EPACK Durable Limited (EPACK) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the EPAC Durables Ltd. Q1 FY27 Earnings Conference Hall hosted by ICICI Securities Ltd. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manan Goyal from ICICI Security is Limited. Thank you, and over to you, sir.

Thank you. Good morning to all. On behalf of ICICI Securities, we welcome you all to Q1 and FY27 Result Conference Call of EPAC Durable Limited. Today, we have with us Senior Management, represented by Mr. Ajay Didi Singhania, Managing Director and CEO. And Mr. Rajesh Kumar Mittal, CFO. Now, I hand over the call to the management for their initial comments on the quarterly performance. Then, we will open the floor for Q&A session. Thank you, and over to you, Mr. Rajesh, sir.

Thank you, Manan. Good morning, everyone. Welcome to our earnings conference call for the first quarter of financial year 2027. I would like to thank ICICI Securities for the remaining two days earnings score. The key financial highlights for the quarter 1 of financial year 27 are as follows. For the first quarter under review, revenue from operations stood at 886 crore which grew by around 34% on year-on-year basis. During the current quarter, the company has not accrued any PLI income. However, the company had accrued the PLI income of Rs.13.31 crore during the first quarter of financial year 2026. The EBITDA for the quarter was 55 crores, increased by around 0.70% on year-on-year basis. The EBITDA margin reported at 6.21% as against 8.24%. The net profit was 11.8 crores. An important comparability on PLI income. Before going further, I would like to flag one item that affects how should we read the margin comparison. The company has not accrued any PLI income in the current quarter of financial year 27, whereas we have accrued around 13.3% of PLI income for the previous quarter on year-on-year basis. This margin was set in the quarter revenue and because it carries no associated cost, flowed almost entirely into EBITDA. If you strip that 13.3 crore out of both the revenue and EBITDA, Based for financial year 2026, last year underlying EBITDA margin was closer to 6.4% and not 8.24%. On like-to-like basis, our year-on-year margin improvement this quarter is closer to 15 basis points and not 203. Now, I would request our Managing Director and CEO Mr. Ajay Gridi Singaniya to brief you on the operational highlights. Over to you, sir.

Thank you, Rajayji. Good morning, everyone. IPEC Durable continues to strengthen its position as a leading living appliances original design manufacturer, while room recommendations remain an important part of our portfolio which are steadily expanding into higher growth, better margin categories as part of our long-term diversification strategy. Over the last few quarters, we have made significant progress scaling our small domestic appliances and large domestic appliances as well as component business. Which are seen encouraging customer traction and growing order pipeline. This is gradually delivering a more balanced revenue mix and reducing our dependence on limited depth of customers for finished product. Our focus remains on broadening the customer base, deepening relationships with existing customers, scaling newer product categories, improving resilience, supporting margin stability, lowering customer risk, and building a stronger foundation for sustainable profitable growth. As results are already shared by Rajivji, I am pleased to report a strong start to F527 with company delivering its highest ever quarterly revenue of 886 Crore with a growth of almost 34% year on year. This reflects healthy momentum across the portfolio. Our core RSA business continues to grow strongly by small and large domestic appliances as well as components scaled up encouraging things led by air freight and washing machines. The growth was broad-based and reflects continued benefit of our diversification strategy. We now serve more to 72 customers across 90 product categories, thereby sharply reducing our customer concentration and materially derisking our revenue base, even as absolute revenue from these customers has grown significantly. We have ended two new product categories in this quarter alone, while four new categories are in pipeline for later in the year. On the branded side, our partnership Hysense continues to build well. Through the season of up to June, which is Jan to June, we produced close to 60,000 year conditions under this partnership. It contributed approximately 65 crores of revenue in just quarter one of this financial year. While the quarter saw some pressure on margin and prevailing commodity and currency conditions, our focus remains on sustaining growth momentum by improving operating efficiency and strengthening profitability as we scale. Our read on quarter is straight forward. We are winning shares, scaling the top line strongly, and near term profitability is being held back by the investment cycle and increase input costs rather than by weakening in demand or competitiveness. The task ahead is to convert this scale into operating leverage. Our priorities are three-fold, first, scale the growth engines, sustain RSA margins while ramping washing machine and LGA capacity, which remain our fastest growing and most margin-operative categories. Second, different strategic partnerships and position impact as preferred manufacturing partner across multiple product categories with our key customers, enabling deeper integration and long-term contracts. Third, rebate margin converts scale into operating leverage as new facilities absorb volume, localization deepens, and our value addition and product mix normalizes towards higher margin categories. We have new product, new customer pipeline across SD, LDN components heading into the rest of Square 27, and we remain confident in long-term growth opportunity across our business, supported by our expanding product portfolio, trending order book, new customer acquisitions, and ongoing capacity expansion. With this, we now open the floor for Q&A.

Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sokrik Patil with EyeSight FinTrade. Please go ahead.

Good morning to the team. I have two questions. The first question to Mr. Ajay is, I just want to understand the forward guidance. Beyond the regular outlook, what are the top two to three application priorities you're focusing on in the next few quarters, and alongside that, what do you see as the biggest risk in demand shifts, regulatory changes, or competitive pressures, and how are you preparing to manage them while strengthening e-pack position in the appliance manufacturing? That's my first question. I'll ask my second question after this. Thanks.

There is a lot of echo in your voice or I think you are on the road or something.

Yeah, I'll just repeat my question. I just want to understand beyond the regular outlook, what are the top 2-3 aggregation priorities you're focusing on in the next few quarters? And alongside that, what do you see as the biggest risk in demand shifts, regulatory changes, or competitive pressure? And how are you preparing to manage them while strengthening EPAC's position in the appliance manufacturing space? Just to understand odd-looking guidance on this. Next question, I'll ask the second question. Thank you.

So, Sukhith, although your question is not very clear, I think a lot of voice modulation is happening because of the background, I will try to answer it, what I understood.

So in terms of the outlook for the appliances industry for the coming through three quarters,

definitely first of all air condition is having the tailwinds still continue and we see long term growth story for air conditions, our core manufacturing product category. On top of it, the other appliances in which we are expanding very aggressively, like the small, the large domestic appliances, each of the newer categories, whichever we are adding, we see strong growth momentum, a lot of customer traction, and as we continue to add newer customers across categories, we believe that the growth momentum for the smaller domestic appliances, and especially for large domestic appliances like washing machines, there is a long-term growth potential, and The growth momentum is going to be much more than even the issues.

My second question to Mr. Mittal is, from a financial point of view, what key risks or challenges do you anticipate in the coming quarters, and what specific measures have been taken to manage margins, cash flow, and strengthen the balance sheet, especially in areas like raw materials, cost volatility, receivables, or compliance? Thank you.

This top line, you have already seen, we have grown 34% in this current quarter. As far as the cash flow situation, the cash flow situation of the company is stable, and we don't see that there would be any requirement to increase the working capital or other requirements with respect to the growth in the business. Generally, with respect to the cash-to-cash cycle, we have the working capital raised around 50 to 60 depending on the season of the company.

Thank you, and congratulations.

The next question comes from the line of Tanisha with TAM Capital. Please go ahead.

Yeah, hi, sir. Good morning, and thank you for the opportunity. I have a couple of questions, and congratulations on a strong top line. I wanted to understand, you know, if you can break up the 44% growth which we reported in REC between volume and value.

So, first of all, in terms of break-up, the total growth for RHP reported is 44%, approximately 30% of which is volume growth, and 12 to 15% is typically the value growth in terms of increased AOPs and the pass on of commodities. So, break-up of 44% is 30% volume growth and 14% value growth.

Sure. And so this 30% volume growth would be largely driven by our anchor customer, correct? Absolutely. Understood. And while you spoke about this 12 to 15% pricing growth, what percentage of pricing has to yet be, or let's say the cost escalation yet has to be passed on in terms of pricing to our customers, which would then sort of normalize our margins?

Tani, since we are doing contracts, wherein the prices are updated every quarter, so the price increase for the previous quarter was already passed, and there hasn't been any significant increase since then for the current quarter, so there is hardly anything remaining to be passed.

I am sorry to interrupt, sir. Your voice is breaking up every now and then. I would request you to come closer to the microphone. Thank you. Tani, I am audible now. Yes, sir, if you could just start again. Yes, sir.

Okay. So, first of all, since this is our contract with the larger customers, the prices are updated every quarter, and hence most of the price increase was normally passed on, whereas there is always a time lag between passing the price increase and when it actually impacts, especially in the turbulence of the global... Supply chain and the global scenario especially impacting March. So there was a time where the price increase was not totally passed on, but yes, contractually it is being passed on and there is hardly anything balanced to be passed on as of now. What impacted us most for the last quarter was specially the forex exchange rate, so that is one line item we like to flag which like the forex source is something which has impacted us largely, but otherwise most of the commodity has, after a time length is typically passed on.

Understood. So we are saying that chunk of the pricing has been passed on in terms of commodity increases and forex is something which impacted our margins. Absolutely. Understood. So the other question which I had is now obviously given that the season is largely behind us, what are the current inventory levels? Are they comfortable or, you know, any insights on that in terms of, you know, demand trends, inventory levels, etc.?

I think especially for the AC industry, this current situation is one of the most comfortable situation for the entire inventory point of view, especially from the British good point of view. Compared to last year wherein we were, there was a lot of pain in the industry because of the inventory overflow and the inventory, I think this is one of the best year or time wherein the trade has mostly liquidated its inventory and the inventory levels are My estimate here would be all put together, the trade and the brand and everything put together, the inventory level would be anywhere at 3.5 to 4 million maximum. So inventory levels are lower than what actually is at this point of time.

Perfect, perfect. And one last thing is, you know, how has our working capital and debt moved, let's say, between 4Q and 1Q? Rajaji, if you could possibly help us with that.

I have already explained that the working capital days, we are, because if you see in the first quarter, the working capital days are usually lower. Because you see the balance sheet that is completely on the proportionate basis, particularly if you see the working capital with respect to APR in the country, it is coming from 60 days. And it was a little lower compared to the March and the year.

So just to add on to Rajeshji's comment, two things interesting to note here is that we have Especially on account of the BIS and the revisions which are happening, I think industry has communicated in Spain that we have been carrying more than the requisite inventories. So that the like at times we have known that the compression PLI or the TCO getting amended and then again the copper TCO getting amended. So the timeline or the time available at the peak season mandates It just takes us to maintain more than the required inventory. Last few buttons, we see the inventory levels have been highly escalated on account of this. So this is one area which has led to a greater requirement of the working capital. So, as we move through the season, definitely end of the season, we again are left with inventories because when we build up inventories in anticipation of the upcoming season, so, for us, the key focus area remains, from working capital point of view, is to normalize the inventory. Currently, inventories are at much compatible level as compared to the last year, but then still slightly escalated, so our efforts continue to normalize them as we move forward.

Understood, sir. Understood. And just on this note, since you mentioned about compressors, do you expect any sort of trouble, let's say, down the line into the new calendar year, given that, you know, the BIS would be expiring in March 27th? Or do you feel like there is sufficient capacity to be coming on stream by the end of this year, which should take care of our domestic demand?

Specially in terms of compressors, the QCO, the QCO, the QCO, the QCO, the QCO, the QCO

Thank you so much for answering all my questions and wishing you all the best, I will come back in the queue. Thanks, Billy.

The next question comes from the line of Nishita, with Sapphire Capital. Please go ahead.

Yes, hello, am I sounding?

Nishita, you are sounding quite muffled. Please use your phone on the handset mode, in case if it's on handset.

Yeah, is it better now?

Yes, please go ahead.

Yeah, so I had a few questions. My first question is that in the presentation, you mentioned that our FAT is lower and has been impacted due to high depreciation and finance costs. I just wanted to understand, is the depreciation and finance costs that we have in Cuba, should we take that as a base depreciation and finance costs for the whole year, or is it going to take the year round?

The Q1 numbers for the depreciation are more or less aligned for the risk. It has increased as compared to Q4 because the new capacities have been good to use. CWF in pipeline for the last of the year, so we can... Thank you.

And what about the finance cost?

Finance cost has also gone up slightly because I told you that there is a requirement with respect to the scale of the operations. The company has seen a growth of 40% in this current quarter as compared to the previous one. Accordingly, there is an increase in the working capital requirement and the finance cost has also gone up by around 3-4% as compared to the previous one. Like, going...

Can you expect us to come down?

Yes, so Nishita, as I was answering to the earlier question, for us, the area of improvement with regards to working capital or finance cost currently is the inventory, I mean, normalization of the inventory, whereas it has happened largely over the last few, but yes, a lot of work still needs to be done there, so yes, there is an opportunity and scope too.

And my next question is Capex. What was our Capex spending in Q1? What is it going to be for the whole year?

For Q1, there hasn't been any significant impact. Roughly 10 crores is what has been booked. And going forward, based on our earlier plans, which was announced last week, we were looking at a total impact of around 450 crores, of which currently 330 to 340 has been already booked. And 40-50 crores is something which is currently in CWAP.

Yeah, so you were talking on CAPEX.

Yeah.

You mentioned that we have already booked 40 to 50 crores in CWIP.

Yeah, so Nishita, I was answering your question on Capex. So, out of a total budget of 450 odd crores which we announced in the beginning of FY26, out of which 340 to 350 is something which is already booked. An additional 10 crores of Capex has been booked in the last quarter, even of FY27, and almost 40 to 45 crores is something which is in CWIT. So, we are estimating a total additional Capex of around 60 to 70 crores for the balance of the year.

Okay, understood. And my last question would be on, so we've seen very good top-line growth in Q1, around 34%. So what sort of growth can we see for the full year FY27? And is there any scope to improve our EBITDA margins from the current level, or are they going to stay in the same range of 6% for the whole year?

Nishita, so in terms of top-line forward-looking numbers, as you know, we don't share any forward-looking numbers, but yes, for AC, we are very confident that this year the industry is expected to grow at around 20%. So we would definitely surpass the industry growth as we have done it in 2021. And our other sectors, our other product categories, the small and large domestic appliances are definitely growing at a much faster rate. So yes, we are looking to grow much faster, much better than The last year, on EBITDA side, currently, yes, 6.5% has been the typical EBITDA net of PLI or excluding PLI for last couple of quarters. But here, the important thing to note is approximately 1.5 to 2% has been the PLI benefit, which was typically partly passed on and partly retained by the company. So, since the current year is the last year of PLI benefit available for IPEG, we have already started rolling back the PLI discounts or benefits that were shared with the customer. And we are looking at almost completely reversing the PLI discount pass on to the brand customers by the end of the year. So, we are hopeful that by the end of the year, the entire PLI discount would be reversed and And next year onwards, we will be able to see more of a normalized ribita.

Okay. Thank you so much.

The next question comes from the line of Rabindra Nayak with Nirmal Bank Securities. Please go ahead.

Good morning, sir. Am I audible?

Yes.

Hello. Am I audible, sir?

Yeah, so

actually in this quarter, you know, what is the total volume that we have done in first quarter, and if you can give the, you know, particularly from the fully built-up unit and the indoor and outdoor units, how much we have done in this quarter in total 622 cross hills, that would be helpful. So I will come to the next question after that. Thank you.

So, Ravindra, we don't typically give out the number of units sold, but like I was answering the idea of question, in terms of the number of units sold, the growth for, especially for air condition, is 30%.

Sir, I cannot listen to you properly, because the voice is completely echoing, I am not able to hear you.

Ravindra, am I audible now?

Still, it is echo.

So, in terms of the number of units, we have never historically given out the number of units sold data, but it is like I was answering the previous question, in terms of the number of units sold, the growth for last quarter is 30 percent, vis-a-vis effort 26, and overall revenue growth is 44 percent as far as air condition is concerned.

Okay. And so, regarding the compressor issue, you actually did this question in the

previous participant, but I cannot hear you properly.

So, can you please repeat your comment on what is the compressor outlook for the industry and what is the compressor for we have booked for now for our, you know, requirement in 27 and one of your competitors has actually mentioned in the call that there is a significant event is going to be effective So, how you are placed for the compressor booking and how the industry, you know, placed for the compressor booking, if you can give us a comment, that would be helpful, sir.

Mr. Ravindra, as far as compressors is concerned, the government has allowed import of compressors till end of this year. So that is when the imports can be done. At the same time, the domestic capacity is already installed and in pipeline, which we believe will be operational by end of December, is mostly in line with the overall industry demand. Hence, we don't foresee any significant challenge in terms of procuring compressors. So, we see that there is enough domestic capacity already installed and in pipeline which is sufficient for the industry's demand. To the next question in terms of PR setting of compressor capacity, we do not comment on PR strategy, but as far as EPAC strategy is concerned, we are not looking at setting We are not setting up any compressor capacity in Vietnam, and we believe that we have We have strategic tie-ups with both the large compressor suppliers and we will continue to harness our issues with them.

And sir, in this disputed frame, the recyclable that you mentioned and wrote, is it related to air conditioner, right?

Ravinder, can you please repeat your question?

The disputed sales that is around 190 clothes that you have reported in the notes and accounts, is it related to the air conditioner business side?

Mr. Ravinder, are you on a loudspeaker or something? We are not actually able to understand.

Okay. So, okay, sir, regarding this, you know, I'm just coming to the light and domestic appliances, small and large domestic appliances. Can you please give me the breakup of how much it is, you know, from the light and small?

So, Mr. Evansa, to what best I could understand your question is, I think you are on the loudspeaker. So, what best I could understand is the growth of small and large domestic appliances for the last quarter is 68%. So, there is a growth of 68% in the small and large domestic appliances as compared to Q1 of F526.

Thank you. The next question comes from the line of Ayush Jain with Equity Advisory Services. Please go ahead.

Hello, good morning. Hello.

Please go ahead, Ayush.

Yeah, good morning. I just wanted to know about XRAC or Outlook and Capacity Utilization for the whole year.

Hello. In terms of capacity utilization across three plant categories which we had, Dairadun, Vivadi and Suricity. For Q1, Dairadun and Suricity capacity utilization was closer to 90%. And as far as Suricity is confirmed, we have seen a significant improvement in utilization of Suricity. From previous reported of less than 25, we have achieved almost a close to 50% utilization of Suricity for the Q1.

Pardon, how much?

Closer to 50% is what we have seen, the utilization of solicit, the other two older plants, Daradhan and Givadi, for Q1, where the utilization level was more than 85%.

Okay, and this is of XRAC, right?

Hello.

Including RAC. Hello. Including RAC. I just wanted to know XRAC, actually.

So, there is no split because the manufacturing facilities are fungible. So, it is not just the assembly line, it is the overall manufacturing, because we have huge amount of equity integration components getting manufactured within the same facility. So, when we talk about capitalization, we talk as a whole.

Okay, and this kind of level is sustainable for the whole year?

This is the Q1 number, Q1F127.

Yeah, Q1 number for the auto for the whole year actually.

So, last year's F426 numbers, the overall plant utilization of Diwadi and Rehazan again was close to 55 percent, and that of Solicity was less than 25 percent.

For this here, your outlook for F527?

So, we are looking at overall utilization of all 3 plants put together at more than 60 percent.

More than 60 percent, including Solicity, right?

Yeah. Average utilization of all the three plants.

Okay. I'm just looking for operating leverage part on the street city plant. If it goes above either 60% utilization of the whole year, there can be substantial upside on both the top line and the bottom end, right? So how can we, when can we expect the same for the street city plant to get really on board on the company's accounts?

Like I was mentioning, the ramp-up of 360 is something which is gradually improving very fast, so compared to the last few years, doubling the utilization, the seasonal utilization at least, and the company with its current robust order book is very confident that the utilization is going forward, especially for 360 where there has been a concern over the last few quarters, improving significantly, and the overall annual utilization definitely achieving. Around 55-60% is one figure that we are targeting at and as we move closer to it by the end of this financial year, we will continue to monitor it and definitely increase it. So the overall outlook of the company is to bring all the three plants at improved utilization by the product mix, especially the non-AC business. So the whole idea behind renting of the non-AC business is to improve utilization for the non-AC season. With this approach, we are very confident that the overall utilization of the 3 plants will improve significantly.

Okay, okay. And my next question is on the line of Hisense, your JV with Hisense, how is it coming up?

Hello. So, in my opening remarks, like I mentioned, for the entire season, which is Jan to June, we delivered close to 60,000 air conditions to Hisense with a revenue of...

Okay, 60,000 to Hisense.

66.0 was total volume delivered for the first half that is Jan to June, revenue of 120-odd crores from AC business alone with Hisense. If we talk about just Q1, Q1 the volume was 25. 35,000 with a revenue of 265 crores. So that was the total growth for AC business and for washing machine. As we have mentioned earlier, end of Q2 is the target date when we believe the front road washing machines pilot production will start and we are on track to begin the front road washing machine production by end of October.

End of October. Okay. Hisense is doing a lot of marketing and they are about to, they have huge plans for India, right? So you're, you're being a preferred partner with them. Do you see the top line to grow like two, three times in three years time? Your top line with Hisense?

Definitely, yes. Especially with regards to Hisense, from the day we spent the MOU and all the announcements till date we have done, we see that the growth envisioned and the timelines agreed are being adhered largely and the plants are intact and in place and as Hisense And the last

question is, since copper prices are increasing like anything, right, and it does not seem in the near term it will stabilize. So, how do you hedge or do you do something with that? So, you maintain an inventory for the raw material or something like that?

Are you sure as far as commodities is concerned whether it is Forex or any other commodities? Good morning, everyone. We don't do any forward booking in anticipation of orders. Whatever orders are confirmed, there is a back-to-back booking done for them in line with the agreements. And whatever increased decreased debtors over the quarter gets passed on in the next quarter. So as a company policy, we don't do any forward trade or unknown booking in anticipation of booking any profits. So we refrain from doing any trade without confirmed orders and acceptance on the customer.

Thank you.

Thank you. A reminder to all participants, you may press star and want to ask a question. The next question comes from the line of Pratab Malival with Mount Hintra Finance. Please go ahead.

Hi, am I audible?

Yes, sir. Yes, Pratab.

Yes, hi. Thanks for taking my question. I just wanted to ask, can we break up the revenues from the LBA? Can you tell me what the current revenues we have from washing machines and how this is expected to scale up with the Hyacinth production from Q2 on use? That's my first question.

Okay, so I can answer your questions in a way which makes it simpler. The total revenue out of 886 crores, approximately 660 is something which comes from room AC and the balance is non-AC, which is a mix of SDA and DA and the components. So that's the closest answer I have. This is the numbers available with me currently. And SDLD, so I don't have numbers right now with me, especially for washing machine. SDLD from approximately 80 crores, last year has grown to 130 crores. So there's this small and large domestic appliances.

Yes, sir, what I'm going to understand is, if I look at the last two quarters, Q2 has been a loss-making quarter for us at the fat level and the EBITDA margins have been 0 to 2%. Last two quarters, the September quarter, if I look at. So, what I'm trying to understand now that we're getting into washing machine, which I believe would be higher margin, as you said, which should also reduce our seasonality in the top line and the margin of credit. So, going forward structurally, can our Q2 September quarter become not just better in terms of top line seasonality and in terms of profitability as well on a structural basis is what I'm trying to understand.

Absolutely. I think Pratap you are bang on target. So yes, Q2 and Q3 historically has been the loss making quarters because of heavy dependence on air conditions. So the entire strategy around SDA, LDA is first to neutralize the loss and we are on track in terms of scaling up the washing machines and the other SDA businesses. And like I shared in my opening remarks, we are constantly adding up newer categories in the SDA as well, which is again the non-ASDA. So, as we continue our journey, we believe that over next 4 to 6 quarter, we should definitely see the breeding situations coming largely under control for Q2 and Q3. So, the washing machine definitely is a big lever for us in this journey, and as we see scaling up of washing machine in currently, especially Q2 as you have mentioned, Q2 and Q3 are significantly good for washing machines in the other SGA category, but it is a journey which we have embarked, and we hope to see the results coming in line with what you are expecting over next 4-6 quarters.

Sir, but this Q2, I believe you mentioned that we'll be doing the pilot production from the end of Q2. So for this current Q2, will it again, will we kind of lose all our margins and go into pat-negative? I'm not asking for guidance, but any direction of color if you want to.

In terms of washing machine, we are currently manufacturing the top load fully automatic which is already under production and we are serving three large national brands, multi national brands in this category. What I was mentioning especially with regards to Hisense is the front load washing machine, so that is one category in which probably we would be the one of the first starters to manufacture front load washing machines as in OEM, OEM. So, that is something which is currently under pilot production and we believe that is a newer category, a much more lucrative and higher price category. So, front load is something, end of September and October is what we are targeting to start the mass production. The other categories of washing machines, especially top load, fully automatic, is already under production and we are already serving some micro customers there.

Understood. So what I'm trying to understand here is that our target for FY29 that you've given, the 5,000 pro target, are we still on track? I mean, I know that Q1 was largely on track, but it requires a revenue taker of approximately 35% or more. So we should have a plan of significant scale going ahead. So are we largely on track?

Yeah, so we are largely on track in terms of our overall guidance that the seasonality impact needs to be minimized and every quarter we are looking at this, we are working to achieve a scenario wherein every quarter is profitable or every quarter the revenue mix is maintainable.

Sorry to harp on the issue again, but Q2 do we anticipate being fact positive? No guidance needed, just directionally this Q2 do we believe we can be fact positive, so we can see the results of the business model actually running around, so just any cover of it.

That will again amount to a power-trucking statement, but like I think I already answered, historically Q2 and Q3 have been the loss-making quarters, and our efforts are on, we are working on this, it's a journey, it will take some time, so 4 to 6 quarters definitely we believe we should be in a situation wherein we can completely stop this breeding situation.

Okay, understood. So, just last question from my side. The depreciation input that you had given to the line wasn't clear. I believe this quarter we had 16, 17 floors. Did you mention that we don't expect it to increase, you know, just any detail. The line won't be able to understand our outlook on that.

In terms of depreciation, yes. The current depreciation for Q1, we do not see any significant increase over the next three quarters. There is a marginal investment which will be booked every quarter. So, overall, during the whole balance of nine months of this year, we see an additional capex being booked of closer to 60 to 70 crores, which will be done in part over each quarter. But yes, overall defects of 60 to 70 crores is in Python, which will be ultimately booked by end of this year.

Sir, finally sir, just one last question, what was the reason for the large rise in the other expenses, over 50 percent it rose this month up?

Other expenses. So, I, increasing other expenses.

Increase in other expenses as I already mentioned with my recent, because in this current quarter, there is a product loss which has been passed in the books, that is around 6 to 7 crore, otherwise there is no other reason.

Okay, thanks for answering all of my questions.

Thank you.

The next question comes from the line of Karan Gupta with Asset C Meta Investment. Please go ahead.

Yeah, hi. Again, on the other expenses part, I couldn't hear properly. So, what was the reason for the...

I told us here, other expenses have gone up by basically one reason, as I explained, that around 7 crore forex loss on quarter-on-quarter basis, and because you know that the sales value and the production value of the company has gone up by more than 35% overall, accordingly the wages cost has gone up.

Okay. Raisins cost, one of them. Raisins, two of them, four of those.

Okay, okay, okay.

The second one on the channel inventory, last quarter you said that most of the old rated inventories are at the channel end. And you don't have any old rated, you know, ACs, room ACs now. So, this growth is purely the new rated as per the BE non-compliant products, right? As you said, 44% of growth, right? And what was the, at the channel end? The channel end growth or the old rated products are already flushed out or it is already, or it is in the channel inventory.

So Karan, first of all, to answer your question, as a manufacturer, we were mandated to start production of new rated, the new BE rated products with effect on 1st of January. So, yes, the The entire group, both for last quarter as well as the The Q1 quarter is attributed to the new rated product. So the manufacturers were not allowed to manufacture anything old rated since beginning from 1st of January 2026. So that was attributed to the new rated product 1. In terms of channel inventory, the channel was allowed to sell old rated product till end of June. So, based on our understanding, we believe that channel has largely liquidated the entire O rated product and this is why there has been a growth of the new B rated product. So, our estimation and approximation is that yes, the O rated B product has been mostly flushed out from inventory. If somebody somewhere has something, I can't estimate, but yes, largely it has been pushed out, because for the past six months, the new rated products were fully manufactured and sold to the trade. So I hope that answers the question.

Yeah, yeah, fair enough, fair enough. On the SDA, LDA side, again, on the overall inventory, what is the inventory in the quarter one? Just to understand, is there any inventory buildup is happening on the SDA-LDA side? So, Karin, for SD and LDA, it's

a very large category with more than 100 SKUs, so you have Thousands of SKUs in SDA and SDA category were put together, and typically as we all know, the festive season is the season, so it's October, November is the season wherein the entire season happens, so my only estimate or my only answer is that this is the time wherein the ramp up and the stock inventory building is happening with this particular categories. Any estimation, anything will get agreed for Any single SKU for this product category, I think it is beyond my estimation because there are thousands of others.

No, I mean non-AC inventory or AC inventory. That's the typical bifurcation I want.

Broadly, to answer your question, as far as EPEC is concerned, our in-house inventory, again, because AC is a category which is larger and more. In terms of value, both the dependence on import is still there, so we have a lot of commodities here. So our in-house inventory is probably 70 to 75 percent would be AC inventory and 30 percent would be the non-AC inventory. So that's the only kind of number I think I can share with you as far as I understand.

And non-AC.

Yeah, 25 to 30 percent non-AC.

Okay, okay. On the margin side, this product's SDA, as you said, washing machine in the LDA side is comparatively high margin, but overall SDA, LDA and component segment, because now the SDA, LDA and component is again, you know, one third of your overall pie. What we can do from here on to, you know, reduce the sizality in quarter to quarter three, we need to ramp up this portion of the pie higher than the AC side, right? So just to understand the margin profile of these two segments and what you can expect next quarter two, three, or overall the FI 27, the growth of this segment. And also, you can share the reason of components, degrowth of 23%.

So, first of all, yes, I acknowledge that the The overall margin as far as non-EC category both SDA and LDA is concerned. So SDA and LDA is comparatively more than that of EC by almost let's say 1.5 to 2 basis points. So that's the additional kind of gross margin. It's not at EBITDA level because EBITDA is a blended EBITDA and a lot of manufacturing facilities are shared. But at gross margin level, yes, the SDA and LDA gross margin is typically 1.5 to 2 basis points more than that of EC. And hence, our entire focus on improving SDLD is given by that fact. And as we continue the growth journey for SDLD, we are again reaffirming that. Like we have done almost close to 60% growth in SDA, LDA, the non-EC business over last quarter, our growth momentum is going to be much more as compared to EC. So, EC will definitely continue to grow, but at the same time, we see the larger scope of growth in SDA, LDA. The component itself will keep growing. Currently, the components catered are largely AC components, controllers, cross-clothers and copper tubings. So, they again are kind of seasonal. So, here again we are exploring opportunities to cater to non-AC components, but currently, yes, it is in line with the AC group.

Okay, okay, and the last one on the SDA side, how many, you know, OEMs as a customer we acquired because this particular segment is, again, consumer durable part is, again, very, you know, competitive as multiple players in the kitchen aware segment also. So, just wanted to know how much or how many customers that we are acquiring or growing our customer base in the SDA segment.

So, as you can see in our investor deck. Closing of F1-26, we had 72 customers all put together ECs and non-ECs, and 18 product categories we have added roughly 2 customers, whereas there are a couple of 2-3 more which are in pipeline, so currently at this time we have closer to 73 customers, and 19 product lines are already productionized, and 2-3 more lines are for which PTA or the pilot production has already been done. Good morning, everyone. Thank you. By end of this year, we are looking to have closer to 75 customers and 20 product clients.

Thank you. Thank you. Fair enough.

The next question comes from the line of Ayush Jain with Equity Advisory Services. Please go ahead.

Yeah, my questions are one more than the same. Sorry.

The next question comes from the line of Ganesh, an individual investor. Please go ahead.

Sir, good morning, everyone. First of all, what do you think about the return of the company?

Ganesh, I am sorry to interrupt. You are not audible. Please speak a little louder.

This is not audible. Yeah, first of all, congratulations for the excellent set of top ten, sir. My first question is on this reason to your technology media initiative package from Andhra to this government. Can you throw some light on that, sir? Already we have spent a substantial amount from November 24, I guess. Thank you very much.

It's not able to be easily properly.

Sir, can you be able to hear me now?

Yes, no matter.

Sir, my first question is on this recent MoD we received from Andhra Pradesh for this telemade incentive package. Can you throw some light on that, sir?

Okay. Mr. Ganesh, with regards to our MOU with the Andhra Pradesh government, the MOU is about the investments we have committed over next five years, starting which is effective till... So that's amounting of rupees 1085 crores, beginning, starting the investment recognized is from beginning of January 24.

For 1000 crores, right? Yeah, 1085 crores.

Ok, ok, ok, ok. For which we have been allocated, we have already been allocated a land of closer to 35 acres and we are looking at wrapping up newer capacities as we move forward. So, there is something in the pipeline, not in the immediate term future, more of normal term future.

Okay, okay. Are the PLA schemes we will be getting very good for next couple of years?

So, there is a state incentive available from the state of Andhra Pradesh. So, approximately, not exactly, but approximately 50% of KPEX which will claw back as subsidy over next 10 years, investment subsidy. So, there is a state government scheme which funds closer to 50% of the total KPEX as investment subsidy over 10 years.

And second question is on the EBITDA margin, sir. EBITDA margin, I think as you stated earlier, it was 7.5%. That's a project anticipated without PLA, right, sir? That's an anti-aspiration EBITDA level. Yeah.

So, when I... The current EBITDA without PLI is closer to 6.5% and we get a PLI income which is practically shared between us and the customers. So over the last traditional, since we have been getting PLI for the last two years, we have been sharing almost 50-50 with the customers. So almost 1% was coming to us and 1% was getting passed on to the customers. So like I mentioned in my earlier question, we have already started negotiating with the customers and ruling We are rolling back the PLI discount, and we are working in a condition wherein by end of this year, we should be able to roll back the entire PLI discount which has been passed on to the banks.

Okay, sir, whether we are eligible, I think FA-21 is the last year for us, sir, PLX?

For EPEC, yes, the current year, FA-27 is the last year.

And then we have projected that this 8,000 close revenue items will be in for the next five years, right? So with this sale, can we expect the F823 we can able to achieve this 5,000 close revenue?

We have already mentioned we have invested in current quarter amounting to 10 crore and we had mentioned in the Adelaidek also total investment was around 450 to 470 crore and remaining investment we will be doing in the current financial year. We are already having around 60 crore rupees in DWIP which will get capitalized in the next two quarters.

Okay, so my question is on the revenue from CCT in the Zizek plant. We are present around 8,000 crores from the next five years. With this scale, could we be able to achieve this 5,000 crores as a target by every 28 cents? It's just aspiration, I'm asking. Okay, okay.

Mr. Ganesh, the total expected revenue from the Zizek partnership was...

Yes, I am not audible. I am sorry to interrupt. I am not audible. Please come a little closer to the microphone. Mr. Gnish Ruiyaj.

That will expect the revenue from high sense was 8000 crores in 5 years. So, FY26, FY26 being the first year. So, the cumulative over next 5 years is what we are expecting to cross 8000 crores with AC and other appliances, washing machines and all put together. So, that's a 5-year cumulative revenue what we had expected from Hisense, current year 26-27 is the first year, and whatever was estimated for the first year, we are largely on track, and I shared the numbers in the previous question, that for this calendar year, we have already done close to 120 crores of revenue with Hisense. We have already sold it to them. Yes, we are largely on track for the current calendar year, and totally next five calendar years, the revenue expected from Hysense Partnership is 8,000 crooks.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks.

Thank you all for participating in the Endings Concall today. I hope you have been able to answer your questions satisfactorily. I again thank ICICI for arranging this Endings Concall today. Thank you all.

Thank you, sir. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.