Ladies and gentlemen, good day, and welcome to the Voltas Limited Q1 FY 2025 earnings conference call, hosted by Nirmal Bang Institutional Equities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Ms. Natasha Jain from Nirmal Bang Institutional Equities. Thank you, and over to you, ma'am.
Good morning, everyone. Nirmal Bang Institutional Equities welcomes all of you to the first quarter results conference call of Voltas Limited. I would like to thank the management of Voltas for giving us an opportunity to host the call. Management is represented by Mr. Pradeep Bakshi, Managing Director and CEO; Mr. Jitender P. Verma, Chief Financial Officer; Mr. Nikhil Chandramani, Head Corporate Finance; and Mr. Vaibhav Vora, Head Treasury. 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.
Hi, good morning, all the participants. At the outset, I will give you a quick brief on our performance, and then, after that, we'll take up the question and answer session along with our MD, Pradeep Bakshi, and myself. So as we all know, the global economic activities and trade around the world were improving during the first quarter, with growth on the upside in many countries. Upside risks to inflation stemming from various issues, such as price pressures on account of renewed trade or geopolitical tension in Middle East continued. Weak global sentiments continued amid rising U.S. recession concerns, leading to lower than anticipated macroeconomic data in the U.S. and fears of a reverse carry trade in yen after surprise rate hike by the Bank of Japan.
Potential changes in government in U.S., its trade policies, tariff hikes, slowing China economy may impact global growth. India's GDP growth continues to surpass expectations. Certain macroeconomic indicators have contributed to the momentum in the economy, including growth in agri business, service sector, rise in manufacturing activity, and moderate inflation may be a positive sign for easing monetary policies by RBI. In the recent budget, fiscal consolidation remained a big positive for the country, with the government focusing on the reduction of India's debt, driven by lower revenue deficit. CapEx budget also remained healthy in the entire budget of the government. All these factors paint a positive picture for the growth story of the country, leading to a positive momentum for the growth of industry and people. The year 2024 continues to be a milestone for the company.
In the results for the year ended March 2024, we had announced a record-breaking top line with the sale of over 2 billion air conditioners in FY 2024, indicating a strong market demand for the company's products, registering a quarterly growth of 72% and annual growth of 35% in volumes at that time. As we entered FY 2025, the rising demand and intense summers helped clock an even stronger growth in revenue and bottom line in this quarter for the company. We are happy to report strong growth in all the three segments, that is UCP, projects, and engineering products and services. The unitary cooling product business continued to outperform the market and maintain its growth momentum, with an overall volume growth of 67% over the corresponding previous quarter.
Also, in case of bottom line as well, UCP replicated the growth in top line, indicating a steady margin. With this incredible growth, the company reported consolidated total income for the quarter ended 30th June 2024, higher by 46% at INR 5,001 crore, as compared to INR 3,420 crore in the corresponding quarter last year. We are excited and thrilled to inform you that we have recorded a lifetime high in profit before tax, PBT, in any quarter earned by the company at INR 452 crore, a growth of 123% as compared to INR 203 crore in the corresponding quarter last year. This quarter's profit is almost close to the PBT earned by Voltas in full year of FY 2024.
Net profit after tax was at INR 335 crore, as compared to INR 129 crore last year. Earnings per share for a face value per share of INR 1 for the quarter ended 30th June 2024 was at INR 10.10, as compared to INR 3.91 in the same period previous year. The corporate balance sheet continues to remain healthy. As you have already seen a snapshot for our results, I think the main point there is that unitary cooling contributed almost 78% of total revenue of the company. Specifically, talking about the segment A, unitary cooling products, the scorching heat, rising temperatures, and a need for cooling and comfort helped scale the UCP vertical to a newer height. With joint efforts of our sales, planning, marketing, and manufacturing teams.
We recorded yet another milestone of selling the fastest 1 million ACs within first 88 days of a quarter, given the unprecedented demand for cooling products. The extraordinary demand due to extreme weather conditions in most parts of the country has pressurized and disrupted supply chains across the industry. However, a mix of round-the-clock operation at factories and strong support from our OEMs has largely helped in meeting the market demand. Our Quarter Four FY 2024 growth story continued in Quarter One FY 2025, with a whopping 67% volume growth in unit cooling products as compared to the corresponding previous quarter. All the products in the room air conditioners category witnessed high demand, driven by consumers' desire to have products with advanced features and its long-term advantages of savings in energy costs.
We recorded around 65% growth in split air conditioner categories, with demand coming from across the country. Strong demand for premium category of products, that is five-star rated products, continued, and overall sales mix for these products has also improved for Voltas. The rest of meeting the market demand and meeting customer expectations by giving them comfort and convenience, and making our products accessible through our widespread distribution reach, leveraging on the supply chain, helped us retain our leadership position for the year with an exit market share of 21.2% in June 2024. Since the past few quarters, we have continued to strengthen our brand proposition and product placement across all channel formats. During the season for RAC, the performance and leadership position continues to remain strong.
The company also registered a significant growth in volume for other cooling products, including air coolers and commercial refrigeration products. Commercial refrigeration industry garnered traction, leading to a high demand for cold beverages and ice creams, thus helping us clock positive results for the business. Within the commercial refrigeration category, demand was buoyant for water coolers and water dispensers. The business recorded all-time high sales in the quarter, driven by sales across all commercial refrigeration products, and led to a growth higher than the industry, helping us retain our market leadership position in freezers, water coolers and water dispenser category. Our new products in cold room and medical refrigeration have also registered good business growth and healthy order bookings, ensuring good volumes in the categories. However, stock liquidation of non-QCO has led to a slight drop in margin during the quarter.
Like RAC and CR, the performance of the air cooler vertical added extra flavor to the milestones of the company in the current quarter, with a staggering 170% volume growth over corresponding previous quarters. High sales in the first quarter have set the path for an exciting year ahead, with advanced bookings of coolers for the next season. Aggressive teams supported to expand distribution network, at the same time, quality products and support from the climatic conditions helped to establish a strong foothold this season. Sell-out remained strong across all channels. Our new cooler models were well accepted and further fueled the growth story for the category.
As per the latest report, market share has also grown to 10.50%, helping us become the number two brand in the month of June 2024 for this category, widening the gap with brands at third and fourth position. Water heater sales had a good start for the vertical and are expected to grow bigger in the coming months, despite this being a lean period for the product. The commercial air conditioning vertical performance also remained steady during the quarter. Sales of VRF, cassette ACs, ducted ACs drove the top line and bottom line for the quarter. Unlike product sales in the current quarter, margins from retrofit jobs were lower, which moderated the overall EBIT performance for the vertical for the quarter. This, however, will improve over the next few months. The labor-centric finance teams contributed significantly to the increase in sales this season.
Additionally, on the cost front, commodity prices have started to accelerate upwards, with USD-INR depreciating over the quarter, and both have been detrimental to the profitability of the business. Considering the seasonality of business, IPL, and a move towards TV advertisements and higher sales and promotional expenses, kept our margins in line with the previous year. On the other hand, various value engineering initiatives and cost austerity drives have kept the margins stable. To summarize, for the quarter ended June 2024, the UCP segment registered a revenue of INR 3,803 crore, a 51% growth in turnover from INR 2,514 crore in Q1 FY24.
The segment reported an EBIT of INR 327 crore in Q1 FY 2025, as compared to INR 207 crore in Q1 FY 2025, growth of 58%. On the capacity expansion front, we are happy to announce that we have started commercial operations in our RAC factory in Chennai, with a capacity of 1 million, and water dispenser line with a capacity of around 3.5 lakh in Vadodara. Both these plants provide us with strategic advantage of location and help us cater to the markets in South and West India. This will enable us to meet growing demand for the under-penetrated air conditioning and commercial refrigeration products market. This would in turn help us deliver a powerful performance to give our consumers comfort and convenience. With our story of volume growth across channels.
and products, we are optimistic on utilization of our factories to the optimum scale and achieve cost efficiencies for the business going forward. Segment B, electromechanical projects and services. The segment revenue for the quarter was INR 949 crores, as compared to the previous corresponding quarter revenue of INR 679 crores, a growth of 40%. In the past, while we faced multiple headwinds in the international projects business, in the current quarter, we reported a positive EBIT of INR 67 crores for this segment. Healthy opening order book, quality professional qualifications, focused project review and governance structure, and a better working capital management has translated into healthy business performance of the domestic projects business. The domestic projects business recorded a growth of 50% for the quarter ended June 2024.
Elections in the country subdued the order bookings for the domestic project business, and the order book stands at INR 4,769 crore currently. We are anticipating order booking to pick up during the second half of this financial year. For international projects business, projects in UAE and Saudi continued to deliver good performance and drive the revenue growth for the business. Strong project execution, timely assessment of cost and preferred profitability has ensured a strong bottom line performance for our businesses after facing challenges for a few quarters.
We are further elated to inform that in both the matters of our BG and cash banks, which pertain to financial year 2022-2023, we have received arbitration awards in our favor, and while the collection of the proceeds may take some time, our efforts of demonstrating full fulfillment of our part of the job and defend an unwarranted encashment have worked positively. We remained cautious in order booking during the quarter. The carry-forward order book for international business as of 30th June 2024 stood at INR 2,734 crore, largely in UAE and Saudi Arabia region. The total carry-forward order book of the segment stood at INR 7,503 crore as of 30th June 2024. Segment profitability was higher, considering the projects achieving threshold milestones, resulting in accrual of profitability for the job.
Segment C, engineering products and services. Segment revenue and results for segment C continued to report better performance for the quarter over previous year. Segment revenue for the quarter was INR 161 crores, and EBIT for the quarter was INR 45 crores, respectively. Mining and construction vertical achieved a positive momentum on top line, ensuring continuation of business activities in terms of O&M jobs and sale of our screeners. However, margin reductions and ancillary overhead costs relating to the business did not help us to replicate the top line growth to EBIT. Going forward, robust growth abilities in both Mozambique and India will help us maintain the business momentum for the year. The textile industry experienced headwinds owing to frustrations in cotton and yarn exports.
As a result, CapEx within the industry decreased across the sector, which led to reduced utilization levels of screeners and thereby a corresponding reduction in demand and margins for our agency business. Despite these headwinds, the business performance of our own after-sales and post-screening businesses has been positive. Voltas Beko. Voltas Beko, our home appliances brand, continues to grow with the support of Voltas' strong brand presence and distribution, and Arcelik technical expertise with the formidable team leading Voltas Beko. The home appliances industry in India witnessed a healthy growth, fueled by a surge in demand for both large and small appliances, and Voltas Beko offered an impressive array of products to meet the demands of the consumers. Voltas Beko has delivered a volume growth of over 50% compared to corresponding periods in the previous year.
With regards to the bottom line, with increased volume and gradual reduction in losses, Voltas Beko continues to reduce loss per unit and move towards our goal of achieving EBITDA breakeven in near future. Voltas Beko has solidified its position among the top three brands in semi-automatic washing machines category for YTD June 2024, at 14% market share, and overall YTD June 2024 share in washing machine category to 7.8%. The refrigerator segment also achieved over 50% growth in business, reporting a YTD June 2024 market share of 5.2%. Other segments, such as dishwashers and microwaves, also achieved better business performance. Voltas Beko is committed to meet its two objectives, enhancing its market presence across various product categories by deploying customized approaches for market penetration and to attain profitability.
These initiatives really involve expanding distribution reach, adopting channel-specific tactics to enhance market reach in key regions through retail and distribution channels, and maintaining a strong focus on boosting e-commerce and omni-channel development. On the cost front, localization of production of a larger portion of its product portfolio, product efficiencies, value engineering efforts, and improving product mix have resulted in a positive outlook for the company. Overall outlook. The period of July to September, that is quarter two FY25, is usually a lean period for cooling products. However, the start of festival period may lead to an early spurt in demand. It will be interesting to see the impact of the interplay of multiple factors.
Such as inflation, movement in crude oil prices, rupee behavior, and geopolitical challenges. I'd also like to inform that company has, on June 20, 2024, as part of internal restructuring earlier announced, executed the share purchase agreement with Universal MEP Projects Pte Limited, UMPPL, a step-down wholly owned subsidiary of the company, incorporated in the Republic of Singapore, for transfer of the company's direct investments in overseas subsidiary companies, namely, Weathermaker Limited, Saudi Ensas Company for Engineering Services W.L.L., and Lalbuksh Voltas Engineering Services & Trading L.L.C. to UMPPL. The transactions are targeted to be completed on or before 30th September, 2024, subject to satisfactory completion of the conditions precedent, including necessary approvals and procedures as may be required in the respective local jurisdictions and in accordance with the provisions of the share purchase agreement.
It's pertinent, pertinent to note that post-transfer of these investments, the economic interests of the company in the aforesaid overseas subsidiary companies will continue to remain intact. The government has remained optimistic in meeting its CapEx commitment for FY 2024 in its budget, and while the order pickup was low in quarter one, with a stable government now in place, we anticipate order pickup for our projects business. However, we will continue to follow a cautious, risk-mitigated approach while selecting new orders. For us, currently, the execution of the orders in hand is paramount to ensure timely completion of the project with attendant margins. In general, we will remain cautiously optimistic on pickup in pace of overall economic activity, and Voltas will seize the opportunity to continue with the growth momentum. That's all from my side. We can open the session for a question answer.
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 while asking a question. Please note that the call will have a hard stop at 11:45 A.M., thus, participants are requested to limit themselves to two questions per participant. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ankur from HDFC Life. Please go ahead.
Yeah. Hi, sir. Good morning. Thanks for your time and a great set of numbers. So my first question was on the room AC segment, you know, and more on your market share, and, you know, how competition is behaving. And clearly, you know, you've obviously been doing a great job in taking back market share. And, you know, what I specifically also see at the GfK data is that Koreans seem to be losing out, you know, across AC, fridges, washers, you know, a trend we've been seeing for the past few months. So any comments from your side, you know, what's really happening on competition, maybe what the Koreans are thinking? Are they like, you know, refocusing more on margins over volumes, and therefore it's obviously helping players like us take back market share?
Just some color, also, other players. Is the industry a little more rational in terms of taking price hikes? So yeah, some color there on competitive behavior.
So yeah. Good morning, this is Bakshi here. You know, I would rather like to, you know, refrain from commenting about the competition, but of course, what, I can talk about our numbers, yes. So, you know, this year it has been quite hot and humid summers. And, Voltas, of course, being a, you know, Tata Group of company, the faith, love, affection, and trust which we get from our consumers was enormous this year and all along in our journey. So that's one part. Secondly, we were very strong in our, you know, managing our supply chain. We had planned better probably than the others, therefore, we could gain on that ground.
Of course, we could, you know, expect gain, you know, reach and breadth and of the distribution was also, you know, it helped us gain momentum and continue to gain momentum in our category. And our product portfolio, wide range of product portfolio and strong dealer network, and along with the, you know, our capability of installation, commissioning, and providing the after-sales service to the consumer, has played—all these things have played good role in enabling us to regain some of our, you know, market share. And as of June end, our market share stands at a strong 21.2%, and we have been able to widen the gap with the number two player by almost 800 basis points.
Right. And any sense on... I understand that, you know, obviously, summers were good and that helped overall industry pricing and margins, but even otherwise, you believe we're moving on to a higher level in terms of margin? So would that be a fair assumption?
Higher level of margin, you're saying?
Yes.
So, you know, it is difficult to say because, you know, we'll have to play by the ear because competition is very stiffer in the, as, as each passing day, each passing month. We've got more than 65 brands available in India, and quite a few of them are private labels as well. So to retain this kind of market share is itself a big challenge. But yes, our endeavor is going to continue to retain this kind of market share and to remain the market leader. More than anything else, we would like to retain our leadership, you know, strong.
On the margin front, you know, you know, whatever we have always been giving guidance that we will retain the high single digit, you know, profitability, which we've been ensuring all along, and our endeavor going forward also will be to retain that, you know, high, you know, single digit profitability. That's what we can assure.
And quickly, a second question would be on the project business, where clearly, you know, margins look very healthy this quarter at 7%. So any, any provision facts, which have been taken, or is this more like a, you know, like those mid-single digit margins is what you could, or we would expect for the remaining quarters going forward?
So, you know, we have, you know, in the last few also, our interactions with all of you, we've shared that we've become more prudent because in the previous years, last couple of quarters, we had some challenges. We had to provide some of the, you know, on the some of the projects prudently and, you know, seeing that, you know, there could be something, the payments are getting delayed, et cetera, and also our bank guarantees got encashed. However, this quarter, there was no such untoward incident happened, and therefore, we could do well. And project, you know, generally give us margin of between 4% and 5% only all along.
Mm-hmm.
So that's what we have been trying, that, you know, it should continue, we should continue in that way. By remaining prudent in selecting the project, actually, we are, you know, doing a lot of screening when the business, from the business side, we get, you know, the tenders, et cetera. So we look at it very carefully and select the projects which are prudent and which are worthy of carrying forward.
I get that. Okay, sir. Great. Thank you so much.
Thank you. The next question is from the line of Bhavik Vithlani from SBI Mutual Fund. Please go ahead.
Yep. Good evening, gentlemen. So my question is, on the unitary cooling. If you could just help us, what was the revenue from the commercial HVAC, commercial, ref segment? You gave the breakup, last quarter for the full year number. So this year, what's the growth in those segment? A continuing question here is, you mentioned there has been certain one-off costs in the commercial ref segment. If you could just help us with that. And, on the pure air conditioning segment, you mentioned full year margins were 10% last quarter. What were they now? And, historically, we have seen margins in the band of 12%-14%, and, and one year, 15% as well. Now that you have gained scale, you have own manufacturing, could we expect double-digit margins, going forward?
May not be this year, but over a couple of years. Is that something which is also you believe is achievable?
You know, firstly, when you talked about the revenue coming in from commercial refrigeration and commercial AC, I hope this is what you are asking. Is my understanding correct?
Yes, sir. Please.
Commercial refrigeration, commercial air conditioning, put together the revenue has been about 18% for both these businesses. And, you know, as regards to your second question, it's probably hovering around the margin, double-digit, going forward, et cetera. So, you know, since you know that we are a very diversified business house, and, it, you know, it is not only the product business where we can look at, you know, high, you know, single-digit or double-digit, but of course, we've got—we have to deal with the project businesses also, where the margins are a bit lower, as I said, is somewhere around 4%-5% in that.
So all in all, you know, to retain a single digit, high single digit margin is the endeavor which we have been gunning for, because we also want to retain and scale up our business and retain our leadership position in all the businesses. So that is also of significant, significant importance for us, and therefore, we are trying to address both, retaining the high single digit profitability and retaining the number one position, leadership position, in all the category businesses which we deal in. So therefore, I'm not, you know, very gung ho about only increasing the profitability to double digit and triple digits. That is not the endeavor. Endeavor is to more scale up the businesses in a big way and expand the industry. That is what we look forward to.
As you grow, then your absolute profitability goes up, your absolute revenue goes up. So that's what we aim for. And you, you are, you become a very number one with a wider, you know, gap with the number two, three, four players. That is what we look forward to.
Sure. So sorry, my question was only on the margins for the unitary cooling products, not the company as a whole.
So unitary cooling also, you'll see that, you know, last couple of quarters you would have seen, we tried retain 8.5%-9%, so that is what we will be gunning for. And if there is an opportunity to improve further, we will not leave any stone unturned on that also. But that's what guidance I'll give, only the high single digit as of now.
Great. Just, what was the negative impact of the inventory write-off on because of the change in... You mentioned about that in your opening remarks.
I think usually we do not quantify. We have not said any inventory write-offs in our opening remarks. We did say there was a QCO related impact in the CR industry, where you know the other industry players they had to sell off their QCO related inventory at you know discounted or cheaper prices. And due to which we couldn't increase our prices, but we didn't have any write-offs or anything, just to clarify that.
So, to further clarify and give further input on this, yes, of course, you know, we were contemplating that, you know, quality control order is coming up in the commercial refrigeration segment, and therefore, we wanted to liquidate the inventory or stocks, whatever was without the quality control order, you know, approved, and therefore, we discounted it a bit and liquidated it. That is why, you know, margins would have suffered a bit in that category, in commercial refrigeration, for a while.
Great. Yeah, thank you so much for taking my questions.
Yeah.
Thank you. The next question is from the line of Nikhil Kale from Invesco. Please go ahead.
Yeah, thank you for taking the question. Congratulations on very strong quarter. So also just wanted to understand, even on the CAC side, you said the margins were kind of impacted. Can you just highlight what were the issues there? And, would it be fair to say that, like, if you kind of keep aside the drag of which, commercial refrigeration and CAC, RAC margins would have kind of improved on a QOQ basis?
So, you know, as far as CAC, commercial air conditioning is concerned, you will not see that there's much of a margin difference, about 1 percentage point only. However, you know, there also was an impact of the quality control order, you know, and therefore, we wanted to, you know, sell off whatever was lying with us without the quality control order approved products. So that was the reason. But here we could still retain and keep our margins intact to about 11.5%, as against 12.5% last year. So I think there it was not much of a damage, but reasonably we could retrieve there.
So then, sir, RAC margins would have kind of improved on a QOQ basis, if you kind of remember this-
Which one, sorry?
RAC, RAC.
RAC?
Yeah.
It is, we are talking about commercial ACs and commercial refrigeration. RAC.
Yeah, just.
RAC quality control order has already happened quite some time back. So that impact is, I think, gone away long back. So now, RAC margins have been, you know, slightly reasonable. And if you look at segment margins have already improved. Only thing is, CAC and CR will have to look up now, after the quality control orders have been implemented, and our products are compliant of this quality control order.
Okay. No, so what I was saying was, like, Q4, we did 9.2% in UCP, and then this quarter was 8.6%. So can we attribute the decline entirely to CAC and the commercial refrigeration?
So partly, yes, because of commercial AC and commercial refrigeration, for sure, but besides this, also first quarter, actually, you know that there is a heavy advertisement cost. We have to advertise a lot, IPL, et cetera, it's been happening around that time. Then, because the sales are higher, therefore, also our subvention costs, et cetera, for consumer financing. So everything goes up actually, relatively, and therefore, I think that has all taken a bit of a, you know, impact on that, and therefore, as against 9.2%, we are at 8.6% at the moment in this quarter.
Understood. And my second question was on the, like, the mechanical project segment. So you said that the arbitration has kind of gone in your favor. So any sense on what kind of amount will we kind of have to collect from the minority and kind of encashment that has happened? So just some sense on what kind of write-backs can we kind of expect over the next few quarters.
See, as we have said in our opening remarks, that we have won the arbitration awards, which is a good win to prove that, you know, which we have been saying all the time, that these encashments were done at a.
Unethical.
Unethical way or as a, you can even say, even without any reason. So that's a kind of a vindicating our stand, that we were right all the time. Now, as far as, you know, the process goes, there is an arbitration award, then it goes to the courts, there are appeals, counter appeals. So I wouldn't be able to confirm when and how we will be able to receive the money, but I can only confirm to you that whenever we receive in the coming quarters, it could be two or three quarters down the line or even longer, we will have to follow the court process. The only assurance we have is that the court processes in these countries are much faster, and we would see the results sooner, unlike some of the results we hear or see in the Indian courts.
So within a period of, I would say, 4-8 quarters, we should see this. If we are able to collect the money, that is, that would remain the key. Yeah.
Got it. Got it. Thank you. Thank you so much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please request, please limit yourself to one question per participant. The next question is from the line of Siddhartha Bera from Nomura. Please go ahead.
Yeah. Hi, there. Thanks for the opportunity. Sir, given the strong momentum we now see in first quarter, any outlook for the year, if you can share for the UCP industry or for you, how to look at the growth? And does the numbers in the current quarter, quarter one, also include the production from the Chennai plant, or it is yet to come?
So, you know, let me answer, and then probably my colleague, CFO can also add to that. You know, quarter two is generally a bit challenging one because it's a lean quarter, and there are a lot of things happening because of rains, also inauspicious period, Shraddh and all happening in India, as all of us believe in that. So sentiments remain a bit down, and we are not very gung-ho about quarter two. And even quarter three, if you look at, for AC category, it is not a big quarter per se, because not very many people come forward to buy air conditioners during this quarter. But of course, for our wardrobe range of products, quarter three is going to be, festival season is going to be a pretty stronger, stronger one. So that is what we are looking forward to.
But then also there are quite a few, you know, geographical, you know, geopolitical challenges which are coming across, including, you know, war situation in some of the countries, not so happy situation in some of the Middle Eastern countries. Sentiments are a bit challenging there. U.S. because of election, et cetera, et cetera. So all this is going to play some part in the next one or two quarters. So we'll have to be watchful of all these events as to how it happens, and therefore, we will keep our fingers crossed. But our endeavor would be to continue to keep pushing numbers as much as possible, so that we, we remain the leaders in each of the category which we represent.
I think just to add to what Mr. Bakshi has said, our strategic intent continues to remain strongly to remain with our number one position, and in that endeavor, we do all our activities in a very, you know, cohesive manner. Thereby, to give you a very quick and short answer, you know, we maintain our guidance or indication of overall single digit high, you know, high single digit profitable margins, profit margins, and that kind of remains the...
Yeah. Yeah, and I need to also give you answer to the, you know, Chennai factory. Yeah, Chennai plant is fully ready to start production. Production has begun in the beginning of first week of this month. We were waiting for, you know, the, you know, the commercial certificate or licensing to be approved by the government, which we have got received as of first of August. So production has commenced. Now they are in the quarter to augment and to facilitate us to cater to the rising demands in this category.
Got it, sir. Sir, at the price side, if you will highlight.
Mr. Bera, please rejoin the queue for more questions.
Sure, sure.
Thank you. The next question is from the line of Sonali Salgaonkar from Jefferies. Please go ahead.
Sir, thank you for the opportunity, and congratulations on a good quarter. Some of my questions are, again, you know, some extensions to your earlier questions. Firstly, with the peak summer season behind us, what are the indications that you are seeing of the underlying demand trend? We understand summer was very strong. There were stockouts at certain quarters, and hence the channel filling can take place. But generally, on the underlying consumer trends, what are you seeing right now, and how sustainable do you think the market share gain of Q1 will be?
So you see, India is a very hot and humid country, and if you, if we see because of global warming, et cetera, et cetera, it is going to continue to remain the same. And I am not too sure there will be any reluctance from the good weather that India will become a cooler country. So I think we will continue to get opportunity. Secondly, if you look at penetration level in India, it is also very low. It's been hovering around 4, 5, 6%, not beyond that, if you look at. And therefore, that also shows big opportunity. Thirdly, if you look at our per capita income, our GDP growth, everything has been falling in line for a big growth, and India is poised for a big growth, and India will continue to grow.
You know, next 10-20 years belongs to India, as I would have said earlier also. So I don't think I have got any apprehensions about India growth story. So that is continue going to go to happen, and we will continue to augment our capabilities to be able to cater to those rising demands. We have earmarked large sums of, you know, CAPEX, almost INR 800-1,000 crores, which we have earmarked for our factories. You know, all the factories are, you know, going in full swing. We are ramping up production. We are investing into plant and machinery. So I don't have any doubt about, you know, the growth story of India. So I am looking forward to big growth, and we will continue to keep on harping on those, you know, opportunities.
Sir. Okay, great to hear. Sir, my second question will.
Sorry, Mr., Mrs. Sonali, please rejoin the queue for more questions. Thank you. The next question is from the line of Rahul Gajare from Kotak Securities. Please go ahead.
Yeah, thanks for the opportunity, and, congratulations on very strong performance during the quarter. Sir, my... I have one question. So, you know, while I think the entire industry is talking about profitability in the UCP business being in the high single digit, you know, do you see you have levers to increase that number, you know, given that, you know, government has kind of eased on you know, China visas or JV approvals, et cetera. So I think, what is your thoughts or the update on your JV on the compressor side? If you could, elaborate on that. And, just continuing with the same question, you know, given your Chennai factory's commenced operations, you are also looking at export opportunity, you know, given Q2, Q3 are, you know, off season, for the AC products.
What are your thoughts on exports? How soon can we see that area also picking up? Thank you.
So there are many questions embedded in Rahul's, you know, question, but nevertheless, you know, one by one, let me answer. Firstly, when you say this, there are, you know, margins, everybody's been talking about high single digits. I am not too sure whether all the brands, all the players available in India have shown, you know, high single digits, barring, you know, probably, I will say one or two, except one or two, I did not see any other. Rather, I'll say, if you talk about only AC category, I could see only one brand which is high single digit, besides us. And rest all are, you know, lower level of single digits. So that's one piece of answer. Secondly, you, you talked about the compressor status.
I know.
You know, as you know, that we were stuck up, we tried our level best. We signed up joint venture, but because of FEMA note, FDI approval, for want of that, we could not carry on, with the compressor manufacturing earlier on. However, we have been trying and attempting if we can, you know, rope in some technology partner, we'll be more than happy to set up a factory very soon. And but we are waiting for something to come up. And as and when the good news comes up, we will share with you. So about that also. But yes, of course, our endeavor is that we should definitely look forward to manufacturing of compressor. Not only compressor, but a couple of other, you know, important ingredients which goes into manufacturing of air conditioner. We are looking forward to, you know, building up capabilities in that direction.
So our R&D and manufacturing teams have been continuously working towards all this. So that is question two. Thirdly, you talked about exports business. So exports, you know, we have made some humble beginnings because of our presence in GCC countries, because of our projects businesses out there. We've made some inroads, but it is not worth, you know, mentioning at the moment. But yes, of course, going forward, as we are setting up more and more factories, and we are augmenting our production capacities. Going forward, we will look at something, but I think if you ask me honestly, and all of us know, that, you know, India itself is providing so much of opportunities. There are so much of, you know, potential available in India. We need to encash upon that before we look at and, you know, explore, start exploring on the exports.
So I think, you know, firstly, I would, whatever factories I'm setting up, my endeavor would be to cater to the rising demand of India. And in case we've got excess capacities, then we'll start looking at, you know, developing some of the geographies where it is meaningful business vision. And also, currently, you look at geopolitical situation in many of these geographies, you know, SAARC countries, you look at not so good situation in, in whether it is called, you know, Bangladesh or Sri Lanka. Financially also, there are some challenges with some of these geographies. Then GCC countries also, you know, there are some kind of a war-like situation happening. So I think we'd rather like to wait and watch to get things clearer before we jump into the export trade.
But yes, whenever opportunities come up, we will surely look at that as well.
Thank you. Appreciate your answers, sir.
Thank you. The next question is from the line of Venkatesh Balasubramanian from Axis Capital. Please go ahead.
Yeah, thank you for the opportunity. Questions are related to the UCP segment. I think you, what you have shared is the exit market share end of June. Is it possible to share what is the market share for the full quarter? So that is one part of the question. The second part of the question is, can you actually tell what is the, how is the channel inventory looking at? Because we have read even throughout the first quarter that there have been stock outs. So is the channel inventory at this point in time, like normal levels or it is below normal levels?
So on the market share front, both on the volume as well as value, we have increased our market share and YTD basis also by 0.5%. So currently, our market share on YTD basis for this quarter is 19.5%, and we are about 450 basis points ahead of the nearest rival. So that is, on the market share. Secondly, on the inventory front, with the trade, it's not high because, you know, the channel and all the brands were struggling, and so were we also to cater to the demand. It was hand-to-mouth kind of a situation in the last one or two months, because nobody could have planned a growth of 60%, 70%, 80%, 100%. And, you know, we grew by about almost 100% in the month of May.
Rest balance of the period also, we were growing more than 50%, 60%, 70% in each of the 4 months of last, you know, March, April, May, June. Inventory is not much, neither with the trade nor with the brands. Yes, but therefore, I said it, we are augmenting as we go forward. This quarter is bit lean, so we'll start building up for the coming, you know, second summers, for some of the geographies in India, and as we go forward for the next year as well.
Thank you all the very best.
Thank you. The next question is from the line of Shrinidhi Karlekar from HSBC. Please go ahead.
Yeah, hi. Thank you for the opportunity. Sir, would it be possible to quantify, advertisement and promotion spend that you did in the AC business in this summer season versus same period last year in terms of percentage of sales? And sir, also related question I would have is, has there been a material change in your channel mix in the AC business if I compare this summer season versus last year?
So generally, you know, we have earmarked about roughly around 3% of our yearly budget for the advertisement. And, you know, this will tend to amount to roughly around INR 200-odd crore, approximately, it should come up to, including the ATL and BTL activities, which we want to spend during the year.
Has there been jumps, if I compare summer period to summer period, like year-on-year?
Yeah, it is, it is. This year we have earmarked more. Earlier on, we used to do about 2%, we used to earmark, but this year, roughly it has been around, you know, 3% we are earmarking. Because we want to, as I said, is we want to scale up our numbers.
Actually, I'd just like to quickly correct it, because I think Mr. Bakshi said 3% for the year. It is 3% for the quarter, but for the full year, we maintain between 1.5%-1.75%. Yeah.
Thank you. But we're incrementally looking to spend more.
Please rejoin.
Yeah, I think one month, this month here and next month here, it can happen.
Okay. Sir, my question on channels, sir. Has there been a material-
Sir Karlekar, please rejoin the queue.
Can you repeat your question on channel?
Yes, sir. What I wanted to know is, sir, has there been a material change in your channel mix in the AC business if I compare this summer versus last year?
Generally speaking, there is no change in the channel mix. Of course, our efforts in certain geographies are much bigger than what they were in the previous quarter.
Yes.
And therefore, you know, based on the geography, as we all know, like south is much more on the organized trade and also therefore, those impacts would have happened. But specifically, we continue to maintain and service all the channels. There is no, you know, one way or the other, differentiating between the channels, because all channels are points for growth, and we are looking at that in with that eye.
Thank you. Yeah, thank you for answering my question, and all the very best.
Thank you. The next question is from the line of Pulkit from Goldman Sachs. Please go ahead.
Sir, thank you for taking my question. Sir, and congratulations on your market share gain. My question is related to this. Sir, what we understand is there's been pretty significant discounting that Voltas has done use conversion scheme in order to gain the market share back, obviously, your distribution and et cetera, helps. My view is, do you think the brand is now sort of moved from premium economy to more like a economy category in terms of where our placement is relative to competition, and that's really something that has helped us get this significant market share in terms of how we are positioned? Would like to know your views, and if there's a third-party research you've done in order to understand what the brand perception is right now.
This perception that we have done heavy discounting to achieve the market share, I would say it's a wrong perception. We have, you know, as a corporate, we are always focused on sustainable, you know, strategies and tactics, both. We never take knee-jerk reactions on any of these kind of things. So we have been continuously doing subvention, because the trend is maybe it's the consumer trend, where the people are using more and more consumer financing on their own. So therefore, the percentage of using the consumer finance by the consumers has seen an increase, but that's a general trend increase. You can call it to the consumer behavior or maybe the new families, they prefer to take the finance. So therefore, our costs also increase because of that.
But it's not that we are going aggressive in any way to go out discounting or to spend more money on subventions and all. No, that's not the right way to look at it. On the other side, I think... What was your last question? Could you repeat?
It was the first question only. I said, have you done any study on brand perception of late?
No, of late we haven't carried out, but generally we do it, you know, once in two, three years only. We haven't carried out any study. But however, if that perception, wherever you have gathered from it, our margins have not, you know, been so down, and we have been able to retain whatever we had to, to people. And if you look at, you know, the last study that we had carried out, you know, some time back, from Brand Finance, also, if you look at Voltas was ranked as one among the top 10 overall strongest Indian brands, as per the prestigious Brand Finance report of 2024.
Although we have not carried out it, it was an independent syndicated research which has, which has bounced off this result to us, so. And we are also being addressed by the same report as fourth most valuable engineering brand, so, and only one in the industry. So I don't think any one of these reports are so challenging that we should start doubting about our perception. I think we seem to have been doing pretty well on our brand image, brand equity scores also. Whenever we carry out, you know, before the season and after the season also, that we'll be able to share with you in the next, you know, probably time we are meeting up with you. And there, generally, our brand equity scores are also pretty high only.
This is the demand, actually, market demands about consumer, you know, financing, et cetera, and therefore subvention costs. And also since we are the most voluminous player, you know, we shared with you in our call also that in first 88 days, we could, you know, capture 1 million ACs, which we used to do in the previous years in first 6-7 months of the year. So that kind of, you know, growth is coming in, and therefore we are facilitating consumers to, to be able to, you know, remain in the comfort and, and, comfort and convenience we want to provide through our products and services.
I think, you know, if we are able to gain on share, you know, reasonably well on the finance margin, et cetera, I don't think there should be any cause of worry.
Sure, sir. So can I take the liberty of my second question? Sorry. Hi, I think we have a time to cut off. We, we would like, and we would.
Yeah, you can write, you can write back to us.
Question is okay.
You can write back to us in case any questions are left. We'll try best endeavor to answer you.
Sure, sir. I'd like to come and meet you instead.
Yeah, sure.
Okay. I think you can come back through WebEx and set up the meeting. Sure, sir.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Ms. Natasha Jain for closing comments.
Thank you. Unfortunately, that would have been the last question due to tight commitments by the management. I now request the management to post closing comments, if any.
I think, our last comment remains the same. We are in a very interesting time period of growth, and we are poised with our, you know, increasing capacities and everything to be able to be part of this growth. And that's all from my side. Yeah.
Thank you, everyone. On behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your line.
Thank you. Thank you.
Thank you, everyone.