Ladies and gentlemen, good day and welcome to PG Electroplast Q2 FY 2026 earnings conference call hosted by Axis Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. This presentation has been prepared for informational purposes only. This presentation does not constitute a prospectus, offering circular, or offering memorandum and is not an offer or initiation to buy or sell any security, nor shall part or all of this presentation form the basis of or be relied on in connection with any contract or investment decisions in relation to any securities.
This presentation contains forward-looking statements based on the currently held beliefs of the management of the company, which are expressed in good faith and in the management's opinion are reasonable. The forward-looking statements involve known and unknown risk, uncertainties, and other factors which may cause the actual result, financial conditions, or performance or achievements of the company or industry to differ materially. Forward-looking statements represent only the company's current beliefs, intentions, beliefs, or expectations, and any other forward-looking statement speaks only as of the date on which it was made. The company assumes no obligation to revise or update any forward-looking statements. I now hand the conference over to Mr. Deepak Agarwal from Axis Capital. Thank you, and over to you, sir.
Thanks, and good afternoon, everyone. On behalf of Axis Capital, I welcome you all to PG Electroplast Q2 FY 2026 earnings conference call. Today, we have with us senior management represented by Mr. Vishal Gupta, Managing Director, and Mr. Vikas Gupta, Managing Director, Operations, and Mr. Pramod Gupta, Chief Financial Officer. Without taking much of time, I will hand over the floor to management for the opening remarks, post which we open the floor for Q&A. Thanks, and over to you, sir.
Thank you, Deepak, and good evening, everyone. Thank you for joining this call today. Hope all of you are doing well. I'm sorry because there was a little delay in uploading the results because the board meeting got over at 4:40 only, so we did not get much of the time to upload the results earlier. It has been done. I think you people can have a look at that. Let me start by saying this. This quarter and first half of FY 2026 has been softer than what we have expected. The room AC business was impacted due to early monsoons and then GST cut announcement, which was done on 15th of August. Nonetheless, we have been able to grow our RAC business by around 2.5% in first half, despite the industry posting almost 25% decline.
The washing machine business has done extremely well, and we have seen a very good growth compared to last year. Washing machines were up by 55% in this quarter. The JV, our Goodworth Electronics, has also ramped up well and has posted sales of INR 483 crore with INR 10.33 crore of EBITDA in first half of FY 2026. We remain optimistic that room AC business will see increased penetration-led growth with the recent rationalization of GST, and we believe that in medium-term, growth in room AC business will remain robust. We are expanding capacities in RACs, washing machines, and coolers. Client engagement across large and emerging brands remains strong. As we have guided in our previous call, FY 2026 will now likely shape up to be a more measured year, and that's fine. We are maintaining the guidance we had shared last quarter.
We will be using this year to consolidate, focus on operational levers, and execute our platform and capacity investments with 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 durables market and in PG Electroplast's positioning to be a key enabler in that space. Our focus remains unchanged to scale profitably, 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.
Hello, and good evening, everyone. I'm sure all of you have seen the financials. Although I also apologize for putting up the data and financials and presentation, but with slight delay. Now, I'd like you to go through along with me all the numbers for Q2. Consolidated revenues stood at INR 655 crore, which was a 2% decline over Q2 last year. Of this, product revenues contributed almost INR 319 crore, or 49% of the total revenue. The AC business contributed INR 131 crore, and it declined almost close to 45% versus last year. The AC business accounted for around 20% of total revenue. Washing machines business was up 55% during the quarter, and it contributed about INR 188 crore to the sales during the quarter. Our 100% subsidiary, PG Technoplast, reported revenues of INR 295 crore during the quarter.
Coming to the profitability, EBITDA for the quarter stood at INR 45 crore and net profit was at INR 2.4 crore. The net profit drop is almost due to lower operating leverage. Also, we had a forex loss of INR 8.4 crore during the quarter versus the gain of INR 1.2 crore during the same quarter last year. We have worked on all our costs during the quarter and optimized wherever possible. From a balance sheet standpoint, the company remains on a strong footing. Cash and equivalents at the end of Q1 are at the end of quarter two are INR 630 crore and we are net cash still. Return on capital employed stands at 20.8%, and our fixed asset turnover remains healthy at over 5X on a trailing 12-month basis. Now, coming to guidance, we are maintaining our guidance shared in first Q2 2026.
That is, for FY 2026, we expect PG Electroplast to be having revenues in the range of INR 5,700 crore-INR 5,800 crore, and net profit is expected to be between INR 300 crore-INR 310 crore. At the group level, including our joint venture, Goodworth Electronics, we expect consolidated sales to cross INR 6,550 crore-INR 6,650 crore. We are continuing with our investment in Greater Noida, Supa, Rajasthan, and South India, and our FY 2026 CapEx will be in between INR INR 700 crore-INR 750 crore. Again, reiterating that our long-term investment, operational model, and growth priorities remain unchanged. With that, we are happy to take your questions. Thank you.
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. The first question is from the line of Bala Murli Krishna from Oman Investment Advisors. Please go ahead.
Hi, good evening, Jassi. The first question is regarding the POS devices you have received the order for. What is the revenue potential of this order, and what is the market potential also to be considered? Secondly, on the traffic side, we have an MOU with the Maharashtra government, INR 1,000 crore, and also AP government also INR 1,000 crore. How are you all planning to deploy?
Jassi, it's Bala Murli.
Jassi, can you just repeat the whole question? Because the first part was not very clear. It was not audible. Can you be a little more clear, please?
And louder.
Louder, please.
Yeah, yeah. Okay. The first question is regarding this POS devices order we have received from the customer. What is the revenue potential of this order, and how many units we are planning, and how it should scale up? Also, any other potential customers also there in this sector? Secondly, on the.
Vikas.
Plan to have an MOU with Maharashtra state and Andhra Pradesh around INR 1,000 crore each. How we are going to decide the cap and when we can?
First of all, Vikas, can you take up this question on the POS, that point of sale, that agreement that we are signing with Tax Technologists? What kind of revenue we can look at? What is the outlook for that revenue from that POS machine business?
Good evening to all. Regarding the POS machine, that agreement that we have entered into with Tax Technologists, and we are expecting to start some pilot production within the quarter three of FY 2026, which is the current quarter. It is too early for me to comment on the revenue potential of this, but we are hopeful that it should become a sizable business in coming months, in coming quarters. We will keep the stakeholders updated on the exact revenue potential of this. Maybe by next quarter, we should have much more clarity on that.
As far as that INR 1,000 crore MOU that we are signing with the state government of Maharashtra, actually, we are in the process of acquiring a large piece of land in Maharashtra, and we have entered into this MOU agreement, and we intend to start CapEx on that piece of land from FY 2027 onwards. We intend to start doing CapEx. This INR 1,000 crore CapEx, we are supposed to do in the next four to five years. We will be doing that, and once we have more clarity, we can share details on that, maybe in the next two or three quarters on that. That is the plan. That is a long-term plan, but we are trying to create a bigger land piece and bigger infrastructure for our future growth potential. We are trying to create future growth potential with these investments.
Okay. So on the Andhra Pradesh INR 1,000 crore MOU, also think the same with the washing and the refrigerator we want to set up.
We have a plan. We have an intention to set up a refrigerator plant in the state of Andhra Pradesh. For that, we have already acquired the land parcel of almost around 54 acres there, and we are starting construction. We hope to start the refrigerator production by quarter four of FY 2027.
Okay. What is the investment CapEx amount that is fixed with INR 4,000 crore? But.
Projecting further to Q4 FY 2027, which is.
Capex will be in the range of almost around INR 350 crore in the first phase for the refrigerators. As we go forward, we'll be expanding further into other product categories like air conditioners and washing machines as well going forward. The CapEx plan of INR 1,000 crore is spread over a period of four years to five years in Andhra Pradesh.
Okay. Lastly, on the inventory side, in the previous time, we had discussed that most of the inventory will be cleared by November.
Sorry to interrupt, but your voice is coming muffled. Could you use a handset while answering the question?
Is it better now?
Yes, sir. It's better now.
Yeah. Is it better now? Yeah. Lastly, on the inventory part, last call we had discussed that the inventory, available inventory is cleared most probably by November. There is some traction also due to the GST rate. What is the status of inventory, and how do you see the demand shaping? I think by November-December, you would have gotten some estimation from the customers that the demand for the coming quarter and next quarter also. Could you please share some light on that?
As per our estimate, the quarter three and quarter four should see improved inventory at our end. Right now, we are carrying a very similar inventory as we were carrying at the end of quarter one. The channel inventories also remain on the higher side as of today, but we are hopeful that given the GST cut and the build-up which happens during the pre-summer should help us and the industry to get rid of the inventory. We think that coming months will be good from the point of view of production at our end. We are hoping that by November end, we will be normalizing our inventory given the plans that we have. We have actually maintained our guidance, and we are hoping that the second half will be much better for AC and other businesses as well.
Okay. Sir, is there any last question? Is there any update on this compressor part? I think we are waiting for information from China government. Is there any update on that?
No, sir. It is still pending. Nothing is getting resolved as per the latest updates what we have from our partner. They are still waiting for the go-ahead from the Chinese government side on this.
If it cannot be put forward, then there are some restrictions on the import of compressors. There will be a lot of discussion will happen.
Your voice is quite muffled, boss. It's not clear.
Okay. Fine. I'll get back to you in a few minutes. Thanks a lot.
Thanks.
Thank you. The next question comes from the line of Viproshi Vastap from Phillip Capital. Please go ahead.
Hi, sir. Good afternoon. Quickly on the cash flow side, where do you see your line for full year? Because we have seen a significant cash flow in H1. Where do you see for full year?
Cash flow for us in the Q1, first half has been okay. We are having higher inventory, and that is probably showing a negative cash flow at the operating level as well as at a free cash flow level. Second half should be much better, largely because of two reasons. One is obviously we are hoping to normalize the inventory. Second thing is that because of this GST rationalization, this should help a better working capital cycle at the manufacturing end because we were paying GST at 28% while the input credit on most of the raw material was at 18%. We were able to recover the 10% additional GST only at the time of collections, which used to be about 60-70 days post the sales. Now that will be also going to be better in the second half.
All these things put together, we are hopeful that the second half will show a good operating cash flow and also a decent free cash flow should be there because in the first half, almost INR 377 crore of CapEx has already been done. The second half remaining CapEx will be, we hope, should be coming out of the inventory rationalization, which we will have.
Sure, sir. Secondly, sir, on the guidance part, sir, you are maintaining your guidance for the full year. How much of that is due to the B rating change happening next year?
B rating was actually known at the time of the guidance when we gave after the first quarter also. There is nothing new in that. We have built in a decent amount of growth, which should come from December onwards because of the B rating and overall business also. That has been accounted for.
Right, sir. Right. Thank you, sir. Thanks a lot.
Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Koushik Mohan from Ashika Group.
[Foreign language]
The line from Koushik is busy. We'll move on to the next question. The next question comes from the line of Achal Lohade from Nuvama Institutional Equities . Please go ahead.
Yeah. Good evening, sir. Thank you for the opportunity. The first question I have, if you could talk a little bit about, you did make a comment with respect to the industry decline. Just to be clear, in the first half, what has been the decline for the industry in terms of the primary sales and secondary sales volumes according to your estimate? Also, if you could touch upon the hello?
Yes, yes, please.
Yeah. If you could also touch upon the inventory situation for the companies plus the channel put together as of September and as of now in your estimate.
See, primary sales have grown by around 20%-25%, but secondary sales have seen a deeper decline. That is why we are seeing an elevated level of inventory in the channel. As per se, we do not have very accurate data on the channel inventory, but our estimate is still, I think, as of 1st November, it should be anything between at least 1.5 million-2 million, sir, at least. That is the number our estimates are there.
This would be usually what number would that be?
Normally, what happens every year during this time of the year, in months of November, December, normally all the brands do a lot of schemes and give a lot of discounts and a lot of selling is primary selling is done, channel filling is done. Maybe we might see a little slowdown or maybe a little late pickup in this channel filling because of that overhang of the last one or two quarters. Having said that, because of the change in the energy rating, that opens up some opportunity for this channel filling happening. We have two things. One, energy rating change, which will push up the channel filling. There might be something because the channel is already choked up, there might be some pushback from the channel from taking energy for the inventory. That we have to keep evolving.
As far as we are concerned, sir, the kind of forecast we have got from our clients, we are quite confident that, see, December, we are seeing good production. The dispatches are also started, but they will start to pick up by end of this month or December first week. Then January-February also, the outlook what we have received from our clients looks quite healthy. That is why we are able to maintain the guidance what we have given in the first quarter.
Got it. The second question I have is with respect to the pricing. Given we will be now in discussion with the customers with respect to the pricing, if you could talk a little bit about given the cost has seen increase, what is the extent of first of all increase in the BOM? And how does the pricing will work out according to you given the inventory situation? Yeah.
See, the competitive industry is very high right now at a manufacturer level also, at a brand level also, because everybody is stuck up with inventories and everybody is trying to clear off their inventory. Competitive intensity will be very high, at least I believe maybe till end of January or February.
Right. If you could talk, what is the extent of cost increase and how do you see that pricing playing out or margin playing out?
I think I have answered this question. Why? Because let me tell you, I can't give you such numbers because pricing depends on the commodity and the exchange rate. Having said that, having said that, since competitive intensity is very high right now, you may not have a very high bargaining or leverage on the pricing with your clients. Brands may not also have with the channel and channel may not have with the consumer. It's a whole value chain which is under pressure right now.
Got it. Got it. Just one clarification on the CapEx. If you could just lay out the plan in terms of 2026, 2027, 2028. See, 2026, you have said INR 700 crore-INR 750 crore. If you could spell out which location, how much is going, and similar details, if you could talk about 2027, 2028, that would be very helpful given the number of locations we are looking at and number of things happening. I think that would help.
2026, we have spelled out very clearly, INR 700 crore-INR 750 crore of CapEx is going to be there, out of which, as Vikasji mentioned, almost half of it, which is INR 300 crore-INR 350 crore, will be for refrigerator, which will be happening in Sri City. There is INR 100-odd crore which we are going to be spending, which we have already almost fully almost spent in washing machine business in Greater Noida. There is INR 200 crore which is getting spent in RAC business in Supa as well as Bhiwadi. You can assume about equal INR 100 crore each. The rest will be actually spent in Bhiwadi only in a new plant which we are creating for tooling as well as coolers and some specialized plastic molding. That is the breakup that she has.
Sir, how about next year?
Next year, we will be able to update you in the quarter four at the end of the quarter four. I can assure you, it will be much lower than this year. It will also depend on the business plan and the opportunities which we foresee. As of today, we think it will be probably much lower than what we are doing right now.
Sounds good, sir. Just last question, if I may, with respect to the applications, how many applications have you filed under ECMS and in what aspects? If you could clarify on them as well.
Vikasji, can you please take this question?
Yeah. We have filed the ECMS applications in four or five different component categories through our JV entity, Goodworth Electronics. That is under camera modules, display modules, mechanical enclosures, some, I think, on the PCB side also, we have put up the ECMS applications. That is still under review. It has not been approved as of now. We are keeping a close watch on it.
Did you say, sir, PCB?
Yes, I did say PCB. Yeah, PCB.
PCB. Understood, sir. Thank you so much. I'll fall back in the team. Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Keyur Pandya from ICICI Prudential Life and Chobham Company Limited. Please go ahead.
Thank you. Hi, team. First question is on the AC part. You have maintained the revenue and profitability guidance. I mean, from Q1 to when we stand today, probably everyone's estimate has got cut of the primary or secondary sales because of the extended monsoon and its ripple effect. What gives confidence? When back of the analyst calculation suggests that the ask rate for H2 would be much higher with pressure on channel and brands to clear their inventory. We have a higher base for Q4 as well. Is it visibility from the brands? If so, is it for Q3 or Q4? Just you can give more or bridge to how confident you are or what gives you confidence. That would be helpful.
We actually were the first one, and we actually in the last quarter itself had anticipated a very weak second quarter. Things have more or less been in our expectation, at least for us from the second quarter point of view. Given the kind of inventory levels, etc., which were there and the way things have played out, things are actually going in line with what we expected. Now, the visibility that we have is based on the audit book that we have from our clients. We are quite confident of achieving the numbers which we have guided for in the second half based on the firm and committed orders from the clients which we are working with.
Okay. Second question on both AC and washing machine. I mean, in washing machine, we have a little lower base. If I can just share, say, any specifics for wallet share addition or new client addition, which will drive us growth, which is higher than industry growth, both for AC and washing machine?
In AC, the same brands continue with whom we were working. We have added a couple of more names, but they will not be contributing so hugely in the very first year. It is mainly the wallet share gain which we continue to see at our end. Similarly, in the washing machine also, it is largely the existing client where we are seeing the wallet share gain and also some share gain from insourcing to outsourcing, which is helping us to post robust growth in washing machine. We hope to continue to do the same in the second half also.
Noted, sir. Thanks a lot. All the best.
Thank you. Before we take our next participant, a reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Koushik Mohan from Ashika Group. Please go ahead.
Hi, sir. Sorry, my call got disconnected last time. Sir, I just wanted to understand how are we seeing in the volume terms the growth in the ACs? It's been like currently we are in the Q3, right? In the Q3, one month is completed and now 10 days is completed. Can I understand, are we gauging that the growth is coming back to us? How about the branded players on what their inventory levels are currently with them?
There are two parts to the question. One is what do we see the volume growth for the industry. First and second is how do we see the volume growth for us. See, probably the industry on a full year basis is likely to remain flattish in our opinion. In our case, in the first half, we had a growth, a very small growth despite the industry seeing a decline. In the second half, we hope to have about 15% or so growth in the volume, overall volume, largely due to two or three factors. One is obviously we're gaining some wallet share. Also, we continue to see some of the brands with whom we work, they are gaining market share in the marketplace, and they are going faster than the industry. That is leading to better volume growth at our end.
These two factors are actually helping us to hope for about 15% kind of overall growth for the full year in this AC business.
Got it. Sir, my second question is on the CapEx part. Currently, this year, our CapEx is ranging in INR 700 crore to, I think, INR 750 crore. Majorly, this CapEx is going for the refrigeration part in South India. The other part of the CapEx, where exactly is this going? What exactly are the components which it is going on?
I don't know about it. We have actually started almost INR 100 crore have gone for washing machine business in Greater Noida. Then INR 200 crore is probably equally split between Supa and Bhiwadi for AC business. We are also actually putting up a new plant for coolers, tooling, basically, and some specialized plastic injection molding in Bhiwadi again in Salarpur. This is a different new plant which we are setting up. There, we are making some CapEx. That is the way it is broken up.
Perfect. Now, majorly, our concentration was coming from AC. Now, we are more diversifying into our more product. The group will be on the normal side. Is my understanding right?
Yeah. Yeah. The diversification is a part of the strategy. We are looking to reduce our percentage dependence on AC, which will actually start becoming much more visible from financial year 2028, 2027, only fourth quarter, the refrigerator will start actually contributing maybe to some extent. We are trying to get into and grow faster the existing non-AC business. We are also focusing on new segments which can actually help us take care of the seasonality in the off-season, especially for the room AC business.
Thank you. Thanks for this.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Sir, thank you for the follow-up opportunity. If you could talk a little bit about plastic molding business, that's seen fairly strong growth for the last three, four quarters. If you could elaborate a little bit in terms of what is driving, what is the outlook, what kind of margins, and what is the capital deployment here, please?
As we have been highlighting, the plastic injection molding business, we have not been pursuing very aggressively. Although I must highlight that this quarter, there was not much growth. There was, in fact, a small decline on the year-on-year basis, not because of volumes, but because the pricing is down there, because the raw material prices have come down, especially the plastic there. That has led to about some decline. Although on a full year, on the first half basis, we have seen a very small, about 10% kind of a growth in that business. That is the component business for us, including plastic and other components. There, we are not trying to pursue or go after that business on a dedicated basis. We are not putting up any capacities or any new capitalization is being done there.
Only in very specific certain areas where we have focused, where we think the capital allocation makes sense and it meets our basically criteria of ROIC and ROCE, we are putting in or allocating capital there. To take care of the off-season business and when we have excess capacity, some of the businesses are being pursued so that if we have to make some small CapEx to take and supply some components which we can do from the facility where we have off-season excess capacity, we are trying to gain those businesses. As such, we have not been allocating much new capital to the plastic component business on a standalone basis.
Got it. If you could just clarify, what is the number for the plastic molding business for the second quarter and the first half, sir?
The second quarter, the number is about INR 211 crore, and for the first half, it is INR 485 crore.
Okay. Understood. The second question I wanted to understand, is there any opportunity from exports perspective which we are pursuing in any of our product categories and any visibility you could provide on that?
Right now, we do not have any large opportunities. There are some small opportunities which we are pursuing, but there is nothing to talk about. It is unlikely to contribute anything significant in the short term.
Got it. Wonderful. Sir, just last question with respect to the following up on the ECMS, the applications. Any thoughts if this was to go through what kind of capital it would require to be deployed?
Vikasji, can you please speak?
Please understand. The capital allocation will depend upon once our applications are approved and once we are able to tie up with the technology partners. That is too early for us to give any kind of a color on that, what will be the amount of investment that we go into that. Once we are able to get the approval of the applications done, second, whenever we are able to get the technology partners, then we will be able to update you on that.
Got it. This is helpful, sir. Thank you so much.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Kuvam Chugh from Point 72. Please go ahead.
Hi. Good evening, and thank you for taking my question. My question is around demand after the GST cut. It's been about a month and a half, and we also have the testing season. How is demand for the end user shaped since the GST cut?
See, at our end, we do not have a firsthand experience. From whatever we have been hearing from the brands, the off-season has nothing spectacular or unusual has happened because of the GST cut yet. Probably it will help a bit when the season starts. In India, largely AC still remains largely an impulse purchase product. It is not a planned purchase. Therefore, even when the prices have come down, the spurt is probably not seen yet. We are very hopeful that given the fact that GST has been cut, the penetration-led growth will start to see good improvement, especially in the second half this year and probably in the season when the first half next year when the season starts. Right now, I can say there is nothing much which has changed.
In that context where consumer demand hasn't picked up and channel inventory is still somewhat elevated, would the pickup in our growth be more back-ended, more towards the summer season and less in the autumn?
In our case, there are two other things which are playing out as we were elaborating. One is that there is a B rating change, and there is an inventory which is going to be built up for that in the month of November, December. Also, as I was telling earlier, we are working with certain brands which have been gaining market share, and we are seeing a volunteer increase in certain of them. These two are helping us to show a decent volume pickup, hopefully in the second half. I think, yes, it will be more back-ended maybe, but not solely in the month of February, March. Some spurt should come in the month of towards the end of December, and then probably February, March we will see a spurt.
Fantastic. Thank you.
Thank you.
Thank you. Our next question comes from the line of Shreyanch Jain from 3A Financial Services. Please go ahead.
Hello. Am I audible?
Yeah. Yeah. You're audible.
Yeah. Good evening. My question, I have a couple of questions. First, could you please throw some light on brand strategy, REC brand strategy? Are they focusing more on manufacturing in-house or outsourcing, sir?
I mean, this is an endless debate, and there is a view certain people have and certain analysts believe that it is going to be more in-house, and certain analysts are of the view that outsourcing will continue. We are a little biased. I will make it upfront because we are dependent on outsourcing of the brands. We continue to believe that in a highly seasonal business where exports are not so much there for the Indian brands, actually, it does not make a lot of economic sense to do their own plant and do the manufacturing in-house because capital efficiencies are low for most of them, I mean, for any single brand.
Given the fact that if you want to put up backward integrated plants, they are capital intensive, the value accretion or value creation from going into heavy CapEx is actually not visible even in most of the brands which have put up their own capacity, in our opinion.
Okay. So I have got it. And sir, on the washing machine side, are the margins better than RAC, and where do you see the product shaping up going forward in future?
Margins, yes, slightly better than REC. I mean, and what was the second question? What is the volume? How do we see the volume catching up there, right?
Yeah. Yeah. How do you see the demand growing up in washing machines?
See, right now, we are gaining wallet share in certain clients, and also we are seeing an increased. We are actually a beneficiary of increased outsourcing in that space, and we are gaining some market share from a shift happening from insourcing to outsourcing. We continue to see good volume growth, at least in the foreseeable future, in the medium term. We have therefore expanded our capacity, invested significant money in expanding the capacity, and a new plant has been constructed in Greater Noida for that. We remain fairly optimistic going forward on the washing machine business.
Sir, any percentage of total revenue you are targeting that should come from washing machines?
We would like washing machines to contribute about something like 15% or so in the medium term, and we are working towards it. Right now, it is this year probably just about going to be 11%-12%. We are hopeful that in the next two to three years, it should reach at about 15% on a much higher number for the overall company's revenues.
Great, sir. One last question, sir. On the new energy norms, what would be the effect on the older inventory and the realization per unit of the new inventory? That would be manufacturing.
From a manufacturing point of view, it is not going to have much impact. The inventory which we are carrying right now is largely for raw material. Finished good inventory is very minimal. Therefore, most of it, almost 99.9%, can be actually used in the new energy rating as well. We do not see any impact on the inventory that we are carrying. That is point number one. Point number two is that in general, we have seen the prices of some of the raw material have gone up largely because copper and aluminum prices have gone up, and also the currency has depreciated. From that point of view, there is going to be a pressure on most of the brands to actually increase the pricing of the existing and new models because there is a cost inflation which is there in the key raw material.
Understood, sir. Thank you so much. It was helpful, sir.
Thank you.
Thank you. Before we take our next question, a reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Dhaval Jain from Sequent Investment . Please go ahead.
I'm audible, sir?
Yeah. Yeah.
Yeah. Just a question on bookkeeping. I was going through our half-year balance sheet. Our debt has increased from INR 301 crore to INR 482 crore, short-term and long-term both. I was just checking on the Q1 numbers. Q1, our finance cost was around INR 34 crore, and right now it is INR 16 crore. Can I have an understanding how our finance cost has almost gone down by 50%, whereas our debts have increased?
Yes. Actually, we explained this very well in the last quarter itself when we had given an outlook for the full year and this quarter. Last quarter, we had some liquidity challenges because on one hand, we had a high inventory, and on the other hand, we were also facing some challenges on our receivables because receivables got delayed because of the lower sales of some of the brands. We resorted to two aspects to take care of that. One was to basically discount some of the receivables. Also, on the payable front, we extended the payables by honoring our LCs while resorting to buyer's credit. That led to some of the finance charges getting affronted. That actually was almost close to INR 20 crore as I explained last quarter. That was the one-time thing which happened.
If you knock off that, then you will come to the conclusion what the numbers are showing, actually.
Hi, Rajith. Just a question on, if you can let me understand, what do other expenses consist of?
The other expenses have several heads, but key out of them are basically things like transportation, logistics, inwards and outward logistics, some of the other admin fees, etc. I'll just read out for you what all we take into the other expenses. Also, forex loss and gain is also one of the components in other expenses. The key things are just give me a second. Basically, rent, rates and taxes, subcontracting expenses, power and fuel, repair and maintenance, travel and conveyance, vehicle running and maintenance, communication cost, printing and stationery, security expenses, legal and professional fees, director sitting fees, then forex is the major. This year, the big swing has happened largely because of the forex. Almost there has been a INR 9.4 crore kind of a swing. This year, we had a forex loss of INR 8.4 crore versus gain of INR 1.2 crore last year.
Great. Then just one last question on our margins. On the call that we have had that we could possibly do the revenues that we have guided for, is there going to be margin pressure in terms of if we have to fulfill our targets?
See, the margin guidance is actually built in the numbers that we have guided for, and we are aware of what we need to do. After doing all the consideration only, we have given the net profit and sales guidance. Yes, right now, as Vishalji had explained, the whole value chain and the AC business is under pressure because of the high inventory and last year or the last season not going well. We are hoping that from January, February onward, things will start easing as the season starts.
Okay. Thank you so much.
Thank you.
Thank you. The next question comes from the line of Nikhat Koor from Dolat Capital . Please go ahead.
Hello. Thank you for taking my question. What is our current capacity in RAC, washing machine, and coolers? After the new lines are commissioned, what will be the new capacity in these categories, like for FY 2027 and FY 2028?
Right now, our capacity in AC is almost close to 350,000 ACs per month on the split side and about 50,000 ACs on the window side. Once by December, we are hoping to increase it to about 425,000 in the split side and 50,000 in the window side. In washing machine, the capacity is already expanded, and we have about close to 200,000 washing machines per month capacity today. In coolers, it is about 50,000 coolers per month.
Okay. After the CapEx is incurred, what would be the new capacity which we are planning?
See, CapEx in washing machine is almost completed. AC, as I told you, it will go from 3.5- 4.25. Coolers, right now, the capacity is about 50,000 per month, but we are not going to see an increased capacity benefit in this year. That will be probably visible much more in the next year, and we will be putting a one line probably of 25,000 per month in the new plant.
Okay. So thank you.
Thank you.
Thank you. The next question comes from the line of Ayush, who is an individual investor. Please go ahead.
Yeah. Hi, good evening. I have two questions. One is about a couple of months back, we have announced to foray into the EV bike manufacturing space with Speed and Mobility. Any update on that? Are we still pursuing this or not? The second question is on the AC compressor manufacturing with the Chinese partner. Any update on that?
That EV thing is getting delayed, and our partner for whom we were supposed to start manufacturing in India, they are not able to get their motorcycle approved from ARAI. At the same time, they have shifted some of their focus to the Africa market. They are trying to grow that business in the Africa market. They already have a strong presence in Africa. At the same time, maybe, but I can feel that they have shifted their focus to the Africa market. Coming back to your compressor thing, we have stated in this call earlier also, we are still waiting for the approval that our partner is waiting for approval from the China government for this thing, for this compressor thing. We are still waiting for that only right now.
Okay. All right. Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Once again, a reminder to all the participants that you may press star and one to ask a question. As there are no further questions from the line of participants, I now hand the conference over to the management for closing comments.
I'd like to thank you all for sparing your time, and we are available to answer any further questions you may have. Thank you.
Thank you all.
On behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.