PG Electroplast Limited (533581) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, everyone, and welcome to the PG Electroplast Limited Q4 FY '25 Earnings Conference Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. This presentation has been prepared for informational purposes only. This presentation does not constitute a prospectus offering circular or offering memorandum and is not an offer or initiation to buy or sell any securities, nor shall part or all of this presentation form the basis of or to be relied on in connection with any contract or investment decision in relation to any securities. This presentation contains forward-looking statements based on the currently held beliefs of the management of the company, which are expressed in good faith and in management's opinion are reasonable. The forward-looking statements may involve known and unknown risks, uncertainty and other factors which may cause the actual results, financial condition, performance or achievements of the company or industry to differ materially from those in forward-looking statements. Those forward-looking statements represent only the company's current intentions, beliefs or expectations, and any forward-looking statement speaks only as of the date on which it was made. The company assumes no obligation to revise or update any forward-looking statements. I now hand the conference over to Shalin. Thank you, and over to you, sir.

Thank you, Anushka. Good afternoon, everyone. And on behalf of JM Financial, I welcome you all to the Q4 FY '25 earnings call of PG Electroplast Limited. We have with us the management represented by Mr. Vishal Gupta, Managing Director, Finance; and Mr. Pramod Gupta, Chief Financial Officer. I will now hand over the call to the management for their opening remarks, post which we can open up the floor for question and answers. Thank you, and over to you, Mr. Gupta.

Thank you, Shalin. Good evening, everyone. Thank you for sparing your valuable time and joining this call today. Hope you all are doing well. I'm being joined on this call by Mr. Pramod Gupta, our CFO. We have already shared our results presentation and hope you have gone through that. Financial year 2025 has been another remarkable year in the growth journey of PG with several milestones. The company has done capacity enhancements and scaled up its product business significantly in FY '25. Now the company is leveraging its size and partnerships to drive innovation, reduce cost and elevate quality standards. And as client expectations for faster turnarounds and greater customization continue to grow, scale has become a defining competitive advantage, enabling PGEL to optimize sourcing, streamline production and deliver exceptional value. For this financial year, our operating revenues for the company has grown by 77% and crossed INR 4,869 crores with the product business contributing around 72.4% of the total operating revenue. EBITDA increased by 81% and stood at INR 519 crores and net profit rose by 112% to INR 291 crores. The company has posted an industry-leading growth in product businesses and operating revenues for the product businesses crossed INR 3,525 crores in FY '25 with 111% growth. This is even though when ASPs in certain categories are down by up to 5% on a Y-o-Y basis. The room AC business contributed INR 3,009 crores, which is a 128% growth on a Y-o-Y basis. The washing machine business had growth of 43% on a Y-o-Y basis, and air cooler business has also grown by 80%. Order book and visibility for the product business remains robust, and the company is on track to grow the product business significantly again in FY '26. Our new product offerings in washing machines and room ACs have received a very good response and the company continues to see increased interest in its product offerings from new and existing clients and we remain very confident in the future growth prospects of our business. Business momentum is underpinned by our disciplined approach to efficient capital allocation, with a strong focus on enhancing asset turnover through sustained growth in product business. This strategy has been the foundation of our success, fueling industry-leading expansion while ensuring best-in-class return ratios. As we accelerate forward, we remain committed to achieving market leadership, leveraging our strength to set new benchmarks in operational excellence and financial performance. For FY '26, our operating revenue guidance stands at INR 6,355 crores in PG Electroplast, which is a 30% growth over FY '25 numbers, and at INR 855 crores in our JV company, Goodworth Electronics, which is a 57% growth over FY '25 numbers. This implies an operating revenue of INR 7,200 crores at a group level, which is a growth of around 33% over our FY '25 numbers. We are also guiding for a net profit of INR 405 crores in PG Electroplast, which is a growth of 39% over FY '25 net profit of INR 291 crores. The growth in product business is expected to be around 35% from INR 3,526 crores to INR 4,770 crores in FY '26. The CapEx guidance for FY '26 is in the range of INR 800 crores to INR 900 crores. The company has planned to further expand the RAC capacity with a new greenfield plant in Bhiwadi. Also, a new greenfield facility is being planned in Greater Noida for washing machines. The company is on the verge of finalizing a land parcel for its refrigerator plant in South India. The Supa facilities will be expanded further with a new building and further capacity enhancement for the RAC business. Also, our Board of Directors today have approved the final dividend of INR 0.25, that is INR 0.25 per share. With this, now, I will hand over the call to my colleague, Mr. Pramod Gupta, our CFO, to elaborate on the financials.

Good evening, everyone, and I welcome you all to this conference call. I'm sure all of you have seen the financials in detail already. We had a very good scale up during FY '25 from operational point of view. All our business has reported very significant growth over the last financial year. The company's operating revenues for fourth quarter '25 were up 77% to INR 1,910 crores. EBITDA grew 93% to INR 232 crores and net profit rose 105% to INR 146.4 crores. During the Q4 and the financial year '25, operating margins have seen slight improvement due to cost control, lower commodity prices and operating leverage. On the balance sheet side, if you look, we are now a net cash company with almost INR 980 crores of cash. During the year, company has done significant CapEx of almost INR 488 crores in commissioning new greenfield plant in Bhiwadi, CapEx in Supa for RAC manufacturing, and also company has issued capital advances for land and building in Greater Noida for new washing machine facilities. As stated by Vishal-ji, we have guided for INR 800 crores to INR 900 crores of further CapEx in FY '26. This will be funded largely by the operating -- by the cash flow -- cash that we have on the balance sheet today. Also, we hope that going forward the growth momentum will be good. And again, I'm reiterating here that the capital efficiency by sweating existing and new assets will be the key focus area for the company in the coming years. Our asset turn -- net fixed asset turn has crossed 5 this year, and we hope to sustain that in coming years as our CapEx get commissioned and we are able to fully sweat them. We remain very optimistic on the growth opportunities in our focus area, and we believe company is well placed to expand its market presence further in coming years. With this, I'd like to open the floor for Q&A.

[Operator Instructions] The first question is from the line of CA Garvit Goyal from Nvest Analytics Advisory LLP.

Am I audible?

Yes, you are audible.

Congrats for a good set of numbers. My first question is on the industry demand. Basically, our customers like Blue Star and Voltas are a bit cautious regarding the near-term demand, particularly due to early monsoon or we can say delayed summer, and they are facing some rising inventory levels at the channel. But we are on the other side, pretty much confident, which is reflected in our numbers as well for FY '26. So sir, please help us to understand what is giving us this level of confidence? Is it because we are further looking for increasing our market share? Or what is this exact growth driver for us for FY '25?

So basically, as we told that we are serving 35-plus brands. So it is -- the market situation is always very dynamic. Sometimes some brands are doing well, sometimes some brands may not have their own -- their issues. So for us, this business is looking very strong as of now also, in spite of the fact that overall industry is facing certain inventory issues because of the rains, early arrival of the rains. But for us, as a company, we are not seeing major challenge as far as June quarter is concerned. And going forward also, we have the guidance that we have given, we are very confident that we'll be able to meet those guidance. The only reason is because we are serving 35-plus brands, so we are able to diversify the risk and diversify those issues with us that normally some customers face.

Understood, sir. And sir, secondly, on our segment side, you mentioned product business is going to do well and electronics also. But looking at your plastic division, so you are estimating a growth of around 10% for next year. So why this slower growth we are targeting for next year in this particular segment, sir?

Basically, the issue is the petroleum prices are on a lower trend right now, and all plastic businesses, the prices are driven by petroleum crude prices. So we are seeing that the drop in the raw material prices -- and this business being a straight pass-through business to our clients, so what we see is the ASPs will drop. So overall volume growth will be good, but at a value level growth, we are targeting is around 5% to 10% only.

Got it, sir. And lastly, on the CapEx side, any new product that we are going to launch via this CapEx that we are going to do next year?

Sir, the only product what we are talking about right now is refrigerator. That is already guided. That is what I have told in the call also right now. So we are planning to put up a refrigerator plant in South India.

The next question is from the line of Achal Lohade from Nuvama Institutional Equities.

Congratulations for a fabulous set of numbers. Just 2 questions, sir. First, with respect to the 35% revenue growth guidance for products, is it fair to say that in washing machine, given the Whirlpool tie-up now, this can grow in triple digit in the current year, given the capacity addition, et cetera?

Sir, we will stick to the guidance what we have given to you. We will not go into those details. So at a product business level, we have guided for 35% growth, and we'll stick to those numbers as of now, sir. And we don't go for customer-specific numbers.

Sure, sure. The second question I had with respect to the PLI and the state incentives, if you could help us, what has been the quantum which is booked in the fourth quarter?

Can you just repeat?

For the fourth quarter, sir, what is the state and central government incentive we have booked?

INR 31 crores -- INR 31.5 crores. INR 30 crores is the PLI and INR 1.5 crores is the state government incentive, which we have booked.

Okay. So INR 30 crores for FY '25 and which is accounted for in fourth quarter. Have I understood right, sir?

It is FY '24 number which we received in '25. In our case, in PLI, we booked this on the basis of a cash only. On the basis, once we get the sanction and the money is just about to resume, we book in our books of accounts.

Understood, understood. And one last question with respect to the compressors. Any update on the status for the compressor manufacturing facility?

See, the building is already being made and the contract is being on the verge of finalization right now.

The next question is from the line of Dhananjai Bagrodia from ASK.

Most of my questions are answered. Just wanted to ask you, now when we're looking ahead, are we seeing now competitive barriers for other EMS players because of PLI now becoming more advanced? So the players who have gone through now -- we are in a very strong position to continue with that growth?

I mean the PLI was just an enabler to gain scale. And now I think PLI is over, in a sense that in the next 2, 3 years PLI will be over. Now obviously, the companies which have been able to take advantage of the PLI and grow and make -- scale up their business will surely have a leadership position in this segment. And as you know, the scale itself becomes a good competitive edge if it can be rightly harnessed by leveraging your strength in customer relationships, sourcing relationship and doing the right product development. So we think that now for any new player to come and enter and scale up to the scale is going to be relatively difficult, much more difficult. And given the fact that the players are now already established, at least for the foreseeable future, we don't see any big threat from any new player to emerge in this segment.

And sir, now in EVs, we've already got a foot into the door. Are we seeing more growth in that along coming? Or how are we seeing that?

The EV partner -- our EV partner has still to get some clearances from Government of India and ARIA for launching their products. So once they get that go ahead, then only we will be putting up the plant for them to start doing the assembly and manufacturing. We are still awaiting those clearances for our partner, our client partner.

And sir, I missed it, CapEx you're looking for the next year?

The total CapEx is going to be in the range of INR 800 crores to INR 900 crores. We are actually going to put up a refrigerator plant. INR 300 crores is earmarked for that. We are going to be spending a significant amount in compressor, and we are going to start a new greenfield facility for washing machines in Greater Noida. And we are also looking for a greenfield plant near Bhiwadi in Rajasthan for components, coolers, and maybe at some stage, doing the tool room there. So these are the plans there. In the next -- next year, we are going to have a very heavy CapEx. And we think that in next 2 years, we'll be actually doubling our gross block from currently about INR 1,200-odd crores to something like INR 2,200 crores odd.

And the majority of that is coming in FY '26 then because if you're saying INR 900 crores will be...

Yes. A large part of it is going to be coming in '26.

Okay. Fantastic. Actually, this is very, very good. Congratulations, sir, again on a very strong set of numbers. Kudos to you all.

The next question is from the line of Ashish Kumar from Ampersand Capital Investment Advisors.

My first question is on PLI again. What kind of PLI incentive can we expect next year for FY '26? And my second question is on the Goodworth business. How do we see it in FY '26 and beyond? Do we expect breakeven? And what kind of profit margin can we expect from this?

So next year, we expect to have a PLI of INR 37.5 crores, which is what is going to be our share for meeting the targets in 2025 financial year. Coming to the Goodworth, this year, we did INR 544 crore turnover and we had a small loss there. At EBITDA level, though, we had a profit about 1% margin. Next year, we hope to improve that. We are budgeting in about 1.5% to 2% kind of EBITDA margin in that business. And you can assume that next year, we should see some profitability. Going forward, about 2% kind of a margin at EBITDA is what is sustainable in that business.

The next question is from the line of Arshia Khosla from Nirmal Bang Institutional Equities.

Congratulations on a strong performance, sir. Most of my questions have been answered. I actually just want to understand the INR 800 crores, INR 900 crores CapEx guidance. Is it including the backward indication that we're looking for in RAC? Or it will be -- I mean, it's just the refrigerator and washing machine part?

No, no, it includes everything, RAC, washing machine, refrigerator and the new plant for basically coolers as well as tool room, which we are looking at, everything. And compressors also.

Okay, okay. Understood. And sir, how is the demand -- I mean, because of -- obviously, because of the delayed summer, the demand -- April has been a complete washout. So how is the demand? How are we looking forward to like May and June for this quarter?

See, April has been a good month for us. We were on track of our budgeted numbers. May also we have not seen any significant cancellation as of yet. June month we will see. We will watch out how things pan out. But from whatever kind of inputs we have, we think at our end we have yet to see some very significant impact. But nonetheless, we have been hearing the stories of South being very slow. And also because of some intermittent rains in the last 2 weeks, there has been slower sale. But on the other hand, I will just say that the summer in North India lasts till July. So we are still in May mid, and I think there is still some room to go. More importantly, we think that because of several other changes which are happening, including this tax reduction, et cetera, which happened in the budget, and also AC being a secular product -- this seasonality will probably impact this or next month, but it is surely not going to kind of derail the long-term story. And we do not actually put up the capacity of our business only for 1 year. In our opinion, we still remain very optimistic and very bullish on the long-term growth prospects of AC business.

Great. Understood. And quickly on the margin side, would you like to guide something on the EBITDA margin side as well?

I think you can assume them to be remaining flattish this year. We think the margins that we have are sustainable.

Congratulations once again.

The next question is from the line of Koushik Mohan from Ashika Group.

Congratulations on this great set of numbers. Sir, I just wanted to understand -- you mentioned now that you are going to get INR 37.5 crores on the PLI for FY '26. And in the last year, you got INR 31.5 crores on the PLI. That means on INR 405 crores, we are expecting 42% growth on the full year, right? That's what is the growth guidance?

See, INR 31.5 crores is what we got in the last quarter. Out of that, INR 30 crores was the PLI, which was accrued to us in the FY '24. But since we received the sanction and the money in FY '25, that's why it has been booked in that way. In FY '25, the sales what we have done, the PLI what has accrued to us is INR 37.5 crores, which will be accounted for in FY '26. We expect to receive that money in FY '26. I hope this clears that out.

There is also one more thing. Out of that INR 31.5 crores, INR 1.5 crores were the state government incentive in the fourth quarter. For the full year, the state government incentive was INR 6 crores. It is going to continue at INR 6 crores even next year.

Got it. That was very clear, sir. And sir, we can see that we are going for a greenfield. So how much in this INR 800 crores, INR 900 crores is allocated for the land acquisition? And how much is for the machinery acquisition? Any calculated numbers do you have?

Yes. I think almost close to INR 600 crores over the next 2 years are going to actually go for land, building across all the 4 locations in India, like Supa -- I mean, in the West, in South, in -- basically in North India and in the West -- in Bhiwadi, basically. Bhiwadi, Greater Noida, yes, Supa. So out of INR 800 crores to INR 900 crores, the building -- land and building CapEx is around INR 350 crores, INR 400 crores. And...

Sorry, sir, I can't hear you.

See, I'll tell you exactly. As I was telling you, over the next 2 years, we think that we will be having -- we'll be almost doubling our gross block. Today, our gross block stands at something like INR 1,200 crores. Now next 2 years, we think that is the kind of CapEx we will be doing. And we are starting 4 greenfield facilities, as I told you. And the total amount of money which we will be spending in land and building across these 4 places is going to be in the region of about INR 600 crores. Large part of this money is going to be accounted for in the first year, because land you have to purchase initially and building also you have to do construction initially and then plant and machinery follows. I'm not going to actually be able to give you exact number of how much land and building. Out of this INR 900 crores which I -- INR 800 crores to INR 900 crores which I expect to be spent this year is going to be land and building, but I think it will be a significant portion. But over the next 2 years, almost INR 600-plus crores is going to be in land and building.

Got it. Sir, post 2 years down the line, the current year CapEx and the next year CapEx will be starting giving us revenue. That means that if we maintain fixed asset turns to be 5, then we're talking about INR 12,000 crores on the sales. Is my understanding right?

No -- your understanding is right, but this 5 is what we have achieved this -- internally, we target 4 to 4.5. That is a good number. And we think that once we actually scale up the whole -- all the facilities, that is what we should be able to achieve.

See, we are targeting of a growth of around 30% to 35% for next 3 years, and this CapEx has been planned for that.

The next question is from the line of [ Navneet Singh ], an individual investor.

Am I audible?

Yes.

So can you please give us some color on some forecast on the expansion -- margin expansion on the products we have higher margins?

See, we are in the business of contract manufacturing. Please appreciate margins are not likely to see major increase. Whatever gains we will get are likely to come only because of the productivity and efficiency gains. And I think -- from an investor point of view, I will suggest strongly that you should focus more on the scaling up of business in terms of volume and value and not on margins specifically. Margins, if happen, is an added bonus, but I will refrain from guiding for margin expansion in the long term -- long to medium term.

All right. On research and development side, so on the R&D side, do we have any moat on that front, any unique product that we are planning to launch?

So we have been actually augmenting our R&D team very, very significantly over the last 3, 4 years. In fact, the products which we have launched, all in the last 3 years, have been -- are becoming industry benchmark. In fact, some of the brands have copied our products. In fact, the innovations which we have done, some of the innovations which we have done in our products, have been very well appreciated by some of our clients. And we continue to invest very aggressively in the product side and -- product development and R&D side. We have been actually increasing and strengthening our team in R&D in both AC and washing machine very, very significantly over the last 2 years.

So what is the expenditure over R&D in terms of sales?

Right now that number will be pretty small because, see, our sales comes largely from doing the contract manufacturing. So right now that number on an overall basis, including maybe whatever expenditure we are doing other than manpower, may be just about 0.5% to 0.75% of our turnover. But it is likely to see increase in terms of absolute amount. See, you also have to appreciate that we have grown very, very rapidly over the last 4 years from INR 700 crore turnover going to INR 4,800 crore turnover, INR 4,700 crores. It's not a small number. And out of that, today, what we are spending is a decent amount of budget for the kind of business which we do, in our opinion. Now, obviously, it will scale up going forward.

Congrats for the great numbers and hope we see even greater heights in future.

The next question is from the line of Pranay Roop Chatterjee from Burman Capital Management.

Am I audible?

Yes, you're audible.

Great. Sir, firstly, on the RAC business. Obviously, more -- plenty of questions have already been asked. So I'll try to get some -- ask in some other way. So obviously, both -- the Q4 numbers that PG has shown, obviously, it was a surprise anyway, a positive surprise. But what was more surprising is the commentary on the growth in upcoming year. So what I wanted to understand, actually, it might help us track your business better in case you can disclose it, in terms of secondary sales, right -- obviously, you are giving primary offtake to your clients. In terms of secondary sales, can you like throw some more color on your RAC business as to how it is split geographically, right? So South, West, East, North, if you can give some color on that? And on the same lines, are these big guys, who we investors keep listening to, like Voltas, Blue Star -- Voltas I know is not as big for you as it was before. But Voltas, Blue Star, Havells, Johnson Hitachi and all these guys, are these really good proxies to track your AC business?

Well, first of all, I'll tell you, I do not have any numbers on North, South, West and East even for my own products. The reason is this, that when I supply from my factory in West or a factory in North, I don't know which model is going to which destination because it depends upon the brand, which -- where are they sending. That is point number one. Point number two is my business actually doesn't depend only on the growth of a particular brand or a particular -- we are servicing more than 35 brands. And also you have to understand more -- there are multiple drivers in our business. It's not only the industry growth. It is also the -- how much outsourcing is happening versus how much in-sourcing is happening. That also is a very important driver for us in terms of the growth and the business to us. So in the last 3 years or previous to FY '25, actually, the industry was doing a lot more outsourcing -- a lot more in-sourcing. This year, I think the outsourcing trend has reversed. And we think and we still believe that economic sense is actually -- or economic rationale is to do more outsourcing till the time this business in India remains highly seasonal. It doesn't make sense for brands to put up large capacities in such a high seasonal business. It makes much more sense to outsourcing, especially given the fact that none of the Indian brands and some of the large Indian brands are still local players. They are not still global players who are exporting and having huge round the year demand. That is point number one. Point number 2 is also that every 2 to 3 years, there's a BEE rating change, which also puts a lot of development and product, I will say, investment onus on the brands, because every 3 years, they have to come up with new models and new categories to take care of the BEE rating. So taking all this into account, I think still the outsourcing makes much more sense, yes, but because of the PLI and other reasons, some of the brands actually decided to put up their own facilities and they were doing a lot more in-sourcing. In our case, we are working with also e-commerce, modern retail and other players. And some of the other brands which are focusing only on these channels, which are gaining huge market share, and they have started to become sizable. They are also one of the key reasons for our growth being slightly better than the industry. And we think that momentum or that advantage that we provide them because of our cost effectiveness, our scale, our sourcing, our product development, R&D is actually sizable and actually helps our client partners to gain market share in the marketplace. And that is one of the key reasons that we are remaining still very confident of the growth even in the next year.

That makes a whole lot of sense, sir. That is well accepted. With regards to your product business revenue growth, which is around 35% for FY '26, the refrigerator segment, for which you have earmarked about INR 300 crores CapEx, I'm assuming that will be taken -- that will be reported as a part of the product business as and when it starts generating revenue.

But in '26, there is no revenue. In '26, I have not budgeted any revenues from that.

Got it. So can you throw -- that is there. Can you throw some color on the business as to when you expect ideally production to start? And on the INR 300 crores CapEx, what would be the peak revenue and EBITDA margins?

These numbers I will take probably in the next call, next conference call because we have still just hired the team and we are just working on them. There are some internal numbers, but I don't want to share them. We are in the final stage of finalizing the plant machinery and land and that budgeting is going on. But in the next conference call, I promise I'll actually be able to show much more light on it. But we are very, very hopeful that we should be able to meet our internal ROC target on that business in the second year of operation -- from the second year of operations.

Excellent, sir. Sir, one follow-up cross check. You gave a detailed answer on the CapEx to a previous participant. I just wanted to confirm that. So doubling of gross block -- almost doubling of gross block over the next 2 years, INR 800 crores to INR 900 crores in FY '26 and the remaining, which is a smaller amount, next year. In the first year -- and the reason I'm asking this, sir, is to gauge how much the depreciation cost would go up because the implied life of land and building is very different from plant and machinery. So in the first year, out of INR 800 crores to INR 900 crores, I heard you say INR 350 crores would be land and building. Is that the correct number? Because -- yes, just [indiscernible].

Yes. It could be actually slightly more also. Basically, we are still scouting for land in certain places. That has not been finalized yet. So that number could be actually maybe INR 400 crores also, but I don't know that number. Once the land parcels are finalized, then I will be able to actually give you a definitive number. But I will like to highlight here that the land, typically, if it is taken on lease from any of the development authorities typically has a life of -- if you are taking for the first time of -- like lease is for 100 years or so. So whatever you write off also in case of land or depreciate itself also is a very small amount, okay? That is point number one. Point number 2 is then -- and even in the building and plant and machinery, till the time you capitalize them, you don't actually start depreciating any of those things. So...

Excellent quarter, and I wish you all the best.

The next question is from the line of Jalaj from Svan Investments.

Am I audible?

Yes.

Sir, I wanted to understand what is the -- where do we stand on the compressor business right now or the compressor plant you are trying to put in? And one more point is, I believe that majority of it would be for internal consumption. So should we assume as and when it comes online should lead to better margins? Or how should we understand that?

See, as I told earlier in the call, the construction of the building has already started. The contract is under finalization. The plant and machinery is also being finalized. And as earlier mentioned that majority of the capacity which is being put will be used for in-house consumption and some part of that will be sold to external parties. And since it is for in-house consumption, it will be margin accretive.

Understood. So tentatively, when are we assuming on building in that -- this should get for a -- commercial operationalization should start from this plant?

Q4 of FY '26.

Q4 of FY '26. So nothing is built in the assumption for current -- in the FY '26 guidance you gave? As of now...

Nothing in this guidance, sir.

And then, sir, what sort of margin expansion can we expect from this if it comes? And how...

I don't think this -- maybe by the time we are able to sign off the agreement and everything is in place, I think we'll be in a better position to share something on that. Not right now.

Understood, understood. Got it, got it. And sir, I see that the cash flows for the -- at least the closing for the full year are standing at -- CFO stands at negative some INR 70 crores, INR 80 crores. So could you help us understand what exactly is -- is it that we are preparing for the coming quarters, that the inventory buildup has been done? Or what is exactly the reason behind it?

Yes. So if you look at our cash flow this year, basically, we are carrying a very large amount of inventory and we had close to about INR 1,300 crores of inventory, closing inventory, at the end of the quarter. Obviously, some of it is going to get -- a significant part of it is going to get shed in the April, May, June quarter because we are not seeing a very -- any big challenge as of yet in the AC business. But one of the reasons also which we were carrying some of this inventory was because there was an uncertainty on account of compressor, BIS-related uncertainty, because BIS was getting over for some of the Chinese players. And we consciously kept higher inventory of compressor, and we are carrying that yet. So that is okay with us. And we think that during the year, we will be able to utilize it in the normal course of the business.

The next question is from the line of Arpit Shah from Stallion Asset.

Am I audible?

Yes, yes, you're audible.

Yes, I just wanted to understand whether the PLI incentive of INR 37.5 crores, which you all are accounting for, is it part of the guidance? Or that will be on top of this?

No, no, it is a part of the guidance.

It's part of the INR 405 crore guidance, right?

Yes. Yes.

Okay, okay. Okay. Sure. And all the 3 new CapEx which you all are planning, you said none of the revenues or anything is part of the current guidance, everything shall come in FY '27?

No, no, none of those CapEx -- only the CapEx on the brownfield expansion of the capacity for AC, which will be a very small amount, will be a part of -- will be contributing to the revenues in FY '26. A large part of this greenfield CapEx is going to be actually starting to contribute only from financial year '27.

Got it. And you had highlighted the amounts which you have allocated. I think INR 300 crores was for the refrigeration. What was the amount for the RAC and the washing machine, Bhiwadi and Noida?

Yes, washing machine is going to be -- washing machine is going to be about INR 90 crores and AC is going to be another INR 200 crores to INR 250 crores this year. It will also include some part of compressor.

Okay. So INR 200 crores to INR 250 crores is going to include the compressor as well?

Yes, yes. See, a large part of it -- some part of it has already been done this year because we have constructed a building. So building augmentation will continue in the coming year, some part of the building will come. And then there's a compressor plant and machinery. And some augmentation to the existing plant and machinery for capacities in AC, we will be doing at Bhiwadi as well as in Supa.

Got it. If you can just walk down the compressor in terms of margins, like how much can it add to our margins since you'll be using a lot of it captive and maybe you'll be selling it outside? So what the margin would look like if we're adding capacity...

Yes. Once we are able to finalize -- we will be finalizing and signing the contract, manufacturing agreement, with the partner. That time we will actually detail the numbers on the margins and the impact they will have on the margins of the company.

And currently, what percentage is imported for India? What percentage of compressors are imported in India and what percentage are manufactured domestically?

Only about 10% to 15% is getting domestically manufactured. 90% -- almost 85% to 90% was getting imported. But in the next 2 years, I think all the plants -- all the companies are planning -- the existing companies as well as some new players are planning capacity expansion in compressors.

And that is with PLI incentives, which you all would be getting?

In compressor, we have not availed PLI incentive.

Best of luck.

The next question is from the line of Vipraw Srivastava from PhillipCapital.

Am I audible?

Yes, yes, you're audible.

Sir, quickly on the other current assets, why have they gone up, resulted in CFO becoming negative?

No, no, I didn't get it. Can you just please reply and be a little clear.

Sure, sir. So what I was asking was the other current assets of the company has gone up for FY '25 and that has resulted in the cash flow from operations becoming negative. So what's the reason for that? I just wanted to know that.

Yes. In the other current assets, there are 2 segments, 2 things which are actually leading to expansion in other current assets. See, we are having a good amount of GST credit, which goes into other current assets because of the decent inventory which we are carrying. So that is one part which we will be utilizing in the coming months. Some part of it, we have already utilized in April. That is one. And second thing is we have also paid some of the advances, capital advances, to some of the vendors for plant and machinery, et cetera. So those things are there right now which are part of the other current assets, which we will be actually able to utilize once the commissioning of the plants, et cetera, happen.

Okay, sir. So by the end of FY '26, it will be back to normal level. Is my understanding correct?

Yes, yes.

Okay, sir. And just one more question. Sir, on the guidance which you have given for FY '26, I'm sorry if I missed it, but how much of the revenue is coming from PLI?

FY '26, the revenues that will come from PLI is INR 37.5 crores.

Okay, sir. Okay, fine. And sir, lastly, on the refrigerator side, since you are doing a significantly large CapEx, what are the asset turns we can expect?

We think this number, we will be able to detail to you in the next call once we will have full numbers in place. Right now, we are still in the works because a lot of calculations and things are going on in the company. Some basic estimates are there, but numbers will get finalized by end of this quarter. And then I will be able to share with you the exact estimates for the asset turns and the return ratios and margins of that business.

The next question is from the line of Kush from Ananta Capital.

Congratulations on always beating your guidance. Sir, one question on refrigeration, refrigerator business. I think this is a new product for us. Is it a more technical product, sir? Do we anticipate any technical know-how issues? Or is it very different from ACs in terms of the product being able to be manufactured efficiently in India?

So the team is already in place. The product team, the R&D team and the operations team and the project team, they are already hired. They are already working on the project. So we don't see any issue in the successful implementation of this project, launching of the products, getting approval from our customers. So the template that we have for our other product businesses, where we aspire to have a cost leadership, and going forward, targeting product leadership also, so this is the template we have adopted for refrigerator business also. So we don't see any major challenge in that, and we are very confident on going on this project.

And I'm sure, sir, there must be already some talk with some anchor customers who would probably anchor the facility as of now. We don't want the names, but, sir, any commitments from any customers for offtake as of now?

Sir, we will not be -- it won't be right for us to say this thing right now, but the project is being put only on the basis of once we have a visibility on the business.

Okay. Understood, sir. And sir, about -- just one technical question, sir. Is PLI incentive part of other income? Or is it part of revenue from operations?

It is part of revenue from operations.

Okay. And one more bookkeeping question. If you are saying INR 405 crores of PAT next year, so if I just do a rough calculation, are you talking of around INR 750 crores of EBITDA and INR 150 crores of depreciation, plus interest, plus other income, and PBT of INR 600 crores? Is that a ballpark number -- rough math right?

No, no, INR 405 crores -- the PBT is not going to be INR 600 crores. The PBT is going to be more like INR 520 crores or INR 510 crores. So we have a 20% tax rate roughly. And I mean, from there, you can work backwards. Most of the CapEx which we are doing this year is not going to hit us immediately. It is going to actually come and hit us only probably in the FY '27.

FY '27. So depreciation will go up in FY '27 is what you're saying largely?

Yes. Yes. Yes.

And sir, I see significant cash on the books. So sir, what will be our overall average debt for the year or year ending debt given that there is scale up in the business, but still we have a lot of cash. So sir, will we require a lot of debt in this financial year?

No, we don't intend to take a lot of debt. In fact, a lot of the CapEx is initially going to be funded through the cash lying on the balance sheet. And whatever -- even if we require some debt, maybe even -- that will be only for working capital, and that will be probably very temporary because we have a seasonality, high seasonality. So typically, that debt, even if it goes up, it also comes down very significantly after June. So I don't think that, that will be the case because we will be having very healthy internal accruals also next year. And even now, this year, we had close to INR 500 crores of EBITDA. So next year, we think we should be able to -- even if you assume the margins remain stable, which is what is our guidance also, then we will be having over close to INR 650 crores of EBITDA. So that should take care of our working capital requirement which we may have. So I don't foresee a huge increase in the debt even next year after the CapEx of INR 800 crores to INR 900 crores.

And all the best, sir. I'm sure -- as always, you have always beaten the guidance. So I was assuming a INR 450 crore PAT when I said INR 600 crores of PBT. So sir, all the best for the next year and beyond, sir.

The next question is from the line of Akhill Shah from YES Securities.

Am I audible?

Yes, you're audible.

Sir, my question is regarding other income. It has gone substantially up from INR 13 crores in FY '24 to INR 35 crores in FY '25. So any reason behind it?

I'll give you the reason exactly. The interest has gone up significantly. One is obviously on account of the business. Business has seen a very sharp growth, especially the AC business. Group AC business even in the fourth quarter actually had a 100% growth, over 100% growth. So that is one of the reasons because it's very working capital intensive. Also, if you will see closely, you will see that we have seen some improvement in number of working days, especially on the receivables side. And one of the reasons because of that is that we have been able to use the vendor programs of some of our clients, where we can actually discount our receivables and get our money early by giving some factoring kind of arrangement -- reverse factoring kind of arrangement, where the interest we have to bear. So because of that, also the interest cost has gone up during this quarter. The reason and why we have utilized those is that we have done some of the FDs, which are at very attractive rate, and it made more sense to actually do and utilize these vendor program factoring -- reverse factoring vendor programs of the clients, which were at a competitive rate in comparison to the FDs which we have right now.

The next question is from the line of [ Vijay Bhatt ], an individual investor. Sir, it seems like the participant's line has got disconnected. Shall I move to the next?

Yeah, yeah, move to the next.

Okay. The next question is from the line of [ Kaustubh Ray], an individual investor.

Congratulations on a great set of numbers. I would like to understand that you are projecting 35% growth in the product business. Now we know there is some compressor issues. So how do you tackle the compressor issue? Do you think the BIS issue will be settled? Or how will you really address the compressor issue to achieve this growth? And the related question, in the projections -- sorry, maybe you carry on. I will ask later. Yes, sir, please.

Government of India has recently issued a notification where they have allowed the import of compressors for 1 more year. So you can import compressors up to 15th April, 2026. So compressor availability, which was seeming to be an issue till 2 or 3 weeks back, is largely resolved for at least 1 year. And hopefully, by that time, our compressor factory should be online.

Okay, okay. And on this compressor, are you planning to import all components and then assembly? Or there is plan of manufacturing some of the components also?

Some parts will be localized, [ Kaustubh ], and some parts we'll be importing from the overseas. Details cannot be given as of now till the time we sign off our agreement.

And the other part, in the projections which you are giving on the revenue numbers, is there -- is the EV business also part of that projections? Or the projection is only of the RAC and washing machine and refrigerator?

So the guidance numbers what we have shared is for PGEL separately and for Goodworth Electronics, which is a JV company where we make EVs has been given separately. So for Goodworth, the projection is around INR 855 crores, and for the PG Electroplast, which combines product business, molding business, tooling business, our other electronic business, which is around INR 6,400 crores. So total is something around INR 7,200 crores at a group level.

The next question is from the line of [ Neeraj Agarwal ], an individual investor.

Can you hear me?

Yes, Neeraj-ji.

Sir, congrats on the great set of numbers. I would just like to check on the inventory. So there is a very high rise on the inventory, much more than our revenue growth. So any specific reason for that? Is there due to some kind of product mix change? So I would like your guidance on that. And secondly, like the 30%, 35% growth that you forecast that is going to be for the next 3 years, and what could be the growth beyond that period, if you can give some guidance on that as well?

See, the inventory numbers are on a higher side, as I just told earlier. Because of the uncertainty on the compressor availability, we at a company level have taken a strategic decision of stocking the compressors. So in order to secure our AC business, that is why we are seeing some elevated levels of inventory. Coming back to the second question, see, we have already guided for 30%, 35% growth for the FY '26, and we hope to maintain this momentum for next 2 to 3 years. Anything beyond that will be very difficult to share right now.

The next question is from the line of [ Jhavli Sharma ], an individual investor.

Congratulations on achieving a good set of numbers, sir. I would like to know regarding refrigerators, sir. Actually, are you going to produce latest models or existing models only? My second question is, are you having any plan to produce front-loading washing machines in future?

See we, at the company level, we are always looking at new product categories in order to increase our wallet share with our clients. And the way the market trends are changing, where consumer behavior is also changing and there is a certain shift from the semi-automatic to top load and top load to front load. So we are at a company level already developing such platforms in order to meet those evolving demands from our clients and customers. And as far as refrigerator is concerned, the capacity what we are putting up will be capable of making both DC and FF category of refrigerator. And the supplies and the production will happen as per the customer demands.

The next question is from the line of Achal Lohade from Nuvama Institutional Equities.

Any update on the laptop opportunity?

Nothing as of now, sir.

Nothing. Okay. Sir, second question I had was with respect to the components' PLI. Anything we would look at? Any opportunity we would consider in this? And is it part of...

Definitely. Definitely, the -- this is not part of the CapEx what we have guided as of now, but we are always exploring business opportunities. We are looking at this also. We are talking to some of the probable partners in China and Taiwan. If something comes up, we'll be definitely participating in this electronic component scheme.

Understood. And just last question, if I may. I don't know if you would be able to answer, sir. I just wanted to get a sense. Given the significant outperformance to the industry growth, is it possible to get some number in terms of CBUs? What would be the industry's outsourced CBU mix? And what would be our market share? Any ballpark number for FY '25?

Sir, normally, we don't share these numbers. But we -- I can very well tell you that we might be in kind of a leadership position in outsourcing category now.

Right, right. A fair point, sir. And with respect to the EV business, so I think there was one question. So the electric vehicle, the client partner is yet to get the approval. So there is no CapEx, there is no revenue or anything of that sort. And just if theoretically if this was to come through, let's say, in this month, this approval, how much time would it take to set up? And what kind of asset turn would we look at?

It will take 3 to 4 months for us to put up the capacity. The CapEx will not be very large, and the asset turns will be very good in that.

It will be a low margin, high asset turn business because initially it will be largely assembly. And as the localization speeds up in India, then the margins will start seeing some improvement, but also with increased investment. Initially, it will be largely an assembly kind of a job which we will start.

Understood. And just last question, if I may, with respect to the electronics segment. I think we've had about INR 350 crores of revenue. How do you see that shaping up over next 2, 3 years? What kind of revenue size we can look at and what categories we could probably look at?

So we have already guided for next year. In that -- we think we will be in the ballpark of INR 500 crores in that segment. And we are working towards it. We are probably going to talk more about it once we have some more clarity. But we think that 25%, 30% growth should be easily possible in that segment. It is a very small segment for us as of now. And things can actually evolve quite significantly if we work towards it, and that's a focus area in the company.

Got it. Sorry, I'm again saying last. Sir, in terms of -- from an EMS perspective, just -- I need the answer from an industry perspective, in terms of the margins, how do they rank in terms of RAC, ref. and washing machines?

Washing machine has the highest and then ref. will be there and then probably RAC will be at par or slightly lower than that.

The next question is from the line of Vipraw Srivastava from PhillipCapital.

Sir, quickly on the room AC demand side of the story. So obviously, the commentary from other players in Southern India has not been very positive. So what's your take on the demand side and how you see it evolving over next fiscal year?

I think I have answered this question, but just repeating. I can answer it for myself that at our end, we continue to foresee good demand environment. And I have taken into account all the, basically, forecast, et cetera, while we are giving our guidance. So we remain pretty confident that we should be able to meet our guidance for next year.

Ladies and gentlemen, I take this as the last question and would now like to hand the conference over to the management for closing comments.

I thank all of you to participate in the conference. And please feel free to contact me or the company for any further questions or any clarifications you have. Thank you. Thank you very much.

On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.