Operator: Ladies and gentlemen, good day and welcome to the Symphony Limited Q2 FY 2027 Earnings Conference Call, hosted by Nirmal Bang Equities Private Limited. 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 the conference call, please signal an operator by pressing Star and Zero on your touchtone phone. I now hand the conference over to Mr. Rabindranath Nayak from Nirmal Bang Equities Private Limited. Thank you, and over to you, sir.
Rabindra Nath Nayak: Thank you, ma'am. On behalf of Nirmal Bang Equities, I extend a warm welcome to everyone joining us for the Q2 Earnings Conference Call of Symphony Limited. I also thank the management for giving us an opportunity to host this call. We are pleased to have with us the senior management team of Symphony, represented by Mr. Achal Bakeri, Founder, Chairman, and Managing Director; Mr. Nrupesh Shah, Managing Director, Corporate Affairs; and Mr. Rajesh Mishra, Chief Growth Officer. The management will begin with an overview of the company's quarterly performance with a corporate presentation, following which we will open the floor for an interactive question answer session. Without taking much time, I would now like to hand over the call to Mr. Achal Bakeri for his opening remarks. Over to you, sir. Thank you.
Achal Bakeri: Thank you, Rabindra, and welcome to all the participants for this Q2 Symphony Earnings Call. This is Achal Bakeri. Our standard sort of clause applies.
Nrupesh Shah: Disclaimer clause applies.
Achal Bakeri: Disclaimer clause applies, and we will be making a presentation by our Managing Director, Nrupesh Shah. Nrupesh Shah will be making a presentation, and post that, we will all be here to take your questions. Thank you very much, and over to Nrupesh Shah.
Nrupesh Shah: Hello. Welcome to Q2 and H1 FY27 conference call. There are three parts of the presentation. Performance highlights. As announced earlier, launch of new products and the details about that, and then annexures. About the performance highlights. Overseas subsidiaries as a whole have registered robust consolidated performance. There has been a measured strategic India revenue growth, and despite cost pressure, there is EBITDA margin expansion on account of operational leverage and cost discipline. As far as consol revenue is concerned for September quarter, it stands at INR 275 crore versus INR 210 crore, registering top line growth of 31%. EBITDA up from INR 13 crore to INR 36 crore and PAT up from INR 17 crore to INR 24 crore. If you can just open the link of that. Because when there is a movement from EBITDA to PAT, at our PAT level, there are various other components also.
Nrupesh Shah: Importantly, the blue portion shows that at a consol level, the PAT is up from INR 5 crore to INR 17 crore and the remaining difference is on account of Forex fluctuation, treasury income, and exceptional gain. That has been highlighted and shared in the presentation. Yes, go back. As far as item number 3, Beyond India Summer Products, on a consolidated basis, it contributed INR 625 crore of top line. As conveyed earlier, on a consol basis, BISP constitutes of all product and geography sales, which is not dependent on India Summer. Basically, this is the de-risking from India Summer, and that now constitutes 51% on a consol basis, which includes LSV, geyser, tabletop fan, exports from India, as well as sales in foreign countries by our overseas subsidiaries.
Nrupesh Shah: EBITDA across BISP in all is now in high single-digit percentage. Even though many of these new product categories were launched in last 3 years, individually, each of the product category, EBITDA wise is positive, and all in all put together on a consol basis, it is in high single-digit percentage, which in a medium term has a potential to improve further. BISP is certainly EBITDA and PAT accretive, consuming minimum capital employed and obviously reducing Indian seasonality. EBITDA margin expansion, as conveyed earlier, despite on a consol basis, due to input cost pressure, gross margin is lower by about 4%, but EBITDA margin percentage stands at 13% vis-a-vis 6.4%, one on account of operating leverage and secondly on account of cost discipline and product mix.
Nrupesh Shah: Today, board of directors have declared second interim dividend of INR 2 per share on a face value of INR 2. In all, the payout will be about INR 21 crore. This is in addition to interim dividend of INR 1 announced post-June quarter. In all, INR 3 and close to INR 30 crore of payout so far. Okay. On a standalone basis, the revenue stands at INR 170 crore vis-a-vis INR 155 crore, EBITDA INR 30 crore versus INR 27, and PAT at INR 29 crore. If you can show the component of PAT. On a standalone basis, PAT, which is in blue box, up from INR 10 crore to INR 20 crore, which is a pure business PAT at 18. I am sorry, it is INR 18 to INR 20 crore, and remaining components last year and current year comprises of Forex, treasury, and exceptional gain. Yeah.
Nrupesh Shah: On a standalone basis, BISP products have contributed in all INR 192 crore in trailing 12 months, that is 24%. On a standalone basis, BISP as a whole, EBITDA is around 10%, and each of the BISP category, even on a standalone basis, is also EBITDA positive and accretive with minimum capital employed. Also would like to share that another channel of sales, which is D2C, which was nurtured over a period of last 4 to 5 years, is not only generating decent contribution and gross margin, but it is EBITDA positive in line with our traditional channel. In fact, more than that, and obviously also at a PAT level in line with that. Later on, we will also cover progressive calibrated launch of new product category, that is room air conditioners, BLDC fans, and air purifiers in current quarter.
Nrupesh Shah: On a standalone basis, even though gross margin percentage is down by about 2.30 percentage, the EBITDA margin has been almost maintained. As far as first 6 months are concerned, on a consol basis, revenue stands at INR 653 crore, up by 17%, EBITDA at INR 83 crore versus INR 51 crore, and PAT at INR 64 crore versus INR 59 crore. If you can take through the components of PAT. On a consol basis, the blue box business PAT is up from INR 31 crore to INR 49 crore. On a standalone basis, revenue stands at INR 411 versus INR 384, while PAT at INR 57 versus INR 65, but business PAT during 6 months is higher than previous year. The differential is purely on account of other components. Going to next.
Nrupesh Shah: Here, we have taken trailing 12-month financials because if you remember, in March 2026, we took one time impairment and hence capital employed and related aspects are more relevant on TTM basis. Which as on 30 September, on a consol basis stands at INR 104 crore versus INR 322 crore, translating into ROCE percentage, that is PBIT, by capital employed INR 143 versus 57%, and return on net worth at 20%. While on a standalone basis, it is a negative capital employed during the first 6 months, and hence, in a way, academically, it is an infinite ROCE and return on net worth of 21%, while treasury now stands at INR 468 crore after repaying most of the loans and borrowings availed in Australia. Next. About the new product category, very happy to share with you.
Nrupesh Shah: We are entering into these three new product category: residential air conditioners, BLDC fans, and air purifiers.
Achal Bakeri: To strengthen the BISP.
Nrupesh Shah: Yeah. So these are the images of room air conditioner and similarly, BLDC ceiling fan in about 8 models, and air purifier to start with 2 models. The basic rationale of new categories, brand and portfolio adjacency, because it is a natural extension of Symphony's cooling and control franchises. With this, we will complete our presence in all the components of cooling pyramid, starting from fan to air cooler to air conditioner. That is number 1. Number 2, until now, as far as our trade channel was concerned, they had an opportunity to interact and sell to the consumers only during season, that is about 2 months of summer. With this trade channel interaction and sale to the consumer and hence, also Symphony's interaction as well as engagement with the trade channel will be round the year.
Nrupesh Shah: As far as our current trade channel network is concerned, it is absolutely befitting and complementary to this, and hence, this will supplement to it. We expect that, because of this, it will have a spillover beneficial effect on our evaporative air coolers also. These products have been launched more because trade was since long looking forward and expecting from Symphony the products which they can sell round the year. Obviously, we will leverage on our brand as well as consumer pool. Excuse me. Just like our existing business, here also, we will continue following absolutely asset-light operating model. There will be outsourced business model and as far as air conditioners and BLDC fans are concerned, there will be zero CapEx. In air purifier, down the line, there may be a small amount of CapEx. Our existing cost base and manpower will remain as it is.
Nrupesh Shah: We will leverage our existing sales marketing team as well as service franchisee. Even otherwise also, service franchisee works absolutely on variable cost model. We will maintain our working capital discipline as we have done so far. We do not target to be in top 3 players. We are targeting adding to the kitty of top line and EBITDA, and hence, we will have measured brand investment more to have really a spillover effect. We will also be in a position to explore our D2C channel, which is generating decent traffic, and last year it contributed 7% of the top line. Ultimately, these two will be EBITDA accretive, profitability lead scaling model, and will add to BISP category substantially. Yeah. Rajesh, will you like to add something to this new product category and launch?
Achal Bakeri: No, I think it is covered.
Nrupesh Shah: Huh?
Achal Bakeri: Yeah. It is covered.
Nrupesh Shah: Okay.
Achal Bakeri: Yeah.
Nrupesh Shah: All right. We are here to take questions if you wish.
Operator: Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, to ask a question, please press Star and one now. Anyone who wishes to ask a question, please press Star and one. First question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Management. Please go ahead.
Bhavya Gandhi: Yeah. Hi, sir. Thanks for the opportunity. Just wanted to understand for the new product launches that is there in December, will there be some sort of upfront OPEX or marketing spends or distribution spends, at least if you can highlight on that front?
Achal Bakeri: You know that in the presentation by Leena. There will be no CapEx in the new products. At this time, there will also be no OPEX incurred specifically for the new products. The existing team, the sales that will sell these products, and we also don't expect to sort of invest in advertising at this time, in this quarter. So we don't really envisage any sort of OPEX or CapEx going forward.
Bhavya Gandhi: Sir, any broad estimates how big this can be over the next few years, at least some initial target that you would have set internally?
Achal Bakeri: We are taking baby steps in these segments. As explained, we really have no delusions of grandeur. We don't think that we will really be among the top players in the country. So we are going to grow these categories cautiously so that they remain EBITDA accretive, and so at this moment, we really don't have a specific number that we can share.
Bhavya Gandhi: Sure. Thank you so much. That's it from my end.
Operator: Thank you. Participants, to ask a question, please press Star and 1. Next question is from the line of Haider Kachwalla from IIFL. Please go ahead.
Haider Kachwalla: Hello. Am I audible?
Achal Bakeri: Yeah.
Haider Kachwalla: Hello, this is Haider from IIFL Securities. As the previous participant asked, you are not suggesting that there will be no increase in ad spends for the new three product lines? There must be something, right? Because how will you show that you have launched three products? Can you just guide on what would the ad spends be going ahead as the product launches?
Achal Bakeri: The question was for the quarter. We do not envisage any ad spend or launch expenses in the current quarter. Maybe come summer, we may maybe spend something on these products. But like I said, it will be a very measured investment in brand building. Just enough to sort of or not so much that it does not remain EBITDA accretive.
Haider Kachwalla: Okay. Understood. Sir, also, if you could just provide a broad strategy on where would you like to see yourselves with these three products. I understand that you are not targeting to be number 1, number 2, or number 3 player, but even a broader strategy on how you would be able to scale these brands so that they can show in the top line and be margin accretive at the same time.
Nrupesh Shah: Okay. What we can guide you, in last 3 years, we came out with three new products. One is a tabletop fan, second is geysers, and before that, LSV. In each of the category as we saw on a standalone basis, of course, including exports, top line is about INR 192 crore, but EBITDA is 10%. It means each of the category does not contribute significantly or substantially in top line, but EBITDA was still accretive, and still we successfully diversified the dealer distribution network, which in this case may not require much. Still, we had a decent advertisement and sales promotion expenses. In fact, for LSV, we have a separate team altogether. In all that respect, in this category, it will be even more cost optimization by using the same team, almost same cost structure.
Nrupesh Shah: It may not be like in next foreseeable future, this category may contribute top-line wise, something like what air coolers or rest of the company currently contributes. It may be in the long term.
Haider Kachwalla: Okay, understood. The reason I ask this question is because you are not targeting to be the top player. You are targeting something that is more accretive to your income statement. But as you are seeing in current times, even the top players are struggling to maintain their margins in the RAC segment. I was just wondering that, how would a new entrant, especially in such a competitive environment, look to scale their income statement with these categories? That is just the thinking behind my question.
Achal Bakeri: Understood. The major players also have their captive manufacturing. This is probably why, again, I cannot say for sure, but that is probably why they may not be EBITDA positive, some of them. In our case, this is going to be purely a variable cost business model. We will just spend enough to grow the business and see where it goes.
Haider Kachwalla: Okay.
Nrupesh Shah: As articulated earlier, the main objective is what is happening currently. Our trade partners sell to the consumers only during 2 to 3 months during the year, even though we as a company sell to them around the year. This will give us an opportunity and also to the trade partners to engage with Symphony brand, Symphony products around the year, which will certainly have a spillover effect on the main business that is the air cooler. Secondly, on our website and D2C, which is in public domain, we generate a huge traffic and conversion ratio is good, so that will also enable us to sell these products through them. Essentially, that is the purpose. Number 2, so far in cooling pyramid, we were only in the middle component. With this, our presence will be across the pyramid.
Nrupesh Shah: Bottom is fan, then air cooler, and then air conditioner.
Achal Bakeri: Every home requires all three products. Our customers also require, those who buy coolers from us also, are customers for the other two categories. There would be a significant amount of brand spillover onto the other categories. We believe that with our approach, we should be able to grow the top line and the bottom line and the EBITDA over time.
Haider Kachwalla: Okay, understood. Thank you, sir. That is it from my side.
Achal Bakeri: Okay.
Operator: Thank you. Next question is from the line of Shraddha Kapadia from SMIFS. Please go ahead.
Shraddha Kapadia: Hello, am I audible?
Achal Bakeri: Yes, please go ahead.
Shraddha Kapadia: Hi. So congratulations on good set of numbers. If we take a look, the management has highlighted calibrated channel inventory buildup amidst the elevated cost input and focus on the inventory economics. If you could just help us understand the current company and the channel level inventory.
Achal Bakeri: In the previous quarter, which is in the June quarter, where there was significant demand, we deliberately sort of made sure that our company's inventory was consumed as well as channel inventory was consumed. We also did some sort of transfer of inventory amongst channel partners. The objective was that even if the company sales is forsaken in the short term, the channel inventory is normalized. That has, to a great degree, been achieved. There would always be in a large country like India, there would always be pockets with some sort of inventory more than desired. But to a great degree, our channel normalization endeavor has been successful. As of now, the current inventory at the company level also. At the end of the previous quarter, the company inventory was also minimal, and the channel inventory was also minimal.
Achal Bakeri: As we speak, the company inventory, company has been producing in the last quarter, and in the current quarter so far, and has been producing what is needed to prime the channel. The company's inventory hasn't built up, but the channel inventory to some extent, has been built up, which is part of the way we do business. It is fresh inventory that has been built up for the summer of 2027. It is not residual inventory from 2025 or 2024 as we had in 2026.
Shraddha Kapadia: Sure. That was helpful. Also, sir, if you could help us understand the potential impact of the El Niño, if you have any comments on the same.
Achal Bakeri: El Niño is a very unpredictable animal. It distorts climate patterns globally. I mean, it could be phenomenal. El Niño usually is great. It brings very high temperatures everywhere. But I wouldn't really bank on El Niño lifting all boats.
Shraddha Kapadia: Okay, sir. Sure. Thank you for answering my questions, and all the best for future.
Achal Bakeri: Thank you.
Operator: Thank you. Next question is from the line of Vinay Nadkarni from Hathway Investments Private Limited. Please go ahead.
Vinay Nadkarni: Yeah. Thanks for the opportunity. Just wanted to know your new product range, that is residential ACs, BLDCs, and air purifiers. What is the kind of working capital investment you are expecting to be done?
Achal Bakeri: Again, good question. It was covered in the presentation earlier. This would be also a fairly low sort of working capital model, the way we are going to approach it. So just like in coolers where our capital employed is fairly low, these products will also fall within that same sort of philosophy. So, these should have a good return on capital employed.
Vinay Nadkarni: Any number of days inventory that you are looking at, even if you don't want to share the rupee value?
Achal Bakeri: No, not really. We're not really looking at building up a lot of inventory, because we will sort of buy and sell. So, depending on what's moving where, we will procure. So that has been our thought so far.
Vinay Nadkarni: Okay. What is the pricing that you are looking at for your room ACs?
Achal Bakeri: Sorry?
Vinay Nadkarni: The pricing for room ACs.
Achal Bakeri: Pricing for room ACs will be in the mid-premium sort of segment. Obviously, we will not compete with the likes of Daikin or Mitsubishi or Hitachi or one of those. We will be more in the-
Rajesh Mishra: Yeah, it will be as per the specs that we are offering.
Achal Bakeri: Yeah.
Rajesh Mishra: Market is fairly mature, they understand, and they pay as per the specification. So we are going for fairly good specs. We do not want to enter into the entry-level segment. So the product is, in terms of specs, slightly on the higher side, and it will be priced accordingly. I think market should be willing to pay as per the specification.
Vinay Nadkarni: Okay. So would it be in the range of, say, Voltas or Samsung or?
Rajesh Mishra: Everybody is operating in the similar. It all depends on what is the cooling capacity you are offering, what kind of features you are giving. So for like-to-like features, yes, we will be more or less similar.
Vinay Nadkarni: Okay. Can we find some cannibalization of your air cooler business because of this or no? Because your margin in air cooler is much better than what you are looking at in the RAC.
Rajesh Mishra: No, not really. Because on the contrary, we believe that with all these product categories, we will also have channel expansion. We should be becoming stronger in some of the outlets, and we should be able to. So currently, I think, at the consumer level, there is a very clear-cut edge that we have. It is at the trade level where some of these new entrant in air coolers are able to force their entry because of their muscle of different products that they are in. So with these products that we have got into, I think it should help air coolers, at least at the channel front. We don't see any such cannibalization. We don't foresee that happening.
Vinay Nadkarni: Okay. Last question is on, you said your D2C sales have turned EBITDA positive and even PAT positive, if I heard you right. What is the D2C sale contribution in Q2 and in H1?
Achal Bakeri: Again, we don't really give the sort of channel-wise breakup. But it is a good contribution. In fact, it has been PAT positive from the second year onwards. So it is not a current year phenomena. It has been PAT positive from the, EBITDA positive from the second year onwards. We're growing that business because the margins there are higher than in the other segments because there is no leakage of margins to the channel, to various channels.
Rajesh Mishra: In D2C, as unit economics improve, as top line improves, obviously EBITDA and PAT margin improves disproportionately. That's what happening.
Vinay Nadkarni: Yeah. Okay. That's all from me. Thank you very much.
Achal Bakeri: Yeah.
Operator: Thank you. Next question is from the line of Rabindranath Nayak from Nirmal Bang Equities. Please go ahead.
Rabindra Nath Nayak: Thank you for the opportunity, sir. Sir, you are entering this market after a long time. The air conditioner market you were present earlier also. So discontinued and entering this market. Now your geographical diversification has also improved substantially. So how can we see the opportunity going ahead for Symphony? I know the cooler is actually a very ongoing market because it is now aspiration of the consumers has improved, so that's why everybody will be going for the air conditioners. Also the competition is huge. So what is your experience and how because you are expanding your TAM by around 40,000 to 50,000 currently, from 2,000, 3,000 TAM to around significant increase in the TAM. So, in two to three years' time, where we can expect to be in Symphony, in two to three years' time?
Rabindra Nath Nayak: Even you can give a five years period time, where we will present in five years' time hence.
Achal Bakeri: Ravindra, even if we get a small sliver of that market, of this market, which is currently INR 60,000 crores and expect it to be
Rabindra Nath Nayak: Yeah, it will be like
Achal Bakeri: like INR 100,000, INR 120,000, whatever. Even if we get a small sliver of that in the next couple of years, that itself should be fairly good. Again, I will hesitate to specify a number because as of this point, nobody knows. We don't know where this is going to go. Of course, we have aspirations, but what the future has in store for us is something which we don't have a clue.
Rabindra Nath Nayak: Okay. And sir, as I said, you have mentioned that we will not put any money as of now. So after three to four years' time, can we expect that the model will be something different manufacturing, or it will remain all through for next two to three years' time, there will be no investment in CapEx?
Achal Bakeri: So again, it all depends. If we are able to scale up significantly and it makes more sense for us to have captive manufacturing, then we are not averse to it because we have manufactured in the past. If that is what sort of business dictates, then we are open to that. But as of this point, we do not know where this is going to go. We have our business plans, we have our internal projections, those are different, but we do not know what the future is going to be. So really difficult to answer your question, Rabindra.
Rabindra Nath Nayak: Okay, sir. Sir, regarding the working capital, you mentioned that the working capital will be controlled up to some extent. We do not have an aspiration to have market products. I know you are having an air conditioning presence in Mexico also. So whether
Achal Bakeri: Australia also. Even Australia.
Rabindra Nath Nayak: Australia.
Achal Bakeri: Brazil.
Rabindra Nath Nayak: Okay. Yeah. So, there, how the growth is, Europe is also one of the opportunities that are opening up. So, can we aspire to go to that level and also perhaps you will be maybe comfortable with the Chinese products to market the product there. So that could be it. Is my understanding correct? If we were going to Europe, then definitely we will not go for outsourcing from India rather than going from China.
Achal Bakeri: Correct.
Rabindra Nath Nayak: Is my understanding correct?
Achal Bakeri: That is right.
Rabindra Nath Nayak: Okay.
Achal Bakeri: Even today, what we are selling in Australia or in Brazil or in Mexico, even parts of the Middle East, we are basically sourcing from China. Exporting from India will probably, in the foreseeable future, does not appear to be.
Rajesh Mishra: Yeah, for this category.
Achal Bakeri: for this category. For air conditioners, doesn't seem. For air coolers, of course.
Rajesh Mishra: We are already very competitive.
Achal Bakeri: We are selling and we are very competitive, but for air conditioners may not be, because there are still a lot of components which are coming in from China, for example, compressor.
Rabindra Nath Nayak: Correct.
Achal Bakeri: The heart of the AC is still coming, for every company, still being imported.
Rabindra Nath Nayak: Okay. So, the BLDC fan again, it is an outsourcing model. So have we already finalized our outsourcing partners so far or it is
Achal Bakeri: Yes.
Rajesh Mishra: ongoing.
Achal Bakeri: Yes, we will be rolling out our products fairly soon.
Rabindra Nath Nayak: Okay. So in terms of region-wise, if we can say, which region would be, we are very comfortable apart from the Western region, the other three to four regions, where we were having a significant say or dominance. Not dominance. Opportunity we can see in the near future.
Achal Bakeri: Ravindra, the opportunity exists across the country. Every nook and cranny of the country has sales, every category of products. And we also have our distribution everywhere. So in a year's time or so, I guess we will be everywhere. We will be PAN India. So it is just that we will first launch in maybe one market just to sort of dip our toes and see, and then one by one, we will expand across the country. So that is going to be how we are going to sell the product.
Rabindra Nath Nayak: Okay. And sir, in terms of sales incentive, we have already finalized our sales team for this. How the incentive structure going ahead for sales, and also for the person we are hiring for the sales incentive initiative?
Achal Bakeri: We already have people with the company on the manufacturing side, in the operations side, on the sales side, who have prior experience with air conditioners. Rich experience with air conditioners. We did not recruit them for air conditioners, but they were already on board for air coolers for the last few years. We already have a fairly, I would say, institutional capability and knowledge of the category. Our incentive structure will be sort of part of what is generally accepted, what is generally seen in the market.
Rabindra Nath Nayak: Okay. And regarding, sir, again, in the growth aspect, particularly from the air cooler side, we are facing some difficulty in terms of the raw material prices. Also, if you see the cooler performance of all the majority of the players, is actually very subdued as of now. How do you see the demand in the channel currently, and how the things are improving for the second half of this year?
Achal Bakeri: Demand to a great degree at the consumer level will depend on temperature. If the temperatures are high enough, then product will sell even if it is more expensive. If the temperature is not high enough, products will not sell even if you discount them. That is the nature of seasonal categories. As we sit today, because the channel is completely clean from the previous year, even a modest demand should see substantial sales, is what we all believe. Because there is no sort of hangover of inventory with the channel. Even a normal summer, not exceptionally high temperatures, but just a normal summer should still result in good sales for all cooling categories.
Rabindra Nath Nayak: Okay. So in terms of dividend payouts, sir, we will maintain our historical payout structure or there will be some moderation going?
Achal Bakeri: It is a policy which has been adopted by the boards, informed to the shareholders. So it is a policy. It is sort of etched in stone unless we revise the policy, which we do not intend to.
Rabindra Nath Nayak: Okay, sir. Okay. Thank you, sir. Thank you very much.
Achal Bakeri: Thank you.
Operator: Thank you. Ladies and gentlemen, we will take that as the last question, which is from the line of Advait Jawekar from EquiPoise Capital Management. Please go ahead.
Adwait Javkar: Yeah, thank you. Thank you for the opportunity. My first question is, I am seeing the margin-
Operator: I am sorry to interrupt. We lost the connection for Mr. Advait. Mr. Advait, are you able to hear me? Mr. Advait, please go ahead with your question.
Adwait Javkar: Yeah. Am I audible?
Operator: Yes, you are now.
Adwait Javkar: Yeah, sorry. Thank you for the opportunity. With margins right now improving from the recent price hike, how should we expect margins to trend in the next quarter as you launch new product categories? Or will this margin sustain or face some pressure?
Achal Bakeri: If you break down the margin by category, as far as air coolers are concerned, the margins would be more or less what you saw so far, which are, at the moment, on a standalone basis, we ended the quarter at 45.9%, which was 2.3% less than at the same time in the previous year. Going forward, we do not see much of a difference in the outcome as far as air coolers are concerned. In the air conditioner category and fans, the margins would be lower because the industry margins are lower. As far as the purifiers are concerned, they should be somewhat in between coolers and air conditioners.
Adwait Javkar: Going forward, the margin range will be around 13% to 15%, EBITDA margin range?
Achal Bakeri: For a blended basis for all products put together. Is that what you are saying?
Adwait Javkar: Yes.
Achal Bakeri: No, I think it will be higher because the bulk of the sales will still come from coolers. Air conditioners and the other products will still not have contributed. We are talking about in the current financial year. Am I right?
Adwait Javkar: Yeah. For FY27.
Achal Bakeri: As the current financial year is concerned, the bulk of the sales will still come from coolers. There in fact, if you see on the screen, as you can see, in the first half on a standalone basis, our EBITDA has actually improved by 18%. So, it is at 14.5%. So, in the next two quarters, in fact, it should be somewhat better than this.
Adwait Javkar: Yes.
Achal Bakeri: Again, primarily because bulk of it will come from coolers.
Adwait Javkar: Okay.
Nrupesh Shah: I think it will be more appropriate to see it like whatever new products have been launched, including what we keep on talking about, the BISP category. It doesn't employ much of the capital, neither in fixed assets nor in working capital. So in a way, they are accretive to the profitability. Obviously, each of the product segment has own market forces. So ultimately, even this new product category will add to the kitty, and we need to see product category-wise profitability and EBITDA margin percentage.
Adwait Javkar: Okay. Thank you for the guidance. The next question is on the international side. So how much did, basically, this USA expansion drive the international turnaround and the profitability? Will the profitability sustain in the H2 FY27?
Nrupesh Shah: Which expansion? USA.
Adwait Javkar: USA. If you are able to basically allocate how much the current revenue from the international market, I just wanted a breakup from that. How much is coming from the USA, Mexico, and Australia, if it is possible for you.
Nrupesh Shah: You mean to say in September quarter, company-wise
Adwait Javkar: Yeah.
Nrupesh Shah: the top line and profitability and how Y-o-Y it has performed? That is what you are asking?
Adwait Javkar: Yeah.
Nrupesh Shah: Well, as far as Mexico is concerned, the top line is INR 40 crore versus INR 17 crore. However, the summer was delayed, so in June quarter, there was a decline in sales, but in this quarter there has been a decent increase and part of the loss of sale has been made up in the current quarter. As far as GSK China is concerned, it is INR 23 crore of sales. As far as Brazil and USA are concerned, of course, there is Y-o-Y increase, but these are actually non-seasonal quarter. As far as Australia business is concerned, so Australia and USA put together is about INR 46 crore versus about INR 34 crore previous year, top-line wise.
Adwait Javkar: Okay. Thank you. That is it from my side.
Operator: Thank you. Participants, we take that as the last question for today, which is from the line of Bhavya Gandhi from Bajaj Alternate Investment Management. Please go ahead.
Bhavya Gandhi: Yeah, hi. Thanks for the follow-up. Sir, just wanted to understand what is it for the manufacturer, because you said you will not be investing more on the working capital side also, you will be investing more on the brand side. So for the manufacturer who is manufacturing the AC on your behalf, what is it in for him? I just want to check whether there will be a sales return policy if you are unable to sell certain products.
Nrupesh Shah: Yeah.
Rajesh Mishra: I think, that is how the industry largely is working. So most of the brands are getting their stuff manufactured from outside. So some are getting complete units, some are getting their outdoor units. So that is how the industry has evolved. So there is nothing new in that. So as far as the manufacturer is concerned, I think, they basically work on a certain margin. But the overall product design, everything, a lot of things are controlled by us. So, your second question was about sales return. No, I think, once we have the product, we take it to sell it. So there is no such arrangement that if we do not sell, we give it back to them. Because whatever the product which comes in our brand, and it is our responsibility to sell that product.
Bhavya Gandhi: No, but sir, you said you will not be investing in working capital also to a greater extent. If you can elaborate on that front, because you will have to build up inventory, right, to sell those products. If you can elaborate on that front as well.
Rajesh Mishra: Initially we are going with GT channel. We won't be starting with organized retail. We will slowly expand there. But, as we had mentioned in our presentation, we would also be effectively using channel finance, wherein we get our money upfront, and we are able to pass on some credit to the organized retail partners, thereby minimizing the working capital requirement.
Bhavya Gandhi: Okay. Just to sum it up, sir, not as a guidance, but as a realistic, can we grow international business, like 30% to 40% CAGR for next 3 to 5 years? Is that the right understanding? Because the base is relatively small and the India cooler business at 10% to 12%, is that the right understanding? Yeah, please.
Rajesh Mishra: International business will grow, but there are uncertainties. For example, current Middle East situation was a big deterrent in growth this year, wherein we had customers who wanted to buy coolers, but because of all the-
Nrupesh Shah: Yes, the money involved also.
Rajesh Mishra: There are cases where we have got the money in advance, but we are unable to ship. The freight costs have shot up. So, on the other end, these are these tariff-related things. Because of all the uncertainties, it is difficult to give a figure. Yes, we have aspirations to grow at a healthy CAGR for the international side.
Bhavya Gandhi: Right. Sir, in the international business, we manufacture everything through China. Just reconfirming on that front. We do not do anything as a
Rajesh Mishra: No, bulk of it is manufactured in India. All the air coolers that we are selling internationally, bulk of it is going from India. There are large size coolers, commercial coolers, industrial coolers that are also going from China. It is a mix.
Nrupesh Shah: Rest of the actual products are going from China.
Rajesh Mishra: Other than air coolers are going from China. Yes.
Bhavya Gandhi: Got it. Fair enough, sir. Yes.
Rajesh Mishra: We are already selling air conditioners in Australia, we are selling heaters and fans in Mexico. All those products are going from China.
Bhavya Gandhi: Got it, sir. Fair enough, sir. Thank you so much, and wishing you all the best for your future. Yeah, thank you.
Rajesh Mishra: Thank you.
Operator: Thank you. Ladies and gentlemen, that was the last question for today. With that, I now hand the conference over to management for closing comments.
Achal Bakeri: Thank you very much to Nirmal Bang Equities for arranging the call and to all the participants for their interest, and look forward to interacting with you a quarter from now. Thank you and have a good day. Bye-bye.
Operator: Thank you. Ladies and gentlemen, on behalf of Nirmal Bang Equities Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.
