Ladies and gentlemen, good day and welcome to PG Electroplast Q3 FY 2026 Earnings Conference Call hosted by JM Financial Institutional Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. This call may contain forward-looking statements based on the currently held beliefs of the management of the company, which are expressed in good faith and in management's opinion are reasonable.
The forward-looking statements may involve known and unknown risks, uncertainty, 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. These forward-looking statements represent only the company's current intentions, beliefs, or expectations, and any forward-looking statements speak 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. Shalin Choksi from JM Financial. Thank you, and over to you, sir.
Thank you, Ikra. Good morning, everyone. On behalf of JM Financial Institutional Securities, I welcome you all to the Q3 FY 2026 Earnings Call of PG Electroplast Limited. We have with us the management represented by Mr. Vikas Gupta, Managing Director, and Mr. Pramod Gupta, Chief Financial Officer. With this, I will hand over the call to the management for its opening remarks, post which we can open up the floor for questions and answers. Thank you, and over to you, Mr. Gupta.
Thank you, Shaline. Good morning to everyone, and 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 we had a good quarter in both room ACs and the washing machine sales. The room AC business picked up in terms of sales. We had an 80% plus YOY growth in our. And in our washers, we grew our business by 45%. With this quarterly performance, we have been able to grow our RAC business by 27% in nine months of FY 2026, despite the industry posting an almost 15%-20% decline in the same period. Our washing machine business also has shown a robust growth of 46% in the nine months of FY 2026.
Our television joint venture, Goodworth Electronics, has also ramped up well and posted a revenue of INR 670 crore in the nine months of FY 2026 with the EBITDA of almost around INR 16.7 crore. We remain optimistic that the room AC business will see an increased penetration-led growth with the recent rationalization of GST, and we believe that in the medium term, growth in room AC business will be robust. We are expanding our capacities in room air conditioners, washing machines, and air coolers, and the client engagement across large and emerging brands remains strong. 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 durable market and in PGEL's position as to be a key enabler in that space. Our focus remains unchanged to scale profitably, stay capital-efficient, and deliver consistent value to all our stakeholders. With this now, I hand over the call to my colleague, Mr. Pramod Gupta, our CFO, to elaborate on the financials. Thank you.
Thank you, Vikasji. Hello, and good morning, everyone. I'm sure all of you have seen the financials in detail already, but let me take you through the quarter three numbers. Consolidated revenues were at INR 1,412 crores, which was a growth of 46% over Q3 last year. Of this, the product business contributed INR 1,140 crores or 80.7% of the total revenue. The AC business contributed INR 932.5 crores, which was a growth of 80.5% over the same period last year. We had also and this AC business accounted for 66% of the total revenue. Washing machine business was up 45% at INR 194 crores during the quarter. Our 100% subsidiary, PG Technoplast, reported revenues of INR 1,067 crores during the quarter. Now, coming to the profitability, EBITDA for the quarter stood INR 126 crores, and net profit was at INR 60.3 crores.
Now, in this EBITDA, we had a forex loss of INR 8.2 crores versus the same quarter last year, a loss of INR 1.4 crores. We have also made a provision of INR 1.35 crores for the impact of new labor code, which is a part of employee expense in the quarter. Looking from the balance sheet point of view, we remain quite liquid, and our balance sheet is healthy. We have currently a cash and equivalents of INR 483 crores, return on capital employed stands at 18.6%, and our net fixed asset turnover remains healthy towards 6x.
We are maintaining our guidance, which we have given in the first quarter 2026 of INR 5,700 crores-INR 5,800 crores of sales, about INR 300 crores of profit. We are continuing with our investments in Greater Noida, Supa, Rajasthan, and Sri City facilities, and the CapEx will be around INR 700-INR 750 crores. Again, reiterating that our long-term investment, operational model, and growth priorities remain unchanged. With that, I would like to open the floor for questions.
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 headsets 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 Koushik Mohan from Ashika Group. Please go ahead.
Hi, sir. Congratulations for the good set of numbers. Sir, I just wanted to understand what was our volume growth in this YOY and QOQ?
This number I will give you offline. Right now, I don't have this number handy, but you can take it offline.
Okay. Sir, and also on the balance sheet, I can see that we have an inventory of INR 1,280 crores. So do we have a breakup of how much is finished and how much is the raw material in this balance sheet?
Yeah. Raw material inventory is almost close to INR 1,160-odd crore, and only INR 120 crore is just finished goods, which would have been the production probably of the last few days in the AC business. So largely, it is the raw material inventory which we are carrying.
Okay. And, sir, how are we seeing future growth on AC sales or the washing machine sales and everything? How is the growth over the market side in the inventory side and everything for the clients?
Washing machine business continues to see strong momentum. We are continuing to grow at about 40%-45% growth, and we hope to maintain that momentum even in our fourth quarter. On AC side, given the fact that there is a very huge channel inventory which is still there, and temperature has still not started rising in the southern India where typically the summer starts early, we are cautiously optimistic, and we hope that this summer season goes well, and we are prepared for that.
But we will say that last quarter numbers were largely because of the fact that there was a huge channel filling, which was taken by some of the brands because of the rating change, etc., and that drove the numbers. But we will have to watch out for how the summer season starts in the month of February, late February, or early March to give a clear guidance on the AC business. But we stand by our guidance, and we think that we should be able to reach INR 5,700 crore-INR 5,800 crore sales for the full year.
Got it. Got it. Thanks, sir. I'll come back in the queue.
Thank you.
Thank you. The next question is from the line of Vishal Dhudhwala from Trinetra Asset Managers. Please go ahead.
Am I audible, sir?
Hello.
Hello. Am I audible, sir?
Yes, yes, you're audible.
Yeah. So first of all, congratulations on the good set of numbers. So I have a couple of questions. First question, can you quantify your refrigerator units? How many units will you produce on an annual basis?
Vikasji, can you take this?
So Vishalji, we are putting up a capacity of 1.2 million refrigerators in our Sri City factory. That should be up and running by the fourth quarter of the FY 2027. That will be the installed capacity. In the first year, we hope to have a loading of almost around 30%-40% on that capacity.
Okay. Second, as you mentioned, that we are on a line of guidance. So if we calculate Q1, Q2, Q3 PAT, so we have roughly done INR 130 crores, INR 132 crores of PAT, and we require for Q4, INR 160-INR 170 crores in Q4. So I just want to know how we're going to do that.
So Vishalji, so Pramodji, you buy it.
Typically, our fourth quarter is the strongest quarter. Even in the last year, last financial year, if you see out of the total PAT of INR 290 crores, we actually delivered INR 146 crores in the fourth quarter itself. There are multiple factors which work in the favor in the fourth quarter. One is obviously the seasonality of the AC and cooler business. Typically, a lot of operating leverage also kicks in during this quarter. We are hopeful that the trend will probably continue, and there is no reason to doubt that because summer is setting in, and we are hopeful that the plans that we have, we will be able to achieve that.
But as you mentioned, you will focus on RAC business in the end of the FAB, so it won't be okay.
No, no. I'm saying as I said, we will focus on the end of the FAB. I'm just saying everybody will get to know how the AC season will pan out only towards the end of February. But the season is continuing. We have a good amount of orders. We are making the ACs as per the plan, and we are very sure of the numbers which we have guided you on.
Okay. And the third thing I want to know is that every OEM player is currently renegotiating their pricing with the OEM players. So how your margin will be secured as OEM players have very slim margins?
Right now, I'll be very upfront with you. Percentage margins is not what we focus on. We actually focus on per-piece margin, which is what we get to make an AC. And there, we are not going to be compromising because of the price increase in the commodity. Typically, commodity prices are passed on, and therefore, maybe with a lag of 10, 15 days, or a month maximum, we hope to pass on the price increase.
In fact, whatever inventory we had from the previous year, we are almost exhausted with that. And whatever new buying which we have done in October, November, December, based on that, we have actually asked for the price increase and negotiated with most of the brands for the January-February dispatches. We remain optimistic that we should be able to maintain the per-piece margin in terms of overall absolute amount which we demand from our customers.
Sir, don't you think if you won't compromise on your pricing, you can lose your market share to another OEM players?
Well, we think there are not pricing is not the only reason on which the customer typically decides on the business. There are multiple factors apart from the pricing. Given the cost leadership which we have, I think that and the quality and the other factors which we give to the customer, the stickiness is rather high. We have seen in the past five years since the time we have started our AC business, we have not lost a single client. In most of the clients, our market share has actually increased over a period of time.
Okay. Okay. And last question. So do we have the same clientele as RAC for the refrigerator, or can you just give some light on the order book of RH refrigerators?
Vikasji, can you?
So basically, we are in discussion with all our clients wherever there is an overlap in the product categories. There are clients for our washing machines and air conditioners which are already into the refrigerator market. So we are in discussions with them. So it is still very early for us to comment on that, but we will keep you updated once we are able to close some kind of a contract with some clients. But we are hopeful to do that in the near future.
Okay. Okay, sir. That's it from my side.
Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance. Please go ahead.
Thank you for the opportunity. Sir, two questions. First, on the EMS side, you mentioned Q3 sales were boosted by, say, pre-buying from the brand. Has that continued in Q4 as well in backdrop of continuously increasing RM prices? I mean, metal prices. So just first question on that. And second, on slightly medium term, that around 1.5 million room ACs, you are probably 10% of the overall market share of the AC market and around 20% of the overall outsourced market share.
Now, from here on, is it fair to assume that it's difficult to gain market share at a very sharp pace? And in that backdrop, what are the growth drivers which are very large? I mean, for example, TV or washing machine at a relatively low scale versus AC may grow at a faster pace but not enough to offset, say, absolute growth. Just something on medium-term growth drivers, these two questions.
Yeah. So as I was saying earlier to one question, that there is a channel inventory which is on the slightly higher side. And obviously, because of the higher inventory in the system, brands are right now having a little muted outlook in the sense that they are going a little slow. But we have seen a decent order book, and we continue to have a good order book. And we are already seeing a 27% growth in the first nine months in the AC business. And we are optimistic that whatever assumptions we have made, which is about 18%-20% growth in the AC business for the full year, we should be able to achieve that number irrespective of whatever is happening to the market in the next two months. And we have a good visibility and order book to the same tune.
Coming to the medium-term outlook, yes, you're right. We have become sizable. We are almost 11%-12% of the overall manufacturing of AC in India currently, and we do have the largest market share. But if you see in the last three-four years, because of the PLI and because of the other things, there has been a good capacity addition which has happened in the brands, and a lot of insourcing has also shifted. And in fact, in the last two years, everybody used to talk about insourcing versus outsourcing. But given the fact that this AC business remains seasonal, in our opinion, the economics is actually not in favor of doing insourcing, and it makes more sense to actually outsource the AC manufacturing. And therefore, in the medium to long term, we think and we believe firmly that economics will prevail.
Once this PLI and all these things get over, then the capital allocation in most of the EMS companies, even the brands, will be towards doing value creation, which may not be necessarily happening today by setting up their own capacity because insourcing actually is a very expensive proposition because of the fact that the business seasonality still remains very high. Outsourcing, at least partially, makes much more sense, and we think that will continue. Net-net, what I'm trying to say is that there are two or three growth drivers for us still, which is one, is obviously that outsourcing should increase over a period of time. Second and bigger thing is that we think the market growth itself probably should accelerate over a period of time from here because the penetration levels are low.
We are probably now, for the first time, seeing that continued growth. Then last year, a GST cut also came. So all these things make us hope that penetration levels will start increasing. Overall, medium term, we remain very positive on the AC business as such. Also, I want to highlight one thing. You need to do the comparison of the AC market with probably China, which is a much colder country than us. And they consume every year over 10 crore ACs, and they make close to 20 crore ACs. And the largest player there makes about close to 5 crore ACs every year. And so that percentage gain or percentage market share probably is not the right way to look at it. Here, the basic thing that we will have to work is towards basically the product development, innovations, and cost leadership.
In our terms, we call it cost leadership and product leadership. We are every year working to improve both those things. I think as the penetration grows, we continue to remain optimistic that we can probably continue to show better than the industry growth. Obviously, the delta that we have enjoyed over the last three-four years may not be as high. For example, even this year, the industry is probably seeing a 10%-15% decline, at least in the first 9 months. We have still posted 27% growth. That kind of growth may not happen, but we still hope that we can probably do better than the industry growth in the coming years also because outsourcing will increase. That is on the AC side. Yes, we are taking a lot of other measures to actually improve the medium-term growth.
Refrigerator is one such aspect. Washing machine is growing faster than the company's overall growth rate. We are working towards electronic components. There are certain other initiatives also which are in the works which I cannot disclose right now, but we are aware, and we are working towards it. But our growth is mostly organic. We tend to actually believe a lot more in organic growth. Given the kind of dynamics which we have, we will be continuing to focus on those aspects.
Capital efficiency remains very key to our capital allocation decisions. Therefore, we do not tend to actually go overboard on the inorganic initiatives in our company. We think that the product lines where we are working in India, the penetration levels are still low, and we can continue to show very, very healthy growth for at least the next three-five years. We can continue to grow at a healthy pace.
Thanks for the detailed answer. Just one follow-up. So REF would probably add from zero base can continue to grow at a fast pace. Washing machine, what is the, say, line of sight for growth, say, not just for Q4 but, say, FY 2027 or for FY 2028 also? But at least for Q27. That is, first and second, this land finalization in Maharashtra under the subsidiary Next Generation. Any specific purpose? I mean, the quantum of land is much higher. So if you can just give more detail on utilization or usage of that land. Thank you, and all the very best.
Vikasji, can you take the first question and then I'll talk?
Sir, regarding washing machines, we are seeing, again, there is a movement towards the outsourcing, especially in the semi-automatic category. As this segment is very price-sensitive and it's a mass-segment product, we are seeing a trend where the brands are starting to outsource. So the semi-automatic market as a whole may not be growing. But we feel because of the outsourcing phenomenon increasing, there will be a growth in the manufacturing of semi-automatic washing machines with the players like us.
And on the top of that, we are already working on the fully automatic top-load platforms. And we are going to start our work on the front-load washing machines as well. So we have a decent visibility, and we are very confident that we should be able to maintain a strong growth rate in the FY 2027 also, which will be similar to what we have achieved in the past years.
Coming to the piece of land that we have taken, as we have been saying, that we think that the potential of growth in each of the categories where we are working is still very high because penetration levels remain low. And we think that India will eventually go China way in terms of penetration. And some of these product lines, especially AC washing machines and the capacity which we have to plan for the next phase of growth, actually have to be keeping in the mind the kind of potential that we see. So as I was saying, that today, we are just making 115 million ACs? Is that the market that we have today for the industry and the largest player, which probably is us or one of our competition, is actually making just about 18-20, sorry, 1.8-2 million ACs.
But if this industry continues to grow, and we have done some simulation at our end, we think that we reach maybe 3-4 crore ACs by 2031, 2032. And even if we maintain our market share, we will have to probably be making probably close to 50-60 lakh ACs over a period of time. Now, if that is the kind of capacity which we have to plan, then the kind of land and the other utilities which we have to plan has to be multiple times of what we are doing today.
So keeping that in mind now, the internal thought process in the company is to work towards larger campus where we can actually have a lot of backward integration, and that will drive the cost leadership in the company. Also, we will be able to work on technologies and innovations in these large campuses where we can have fully integrated manufacturing facilities. So that is the thought process. That is why we have taken these two land parcels. One is Sri City, which is 52 acres. This is a 72-acre parcel in Ahmednagar.
So just to add to what Pramod has said, just to add to that, please understand, we have already our land utilization in the current factories in West District of Ahmednagar is already saturated. What we feel, as Pramod has said, that for the next phase of growth for the coming 5-7 years, we will require a large parcel of land. As a company, what we are trying to position is we are trying to create three large manufacturing hubs: one in north, the second one in west, and the third one in south.
All these locations will be going forward the multi-product locations where we will be producing all our product categories going forward to have a better utilization of the assets and to have economies of scale at all these three locations and where we can offer the products that we manufacture from these three locations to have a better cost efficiency in terms of logistics costs for all our customers. That is also one of those ideas.
Thanks a lot, sir, and all the best. Thank you.
Thank you.
Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Management Limited. Please go ahead.
Yeah. Thanks for the opportunity. Sir, is it possible to provide the CapEx split for the INR 700 crore? How has it progressed as of now? What are the commissioning dates and expected revenue and margins from this CapEx? When can we expect those revenues to start reflecting in terms of numbers?
So out of the INR 750 crore, INR 300 crore we had earmarked for the refrigerator facility which we are putting up in Southern India. And this project is going to actually become operational only in the fourth quarter next year. We just did a groundbreaking there. Almost close to INR 200 crore kind of a CapEx has actually gone in the washing machine capacity and the new campus which we have actually built in Greater Noida. And that is almost ready. And we hope to start doing commercial production very soon in that. Some work as a trial production, etc., is going on already there.
There is another small campus which we are building in Bhiwadi of about 10 acres where we are actually in the final stages where we have actually going to be putting up the toolroom and some of the facilities for basically our plastic molding business, especially for the sanitary where we are doing some interesting work. So that campus, we hope to start probably by this quarter end. And then we have done some CapEx in the ongoing facilities in Supa and Bhiwadi for AC manufacturing. Both of those are also ready. And they will be actually contributing in the fourth quarter. Apart from that, there is a land parcel which we have bought in Supa for 72 acres, close to about INR 84 crore has been spent on that.
That we will be probably looking to start construction sometime maybe next year. So that is the backup of the CapEx. Large part of the CapEx will actually start contributing in the next one year, in our opinion. Some of the CapEx will be operational this year only, barring the most of the CapEx will be operational this year, barring the capacity which is coming in the refrigerator in Sri City.
Just to sum it up, for the next year, what could the growth number look like? I'm trying to understand the CapEx.
It's too early to say. It's too early to say. See, the issue is this that it will depend on the market conditions. AC still remains a very large portion for us. And how the actual summer season pans out this year is going to be quite interesting to watch out because what has happened is that because of the channel inventory, things are still not very clear. But we remain optimistic that the medium-term growth outlook is good. And we are not planning for season to season. Obviously, we are taking a 3- to 5-year view on all the CapEx which we do. And therefore, we are optimistic that all the capacity which we are creating will be optimally utilized over a period of next three-four years.
Got it. What could the revenue number look like based on all this CapEx that we are doing? I understand maybe next year you are not able to guide. Once the INR 750 crore CapEx fructifies, what could the number look like in terms of revenue? Should we take the asset turn that you mentioned, 4-5, or how is it?
Yeah. Yeah. Typically, on a fully operational basis, we internally try to have a fixed asset turn of about 4x at least on the overall numbers. That is what is at least you should assume will reap the contribution which will be coming from the ongoing CapEx in the next few years.
Got it. And on the PLI scheme, will it affect outsourcing players as well? Because I think that is usually a pass-through. So that benefit also will go away while you say that insourcing will be reduced once the PLI goes away. Will it impact outsourcing EMS players as well in terms of margins and stuff like that?
No. See, what I'm talking about is today that in the last three, four years, there has been a lot of capacity which has come up in the system. And the capacity has both come in outsourcing players as well as the brands themselves. And actually, if you see on an overall basis, there has been a shift towards insourcing because almost the outsourcing imports which were there, they have become zero. So what has happened is since 2021, some of that gap which was filled by some of the outsourcing players like us, and some of it went actually in the insourcing capacities of the brands. Now, what is happening is that some of these brands actually changed their internal policies to start outsourcing because also they thought that there was an additional advantage which they were getting because of the PLI benefits or those things.
What we are seeing and realizing is that most of the brands are not able to utilize the capacities as per plan. For most of them, at least our analysis says that the manufacturing remains uneconomical in the sense that it is not doing any value creation for them. They have allocated a huge amount of capital to that. Still, most of the manufacturing is just not making sense because they are able to get the product from them
From players like us at 2%, 3%, 4% cheaper than their factory gate cost. That is why the outsourcing happens. Therefore, this phenomenon of putting up the capacity probably at some point in time will start reducing in the brands. They will probably start outsourcing more. That is what all I'm trying to say. Therefore, I remain very optimistic that growth opportunities are likely to be good in the medium term also.
Got it. Just, I mean, a follow-up. That PLI, does it affect us? Because once the PLI goes away, is it only to the brands?
Nothing like that is going. PLI is going to go away for everyone. But today also, when we do the pricing of the product, in none of the product pricing, the PLI benefit passing is coming. It is only about the net price at which you are going to supply the product to the end brand. Now, if the brand is finding the price competitive vis-à-vis its own manufacturing or vis-à-vis other outsourcing company, then they try to outsource to companies like us, or they will give the business to us, or they may decide whether they want to do it own manufacturing. So that is the way this business works.
Got it. Fair enough. Thank you so much. Thank you so much for the elaborate answers. Appreciate it. Yeah. That's it from my end.
Thank you. The next question is from the line of Tanay Shah from DAM Capital. Please go ahead.
Yeah. Hi, sir. Good morning. Congratulations on a great set of numbers. So just one question first. On the AC business, right, you mentioned that the inventory levels are on the higher end. So what, according to you, is the industry inventory levels, let's say, at both the brand and channel end?
I think the total number in my estimation is probably close to about 5 million, which is there in the channel plus brands. Typically, this is slightly on the higher side in comparison to typically what the number is. One of the reasons has been very, very slow sales in this year, even in the off-season. If you see the sellout from the channel to the end customer has actually not picked up even after the GST cut. That is what probably is the reason that the inventory has actually piled up in the system.
Sure. So given that the inventory, obviously, already is at around 5 million and summers yet haven't picked up to a great extent, what kind of gives us the confidence on the fourth quarter and the first quarter production? I know that you did mention that you have healthy order books. But from that sense, what is your outlook on the RAC for, let's say, 4Q and 1Q?
So 4Q, we are maintaining see, despite showing a very robust growth in this quarter of about 80%, I'm still maintaining for a full year, guidance of about 15%-17% growth in the AC business in the sense that first nine months, we have seen a growth of 27%. And we are still projecting a growth of about if you see the numbers which we have given in terms of the guidance, so we are still talking of a full year guidance of that number. So we are expecting that whatever acceleration now will probably happen is towards the end of the quarter. In fact, we are hoping that because see, it is also the reaction of the brands right now.
Manufacturing is slow because sales are slow, generally, with most of the brands and with also the outsourcing companies because the sellout is just not picking up the way it should have picked up from the channel. But I'm hopeful that because this is typically the peak manufacturing season, January, February, March. Now, if in January and February, you are not doing a peak manufacturing in the industry as a whole, then there will be a huge pressure which will probably come if the season is normal in March and April. And that is what I think is probably likely to happen once we see the season getting into effect. Today, actually, everybody is in a wait-and-watch mode. Also, there is one more reason. Most of the channel is sitting on a very low price inventory.
Now, given the price of commodity has risen so sharply, the price increases have to be taken by most of the brands as well as, I think, all the contract manufacturers. Now, channel is still reluctant to actually absorb the full price hike because outselling is still not picked up in a very big manner. So I think once actual outselling happens, which is probably going to happen towards the end of this month, in my opinion, then we will actually get to know the full picture and final picture.
Right. I think the summer needs to be very strong for the outlook to fall in our favor. 4Q may just temporarily see some sort of good growth.
Yeah. Yeah. See, I'll tell you the reason. You have to look at the response function also. See what happened for us. Most of our brands were not doing manufacturing in the month of July, August, September. October, November was slightly slow, but still, they were okay. Then December, everybody came asking for the product because they had to fill the channel. Now, same thing is probably going through with the brands and channel that right now, everybody is a bit slow because everybody is waiting and watching. If March is okay and it's a normal summer, then probably we will see everybody coming and asking for the products maybe in March or April.
Got that. Got that. So fair enough. Fair point. That makes sense. And second is our current capacity right now for AC is around 425.
It's about 4, yeah. Yeah. 425,000 a month is what we can make every month.
Okay. We're expanding that to around 450, correct?
No, no. Right now, it is already expanded. So there is 425,000 we can make a split AC and about 50,000 window AC is what we can make every month.
Understood. And sir, on the refrigerator piece, right, I mean, could you just speak a little more on what our plans are out here, 1.2 million capacity which you're sort of putting up? What is the outsourcing opportunity here given that even competition is putting up large capacities? So what are the product segments which you're targeting, DC or FF? Just some more color on how we're looking at the refrigerator piece.
Yeah. So please understand what we feel as it has happened in the washing machine semi-automatic category as it is happening in the RAC business as well, we feel the outsourcing trend will increase in coming times, especially in the single-door direct cool category of refrigerator because, again, these products are very price-sensitive in the mass-selling products. And we feel that if we grow, the outsourcing will grow in this particular segment. And that is the first segment that we are targeting to look into. And we are already developing a product in the single-door category which should be up and running as we start the mass production towards the quarter four of FY 2027. So we feel going forward that we will be adding frost-free two-door product also in that lineup.
Our location of the plant for manufacturing of refrigerators in southern India, we feel, is a unique advantageous position for us because there are not many large manufacturing capacities available for refrigerator in southern India. Logistics and the freight cost plays a very important role in bringing a product all the way from northern India to southern India. We feel that we will have that kind of attraction from the brands who pick up the inventory from our plant in southern India for their southern India markets. We are hopeful for the good business coming through in the refrigerator category.
Fair point, sir. Fair point. Thank you so much for answering my questions and wishing you all the best.
Thank you.
Thank you. The next question is from the line of Achal Lohade from Nuvama. Please go ahead.
Yeah. Good morning, sir. Thank you for the opportunity. Just two quick questions. First, in terms of the margin in this quarter, 3Q, was it normal or was there any pressure on margin for the third quarter, sir, for the RAC business?
There was a bit of a pressure on the RAC margins because we wanted to actually gain the market share and also because we had a high inventory. So we were a little bit under pressure on that. But I'll just also like to highlight here one thing that there are two parts to the margin. One is obviously the gross contribution which you are seeing. That is looking on the slightly lower side this quarter because of the fact that we have actually shifted to SAP across the whole organization.
And in the previous ERP which we were having, there were certain raw materials which we used to classify as consumables, which used to be part of other expenses. They have actually gone up, which has actually impacted the AC margins by almost close to 150 basis points and overall margins at the gross level by 120 basis points during this quarter. That is one of the reasons why gross contribution is looking up. But then at the same time, because of that, the other expenses are looking lower.
Now, coming to the fact, yes, this quarter, just to gain the market share and also because the industry and the companies were some of the clients were having a little bit of a pain we have tried to support them wherever possible by compromising a little bit on the margins. But we hope that that situation is over now. And now we are comfortable. And also, most of the brands are trying to take a price increase. We have also taken a price increase in January and for the February delivery. That situation is almost over now.
Got it. Just a clarification on the channel sales. Did you say channel has seen a 10%? The retail sales is actually 10% down in first nine months. For us, it's 27% growth. Have I understood the number right, sir?
Yeah. Yeah. So I think the channel sales, generally, by most of the brands is down, in our opinion, from the numbers which we have done and by anywhere between about close to 10%-15%. And we have still been able to manage a growth of 27% for the nine months in this year.
Got it. Thank you. Those were my two questions. I'll call back in the queue. Thank you.
Thank you.
Thank you. The next question is from the line of Mohit Jain from Tara Capital. Please go ahead.
Hello. Can you hear me, sir?
Hello. Yeah, I can hear you, sir.
Yeah. Sir, you talked about the channel inventory and the overall inventory, and you said for channel plus brand, which is at 5 million, and which I believe earlier you have in the G2 call said that as its first member, it was around 1.5-2 million for the channel only. And now, with such high inventory and I guess Blue Star has hinted that they need at least 10% price hike for the recent increase in the RM and the INR depreciation. So do you think with such high inventories and with the summers not starting as of now, even slightly delayed in the southern India and northern India is also right now having very cool weather, do you think there's a likelihood that the price hike may not happen for at least next few months unless the inventories get depleted first?
I don't think so. My sense is that, see, because the price increase will also happen because most of the brands are now selling only in fact, all the brands are selling only the new B-rated products on which they are obviously charging slightly higher price than what they were charging for the like-to-like basis in the earlier rated thing. That is one part. And because under that gap, they will be able to charge some price increase. And actually, price increase always happens or the price adjustment always happens when the sales start to pick up. So as I'm saying, probabl
y, yes, right now, the price increase is maybe slow. But as soon as we enter the February and March thing, I think most of the brands will probably enforce the price increase. And price increase can happen in many ways. There are several schemes which they keep on running. Some of those may be withdrawals or there will be some other measures which they will take to take a price increase. But price increase is surely likely to come. There's no choice because the kind of movement which we have seen in the commodity, especially copper and aluminum, it's not possible to actually absorb that kind of a price increase by anybody.
Okay. Okay. Thank you, sir.
Thank you. The next question is from the line of Krishan from iDrive Capital. Please go ahead.
Hi. Good morning, sir. I have a quick question. What are the asset terms in the AC manufacturing business for us in terms of fixed asset and the total asset terms?
Just give me a second. I'll just tell you the AC business asset terms also. Just a minute.
If you have some other question, we can follow up with that.
Yeah.
Okay. And with brands having set up significant capacity over the last few years, do they use outsourcing partners for demand beyond their own capacity or enter some other dynamic side play where utilization is similar for our own plants, brand's plants, and outsourced plants?
So please understand the outsourcing in RAC segment is not only influenced by the seasonality of this product. There are other factors also which play into the equation because it is not possible for the brands to make all the different SKUs, all the different models that they want to give to their channel partners because they would like to have different model lineups for the different sales channels. For the online sales, they will like to have a different model lineup. And for the offline sales, they will like to have a different lineup of models to avoid any channel conflict. So that is basically called as a DMDC, means different models for different channels. So in that case also, the brands are always looking to outsource because they will try to pick up certain models, maybe for the online or for the large format retail chains.
They will try to pick it up from the contract manufacturers like us. So there are various factors that play into the outsourcing game. And I feel we have already said this thing in our call, and there were previous callers also who asked this question. So we feel outsourcing is a phenomenon that is growing. It can be seen from the numbers of the contract manufacturers, how the sales and the revenue has grown for the contract manufacturing companies in our space as compared to whatever is the growth of the industry. Coming to your first question about the net fixed assets, the total net fixed assets that we have deployed as of December in the AC business are close to about INR 800 crore. And as of trailing 12 months , we are having probably a fixed asset turn on that at about 5.4x on that business.
Okay, sir. Got it. Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Mythill Balakrishnan from Alchemy. Please go ahead.
Thank you for the opportunity. A couple of questions. Wanted to check with you whether the current quarter had any PLI or any other government benefit that we have received.
There was no PLI in this quarter. PLI typically comes to us in the fourth quarter. We will be taking that PLI as and when we will get the confirmation from the government on that. That will be last year's PLI, which will be INR 37.5 crore, which will be coming in the fourth quarter to us.
Okay. So most likely, we'll have INR 37.5 crores as PLI in 4Q.
Yes.
Got it. Any other government scheme, like there was a Maharashtra scheme, etc., which was there, there has been nothing per se in our margins, right?
There is a INR 1.5 crore kind of amount which keeps on coming from the PLI for the PG Electroplast, which is there in the quarter.
Got it. In terms of the growth plans ahead, right, I wanted to get a sense of what is happening on the compressor side. Is there any development on that front?
We are in touch with our partner, and we will be updating you as soon as we have any further information on that. But we are very, very hopeful that we should be able to close it very soon.
Got it. My last question is, right, on this growth, right. We have done so much significantly ahead of what has happened on the industry side. Just wanted to get a sense from you of how you have managed to get this growth. Is it wallet share that you have grown or how exactly you have done this? Because this is quite a very it's a very good number when you especially compare it with what has happened in the industry.
See, obviously, there are two, three reasons. Some of the brands who are our key customers, the outsourcing is probably today much more than the in-house manufacturing. That is one. And they have actually continued to do that in the fourth quarter also to fill the channel. Second thing is that probably we have gained market share wherever the other contract manufacturers also. And that is also the reason because of which we have done well. But to put things in perspective, these numbers are looking too good. But overall, we have done close to 4.8 lakh AC manufacturing in the fourth quarter. So on overall numbers, they are not so big number. But yes, because this is typically a smaller quarter in comparison to fourth quarter, so that's why the numbers are looking on a percentage term slightly higher.
Good. Thank you. And all the best for the quarter ahead. Bye.
Thank you. The next question is from the line of Abhay Jain from Hem Securities. Please go ahead.
Hi, sir. Congratulations for the great set of numbers. I have only one question. In the recent budget, the PLI for the white goods, AC and LED lights, has been significantly increased to more than INR 1,000 crore. Your view on that regarding PG as it has one of the highest market shares?
No, no. That is the outlay on the budget. But that PLI, it was always there. Now, see, the PLI is entering the fourth year of its being. Now, in the fourth year, the total outlay to this PLI was INR 6,000 crore, if I'm not wrong. And therefore, every year, the money which has to be distributed to the successful participants who meet all the criteria has to go up because it is based on the percentage of sales. And sales targets on an incremental basis are going up every year. So that's why we are seeing an increase in the outlay by the government in this year. But this INR 1,000 crore is a part of that overall INR 6,000 crore which was initially undercharged for the industry at the beginning of the PLI.
Okay. Thank you for the clarity, sir, and all the best for the future.
Thank you.
Thank you. The next question is from the line of Anup Suresh from BOB Capital. Please go ahead.
Hello, sir.
Hello.
My first question, yeah. So my first question is on the RAC segment. I just wanted to know, did the recent growth came from existing customers or were there any new client additions? And secondly.
No, no. Largely from the existing customers.
Okay. Okay. So no new client additions?
No, no. There are new clients. But typically, in the very first year, new client typically is a very, very small percentage of the overall numbers because, see, we are doing a very large number of ACs. In the very first year, no customer is actually going to buy a few lakh ACs from you. So typically, see, we are making close to about 17-18 lakh ACs is what we have done in the last financial year.
And this year, we are probably going to close at close to 20 lakh ACs. So in the first year, even the biggest brands normally do not do more than 1.5 lakh ACs. And the smaller brands are typically much smaller in the very first year because they are testing you, and they are working with you for the first time. It's only in the second and third year that the big ramp-ups happen.
Okay. And secondly, on the tie-up to manufacture POS devices, could you share how the current order book for POS machines is shaping up and what kind of demand visibility you have there?
No, no. I didn't get this question. I mean, I got that. It's on the point of sale devices, point of sale devices that we have entered into an agreement to manufacture for PAX Global. So please understand, our models are already under testing and evaluation with the Indian customers. And we are hopeful that in coming one or two months, we should be able to have the order book from them. And we will be sharing the visibility with you in the due course of time on that.
Okay. Thanks for explaining about that. One last question. It's just a bookkeeping question. Could you confirm the cash flow from operations for 9-month FY 2026?
Hallo?
Pramod, can you take that? The cash flow from the operations for the nine month.
No, no. Offline. Yeah. Offline, we will have to take it offline. I do not have this number handy with me, right?
Okay. Thanks for answering my questions. Thank you.
Thank you.
Thank you. The next question is from the line of Neel Mehta from Equirus Securities. Please go ahead.
Yeah. Thank you for the opportunity. Sir, given that the total inventory in the system right now, as you mentioned, is already high at almost around 4.5-5 million, including the brands plus channel, what is driving your decision to further build the raw material inventory, which is almost around 11 million that you mentioned? Is this linked to anticipated demand recovery or supply side risk? And how should we think about inventory conversion and rotary capital this way? Thank you, sir.
Previous quarter, when we started the.
Sorry, sir. We are unable to hear you.
I will take this. I am not audible. Pramod ji ?
Hello?
Yes, sir. You are audible. Please go ahead.
We had an inventory of close to 6.5 lakh AC for the manufacturing. This quarter, we have actually done 4.8 lakh ACs already we did build. And then this quarter, what has happened is, on an average, the price of the raw material has moved up for the last quarter itself by about 10%-15%. And we have actually reduced the AC division inventory from the third quarter by almost 7%-8% there. So effectively, the number of AC inventory which we are carrying is down by almost 15%-17%. So right now, we have close to about 5.5 lakh inventory which we were carrying as of the December 31st in the AC division.
Also, I want to highlight that typically, January, February, March is the peak manufacturing month for us. During the last year, we had a very good growth, and we did a manufacturing of almost close to 800,000 ACs in the last quarter. Right now, I am carrying an inventory which is very normal given the capacity that I have. We have a capacity, as I said, of about 425,000 ACs as well as about 50,000 window ACs.
Mr. Mehta, do you want to ask more questions?
That is from my side. Thank you, sir.
Okay. Thank you. Ladies and gentlemen, that was the last question for today. On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you all for joining us today. And you may now disconnect your lines.