Aditya Vision Limited (540205) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Aditya Vision Limited Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devanshu Bansal from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Yes. Good evening, everyone. I would like to welcome everyone on the call and thank AVL's management team for giving us this opportunity. We have with us today Mr. Yashovardhan Sinha, Chairman and Managing Director; and Mrs. Yosham Vardhan, Whole-Time Director. I shall now hand over the call to the management team for the opening remarks. Over to you, sir.

Thank you, Devanshu. Good evening, ladies and gentlemen. Welcome to Aditya Vision’s Q1 FY '26 Earnings Conference Call. Our earnings presentation and financial results for the quarter have been uploaded to the stock exchanges. We trust you've had the opportunity to review them. This quarter, witnessed one of the most unusual summers in entire history of 26 years of Aditya Vision with unusual rains continuing throughout Q1 with no heat waves in our core markets of Bihar, Jharkhand and Uttar Pradesh. May -- in fact, May '25 was the coldest in over 6 decades across India. You may like to compare the rain and temperature as mentioned in investor presentation, which will show the tough conditions as encountered by the sector. In fact, to tell you, rainfall during March to June was 198 mm compared to average of 145 mm in UP. In Bihar, it was 223 mm compared to 157 mm average. And Jharkhand, it was 215 mm compared to 155 mm average. So you can see the difference in this period. Similarly, temperature during March and June in current year in UP, it was 35.1 degrees Celsius as compared to 37.6 degrees Celsius. In Bihar, it was 34.8 degrees Celsius in current year compared to 37 degree centigrade average. And in Jharkhand, current year, it was near 34.5 degrees Celsius, whereas its average was 36.4 degrees Celsius. As a result, demand for the seasonal cooling products plummeted in line with the broader industry trends for retailers and OEMs. Leading OEMs in the cooling category reported a 15% to 30% decline in primary sales due to sharp buildup of channel inventory, particularly across India on start of summer season. However, even under these circumstances and challenges beyond our or anyone's control, I'm happy to inform our shareholders that our revenue grew 6% year-on-year over a strong Q1 FY '25 base to INR 940 crores, highlighting our strength of execution and adaptability to adverse situations. Despite elevated fixed costs associated with the 29 new stores launched in trailing 12 months, which are expected to normalize as they mature, I'm really happy to report that we have maintained EBITDA margins at 9.5% and our profit after tax grew by 4% to INR 55 crores compared to INR 53 crores Y-o-Y. Our gross margins improved from 15.22% to 15.33% Y-o-Y. This was a result of our proactive steps to manage profitability. We rationalized noncritical operating expenses, including advertisement, promotional spending, warehousing, freight and security expenses while preserving front-end service quality. This measured focus and precise cost control ensured operational stability throughout this peak season. Amid external softness, internal discipline played a decisive role, anticipating a strong summer air conditioner sales, as you are aware, we proactively stocked inventory at the end of Q4 FY '25 to mitigate potential compressor shortages and benefit from early season OEM discounts. However, as demand softened, our teams responded swiftly driving selective sales through targeted promotions and engaging OEMs early to provide enough support in liquidation of excess inventory. This agile approach helped reduce our inventory levels by INR 150 crores in Q1 FY '26 compared to March '25. And your company remains comfortable on stocks of AC, which has now come to company's historically normal levels. We also saw a meaningful improvement in our capital position due to effective inventory liquidation, robust receivable management and disciplined procurement. The short-term borrowings declined sharply from INR 278 crores in March '25 to approximately INR 115 crores as of -- as on June 30, '25. Our retail footprint continues to expand in line with our long-term strategy. We opened 4 new stores during Q1, consistent with our strategic quarterly pace. I'm pleased to share that we have added 3 more stores in July '25, taking our store count to 182 as on date. We remain on track to add 25 to 30 new stores in FY '26, aiming to cross the 200-plus store milestone by year-end. Our presence in Central Uttar Pradesh, including Lucknow, has deepened further, strengthening our reach across key cities of UP. Looking ahead, we remain optimistic. India's economy is expected to grow by 6.4% in FY '26, supported by rising rural incomes, public CapEx momentum and improving consumer confidence. The Union Budget 2025 personal tax relief is expected to release INR 1 lakh crore into consumers' hands. Should provide a strong tailwind for discretionary retail during the festive quarters. In Bihar, as I speak, effective today, the 125 unit free electricity scheme has been launched by the government, which will boost consumer durable and electronic demand and support overall consumption. It will further enhance the disposable income in hands of consumers and will psychologically lead them to buy products driven by electricity. While Q1 brought unforeseen external challenges, our fundamentals remain solid, a reflection of Aditya Vision maturity, resilience, resurgence and consistent execution. And we hope that this pent-up demand is -- we are going to reap the harvest in next FY Q1. So now, I'll hand over the floor to Mrs. Yosham Vardhan to provide an overview of the financial highlights for the quarter. Over to you, Yosham. Are you there?

Thank you, sir, and good evening, ladies and gentlemen. We are pleased to report a stable financial performance for the Q1 of FY '26. Let me take you through the key highlights. Revenue for Q1 FY '26 stood at INR 940 crores, reflecting a year-on-year growth of 6% compared to INR 889 crores in Q1 FY '25. Gross margin saw improvement at 15.3%, up from 15.2% in the same quarter last year. EBITDA for the quarter stood at INR 90 crores with EBITDA margin maintained at a healthy 9.5%. Profit after tax came in at INR 55 crores, registering a 3.9% increase over INR 53 crores in Q1 FY '25. Our retail footprint continues to expand. As of June 30, 2025, we operate 179 stores, 113 in Bihar present across all 38 districts, 30 in Jharkhand, covering 21 of 24 districts, 36 in Uttar Pradesh, where our brand continues to gain strong traction. In Q1 FY '26, Bihar remained our largest revenue contributor at 76%, followed by UP at 13% and Jharkhand at 11%. Same-store sales growth for Q1 FY '26 stood at minus 4%. We also witnessed a reduction in inventory by INR 150 crores compared to March 2025 and reduction of short-term borrowing from INR 278 crores in March to approximately INR 115 crores as of June 30, 2025. Thank you for your continued trust and support. We now open the floor for questions.

Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Aniruddha Joshi from ICICI Securities.

Sir, regarding the air conditioner, essentially air conditioner, refrigerator, air cooler and fans. So all the summer products, what will be the inventory? And what will be the plan to, in a way, reduce the more than normal inventory? Also, whether the brands are offering any support to us. We heard that the air conditioner market [indiscernible] offering free installation also or like #2, #3 players are also offering discounts, some discounts. So how are we on that front? So that is question number one. And then question number two is the BEE norms will change in air conditioner in January, means rather from January. So we will have to finish off all the inventory, I guess, by end of December itself. So considering only 5-odd months left, so which are anyway monsoon and winter months. So what will be the strategy of the company to work towards the reduction in the inventory?

Thank you for the question. As far as inventory is concerned, I have already spoken in my earning call that we have reduced our inventory to the tune of INR 150 crores. And on the AC front also, we are at a very normal level, which is a historical level for our Aditya Vision with so many stores. So we are quite comfortable with our stocking of AC. And it's not a cause of concern at all. As per our strategy, we -- in fact, from mid-May, we started destocking. And right now, again, what you said that whatever stock left, your question number second is that BIS will be applicable from January next year. So actually, we are not bar from selling whatever we will be carrying at that period. The only manufacturer OEMs cannot -- they cannot manufacture product, which is not BIS as per government guidelines. So we are not stuck up with any product, even if -- otherwise, also, you are not going to sell all the ACs even placed on display on your showrooms. And when you are having, let us say, 180-plus showrooms, so everywhere, you have to keep the AC, whether it is -- even if it is a winter or something because when customers, they see it, then only they come to buy it when the season arrives. So that way, we are -- I don't think there will be any challenge. And as you said that OEMs are very flexible in this regard. In fact, they were very supportive. It will not be proper for the company to divulge what support we actually get from OEMs. But I will say that substantial support has been provided by all OEMs to us so that we can could liquidate our AC inventories, and we are quite satisfied on that front.

Okay. Sure, sir. Just in terms of the stores, now we have rolled out only 4 stores in Q1, but I guess we have rolled out 3 stores in July month itself. That's right?

Absolutely. So as you know -- you must be aware, strategically, we opened less stores in Q1 because of lean season -- entry into lean season. And then we start building up our store count.

No, just wanted to reconfirm.

The next question is from the line of Rehan Saiyyed from Trinetra Asset Managers.

I have a couple of questions.

Hello, I am not getting your voice.

Am I audible to you?

Rehan sir, your voice is breaking.

Now, its clear?

Now clear, please go ahead.

My question is focused towards the upcoming festive season. So how do you view quarter 2 demand given the upcoming festive season has strong monsoon so far?

Again, I'm not able to hear you.

Okay, sir, I will speak a bit slower.

Speak on the microphone or you speak slightly loudly.

Okay. Sir, how do you view quarter 2 demand given the upcoming festive season and monsoon so far, are you seeing any early pickup in the [indiscernible]?

It is -- in fact, I'll say it is too early for us to comment on that. Festive season will start in late September. This is very early this year. Festive season is going to come. I think Mahalaya will be in September itself. So we'll be preparing ourselves by end of this -- before the end of this quarter for that. And as far as demand is concerned, I'm very optimistic that because of good rains, as you have seen, very good rains and probably 10% more crop has been sold. So I think that bumper harvesting will be there in entire geography where we are operating. So I think given that Q1 was not that good, so people will be having so much of disposable income with them. And I think festive season should be really very well.

Okay, sir. Okay. And my second question is around your seen sharp jump in revenue quarter-on-quarter. So could you highlight how much of this was sharp jump in revenue in quarter-on-quarter basis. So could you highlight how much of this was driven by volume growth versus price hike or average selling price increase?

You are aware that in Q1, this is the summer season and AC contributes higher. So our contribution for AC in '26 was around 42% of our entire revenue.

Okay. And sir, one more question is around -- like lastly, what are the 2, 3 focus areas for the management team in the second half of FY '26 for sustainable growth?

What are the focus areas?

Two to three focus areas that management is focusing internally.

Our focus area will be to how to enhance our presence everywhere and boost sales. This will be our primary focus.

No sir. If I clarify more like apart from Bihar, are you focusing towards any other geography or any other state?

No, no. We are expanding. Right now, we are -- our focus is Uttar Pradesh, UP, and we are not right now focusing any other state.

Okay, sir. Can you clarify the CapEx guidance regarding for this year?

You are not audible. CapEx for what you said, repeat it?

For this year, for this year, FY '26.

We have already guided that we'll be opening around 25, 30 stores in this financial year.

The next question is from the line of Devanshu Bansal from Emkay Global Financial Services.

Just wanted to better understand the steps that have gone or initiatives that have gone behind the stable EBITDA margins. As you mentioned that, obviously, retail comes with higher fixed costs and there were new store additions over the last 12 months as well. So if you could just throw some light on the key initiatives that we have taken? And are these sort of sustainable or with the return of sales growth, these expenses should also sort of come back to the previous levels?

Actually, I've already spoken in my earnings call that we -- when our top line was -- we could understand that top line cannot improve because of the weather. So we were very much focused on our expenses, operating expenses. So we try to keep it as minimum as possible. As you know, if sale is not there, so there are so many bonuses and incentives, these are also not there for clients. So that has also cut down on our expenses. And more so when the sale is not like -- we are used to grow at a 30% level. But we have not grown at that level in this quarter. So our entire cost on freight, security expenses, warehousing, sale promotion, everything has come down. So these things have been effectively managed by us and keeping in view that we have to see the bottom line as well. And if we are not able to increase the top line, at least our bottom line should remain stable. So these are the key factors. And once we are on our track of high growth, then again, these expenses are going to go up.

Understood. Understood. Fair enough, Mr. Sinha. Secondly, sir, you did provide that gross debt is around INR 115 crores. Can you also highlight what is the cash level at Q1 end, that will be really helpful.

In fact, if you take entire equity and cash -- whatever cash is cash equivalent with the company, it's down at INR 141 crores.

Okay. Okay. Fair enough. So whatever cash inventory reduction has happened has helped to sort of lower down our debt levels, right? So that is the right understanding.

And there has been a nice cash flow also -- positive cash flow also.

The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, I wanted to understand the inventory that we have as of Q1 FY '26 end versus what it was in Q1 FY '25.

I may not be able to tell you about last year's inventory level. But what I remember, it must be around [indiscernible] June 30, it must be around INR 380-odd crores. And in this year, it will be, if you subtract INR 698 crores and minus INR 150 crores. So it will be around INR 548 crores.

Got it. Sir, do we like foresee -- sir, we mentioned that we focus on discounting to get our AC stocks to normalized levels. So do we -- sir, I wanted to understand 2 things regarding that. Sir, do we expect any further discounting over the next 3, 4 quarters or interest cost burden that we can expect? And the second question was, sir -- yes, sir, that was my question, sir.

I'm afraid, Madhur, you will have to repeat the question.

Yes, sir, I wanted to understand regarding this inventory level.

Can you speak slightly louder, please?

Yes, sir. Sir, is my audio better right now?

Yes. Now it is much better.

Yes, sir. Sir, I wanted to understand, you mentioned that we focused on a little higher discounting to get our AC stocks to normalized levels. So what was the impact of that on our margins? So was at 0.5%, 1% on our margins? And the second question was, sir, this inventory that we have currently, sir, do we expect some kind of either discounting cost or interest cost burden over the next few quarters to hit our books? Or we expect we are fairly comfortable with that?

But I think I never -- Madhu, I never said that we've resorted to discounting. I do not know where you have got this word from. But we never resorted this to any discounting. We -- in fact, we took all the support from OEMs like, as you know, how they support, they give free installations and they give various other facilities to the customers, so these are the things. But discounting is not -- by discounting, there was no need for it to give any discount that way. And secondly, in future also, when I'm telling you that we are at a comfortable level of stock in air conditioner, so we need not go for discounting or -- we are very comfortable. We aren't desperate to liquidate our stock.

The next question is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund.