Virtuoso Optoelectronics Limited ($543597)

Ladies and gentlemen, on behalf of Kaptify Consulting Investor Relations team, I welcome you all to the Q4 H2 and FY '26 Post Earnings Conference Call of Virtuoso Optoelectronics Limited. On the call from the management, we have with us Mr. Sukrit Bharati, Managing Director; and Mr. Sajid Shaikh, Chief Financial Officer. As a disclaimer, I would like to inform all of you that this call may contain forward-looking statements, which may involve risks and uncertainties. Also, a reminder that this call is being recorded. I would now request the management to brief us about the business and performance highlights for the period ended March 2026, the growth perspective and vision for the coming year, post which we will open the floor for Q&A. Over to you, sir.

Good morning, everyone, and thank you very much for sparing your valuable time to join this session. I would request Rahil to please run through the presentation, please. Can you just [indiscernible], Rahil? It's not visible yet visible? So to start with, I would like to say that this -- the year that has gone by '25, '26, was a year that was a year that defined the resilience that Virtuoso has. I think despite of the fact that we had a very challenging H1 with multiple factors at play, we still were able to recover the entire year through the last 6 months. And overall, I think the year has gone decently well for us. These are the numbers that are currently displayed on the screen. I think we have closed the year at INR 823 crores, which is roughly 18% of top line growth vis-a-vis what we did last year. The EBITDA numbers have also improved significantly. If you see the overall absolute numbers from a INR 60-odd crores of EBITDA, we have moved to about INR 86 crores EBITDA. The percentage margin also is relatively better, I think decently better. From an 8.6%, it has moved to 10.4%. The PBT levels have remained more or less stagnant because of multiple factors because this is the first year that we have moved to Ind AS and the right-of-use assets have played their role as far as the overall waterfall from EBITDA to the margins are concerned. Profit after tax has also shown a slight improvement, from 1.7%, it has moved to 1.8%. On an absolute terms, I think from a INR 12 crore ballpark PAT margin that we had in the last year, we have moved to a INR 15 crore PAT margin this year. These are the numbers, of course, that I'm talking from the consolidated point of view. Q4, when you see Q4 also, I think Q4 also has a story to tell. Last year Q4, Q4 '25, was an excellent Q4 for us -- excellent quarter for us, where we did INR 240 crores. But this year, we have beaten that number also by a decent margin from a INR 240 crores, we have done INR 317-odd crores kind of a number in Q4. And I think Q4 of this year has been the mainstay as far as our comeback is concerned. So that's an important number that has come about. Can we move forward? So these are the numbers that we are displaying the overall from '21 onwards, the CAGR has been 49% as far as revenue is concerned. EBITDA also has moved about 47%. PBT margins in excess of 50%, 56%, and PAT numbers also in excess of 50% to 52%. So that's the kind of growth that we have been able to show over the last 6 years. Can you move forward, please? I'll just spend a little while over here is what we are trying to do now going forward from FY '26, '27 onwards. The first thing here is that we have been able to set up capacities in all 4 segments. The 4 segments that we have, the broad 4 segments that we classify our business into our EMS and lighting, AC, refrigeration, which includes commercial refrigeration, and compressor, which is a new segment. In all of these segments, we have been able to invest and create capacities. Going forward, this year onwards, we intend to increase utilization, translate these assets to the maximum possible. And also we want to increase capacity going forward here as well. I mean if I go segment-wise, when you talk about LED, EMS, I think we are in the process of adding a new facility altogether for EMS, which will be an advanced kind of facility in comparison to what we have now. So that's what we are doing in EMS. In AC, we are looking to -- as we move forward into further sides, there will be more description on that, but AC also, we are trying to increase capacity. So one is the capacity that we have already established. We want to ensure that utilization goes up there. And at the same time, we want to increase capacity. In line with what we have been doing as a philosophy -- I think as a company philosophy over the last 6, 7 years, we intend to continue with that in terms of deepening our backward integration, whether it is in EPS, plastics, CFF, we already have EMS capabilities that I just spoke about. We are happy to announce that the new tool room that we have in Nashik has also become operational, and it is currently being scaled so that the turnaround times in terms of our product developments, et cetera, is [indiscernible]. We also want to grow on the ability that we have been able to acquire last year. Last year was a significant year for us because of the fact that in the AC segment specifically, we moved from being an OEM to an ODM. This is what has helped us in acquiring additional customers. And going forward also, I think that will help us stand in good. And VOEPL, in addition to this, is also working continuously in trying to develop newer products options and add or offer more variety to our customers. Beyond which we are also looking to grow in the high potential category, AC, I've already spoken about. Compression production. Compressor production is something that has really been an exciting part for us. I think this is something that I missed in the initial part of it. January, we have started commercial production compressor. And we are -- as we speak now, I think it's the 5th, 6th month of production, and we are already running at about 60-odd percent capacity utilization. And we are very confident that I think going forward, in the next 2 to 3 months, we should be running at about 80% odd kind of a capacity. In the commercial refrigerant bit also, we have added our offerings. We have -- in addition to the hard-top that we have been manufacturing now, we have added the glass-top range also. Can we move forward? So these are the growth levers we have, capacity utilization being one of them. We are talking about the non-AC segment acceleration, refrigeration and compressor. ODM, I've already spoken about, and I've also spoken about the backward integration. Can we move forward? These are the capacities. In EMS from the current 4 lakhs EPH, we are moving to 8 lakh in the first phase and 12 lakh in the second phase. AC as a set, we are currently sitting on a capacity of about 1 million, and we look to take it to about 1.8 million by the end of this year. Deep freezers, I think we have spoken about it earlier also that the current capacity is 1.5 lakh units, plant capacity is 4 lakh units. It will happen in 2 phases. The first phase is where we want to move to 2.5 lakhs and then 4 lakhs. And in compressors, the current capacity is 2.8 million. We want to take it to 6 million before the end of this financial year. Work towards this has already started. Can we move forward? So these are the growth drivers. We have strong domestic demand in all the segments that we are present in. There is an active push from the government in terms of localization that is also kind of providing us tailwinds. When we talk about the compressor segment, I think the announcement from the government where they have given so-called relaxation for the import of compressors, the reciprocating compressors in the segment that we are in, I think 40% is what they have given us, which is a very good signal for us. It directly means that 60% of the requirement of whatever the manufacturing companies have today will have to source locally, which directly opens the gates for us because, as of now, we are the only ones who are doing this in the OEM space, reciprocating compressors. Of course, we have a strong blue chip customer base. I think all of the segments now have marquee customers, whether it is LED, EMS, AC, deep freezers as well as compressors. And beyond the central government PLI scheme, we have also -- Maharashtra electronics policy, which is also helping us scale up and accelerate the growth that -- the growth plans that we have. This is one -- I would just like to touch base upon one area here is that, till last year, it was more of a single product company that we were. I mean a lot of dependence was there on the AC segment where AC was almost contributing to last year to about 70%, 75% of our revenues. From there, AC -- dependence on AC has gone down to about 60% roughly. So the rest of 40% is coming through the other segments that we have spoken about, and this is a very encouraging trend that has come up, a change that is going to help us in the long run and shifting from OEM ODMs that I've already spoken about. Yes, I think we can move forward. This is how we are currently placed. Virtuoso Optoelectronics as a listed company, the flagship company, we have subsidiaries, Virtuoso Compressors Private Limited and Virtuoso Polymers. Polymers has 2 units, one of them at Sanand and in Chennai. Compressor is also looking to have a separate manufacturing facility of its own in Nashik. Hopefully, very shortly, the development work on that site is going to start. These are the broad numbers that we talk about in terms of the AC components and EBITDA margins, if you can move forward. This is what I spoke about where air conditioner has gone down from about 75% to 60%. EMS is around 15%. It has been there. Commercial refrigeration 10%. Components is something that has taken up a good amount of space last year, and I think it's rising, 7%. Compressor this year is going to be even more than that. I think we had only 3 months of actual production that was available to us in the last year. And within that short period of time, I think compressor was able to contribute a good revenue share. Yes, we can move forward. I think most of this is anyways -- so the revenue scale, yes, as a company, I think we are looking at a 35%, 40% kind of a CAGR going forward in the next 3 to 5 years that we have been seeing and we continue to stand with that. I think that's one number that we are looking at. OEM we have already spoken. Yes.

[Operator Instructions] We take the first question from Dhruv Jain.

Congratulations, Sukrit and Sajid, for very good numbers. My first question is on price hikes, right? So what we've seen is that the AC pricing has really moved up given raw material prices, et cetera. So just wanted to understand: a, what is the kind of price hikes that you have taken? And incrementally, do you expect your margins to remain where they are in this year, at least from an AC perspective? Or do you see some pressure there given the raw material pricing? That's my first question.

So I think to answer your question, I would say that whatever pressure came on the margins owing to the fact that there was an increase in the raw materials, the price hikes have been able to kind of cover that. We cannot say at this point in time that there has been any real gain. But the only thing that I can say is that whatever was the pressure on the margins, whatever is that we probably were kind of losing out there has been compensated. That's the only thing that has happened as far as the hikes are concerned. Going forward in this year also, we expect the margins to remain where they are, unless, of course, there are any other macroeconomic...

Sajidji, there is some disturbance behind you.

No, it's not me. I think that's somebody else. So was I audible when I answered the question?

Yes, yes.

And just to add to that, the reason why -- I mean, our margins were already below or lower because we were an OEM and ODM range has recently been introduced. So of course, we've not been able to probably get the advantage that we should have hoped to get as an ODM. So margins to that extent are not ideal, but the pressure, I think, will persist. So I think there are 2 ways this will end probably. If the rates settle down at a certain price, right now, there is uncertainty of the RM rates in the market. Once we know for sure that they're settling at a certain level, then I think the market will also adjust their pricing based on that. And effectively, we will also get passed on whatever the balancing rates are. But till the final RM price is derived or the market price is established, our pricing is difficult to completely become immune to the fluctuation. So there has been an impact, but the impact has been sort of mitigated with the combination of multiple reasons. One, of course, addition of customers; second, old inventory and third, government support in terms of subsidies and fourth because of product diversification. So that has been the story of last year. Let's see how this year goes. I hope I answered your question. Exact percentages are difficult, but I hope I broadly answered it.

We take the next question from [indiscernible]. We will take the next question from Sidhat Jain.

Sir, firstly, we have -- one of the slides shows the capacity expansion plans that we have. If you can just give us the time line of when do we expect these different capacities to come online that will be helpful.

EMS is expected to be online, I think, in the next 3 months' time. It's already underway. So that's EMS. AC is also an ongoing process. The movement from 1 million to 1.8 million, as I said, which would be completed within this FY, hopefully, before we enter the next season, AC season. But I think that is also going to happen incrementally. So from 1 million to 1.3 million probably before the season is definitely on the cards. And again, as I said, within this FY, we need to take it to 1.8 million. Freezes also should happen -- the first phase should get completed before the end of -- before the start of the forthcoming season. Compressors, as I said, is a 9- to 10-month journey. So the next phase of expansion from 2.8 million to 6 million should happen, let's say, by March.

[indiscernible]? And how do we plan to fund it, sir?

Sorry, I just lost you in between.

So what will be the CapEx outlay for these CapEx plans, and how we plan to fund them?

So compressors, we have already tied up. So compressor is INR 150-odd crores kind of an investment that is going to happen over the next 1 year. That's Phase 1 of the expansion. That is already tied up. And beyond which I think the rest of it is also tied up. EMS is something that we have already spoken about in the last investor call as well. I think there's a INR 25-odd crores of investment that is happening that's tied up. AC is something where we'll require funds, but I think we are looking at debt as a primary option there. And as time approaches, we'll see what else is required. But I think for now, whatever is required appears to be tied up. There might be some requirement that might come up in the next 1 or 2, 3 months. We'll just see how it pans out. And depending on that, we'll look at it.

We take the next question from [indiscernible].

Am I audible?

Yes, you are, Raghav.

Congratulations on a great set of numbers. So sir, my first question is around the compressor segment. So as of now, can you tell us the capacity utilization that we are running on?

About 60%.

60%. Okay. And sir, for the AC segment, in total, how many customers do we have right now?

We are currently catering to 4.

Currently catering to 4. All right. And are we in talks to finalize some new ones?

Yes, there are. But I think especially during the last 1 or 2 months, our capacity was getting fully utilized. So there was capacity constraint and hence, we were not able to add this year. But I think going forward, hopefully, in the next season, we might have 1 or 2 new mills as well.

Right. And sir, secondly, sir, like we mentioned that our capacities like compressor is running at 60%, and AC, like you said, we have already exhausted the -- so for this 30%, 35% growth that you said in the initial remarks, where is that -- like do we have the headroom for that in terms of capacities?

Yes, we do have headroom for capacity. So when I'm saying capacity -- see, again, AC is something where we need to understand that during the season, we are talking about the peak capacity utilization.

Understood, sir. And sir, my next question is regarding the main board migration, sir. In your last, I think we have got the approval. So can you give us a time line like by when can we see this happening completely?

So we have received the in principle from BSE. We are expecting the in principle to come from NSE in the next maybe week or so. Beyond which we are told that there is another 4 to 6 weeks that we require for the actual migration to happen. So listing is the next part of it, which will take 4 to 6 weeks.

So I think by the end of August, is it safe to assume?

Yes. Let's hope it doesn't go that long.

We'll take the next question from Shreyansh.

Am I audible?

Yes, you are audible.

A couple of questions. Despite ongoing energy crisis, commodity inflation and the norm change, our margins were better as compared to peers. So could you please throw some light on what are the initiatives being taken by us during such situation to protect our margins?

See, one is that in the first 9 months, if you see, the margins were mainly, you can say, supported by the fact that we did a lot of components in the first 9 months. I think that was one major factor that helped us keep our margins to that level because AC in general is a low margin product and the entire CBU. So we don't really believe that there's something extraordinary that we would have done there. But components as a product mix, what we did was able to help us. Secondly, a little while ago, Sukrit were saying that we moved to from an OEM to ODM. So I think it did not help us in increasing the margins in general, but I think retaining the margins or protecting the margins was possible primarily because of that reason. I think when you look at the overall numbers and have these 2 factors on your mind, I think that is what has helped us. Although there has been a slight decline when you see from Q3 to Q4, again, of course, because of the fact that we did more ACs in Q4. So when you see Q3 and Q4, you realize that there's been a slight drop in our margins.

And just to add, the margins definitely are something that we are also fighting for with our customers, and we -- customers have also supported. I think we appreciate that also, to the extent that they can, they have also supported. But one point just to add is product segmentation mix also happened. So that also helped. So it was a combination of multiple things, not one specific thing that sort of came to the rescue. And like we've been discussing for the last couple of years, diversification was something that we were doing so that we are better prepared for such situations. And I think that situation came faster than we had anticipated. But this is where we are. Hopefully, this will lay the foundation to better results going forward.

Okay. So could you quantify what percentage of revenue is coming from ODM in RDC, sir?

I don't have the exact percentage number, but I believe this year, revenue from ODM was between 40% and 50% out of the AC revenue.

We take the next question from Bala.

So first question is regarding the CapEx. So earlier also, we have a target to increase the capacity from 150,000 to 400,000, but it's not materialized. So how do you think that whatever out and shown in the presentation of this quarter will get materialized as per the time lines and also mostly in this current financial year?

So last year, because of the overall slowdown in the market and for us also, it was important to conserve cash, hence, we did not push on projects which were not absolutely essential. Expansion will continue to be part of strategy, and we'll continue to work towards expansion based on demand and, of course, availability of resources. So see, plans are definitely plans. I mean 100% execution of plans is not always in our control. But the idea is that we try to stay as close to the possible road map that we give out is the intention.

Okay. On the compressor side, actually, could you please help me to understand what the average realization of the compressor? And also when it comes to margins front, so in previous quarters, we are maintaining 11% margins. So then we are expanding other products also in this current financial year with the compressor and the freezers EMS also. So do you expect the overall margins of the FY '27 could be around 12%, is it possible?

Well, very wishful number. I think we will try and keep it closer to double digits. So between 9% and 10% is what we expect.

We take the next question from Kaushal Sherma.

Am I audible?

Yes. you are audible.

My question is on your CapEx, you have said that we are expanding EMS, freezer and compressor. So what kind of [indiscernible] are we expecting in this or what kind of peak utilization level or potential revenue are we expecting from these additions? And sir, you said that require CapEx. So what is the quantum of the CapEx and what amount of debt we are requiring in this?

So 3 questions. One is you spoke about the asset turns. For each of them, the asset turns are different. I think EMS asset turns are between 3 and 5 depending on what product we make. Air conditioners, the asset turn is again 4 to 5. Refrigeration is also between 4 and 5 as of now. For compressors, as long as we do not backward integrate, the asset turns are around 4 -- 3.5, 4. So that's the first question that you had asked. The second question was the peak capacity utilization. So when you are saying peak capacity utilization, if you annualize that, depending on the seasonality, et cetera, the current set of expansion that we are looking at is good enough to take us beyond INR 2,500 crores.

INR 2,500 crores?

INR 2,500 crores. Yes. Yes. So have you also -- the third part was the -- so AC would require about INR 40 crores to INR 50 crores of investment.

Entire would be funded from this?

That we'll see as we go ahead. Some of the debt we have already tied up.

We take the next question from Kunal.

Am I audible, sir?

yes, you are.

Okay. [indiscernible] CapEx amount for each segment, AC INR 40 crores, INR 50 crores and compressor were I think INR 150 crores. You can tell those numbers...

Refrigeration is in 2 phases. So refrigeration is 2 phases. I think the first phase would require about INR 20 crores, INR 25 crores. The second phase again will require a similar kind of number. So between INR 25 crores and INR 50 crores in the 2 phases that we are talking about as far as compressor is concerned. EMS, I think I spoke already, it's about INR 25 crores that we need to spend there.

And about compressors, what percentage of the -- I mean have you already started tying up the expanded compressor capacity for FY '27?

What we can say is that we have enough interest on this product, which gives us a confidence that the additional capacity will also be booked pretty fast.

And this will come up in 9 to 10 months, right?

Yes.

Okay. What revenue contribution and EBITDA margin do you expect from the compressor business in FY '27? And for the margins, what progress do you see from '27 to '28?

So margins, I think we have spoken earlier also. Margins is a 2-way story -- 2-factor story. One of them is the as long as Chinese imports are allowed and the quantum of Chinese imports that are allowed, that will dictate the margin. So from 100% kind of a situation that we had when we started to a 40% that I spoke about earlier, the margins are going to stay between 6% and 7% this year. And with the complete -- hopefully, the complete stoppage of imports from China, this can move closer to double digits in the next 2 years.

Okay, sir. The other question was about the RAC volumes in FY '27, the growth in RAC volumes, if you can give that? And what utilization are you targeting for this year, FY '27?

RAC utilization between 60% to 65% is very healthy in our understanding and experience. So I think that's what we are targeting for. And growth is going to be around 30-odd percent, 30% to 40% growth.

We'll take the next question from Omkar.

Am I audible?

Yes, yes, you are.

First question is currently, how much value addition are we doing in compressor? And for next few years, what are our plans in this product? Will we focus more on volumes or on [indiscernible]?

I think we have spoken earlier as well. The idea is to first ramp up capacities. The initial target -- capacity target for us is about 8 million. So from 2.8 million to 6 million and let's say, 8 million, 8.5 million is what we want to take this capacity to. The value addition as of now is between 5% and 10%. It will remain at the same levels till the time that we are able to hit the capacity target that we have. And once that is there, post that, that is the Phase 2 of our plans is where we will start increasing the backward integration. The idea is to take it to maybe about 60-odd percent in the next 5 years. But that will happen once we have reached the capacity targets.

And what will be the margins on compressors?

I think I have already spoken, this year, it should be between 6% and 7% and progress as we have both these scenarios unfolding. One of them is the government restrictions on imports from China. And the second one is, of course, the backward integration. I think both of them, put together, this can exceed double digits as well. So the journey from 6% to 7% will start this year. And in the next 4 to 5 years, we hope that it will probably hit 11%, 12% kind of a number.

Okay. And question on capital allocation. We are planning to raise around INR 250 crores [indiscernible] and INR 150 [indiscernible].

Can you, please come a little more clearer, I'm not able to hear you.

Question is on capital allocation. We are planning to raise around INR 250 crores equity and INR 150 crores via debenture. So could you please throw some light on what are plans going forward?

That INR 250 crores is a blanket approval we have taken. I mean it doesn't mean that we have to raise INR 250 crores or time lines in which we have to raise this INR 250 crores. That's just a blanket approval we have taken. INR 150 crores, of course, is there that is going to come in the subsidiary, and that is the exact amount that is going to be needed in the subsidiary for the first phase of the expansion from 2.8 million to 3 million.

We take the next question from Abhishek.

Sir, my first question, I want like this year, Q4, we see the employee expense are significantly increased. Can you give some clarity on that?

You're saying employee expense?

Yes, sir. Yes, sir.

See, we started off very small. And as time has progressed and we have started diversifying, we are trying to create a structure and obviously, new people are getting hired. The capacities that we are talking about multi-locations where we have 2 plants in Chennai, in Sanand and multiple locations within Nashik as well. So I think all of that and the structuring where we are trying to bring in the business unit head methodology where we have each of the businesses being headed by a unit head. So all of that plus the team that are required. So I think the levels of the hierarchy is now getting established. And obviously, that is going to add to the cost over there in that column. I think nothing is extraordinary beyond that.

Okay, sir. And second on receivable side. Yes, on trade receivable, we can see like this year also a significant like there is we can any trouble in cash collection or it's a normal thing?

No, it's a normal thing. I think there's not much. I think the numbers are at par with what one would expect.

Yes. Okay. And in the EMS side, you increase your capacity in 2 phase. So can you just give me the Phase 1 and Phase 2 time line when you...

Phase 1 happening in the next 3 months itself. By end of August, we should be ready with Phase 1 expansion.

And by year-end...

By the end of this FY, I think Phase 2 will also get completed.

We'll take the next question from [indiscernible].

I just wanted to have a clear guidance on balance sheet size for the FY '27 and '28, like since we have got funds tied up, so what kind of debt and equity situation we could see on the balance sheet for the next 2 years?

Debt and equity is what we are trying to look at. I think going forward, the debt is INR 150 crores is what is getting added on the subsidiary this year, of course. There will be some equity that gets added so that we balance out the story. Very difficult to predict the exact numbers over there, but I think in the listed company or the holdco, if I'm talking about, there will be a net addition of about INR 50 crores, INR 60 crores of debt this year.

Okay. And we have taken a blanket approval of INR 250 crores. So any little guidance on kind of equity we might raise because earlier we had guided we would be keeping a certain ratio for debt equity. It was -- I guess it was 1:1?

Yes, correct.

Right. And okay. On the second approach that we are moving towards an ODM model in the AC segment. If we have any -- if you can throw any light on the average realizations because since we are moving to an ODM model, they might have increased from what they were previously?

Realizations have remained stagnant. I think we have spoken earlier also on this. But we hope that we probably will be able to get a little more because of the fact that we have become an ODM. But I think for now and the volatility that's there in the market, the realizations are pretty much similar. The average realization at a CBO still stays about 20,000-odd.

20,000-odd for the unit...

The average realization. Of course, there will be lower and the upper end to it because...

Yes. Okay. Understood. And just wanted to again, the INR 150 crores that we'll be raising in the subsidiary for compressor that is enough for the 6 million unit capacity for year-end?

Yes, yes.

We'll take the next question from [indiscernible].

Am I audible?

Yes, you are.

Sir, first question is on the demand environment side. Currently, what kind of environment are we seeing, particularly on the RAC, refrigeration and EMS side of it, like, how the primary and the secondary market are working for us?

In the AC segment, I think we are seeing enough and good demand. Also because of the fact that we have become an ODM, I think that's one more factor. The second factor is that the base, the kind of base that we have is also pretty small. So for us, the runway is quite long. And yes, of course, the demand is also there. Numbers for March, I'm sure you all know it. April, May, June also looks to be on course to be an excellent quarter as far as RAC is concerned.

And on refrigeration and EMS side of it, sir?

I think we have enough demand in both the segments. That's one of the reasons why we are expanding. I think that's an indicator that we have good demand.

And you mentioned about the 30%, 35% growth and EBITDA margin, maybe in the range of 9% to 10%. But what kind of PAT margin range are we anticipating? Because I think depreciation is also kicking.

Depreciation will kick in, of course. I think PAT also should start improving going forward. So whatever adjustments we have moved from the IGAAP to Ind AS this year. So a lot of adjustments have taken a toll on the PAT margins this year. But I think going forward, PAT margin should improve. Can't I mean, predict as of now, but I think a 50 to 100 basis points improvement is expected over the next 2 years.

And on the compressor side of it, with this extension on the restrictions of the import means is it going to slightly negative for us in the near term? Or how do you look at it?

It's a very positive signal for us, positive because the restrictions have not been completely lifted, but the allowance that has been given is only up to 40% of the imports that any manufacturer would have done in the base year, which is '24, '25, which eventually means that almost 50%, 60% of their requirement, they have to currently buy from us. If there was a 100% restriction applied now, there would have been chaos in the market because apart from us, there's nobody else as of now. This is our understanding. Nobody else as of now who is doing the compressors in the OEM, ODM segment. So obviously, this has to go in a calibrated fashion. It will go step by step. And I think whatever best was there has come out for us.

I think -- sorry, just to add, government has also taken a very conscious call. They have calibrated and understood what capacities exist in India. I mean capacity is not just of OEM, ODMs, but also companies manufacturing their own compressors and refrigerators. So that capacity also, they have taken into account. They have also taken into account the capacity that are planned to come in this year. So I think the decision from the government is also very wise, and we support it because model validation, customer validation of the model and all of that also is a long process. So we hope that things can settle in. And since the demand gap is quite big, we hope our capacities we will be able to book at a decent level even if there is -- I mean, even with the planned addition of 1 or 2 competitors that will come in over the next year or so.

We'll take the next question from Jitinder.

I hope I am audible. First of call, congrats on a good Q4. Just to continue on the QCO discussion, sir if you can elaborate like what are the capacities that are coming? And you mentioned that this is a positive for us, but did it change any of our time line, I mean, in terms of adding to our current capacity? Because I think the previous guidance was we were going to take our capacity to 7.5 million compressors by this year-end. I think now it is 6 million. So if you can just elaborate on that. I mean I agree with your point that blanket or full kind of restriction would have created chaos in the market. But does it provide time for our competitors to also build capacity? So if you can give us some color on the landscape, who else is bringing capacities and how we are positioned, that would be helpful.

So a couple of points...

Point Number One, yes, would you like to take this?

Yes. So a couple of things. One, of course, we are aware of 2 competitors who plan to come in. Time lines and details, I think best they share. But I think we are expecting local manufacturing to start maybe by end of Q3 or Q4 or early Q4 for one and maybe mid next year for another one. I think the total capacities that are expected -- I mean, the total gap in the market is about 14 million to 15 million as of today. And the total capacities, all capacities put together, I think, are expected to be between 15 million and 18 million as of now. Of course, these numbers are subjective and subject to change also depending on how everybody behaves. So -- but it also depends on what market share, what is the pricing of each manufacturer and what is the quality of product, quality of product and service as we go forward. So we believe there will be 2 or 3 players in this segment active in a year or 2, which also makes for healthy competition. But we still believe that 6 million is a number that we'll be able to fill in. If there is opportunity, we will look at growing further to 7.5 or maybe 9.5 million. 6 million was more to optimize the line productivity. Initially, we had planned for 7 million and the 7 million to 6.5 million is not because of the government order, it is more to optimize the line so that the operational costs are minimum. If we continue to see demand and we are able to sign long-term contracts, then we will further look at increasing to maybe a 9 million or 10 million number. So I think we will wait for the things to pan out. But this year, first, we go to 6 million, and we see how customers feel. And if they are happy with the product and we are able to get good projections, then we will look at further capacity expansion in the next financial year.

Yes. And just one point here. So the 7.5 million that we spoke about was also in 2 phases. It was never going to be in 1 phase in 1 year. I think we have already stated earlier that we wanted to do it in 2 phases from the current 2.8 million to 5 million and then to 7.5 million. So the first phase is still there. It's on as per plan. I mean there's no change in plan.

Right, right. No, no, you have told it will be contingent on the and how things pan out. Just wanted to check, you are currently selling like 50% of the current capacity. So we'll be adding some more capacity in the next few quarters. So we already have clients in pipeline, I mean, to sell these compressors or we're going to add clients and all like how does this...

We have enough interest. We have enough interest. I think we are confident we'll be able to do that.

We'll take the next question from Shriya Patel.

Am I audible?

Yes, sir.

My question will be on the raw material side. How much of the raw material price variations are you able to pass through to our customers? And what is the typical time lag for these adjustments?

How much...

yes. Please, please go on.

Quantify. Actually, last 6, 8 months have been -- not 6, but effectively 5, 6 months have been quite volatile. And so pass on depends on multiple factors, like I explained earlier, it depends on how much the market is absorbing, how much the customer is absorbing, how much inventory do we have in the pipeline. So it is a factor of multiple things. But like I said, customers have supported and between 10% and 15% as a ballpark figure has been passed on overall from manufacturers to brands and from brands to the end consumer. Also, see, the pricing increase is not specific to us or anybody else. It is a phenomenon that everybody appreciates in the market. So we also appreciate the fact that customers are acknowledging it and they're trying to figure out ways to sort of help us as manufacturers as well. So there is no direct number, and it varies from customer to customer, product to product. So there is a variation. But general thumb rule, like I mentioned, is about 10% to 15% pass-through that has happened overall across the industry so far.

Okay. And my another question is on the compressor vertical. So we are making reciprocating compressors for refrigerators, right?

Correct.

So are we having any future plans on manufacturing rotary compressors? That's for AC, I think?

Not yet.

[Operator Instructions] We'll take a follow-up question from Raghav.

As of now, our non-AC segment accounted for 40% in FY '26. What is the path that we are looking for in FY '27 and by FY '28? Like do we see 50-50 or more than that?

AC should remain at around 50% in the...

Sorry, sir?

AC should remain around 50%.

So again, this number is not something that we are hardlining. We want AC to be 50%, 60% as a good diversification. But depending on seasonality of product, depending on overall mix, there might be changes. It is just a guidance that we have set for ourselves considering the fact that, as a company, we need to have a healthy mix. But in general ballpark figure that we expect is 50% to 60%, yes.

We'll take another follow-up question from Jay Raj.

On the PLI side, this year would be the last year for PLI, right? So are there any talks with government to renew the existing scheme or the next scheme would be only for players that are backward integrated? Could you please throw some light on that?

There is no concrete road map as of now that we know of. But I understand that the government is working on some options to help support the industry, but there is no concrete discussion that I can share with you today.

We'll take another follow-up question from Bala.

So last time I asked the question about the [indiscernible] of the compressor. Could you please share that? And also when it comes to your revenue potential of INR 250 crores from the after CapEx completion. So do you think that FY '28 we can do that number given the demand is similar to FY '25?

Average realization for compressor is about INR 1,400, INR 1,500. That's your question. I think a jump from [ 800 to 2,500 ] in 2 years is a big ask. I think it probably will come, but it will take a little more time.

We'll take next question from Akshay.

Am I audible?

Yes, you are.

What will be the [indiscernible] in '27?

Sorry, I didn't get your question, please...

What will be the mix debt in financial year '27?

Net debt you are saying?

Akshay, you are speaking too close to the mic, if you can speak a bit clearly your question is...

What will be the total debt in the financial year '27?

I'm saying INR 50 crores, INR 60 crores is expected to be added this year.

Okay. And what will be...

Net debt.

The cost of borrowing?

Cost of borrowing remains at around 8%, 8% to 8.25%.

A follow-up question from [indiscernible].

Sir, 1 year back, we were targeting somewhere around INR 1,200 crores kind of top line in FY '27. But looking at the current guidance, we will be marginally clocking INR 1,000 crores for FY '27 despite you are saying there are good environment, demand is good in [indiscernible] categories. Why there is like [indiscernible] revenue guidance for FY '27?

FY '27, I think we have said that we are going to have a 35%, 40% CAGR. On an INR 825 crores base, 35%, 40% is closer to the number that you are saying.

We will take another follow-up question from Kunal.

We are not revising the guidance. We are just saying that we are expecting a good number. Exact numbers, we'll probably share with you over the course of the year. The guidance remains same.

In this year, how much volume contribution are you expecting from the Chennai facility? And just a clarification to 60% to 65% of CU of AC you mentioned is that -- what's the base for that?

Sorry, I didn't understand the second part of your question.

He is saying 60% to 65% utilization, capacity utilization. What is the base for saying that? Seasonality, of course?

No, no. I mean, is that 1 million or 1.3 million? On what base?

Base you're saying, base in that sense. See, again, here where we have to understand that these capacities are not static numbers. These are growing quarter-on-quarter. So we have to look at it from that perspective.

And also, there is a product mix of what products customers are taking. So in some cases, we have IDOs or some cases, we have ODO, some cases, we have CBUs. So it depends on multiple. But 60% to 65%, our target is on the increased capacity of 1.3. But conservatively, at least on the current capacity, we hope to be at 60%, 65% because the new capacity will come blended across the year. So you can consider 65% or 60% on the current capacity of 1 million. The second part of Chennai, this being the first year, we are not expecting a massive number to come from Chennai. Maybe a 5%, 6% contribution if we are able to generate out of Chennai, I think that will be an overall win for the plant.

We'll take another question from [indiscernible].

I have one question. You have provided 9-month FY '26 product [indiscernible], could you please provide product-wise revenue for FY '26?

Product-wise revenue for...

FY '26, full year.

No, I didn't get your question, again. Can you please come again?

In PPT, we have given 9-month FY '26 product-wise revenue. We have not given FY '26 full year product-wise revenue.

Okay. All right.

I think we have given full year mix.

I think the general mix has been given, not product-wise. I think we...

There ia correction in the presentation. It's not revenue share 9 months. It is revenue share 12 months. We will get that identified.

We'll take the last question from Aryan.

My question is if you can provide the capacity utilization for each of the segments? And second question is the PLI. What is the PLI we have received this year and the expected PLI in the next year?

Capacity utilization for each of the segments have been different. I think EMS, we have been running at full capacity, almost 70% to 80% capacity through the year. AC, again, as we have been, as I said, progressively increasing the capacity over the last 2, 3 years. So it's very difficult to have a number which matches the number at the end of the year. But in general, I think during the peak season, we have been working at almost full capacity, 90%, 95% kind of a capacity over the last 2, 3 months. Refrigeration, we are at about 60-odd percent capacity utilization and compressor also at about 60-odd percent utilization. And I'm sorry, I forgot your second question.

I think he is not there. So since there are no further questions, would you like to give any final closing comments?

Sukritji?

Right. See, the last year was full of uncertainties and challenges. Hopefully, this year will be more stable considering the geopolitical situation. But I firstly thank, of course, all investors and stakeholders, also customers and the team for facing the challenges head on. And I think we have come out stronger. So we believe we can build on this and take it -- take the company to newer heights as we go forward. Thank you once again for all your time and -- on a Monday morning, and see you again in the next call, right. Thank you so much.

Thank you. This brings us to the end of today's call. Thank you to all the participants and management. You may disconnect.