Ladies and gentlemen, good day and welcome to the PG Electroplast Q1 FY26 earnings conference call hosted by Axis Capital Limited. This presentation has been prepared for informational purposes only. This presentation does not constitute a prospectus, offering circular or offering memorandum, and is not an offer or invitation to buy or sell any security, nor shall part of or all of this presentation form the basis of or to be relied on or in connection with any contract or investment decision in relation to any securities. This presentation contains forward-looking statements about the company which are expressed in good faith and in the management's opinion are reasonable. The forward-looking statements may involve known and unknown risks, uncertainties, and other factors which may cause the actual results, financial condition, performance, or achievements of the company or industry to differ materially from those in forward-looking statements.
Those forward-looking statements represent only the company's current beliefs, intentions, or expectations. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Agarwal. Thank you and over to you, sir.
Thanks. Good afternoon, everyone. On behalf of Axis Capital, I welcome you all to PG Electroplast Q1 FY26 earnings conference call. Today, we have with us management represented by Mr. Vishal Gupta, Managing Director, Finance, Mr. Vikas Gupta, Managing Director, Operations, and Mr. Pramod Gupta, Chief Financial Officer. So, without taking much of your time, I will hand over the floor to the management for the opening remarks, post which we will open the floor for Q&A. Thanks, and over to you, sir.
Thank you. Thank you, Deepak. Good afternoon, everyone. Thank you for sparing your valuable time and joining this call today. Hope all of you are doing well. Let me start by saying that this quarter was softer than what we have expected. We have just come off a year of very strong growth, strong demand, and strong execution. And naturally, we were confident heading into FY26, and our guidance reflected that optimism. But what changed quite quickly and unexpectedly was the weather. The monsoon arrived earlier than usual, and the room AC season ended abruptly. Sellout in the trade channel was lower than forecasted, and inventory levels stayed higher for longer. In hindsight, we weren't fully prepared for that kind of shift in this quarter. Given this and the visibility we now have for the next couple of months, we have recalibrated our guidance for the full year.
We believe this is a responsible thing to do to stay transparent and align with where the market is today. That said, it's also important to look at what didn't change. Our room AC business still grew 15% basis in this quarter despite the season cutting short. Washing machines grew by 36% with strong volume growth from new platforms. Our new plant in Bhiwadi is already ramped up now. Our order book is healthy. We are expanding capacities in RACs, washing machines, and coolers, and client engagement across large and emerging brands remains strong. FY26 will now likely shape up to be a more measured year, and that's fine. We will use this time to consolidate, focus on operational levers, and execute our platform and capacity investments with more discipline. These are the foundations we need to get in place for the next phase of growth.
We remain confident in the long-term opportunity in India's consumer durable market and in PG's positioning to be a key enabler in that space. Our focus remains unchanged to scale profitability, to stay capital efficient, and deliver consistent value to our stakeholders. With this now, I will hand over the call to my colleague, Mr. Pramod Gupta, our CFO, to elaborate on the financials.
Hi. Good afternoon, everyone. I'm sure all of you have seen the financials in detail already. Thank you, Vishal, for giving the introduction. Let me take you through the numbers for quarter one. Consolidated quarterly revenue stood at INR 1,504 crores, which is a 14% increase over Q1 last year. Of this, the product business contributed INR 1,159 crores, or 77% of the total revenue. AC business contributed INR 1,015 crores, a growth of nearly 15%, and accounted for around 68% of the total revenue. Washing machines were up 36%. Cooler sales were slightly lower on account of the shortened season. Our 100% subsidiary, PG Technoplast, reported revenues of INR 1,211 crores during the quarter. Coming to the profitability, EBITDA for the current quarter stood at INR 139 crores, and it was up 3.5% year-on-year. Net profit was at INR 66.7 crores compared to INR 84.9 crores in Q1 2025.
The drop in net profit is mostly due to negative operating leverage from AC volumes or planned AC volumes and some input cost pressures. Due to the abrupt end of the season, we were left with high inventory levels this quarter. To manage our cash flows, we had to get a lot of our receivables discounted, which led to an additional outflow of almost INR 20 crores of financing cost. Our overhead remained high during the quarter as we got caught off guard. We are working on optimizing our overhead cost. From a balance sheet standpoint, the company remains on a strong footing. We have cash and equivalents of around INR 911 crores, and return on capital stands at 25.2% on trailing 12-month basis. Our fixed asset turn remained healthy at over 5X.
Now, coming to the revised guidance for FY26, we expect PGEL standalone revenues to be in the range of INR 5,700-INR 5,800 crores. Net profit is expected to be between INR 300-INR 310 crores. At the group level, including our joint venture, Goodworth Electronics, we expect consolidated revenues of INR 6,550-INR 6,650 crores in sales. We have also pushed some of our CAPEX plans to next year. We are continuing with our investment in Greater Noida, Supa, Rajasthan, and South India, with FY26 CAPEX to be between INR 700-INR 750 crores, down from INR 800-INR 900 crores planned earlier. As always, we are watching market trends closely, and we will adapt if needed. But our long-term investment, operating model, and growth priorities remain unchanged. With this, I'll be happy to take any questions. Please open the floor for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Saumil Mehta from Kotak AMC. Please proceed.
Yeah, thanks for the opportunity. Sir, two questions from my side. Now, obviously, this season is going to be weak, but in terms of our discussion with the larger clients, what sort of pricing actions are we taking? Have they asked for better pricing for us given they themselves are under stress? And in that backdrop, how should the overall margin profile look for the upcoming season for us? That's my first question.
I'll tell you, right now, pricing is not being discussed. Right now, there are so many other issues which are being discussed with the client because of the kind of inventory that we have accumulated for our clients, and those materials have not been taken by them. So we are discussing those things right now. Pricing things are not in discussion right now because even if you are able to offer some discount, there is no demand for the material because the channel is totally choked up with the inventory. So that is something which is not being discussed right now. Margin profile will remain under pressure. That is why the guidance has been revised because we believe that there might be some pressure on the pricing. That is why we are factored in those things in our guidance.
And is there any early indication of cancellation of orders? And if yes, will it come from the larger clients or mid-size clients? Any rough indication or estimates of what we are projecting for this year?
What happened was a lot of cancellations happened for the month of June, July, and August. In fact, all the plans which were there, they were canceled to the tune of 50%-70% across most of the clients for the month of June, July, and August, and the situation for the next year or the next season, we will get to know only post-September or maybe sometime in mid-October because by that time, the whole industry is expecting that there will be some introduction in the channel inventory, and then they'll be able to plan for the next season. Right now, most of the brands as well as contract manufacturers are actually slowing down the production to probably get rid of the inventory in the channel and the inventory that they have for the finished goods.
Because this year, there's a rating cycle change, and the current inventory which people will be having, especially the brands and the contract manufacturers, will be difficult to sell post-January first.
Sure. And my last question, any update on the compressor tie-up? We were going to announce that very soon. At what stage of negotiation that is? And ballpark, any change in economics from where we were earlier looking for that JV? That's my last question. Thank you.
So as far as the economics is there, there is no change. But there is some delay in getting some clearance from the governments, especially from the China government, on this project. So we are just waiting for that. There has been a delay, but in the next one or two months, we will have some more clarity on this.
Sure. Sure. Thank you so much.
Thank you. We take the next question from the line of Vishal Dudhwala from Trinetra Asset Management. Please proceed.
Thank you for the opportunity, sir. Am I audible to you?
Yes, you are audible.
So can you throw some light on your refrigerator business in the upcoming year to your installed capacity or utilization or the expected revenue contribution? Plus, any signed clientele for this?
Vikas? You will be there?
We are in an advanced discussion with our clients, and we are in the process of acquiring a land parcel in South India. We should be able to finalize that within this month. And we have already onboarded a team for the development of the complete project. So the timeline for that project will be tentatively take almost around 12-14 months from now to start the mass production. So the revenue will start kicking in, and it will have numbers that will accrue in the FY27 only. We are in active discussion with the clients, which are already our common clients in our air conditioner business as well as in washing machine business. So we have an overlap of clients there, and we are confident that we should be able to tie with one significant client in the coming days and weeks.
Okay. And the second thing, can you just tell us how much expectation in expansion of the RAC air cooler and washing machine capacity?
So right now, Vishal, I'll do something. RAC, the capacity expansion has been a little bit curtailed, but the land and building where we have already started the CAPEX, we are not holding back. But some plant and machinery orders have been held back, and we will closely watch the season, how this 2026 season will pan out. After that, we'll decide whether we have to further expand the capacities or not.
Okay, so why not?
In case of washing machines, we are seeing a robust growth, and we are further expanding our capacity in washing machines. And so we will make our capacity. We'll take it to the level of more than two million washing machines in the current financial year.
Okay. And what about your air cooler?
Air cooler also, sir, this year's season has been quite muted, so we already have enough capacity for that, and creating capacity for air coolers, the lead time is very less, so I don't see any major challenge. Whenever there is demand, we can ramp up the capacity very fast in air coolers.
Okay. And one last question about the costing. AC costing and how much they have inventory in the costing of inventory?
Sorry, I didn't get your question. Can you repeat?
So question is about the AC costing.
Hello?
Question is about AC costing.
Right. What was the question? Can you repeat your question, please?
Okay. The unit economics of your inventory about your AC?
We don't have any finished goods inventory. A large part of the inventory, almost 97%, 98% of the inventory is actually the raw material for the making AC. Actually, everything is made to order. Basically, depending upon the order from the brands we make, and typically we don't keep inventory of more than a week or so. So right now, we do not have much finished goods inventory. It's largely the raw material inventory which we have.
Okay. So that's it from my side as of now. I will wait and let you.
Thank you.
Thank you. Before we proceed with the next question, I would like to request participants that please limit your questions to two per participant as there are several participants waiting for their turn. The next question is from the line of Ashish Jain from Macquarie India. Please proceed.
Hi, sir. Good afternoon. Sir, my first question is, you also look at some of the comments you made in terms of your AC capacity expansion. We are putting on hold. And these seem like quite serious comments, right? Because we are building business for the next three, five, 10 years and one bad season, and we are revisiting or even closing out our expansion. Can you just talk a bit more about that? And secondly, I think earlier you made a comment that we had to do some better discounting for cash management and also. Sorry, I hope I heard it right. But can you just elaborate a bit more on that as well?
So first question, I will take. Second question, probably you will answer. So I will tell you, as I told earlier in the call, we are not holding back our creation of extra land parcels and creation of buildings where the lead time is much higher. Plant and machinery lead time is four-to-six months. So whenever there is a requirement that can be always taken in four-to-six months lead time, you can manage that capacity. The longer lead time is the land and the building which we are not holding back those investments. And cash flow, so in order to conserve also cash flows, we have tried to hold back some CAPEX in order to conserve cash flows also.
Second question.
Coming to management of cash flow, see, we had already ordered inventory for the season, which it was based on the ordering from the clients. But as in the months of May, June, July, we saw that the orders were not getting canceled. Basically, orders were getting canceled, and we were not able to convert that, but we had to pay the payables, basically, to the vendors. So what we did was basically whatever sales we had, and we started getting those discounted from the bank to pay to the, basically, our vendors. And that has actually led to some additional cost because we are having a lot of raw material inventory.
If you see the balance sheet which has been given on the presentation, this year, we are carrying close to INR 1,300 crores of inventory, whereas last year, 1,356, out of which almost close to INR 1,200 crore inventory is in AC business, and last year, the same number was only INR 368 crores, so INR 1,000 crores of additional inventory we are carrying, and that actually led to our cash flow getting a bit strained because we have cash, but that cash is for a very specific purpose because of the CAPEX plan which we have and the objective of the QIP issue which we have taken.
So this inventory number is as of June, you are saying?
No, the INR 1,350 crore inventory.
Pardon? The inventory number you said is as of June this year or March number you said?
Yes. No, I'm saying June this year. June this year.
Okay. And the second one is on the customer side. Like you said, any.
Thank you so much, Ashish. I would request you to go back to the queue as there are several participants waiting for their turn.
Okay.
Thank you so much. We take the next question from the line of Aman Soni from Invest Analytics Advisory LLP. Please proceed.
Hello. And audience? Hello.
Yes. Please go ahead.
Sir, continuing with the previous participant, we are pushing our investment plan to the next year. But what I am not understanding is because you mentioned it is mainly because of the monsoon season, right? So it should be a temporary thing kind of. So in this case, if we are shifting our CAPEX, so there must be some strong reason for it. So are you people witnessing any kind of change in the customer sentiment which are getting affected as a cascading effect of the global headwinds which we are witnessing right now? Is that the cause which is resulting in the shifting of the CAPEX? So that's my first question.
First of all, let me tell you, as I told earlier in the call, we are very confident about the long-term and medium-term potential of consumer business in India. There is no issue in that. Coming back to your point, like I explained, we are already going with the CapEx. The earlier CapEx guidance was around INR 900 crores, which has been scaled to INR 700 to 750 crores. There is not a very big cutback in the CapEx. CapEx is happening. Some plant and machinery orders are being delayed to next year, and the compressor project which was planned was supposed to happen this year. We are estimating it might slip into the next year, right? That is why there is some revision in the CapEx guidance.
We are very confident about the long-term and the medium-term potential of this business because the penetration of the products where we are operating is very low in India, and second point, see, next two, three quarters will be a little soft, but going after that, we see a very strong growth happening again in this business. Actually, two quarters, we look maybe up to November, December, we might see some softness up to November. After that, I think we are going to see a strong pickup, very strong pickup. I will just explain to you one thing. April, we saw 70% growth on a month YOY basis for the month of April. May, we saw a growth of around 18%, but June and July has been down by 70% YOY degrowth is there in June and July.
So, see how abrupt, how volatile the behavior is right now. So we have to closely see. We are carrying very large inventory. So we have to turn cautious right now. We have to be careful now, sir. But let me assure everyone, we are fully geared up and fully prepared for any growth. We are very much focused on that. The idea is to keep our focus on capital efficiency also. We are already carrying a lot of inventory, so we have to be very careful now.
Understood. And you also mentioned about the price erosion thing, and that is why we are estimating it in our margins as well. So I want to understand more towards it. Is it mainly because of we have to clear our inventory, or is it like we are seeing more of raw material kind of inflation? And when, like you mentioned, after November, there will be pickup in demand? So do you see margins will also start picking up from then?
See, the margin picture will become clear as the new season negotiations start. Right now, the new season negotiations have still not begun. Most of the people and brands are still busy with the last season inventory and the inventory in the channel. So we, as a cautious sense, are saying that pricing is likely to be under little pressure, but we don't know exactly how the situation is going to pan out. That will totally depend on the channel inventory and the inventory with the brands till the new season negotiations begin, and I will further add to one more point, so as we told that June, July have been very soft, so AC being a seasonal business, the only thing which matters is how many months, which months you make money, and which months you try to bleed very less.
So what we feel this year, those months where we will have little soft financials, those months will be little more. That is why that guidance has been revised accordingly for that.
Got it, sir. Thank you very much, sir. I will join very quickly. Thank you.
Thank you. We take the next question from the line of Aachal from Nuvama Institutional Equities. Please proceed.
Yeah. Good afternoon, sir. Thank you for the opportunity. Sir, sorry, I'm just hopping on this industry part. If you could give us a broad sense about the industry from January to June, because what is happening is the March quarter was phenomenal, and the June quarter has been a bit weak. So if you could help us understand January to June, how the industry volume would have been, how much would have been the outsourcing percentage, and how have we done on the January to June period in terms of volume growth? If you could help us understand that part first.
See, industry did very well up till April, actually. Although there was a bit of a weakness in the southern market because this year, southern market never picked up. But as per our understanding, industry was still growing very well till April. And overall, the sales to the channel were very good in the sense that the probably industry, basically brands, sold almost close to 20%-25% growth they posted in the month of January, February, March, and April. But then from April mid or April end, things started becoming slower. And May was a bit of a very bad dampener month because towards the end of May, only the monsoon covered the whole country. See, till actually May 20th also, the sales in North India were pretty decent, and North and West were doing okay. Then Southern and East never picked up this year.
So there was a bit of a slow response on those markets. But post-May, I think everything has just collapsed because the channel inventory is high, and outsales from the channel were very slow in the month of June and July. And that started reflecting on the sales from contract manufacturers to the brands. And it is now getting reflected in the numbers also. Although I will say still that the contract manufacturers have still now posted better numbers. Probably the growth for the AC business, AC fully built AC, as we call finished unit AC, has been still, even in the quarter of April, May, June, positive to the tune of 10%-15% by the contract manufacturing industry. But the brands have mostly posted a negative or a decline from last year, anywhere between 10%-12% to 30% till now.
I think we will have to watch out for the quarter ending September and maybe December, and how the inventory actually reduces is going to be important.
Understood. Sir, again, I'm going back to the question. In terms of for six months, if you could give a holistic number, how much would have been our growth for us? If I see it's 103% YOY in fourth quarter for RAC, and it's 15% for the first quarter, does that mean that our volume growth is 50, 60% or 70% type?
Yeah. Our growth will be to the tune of about 65% or so in the first half this year. But as I'm saying, for the last three months, we have actually for the month of June, July, and now even August, we are seeing a decline, which is to the tune of 60%-70%. And this is largely because most of the orders have been canceled because there is an inventory with the channel as well as the brands.
Right. And if you could help us understand in terms of the channel inventory, because we get to hear that channel inventory for a particular brand is very, very negligible or probably just a month extra considering the monsoon season. So any color you could provide in terms of the channel inventory? And also with the brands, any color on the number at the industry level if you have?
I think overall industry level and inventory level are probably close to two to 2.5 million, which at this point in time should have been less than a million. That's all I can say, but then there is an additional inventory of finished goods with the brands also, which in our estimate is to the tune of about two million.
So you're saying it's as large as what is with the channel is with the brands. Have I understood right?
Yes.
Right. Does that mean, sir, is there a downside risk to your numbers in that case given the brands are stuffed with so much inventory that you could have a further downside risk to the profit number what you are guiding for?
We have taken these numbers are on a very realistic basis, actually, and they are based on some estimations and some calculations, and we are very confident of achieving these numbers. We think that these numbers are base minimum, which we should be able to do.
Got it, sir. Thank you. And wish you all the best. I'll fall back in the queue. Thank you.
Thank you.
Thank you. We take the next question from the line of Kaushik Mohan from Ashika Group. Please proceed.
Hi, sir. Sir, I just wanted to understand from the last guidance that we have from that guidance to this guidance, we have reduced it around 90 crores almost. So how much in that 90 crores is being put into inventory costing that we are taking? And how much is for the financing costing that we are taking? Because it's both the side that is affecting us, right?
Almost close to 40-50 crore will be because of the additional inventory which we are carrying. We have about 1,000 crore of additional inventory, which we think we will be able to reduce only in a meaningful way post-October, November. For six to seven months, you can imagine the cost of carrying almost 1,000 crores of inventory which we are carrying.
Okay, and remaining around the INR 40-50 crores will go for the costing side?
Not costing, there's an operating leverage. See, in our business, the way it works is that AC business is highly seasonal. So you make good money in the season when your plants are running at a good utilization level, and you actually lose money in the off-season because you are never able to cover your fixed cost. In a good season, typically these bad months or the loss months are lower numbers, and good months where you are running your plant at optimal utilization are high. Here, that situation has changed, and we are seeing probably a higher number of loss months because of the very high inventory and very low offtake from, say, June till November maybe, and therefore, we are guiding for taking that negative operating leverage into account. We are guiding for a new set of revised profit numbers.
Got it. And sir, on the CAPEX side, we are doing around INR 700-750 crore in this year. How much is going into it for the existing business, and how much is going for the new businesses that we are going to cater for?
Almost INR 400-INR 450 is for the existing business, and INR 300 crores is going for the new business, which is refrigerator.
Got it. Sir, with the new business coming into line, do we have how much kind of the mix in the revenue are we expecting in next year? The contribution of the AC in the overall pie comes down. Do we have anything on that side?
Overall contribution of AC will be probably coming down because we are hoping other businesses to expand faster. But nonetheless, for the next couple of years, maybe this year and next year, you should assume that the change that will happen is not going to be very significant. Next year is going to be the first year. It is going to be a ramp-up year. And I do not think we should assume more than INR 200 crores of contribution from the refrigerator. FY28 should be a year when we will see probably full year for refrigerator and full ramp-up capacity utilization in the refrigerator business.
Got it. Sir, with the current balance sheet and with the new CAPEX?
I'm sorry.
Ma'am, last one question. I'm sorry. With the current balance sheet and with the CAPEX work we are going to do, what is the optimum top line that we can expect, sir, if we are keeping still at the 5X of the figure set? What kind of a top line that we can visualize?
You should assume about 4.5-5X on a fully ramped-up basis on a net block. That is typically the asset turn we try to achieve in our business. So to begin with, it should be at least about 4.5. And then as the ramp-up happens and the capacity gets optimally utilized, we should be probably close to 5X on the fully ramped-up basis.
Got it. Got it, sir. I'll come back and look here. Got it.
Thank you. Before we proceed with the next question, a reminder to the participants, please limit your questions to two per participant. The next question is from the line of Neel Mehta from Equitree Capital. Please proceed.
Hi, sir. Am I audible?
Yes.
Sir, thank you for the opportunity. Sir, I just wanted to understand one thing that current inventory levels are at almost INR 1,400 crores. How much time will it take to liquidate those inventories? Because I'm assuming in third quarter, because of the Star Rating, new kind of orders will be assigned, right?
No. No. That assumption is wrong. I just want to correct you here. That assumption is wrong. There will be a good amount of orders for five-star ACs of the old rating. And most of the components are going to be anyhow used even in the new star rating ACs. So that obsolescence risk is very minimal, maybe very, very small, maybe not even 0.2% or 0.3% of this INR 1,200 crores of inventory in the AC business, which we have.
Okay, so as in no incremental capital we have to deploy for those orders, right?
See, also, I want to highlight one thing that in the month of April and May, we were running at almost close to 400 crore plus run rate in AC business. So for both months, when the season was going on, we can actually do a production of more than 500 crores of AC with our existing capacity. So these inventory levels, which are looking high right now, are there because there have been order cancellations for the month of June and July and August. And therefore, especially the month of June, as the month of May and June would have been normal, then the inventory levels would have been much lower.
Okay, sir. Got it. And sir, just one last question from my side. Sir, is there any change in unit economics of the compressor plant as of now, or is it the same?
No. There has been no change in the unit economics. It's just that the partner is taking some time to get some clearance from their government.
Okay. Got it. That's it from my side, sir. Thank you so much, sir.
Thank you.
Thank you. We take the next question from the line of Tanish Chetia from Pumartha Investment Advisors Private Limited. Please proceed.
Hello, sir. Good afternoon. Actually, I wanted to ask two questions. One is upon how long will it take for you to actually work with maximum utilization after the CAPEX is done so that we can achieve the ratio of five which you mentioned earlier? And the second question is we have seen inconsistent promoter holding going down. Is there any particular reason for that? I'll take the first question. Typically, whenever you start a new business or new capacity, it is typically one to one and a half years before the optimal capacity utilization levels are reached. Because it's a new product, it takes time for getting the product validated and product approved with all the customers, and then finally to ramp up the capacity. Coming to the second question, if you see the, as you were saying, the promoter holding has come down.
Promoter in the last five, seven years have only sold only once. That was in the last year in the month of May this year. Before that, we have raised capital twice in this company, once in 2021, and then 2023, and then 2024, this and now. So because of those capital raises and QIP and money raised in the company, there has been a promoter holding which got diluted.
Okay. Thank you. If I can ask one more question, I wanted to know what is the guidance which you will give in the next year?
It's too early to talk about next year. It's too early to talk about the next year right now. Because even the next season has to start, and that will start from November, December. So let's see how the things pan out this year and how the second half goes. We will be talking about the next year maybe sometime in April.
Okay. Thank you. All the best.
Thank you.
Thank you. We take the next question from the line of vipraw Srivastava from PhillipCapital. Please proceed.
Thank you. Thanks for allowing me. Sir, quickly on the ESOP cost and how much is ESOP Q1 FY26?
Once you're breaking up, can you just repeat your question?
Sir, what I'm saying is how much is the ESOP cost for Q1 FY26?
Yes, sir. I'll just let you know. Just give me two minutes. I'll tell you. You can in the meantime ask me any other questions if you have.
Sure, sir. Sir, quickly on the quarter two, sir. I mean, August has been weak, but are you expecting revival in September and October?
I think we will have probably revival from the month of November. October is going to be a festival month. Typically, in festival month, we don't see much uptake. What has been our experience is that if the season is good, typically then the uptake happens in the month of October, November, and if the season is a little slow, then it happens in November, December.
Right, sir. So that's all on my end. Just the ESOP cost, that's only.
ESOP cost, I'll give you in the meantime. We can continue with the next question. I'm just asking my team to figure that out.
Yes. I'm done, sir. So you can let me know.
Share-based expense this quarter was INR 3.27 crores.
Okay, sir. Thank you. Thanks a lot. Thank you.
Thank you.
Thank you.
Thank you. We take the next question from the line of Keyur Pandya from ICICI Prudential Life Insurance Limited. Please proceed.
Thank you. Sir, just want to understand first on the non-RAC side. So how do you see any impact on the washing machine business? And if not, what kind of growth? So what are the expansion plans? That is first, considering what growth do you expect in the washing machine business? That is first. And second, on the compressor side, I mean, it has got delayed for quite some time. So if you can just let us know what kind of capital has already been deployed, then do you think that what timeline do you expect? Or do you think is there any risk to some cost? That is the second question. Thank you. And all the best.
Vikasji, can you take the first question? Second question, I'll take.
So, regarding washing machine business, fortunately, we are seeing a very robust demand, like as shown in our quarter one numbers. The growth is more than 35% in that. And we are very hopeful that we should be able to have a growth of almost 40%-45% in our washing machine business for FY26. So we are expanding our capacity. We are launching new platforms. We are adding new clients. So we are very confident on the washing machine business.
Coming to the compressor, we are seeing certain delays, but we are very hopeful and we are very confident that this business we will be able to do. Probably it will slip the CapEx part will slip to the next year, some part of it. We are hoping we have already done a CapEx of close to INR 1.2 billion in constructing the building. Building is almost completed. Right now, we will be making it in the coming months, we will be utilizing it for other purposes, maybe for keeping some of the inventory and maybe the season. But as soon as our partner gets a go-ahead, we will be ordering the plant and equipment, and then probably within six months, we will start installing that. So we are not seeing any risk for basically any issue of the plant and for the building that we have constructed.
By the way, that building can also be repurposed for other issues, other things if we need.
That building is just part of our existing campus, AC manufacturing. So this building is being used currently for AC products only right now.
Understood.
So there is no cost. I just want to clarify that.
Got it. Clear. Absolutely clear. So just tentatively, what timeline we should work with for compressor business? Tentatively.
Okay. So you know we have been always very transparently sharing the feedback. I was in China three weeks back and had a discussion with them. So it's held up at their end right now. Everything's ready. All plant and machine technicals, all commercials are closed. We are just waiting for that approval. Once we have that approval, I think then we'll put the ball rolling.
Noted. Sir, thanks a lot and all the best. Thank you.
Thank you.
Thank you.
Thank you. We take the next question from the line of Rajendra Singh, an individual investor. Please proceed. I would request Mr. Rajendra to please unmute himself and then speak. Rajendra, we are unable to hear you, sir. I would request you to join back the queue. Till then, we'll proceed with the next question. The next question is from the line of Abram Shrivasa from PhillipCapital. Please proceed.
Yeah. Thank you for allowing me to follow up. Quickly, sir, any other categories you plan to enter apart from refrigerator and compressors?
We keep on evaluating several proposals and several opportunities. But then, as we have been highlighting, we have a very strict capital allocation criteria and guardrails, and based on those guardrails only, we approve the new capacities or then new categories. We are in the process of evaluating certain categories, and as and when we decide to go ahead in any of them, we will be able to give you the information.
Right, sir. And sir, lastly, one more on the TV segment where PG is dealing with China. So obviously, large players in the industry have had a weak commentary. But what's your view on this? How is it ramping up as far as PG is concerned?
So for us, the television business is looking very strong. And we have given a guidance of almost around INR 850-900 crores of revenue as compared to last year's revenue of INR 540 crores. So we are maintaining that, and we are currently having a very strong order book. And the current festival season is looking very robust in that.
Noted. Thank you.
Thank you. We take the next question from the line of Mahesh Kaushal from MN Investment. Please proceed.
Hi, sir. Thanks for the opportunity. So just wanted to check. In May and we offloaded a substantial stake that was a promoter entity. And then from June, July onwards, we get such numbers. So just wanted to understand what was the thought process then, and is there something that is being missed? Because I mean, everything fell off a cliff post that. So just wanted to get your sense on that, that what happened and what was the thought process then?
Actually, as I have stated earlier also, in the month of April, we saw 70% growth. So we were seeing very strong traction in this business, as I've already stated earlier also in this call. It was looking very great. But suddenly, there has been a drop in the demand, and there is actually, it's kind of fallen off the cliff. It has just evaporated.
So you were not aware of anything in May and that's the question, sir?
Yes, sir. That is why we are caught up with so much inventory. That is why we are caught up with the cost and all those things have gone for a ride only because I will tell you what was happening. Till end of April or middle of May, clients were hoping that season will open up, and people were still continuing the manufacturing, and then suddenly, by end of May, they took a call that they have to control their inventories. It was very sudden, sir.
Tell me the reason on that?
See, I'll just tell you the reason. See, this year, till May, even in May, and the North market was doing fine. North and West were doing fine. There were high temperatures. See, typically, May is the highest selling month in any year for the AC business. This year, as the monsoon started getting earlier, first, the southern market closed, and then abruptly, in a very short period of time, in May itself, the whole of the cooling business actually saw an end because the monsoon covered the whole of India by May end. That led to a lot of cancellations in June. We had budgeted when we were giving our guidance, even in the 12th, May was our result. We had budgeted that there will be a slowdown because there were slow southern markets in the first half of the season.
But we did not expect the season to get abruptly ended in the month of June itself. And over that, July and August have also seen very, very low uptake. In fact, I can tell you, in the month of April, we had a 70% growth YOY. Even in the month of May, we had a 19% growth. In the month of June, we had a 70% decline. And in the month of July also, we had a 70% decline on a YOY basis in AC business.
Fair enough. Thanks.
Thank you. We take the next question from the line of Archit Singhal from Barclays. Please proceed.
Yeah. Thanks for the opportunity. So two questions from my side. Firstly, I mean, hypothetically, if we were to believe that next year the season would be strong, then would we be able to more than make up for the loss in FY26, I mean, loss in terms of guidance, I mean?
Next year, yes, if the season will be strong, we will be able to make more than make up. See, if you look at our track record, in the last four years, we have shown exceptional growth rate in our AC business. We have had an exceptional execution track record. In fact, in a category like AC, we have been growing at 100% plus last year. In fact, our AC business just grew 120% plus. In fact, fourth quarter also, we grew 100% plus in the AC business because there was an opportunity and we could see. Now, the environment is such that there is an inventory in the channel right now, and inventory with the brands also. Market is very slow right now. So till the time this inventory gets cleared, we cannot commit on the numbers.
But yes, if there will be an opportunity, we rest assured we will be the first one to bounce back, and the bounce back will be very sharp. Point number one. Point number two is, long term, we still remain very bullish and very optimistic in this business. We continue to make significant investments, and we are planning very significant, I would say, ramp up of the capacity or building up of capacity in the coming years. We are expanding our capacities in both north as well as western area. We are looking at building a new campus, a very large campus for AC manufacturing in western India. And in the north, in Bhiwadi, we are already going ahead with the CAPEX in the existing plant. So we have not had any change on our long-term view of the sector of the company.
It's just that this year, we have been caught off guard, caught on the wrong side with huge inventory in the channel and with us also. So we want to be a little cautious for this year.
Understood. And second question, I mean, like you mentioned about the long-term thoughts. So second question is, I think on the last call, you mentioned the gross block should increase from INR 1,200 crore to INR 2,200 crore in the next two years. And you also mentioned asset turnover on 4.5x or so. So fair to understand FY28, if everything remains, we should clock our revenue of INR 9,000 crore out. Is that understandable, sir?
That is what is the internal target that we have for ourselves, and we are doing all our CAPEX and whatever working we are doing internally, we are doing based on those assumptions only, so our long-term assumptions do not change because one season has gone wrong.
Understood. And if that happens, I mean, to achieve that revenue guidance, the margins which we can achieve in FY28 should be better than the FY25 margin because of operating leverage, right?
Hopefully, yes. Not FY25, but yes, we should be able to match or should be near to FY25 margins. Let's see how it pans out. But yes, we should be able to reach at least FY25 margins.
Thank you. That's it from my side.
Thank you.
Thank you. We take the next question from the line of Ruchita Kharge from iWealth. Please proceed.
Hello, sir. Very good afternoon. So, sir, mainly my question was on the other expenses side, right? So we've seen a huge bump up from the last two quarters in the other expenses side. So how do we see this panning across for the remaining quarters of this year?
See, what happened was, as I was telling you, that we were caught off guard, and we did not actually control the cost, and we were still having good commitments and orders which were canceled at the last moment. So some of those costs are on the higher side. In the coming quarters, you will see a good control on some of these costs. We remain very confident that we will be able to control some of these costs in the coming quarters.
So, sir, what is your, if you could just broadly tell me, as a percentage of revenue, how do you see this other expenses for the whole year?
See, in the past, they have been in the range of about 4%-5%, 4-4.5%. And in the long term, that is what we should be seeing in the normalized year. That is what should be the number, this other expense number.
Sorry. For this year, are you not guiding anything?
Yes. I'm saying that in the medium term, that should be the number. On a few-year basis, that 4-4.5% should be the other expense number which should prevail.
Okay. Okay. And what about the employee cost, sir? How do you see that going? Should this kind of reflect our revenue growth in terms of that?
This year, the employee cost is looking higher, and it will remain probably slightly on the higher side because of the lower growth and the kind of expenses which we are having because of the increases as well as the people which we have added. But it will also get normalized in a normal season, which we hope will happen probably from the next year.
Okay. So on the EBITDA margin side, we'll see around the 200 basis points decline, right, this year?
We have not built in that steep decline, but yes, there will be a decline on a full-year basis. Actually, if you see this year from the initial guidance, additional expenses of close to INR 50 crores odd will be there on the interest cost because of the inventory which is carrying. Then there is some cost which will be there additionally. Still, we think we should be able to control the margins in the range of about 1.25%-1.5% from the last year at the EBITDA level.
Okay. Okay, sir. Understood. Understood. That's it, sir. Thank you so much.
Thank you.
Thank you. The next question is from the line of Chavi from an individual investor. Please proceed. I would request Chavi to unmute and then speak. Due to no response from Chavi, please join back. We'll proceed with the next question. The next question is from the line of Karthik Soni, Soni & Associates. Please proceed.
[Foreign language]
Yes, we can hear you. Please go ahead.
[Foreign language]
[Foreign language]
[Foreign language]. I think except for Blue Star and I think Hitachi, everybody else has posted more than 20% decline in their sales in the quarter, in this quarter. And second thing is, even in these companies, especially, I mean, they have some other businesses also, which have been able to probably help them withstand such a huge decline. By the way, Voltas results are just come, and probably they have also shown a good decline in the unitary cooling product business. Yeah. And I think overall margin, overall the brands have seen in our opinion at least 20%-25% decline in the month of April, May, June in the sales to the channel. June was a total washout for most of the brands in our opinion.
Okay, so sir, one follow-up question. Sir, so much dependent on AC, so sir, our diversification is, what have we plan to diversification of electronics?
Yes, yes, we are planning a lot of diversification, and the results of those will be visible to you in the coming year.
Okay. And sir, one last question. Sir, [Foreign language] right?
[Foreign language].
So, sir, as I can see, sir, in the balance sheet of March 31st, sir, cash position is around INR 980 or so crores. And sir, we have spent about INR 900 crores already. No, cash position is still INR 900 crores. We have INR 910 crores of cash in balance sheet, but short term debt have increased for us from March to now.
And sir, that income kitna hua, sir?
About 200 crores.
Okay. Okay. And sir, so the CAPEX plan is still about the.
Sir, ma'am, just one, just a follow-up question. The CAPEX plan is still the 750-800 crores ka wahi impact hai?
Yes, we already have a planning 800-900 crores. Now, it is about 700-750 crores.
Plan approved. No additional debt?
No. We don't have, we don't require debt. We have cash in the balance sheet, and we will have internal approval.
[Foreign language]
This inventory will surely get over by month of January and February in our.
[Foreign language]
December and January.
Long time, so that, so that's a long time to hold up, sir.[Foreign language]
So, we are aware of that, sir. It's a long time, and that's why we have cut on the guidance, sir.
Okay. Thank you, sir. All the very best.
[Foreign language]
Thank you. The next question is from the line of Arshia Khosla from Nirmal Bang Institutional Equities. Please proceed.
Yeah, hi, sir. I am sorry for repeating the question. I, the call just dropped in between. I, have you given any guidance for FY27 on the top line as well as some margin guidance?
No, nothing. We have not talk about 27.
So, any target that you would like to give from 25 to 27? I mean, what kind of growth are you?
No, no, 27 is too fast right now. We will be still focusing a lot on 26.
Understood, sir. Understood. Yeah, that's it. Thank you.
[Foreign language]
Thank you. Due to no questions from the participants, I would now like to hand the conference to the management for closing comments.
Thank you all for joining the conference. Please feel free to contact me and the company for any further questions you may have. Thank you. Thank you all.
On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your.