Ladies and gentlemen, good day and welcome to the Electronics Mart India Limited Q1 FY 2027 earnings conference call. Before we begin the conference, a brief disclaimer. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as of the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. 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 would now like to hand the conference over to Mr. Karan Bajaj, Chief Executive Officer from Electronics Mart India Limited. Thank you. Over to you, sir.
Thank you very much. Good evening. A very warm welcome to everybody present on the call. Along with me, I have Mr. Premchand Devarakonda, our Chief Financial Officer, and SGA, our investor relationship advisors. We have uploaded our results, press release, and investor presentation for the quarter end 30th June 2026 on the stock exchanges and the company's websites. I hope everyone had the opportunity to go through the same. I am delighted to share that Q1 FY 2027 has been our strongest quarter to date, with all the key metrics moving decisively in the right direction. Revenue grew by 39% to INR 2,419 crores. EBITDA increased by 118% to INR 239 crores and at a 9.9% margin. The PAT grew by 458% to INR 121 crores.
This is our highest ever quarterly profit. I want to spend the next few minutes walking you through what drove this performance and where we go from here. Let me start with the season itself. The summer of 2026 has been good for us. Air conditioners had their best quarter yet, both in terms of volume and value. As demand stayed strong right through the quarter, footfalls in our stores were consistently healthy through the quarter. Conversions held up well even as we saw customers trading up within the category. Our inventory planning going into the season with a calibrated mix of carry forward and new models meant we were well stocked to capture this demand as it came. This discipline is reflected directly in the numbers this quarter.
It is worth noting that a strong AC season does more than just add up to the top line for the quarter. It also brings in a wave of new customers into our ecosystem, many of whom we expect to return for large appliances and mobile phones later in this year. That is a dynamic we will be watching closely as we move through FY 2027. Moving to category performance more broadly, large appliances remained our largest contributor at 48% of revenue, with ACs leading, supported by continued traction in washing machines and refrigerators. Mobile phones contributed 39% to our revenue mix. Same-store sales growth for the quarter came at 34.2%. This is one of the standout numbers in this quarter. It tells us two things. Our existing stores are maturing well, and demand in our core markets remained exceptionally strong.
Breaking this down further, our core south market has picked up in a very significant way. Andhra Pradesh alone grew revenue 62% year-over-year with an SSG of 49.1%, while our Telangana-AP market grew at 48% with an SSG of 40%. Even our large established Hyderabad city waves grew by 34%, with an SSG of 32.3% for the market we have operated in for over four years. To see this kind of reacceleration is a strong validation of EMIL, the brand, and how our stores are resonating with customers. Overall, our south cluster delivered 40% revenue growth for the quarter and continues to operate at scale, profitable engine at 10.9% EBITDA margin. I am equally pleased to report that our north cluster has turned a corner this quarter.
Revenue in the north grew 29% year-over-year, EBITDA margin improved to a record 4.9%, meaningfully ahead of where we were even a couple of quarters ago. As more of our north stores gain vintage and scale, we expect store productivity and margins here to continue trending towards our south cluster benchmark. This brings me to the theme that I think is central to understand that our margin trajectory going forward, the performance of our non-mature stores. As of this quarter, we operate 96 stores that are over four years old and 131 stores that are less than four years old. Our mature stores are already operating at an EBITDA margin of 11.2%, but what is encouraging is that our non-mature stores delivered an 8.1% margin this quarter, a meaningful step up, prove that these stores are picking up pace faster than we had originally modeled.
With a significant part of our network still in these early stages, we see this as a genuine source of embedded built-in margin improvement for the company over the next few years. Looking ahead, we are preparing to enter West Bengal, which is the next step in our cluster-based expansion strategy. We have studied this market closely, we see meaningful headroom for organized retail here, much as we saw when we first entered the north a few years ago. Consistent with how we have approached every new cluster, we will enter deliberately, build density before we build our stake of size, let the unit economics guide the pace of our expansion. For the remainder of FY 2027, our priorities remain clear and unchanged. First, working capital efficiencies. We will continue to tighten our inventory and cash conversion cycles to better demand forecasting and technology-led replenishment. Second, disciplined expansion.
We will deepen our presence in existing clusters, including the north and our upcoming entry into West Bengal, while being selective about where and how fast we grow. Third, and perhaps most important, the customer experience that has underpinned EMIL's growth for over four decades. Whether it is our in-store product experience or consultative selling approaches or the trust we have built with our brand partners, this remains the foundation on which everything else we do is built. With that, I will now request Mr. Premchand Devarakonda, our CFO, to take you through the detailed financial performance of the quarter. Thank you.
Thank you, Karan, sir, and good evening, everyone. Let me take you through our financial performance for the first quarter of FY 2027. Revenue from operations stood at INR 2,419 crore compared to INR 1,739 crore in Q1 FY 2026, registering a robust 39% YOY growth. Gross profit increased to INR 417 crore from INR 253 crore of Q1 last year, reflecting a strong 65% growth. Gross margins expanded significantly to 17.2% compared to 14.6% in the corresponding quarter of last year. EBITDA stood at INR 239 crore compared to INR 110 crore in Q1 FY 2026, delivering an impressive 118% growth. Consequently, EBITDA margins improved to 9.9% from 6.3% a year ago. Profit after tax improved to INR 121 crore, which was INR 22 crore in Q1 FY 2026, translating into a 458% YOY increase. Our SSS remains exceptionally strong at 34.2%, reflecting healthy underlying consumer demand and effective execution across our network.
The South cluster delivered 40% revenue growth with EBITDA margin of 10.9%, and the North cluster recorded 29% revenue growth and achieved an EBITDA margin of 4.9%. Working capital days reduced sharply to 42 days as of June 2026 compared to 73 days as of March 2023. This was driven by tight working capital management and strong seasonal sell-out throughout the quarter. During the quarter, Pre-Ind AS operating cash flows and Post-Ind AS cash flows were INR 631 crore and INR 671 crore respectively. I am also pleased to highlight that by end of this quarter, we could bring down the working capital borrowings to INR 97 crore, which stood at INR 658 crore at the beginning of the quarter. Return on capital employed stood at 20.1% on trailing 12 months basis, and Return on equity stood at 11.9% on a TTM basis. With this brief presentation, I open the floor for questions. Thank you.
Thank you very much, sir. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself, you may press star and two. Ladies and gentlemen, participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Yes, sir. Hi, Karan. Many congratulations on a great set of numbers.
[inaudible].
Karan, I wanted to understand this quarter also comes on a weak base, right? If you could just help us better understand as in what are you targeting for the full year across maybe North and South clusters, that would help us better appreciate your performance, right? What's your view there for the full year FY 2027?
Sir, in terms of revenue, we want to be a little conservative on the number. Looking at quarter one going forward for us and how things are moving forward in terms of the demand in the market, we feel that the festive period in quarter three is going to be quite good for us. On an overall number, we can look at a good 18%-20% kind of a revenue growth. That should be very easily achievable. That is what we have in mind. Plus, our operations in Bengal also start definitely with lesser stores. By the end of quarter three, or the beginning of quarter one, we'll have more stores coming up in Bengal as well. I think we'll have some flavor of Bengal adding up by the year-end as well.
Wow. Very encouraging. Secondly, sir, this gross profit margin has inched up significantly. I wanted to understand, such in our business profile that we are in, this is a really great margin, right? Is there any direct sourcing that we are sort of engaging in now versus via distributors now? What are the key drivers of this gross margin improvement for you?
Sir, majorly, summer season cooling products definitely have a higher gross margin. If you see quarters where cooling product dependency has gone up, and the mix of large appliances majorly is coming through from cooling product categories, that is where you will see a blended gross margin being higher, number one. Number two, few categories like laptops and mobile also actually gave us a little more better gross margin than our competitive quarters. It's because when the pricing was going up, we were able to buy stocks at a lower price and then play on that price margin game, the price increase game and take that at an advantage. That is a temporary upside. Probably, till the time the market is a little volatile in terms of price increase and stuff like that, we might take that advantage.
It's not necessarily that it's going to be a permanent increase in the price. What remains at a good level is gross margin across the cooling product category, especially air conditioners and refrigerators. With the volumes going up in that category, definitely you will see an improvement in gross margins.
You are indicating that some of these 260 basis points is maybe just because of some benefit for the near term that you are enjoying, right? Maybe for the full year, if you could highlight is 16.5% doable from a gross margin perspective for you this year?
Sir, I would like to add one more thing here. See, we should compare the gross margins of Q1 FY 2025 because the base quarter was one of the bad quarters.
Okay.
That's why if you compare that, there is no substantial growth. Definitely, there is about 100 basis points up in the current quarter, and that was mainly contributed by the cooling product sales as well as the price escalation advantage we got in IT products. If that similar trend continues, I think that can be achieved in the next year first quarter as well.
Okay. Can you provide some outlook for full year, sir? As in, what should be the target from gross margin perspective?
It will be above 15%, sir. 15%-15.5%.
Sir, last question from my end. Mobiles, et cetera, because of increase in chips prices, have seen very strong, healthy growth in the prices, as you have also mentioned. Was that reflective in our growth? Why I'm asking because our mobile mix actually went down. From 40% to 39%. Are we expecting that benefit to materialize in the coming quarters? What explains a lower growth in mobile?
Devanshu, now if you look at Premchand sir was referring to Q1 FY 2025, if you look at the number there also, the product mix remains similar. Usually, cooling product category quarter, usually mobile but now Q2, Q3 that will be by the end of the year, you will see a similar product mix change, 1% or 2% ± only.
Okay. Karan, did we enjoy this price benefit for the full quarter, is what I wanted to understand from mobile category perspective.
It was periodic. It was not across all brands, not across all SKUs, not across all the 90 days of the quarter.
Okay, more may sort of lap up in coming quarters, right? Some more benefit will come in.
Yeah.
Okay, sir. Thank you for taking my questions.
Thank you, sir.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to only two per participant. Should you have a follow-up question, we request you to rejoin the queue. We have our next question from the line of Aditya Bhartia from Investec. Please go ahead.
Hi, good evening, Karan.
Good evening.
Hi. Karan, my first question is that we have obviously had very strong revenue growth. Would you have any sense on how the broader market is likely to have grown in Hyderabad, Andhra Pradesh, and the NCR region? Is it that some of these product categories themselves grew at a very fast pace, especially ACs, given the season in Hyderabad and AP? Or is there a market share gain also that we would have enjoyed in first quarter?
Aditya, both the things here. Especially markets like NCR, we were quite new, the base was less. Even Andhra Pradesh, where we had opened up a lot of new stores last year, which are yet to get matured. Definitely market share there. You would see an upside coming in from the market gain share as well. Whereas existing markets compare base itself for air conditioners, a lot of other cooling products was less. That said that this time South overperformed than any other cluster in the country, especially Tamil Nadu was the number one market. Tamil Nadu actually grew in terms of cooling product category more than AP-Telangana also this year. That itself was a very big number coming in from Tamil Nadu. And the base was comparatively a little slower. North was negative. Because our base was less.
Last year, if I tell you, for the first six months of the year, we did around 20,000 odd units of air conditioners. This year we did around 26,000, 27,000 units, with a similar number of store count. Base so we could have gained that market share. [Non-English content] Players [Non-English content] 24 [Non-English content] number perform [Non-English content] and North, we are seeing a trend of unorganized players moving out and organized players taking over. Not only me, but all other, the bigger ones, Vijay Sales, Croma, Reliance, other ones are also doing really good there.
Understood. This particular quarter, we are seeing exceptional growth mainly also from markets which are fairly matured for us. In that context, should we assume that this quarter I mean, a lot of things really came together in this particular quarter, and therefore, sustaining this performance is going to be a little difficult?
Now, see, if you look at the trend going on, we don't see any external factors affecting the growth coming through. Definitely, if you're comparing this number to last year, then because of a bad summer, you would definitely see a very good growth coming in. We were even comparing this number to 2024, 2025 year as well. Whereas, we would see a definitely upside, especially with a lot of new stores in the AP-Telangana cluster that we opened up, have started performing really well. That definitely gives you a confidence that things are going to look better in the coming times because we started gaining market share there, not only across Cooling products, but even in panels, in mobile phones, laptops, other categories as well.
It is going to be a mix of all products going forward because cooling products might contribute only in one major quarter in a year, but all three other quarters would depend on the product mix coming in from other categories as well. The focus is there. All individual teams are on ground, working, making sure that the profitability is sustained, the growth is there, all stores perform, and that is what you would see a result like this.
Perfect. That's great to hear, sir.
Thank you, Aditya.
Just one more thing. My last question is that, are you seeing any challenges on the volume side for categories like mobile phones and IT hardware, laptops, et cetera, because of memory chip shortages, or all brand owners are able to manage it quite well?
Definitely, we would be given a heads-up in terms of there is going to be a shortage. That is how we pre-plan our purchases, making sure that there are no stock-outs at the store level. Probably few products, few categories, few brands there, we might have to stock up a little more than on average that we would do. Instead of stocking up to 30 days, we might stock up to 50, 60 days also. For a few SKUs, not across all categories.
Understood. Perfect, sir. That's very clear. Thank you.
Thank you, Aditya.
Thank you. A reminder to all participants, please limit yourself to only two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. We have our next question from the line of Rupesh Tatiya from Long Equity Partners. Please go ahead.
Yeah. Hi, Karan. Congratulations on fantastic set of results. I am looking at Post- Ind AS EBITDA margins, and last several years they have been between 6% and 7%. Given such a strong start to the year and mature stores, I think moved from 83 in Q4 to 96, and I think, I'm sure they will improve through the year. Is it now fair to model that we will have EBITDA margins between, let's say, 8% and 9% this year?
Your Post- Ind AS EBITDA?
Post- Ind AS EBITDA. I am asking Post- Ind AS EBITDA, yes.
It will be too optimistic. 9% means too optimistic. Around 8%+, I mean, 7.5%-8% is easily achievable looking at the current trends.
That is good to know. Finance cost, I think now our gross debt is what? INR 300 crore. Any number would you like to guide for FY 2027 on the interest cost?
That interest cost has multiple components. It includes the interest on these liabilities also.
Yeah. Can you give INR 154, it was INR 154 last year. This year will be INR 130? INR 120, INR 130?
INR 154. It will be in the same lines like last year. I mean, about INR 10 crore will be less. It will be less by at least INR 10 crore.
Okay. Second question, Karan, is why seems SSGR for Delhi NCR circuit is low. Is it to do something with the product mix? What's going on there?
Rupesh, [Non-English content] Delhi actually didn't form this year for air conditioners and cooling products. [Non-English content] the cooling products between refrigerators, air conditioners, and air coolers, the [Non-English content] market degrew. The whole north market was actually minus. 2024 as well, if I look at the bigger cluster, 2024. Though we had a small base, so we could see that upsell coming through with our stores, but overall market was minus for north. North didn't perform well this year. [Non-English content] performance, you'd have seen SSG as, I mean, or higher than what south would have done. Because the base is less. Now if you look at the trajectory, our SSG, say, for this month also, it is quite in line with what we have planned to achieve there.
Perfect. Perfect. What is the store opening target for Kolkata this year?
Kolkata, hopefully we should be operational around Diwali.
How many stores are we planning to open?
Five stores will be operational by Diwali. By 31st of March, by end of quarter four, we should be operational by 10- 12 stores.
Okay. Thank you. I have more questions. I'll come back again.
Thank you, sir. Thank you.
Thank you. We have our next question from the line of Manoj Gori from Equirus Capital. Please go ahead.
Hi. Thanks for the opportunity and congratulations on good set of numbers. Karan, my question would be on the overall guidance that you have been offering, probably 18%-20%, because if you look at the price increases have been very significant across product categories. Plus, if you look at there was some favorable deals also of last year, and you are already being very optimistic on the underlying demand environment. Plus, when I look at, there are anticipation that there would be further price hikes, probably during the month of August and September, before festive season starts on mobile phones and on laptops. Which should also boost your margins, as you said, it benefited in Q1. Just wanted to understand in detail, probably where is the gap here, and probably is your guidance too conservative? That's what I want to understand on the first part.
Hello, Manoj-j i. When we look at the growth between value and volume both, we've been seeing a significant growth in volume as well, not necessarily the growth is only coming in from value. This is only, I think to a very high extent, based in categories like mobile and laptops is where we would see a drastic price increase. In terms of televisions, refrigerators, washing machines, or even air conditioners, we've seen a single-digit price hike, not more than that. The dependency on the manufacturing cost or the raw material cost, those categories was not affected much compared to what shortage we saw in chipsets for mobile phones and laptops. If you look there, definitely yes. Then number two, the biggest advantage that we had was that we anyways were a premium seller.
We were already in a certain AC, whereas a lot of other partners could not take advantage of this, who were always selling entry-level or had smaller store footprints or were not in premium selling categories. [Non-English content] . They could not take advantage of this price hike or increase their sales drastically.
Okay. Secondly, I just want to understand, suppose if the prices are going up. One thing is we will always ensure that the gross margin level, we probably try to maintain or improve. Is that understanding correct?
Correct.
Because that will affect.
Absolutely.
Your return profile also positively. Your incremental investments will be only to the extent of cost of goods or probably to the extent of price increases. With the rest of the investment being stable, your return ratios are also likely to improve. Is that understanding correct?
Yes, sir. It is a mix of that and even a mix of the performance that we've got from all the other stores that we opened up in clusters like in AP and Telangana, especially in the upcountry market, where we've gained a lot of market share as well. It is a mix of everything, not necessarily that the ASP is driving only through the growth in value. Even the volumes growth in those clusters have been significantly high, where we took advantage of gaining market share because we did a lot of initiatives on ground for marketing. We're trying to do a lot of local activities, targeting our audience in those local clusters and not just doing the general generic ad across all the major cities.
Correct. Lastly, to Premchand sir, if you can guide on the CapEx front, specifically probably for Best Buy Global, what would be the CapEx and how should we look at the company there at all?
Sir, we plan to open around 25-30 stores in the existing geographies as well as even in Bengal for that matter. The CapEx that we plan to invest would be in the lines of around INR 100 odd crore for the upcoming stores, ± INR 5 crore-INR 10 crore because that way. Another INR 50 odd crore would be the investment that will go through in buying out properties in Calcutta. In the next two years, we'll be buying around 11 odd properties. Transaction might happen in quarter one next year, quarter two next year, depending on how soon the buildings will be ready for us. That will be the complete outflow. We plan to open around 30 odd stores in Calcutta itself, then by the next financial year, we will then plan to expand into Darjeeling, Siliguri, and neighboring places there.
Okay. This will all be through internal accruals?
Absolutely.
Thank you and wish you all the best.
Thank you, Manoj-j i.
Thank you. We have our next question from the line of Deepak Poddar from Sapphire Capital. Please go ahead.
Yeah. I'm audible, sir?
Yes, sir.
Okay. Thank you very much for this opportunity, sir, and many congratulations on a good set of numbers.
Thank you, sir.
Just want to understand, first off clarification, when you say Post- Ind AS EBITDA margin, this is as in reported basis, right?
Yes.
Okay, great. Secondly, in terms of store opening plans, everything is our own stores? I mean, we are not into franchisee route, right?
No, sir. They're all company-owned, company-operated stores only. No franchisee model at all. We lease out the properties and then we only make them and operate them.
Any thought process there, in case you want to grow it faster? This would be a good asset-light model. Any thought process we have put in there?
That we do definitely have a lot of internal discussions on the various models available out there. Especially to our industry, we've not seen for our scale. Mobiles and all, definitely you have a lot of players doing the franchisee opportunity which is out there. For our large format stores with the brands that we deal with and the categories that we are in, right now we've not seen any significant player becoming big in this. Some of them tried, even the bigger ones have tried, but they've all shut stores. We don't want to rush into it until and unless we are confident. Then we'll definitely open and discussing it. Right now we don't see a great opportunity by franchising our company stores.
Okay. We're still kind of open to it in case you get good opportunities, right?
No, always. Why be rigid? We're quite flexible.
Okay. I got it. That would be it from my side. I wish you all the best. Thank you.
Thank you, Deepak-j i.
Thank you. We have our next question from the line of Akhil Parekh from 360 ONE Capital. Please go ahead.
Yeah, thanks for the opportunity and many congratulations to the entire EMIL team for the solid performance. My first question is on the bill cuts versus ASP growth. While we understand the memory chip prices have risen sharply, probably 4x, 5x over last one year, and hence the prices of mobile laptops have also increased. However, if I look at our ASP growth is just 2% basically, while the bill cuts have grown 36%. Two parts to my first question. One is it fair to assume the SSG growth is largely because of better footfalls and better volumes as against the ASP increase, basically, and hence the margin improvement, again, largely to do with the better volumes and less to do with the ASP increase? That's my first question.
Yeah. Akhil-ji, you are absolutely right. There were ASP increase only in limited categories, [Non-English content] broadly, [Non-English content] volume growth is quite high. That's why you would see an increase in bill cut along with a lot of new initiatives that we've taken on floor, like our audio products, which are low in value but high in volume, our accessory products like screen guards, headphones, a lot of categories that we've launched recently and have started doing quite well for us. That's why you will see a higher number of bill cuts compared to the average ticket size or the ASPs going up there directly.
I think it is a mix of everything and higher footfalls, definitely, yes. As I mentioned earlier also, the clusters that we were operating in the southern clusters where we had opened a lot of stores in the past in smaller towns, finally we got the fruit of the seed that we grained in those places, especially in Andhra. [Non-English content] Andhra's number, Andhra has almost grown by 57%, especially air conditioners have grown at a much higher number, and there the product mix would be a little lower there. Mobile would be around 27%, 28% compared to 39% on an overall balance sheet level. Those places actually outperform in terms of larger appliance product category sales.
Great. Very good to hear that. Second, you mentioned that we have gained market shares across certain pockets. Any quantifiable number you have, like how much of market share gains would have happened for us, at least in core geographies?
The least I would be able to tell you is the least existing clusters may, the least that we've grown outside Hyderabad would be at around 4%, the least in any of the market, and the highest would be around 12%. These I'm talking about smaller towns, there 12% gain, you're fighting with mom-and-pop stores. Much easier to gain compared to a city like Vijayawada or Visakhapatnam.
arket share gain is between 4%-12%, depending on geography to geography.
[Non-English content].
Okay, great. The third and last question. Our one, two numbers are very good. Our pre-interest operating cash flows, if I look at it's almost INR 600 crore +. Our debt is now negligible. We'll still generate substantial operating cash flow for remainder of FY 2027. What are some of the internal checks and balances to make sure we don't squander the advantage now we have got probably after a lot of hard work in this quarter? How do we ensure that our capital allocation will remain prudent for next few years at least? That's my last question.
Okay. Sir, our CFO would like to answer that question, sir.
Sir, if you look at our short-term debts, they have come down drastically. See, what we did, instead of looking for rapid expansion, what we did, we reduced the debt. Thereby we'll be saving the interest cost substantially. That is one part. Second part, we are able to fund our expansion projects. Whatever the 25 stores we are planning to add in the current year, all those investments were made out of our internal accruals and cash flow position as of now very comfortable and our current inventory levels are sufficient to cater to the needs over the next couple of months. We are sitting on good inventory level and also our debt is at the lowest.
It means we'll not go very aggressive in terms of store expansion. We'll maintain our regular pace.
Yes. No inorganic expansion, no rapid expansion. It will be all calculated. See, sir, we've been studying a lot of other new geographies apart from Bengal as well. Given an opportunity, probably, we might start off something new in quarter four or the beginning of quarter one next year, but nothing before that. We want to stabilize. We are quite conservative, one, in terms of the store performance, making sure that stores are profitable. Instead of 20, we might open 25. That's all the difference that it will make, but 20 will not become 100. That has to be very calculated in terms of the market that we open and the geography that we're looking at.
Definitely we would like to take advantage of any missing pockets in our existing clusters, like in Delhi NCR or AP-Telangana, because that is where we want to establish ourselves deep dive strongly because all the setup, the logistics, the infrastructure, the marketing, everything is set. There probably it would be our advantage to expand in that existing cluster. Any given opportunity in those markets, definitely we will jump into that quicker than any other new market.
You mentioned 30 stores for Calcutta , right? That is what the number you said for next.
Sir, next 24 months or 30.
Okay. For next two year it will be total 30 stores.
Yes.
Great. Fantastic. Best wishes for coming quarters. Thank you so much.
Thank you, sir. Thank you very much.
Thank you. We have our next question from the line of Zaki Nasser from Nasser Investments. Please go ahead.
Sir, I think congratulations on a phenomenal quarter. I think it is better than what any of us expected. Bengal being a very exciting territory as of now. Do you think that in a decently tailwind year and with things being on our side, would it be possible to cross the psychological mark of INR 10,000 crore this year, sir?
Zaki, sir, I hope, I wish it would happen. You pray that it happens for us. We're trying hard, but we would like to give a very comfortable number of 18%-20% that we can achieve. On top of that, because see, now season went very well in quarter one. The same thing with quarter four. If I compare quarter four, that would be January, February, March in this FY 2027. If that also supports us, then definitely we will cross that mark of 20% as well. All depends on seasonality, all depends on how soon the market picks up for us, the product mix. There is no new technology coming up. It is just an upgrade cycle. It is the new buyers. The penetration has to increase in few categories. The categories that we've tried on the side is like audio accessories, built-in appliances.
That would not move the needle much because those are small categories and contribute very little. The contribution [Non-English content] but it will not move the needle at a INR 10,000 crore number. Depending on how quarters move on, then we'll have a better picture. Quarter four again stays quite important in terms of summer. The sooner the summer starts, the better it is for us.
Sure. Coming to a slightly macro kind of a question. Do you think the curve between the online and the physical store has at last bottomed out and people are coming back to the physical store from the online model?
Sir, now if we categorize that, I feel a certain category or ASP of products selling in our industry definitely is still quite strong enough online. Like you're talking about an INR 1,000 headphone, an INR 500 product, or a charger, a cable. Those kind of product categories are quite relevant online. When you're talking about a core product category like built-in side-by-side, front-loading, or a 75-inch or a 65-inch television, or an INR 1 lakh soundbar. All these categories are nowhere close to what offline is selling today. Not only me, but any mom-and-pop store would outperform the online in these categories.
Thank you, sir. Sir, before looking at Bengal as a territory, you would have done some math. Would you think that Bengal can become between Telangana side and your Delhi market? Do you think Bengal can overtake the north market very fast?
No, sir. North cluster is much bigger in terms of value and volume both. Bengal would be, for us, what we're anticipating is that compared to north, irrespective of the volume targets that we've got, I feel like the turnaround or the payback period would be sooner here compared to what we're seeing in the north for us.
Sir, Bengal is a rather raw market as of now, sir. I mean, the penetration and if you can have good experience stores over there, I think it'll be a faster than expected kind of ramp-up for you.
Definitely. That is what we're anticipating. In terms of cluster, in terms of the state size itself, it is 1/3 the size of NCR region. Just by going by the numbers on the books.
Sure. Thank you, sir. Best wishes. Let's at least aim for the INR 10,000 crore mark, sir.
Thank you, Zaki sir. Thank you.
Thank you. We have our next question from the line of Ankit Kedia from PhillipCapital. Please go ahead.
Sir, first question on the store opening. Ex of Calcutta, the store opening will hardly be 10, 12 stores in Andhra, Telangana, and in the NCR market. Especially in the south market, do you see that broadly most of the stores are open there now, very little store penetration can happen in next two to three years?
Ankit, if you look at cities like Amaravati, Guntur, Vijayawada, Visakhapatnam, even Hyderabad for that matter, the peripheries keep growing, right? Organically because [Non-English content] state, [Non-English content] comfortable market. Now because we are rationing out between 25, 30 stores a year, making sure the cash flows are all deployed correctly. We don't overburden ourselves with CapEx. We're looking at all those rationale. We are making sure that we selectively open stores where the market demand is there, where the markets are big, where the markets are growing, or in a market where we don't have a store at all. Those kind of rationale, and then we move ahead in opening stores. If we feel that there is a demand of you opening 30 stores, we'll open 30 stores.
Sure. Even in the NCR market, you see opportunity being low? There also we can see?
NCR is a long way to go, sir. We've just started. There's a long way to go in NCR. We've got big plans for NCR going forward as well. You would see that improvement coming quarter on quarter, probably one bad quarter, one good quarter. We know how the daily trends are moving towards, how the market is shaping up. Delhi is a market we're not looking at as a quarter-to-quarter number. We're looking at a long-term play for Delhi as a city.
Sure.
We're quite confident on how we're shaping up there.
Sure. Next, as you guided for Calcutta market, 30 stores in next 18- 24 months. In the NCR market similarly in FY 2027, 2028, how many stores can come in?
Sir, we're looking at anywhere between eight to 1 0 stores. Two have opened this week. One in Sarkari and one in Gurgaon. Three, four are getting constructed as we talk. We'll comfortably come up with eight to 10 stores this financial year, or probably a little higher if we find good property.
12 will be Calcutta or West Bengal, 10 will be in NCR. South will be only two or three stores this year.
Five stores.
Understood. Sir, my second question is on the price increases. Do we have still low-cost inventory in the system for us, be it for laptops, mobile handsets? In this quarter, how much was the low-cost inventory of ACs? Because a lot of the companies took price increases in quarter four, and we would be sitting on some of the inventory of unsold inventory last year, which would have aided our margins as well. If you can just help with the inventory numbers, which could help gross margin expansion in quarter two as well, and specifically AC margins, if you can wish.
Ankit- ji, sorry, your question is really apt and quite detailed, unfortunately, it is a mix of an ongoing process. We buy old, new, buy stocks less price, sell it at a higher price. That is an ongoing process, telling out this exact number is going to be little difficult. In terms of AC, I can tell you that whatever we were carrying from the last year, we replenished that stocks with newer stocks starting from January this year with the new BEE rating. That was a mix in that one product category, which was a little higher with older stocks, which liquidators are getting liquidated by April, May. Apart from that, everything is fresh now. Everything is new, and even if we get that older pricing, we're talking about 100, 200 laptops.
That is a quantity that we get old price, utilize that for benefit in terms of price gain. Eventually you have to keep buying the new one. It is always a cycle, ongoing cycle, but there is no internal data available right now with us where we can actually give you the correct numbers on this.
Sir, the reason why I was asking is, will our gross margins normalize from Q2 onwards, or they should still be at elevated levels given the cost advantage we have with inventory?
Sir, if you look at it, you will compare it with quarter one because the cooling product category will appear inflated to you, it will appear higher. You can compare quarter one, quarter one, quarter two, quarter two. If you compare it with last year's quarter two, this quarter two, the numbers would look better.
Understood. Cool, sir. Thank you so much.
Thank you.
All the best, sir.
Thank you, Ankit sir.
Thank you.
Thank you. We have our next question from the line of Harshit Sachdeva from Columbus Capital. Please go ahead.
Hi, sir. Am I audible?
Yes, sir.
Hi. Congratulations on a really good set of numbers, sir. How do you look at payback periods in terms of your new stores across geographies? I mean, CapEx, OpEx, and in terms of months as well, or what is the target sales that you look at for any store to become profitable and what levels?
Okay. Sir, now because the company is established in South, we've been deeply penetrated in markets here. You would look at a payback period of around under 10 months, 10-11 months here in this cluster in South, and this number up North would be around 16-18 months. In terms of breakeven, South, we would look at 30-40 days and say under around a month. Up North, it would be around two and a half months that we would look at this number. In terms of the CapEx, the OpEx that we look at, we spend around INR 2,500 crore sq ft on an average in terms of CapEx. On a 10,000 sq ft average store size, we spend around INR 2.5 crore of CapEx, and then another INR 2 crore of inventory there.
Depending on the store size, it's ± INR 10 lakh-INR 20 lakh of high-end inventory. This is the broader math that we do, and then we make sure that the revenue that we would generate, we would try to keep the cost, the OpEx, say, in terms of rental, under 3% initially, till the time the store doesn't get matured or doesn't get productive. We don't take up a store which are 5%, 7%, 10% revenue cost of the rental. Same thing with the manpower, try to keep it under 1%, marketing is under 1%. All the store operation costs, initially, we try to benchmark it under 8%-9% or maximum 10%, depending on which cluster we open the store in.
That is the number that we initially look at and then try to increase the productivity from those stores in year one, year two, and year three, and then taper it down to at least a 10%-12% CAGR growth from year three onwards.
Okay. Understood. Thank you so much for the details. Sir, second question is on how do you go about deciding shelf space? I ask this in the sense that ACs alone, [Non-English content] brands both on the lower end or as you go higher up as well. How do you decide which brands to push for or sell more or versus more visible to the customers? Is it based on margins or any incentives from the brands or the distributors? How do you go about it?
Harshit sir, if you actually look at us, what we do is we only do pool brands. We don't do push brands at all. We don't do private labeling, white labeling at all in our stores. Every category with us would have the top 80%-90% market share leader brands with us. Every category would have three or four brands, not more than that, except air conditioners, because there are different brands that have a certain market share. We have eight brands in air conditioner. All other brands, all other categories, we have not more than three or four brands. The top brand, like television, we've got only LG, Samsung, and Sony majorly, contributing 95%-97% of our revenue in that category.
We decide the top brands in terms of, and it is irrespective of what margins we earn, but at least we try to maintain a certain gross margin level in those categories. Apart from that, we see where a certain product category has a certain demand or the brand has a certain demand in a certain cluster or a geography, then we try to introduce those brands at the store.
Okay, cool. Thank you so much. Thank you.
Thank you.
Best wishes.
Thank you.
Thank you. Ladies and gentlemen, that would be the last question of the day. I now hand the conference over to the management for closing comments.
I would like to thank you all for joining the call. I hope we were able to answer all your questions. For any other further queries, you may get in touch with us or the SGA team. We will be happy to address all your queries. Thank you once again.
Thank you, sir. On behalf of Electronics Mart India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your line.