Voltas Limited (VOLTAS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Voltas Limited Q3 FY '26 Earnings Conference Call hosted by PhillipCapital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Natasha Jain from PhillipCapital. Thank you, and over to you, ma'am.

Thank you, Sagar, and good evening, everyone. On behalf of PhillipCapital, I welcome all of you to the third quarter FY '26 Earnings Conference Call of Voltas India Limited. From the management today, we have Mr. Mukundan Menon, Managing Director; K.V. Sridhar, Chief Financial Officer; Nikhil R. Chandarana, Head, Corporate Finance; Sumana Tripathy, Head FP&A; and Vaibhav Vora, Head Commercial. I would request the management to give their opening remarks, post which we shall open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Natasha. Good evening all. Glad to connect again for the quarter call. So just to give you a brief, Voltas strengthens its leadership in Q3, backed by room air conditioners recovery and sustained performance from other verticals. Global conditions in 2025 remain unsettled with geopolitical tensions, new tariff actions and periodic supply chain detours creating volatility across input categories such as energy, base metals and select electrical components. At the same time, uneven growth -- global growth, currency and commodity fluctuation and persistent policy uncertainty tempered sentiment across several markets even as emerging economies, most notably India, continued to demonstrate relative resilience driven by steady consumption and sustained public investment. This environment shaped a mixed demand backdrop for consumer-facing categories and infrastructure-linked sectors, forming the macro context in which Voltas Consumer and Projects business operated during the quarter. Voltas Limited announced its financial results for the quarter and 9 months ending 31st December 2025. Through this quarter, the company's performance was anchored by the room air conditioning business, driven by healthier channel activity following the GST rate cut and buying ahead of the BEE star label transition as customers anticipated price hikes on the new table. The projects business continued to lend stability through consistent execution and strong order pipeline, reinforcing the -- continued to lend stability through consistent execution and a strong order pipeline, reinforcing the strength of Voltas' diversified portfolio. Management remained focused on market leadership in the cooling segment, regulatory preparedness and disciplined performance across businesses. At an overall level for the quarter, total income was at INR 3,130 crores (sic) [ INR 3,120 crores ] against INR 3,164 crores last year. Profit before tax was INR 116 crores after factoring in the labor code impact versus INR 191 crores in Q3 '25. Net profit was at INR 84 crores against INR 131 crores last year. For the 9 months ending December '25, the total income was INR 9,552 crores compared to INR 10,890 crores last year same period. And profit before tax was INR 373 crores versus INR 848 crores in the corresponding period last year. Net profit was at INR 257 crores compared to INR 599 crores last year same period. In terms of the segment performance a bit in depth, in terms of segment A, Unitary Cooling Products, the segment delivered a relatively steady performance in both volume and revenue despite inherent seasonality and the impact of a shortened second summer. The room air conditioner business continued to anchor segment A, maintaining Voltas' leadership position with 17.9% year-to-date market share and benefiting from strong channel activity following the GST reduction and buying ahead of the upcoming BEE star label transition. Growth during the quarter was driven by structured network expansion with micro level targeting, improved channel readiness and sharper retail and digital activation across priority markets. These changes are expected to drive consumer upgrades in the coming quarter, providing a positive flip to demand and product mix improvement. Complementary categories such as air coolers, water heaters and fans, though facing some headwinds due to inventory overhang, continued to build relevance through refreshed lineups, wider retail reach and sharper digital activation, reinforcing Voltas' comfort solution positioning and broadening the nonseasonal share of cooling products. Together, these initiatives support brand preference and strengthen category resilience into the upcoming season. Within segment A, commercial air condition continued to act as a growth contributor, supported by corporate, commercial and industrial demand with healthy traction across product categories and AMC business. Commercial refrigeration delivered a softer quarter amidst lower product offtake and competitive intensity. The focus remained on sharpening the offer in priority segments and stabilizing the mix to support sequential improvement. Together, CAC and CSR reinforce the diversification within UCP and helps balance seasonal volatility in true cooling. Segment A margins in Q3 reflected the seasonal profile of the quarter and the competitive environment with profitability shaped by higher channel and customer support. In the coming quarter, management remains focused on mix improvement, cost optimization and structured network expansion to support sequential recovery. The company is fully ready and realigned for the new BEE efficiency table with refreshed lineups and calibrated pricing architecture in place and is geared to meet seasonal demand with aligned production plans across Pantnagar and the new Chennai factory. Production capacity utilization, operational efficiency improvements and supply chain actions have been tuned to support faster ramp-up into the season and improved availability of priority SKUs. Voltbek Home Appliances. Voltbek delivered a solid Q3, sustaining broad-based momentum across washing machines and refrigerators, led by dominant semi-automatic segment and a clear step-up in fully automatic. Top load alongside a stronger showing in the frost-free segment in an expanded energy-efficient locally manufactured lineup. In refrigerators, Voltbek's overall market share stands at 6.2% year-to-date and in washing machines at 8.2% year-to-date, reflecting improved portfolio relevance and tighter in-store execution. Voltbek will sustain momentum through a focused brand-led premiumization strategy, combining high-impact consumer engagement and an expanded energy-efficient portfolio across categories to deepen preference and conversion across priority channels while steadily broadening the franchise towards a full-scale home appliance platform that complements Voltas' end-to-end home solutions. In parallel, ongoing pricing and cost optimization initiatives across the portfolio are intended to support margin resilience as scale builds through the season. Together, these developments reinforce Voltas' progression from predominantly seasonal cooling business to a year-round full-stack consumer durables enterprise supported by a broader innovation-led portfolio and disciplined operational execution. Segment B, Electro-Mechanical Projects and Services. The domestic projects business continued to book and execute orders across all verticals, underscoring engineering depth and multi-vertical presence. Prudent selection of projects backed by on-time handovers, tighter project governance and cash conversion facilitated the margin expansion. The international environment remains competitive for fresh wins, but delivering momentum supported by a mix of ongoing projects and disciplined project engagement. During CY '25 year-to-date, Voltas secured new orders and lifted the order back and the international project business reported sequential exposure reduction, reflecting tighter commercial controls and collection. With a robust consolidated order book of around INR 6,100 crores and a healthy order pipeline, the segment is well positioned to drive steady growth and deliver consistent performance over the medium term. Segment C, engineering products and civil services. The Mining and Construction Equipment division delivered steady top line growth, supported by continuity in operations and maintenance contracts and sustained demand for power screen crushing and screening machinery. Going ahead, the mining and construction equipment service annuities and a healthy inquiry funnel provide performance visibility. The Textile Machinery division business was adversely impacted by macro backdrop, notably the 50% U.S. tariff imposition on certain textile products, which weighed on MSMEs and led to production cuts and softer domestic demand for yarns and fabrics. Execution of pending orders, strong aftersales run rate and post-spinning momentum helped cushion the effect. Looking ahead, TMD remains focused on aftersales, post-spinning mix and disciplined delivery while looking forward for a recovery in the core spinning category. Balance sheet and working capital. Working capital was tightly managed in Q3 with improved inventory and receivables ahead of upcoming season, supported by availability of priority SKUs and steady project billings and collections. Commercial controls, selective order intake and exposure reduction further supported a stable position despite uneven demand pockets and a competitive environment. Overall, the company exited the quarter with a balanced working capital profile. As Voltas enters Q4 focused on execution and seasonal readiness, the company is fully aligned to the new BE efficiency table with a refreshed RAC lineup and calibrated pricing and is geared to meet peak season demand with aligned production plan across factories, including the new capacity ramp-up at Pantnagar and Chennai. The priority is to boost all demand sources, core retail, organized retail -- organized trade and institutional while optimizing resources across manufacturing, supply chain and channel. The projects business will continue to selectively book and execute across all verticals in which we are present, supported by a healthy bid pipeline and a stronger project governance. Overall, the strategy remains simple and focused, be regulatory-ready, scale-efficient into the season using the expanded manufacturing footprint and convert demand with sharper in-market activation and disciplined delivery across businesses. In terms of margin, we are committed to further optimize costs through value engineering, better inventory planning while being cautious about the impact of commodity and currency fluctuations. Thank you.

Sir, should we open the floor for questions?

Yes.

Yes, please.

[Operator Instructions] Our first question comes from the line of Aditya Bhartia from Investec.

So my question is on -- you kind of referred about raw material inflation and rupee depreciation impact. So my question is, what kind of price increases do you think are warranted? And given that we are coming from a fairly weak season, do you think that the industry would be in a position to pass on these price hikes or part of that may need to be absorbed by the company? And you also mentioned about cost optimization. So what are the measures that you can undertake to kind of partly offset this impact?

Thanks. Thanks for the question. I think it's a valid one given the environment that we are in. So see, this quarter will be a slightly mixed one in terms of navigating the old table sales and also the new table sales, right? So we would sort of be holding a very balanced approach in terms of trying to navigate the pricing. Will the commodity and the currency fluctuation have an impact on the pricing? Definitely, yes. There will be an impact of the pricing. But how much and when to sort of pass on is something -- it's a very dynamic decision that we'll have to sort of look at it fairly almost on a daily basis. And I think the pricing decisions will have to be fairly dynamic. So to put a number would be difficult, but is there an impact on the pricing? There is an impact on the pricing. We are looking at it ongoing basis, and we'll take a call accordingly. I think the new table also, I think, will take some time for also the pricing also to stabilize on that front. And that I think will also take a few months given that this quarter is likely to be a mix between old table and the new table sales.

Understood, sir.

Thank you.

Our next question comes from the line of Manan Goyal from ICICI Securities.

Hello?

Yes, we can hear you.

Yes. So this is Aniruddha Joshi here. So my question is what was the exit market share at the end of either November or December, if you can share, you have shared YTD market share? And secondly, was there any excess trade discount given to clear the inventory at the end of December? And last point, Voltas Beko, there is a very strong market share across both categories, refs and washers. But despite that, the profitability still remains in a way, still in red. So how do you see the profitability? Earlier, there was an indication by end of FY '26, it should be profitable. So how should we read about Voltas Beko? Yes, that's it from my side.

Thanks, Aniruddha. So this Mukundan Menon here. So on the market share, our exit market share for the month of December is also at 17.9%, which coincidentally coincides with our YTD market share also, which is at 17.9%. So if you recall, when we began this calendar year, that is the Jan to March quarter, we had a market share of 15.8%, and that has grown to 17.9%. So over the last 12 months, we've gained market share of roughly 2.1%, which is a good -- I think it holds us in good stead. In terms of schemes, yes, the -- most of the channel partners had a lot of inventory with them, and it is imperative for us to help them to clear the stock. So the schemes were progressively being given to them during the quarter 3. But as we approach summer, these schemes will start becoming a little more market demand related. So indeed, to facilitate the secondary sales, schemes and discounts were offered in quarter 3, which is reflecting in our margin profile also, if you see. Going back to Voltas Beko, the story is a little different. Here, the primary focus is to gain market share, which we are doing consistently. Refrigerators, we are at a market share of 6.2%, and this is a gain of roughly 1.1% over -- yes, 6.2% for the YTD number. However, the exit November number, the December number, we haven't seen as yet is the better number at 6.8%. And the washing machine market share, YTD is 8.2%, but the exit November number is again a very healthy 10.2%. So here, the focus is about gaining market share, about making our presence fill. And the profitability in a way, the scale is slowly getting us to a place where in the very near future, we will see this getting to at least a breakeven kind of situation.

Okay. Sure, sir. This is very helpful.

Thank you, Aniruddha. Yes.

[Operator Instructions] Our next question comes from the line of Natasha Jain.

Sir, just one question. Given that we have one of the highest assembly capabilities and the season for calendar '25 was bad, so I assume that we were also left with higher number of inventory. And given that sequential growth for Voltas and UCP has been quite high, is it fair to assume that channel is sitting with larger inventory of Voltas? And by that logic, is it again fair to assume that if and when summer picks up, market share growth for Voltas in 4Q will be sharper than peers? That's it.

Yes. So Natasha, very well said. The second point is the market share will see a very positive trend because of the volumes that -- the primary billings that we have done is also significant. So the market share gains will be visible in quarter 4 for sure. Inventory of Voltas, my sense is that we are talking about a few weeks, 5 to 6 weeks of inventory is there in the channel. And it's just a matter of time by March, middle, I suppose the entire inventory will get finished. So that's the way we see it. So it's not a very high number because the summer season is going to pick up. So February -- between February when the summer begins from Kerala and then moves on towards the Western region and Tamil Nadu, Karnataka and comes into Maharashtra. I think we are talking about a clear 45 days -- less than 45 days for the inventory of our channel partners to sort of deplete completely.

That's helpful.

Thanks, Natasha. Yes.

Our next question comes from the line of Girish Achhipalia from Morgan Stanley.

Mr. Mukundan, I had one question on the price hike that the system and you would need because of the copper being where it is, aluminum being where it is and the rupee being where it is. My estimate says that it could be between 12% to 14% basis the commodity move as well as the new norms that have kicked in and also some e-waste tools, et cetera. So if you can comment, I know this is like going to be a mixed quarter, some old inventory, some new inventory. But once the new inventory comes through, is that a fair assessment of price increases needed? And how much has already been taken, if at all, in the month of January?

Thanks. Girish, actually, Mr. Sridhar will address.

Thanks, Girish, for the question. I think it's sort of comparable to the first question that sort of came up. So this quarter will be a mixed one between old table and new table. So obviously, the costs will be different, as you know. And by the time the prices stabilize as part of the new table, I think it will take maybe a couple of months, I think, that's likely to be the case, and that's what our sense is also. So we'll have to sort of do a wait and watch. But to your primary question, is there an impact of commodity and currency, there is, okay? To that extent, there is. But the exact quantum and how the price transition will happen, that I think we'll have to do a bit of wait and watch. We are sort of monitoring it almost regularly. And any pricing decisions, we are linking it to the market requirements. But there is an impact of currency and commodity hedging.

But sir, can you -- I mean, directionally am I right in the ballpark for the new rules that have been applicable and the commodity, if they were to remain for the new inventory that you place in the system, is that commodity price remain...

Sorry to interrupt. Sorry to interrupt Girish, sir...

I'm actually asking the same question, yes, I'm actually asking the same question.

Yes, yes. So Sagar, we'll answer that. So essentially, the -- Girish, the thing is that the table change impact on the pricing is a little different for the 3-star and is a little different for the 5-star. 3-star is a little lesser, but 5-star is very, very significant increase. So the increase will -- impact on the 5-star will be more. Now the impact of the commodity, the copper and the dollar it's -- these are the moving pieces in this entire thing. So the overall numbers will be a summation of these 3 things: table change increase for 3-star plus the commodity and copper for the same. The table change impact for the 5-star and the copper and the currency impact for the same. So typically, 5-star will be a much higher number. We are -- as Sridhar said, it's still too many moving parts in the overall thing. We are unable to really quantify the number to whatever you mentioned. But the fact of the matter is these all will impact the -- sort of the pricing certainly because these are not small impact. These are not small numbers by any stretch of imagination yes.

Best wishes, sir.

Thank you. Thank you, Girish. Yes.

The next question comes from the line of Naushad Chaudhary from Aditya Birla Mutual Funds.

One question on the project business. This business is consistently -- order book consistently declining, though we are adjusting the domestic and international portfolio. But overall -- on an overall basis, this business seems struggling. So just wanted to understand when do you see by when the order book slide should stop and from when we should start experiencing growth in the order book? And is this business has a potential to be INR 8,000 crores, INR 10,000 crores of business? And if yes, how much time will it take to reach those scale.

So Naushad, see, this projects business has got 2 parts, as you rightly pointed out. There is a domestic and there is an international business. So the general thing is that across both these businesses, the domestic and the international, we have been very careful in terms of picking up projects over the last 12 months, I would say. So we've been very prudent in selection of the clients. There are proper guidelines and frameworks for that in terms of nature of the client, the credentials of the client, the payment terms, the margin profile and the exposure of bank guarantees, the liquidity damages, we work around multiple things. So the -- if you ask the size of the order book might have diminished, but the health of the order book is very, very healthy compared to what it was a year ago. So we have been very prudent, and we have been extremely prudent, especially in the international business, where we have been very careful in selection of the clients. And essentially, we are going after projects where we get a sort of a preferred sort of a vendor thing compared to others. So we are not really bothered about the overall size of the order book because these are generally order books which sort of get built over a period of 2, 2.5 years or so. In terms of the domestic projects, again, if you see there are 3 different verticals. There is a mechanical and electrical and plumbing MEP vertical. The second one is the water vertical and the third one is the electrical and solar vertical. The electrical and solar as well as the water verticals predominantly operates in the government space, and these are long gestation projects with a fair amount of sort of working capital locked up for a larger period of time. We have been very prudent in picking up jobs in this category, and we've been very selective about it. However, in the mechanical and electrical and plumbing, we have been picking up fairly good, healthy jobs in the manufacturing segment. We are also focusing on the data center segment. And these are the general industrial segment and data center are the segments which are very fast track with completion, very low risk and in terms of profitability also, it's a quick turnaround. So we have been prudent in this. So the size of the order book less important compared to the health of the order book. That's the way we see it, Naushad.

We see growth in...

Sorry to interrupt. Naushad, sir, may we request you return to the queue for follow-up questions, please. Our next question comes from the line of Akshen from Fidelity.

Congratulations on a good show on the market share. Just wanted one clarity from you on. How should we be thinking about margins in the unitary business? It's been a tough year right now. We've been used to making 8% to 10% margins here. Given what you know in terms of cost pressures, in terms of channel inventory, not in like Q4, but just generally over the next year or 2, what's the kind of margin should we be thinking about? Do margins go back to 8% to 10%? Or do you think we should first focus on getting top line right and then focus on getting the margins right? That's the only question.

Sridhar here, again. So I think a fair question. I think in terms of where we see whether it's market share or margins, I think it's never quite possible to sort of give either or answer to be fair. I think it's -- both has to be sort of balanced. While we don't want to lose out on the market leadership that we have, we want to sort of focus on. At the same time, we have to continue to focus on the margins also, right? So in terms of -- if you see the intent is to sort of focus on the cost reduction initiatives very, very prudently in a very institutionalized manner, look at any pricing opportunities that we have. We're also looking at mix opportunities in terms of -- from a product portfolio point of view. So we are looking at all multiple aspects in terms of trying to see how we can sort of focus on the margin improvements also. So it's not either or in all fairness, it is an and, and the focus has to be there on both. Obviously, top line has to happen and also in terms of market share growth. At the same time, focus continues on margins also.

Sorry, just continuing that question. There is no doubt that incremental margins will sort of improve and...

Sorry to interrupt, Akshen, sir, may we request you return to the queue for that particular part of...

Sorry, this is a -- my question wasn't answered. I'm just seeking a clarification on the same question.

Yes. That's fine, Sagar. Yes.

Yes, tell me. Yes, please go ahead.

Yes, yes, sorry. Sorry, just sort of want to belabor on that point a little more. Just to maybe think about margins. So you're saying incremental margins will move up with all the initiatives that you outlined, which is a fair summation and a good strategy. I'm just trying to understand the trajectory of that because from where we are to, let's say, where normative margins were is a decent gap. So I'm just trying to understand should our expectations be towards 8%, 10% right away? Or should it be over a period of time? That's the only clarification.

So the recovery will be sequential as we sort of discussed, right? And also the -- there are too many moving parts, unfortunately, in this piece, I think the commodity inflation, the currency depreciation. So there are multiple moving parts and also the table change impact also. So there are multiple moving parts in this. Intent is to sort of get better. Will it be a sequential improvement? There will be a sequential improvement. When and what we will reach, unfortunately, it will be maybe too soon to sort of quantify. That's the only point where we are. But intent is to sort of definitely get better and come closer to the expectations that you have.

Akshen, sir, does that answer your questions?

Yes, yes, it does.

Thanks, Akshen.

Our next question comes from the line of Renu from IIFL Capital.

I have only one question. So what would be your strategy for the domestic MEP portfolio? How is our market share stacked up? And what is the strategy of getting Voltas back on the mainstream with a market-leading share and margin from a medium-term perspective?

Yes. So Renu, just you're referring to the domestic MEP projects segment.

No, overall domestic.

Yes. The -- no, no, the domestic MEP or the HVAC portfolio that we are looking within the projects part of the business. Not water, not electrical solar, core MEP?

Understood. So as I said, we have decided that we will focus this time on the MEP part of the infra projects that is less of water, less of electrical, the way you have sorted. And essentially, within MEP also, there are 2 or 3 different customer categories. One is the industrial and data center category, which we call it manufacturing and data centers. And the second one is the commercial buildings, which is to do with shopping malls and so on and so forth. And there's a third category, which is metros, airports and so on and so forth. So the focus currently is that we want to have a larger pie of the manufacturing and the data center market. We are also looking at the -- a steady flow of -- these are generally fast-track projects, which will quickly give -- are turned around within less than 9 months to 12 months. And we are also looking at the metro and such infrastructure projects, which are generally spread over a longer period of time, but come with a lot of comfort with respect to the price variation clauses and the risks are very limited in this. So a mix of these 2 and a little lesser focus on the commercial is what we are looking at. And of course, the electrical and the water segments are areas which we have been very careful now, and we are just cherry picking the projects that we wish to do in this category.

Sure. And sir, what is the current market share, sanitary market share?

Sorry to interrupt. Renu, ma'am, sorry to interrupt.

Just in this area, there is -- generally, these market shares don't get tracked because, for example, MEP, the overall size of the market and the overall sort of...

Yes, we don't capture the data from an external, there are no external data things. It is all depending on the orders that you quote and the orders that you win and versus the orders that you lose, we have some internal -- yes, I think which we...

First lens of the market share.

Yes, very difficult to say because it could be even wrong because there are many projects which we would not even know that has been bid. It's possible. It's possible that way, yes.

Understand.