Ladies and gentlemen, good day and welcome to the Elin Electronics Q1 FY26 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 the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavani Kumar from Axis Capital. Thank you, and over to you, sir.
Thanks, Shruti. Good evening, everyone. On behalf of Axis Capital, I welcome you all to Elin Electronics Limited Q1 FY26 earnings conference call. Today, we have with us management represented by Mr. Kamal Sethia, Managing Director, Mr. Sanjeev Sethia, Director, Mr. Praveen Tandon, Chief Executive Officer, and Mr. Aakash Sethia, Business Strategy and IR. We thank Elin Electronics for giving us the opportunity to host the call, and we would now like to hand over the floor to management for the opening remarks, post which we will open the floor for Q&A. Thanks, and over to you, sir.
Thank you very much, Bhavani. Good evening, ladies and gentlemen. This is Sanjeev Sethia, and we also have on call today our Managing Director, Mr. Kamal Sethia, our Strategy Head, Aakash Sethia, and our CEO, Mr. Praveen Tandon. Thank you for joining our earnings call for first quarter of fiscal year, March 2026. Coming to our overall performance for the quarter, operating revenues for the quarter was INR 295 crores against INR 293 crores in the same period last year, up 1% on a YOY basis. Quarter on quarter was down because of seasonality. Our revenue growth was impacted because of two key reasons: higher than expected rains that impacted our cooling product businesses, fans, fan motors, and AC motors and components thereof. Decline in lighting business from our key customer, Signify, who has created a JV with another contract manufacturer, as you know, Dixon.
This is as per our guidance shared earlier by us. We will cover the entire lighting business update and way forward later in the call. Consolidated EBITDA for the quarter was INR 17.6 crores against INR 13.3 crores in the same period last year. This has been driven by 130 basis points of higher gross margins due to better sales mix and efficiency in procurement and quality. Also, it is pertinent to note that within employee cost, there are non-recurring items of INR 1 crore, and therefore, recurring EBITDA is INR 18.6 crores for the quarter, with an adjusted EBITDA margin of 6.3% against a reported margin of 5.9%. Therefore, even with a modest 1% increase in revenue, adjusted EBITDA has increased by 40%, showing the strong operating leverage in the business. Consolidated PAT for the quarter was INR 9.4 crores against INR 5.9 crores in the same period last year.
Our liquidity position remained strong, with net cash of INR 103 crores as of June 2025. Our CapEx spend in Q1 FY26 was tightly controlled at INR 6.5 crores. We remain confident to deliver on our stated guidance. I would like to take this chance to reiterate our aspiration and strategy for the coming year. The aspiration is to be a one-stop shop for all high-volume home appliance and durable needs of OEM and our customers. This includes our existing business: lighting, fans, small appliances, and our planned new businesses: medium appliances such as air fryers, air coolers, chimneys, OTGs, etc. We will continue to look for such products to add in our portfolio over the next several quarters. Now, I would like to share with you the performance and strategy in each of our business verticals going forward.
In lighting, fans, and switch segment, the revenue for the quarter was INR 80.1 crore against INR 89.4 crores in the same quarter last year. This was primarily driven by a decrease in revenues from lighting, which was partially offset by an increase in revenue from fans. LED lighting, ex-flashlights, declined from INR 63.4 crores last quarter to INR 39.5 crores in the current quarter. This was largely led by volume decline from our key customer, Signify. They have moved businesses to its recently formed JV. Compared to Q4 fiscal year 25, we have experienced a revenue decline of INR 10 crores for the quarter or INR 40 crore annualized. As shared in the last quarterly call, this is in line with our estimate of reduction in revenue of INR 50 crores on an annualized basis for the year. Now, coming to the positive effects of the change in competitive scenario.
In lighting business, we have added three new customers in the lighting space, one of whom is a top five player in the Indian market. We expect to add another two to three customers by the end of this fiscal year. While they have started off small, we expect that these customers will ramp up to their peak requirement over the course of the next two, three quarters. Our outlook is that by the end of Q4 of this fiscal year, our monthly run rate, as compared to our business with Signify, our monthly run rate will be substantially higher because of the addition of these new customers. So, the lighting business, which has been flat for us for the last three years, I think from the end of this year and the coming fiscal year, we should see substantial growth.
Moving to our fan business, while our ceiling fan business has done well on a year-on-year basis, it has impacted by higher than expected rains. Our revenue for the quarter is up two times year-on-year. While Q2 is seasonally weak for fans, we expect this to pick up strongly again in Q3 and continue to do well in Q4 as well. I would like to highlight that our launch of BLDC products in the last two years with our customer Signify has gone quite well, and the market reception has been very encouraging. Signify itself is very bullish for the fan business in the coming season, and we will be adding another three or four new products in this segment with Signify.
Traditionally, in the off-season, our fan businesses have seen a major decline, but due to the good acceptability of our new designs, the average business we have is much higher than what we have experienced earlier, so I think our fan business, especially BLDC fan business, is going to do fairly well in the coming year, and similarly, our TPW business is also picking up. We are streamlining our TPW business from Goa to Ghaziabad in the coming season. We expect that this will help us generate increased business. As an overall product, we can offer a customer a much better deal from our Ghaziabad unit. Moving on to the home appliance segment, revenue increased from INR 63.6 crores last quarter to INR 68.6 crores this quarter. Kitchen and home care revenue increased by 8% year-on-year. This was on the back of improvement of revenue from mixer grinders and toasters.
We are particularly enthused about the growth prospect of OFR for the upcoming season. Given that we started this only last year, this has scaled up well in a short span of time. Personal care segment was up 9% year-on-year basis. We expect this to further get stronger in the coming quarter. Future growth is going to be driven by this segment on our strong focus on also growing ODM share of the business. While still nascent, we expect this to grow strongly over the next several quarters. A quick update about the medium appliance category. While these will be built out of Bhiwadi, which will start next fiscal, we have already initiated discussions with customers for this.
For select products such as chimney, we are in a reasonably advanced stage of discussions and are hopeful of getting business from one of the leading OEMs of this segment in the country. For other products such as coolers, we will provide an update in the subsequent quarter. We had shared our optimism in the last call about our relatively nascent export business. We remain in exploratory talk with few OEMs to localize in India and export to the U.S., Western world. While still in early stage, the engagement levels have been encouraging. Further, the government's stance on local manufacturing and disincentivizing imports via BIS and QCO makes us further optimistic on our business going forward. Moving on to the FHP motor segment, revenues were flat at INR 47.48 crores. This segment has also been impacted by the rains. We expect this segment to pick up strongly in Q2 and Q4.
Specifically, we see the chimney motor business having a very healthy growth in this coming quarter. And of course, I'm talking about motors and just reflecting on third-party sales. Going forward, we are adding cooler motors to our category, which we expect to launch by the coming October-November of this year. We have also started BLDC motors for chimney, and our first billing will happen in this month. BLDC chimney motors is also a rapidly growing segment, and this will also further add to our overall growth in the motor business. There are two other categories which have a fairly large market in India but are currently dominated by imports. With BIS coming in September of next year, we see that there's an opportunity in these two categories, namely washing machine motors and AC IDU/ODU motors.
We are having extensive talks with suppliers of the lines of these motors, and we will shortly be taking a decision to enter these categories also. Now, I would like to set our guidance. For the full year FY26, we believe revenue will be in the range of INR 1,350 crores, representing a growth of 15% over FY25. EBITDA for the year is forecast at 6%-6.5% margin. CapEx for the year will be INR 100 crores-INR 120 crores, split at INR 60 crores-INR 65 crores for phase one of the new plant in Bhiwadi, and INR 50 crores for growth of the existing business and factories. Once the new facility is stabilized in two years from starting, this would also help us drive our return on capital employed since cash sitting idle on a balance sheet has been a drag on the capital employed.
A quick update on the Bhiwadi factory: construction has commenced in July 25, and we expect the plant to be ready and operational by March or April of 2026. We expect revenues of around INR 140 crores in FY27 and INR 250 crores in FY28 from this facility. Reiterating that full revenue potential of the plant is INR 550-600 crores. Further, we expect a steady state EBITDA of 7%-7.5% for this plant. At these levels, return on capital employed for the plant will be 20%. With this, we conclude our opening remarks. We can now open the floor for questions and answers. 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 Kunal Mehta from Sunidhi Securities. Please proceed.
Yeah. This is Bajrang Bafna. Congratulations for a good set of numbers. Although top line was flat, but you kept on the margin improvement, what we have seen in the last quarter. So just a strategic question purely from a macro perspective. We have constantly seen the government is embarking on a journey where they are pursuing an agenda that most of the items that India is importing from China, almost 70-80 products, which currently most of the larger brands are importing from China and putting their brand and selling in India.
So that thing the government wants to end in India, and there are multiple articles and multiple announcements that have come from the government side where the deadlines are somewhere ranging from March 26 to almost September 26. So we just want to understand that what is the ground reality on this? Are the brands really moving to companies like us for the contract manufacturing? And what is the response that we have seen in the last two, three months, whether larger brands are coming forward for contract manufacturing to us, and how this particular thing is going to move? If you could elaborate on that, it will be really helpful for a broader direction for companies like us. Thank you.
Yeah. So definitely, we are seeing this movement happening post implementation of BIS. Certain categories, if we see where we ourselves have benefited, is like steam irons, kettles, OFR heaters.
Two categories which I had mentioned in my call is one was the washing machine motor and the AC IDU/ODU motor, which have a fairly large market demand in India, but unfortunately, more than 80%-85% to my knowledge of the demand is currently fulfilled by the Chinese companies. So I think we are seeing a lot of movement of companies taking a call of investing in infrastructure in India to get up for the capacities as and when BIS comes in. So definitely, I mean, across product categories, like I've just mentioned a few, but for example, flashlight torch is another category with BIS has just come in for July of this month. There again, we are seeing localization happening. So overall, I think there's actual movement happening on ground. Companies are trying to source more and more from India.
That's our, I mean, look, our thought process in this matter.
And just one more aspect to this. We are also seeing most of the global brands also have a tendency for China Plus One, where a couple of brands want to move their production on the side to India as well. So are we seeing some inquiries on that side as well where this could be a reality? We know that the tariff issue has recently emerged where India is right now getting charged higher than China. But hopefully, going forward, this structure will change, and probably we will be a strategic question. Suppose China becomes, let's say the 40% is the final rate, and India becomes, let's say 20% is the final rate.
And if there is a 20% rate differential between India and China, can we see some of the products in our basket become viable to be exported to these global brands? Is there a possibility of that sort existing in this sector or not? Just your sense on that, sir.
Definitely, there's a possibility. So we have a live example for us. So far out of our Goa factory, we have just started exporting a category of exhaust fans to the American market. Of course, like you mentioned, just with the QCOs coming, there is a slight question mark on how it goes. But this thing has started happening, and we have also got certain queries of companies willing to import from India as part of China Plus One. We are hoping that this duty aberration for India is very temporary, and it gets resolved soon.
But definitely, companies are looking at moving supply chains from China, and we have an example of a category where we've already started exporting. We've already, I think, sent in about 11 containers for this particular product to our US customers. So it's happening, but probably not at the speed at which the companies want because there is a reality also that the general manufacturing ecosystem in China is far more advanced than what it is here. Component availability, whether it's electronics or other assemblies and thereof. And in China, availability because of their strong 20-plus years of manufacturing. The ecosystem is much more conducive over there as compared to India. So it's happening. So it's developing here, but it's probably a little much slower than what these companies would like. So my overall take is that, yes, that shift is happening. Companies are coming over here.
But overall, I think across India, we have to speed up our speed of response so that it happens much faster.
Got it. Got it, sir. Thank you very much. I'll be in the queue for further questions, and wish you all the best to achieve good success going forward, sir. Thank you very much.
Thank you. Participants who wish to ask a question may please press star and one at this time. The next question is from the line of Dhruv Shah from Ambika Finance. Please proceed.
Thank you, team, for the opportunity. I just have one question. So how confident are you on still maintaining the 15% growth considering there has been unseasonal rain in Q1? And is it? So I just wanted to understand that part of the business.
Hi Dhruv. Thank you for your question.
Look, like we highlighted, we are reasonably confident that we should be in and around the INR 1,350 crore mark. Not all of this is going to be back-ended. You'll start seeing reasonably strong growth coming from quarter two itself. The structure of the business is such that there is a little bit of seasonality where Q2 and Q4 are higher revenue quarters, followed by Q1 and then by Q3. So that's the nature of the business. So we are reasonably confident that we should hit our guidance, and you will see proof of that coming in Q2, Q2 itself.
Okay. Aakash. And Aakash, just one more thing. We mentioned that by Q4, we should see a monthly run rate in lighting more than what Signify used to give us the revenue, right?
Sure. Yeah. That's correct.
Okay. Great. Great. Thank you so much and all the best.
Thank you. Thank you.
Before we take the next question, we would like to remind participants that you may press star and one at this time. The next question is from the line of Bhavani from Axis Capital. Please proceed.
Yeah. Sir, thank you so much for the opportunity. So sir, first question on the inventory side, just wanted to understand at what kind of inventory we are currently sitting at, particularly in clients?
Currently, as of June, we are operating at approximately 40-42 days of inventory, while this is higher than what we would like. But the fact of the matter is that Q2 is a big kind of quarter for us. So keeping in mind the upcoming offtake that we have planned based on discussion with our customers, we are carrying slightly higher amounts of inventory in order to kind of meet their demand.
Sure.
So what is the normal level of inventory which generally we keep?
So historically, this used to be the normal. It was in the range of between 35 and 45 days. However, one of the targets that we have kind of set out for ourselves and we've established at the start of the year was to bring down overall working capital levels to about 45-50 days kind of number on a net basis. So this will largely be driven by improvement in inventory as well as some improvement on the table side. So it is in that context that I mentioned that inventory is higher than what we would like. It is not out of the ordinary from a historical perspective, just that not as reduced as we would like, relevant in respect to our guidance.
Got it.
Sir, what is the current capacity utilization across all the segments if you can just help us?
There's no easy answer to that because it varies by segment. But if I were to just give you a very, very rough number, it would probably be in the range of early 70s kind of number. I mean, 70, 72, 75% on average. Across the categories. Okay. Yeah. Yeah. Obviously, some are better, some are lesser.
Understood. Understood. Thank you so much for this, sir. And the last one question is particularly just to understand, so sir, how the current demand is shaping up because we are also hearing about that the festive season should do well. So are we witnessing some kind of uptrend overall now, or there is some early signs from your customer that they have anxiety with regards to orders, particularly for the season?
No, no.
I mean, if you're talking about festive demand, which is in the current quarter that we are sitting in the run-up to Diwali, which is a large part of Q2 and one month that falls in Q3, so far, so good. We are happy to share that inquiries are good, demand is good, orders are good, more importantly. So like we said, we should be doing quite well in Q2.
Understood, sir. Understood. So sir, I'll come back in the queue. Thank you so much.
Thank you. Participants who wish to ask a question, please press star and one now. The next question is from the line of Kunal Mehta from Sunidhi Securities. Please proceed.
Hi sir. Very good afternoon. My first question would be, sir, in this quarter, we saw a gross margin improvement of about 1.6% YOY.
But over last quarter, if you see the employee benefit expense has gone up from 12.9 to 14.5. Can you just explain this explanation analysis a little better? Why the gross margin has improved, but why the benefits have again gone up?
Okay. So I'll just take it step by step. So gross margins have come up, like we've said, big two parts. So one is on the sales mix, where if you have certain category of products that have a relatively higher gross margin, the share of those products goes up, which in our case is the components business. Then obviously, overall gross margin tends to move up. Second is, like we mentioned, we've put in place an operational excellence team that is working on improving quality, reducing wastage, rejection, all of that, as well as efficiencies in procurement.
So these are the reasons why gross margin has improved on a YOY and a QOQ basis. Regarding the slight decline in employee metrics, there are two reasons. One is obviously there is an element of increments that have come in. So last quarter was last fiscal. From first April, there have been certain increments that have come in, which is normal for, I guess, every business. So one is the impact of that. And two, like we pointed out, there is a non-recurring element of gratuity to the extent of about INR 1 crore that is sitting in this quarter that was not there in the last quarter. So if I adjust for these, then we are good. You'll see the benefit that we kind of spoke about very clearly visible in upcoming quarters.
We totally stand by the guidance that we've given, and those numbers will become kind of clear in the upcoming quarters.
Okay, sir. I'll come in the queue again.
Thank you. The next question is from the line of Sahil Doshi from Thinqwise. Please proceed.
Good afternoon and congratulations on a great set of operating metrics in this quarter. Firstly, just wanted to clarify on the lighting demand. You said at the exit rate, we should be at a higher rate this time. So could you just quantify? Is it from the March end, or how are we looking at this?
What I meant was in terms of revenue. So if I can quantify it, our average revenues from Signify used to be at around INR 19 crores-INR 20 crores kind of number for last two, three years. In fact, it's been declining.
What I mean is by the end of quarter four, our per monthly revenue will be significantly higher than INR 19 crores a monthly rate. So even after a drop in the average rate of procurement, Signify is not becoming absolute zero. There will still be our customers. But our addition of four to six customers by that quarter should give us at least a 20%-30% increase of the nominal in buying what Signify used to do from us.
Understood.
And just to clarify this further, in terms of do we have any more clarity from Signify as in how do they plan the entire transition? And do we envisage further losses in the years forward?
So we do have clarity. There are basically two types of the business that Signify has divided into two segments.
One is what they call the consumer segment, and the other is the professional segment. The professional segment business, as per the information given by them, will not be moved to the JV. So that will continue with manufacturers like us and a few more like us so that business stays with us. And a portion of the consumer business will move. I believe a major chunk of what had to move has moved. They will still also buy consumer products from us. So I expect that probably the majority of the movement which has to happen has happened. Maybe it could be a little more. But at the same time, we are confident that the addition of these new customers will more than make up for the loss of business from Signify and then add to our overall revenue.
So in the coming fiscal, I think our lighting businesses overall should see a significant growth.
Okay. So FY26, we should close as a positive growth versus last year, is what you would indicate, basically.
Sahil, FY26 could be touch and go. But FY27, most definitely, is going to be a very strong growth over FY26. I think the way to look at it is orders have already started to come in. But you will appreciate that when there is a supplier shift, there are all of the formalities such as BIS and all of that to be done again, right? Because BIS is a production concept, not a customer concept. So that has to be redone, which takes some amount of time. Once that is done, the whole shift in supply chain is gradual, right?
So like I've mentioned, we already have three customers who've come in, one of whom is a top five in the Indian lighting space. We are very confident that the numbers will come in based on detailed discussions with the new customers. Now, whether FY26 overall will grow or not, very honestly, as of now, it's a little bit tough to say. But FY27 definitely will be a very, very strong growth over 26 in terms of the lighting business.
Perfect. Appreciate that. And I would just want to check that I'm hoping that this will come at a much higher or a better profitability metric as a whole.
Look, I won't say much higher or much higher. In some cases, marginally better. In some cases, somewhat similar. So I don't want to guide you to expect much higher profitability.
Yes, what one could expect is that while gross margin should be similar with maybe a marginal upward bias, EBITDA should start to get better because once your overall revenues tend to go up, the concept of operating leverage kicks in.
I'll just add to that there will be another advantage. So some of the customers who we have added or are in the process of adding will be lighting first. But they are also selling similar appliances of what we make. And so maybe we begin with lighting, but once our engagement with them increases, I'm hopeful that we'll be able to add some other categories that we'll be able to cross-sell. So I think we'll see the benefit of this in our other businesses as well.
Understood. Understood. And just other segments, I just wanted to check.
We've seen strong growth in medical diagnostic cartridges for the last two, three quarters. If you can just talk about if there is any traction we are seeing, how this business could evolve over the next two to three years, or what is the potential there? And second is on personal care. I think for the last eight quarters, we've been in the range of around INR 25-INR 30-odd crores. And the growth seems to have stagnated there. So what's the outlook you have on for both?
Sure. I'll just take it step by step. So on the medical cartridge, please look, it's a fantastic business to be a part of. So firstly, we are the only third-party manufacturers aside of the principal company that does this, right? So the company is Molbio. Aside of them doing it themselves, only we do it.
This is primarily because of geographical proximity. We are situated in the neighboring region of their factory. Just in terms of how the business works, this is primarily, from our principal's perspective, a tender-based business, right? So both the Indian as well as global governments release tenders, which these guys participate in, based on when they win and if they win, orders kind of get passed on to us. So you will notice that this is a bit of a lumpy business. It's difficult to predict with a high degree of accuracy in terms of how this will pan out. But we do have visibility for the next six odd months. That number should broadly continue in terms of the run rate that we currently are at. Beyond that, I don't have visibility, so I don't want to give guidance with this specifically. I'll just pause here.
If there are any queries around medical, let's just address that first and then move on to the other questions.
Sure. No, that helped. Any new wins or can we add capabilities in this business or something as a medical something?
So look, as of now, this business is single product, single customer kind of segment. Yeah, we are on the lookout, but as of now, no real news to share. As and when there is, we'll be, of course, intimating all our shareholders of the same.
Sure. Sure.
Sorry, what was your?
Yes, the only person who cares.
Yeah. Yeah. Yeah. So numbers have been, yeah, I won't say flattish, but yeah, not kind of the strong growth that we had experienced maybe earlier in the six quarters. So we've been high single-digit kind of number. We are in touch with our customers.
What we have understood is that over the course of the next three quarters, numbers should improve. While they will improve, specifically for our largest customer here, I think numbers will be in the early double-digit kind of or low double-digit kind of growth rate. Probably that is something that you should model in, not model in a very, very exclusive growth rate for this over the course of the next three odd quarters at least.
Sure. That helps. I'll just come back in the queue. Thank you so much.
Thank you. The next question is from the line of Kunal Mehta from Sunidhi Securities. Please proceed.
Hi. I just wanted to ask one last question, which is the working capital-based guidance at the end in the last quarter was given 40 to 45 days.
And as of Q1 now, I think it's revised a little upwards from 45 to 50 days. So maybe if you can just highlight what led to the revision of this, is it because of inventory or because of payables?
Yeah. Let me actually just request our CEO who's driving this part to just come in and address this query.
Hi, Kunal. Good evening.
Yeah. Hi.
Thank you for the question. Yeah. Yeah. The major part, as explained by Aakash also, the quarter has been a little slow on sales. As per the season as concerned, the rainy seasons, and we were not able to get the same numbers as what was projected. The growth happened 1%. Similarly, to secure the quarter two also, we were advancement of stocks so that we can meet the customer expectation.
Third, there were a lot of new customers getting in, as we have shared. So a lot of inventories are being ordered based on their requirements. So you'll see that improvement in the quarter two. And overall, we'll be meeting that to that level of 45-50 days. That's the guidance which we will be.
Okay. And one more question. Bhiwadi construction has started. But on the parallel side, if you all can provide any update on how are the improvements in the approval of the design and all from the customers. So will it have a lag after the facility starts that you all will still work on the approvals of the designs and then start production, or that all will be done before the factory is already ready?
No, no. So I think we, yeah, Akash.
So we mentioned in the first part of the call that specifically two products. So chimneys, we mentioned that we are in a reasonably advanced stage of product approval with our customer. So our estimate is that by the time the factory is ready, we should be ready pretty much immediately for go-live in terms of production. For some of the other products, such as coolers and air fryers, we are probably a little bit slower in terms of the approval and the design stage. But we are in touch with customers on a constant basis for all of that. So overall, the idea is that once the facility is set up, we hit the ground running. We don't have to then wait for much longer to secure approvals.
I'll just add on to this.
So our strategy, as far as Bhiwadi is concerned and like Aakash mentioned, will be a combination of certain new products and some product that will be shifted from our existing Ghaziabad factory. So chimneys, we are, like Aakash mentioned, we are in discussions, and we would like to start the production of chimneys in our existing facility. And as the Bhiwadi factory comes in, it will be a shifting of chimneys, OFR, and OTG. These categories will be shifted out of our existing factory in Ghaziabad to scale up and hit the ground running in Bhiwadi. There is no lag that the facility is ready and there's no manufacturing happening. And coolers will be started from Bhiwadi factory. But what we are doing right now is based on the design and the prototypes and all which we have under development right now.
We will have customer approvals in place so that as soon as the product is ready, it can start being manufactured. So our strategy is based that the Bhiwadi factory, as soon as it is ready, we should be in a position to start commercial production from there. I hope it's just clear that it is based on Bhiwadi.
Yeah. So yeah. So the INR 140 crore guidance that you all have given for FY27 includes chimney, OFR, and OTG in the first phase of initiating production. And then FY28 will see coolers and air fryers coming in as well.
We expect coolers also to start next fiscal, so it includes all four: OFR, OTG, and OFR. And our facility, which we free up in our Ghaziabad facility, that we are going to use to expand our fan and motor business.
Like I mentioned, we are very seriously looking at the washing machine motor and AC IDU/ODU motors, and to increase our ceiling fan and TPW business. So the plan going forward is to increase the fan business in Ghaziabad, the fan and motor business in Ghaziabad, free up the capacities there, and shift the other OTG and medium-scale appliances in Bhiwadi so that there is an opportunity to scale up these businesses over there as well.
Okay. Okay. Thank you.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one at this time. The next question is from the line of Yashovardhan Banka from Tiger Assets. Please proceed.
Hello, sir. So what are the utilization levels for a new facility that we're targeting in, say, FY26 and FY27 as well?
Sorry, your voice was a little bit muffled. Can you just repeat your question, please?
Sure. Can you hear me now? Yeah. Yeah. Yeah. What are the utilization levels that we are targeting for FY26 and FY27 for a new facility?
So FY26, the new facility will not be up and running. The new facility only gets ready around April 2026. So the new facility, first, like we mentioned, the overall revenue potential of the new facility is approximately INR 550-odd crores. We've mentioned that we should be in the INR 140 crore- INR 150 crore range. So looking at that, we should be around the 25-odd% utilization mark for the first year, which then goes up to 50%-60% over the course of the next couple of years, right? So that's regarding Bhiwadi.
Regarding our existing facility, just to give you a ballpark number, we are probably close to 70-odd% utilized on a blended basis across our three existing factories.
Understood. Understood. Also, I was a bit curious on the medical cartridges part. And who are the competitors who are manufacturing the same domestically and globally?
No. So this is, look, the way the business is, the principals own this. This is a high IP product. The principals own the design. We manufacture it on an OEM kind of basis. So there is no real competition. This product itself is either manufactured in-house by the principal or outsourced to us. So in a sense, there are only two factories producing this particular product.
Okay. So what is the ballpark addressable market we're looking at for this particular product?
It's very difficult for me to give you an exact number because this is, like I mentioned, this is a tender-based business. So the way our principal wins business, primary supplies of this product is to the Indian government, global governments, World Health Organization, and so on and so forth. And this is tender-based, right? So these organizations periodically release tenders, which then are bid out. Once our principals win a share of the business in the tender, is when orders get released.
Understood. Understood. And are we expecting to benefit from any of the government policies, say, PLI or BIS for any specific projects?
Sorry, again, your, sorry, what was your question? Can you just repeat it?
So are we expecting to benefit from any of the government policies, say, PLI or BIS for any specific projects? Specific projects.
No.
So, BIS, so of course, we are, I mean, expecting a big part of our growth over the next two years to be premised on the imposition of BIS and QCO standards across the various products that we deal in. PLI, specifically right now, is only in lighting. If and when there is another PLI that comes in the product segments that we are a part of, we are happy to evaluate at that point in time.
Okay. Okay. And just one last question. Are we sort of facing any risk moving on in respect of any of our clients going for any further vertical integration? Any of our marquee clients?
Any of our marquee clients going for, sorry, what?
Vertical integration?
I mean, not to the best of our knowledge. No. Not really.
Okay. Okay. Okay. Understood. Yeah. Thank you.
Thank you.
The next question is from the line of Swapnil Desai from Capital One. Please proceed.
Hi. Good afternoon, everyone. So this is my first call, so please pardon if the question has been covered. And if so, please guide me where I should look for. But the question is more on the business model side of it. So let's say I wanted to understand what is typically the model in terms of the cost structure and margin. So let's say if you do the contract manufacturing for a client, is it on an open book basis with a pass-through of all the costs? And if so, as and when you get more efficient, do we have to pass on the benefit to that, or that adds up to our margin? How does that work?
So yeah, look, costing is more or less transparent.
So there is a defined bill of material. There is a defined value addition, which in our case is in percentage terms. And that leads to the final price. So any price movement that happens on a periodic basis is passed on. So typically, it's passed on either on a monthly or a quarterly basis to our customers with a lag. So with a lag of one month or a lag of one quarter. Sorry. So this is regarding what was the second part of the question?
So any efficiency gains that you achieve as a part of your learning and kind of getting the processes better aligned, is it also eventually customer will seek more gain from that as a pass-through to give you more business?
Look, the way the business works is that whether you like it or not, the customer forces you to innovate and be efficient because the job of every purchaser is a company is to come to you every year and ask for a 2%, 3%, 4% price reduction. So I mean, that's the nature of the business. So they kind of keep you on your toes. And because of that whole conversation, one is always thinking of ways to get more efficient.
Okay. So the reason I'm asking this question is that so we are guiding for 6-6.5% margin this year from new clients, 7%-7.5% kind of a margin we are targeting.
So I'm saying, is this the feeling that we have in our business in terms of margin profile, let's say over a medium term, three, four, five years, or is there a room for margins to go up from that number?
Well, look, okay. So philosophically speaking, yes, one could probably aim for a slightly higher margin. But in our experience, or in our limited experience, whatever we've learned is to guide for something that is achievable. So while we may have higher aspirations in terms of what we want to guide the investor community and the analyst community for 6, 6.5 this year and 7, 7.5 next year, internally, of course, we have a slightly higher aspiration.
But I think right now, given that we are coming out of a lull of two years where our margins compressed from 8% all the way down to 4%, it's a little bit premature to talk of aspiration. Let us first deliver on the 6% and 7% or 7.5% that we've spoken about for the next two years. And once we get to that is when we can talk about higher aspirations.
That makes perfect sense. And second question is, as you go into medium appliances, how do you generally look at moving from a smaller realization product, lower realization product to higher realization product? Is it the value addition part per unit will go up significantly and hence the margins are higher, or because the realization are higher, the percentage of that is higher, hence the margins are higher?
Yeah. It's the latter.
So because these are generally higher realization products, typically what happens is that, in fact, I would say that overall gross margins will tend to be at the lower end of the spectrum where we currently are. It's not going to be at the 25%-27% mark. It'll probably be around the 20%-22% kind of thing, broadly speaking. But because these are higher realization products, therefore all your other overheads in terms of labor and other general overheads, on a percentage basis, they are very small. So therefore you have a slightly higher EBITDA. So what we've mentioned for Bhiwadi is that once the plant is stabilized, we will definitely be achieving north of 7%-7.5% kind of EBITDA margins.
That's great. Thank you and wish you all the best.
Sure.
And just one for the moderator, I think due to paucity of time, maybe we can just take one or two more questions. Thank you.
Thank you. Due to time constraints, that was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir.
I'm Kamal Sethia, Managing Director. Thank you all for your time and being part of this call, earnings call. And wish you all the best. Have a great day. Thank you so much.
Thank you. On behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your line.