Q2 24/25

Nov 7, 2024

Summary

Q2 revenue rose 11% YoY, while PBDIT margin eased to 6.6% amid washer-transition delays and mix pressure. Management expects cost reductions and stronger washer demand to support margin recovery, targeting 9%–10% by Q4.

Ladies and gentlemen, good day, and welcome to IFB Industries' Q2 FY 2025 conference call hosted by Nirmal Bang Equities Private Limited. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Natasha Jain from Nirmal Bang Equities Private Limited. Thank you, and over to you, ma'am. Thank you, and good evening, everyone. Nirmal Bang Institutional Equities welcome all of you to the second quarter FY 2025 results conference call of IFB Industries. I would like to thank the management of IFB for giving us an opportunity to host this call. Management is represented by Mr. Bikramjit Nag, Chairman, Mr. Raj Shankar Ray, MD and CEO, Home Appliance Division, Mr. P.H. Narayanan, MD, Engineering Business, Mr. Soumitra Goswami, CFO, and Mr. Jayanta Chanda, CFO of Engineering Division. I would now like to hand over the call to the management for their opening remarks, post which we shall open the floor for Q&A. Thank you, and over to you, sir. Thank you. This is your Bikram Nag here. Ritesh, I think there are mistakes. Mr. Ray's- They have not been corrected. No, this has been corrected. I think they have copied the earlier one. Natasha, can you just please verify this? Hello? Yeah. Natasha, can you please verify? The names which have been stated is incorrect. Anyway, let's start. Hello, can I start? Yes, sir. Good afternoon, everybody. I welcome you all for IFB Industries Limited. We will state our call leader name first. I am Soumitra Goswami, the Chief Financial Officer of IFB Industries Limited. I have with me Mr. Bikramjit Nag, Chairman of IFB Industries Limited, Mr. P.H. Narayanan, Managing Director and Chief Executive Officer of our Engineering Division, Mr. Jay Chanda, CFO of our Engineering Division, Mr. C.S. Ravindranath, Executive Director, Manufacturing of our Home Appliance Division, Mr. Ranjan Mathur, Head of Sales of our Home Appliance Division, Mr. Ashish Singh, Head, Plant Account of our Home Appliance Division, Mr. Kartik Muchandi, Head of Marketing Account of our Home Appliance Division, and Mr. Arup Das. Mr. Das is a member of our Home Appliance Division team. Now I will inform you about the quarter 2 result. Revenue for the quarter was INR 1,189.24 crores against last year's INR 1,074.12 crores, which is growth of 11%. PBDIT for the period was INR 79.02 crores, and its percentage to revenue was 6.6% as compared to last year's INR 74.83 crores, which was 7% on revenue. PBDIT amount came across a growth of 6% year-on-year. Flat revenue growth in July and August affected the margin for the quarter, which later on improved in the month of September. Fixed expenditures up for the quarter was well within budget. PBT for the period was INR 44.64 crores against last year's figure of INR 38.20 crores. Quarter 2 PAT was INR 33.30 crores, which is 2.8% on revenue against last year, 2.7%. Now, figures of YTD September 2024 period are the following. Revenue for the YTD period was INR 2,433.65 crores against last year, INR 2,136.97 crores, which is a growth of 14%. PBDIT for the period was INR 165.57 crores, and its percentage to revenue was 6.80%, as compared to last year's INR 115.51 crores, which was 5.4% on revenue. PBDIT amount came across a growth of 33% year-on-year. Fixed expenditure for the period were well within budget. PBT for the period was INR 97.04 crores against last year's INR 41.75 crores, which is a growth of 132% over last year. PAT was INR 72.14 crores, which is 3% on revenue, against last year, INR 31.32 crores, which is 1.5% on revenue. With this, I will request to start the question and answer session. 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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets when 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 Viraj Mehta from Enigma Investors. Please go ahead. Yeah. Hello, Mr. Nag. Sir, my first question is, if you look at last year's Q2 presentation that you gave, and reiterated multiple times, including when we visited you in the AGM, the savings that you talked about, most of those savings have not panned out the way you said, and it has been over three quarters now, sir. Can you please explain where are we missing? I think what has happened is, if you see on the material cost side, the required saving has not come. We spoke about two odd quarters back that we were engaging with McKinsey, et cetera. I think in the last call, someone raised the point that have we closed issues with them. The answer is, yes, we have. The board last week said that we need a counter quote. So we put Alvarez & Marsal into it also. All of this will be done by November 20, and the contract will be given out. So we believe on material cost, logistics, et cetera, the total saving we should get is a little over INR 200 crore. Some amount has come in into material cost. What happened is, during the changeover of the washing machine introduction, the old model lineup went out, the new model lineup came in, and in that there were some delays in introduction, et cetera, so we've not got the full benefit out of it, which Mr. Kartik Muchandi will explain to you better. But broadly, the work has happened substantially. We've not seen the benefits as yet. I think from Q3 it will start kicking in. We saw some benefit of this in October, but not fully. October results, however, which we just finished, was actually very good, and targets were achieved. But the question that we are asking ourselves is: Is this sustainable in November, December, and going forward, especially in January, et cetera, when AC comes in, which is a lower margin product? The answer is that the work we've done on all this, I think will lead us to the required margins. That's our internal assessment so far. But sorry to correct, sir, but even year-over-year, our gross margins are down. If I look at the engineering business, obviously we do not get gross margin for each division, but gross margins at an overall company level is down and engineering EBITDA is up. Then the only takeaway I as an investor have is that year-over-year, your gross margins in your appliances business are substantially down. Then it begs the question that in the best quarter of the year, if our margins are down year-over-year, after which we have done so much work, I just do not understand how are the numbers tallying to what you are saying. The commentary and the numbers just seem very different, sir. Sorry to be honest and brutal about this. Understood. You see, what happened with AC is July, August was bad. But for us, September was good. October has been very good because those things are kicking. But Kartik, can you explain it better so that he understands? Yes, sir. So in Home Appliance Division, year on year, H1 last year versus this year, there is a 2% reduction in the gross margin, but in absolute terms, the gross contribution has expanded. The main reason for this is, in washing machines, the market was flat and our revenues also, what you have seen, the growth is muted. We have hardly 3% to 5% growth. The major growth is driven by cooling categories, which is AC and refrigerators. In these categories, the margins are positive but lower than the washer category. Since there is a change in the product mix last year versus this year, percentage terms, you can see a reduction, but in absolute terms, the margins have expanded. No, but Kartik, his question is, please also convince him on the point of washer margin expansion, what is happening. Where are we on that? Yeah. Overall, of course, on the cost down, which will ultimately be reflected in margins, which is what we discussed today. Yes, sir. In washer, the material cost has reduced by 100 basis points, which is 1%, with respect to last year. That can be seen in this quarter. In the current quarter versus last year same quarter, our material cost has reduced. Apart from this, we are running project of bill of materials cost reduction, and our internal target is to reduce the material cost by INR 200 crores in next 12 months. Sure. Kartik, one second. Kartik, you are not explaining properly. What happened in July and August? Explain that to him so that he understands why this margin thing has happened. Yeah, okay. We had an entire model changeover in quarter two. The entire old model lineup has been removed and the new model is coming from August. So during this changeover, we have lost substantial sales. If I could quantify, we have lost INR 70 crores of sale in quarter two because of this changeover and ramp-up of new model. But if you see September and October, we are experiencing a growth of 20%. So in long term, the new models are received very well in the market. But the impact of changeover- The new margin, is the GP better? You explain that to me. Yes. The GP and the EBITDA, both are better than the old models. Sure, sir. Sir, my- You will see this. Kartik, one second. See, I am getting Kartik into the call for the first time, so Kartik is getting lower. Sorry. Kartik, please explain to him again, this point on, are you having margin expansion or not with the new model expansion. Introduction, sorry. Explain that to him. If not, when are you going to have it so that GP is equal to before, if not more? Yes. As of October, as of quarter three, our gross margins in new model is better than the earlier. There are two reasons to this. One is our mix, because in the new model, our new models are taken well in the market, and the high-end is selling much better than earlier. That is why our overall gross margins have improved since September and October, and we see this trend to continue in the quarter three, quarter four as well. Sure. Over and above this, we are working on a cost reduction project which I just explained, which we have an internal target to reduce the material cost by- The new models have been very well received. In September, we were stock out. We had an issue with supply chain, which is much lower than before issues that we had with supply chain, but we were stock out both in top load and in front load. The same situation continued in the month of October, but the stock out situation was less, but we were still stock out. Capacity was sold. November has started off strongly for us. The new model has been very well received. But in the introduction, where the old models were taken out and new models were brought in, there was an issue there, because the lower-end models came in first, and there was an issue there on the mix. On the new model introduction, the cost down was delayed by 2 months. The effect of that has started coming only in the month of October. So you will see the effect of that in Q3. Sure, sir. If I put all of what you said in terms of gross margin improvement and supply chain, and you always keep mentioning that we have to double-digit margin. At least by Q4, can we see high single-digit margin? Can we go back to 8%, 9% margin? Or that also seems a stretch. I think in the month of September, we did far better than before. I am just answering sequentially. Sure. Month of October, I think we were close to the target. So target is double digits? Correct. Okay. Month of October, we were close to target, if not on target. I am not going to say more than that now. Sure. We believe in month of November, depending on how the volumes pan out. See, November, December, as you know, AC volume picks up because the dealer build-up takes place. November, not like so much. November production will go up. The dealer offtake starts from the month of December. The dealer stock build-up starts. Sure. The new washing machine thing is very good. I think we will be very close to that in Q3. We should be good in that in Q3. By Q4, we are rather sure we should hit it. Sure. If we do not hit it, between 9%-10%, we should be there. Right. Sir, my last request would be that we have a very large gap between our results and our con call. It leaves a lot to be desired for a company of our stature, because that leaves room for insider trading. I agree with you, Soumitra. Yes, sir. You will recall what I have said to you on this, and Kartik on this. You have not done it. We have to hear all this. But can you please from next quarter, make sure it happens next day or the same day, please? Next day may not be possible because you know what is happening. Others are doing it, that I am aware of. But the thing is, after the board declares the results, it goes to a person who organizes the report, and that form takes about a day and a half, two days. This time it took longer. But I think in two days it should be done. Sir, even two days will be great. Yeah. We will try and do it. Done. Thank you. Thank you, Mr. Nath, and best of luck. Thank you. Thank you very much. The next question is from the line of Manoj Gori from Equirus Capital. Please go ahead. Thanks for the opportunity, sir. Welcome. Sir, my first question would be, if we talk about supply chain issues that we face from July onwards. I was just concerned, like in the month of August, on 6th of August to be more specific, when we had our con call. Probably, I think, even this should have been highlighted, because obviously we were not aware of the thing and we were expecting that Q2, the margin improvement, probably we are very much on track. In the presentation, it definitely came as a surprise that we had some supply chain issues during Q2. September, obviously, things have improved materially. Because if you look at washing machine being one of our major category and the most profitable category, if we mess up with the supply chain over here, our entire yearly profitability goes for a toss. I will explain what happened. The new models being introduced together, all of them at the same time with different capacities, and the old models being tapered out. In this changeover, we actually sort of even mistook the pull of the new models. From the market, we did not expect the demand to be as overwhelming as it has been. We were caught unawares. The sales team was caught unawares. We lost out as a result of this. Therefore, in supply chain, some things are imported, which has a 90-day cycle. Correct. You see. So there we got caught up. Also some things that come in from China, customs is taking longer. All these things just added up, and we did not manage it well enough. So internally, we took stock of that, but it happened. Right, sir. In the month of October- Yes The festive season did come in October this year. Yes. We saw some impact in October, but still what we understand from our channel check that washing machine market or category would have grown by roughly around 20%. Are we in line with that? Because obviously we would have lost sales during Q2, so ideally we should have done better. I think our October sales have been very good. We could not supply, as I am saying. The supply loss was slightly less in October compared to September, but we were stock-out. Company capacity was sold. Correct. We had that issue. But the good thing is, we think there is possibly been a reset in the demand for the products that have been designed and introduced in the market, and we do not expect, especially for top loader, et cetera, the demand to fall much. Which means if you take September and October's average, I think that will be the demand. Which is a substantial increase to before, and is more than 20% increase. Correct, sir. That is all. Yeah. Secondly, if you look at, we have been talking about achieving better efficiencies from the existing retail touchpoints. Yes. We have been talking this for a while. In fact- Yes This is in fact for last three, four years we have been hearing. Yes. What has been the progress, how we look at the extraction? In the presentation, we have also talked about market share gains in the coming times. Probably it's not visible even on that front. I think the market share gains have happened in September, October. What has happened is the market share, actually, companies look at the data. The data comes from an independent third-party firm called GfK. GfK is the most widely used data service for the appliance industry. GfK and Nielsen have merged, but GfK is the best company for this. GfK data is directionally correct. It is directionally correct because it takes care of a significant portion of dealers, but it does not take care of the brand stores, et cetera. It doesn't take care of e-com, et cetera. But directionally correct. GfK shows there has been significant brand pull and market share gained by IFB in the last few months, as far as the washer category goes. We are feeling that because we are having capacity issues for the first time. Correct, sir. We have not had this. Secondly, if you look at the air conditioners, even that is one category where we have taken- I will say this. Sorry. I will just take a second. Sure. Whilst we are saying this, I think we must also point out that had our planning been better, had we foreseen this, we would have built up stock starting July, for example. We did not do that. There was a small error in planning as well. But honestly, we did not see the market pull for our products be as good as it has been. Correct, sir. Secondly, on the air conditioners, even there we have taken number of initiatives. On the what, sorry? On the air conditioners. Air conditioners. Yeah. If you look from December onwards, there will be inventory built up on air conditioners as well, especially from the larger format players. Yes. In that scenario, our cost obviously would be lower as compared to a year ago as a percentage of sales. Overall on net basis from year on, we are just moving northwards on the margin side. Is that understanding correct? Yes. I think Kartik can answer this in a more eloquent manner, but we are confident of margins in this. Kartik, can you answer? Yes, sir. On margin terms, last year we were negative EBITDA of INR 31 crore. This year we are at positive EBITDA YTD. Okay. That's great. No, going like forward, Kartik. Going like forward, what's happening from now to March. He's asking that. Okay. Now to March, we have further projects for bill of materials cost reduction, as well as our sales volume is going to go up in quarter 3 and quarter 4. Correct. Lastly, if we look at. Currently, what are the plans for the CEO position that currently is vacant for Home Appliances? Any progress over there? Yes. We have interviewed a number of people, and we have still not zeroed in on someone. The reason is, we are not able to find someone who has complete 360-degree knowledge on all aspects, including balance sheet control. We are wanting that. It is not only someone who will lead for sales and marketing, for example, but he should have good control over factory and other balance sheet matters. So we have interviewed a lot of people, shortlisted some, and the process is on. Sure, sir. Thanks for this and wish you all the best. Thank you. Thank you very much. The next question is from the line of Pritesh Chheda from Lucky Investments. Please go ahead. Sir, can you give some color on the industry category performance in the festivals? Basically, whatever post-Shraadh, so half of September, major of October. So in that period, the main category is washers, AC, ref, what in your opinion should have done in the market? For us, will there be any market share changes? I think washing machine, we have answered. Both top load, front load, we had capacity sold out and we couldn't supply to the market as per the demand of the market because we had supply chain issues and the planning in July was not to the extent that it could have been. But we underestimated the demand for the product launch. So that demand would have grown at what rate, in your opinion? It will be like 15%-20% more than that? I'm not sure how much market has grown by percent, but we have grown substantially. Okay. If you see- Any differences within the washers that you have seen in the top load and the front load? See, for us, the top load demands we see with the new model we have is actually tremendous and we may have to take up capacities. As far as the front load goes, I think with the work we started quite some time back on numerical reach and extraction, et cetera, I think it started paying dividends and I think we'll be close to capacity selling, which is a substantial growth from last year's average. The growth is more than 20%, to answer your question. Okay. Is there any loss of market share? No, I just answered some time back, 2 minutes back, that we have gained Okay our market share as per GfK data. Okay. Could you give the same comments for the other categories? Other categories, we feel with the work we are doing on AC, et cetera, we should be able to achieve our, or at least close to our budgeted target. In refrigerator, we have our internal target of around I think over 40,000 a month. We are now at about 28,000 to 30,000 a month. Refrigerator is an EBITDA positive business. How about that category, sir? Has it grown in the festive, the ref and microwave? I am not sure of the category growth in ref and microwave, but we have grown. But then in ref, our base is small. So the growth is not something that we really look at. You see, because if we were doing, let us say, 20,000 ref, and if we go to 28,000, that is not a correct representation of the category. Okay. As I sum up here, let us say, as a festive, was it a really good festive versus what last couple of years the category was doing? Our festive was good, and we could have done much, much better. Okay. Especially in refrigerator, et cetera. And washing machine, as I said, and I am like repeating, we had issues of capacity. Okay, sir. Thank you very much. As far as margin goes, we were towards our targets. Okay. Thank you very much. Thank you. Thank you. Thank you very much. The next question is from the line of Shreyans J. from Cron Investment. Please go ahead. Mr. Shreyans, your line has been unmuted. Please proceed with your question. Can you hear me? Mr. Shreyans, please proceed with your question. Your line has been unmuted. Hello. Thank you for the opportunity, sir. My first question- Hi. Hello. Hi. Yeah, hi. Sir, my first question is on the AC front. AC, our base also is comparatively low versus last year, and I feel in PPT you have mentioned we could have done better sales in AC. I look at other players who have done 20%, 20% odd growth rates at their base. I am just trying to understand what went wrong for us in AC in this quarter, sir. We have still not got distribution and all right. The team is still not right as far as AC is concerned. We fixed it substantially for the washer. What we realized was that in every branch, we need further depth as far as AC and ref goes. Which means within a branch, we need more number of individuals to focus on these categories, and that team is being built up. Okay. Sir, the second question is, we have hired Mr. Govindaraj. Can you just help us understand what- No, Mr. Govindaraj has been in the system for a long time. He was managing the industrial business. His background is manufacturing. All manufacturing units of IFB have been put under him, and the industrial business is anyway with him. Okay. He used to head LG factories before. Okay. He has been with us since 2018. He has been with us. He was with us before, then he left for a few years, and then he came back when we all bought this company in Bangalore, which is the industrial laundry company, because we had wanted to relocate to Bangalore from Goa because of his mother. Okay. Sir, my other question is, we do services- Sorry. Now the structure is, in Mr. Ray's absence, yes, we do not have a CEO, but Govindaraj manages manufacturing fully along with industrial business. Mr. Ranjan Mathur, who is on this call, manufactures end-to-end sales and marketing, and finance is managed separately, which is Soumitra manages finance. Okay. So what exactly is the responsibility of Mr. Govindaraj, sir? Sorry? What is exactly the responsibility for Mr. Govindaraj in the appliances business? All the factories. He has been tasked with the gross margin improvement that we are looking at, about 200 odd crores. Correct. Material cost reduction, quality issues, warranty reduction, et cetera, that is all with him, apart from industrial business, which is also with him. Okay. Sir, the other question is, I was seeing your presentation. We have about- Shreyans, may we request you to come back in the queue because there are other participants waiting in the queue. Let him ask the last question, please. Let him just ask the last question. Okay, sir. Go on, please. Yeah. Thank you, sir. Sir, looking at your presentation, we do about INR 150 odd crores of services, and out of that INR 50 odd crores is some IFB products that we sell. I am just trying to understand, what is the balance INR 100 crores of service revenues that we do, sir? Kartik, answer. These are out of warranty spare sales and AMC. 100 crores of- Essentials. These are IFB Essentials, which are liquid detergent and other accessories, like trolley for the washing machine, et cetera. Okay. All right. Thank you, sir. AMC income is there. AMC income is a big part. In the service revenue, AMC income is there, sale of spare, sale of accessory, and sale of essentials. AMC bit would be the larger portion out of this 150. It is around INR 34 crore-INR 38 crore. INR 35 crore-INR 38 crore. Okay. Essentials is INR 50 crore. Essentials is there, accessory is there, and also sale of spare. Okay. All right. Thank you, and all the best. Thank you. Thank you very much. The next question is from the line of Navid Virani from Bastion Research. Please go ahead. Hello, am I audible? Yes. Yes, sir. I just have one question. I understand that we can capture a lot of growth that the industry gets potentially more. From your previous answers as well, we are still grappling with some internal affairs of getting things right. Keeping those things in mind, like industry is with acceptable levels of growth, but there are some internal changes which we might have to make. I just want to understand what kind of initiatives are we taking on the ground which can help us avoid situations like the stock out situation which we were discussing. Also, having the right kind of sales representatives at all the counters which are relevant. Sorry, your voice is getting cut off. Can you just repeat the question, please? Is it better now? Yeah, somewhat. Yeah. I was just asking that I understand that there is a lot of growth in the industry which could be captured, but at the same time, there are some internal aspects that we have to get right first, right? Keeping both these things in mind, can you share some examples of the initiatives which we have taken to avoid situations like stock outs or avoid situations where we do not have the right kind of sales representatives present at counter. If you can give a couple of examples, that would give us a better clarity on how strategically the company is moving in terms of addressing these issues. I think on the supply chain matter, we need better visibility on projected sales for market so that we can plan supply chain. Because in supply chain, you have to tell a vendor to produce some things for you, and sometimes parts are imported, which is a 90-day cycle, for example. I think this thing between front-end and back-end integration, I think we need better visibility, which is a factor of how we look at the market and also some IT integration that we need in supply chain. We are working on that. On the point of what else we need to do on the ground, this point we have discussed many, many times, and we have not done a good job on this, which is to have each area manned well by a competent person who is able to manage that area. Now, have we completed this? I think on the senior management side, this is done. All the regions are manned. All the branches are now manned. On that front, there is no gap. That gap has existed before, but that gap is by and large closed. Are all the people up to a certain standard? Answer is no. Answer is no. We still have to work on that. Is every territory manned competently? Answer is no. Is it better than before? Answer is yes. This is a constant thing that we have to work on, and that work is going on. I can only say it's going on with a lot more rigor. I think the branches and the regions are very well sensitized to this now. This work was started by Mr. A. He only started it. It's taken a very long time. I am aware of this, and I've been the most impatient on this as well. This work was started. It's really taking enormous time. I think we are coming to a situation where the rank and file have understood that we are not going to relent on this, and I think it's working now. I think we'll see the upside fast. At least hopefully from my side. Yeah. Thank you for the answer. Thank you. Thank you very much. The next question is from the line of Zalak Rathi from Agility Advisors. Please go ahead. Hello? Yes. Hello. My question is, what is the traction that we are seeing from IFB Points? Is it giving revenue visibility? Is it like giving us? Revenue visibility increase, any incremental revenue, like in the last- IFB Points in September, October has done much, much better. Okay. There is a— We are doing some management reinforcements there, and that work is on. But October sales from IFB Points was actually good. It was good, and hopefully, that will be carried forward, and IFB Points is going back into expansion mode. As we are expanding this from 215 stores to 465 stores, We are 475 now, I think. 465. 465. Sorry. What is the revenue growth that you are expecting from these stores? I think I will not give a revenue target now, but I would like to say we want IFB Points to be maintained at least 15% of our sales. We do not give guidance on sales, but we would like it to be at about 15% of sales. It had slipped earlier, but now it is coming back up. Okay. Thank you. Thank you. Thank you very much. The next question is from the line of Vitnesh Aiyar from Sequent Investments. Okay. Please go ahead. Hello. Thank you for the opportunity. Basically, with interacting with a few other players in the industry, there is a general understanding that quarter 2 with quarter 2 of last year is not really a straightforward comparison because of the festive day shifting from quarter 2 to quarter 3 in key occasions. Just to get more understanding on the sales part, can you help us understand how the festive season has panned out this year versus the festive season that was there in last year to get an increase in the sales volume as such? Last year festive happened in like November. Diwali was in November. Yeah, but because of what I understand, there was one this Pitru Paksha that 14 days came in quarter 2, so there was less sales. That is when told about this industry. That's why I'm asking, did it impact us in any way? I think our understanding is. Hello. Sorry. I got put on hold. Oh. Hello. Yeah. Sorry. I think our understanding is that from September onwards, we have seen an uptick because of the products launched. I would like to stick to that point. I think the product launched has been very well received and the work done on the ground on putting the right product in the right counter, et cetera, which is the model mix, et cetera, that work has been done relatively better. We have seen impact of that in September and October, and we are confident that this will do better November, December also. As far as the other product categories go, our share is very small in terms of number, and we expect to see uptick in that as well. As far as we are concerned as a company, we think we will do much better. To answer your specific question on the season, I think we are better off compared to last year. Okay. But I don't know how we have done vis-a-vis others because we have not seen, we have not reviewed the results of others, even though Blue Star has come out today. I am aware of that, but we don't know the others' results. Got it. Sir, also on the refrigerator part of the business. We have done around 50,000 units production in this quarter, and we have our target of monthly sales of 50,000 units. What is the strategy behind it now? What is the timeline that we see trying to achieve this sale? Our target is that by February, March, we should achieve it. February, March, 50,000 units per month. We should be close to that, yes. Okay. Got it, sir. Yeah. Internal target is that, but if you see now we are hovering between 25,000 to 28,000, 30,000, and I think we will get there. That is what my sales rep's prediction is. Okay. All our assurance to means. Yeah. Thank you. Yeah. Thank you. Thank you very much. The next question is from the line of Natasha Jain from Nirmal Bang. Please go ahead. Yeah, thank you for the opportunity. Sir, just a follow-up on the last participant's question. In terms of refrigeration, are we on track to achieve the 6 lakh guidance that we said earlier, or should we land somewhere? No, because the first six months has passed, so we are not going to be there. But going forward, we hope that by February we should be averaging close to what we need to be averaging. Then going forward, we will achieve that. But I don't think we'll achieve guidance of 50,000 for the year. I mean monthly for the year. Got it. So we should be landing somewhere around 4.5 lakh units for FY 2025. Yeah, somewhere like that, I think. Sir, we have broken even at EBITDA level, right, for refrigeration? Yes. Understood. We have broken even at EBITDA level. Great. Sir, on RAC, I may have missed out, so have you called out the volume numbers sold in second quarter? Volume in second quarter has not been good for us. For AC, you are talking about? Okay. Are you talking air conditioners? Sir, only AC sales. I wanted to know the volume growth for second quarter. What is the exact volume growth, Kartik? No. In terms of growth, how much have we cut it? The volume growth is- Growth it will be 80%. Understood. But again, because our base is small, this is irrelevant. Understood. It is absolutely irrelevant and we have to get into starting now the build-up to the season, whether we can supply or not, and all of that work is going on now. If we can do what we are supposed to do between now and 31st of March, then we will be achieving our budgeted number. Which would be ideally 5 lakh units for FY 2025? Close to that, yes. And sir, we are already at EBITDA positive level, right, for room air conditioner category? Yes. By and large. Kartik? YTD September EBITDA. Yeah. Yeah, EBITDA positive YTD September. Understood. Thank you so much, sir. Thank you very much. Thank you. Thank you very much. The next question is from the line of Keshav Garg from Counter Cyclical Investments. Please go ahead. Sir, firstly, I wanted to know that the rupee is depreciating and we are importing roughly one-third of our raw materials and cost of goods sold. So whatever you are talking about, INR 200 crore cost savings, sir, it is adjusted for the rupee depreciation or, sir, we will realize this in the subsequent quarter that why we haven't been able to achieve 10% raw material margin because the rupee has depreciated. Whatever rupee depreciation takes place now, et cetera, let's say, we will have it compensated either by price increase or let's say whatever. But the thing is, internally, when we did the budget for the year, we never thought rupee will be at say 84 whatever now, so soon. So that has been an issue. But we will overcome this. I don't think this will affect much our targeted EBITDA numbers, EBITDA percentage numbers. Sir, also, sir, now if we see that there are so many global giants in every single category that we are in. For example, in ACs, there are so many people like Daikin, even Blue Star from India, O General, and Carrier. So they do only air conditioning, and they focus on that, and, sir, globally they are giants. Sir, but somehow we think that we can compete with all of these global giants in each of the categories. Sir, if you look at some of our verticals, so they are totally minuscule. I think in modular kitchen we did INR 1.4 crore revenue in one quarter. So I'm sure that this vertical must be loss-making, our inventory would have been stuck. The management bandwidth is going over all these small segments. Sir, now, similarly, if we see the built-in oven, chimney hob, sir, it is less than INR 6 crore revenue per quarter. So again, this would also be, I am assuming, loss-making. So why do not we just focus on few major categories so that we can really scale up our number? I think the fact of the matter is we compete with LG, Samsung, Bosch in every product category. I would not single out air conditioning from that angle. So let us say with washer, you will always compete with LG, Samsung, Bosch, for example, and Plus now Haier, et cetera. In AC, you will compete with whoever you are talking about. Refrigerator, everyone. I think this is part and parcel of the game, and I think there is no company that can really over time I think will do well with a single-minded focus on one product. The reason why in AC, the companies you are talking about are doing relatively okay is because of the industrial segment helping them. Blue Star has a large industrial segment, Voltas has a large industrial segment, and so does Daikin. We are not in that. We just prefer to be in the home thing, in the room thing. Our internal strategy document formulated long, long back, it basically said we should make all products for the house, electronics for the house in terms of white goods, et cetera, and brown goods. We are just progressing on that. In certain things we have not done well is a fact. In certain things, whether we should close it down or not, we keep evaluating it. As and when we take a decision, you will get to know. But as a company, our aim is to grow faster and to achieve the required margin. We are very focused on that. I think in Q3 and Q4, hopefully you will see substantial difference, sir. Sir, since this is such a hyper-competitive market, this home appliances market, and sir, also now there are free trade agreements and duty-free goods are coming from Thailand. Sir, please correct me if I am wrong. So, our competitors are global in scale and manufacturing, and sir, they are global leaders in technology. So basically, I am trying to understand that what is our USP? What is our right to win over here? Keshav, may we request that you return to the queue to ask your follow-up. Ma'am, my question is already over, so I am waiting for the answer. Yes. I think to answer your question, we must be doing something right for people to buy IFB and for you having invested in IFB. Something you must have seen in it. [Foreign language] because I do not know you personally. But you must have done your homework. I think I do not dwell much on this. As far as I am concerned, I talk to my team on one single matter. Please make a very good product and sell it in every corner of India. On that, on the selling part, we have failed. We have not done as well as we should have done. For that, whatever management changes are being made, are being made, reinforcements are being introduced, et cetera. The project was started by Mr. A, it just took too long. But I think we are on the right track, and I think you will see it in the results soon. Right. Thank you very much and best of luck. Thank you. Thank you very much. The next question is from the line of Shubham Jain from NV Alpha Fund. Please go ahead. Hello, I am audible? Hi. Sir, I just wanted to re-ask this question. I know the first participant asked this. You mentioned that, what is the reason for the gross margin decline of 200 to 230 basis points? I understand that there was a transition period that was happening in washers. Could you just help quantify how this impacted us from an RM procurement point of view? Kartik, you can answer this very well. Kartik and Mr. Govindaraj. Yes. The first part, you already know, washer category, we lost 70 crore sales, which could have definitely- No, they are asking why? How? How has it happened in My focus is more on the gross margin. If you lost 70 crore sales, all that procurement has happened and is that sitting on the RM, is that the reason? No, no. 70 crore sale what we lost is washer, where the gross margins are very high. That is the first point. Second point is that in Q1, our washer sale is flat. But we got 80% growth in AC. What happens is that the gross margin in AC is relatively lesser compared to washer. That is why in absolute terms, you will see our gross margin has expanded, but as a percentage to sales, it is reduced. Sir, if I compare 2Q 2024 to 2Q 2025, right, our washer sales are flat. We have done 378 crores in front load, 133 crores in top load, which is more or less flat in 2Q 2025. AC sales have gone up only by 12 crores. That too, our own brand sales have increased, so I would assume the gross margins are higher. This still doesn't explain why our gross margins have fallen from a year-on-year perspective. No, this is a- This is a point. For the quarter. Go on. For the. Sorry, carry on, Kartik. Yeah. For year-on-year, if you see, our growth in AC is more than 100%. I will just give you the numbers. Just one second. Sure. Yeah. Yeah, it is exactly 100% growth in AC. But the washer sale is less than 10%. That is the reason why percentage gross margin is- Yes, but Kartik, please tell him what is that. That is because of July, August in washer. Because of the changeover plan, et cetera. What happened in washer in September, October? Yeah, in September, October, the trend has reversed completely. We have more than 20% growth in top line. Whatever we produce, everything is sold in washer. We could have further sold, but we did not have stock or neither we had capacity. Had we sold the washer enough, then the gross margin would have been better than last year's same quarter, even in terms of percentage. Sorry, I am going to repeat this question. AC sales again, INR 51 crores have gone to INR 63 crores. On an overall basis, it is not a very high number that it can impact the gross margins. It does not seem to be an AC thing. If you can just help me understand this washer thing, what happened in July, August for our gross margins to get hit? Yeah, in July, August, there was a changeover. In changeover, the new models were coming in. Initially, we introduced the low-end. Model. Old models had to be taken out. The new model coming in and the old model taken out, we could not do a one-to-one replacement. Got it. So in the new models, we made a lower gross margin? No, the new model did not go into the extent required, first and foremost, so sales got hit. New model, the cost down was 2 months delayed. The BOM cost was not achieved in the models when it was launched. That came 2 months later. That affected the GP. Out of the 375 plus 130, almost 500 crores of washer sales that we've done in this quarter, how much is new models and how much is old models? Like a broad sense. Karthik? Yeah. Exact numbers, we don't have, but maybe 60% old model and 40% new model. But we could give you the exact figures. If I could just request, if I could take this offline and clarify some of these numbers with you. If I can just have a, I will just reach out, and we can have this clarified then. Yes, Kartik, you can reach out to Kartik. Kartik and Ritesh. Okay, sure. Thank you. Thank you very much. The next question is from the line of Aditya from Svan Investment Managers. Please go ahead. Hi. Thank you for taking my question. My question was more on the washer. Is it like a particular region we are seeing growth or is it pan-India? I am just trying to understand what is the driver for such a good uptake when you say that you are out of capacity to produce. I am just trying to understand what is the exact reason. Sorry, what? What is the exact reason? Did you find a new geography where you expanded because of which the sales took off like this or? I think the new models, if you go into the market and see, have been very well received. The looks are very good, the pricing is right. I think we just got the whole thing right, including dealer by dealer planogram has been right. What should go in where, how it should. I think that whole 360 work has been done very well. Basically, if you look at it that way, then it's- It's like saying that in Mahindra, let's say the XUV700 has been received very well. Why? Because it's a very good car. It looks good, it feels good. Customers have liked it. I think what has been launched by this team, by the R&D team and the manufacturing team together, this was overseen by Mr. Ravi, has been very well received by the market. That's my point. If you get the example of Mahindra, over there, we've been speaking about it for these last three, four years, the preference of customers towards SUVs overall has gone up. It's not just a Mahindra thing. Everybody, all brands, the XUV sales have been picking up. Added to that, yeah, you had a good line of cars from Mahindra and their XUV sales have really picked up. So there you had this whole theme of the premiumization, the buyer wanting to prefer XUV over- It happened in washer as well. In front load washer, it happened. Premiumization. High-end models are selling more. Our models are now really contemporary and people have liked it more, more than competition. The growth is across. Yeah, growth is across India. Yeah. Okay, thank you. Thank you. Thank you very much. As there are no further questions, I would now like to hand the conference over to Ms. Natasha Jain for closing comments. Thank you. I would request the management to give closing comments, if any. Thank you, everybody. Thank you, everybody, for participating in this call. We will meet again in quarter 3. This is Anil calling. Thank you, everybody, again. Yeah, one more point from my side. Vikram Mahajan again. We as a company are acutely aware of the fact that we should be doing better across product category, namely washing machine front load, top load, air conditioner, refrigerator, apart from the smaller ones. These are the four major categories. Microwave also, I think. We are acutely aware that we've not hit the required margins, neither have we done as well as we should do in terms of revenue. It's not something that we are happy about or that we are proud about. Every day, we are looking at this seriously and making the necessary changes to achieve required results. More than satisfying shareholder, it is something we need to do for ourselves internally. I can only say that a lot of focus is going into it. Thank you. Thank you, sir. Thank you. Yeah. That concludes the conference. Participants can disconnect their lines. Thank you.