Electronics Mart India Limited (EMIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Electronics Mart India Limited Q1 FY '26 Earnings Conference Call. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bajaj, CEO and Promoter of Electronics Mart India Limited. Thank you, and over to you, sir.

Thank you. Good evening, and a very warm welcome to everybody present on the call. Along with me, I have Mr. Premchand Devarakonda, our Chief Financial Officer. We have uploaded our results and investor presentation for the quarter end 30, July 2025 on both the stock exchanges and the company's website. Hope everyone had a chance to go through the same. During Q1 FY '26, our revenue stood at INR 1,739 crores. EBITDA stood at INR 110 crores with EBITDA margin of 6.3% Pre-Ind AS as margin stood at 4.4%. Q1 FY '26 turned out to be one of the coolest summer quarters in the recent years, driven by unseasonal and widespread rainfall across April and May. This unusual weather pattern significantly impacted summer appliances demand, particularly in the air conditioners and air cooler category, which rely heavily on peak summer temperatures to drive sales. To put this in perspective, in April and May, our key months for AC sales, saw nearly 50% higher rainfall than normal in Telangana. Over the full quarter, the state received 235 mm of rainfall versus a normalized average of 211 mm of rainfall, reflecting 11% deviation. In Andhra Pradesh, May alone recorded a sharp 148% increase in rainfall compared to the long-term average. While June was relatively dryer, the overall weather conditions during Q1 subdued typical seasonal demand. Despite the softer summer season, we adapted swiftly to the evolving environment and remain profitable at the company level, leveraging our diversified product portfolio and strong on-ground execution. We were able to pivot focus towards other categories. Our agile inventory management, targeted promotions and customer-centric approach enabled us particularly offset the impact of cooling product sales. While our EBITDA margin for the quarter appears softer on a year-on-year basis, it is important to recognize that Q1 FY '25 was an unusually stronger quarter driven by multiple heat waves across northern and southern part of the country, which has significantly boosted cooling product sales and overall margins. Additionally, over the last 12 months, we have expanded our retail footprint by adding 44 new stores, including 8 stores during the quarter 1 of FY '26 alone. This addition of 44 stores represent nearly 20% of our current network. These additions have been primarily in the MBO format. As with any rapid expansion, there is an initial impact on margins due to the fixed cost absorption lag. As newer stores typically operate at lower throughput compared to more mature stores, currently, many of our stores are less than 3 years old. We believe that as these stores gain traction and build a stronger presence, their unit economics will improve, which will eventually boost margins going forward. As of June 25, our total store count stood at 208, comprising 197 MBOs and 11 EBO stores. A significant portion of our store expansion this quarter was focused on Andhra Pradesh and Telangana with 7 out of 8 new stores opened up in these states. Unfortunately, this region also experienced a particular cool summer, coupled with highly unseasonal rainfall, which impacted demand for seasonal products. As a result, EBITDA margins for our South cluster stood at 6.7% primarily due to a lower contribution from air conditioners and lower fixed cost absorption driven by the early stage performance of new stores. On the other hand, our performance in the NCR region remains strong. MBO sales in the North stood at INR 159 crores, reflecting a robust 21% year-on-year growth. EBITDA margins for the North cluster improved 3.6%, up from 2.6% in the same quarter last year. Moving to category-specific performance for the quarter. Large appliances contributed 48% to our total sales in Q1 FY '26. While this quarter has been an exception in terms of growth due to external weather-related factors, our continued focus on driving sales in the premium segment featuring significantly high ASPs has helped us stay ahead of the curve. Our strong partnership with full brands continue to differentiate us and reinforce our position in the premium end of the market. Our second largest category, mobile phones contributed to around 40% of our total revenue in Q1 FY '26. We believe the category is poised for a new wave of demand driven by upcoming technology upgrades and feature enhancements. Many OEMs are actively working on next-generation AI-enabled devices, which we expect will not only enhance consumer interest, but also lead to an increase in both ASPs and volume going forward. This positions us well to capture growth and upgrade cycle begins to accelerate. India's economy outlook remains optimistic with projected GDP growth in the range of approximately 6.2% to 6.8% for the upcoming fiscal year, according to various reputable government and international bodies. This anticipated growth is supported by increased government capital spending and a rebound in demand driven by premiumization alongside favorable demographics trends and expanding consumer financing. Despite global uncertainty, these factors provide a strong foundation for sustained economic momentum. Further, the Union Budget '25 has provided significant personal income tax relief by raising the taxable income threshold, effectively putting an estimated INR 1 lakh crore back into the hands of the middle class. This increase in disposable income is expected to boost consumer spending, especially in the consumer durable sector. With greater purchasing power, households are likely to upgrade and purchase new home appliances and electronics, driving overall demand growth and benefiting both manufacturers and retailers in the industry. Despite the challenges faced during the summer season, we remain optimistic about the upcoming quarters. As our newly added stores begin to ramp up, our focus will be on improving per store unit economics and driving higher throughput. This is expected to support margin improvement through better fixed cost absorption and operating leverages. We also anticipate a strong festive season this year, which should further aid overall momentum. Looking ahead, we plan to open 25 to 30 new stores in FY '26, while continuing to optimize the supply chain, enhancing inventory efficiencies and strengthen our footprint in both existing and emerging markets. With this, I request Mr. Premchand Devarakonda, our CFO, to update you on the financial performance. Thank you.

Thank you, Karan sir. Good evening, and warm welcome to all the participants. Firstly, I would like to share a few updates pertaining to the fire incident that occurred on 29, May 2025. One of our warehouses located in Guntur met with a massive fire accident, resulting in damage to the inventory to the tune of INR 8 crores. These stocks are adequately covered under the insurance, and we launched the insurance claim well in time, which is under the final stage of assessment by the insurer. As the claim is pending for settlement as on date, our management has decided to create a provision and disclose it as an extraordinary item in the statement of profit and loss for the quarter. Secondly, we have reclassified sellout incentives earned under various schemes of the suppliers from revenue from operations to reduction from purchase of stock in trade in the financial statements of the current quarter, which is in line with the applicable accounting standards, as these incentives and discounts are directly associated with inventory purchases and not in essence for any distinct goods or services by the company to the supplier. The consequent adjustments made to the comprehensive financial statements are not considered material to the financial results. Now moving on to the financial performance for the quarter. Our revenue stood at INR 139 crores. EBITDA for Q1 FY '26 stood at INR 110 crores. EBITDA margin for Q1 FY '26 stood at 6.3%. Pre-Ind AS EBITDA for Q1 FY '26 stood at INR 75 crores with a margin of 4.4%. PAT for Q1 FY '26 stood at INR 22 crores. PAT for Q1 FY '26, including -- excluding exceptional items, stood at INR 30 crores. Like-to-like sales growth for the quarter was negative 18%. Annualized ROCE and ROE for Q1 FY '26 stood at 13.4% and 7.7%, respectively. The working capital days as on 30, June '25 stood at 60 days and Pre-Ind AS cash flow from operations stood at INR 393 crores. With this, we can now open the floor for questions. Thank you.

The first question is from the line of Subhanu from 3H Capital.

Why your North cluster EBITDA margin very low than South cluster?

Sir, it's not as a cluster is a very new cluster that we started off 3 years back. If you look at the total number there, the productivity of store, throughput per store is divided between all the new stores that we open up, so we are expanding in the periphery. We opened up, say, stores which are almost out of the 30-odd stores that are operating in that region, 20-odd stores are less than 24 months in that region. Usually, we take around 3 years-plus to -- for a store to get mature, and that is where you will see the productivity of the stores. If you're adding up stores in an existing cluster like, Hyderabad, where you already have mature stores, so you will not see an impact on the EBITDA there. But because of the new store addition in the newer cluster, the number of stores are much higher, you will see this kind of a number, which is improving. Once the stores reach a certain maturity level, you will see the similar number of EBITDA margin that you would see down south as well.

My understanding is mainly high operational cost?

Exactly. You can attribute to high operational cost because the throughput per store today is much lesser than what the existing markets would do for us in South. That automatically would your rental, your manpower, your electricity, marketing. All expenses would be definitely much higher in terms of the percentage cost there. But once the productivity of the stores reaches cross, let's say, crosses INR 40-odd crores, then you will see a similar number back from that [new too].

How many stores you are expecting going forward in North cluster?

Sir, right now, in the pipeline, there are 8 more stores. That will add up -- so we are opening up 2 more stores this month in Delhi and probably 2 in the next month. You'll see around 6 more stores coming up at least before Diwali in that cluster.

The next question is from the line of Yash Sonthalia from Edelweiss Public Alternatives.

I have 2 questions. My first question is on Y-o-Y basis, our gross margin has declined by 1%. I wanted to understand it better by how can we break it up between the change in mix of product mix change and the part contributed by the discounts we provided in the quarter?

Yes, it was mainly because of the reduced throughput coming in from the cooling products, mainly air conditioners and coolers. In the last year, in the first quarter, we -- these air conditioners and coolers contributed almost 40% to the top line. This time, the same thing has dropped down by almost 40%. As a result -- because these cooling products will give us the highest gross margin. Because of this drop in the contribution from these cooling products, this year, the gross margins got impacted. That was the main reason.

Any impact or any discounts we provided and loss we take on our books to liquidate the inventory?

No, not yet. See, those things -- that situation has not yet arrived. It will take -- I mean, we'll see the trend in the upcoming festive season, then we'll take a call. As of now, there was no -- it was total demand slowdown for these products because of the unfavorable weather. That means it was favorable to the farmers, but unfavorable to us, so that was the reason. As of now, we didn't liquidate any inventories by offering additional discounts.

Sir, on the inventory part, can you help me understand what was our inventory at Q1 and FY '25? What is the inventory as of now? Just wanted to understand how much of extra inventory we are carrying because of this additional rain in the quarter. On Y-o-Y basis, how the inventory has increased, in Q1 FY '25, what was our total inventory and in Q1 FY '26, what is our inventory? Where we are standing?

Yash, it would be majorly the cooling product category where the inventory would be a little higher, higher by around INR 250-odd crores for air conditioners majorly. In air coolers, we not carry much stocks with us anyways. Almost INR 250 crores of AC inventory is a little higher, which we plan to liquidate up till December this year.

One last question, what the sales mix you give on Y-o-Y basis, not only large appliances, I can see small appliances and mobile sales are also down or flat. Are the reasons similar because of rains, people are not coming, the footfall is lower? Or is there anything else we are also facing in the quarter?

Small appliances would even contribute the category from air coolers. Now air coolers are practically flat this year. I mean like they were practically 0 this year. They were very low in terms of sellout.

I thought you have a very miniscule part of air coolers, so that won't impact a lot on small appliances.

Quarter 1, if you see last year also, the number is quite big, significant number.

The next question is from the line of Mehul Desai from JM Financial.

My first question is on the top line. Can you just give some flavor on how the exit trends have been in July so far? How do you look now the balance 9 months of FY '26? Do you still think that low double-digit kind of revenue growth is possible this year?

All good from our end. Things look very good. July has been an exceptionally great month, especially for AC and other categories. We were expecting that to happen anyways because organically, last quarter didn't do that well for cooling products. ACs have seen the major jump this quarter as well, whereas mobile televisions and refrigerators, all categories have seen a higher double-digit growth this year in the month of July. August, definitely, we are quite optimistic because a couple of big festival periods there and especially 15, August comes over a weekend this year. We're quite optimistic on that sellout. Mobile phones have started doing very well, especially, the new ZFold7 that we launched recently. That has almost seen a 50% jump from last year what it was. We are anticipating Apple to launch their new product by September last week -- third to last week. We are going to see good sales coming in from iPhone 17 as well. Then -- around 20th of September, we start off our festival period, 22nd is the first Navratri. We see that 10, 12 days of festival sales dropping in, in the second quarter as well. We are quite optimistic on how things are shaping up in the quarter 2, and we're going to look at least higher double-digit growth this quarter.

For the full-year, sir, because second half also, the base is quite weak for you. From that perspective, I think overall, while we were -- we used to guide 15% kind of revenue growth in the top line.

Yes, that will be in line with that only. Yes, definitely, it will be in line with that only. We're expecting that to be probably a little better than what the expectation should be.

On the margin front, this 6% kind of EBITDA margins are sustainable for -- I mean, you think that should sustain, right, given that the growth will improve, if in a weak quarter, you have sustained 6%, do you see that in the balance 9 months also.

Absolutely. That is how we're hoping it to pan out in the coming quarters as well. We are quite optimistic on that as well.

From the inventory perspective, from a full-year -- obviously, as you said, this INR 50 crores inventory is there. From a full-year perspective, will the inventory days or as the overall inventory will be higher at the end of FY '26? Or you think that should not be a major impact and you will be able to liquidate?

See, by this end of quarter 2 and probably the mid of quarter 3, we should be liquidating the stocks, especially the ones that are holding up our numbers quite high. That number of inventory days anyway organically by 31, December, it will come down to an organic number less than 60 days.

Sir, other expenses have been lower this quarter, is it due to A&P -- lower A&P? Or I mean, what has led to this 1% decline in other expenses this quarter?

[Foreign Language]. There was no point of spending money on marketing in a big way like we usually do [Foreign Language].

The next question is from the line of Umang Mehta from Kotak Securities.

Karan, just a follow-up linked to Mehul's question. You mentioned that July has seen a decent pickup in ACs and other appliances. Could you comment on the trends on a same-store basis? Is it that ACs and other appliances on a same-store basis has also seen a decent.

Yes. In fact, all clusters, not only same-store in a certain cluster, but across -- so Hyderabad is a major cluster has definitely seen the highest among the older clusters between Telangana and Andhra.

The concern on real estate sales, which you had highlighted last quarter, has anything changed on that front? Just -- I mean, from a slightly, maybe medium-term perspective?

I didn't get your question Umang, real estate?

You had highlighted some issues in Hyderabad real estate related market.

Yes. Definitely, there is a slowdown in the real estate trends across the country. In fact, I was talking to somebody in Karnataka also very recently, the Bangalore is also seeing a similar trend, but that is going to pick up, and it is seeing, again, a positive sell-through coming through in the real estate as well. But usually, if it starts off now, the impact or the benefit to us comes a little later because in the time the positions are given, handovers are done, customers start moving into the newer apartments or houses. That would be a 3 to 6-month trend, which we will start seeing that number coming for us as well.

The next question is from the line of Akhil Parekh from B&K Securities.

Karan, my first question is on the margins in the North cluster. We have seen 100 bps of improvement on a Y-o-Y basis probably because of operating leverage kicking in. Do you see that 100 bps of improvement to continue for at least next 3, 4 quarters in FY '26?

Yes. Quarter 2, quarter 3, so it will definitely go up from here on, but I would not be able to attribute exactly how much will it grow from here on every quarter-to-quarter, but eventually, by next year, we should be looking at least a 5%-plus EBITDA margin in that cluster.

End of FY '27, you are saying, we should be doing 5% in the North cluster, basically.

Yes.

Any quantum in terms of what kind of sales level the North cluster needs to reach to clock the margins which are in line to the South cluster?

[Foreign Language]

INR 770 crores is what North needs to clock to reach 6%, 6.5% of EBITDA margins. Is that correct?

5%-plus.

No, I was asking for to reach that -- to reach to in line...

[Foreign Language]. Then it reaches INR 1,000 crores next year, so that is when this number will be in line with what we do in Hyderabad.

Second, on AP and Telangana as a market, right, last year -- last 2 quarters, we had highlighted that there were challenges overall in terms of the growth in these 2 geographies. Has the situation normalized now? Obviously, 1Q was an aberration because of the early monsoon, but ex of that, do you think now the things would have normalized?

Yes. We've seen a positive uptrend in all categories, especially mobile phones, panels. Yes, so we've definitely seen that for the last 2 months. Even if, June, July, both the months did well there, and we're looking at a positive trend going forward as well in the Hyderabad cluster.

Third and last question on the growth front, you are saying that we're still confident of achieving 15%-plus top line growth for FY '26, while we had a decline of 10% in 1Q, so it means that we should be doing 20%-plus for remaining 3 quarters of FY '26 this year. Do you think that is achievable?

100%, sir, because the stores that were in pipeline, especially in the clusters in AP and Telangana are moving towards the mature store trend, so they are delivering. All categories are performing well. We are quite optimistic with new technologies coming in. Like we're seeing now more or higher ASP products selling much sooner than the entry-level ones. The focus on the premium is definitely helping us out there. iPhone sales are going to -- iPhone sales, in fact, for the first quarter also was very positive even after no new launches. 17 is going to get launched by the second, third week of September. That is definitely going to bring in a big change this year. The value addition is going to be much higher. Products like Samsung that folded very well. It's still continuing doing very well after the launch as well. Audio devices, built-in devices, those categories are picking up really well. I think overall, we're going to see a positive trend this year. We're quite optimistic on that. Then definitely, AC definitely was not under our control when the weather went bad, but definitely, there is going to be an upsell coming through in the second quarter or the third quarter because there's going to be a change from January as well as the pricing expected to grow to increase on the AC as a category because there's going to be a revision on the star rating. We are quite optimistic that we'll be able to sell out ACs what we couldn't do in the summer quarter versus in the festive period, definitely, it's going to be much higher than last year.

Sure. That's really good to hear. If I can squeeze in just one more question on the NCR store expansion front. Going forward, we'll be continue to lease -- this kind of lease out the stores, right? We are not looking to buy out the stores, basically?

Sir, not really. Most of the acquisitions that we have done in the recent past also are going to -- the properties that we have bought out in the recent past are yet to open up stores, yet to start up operations in the next, say, a month or so. [Foreign Language].

That's what my question is that we are not looking forward to buy on the properties going forward?

Yes. Most of the prime locations that we plan to initially buy property, we bought out those properties. Now it is majorly the peripheries and the smaller markets, where we usually end up leasing out stores even down south. That is the strategy that we had planned for Delhi region now.

The next question is from the line of Jitaksh Gupta from Tikri Investments.

Sir, I just wanted to understand the competitive landscape, the market of the Andhra Pradesh and Telangana because we see a revenue drop is in double digits. I just wanted to understand the market scenario.

Majorly, any bad quarter in terms of numbers going down, you have to make sure that your market share is intact, so all growing. That is one thing that is positive. Clusters where we have new or cities where we are in AP, Telangana also, we are still capturing the market there and our market share is increasing definitely there. We are sustaining our previous market share numbers for the mature markets like Hyderabad, Warangal, Vijayawada and Visakhapatnam. Those markets are already intact. What happened was for the summer quarter was definitely not expected. The rainfall spoiled the whole season for us. But as we talk now also, we are gaining share in the newer markets that we're opening stores in this region. Our biggest competitors in Andhra are Sonovision, and that's spread across the whole of Andhra Pradesh state. The biggest challenge there is that every city would have a regional mom-and-pop chain with 10 or 5 stores in the city like Guntur, Vijayawada, Nellore, Vemavaram, Rajahmundry. Yes, when you're competing with them, it's a different play altogether. It is not like as simple as what you're doing with the organized play. You know the structure, you know what they are playing on the products or the brands, but with mom-and-pop stores, the play is very different. It is more like a local approach that has to be in place. Our teams on a daily basis, look into that to make sure that we don't lose out our customer or how do we improve our shares in those markets.

The next question is from the line of Rupesh Tatiya from Shree Rama Managers PMS.