Good morning, ladies and gentlemen. It's a pleasure and privilege to interact with you.

You might have seen the press release yesterday after the board meeting. I had been indicating from November onwards that this quarter is also going to be a subdued one.

If at all one can expect some revival in the room air conditioners growth with the energy label change that was scheduled on 1st of January 2026. Therefore, you will see the results almost, it is same as what I had indicated.

It is a modest revenue growth, a flat or a slight modest increase in the operating profit. Even the carried forward order book indicated a modest growth.

While Nikhil will deal with it, the silver lining is that the room air conditioner business seems to be returning to the growth path and building up to the Q4 onset of summer season. The cost control measures that we had implemented, that seemed to be resulting in managing the margins well.

Otherwise, it's a quarter which one would like to forget and move forward, the three quarters, and look at an excellent Q4. That's where we are.

In other words, 2025 was a year, I think, after many, many years of quarter-after-quarter significant growth, we faced these challenges. Having said all this, I believe that we are doing better than the industry peers, and we would have shown higher margins.

We would have gained market share modestly, some decimal points. We would like to now focus on Q4 and FY 2027.

That's where we are. With that, I will hand it over to Nikhil for highlighting the details of Q3 as well as 9-month-ended December 2025 results.

Over to Nikhil.

Thank you, Mr. Thiagarajan, and good morning, ladies and gentlemen.

Let me take you through the financial highlights for the third quarter. During quarter three FY 2026, the company has recorded a modest revenue growth despite prevailing market headwinds.

The good news is that for the first time in this fiscal, the room air conditioner business has witnessed modest growth owing to channels building up the inventory ahead of the energy label change deadline of January 2026. Financial highlights for the quarter ended December 31, 2025 on a consolidated basis are summarized as follows.

Revenue from operations for Q3 FY 2026 grew 4.2% to ₹2,925 crores as compared to ₹2,807 crores in Q3 FY 2025. EBITDA, excluding other income, for the third quarter FY 2026 improved to ₹221 crores, EBITDA margin of 7.5%, as compared to ₹209 crores, EBITDA margin of 7.5% also, in last year's quarter three.

PBT before share of profit or loss of JV and exceptional items—can you hear me? Yeah.

So—

PBT before share of profit or loss of JV and exceptional items was marginally lower at ₹165 crores in quarter three of FY 2026 as compared to ₹167 crores in quarter three of last year. Tax expense for the quarter three was at ₹27 crores as compared to ₹47 crores in Q3 of last year.

Pursuant to the notification of the labour codes, as required by ICAI guidance note, the company has recognized an incremental impact of gratuity and leave encashment amounting to ₹56 crores on an estimated basis. This non-recurring item is shown as an exceptional item in consolidated statement of profit and loss account for the quarter ended December 31, 2025.

Consequently, the net profit was at ₹80.5 crores in Q3 of FY 2026 as compared to ₹132.5 crores in Q3 of FY 2025. Carried forward order book as of December 31, 2025 grew by 1.3% to ₹6,898 crores as compared to ₹6,810 crores as of December 31, 2024.

Carried forward order book as of March 31, 2025 stood at ₹6,263 crores. The capital employed as of December 31, 2025 increased to ₹3,551 crores as compared to ₹2,763 crores as of December 31, 2024.

Net borrowings is at ₹352 crores as on December 31, 2025 as compared to a net cash position of ₹102 crores as of December 31, 2024. Coming to business highlights for the third quarter, Segment 1, Electro-Mechanical Projects, Commercial Air Conditioning, Segment 1 revenue grew 8.6% to ₹1,696 crores in Q3 of FY 2026 as compared to ₹1,562 crores in Q3 of FY 2025.

Segment result was ₹115 crores, that is 6.8% of revenue, in Q3 of FY 2026 as compared to ₹119 crores, which was 7.6% of revenue, in Q3 of FY 2025. Order inflow for the quarter was lower by 16.5% compared to previous quarter.

The quarter order book was ₹1,459 crores in Q3 of FY 2026 as against ₹1,748 crores in Q3 of FY 2025. Coming to Electro-Mechanical Projects business, in the third quarter, enquiry momentum from buildings, data centres, and factories was encouraging, but a few large order finalisations were deferred to next quarter.

Hospitals and malls have witnessed strong growth potential, including in Tier 3 cities, supporting a favourable medium-term outlook. Commercial office demand remains healthy in select pockets, while data centre and factory segments continue to see stable and robust enquiry traction, supporting a steady order momentum.

We continue to remain selective about new order bookings as we focus on effective capital deployment. Since the infrastructure projects' profitability is lower than commercials, buildings, factories, and data centre verticals, as we approach closure of these projects, the segment margin gets impacted to that extent.

Carried forward order book of Electro-Mechanical Projects business was at ₹4,777 crores as on December 31, 2025 as compared to ₹5,146 crores as on December 31, 2024, a negative growth of 7.2%. Commercial Air Conditioning Systems: Commercial Air Conditioning Systems business saw a healthy order bookings in this quarter, supported by strong demand.

While the revenue during this quarter was subdued as some product deliveries were shifted to next quarter, the strong order book gives confidence in the future prospects. International business: given that the tariff-related uncertainties persist, the future prospects of the US business are highly dependent upon the outcome of the India-US trade deal.

Despite this headwind, our foray into the US and Europe is progressing well. On account of the above change in the business mix, Segment 1 margins were lower at 6.8% of revenue in Q3 of FY 2026 from 7.6% in Q3 of FY 2025.

Segment 2, that is Unitary Products, the revenue was flat at ₹1,154 crores in the current quarter as compared to ₹1,164 crores in the quarter three of last year. Segment result was ₹98 crores, which was 8.5% of revenue in Q3 of FY 2026, as compared to ₹95 crores, 8.1% of revenue, in quarter three of last year.

Coming to room air conditioners, as anticipated, the energy label change with effect from January 1, 2026 helped in reduction of inventory, and we witnessed revival of growth. The company would have gained market share slightly during this quarter.

The cost reduction initiatives undertaken since Q1 of FY 2026 have contributed to the improved margins. The production of new range of products as per the new energy label norms has begun, and the company is preparing for the summer season 2026.

We have taken short-term, long-term measures to achieve supply chain resilience. The depreciation of INR and rising commodity prices will compel us to revise the prices upwards in Q4 of FY 2026.

The dealer network expansion is progressing as per the plans. As far as Commercial Refrigeration business goes, contrary to the expectations that the commercial refrigeration business will rebound during the festive season onwards, the market remained muted.

Consequently, all the product lines other than the storage water coolers degrew. The anticipation is that the demand will revive only during the summer season.

Due to focus on cost optimization and overall cost management, the segment margins improved to 8.5% in Q3 of FY 2026 as compared to 8.1% in Q3 of FY 2025. Coming to Segment 3, that is Professional Electronics and Industrial Systems, the revenue degrew by 7.1% to ₹75 crores in Q3 of FY 2026 as compared to ₹81 crores in Q3 of FY 2025.

Segment result was ₹6.8 crores, which was 9.1% of revenue in Q3 of FY 2026, as compared to ₹6.2 crores, which was 7.7% of revenue, in Q3 of FY 2025. The uncertainties around the regulatory policy framework pertaining to the MedTech solutions business are yet to be resolved.

Consequently, the business has slowed down. However, industrial solutions continue to grow, driven by strong demand in automotive and steel industries, and data security solutions maintained steady performance.

Coming to business outlook, while three quarters of this fiscal had been challenging, the signs of market revival are encouraging. The company expects Q4 FY 2026 to be a strong quarter for room air conditioners, commercial air conditioning, and refrigeration products.

In Electro-Mechanical Projects business, the demand from factories and data centre vertical continues to be healthy. In anticipation of a robust growth in FY 2027, the company is focused on expanding distribution reach and continues to invest in R&D, manufacturing, and digitalization while persisting with cost optimization measures.

We now— With that, ladies and gentlemen, I'm done with the opening remarks. I would like to now pass it back to the moderator, who will open the floor to questions.

We'll try and answer as many questions as we can, and to the extent that we are unable to, we'll get back to you via email. With that, we are open for questions.

Thank you for the opportunity, and congratulations, team, on a good quality set of numbers. Very quick three questions.

First, your UCP top line is flattish, high-margin commercial business is muted, and yet you have posted margin improvement. Can you call out the kind of cost rationalisation that you have done this quarter?

That's the first one.

Thank you, Natasha. The first thing is that, as you are aware, this question will keep coming, it's a blended revenue and results pertaining to room air conditioners and commercial refrigeration.

As far as revenue is concerned, commercial refrigeration, there seem to be a problem that is connected with, we keep wondering why that is happening. It is basically because of the FMCG-related demand that has not come back at all.

The ice cream, QSR, and other segments will have to go into expansion mode. We thought with the substantial reduction in GST for food and processed food products, there should be huge demand growth, and at least we have not seen till now that part reviving.

The room air conditioners is the one which has helped us to get, we have not only grown in revenue, which the breakup I won't be able to disclose, you all will get it once the GfK numbers get published. The margin improvement is basically our own decision not to get into discounting in order to improve the numbers.

You are aware that 1st of January was the energy label change. Now the inventory pressure was there for all the brands.

As I had indicated in the Q2 results, our inventory situation was much lesser. We stopped producing the products in order that we won't be saddled with inventory.

If you are saddled with inventory, you will be heavily discounting in order to get rid of the stock before the deadline. For the benefit of others, the 5-star would have become 4-star, 4-star would have become 3-star, on and so forth.

Obviously, 3-star being the highest selling SKU, we would have got into trouble if we are going to produce inventory in anticipation of the market demand. We took that decision much earlier not to slow down the production and move towards the new energy label products.

The second part is connected with the variable costs connected with the room air conditioner business. We had been moderating ever since May 2025, and those are resulting in improved margins.

Now I will have to also deal with what will happen in Q4. I think in January, there would have been enough inventory which the brands would have pushed into the channel.

I do not see January to be a great month. It should pick up in February.

All depends on how the summer season is going to begin. In the meanwhile, three things have happened.

Number one, due to GST, there would have been a 10% reduction to the consumer. The energy label change would have pushed up the prices depending on the SKU, depending on the brand.

I am talking about Blue Star. It would have increased the prices at least 5% to 7%.

This is what would have happened. Then you have got the commodity prices and the exchange rate.

All this put together, the price is going to be much higher. GST reduction is available, whereas the other three, energy label change plus you have got the commodity prices, which are continuing to shoot up, and the exchange rate.

All this put together will result in, my estimation is that somewhere around at least 10% of net increase to the consumers. Whereas the consumer would have been believing that there is a 10% reduction than last year they are going to get it because the GST reduction will translate into, which is not going to be the case.

Therefore, we will need much more discipline going forward in Q4 and in the summer season itself. That we have to watch how the demand will be, which is dependent entirely on summer season, to how the pricing will be in the marketplace from February onwards.

January is anyway old inventory would have moved in. Second half of February onwards what it is.

The good news is the demand seemed to have revived, and there will be pent-up demand as well. Our intention is to maintain this kind of margin levels in Q4 as well.

For the simple reason, again, I am disclosing the costs that are being borne by the industry. Number one is connected with the consumer finance itself, that it is 40% of the sales, and it'll continue to grow, the consumer finance cost burden shared with the dealers.

The second part is connected with the e-waste liability as you move every year. That, for Blue Star, it will be 2016 numbers multiplied by 70% of that.

That will become our liability. That is what it is.

In the industry in the marketplace, a 5-year warranty seemed to be a thing, and 5- to 10-year warranty cost, that is the other part of it. In-shop demonstrators is an additional cost.

With all this, meaningfully one should be running the business for delivering an ROCE, and I think that 8.5% kind of a margin is bare minimum one should look at it. If it is a great summer year, one should try to do 9.5% in the best interest of the category.

Thank you.

This is extremely helpful. Just one clarification.

Sir, you mentioned that 10% will be the net increase to consumers, right? This is after incorporating the GST discount.

Approximately. See, this can vary in the sense that you consume the old raw material, you keep buying the raw material, the volatility is very high in the marketplace of the commodity prices and the exchange rate, and you're building up to the summer season.

Your consumption of the raw material will depend on also. I think it should be around 10%.

I'm not categorically saying in the region of around 10% increase is inevitable.

Understood. Sir, and one last question.

The entire thesis is based on a good summer, right? Let me just ask you slightly reverse question.

Just hypothetically speaking, if calendar '26 is also bad in terms of summer, then how does Blue Star navigate the challenges? What are the other sharp growth levers which can keep us afloat despite RAC and commercial not working in case of a bad summer?

Thank you.

The very first thing is that the history shows that you will not it does not two consecutive summers have not happened like that. The pent-up demand, given that the category penetration is very low, it should be much better than last year, okay?

People are not going to be postponing forever. We are still our market size is nowhere comparable to China.

That should be that that should be kept in mind. Then I had said that the weatherproofing Blue Star is a program, which means you need to look at the B2B businesses as well, like the commercial refrigeration is not that seasonal dependent.

There is It is also It is not that much impacted. There is some impact of of summer season getting washed out there.

Commercial air conditioning part of it is another portfolio where we have a strong presence. In Electro-Mechanical Projects, whether it is connected with the traditional segments, the buildings or the factories and data centres, we should not have any worry.

Infrastructure comes it's with its own risk. The weatherproofing Blue Star is connected with portfolio, how you manage.

The second part is connected with how much of expenditure you can keep it variable. For example, advertising, if anticipation of the summer, we will begin in the middle of March with on, with IPL.

I am saying one example. With with the IPL matches beginning, you will end up spending, you will commit for that, and hoping that April will be better, April second half will be better, something like that.

Then you last year, that's what happened. You spent the money, nothing will happen, and you can't get it right.

We do have the variable expenses, how you can manage. The third part is the localisation is happening in a significant manner, whether it is the finished goods or whether it is connected with the component ecosystem.

Therefore, you will be in a position to manage the inventory. See, the 2025 summer washout was managed far better than 2023 summer washout.

In 2023, the inventory lasted for a much longer period. Therefore, the the weatherproofing Blue Star, we call it internally, that is a program.

Having said that, I'm again saying the two summers cannot be We have not seen it. Even if the if the summer is going to be bad, the demand will not be that bad.

Remember this, the when you compare next year, you will compare with a bad year. Obviously, the results will be, but internally we will be looking at how we do with FY '24 rather than sorry, with FY '25 rather than FY '26.

That's I am answering the initial questions elaborately so that these questions do not come up later. Thank you.

Thank you so much, sir. All the best.

Thank you.

Hi, good morning, Mr. Thiagarajan and Nikhil.

Sir, firstly, just a clarification on Natasha's question. The 10% net hike, 8% to 10%, is basically after the GST cut, right?

It's adjusted for the GST cut.

Yeah. Our principle has been very clear that any reduction will be passed on to the consumer, any increase will be passed on to the consumer if you have to maintain the margins.

It was completely passed on. Then you have got the energy label change pushing up the prices.

Then you have got commodity prices. Then you have got exchange rate.

All are happen.

Yeah. Understood, sir.

Understood, sir. Basically now getting to questions, just couple of them.

Firstly, on the growth outlook, on Segment 1 and Segment 2, and Segment 1 essentially on the projects and CAC, typically we discuss 12% to 15% CAGRs is what the growth rate should be. I think if I look at past 3 years, we've done way better than that, 20% kind of growth.

Just wanted to understand in your sense how should we model a medium-term growth here, right? Because projects have been doing fairly well for you, plus commercial plus international, I think, mix of this segment is actually doing better.

Some colour on that will be helpful over a 2- to 3-year time frame.

I'll straightaway answer. The thing was that for varied reasons, FY '26 is muted, the order finalisation, and we didn't see the liquidity in the market.

You are aware that we are extremely cautious in getting into infrastructure projects because infrastructure projects are of low margin, long duration, and as these projects get to the closure stage, which will be 2, 3 years later usually, you start booking many costs. Therefore, we have been very, very cautious in chasing market share out there.

Commercial air conditioning is connected with multiple sectors: factories, the shop, showroom, boutiques, hospitals, on and so forth. Unfortunately, the shop, showroom, boutique, retail, all these segments we have not witnessed any great growth in FY '26.

In FY '27, there are signs that it will come back in a good manner. Keeping all this in mind, I think if you ask me at the moment, I will take it as CAGR of around 8% to 10%, then look at and revising it depending on how first 6 months of next fiscal goes.

Sir, 9-month growth rate is almost 20%, right, sir?

Which one?

The 9-month growth rate for Segment 1 is almost 20%, right?

Correct. The pending order book was there.

The thing is that I will slow it down for 6 months because you have seen order inflow has not been good, right?

Got it. Secondly, sir, on the commercial ref, similar question on 9-month growth rate.

If you could just comment on growth rate for 9 months for commercial ref, and how should we build the medium-term CAGR for this segment? Thank you so much.

You don't have the breakup of that actually for me to disclose. The category is supposed to grow at a CAGR of anywhere between 12% to 15% given the processed food penetration or dairy or anything, pharma, anything you take it.

We are a very, very small market size country given our size. It was a bad year again, FY '26.

There you can take it 12% to 15% CAGR is a good modelling. Room air conditioners, despite the failed summer, I will still model it on anywhere between 18% to 20%.

Thank you so much, sir. Wish you all the best.

Thank you.

Thanks, sir. Thanks for the opportunity.

Sir, in the opening comments, you indicated while 9 months were muted for UCP, but there are demand drivers now. If you can elaborate a bit more on this, means which regions you're seeing the growth: east, west, north, south, or rural versus urban?

Are you seeing growth coming back in metros, or in terms of the product profile, whether the growth is more in premium versus the value-for-money air conditioner? If you can share more details on these aspects.

All regions have done well. It is not one region has done well like that.

Obviously, Tier 3, 4, 5 are the ones which will continue to drive the growth. I think that is true for many categories because the penetrations are relatively lower there.

It will depend on the agricultural income, actually. That is the driver of the rural economy of India.

I have been saying this, the Tier 3, 4, 5 consumers and the Tier 3, 4, 5 geographies will constitute close to 70%. That is reflected in the consumer finance schemes being availed.

That is reflected in the question that you asked, it is the entry-level products. Whether it is airline, whether it is car, whether it is two-wheeler, or whether it is mobile, Wi-Fi services, you will see this, that Indian market is driven by aspirational middle class.

It is highly price sensitive. It is entry-level, value-for-money products.

You see number one, number two in many categories, it is the fact. That should be true for air conditioners as well.

Thank you.

Okay. Sure, sir.

Just last question. Mr.

Mohit Sood is appointed as Executive Director of UCP segment. For a period of 5 years, heartiest congratulations to Mr.

Mohit. What will be the 5-year KRAs in terms of for Mr.

Mohit from the board, whether it will be driving market share, driving profitability, or entry in new products, etc.? If you can elaborate on that.

That's it from my side. Thanks.

No, the annual KRAs are set by the NRC, approved by the board, and so that will keep happening. That's a internal process.

The broad drivers for the company will translate into KRAs, right? What is company strategy, that drives the KRAs of let alone Mohit, whether it is he, or me, or Mohit, or the entire top management, the company's strategic KRAs and operational KRAs, that's what will determine ours.

Now broadly, if you want to understand what we are looking at is, our track record has been growing faster than the market and gaining market share. We have not yet reached our first goal of reaching 15% market share.

That we are somewhere, we have crossed 14, and even in a challenging year, I think we have gained marginally some market share. That we need to do.

The second important part is that growth has to be a profitable growth, which means the margin guidelines that I mentioned, somewhere around 8.5% EBIT margin is absolutely important. In ROCE, Blue Star is a benchmark, an outlier in the industry, that we look at anywhere between 25% to 30% ROCE.

That is an important KRAs. There are other numerous KRAs, right, for example, whatever my brand salience, that brand has to be made relevant to the new consumers, and it should continue to be stronger in terms of salience.

The next is that the customer experience, which differentiates us, that is an important strategy of Blue Star, to provide a world-class customer experience. Broadly, the company strategy is this, and that will translate into, including things such as that I will be ahead of the curve in terms of sustainability initiatives, like if it is energy labelling, if it is connected with refrigerant, new refrigerant migration, carbon footprint, we have been ahead of the curve.

That's what we would be. This is what will determine all of our top management KRAs.

Thank you.

Yeah. Sure, sir.

Just last thing. In this entire trade inventory, summer, etc., the issue which is forgotten is the compressor.

From 1st of July, again, the industry as well as Blue Star will have to manufacture compressors in India. How do you see the preparedness of Blue Star on this aspect?

Thanks.

The thing is that first of all, it is not Blue Star has to manufacture. Whether there is enough component ecosystem that is available for us to source.

I have stated this till at least 2028, and we need to reach a particular scale for considering manufacturing of compressors, but supply chain resilience is an important program, and I think we are well secured with the domestic manufacturing capacities that are coming up from many players. Thank you.

Thank you. Thank you, sir, very helpful.

Sir, thank you for the opportunity, and congratulations on a good operational result. Sir, my first question is could you help quantify maybe on an industry level or the company-specific level, whichever you are more comfortable with, the inventory situation for air cons now versus say start of October?

Sonali, thank you, but I don't think we deserve any congratulations. It's a very modest growth.

It's not a great result, I would say. We may have done better than the industry, our hope.

The inventory level, my estimate is that in maybe 8 to 10 weeks for the industry, and it may be lower for us. I think it may be 5 to 6 weeks is my estimate.

Ours, I am sure. Industry, I am guessing it.

That's what it should be. From second part, I couldn't follow.

From October onwards, there has been substantial reduction. Now I would say, you see, inventory will not be zero in any case.

It has to be some 2 to 4 weeks inventory will always be there. In our case, I think there is at least some 2 to 3 weeks of more inventory is there, but it is always manageable.

That's what it is. The industry again, first of all, you had produced anticipating a great summer.

Then during the GST transition, there was a bottleneck, blackout period. Then you were left with a winter season coming in and an energy label change.

There was a pressure. I wouldn't consider inventory as a great bottleneck for February, March.

The one and the only event that we should be watching out for is onset of summer. If the summer sets in, there is nothing to worry about.

Sir, just a clarification over here. 5 to 6 weeks is company plus channels, right?

Secondly, what is the normal inventory level, 4 weeks?

It will be around 4 weeks. Normally, from January onwards, we will start building up inventory for the forthcoming season, okay?

Because you won't be able to meet the demand in March last week, or March second half, April, May. We will be even comfortable with, in our case, 8 weeks of inventory being there in January, 10 weeks of inventory being there in February, 12 weeks in the month of March if the summer is definitely going to be stronger.

You will be very cautious having gone through the past, right? Also, the system said change now.

You have got a local component ecosystem and your own manufacturing units. You are not dependent on some China imports of finished goods.

I would say that in the build-up to the summer, even 8 weeks is okay.

Got it, sir. Sir, my second question is regarding the price hikes that you mentioned, that about 10% price hike.

Sir, would it be able to bifurcate this price hike between, a, the hike because of energy efficiency, and secondly, because of the rising input cost? I believe energy efficiency has already entailed a 7% to 8% price hike.

Is it fair to assume that just 2% to 3% have been passed on to the consumers because of the price hike?

No, no, no. This is not a universal norm.

Depending on the product designing can vary from manufacturers to manufacturers, don't take it as I am talking for the industry. My estimate is that there are certain products in our portfolio that the new energy label would have costed only 5%.

There are models which are energy label is pushing up the price between 7% and 8% in our portfolio. The other part of it is entirely dependent on when you bought the inventory and what pipeline you have got because week to week it is changing.

It is very difficult to estimate. I am saying that around some 7% may be due to energy label change, and you may have around 8% to 10% arising out of commodity, then 10% reduction you have got in GST.

Therefore, net I am saying ballpark is 10%. Very difficult to estimate at this point of time.

Again, we are not a forex dealer to be determining daily rate. When you announce the price, it will be for a at least 3-month period, right, or a 2.5-month period.

You can't be altering prices every day. You have to pass a judgment and increase the prices.

Dealer

won't be able to manage. He can't sell it on one price, day after tomorrow change it, etc., because the customer who is bought will be fighting.

Therefore, I am saying we will be looking at price increase soon as the inventories get liquidated.

Sir, any quantification ballpark as to how much price increase would you want to pass on the input cost pressures?

I am telling it may be in the order of 10%.

10% more?

That is right. We will determine it.

Let us say there is some US deal is signed, the dollar may come down, and what are all going to happen, I don't know, because everyday is something is changing. If you ask me to take a call today, it is important to increase the price by 10%.

Got it, sir. Thank you very much.

All the best.

Thank you. Sir, first question on the margin that you mentioned, 8.5% kind of margin for UCP.

I think in last concall, you looking at the slowdown, you guided for 7% around margin for the segment. Now this is more of 8.5% aspiration, or do you think you can achieve that in Q4 and in FY '27 despite all the inflationary challenges?

What I indicated two parts. Number one is what would be the margin for Q4, you have seen the Q3 margin, and you have to look at the next year steady state.

That's what it means. It's not full year is going to be changing to this, definitely not.

You can make up for the summer, right?

FY '27?

Q4 of FY '26 and FY '27 the margin outlook is 8.5%. Unless and until summer is going to be so very harsh summer, it can go up to 9%, and I am not forecasting anything now.

It can be looked at closer to March. My estimate is that one should if you do 8.5%, that's a reasonable margin looking at it today, especially with the higher prices.

Just one clarification on this. The assumption is that the operating leverage of good summer and good volume growth would allow you to take the price hikes that you mentioned, and thereby 8.5% kind of margin?

Not at all. You have seen our margin.

It's above 8% already in Q3. Q4, irrespective of the summer season, irrespective of the price increase, 8.5% is doable.

FY '27, 8.5% should be the target. If the summer season is extremely good, it can go up to 9%.

We don't know now. That call has to be taken.

Price hike has to be taken in any case. It is not optional.

In a category in which the margin is in the order of 8% to 8.5%, you can't absorb this kind of commodity price increase or the exchange rate issues. That is not your option.

In my mind, it has to be done.

Understood. Just last—

Remember one more thing. While the

wage-code-related

cost is in the exceptional items, it is a permanent burden. Your conversion costs, service costs, warranty service costs all will have to be borne, and it has to be passed on.

There is another element of cost. We can't ignore that because this quarter it is under exceptional items, right?

It is going to push up the cost of the product or the services.

Understood. Second—

What can happen is and it is a level playing field. It is not that one brand can absorb, another brand cannot.

The industry level, it in different intervals, the timing may be different, all will have to. What it means is that the overall prices will go up.

Consequently, whether the demand will be lower, and if one is saying 19% CAGR, whether because of this CAGR will reduce to 17% or 16%, we can see. That can happen.

I don't think there is a choice. If it is a very high margin industry, one can have the discretion, I am not passing on, absorbing, which is not the case.

Understood. Second question on the Segment 1.

Where considering the order book, you are saying for the full year FY '27 the growth should be in single digit, it may be by choice because of the better quality of order book, but then it should see lower growth because of the lower order book, and will that have any impact on the guided margin range? Thank you.

No, I don't think there is a reason to worry about margin there. There again, in the commercial air conditioning products, prices have to be increased.

In Electro-Mechanical Projects, the price escalations have to be obtained for a higher labour cost because it's a people business there. There is indeed a wage code-related burden that is existing.

The last point is roughly 1/3 of our revenue is infra projects, and quite a few projects will come to a closure now because these are all metro railway projects or water, railway electrification, etc. When these projects is nearing a closure, usually the costs go up, and it pulls down the overall margin.

You would have seen already the margin is lower than last year in Q3. I think this will be a trend for next two, three quarters because the infra projects are coming to a closure.

Otherwise, I don't see a concern for huge correction in the margin.

Noted, sir. Thank you and all the best.

Thank you.

You can move

Hi. Good afternoon, team.

While other dots have been answered, if you can just help us understand a bit more in terms of updates with respect to how are we working on new product development or JV tie-ups for the data centre market, chillers as well as the HVAC solutions?

We are a very large player in chillers. Therefore, I don't think we need an external collaborations for developing a chiller for the data centre market.

We have those developments are going on. The second part is connected with certain other solutions meant for data centre segment, which is actually called the liquid cooling, or the CDU, cooling distribution unit.

These we are exploring multiple tie-ups across multiple geographies, which are classified in nature because we have signed non-disclosure agreements. This is the same as once in three, four years something new happens, and you need to figure out.

At that point of a time, clarity completely doesn't emerge, but our track record has been that we are able to catch up. Like the VRF, at some point of a time, what we will do for VRF was a question, and it happened.

Indeed, that's a market. For one part of the data centre market, we need that.

We are building.

Right. For our own in-house products, by when would we be commercially ready?

I think many models are in advance stages. Let us say 12 months.

Got it. Thank you, team.

In the MEP part of data centre, or the EPC part of it, we are the leaders. Even in the semiconductor-related space of air conditioning, which are sophisticated Electro-Mechanical Projects that happen, we are market leaders.

We are building our leadership in that sector as well. These two combined with factories, factories is a regular one.

Data centre or semiconductor, we are building leadership in a significant manner in EPC part of it. Because of that, we believe that chillers again we will be able to build market share and be a leader there or be a choice of the customer, preferred choice of the customer.

The products are to be tested thoroughly. That's what is happening.

Correct. We're already executing them, right?

Got it. Thanks much, team, and best wishes.

Thank you.

Oh, thank you. My questions have been answered.

Thank you.

Thank you, sir. Am I

Is it better now?

Yeah. Thank you.

We're fairly new to the business, but we have two questions if you could please help us. The first is just on the EMP segment.

We noted that you've given a single-digit growth guidance. Could you give us some nuance as to what is generally the split of this business, and which pocket you're seeing some slow down in, and why is it that these margins tend to come down closer to the closure of these projects?

Number one is it includes multiple things, right? It includes the Electro-Mechanical Projects and Commercial Air Conditioning broadly, okay?

For obvious reasons, I can't tell you the break-up of that. Entire thing is slow.

In other words, the B2B business, order inflow has been muted for a very long time. For various reasons, and there is a GST-related some disruption was there.

Then there is liquidity issues as well. Other than some infra projects, order finalisation have not been happening.

Having said that, January has begun very well, and many enquiries are coming up for finalisation, so that should be happening. When your pending order book is lower, your growth from the subsequent month will be impacted, correct?

That is why I said that one should look at a single-digit growth or just a 10% growth. That's all one should look at it.

The impact is, I'm repeating again, there is a infra segment, there is a building segment, there is factories, data centre segment, out of which infra is lowest profitable segment within that. Then those infra projects takes many years, 3 to 5 years, like you are aware, we are part of Mumbai Metro, for example, Bangalore Metro we are executing, there are some railway electrification projects, there are certain water distribution projects.

All these, when it is moving towards, cost overrun can happen as it is coming to a closure. You are in a great hurry to close and handover.

Then at that point of a time, the margin will further come down. That is where we are.

That is the only reason. Otherwise, the other parts are all doing well.

Understood. Should I understand this, in summary, based on the current order book, you feel next year it's going to be single-digit for all the reasons you explained.

Would you say this is the bottoming out for order inflows, and inflows could start improving from here? Or do you think inflows will also continue to stay at these levels?

See, looking at the customers' behaviour and what has happened in January, I think it has bottomed out, and it is taking off. That's what is our sense.

See, it cannot be, in any business, it cannot be down when the penetration levels are lower. Forever it cannot be down.

It has to revive at some point of time. That is what is happening.

I can tell you that in January itself, we will have close to ₹400 crores worth of orders already, which is a record month again. I think it is taking off after a subdued period.

Sir. That's very clear.

Just my second question is the margins in the Unitary Products segment are very strong, right? If you had to call out one or two primary drivers as to why you've been able to sustain these margins despite how these last few quarters have been, what would those be?

I don't think it is very strong. It is good.

As I told you that our guideline has been 8.5% should be, and the reason being that we were very clear that we will not force ourselves into an inventory pressure. We stopped, or controlled production, and therefore you were not desperate to liquidate the stocks at a lower price.

That is first part of it. Second part of it is connected with the variable costs ever since April when the summer was not happening.

Those measures were implemented meticulously. Like the marketing spends, or the employee sales incentives itself will be lower as well because some part of the compensation is through the quantities sold.

The third part is that systematically ensuring that your input costs are controlled. That's why it happened, and it is a continuous process.

This challenge will continue, and we have to deliver.

Understood, sir. Lastly, any initial trends that you're getting from the channel, retail side on how these summer months are shaping up in Q4 and probably what they're thinking for Q1?

Thank you.

All that we know is that compared to the previous months, it is better, it is not spectacular. We have to see when the summer sets in.

As of now, it is not setting in. Everywhere seem to be very pleasant.

Winter continues, and let us see when it is going to set in.

Understood. Thank you very much, sir.

Thank you. Just one clarification again on the project business, sir.

If EMP is slowing and commercial AC is growing faster, should we expect a margin improvement in this business in FY '27?

No, yeah, all that I mentioned, it is not becoming zero, right? You do have significant amount of projects.

We are talking about a growth, whether it will be a significant growth. It is again I'm saying that'll be a growth, the CAGR of 8% to 10%.

It is not stopped, okay? That is first part of it.

Second part is that there are factories, data centre, and buildings. These are good margin projects, and margin may not improve dramatically, but it is not going to deteriorate.

On the other hand, infra projects will be at a peak of its execution because we want to expedite the closure, and in the process, it's a lower profitable segment. Commercial air conditioning, order inflow was muted, now it is picking up.

If you ask me broadly, whether FY '27 should be better than FY '26, that's what one can guess. Always you have seen that we were exceeding the estimates.

The questions used to be this, right, that how come 8% margin you are delivering? Our guideline has been that we will be some 7.5% margin.

7% to 7.5% is supposed to be the margin. Sometime it used to be 8%.

In the order of 7% in FY '27 modelling you can assume. That should happen.

It is not going to become some 8.5% because some project is slowing. It has not slowed down.

Some part, there is a slowdown. That's about all.

In other words, I'm summarizing for the benefit of everyone. The outlook for Q4 is 7%, 6.5% to 7%, closer to 7% maybe for Segment 1, and it should be 8.5% for Segment 2.

That is the guideline."

From a 3- to 4-year point of view, should we expect higher CAGR growth from a commercial AC sub-segment versus EMP, or should both grow parallelly? See,

by all estimates, the commercial or any B2B part of the business, it is expected to grow only at 10% to 12% CAGR. Room air conditioners is a durable, and its penetration level is very low, it is projected at a CAGR of 19%.

Or, if it is a bad summer year, it will be worse. That's about all.

This is not going to change. I don't see some significant 20% growth, nor we are into any inorganic growth at all.

See, if the market is going to be like this, for us to grow, it has to be inorganic growth. There is nothing.

It is not we are not present in some segment, now I'm going to enter that segment. There is no such thing.

We have been in all parts of the segment.

Right. Anything you want to talk about on the export side?

We are tracking quite well. We have reached to not sizeable, but at least to ₹200-crore of odd run rate we have reached on a quarterly basis.

How big— Really

Let me let me answer this with this ₹200 crores. The the thing is that first of all, FTAs are getting signed.

It has not meaningfully translated into any significant business. Our our interest has been with Europe, which anyway the heat pump market is very slow.

It has not taken off at all. The on the other hand, the US market is U.S.

market is because of this trade barriers. That's where it is.

Now it is suiting us actually because you can keep developing more products, and you have got domestic challenges as well, right? The the thing is if the market would have opened up, there is a huge demand, and we have to go ahead and do all this, we would have.

As of now, we are very clear that we are not entering there with our own brand. We are investing and our own R&D and manufacturing in order to become globally competitive, and we have developed products which are successfully tested abroad.

The customers whom we acquired, they are all very happy. The conditions are in Europe market has not opened up.

The in European market, consumers expect some subsidy from the government to switch over to heat pump or green products. In US, there is a trade barrier.

Therefore, it is fine. We are moving steadily, and we are building that foundation.

The direction is as follows: When China grew in exports, it was not that China was going and marketing anywhere. The people the they went to China to shop.

Same way, we should build the capability where somebody should say, 'Can you make for us?' That is the situation or a position we would like to build.

That's where we are. So ₹200 crores, ₹300 crores, ₹400 crores, and all are doesn't matter at this point of time.

We know very well we are poor in our export footprint, but I can tell you in 3-year time, I think 15% of our revenue should come from exports. Thank you.

Thank you.

Yes. Thanks for the opportunity, sir.

Sir, I just need one clarification. Most of the questions have been well answered.

Just one clarification on the project business. So 8% to 10% range that we are talking about is for the entire EMP business, right?

Not only for the infra business.

No, Electro-Mechanical Projects business in totality.

Yes. That's what, sir.

EMP and

even Commercial Air Conditioning business.

Got it, sir. Thank you, sir, and wish you all the best, sir.

Thank you.

Thank you very much, ladies and gentlemen. With this, we conclude this quarter's earning call.

Do feel free to revert to us in case any of your questions were not fully answered, and we'll be happy to provide you additional details by email or in person. Thank you.