Thank you, ma'am. 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 - Finance, Mr. Vikas Gupta, Managing Director - Operations, and Mr.

Pramod Gupta, Chief Financial Officer. Without taking much of time, I hand over the floor to the management for the opening remarks, post which we'll open the floor for Q&A.

Thank you, and over to you, sir.

Thank you, Nikhil, and good morning, everyone. Thank you for joining PG Electroplast Q1 FY27 earnings call.

I am Vishal Gupta, and I'm joined by Mr. Vikas Gupta, our MD 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 team executed well across the board. Consolidated revenues crossed ₹2,000 crore for the first time in the company's history, and our RAC 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 passed through to our customers.

Our order book remains healthy across all product lines. I will now let Pramod take you through the numbers in detail, and then I will come back to cover our capacity road map and few operating priorities for this year.

Pramod?

Thank you, Vishal. Good morning, everyone.

As all of you would have seen the numbers, consolidated revenue for the quarter was ₹2,034 crore, up 35.2% YoY. EBITDA came in at ₹156.2 crore versus ₹139.4 crore last year with a growth of 12.1% and EBITDA margin of 7.7%.

Net profit was ₹75.3 crore versus ₹66.7 crore, which was up 12.9% YoY. Product business was the key contributor for the growth, and it contributed 80% of sales, growing 40.7% YoY.

Within that, RAC grew 38.1% to ₹1,401 crore, washing machine grew 67.2% to ₹211 crore, and cooler grew 3.4% to almost ₹19 crore. Electronic business has grown 6.3% YoY and contributed 5.3% of the revenues.

Plastic molding and component contributed ₹294.6 crore and was up 7% YoY. Our JV, Goodworth Electronics, posted sales of ₹177.3 crore versus ₹147.5 crore last year, and EBITDA for the JV was ₹6.3 crore versus ₹4.3 crore last year.

Our subsidiary, wholly owned subsidiary PG Technoplast, reported strong sales of ₹1,600 crore for the quarter. On margins, gross margin as a percentage softened both quarter on quarter and year on year, driven by elevating 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 show up as a lower percentage of larger revenue base. On per-unit basis, margins remain stable versus last year, and commodity cost increases has been partially passed through to the customers.

On balance sheet, things are quite healthy. We are a net cash company now.

Cash and bank balance stood at ₹491.3 crore, and we have a modest debt at the end of 1Q 2027. With this, I will hand it over back to Vishal.

Vishal?

Thank you, Pramod. Let me now cover where things stand on our capacity along with couple of other developments for this quarter.

First, our flagship washing machine manufacturing facility have 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 machine business has grown 150% on YoY basis in this quarter, and we are launching a brand-new 18 to 20 kg range washing machine platform. This will let us go after a higher-capacity, higher-value segment which we had 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 quarter four of this financial year, and with this becoming a meaningful revenue stream for FY28 onwards.

We have also tied up with our anchor customer for this business, and we are already 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, and in the first phase, we are starting with direct cool and side-by-side refrigerator.

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 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 online. 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.

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?

See,

for RAC, at the industry level in this first quarter, we have a sense where we can give some idea on the primary level what the growth and what 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%-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 clients, 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.

We don't have very exact idea on this, but 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.

How about, 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?

It is very near to the normal inventory levels now. What is happening, sir, now the competitive intensity is so high, nobody wants to lose any opportunity of any sale.

People tend to keep inventory 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. It's my very personal view.

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?

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

Sorry to interrupt, sir, I meant for the RAC, the outsourcing percentage. Has it gone up for the RAC?

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.

Got it. Got it.

Second question if I may ask, with respect to RAC growth for us, was there any spillover positive impact? Given fourth quarter end we had logistical challenges, has that also kind of benefited?

On a 6-months basis, how do you see that number or the market share gain if you could call out?

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, but it was not a very large gain from that point of view.

If you're not able to meet your sales or you are not able to service your client in the time he wants that, then, sometimes you lose that opportunity. Overall 6-year 6 months for this quarter, I would say, we will see a growth, but will not see a very large growth.

It should be around 15%-20% growth should be there on a 6-months level for this year.

Got it. Thank you, and I'll fall back in the queue for follow-up.

Thank you.

Thank you. Thank you.

Hi, sir. Good morning.

Thank you for the opportunity. I have two questions.

First is, we spoke about the fact that almost [share?] , a cup of your 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 sort of playing out over the next few quarters in terms of a gross margin?

See,

cost increase has been partially passed through to the clients. I can give very specific numbers on that, and it varies from customer to customer.

We are hopeful that we will be able to again go for a price increase going forward because today, the copper has crossed $14,000, and the rupee is also hovering around 95.5 95.5 and 96. That impact is still to be passed on to our clients.

It will be there, but right now, see, it's so off-season that demand is not there. I don't think this is the right time to go for a price increases right now.

I think the price increases will happen in the December quarter probably with our clients. Right,

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?

Definitely so. Definitely, Tanay, we cannot be away from this.

We are part of this whole value chain, 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, and 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, if some of the people give very clear numbers on the RAC performance and other category performance, then you can see that relatively our numbers or maybe our margin profile is little better than the rest.

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

Sure. Sir, just one more.

Could you possibly split the RAC growth into volume and value for us, just since you mentioned there was double-digit growth for both? That would be helpful.

RAC at a volume level has grown around 20%-22% for us in this quarter. Rest of the value have come from the price increases.

ASP has increased by around 10%

to 12%. All right, sir.

Thank you so much. I'll just come back in the queue.

Thank you so much.

Thank you, bro. Thank you, Tanay.

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 channel inventory? That's my first question, sir.

Neel, we don't have very exact idea, and nobody in 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 sometime back that we believe that inventory levels have come down in this industry right now, okay? Yeah.

I think 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.

Perfect, sir. Sir, how do we see the price hikes in July month at the industry level?

If you can highlight that. See,

July, August, September are the lean period 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 mixed.

It's a very brand-specific strategy. Every brand has their own strategy, I can't comment on that.

Yes, brands are trying to price increase, but they are very limited success on that, maybe some of the brands are not taking the price increase, there is a pressure on everyone because of that.

Got it, 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 key leadership hiring in that?

If you could just highlight what would be the capex number for the quarter particularly, and if you can bifurcate between the segment like the compressor or like general capex, if you can just bifurcate. See,

our compressor project is on line 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 us to start the mass production in December-January. Everything is on line.

I can only tell you this way. By December-January, when the mass production will start, we'll be in a position to share a lot of things in detail with you people.

On the capex side, I will take this question offline with you. Right now, I don't have the figures handy.

For the capex, specific numbers, yeah.

Sure, sir. That is from my side.

Thank you very much, sir.

Hi, team. Thanks for the opportunity.

Sir, 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 2 or 3 years, this number of outsourcing as a whole for the industry rises materially, benefiting people like ourselves?

Dhruv, first of all, you just need to recheck your numbers. I believe in last 3-4 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 the brand growth, I think when you do that number crunching, you will come to know in spite of PLI in last 3-4 years, the outsourcing at an industry level has increased as a percentage of our overall this.

Coming back to what is going to be next 3-4 years, as I told you, that 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.

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 sense fully 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.

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 keep for those two segments over the next, say, 2 or 3 years.

See, we have stopped giving revenue guidance. As we've told in the call earlier, washing machine we are seeing a very robust growth for last 2 to 3 years.

This quarter also, this business has grown at 67%. We are seeing a healthy growth going forward also for next at least 2 to 3 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 for the refrigerator is concerned, it should be start mass production is again December-January of this calendar year. We have already tied up with the anchor customer where we have already got capacity commitment of around 30%-35% from that customer.

In addition to that, October or November we'll start manufacturing of side-by-side refrigerators also in India. Second phase, we'll go for 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, and even if we are doing 600k, 700k if we are able to achieve in FY28, we see a very meaningful revenue coming out of this.

Got it, sir. Thank you so much.

Thank you, Dhruv.

Thank you for this follow-up opportunity, sir. In terms of the RAC margins, ex of PLI incentive in 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?

Pramod, can you take this, please?

Hello. Yes, sir, I'll take it.

Please.

See, 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 increased very sharply, that is one, and 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 commodities stabilizing here, we hope that passing on of the commodity in the next season should be better.

Therefore, we are hopeful that margin 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.

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 reported, you will realize significant improvement is there in the margins.

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 in compression on percentage basically?

On electronics, it is more of a job work, there the margins are typically stable kind of a number. We do not see a huge challenge there.

In washing machine, because of the fact that 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.

Were you able to quantify, sir, how much was the impact of this for washing machine margin?

I will not be able to give you very specific numbers. We don't actually share the margin on the product.

Rough impact, I meant, actually. Was that like 20-30 basis point of the overall margin?

No, no, no. It was larger than that.

It was much larger, sir.

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?

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 level is practically low, etc.

There, we are having a more like a job work kind of a relationship where most of the time the client itself tells from where we have to buy, what price we have to buy plastic resin. There, the margin impact is not so much.

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

I'll give you this number, just give me some time. Okay.

Thank you so much. Those were my questions.

Thank you.

Thank you. Thanks for the opportunity.

Sir, first question is on, sir, volume growth for this year, you mentioned 20% to 23% kind of volume growth

Hello?

Sorry. Keyur, you're You're not clearly very audible.

It is muffled.

Thank you for the opportunity, sir. Good morning to all of you.

Sir, my question is more from a consumer point of view. We understand there were a lot of price hikes that happened in 1Q, but it was pretty much offset by the GST cut and there was still low-cost inventory that was in the system.

Now we're seeing that continuously there is another set of cost hikes that's happening. From a very consumer point of view, how do you see the demand panning out?

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 to sort of look after, we could see tapering off of demand itself after some time?

I'll take that question, Vishal-ji. I think if you look at it, the consumer sentiment till now in other sectors, especially auto, etc., has been pretty strong.

If you see the numbers of all the auto company, etc., 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, the industry had tried to pass on some price increase, and this year again, there will be more price increases which will be coming, especially commodity price remains here. 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, 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 thing, the 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, etc., in the overall product.

My sense is, it should not actually impact usually the sentiment or anything 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, 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 prevents people from buying product like AC at home.

AC is actually still available at ₹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.

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 hikes, schemes will have to be continuously passed on in order to move demand, at least for the mid-segment brands, and therefore, the structural margins in this industry is going to remain under pressure?

I don't agree to that also. Every 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 quarter bad year, and then there was a rating change also which happened during the season, actually just before the prior to the season.

There was a huge inventory which was lying in the system for the old-rated ACs. Therefore, brands and channel was actually gaining the old inventory gain.

Basically, that led to some kind of a pricing pressure and pricing could not be, the other cost could not be passed on fully. This year, we don't think that is the case.

Most of the brands and most of the companies are under tremendous pressure because of the the the high price of the commodity, and 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 mid-brand where we have been seeing every 2-3 years, there has been a new player who has been coming and, trying to gain market share by dropping prices.

People are getting used to it, and the whole industry is actually suffering because of the very high commodity price, especially copper, aluminum, etc. My sense is, this year 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.

Got it, sir. This is helpful.

Thank you so much, and all the very best.

Thank you.

Hello. Am I audible?

Sir, first question on the volume growth. You mentioned 20% to 23%

Hello. Is it better?

little bit. Okay.

With low base for most of the quarters from here on, especially Q2 and Q4, and the price hike, is it fair to assume that this 20%-plus volume growth is achievable for the full year considering, say, low channel inventory and all the other factors of unfavorable base, etc.?

We think that should be a possibility for us given the fact that for us for the next 9 months, barring December, base is pretty low. Yes, if industry is even normal in the sense that we see industry normalizing and like last year the channel inventory is not high, etc., we think that we should be having close to 20%-plus kind of a volume growth for the full year.

In that, just one follow-up. As you mentioned, except for December, for most of the months or quarter, you have much lower base.

The 20%, you're thinking of 20%-plus, because I think 20%, considering industry growth and low base, isn't it a low number? The derivative question is that FY27 earning, you think can surpass or meet FY25 earnings?

That is my follow-up.

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 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 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-November, we hope to gain further market share in the outsourcing market.

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 4%-5% better than that.

Noted. Sir, the second question on just slightly longer-term outlook.

You have highlighted ref expansion, washing machine, and compressor. Even if I add, say, at least with first phase of all these three products, the EBITDA that can contribute on the current high base won't be significantly higher, say probably 2 years down the line.

From, say, exiting 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, or whichever way. 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 capacities 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. 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 the TV through our joint venture. All these things put us at a very strong positioning for anybody who is 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.

In the last 3 years, we have actually, including this year, we have done very significant capex. Our gross block is more than doubling at the end of this year from previous 3 years back if you will see.

Now it's high time that we try for the next at least 1.5 to 2 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, '27, '28, I don't see any reason why we will not have 25%-30% growth for us.

Even if, say, for '29, 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 profitability including 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 2-3 years, at least with the capex and the things we have done in the last 2-3 years.

Understood. Sir, just last question, say, on ref and compressor, which are new product

Sure. Thanks a lot, and all the best.

Prafull. Hi, good morning, sir, and congratulations on good numbers.

Sir, broadly want to understand more on this R&D capability we are building, in terms of capital allocation towards it, human resources in terms of hiring, and what exactly are we building over 2 to 3-year period in terms of, say, capabilities in terms of technology, and then manufacturing on the compressor side? That's all we want to understand.

In the medium term, what we are trying to build?

Vishal-ji, will you like to take this question? See,

Praful, that at the organization level, we are undertaking a lot of initiatives like SAP is being implemented across all 14 units across all group companies also. SAP journey started a year back, and now we are very well confident that we are done a 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. Then lot of management development programs are also undergoing.

We have also hired one part of the Big Four audit firms who is helping us in defining SOP for key business processes in the company. We are undertaking all these steps so in order to make sure that this growth is sustainable.

His question was more on R&D capability. Pramod-ji,

yeah, please.

Yeah. 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 a 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, and 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. 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, 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. 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. 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, and we have now a new COO who has come who has a very vast experience in the AC 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, and 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, etc.

Right. Okay.

Thank you, team. Thank you.

Thank you.

Are you able to hear me? Sorry, I was on mute.

Yeah. Hi, sir.

Thank you for the opportunity. Couple of questions.

One is regarding the EBITDA margin. You said there's commodity inflation and that with a lag you'll 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?

Because you said somewhere in December you will be able to pass on the further commodity inflation.

10% EBITDA margin, that is not the way that our business work 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, the margins typically look high.

Also, couple of years back when the copper was at maybe $7,000-$8,000 per ton, now it has gone to $14,000 per ton. The customer doesn't 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 or something like that. In that scenario, your percentage margins will look low.

Coming to that 10% question, I don't think 10% 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, 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 per-piece basis to the normalized levels soon both in AC and washing machines.

Because the commodity inflation has been very, very high. It has been a big challenge last year because of the rating change, etc., and high inventory for the brands also to pass on the full commodity price increase.

Therefore, the whole value chain has suffered. This year, I don't see that kind of a reason, and we think that price increase will be passed on in the whole value chain, and therefore, things should start normalizing.

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 that would be the same value for one unit of compressor that will be manufacturing?

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

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

RAC realization average will be probably close to ₹21,000 now.

Okay. Fair enough, sir.

Thank you so much. Really helpful.

That's it from

my side.

All my questions has been answered. Thank you so much, and all the best to the management.

Thank you.

Hi. Can you hear me?

Yes, I can hear you.

Yes. Hi.

On lines of margin only, I understand that by December, we are expecting to reach back to the normal margin level in absolute terms. A, should we see a YoY flattish margin percentage as compared to previous year?

Second is, how much should be the absolute EBITDA growth that we can expect for the current year?

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 December quarter 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, on an overall basis, I am expecting margins at the operating level, which is basically ex of PLI, ex of any incentive, etc., to improve significantly because that pass-through 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 7.7%. We are hopefully going to reach that number on a full-year basis, and therefore, we are expecting that the next 9 months should be better for us, especially the fourth quarter when all these things start coming, which is going to be the high quarter also for us.

Understood. So 8% margin is what we can expect for the full year.

Yes.

Okay. Thank you.

Thank you.

Thanks for taking my question. First is on the compressor side.

You mentioned about 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 all in pipeline, is sufficient to offset this import?

Also from PGEL's standpoint and maybe perhaps at the industry level, what are the key risks that you see that plant capacities coming on line, probably won't come on line on time as expected?

Pramod, you want me to take this?

Yes, sir, please take this.

Okay. At industry level, I think we are still importing around 50% of our compressor requirements in India right now, around 50% to 60% right now.

A notification has come where any compressor import is allowed, but that is restricted to 25% of your FY25 imports. The industry, if industry has imported in FY25 maybe around 10 million compressors, at a 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. We believe that with this quota which is available to the industry and whatever new expansion 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 in availability in India.

As Pramod 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 the time March-April, we'll 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. At a 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 estimate, internal estimates.

Thank you. 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?

There can be lot of geopolitical factors right now. See, we are living in such uncertain times.

You no, no what will happen tomorrow. See, whatever things you make in India, there are lot of things which we are dependent upon overseas suppliers.

If we get any constraints on that, then that is one risk which is there for the whole of the industry, not only for us.

Within that, the company's point of view, are we covered in terms of technology and the machinery that we need for these lines?

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.

Thank you very much. All the best.

Thank you.

Yeah. Vishal-ji, good morning.

Before going into questions

Yeah. Is it okay now?

Yeah. Vishal, first of all, I'd like to put some concerns before asking questions.

I was waiting in call since 1 hour, and the operator is giving opportunity to other people to ask follow-up questions. When I asked that, then they told that it's management prompt.

If it's your call to select the users, you can comment later on that. Secondly, in the No, no, no.

Sorry, sir. No, no, sir.

I need to comment on this here only. We don't select the calls.

We don't select the question asker, sir. No, no, sir.

We don't do that. I think, whenever a person is asking questions, they are allowed to ask a follow-up question.

Only once follow-up question is allowed. That is what SOP they normally follow in such earnings call, sir.

Please continue with your question.

My opinion also the same. After completion of a question, they've given second chance to other people for the follow-up questions.

It should not be the case when people are waiting in a call to ask their first questions. Secondly, sir, on the investor relations communication, you invited people to plant visits also in so many calls.

When we send the email for that one, there'll be no response. Also, when we send any questions after concall when we didn't get opportunity to ask questions, there'll be no responses from the investor relations email, sir.

Last time in the last call, after completion of call, I send an query regarding the PLI benefits, whether it will be accounted in Q1 or not. No response.

Even that is a mistake from our side, sir Sir,

maybe that's a mistake from our side, sir. What I will do, once this call is over, I'll have your mobile number with me.

I'll ask the coordinator to share your mobile number with me, and Pramod-ji's number and my number will be shared with you. You can directly interact on this, sir, at a direct level, sir.

Sorry for this if we have ignored it, sir.

Thank you so much for the clarification. For the first question is regarding the inventory, sir.

Last year, we had an impression that it was inventory and this time we thought that it will reduce substantially. Still, I think we are at around greater than ₹1,000 crore inventory by the end of June.

How is the level adopted, sir, and do you see any reduction in the coming quarter?

I'll take this question, Vishal. You have to realize that commodity prices are continuously increasing.

Second thing, supply chain is also getting a little bit constrained because of the QCOs, etc. For example, I'll tell you, as Vishal already told you, that compressor import is not going to be allowed in India from 1st of April, 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.

Second thing is similar thing is happening on the copper tubing which typically is imported, especially the inner-grooved copper tubing, IGBT it's called. That import is getting restricted from November.

Post November, you cannot import IGBT into the country. Now if these kind of things are there in the system, then keeping some strategic inventory level becomes very important to continue to 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 ₹700 crore. This year, the same 5 lakh AC inventory is probably at something like ₹940-odd crore.

That is the kind of difference which has happened in terms of the increase, especially because of the copper as 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 ₹100-odd crore lower if that would not have been there. 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, etc., are 12% to 15% on a YoY basis because of the higher commodity price, but the input prices have also risen very sharply.

Yeah. Sir.

Thanks for the explanation. My second question is regarding the washing machine.

Washing machine, I think, compared with the seasonality, compared with RAC, it is consistent all over the quarter, sir. What was our previous capacity and what was the capacity utilization before commissioning of this new facility, and the new facility, what kind of utilization level you are expecting by the end of the year?

Vikas, will you like to take this question? Yeah.

Basically, sir, this new capacity which is coming on line will bring our total capacity to around 3 million. We are hopeful that 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 2 to 3 years.

Just a follow-up on that, sir. We added capacity.

What was the

No, no, no, just hold on. Let him continue, please.

Tell us, Mr. Krishna.

Yeah.

What I was asking, sir, we added a capacity because the previous capacity would be reaching some optimum level of capacity utilization. I'm asking about what was the previous capacity or utilization, because when these capacities also reach some optimum level of utilization, maybe then we'll go for again some capex.

That's why I'm asking.

Mr. Krishna, the current capacity utilization that we were able to achieve was almost on the annualized basis almost around 70% 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 2 to 3 years, we should be able to have a utilization of almost around 70%. Okay.

Thank you so much for the clarification, sir. All the best.

Hello, sir. Am I audible?

Yes.

Sir, after the compressor unit comes on line, what kind of margins do we expect, and what is the fixed asset turns that we're expecting post the commissioning of all our capex?

Overall on a company basis, we all the time target that fixed asset turns 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.

We hope that given the fact that first time 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 1st of April 2027, then compressor pricing should also remain good and it should be giving us good, decent margin because pricing power will be there in the system because imports will probably be restricted.

Sir. You said 4x plus, this is on gross block basis.

Any margin guidance for the next year as such?

No, no. Margin guidance is not there even for this year.

This is a 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. Given the backward integration and new capex, etc., and hopefully the better volumes in the coming quarters, we think that 8% is something which we should be able to achieve.

All right. Thank you, and all the best.

Thank you.

Hello. Am I audible?

Thanks for the opportunity. Sir, just a one question on the seasonality of the business.

Since we are diversifying to refrigerator, washing machine, compressors, what impact it will have on the seasonality which we had been seeing, more dependence on the RAC business? How it will go on in next few years?

Obviously, with all the diversification initiatives which we have taken, 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 2 to 3 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, etc., 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.

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

See, it is the first line which we are commissioning. One line can give you roughly about 2 million kind of an output at 80% maybe about 1.6, 1.7 million compressors.

When you can take for the calculation point of view about ₹2,850 or ₹2,900 kind of a pricing per compressor. That is the kind of output which you can have.

The plant which we have commissioned has a the land and building is good enough to totally deploy four lines. First line has taken us is going is taking us close to about 6 months to commission, 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 part components which have, critical plant and machinery components which are have a long lead time, which will not be required in the second phase of growth.

We can actually in the same plant grow 4x the initial capacity, and also the future expansion will be much faster. Okay.

Thank you, sir.

Hello. Is my voice audible?

Yes.

Good morning, sir. Thank you for the opportunity.

I just want to ask two questions. The first one is regarding the order book.

Could you please comment on that, what is the order book as of Q1 FY27, and what order book we have executed? The second one is of the capex, that any capex plan if you are having.

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 the 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, 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 within time for the summer 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 share the numbers for that, and we have never had a practice of sharing those numbers.

Okay. Also, sir, any capex plan if you are having?

This year, the total capex that we have is about ₹400 crore, which is going to actually be utilized in completing the ongoing projects of compressor and refrigerator. 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.

Those are the only capex for this year. This year, more focus is on completing these projects and start basically sweating these assets.

Sir. Considering of Q2, just I want to ask any approximation that do you see any festive demand opportunity which will be there, it will benefit for the Q2 revenue or something like that?

We do not give any quarterly basis guidance, we have never given. See, this totally approximation that the festive season is approaching and is going to start in some days or in some months, within 1 month.

You see that any benefit of this will effect on the Q2 results or something like that? Any benefit?

No, we don't comment on that, no thing. Q2 numbers, etc., I won't comment, actually.

Okay. Thank you, sir.

Thank you.

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? You can share my number with him and share his number with me so that whatever query is here, we can take it on later.

All others, whoever has any question, they can take our numbers from Nikhil. Nikhil, you need to coordinate whatever questions they have, the follow-up questions.

We need to take care that those questions are addressed effectively by us. Please.

Thank you. Thank you all.

Thank you.