Ladies and gentlemen, good day and welcome to Q4 FY25, Elin Electronics Limited Earnings Conference Call, hosted by Axis Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Deepak Agarwal from Axis Capital. Thank you, and over to you, Mr. Deepak.
Yeah, thank you, Hamshad. Good afternoon, everyone. On behalf of Axis Capital, I welcome you all to Elin Electronics Limited Q4 FY25 and FY25 Earnings Conference Call. Today, we have with us management represented by Mr. Kamal Sethia, Managing Director, Mr. Praveen Tandon, Chief Executive Officer, and Mr. Akash Sethia, Head of Strategy. Without taking much of your time, I would now like to hand over the floor to the management for their opening remarks, post which we'll open the floor for Q&A. Thank you, and over to you, sir.
Thank you very much, Deepak Ji Good evening, ladies and gentlemen. This is Akash Sethia, and we also have on call today our Managing Director, Mr. Kamal Sethia, and our CEO, Mr. Praveen Tandon. Thank you for joining our earnings call for the Q4 and full year ended March 2025. I am very pleased to share that the company has reported the strongest set of numbers since our IPO. With a strong focus on operational efficiency and growth, we believe the next several quarters should continue to see higher growth in both revenue and margins from here on. Coming to our overall performance for the quarter, our operating revenue for the quarter was INR 315.7 crores against INR 277.8 crores in the same period last
year, up 14% on a YOY basis. On a quarter-on-quarter basis, it was up from INR 266.3 crores by 19%.
Consolidated EBITDA for the quarter was INR 20.3 crores against INR 12.4 crores in the same period last year. This has been driven by 70 basis points of higher gross margins and some operating leverage playing out. Also, it is pertinent to note that within this, there are non-recurring items of INR 1.4 crore, and therefore recurring EBITDA is INR 19 crores for the quarter, with an adjusted EBITDA margin of 5.9% against a reported margin of 6.4%. Consolidated profit after tax for the quarter was INR 17.2 crores against INR 3.5 crores in the same period last year. This includes a net benefit of INR 7.5 crores towards profit on shares sold by subsidiary Elin Appliances Private Limited of Elin Electronics Limited.
Our liquidity position remains strong with net cash of INR 75 crore as at March 2025. Our cash CapEx spend in the entire financial year 2025 was at INR 40 crores.
Our working capital cycle as at March 2025 is unchanged from March 2024 at a net 52 days. I would like to circle back on our actual performance versus the guidance shared at the start of the year. We had guided for a revenue range of INR 1165 to INR 1200 crores. We have achieved INR 1180 crores. We had guided for an EBITDA of a range of INR 60 to INR 65 crores. We achieved INR 52 crores. We had guided for a cash CapEx spend of INR 40 crores. We actually spent INR 40 crores. We have guided for a net working capital of 45 to 50 days. We are actually at 52 days. As you can see, it has been a mixed bag for us in terms of full year delivery, largely relating to the miss on EBITDA margin front.
However, we take great comfort and pride in our Q4 performance, especially regarding margins.
As you can see, we have seen both revenue growth and margin expansion in Q4. We are very confident of this margin expansion and revenue growth sustaining in full year FY26. I would like to share with you also what has led to the margin uptake in Q4. We have created an operations excellence team to bring in operational efficiencies for the business via Industry 4.0, best practices within industry, and a strong focus on automation. Through these activities, we have achieved a savings of INR 1.5 crores for Q4, or an annual run rate of INR 6 crores per annum. We are further confident of achieving this and increasing this to INR 8-9 crores for the full year FY26 across labor and overheads.
I would now like to outline our aspiration and strategy for the company going forward for the next two years.
The aspiration is to be a one-stop shop for all high-volume home appliances and durable needs for our OEMs and customers. This includes our existing business, which is lighting, fans, small appliances, and our planned new business, which is medium appliances, such as air fryers, air coolers, chimneys, OTGs, and so on. We will continue to add such products in our portfolio over the next several quarters. Let me explain the significance of this. These medium appliances that we are planning to make have realizations between INR 2,100 to INR 5,000 per product. This is substantially more than our realization from our current range of products,
which stand at between INR 300 to INR 600 per product. This means that our average realizations will be moving up substantially over the next few years as revenue contributions from medium appliances increase.
In the last year, we have executed on this strategy by increasing our fans business and commencing the OFR business. This year, both the fans and OFR business should see substantial growth. We will also be entering air coolers, chimneys, OTGs, and air fryers. Now, this is important because on these higher realization products, the direct labor cost and other overheads as a percentage of revenue decline substantially. Therefore, what this does is create both higher and more predictable margins. This is also in line with our goal for getting back to 7% to 7.5% EBITDA margin by financial year 2027. Now, I would like to share with you the performance and strategy in each of our business verticals going forward.
In the lighting, fans, and switches segment, the revenue for the quarter was INR 86.3 crores against INR 78.5 crores in the same quarter last year.
This was primarily driven by an increase in revenue from fans, which was partially offset by a reduction in the lighting business. The LED lighting business declined from INR 57 crores last quarter to INR 50 crores in the current quarter. This was largely led by a volume decline in certain categories. Further, we would like to share an update with you on the lighting business. Our key customer, Signify, has entered into a JV with a competitor for the consumer lighting business. This has happened fairly recently, and full details on how this will impact us are not fully visible yet. However, going by the actions of our customer and the preliminary discussions we have had with them,
it seems that a reasonable share of the consumer lighting business, which is panels, downlights, etc., could be shifted to the JV entity, which may cause a reduction in lighting revenue for us.
We estimate this lighting revenue reduction to be in the range of INR 45 to INR 50 crores for the full year. However, this JV entity has also worked as an opportunity for us, as most of the OEMs and brands do not want to work with competition, and the JV is half-owned by a competitor. They have initiated development discussion in all seriousness with us. We hope to start business with them within the next few months. Net of new customer addition, the net impact we potentially expect on our business is likely to be in the range of INR 30 to INR 35 crores for fiscal 2026. Over time, our endeavor is to neutralize the impact totally.
Regarding our fans business, our ceiling and TPW fans business has done quite well in the quarter. Our revenue for the quarter is up 2x on a YOY basis.
We are further working on making some operational enhancements that should further drive revenue and profitability in the fans business. Also, our export of fans out of Goa has commenced. Like we have highlighted earlier, we are optimistic of expanding our entire export business. Moving on to the home appliances segment, revenue rose from INR 68.7 crores last quarter to INR 87.1 crores this quarter. This was primarily driven by a strong growth in the kitchen and home care business. The kitchen and home care revenue increased from INR 43.7 crores in the last quarter to INR 61.7 crores in the current quarter.
This was on the back of an improvement in sales of mixer grinders and irons. Personal care segment was flat YOY. We expect this to revive in the coming quarters. Future growth is going to be driven by this segment and a strong focus on growing ODM share of the business.
While still nascent, we expect this to grow strongly over the next several quarters. A quick update on this segment. In the upcoming Bhiwadi plant that we announced recently, we will be making medium-sized appliances such as chimneys, coolers, air fryers, and potentially microwave ovens as well. With a clear objective of becoming a one-stop shop for brands for high-volume, small, and medium appliances, we have renamed this segment to home appliances. We are also optimistic about our nascent export business. Given the tariff situation and the uncertainty it has created for global supply chains, most global OEMs are seriously looking to diversify supply chains away from China and towards India.
We are in exploratory talks with a few global OEMs to localize in India and export to the USA and the Western world. While still in early stages, the engagement levels have been very 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 up from INR 49 crores to INR 51 crores, primarily driven by an increase in revenue from terminal blocks and synchronous motors. Please note this segment reflects only third-party revenue. Although revenue from third-party as a segment has been muted, this has been captured as higher revenue from complete appliances via captive consumption. Actual motor consumption and production has been quite strong. Now, I would like to set out our guidance.
For the full year 2026, we believe revenue will be in the range of INR 1,350 to INR 1,400 crores, representing a growth of 15% to 18% over FY25. EBITDA for the year is forecast at between 6% to 6.5%.
CapEx for the year will likely be in a range of INR 100 to INR 125 crores. The split is INR 60 crores approximately towards phase one of the new plant at Bhiwadi and the balance for the existing business and factories. Once the new factory in Bhiwadi is stabilized in two years from starting, this will also help us drive up our ROCE since cash sitting idle on a balance sheet has been a drag on ROCE. A further quick update on the numbers of the Bhiwadi business. We expect the plant to be operational and contributing to revenue by March 2026. We expect a revenue of INR 140 crores in FY27 and INR 250 crores in FY28.
The full revenue potential of the plant is between INR 550 to INR 600 crores. At a plant level, we expect a steady-state EBITDA of 7% to 7.5%.
At these levels, ROCE for the plant will be 20% pre-tax. As always, we remain committed to drive value for our customers and shareholders alike. With this, we conclude our opening remarks. We can now open the floor for Q&A. 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 Darshil Pandya from Finterest Capital. Please go ahead.
Hello. Am I audible, sir?
Yes, you are. Yes, sir.
Congratulations on a very strong comeback quarter.
Sir, my questions, you know, it is on the guidance that we have given of 6% to 6.5% EBITDA margins and, you know, the guidance that you have just given. So I just wanted to ask, what does management think about, you know, how we will be achieving this guidance? Will it be, you know, led by the fans and the home appliances, which are, you know, strongly come up? And will this be over the quarters, or, you know, it will be spread out between 40% or 60% in H1 versus H2? How will it look like?
Sure. So let me just break it down into two. I'll just talk about first the revenue guidance and then the margin guidance. The revenue guidance, like we said, is a growth of 15% to 18%, you know, in FY26 that we expect over FY25.
This will largely be led by the home appliances segment, the motor segment, and the fan segment, right? We've already mentioned that lighting, we expect some sort of degrowth. This overall growth, 15% to 18% that I'm talking about, is despite the reduction in the lighting business. Now I just move to, you know, the margin front. For FY26, we are guiding for an EBITDA of between 6% to 6.5%. Please do note that even in the current quarter, we have reported an actual margin of 6.4%. And after adjusting for, you know, some lumpy business, we have reported an adjusted margin of 5.9%, which is already close to the guidance that we are setting out.
One of the key reasons how we've gotten to this number already is we mentioned that we've set out, you know, an operations excellence team.
This team is, you know, doing a very strong kind of focus and activity under the savings on manpower as well as overheads. So we've already, you know, done a savings of INR 1.5 crores for the current quarter, which is a run rate of INR 6 crores per annum. What we are saying is that this run rate will be better, and we are expecting a net savings for the entire year of approximately INR 8 to INR 9 crores at the minimum. We are fairly confident that with the right work, this number could be larger. Now, all this is being driven by Industry 4.0 best practices in the industry as well as a strong focus on automation. I'll just pause here. If there are any further queries to this, happy to clarify.
No, it sounds good.
And, sir, the capacity utilization for FY25 of our current plant, if you can just share.
Sure. Look, so obviously, you know, I'm just going to give you a blended number. It varies, you know, by product segment, and within product segments also, we have multiple subsegments. But at a very, very, you know, high level across for the entire company, it's approximately between 70% and 75%.
70% to 75%, you're saying.
That's right.
Got it. So we are actually running at very, very good optimum levels. Got it. And, sir, just wanted to confirm, all our products are sold to OEM or to the main plant? Just to understand.
We are only a third-party manufacturer. We do not have any own brand in any finished product. We are a third-party contract manufacturer.
Great.
So we do actually only give it to the OEMs, and then the OEMs give it to the main customer.
That's right.
So do we have any plans to, you know, connect with the customer directly and rather make some, you know, that if something can help us in the margin front?
No, no, no. Because, you know, look, we are very clear with our philosophy. We want to continue to be a third-party, you know, contract manufacturer for OEMs because your customer cannot be your customer and a competitor. If we launch a brand, then our customer becomes, in some sense, our competitor. And, you know, we want to avoid that confusion. So we will continue to remain third-party. There is no plan of, you know, launching our own brand or anything like that.
Okay. Copy.
And, you know, with regards to, as we have seen, you know, some good growth in the fans business and the home appliances business, so do we have in future any plans to, you know, cut down to maybe three, four, or, you know, five products that can, you know, yield up our good numbers? Do we have something? Because right now, we have a lot of products in our basket.
No, the growth has been broad-based. We see no reason to cut down our business as long as, you know, each engine or each sub-engine of the company is performing. Why should we cut down on anything? Obviously, you know, there is always the area of interest.
We can cut down, but, you know, just as, you know, we can see some good growth in the segments that we are seeing currently. And, you know.
Sorry, I didn't get your question.
So just, I'm not trying to say that, you know, we just should just cut off. But just to understand, you know, since the other segments, which are right now performing well for us, we might, you know, make some expertise over there. Because the other products, as of now, what I've been seeing in the yearly numbers is, you know, are not so encouraging. Maybe the growth is not that good when it is compared to our home appliances or, you know, fans businesses. That's the whole point of understanding.
No, no. We are fairly confident. Look, home appliances have been very strong. Fans have been very strong. Motors, like we mentioned, optically, it is not showing growth to you because this captures only third-party motor sales. What it does not capture is captive consumption.
So that is captured in the strong, complete home appliances. So each of our home appliance, fan, and motors business has shown strong growth. The only business that, you know, has shown some degrowth is the lighting business. We've explained that already. We hope to make strides in mending that.
Correct, correct. So last, just if you can repeat the Bhiwadi plant revenue that you just, you know, you had shared. I just missed on the numbers that you just explained.
I'll just repeat it, but after this, I would just request you to just rejoin the queue because there are other participants.
Yes, 100%.
So on the Bhiwadi business, the plant is expected to be operational by March 2026. So for the first full year of operation, which is fiscal 2027, we expect a revenue of INR 140 crores. For fiscal 2028, we expect INR 250 crores.
The full revenue of the plant, the full revenue potential of the plant is between INR 550 to INR 600 crores.
Got it, got it. I'll fall back into the queue. Thanks so much, Akash.
Thank you.
The next question is from the line of Kunal Mehta from Sunidhi Securities. Please go ahead.
Hello. Hi, very good evening and congrats on the amazing set of numbers. So my first question would be on the employee expenses, which, you know, have just been almost the same as last year, but there has been a mention in the presentation that going ahead, there will be an improvement about INR 2 to INR 2.2 crore per quarter. So can you just explain maybe that how, like, will there be the benefit?
Sure, sure. Sure. So let me just take a moment to just explain this.
What we are saying is that already in the current quarter, there have been savings achieved of INR 1.5 crores. Now, to your point of the employee number on an absolute basis being the same, please look at the labor cost of the employee cost to revenue ratio, where you will see that despite the same kind of absolute cost, there has been a sharp improvement in revenue. So the way to also look at it is not only on an absolute basis, but in terms of, you know, cost relative to revenue. So you will see that, you know, from 14% to 14.5% levels of employee cost to revenue where we were for, you know, last year, for the majority of the last year,
we have managed to bring this down to slightly under 13% for the current quarter.
We expect, you know, for the full year, us to be able to bring this down to around 12.5% or 1% for the full year for the company as a whole. That is probably the correct way to look at these savings, not probably on an absolute basis. I hope that clarifies. .
Yes. And, sir, the other expenses have also seen improvement, about 60 basis points, if you see or on your. So that is because of any power savings or something else?
Primarily power savings, right? But also, there is work ongoing on every, you know, expense line item. So we are literally, you know, we've taken a fine-toothed comb and, you know, every expense line item is being monitored extremely carefully. Like we said, this is just the start of, you know, the whole savings exercise under the operational excellence team.
The numbers that I've given you of savings of INR 8 to INR 9 crores are fairly conservative. We are extremely confident that we will, you know, easily achieve these numbers, if not surpass them. Also, one point I'd just like to make, there is a lot of work ongoing under a new CEO for the purchasing side. You know, he is a supply chain specialist and is doing a lot of work on the purchasing side, which, you know, is not fully reflected in our numbers today. So we have, you know, the guidance that we've mentioned is fairly conservative. Once all of this comes together, you know, efforts on the purchasing, on the labor, and the overheads, we are fairly sure.
We've mentioned that by fiscal 27, we want to get back to the 7% to 7.5% EBITDA. We are 100% confident of getting back to these numbers by that time.
So when you say purchases, sir, you mean that gross margins are likely to improve from the 25% to 28%, which is of FY25 to maybe the 27% to 28% in the coming years?
So if you look at our current quarter, we are at approximately close to 27%, right? Or 20%, I mean, between 25% and 20%. We've already seen that improvement. Now, obviously, you know, this is not going to happen every quarter because there is some element of sales mix also that plays a part, which we've transparently, you know, highlighted also in our investor presentation. But yes, it is correct to say that we expect that, you know, gross margins should continue to get better over the next few quarters.
When I say get better, I'm not saying from this current quarter, but from the 25% that we've normally set out, we do expect that there could be a potential to improve at least 100 basis points on that number.
Okay, sir. And the CapEx that is mentioned about a total of INR 110 crores for the next year, that will be completely deployed next year, or will there be phases? And will it be debt and internal accruals or only internal accruals?
Sure. So let me just split that out. Like we mentioned, total CapEx for the year is estimated at between INR 100 and INR 125 crores. Of this, approximately INR 60 to INR 65 crores is towards phase one of Bhiwadi. Bhiwadi, the total CapEx is in the range of INR 90 to INR 95 crores. So out of the INR 90 to INR 95, this year, we will be spending INR 60 to INR 65, which is approximately two-thirds.
The balance, you know, INR 50 to INR 60 crores is for the existing business, the existing factories. With this, you know, revenue should be approximately INR 1,350 to INR 1,400 this year and approximately INR 1,750 crores next year because a bulk of the CapEx is towards Bhiwadi. Bhiwadi, like we mentioned, will only come on stream by March 2026. So the full benefit is going to be visible only in fiscal 2027. So that's the way to look at CapEx and revenue in totality. To your second question, this is going to be largely funded only by internal accruals. Even after this large round of CapEx, we do not expect to have any debt on our books. When I say debt,
I mean long-term debt. Working capital debt on a need basis, obviously, is actually present right now.
Okay. Sir, I have a few more questions. I'll come back in the queue.
Thank you.
Thank you. The next question is from the line of Pratap from Mount Intra Finance. Please go ahead.
Hi. Am I audible?
Yes, sir.
Yeah. Hi. And congrats on a good set of numbers. So my first question was regarding the JV that was set up with the contract manufacturer, our peers. So the net impact that we are considering of INR 30 to INR 35 crores. So have we already got into discussions with some of the other brands that might be moving away from them, or is this something that we expect to happen in the future?
Look, okay, let me just give you some context. These discussions with these other brands were ongoing even before this JV came up. However, because of the whole oversupply situation, you know, there was no meaningful headway being made.
Now, with this JV coming up with, you know, Signify aligning with another contract manufacturer, brands typically view you as either supplier or competitor, not as both, right? So these brands are now in serious discussions with companies such as ours to kind of look to move some part of the, you know, supply chain or product production to us over them. So now what we are saying is that this discussion is ongoing. It's at a fairly advanced stage, but no revenue is currently coming in from this. What we've estimated is that the total impact net of customer additions for this should not be more than INR 30 to INR 35 crores in reduction in lighting business for fiscal 2026.
Yeah.
And going forward, just to follow up on that, so as that JV scales up, is there any possibility that there might be more leakages from our current book of business with Signify for FY27?
Look, we mentioned, you know, in full transparency, we don't know. It's still early days. Point one, what we understand is that, you know, this is restricted to the consumer lighting part of the business. We are also present in the professional or the office part of the lighting business. So point one is that. So in our business, you know, 50% is consumer, 50% is professional. So from what we understand, the professional part is not under that JV. That is point one. Point two, under the consumer part, we've already taken a reasonably, you know, high estimation of revenue going away already, which is what we've communicated.
So incrementally, whether everything will go away—unlikely. I mean, you know, whether you are, you know, a partner in a JV, nobody wants to have reliance on only, you know, one supplier. So will it go away completely? I don't think so. But like I said, it's still very, very early days. This was all done only late March, so it's not even two months. So maybe by next quarter, we will be in a position to give you a better update. But as things stand, this is the information that we can share with you.
Understood, sir. And regarding our medium appliances that you said, so are we already kind of selling medium appliances, or is that something kind of a revenue line that we're developing for the future?
So look, some segments we are already selling.
So we are already, you know, doing, you know, TPW fans, BLDC fans, OFRs, so on and so forth. But a bulk of the medium appliances that we are intending to get into will come out of the Bhiwadi facility, which is, you know, air coolers, air fryers, ovens, potentially, you know, microwaves. So while we've already made, you know, some sort of headway in getting into medium appliances, but this will only scale up over the next, you know, couple of years.
What is our current revenue for medium appliances? Is it kind of measured by?
Should be, if I talk of medium appliances currently being fans and OFRs, it should be in the range of INR 65 to INR 70 crores. Okay.
Thank you for taking my questions. I'll follow back in the queue.
Thank you.
The next question is from the line of Vidhi Raika from Tradelink Exim India Private Limited. Please go ahead.
Hi. Congratulations on the good results. I just wanted to ask a few questions. You had mentioned that there are going to be news for the product launches. So what kind of products are you planning to launch?
Thank you. Thank you for your question. We just mentioned, right, we are getting into, you know, medium appliances, larger sized appliances. Some of them that we will be launching in fiscal 2027 out of Bhiwadi are air coolers, air fryers, chimneys, and OTG ovens, right? These four categories are already identified. As in when we find new categories to add, we will notify all of you via our stock exchanges of the same.
Okay. Thank you so much.
Thank you.
The next question is from the line of Amar Mourya from Lucky Investment . Please go ahead.
Hi, sir. Thanks a lot for the opportunity. Sir, I just wanted to understand more about your guidance of 18% and which will be largely driven by home appliances and fans. So what exactly in home appliances? These are the existing customers' growth we are talking about, or this is some new customer addition into the growth?
So, sir, it is a combination of both, but it is more towards, you know, new customers. So when I say new customers, sir, I don't mean a new customer to Elin. I mean a new product segment being sold to them. So, for example, if I already have customer A who I'm selling lighting to, but not selling home appliance products to, I am talking of that cross-selling opportunity that we are now getting deeper into.
Now, as we know in India, for a buck, there are only those, you know, 10, 15, or 20 brands that sell lighting, fans, small, medium, large appliances, right? So it is about basically, you know, deepening your relationship and your business penetration for customers who we sell only one segment to, to be able to cross-sell other segments to also. So the revenue growth that we are talking of is largely on account of that.
Okay. And these contracts are largely signed, or these are speculation as of now?
No. So firstly, they are not, you know, contracts. They are more. It's a peer-to-peer kind of business relationship. That said, you know, these relationships tend to be very sticky.
Once a customer comes on board, it is fairly difficult to move supply chains away because, you know, there are tools, dies, and molds that, you know, either we develop or the customer develops. It's difficult to just shift, you know, the tooling away from one supplier to another. So even though it is peer-to-peer, point one. Point two, most of them, at least in terms of the revenue guidance that we are giving, most of them are already in the bank.
Okay. Fantastic. Fantastic. And secondly, now this 6% margin improvement, this is largely all operating leverage benefit we are talking about? Or there is a.
We mentioned. Yeah. I'll just take you through it. I've mentioned, you know, there are two, three points obviously that are, you know, kind of playing out in it. One is a slight improvement in terms of gross margins.
Two is, you know, an operations excellence team that we have created that is helping us drive savings in manpower as well as overheads. This activity alone, we estimate, will save us anywhere between INR 8 to INR 9 crore for the full year 2026. And three, there is a general benefit in terms of, you know, your indirect cost or fixed cost remain fixed even as your turnover increases. So therefore, you know, those expenses as a percentage of revenue obviously decline, leading to a margin uptake, which is operating leverage. So it is a combination of these three. I would also like to point out that the 6% is the lower end of the guidance that we've set out.
We've actually set out a guidance of 6% to 6.5%. We hope that we are able to achieve the upper end of the guidance. Got it.
Got it.
Lastly, we are talking about a working capital improvement of around 35 days, and then largely from inventory and payables. So what exactly we are going to do with inventory and payables? I mean, is it good we are going to reduce the finished goods inventory of?
No, no. We are not talking of 35 days improvement. We are currently at 52 days. We are saying that we will do 40 to 45 days. So we are talking of, say, between seven days on the lower side, 12 days on the higher side. I mean, that is the kind of improvement that we are talking about. So currently, 52 days, we are saying we'll get to 40 to 45 days.
So 52 days, your inventory days is 70 days, correct?
No, no. Our inventory days are not 70 days.
Debtor days is 70 days, correct?
Yeah. Debtor.
That's right. That's right.
Better is 70. Inventory would be 52, correct? Or...
No, inventory is closer to 45. So inventory we look at on material consumed, not on...
material basis. Okay. Got it. Got it. Got it. I think we are looking from revenue basis. Got it.
Yeah.
That's the difference. We've set that out also in our investor presentation. So you can just have a look. If you have any queries specific to this, once you've had a look at the presentation, you can connect with us offline.
I have looked into the presentation. Perfect. Perfect. Fantastic, sir. Thanks a lot, and congratulations for a very good set of numbers. Yes.
Thank you.
Thank you. The next question is from the line of Niraj from White Pine Investment Management. Please go ahe ad.
Yeah. I think congratulations on the numbers. A good improvement.
In fact, the structural thing that we have seen is that you're moving away from a smaller to slightly medium-sized appliances, which is a welcome sign. So a few things. One, on the new products that you're talking of, how will you—what is the strategy to get more customers? Like, why would customers come to you for those businesses which actually are existing in India, like the air coolers, chimneys, fryers, OTGs? So can you give some thoughts on how you plan to get those customers for those products?
Sure, sir. See, there are two, three aspects to this, right? Point one is, in a lot of these categories, there is BIS that is coming, which means that, you know, from imports, people have had to localize.
Now, when you localize, Elin as a company is one of the few organized companies that is an option for a brand to partner with for their production needs. That's point one. Point two, if I look at categories that are not under BIS, there are also a lot of these categories. Let me give you an example. Nothing to do with BIS. Let me give you an example of an air cooler. Now, air cooler, if I look at the market, 65% or 70% of the market is unorganized. As things stand, this ratio of organized is going on improving every year for the last five, seven years, right? Given a choice, given the same price, every brand will prefer to buy from an organized company than an unorganized company, purely on the benefit of reliability that an
organized company offers to you, right?
That is the second element to it. Third is obviously cost leadership. Now, once, you know, you become of a certain size and scale, there are lots of economies of scale that kind of kick in that make it, you know, very, very difficult for smaller companies to compete with or for them to compete with us, right? So it's a combination of these two. There is BIS ongoing in a lot of the categories of the products. There is a shift from unorganized to organized. And then there is the element of cost leadership. If all these three are present in one or the other segment, we are fairly confident that, you know, we will be able to kind of attract customers and deliver the numbers that we are talking about.
Please also note that the numbers that we have spoken about are also after discussion with customers.
These are not unilateral numbers. This is all, you know, a bilateral kind of discussion with customers.
Okay. So one related question, two related questions. On the gross margin of these medium appliances, how do you see it? Will it be similar or will it be lower or higher? Because this is the first time we'll be moving to a higher side in appliances.
Sure. So I think, look, company-wide, we are currently at maybe around 25% to 26% gross margin. For these larger appliances, gross margins itself are slightly lower. They're probably closer to between 18% to 22% or 19% to 22% in that kind of range. That said, the EBITDA is slightly higher because, like I pointed out, you know, from a labor cost and other overhead perspective, that ratio to revenue drops significantly.
So if you look at it from a gross margin perspective, it is slightly lower than, you know, some of ours than the current company average. But if you look at it from an EBITDA perspective, these are all products that are in the 7% to 7.5% to 8% kind of EBITDA range that one can expect.
Got it. And hypothetically, this question on how do you compare yourself with the US and the Chinese cost? Because we know we are standing in front of a potential trade agreement. And please comment on, is there a potential opportunity to you? What is the differential between you and China in terms of costing? And how should we look about it? Like, if tomorrow China is 30%, India becomes 10%, does it benefit you? Just some broad number would be useful.
It's a fee.
The differential in, you know, India versus China first has to be looked at from an apples-to-apples perspective. So when you look at an LL of India, you have to compare this with an LL of China. Point one. In China, there are all sorts of suppliers. There are small, medium, large, all kinds of suppliers, right? So one is you do an apples-to-apples comparison. Second, obviously, this number is going to vary widely basis what kind of product that you are talking about. But if I were to give you a very, very large generalization, and please, I'm deviating my statement by telling you large generalization, as things stand today, maybe China is more competitive by anywhere between 4% on the lower side, 7, 8% on the higher
side. It is less than 10% price differential. It's not larger than that.
And if you look at China labor, China labor is almost 4x that of Indian labor cost.
Yes.
So the only difference that remains is largely on the bill of material side. On the conversion side, we are actually more competitive. On the bill of material, because of the scale and the incentives that the government offers them, they are probably more competitive, which is the number that I gave you, right? Average generalization, 4% to 8%. Okay.
This is a broad range. Thank you very much. Thank you very much.
Sure.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, please limit your questions to two per participant. The next question is from the line of Dhruv Shah from Ambika Fincap. Please go ahead.
Yeah. Hi, Akash. Congratulations on a really good set of numbers.
I just have one question. You mentioned on the call that you are running at 70% capacity. Till what capacity can you go till the time the new CapEx at the existing facility can come up?
See, when we talk about capacity utilization, there are two kinds of capacity utilization. One is obviously at the back end, which is the molding, power press, you know, all of that, which actually does, you know, the production of the parts and components. Two is obviously the assembly capacity, which actually just does the assembly on the line. Now, when I talk of the assembly capacity, that can be increased very easily because that you can run multiple shifts to increase capacity. So the more critical bottleneck as such is the capacity at the back end of the molding plants, of the power presses, so on and so forth.
So when I'm talking of the 70% to 75%, I don't see any challenge. If there is enough demand, we can easily scale this up to 85% to 95%.
Okay. Okay. Fair enough. Thank you so much.
Thank you.
The next question is from the line of Kunal Mehta from Sunidhi Securities. Please go ahead.
Sir, can you just confirm again that you're saying that in the lighting segment for this full year, you all finished at around INR 240, INR 235, INR 239 crores? And you're saying there'll be a net impact of about INR 35 crores even after, you know, maybe signing another OEMs for FL26. Is it correct?
Yeah. LED lighting, excluding flashlights, is approximately at INR 215 odd crores if I remember correctly, right?
Correct.
Now, what we are saying is that the total impact of this whole Signify JV will be in the range of approximately INR 50 odd crores reduction.
We estimate that this change in competitive landscape, we estimate at a minimum, for us to be able to sign on new customers. Now, this sign-on of new customers will happen at varying parts of the year. So that full benefit of the year will not be available, right? So we are saying that there will be a benefit of, say, maybe INR 15 to INR 20 crores available for the full year because it takes time and moving supply chains away. So the net reduction that you can model in is gross INR 50 less new customers, s ay, INR 15 to INR 20. So net reduction of, say, around INR 30 to INR 35 crores ballpark. We are hopeful. We've mentioned that we want to be able to completely neutralize this.
But just in the spirit of transparency, we are stating that this is something that you can consider as your worst-case kind of scenario.
We've also mentioned this JV is very, very new. So maybe, you know, as we get more further information, as we get, you know, updates on the next one, we will also be able to shed more light on the impact of this. So this is also very new. These numb ers are based on early assessment by us.
Okay. So what comes under the other EMS segment of the revenue?
Those are all smaller products, right? Like, you know, for example, we also sell mixer grinder blades, like just the blade, right? So to other kind of contract manufacturers. So products like those, it's a fairly small number. It's not a large number, but these are small components, basically, that are sold.
Okay. And, sir, in the non-EMS segment, we have seen, you know, consistent growth over the last years.
So what we did this year, we did about INR 278 crores in the non-EMS segment. So can you just maybe throw some light on that? You know, currently we have Denso and IFB. So do we see more revenue coming from those? And will Bhiwadi plant have any of that manufacturing?
Sure. So, look, for the Bhiwadi plant, I'll just answer first. That is actually very close to the auto belt of Manesar, right? One of the prominent auto belts in India is in Manesar. So we are very hopeful that, you know, we could expect new business. That said, auto business is, you know, a long gestation business to get. Typically, there are multiple audits. It takes several quarters to, you know, to get business. So, you know, it is a little bit premature for me to give you any sort of indication on whether we will get business.
That said, whether are we trying for it? Most definitely we are because, you know, it's a sticky business, good names, decent margins, good payment terms. So it's definitely a business that we would look at scaling up. But it's a little bit too premature whether, you know, that plant will get any auto business. Secondly, to your broader question, you know, that business broadly is, you know, two areas: automotive, where, you know, Denso, Magneti Marelli, Musashi, are our key customers. And then there is the consumer business, which is largely IFB. And we have a small medical cartridge business where we sell medical cartridges to a company called Molbio. That's the broad extent of the business.
Okay. So we are in. In order to consistently have a revenue growth, sustained revenue growth in that segment as well?
So the way to look at it is this segment will be slower revenue growth, but slightly better margins. EMS segment will be higher revenue growth, but slightly lower margins than the components business. That's the way to probably look at the whole business.
Okay. And, sir, you mentioned about INR 250 crores in FY28 from the new plant, Bhiwadi. And you said that potential is about INR 550 crores. So that will still be about 50% capacity utilization. So after the Bhiwadi plant comes, we can expect about INR 2,000 crores of total revenue potential the company can earn. So, I mean, can that be? Are we running on already exhaust, like top maxed out shifts, or this can be improved?
No, no. Let me just clarify. See, from our existing three facilities, we can do a revenue of approximately INR 1,700 odd crores, approximate number, right?
Bhiwadi full revenue potential is approximately INR 550 to INR 600 crores. So if you add up everything, then the total revenue potential goes up all the way to approximately INR 2,300 crores, right? INR 22 to INR 23 crores. That is point one. Now, Bhiwadi, obviously, we are saying that March 2026, you know, we will complete it. We've given you a fair idea that within two years, we can see, you know, approximately 45% to 50% kind of revenue utilization being achieved. As regards, you know, slightly higher utilization, maybe, you know, it happens over three, three and a half years. It's a little early to say. Just give us some time because the plant is not up yet. Once we have the plant up and running,
we'll be able to give you more color on, you know, when we can expect better revenue utilization.
Okay.
Sir, can we estimate the depreciation for the next year to be about INR 30 crores with about INR 50 to INR 60 crores of capitalization of the new plant?
You're talking of depreciation?
Yes. Overall. Yeah.
Yeah. 30 crores is probably the, I mean, probably on the highest side, right? INR 28 should be around INR 27to INR 29 crores. Somewhere, somewhere.
Okay. Okay. Okay. Thank you.
Thank you.
The next question is from the line of Sahil Doshi from Thinqwise Wealth Managers. Please go ahead.
Yes. Thank you for the opportunity and congratulations, Akash, on a great set of numbers. Two points. Just on gross margin, we've seen significant benefit in terms of reversion sequentially also. Is this partially because of lighting business declining? Incrementally, when you're saying 100 basis point improvement in gross margins on an annual basis, is this also being driven by lighting business declining?
Look, Sahil, it's, I mean, I don't have the exact numbers right now to be able to, you know, attribute. I can just get back to you separately on this point. But as a general comment, I just want to reiterate that the 100 basis points gross margin that I'm talking about, improvement, is more from the historical average of approximately 25% that we have been operating at. It is not from current levels. If you look at this quarter, we are already at approximately 27%, closer to 26.5%, right? It's going to be very tough to further increase 100 basis points from here. So please treat that 100 basis points improvement from mean levels and not from the current quarter levels.
Point two, some of that, you know, improvement is driven by a sales mix benefit.
Some of that has been driven by some of the work that, you know, our purchasing team has been, you know, they're working extremely hard. So some of that benefit has been driven by them. So it's a combination of change in sales mix as well as some sort of savings. You know, we're doing a lot of work around consolidation of vendors across all the plants, optimization, hard negotiation. So a lot of it is also benefit on those accounts. Regarding a specific question of lighting, I'll just have to get back. I don't really have the data with me handy.
Sure.
Just the reason I ask this is, for example, say if the Signify business ramps down significantly, maybe a little more aggressively than what we are thinking, just trying to understand that is there a possibility of our, you know, expenses or the fixed cost, you know, staying at where it is, or could that actually, you know, you can cut that at the same pace?
Look, we can cut fixed cost to a certain extent. I mean, it's very hard if, assuming worst-case scenario, there's a very steep drop in business from then. It is, it's going to be very difficult, obviously, to make that number zero or whatever. But yeah, to a certain extent, we are flexible. We can cut cost down. But like you can already appreciate, you know, there's a certain number to which it can go down. It cannot ever become zero or something.
Sure.
Sure. And just on that, I wanted to check. You have done a great job on the purchasing side, it seems. But working capital has taken a little longer. So could you possibly illustrate where we are in this journey and by when do we think we should be at the aspirational 45 days or something like that?
I think, Praveen, maybe you are the right person to, you know, just comment on this and just answer Sahil's question.
Yeah. Right. Rightly said. We have not touched our aspirational figures of 45 days this time. But yes, we are on the right track looking to the overall expansion in the sales and total inventory management. So we are on the right track, and we believe by H1, we will be around touching the same target numbers as per the current operational efficiencies which we are delivering. So.
Sure.
Praveen, meaning, you know, we had seen some improvement in the recent H1 also, but possibly that's not sustained. So could you call out, meaning, what are the steps we are taking so that it becomes more sustainable and permanent?
As Akash mentioned, that we have built in an operational excellence scheme. It doesn't only reflect the excellence scheme with respect to the overhead and productivity. It reflects to the inventory levels, how we manage the AR and AP of the customers and the vendors. We manage now on a fortnightly basis all across since last quarter. So we are, in a way, the last year, the improvement which you saw from April to September was considerable. And this six months being the season time, so a lot of inventories were inducted, the import inventory was high.
We could not have the right model mix, and there were some sales corrections. So it was not controlled in that pattern. But now we are on a fortnightly basis review mechanism, and the excellence team is now working out how to shorten the lead times so that we are on our targets of inventories and working capital.
Sure, sir. Perfect. And just wanted to check on this. You know, we had plans to launch chimneys and scale up OFR as well as, you know, possibly OTGs in the coming year itself. With this new Bhiwadi plant, does it mean that this is pushed by a year, or can we use our existing facility for it to start off?
No.
Currently, if we see OFR from last year to this year, it will be a considerable amount, maybe about 5X the numbers what we have got the mandate from our customers. So OFR is a big business now, and in H1 and quarter three. Quarter two and quarter three will be the major quantity up, which we have already received the orders, and the plan is in progress. Looking to the OTG, we will be starting from quarter two. Already, the orders are processed. Yes, the scale-up, which we project in a larger scale as medium domestic appliances, will be done in Bhiwadi plant next year. So there, there will be bigger lines, so more productive and more efficiencies can be derived out there.
So currently, we'll be doing that OFR and OTG here. So it's not we are shifting. We will be making this year only.
In quarter two and quarter three, you will see the numbers yourself.
On chimneys, sir, the same?
Ch imneys, sir, it is currently on a prototype and designing phase. So we are already in discussion with the customers. As the validation time, it takes some time. So we are installing basic instruments and fixtures for that out here. So I don't think that chimney by quarter three, we'll be able to get the testing clearances done. But as Bhiwadi is progressing, and if we are able to have that by November, December, so we can initiate the test trials and the supply chain from quarter four, possible. But currently, it is under trials with the customers.
Understood. Understood. And just lastly, I wanted to check, you know, this quarter, our motor segment, we said because of internal consumption, we couldn't have a higher sale.
Could that also become a constraint for growth in the next year? And secondly, on the personal care, which you said you expect a revival, could you talk about that segment and the potential from exports as well?
Sahil, let me just clarify regarding motors. So there is no capacity constraint. What I said was that the preference always of the company is to achieve a value addition on a higher sales number, right? So if I sell just the motor, say the motor is, example, for INR 500, say a complete mixer grinder is for INR 1,000, right? So the goal of the company is always to kind of look for, you know, a higher value addition, moving up the value chain.
What we are just trying to say is that although optically, you know, third-party sales of motors are kind of, you know, INR 49 to INR 51 crores, which is not a meaningful revenue, but the motors business itself has done quite well because, you know, we've utilized all that increased offtake in our own captive consumption for sales of, you know, mixer grinders and fans and so on and so forth.
Okay. Got it. And just on the personal care, if you can comment.
Yeah. So look, personal care, you know, it's a little bit, you know, tough to give an exact estimation on, you know, when that exact bump-up comes. Hopefully, you know, in the run-up to Diwali is the season time. So we are fairly confident that, you know, numbers should start to improve.
It was a little bit of a little bit of a disappointment this quarter, numbers being flattish. But we are fairly hopeful. We are in constant engagement with the customers to drive this growth faster.
Sure. Thank you so much. And best wishes to Elin. Thank you.
Thank you.
Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you. Thank you, everyone, for your trust in Elin, in us. We hope to deliver on this trust over the next several quarters and do well for all our stakeholders. Thank you.
Thank you. On behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.