Aditya Vision Limited (540205) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Aditya Vision Limited Q2 and FY '26 Earnings Call hosted by IIFL Capital Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddhesh Deshmukh from IIFL. Thank you, and over to you, sir.

Hi, everyone. Good evening. We are pleased to host the management of Aditya Vision Limited for their 2Q FY '26 earnings call. I have with me on the line, Mr. Yashovardhan Sinha, Chairman and Managing Director; and Ms. Yosham Vardhan, Whole-Time Director. I will hand over the call to the management for their opening remarks, post which we can open the floor for Q&A session. Over to you, sir.

Thank you Siddhesh. Good evening, everyone. We are delighted to welcome you to Aditya Vision's Q2 and H1 FY '26 Earnings Conference Call, where we will review the company's financial and operational performance, along with key strategic developments during the period. Our earnings presentation and financial results have been uploaded to the stock exchanges, and we hope you have had a chance to review them. Trailing muted Q1, July, September quarter presented its own set of external challenges, marked by extended and above normal monsoon across our key markets. The rainfall during the period remained significantly above the long-term average with Uttar Pradesh receiving around 870 mm, Bihar about 990 mm and Jharkhand roughly 785. Temperatures were also significantly below seasonal norms, which resulted in softer demand for cooling products. More details are on the investor presentation. In addition, the quarter was influenced by subdued demand during Shradh period, coupled with delayed implementation of the revised GST slabs, which kept customers withholding their purchases throughout most of the August and September. With the onset of festive season, colliding with implementation of revised slabs of GST from September 22, 2025, the last 9 days of quarter saw a very strong rebound with demand rising exponentially in big size television and AC category along with all other categories as well, which gave us respectable growth in sales. Despite these temporary headwinds, Aditya delivered a robust performance in Q2 with revenue growing by 22% year-on-year to INR 458 crores. Our gross and net margins largely remained stable, supported by an optimized product mix, tight cost control and continued efficiency in operating expenses. As a result, profit after tax for Q2 increased by 4.2% year-on-year to INR 13 crores. Category-wise, large screen televisions, mobiles and washing machine performed well, supported by pent-up demand and improved affordability following the massive GST cuts. We continue to expand our retail footprint with the same cluster discipline that has been central to our model, adding 9 new stores during the quarter and taking our total 188 as of September 30, '25. We remain on track to cross the 200 store milestone within this financial year, reinforcing our presence across Bihar, Jharkhand and Uttar Pradesh and expanding deeper into UP markets. With our entry into bigger cities and towns in UP, we have seen elevated CapEx due to bigger store sizes, which will continue as our major expansion now focused on large showrooms. Our cluster-based approach ensured optimized logistics, superior service delivery and a stronger regional brand recall, helping us sustain our leadership in Hindi Heartland. As of September 30, 2025, our inventory stood at INR 676 crores. The higher inventory position reflects deliberate stock deposition for the ongoing festive period with major events such as the Sara started from September '22, Navratri and Dhanteras and Diwali coming in very early this time in mid-October. This strategic buildup ensured adequate product availability across key categories and timely readiness for peak consumer demand during the festive season. Encouragingly, early trends of festive period indicate strong momentum, particularly in premium appliances supported by post GST price rationalization and improved consumer sentiment. Aditya Vision has entered Q3 in a strong footing, supported by healthy demand trends and strategic inventory positioning. The broader environment is turning increasingly supportive with several policy initiatives driving rural and semi-urban consumption. The INR 10,000 direct transfer under the Mukhyamantri Mahila Rojgar Yojana in Bihar to about 130 crore women amounting to INR 13,000 crores is already boosting household liquidity and discretionary spending. The free electricity scheme for up to 125 units per household amounting to approximately INR 900 per month is lowering monthly outflows, freeing up income for essential and aspirational purchases. Salary revisions linked to the 8th pay commission with hikes of 30% to 35% for government employees and pensioners will further enhance purchasing power. And at the national level, present personal tax relief announced in the Union Budget 2025 are expected to release over INR 1 lakh crores into consumers' hands, creating a multiplier effect for retail demand. Our fundamentals remain strong and future-ready built on 26 years of consistent execution, regional dominance and an unwavering focus on delivering value for our customers, partners and stakeholders. With that, I'll now hand over the floor to Ms. Yosham Vardhan to share the financial highlights for the quarter and half year ended. Over to you, Yosham.

Thank you, sir. Good evening, everyone. We are delighted to showcase the financial performance of Q2 FY '26 and H1 FY '26. Here is a snapshot of our financial outcomes. During H1 FY '26, our revenue increased 10.5% year-over-year, driven by continued expansion and steady demand recovery across key product categories. Gross margin stood at around 15.2%. EBITDA stood at approximately INR 124 crores, translating to an EBITDA margin of around 8.9%, reflecting disciplined expense management and operational efficiency. PAT grew by over 4% year-over-year in H1 FY '24. SSSG for Q2 FY '26 bounced back to double-digit 12%, while for H1 FY '26 came to 2%, reflecting a softer first half impacted by extended monsoons and temporary GST-related adjustments. However, demand witnessed a strong rebound towards the end of the quarter, supported by improved festive traction and recovery in consumer sentiment. In H1 FY '26, Bihar contributed the majority of revenues touching 77%, followed by Jharkhand 11% and Uttar Pradesh, 12%, reaffirming the strength of our cluster-based approach and strong regional presence. In Q2 FY '26, our revenue recorded a year-on-year increase of 22%, supported by a strong rebound in the closing weeks of the quarter. Gross margin remained steady at around 15.1%. EBITDA for the quarter stood at approximately INR 35 crores with margins of 7.6%. Profit before tax stood at approximately INR 17 crores and profit after tax for the quarter stood at INR 13 crores, up by 4.2% from INR 12 crores in Q2 FY '25. We can now open the floor for questions.

[Operator Instructions] Our first question comes from the line of Anirudh Joshi from ICICI Securities.

Congrats for very healthy revenue growth in a tough quarter. Sir, now the margin is slightly on the lower side on a year-on-year basis. I agree these kind of variations are normal, but any color if you want to share on that? That is question number one. Question number two, now in AC and fans, the entire industry will shift to new BEE norms from January itself. So just less than 2 months now. So what is the strategy on inventory buildup in these 2 categories before the -- in a way the change happens in terms of pricing also and new products also? And third and important question, now with the Bihar elections underway, we hear about a lot of schemes like INR 10,000 given to more than 1.25 crore women. So logically, that can lead to some growth in kitchen appliances or other appliances also. So what is the outlook? And how do you see the -- any potential on that front? Yes, that's it from my side.

Anirudh, as far as gross margin is concerned, it would -- actually sale of air conditioner and cooling products, as you know, has been muted in entire half year. So this is because we were having much better margins in cooling products normally in Q1 also. So in that H1 has suffered. And in fact, what I told in the earning call also that even Q2 was also very soft in that temperature-wise or rainfall, but there were a lot of rainfall. So gross margin was under pressure definitely because of major categories of cooling products were flat. Secondly, you have asked for new launches of AC. Yes, new launch of ACs are in the pipeline from all manufacturers. So we think that going forward, we'll be having new products altogether because we -- as I have told earlier also, we are comfortable on our inventory side. Lastly, what you asked about the scheme, INR 10,000 Mukhyamantri schemes has come. It has, in fact, inducted around about INR 13,000 crores in the hands of women. And we are expecting a very good rebound in ASPs also because of this extra liquidity among them. And we are very bullish on commercial refrigerators or commercial deep freezers and all that because these categories will do very well for those who want to build some new businesses.

Okay. Sure, sir. Very helpful. And just one last question. What will be the inventory of cooling products that is essentially air conditioner and refrigerator, any excess inventory only in these 2 products?

No, I just told you that there's nothing. We are very comfortable as far as cooling product. The cooling product inventory actually refrigerator, there is no problem at all. The reason being that we are very -- always very short of it because it is sold across the entire year. And ACs are of course, these are the products which are sold mostly during summer period. So we are comfortable on that.

Our next question comes from the line of Yash Sonthaliya from Edelweiss Public Alts.

Congratulations for a good set of numbers. So my first question is on the pricing part, which you have mentioned in your PPT, 7%, 8% decrease in prices. Is this a replacement to the EMI discount, which came after GST in all your stores? Or is it over and above those discounts which are going on?

No, no. My answer in a very simple way, Yash, 7% to 8% prices have come down just because of GST cut. It's nothing to do about with our discounting on anything.

So if I'm understanding it correctly, then now in the stores, the prices will be 7%, 8% down and then there will be also one EMI or something which is already going on. Am I correct?

These are ongoing schemes which is given by the manufacturers in collaboration with financial. So these things are totally different thing, which is brought by the manufacturers.

Got it. Got it. And sir, specifically, like you already mentioned in the earlier question, but specifically Q2 to Q2 comparison, our AC and cooling product sales were on the Y-o-Y basis lower level for the quarter or at least have grown?

No, it has not dipped. It has just remained flat.

So sir, I wanted to understand if the sales of cooling product has been flat on Y-o-Y basis, then why our margins for Q2 is lower by 30 bps when compared to Q2 of last year?

This is the reason because we were selling ACs a lot. The percentage of sale of AC was nearly 48% last year. And in H1 -- entire H2, it was 38%, which has come down to 34%. So when cooling products -- sale of cooling products come down, margins are affected.

Got it. And sir, last bookkeeping question. What was the SSG particularly for Q2?

SSG for Q2 was 12%.

Our next question comes from the line of Manoj Gori from Equirus Capital.

Glad to see the assuring performance during Q2 despite the uncertainties. So my question is, if we look at this year, as you highlighted in the opening remarks, like at the end of the quarter, probably during the last week, we saw a huge turnout of consumers with the festive season onset and GST rates getting implemented. There has been some spill from Q3 to Q2. So just a near-term question, Q3 and Q4 when we are looking at 20%, 25% growth, but with festive season slightly moving into Q2, how do we see the quarter probably for the second half? That's my first question.

That's your first question. Can you ask all your questions?

Sir, my second question is, given that this year, we have seen a very muted performance on the cooling product categories, including air coolers, refrigerators or ACs, how do we see the upcoming season because obviously, the base will be favorable. Do you see pent-up demand coming in the volumes that we would have lost, plus do we see organic growth also kicking in? And accordingly, your Q1 of FY '27 should be extremely strong. And accordingly, your FY '27 growth might look far higher than what we normally aspire for of 20% to 25%, that's my second and last question.

Okay. My reply to your first question is that, yes, of course, 9 days, it was kicked in that huge sale was -- had kicked in or festive season overlapped Q2. But entire -- as you know, in Bihar, in Jharkhand and Eastern UP, our festive season is prolonged. It goes beyond Diwali upto Chhath, which is almost -- we have got another month's time, entire October, we have got as a festive season. This was the reason also for keeping our inventory level high because we were aware that we'll be selling throughout October. And as I have told you that it has started very well also. So again, whatever we are still seeing very good pent-up demand. Still, we are seeing and what I said that from macro level, so much of money is coming. So the money, we definitely, we believe that it is going to come into our system. And second question was about that we'll be doing better. Yes, yes.

Better than 20%, 25%.

Yes, definitely, this is what we foresee. And you can understand that even though we'll be entering into Q3 and Q4, we expect very good figures in Q3 and Q4 both as well. And what you said that if things are normal, then Q1 FY '27 should be definitely a very, very great one.

Sir, one small question just as a follow-up. So if we look at all the government initiatives or the liquidity infusion that has been happening, are we trying to be conservative or probably we are still keeping a watch how this translates into demand? As you highlighted in your opening remarks as well that all this INR 10,000 and everything will be flowing into the purchases. Can this be an additional catalyst for demand in the coming times?

Definitely, Manoj that the money, whatever money is coming in the hands of these people, it is bound to be invested somewhere like just think of it that it is passed over to women mostly. And if they start up a business, they are going to get another around full INR 2 lakh per person if they start a business. So starting -- for starting a business the primary thing will be either it will be a dairy, in dairy they need refrigerator, they have to come to us. For establishing a business, they have to have a mobile or a laptop. So these are -- the money is going to bound to flow into our system, and we will be a key beneficiary for all these benefits.

Our next question comes from the line of [ Vidhi Shah from CRK ].

My question is how many stores are you planning to add in FY '24?

Excuse me, Vidhi Shah, can you speak louder, please?

Am I audible now?

Yes, yes. You are audible but just slightly louder.

Yes, sir. So my question is can you guidance on the number of stores that you're planning to add in FY '26 second half as well as FY '27? And can you tell me how will it be funded?

It will be funded from our own sources. And we are planning to add 30 to 35 overall stores in FY '26.

Okay. 30 to 35 in H2 '26 itself?

No, no. I said overall. So whatever we have opened, overall, it will be 30 to 35 stores in entire year.

Okay. Understood, sir. And your guidance on EBITDA margins and SSG?

We have already -- one more thing. We have already opened 13 stores, and our strategy is to open most of the stores in H2. This is -- this strategy means with us. So most of the stores will be opened in H2.