Ladies and gentlemen, good day and welcome to Q1 FY 2027 earnings conference call of Voltas Limited, hosted by PhillipCapital India Private Limited. As a reminder, all participant lines will be in a 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 would now hand the conference over to Ms. Natasha Jain from PhillipCapital India Private Limited. Thank you, and over to you, ma'am.
Thank you, Musk an. Good evening, everyone. I, Natasha Jain, on behalf of PhillipCapital, welcome all of you to the first quarter FY 2027 earnings conference call of Voltas Limited. From the management, we have Mr. Mukundan Menon, Managing Director; Mr. K.V. Sridhar, Chief Financial Officer; Mr. Nikhil R. Chandarana, Head Corporate Finance; Ms. Sumana Tripathy, Head FP&A; and Mr. Manish Somani, Head Finance Controlling. I request the management to give their opening remarks, post which we shall open the floor for Q&A. Thank you, and over to you, sir.
Yeah. Good evening, all. This is Sridhar here, CFO, Voltas. Glad to connect this evening with our earnings call. To give us overall summary, Voltas delivered a strong performance in Q1 FY 2027, significantly outperforming competition and further strengthening its leadership in the cooling segment. The company achieved a 17.3% secondary market share in room air conditioning for FY 2027 for the first quarter, and widened its lead over the nearest competitor to 4 percentage points, reinforcing its position as the undisputed market leader. Strong execution across marketing, product management, channel expansion, manufacturing capacity and supply chain readiness supported the performance. During the April to June quarter, the global economy continued to face geopolitical tensions, elevated energy prices, and persistent inflationary pressures. Conflict in the Middle East added to commodity and currency volatility and supply chain uncertainty.
Against this backdrop, India continued to demonstrate resilience, supported by domestic consumption, infrastructure investments, and strong underlying macroeconomic fundamentals. The Indian consumer durables industry witnessed steady demand during the quarter. Continued demand for cooling products, room air conditioners remained a key growth lever, supported by the summer season, aided by increased penetration and expanded demand across Tier 2 and Tier 3 markets. Against this operating environment, Voltas delivered a substantially strong performance compared to the previous year, supported by growth across its key businesses and disciplined operational execution. The company achieved a significant milestone by selling 1 million RACs in just 81 days, demonstrating the strength of its brand, product portfolio, distribution reach and execution capabilities. Voltas also emerged an important growth lever, substantially outperforming the industry and recording its highest-ever quarterly sales in both value and volume.
The projects and engineering business provided further resilience and balance, underscoring the strength of Voltas' diversified portfolio. For the quarter ended 30th June 2026, Voltas recorded consolidated income of INR 4,765 crores compared to INR 4,021 crores in Q1 FY 2026. Profit before tax was INR 285 crores versus INR 203 crores for the same period last year. Net profit was INR 213 crores compared to INR 141 crores last year. Now, if you go into the detail of the respective segments, in terms of Segment A, Segment A delivered a strong growth of 33%, led by exceptional performance in the room air conditioning business. RAC volumes grew by 45% year-on-year, significantly outperforming the industry and key competitors. As mentioned earlier, the secondary market share was 17.3% for Q1 of 2026 and progressively strengthened its competitive position through the quarter.
For Q1 2026, the company widened its market share lead over nearest competitor to four percentage points, reinforcing the strength of its brand equity, product positioning, distribution network and execution capabilities. A sharper brand and marketing strategy was an important contributor to this performance. The refreshed brand positioning, supported by sustained investments across television, digital, retail, and consumer touchpoints, strengthened consumer engagements and brand salience. The true 1.5 Ton cooling capacity campaign and industry first initiative highlighted the superior 5,000 W cooling capacity of the Voltas 1.5 Ton air conditioners, enabling consumers to make more informed and value-driven purchase decisions while enforcing the brand's credentials around powerful cooling and performance. Product management and innovation remain central to the growth strategy. The refreshed RAC portfolio, led by AI-powered Vertis Split AC series, introduced in March 2026, offered differentiated features across AI adaptive cooling, AI geo-fencing, and AI energy manager.
A sharper portfolio across capacities, energy ratings and price points enabled Voltas to address evolving consumer requirements, increasing premiumization, and growing demand for intelligent and energy-efficient cooling solutions. The company continued to expand and deepen its channel presence across Tier 2 and Tier 3 markets, where RAC penetration remains relatively low. Wider distribution, stronger dealer engagement, and increased presence across traditional trade, modern retail, and emerging channels improved product availability and enabled Voltas to capture incremental demand across markets. Another key enabler was the company's manufacturing and supply chain preparedness. Capacity was progressively ramped up ahead of the summer season, with the Chennai and Pantnagar facilities operating at high utilization levels. Strong raw material planning, supply readiness, deeper localization, and disciplined inventory management ensured product availability during the peak season and enabled the company to effectively service the significant increase in demand.
Commercial air conditioning delivered a stable performance and continues to represent a significant long-term growth opportunity supported by urbanization, infrastructure development, data center expansion, and increased adoption of intelligent building solutions. Commercial refrigerations and air coolers recorded a relatively muted performance, primarily due to slower market uptake following price increases. The company continues to focus on institutional sales, channel development, customer diversification, and new product introductions to drive improved performance in the coming quarters. Segment A margins improved significantly compared to the previous year, despite commodity inflation and currency depreciation. These pressures were partially mitigated through progressive price increases and comprehensive cost optimization program initiated in FY 2026, encompassing strategic sourcing, deeper localization, product design improvements, and manufacturing product initiatives.
Overall, the combination of sustained brand investments, differentiated products, sharper product management, expanding channel reach, enhanced manufacturing capacity, and resilient supply chain execution enabled Voltas not only to maintain its leadership, but to materially widen its lead over competition. Voltas has entered into a binding term sheet with Atomberg Innovation Private Limited for a proposed 50/50 joint venture to develop and manufacture high-efficiency RAC compressors in India. The proposed venture will strengthen indigenous sourcing, reduce import dependency, and enhance long-term supply security. The transaction remains subject to satisfactory due diligence, product validation, definitive agreements, and necessary approvals. Voltas continues its strong growth trajectory in Q1 FY 2027, substantially outgrowing the industry and recording its highest ever quarterly sales in value and volume. The business achieved a year-to-date market share of 9.4% in washing machines and 7.4% in refrigerators, further strengthening its position in highly competitive Indian home appliances market.
The company maintained its number two position in the semi-automatic machine category, touching highest ever market share of 15.6%. The performance was supported by sharper product and premiumization strategy, with refreshed product lineups across frost-free refrigerators and fully automatic washing machines. These introductions strengthened Voltas's presence in higher value segments, improved overall product mix, and enhanced its relevance among consumers seeking differentiated features, contemporary design, and superior performance. Voltas continued to strengthen its brand and channel strategy through an expanding retail footprint, deeper channel penetration, enhanced in-store visibility, and stronger consumer engagement across key markets. At the same time, increased focus on localization, strategic sourcing, material optimization, product design, and manufacturing efficiencies is expected to progressively strengthen cost competitiveness and profitability.
With increasing scale, improved market share, and a stronger premium portfolio, Voltas remains a key pillar of Voltas's long-term strategy, supporting portfolio diversification, premiumization, and the company's evolution into a comprehensive home appliances player offering integrated cooling and home appliances solutions. Segment B, electromechanical projects and services. Segment B continued to play an important stabilizing role in Voltas's diversified portfolio, reinforcing the company's position as a leading engineering and project solution enterprise. During Q1 FY 2027, the domestic products business maintained strong order momentum, securing strategic wins across key growth sectors, including industrial infrastructure, electronics manufacturing, metro and turnkey projects, and data centers. The company continued to selectively pursue fast-track and value-accretive opportunities, strengthening the quality of the order book and supporting healthy revenue visibility. The business maintained strong execution discipline across projects and geographies, with continued focus on timely delivery, project profitability, working capital management, and risk controls.
Within the international projects business pursuant to the court award received, Citibank guarantees amounting to 167 million QAR equivalent to INR 433 crores were canceled during the quarter. The quarterly financials has more details. While Voltas effectively mitigated risk arising from geopolitical crisis and ensured continuity across key projects and customer engagements, new order book remained delayed following the impact of the conflict in the Middle East. Against this backdrop, the business continued to focus on operational stability and tighter project controls, disciplined risk management, and selective pursuit of opportunities. As of 30th June 2026, the total carryover order book value for Segment B stood at INR 6,345 crores, providing revenue visibility and underpinning the company's confidence in the long-term prospects of both its domestic and international projects businesses. Engineering products and services.
Segment C delivered high double-digit top-line growth during Q1 FY 2027, further strengthening the scale and contribution of Voltas in engineering products and services portfolio. The mining and construction equipment division delivered impressive top-line growth supported by sustained demand for crushing and screening equipment, continued execution of operations and maintenance contracts, and stable performance from the Mozambique operations. The division also continued to strengthen its higher margin aftermarket and service annuity business through deeper customer engagement, enhanced lifecycle support, and expanded service capabilities. The textile machinery division delivered double-digit growth despite a challenging operating environment characterized by geopolitical uncertainty and cautious industry sentiment. Encouraging the market has begun to demonstrate early signs of a gradual revival, reflected in improved order booking levels. Continued focus on after-sales, spinning accessories, and services delivered encouraging results and further strengthened the resilience of the business.
Together, Segment B and C continued to enhance the resilience and diversification of the Voltas portfolio, providing balance to the consumer businesses while contributing to sustained growth and revenue visibility. Supported by strong summer season and disciplined execution, the company exited the quarter with a strong liquidity position and well-controlled working capital profile. Continued focus on inventory, collections, and cash flow discipline strengthened the balance sheet and provided the flexibility to support investments in brands, products, channels, and manufacturing capabilities while maintaining financial strength. Voltas enters the coming quarters from a position of strength, supported by structural initiatives undertaken across businesses. Refreshed product portfolios, sharper product management, sustained brand and marketing investments, channel expansion, enhanced manufacturing readiness, localization and cost optimizations have strengthened the company's competitive position.
While Q2 is traditionally a leaner period for the cooling industry and geopolitical uncertainties continue to create commodity currency and supply volatility, Voltas remains well-positioned to navigate these challenges. In room air conditioners, the focus will remain on consolidating and extending leadership through product innovation, premiumization, sustained brand investments, and deeper channel penetration. Commercial air conditioning delivered a stable performance and continues to represent a significant long-term opportunity supported by urbanization, infrastructure development, data center expansion, and increased adoption of intelligent building solutions. Voltas Beko continues to be one of the fastest-growing home appliances businesses in the country with product segmentation, premiumization, innovation, and channel expansion expected to drive market gains and progressively improve financials. With the projects business, the company remains focused on selective and value-accretive orders booking, execution excellence and cash flow discipline, and project profitability.
The engineering products and services business will continue to build on their growth momentum with increasing emphasis on higher margin aftermarket and service revenues. Across its businesses, profitable growth, market expansion, and sustained improvement in profitability remain central to Voltas' strategy. The company continues to unlock efficiencies through strategic sourcing, localization, product and design optimization, manufacturing excellence, process improvements, and increasing benefits of scale. Thank you. Natasha, over to you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handhelds for 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 Indrajit Agrawal from CLSA. Please go ahead.
Hi. Thank you for the chance, and congratulations on a good set of numbers. I have two questions. First, if you can share some contours of the compressor JV, what kind of CapEx can there be and when can we see commercial production? How will the capacity be shared between the two entities?
Good evening, everyone. My name is Mukundan Menon. Thank you for the question, Indrajit. This JV that we have signed with Atomberg, it is for a manufacturing capacity of around 2.8 million compressors for air conditioners to begin with. That is what we are trying to achieve. This is an effort to secure the supply chain for a category which is a very important category in the overall compressor. The heart of the air conditioner is the compressor, and we always felt that it is very important to secure this very important part within India because with all the challenges that are happening with respect to the QCO restrictions, the quantum of imports which are allowed, the quota system, there is also something called the transition QCO rules.
We felt it would be good for us to have, as a leader in the air conditioner market with a very high volume, we did not want to leave this very important component unhinged. That was the reason we went for this sort of arrangement. In terms of the overall CapEx, it is still in the early stages. As we work out the details of the definitive agreement, we will arrive at that. It is a little early to comment on the total CapEx requirement, actually.
Sure. Secondly, while our market share in Voltas Beko has been gradually inching up,
Yeah.
Do we have an EBITDA breakeven line of sight yet, or is it still too early?
Indrajit, this particular year was when we initially were aspiring to get to an EBITDA breakeven. Unfortunately, what has happened with respect to the West Asia crisis took up prices of the commodities quite sharply, and most of the brands, including us, struggled to pass the entire thing on to the market. In a way, I think if we were to assume that we were to reach this year, I think the way it may get sort of pushed over by a few quarters. That is the way we see it, yeah.
Sure. I have more questions, but I will join back.
Yeah. Thanks, Indrajit.
Thank you. The next question is from the line of Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Yeah. Good evening, team. Thank you for the opportunity. Sir, my first question is, with respect to the volume growth. If you could call out what has been the volume growth for the industry. We have grown by, you mentioned, 45%, but what has been for the industry? Secondly, how do you see it in terms of the current channel inventory and the way forward for the full year? If you could comment a little bit on same.
On the room air conditioner, Achal, the industry seems to, on the secondary market shares, the secondary sales, what is published by GfK Nielsen, they showed a 15% growth in secondary. That's what they have said. My sense is this primary increase would be anywhere between 20%-22% in volume terms, and maybe around 25%, 26% in value terms, maybe the industry growth. As against that, we have done better, which is reflected in our market share growth, which we have seen our market share significantly growing from 15.9% for the full financial year last year to 17. 3%. Our volume growth was around 44%, was our volume growth, and our value growth on equivalent basis around 50-odd percentage.
Understood. If you could give us some sense in terms of what is the extent of cost inflation and how much price hike we have taken so far and how much we are expecting now.
The cost this year has seen two things happening. One was there was a table change which happened, and that took up the prices of all the 3 Star ACs by roughly 5% and the 5 Star by 15%, a weighted average of somewhere around 7%, 8%. Then there was the commodity price increase, the depreciation of the rupee, plus the increase in the ocean and freight charges, some increase in plastic costs. All that added up to another sort of 4%, 5%. So overall, all put together, 10% to 12% was the cost, and we have also passed on very close to that number into the market. Maybe a percentage or two less, if at all, actually, because we had a reasonable stock of these units a little before all these disturbances started.
We were blessed with the fact that we did not have any disruption in our production during the peak summer months, which is March, April, May. Despite all the disturbances which were there, we managed to keep our production running. We have utilized some of the stocks of the products that we had imported at a little better price before all this hit us. So more or less, we have passed on maybe a couple of percentages, if at all, we would have held on to it.
Does that mean we do not necessarily have to take any further price increase? Have I understood right, sir?
Yeah. The price increase, generally, we would not. We normally what we do, Achal, is that if at all there is some moderation, if the costs keep moving up further, we will have to obviously take a price increase. We are watching what is happening on the overall West Asia crisis. If things worsen, obviously, if the costs get impacted, we will necessarily have to take a price increase. However, if it is nothing significant, what will happen is to shore up the margins, a little bit of reduction in the channel schemes. That is what we will do.
Understood.
Yeah.
Just clarification in terms of the mix for the season, if I were to ask from January to June, what would that be in terms of outsourcing versus insourcing, sir, for us?
Yeah. Out of the total air conditioners that we sell, roughly 7%-8% of the sale, or I would say in the peak season, quarter one, maybe a little more than around 10% of the sale happens to be window air conditioners. Window air conditioners are completely OEM. Out of the split ACs, which is the balanced 90%, we have a 70/30 mix, actually 75/25 mix kind of thing between self-manufactured and OEM-manufactured.
Got it. Just a second question with respect to the compressor joint venture.
Yeah.
What I wanted to check, is that the energy efficient compressor we are talking about? If you could give some sense in terms of, A, how soon can this go on stream and what kind of advantage it can bring to us?
The compressor that is getting developed, the platform that is getting developed is for the 3 Star as well as the 5 Star, which are the popular categories. We begin with the most voluminous product, the one which is a volume driver, 1.5 Ton 3 Star and 5 Star. All of them have energy efficiency levels, sort of meeting the requirements of the energy table. Really energy efficient machines, which will meet the 3 Star requirement as well as the 5 Star current tier requirements. Current table requirement, which goes on till next year December, 27th December. 28th, there is another table change. All these products are capable of getting upgraded to a better energy efficiency. The energy efficiency of a compressor is driven by the motor, and the motor gets upgraded when there is an energy table change.
To answer your question, Achal, these are the best in class in terms of energy efficiency today, and it will also can be upgraded to the best in class when the table changes.
Right. In terms of costing, that is my last question. Sorry, sir. Thank you.
Yeah.
Would that help in terms of cost savings compared to the regular compressor as of now?
Yeah. The way we have looked at it is currently, as we had mentioned at the beginning itself, even in Mr. Sridhar's message, it was essentially to have a supply chain security. Being the largest manufacturer of air conditioners with a leadership position, we have to secure the supply chain, and it was done with that intent. Most of the other things like cost, all this will be a work in progress, because as the product gets sort of commercialized over the next 1.5, 2 years, all these numbers will play out actually. A little early to comment on that, Achal. Yeah.
Got it, sir. Thank you and wish you all the very best. Thank you.
Thank you, Achal. Thank you.
Thank you. The next question is from the line of Aditya Bhartia from Investec. Please go ahead.
Hi. Good evening, sir. My first question again is on Atomberg JV. How long is it likely to take for the plant to become operational? How would technology be sourced? Until then, how are we going to meet the QCO norms? What are the arrangements that we have done until then?
Yeah. Aditya, the way we have planned this out from assuming the work starts on this immediately, it's an 18-month kind of runway that we're looking at before the commercial production starts. So during that period, the plant has to be put, the products have to be manufactured, the pilot batch has to be taken out. The field testing of the pilot batch has to go on, and then we start the full-fledged commercial production. So 18 months from now is when we are expecting full-fledged commercial production of the compressor. And the second question, what was it, Aditya, the second question?
Sir, until then, how are we going to manage the QCO norms? What are the arrangements that we have done for that?
Currently, the QCO norm says that up to 30% of your FY 2025 numbers you can import, so that we can continue to import. That is point number one. Point number two, there are two big compressor manufacturers, which is Haili and GMCC, have built up capacities in India, and we have blocked those capacities from India, so that we take it from there. Our idea is that even after these products come into the thing, our scale will be so much by the time this gets commissioned that we will still have a mix of these compressors from these two vendors made in India, along with our own secure supply chain of compressors. It will be a blend of that. It is not this or that.
We will continue to buy from them, and we will also continue to manufacture and secure our supply chain. It is a double two-sided thing. We wanted to ensure that we secure our supply chain, both with suppliers as well as have our own indigenous technology.
Understood, sir. Sir, my second question is, you mentioned that besides the BEE norm change, there was roughly a 4% odd kind of a price escalation or cost escalation that we saw. Given how sharply some of the commodities moved and rupee depreciated, is this 4% the hit that we saw with the benefit of lower cost inventory? Or are you saying that with these increased costs, the overall increase in terms of costing is only around 4%? Just want to clarify.
So actually, if you have seen the results that we have published, we seem to have sort of done a little better than some of the key competitors. I think we did a lot of right things. One is we had planned for the season well. As I had mentioned, there was no disruption in the factory, so the volumes came and the absorption of the cost of the factory also was well done. We also had a very active cost takeout project, which is going on, and I think it has helped us at the right time when the things started going wrong. That cost takeout project has started sort of fructifying into some savings.
I think a mixture of the sheer scale, the lack of discontinuity in the manufacturing, the proper absorption of our cost because of the larger volume and lack of disruption, coupled with this cost takeout project, I think a mixture of these four things, I think played out in our favor, I suppose, Aditya.
Sure, sir. That is helpful. Thank you.
Thank you, Aditya.
Thank you. The next question is from the line of Siddharth a Bera from Nomura. Please go ahead.
Yeah. Thanks for the opportunity, sir. First question is on the UCP segment. I'd like to allude it to the fact that while the AC revenues have grown at 50%+ , our overall revenues are up 30%. Can you please share, like in the commercial refrigeration and the CAC segment, what has been the decline, and how do you see the outlook for the commercial refrigeration segment going ahead, given that it has remained under stress for quite some time? Some thoughts, sir.
Yeah. What you said is right. The kind of buoyancy that we saw in the room air conditioner segment within UCP was probably not seen in the other two categories, which is commercial refrigeration, which is deep freezer, water coolers, water dispensers, nor was it seen in the commercial air conditioning category, which is ducted VRF and chillers, and the light commercial air conditioner. It was indeed a muted. It was, I think, a reasonable growth in the commercial air conditioner segment, which is the ducted VRF and chiller, but a muted kind of performance in the commercial refrigeration. What you said is absolutely right. You would have heard from the other major competitors in the commercial refrigeration space, the industry seems to have de-grown by around 15% or so, and I think we did a little better than that, I suppose, compared to that.
But going forward, I think things will indeed settle down. This was a category where the price increase was significant. Unlike in the room air conditioner category, here the costs went up a little more significantly, like for freezers by 10%, of water coolers by around 15%, and water dispensers again by 10%. Very steep price increases, cost increases, forced all the major brands to increase selling prices to that effect, and probably the channel was not fully ready to absorb that cost, so they played the wait-and-watch thing. But over the last few months, we are seeing them taking to that because there seems to be a normalization and a complete acceptance of the fact that this is a cost pass-through and there's no other way to manage. So we are seeing some improvement in the traction this quarter.
Okay, sir. Got it. Thanks a lot, sir. I will come back on the call.
Okay. Thank you.
Thank you. The next question is from the line of Sameer Gupta from IIFL Capital. Please go ahead.
Hi, good evening, everyone, and thanks for taking my question. Sir, I am a little new to the company, so pardon me if some of the questions sound very naive. Just trying to get some color on the margin performance first. EBIT margin in Unitary Cooling Products is around 5.3%. Now, this is on a back of a good summer season, and you alluded to market share gains in the RAC segment. I understand commodity cost inflation would have had a negative impact, but if I look at overall company gross margin, it is flat-ish. I would have also expected a 32% revenue growth to have some kind of operating leverage benefit. Just trying to understand, this is the best quarter of the season and we are doing a 5% kind of an EBIT margin. What can we then assume as a steady-state profit expectation for this segment?
Yeah. Mr. Gupta, what you said is absolutely right. If you look at some of the other, this has been a rather difficult quarter for the industry as a whole. The summer, a reasonably good summer compared to the very weak summer last year, increased the demand, as I mentioned, by around 20-odd percentage, 25% or whatever. However, the commodity price increase and the dollar depreciation, which hurt, it hurt everybody. If you look at the results of most of the competitive brands, some five or six of them who are top players in this category of room air conditioner, saw a significant shrinkage in their EBIT by almost 3% down, some of them 4% down. In comparison to that, we seem to have done better. In fact, our Q1 to Q1, there is an increase in our EBIT percentage last year to this year.
We have, I think, weathered the storm much better than the rest of the people. The reason for that is the points that I mentioned a little while earlier, which is to do with the way we manage the factory without a disruption, cost absorption, the sheer scale effect, and the fact that we have an active cost down project. Whether these numbers don't reflect that very high buoyancy in the sales volume completely, I agree. It is primarily because of the dampening effect of the cost increases which came, which could not get passed down typically into the market, Gupta.
Got it, sir. But the problem was in the below the RM cost, like more channel financing or more discounts and schemes? Because the GM line still seems to be reasonably okay if I look at the full quarter for full company performance.
Actually, yeah. It's essentially at the, yeah, probably the material cost actually is the one which affected it big time. Yeah.
Okay. Got it, sir. Second question is on the Atomberg JV.
Yeah.
So firstly, why is there a I'm sorry if this sounds naive, but why is there...
No
import dependence in compressors in this industry? Is it that...
Yeah
certain RMs are not available in India, or is it just cheaper procuring it from outside? And secondly, why a JV and not do it organically?
Yeah. The import content in an air conditioner currently, around four or five years ago, almost 75% of the BOM of an air conditioner used to be imported. The major components are compressors, there is the copper, there is aluminum, there is controller, and there are motors. Most of it used to be imported. Currently, from that 70% import content, here I am talking about the industry, not only of Voltas. That 70% has now come down to around 35%, because there is copper getting manufactured here, controllers getting manufactured here, motors getting manufactured here. Almost 40% of the compressor requirements of the industry are getting manufactured here. That has brought down the import dependence to around 35-odd percentage. That is point number one.
The compressor is a thing that we felt is very important because while there are many companies who have entered into manufacturing PCBAs, controllers, who have entered into manufacturing the special type of tubes which are used for air conditioner, we call it inner grooved tubes. For aluminum, there are many manufacturers who have entered into India. We felt that the compressor is an area where there is a gap between what is being made in India versus what is required by the industry. Being the most important component in the bill of materials, we felt it is important that we have this manufacturing sort of capability built within the organization or through a joint venture. The second question you mentioned, about why can't we do this on our own? In a compressor, the most important item within the compressor is the motor.
Our tie-up with Atomberg is a leader in motor, and they compete with the global giants in this category because of the sheer volumes that they have made in the ceiling fan category. They seem to have cracked the code as far as the most important item on the bill of material is concerned, which is the motor. This is a capability that a company like Voltas does not have, and because we have never gone into a component manufacturing so far, this is the first time that we want to secure this, and we are doing it. The answer is that we did not have this capability, and we felt it is better to partner with somebody who is way ahead of the curve and do it along with them.
Superb, sir. That's very helpful. Just a small follow-up here. Why-
Mr. Sameer, I just request you to rejoin the queue, please, for the follow-up question.
Sure, I'll do that. Thank you so much.
Thank you.
Thank you. Thanks, Sameer.
Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit a question to one question per participant. If you have follow-up questions, we request you to rejoin the queue. The next question is from the line of Rahul Agarwal from Ikigai Asset Manager. Please go ahead.
Yeah. Hi. Good evening, Mr. Menon and everybody on the call.
Good evening.
Sir, just one question I had. Obviously, the UCP margin last year is not something to look at in terms of sustainable number, right?
Yeah.
I mean, Voltas had a very bad year last year, right?
Correct.
First quarter, this quarter is better than last quarter, QoQ 30 basis points increase, which is good. I wanted to understand from you, if plants are at peak season, they are fully utilized. You have gained so much market share of volume growth is like 45% on RAC, 44%. If that's played out, that peak capacity utilization, pricing being not so much in favor, but you have passed through. Does that mean that going back to 6%-7% is going to be extremely difficult for the company going forward? You can talk about either this year or next two year, as you feel comfortable. Second question was also on the project side. I understand that there were execution issues. We've seen some top line softness. I don't know why, execution softness. On margins over here, I thought we are getting into more shorter gestation projects.
Our margin should get better here because the quality of order book is getting better. Just your comments on next 24 months, where should we see EBIT margins for UCP and for the project segment? Thank you.
Yeah. Also, for the UCP, if you see last year's quarter was a very weak quarter, so 3.7% versus 5.3%. There's a significant gain, it's quite an improvement, and the numbers would have been a little better if the cost increases had not hit us the way this entire crisis played out and things became very volatile. The entire advantage of the huge scale-up would have played out a little better. So whether there's a room for improvement going forward over a long period of time over the next eight quarters or so? The answer is certainly yes, actually, because eventually, we've had margins of upward of 7% in these quarters earlier. So our aspiration is indeed to improve this year on year improvement, that continues. So we're working towards that. The second question was more on the project's margin, actually.
So what has happened is, this was a very volatile period, and we could see that things were looking a little hazy in the thing. So we were very calibrated and careful in picking up orders because having an order book at a fixed price without an escalation clause would have hurt us more. So this calibrated order booking and calibrated execution actually is a saving in disguise. Because once you lock in a price with a client, you cannot change it irrespective of any of these. So in a way, we see it as a blessing in disguise. As things settle down, we are continuing to focus, as you rightly said, Rahul, on being very selective of what projects we are getting. We are looking at more of manufacturing data center kind of jobs, MEP jobs.
Our focus is shifting to faster gestation jobs, more in the private sector, less to do with government, where payment delays will bother us. So we are altering a little bit of a course of our entire journey, and this will start playing out well over the next few quarters.
Mr. Menon, just one follow-up. This 7% expiration-
Rahul, I am sorry to interrupt.
Yeah. Just a follow-up. I mean, it's not a new question, Mr. Menon. Just one follow-up. On this 7%, could you take us to the bridge in terms of two, three points which could help us achieve this? Thank you.
Yeah.
Okay. Just to add to that question, for example, I think one of the things which I think has paid off for us, I think as Mr. Menon alluded to, was in terms of the cost on projects, for example, is something that we are actively working on, which should actually help us. Some of the investments in CapEx that we had done, say about 18 months back, which sort of was a bit of a deterrent last year, is playing out favorably for us. So these are some of the things which would help us to sort of get better. Again, the focus, as I think we have said consistently in the past, has been we want to grow top line very aggressively. We want to make sure that we continue to gain market share. So I think that's something we want to continue doing.
The profile per se, I think will sort of take care of itself. We compare it with the same period last year and look at improvements. I hope that answers the question.
Yes, sir. Thank you so much. Thank you for answering all my questions, and all the best for the rest of the year.
Thank you, Rahul.
Thank you.
Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Managers Limited. Please go ahead.
Yeah. Hi, thanks for taking my question. Sir, my question is regarding the outsourcing opportunity versus insourcing. While the outsourced players claim that the outsourcing pie is increasing, just wanted your understanding, how is it going? Is it the insourcing which is increasing or the outsourcing is increasing? If you can comment on the overall industry, what is the mix and how do you expect this mix to keep going forward? Yeah.
In our case, outsourcing has not increased because we have built a large capacity in Chennai. We have a capacity of around 1.4 million in Pantnagar, almost the same, 1.2 kind of thing in Chennai. For us, I think those plants having come fully upstream, we don't see our outsourcing increasing. It's at a steady level.
Fairly steady level. I think the proportion, I think Mr. Mukundan Menon did answer earlier. I think broadly it will broadly be the same level. Yeah.
Got it, sir. That's it from my end. Thank you so much.
Thank you.
Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. Sir, in the last question, have I understood correct, going forward also your outsourcing and insourcing mix will remain similar? Secondly, what is your RAC mix in UCP segment in this quarter and normally how would this be for a year?
Keshav, the outsourcing will continue in the same ratio. As I said, window air conditioners will continue to be 100% outsourced. In the split AC bucket, we will have that 75/25 kind of mix. That will continue.
Yeah. The proportion has not changed very much. Obviously it is quarter wise, obviously the proportion within the segment and the RAC keeps obviously changing within the quarters. But in overall level, broadly it will remain the same we see at the annual level, I think. Yeah.
How much was it in this quarter, RAC mix in this quarter?
Keshav, I just request you to rejoin the queue for the follow-up question, please. The next question is from the line of Sonali Salgaonkar from Jefferies. Please go ahead.
Sir, thank you for the opportunity. Sir, I have two questions. Firstly, on the current demand dynamics in terms of AC channel inventory, the demand in July, August so far, maybe in volumes and the festive season, any initial thoughts that we have, how are the channels behaving, are they restocking, et cetera? My second question is on FY 2027, 2028 CapEx estimates for you, as a company, especially because of the JV of Atomberg, will the CapEx be also split in 50/50 and from where will Atomberg get the technology for manufacturing compressors?
Okay. Sridhar here. In terms of the initial feedback that we are hearing from the channel, I think the channel is broadly been fairly cautious in terms of the stock that they are maintaining. I think we feel that the channel inventory would be in the range of around four weeks as what we have maintained in the past. I think that's been the thing. Based on the secondary is where the buildup will happen. For the festive season, I think it's a bit early. It may be more relevant maybe for the home appliances where I think it will be more relevant and I think that's something we'll have to monitor over the next four to six weeks. That's when we will have a better view of it.
In terms of the CapEx for 2027, 2028, there is no material major CapEx. I think we already had done the CapEx for Chennai a couple of years back, as you know the benefits that we are yielding now. It will be more a maintenance CapEx that we will continue to have. No major sort of commitment from our side. The CapEx from the Atomberg side, yes, should be ideally on a 50/50 basis. The exact quantum et cetera is getting firmed up. Once we have better clarity, we will be able to share it with you.
When we say 18 months runway for the commercial production means, correct me if I'm wrong, but our majority CapEx for this JV should happen over FY 2028 and 2029. That's correct?
Yeah, that will be a fair assumption. Whatever quantum we agree should be, yeah, should be around that time. That's a fair assumption.
Understood, sir. Thank you, and all the best.
Thank you, Sonali.
Thank you.
Thank you. The next question is from the line of Ram from JPMorgan. Please go ahead.
Sir, I have two questions. The first is regarding how much is the loss in Voltas Beko in the current quarter. I understand that we are still not making money in that. The second question is, will the margins improve in electromechanical projection services? Because in the current quarter, I see on a comparative basis, the results are not good. What could be the future outlook in this segment?
Yes. I think the share of the JV loss for this is mentioned in the financials. So INR 37 is what we have booked for our share. I think that is visible in the financials. In terms of the electromechanical, I think the quarter was a bit soft from a top line due to the execution challenges that Mr. Mukundan Menon, I think, outlined earlier. Because of which the top line was a bit lower and also obviously the related impact from an EBIT point of view. We see the situation sort of getting gradually better. Maybe Q2 also may not be very much better, but I think post that Q3, Q4, I think is when we feel that it should get really better. And I think that is where the recovery should ideally happen.
Okay, thanks.
Thank you, Ram.
Thank you. The next question is from the line of Archit Shah from 360 ONE Capital. Please go ahead.
Thank you, sir, for the opportunity, and congratulations on good set of results. Sir, just two questions on compressor side. First, how much will be the localization of this compressor? Like you said, motors will be manufactured by Atomberg since they have good technology. I understand that certain parts like magnetics or something, China has an upper hand in terms of some rare earth metals. Do we need to import any components and anything? Secondly, in terms of competitiveness of this cost of compressors, while we are doing this to secure compressors for future growth, in terms of cost, how would we be placed in like-to-like for Chinese imports or Haier or GMCC who are doing here? Also in terms of LG or TG who are doing here. Just both the questions on compressors. Thank you, sir.
Yeah. Archit, actually the most important item in the compressor is the motor. So that Atomberg has sort of mastered it, and so that 40%, 50% of the BOM is covered from an indigenous manufacturer. There may be a few things within the compressor which is imported, that is true. But gradually that dependence also will come down. The rest of the items initially will be imported, but gradually we will try and indigenize it at a cost optimized kind of thing over a period of time. Our expectation is that this will be able to compete with the imports for sure. That is the way we are looking at it. The way we see it is, one is it should secure our supply chain in a complete manner that there is very low risk of anything going wrong with the supply chain.
Second is, this will certainly not hurt our competitiveness with making the product costly. That's the first sense that we have on this actually.
Okay. Thank you. Thank you so much, sir.
Thank you, Archit.
Thank you. The next question is from the line of Aditya Vikram from DB Securities. Please go ahead.
Hi, sir. I only have one question. In the last con call, you had mentioned that the target to achieve 7%-8% is a gradual process. Currently, as we stand even during the peak summer cycle, we have not been able to significantly scale up the EBITDA margin. Do you foresee this getting a little prolonged in terms of achieving that target, or do you see that there are more benefits and scales? It seems like there is a cautious commentary coming along all the way. Just wanted to get your thoughts on that, because at 5.6, it doesn't look like it would be a. Some of your competitors have called out that it might be tricky to achieve significant increase in margins from where we stand. Thanks.
Yeah. Yes, a fair question. If you see the results, I'm sure you're keeping track of obviously some of the peer group also. I think it has been a bit of a difficult quarter because of the events that are well documented, so don't want to elaborate on that. Because of that, obviously, there was an impact from a cost side. But I think most had a bit of a regrowth while we were able to get better in terms of from a margin profile versus same period last year, I think. I think some of the initiatives I think we called out earlier, I think has become a bit of a differentiator for us and sort of helping and supporting us.
We sort of feel that this will help us, it will pan out, continue to help us pan out better. I think we want to make it a sustainable type of thing in terms of working on some of these initiatives, and we feel that it will sort of gradually start getting better. So I think that's broadly where we see it at this point.
Okay. So just to follow up on that one, should we assume that the current quarter EBITDA margin is a steady state for at least some time till the time things pan out or till the time things sort out on their own?
No. I think if you sort of go through the margin profiles, if you're purely looking at the margin profile, the quarter-on-quarter margin profiles are fairly variant, if you see. So from that angle, I think we'll have to sort of go on a quarter-on-quarter basis and see how it sort of goes.
Okay. Thanks very much. Appreciate it.
Thank you. We will take the last question from the line of Amarendranath Nath from Nirmal Bang Securities. Please go ahead.
Good evening, sir. Thank you for the opportunity. Sir, regarding this again, this compressors. For how many compressors volume we have now, the joint ventures and this is, and whether it is a greenfield expansion, a greenfield investment by Atomberg and us? Otherwise, whether Atomberg has already taken some investment, we are just augmenting the investment with the joint venture, and what is the uptake for Voltas from this compressor, and what is the total capacity of the compressor you envisaged? If you can deal on this. Thank you.
The factory which we will put up will be gradually ramped up. We will begin with smaller quantities initially, and that beginning will be 18 months from now. Then we will ramp up over a period of time, starting with maybe less than 1 million, then taking it to between 1 and 2, and then eventually taking it to 2.5+ million. That is the plan, actually. The technology exists. The product has already been made, and it is being tested right now, actually. The designs are sort of new. This product has been in development for the last year or so.
Okay. In terms of pricing, what will it be?
The economic angle, as I think Mr. Menon did elaborate, obviously the key thing was from a supply security point of view that we are looking at, and also linked to the QCO angle that Mr. Menon mentioned. The economic aspects are still being finalized as we speak, and then we will come back to you when we have better clarity.
Thank you. As that was the last question for the day, I would now hand the conference over to Ms. Natasha Jain for closing comments. Over to you, ma'am.
Thank you, Muskan. I request Sridhar, sir, to give his closing remarks. Thank you.
Yeah. Thanks, Natasha. Just closing comments from my side. Supported by the stronger brand, differentiated products, expanding channels, enhanced manufacturing capabilities, a rapidly scaling home appliances business, and disciplined execution across this diversified portfolio, Voltas remains well-positioned to strengthen its leadership and deliver sustainable, profitable growth over the medium to long term. Thank you all. Thanks for joining the call today.
Thank you everyone for joining in. Have a great weekend and happy-
Happy Independence Day to all of you
Happy Independence Day to all of you, yeah.
Thank you. On behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you