Elin Electronics Limited ($ELIN)

Good evening, ladies and gentlemen, I'm Akash, moderator for the conference call. Welcome to Elin Electronics Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to hand over the floor to Mr. Gulshan Singh from [indiscernible]. Thank you, and over to you, sir.

Thank you, sir. Good evening, and a very warm welcome to everyone. On behalf of [ Sunergy ] Securities, I welcome you all to Elin Electronics Limited Q4 and FY '26 Earnings Conference Call. Today, we have with us management represented by Mr. Kamal Sethia, Managing Director; and Mr. Akash Sethia, Head of Strategy. We thank Elin Electronics Limited for giving us the opportunity to host the call. I would now like to hand over the floor to the management for their opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, Akash.

Thank you very much, Gulshan. Good evening, ladies and gentlemen. This is Akash Sethia. We also have on call today our Managing Director, Mr. Kamal Sethia. Mr. Sanjeev Sethia could not attend the call due to some last moment emergency. So I apologize on his behalf. Thank you for joining our earnings call for the fourth quarter and full fiscal year ending March 2026. Coming to our overall performance for the quarter. Operating revenue for the quarter was INR 324 crores against INR 315 crores in the same period last year, up 3% on a Y-o-Y basis. Consolidated EBITDA for the quarter was INR 6 crores against INR 20.2 crores in the same period last year. This sharp reduction is primarily attributed to a sharp surge in raw material costs across categories, driven by disruptions in supply chain due to the war in the Middle East and challenging geopolitical situation. This has impacted gross margins for the quarter by 390 basis points. Consolidated loss for the quarter was INR 0.8 crores against a profit of INR 17.2 crores in the same period last year. Our liquidity position remains strong with a net cash balance of INR 70 crores as at March 2026. Our working capital position is at net 59 days. Of this, inventory days was higher than anticipated as we had to stock up on raw material inventory in March 2026 to safeguard against potential shortages due to the challenging geopolitical situation. Our CapEx in FY '26 was at INR 32.5 crores across all our existing facilities, excluding [indiscernible]. We generated cash from operations of INR 14.6 crores in FY '26 against INR 16.7 crores in FY '25. Before sharing our segment-wise results, I would like to set out the impact of the war and the challenging geopolitical situation that we have faced during the quarter. As you all know, the war has led to a sharp spike in crude oil prices, which has, in turn, led to a sharp spike in polymer prices as well as a sharp depreciation in the USD INR rate. This combined basket constitutes 30% of our input cost leading to a sharp spike in our RM cost. This spike has happened during the month of March 2026. Most of our customers are on monthly quarterly price settlement so this increase in RMC had to be completely absorbed by us. Now I would like to share with you the performance and strategy in each of our business verticals. In lighting, fans and the switch segment, the revenue for the quarter was INR 94 crores against INR 86.3 crores in the same quarter last year. This was primarily driven by a strong increase in revenue from the Fan segment. The LED lighting segment ex flashlights declined from INR 50 crores last quarter to INR 39.5 crores in the current quarter. Price decline is now completely behind us. Small price increases have been undertaken with customers. The revenue run rate on a quarter-on-quarter basis is on an improving trajectory. As on date, we are serving 5 new customers in lighting in addition to Signify. We reiterate that we expect double-digit growth in our lighting business in fiscal 2027. Moving on to our Fans business. We have seen strong growth of 67% in our Fans business on a Y-o-Y basis. This has primarily been driven by our BLDC seeing finance and TPW fans business. We are also working on diversifying our customer base and adding new customers. We expect the strong growth momentum to continue in Q1 as well. Our TPW business is also showing good demand. We are also happy to share that our export business of fans, which had stopped in August 2025 due to tariff-related issues has restarted in May 2026, although with small numbers. We expect this to scale up gradually over the course of the year. Moving on to the Home Appliances segment, revenue increased from INR 87.1 crores last quarter to INR 94 crores this quarter. Kitchen and home care revenue was flat on a year-on-year basis. This would have been a bit higher, but we deferred some orders from March 2026 due to surge in raw material costs. Personal Care segment was up 27% Y-o-Y on the back of better demand across hair dryers, sterilizers and hand brushes. Moving on to the fractional horsepower motors segment. Revenues declined from INR 51 crores in the last quarter to INR 45.7 crores in the current quarter. Please note, this segment reflects only third-party sales. We will be launching Polar motors and BLDC chimney motors this year for both third-party sales as well as captive consumption towards finished product. Overall, the quarter has been very tough from a margin perspective. The spike in RMC and depreciation of INR against the USD caused EBITDA margins to compress sharply. Even labor availability was somewhat of a challenge in the quarter gone by. Further, you would also have read that minimum wage has been revised upwards sharply in Ota Pradesh, resulting in an effective increase of 26% in April versus March. This was done on 14th of April 2026 with effect from 1st April 2026. All of this combined has resulted in an unprecedented situation where there is pressure on both material and labor, and therefore, pricing has had to increase between 10% and 18% just to sustain earlier margins, given the substantial quantum of increase in material and the sudden unexpected increase in labor, minimum wage mid-month, we expect that the price transmission to be fully passed on to customers only by June 2026. As on the current date, polymer prices have pulled off a bit from highs reached in March 2026 although the USD INR rate continues to stay at elevated levels. Now I would like to share our guidance for FY '27. We expect a revenue growth of 15% on a year-on-year basis. However, on EBITDA, we will be able to share the guidance perhaps only by next quarter as the current input cost situation are extremely volatile and difficult to predict. CapEx for the year will be between INR 70 crores and INR 75 crores split as INR 45 crores for the Bhiwadi facility and the balance INR 25 crores to INR 30 crores of growth of the existing business and factories. Once the Bhiwadi facility is stabilized in 2 years from starting, this will also help us drive up our return on capital employed. Regarding construction of the Bhiwadi facility, it is largely complete. We are in the process of fitting out the facility with machines and assembly lines over the course of June 2026, after which there will be test runs and commercial production starting in the end of July 2026 or the beginning of August 2026. A quick update on the total project cost. The total project cost is estimated at INR 100 crores of this Phase 1 is at INR 67 crores, of which INR 26 crores has been spent and lying in capital work in progress. Balanced spend of INR 41 crores towards completion of Phase 1 spending. Due to the slight delayed commissioning of the facility, we expect a revenue of INR 80 crores in FY '27 against an earlier estimated revenue of INR 140 crores in FY '27 from Bhiwadi. However, the differential revenue will be done in Ghaziabad itself, so there will be no loss of revenue to the company as a whole. Reiterate that as per current estimates, revenue potential of the plant is INR 550 crores. Further, we expect a steady state EBITDA of 7% for the plant, which should be achieved in the third year of operations. At these levels, ROCE for the plant will be 20%. With this, we conclude our opening remarks and can now open the floor for Q&A. Thank you.

[Operator Instructions] First question comes from the line of Mr. Kunal Mehta from Inked Equities.

[indiscernible] I think the margins being in stress earlier. However, I think this year we saw some good recovery in margins, but because of the raw material price in Q4 took a big date. So I think we have revised down our revenue guidance and I think margins also will be compressed for this year as well as the new facility ramp-up. How are we gauging the macro environment? Is the demand -- it's quite [indiscernible] how it was last year versus this year also is because of the El Nino current effect. So how are we seeing the demand in terms of ACs and coolers, which cooler is going to launch as well as demand for kidneys, which we have started in a new facility? So is there the demand subdued? Is that the reason we are not ramping it up faster? And is there any upside to the current guidance if the situation improves?

So thank you, Kunal. Fair points that you've raised. I'll just take it one by one. So on your first point on whether the current scenario, we are seeing some sort of demand compression. Look, the reason we have revised slightly revised downward the guidance for fiscal '27. Is that like I mentioned, we have had to undertake a fairly large price increases. I mentioned in my opening remarks that price increases have been to the tune of as low as 10% to as high as 18%. Now when you have such large price increases, one is not quite sure of how that will affect demand itself. And since we are pretty much at the beginning of the year, it is very hard to forecast how this will impact revenue for us. So we've just been a little bit conservative to start with. Of course, like you said, if there is a quick resolution of the war basis which one will see crude price -- crude oil prices come down. And then polymer prices, especially will come down, the rupee hopefully should appreciate a little bit. All of those would have a positive impact on us, and there could be some sort of upside to our revenue guidance. But those matters, frankly, are not in our hands. So one will have to kind of wait and watch how it pans out, right? We're almost 2 months into the fiscal 2027. So we just wanted to be a little bit conservative on the conservative side rather than giving a very aggressive guidance and then cutting it down midway. Does that answer your question?

Yes. Also, one more thing on the BIS norm, which were to be implemented and we are by September 2026. That -- is the timeline still the same? Or is there more relaxation by the government from that?

So as of now, it is still September 2026. Now whether itself gets relaxed, we don't know yet. Probably closer to the date we might have an update. But as of now, it's September 2026.

Okay. And will we be having any plan for the new Bhiwadi facility [indiscernible] the commission?

I didn't catch your question. Can you just repeat?

No. Will we having a plant visit for the new Bhiwadi facility?

Yes, we are going to plan that, but that is, like I said, we are expecting commercial production only to start by end of July or maybe early August. So only once commercial production starts, will we be planning that. So it is still maybe 2 or 3 months away. So once that is done, we will certainly be planning a visit for the financial analyst community at large.

And I know you mentioned EBITDA top 2 give guidance about any range if you can give a simple not be below the ton range or not be beyond a certain range?

Kunal, I mean just allow me this quarter not to give you a because we don't want to give you a range and then it's very, very difficult right now. You would -- if you've been tracking the company closely, so you will appreciate that these are unrecedented kind of situation. So just bear with us. Maybe by next quarter, we will certainly be in a position to give you some sort of update.

Next question comes from the line of Mr. [ Rehan Lai ] from [ Coherent ].

I wanted to understand more on the RMC part. I think you primarily are affected by polypropylene prices. And that, I think you purchased from Reliance, is my understanding correct?

We have -- I mean you are understanding that PPP buy from Reliance is correct, but it's not only PP, we buy PC, we buy ABS, we buy nylon, we buy PBT, so on, such -- it's a full range of plastics per se, only.

And what would be the largest component of your raw material?

In an entire raw material basket or in our [indiscernible]?

No, in your overall basket, what will be the largest drag for this kind of number?

So look, we have 4 key raw materials. So there is the whole range of plastics. There is steel. There is aluminum and then there is copper. So these are the 4 current of key RMC kind of components that we do. Of which, this quarter, we have been particularly affected by the whole polymer basket as well as to a large part, aluminium, even aluminum saw a pretty sharp increase. And then our imports are about of the total consumption that we have, approximately 15% is imported, 85% is kind [indiscernible] that 15%, even the depreciation of the rupee against the dollar hit us hit us quite hard.

So Akash, just to understand, would this ideally be a bottom kind of a margin because at an operating level at this scale of INR 130 crores, INR 1,400 crores of top line, it's very hard to understand how can the margins be so fragile for a company that is so large and reputed. So would it be fair to bet that this would be technically a trust or you expect that even if the RM prices stay as you could report further EBITDA percentage terms lower? Or how would it work going forward? Because let's assume that the RM prices stay as is at the moment, even if you get a price hike, let's say, 90 days from today because I understand it cannot happen overnight, and that's only fair. But what would be your base understanding at the company level because the scale is pretty large, and the impact can be pretty hard if you're not taking the right amount of cost measures in a way?

To your question, directionally, is this probably towards the lower end, we certainly hope so. We certainly think so. Is there a guarantee for the same. Unfortunately, this is business ran guarantees. That's point number one. Point number two is, if you've been following our company has been pretty consistent in terms of how revenue pass-throughs, the pricing pass-throughs happened. So with about maybe 2/3 of our customers, it's on a quarterly basis. So the pricing of Jan, Feb, March, for example, is applicable on the April, May, June price settle. Therefore, there is a lag of a quarter. And on the balance, 1/3, it is done on a monthly basis. So for example, for the month pricing, we would be relying on last month's average pricing, right? That's how it was. Also in my opening remarks, have been transparent because we've seen such large price increases, those full pricing pass-throughs did not happen in the month of April itself. I mentioned that we expect the full pricing to happen only by June. So of that anywhere between 10% to 18% that we've had to kind of undertake price increases. A large bulk of it has happened in April and May, but some small bit still remains to be passed on in June. So only once that transformation is complete, will we be able to kind of get back to sustaining margins due to the March price increase. I hope that clarifies your question.

Yes. So basically, you're saying that if you -- once this price increases happen at your customer level, you would move back to about a 23%, 24% gross margin. Is that a fair understanding?

That's right.

And that can -- that will be that will be applicable for the June quarter? Or will it take a Q2 also lag? Like will we see the full effect in Q2 or Q1?

Exactly. So it will be applicable for the month of June. In the month of June, we would be at that 24% kind of percent gross margin. But for April and May, it would be lower because that complete price transition did not happen. What should have logically probably happened immediately in the first week of April, did not happen. So Q1 also, margins will be under pressure, although it will not be under this kind of pressure, but it will still be under pressure overall.

Okay. And considering that you're scaling up your fan business and your lighting business, which are technically margin accretive, is it safe to say that if things normalize and we hope it normalizes faster than never? Would we see much better margins at a company level, like about 6-odd percent kind of EBITDA? Is it possible at only those 2 segments, I'm asking, those 2 segment specific?

Lighting is probably one of the -- I mean, nothing to do with the war per se, but even otherwise, lighting was under maximum pressure even per I am saying I think the word. What has happened? That happened due to kind of irrational competition in the sector. What has happened is that there was massive price erosion. So that price erosion is completely behind us now. In fact, in the month of Feb itself, it started to undertake small price hikes. And those price hikes will only get slightly larger as time goes by. So I do expect that maybe currently, if you look at our lighting business, just in terms of gross margin, we would be on a blended basis as of that maybe around 15-odd percent. We expect that to move to 18%, 19% maybe over the course of the next 2, 2.5 months, maybe 3 months.

Okay. So that would automatically also in your gross more than 24 and then Q2 onwards?

I mean I wouldn't say for now for you to subscribe to more than a 24% valuation of gross margin. I think that is what you should assume because at some level, just increasing pricing does have some effect on customer demand as well. So one has to kind of finally balance how much of price hike to take whilst we pay customer demand and [indiscernible].

And since you guys have been fairly prudent and with your working capital. How do you procure your inventory? Like is it like order base because I'm sure your customers give you like a yearly or quarterly or semi-annually outlook what they want to procure from you? So considering all that, how do you purchase your inventory?

See, customer orders, typically, customers share with us what they call an annual operating plan to help us prepare our resources for a full fiscal ahead. But a nonbinding, what is confirmed is a monthly kind of RPO with the quarterly forecast. So there is a 3-month rolling forecast with monthly or on POs basis, which we do procurement. I mean will we kind of make a performing strategy basis.

So it's a 90-day old procurement strategy?

90 day with formed procurement only 30 days. But I mean, even we have to give our kind of suppliers some sort of outlook and visibility. So we shared a basis the customer orders that we get. We should our suppliers also our procurement strategy on a rolling basis, but with confirmed orders only.

Okay. And the current facilities that we have across [indiscernible], et cetera, what would be the capacity utilization in percentage terms?

From our existing 3 facilities, we could be somewhere in [ 60 crore ] kind of range. So we are currently at whatever, [indiscernible] I mean roughly INR 1,300. I mean somewhere around the 77%, 78%, 79%.

Okay. And for the new facility, which is coming up at Bhiwadi, what kind of -- like are we -- do we need to do more hiring or the hiring than the brand everything is organized? Is it already in our fixed part?

Sure. So just in terms of hiring at a white collar level versus a blue collar level and just specify both. So first, in terms of employees, so we've already put in place a basic team, which is like a GL level person and for plant maintenance and so on and so forth. Procurement will be centralized within the Ghaziabad facility itself. So we don't really expect to deploy more people on the purchase and purchase planning side. In terms of labor, this will be largely via at. We've firmed up the contractors that we will work with. But obviously, there is no per se labor availability right now in terms of -- I mean, we've not finalized the labor availability, given the contractor, the heads up. And by August, once we start commercial production, we expect that there should not be too much of a problem. We are, in any case, well located within a fairly large electronics cluster. So there are multiple other factories that work in the same sphere or same line of work should be okay.

And the tentative breakeven for the plan because I understand it won't be EBITDA positive from day 1, but at the INR 80 crore top line, which you've guided for in FY '27, would that be breakeven at the plant level alone?

EBITDA, we will definitely be positive. That would be touch and go. I think the breakeven is closer to 120, if I'm not wrong. But that also then depends a little bit on the sales mix, right? Because new products have a slightly better gross margin was have a slightly lower gross margin. So I can -- we can just circle back maybe offline for a more deeper understanding on that. Broadly, we [indiscernible].

[Operator Instructions] Next question comes from the line of Mr. [indiscernible], an individual investor.

And I think it's a decent set of numbers in a tough time. Sir, you have given a guidance for a 15% growth in top line for the current year. how would this be divided, sir?

I mean broadly, what we do is onto lighting, [indiscernible] from other appliances. Would it broadly fall in that kind of model, sir? So the numbers that you have given high end of use to be the norm a little bit earlier. But now the mix has somewhat changed. So firstly, the numbers that you're sharing, obviously, within the EMS basket of the finished goods basket, we have a components business that is approximately 20% of our total top line. So of the total top line, 80% is finished good stroke EMS and the balance is the components business. Of the 80% broadly, there is lighting and fans. There was appliances and then there are motors. So lighting and fans and appliances would be the overwhelming majority as on the end of this fiscal, motors is down to approximately 17%, 18% of the total revenue that is and we expect that to kind of continue. So lighting and fan and appliances would be the major revenue drivers going forward.

And sir, of course, we are going through a tough period in terms of input prices and stuff like that. But during the next 2, 3 years, what would be your aspirational EBITDA margin? I think we've done a high of 6%, 6.5%. So would you feel that, that is a decent EBITA margin to expect in the longer term, sir?

Aspirational would be higher than that, 6%, 6.5% is definitely achievable. Aspirational would be closer to 8%. But when I say 8%, I also say that in the context of your question being aspirational. It is not easy to do 8% at all. What is realistic is probably say 6.5% in normal times. If you do a phenomenal job, then you could get to the 7.5%, 8% mark.

And how do we -- how do we compete with China on the finished product? And do you think these kind of products can even be made at lower than these kind of margins by anyone at all, sir?

How do we compete with China. So there are 2, 3 points. One, of course, the government has been supportive of manufacturing by putting in BIS norms, QC orders, so on and so forth. That is point one. going to our liberates are a lot more competitive than China, although their productivity in all fairness is much more superior to India. So I think those are the 2 important points when it comes to China versus India also now what is happening is the way the rupee is depreciating against the dollar and therefore, the yuan, it is not going to be easy to import because imports continuously keep getting more expensive, they day, right? So I think those are my thoughts when you talk about the whole China [indiscernible]. And then, sorry, you had one more question, which I just missed.

I mean, can these good -- what you do even be sold at the lesser than the current going EBITDA margins you are doing or even 6%, 6.5% I don't think going forward, anyone can even supply and stay in the market lesser than this at 6%, 6.5% at least.

So you're asking your question, it's very difficult to answer because I mean, I cannot really say what other people will do or will not do. Competition can be -- rational competition is good for everyone. Irrational competition is terrible for everyone. We've seen of irrational competition in the lighting space. So can people supply at lower prices, people have done it. So I won't say no. But logistically, what he was saying is correct. But unfortunately, sometimes reality doesn't always work according to Logic.

The next question comes from the line of Mr. Sahil Dosh from [indiscernible].

Just firstly, cash just on a clarification on the employee cost. So I understand the other raw materials and the environment mix is difficult to predict. But at least on the employee cost, if you can guide given the rate hike, what's the normalized level? And what kind of expense increase are we aiming for this year?

So for this year, if you've seen the full year, I think we've clocked in an improvement on a full year basis of almost 100 basis points. I mean if you look at FY '25 versus FY '26, so '25, we were closer to 14-odd percent or slightly larger, slightly higher. This year, we've come in at, I think, close to 13%, right? So that is point one. Directionally speaking, we want to get to sub 12%, closer to 11.5%. That is the number that we are working with. Of course, that is driven by some sort of automation that helps you reduce reliance on labor and makes you kind of protected from these near wage increases. Two is, of course, the base itself expanding. So when your turnover in totality goes up, that helps you rationalize especially your cost on the indirect side because you only incur directly. And third is we are kind of working a little bit hard to review our indirect cost structure and see where their optimization can be done. But to your point, precisely, so our direct labor costs of the total employee cost of 30-odd percent. Direct labor cost is approximately 8.5 -- between 8.5% and 9% with the balance being in [indiscernible]. So on that 8.5%, 9%, which is pretty much the norm across all the 3 facilities. The minimum rate just for UP has gone up by almost 25% or 26%, right? So we are working with customers to get that pricing increase, which we expect should be done by June. Once that is done, then not only 13%, but we should be able to get to that [ 2%, 2.5 ]% this year. But of course, like I mentioned, Q1 will be under pressure. So don't look at this on an immediate quarter basis, but more from the annual kind of basis.

Sure. This helps. Just secondly, in terms of the motor business, though you caught out, there was some impact because of the cash prizes. But the entire year, quarter-on-quarter, we've seen the growth has been fairly muted. And if you see -- we think of in the core strength is motor. So what maybe transpiring your strategically, what do we think about this? And given where the Chinese yuan [indiscernible] meeting, the INR has appreciated around 60-odd percent versus Chinese. Doesn't it make more sense or make us more competitive actually?

Look, Saheel, what you're saying is completely logical. But somehow China continues to keep surprising us with their pricing. We are not really able to logically work out how it is that they go on, go on kind of offering lower rates to grab business. So Chinese pricing is somewhat of a mystery, I think, definitely to us and a lot of other Indian industry at large. Two, just in terms of your overall question on motors, I think, look, the market is shifting more towards being or looking at a solution provider in totality. So what we have seen is that earlier customers who are just buying, for example, just motors from us, you're not talking to us in terms of getting the full solution. So instead of just supplying a fan motor per se. We are talking of getting the full fan. Similarly on the mix of kind of side, the same thing. Of course, a little bit of it was impacted due to the war because a lot of these plants run gas-fired shops. And because of the cash availability, a lot of them had to take some sort of shutdown in March. So there was some sort of impact temporarily, although that is now resolved. So these are my thoughts. I mean, I don't know if that completely answers your question or no over to you.

Sure, just clarifying on the motor rate, again, if you're doing a system integration or a complete value-added essentially structurally or value addition or the gross margin should improve, right? So it has to be captured somewhere in the system. If you're not selling motor, we are having a solution, that should somewhere reflect in that. So I just wanted to get a clarity on that. And second, again, with motor, I think we were trying to make some inroads into the sector motor and as well as refrigeration motors, washing machine motors. So if you can talk a little on those aspects as well.

Look, what typically happens is, let me give you an example of a mix of kind of product, right? So what happens is that once you hit anyone who's just doing assembly buying motors from us. So assembly is obviously a lower value addition activity, manufacturing of motors as a slightly better manufacturing activity -- I mean, value-addition activity. So once you hit some sort of critical mass in terms of getting some good decent numbers for the FG SMB. Typically, every person will look at going in-house. I mean that is how the industry is it's kind of transpiring because motor is a slightly -- not slightly, a reasonably better value addition product, right? That is one. That is why I said that most customers are looking at complete kind of solutions where you supply the finished good itself rather than just the component, right? To your second question on washing machine motors, like I mentioned, we are early in touch with our potential customers, I must say, for washing machines. Unfortunately, not like I said, China is further kind of reduced its price to accommodate on the foreign exchange rate. So how they work out there pricing, like I said, is a bit of history to me even again try and go back to the drawing board and see what can -- and we can, of course, connect offline to discuss this even in more detail.

Sure. And just a final question in terms of guidance. if you're saying 15% growth, essentially, that's taken care of the price hike itself, right? So this doesn't -- this seems to be a little conservative given the new capacity expansion as well. And secondly, on the working capital as well, I think we have to be for 45 days, it seems to have been gone to the 50 band, so [indiscernible].

So things, one, is you're right that we have given a bit of a conservative guidance. There are 2 points. One is a sharp increase in pricing does cause some sort of demand disruption typically. Now whether that happens or not, it's late seen, we don't know because the basket that we operate in is largely discretionary, right? We don't really operate in the necessity of the Staples market. We operate in a discretionary market. People can't live without the products that we manufacture. So those purchases by end of tend to get deferred when prices go up. That's point one. Two is we hopefully don't expect this sort of war situation to last for the full fiscal. Otherwise, we'll have enough problems to deal with. So I do expect that at some point, things will get resolved, pricing will come down. So then one will also have to work with some sort of volume growth to meet our new targets. We've consciously given somewhat of a conservative kind of guidance, we would be very happy with our same Q2 or Q3 kind of a position to increase that.

Perfect. Perfect. And just on the working capital?

Working capital, again, I mean this is just being prudent. The target is to stay at 45% or even lower, but currently, the situation is so volatile that we are just working with consciously working with higher inventory, higher procurement of Class A, Class B and Class C items. So in times like this, it's just important to align your investor partners with what you're doing. So we're just kind of giving you a head up. Of course, once the situation kind of normalizes, we will endeavor to get to the lower end of that band and even probably lower than that.

The next question comes from Mr. [ Samarth Ashok ] from [ Jaragua Securities ].

Yes, sir, you are. So per year, a part of [indiscernible] business was priced in such a way that we used to get the value add of the raw material. And we used to benefit in the inflationary trend. So do we still have that business or we are completely vacated out of that kind of pricing now?

No. Sir, we have that business. But see, typically, what happens is that inflation in small doses over sustained period of time is what is typically acceptable to customers when pricing overnight in 1 month or even 2 or 3 months goes up by double digit, that gets very, very difficult to absorb because customers -- I mean, our end customers typically cannot or do not tinker with MRP on a very regular basis. And this is -- this kind of inflation is also led by a supplier side shop one logically keeps hoping and anticipating that there will be some end of this war after which prices will suddenly cool off. I mean [indiscernible], the anticipation. Now how does that happens? No, I don't know. But those are just some thoughts as to why this kind of supply shock led inflation is not good. but inflation in probably steady doses and over a regular period of time is good for us. I hope that clarifies.

Got it. Sir, second question is on the -- if I do a consol minus stand-alone, so the BD entity, which is basically the part of Helen appliances, it has reported an all-time low gross margin of 12.7%, and it is making a slight EBITDA loss also. So this entity, the gross margins have been continuously falling down for last tears. While the operating costs have increased. So what are the issues? Is it because of product mix or the cost in general have increased over here? I mean what are the issues?

So data -- so one is don't look at just that entity because sometimes what happens is sometimes bidding happens in the stand-alone -- I mean, Elin Electronics Limited, sometimes it happens in Elin Appliances Private Limited. So customers kind of keep picking and choosing some time, and I'm not saying all the time. So one is that. Two is you're right that some part of the business has kind of I mean kind of gone through a challenging phase that is housed in Elin Electronics Private Limited. We are working on getting that business correctly priced. Hopefully, that should happen in maybe maximum 2 quarters. As and when this happens, we will get in touch with you and let you know, but that will also ultimately reflect in the numbers itself.

Yes. Do we want to run this need after moving from part [indiscernible], which you are going to do and with the new Bhiwadi campus. Do we need to continue to run this particular plan because there are no excise benefits also now?

How much tax and regulation target for that focus...

So. [indiscernible] That's right.

Sorry. Can you just repeat the question, and then I'll just answer.

Sir, with the expansion that we are doing in Ghaziabad where we are shifting some of the mix of production. And expansion in Bhiwadi in longer run, do we intend to run the Bhiwadi plant? In does it make strategic sense?

Look, there is a lot of capital investment that has already been incurred and sitting there. So I honestly don't -- I mean there is certainly no plan on an immediate basis to shut that down something. One will obviously have to wait and watch. You are right that there is no benefit from running that front currently, that asset, but there is a full ecosystem there is infrastructure there that frankly, costly. And I don't -- even though if it's practical to just take it here and there. So there is no immediate plan in terms of relocating their entire facility is one, I will say.

Next question comes from the line of Mr. [ Mark Shankar ] from [ Hallum ] Capital.

Sir, can you guide me regarding any recent management change in the company and provide some color regarding that?

So -- I mean, the last news that we had shared, which is when it happened was that our Austral CEO had the time. So that was, I think, the only senior management change, but nothing per se otherwise.

Okay. So do we have a new CEO in place of them? And any reason for the sudden departure?

I mean, no reason to me, what was known is what was disclosed found a better opportunity to move down. that's what we know. And we don't intend to get a new CEO. For us, what we realize is probably better to work with kind of individual business heads and slightly one level below CEO people. So we will not be getting our CEO in the near future.

[Operator Instructions] I have a follow-up question from Mr. Kunal Mehta from Inked Equities.

Just one question. Now that [ Caliber ] has moved on. And I think the we mentioned that he was focusing a lot on the procurement side and now performance being difficult. So who in Linio response to procurement to have you hired someone internally? Or do we have a deal in place with the business side for [indiscernible]?

No. So when you -- obviously, a, one is, look, there is no 1 single person who can do a full company as well. So there is a person -- I mean, Paving used to oversee that function. And currently, that function is now being overseen by 1 of the family people. But there is a full team in place that always was before. We had made a couple of weeks to that. There is a full team even now that is there is reasonably effectively doing the work in discharging the duty.

SP1 Let's question come from the line of Mr. [ Pawan Kuri ] from Kolkata [indiscernible].

Sir, I wanted to ask we have a program to plans in the future to launch any products under our own brands and we don't have our own brand.

We don't intend to launch any products in all print. And by when do we expect this new facility to be full year as an and start generating positive cash flows.

Will it be operational by, like I said, commercial production should begin latest by August 2026?

Unlike how much time will it take to like 70%, 80% of the plant capacity and new [indiscernible].

So look, the revenue potential of the plant is probably INR 550 crores. [indiscernible] to get to 80%, it might take 4, 5 years. For 4 years maybe.

In the interest of time, we can -- maybe if there are any further questions, we can just take 1 or 2 and then wrap up.

[Operator Instructions] There are no further questions, sir. Now I hand over the floor to the management for closing comments.

This is Kamal Sethia. Thank you for your time. There has been challenging time we've been going through in the last quarter or so. But we have started the process of our mitigation through remedial processes, which is ongoing, and all the departments are engaged in that. So we hope for improvement in the coming quarter, of course, the geopolitical situation easing out would help us much more. So thank you so much for your time and attending the call. Thank you.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a pleasant evening.