IFB Industries Limited (IFBIND.NS) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, we have Soumitra Goswami, sir, connected with us on the line.

Soumitra, you can start. Hello, there's something wrong with your line I think.

Yes. Soumitra, sir, you can start.

Good afternoon, everybody. I am Soumitra Goswami, the Chief Financial Officer of IFB Industries Limited. I welcome you all for IFB Industries Limited Investor Call for quarter 2 of FY '25, '26. Now I will inform you about the quarter 2 results. Revenue for the quarter was INR 1,327 crores against last year INR 1,189 crores, which is a growth of 11.5%. EBITDA for the period was INR 102.5 crores and its percentage to revenue is 7.7% as compared to last year INR 79.04 crores, which was 6.6% on revenue. EBITDA amount came across a growth of 13% year-on-year. This expenditure for the quarter were well within budget. EBITDA for the period was INR 68.3 crores, which is 5.2% on revenue against last year's figure of INR 44.6 crores, which is 3.8% on revenue. Quarter 1 PAT -- sorry quarter 2 PAT was INR 50 crores, which is 3.8% on revenue ended last year, INR 33 crores, which was 2.77% on revenue. YTD September 2020 figures are like this. Revenue for the period was INR 2,637 crores against last year INR 2,434 crores, which is a growth of 8.4%. EBITDA for the period was INR 172.45 crores, this percentage to revenue is 6.5% as compared to last year INR 165.57 crores, which is 6.8% on revenue. Performance for the YTD period was impacted due to subdued quarter 1 revenue, which impacted the overall growth momentum for the 6-month period. This expenditure like quarter 2 were well within budget. PBT for the period was INR 102.25 crores against last year's figures of INR 97.04 crores. Half year PAT was INR 75.11 crores, which is 2.8% on revenue against last year's INR 72.14 crores, which is 2.9% on revenue. Before we move to the question-and-answer session, I would like to highlight briefly on some important points, which we -- where we intend to focus on for driving our future improvement. Those points are ongoing material cost reduction initiatives are expected to deliver annualized savings of INR 200 crores. Out of that, INR 41 crores...

Soumitra, you have to specify this is for applied division only.

It is for applied division only all the initiative what I am talking now, which is for applied division only. Material cost reduction initiatives are expected to deliver annualized savings of INR 200 crores. Out of that INR 14 crores we have realized already in first half. And for the balance period, balance amount of around INR 60 crores to INR 70 crores will be realized. On fixed cost reduction, we did not do well in this area. The team has been prepared. The team is focusing now to address this area and initial results are expected to materialize from quarter 4 of the current fiscal. On logistic cost log cost of approximately...

The team is working with algorithm [indiscernible].

And we are working with algorithm merchant only. On logistic cost of approximately INR 150 crores, a cost optimization project targeting a 10% reduction has been initiated. A&M and our team are working together on the same. Efforts are underway to improve counter sales representative productivity and optimize market coverage. We are improving the efficiency of scheme payout. Up to 30th September 2025, we have reversed INR 28 crores from dealers who did not achieve their volume target as per the tie-up letter. The annual scheme payout, including consumer finance and scheme of service stands at INR 1,500 crores up to 31st March 2025. We continue to identify additional inefficiencies in this area and further actions will be taken in the second half of this year. Our intent is to achieve double-digit margin by addressing all the 5 points which I have spoken now and along with the enhancing counter level extraction and expanding the market share on each individual product category. Now with this, I will be requesting to start the question and answer session.

[Operator Instructions]. The first question comes from the line of Vivek Kumar from [indiscernible] Research Advisory.

I'm audible, Sir?

Yes, you're audible.

So my general question on the home appliance division. Where do we -- like we are having good market share in front loaders, top loaders and microwave oven. So this newly, we are now concentrating on refrigerators and air conditioners. But if you go to any big retail market, you see lots of competition. So how should we think -- I'm not saying you will not be able to make it or you'll be able to make it. How should we think -- are you going to concentrate in a few [indiscernible] locations, location states? Why do you see you can go to 15% market share that you are seeing in ACs? Why do you think we can go there -- I'm not even saying this time line, but there should be some assumptions, right, that you have put up your own plant, you are doing everything in-house, which is like very commendable. So there should be some assumptions from the management side why we will get to that market share in both refrigeration and -- because if you see there are like Korean companies, Japanese companies, Chinese companies and also some Indian companies across all these categories. I'm not undermining IFB. I'm just saying what are the assumptions that you think to this AC and refrigeration, you will get some market share over the next 4, 5 years.

I think Ranjan Mathur will answer this question. He's the sales head. But one thing -- Hi, this is Vikram. I would like to say I don't think anywhere we have said AC will get 15% market share. I don't think...

Okay. So sir, my point is you want to get established...

However, I think the fact is if you are in a business, -- in the business, you have to aspire to do well. And to do well, many things you have to do well. One is your design has to be good. The look of the products has to be good. Durability has to be good. Your sales structure has to be good. Your overall cost structure, including material cost, et cetera, has to be good. Logistics and warehousing has to be very good. Even if you take a company like Panasonic, which is a global company, with everything being very good, by and large, they have failed in a lot of product categories, and they have decided to exit some. We feel, however, that in many of the product categories we are in, we can do much, much better than we are doing today. That is our belief. And however, from here, Ranjan will take over, please.

So with regard to ACs and ref the initial response both for refrigerator and ACs in the market is very encouraging. And today, we call it modern trade, we are being placed across. And the overall the secondary movements are reasonably good. So we are quite confident that we'll be able to get our rightful position in both the categories.

Okay. So is there any target, sir, like the growth rate targets you have on the home appliance division over the next 2 to 3 years because we have now undertaken cost initiatives with the sales traction and now that I think I'm not saying there will be no new products, but at least [indiscernible] products across being cooking and cleaning. So any growth rate you can target over 3, 4 years? I'm not asking this year or next year, home appliance [indiscernible] Growth target, revenue targets?

So basically, we don't give any forward guidance. But what we envisage is overall, the growth which we could feel or we could assess, we'll be growing at a far rapid pace than the industry and we will be gaining our market share.

So can we assume a 20% growth over the next 4 years, that like lots of investments have gone over the last 6, 7 years. So there's not much growth. So I'm not asking you to give guidance, but there will be some assumptions that, okay, 20% should not be a difficult or 10% should not be difficult like that. I'm not saying you should grow only at 20% or 10%, but some growth rate should not be difficult that we have done so many investments over the last 4, 5 years.

Look, all this will depend on the industry, but we are quite confident of growing at a much rapid pace.

So much rapid pace can be double digit, at least north of 20% or north of 10%?

Yes, it has to be more than that. It has to be around -- it will be more than double digit.

The next question comes from the line of Lakshminarayanan from Tunga Investments.

I just want to understand your cost saving things which you're actually talking about. I want to understand whatever tax we are saving, whether how thinking whether it would actually be passed on to the consumer or it will directly come to our bottom line or it will be -- I mean, or it will be spent on advertising and things like that? How are you thinking about the cost savings?

Look, cost saving has nothing to do with saving on tax. They are 2 different things. Saving on tax has to on the GST saving, et cetera, everything goes back to consumer.

No, no, no. I'm not talking about that. Sorry, I'm talking about the cost saving initiatives which we have taken, which is in the variable cost savings and the fixed cost savings, which we have actually [indiscernible] as a project. I'm talking about that.

That will go to bottom line -- that will go to bottom line.

Okay. And in terms of the variable cost savings, among the INR 200 crore plan which we had, how much you think would actually would get affected for this year?

I think we just answered that. We just answered that, that -- about INR 70 crores to INR 80 crores will come this year. Balance will come next year, which is as per our last quarter thing.

Got it. And in terms of the fixed cost savings, which you talked about, I think it was mentioned that there is some kind of a delay in fixed cost savings. Can you just talk about...

Yes. Now that project has been given to Alvarez & Marsal as well. We now have a team full time with Alvarez & Marsal and ourselves to look into this. In this, there has been no movement at all sadly, a lot of movement on material costs and other things.

Got it. Sir, moving on to your BLDC motors. Can you just help me understand because there has been some mention that you have started -- I mean not only producing, but also been having some orders in hand. Can you just talk about the BLDC plan for now?

BLDC plan for which one, washing machine or for AC?

Both, sir. How many we are manufacturing...

Washing machine supplies have started full stream to IFB Industries Goa plant. We don't have any other customer though. We are only supplying internally now. And AC has also supplied now. I think we supplied in October second week, certain number. And November, I think we'll do about 20,000 or 30,000 numbers. And for the OEM for AC, the OEMs have already started putting our motors are working on the development program with us.

Got it. Got it. Sir and AC...

[indiscernible] AC production has started also and again...

Got it. When I look at your refrigerators volume, and I see that the realization has actually gone up by around 5% when compared to the last quarter. So can you just help me understand what is the mix of -- is it because of the no frost also coming in? Or is it for any other changes you have done?

No frost, I think no frost has come in. And as soon as volumes increase, I think you get better economies of scale across the board. However, in refrigerator overall, if you see, we are still unhappy with the volumes. And as a percentage, if you see there has been sizable increase. But compared to our internal target, we are still about 30% short.

Got it.

32% percent.

Got it. Sir, can you just give a volume number of front load, top load machines for this quarter?

Kartik, please take over this.

You're talking Q3 or Q2?

Yes, the current -- I mean as in Q2.

Q2, we sold around...

I don't think -- I don't think -- I don't think we give volume. I think if you see for whatever we've done so far, I think July, August, September and October have been good. And for truckloader, it's been very good.

Sorry, sir?

For top loader, it's been very good.

Okay. Okay. And in terms of our capacity for front loading and top loading, what has been our capacity right now? And what has been the -- where do you think you will actually end in terms of utilization for the year?

Kartik, I think capacity, we still have a lot to do in FL. But top load, I think we are using sizable capacity, but Kartik will answer this.

Sir, can I answer sir. Govindaraj here.

Yes, yes, please.

As far as the front load is concerned, our capacity has been 85,000 per month. And in the month of September and October, we have almost used to 92% to 93%. And going forward, we are doing activities which we want to enhance the capacity by another 10% to 15%. As far as top loader is concerned, our capacity is 60,000. And in September, we have almost achieved 95% utilization. Same way, we are looking forward to about 10% increase in our capacity.

Got it, sir. Sir, and as we grow forward in the next couple of years, can we -- is it...

Mr. Govindaraj, there is a question exactly what you're asking. For 2 or 3 months if capacity utilization is good -- the question is the balance 9 months. When you look at it overall, then optimization is not good. That is correct.

Understood, sir.

So if you just increase capacity, it doesn't make sense [indiscernible] substantially.

It only help up in better... Sorry, should I go ahead? Sir, my question is that for the full year, I assume your capacity you are talking about all the ships included. My question is that from a full year point of view, what is the total capacity you can actually do? Is it 85,000 into 12 and 60,000 into 12, and 3 shifts a day is what I assume. Now as we go forward, maybe in the next 1, 2 years, how can we add capacity? Do we have place to add the assembly line? Or how do we think about it...

We have all that, got into space per freight for the next 2 to 3 years. By and large, we are okay. But if sales grow by that amount, by a huge amount, then we may need to add tools, et cetera.

Got it. And we are working 3 shifts a day, sir, on both the shifts?

Not for 365 days. And in certain sections, we are working 3 shifts throughout the year, like in the plastic molding section, et cetera. But certain sections, we are not.

Got it. There was a mention regarding having McKinsey for a consulting engagement. Can you just help me understand what would be the duration or what are the things you like to -- you are expecting out of that as an outcome?

It's about a 12-month thing, basically on e-commerce. We realize that the processes, et cetera, we may need to update or the better word is modernized that we have internally vis-a-vis the best practices followed by other leading firms. So we realize we need an outside firm to just help us speed up on this. And hence, it's about a 1-year assignment. And along with that, we've given them a target of marketing cost optimization at the same thing so that the project cost is cost neutral. That's our agreement with them. It's marketing cost optimization as well as e-com.

[Operator Instructions]. The next question comes from the line of Udit Bokaria from Cataraman.

Sir, just wanted to understand, historically, despite being a market leader in front load washing machine as well as microwave ovens, right, why were our margins low? And when -- and what was the rationale or what was the thought process then what is the stabilized margins? That's the first question. And the second question would be, if you can just break up that INR 200 crores, how much is due to fixed cost reduction and how much is material cost reduction and what are the other things? Yes. These are the 2 questions.

The major thing on margin, if you see, you will see our material cost is high and fixed costs are high, by and large. I mean that has to be fixed. And any good company works on double-digit margin plus, double-digit plus margin. So we have to get there. We are very, very clear on that internal. The fact that it is taking so much time is bothering us. And hence, we got in external firms to help us. In fact, in one of the investor calls a long time back, one of the investors said to me that, look, it is much better you work with an outside firm because it will help you move faster rather than trying to do this internally. I had resisted that. and we wasted a lot of time and we have corrected that. So we are very clear on the margin objective and various corrections need to be done, including material costs, logistics cost, fixed cost, et cetera, schemes, optimization of schemes as Kartik spoke about, all of this has to be done. We are clear on that.

And is there any quantum which you can share like of that INR 200 crores, how much is material cost, how much is fixed cost?

I think as we've said, in this year, our target was INR 100 crores, but I think we'll end up with material cost of anything between INR 70 crores to INR 80 and the balance will come between April and September, October of next year, significantly. The reason for this thing is in material cost, et cetera, a lot of validation, et cetera, has to take place when you go to alternate material and all of that. So all that project is on. So this is significantly material cost. Some of it will be logistics cost. Fixed cost is over and above this.

And the material cost reduction is just that you have found a supplier who is able to give you the same quality parts at a cheaper rate? Or what is it?

No. We are able to renegotiate better with zero-based cost structures, et cetera, zero-based costing in place, et cetera. In certain cases, we are replacing. In certain cases, there is design optimization, et cetera. So I think a lot of different levers are being looked into. We now have, in fact, 6, 7 people from our team full time pulled out of operations into this and about 5, 6 people from [indiscernible] . So it's 12 or 14 member team, which is full time working on this and that is helping actually.

Got it. And just on your Engineering division, right? So it seems like there's a renewed focus and a lot of capital like because you have planned of acquisitions as well as there is organic CapEx going, right? So what is the reason for excitement or higher capital allocation towards this division?

Firstly, acquisition, nothing has happened. We bid for a company recently, which was into railway, significantly into the railway segment. We bid for a company, but we were outbid by others. The company had sales of close to about INR 300-odd crores, but we were outbided by others. We think this is a good stable business, engineering business for the long term and India becoming a good manufacturing haven in this China plus one thing, we thought we should expand capacities of our own and look at others we can acquire, other things we can acquire in order to really grow. However, we have looked at approximately up to last week, I think we've looked at 60 targets, which was 48 in last quarter, I think, 48 or 50. We looked at 60 targets out of which formal bids we put in, I think, about 4 -- 3 or 4, I think. The last one big [indiscernible] -- but none of them materialized mainly on valuation of a Japanese company that they had bid for because they told us they will exit and then come back into India on their own after selling to us, we get backed out of that transaction. So it's really taking a lot of time. But we think this is futuristic for us.

And any organic plans like where you're seeing good traction, like where you can put good amount of capital and customer and you have found some customers as well.

Yes. So we are -- if you see our growth this quarter has been very, very muted in engineering. Our internal target was much, much more. But many customer schedules dropped, and I think marketing has not done what they're supposed to do because our internal thing was much, much better, but it's not happened. However, even at these lower sales, they could control costs and keep the margins intact. Internally, we are expanding capacity in the stamping business, which is in Bangalore. In fine banking, there's marginal -- there's some CapEx going in, but a lot of work is going into productivity improvement, including making tools with newer technology, which will free up existing capacity and all. So a lot of debottlenecking work and in stamping business, we will put in CapEx. Also, we are looking for expansion in Gujarat. Stamping -- put up in Gujarat. We are applying to the government of Gujarat to set up a greenfield plant there for stamping and a few other things for that market where customers have asked us to put up a plant. We are doing that.

Got it. And what stage of commercialization are we in the Advanced Electronics division? I think you had mentioned the same in your...

Advanced Electronics venture has started. We supply to Titan. We are doing work for Titan. So that has started. And it has started slowly. I think we'll have a lot more to say about this in the January quarter.

What is the part that you're supplying there?

We are only doing machining work now. High-end machining work. And we are talking about parts still, but the discussion on parts is still on, but machining has started.

And this is for their steel division or like which division for -- of Titan?

Titan for their Advanced Electronics division. But I can't name the customer. The end customer, we are not allowed to name.

The next question comes from the line of from Naitik from NV Alpha Fund.

Congrats on good set of numbers. So my first question is we've seen very decent momentum in demand and in numbers both in the washing machine segment this quarter. So my first question is, do we expect this demand momentum to sustain? And what sort of growth can we see in this division?

Kartik.

So what we feel is the momentum is still continuing. And October was good and November also if we see the secondary sales, it's on the track. So we expect the momentum to continue in this -- in both the categories.

And any sort of number that you would like to sort of give in terms of growth, how we see this washing machine growing this year and next year?

I think we answered that. We don't give any forward guidance, but it will be a reasonable good growth.

Got it. Got it. Sir, my next question is what percentage of our portfolio has actually been benefited from GST rate cut? And have we actually seen demand increasing because of that in that part of the portfolio?

So I think GST, the major thing was supposed to be AC and the AC sales are down. There were rains and all, but Kartik can explain this better.

So in our case, it was basically ACs and dishwashers. ACs, the sale, -- the secondary sale has not yet started, which...

Kartik, please correct this. You have no benefit from GST because AC which was supposed to benefit is totally down.

Yes.

Please explain properly.

Yes. The GST reduction is in 2 categories. One is AC and second dishwasher. In AC since there was an industry level issue with regard to stock, though the benefit is there for the customer in terms of reduction in selling price because of the rails and in last quarter, there was no benefit. As far as dishwasher is concerned, there is an uptick in demand and our growth rates are also much higher than industry. We have increased on the market share also as far as dishwashers is concerned.

This quarter and going forward, are we seeing increased demand now or is it still being affected because of the weather condition?

No. But Kartik, one thing. On the dishwasher front, the GST benefit vis-a-vis the exchange rate, what has happened exactly?

Yes. The euro has appreciated, which has impacted the material cost. But as far as...

[indiscernible] Kartik, can you explain that properly, please?

Yes. At the company level, what has happened is that since the imports are denominated in euro, so the cost has gone up by 10%. So to that extent, the price has gone up. So after GST increase, after passing on the benefit to the customer, there is no net benefit to IFB in terms of margin.

Got it. Sir, next question is the INR 150 crore logistics cost savings you mentioned is over and above the INR 200 crore material cost savings, one and...

No, INR 150 crores is logistics cost. INR 150 crores, we are expecting minimum 10% savings, which is INR 15 crores.

Okay. INR 150 crores is a total cost, okay, got it.

The next question comes from the line of [indiscernible] From Param Capital.

Yes. So I would just like to ask around the cost savings that were mentioned here. You've guided that around INR 80 crores is going to be the savings for this year via the A&M cost program. How much of this is actually going to flow down to EBITDA? And how much will be offset by pricing pressure or inflation?

Yes. Kartik here. As we explained earlier, in the first 2 quarters, we have already got INR 14 crores in P&L. And in Q3, Q4, we are expecting another INR 60 crores to come in P&L. As far as commodity and ForEx is concerned, we are -- we cannot predict what will happen in Q3 and Q4, okay? At the same time, wherever possible, we are also increasing the selling price to recover the commodity and ForEx impact. In top loader, we have increased the price from 1st of November. In front-loading washing machine also, we are looking at a price increase. And judicially, we'll do the price increase.

Okay. So there will also be raw material cost savings as well as ASP increases quarter-on-quarter, right?

Yes.

Okay. So how much can we expect the EBITDA margins to look like steady state?

No. Madam, we will not be able to give the EBITDA forecast.

The next question comes from the line of Naveen from Nuvama Asset Management.

Just wanted to know what's the IP point count and what's the revenue that we're doing in that segment?

Currently, we have got 521 IP points across country, and they contribute to around 12% of our sales.

The next question comes from the line of Lakshminarayanan from Tunga Investments.

Sir, in terms of air conditioning, what is the total capacity we have? And how do we plan to expand the OE sales there?

Okay. This is Govindaraj here. As far as the air conditioner capacity is concerned, we are about 65,000 per month capacity is available. And in the peak, we have touched about 55,000 about 90%. That is point number one. Point number two is, as far as the OEM is concerned, our efforts are with our partners to give a competitive price, and we hope we'll be able to get some orders on that.

Got it. Got it. And one feedback which I have received, you may correct me if I go wrong here, is that the servicing of IFB washing machines have sometimes been a problem because the franchisee who you appoint when they come up with the -- addressing the customer query, they end up selling so many other materials because they want to actually maximize their profit. Does it -- is that been -- if that is the case, have you corrected that particular practice? And how your customer satisfaction scores in the washing machines have been? How it has changed in the last 1 year? I'm sure you will be measuring that score.

Kartik [indiscernible] you can answer this. Otherwise, I will answer.

Sir, the customer satisfaction survey is being done. The score is about 90%, and it has improved over last year.

And with regard to...

We actually -- and this is actually monitored every week on Monday. So the customer satisfaction score as well as pending calls, these 2 things are actually monitored by the Director in Charge of Service, Mr. Negi, every Monday morning. And we've seen improvement. But this point on selling, it has come out before, and we are seeing how to do this in other ways. So for example, now we are also working on selling can be done whilst we do digital marketing and all to basically the customer, a lot of the delivery can be done by third parties, thereby reducing the strain on the service people to sell. And therefore, we've increased sales of our detergents and all via Blinkit, et cetera, et cetera. We've done that...

Got it -- and last time you mentioned that we are trying to improve our sales saliency through this cashback mechanism because many of our competitors have tied up with several credit card companies. So my question to you is that what percentage of our sales happen through these EMI kind of options? And what percentage goes through this cash back? Because what the feedback I have received is that our cash back is not -- our tie-ups are not very strong. Therefore, in some fringes, we lose market share.

Kartik.

Yes. In this current season, Diwali season, our cashbacks and schemes have been very competitive in line with the competition. And for the industry and also for IFB, the attachment for cashbacks, consumer finance is around 40% to 50%.

Further, I said in last conference also that we are into product sales and the competition where you are just now saying we have higher cash back is not the right approach. So we sell our products on features and benefits, not on cash backs. So that is something how we differentiate ourselves.

Got it. Sir, on the fine blanking division, can you just help me understand what is the industry mix which we cater to? And even in the last call, you mentioned that there is a growth plan you actually have envisaged. So organically, how do you intend to grow that particular business? I'm just talking purely organically -- organic growth in the fine blanking division and the industry split which we have now.

I think organically, any business should grow -- I mean, we have enough within to grow by 20%, I think, 17% to 20%. And we need marketing to do a better job. In the case of stamping, however, because we are very small in stamping, we are doing about INR 8-odd crores a month, okay? So when we add capacity either in the existing plant in Bangalore or a new greenfield in Gujarat, this can, of course, grow by many more times. So whilst I spoke about Gujarat greenfield, we are also looking at setting up a plant in close to Maruti and Hero in close to Manesar. So 2 facilities to come up, one in Gujarat and one close to Manesar is what we are thinking of. And therefore, as this business from INR 8 crores a month, we will significantly grow it. We've not put any numbers to it as yet because it's not -- we have not taken it to the Board as yet in terms of a number, but we expect it to be substantial. This will be finalized in the next 60 days, and we'll take it to the [indiscernible] .

Sir, how many P&L divisions we have in our company? And one is, of course, the Engineering division and the Home appliances division?

Engineering division, the P&L is bifurcated. So for example, fine blanking is one, pumping is another P&L. Then motor is the third P&L, so like that we have it. And the reason we have it is so that the existing management of that line of business takes like responsibility end-to-end.

Okay. And how is it in terms of the Consumer Appliances division?

And in consumer thing, we have factory heads for each of the plants. But P&L is one. But service P&L is separate, so meaning marketing, we have a P&L, [indiscernible] we have service we have. Ultimately, consolidation is one as a client business, but we look at it as 3.

And what is the pure advertising budget we actually have for the year? And how much we have spent on media advertising? And if you can just give me a split of whether it is in terms of print, e-com I mean...

[indiscernible] now. But if you see how much we spend annually is approximately INR 100 crores to INR 120 crores, taking everything into account, including what is spent on digital. And one of the things given to McKinsey was help us to optimize this by 15% to 20%.

The advertising spend also?

Yes. This INR 100 crores to INR 120 crores cost that we have in marketing overall, we've asked them to help us to optimize this.

Sir, in terms of the customer sales representative of the CSR, which we have, I mean, how have you increased in the last 6 months over the previous 6 months? Because one feedback which I hear from the market is that our variable structure to the CSR has to be -- has to improve. And just because of it, there are some attrition also. So can you just help me understand that a bit, sir?

Yes. I think our major thing is we actually continuously benchmark. And one of the points that have come out in the benchmarking, which is what you are also quoting is the difference in the variable pay structure between us and others, namely like the bigger guys. But that is because the bigger guys are working on a structure which is suitable for them, which we don't think is suitable for us, but we are relooking into it. Whilst relooking into it, we have found some anomalies in our existing structure. So for example, in our existing structure, let us say that we say a person has to do a minimum of 20 before they earn incentives, okay? And whereas others talk about 30 for example. But the others have a slightly higher fixed as a result of that. Our thing is that when you look at the 20, the 20 cannot be looked at flat because every single counter has a different throughput, meaning in a counter, if total sales is, say, 200 numbers from that counter across brands. Okay. And then you say, okay, your target is only 20. Then we are doing lesser than the requirement -- in terms of market share in the counter. And similarly, in some counters, suppose the throughput is only going to be maximum of 80 or maximum of 50, maybe asking for 20 is also unfair. So the counter-by-counter proper planning is not there. Having said that, as far as the CSR average wage is, let's say, anything between INR 15,000 to INR 17,000, INR 18,000 depending on the city. I think we need to rationalize the structure and the incentive depending on the city rather than a flat all India. Meaning the structure for Bombay cannot be the same as the structure for Amritsar.

Got it. Got it.

I think this rework is taking place. It will be done by November 15, 16 and the new thing will be rolled out...

And how many we have -- how much we have increased our CSR people in the last 6 months to the previous 6 months?

I think we've increased by about 600 numbers.

600 on a base of 4,000, right?

600 to 700 numbers [indiscernible] or how much...

700, we have increased and our current number of CSRs is 5,300 across country.

And given the kind of complicated things which you actually just mentioned, how are we structured in terms of our information systems right from the factory to the primary sale to the secondary sale? And how do we track it so that the right product positioning happens, the right CSR is actually put. How have we improved our...

Yes. So I think I think this overall thing of connecting right up to the end in real time, we have some issues here. We are working on this. We are working on this. And I think these are one of the points where we may need external help.

Sir, right now, your multiple plants, all of them are in the same information system that what you are buying in Goa versus what you are buying in other place. Do we have the visibility in terms of whether the materials are correctly procured at the right price and the right inventory? Is that unified now from an information system point of view?

From an information system point of view, it is there but may not be used effectively, as effectively as it can be used. Is the information there in the system? The answer is yes. Is the information used effectively? Maybe not 100%. But to your question, is the information answer is yes. So what we've done now is supply chain across the board has become one in terms of buying. We put one person basically in charge. We put a committee in charge of price increase to be given to suppliers, et cetera, et cetera. So a lot more control has been brought in, and that is giving us benefit.

Next question comes from the line of Shreyansh Jain from Swan Investments.

Sir, my first question is, when I actually break your P&L, other expenses up, and I'm talking about FY '25, we've got these numbers from the annual report. So there is this cost called ancillary cost, which has actually doubled in the last 5 years. So can you just throw some light there, INR 140 crores of ancillary costs, what are these costs exactly, sir?

You are talking about the engineering division.

No, I'm talking about the overall consolidated profit and loss account of IFB Industries.

Sir, I am [indiscernible]

Talking to ancillaries only engineering know?

No, ancillary is there in home appliance division also. I am answering this...

[indiscernible] some might not know. What is ancillary home appliance. [indiscernible] what is ancillary home appliance?

[indiscernible] apprentice allowance, which was grouped earlier under employee cost, now regrouped under ancillary cost in this year. So the cost looks higher as compared to last year. Whatever he's saying is correct. There is an additional impact of INR 4.5 crores in the quarter and around INR 9 crores for the YTD period. Otherwise, there is no such additional impact in the ancillary cost.

Sir, if I'm getting this right, this is employee cost, is it INR 140 crores...

No, no, no. It was -- this cost is pertaining actually to apprentice. We have many apprentices in the appliance factory who are actually...

Soumitra, please understand what he's saying. Ancillary cost of INR 140 crores cannot be apprentice...

No, I am not telling that. See, in the IFB industry P&L, this year for the quarter, ancillary cost is INR 14 crores as compared to...

Full year '25, last year. I want to understand the expense head broadly.

For last year.

Yes. For last year, it was INR 140 crores.

Last year...

INR 40 crores has become -- it was INR 70 crores in FY '21. So it has doubled in the last 5 years, whereas our home appliance division and all divisions put together, our revenues have not compounded at the rate that this expense has compound.

I am telling you, I'm telling you, if you talk about '24, '25, INR 140 crores, out of that approximately 78% to 80% is pertaining to our Engineering division. Engineering division, they are doing many ancillary jobs, which are happening inside the factory, which are going outside the factory that are being booked under ancillary cost. And in addition to that, Home appliance division also is having ancillary cost, we keep around 18% to 20% of the total ancillary cost of the company.

Okay. And my second question related to the same thing. When I just break this other expenses, INR 1,250 crores of total expenses. Now, if you look at the 5 largest expense heads, sir, one is consumption of stores and spare parts. The other is freight of carriage. The other is ancillary cost and the fourth is advertisement sales promotion of INR 285 crores. Now sir, as of my understanding, all these 4 large cost heads are largely variable in nature. So as you increase your business, you will need a lot of these things, right? So I'm just trying to understand when you talk about INR 120 crores of cost savings, which will come from other expenses, which line item are we actually targeting or are we looking at getting the most out of?

Regarding the material cost reduction, whatever we are talking about for last 1 hour many shareholders...

[indiscernible] 60 to 80, right?

One minute, I'm just coming. Suppose you are talking about consumption of stores and spares under other expenditure, correct. Consumption of stores and spares, though it is appearing under other expenditure in Schedule 3, but it is clubbed under material cost only when we are combining the P&A. Understood. This is point one. Ancillary cost, I have already explained [indiscernible] sales promotion expenditure, which we have discussed about 5 minutes back, where CSR expenditure and normal promotion expenditure are come up, apart from that, another [indiscernible] CSR expenditure that is also a big amount, but it is coming under promotion cost only. [indiscernible] clear to you now?

It is not very clear.

Or you can...

We request you to if we can take this offline, somebody...

Yes, you can come back to me offline. I will explain to you.

Yes. And sir, the other question is we...

Sorry, -- can I just interject because I like this point Kartik.

Yes, sir.

Out of the INR 200, whatever he say, INR 250 or INR 280-odd -- as far as I know, marketing cost is INR 120. That is what we've given to McKinsey.

Yes.

Now CSR cost is about 14, 15 a month or 13 to 15 a month, correct? so it was saying that is added to marketing cost, correct? And hence, it becomes INR 280. Am I right assuming that?

Yes, yes, yes.

Okay. So it's a question of CSR. It is an issue of getting productivity up, which is what we've been debating for the last few days. So that's a separate exercise, and you must put some numbers around it. So how much should we get out of that exercise, Kartik.

Yes, we are working.

Understood [indiscernible] no, no first, you understand the question. His question is a correct question. On the CSR part, what is the productivity improvement, et cetera, you are expecting and there must be some numbers like in cost reduction of material you're working on some numbers. Please answer yes or no.

Yes, yes, sir. So during the...

But you have no numbers for CSR.

Yes. Sir, during the fixed cost reduction project, we will...

I don't want [indiscernible] reduction in CSR. I want productivity improvement in CSR.

Yes, sir.

Kartik, you can speak about... Kartik, you can speak about whatever we discussed yesterday evening.

Please Kartik, [indiscernible] don't interject when I'm talking. Kartik, have you understood what I'm saying? What am I...

Yes. Understood it.

Yes. What you said is CSR is not a fixed cost reduction exercise. We need to work on productivity improvement, and we have to set a...

Yes. Like what [indiscernible] do we need to improve the structure, et cetera, et cetera. The point is a correct point. We've been discussing this for the past few days. Put some numbers to it. Okay. Like we've done for material cost, we are material cost, we get, let's say, INR 80-odd crores or whatever now this year. Put some numbers to CSR. What will we get out of this restructuring?

Understood, sir.

And for each of the points, the other point that he is raising also, those 4 or 5 headline items, you put some numbers to each one of them. The point is a correct point.

Yes, sir.

And sir, my last yes, my last question is, sir, when we talk about INR 100 crores to INR 120 crores of pure advertisement expenses, can you help us understand how much of this is above the line and how much of this is below the line? Now why I'm asking this is, when we did our channel checks, a large part of the MBO guys we met. So what their feedback is IFB as a product is top notch. There's no question on that. But what the feedback was is none of the customers actually who come in, they actually know what the product delivers, how superior is the product. So they said the customer awareness is very low.

Yes. So we are working on a campaign. We are working on a campaign with [indiscernible] for awareness building. And that campaign will come out soon. It is delayed. We've not come out because the right idea we've not been able to strategize on, but that work is going on. This cost includes a lot of digital cost also. INR 120 crores includes a lot of digital cost. We can give you the breakup. But the APL, as you are talking about in print, that is minimal. That point is a correct point. But only -- but we are relooking at this. And therefore, that optimization and then recasting that and deciding on which media, how much to put in, that whole work is being worked out with O&M as well as the media buying agency, which is initiative media.

Okay. Okay. So do we expect some ramp-up in that expense, INR 100 crores, INR 120 crores?

No, we don't expect ramp-up just blind. We first expect McKinsey to help us with some rationalization, and we expect EBITDA improvement to happen before ramp-up happen.

Okay. And sir, my last question is, if I just dial back to the last quarter, where our top load and front load, front load specifically, which is our major part of our washing machines, that didn't do well. So I think last quarter, we were targeting 15%, 20% kind of growth rate. So in that light, when we've done 14% this quarter, how do you look at this number? Are you internally happy with this? Or do you think there was room for a 5%, 6% kind of growth rate more?

There was room for further improvement. And in some of the states where the management is not good in that state, changes are being made. So to answer your question, yes, we were not happy because in pockets where management is weak, we have had issues.

Okay. And sir, would we have gained any market share?

Yes, I think we've gained market share.

As there are no further questions, I would like to now hand the conference over to management for closing comments.

Thank you very much to everybody for participating in this call. We'll meet again after quarter 3. Thank you very much.

Thank you.

Thank you, sir. This brings the conference call to an end. On behalf of Nirmal Bang, we thank you all for joining us. You may now disconnect your lines. Thank you again.

Thank you.