastic molding and component contributed INR 294.6 crore and was up 7% YoY.

Speaker #2: Plastic molding and component contributed ₹294.6 crore, and was up 7% year-over-year. Our JV, Goodworth Electronic, posted sales of ₹177.3 crore versus ₹147.5 crore last year.

Pramod Gupta: Our JV, Goodworth Electronics, posted sales of INR 177.3 crore versus INR 147.5 crore last year, and EBITDA for the JV was INR 6.3 crore versus INR 4.3 crore last year. Our wholly owned subsidiary, PG Technoplast, reported strong sales of INR 1,600 for the quarter. On margins, gross margin as a percentage dropped both quarter-on-quarter and year-on-year, driven by elevated commodity prices, particularly copper and aluminum, along with the rupee depreciation. I want to be clear on the mechanics here. Product pricing in the industry is typically structured on a per-unit margin, not a percentage. When commodity prices rise and we pass through via ASP increases, the same per-unit margin shows up as a lower percentage of larger revenue base. On a per-unit basis, margin remained stable versus last year, and commodity cost increases have been partially passed through to the customers.

Speaker #2: And EBITDA for the JV was ₹6.3 crore versus ₹4.3 crore last year. Our fully owned subsidiary, PG Technoplast, reported strong sales of ₹1,600 crore for the quarter.

Speaker #2: On margins, gross margin as a percentage softened both quarter-on-quarter and year-on-year, driven by elevated commodity prices, particularly copper and aluminum, along with the rupee depreciation.

Speaker #2: I want to be clear on the mechanics here. Product pricing in the industry is typically structured on a per-unit margin, not a percentage.

Pramod Gupta: Product pricing in the industry is typically structured on a per-unit margin, not a percentage. When commodity prices rise and we pass through via ASP increases, the same per-unit margin shows up as a lower percentage of larger revenue base. On a per-unit basis, margin remained stable versus last year, and commodity cost increases have been partially passed through to the customers.

Speaker #2: So when commodity prices rise and we pass through via ASP increases, the same per-unit margin shows up as a lower percentage of the larger revenue base.

Speaker #2: On a per unit basis, margin remained stable versus last year, and commodity cost increases have been partially passed through to the customers. On the balance sheet, things are quite healthy.

Pramod Gupta: On the balance sheet, things are quite healthy. We are a net cash company now. Cash and bank balance stood at INR 491.3 crore, and we have a modest debt at the end of Q1 2027. With this, I will hand it over back to Vishalji. Vishalji?

Speaker #2: We are a net cash company now. Cash and bank balance stood at ₹491.3 crores, and we have a modest debt at the end of Q1 2027.

Speaker #2: With this, I will hand it over back to Vishal ji. Vishal ji?

Speaker #3: Thank you, Pramudji. Let me now cover where things stand on our capacity, along with a couple of other developments for this quarter. First, our flagship washing machine manufacturing facility has come online in a new campus in DMIC, Greater Noida, Uttar Pradesh.

Vishal Gupta: Thank you, Pramodji. Let me now cover where things stand on our capacity, along with a couple of other developments for this quarter. First, our flagship washing machine manufacturing facility has come online in a new campus in DMIC, Greater Noida, Uttar Pradesh. It's a state-of-the-art plant, one of the best in the industry, with a capacity of 1.8 million washing machines annually. Our fully automatic washing machines business has grown 150% on a YoY basis in this quarter, and we are launching a brand-new 18 to 20-kilogram range washing machine platform, which will let us go after a higher capacity, higher value segment, which we have not addressed fully before. Secondly, on our refrigerator facility at Sri City in South India, it is progressing well. We are targeting commercial production by Q4 of this financial year, and with this becoming a meaningful revenue stream for FY28 onwards.

Speaker #3: It's a state-of-the-art plant, one of the best in the industry, with a capacity of 1.8 million washing machines annually. Our fully automatic washing machine business has grown 150% on a year-on-year basis in this quarter.

Vishal Gupta: Our fully automatic washing machines business has grown 150% on a YoY basis in this quarter, and we are launching a brand-new 18 to 20-kilogram range washing machine platform, which will let us go after a higher capacity, higher value segment, which we have not addressed fully before. Secondly, on our refrigerator facility at Sri City in South India, it is progressing well. We are targeting commercial production by Q4 of this financial year, and with this becoming a meaningful revenue stream for FY28 onwards.

Speaker #3: And we are launching a brand new 18 to 20 kilogram range washing machine platform which will let us go after a higher capacity higher value segment which we have not addressed fully before.

Speaker #3: Secondly, on our refrigerator facility at Siri City in South India, it is progressing well. We are targeting commercial production by Q4 of this financial year, and with this, it will become a meaningful revenue stream for FY28 onwards.

Speaker #3: We have also tied up with our anchor customer for this business, and we are already in active discussions with other customers as well, where we are getting some soft conversations from them.

Vishal Gupta: We have also tied up with our anchor customer for this business. We are already in active discussions with other customers also, where we are getting some soft commitments from them. This facility will have a capacity of 1.2 million units. In the first phase, we are starting with direct cool and side-by-side refrigerators. In the next phase, we'll expand to frost-free and multi-door category of the refrigerators. On the compressor front, this project, which is coming up at Supa, is also on track for mass production in this financial year. Things are progressing well. We expect our two million capacity line to come online in this financial year as already planned and conveyed. Our new facility in Rajasthan, which is under the subsidiary PG Electroplast, is also becoming online.

Speaker #3: This facility will have a capacity of 1.2 million units and in the first phase we are starting with direct cool and side by side refrigerators and in the next phase we'll expand to frost free and multi-door category of the refrigerators.

Speaker #3: On the compressor front, this project, which is coming up at SUPA, is also on track for mass production in this financial year. Things are progressing well.

Vishal Gupta: On the compressor front, this project, which is coming up at Supa, is also on track for mass production in this financial year. Things are progressing well. We expect our two million capacity line to come online in this financial year as already planned and conveyed. Our new facility in Rajasthan, which is under the subsidiary PG Electroplast, is also becoming online.

Speaker #3: We expect our 2 million-capacity line to come online in this financial year, as already planned and conveyed. Our new facility in Rajasthan, which is under the subsidiary PG Technoplast, is also becoming operational. Given our anticipated growth, we are consolidating operations by relocating some of our units in Greater Noida to this new Salarpur facility.

Vishal Gupta: Given our anticipated growth, we are consolidating operations by relocating some of our units in Greater Noida to this new Salarpur facility. Alongside that, our strategic priorities for this year are R&D, new product development, backward integration, and capability enhancement, all aimed at building longer-term resilience and improving capital efficiency, which Pramod has touched upon. With that, we'll now open the floor for questions. Thank you.

Speaker #3: Alongside that, our strategic priorities for this year are R&D, new product development, backward integration, and capability enhancement—all aimed at building longer-term resilience and improving capital efficiency, which Pramudji has touched upon.

Speaker #3: With that, we will now open the floor for questions. Thank you.

Speaker #1: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. A request to all participants, please restrict your questions to two questions per participant. For more questions, please rejoin the queue. The first question is from the line of Achal Lohade from Nuvama. Please proceed.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.

Speaker #1: A request to all participants: please restrict your questions to two per participant. For more questions, please rejoin the queue. The first question is from the line of Aachal Lohade from Nuvama.

Speaker #1: Please proceed.

Speaker #4: Yeah good morning team. Thank you for the opportunity. Sir if you could help us understand A in terms of the RAC the largest segment in terms of how has been the industry trends in terms of primary and secondary sales volume growth and also for the EMS you know industry how has been the volume growth and what kind of market share gain have we seen if you could comment on that first.

Achal Lohade: Good morning, team. Thank you for the opportunity. Sir, if you could help us understand, A, in terms of the RAC, the largest segment, in terms of how has been the industry trends in terms of primary and secondary sales volume growth. Also for the EMS industry, how has been the volume growth and what kind of market share gain have we seen? If you could comment on that first.

Speaker #2: For RAC you know this at a industry level in this first quarter you know we have a sense where we can give you some idea on the primary level what the growth and the numbers have been secondary level we don't have very direct access to the data but still you know primary level we see that in Q1 I think overall industry has done around 10 to 15% better 15% better as compared to last year and on the couple of that if you combine that with around 10 to 12% value growth in the ASP so it's the combined is around 20 25% is the growth in the at the primary level for the RAC secondary level we believe and as per the information we have got from our client secondary level the sales have been little better some people are giving it's very mixed signal some people are saying it's little better some people are saying it's much better so we don't have very exact idea on this but overall secondary sales have maybe at the June end the channel and the brand level inventory much be at a little lower side than what we we had in the last year on the same time.

Vishal Gupta: For RAC, at an industry level in this Q1, we have a sense where we can give you some idea on the primary level what the growth and the numbers have been. Secondary level, we don't have very direct access to the data, but still, primary level, we see that in Q1, I think overall industry has done around 10% to 15% better, 15% better as compared to last year. On the couple of that, if you combine that with around 10% to 12% value growth in the ASP. The combined is around 20% to 25% is the growth at the primary level for the RAC. Secondary level, we believe, and as per the information we have got from our client, secondary level, the sales have been little better. It's a very mixed signal. Some people are saying it's little better, some people are saying it's much better.

Vishal Gupta: We don't have very exact idea on this. Overall, secondary sales are better than the primary. Maybe at the June end, the channel and the brand level inventory must be at a little lower side than what we had in the last year on the same time. Yeah.

Speaker #2: Yeah.

Speaker #4: How about, as in, you're saying June-end inventory is lower than last year, but last year was actually pretty high. So, is it still higher than usual or is it now kind of normalized?

Achal Lohade: How about, as in, you're saying June end inventory is lower than last year, but last year was actually pretty high. Is it still higher than usual or it is now kind of normalized?

Speaker #3: It is very near to the normal inventory levels now. And what is happening, sir, is that the competition intensity is so high that nobody wants to lose any opportunity for any sale.

Vishal Gupta: It is very near to the normal inventory levels now. What is happening, sir, now the competition intensity is so high, nobody wants to lose any opportunity of any sale. People tend to keep inventories at a higher level in order to ensure that they don't miss any sales opportunity. We will see elevated level of inventory going forward, seeing the competitive intensity of this industry now. I believe so. This is my very personal view.

Speaker #3: So, people tend to keep inventories at a higher level in order to ensure that they don't miss any sales opportunities. So, we will see elevated levels of inventory going forward, seeing the competitive intensity of this industry now.

Speaker #3: This is, I believe so. This is my very personal view, you know.

Achal Lohade: Fair point. Sir, on the EMS front, if you could call out how has been for the EMS players. Have you seen more outsourcing compared to last year?

Speaker #4: Fair point. And sir, on the EMS front, if you could call out how it has been for the EMS players—have you seen more outsourcing compared to last year?

Speaker #3: The EMS electronics is not a very large business for us. We are still doing the large capacity that we have.

Vishal Gupta: The EMS, electronics is not a very large business for us. We are still doing so large capacity what we have.

Speaker #4: Sorry to interrupt, sir. I meant for the RAC, you know, the outsourcing percentage—has it gone up for the RAC?

Achal Lohade: Sorry to interrupt, sir. I meant for the RAC, the outsourcing percentage, has it gone up for the RAC?

Speaker #3: Yeah, RAC outsourcing percentage is definitely going up. It is definitely going up if you see the numbers. Overall percentage of RAC outsourcing is definitely going up, sir.

Vishal Gupta: Yeah. RAC outsourcing percentage is definitely going up. It is definitely going up if you see the number. Overall percentage of RAC outsourcing is definitely going up, sir.

Speaker #4: Got it, got it. Second question, if I may ask, with respect to RAC growth for us. So, was there any spillover, you know, positive impact given that at the fourth quarter end we had logistical challenges? So has that also kind of benefited? And on a six months basis, how do you see that number, you know, or the market share gain, if you could call out?

Achal Lohade: Got it. Second question, if I may ask, with respect to RAC growth for us, was there any spillover, positive impact, given Q4 end, we had logistical challenges. Has that also kind of benefited? On a H1 basis, how do you see that number or the market share gain, if you could call out?

Speaker #3: The AC is a very seasonal business so you have to be present at that moment of time to meet your client's requirement. You know definitely we had some spill over but it was not a very large gain in that from that point of view if you are not able to meet your sales or you are not able to service your client in the time he wants that then you know sometimes you lose that opportunity.

Vishal Gupta: RAC is a very seasonal business. You have to be present at that moment of time to meet your client's requirement. Definitely, we had some spillover, it was not a very large gain from that point of view. If you are not able to meet your sales or you are not able to service your client in the time he wants that, sometimes you lose that opportunity. Overall, H1 from this quarter, I will say, we will see a growth, will not we see a very large growth. It should be around 15% to 20% growth should be there on a H1 level for this year.

Speaker #3: Overall, six years six months for this quarter, I will say, you know, we will see a growth but we will not see a very large growth.

Speaker #3: It should be around 15 20% growth should be there on a six month level for this year.

Speaker #4: Got it, thank you. I'll fall back in the queue for follow-up. Thank you.

Achal Lohade: Got it. Thank you. I'll fall back in the queue for follow-up. Thank you.

Speaker #3: Thank you. Thank you.

Vishal Gupta: Thank you.

Speaker #1: Thank you. The next question is from the line of Tanesh Shah from DAM Capital. Please proceed.

Operator: Thank you. The next question is from the line of Tanay Shah from DAM Capital. Please proceed.

Speaker #5: Yeah, hi sir. Good morning. Thank you for the opportunity. I have two questions. So first is, you know, we spoke about the fact that almost a chunk of the commodity increase has been passed on.

Tanay Shah: Yeah. Hi, sir. Good morning. Thank you for the opportunity. I have two questions. First is, we spoke about the fact that almost a chunk of the commodity increase has been passed on. What percentage of the cost increase has been passed on to our customers and what is yet left with us? How do we see that playing out over the next few quarters in terms of a gross margin?

Speaker #5: So what percentage of you know the cost increase has been passed on to our customers and what is yet left with us and how do we see that sort of playing out you know over the next few quarters in terms of a gross margin?

Speaker #3: Cost increases have been partially passed through to the clients. I cannot give very specific numbers on that, and it varies from customer to customer.

Vishal Gupta: See, cost increase has been partially passed through to the clients. I cannot give very specific numbers on that, and it varies from customer to customer. But we are hopeful that we will be able to again go for a price increase going forward. Today, the copper has crossed INR 14,000 and the rupee is also hovering around 95.5 and 96. That impact will still to be passed on to our clients. It will be there, but right now, see, it's so soft season, the demand is not there. I don't think this is the right season, right time to go for a price increases right now. I think the price increase will happen in the Q4 only, with our clients.

Speaker #3: But we are hopeful that we will be able to again pass on a price increase going forward, because today, you know, copper has crossed $14,000, and the rupee is also hovering around 95.5 and 96.

Speaker #3: So that you know, impact will still be passed on to our clients. So it will be there, but right now, see, it's a soft season—the demand is not there.

Speaker #3: I don't think this is the right time to go for a price increase right now. I think the price increase will happen, you know, in the December quarter only with our clients.

Speaker #5: Sure, sir. Sure. And so, the other thing that you had mentioned, even in the previous call, is that you expect competitive intensity to only go higher this year as well.

Tanay Shah: Sure, sir. Sir, the other thing which you had mentioned even in the previous call, is that you expect competitive intensity to only go higher this year as well. Given the fact that even brands are increasingly getting competitive with a lot of new brands coming in to the RAC segment as well, do you see that pressure sort of coming down to even EMS players like us across the board because they will try and be more competitive?

Speaker #5: And given the fact that even brands are increasingly getting competitive, with a lot of new brands coming into the RAC segment as well, do you see that pressure sort of coming down to even EMS players like us across the board? Because they will try and, like, you know, be more competitive?

Vishal Gupta: Definitely, sir. Definitely, Tanay. We cannot be away from this. We are part of this whole value chain, so we cannot be very away from that. If you see our numbers closely, you can see last few quarters, we have been trying to restructure our company and try to control our operating expenses. We have been able to improve our operating expenses ratio also. Our focus is that to improve this efficiency in our operations so that we are able to match with the competition and maybe do little better. If you see the numbers also across industry, some of the people give very clear numbers on this, RAC's performance and other category performance. You can see that relatively our numbers or maybe our margin profile is little better than the others.

Speaker #3: Definitely, Tanish, we cannot be away from this. We are part of this whole value chain, so we cannot be very far from that. If you see our numbers closely, you can see in the last few quarters we have been trying to restructure our company and try to control our operating expenses.

Speaker #3: And we have been able to improve our operating expenses ratio also. So our focus is to improve this efficiency in our operations so that we are able to, you know, match the competition and maybe do a little better.

Speaker #3: If you see the numbers also across industry some of the people give very clear numbers on their RAC's performance and other category performance so you can see that relatively our numbers are maybe our margin profile is little better than the others and we are we are very conscious about this fact and we are preparing ourselves for this you know battle which is going to come in next few quarters.

Vishal Gupta: We are very conscious about this fact, and we are preparing ourself for this battle which is going to come in next few quarters.

Speaker #5: So just one more. Could you possibly split the RAC growth into volume and value for us, just since you mentioned that there was double-digit growth for both?

Tanay Shah: Sir, there's one more. Could you possibly split the RAC growth into volume and value for us? Just since you mentioned there is double-digit growth for both. That would be helpful.

Speaker #5: That would be helpful.

Speaker #3: RAC, at a volume level, has grown around 20–22% for us in this quarter, and the rest of the value has come from the price increases. ASP has increased by around 10–12%.

Vishal Gupta: RAC at a volume level has grown around 20% to 22% for us in this quarter. Rest of the value has come from the price increases. ASP has increased by around 10% to 12%.

Speaker #5: Perfect, sir. Thank you so much. I'll just come back in the queue. Thank you so much.

Tanay Shah: Perfect, sir. Thank you so much. I will just come back in the queue. Thank you so much.

Speaker #3: Thank you, boss. Thank you, Tanish.

Vishal Gupta: Thank you, boss. Thank you, Tanay.

Speaker #1: Thank you. The next question is from the line of Neel Securities. Please proceed.

Operator: Thank you. The next question is from the line of Neel Mehta from Equirus Securities. Please proceed.

Speaker #4: Hi, sir. Good morning, and thank you very much for the opportunity. Sir, I just wanted to know, at the industry level, what would be the inventory levels now in terms of volume, including brands as well as the general inventory.

Neel Mehta: Hi, sir. Good morning, and very thank you for the opportunity. Sir, just wanted to know at the industry level, what would be the inventory levels now in terms of volume, including brands as well as the general inventory? That is my first question, sir.

Speaker #4: That's my fourth question sir.

Speaker #3: Neel, we don't have a very exact idea. Nobody in the industry has any definite data on this. There are guesses about that. As I told you earlier, in response to a question that was asked by me just a short while back, we believe that inventory levels have come down in this industry right now.

Vishal Gupta: Neel, we don't have very exact idea. Nobody in the industry has any definite data on this. There are guesses to that. As I told earlier to one question which was asked by me right now, some time back, that we believe that inventory level has come down in this industry right now. Okay? Yeah. I think it should be little lower, should be anything between 4.5 to 5.5 million at the both industry and the brand level and the channel level.

Speaker #3: Okay, yeah. So I think it should be a little lower—should be anything between 4.5 to 5.5 million at both the industry and the brand level, and the channel level, you know.

Neel Mehta: Perfect, sir. Sir, how do we somewhat see the price hikes in July month at the industry level, if you can highlight that?

Speaker #4: Perfect, sir. And sir, how do we see the price hikes in the month of July, you know, at the industry level? If you can highlight that?

Speaker #3: See, July, August, and September are the lean periods when the consumer is also not there. Some brands have been able to take some price increase.

Vishal Gupta: See, July, August, September are the lean periods when the consumer is also not there. Some brands have been able to take some price increase, some brands have taken and then they have rolled back. It's a very brand-specific strategy. Every brand has their own strategy. I can't comment on that. Yes, people are trying, brands are trying for price increase, but they have very limited success on that. Because maybe some of the brands are not taking the price increase, there is a pressure on everyone because of that.

Speaker #3: Some brands have taken that, and then they have rolled that out. So it's a very nice, very brand-specific strategy. Every brand has their own strategy.

Speaker #3: I can't comment on that. But yes there is a people are trying brands are trying for price increase but they are very limited success on that you know because of the maybe some of the brands are not taking the price increase so there is a pressure on everyone because of that.

Speaker #4: Thank you sir. And sir just last question if may I ask sir related to our compressor project where are we stand now you know in terms of like say ordering of plant and machinery the second thing is that are we doing any kind of you know key leadership hiring in that and if you could just highlight what would be the capex number for the quarter particularly and if you could bifurcate it within the you know segments like the compressor or like say an RAC something if you can just bifurcate it.

Neel Mehta: Thank you, sir. Sir, just last question, if may I ask. Sir, related to our compressor project, where are we stand now in terms of, say, ordering of plant and machinery? The second thing is that, are we doing any kind of senior leadership hiring in that? If you could just highlight what would be the CapEx number for the quarter particularly, and if you could bifurcate it within the segments like the compressor or like gen RAC, something like that, you can just bifurcate.

Speaker #3: See our compressor project is online as I told you in the call right now. I can't give you very specific inputs right now because let me tell you sir we are very much trying to keep it under low profile and targeting that we start mass production by December January that is a target for ours to start the mass production in December January everything is online I can only tell you only this thing by December January when the mass production will start we will be in a position to share lot of things in detail with you people.

Vishal Gupta: See, our compressor project is online, as I told you in the call right now. I cannot give you very specific inputs right now because let me tell you, sir, we are very much trying to keep it under low profile and targeting that we start mass production by December, January. That is a target for us to start the mass production in December, January. Everything is online. I can only tell you only this thing. By December, January, when the mass production will start, we will be in a position to share lot of things in detail with you people. On the CapEx side, I will take this question offline with you.

Speaker #4: On the capex side, I will take this question offline with you. Right now, I don't have the figure handy.

Neel Mehta: Yeah.

Vishal Gupta: Right now, I do not have the figures handy.

Speaker #3: For the CapEx-specific numbers, yeah.

Neel Mehta: For the CapEx?

Vishal Gupta: Sure, sir.

Neel Mehta: Specific numbers. Yes. Sure, sir. That is from my side. Thank you very much, sir.

Speaker #4: Sure, sir. That is all from my side. Thank you very much, sir.

Speaker #1: Thank you. The next question is from the line of Dhruv Jain from Ambit Capital. Please proceed.

Operator: Thank you. The next question is from the line of Dhruv Jain from Ambit Capital. Please proceed.

Speaker #4: Hi team. Thanks for the opportunity. So my first question is related to the you know question of outsourcing versus insourcing. So you know over the last few years what we have seen is that insourcing has risen because brands have put in capacity.

Dhruv Jain: Hi, team. Thanks for the opportunity. My first question is related to the question of outsourcing versus insourcing. Over the last few years, what we have seen is that insourcing has risen because brands have put in capacity. With PLI going away, do you think that, say, over the next two or three years, this number of outsourcing as a whole for the industry rising materially benefiting people like yourself?

Speaker #4: But with PLI going away, do you think that, say, over the next two or three years, the amount of outsourcing as a whole for the industry rises materially, benefiting people like yourself?

Speaker #3: Dhruv, first of all, you just need to recheck your numbers. I believe in the last three or four years, if you see the growth of some brands who are listed, and some of the outsourcing companies like us who are listed, and what is their growth, and what is the industry growth, what is their brand growth.

Vishal Gupta: Rohit, first of all, you just need to recheck your numbers. I believe in the last three, four years, if you see the growth of some brands who are listed and some of the outsourcing companies like us, and they are listed, and what is their growth and what is the industry growth, what is their brand growth. I think when you do that number crunching, you will come to know in spite of PLI in last three, four years, the outsourcing at the industry level has increased as a percentage of overall mix. Coming back to what is going to be next three, four years, as I told you, at brand level, the competition intensity is so high that they are not able to make money. They tend to come to people like us in order to conserve their margins.

Speaker #3: So I think when you do that number crunching, you will come to know that in spite of PLI and the last three to four years, the outsourcing at an industry level has increased as a percentage of overall this.

Speaker #3: Coming back to what is going to happen in the next three to four years, as I told you, at a brand level, the competition intensity is so high that they are not able to make money.

Speaker #3: So they tend to come to people like us in order to conserve their margins. So when they make in-house and when they outsource from people like us there is always a price arbitrage so they have revised this thing post PLI post putting up their own plants they have understood what is more economically sense full for them to go to outsourcing but having said that see lower end models entry level models are largely outsourced where the competition intensity is very high and premium level models they try to make in-house.

Vishal Gupta: When they make in-house and when they outsource from people like us, there is always a price arbitrage. They have realized this thing post PLI, post putting up their own plants, they have understood what is more economically sensible for them to go to outsourcing. Having said that, see, lower-end models. Entry-level models are largely outsourced where the competition intensity is very high and premium-level models they try to make in-house. That is the way how industry works.

Speaker #3: That is the way the industry works.

Speaker #4: Fair enough. Sir my second question is on you know your washing machine and refrigerator ramp up. So we've seen a very sharp growth in the washing machine side and with you getting into refrigerator with and also your new plant with respect to washing machine.

Dhruv Jain: Fair enough. Sir, my second question is on your washing machine and refrigerator ramp-up. We've seen a very sharp growth in the washing machine side and with you getting into refrigerator, and also your new plant with respect to washing machine, just want to understand in terms of any revenue guidance or a ramp-up guidance that you'd like to give for those two segments, over the next, say, two or three years.

Speaker #4: Just want to understand in terms of any revenue guidance or a ramp-up guidance that you'd like to give for those two segments over the next, say, two or three years.

Speaker #3: See we don't tend to give any we have stopped giving revenue guidance but as we told in the call earlier washing machine we have seen we are seeing a very robust growth the last two to three years and this quarter also this business has grown by 67%.

Vishal Gupta: We have stopped giving revenue guidance, as we told in the call earlier, washing machine, we are seeing a very robust growth the last two to three years, and this quarter also this business has grown by 67%. We are seeing a healthy growth going forward also for next, at least two to three years. We are getting more customers. We are increasing our wallet share. We are increasing our product offering. We are offering top-load models, fully automatic models. We are getting into higher capacity washing machines. That is helping grow our business. As far as refrigerator is concerned, it should start mass production in, again, December, January of this calendar year. We have already tied up with an anchor customer where we have already got a capacity commitment of around 30% to 35% from that customer.

Speaker #3: We are seeing healthy growth going forward. Also, for at least the next two to three years, we are getting more customers, we are increasing our wallet share, and we are increasing our product offering. We are offering top load models and fully automatic models. We are getting into higher capacity washing machines.

Speaker #3: So that is helping grow our business. As for a refrigerator is concerned it should be start mass production in again December January of this calendar year and we have already tied up with the anchor customer where we have already got a capacity commitment of around 30 35% from that customer in addition to that our side by side business refrigerators which we are going to you know start in maybe October we'll start manufacturing October or November we will start manufacturing our side by side refrigerators also in India and second phase we'll go for direct cool and sorry this frost free and this multi door category also.

Vishal Gupta: In addition to that, our side-by-side business refrigerators, which we are going to start in maybe October, we'll start manufacturing. October or November, we will start manufacturing of side-by-side refrigerators also in India. Second phase, we'll go for, sorry, frost free and this multi-door category also. That also, going forward, when we have a 1.2 million capacity in FY28, which can be utilized. Even if we are doing 600,000 or 700,000, if we are able to achieve in FY28, we see a very meaningful revenue coming out of this.

Speaker #3: So that also, you know, going forward, when we have a 1.2 million capacity in FY28, which will be fully—can be utilized—and even if we are doing 600,000, 700,000, if we are able to achieve that in FY28, we see a very meaningful revenue coming out of this.

Speaker #4: Got it, sir. Thank you so much.

Dhruv Jain: Got it, sir. Thank you so much.

Speaker #3: Thank you. Thank you Dhruv.

Vishal Gupta: Thank you. Thank you, Rohit.

Speaker #1: Thank you. The next question is from the line of Aachal Lohade from Nuvama. Please proceed.

Operator: Thank you. The next question is from the line of Achal Lohade from Nuvama. Please proceed.

Speaker #4: Yeah. Thank you for the follow up opportunity sir. In terms of the RAC margin you know x of PLI incentive last quarter you know how how do you see that moved actually QOQ have we got to a normal level or it is still below normal?

Achal Lohade: Yeah. Thank you for the follow-up opportunity, sir. In terms of the RAC margins, ex of PLI incentive last quarter, how do you see that moved actually QOQ? Have we got to a normal level or it is still below normal? How do you see it in the coming quarters?

Speaker #4: And how do you see it in the coming quarters?

Speaker #3: Pramodji, can you take this, please?

Vishal Gupta: Pramod, can you take this, please? Margins are slightly under pressure still. We are hopeful that in the coming quarters, we should be able to pass on better the commodity price increases. Commodity prices increased very sharply. That is one. Second thing was rupee depreciated also very sharply in the previous quarters. Full pass-on was not possible. Hopefully, with the stability in the rupee in the coming quarters and maybe the commodity stabilizing here, we hope that passing on of the commodity in the next season should be better. We are hopeful that margins will trend to a normalized level. There has been a quite sharp improvement in the margins in the AC business on quarter-on-quarter basis, ex of PLI.

Vishal Gupta: Pramod, can you take this, please?

Speaker #4: Margins are slightly under pressure still but we are hopeful that in the coming quarters we should be able to pass on better the commodity price increases commodity prices increase very sharply that is one and second thing was rupee depreciated also very sharply in the previous quarters so pass on full pass on was not possible hopefully with the stability in the rupee in the coming quarters and maybe in the commodity stabilizing here we hope that passing on of the commodity in the next season should be better therefore we are hopeful that margins will trend to normalized level there has been a quite sharp improvement in the margins in the AC business on quarter on quarter basis x of PLI because if you will adjust for PLI last quarter which was there and this quarter we have no PLI nothing in this numbers which we have quite significant improvement is there in the margins.

Pramod Gupta: Margins are slightly under pressure still. We are hopeful that in the coming quarters, we should be able to pass on better the commodity price increases. Commodity prices increased very sharply. That is one. Second thing was rupee depreciated also very sharply in the previous quarters. Full pass-on was not possible.

Pramod Gupta: Hopefully, with the stability in the rupee in the coming quarters and maybe the commodity stabilizing here, we hope that passing on of the commodity in the next season should be better. We are hopeful that margins will trend to a normalized level. There has been a quite sharp improvement in the margins in the AC business on quarter-on-quarter basis, ex of PLI. If you will adjust for PLI last quarter, which was there, this quarter we have no PLI, nothing in these numbers, which we have reported margins quite significant improvement is there in the margins.

Vishal Gupta: If you will adjust for PLI last quarter, which was there, this quarter we have no PLI, nothing in these numbers, which we have reported margins quite significant improvement is there in the margins.

Speaker #4: Fair point. Sir, you know, in terms of the margins for the washing machine or electronics, how have they trended? Have they improved, or are they also seeing some pressure on percentage, basically?

Achal Lohade: Fair point. Sir, in terms of the margins for the washing machine or electronics. How have they trended? Have they improved or they are also seeing some pressure on percentage, basically?

Speaker #3: On electronics, it is more of a job work, so there the margins are typically a stable kind of number. We do not see huge challenges there. But in washing machines, because of the fact that resin prices—plastic resin prices—have risen very sharply, the full pass-on of the commodity price increase has not happened in this quarter. We are hopeful that in the coming quarters, we will be able to get some price increases from the customers to take care of the resin prices, which have risen very sharply in the last quarter.

Pramod Gupta: On electronics, it is more of a job work. There the margins are typically stable kind of number. We do not see a huge challenge there. In washing machine, because of the fact that resin prices, plastic resin prices have risen very sharply, the full pass-on of the commodity prices has not happened in this quarter. We are hopeful that in the coming quarters, we will be able to get some price increases from the customers to take care of the resin prices, which have risen very sharply in the last quarter.

Speaker #4: Would you be able to quantify, sir, how much—how much was the impact of this on the washing machine margin?

Achal Lohade: Would you be able to quantify, sir, how much was the impact of this for washing machine margin?

Speaker #3: I will not be able to give you very specific numbers; we don't actually share the margin on the specifics.

Pramod Gupta: I will not be able to give you a very specific number. We don't actually share the margin.

Speaker #4: The impact I meant, actually—was that like 20–30 basis points of the overall margin?

Achal Lohade: Impact, I meant. Was that like 20, 30 basis points of the overall margin?

Speaker #3: No, no, no, it was—no, it was larger. It was much larger.

Pramod Gupta: No.

Achal Lohade: That large?

Pramod Gupta: No, it was larger than that. It was much larger than that.

Speaker #4: Understood. Just one last question with respect to the plastic molding business—was there any element of inventory gain, or, you know, anything in terms of margins for the plastic molding business?

Achal Lohade: Understood. Just last question. With respect to plastic molding business, was there any element of any inventory gain or in terms of the margins for plastic molding business?

Speaker #3: No there is nothing. There in in plastic business it's more again like component business where the plastic prices typically pass through is faster because the inventory levels are typically low etc and there we are having a more like a job work kind of a relationship where most of the time vendor the client itself tells from where we have to buy at what price we have to buy the the the raisin.

Pramod Gupta: No, there is nothing there. In plastic business, it's more again like a component business where the plastic prices typically pass through is faster because the inventory levels are typically low, et cetera. There we are having more like a job work kind of a relationship where most of the time the client itself tells from where we have to buy, at what price we have to buy the plastic resin. There the margin impact is not so much.

Speaker #3: So, plastic resin—there, the margin impact is not so much.

Speaker #4: Got it. Got it. And would you be able to quantify what was the RAC volume for the quarter?

Achal Lohade: Got it. Would you be able to quantify what was the RAC volume for the quarter?

Speaker #3: I'll give you this number. Just give me some time.

Speaker #4: Sure, sir. Thank you so much. Thank you. Those are all my questions. Thank you.

Pramod Gupta: I'll give you this number. Just give me some time.

Achal Lohade: Sure, sir. Thank you so much. Thank you.

Speaker #1: Thank you. The next question is from the line of Kayur Pandya from ICICI Prudential Life. Please proceed with your question.

Pramod Gupta: Thank you.

Achal Lohade: Those are all my questions. Thank you.

Operator: Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life. Please proceed with your question.

Speaker #5: Thank you. Thank you for the opportunity. Sir, first question is on volume growth for this year. So you mentioned 20.

Keyur Pandya [Chief Manager: Thank you. Thanks for the opportunity. Sir, first question is on volume growth for this year. You mentioned 22%.

Keyur Pandya: Thank you. Thanks for the opportunity. Sir, first question is on volume growth for this year. You mentioned 22%.

Speaker #1: Mr. Pandya.

Speaker #5: 23% kind of volume growth.

Speaker #1: Mr. Pandya, can you hear me?

Speaker #5: Hello.

Operator: Mr. Pandya

Speaker #1: Your line is not clear. Can you please speak a little louder?

Keyur Pandya [Chief Manager: kind of volume growth.

Keyur Pandya: kind of volume growth.

Operator: Mr. Pandya, can you hear me?

Keyur Pandya [Chief Manager: Hello.

Keyur Pandya: Hello.

Operator: Your line is not clear. Can you please speak a little loudly?

Speaker #5: I'm audible.

Speaker #3: Sorry.

Speaker #1: Yeah.

Keyur Pandya [Chief Manager: Am I audible?

Keyur Pandya: Am I audible?

Speaker #3: You are not very clearly audible, but still, yes, please go ahead.

Pramod Gupta: Sir.

Operator: Yeah.

Pramod Gupta: You're not clearly very audible. Still, yeah, please try again.

Speaker #1: Yeah, please get back in the queue.

Speaker #3: Yeah.

Speaker #1: Yeah. The next question is from the line of Natasha Jam from Philip Capital. Please proceed.

Operator: Yeah. We can get back in the queue.

Pramod Gupta: Yeah.

Operator: Yeah. The next question is from the line of Natasha Jain from PhillipCapital. Please proceed.

Speaker #4: Thank you for the opportunity, sir. Good morning to all of you. My question is more from the consumer’s point of view. We understand there were a lot of price hikes that happened in one year.

Natasha Jain: Thank you for the opportunity, sir. Good morning to all of you. My question is more from a consumer point of view. We understand there were a lot of price hikes that happened in Q1, but it was pretty much offset by the GST cut, there was still low-cost inventory that was in the system. Now we are seeing that continuously there is another set of cost hike that is happening. From a very consumer point of view, how do you see the demand panning out? I mean, historically, if such cost hikes have been taken, immediately what happens to the consumer sentiment? Do you think that going forward, even if there are seasonal quarters, say Q4 in the offing, we could see tapering off of demand itself for some time?

Speaker #4: But it was pretty much offset by the GST cut, and there was still low-cost inventory that was in the system. Now, we are seeing that, continually, there is another set of cost hikes that's happening.

Speaker #4: So, from a very consumer point of view, how do you see the demand panning out? I mean, historically, if such cost hikes have been taken immediately, what happens to the consumer sentiment?

Natasha Jain: From a very consumer point of view, how do you see the demand panning out? I mean, historically, if such cost hikes have been taken, immediately what happens to the consumer sentiment? Do you think that going forward, even if there are seasonal quarters, say Q4 in the offing, we could see tapering off of demand itself for some time?

Speaker #4: Do you think that going forward, even if there are seasonal quarters, say Q4 in the offing, we could see tapering off of demand itself for some time?

Speaker #3: Yeah, I'll take this question, Michelle sir. Actually, if you look at it, the consumer sentiment till now in other sectors, especially auto, etc., has been pretty strong.

Pramod Gupta: I'll take this question, Natasha. Actually, if you look at it, the consumer sentiment till now in other sectors, especially auto, et cetera, has been pretty strong. If you see the numbers of all the auto companies, et cetera, are pretty decent. AC as such a product has not seen a very huge inflation. If you look at over the longer period of time, yes, this huge copper price increase and rupee depreciation is impacting on a last year basis and this year basis, there will be a price increase. Last year, people have tried to pass on some price increase, and this year again, there will be more price increasing which will be coming, especially if commodity price remains there. Overall, after GST cut of 10%, I think the price increase is going to be in the range of maybe another 10% to 15% for the brands.

Speaker #3: If you see, the numbers of all the auto companies, etc., are pretty decent. And AC as such a product has not seen a very huge inflation.

Speaker #3: If you look at it over the longer period of time, yes, this huge copper price increase and rupee depreciation is impacting. On a last year basis and this year basis, there will be a price increase.

Speaker #3: Last year, people tried to pass on some price increases, and this year again, there will be more price increases coming—especially if commodity prices remain at these levels.

Pramod Gupta: Last year, people have tried to pass on some price increase, and this year again, there will be more price increasing which will be coming, especially if commodity price remains there. Overall, after GST cut of 10%, I think the price increase is going to be in the range of maybe another 10% to 15% for the brands.

Speaker #3: But overall, after the GST cut of 10%, I think the price increase is going to be in the range of maybe another 10% to 15% for the brands.

Speaker #3: Which should be, I think, absorbed by the customer without much issue because there is a latent demand in the system for these things. That is one. Second, the bigger, important thing is that over the last so many years, the prices of ACs have actually not increased, especially if you see the kind of improvement which has happened because of the energy efficiency rating, etc., in the overall product.

Pramod Gupta: Which should be, I think, absorbed by the customer without much issue because there is a latent demand in the system for these things. That is one. Second and bigger important thing is that over the last so many years, the prices of AC has actually not increased, especially if you see the kind of improvement which has happened because of the energy efficiency rating, et cetera, in the overall product. My sense is it should not actually impact hugely the sentiment or any such thing. Anyhow, my opinion always has been, and our opinion in the industry has always been that it's not the price of the equipment which is actually the deterrent for the buyer.

Speaker #3: So, my sense is it should not actually impact, usually, the sentiment or anything of that sort. And anyhow, my opinion always has been—and our opinion in the industry has always been—that it's not the price of the equipment which is actually the deterrent for the buyer.

Pramod Gupta: My sense is it should not actually impact hugely the sentiment or any such thing. Anyhow, my opinion always has been, and our opinion in the industry has always been that it's not the price of the equipment which is actually the deterrent for the buyer.

Speaker #3: It is actually the electricity consumption because of the cross-subsidy which we have in India, where a higher consumer or higher user pays a higher price for the electricity, which actually prohibits people from buying.

Pramod Gupta: It is actually the electricity consumption because of the cross-subsidy which we have in India, where higher user pays higher price for the electricity, which actually prohibits people from buying AC at home. The AC is actually still available at INR 30,000, 35,000 for a user, which is much lower than most of the consumer electronic items or consumer durable items which are there. It's not actually that product price which is going to have such a huge impact in my opinion.

Speaker #3: Like AC at home. The AC is actually still available at ₹30,000 to ₹35,000 for a user, which is much lower than most of the consumer electronic items or consumer durable items which are there.

Speaker #3: So it's not actually the product price which is going to have such a huge impact, in my opinion.

Speaker #1: Got it. And sir, just one related question.

Speaker #4: Here. So, going forward, I mean, you mentioned that 10 to 15% is over and above the cost hike post-GST. So, do you think at a channel level, because of overcrowding and too many cost hikes, schemes will have to be continuously passed on in order to move demand, at least for the mid-permit brands? And therefore, the structural margins in this industry are going to remain under pressure?

Natasha Jain: Got it. Sir, just one related question here. Going forward, you mentioned 10% to 15% is over and above cost hike, post GST. Do you think at a channel level, because of overcrowding and too much of cost hike, schemes will have to be continuously passed on in order to move demand, at least for the mid-pyramid brands and therefore, the structural margins in this industry is going to remain under pressure?

Speaker #3: I don't agree with that either. This is my personal view and has nothing to do with any particular brand or anything.

Pramod Gupta: I don't agree to that, also. This is my personal view and nothing to do with any particular brand or anything. See, if you look at the industry, last year was a very unusual year. We had a bad year, there was a rating change also, which happened during the season, actually just before, prior to the season. There was a huge inventory which was lying in the system for the old rated ACs and therefore brands and channel was actually playing the old inventory game. That led to some kind of a pricing pressure and the cost could not be passed on fully. This year, we don't think that is the case, and most of the brands and most of the companies are under tremendous pressure because of the high price of the commodities.

Speaker #3: See, if you look at the industry, last year was a very unusual year. We had a bad quarter, a bad year, and then there was a rating change also, which happened during the season, actually just prior to the season.

Speaker #3: And there was a huge inventory which was lying in the system for the old-rated ACs, and therefore, brands and channel were actually playing the old inventory game.

Speaker #3: So basically that led to some kind of a pricing pressure and pricing could not be the cost could not be passed on fully. This year we don't think that is the case and most of the brands and most of the companies are under tremendous pressure because of the the the high price of the commodities.

Pramod Gupta: That led to some kind of a pricing pressure and the cost could not be passed on fully. This year, we don't think that is the case, and most of the brands and most of the companies are under tremendous pressure because of the high price of the commodities.

Speaker #3: And I don't see a reason why the price increase should not be passed on this year. And coming to the competitive intensity, it has always been high in the mid brands. As you have been saying, every two or three years there has been a new player who has been coming in and trying to gain market share by dropping prices.

Pramod Gupta: I don't see a reason why price increase should not be passed on this year. Coming to the competitive intensity, has always been high in the mid brands, as you have been saying. Every two, three years, there has been a new player who has been coming and trying to gain market share by dropping prices, but people are getting used to it, and the whole industry is actually suffering because of the very high commodity price, basically copper, aluminum, et cetera. My sense is, this year, our industry will probably take a good effort to increase the prices, and I don't see a reason why it should not happen this year.

Speaker #3: But people are getting used to it, and the whole industry is actually suffering because of the very high commodity prices, especially copper, aluminum, etc.

Speaker #3: So, my sense is that this year, the industry will probably make a good effort to increase prices, and I don't see any reason why it should not happen this year.

Speaker #4: Got it, sir. This is excellent. Thank you so much, and all the very best.

Speaker #3: Thank you.

Speaker #1: Thank you. The next question is from the line of Kayur Pandya from ICICI Prudential Life. Please proceed.

Natasha Jain: Got it, sir. This is helpful. Thank you so much, and all the very best.

Pramod Gupta: Thank you.

Operator: Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life. Please proceed.

Speaker #3: Thank you, sir. First question on the volume growth: you mentioned 20 to 23%.

Speaker #1: Sir Kayur, please be a little louder.

Keyur Pandya [Chief Manager: Thank you. Sir, first question on the volume growth. You mentioned 20% to 23%.

Keyur Pandya: Thank you. Sir, first question on the volume growth. You mentioned 20% to 23%.

Speaker #3: Hello. Is it better?

Speaker #1: Yeah.

Speaker #3: Hello. Okay, so with a low base for most of the quarters from last year, especially Q2 and Q4, and the price hike, is it fair to assume that 20% plus volume growth is achievable for the full year? Considering factors such as low channel inventory and the other unfavorable base effects, etc.

Operator: Sir, can you please be a little louder?

Keyur Pandya [Chief Manager: Hello. Is it better?

Keyur Pandya: Hello. Is it better?

Operator: Yeah.

Keyur Pandya [Chief Manager: Hello. Okay. With a low base for most of the quarters from here on, especially Q2 and Q4, and the price hike, is it fair to assume that whatever volume growth, say 20% plus volume growth is achievable for the full year, considering, say, low channel inventory and all the other factors of unfavorable base, et cetera?

Keyur Pandya: Hello. Okay. With a low base for most of the quarters from here on, especially Q2 and Q4, and the price hike, is it fair to assume that whatever volume growth, say 20% plus volume growth is achievable for the full year, considering, say, low channel inventory and all the other factors of unfavorable base, et cetera?

Speaker #3: Yeah. We think that should be a possibility for us, given the fact that for the next nine months, barring December, the base is pretty low. Yes, if the industry is even normal—in the sense that we see industry normalizing and, unlike last year, the channel inventory is not high, etc.—we should be fine.

Pramod Gupta: Yeah. We think that should be a possibility for us, given the fact that for us, for the next nine months, barring December, base is pretty low. Yes, if industry is even normal, in the sense that we see industry normalizing and unlike last year, the channel inventory is not high, et cetera. We think that we should be having close to 20% plus kind of a volume growth for the full year.

Speaker #3: So, we think that we should be having close to 20% plus kind of volume growth for the full year. And, just one follow-up.

Speaker #3: I mean, as you mentioned, except for December, for most of the months or quarters you have a much lower base. So the 20% you are saying, or 20 plus, because I think 20, considering industry growth and low base, isn't it a low number? And the derivative question is that FY27 earnings—you think they can surpass or meet FY25 earnings? That is one follow-up.

Keyur Pandya [Chief Manager: In that, just one follow-up. As you mentioned, except for December, for most of the months or quarters, you have much lower base. The 20% you are saying, or 20 plus, because I think 20, considering industry growth and low base, isn't it a low number? The derivative question is that, FY27 earnings you think can surpass or meet FY25 earnings? That is one follow-up.

Keyur Pandya: In that, just one follow-up. As you mentioned, except for December, for most of the months or quarters, you have much lower base. The 20% you are saying, or 20 plus, because I think 20, considering industry growth and low base, isn't it a low number? The derivative question is that, FY27 earnings you think can surpass or meet FY25 earnings? That is one follow-up.

Speaker #3: We are hopeful that we coming to the earnings we are very hopeful that we should be able to surpass the 25 numbers this year we don't see a reason why we should not if the the sales is good in the second half coming to the volume I'll tell you see as I was saying we are hoping that this is a base case but we are prepared for a higher volume say we will get an opportunity to have those higher volumes and we are prepared for that and given the competitive positioning is going to increase significantly once our compressor plant is going online in October or November we hope to gain further market share in the in the outsourcing market and we don't see a reason that if industry grows at say whatever say 15% we should be able to do 20 if industry grows at 20 we should be able to do about four five percent better than that.

Pramod Gupta: Coming to the earnings, we are very hopeful that we should be able to surpass the 25 numbers this year. We don't see a reason why we should not, if the sales is good in the H2. Coming to the volume, I'll tell you, as I was saying, we are hoping this is a base case, but we are prepared for higher volumes if we will get an opportunity to have those higher volumes. We are prepared for that, and given the competitive positioning is going to increase significantly once our compressor plant is going online in October or November. We hope to gain further market share in the outsourcing market. We don't see a reason that if industry grows at, say, 15%, we should be able to do 20.

Pramod Gupta: We are prepared for that, and given the competitive positioning is going to increase significantly once our compressor plant is going online in October or November. We hope to gain further market share in the outsourcing market. We don't see a reason that if industry grows at, say, 15%, we should be able to do 20. If industry grows at 20%, we should be able to do about 4% or 5% better than that.

Speaker #3: Noted, sir. The second question, on just a slightly longer-term outlook: you have highlighted ref expansion in washing machine and compressor. Even if I add, say, at least in the first phase of all these three products, the EBITDA that can contribute on the current high base won't be significantly higher, say probably two years down the line.

Pramod Gupta: If industry grows at 20%, we should be able to do about 4% or 5% better than that.

Keyur Pandya [Chief Manager: Noted. Sir, the second question on just a slightly longer term outlook. You have highlighted ref expansion, washing machine and compressor. Even if I add, say, at least with the first phase of all these three products, the EBITDA that it can contribute on the current high base won't be significantly higher, say probably 2 years down the line. From, say, exit at the time of FY28, what are the growth plans? How are you thinking about, say, over next 3, 4 years? New category additions or second phases for this product, whichever way.

Keyur Pandya: Noted. Sir, the second question on just a slightly longer term outlook. You have highlighted ref expansion, washing machine and compressor. Even if I add, say, at least with the first phase of all these three products, the EBITDA that it can contribute on the current high base won't be significantly higher, say probably 2 years down the line. From, say, exit at the time of FY28, what are the growth plans? How are you thinking about, say, over next 3, 4 years? New category additions or second phases for this product, whichever way.

Speaker #3: So, from, say, exit at the time of FY28, what are the growth plans? How are you thinking about, say, over the next three or four years?

Speaker #3: New category additions or second phases for this product, whichever way. See, first of all, I want to highlight here that you know, next—this financial year and next financial year—we think we have a very strong growth trajectory because this year we have a low base of last year, and we are having a lot of new projects which are coming online. Like, washing machine has already come online; in the second half, we will have compressor and refrigerator plants coming online.

Pramod Gupta: See, first of all, I want to highlight here that this financial year and next financial year, we think we have a very strong growth trajectory because this year we have a low base of last year, and we are having a lot of new projects which are coming online, like washing machine has already come online. In the second half, we will have compressor and refrigerator plants coming online. Next year, again, these things will be ramping up, and we will be probably adding some capacity in the compressor side if the first line goes on the way we are expecting. Therefore, we don't see any challenge on that side.

Speaker #3: Next year again, these things will be ramping up, and we will probably be adding some capacity on the compressor side if the first line goes as we are expecting.

Speaker #3: And therefore we don't see any challenge on that side. Third thing which I want to highlight is that because of the competitive positioning which we will be having which is going to improve after the compressor plant the volume growth should be good for us and we should be gaining continuing to gain market share and we will now be able to offer the whole bouquet at a single company level in the sense that we can have we will be able to offer washing machine refrigerator AC and TV through our joint venture.

Pramod Gupta: Third thing which I want to highlight is that because of the competitive positioning which we will be having, which is going to improve after the compressor plant, the volume growth should be good for us, and we should be continuing to gain market share. We will now be able to offer the whole bouquet at a single company level, in the sense that we will be able to offer washing machine, refrigerator, AC, and TV through our joint venture. All these things put us at a very strong positioning for anybody who's looking to outsource and doing partnership with us. We don't see a reason for at least next 2, 3 years in terms of growth. Second thing I want to highlight is from the capital efficiency point of view, and not only looking at growth, but also looking at margins and the sweating of assets.

Speaker #3: So, all these things put us in a very strong position for anybody who is looking to outsource and do a partnership with us. We don't see a reason, at least for the next two to three years, in terms of growth.

Speaker #3: Second thing I want to highlight is from the capital efficiency point of view— not only looking at growth, but also looking at margins and the sweating of assets.

Pramod Gupta: We don't see a reason for at least next 2, 3 years in terms of growth. Second thing I want to highlight is from the capital efficiency point of view, and not only looking at growth, but also looking at margins and the sweating of assets.

Speaker #3: In the last three years, actually including this year, we have done very significant capex. Our gross block is more than doubling at the end of this year from where it was three years back, if you see.

Pramod Gupta: In the last three years, including this year, we have done very significant CapEx. Our gross block is more than doubling at the end of this year from three years back, if you will see. Now, it's high time that we try for the next at least one and a half, two years, to sweat this asset, get all these capacities online, focus on profitability, get to a sustainable margin, invest in more R&D, backward integration to make the margins more sustainable, because these things are also very important. Even if, say, 2027, 2028, I don't see any reason whereby we will not have 30% growth for us.

Speaker #3: Now it's high time that we try for the next at least one and a half to two years to sweat this asset, get all these capacities online, focus on profitability, get to a sustainable margin, invest in more R&D, backward integration, so we make the margins more sustainable, because these things are also very important.

Speaker #3: So even if, say, 2027 or 2028, I don't see any reason why we will not have 25–30% growth for us. And even if, say, for FY29, if it is a consolidation year, we don't mind because, in that year, we will actually be consolidating our position, getting our operations much more efficient, and improving profitability, which is ROCE and ROE, which are very important for us.

Pramod Gupta: Even if, say, for 2029, if it is a consolidation year, we don't mind because in that year we will be actually consolidating our position, getting our operations much more efficient, and getting the profitability, which is ROC, ROE, which is very important for us, at a respectable level so that we can have money to invest in the next phase of growth. That is what is going to be the strategy, and we don't think that growth is going to be a challenge, at least for the next two, three years, at least with the current kind of CapEx and the things we have done in the last two, three years.

Speaker #3: At a respectable level so that we can have money to invest in the next phase of growth. So that is going to be the strategy, and we don't think that growth is going to be a challenge at least for the next two to three years, at least with the current kind of capex and the things we have done in the last two to three years.

Speaker #3: Understood. Sir, just one last question: regarding refrigeration and compressors, which are new products. Sorry to interrupt you, Mr. Pandya, but may I request you to rejoin the queue?

Keyur Pandya [Chief Manager: Understood. Sir, just last question. Say, on ref and compressor, which are new product-

Keyur Pandya: Understood. Sir, just last question. Say, on ref and compressor, which are new product-

Speaker #3: Sure. Thanks a lot, and all the best. Thank you. The next question is from the line of Prafool Kumar from Diamond Asia. Please proceed.

Operator: Sorry to interrupt you, Mr. Pandya, I may request you to rejoin the queue.

Keyur Pandya [Chief Manager: Sure. Thanks a lot, and all the best.

Keyur Pandya: Sure. Thanks a lot, and all the best.

Operator: Thank you. The next question is from the line of Praful Kumar from Dymon Asia. Please proceed.

Speaker #3: Yeah, Prafool. Hi, good morning, sir, and congratulations on the good results. So, broadly, I want to understand more on this R&D capability you are building. So, in terms of capital allocation towards it, human resources in terms of hiring, and what exactly are we building over the two- to three-year period in terms of, say, capabilities in technology and then manufacturing only.

Pramod Gupta: Yeah, Praful.

Praful Kumar: Hi. Good morning, sir, and congratulations on good results. Sir, broadly, want to understand more on this R&D capability you are building. In terms of capital allocation towards it, human resources, in terms of hiring, and what exactly are we building with the two, three-year period in terms of capabilities, in terms of technology and then manufacturing on the compressor side? That's all I want to understand, sir. Over a medium term, what we are trying to build.

Speaker #3: Compressor side—that's all I want to understand. You are a medium-term. What are you trying to build? Vishal ji, would you like to say?

Speaker #3: See Prafoolji that you know at a company level at a organization level we have taken we are undertaking a lot of initiatives like SAP is being implemented across all 14 units you know across all group companies also.

Pramod Gupta: Vishal, will you like to take this?

Vishal Gupta: See, Praful, at a company level, at an organization level, we are undertaking lot of initiatives, like SAP is being implemented across all 14 units, across all group companies also. SAP journey started a year back, now we are very well confident that we are done lot of integration in SAP now. Lot of inventory visibility across the group is there. Operational efficiency is improving, inventory efficiency is improving because of the improved visibility of the raw materials and the material across the group companies. Lot of management development programs are also undergoing, we have also hired one company, one part of a Big Four audit firms, who is helping us define SOPs for key business processes in the company. We are undertaking also steps in order to make sure that this growth is sustainable.

Speaker #3: So, the SAP journey started a year back, and now we are very confident that we have done a lot of integration in SAP. Now, a lot of inventory visibility across the group is there.

Speaker #3: So, operational efficiency is improving, and inventory efficiency is improving because of the improved visibility of the raw materials and the material across the group companies.

Speaker #3: Then lot of you know management development programs are also undergoing and we have also hired you know one company one part of a big four audit firms who is helping us define SOPs for key business processes in the company.

Vishal Gupta: Lot of management development programs are also undergoing, we have also hired one company, one part of a Big Four audit firms, who is helping us define SOPs for key business processes in the company. We are undertaking also steps in order to make sure that this growth is sustainable.

Speaker #3: So we are taking undertaking also steps so in order to make sure that this growth is sustainable. And I his question was more on R&D R&D we have sorry I missed that and Prafoolji yeah please.

Speaker #3: Yeah. We have actually see we were till now most of more of a design where we were designing largely the system we were not getting into the component design phase.

Pramod Gupta: His question was more on R&D. R&D we have

Vishal Gupta: Sorry, I missed that then. Pramod, yeah, please.

Pramod Gupta: See, we were till now more of a design, where we were designing largely the system. We were not getting into the component design phase. We were largely taking up the components which were available off the shelf and designing the whole system. That was the capability which was there in the company. Now, realizing the fact that Government of India is keen and is putting up more and more focus on doing more higher value addition. Therefore, the backward integration is becoming very very key in this industry and across all the manufacturing industries, I believe. Therefore, getting into the component level R&D and design is becoming critical and very key for long-term, I will say survival as well as long-term competitiveness in the industry. We have therefore started focusing on those aspects, and we have been building teams to get into that.

Speaker #3: We were largely taking up the components which were available off the shelf and designing the whole system. That was the capability which was there in the company.

Speaker #3: Now realizing the fact that government of India is keen and is putting up you know more and more focus on doing more higher value addition and therefore the backward integration is becoming very very key in this industry and across all the manufacturing industry I believe therefore getting into the component level R&D and design is becoming critical and very key for long term I will say survival as well as long term competitiveness in the industry.

Pramod Gupta: Therefore, getting into the component level R&D and design is becoming critical and very key for long-term, I will say survival as well as long-term competitiveness in the industry. We have therefore started focusing on those aspects, and we have been building teams to get into that.

Speaker #3: And we have therefore started focusing on those aspects and we have been building teams to get into that. I will not be able to get to you give you very specific things on compressors or controllers or motors which we are doing and I can just tell you one thing that we are very well aware that given the fact that government of India is very keen that they are putting QCOs first they put it on on the products and now on component level it is very very likely that the imports of these things are going to get restricted in the future and it makes high sense for companies which have a very high market share in the domestic market to focus on these components.

Pramod Gupta: I will not be able to give you very specific things on compressors or controllers or motors, which we are doing. I can just tell you one thing, that we are very well aware that given the fact that Government of India is very keen that they are putting QCOs. First, they put it on the products and now on component level. It is very likely that the imports of these things are going to get restricted in the future. It makes high sense for companies which have a very high market share in the domestic market to focus on these components. Reliance on imports has to be reduced. With that thought process in the mind, we are working and building teams in India to take care of immediate and future requirement.

Pramod Gupta: First, they put it on the products and now on component level. It is very likely that the imports of these things are going to get restricted in the future. It makes high sense for companies which have a very high market share in the domestic market to focus on these components. Reliance on imports has to be reduced. With that thought process in the mind, we are working and building teams in India to take care of immediate and future requirement.

Speaker #3: And reliance on imports has to be reduced, and with that thought process in mind, we are working and building teams in India to take care of immediate and future requirements.

Speaker #3: And we are keen that we should have backward integration, because that is the only way to actually increase competitiveness in this industry.

Pramod Gupta: We are keen that we should be having backward integration because that is only the way to actually increase the competitiveness in this industry in the longer term. You visit us and probably you will once see our facilities and meet the people. We have now a new CEO who has a very vast experience in the AC. He is driving our strategy and also the whole operations and the team. You meet him and you will realize from his vision what we are trying to do. I think that is all I can say. I can't actually disclose a lot on the public thing that what we are trying to do in R&D on compressors or motors or controllers or et cetera.

Speaker #3: In the longer term, you visit us—and probably you will, once—to see our facilities and meet the people. You and we now have a new CEO who has come, who has very vast experience in the AC.

Speaker #3: He is driving the strategy and also the whole operations and team. You meet him and you will realize from his vision what we are trying to do.

Pramod Gupta: We have now a new CEO who has a very vast experience in the AC. He is driving our strategy and also the whole operations and the team. You meet him and you will realize from his vision what we are trying to do. I think that is all I can say. I can't actually disclose a lot on the public thing that what we are trying to do in R&D on compressors or motors or controllers or et cetera.

Speaker #3: And I think that is all I can say, and I can't actually disclose a lot on the public forum about what we are trying to do in R&D on compressors, motors, controllers, etc.

Speaker #3: Got it. Okay. Thank you both. Thank you, thank you, thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment.

Praful Kumar: Got it. Okay. Thank you very much, sir.

Pramod Gupta: Thank you.

Praful Kumar: Thank you.

Speaker #3: Please proceed. Mr. Gandhi, are you there? Yeah. Are you able to hear me? Sorry, I was on mute. Yeah, so sorry. Thank you for the opportunity.

Operator: Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment. Please proceed. Mr. Gandhi, are you there?

Speaker #3: Couple of questions. One is regarding the EBITDA margin. You said there is commodity inflation and that there will be some lag, but with the lag you'll be able to pass it on to the customers.

Bhavya Gandhi: Yeah. Are you able to hear me? Sorry, I was on mute.

Operator: Yes.

Bhavya Gandhi: Yeah. Sorry. Thank you for the opportunity. Couple of questions. One is regarding the EBITDA margin. You said there is commodity inflation and that it will take some lag. With the lag, you will be able to pass it on to the customers. In your experience, sir, can we expect we are a year away from getting back to 10% historical EBITDA margin? Is that the right understanding? You said somewhere in December you will be able to pass on the further commodity inflation.

Speaker #3: So, in your experience, sir, can we expect that we are about a year away from getting back to the 10% historical EBITDA margin? Is that the right understanding?

Speaker #3: Because you said somewhere in December you will be able to pass on the further commodity inflation. Ten percent EBITDA margin—that is not the way our business works.

Speaker #3: Actually, our business is not based on a percentage margin. Percentage is an outcome. It typically depends on a per piece basis—how much money you are asking for making all the components and doing the assembly of the product.

Pramod Gupta: Coming to 10% EBITDA margin, that is not the way our business works. Actually, our business not on a percentage margin. Percentage is an outcome. It typically depends on per piece basis, how much money you are asking for making all the components and doing the assembly of the product. That is the way this industry works. When the commodity prices are low, typically, the margins typically look high. Also when, a couple of years back, the copper was at maybe $7,000, $8,000 per ton. Now it has gone to $14,000 per ton. The customer does not give you money based on that higher commodity price as a percentage. He gives you fixed money for making the AC, maybe ₹2,500 or ₹2,300, something like that. In that scenario, your percentage margins will look low.

Speaker #3: That is the way this industry works. And when the commodity prices are low, typically the margins look high. Also, a couple of years back, copper was at maybe $7,000 or $8,000 per ton. Now, it has gone to $14,000 per ton.

Speaker #3: So, you know, the customer doesn't give you more money based on that higher commodity price as a percentage. He gives you fixed money for making the AC.

Pramod Gupta: The customer does not give you money based on that higher commodity price as a percentage. He gives you fixed money for making the AC, maybe ₹2,500 or ₹2,300, something like that. In that scenario, your percentage margins will look low.

Speaker #3: Maybe 2,500 or 2,000–3,000 rupees or something like that. So, in that scenario, your percentage margins will look low. So, coming to the 10 percent question, I don't think 10 percent is something which you should look at.

Speaker #3: What we are saying is that in a very high commodity price environment, typically getting that ₹2,500 or ₹2,000, or whatever amount you are charged, also becomes a challenge because you are not able to immediately pass on the very high cost price in the same season.

Pramod Gupta: Coming to the 10% question, I do not think 10 percentage is something which you should look at. What we are saying is that in a very high commodity price environment, typically getting that ₹2,500 or ₹2,000 or whatever amount you charge also becomes a challenge because you are not able to immediately pass on the very high cost price in the same season. That is likely to see a change. We are going to get back to that number. Percentage is something which I will not commit to. I think we will be going back on a per piece basis to the normalized levels soon, both in AC and washing machines.

Speaker #3: That is likely to see a change and we are going to get back to that number. Percentage is something which I will not commit to but I think we will be going back on a on a per piece basis to the normalized levels soon both in AC and washing machines in because the commodity prices have actually been the the commodity inflation has been very very high and it has been a big challenge last year because of the rating change etc.

Speaker #3: And high inventory for the brands also prevented them from passing on the full commodity price increase, and therefore the whole value chain has suffered. This year, I don't see that kind of a reason, and we think that price increases will be passed on throughout the value chain. Therefore, things should start normalizing.

Pramod Gupta: The commodity inflation has been very high, and it has been a big challenge last year because of the rating change, et cetera, and high inventory for the brands also to pass on the full commodity price increase, and therefore the whole value chain has suffered. This year, I do not see that kind of a reason. We think that price increase will be passed on in the whole value chain, and therefore things should start normalizing.

Speaker #3: Got it. Fair enough. So, second question is regarding the compressor. What would be the value of the compressor in the RAC, and is that—if the number, whatever the number is—can we assume that would be the same value per unit, for one unit of the compressor that will be manufactured?

Bhavya Gandhi: Got it. Fair enough. Sir, second question is regarding the compressor. What would be the value of compressor in the RAC? Whatever the number is, can we assume that would be the same value for one unit of compressor that we'll be manufacturing?

Speaker #3: Today, the compressor price in India is roughly around ₹2,800 to ₹3,000, and that is what we also hope to sell the compressor for once we start manufacturing the compressor in India.

Pramod Gupta: Today, the compressor price in India is roughly around INR 2,800 to INR 3,000. That is what we also hope to sell the compressor once we start doing the manufacturing of the compressor in India.

Speaker #3: Okay. And sir, what would be the average realization for RAC for us, at least? RAC realization average will be probably close to ₹21,000 now.

Bhavya Gandhi: Okay. Sir, what would be the average realization for RAC for us at least?

Speaker #3: Okay, fair enough, sir. Thank you so much. Really helpful. That's it from my side. Thank you, thank you. The next question is from the line of Akshay.

Pramod Gupta: RAC realization average will be probably close to INR 21,000 now. Okay, fair enough, sir. Thank you so much. Really helpful. That's it from me. Thank you.

Pramod Gupta: RAC realization average will be probably close to INR 21,000 now.

Bhavya Gandhi: Okay, fair enough, sir. Thank you so much. Really helpful. That's it from me. Thank you.

Speaker #3: From AK Investment. Please proceed. All my questions have been answered. Thank you so much, and all the best to the management. Thank you. Thank you.

Operator: Thank you. The next question is from the line of Akshay from AK Investment. Please proceed.

[Company Representative] (AK Investment): All my questions have been answered. Thank you so much. All the best to the management.

Akshay Kaila: All my questions have been answered. Thank you so much. All the best to the management.

Speaker #3: The next question is from the line of Mohit Jain from Tara Capital. Please proceed. Hi, can you hear me? Yes, I can hear you.

Pramod Gupta: Thank you.

Operator: Thank you. The next question is from the line of Mohit Jain from Tara Capital. Please proceed.

Speaker #3: Yes, size of margin only. I understand that in December we are expecting to reach back to a normal margin level in the absolute sense. So, should we see a year-on-year flattish margin percentage as compared to the previous year? And second, how much should be the absolute EBITDA growth that we can expect for the current year?

Mohit Jain: Sanji, can you hear me?

Pramod Gupta: Yes, I can hear you.

Mohit Jain: Yes. Thank you. Rise of margin only. I understand that by December we are expecting to reach back to the normal margin level in the absolute sense. A, should we see a YoY flattish margin % as compared to previous year? Second is how much should be the absolute EBITDA growth that we can expect for the current year?

Operator: Yes.

Mohit Jain: Thank you. Rise of margin only. I understand that by December we are expecting to reach back to the normal margin level in the absolute sense. A, should we see a YoY flattish margin % as compared to previous year? Second is how much should be the absolute EBITDA growth that we can expect for the current year?

Speaker #3: The guidance we are not giving. See, last year was a bit unusual for us because the season for AC went bad, and there was a rating change because of which the December quarter probably had a bump up in the volumes.

Pramod Gupta: The guidance we are not giving. See, last year was a bit unusual year for us because the season of AC went bad and there was a rating change because of which Q4 probably had a bump up in the volumes, which is typically not the case for us in a normal year. For us, the best quarters are Q1 and Q4. What actually happened last year was because of the huge pressure in the whole value chain and the kind of inventory which was being carried, especially the older inventory, passing on of the full commodity price became a bit of a challenge. That scenario should start changing for the whole industry, in my opinion, in coming quarters. We are hoping that we will get back to the normalized margin this year.

Speaker #3: Which is typically not the case for us in a normal year. For us, the best quarters are Q1 and Q4. So, what actually happened last year was, because of the huge pressure in the whole value chain and the kind of inventory which was being carried—especially the older inventory—passing on the full commodity price became a bit of a challenge.

Pramod Gupta: What actually happened last year was because of the huge pressure in the whole value chain and the kind of inventory which was being carried, especially the older inventory, passing on of the full commodity price became a bit of a challenge. That scenario should start changing for the whole industry, in my opinion, in coming quarters. We are hoping that we will get back to the normalized margin this year.

Speaker #3: That scenario should start changing for the whole industry, in my opinion, in the coming quarters, and we are hoping that we will get back to the normalized margin.

Speaker #3: This year, on an overall basis, I am expecting margins at the operating level, which is basically excluding PLI, excluding any incentive, etc.

Pramod Gupta: On an overall basis, I am expecting margins at the operating level, which is basically X of PLI, X of any incentive, et cetera, to improve significantly because that passthrough should be there. On a reported basis, we should be having a slightly better margin than last year. Initially, at the beginning of this year, we had guided that we should be probably close to 8% kind of a margin for the whole year, at least at the operating level, which is this quarter about 7.3%. We are hopefully going to reach that number on a full year basis. We are expecting that H2, the next nine months should be better for us, especially the Q4 when all these things start coming, which is going to be the high quarter also for us.

Speaker #3: ...to improve significantly, because that pass-through should be there. So, on a reported basis, we should be having a slightly better margin than last year. Initially, at the beginning of this year, we had guided that we should probably be close to an 8 percent kind of margin for the whole year, at least at the operating level.

Speaker #3: This quarter is about 7.3, and we are hopefully going to reach that number on a full-year basis. Therefore, we are expecting that the second half—in the next nine months—should be better for us, especially the fourth quarter, when all these things start coming in, which is going to be the high quarter also for us.

Pramod Gupta: We are hopefully going to reach that number on a full year basis. We are expecting that H2, the next nine months should be better for us, especially the Q4 when all these things start coming, which is going to be the high quarter also for us.

Speaker #3: Understood. So, 8 percent margin is what we can expect for the full year? Yes. Okay. Thank you. Thank you. The next question is from the line of Santosh Sheshadri.

Mohit Jain: Understood. 8% margin is what we can expect for the full year?

Pramod Gupta: Yes.

Mohit Jain: Okay, thank you.

Speaker #3: From Avendus Spark. Please proceed. Yes, thanks for taking my question. So, my first question is on the compressor side. You mentioned the potential import restrictions.

Operator: Thank you. The next question is from the line of Santhosh Seshadri from Everest Park. Please proceed.

Santhosh Seshadri: Yes, thanks for taking my question. My first question is on the compressor side. You mentioned about the potential import restrictions. Can you help us understand at the industry level, how much of the current requirement is still being imported, and whether the domestic capacity, both the current capacity and those that are in pipeline, is sufficient to offset this import? Also from a PGEL standpoint, and maybe perhaps at the industry level, what are the key risks that you see that these planned capacities coming online probably won't come online on time as expected?

Speaker #3: Can you help us understand the how much of the current the industry level how much of the current requirement is still being imported and whether the domestic capacity both the current capacity and those that are in pipeline with sufficient to offset this import.

Speaker #3: Also, from a PGL standpoint and maybe perhaps at the industry level, what are the key risks that you see that these planned capacities coming online probably won't come online on time?

Speaker #3: As expected. Pramod ji, you want me to take this? Yes sir, please take this question. Okay. So at the industry level, I think we are still importing around 60 percent of our compressor requirements in India right now—around 50 to 60 percent. The Government of India has already announced, a notification has come, where any compressor import is allowed, but that is restricted to 25 percent of your FY25 imports.

Pramod Gupta: Pramodji, you want me to take this? Yes, sir, please take this question. Okay. At the industry level, I think we are still importing around 60% of our compressor requirements in India right now, around 50% to 60% right now. Government of India has already announced, a notification has come where any compressor import is allowed, but that is restricted to 25% of your FY25 imports. If industry has imported in FY25 maybe around 10 million compressors, at the industry level, we can import only 2.5 million compressors. That too up to 31 March 2027. After that, compressor import is not allowed in India.

Vishal Gupta: Pramodji, you want me to take this?

Pramod Gupta: Yes, sir, please take this question.

Vishal Gupta: Okay. At the industry level, I think we are still importing around 60% of our compressor requirements in India right now, around 50% to 60% right now. Government of India has already announced, a notification has come where any compressor import is allowed, but that is restricted to 25% of your FY25 imports. If industry has imported in FY25 maybe around 10 million compressors, at the industry level, we can import only 2.5 million compressors. That too up to 31 March 2027. After that, compressor import is not allowed in India.

Speaker #3: So, if the industry has imported in FY25 around maybe 10 million compressors, then at an industry level we can import only 2.5 million compressors, that too up to 31st March 2027. After that, compressor import is not allowed in India.

Speaker #3: So we believe that with this quota which is available to the industry and whatever new extension of capacity is happening in India in compressors by the Chinese companies and some other Korean and Japanese companies in India we will see see still a shortfall in the capacity in availability in India as Pramodji has said earlier also in the call that once our production starts in December January and we are able to stabilize that production and by that time March April we will have a clear visibility of the how the season of 2027 is panning out.

Pramod Gupta: We believe that with this quota which is available to the industry and whatever new extension of capacity is happening in India in compressors by the Chinese companies and some other Korean and Japanese companies in India, we will see still a shortfall in the capacity availability in India. As Pramodji has said earlier also in the call that once our production starts in December, January, and we are able to stabilize that production, and by that time, March, April, we will have a clear visibility of how the season of 2027 is panning out. Once we have some clarity on that and whatever capacities are there in India, we are planning for another line immediately after that. In April, May, we might take a decision adding one more line for 2 million compressor capacity in our existing plant in Supa.

Vishal Gupta: We believe that with this quota which is available to the industry and whatever new extension of capacity is happening in India in compressors by the Chinese companies and some other Korean and Japanese companies in India, we will see still a shortfall in the capacity availability in India. As Pramodji has said earlier also in the call that once our production starts in December, January, and we are able to stabilize that production, and by that time, March, April, we will have a clear visibility of how the season of 2027 is panning out.

Speaker #3: Once we have some clarity on that and whatever capacities are there in India, we are planning for another line immediately after that. In April or May, we might take a decision to add one more line for 2 million compressor capacity in our existing plant in Supa.

Vishal Gupta: Once we have some clarity on that and whatever capacities are there in India, we are planning for another line immediately after that. In April, May, we might take a decision adding one more line for 2 million compressor capacity in our existing plant in Supa. At an industry level, we believe that we might see some tightening of compressor availability in India from January, February onwards. This all depends on how is the demand playing outside. Supply side, we might see some constraint if the demand is good. That is our internal estimates.

Speaker #3: So, at an industry level, we believe that we might see some tightening of compressor availability in India from January-February onwards. This all depends on, you know, how the demand is playing outside.

Pramod Gupta: At an industry level, we believe that we might see some tightening of compressor availability in India from January, February onwards. This all depends on how is the demand playing outside. Supply side, we might see some constraint if the demand is good. That is our internal estimates.

Speaker #3: On the supply side, we might see some consent if the demand is brought. These are our internal estimates. Thank you very much, sir.

Speaker #3: And on the second part of the question, do you see any, you know, operational risk or any sort of risk to the existing capacities, and sorry—to the new capacities in the pipeline? So, what could potentially go wrong here?

Santhosh Seshadri: Thank you very much, sir. On the second part of the question, do you see any operational risk or any sort of risk to the new capacities in pipeline? What could potentially go wrong here?

Speaker #3: There can be lot of geopolitical factors right now. See we are living in such uncertain times. You don't know what will happen tomorrow. See lot of still supply chain in India whatever thinking make in India there are lot of things which we are dependent upon overseas suppliers.

Pramod Gupta: There can be lot of geopolitical factors right now. See, we are living in such uncertain times. You don't know what will happen tomorrow.

Vishal Gupta: There can be lot of geopolitical factors right now. See, we are living in such uncertain times. You don't know what will happen tomorrow. See, lot of still supply chain in India, whatever things we make in India, there are a lot of things which we are dependent upon overseas suppliers. If we get any constraints on ban, you know that is one risk which is there for the whole of the industry, not only for us.

Vishal Gupta: See, lot of still supply chain in India, whatever things we make in India, there are a lot of things which we are dependent upon overseas suppliers. If we get any constraints on ban, you know that is one risk which is there for the whole of the industry, not only for us.

Speaker #3: If we get any constraints on van, then you know that is one risk which is there for the whole of the industry, not only for us.

Speaker #3: And from the company's point of view, we are covered in terms of the technology and the machinery that are necessary. Yes, sir. Yes, sir. We are very confident in the product that we are developing at the compressor level, and we are quite confident. We have already received initial positive feedback from our clients.

Santhosh Seshadri: On the company point of view, are we covered in terms of technology and the machinery that are necessary?

Vishal Gupta: Yes, sir. We are very confident the product what we are developing at a compressor level, and we are quite confident, and we have already got initial positive feedback from our clients. We are hopeful of starting our mass production from December, January, and we will be able to start supplying compressors to our customers.

Speaker #3: So we are hopeful of starting our mass production from December–January, and we will be able to start supplying compressors to our customers. Thank you very much.

Speaker #3: Yeah, all the best. Thank you. Thank you. The next question is from the line of Bala Murli Krishna from Oman Investment Advisors. Please proceed.

[Company Representative] (AK Investment): Thank you very much.

Santhosh Seshadri: Thank you very much.

Vishal Gupta: Okay. Thank you.

Operator: Thank you. The next question is from the line of Bala Murali Krishna from Oman Investment Authority. Please proceed.

Speaker #3: Yeah, we shall do. Good, good morning. First of all, I want to— Can you speak a little louder? We can't hear you. Yeah, yeah.

Bala Murali Krishna: Yeah, Vishalji, good morning.

Balamurali Krishna: Yeah, Vishalji, good morning.

Speaker #3: Is it okay now? Yeah, better, sir. Yeah, we shall do this. First of all, I'd like to put some concerns before asking questions. I was waiting on the call for one hour, and the operator is giving the opportunity to other people to ask follow-up questions.

Operator: Sir, can you speak little loudly? We can't hear you.

Operator: Yeah. Is it okay now?

Operator: Yeah. Better.

Vishal Gupta: Yes, sir.

Bala Murali Krishna: Yeah. Vishalji, first of all, I'd like to put some concerns before asking questions. I was waiting in call since 1 hour, and operator is giving opportunity to other people to ask follow-up questions. When I asked that, then they told that it's management call. I don't think it's your call to select the user. Maybe you can comment later on that. Secondly, in the investor relation.

Balamurali Krishna: Yeah. Vishalji, first of all, I'd like to put some concerns before asking questions. I was waiting in call since 1 hour, and operator is giving opportunity to other people to ask follow-up questions. When I asked that, then they told that it's management call. I don't think it's your call to select the user. Maybe you can comment later on that. Secondly, in the investor relation.

Speaker #3: So when I asked that, they told me it’s a management call, but I don’t think it’s your call to select the user. Maybe you can comment later on that.

Speaker #3: And secondly, in the investment—no, no, no, sorry sir. I will comment in—no, no sir, I need to comment on this here only.

Speaker #3: We don't select the calls. We don't select the questions asked, sir. No, no, sir. We don't do that. But as a courtesy, whenever a person is asking a question, they are allowed to ask a follow-up question—only one.

Vishal Gupta: No, sorry, sir, I will comment it. No, sir, I need to comment on this here only. We don't select the calls. We don't select the question asked, sir. No, sir, we don't do that. As a courtesy, whenever we know a person is asking a question, they are allowed to ask a follow-up question. Only one follow-up question is allowed. That is what SOP they normally follow in such earnings call, sir. Please continue with your question.

Speaker #3: Follow-up questions are allowed. That is the SOP they normally follow in such earnings calls, sir. Please continue with your question. Yes, my opinion is also the same.

Speaker #3: But after completion of a question, they give a second chance to other people for the follow-up questions. So it should not be the case when people are waiting on the call to ask their first question.

Bala Murali Krishna: Yes. My opinion was the same. After completion of question, they give a second chance to other people for the follow-up questions. It should not be the case when people are waiting in the call to ask their first question. Secondly, sir, on the investor relation communication, you invited people to plant visits also in so many calls. When you send an email for that one, there will be no response. Also when you send any questions after conf call, then we didn't get opportunity to ask questions. There will be no response from the investor emails. Last time in the last call, after completion of call, I sent an inquiry regarding the PLI benefits, whether it will be accounted in Q1 or not. There is no reply on that question, sir.

Balamurali Krishna: Yes. My opinion was the same. After completion of question, they give a second chance to other people for the follow-up questions. It should not be the case when people are waiting in the call to ask their first question.

Speaker #3: So, secondly sir, on the industry relation communication—you invited people for planned visits also in so many calls. So when you send the email for that, there will be no response, and also, when you send any questions after the con call, then we didn't get the opportunity to ask questions.

Balamurali Krishna: Secondly, sir, on the investor relation communication, you invited people to plant visits also in so many calls. When you send an email for that one, there will be no response. Also when you send any questions after conf call, then we didn't get opportunity to ask questions. There will be no response from the investor emails. Last time in the last call, after completion of call, I sent an inquiry regarding the PLI benefits, whether it will be accounted in Q1 or not. There is no reply on that question, sir.

Speaker #3: So, there will be no response from the investor emails. Last time, in the last call, after completion of the call, I sent an inquiry regarding the PLI benefits.

Speaker #3: Whether it's accounted, it will be accounted in Q1 or not. So there is no requirement questions also. Maybe that's a mistake from our side, sir.

Speaker #3: But I will do so once this call is over. I will have your mobile number with me. I will ask the coordinator to share your mobile number with me, and Pramodji's number and my number will be shared with you.

Vishal Gupta: Maybe that's a mistake from our side, sir. What I will do, once this call is over, I will have your mobile number with me. I will ask the coordinator to share your mobile number with me and Pramod's number and my number will be shared with you. We can directly interact on this, sir, at a direct level, sir. Sorry for this. We will move on it, sir.

Speaker #3: We can directly interact on this, sir, at a direct level. Sorry for this if we moved on it, sir. Thank you so much.

Speaker #3: Thank you so much for the clarification. So, next, the first question is regarding inventory, sir. Last year, we had 1,600 worth of inventory, and this time we thought that it would reduce substantially.

Bala Murali Krishna: Thank you so much for the clarification. Next up, the first question is regarding to inventory, sir. Last year we have I think 600 gross inventory, and this time we thought that it will reduce substantially. Still I think we are with around greater than 1,000 gross inventory by the end of June. How is the level as of now, sir? Do you see any reduction in maybe in the coming quarter?

Balamurali Krishna: Thank you so much for the clarification. Next up, the first question is regarding to inventory, sir. Last year we have I think 600 gross inventory, and this time we thought that it will reduce substantially. Still I think we are with around greater than 1,000 gross inventory by the end of June. How is the level as of now, sir? Do you see any reduction in maybe in the coming quarter?

Speaker #3: But still, I think we are with around greater than ₹1,000 crore inventory by the end of June. So how is the level as of now, sir, and do you see any reduction maybe in the coming quarter?

Speaker #3: I'll take this question. I'll take this question. Okay. First of all, you have to realize that commodity prices are continuously increasing. Second thing, the supply chain is also getting a little bit constrained because of the QCOs, etc.

Pramod Gupta: I'll take this question.

Bala Murali Krishna: Okay, Pramod.

Vishal Gupta: Okay, Pramod.

Vishal Gupta: First of all, you have to realize that commodity prices are continuously increasing. Supply chain is also getting little bit constrained because of the QCOs, et cetera. For example, I'll tell you, as Vishalji already told you, that compressor import is not going to be allowed in India from 1 April. This year itself, the total compressor availability is constrained because only 25% of what you imported in 2025 is being allowed to be imported. Similar thing is happening on the copper tubing, which typically is imported, especially the improved copper tubing, IET it is called. That import is getting restricted from November. Post November, you cannot import IET into the country. If these kind of things are there in the system, then keeping some strategic inventory level becomes very important to continue the operation. That is point number one.

Pramod Gupta: First of all, you have to realize that commodity prices are continuously increasing. Supply chain is also getting little bit constrained because of the QCOs, et cetera. For example, I'll tell you, as Vishalji already told you, that compressor import is not going to be allowed in India from 1 April. This year itself, the total compressor availability is constrained because only 25% of what you imported in 2025 is being allowed to be imported. Similar thing is happening on the copper tubing, which typically is imported, especially the improved copper tubing, IET it is called.

Speaker #3: For example, I'll tell you, as Vishalji already told you, that compressor import is not going to be allowed in India from the 1st of April.

Speaker #3: But this year itself, the total compressor availability is constrained because only 25% of what you imported in '25 is being allowed to be imported.

Speaker #3: The second thing is, a similar issue is happening with the copper tubing, which is typically imported, especially the in-group copper tubing—IGT, as it is called.

Speaker #3: That import is getting restricted from November. Post November, you cannot import IGT into the country. Now, if these kinds of things are there in the system, then keeping some strategic inventory level becomes very important to continue the operation.

Pramod Gupta: That import is getting restricted from November. Post November, you cannot import IET into the country. If these kind of things are there in the system, then keeping some strategic inventory level becomes very important to continue the operation. That is point number one. Point number two is this, that the prices itself of commodity have gone up. For example, till last year, if I was keeping an inventory of, say, 5 lakh AC, that was constituting close to INR 700 crores. This year, the same 5 lakh AC inventory is probably at something like INR 940 odd crores.

Speaker #3: That is point number one. Point number two is this: the prices themselves of commodities have gone up. So, for example, till last year, if I was keeping inventory of, say, 5 lakh ACs, that was constituting close to ₹700 crores.

Vishal Gupta: Point number two is this, that the prices itself of commodity have gone up. For example, till last year, if I was keeping an inventory of, say, 5 lakh AC, that was constituting close to INR 700 crores. This year, the same 5 lakh AC inventory is probably at something like INR 940 odd crores. That is the kind of difference which has happened in terms of the increase, especially because of the copper and all the other components, even the controllers or the other things. That is leading to a higher inventory level. Yes, there has been some softness in the month of June also, which actually led us to miss the inventory levels by maybe INR 100 odd crores lower if that would not have been there.

Speaker #3: This year, the same 5 lakh AC inventory is probably at something like 940 or 950 crores. So, that is the kind of difference which has happened in terms of the increase, especially because of the copper and all the other components, even the controllers or other things.

Pramod Gupta: That is the kind of difference which has happened in terms of the increase, especially because of the copper and all the other components, even the controllers or the other things. That is leading to a higher inventory level. Yes, there has been some softness in the month of June also, which actually led us to miss the inventory levels by maybe INR 100 odd crores lower if that would not have been there.

Speaker #3: So that is leading to a higher inventory level. Yes there has been some softness in the month of June also which actually led us to miss the inventory levels by maybe 100 odd crores lower if that would not have been there.

Speaker #3: But one of the key reasons is the very high commodity prices, which is reflected in the sales as well. So, if you see the average selling prices of both AC, washing machines, etc.

Vishal Gupta: One of the key reasons is that the very high commodity prices, which is reflected in the sales as well. If you see the average selling prices of both AC, washing machine, et cetera, are up 12% to 15% on a YoY basis because of the higher commodity price. The input prices have also risen very sharply.

Pramod Gupta: One of the key reasons is that the very high commodity prices, which is reflected in the sales as well. If you see the average selling prices of both AC, washing machine, et cetera, are up 12% to 15% on a YoY basis because of the higher commodity price. The input prices have also risen very sharply.

Speaker #3: are up 12 to 15% on a year-over-year basis because of the higher commodity prices. But the input prices have also risen very sharply. Yeah, great, sir.

Speaker #3: Thanks for those explanations. The second question is regarding the washing machine. So, washing machines I think are, compared with airomatic, it says some consistency, but which will—sales will be consistent all over the quarter.

Bala Murali Krishna: Yeah, great, sir. Thanks for the explanation. The second question is regarding the washing machine. Washing machines, I think, in compared with air conditioner, it's consistent, but its sales will be consistent all over the quarters. What was our previous capacity and what was the capacity utilization before commissioning this new facility? The new facility, what kind of utilization level you are expecting maybe by the end of the year?

Balamurali Krishna: Yeah, great, sir. Thanks for the explanation. The second question is regarding the washing machine. Washing machines, I think, in compared with air conditioner, it's consistent, but its sales will be consistent all over the quarters. What was our previous capacity and what was the capacity utilization before commissioning this new facility? The new facility, what kind of utilization level you are expecting maybe by the end of the year?

Speaker #3: So, what was our previous capacity, and what was the capacity utilization before commissioning this new facility? And for the new facility, what kind of utilization level are you expecting, maybe by the end of the year?

Speaker #3: In what capacity would you like to take this question? Yeah. So basically, sir, this new capacity which is coming online will bring our total capacity to around 3 million.

Pramod Gupta: Vikasji, will you like to take the question?

Vikas Gupta: Yeah. Basically, this new capacity which is coming online will bring our total capacity to around 3 million. We are hopeful that in next one or maybe not by end of this year, maybe by the FY28, we should have almost around 70% to 80% utilization of our total capacity. We are seeing a rapid volume growth in our washing machine business. We are trying to position this plant to take care of the demand that comes up in next two to three years.

Speaker #3: And we are hopeful that in the next one—or maybe not by the end of this year, maybe by FY28—we should have almost around 70 to 80% utilization of our total capacity.

Speaker #3: So we are seeing rapid volume growth in our washing machine business, and we are trying to position this plant to take care of the demand that comes up in the next two to three years.

Speaker #3: Just a follow-up on that, sir. So, we added capacity. So what was the— Sorry to interrupt you, Mr. Krishna, but may I request you to rejoin?

Bala Murali Krishna: Just a follow-up on that, sir. We added capacity. What was the-

Balamurali Krishna: Just a follow-up on that, sir. We added capacity. What was the-

Speaker #3: Okay. Just, just hold on. Let him continue, please. Let him continue. Yeah. Tell me, Mr. Krishna. Yes. What I'm asking, sir, is that we have added capacity because the previous capacity would be reaching some optimum level of capacity utilization.

Operator: Sorry to interrupt you, Mr. Krishna, may I request you to rejoin the queue?

Vikas Gupta: Yeah. Okay. Just hold on. Let him contribute, please. Let him contribute. Yeah, tell me, Mr. Krishna.

Bala Murali Krishna: Okay. Yes, what I'm asking, sir, we have added a capacity because the previous capacity would be reached some optimum level of capacity utilization. I'm asking about what was the previous capacity utilization. Maybe when this capacity will also reach some optimum level of utilization in your view, maybe then we'll go for again for some CapEx. That's why I'm asking this.

Balamurali Krishna: Okay. Yes, what I'm asking, sir, we have added a capacity because the previous capacity would be reached some optimum level of capacity utilization. I'm asking about what was the previous capacity utilization. Maybe when this capacity will also reach some optimum level of utilization in your view, maybe then we'll go for again for some CapEx. That's why I'm asking this.

Speaker #3: So I'm asking about sir what was the previous capacity utilization because maybe this when we when we when this capacity will also reach some optimum level of utilization in your view maybe then we'll go for again for some capex that's what I'm asking.

Speaker #3: So, Mr. Krishna, the current capacity utilization that we were able to achieve was, on an annualized basis, almost around 70% to 72%, which now, because during the peak season the capacity utilization goes above 100%.

Vikas Gupta: Mr. Krishna, the current capacity utilization that we were able to achieve was almost on the annualized basis, almost around 70%, which now, because during the peak season, the capacity utilization go above 100%. Usually what happens, we have to create a capacity to take care of the peak demand. Peak demand may not be so high during the normal months. The capacity utilization, if you look at on the annualized basis for the previous capacity, was almost around 70%. With the new plant coming up and within next two to three years, we should be able to have a utilization of almost around 70%.

Speaker #3: So, usually what happens is that we have to create a capacity to take care of the peak demand. The peak demand may not be so high during the normal months.

Speaker #3: So sir, the capacity utilization, if you look at it on an annualized basis for the previous capacity, was almost around 70%. With the new plant coming up, within the next 2 to 3 years we should be able to have a utilization of almost around 70%.

Speaker #3: Thank you so much, sir. That's all from me, sir. All the best. Thank you. The next question is from the line of Vidisha from PR Kothari.

Bala Murali Krishna: Thank you so much, sir. That's all from my side. All the best.

Balamurali Krishna: Thank you so much, sir. That's all from my side. All the best.

Speaker #3: Please proceed. Hello, sir. How are you? Yes, sir. After the compressor unit comes online, what kind of margins do we expect, and what is the fixed asset turn that we're expecting?

Operator: Thank you. The next question is from the line of Vidisha from Prabhudas Lilladher. Please proceed.

[Analyst] (Prabhudas Lilladher): Hello, sir. Am I audible?

[Analyst]: Hello, sir. Am I audible?

Vikas Gupta: Yes.

Pramod Gupta: Yes.

Operator: Sir, after the compressor unit comes online, what kind of margins should we expect and what is the fixed asset turn that we're expecting post commissioning of all our CapEx?

[Analyst]: Sir, after the compressor unit comes online, what kind of margins should we expect and what is the fixed asset turn that we're expecting post commissioning of all our CapEx?

Speaker #3: Post commissioning of order capex? Overall, on a company basis, we all the time target that fixed asset turn should be more than 4x. Compressor contribution to the margin I will not be able to spell out right now, but it will also depend on the competitive positioning and how the other people behave in the compressor pricing, etc.

Pramod Gupta: Overall, on a company basis, we all the time target that fixed asset turn should be more than 4x. Compressor contribution to the margin, I will not be able to spell out right now, but it will also depend on the competitive positioning and how the other people behave in the compressor pricing, et cetera. We hope that given the fact that first line that we will be commissioning will be largely used for in-house manufacturing of AC, compressor will be margin additive for us. That is the hope that we have. We think that if the compressor QCO is implemented from 1 April 2027, compressor pricing should also remain good, and it should be giving us decent margins because pricing power will be rare in the system because imports will probably be restricted.

Speaker #3: But we hope that, given the fact that the first line that we will be commissioning will be largely used for in-house manufacturing of AC compressors, it will be margin additive for us.

Speaker #3: That is the hope that we have. And we think that if the compressor QCO is implemented from 1st of April, 2027, then compressor pricing should also remain good, and it should give us a decent margin because pricing power will be there in the system, as imports will probably be restricted.

Pramod Gupta: We think that if the compressor QCO is implemented from 1 April 2027, compressor pricing should also remain good, and it should be giving us decent margins because pricing power will be rare in the system because imports will probably be restricted.

Speaker #3: Okay, sir. And you said 4 plus — this is on a gross plug basis? And any margin guidance for next year, if possible? No, no, margin guidance is not there even.

[Analyst] (Prabhudas Lilladher): Okay, sir. You said 4 plus, this is on gross plug basis, any margin guidance for the next year, if possible?

[Analyst]: Okay, sir. You said 4 plus, this is on gross plug basis, any margin guidance for the next year, if possible?

Speaker #1: And for this year, this is the aspiration which we have—that I have told you—that an 8% kind of margin is what we want to reach for the full year.

Pramod Gupta: No, margin guidance is not there even for this year. This is the aspiration which we have that I have told you that 8% kind of a margin is what we want to reach for the full year. Please don't construe anything as a guidance. We are just telling you on what are we aspiring, and given the backward integration and new CapEx, et cetera, and hopefully the better volumes in the coming quarters, we think that 8% is something which we should be able to achieve.

Speaker #1: And this we don't do anything as a as a guidance . We are just telling you on , on what is what . Are we aspiring and given the backward integration and new CapEx , etc.

Speaker #1: And hopefully, with better volumes in the coming quarters, we think that 8% is something we should be able to achieve.

Speaker #2: Thank you

Speaker #1: Thank you

Speaker #3: Thank you. The next question is from the line of Aditya Mehta from GK Capital. Please proceed, Mr. Mehta. Can you hear me?

[Analyst] (Prabhudas Lilladher): All right. Thank you. All the best to you.

[Analyst]: All right. Thank you. All the best to you.

Pramod Gupta: Thank you.

Operator: Thank you. The next question is from the line of Aditya Mehta from GK Capital. Please proceed. Mr. Mehta, can you hear me?

Speaker #4: Hello . AM I audible ? Yeah . Yes Yeah . Thanks for the opportunity . Sir . My . Just have one question on the seasonality of the business .

Aditya Mehta: Hello, am I audible?

Speaker #4: Since we are trying to refrigerator washing machine compressors, what impact will it have on the seasonality, given that we have been seeing more dependence on the business?

Operator: Yeah.

Pramod Gupta: Yes.

Aditya Mehta: Yeah, thanks for the opportunity. Sir, just one question upon the seasonality of the business. Since we are diversifying to refrigerator washing machine compressors, what impact it will have on the seasonality, which we have been seeing more dependence on the RAC business. How it will go on in next two to three years?

Speaker #4: So, how will it go on in the next few years?

Speaker #1: Obviously, with all the diversification initiatives which we are taking, and there are certain more things which we are doing in terms of new product lines as well as new lines of business, we hope that the overall dependence on AC will surely come down going forward.

Pramod Gupta: Obviously, with all the diversification initiatives which we are taking, and there are certain more things which we are doing in terms of new product lines as well as new lines of business, we hope that the overall dependence on AC will surely come down. Today, AC contributes almost 60% to 65% of the sales in the company, which we want to bring down closer to 50% to 55% over the next two to three years, especially given the fact that the new lines of business will be added and some lines like washing machine and electronics and even in the plastic, et cetera, there are certain things which are increasing at a much higher, faster growth. We are hoping that will bring down the dependence as well as the seasonality on the overall business.

Speaker #1: AC contributes almost 60 to 65% of the sales in the company, which we want to bring down closer to 50 to 55% over the next 2 to 3 years.

Pramod Gupta: Today, AC contributes almost 60% to 65% of the sales in the company, which we want to bring down closer to 50% to 55% over the next two to three years, especially given the fact that the new lines of business will be added and some lines like washing machine and electronics and even in the plastic, et cetera, there are certain things which are increasing at a much higher, faster growth. We are hoping that will bring down the dependence as well as the seasonality on the overall business.

Speaker #1: Especially given the fact that the new lines of business will be added and the some lines like washing machine and electronics and in the even in the plastic , etc.

Speaker #1: There are certain things which are increasing at a much higher, faster growth. So, we are hoping that will bring down the dependence as well as the seasonality on the overall business.

Speaker #4: And secondly, what peak revenue can we expect from the compressor business at full utilization? We

Aditya Mehta: Secondly, what peak revenue can we expect from the compressor business at full utilization?

Speaker #1: It is the first line which we are commissioning . One line can give you roughly about 2 million , kind of a output at 80% , maybe about 1.6 , 1.7 million .

Pramod Gupta: See, it is the first line which we are commissioning. One line can give you roughly about 2 million kind of output at 80%, maybe about 1.6 million, 1.7 million compressor. You can take for the calculation point of view, about INR 2,850 or INR 2,900 kind of pricing per compressor. That is the kind of output which you can have. The plant which we have commissioned, the land and building is good enough to totally deploy four lines. First line is taking us close to about six months to commission. The next line, we think we will be able to commission in a much shorter time, maybe three to four months, because there are some critical plant and machinery components which have a long lead time, which will not be acquired in the second phase of growth.

Speaker #1: Compressor. And you can take, from the calculation point of view, about ₹2,850 or ₹2,900 as a kind of pricing per compressor. So that is the kind of output which you can have.

Speaker #1: But the plant which we have commissioned—the land and building is good enough to totally deploy four lines. And the first line has taken us, is going, is taking us close to about six months to commission.

Speaker #1: But the next line we think we will be able to commission in a much shorter time , maybe 3 to 4 months , because there are some critical components which are critical plant and machinery components , which are have a long lead time , which will not be required in the second phase of growth So we can actually , in the same plant , go for the initial capacity and also the future expansion will be much faster

Pramod Gupta: The next line, we think we will be able to commission in a much shorter time, maybe three to four months, because there are some critical plant and machinery components which have a long lead time, which will not be acquired in the second phase of growth. We can actually, in the same plant, go 4x the initial capacity, and also the future expansion will be much faster.

Pramod Gupta: We can actually, in the same plant, go 4x the initial capacity, and also the future expansion will be much faster.

Speaker #4: Thank you sir

Speaker #1: Thank you .

Speaker #3: Thank you. The next question is from the line of Kumar Divyanshu, an individual investor. Please proceed.

Aditya Mehta: Okay. Thank you, sir.

Pramod Gupta: Thank you.

Operator: Thank you. The next question is from the line of Kumar Divyanshu, an individual investor. Please proceed.

Speaker #4: Yeah . Hello .

Speaker #1: Is my voice audible? Yes. Yes. Good morning, sir. Thank you for the opportunity. I just want to ask two questions.

Kumar Divyanshu: Yeah, hello. Is my voice audible?

Speaker #1: The first one is regarding the order books. So could you please comment on that? What is the order book as of Q1 FY '27?

Pramod Gupta: Yes.

Kumar Divyanshu: Yes. Good morning, sir. Thank you for the opportunity. I just want to ask two questions. The first one is regarding the order books. Could you please comment on that, what is the order book as of Q1 FY27, and what order book you have executed? The second one is of the CapEx, that any CapEx plan, if you're having.

Speaker #1: And what order book you have executed ? And the second one is of the CapEx that any CapEx can if you are having No , we do not share any order book numbers and typically the order book is not in terms of any other .

Pramod Gupta: No, we do not share any order book numbers. Typically, the order book is not in terms of any firm commitment. It is basically the brands with whom we work, the partner brands, they typically give us a forecast of how much numbers of washing machine or ACs they are looking to outsource in the season. AC season is coming to an end, so there we don't have a fresh order book as of now. That fresh order book will be starting to get built from September and October, beginning time for the coming season, which will be starting from December onwards. In washing machines, we do have some commitments in terms of volumes from our client partners, but I am not allowed to basically kind of share the numbers from that, and we have never had a practice of sharing those numbers.

Speaker #1: From commitment . It is basically the brands with whom we work , the partner brands , they typically give us a forecast of how much numbers of washing machine or AC they are looking to outsource in the season .

Speaker #1: So AC season is coming to an end . So there we don't have a fresh order book as of now . That fresh order book will be starting to get built from October , September and October beginning time for the upcoming season , which will be starting from December onwards .

Pramod Gupta: AC season is coming to an end, so there we don't have a fresh order book as of now. That fresh order book will be starting to get built from September and October, beginning time for the coming season, which will be starting from December onwards. In washing machines, we do have some commitments in terms of volumes from our client partners, but I am not allowed to basically kind of share the numbers from that, and we have never had a practice of sharing those numbers.

Speaker #1: And in washing machines, we do have some commitments in terms of volumes from our client partners, but I am not allowed to basically kind of share the numbers on that.

Speaker #1: And we we have never had a practice of sharing those numbers Okay . Sir , any CapEx plan you can have in this year , the CapEx that we have is about 400 crores .

Kumar Divyanshu: Okay. Thank you, sir. Any CapEx plan, if you're having?

Speaker #1: Which is going to actually be utilized in completing the ongoing projects of compressor and refrigerator. And we are, as Vishal had mentioned recently, kind of taken up a big land parcel in Salarpur where we are consolidating our plastic molding and some of the other business which we were doing in Greater Noida, etc.

Pramod Gupta: This year, the total CapEx that we have is about INR 400 crore, which is going to actually be utilized in completing the ongoing projects of compressor and refrigerator. We are, as Vishalji had mentioned, recently kind of taken up a big land parcel in Salarpur where we are consolidating our plastic molding and some of the other business which we were doing in Greater Noida, et cetera. Those are the only CapEx for this year. This year, more focus is on completing these projects and start basically sweating these assets.

Speaker #1: So, those are the only CapEx for this year. This year, the focus is more on completing these projects and basically starting to sweat these assets.

Speaker #1: Okay , sir . And in considering of Q2 this , I want to ask in any approximation that do you see any like festive demand opportunity which will be there .

Kumar Divyanshu: Okay, sir. In considering of Q2, I want to ask any approximation that do you see any festive demand opportunity which will be there, so it will benefit to the Q2 revenue or something like that?

Speaker #1: So, will it benefit the Q2 revenue or something like that? We do not give any quarterly basis guidance. We have never given.

Speaker #1: We are hopeful—just an approximation—that the festive season is approaching and is going to start in some days or in some months, within one month.

Pramod Gupta: We do not give any quarterly basis guidance. We have never given.

Kumar Divyanshu: Only approximation that festive season is approaching and is going to start in some days or in some months, within one month. Do you see that any benefit of this will affect on the Q2 results or something like that? Any benefit?

Speaker #1: So it does. Do you see that any benefit from this will affect the Q2 results or something like that? Any benefit?

Speaker #1: No , we don't comment on that . Due to numbers , etcetera . I won't comment Okay . Thank you sir . Thank you

Pramod Gupta: No, we don't comment on that, those things. Q2 numbers, et cetera, I won't comment actually.

Speaker #3: Thank you, ladies and gentlemen. Due to time constraints, that was the last question for today. I now hand the conference over to the management for closing comments.

Kumar Divyanshu: Okay. Thank you, sir.

Pramod Gupta: Thank you.

Operator: Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.

Speaker #3: Over to you , sir

Speaker #1: Thank you all . Thank you for attending this call . Meanwhile , Nikhil , can you share the contact number of the gentlemen who wanted to have some direct interaction so you can share my number with them and share his number with me .

Pramod Gupta: Thank you all. Thank you for attending this call. Meanwhile, Nikhil, can you share the contact number of the gentleman who wanted to have some direct interaction, so you can share my number with him and share his number with me, so that whatever queries he has, we can take it on later. All others whosoever have any questions, they can take our numbers from Nikhil, or Nikhil, you need to coordinate whatever questions they have, follow-up questions, we need to take care that those questions are addressed effectively by us, please. Thank you. Thank you all.

Speaker #1: So that whatever queries he has , we can take it on later . And all others , whosoever have any questions they can take our numbers from .

Speaker #1: Nikhil on . Nikhil . You need to coordinate whatever questions they have . Follow up questions we need to take care that those questions are addressed effectively by us .

Speaker #1: Please. Thank you. Thank you all. Thank you. Thank you.

Speaker #3: Thank you . On behalf of Axis Capital Limited , that concludes this conference . Thank you for joining us . And you may now disconnect your lines .

Aditya Mehta: Thank you.

Vishal Gupta: Thank you.

Operator: Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

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