Blue Star Limited (BLUESTARCO.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Blue Star Limited Q3 and Nine Month FY '26 Earnings Conference Call. We have with us today from the management, Mr. B. Thiagarajan, Managing Director, Blue Star Limited; and Mr. Nikhil Sohoni, Group Chief Financial Officer, Blue Star Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. B. Thiagarajan. Thank you, and over to you, sir.

Good morning, ladies and gentlemen. It's a pleasure and privilege to interact with you. You might have seen the press release yesterday after the Board meeting. I have been indicating from November onwards that this quarter is also going to be a subdued one. And if at all, one can expect some revival in the Room Air Conditioners growth with the energy label change that was scheduled on 1st of January 2026. And therefore, you will see the results almost it is same as what I had indicated. It is a modest revenue growth, a flat or a slight modest increase in the operating profit, even the carryforward order book indicated a modest growth. The highlight, while Nikhil will deal with it, the silver lining is that the Room Air Conditioner business seems to be returning to the growth path and building up to the Q4 onset of summer season. And the cost control measures that we had implemented, that seem to be resulting in managing the margins well. Otherwise, it's a quarter which one would like to forget and move forward, the three quarters, and look at an excellent Q4. That's where we are. In other words, 2025 was a year, I think after many, many years of quarter after quarter significant growth, we faced these challenges. Having said all this, I believe that we are doing better than the industry peers, and we would have shown higher margins. We would have gained market share modestly some decimal points. And we would like to now focus on Q4 and FY '27. That's where we are. And with that, I will hand it over to Nikhil for highlighting the details of Q3 as well as nine months ended December 2025 results.

Thank you, Mr. Thiagarajan, and good morning, ladies and gentlemen. Let me take you through the financial highlights for the third quarter. So during quarter 3 FY '26, the company has recorded modest revenue growth despite prevailing market headwinds. The good news is that for the first time in this fiscal, the Room Air Conditioner business has witnessed modest growth owing to challenge building up the inventory ahead of the energy level change deadline of January '26. Financial highlights for the quarter ended December 31, 2025, on a consolidated basis are summarized as follows: Revenue from operations for Q3 FY '26 grew 4.2% to INR 2,925 crores as compared to INR 2,807 crores in Q3 FY '25. EBITDA, excluding other income, for the third quarter FY '26 improved to INR 221 crores, EBITDA margin of 7.5% as compared to INR 209 crores, EBITDA margin of 7.5% also in last year's quarter 3. PBT before share of profit and loss of JV and exceptional... can you hear me? So PBT before share of profit and loss of JV and exceptional items was marginally lower at INR 165 crores in quarter 3 of FY '26 as compared to INR 167 crores in quarter 3 of last year. Tax expense for the quarter 3 was at INR 27 crores as compared to INR 47 crores in Q3 of last year. Pursuant to the notification of the labor codes as required by ICAI guidance note, the company has recognized an incremental impact of gratuity and leave encashment amounting to INR 56 crores on an estimated basis. This nonrecurring item is shown as an exceptional item in consolidated statement of profit and loss account for the quarter ended December 31, 2025. Consequently, the net profit was at INR 80.5 crores in Q3 of FY '26 as compared to INR 132.5 crores in Q3 of FY '25. Carried-forward order book as of December 31, 2025, grew by 1.3% to INR 6,898 crores as compared to INR 6,810 crores as of December 31, 2024. Carried-forward order book as of March 31, 2025, stood at INR 6,263 crores. The capital employed as of December 31, 2025, increased to INR 3,551 crores as compared to INR 2,763 crores as of December 31, '24. Net borrowings as at INR 352 crores as on December 31, 2025, as compared to a net cash position of INR 102 crores as of December 31, 2024. Coming to business highlights for the third quarter. Segment 1, Electro-Mechanical Projects, Commercial Air Conditioning. Segment 1 revenue grew 8.6% to INR 1,696 crores in Q3 of FY '26 as compared to INR 1,562 crores in Q3 of FY '25. Segment result was INR 115 crores, that is 6.8% of revenue in Q3 of FY '26 as compared to INR 119 crores, which was 7.6% of revenue in Q3 of FY '25. Order inflow for the quarter was lower by 16.5% compared to previous quarter. The quarter order book was INR 1,459 crores in Q3 of FY '26 as against INR 1,748 crores in Q3 of FY '25. Coming to Electro-Mechanical Projects business. In the third quarter, equity momentum from buildings, data centers, and factories was encouraging, but a few large order finalizations were deferred to next quarter. Hospitals and malls have witnessed strong growth potential, including in Tier 3 cities, supporting a favorable medium-term outlook. Commercial office demand remains healthy in select pockets, while data center and factory segments continue to see stable and robust inquiry traction, supporting a steady order momentum. We continue to remain selective about new order bookings as we focus on effective capital deployment. Since the infrastructure project profitability is lower than commercial buildings, factories, and data center verticals, as we approach closure of these projects, the segment margin gets impacted to that extent. Carried-forward order book of Electro-Mechanical Projects business was at INR 4,777 crores as on December 31, '25, as compared to INR 5,146 crores as on December 31, '24, a negative growth of 7.2%. Commercial Air Conditioning Systems. The Commercial Air Conditioning Systems business saw healthy order bookings in this quarter, supported by strong demand. While the revenue during this quarter was subdued as some product deliveries were shifted to next quarter, the strong order book gives confidence in the future prospects. International business, given that the tariff-related uncertainties persist, the future prospects of the U.S. business are highly dependent upon the outcome of the India-U.S. trade deal. Despite this headwind, our foray into the U.S. and Europe is progressing well. On account of the above change in the business mix, Segment 1 margins were lower at 6.8% of revenue in Q3 of FY '26 from 7.6% in Q3 of FY '25. Segment 2, that is Unitary Products, the revenue was flat at INR 1,154 crores in the current quarter as compared to INR 1,164 crores in the quarter 3 of last year. Segment result was INR 98 crores, which was 8.5% of revenue in Q3 of FY '26 as compared to INR 95 crores, 8.1% of revenue in quarter 3 of last year. Coming to Room Air Conditioners. As anticipated, the energy label change with effect from January 1, '26, helped in reduction of inventory, and we witnessed revival of growth. The company would have gained market share slightly during this quarter. The cost reduction initiatives undertaken since Q1 of FY '26 have contributed to the improved margins. The production of new range of products as per the new energy label norms has begun and the company is preparing for the summer season 2026. We have taken short-term, long-term measures to achieve supply chain resilience. The depreciation of INR and rising commodity prices will compel us to revise the prices upwards in Q4 of FY '26. The dealer network expansion is progressing as per the plan. As far as Commercial Refrigeration business goes, contrary to the expectations that the Commercial Refrigeration business will rebound during the festival season onwards, the market remained muted. Consequently, all the product lines other than the storage water coolers degrew. The anticipation is that the demand will revive only during the summer season. Due to focus on cost optimization and overall cost management, the segment margins improved to 8.5% in Q3 of FY '26 as compared to 8.1% in Q3 of FY '25. Coming to Segment 3, that is Professional Electronics and Industrial Systems. The revenue degrew by 7.1% to INR 75 crores in Q3 of FY '26 as compared to INR 81 crores in Q3 of FY '25. Segment result was INR 6.8 crores, which was 9.1% of revenue in Q3 of FY '26 as compared to INR 6.2 crores, which was 7.7% of revenue in Q3 of FY '25. The uncertainties around the regulatory policy framework pertaining to the Med-Tech Solutions business are yet to be resolved. Consequently, the business has slowed down. However, Industrial Solutions continued to grow, driven by strong demand in the automotive and steel industries, and data security solutions maintained steady performance. Coming to business outlook. While three quarters of this fiscal have been challenging, the signs of market revival are encouraging. The company expects Q4 FY '26 to be a strong quarter for room air conditioner, commercial air conditioning and refrigeration products. In Electro-Mechanical Projects business, the demand from factories and data center vertical continues to be healthy. In anticipation of a robust growth in FY '27, the company is focused on expanding distribution reach and continues to invest in R&D, manufacturing, and digitalization while persisting with cost optimization. We now... with that, ladies and gentlemen, I'm done with the opening remarks. I would like to now pass it back to the moderator, who will open the floor to questions. We'll try and answer as many questions as we can, and to the extent that we are unable to, we'll get back to you via e-mail. With that, we are open for questions.

[Operator Instructions] Our first question comes from the line of Natasha Jain from PhillipCapital.

Congratulations team on a good quality set of numbers. Very quick three questions. First, your UCP top line is flattish, high-margin commercial business is muted, and yet you have posted margin improvement. So can you call out the kind of cost rationalization that you have done this quarter? That's the first one.

Thank you, Natasha. The first thing is that, as you are aware, this question will keep coming. It's a blended revenue and result pertaining to Room Air Conditioners and Commercial Refrigeration. As far as revenue is concerned, Commercial Refrigeration, there seem to be a problem that is connected with... we keep wondering why that is happening. It is basically because of the FMCG related demand that has not come back at all. So the ice cream, QSR, and other segments will have to go into the expansion mode. We thought with the substantial reduction in GST for food and the processed food products, there should be huge demand growth. And at least we have not seen till now that part reviving. So the Room Air Conditioners is the one which has helped us to... we have not only grown in revenue, which the breakup I won't be able to disclose. You all will get it once the GFK numbers get published. The margin improvement is basically our own decision not to get into discounting in order to improve the numbers. First of all, you are aware that 1st of January was the energy label change. Now the inventory pressure was there in the... for all the brands. And as I had indicated in the Q2 results, our inventory situation was much lesser. We stopped producing the products in order that we won't be saddled with inventory. If you are saddled with inventory, you will be heavily discounting in order to get rid of the stock before the deadline. And for the benefit of others, 5 star would have become 4 star, 4 star would have become 3 star, so on and so forth. And obviously, 3 star being the highest selling SKU, we would have got into trouble if we are going to produce inventory in anticipation of the market demand. We took that decision much earlier, not to slow down the production and move towards the new energy label products. The second part is connected with the variable cost connected with the Room Air Conditioners business. We had been moderating ever since May 2025, and those are resulting in improved margins. Now you have... I'll have to also deal with what will happen in Q4. I think in January, there would have been enough inventory, which the brands would have pushed into the channel. And I do not see January to be a great month. It should pick up in February. All depends on how the summer season is going to begin. In the meanwhile, three things have happened. Number one, due to GST, there would have been a 10% reduction to the consumer. The energy label change would have pushed up the prices depending on the SKU, depending on the brand. I'm talking about Blue Star. It would have increased the prices at least 5% to 7%. This is what would have happened. Then you have got the commodity prices and the exchange rate. All this put together, the price is going to be much higher. So GST reduction is available, whereas the other three, energy label change, plus you have got the commodity prices, which are continuing to shoot up, and the exchange rate, all this put together will result in, my estimation is that somewhere around at least 10% of net increase to the consumers, whereas the consumer would have been believing that there is a 10% reduction than last year they are going to get it because the GST reduction will translate into, which is not going to be the case. So therefore, we will need much more discipline going forward in Q4 and in the summer season itself that we have to watch how the demand will be, which is dependent entirely on summer season, to how the pricing will be in the marketplace from February onwards. January is anyway, all the inventory would have moved in second half of February onwards, what it is. The good news is the demand seems to have revived, and there will be pent-up demand as well. And we... our intention is to maintain this kind of margin levels in Q4 as well for the simple reason. Again, I'm disclosing the costs that are being owned by the industry. Number one is connected with the consumer finance itself, that it is 40% of the sales, and it will continue to grow the consumer finance cost burden, which we'll share with the dealers. The second part is connected with the e-based liability. As you move every year, that for Blue Star, it will be 2016 numbers multiplied by 70% of that, that will become a liability, that is what it is. And in the industry, in the marketplace, 5-year warranty seem to be a thing and 5- to 10-year warranty cost, that is the other part of it. And the in-shop demonstrators is an additional cost. So with all this, meaningfully, one should be running the business for delivering an ROCE. And I think that 8.5% kind of a margin is bare minimum one should look at it. If it is a great summer year, one should try to do 9.5% in the best interest of the category. Thank you.

This is extremely helpful. Just one clarification. Sir, you mentioned that 10% will be the net increase to consumers, right? This is after incorporating the GST discount.

Approximately. All the... if this will... this can vary in the sense that you consume the old raw material, you keep buying the raw material. The volatility is very high in the marketplace of the commodity prices and the exchange rate, and you are building up to the summer season, your consumption of the raw material will depend on also. I think it should be around 10%. I'm not categorically saying in the region of around 10% increase is inevitable.

Understood. Sir, and one last question. So I mean, the entire thesis is based on a good summer, right? So let me just ask you a slightly reverse question. Just hypothetically speaking, if calendar '26 is also bad in terms of summer, then how does Blue Star navigate the challenges? What are the other sharp growth levers which can keep us afloat despite RAC and commercial not working in case of a bad summer?

So the very first thing is that the history shows that you will not... it has... not two consecutive summers have not happened like that, but the pent-up demand, given that the category penetration is very low, it should be much better than last year, okay? People are not going to be postponing forever. We are still... our market size is nowhere comparable to China. So that should be kept in mind. Then I had said that the weatherproofing Blue Star is a program, which means you need to look at the B2B businesses as well, like the Commercial Refrigeration is not that seasonal dependent. There is... it is also... it is not that much impacted. There is some impact out of summer season getting washed out there, but Commercial Air Conditioning part of it is another portfolio where we have a strong presence. And in Electro-Mechanical Projects, whether it is connected with the traditional segment, the buildings or the factories and data centers, we should not have any... infrastructure comes with its own risk. So the weatherproofing Blue Star is connected with the portfolio, how you manage. The second part is connected with how much of the expenditure you can keep it variable. For example, advertising, if anticipation of the summer, we will begin in the middle of March with the IPL, I'm saying one example with the IPL matches beginning, you will end up spending, you will commit for that. And hoping that April will be better, April, second half will be better, something like that. But then you... last year, that's what happened. You have spent the money, nothing will happen. And you can't set it right. So we do have the variable expenses, how you can manage. The third part is the localization is happening in a significant manner, whether it is the finished goods or whether it is connected with the component ecosystem. Therefore, you will be in a position to manage the inventory. See, the 2025 summer washout was managed for better than 2023 summer washout. In 2023, the inventory lasted for a much longer period. So therefore, the weatherproofing booster, we call it internally, that is a program. But having said that, I'm again saying the two summers cannot be... we have not seen it. But even if the summer is going to be bad, that demand will not be that bad. First of all, remember this, when you compare next year, you will compare with the bad year. So obviously, the results will be. But internally, we will be looking at how we do with FY '24 rather than... sorry, with the FY '25 rather than FY '26. That's the answer... I'm answering the initial questions elaborately so that these questions do not come up later. Thank you.

[Operator Instructions] Our next question comes from the line of Rahul Agarwal from Ikigai Assets.

Sir, firstly, just a clarification on Natasha's question. The 10% net hike, 8% to 10% is basically after the GST cut, right? It's adjusted for the GST cut.

Yes, yes, yes. Look, the [indiscernible] has been very clear that any reduction will be passed on to the consumer, any increase will be passed on to the consumer if you have to maintain the margins. So GST reduction will be completely... it was completely passed on. Then you have got the energy label change pushing up the prices. Then you have got the commodity prices, then you have got exchange rate. So it is all that happened. So there is [indiscernible]

Yes. Understood, sir. So basically, now getting to questions, just a couple of them. Firstly, on the growth outlook. So on Segment 1 and Segment 2, Segment 1, essentially on the Projects and CAC, typically, we discuss 12% to 15% CAGR is what the growth rate should be. I think if I look at past 3 years, we've done way better than that, 20% kind of year. Just wanted to understand, in your sense, how should we model like a medium-term growth here, right? Because Projects have been doing extremely well for you, plus commercial plus international. I think a mix of this segment is actually doing better. Some color on that will be helpful over a 2- to 3-year time frame.

The problem, as I said in my answer, the thing was that for varied reasons, FY '26 is muted. The order finalization, and we didn't see the liquidity in the market. As you are aware that we are extremely cautious in getting into infrastructure projects because infrastructure projects are of low margin, long duration. And as these projects get to the closure stage, which will be 2, 3 years later, usually, you start booking many costs. And therefore, we have been very, very cautious in chasing market share out there. Commercial Air Conditioning is connected with multiple sectors, factories, the shop showroom, boutiques, hospitals, so on and so forth. But unfortunately, the shop showroom, boutique, retail, all these segments, we have not witnessed any great growth in FY '26. But in FY '27, there are signs that it will come back in a good manner. Keeping all this in mind, I think if you ask me, at the moment, I will take it a CAGR of around 8% to 10%, then look at revising it depending on how first six months of next fiscal goes.

Sir, nine-month growth rate is almost 20%, right?

Which one?

The nine-month growth rate for Segment 1 is almost 20%, right?

Correct. The pending order book was there. But the thing is that I will slow it down for six months because you have seen order inflow has not been good, right?

Okay. Got it. And secondly, sir, on the Commercial Ref, similar question. Nine-month growth rate, if you could just comment on growth rates for nine months for Commercial Refs? And how should we build the medium-term CAGR for this segment?

You don't have the breakup of that actually to... for me to disclose. But the category is supposed to grow at a CAGR of anywhere between 12% to 15%, given the processed food penetration or dairy or anything, pharma, anything, you take it. We are a very, very small market size country given our size. But the... it was a bad year, again, FY '26. There you can take it, 12% to 15% CAGR is a good modeling. And Room Air Conditioner, despite the summer, I will still model it on anywhere between 18% to 20%.

Our next question comes from the line of Aniruddha Joshi from ICICI Securities.

Sir, in the opening comments, you indicated about there are... while nine months were muted for UCP, but there are demand drivers now. So if you can elaborate a bit more on this, means like which regions you are seeing the growth, East, West, North, South or rural versus urban? Are you seeing growth in coming back in metros? Or in terms of the product profile, whether the growth is more in premium versus the value for money air conditioners? So if you can share more details on these aspects?

So all regions have done well. It's not one region has done well in that. And obviously, the Tier 3, 4, 5 are the ones which will continue to drive the growth. I think that is true for many categories because the penetrations are relatively lower there, but it will depend on the agricultural income actually. And that is the driver of the rural economy of India. I have been saying this, the Tier 3, 4, 5 consumers and the Tier 3, 4, 5 geographies will constitute close to 70%. That is reflected in the consumer finance schemes being availed, that is reflected in the question that you asked, it is the entry-level products. And whether it is airline, whether it is car, whether it is two-wheeler or whether it is mobile Wi-Fi services, you will see this that Indian market is driven by aspirational middle class. It is highly price sensitive. It is entry-level value for money products. And you see #1, #2 in many categories. It is a fact. And that should be true for air conditioners as well.

Okay. Sure, sir. Just last question. Mr. Mohit Sud is appointed as Executive Director of UCP segment for a period of 5 years. So heartiest congratulations to Mr. Mohit. And what will be the 5-year KRAs in terms of... for Mr. Mohit from the Board, whether it will be driving market shares, driving profitability or entry in new products, et cetera? So if you can elaborate on that? Yes, that's it from my side.

No. The annual KRAs are set by the NRC approved by the Board. So that is... that will keep happening. That's a internal process. The broad drivers of the... for the company will translate into KRAs, right? That what is company strategy, that determines the strategy of... that drives the KRAs of let alone Mohit, whether it is Vir or Me or Mohit or the entire top management, the company's strategic KRAs and operational KRAs, that's what will determine ours. Now broadly, if you want to understand what we are looking at is our track record has been growing faster than the market and gaining market share. We have not yet reached our first goal of reaching 15% market share, that we are somewhere... we have crossed 14%. And even in a challenging year, I think we have gained marginally some market share. So that we need to do. The second important part is that growth has to be a profitable growth, which means the margin guidelines that I mentioned, somewhere around 8.5% EBIT margin is absolutely important. And in ROCE, Blue Star is a benchmark outlier in the industry that we look at anywhere between 25% to 30% ROCE. That is an important KRA. There are other numerous KRAs, right? Like, for example, whether my brand salience, that brand has to be made relevant to the new consumers, and it should continue to be stronger in terms of salience. The next is that the customer experience, which differentiates us, that is an important strategy of Blue Star to provide a world-class customer experience. So broadly, the company's strategy is this, and that will translate into, including things such as that I will be ahead of the curve in terms of sustainability initiatives, like if it is an energy labeling, if it is connected with refrigerant, new refrigerant migration, carbon footprint, we have been ahead of the curve. That's what we would be. So this is where... is what will determine all our top management KRAs. Thank you.

Yes. Sure, sir. Just last thing. In this entire trade inventory summer, et cetera, the issue which is forgotten is the compressor. From 1st of July, again, we will... the industry as well as Blue Star will have to manufacture compressors in India. So how do you see the preparedness of Blue Star on this aspect?

So the thing is that, first of all, it is not Blue Star has to manufacture, whether there is enough component ecosystem that is available for us to source. And I estimate till at least to 2028, we need to reach a particular scale for considering manufacturing of compressors, but supply chain resilience is an important program. And I think we are well secured with the domestic manufacturing capacities that are coming up from many players. Thank you.

Our next question comes from the line of Sonali S. from Jefferies India.

Congratulations on a good operational result. Sir, my first question is, could you help quantify maybe on an industry level or the company-specific level, whichever you are more comfortable with, the inventory situation for air cons now versus, say, start of October?

Sonali, thank you, but I don't think we deserve any congratulations. It's a very modest growth. It's not a great result, I would say, but we may have done better than the industry is our hope. The inventory level, my estimate is that in maybe 8 to 10 weeks for the industry, and it may be a low year for us. I think it may be 5 to 6 weeks is my estimate. But ours, I'm sure. Industry, I'm guessing it. That's what it should be. And from... second part, I couldn't follow, that from October onwards, there has been substantial reduction. Now I would say, see, inventory will not be 0 in any case. It has to be some 2 to 4 weeks inventory will always be there. In our case, I think there is at least some 2 to 3 weeks of more inventory is there, but it is always manageable. That's what it is. The industry, again, first of all, you had produced anticipating a great summer. Then during the GST transition, there was a bottleneck, a blackout period, then you are left with the winter season coming in and the energy label change. So there is... there was a pressure. But I won't consider inventory as a great bottleneck for February, March. The one and the only event that we should be watching out for is onset of summer. If the summer sets in, there is nothing to worry about.

Sir, just a clarification over here. 5 to 6 weeks is company plus channel, right? And secondly, what is the normal inventory level, 4 weeks?

Yes, it will be around 4 weeks. But normally, from January onwards, we will start building up inventory for the forthcoming season, okay? And because we won't be able to meet the demand in March last week or March, 2nd of April, May. So we wouldn't have... we will be even comfortable with, in our case, 8 weeks of inventory being there in January, 10 weeks of inventory being there in February, 12 weeks in the month of March, if the summer is going to be... definitely going to be stronger. But you will be very cautious having gone through the past rate and also the systems have changed now. You have got a local component ecosystem and your own manufacturing units. You are not dependent on some China imports of finished goods. And I would say that in the buildup to the summer, even 8 weeks is okay.

Got it, sir. Sir, my second question is regarding the price hikes that you mentioned, that about 10% price hike. Sir, would it be able to bifurcate this price hike between, a, the hike because of energy efficiency, and secondly, because of the rising input cost? I believe energy efficiency has already entailed a 7% to 8% price hike. So is it fair to assume that this 2%, 3% have been passed on to the consumers because of the price hike?

No, no, no. First of all, this will vary. It is not a universal norm. Depending on the product design, it can vary from manufacturer to manufacturer. So don't take it as I'm talking for the industry. My estimate is that there are certain products in our portfolio that the new energy label would have costed only 5%. There are models which are... energy label is pushing up the price between 7% and 8% in our portfolio. The other part of it is entirely dependent on when you bought the inventory and what pipeline you have got because week-to-week, it is changing. So it is very difficult to estimate. So broadly, I'm saying around some 7% may be due to energy label change. And you may have around 8% to 10% arising out of commodities, then 10% reduction you have got in GST. So therefore, net, I'm saying ballpark is 10%. But very difficult to estimate at this point of time. Again, you can't be... we are not a ForEx dealer to be determining daily rate. When you announce the price, it will be for at least a 3-month period, right, or 2.5 months period. You can't be altering prices every day. So you have to pass a judgment and increase the prices. The dealers won't be able to manage. He can't sell it on price, day after tomorrow, change it, et cetera, because the customer who has bought will be fighting. So therefore, I am saying we will be looking at price increase soon as the inventories get liquidated.

Sir, any quantification ballpark as to how much price increase would you want to pass on the input cost pressures?

I think it will... I am telling it may be in the order of 10%.

10% more?

That is right. We will determine it. And let us say, there is a U.S. deal is signed, the dollar may come down, and what are all going to happen, I don't know because every day something is changing. But if you ask me to take a call today, it is important to increase the price by 10%.

Next question comes from the line of Keyur Pandya from ICICI Prudential AMC.

Sir, first question on the margin that you mentioned, 8.5% kind of margin for UCP. I think in last con call, you... I mean, looking at the slowdown you guided for 7% around margin for the segment. So now this is more of 8.5% is aspiration? Or do you think you can achieve that in Q4 and in FY '27 despite all the inflationary challenges?

So what I indicated, 2 parts. Number one is what would be the margin for Q4. You have seen the Q3 margin. And you have to look at the next year steady state. That's what it means. It's not full year is going to be changing to this, definitely not. So you can't make up for the summer, right?

But FY '27?

Q4 of FY '26 and FY '27, the margin outlook is 8.5%. Unless and until summer is going to be so very harsh summer, it can go up to 9%. And I'm not forecasting anything now. It can be looked at closer to March. And my estimate is that one should... if you do 8.5%, that's a reasonable margin, looking at it today, especially with the higher prices.

So just one clarification on this. The assumption is that the operating leverage of good summer and good volume growth would allow you to take the price hikes that you mentioned and [ deliver ] 8.5% kind of margin?