EPACK Durable (NSE:EPACK) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the EPACK Durable Limited Q1 FY 'twenty seven Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to mister Manan Goel from ICICI Securities Limited. Thank you, and over to you, sir. Thank you. Good morning to all. On behalf of ICICI Securities, we welcome you all to q one and FY twenty seven result conference call of EPACK Durable Limited. Today, we have with us senior management represented by Mr. Ajay Devi Singhania, Managing Director and CEO and Mr. Rajesh Kumar Mittal, CFO.

1:05 Now I hand over the call to the management for their initial comments on the quarterly performance. Then we will open the floor for Q and A session. Thank you, and over to you, Mr. Rajesh Shah. Thank you, Manan. Good morning, everyone. Welcome to our earnings conference call for the first quarter of financial year twenty twenty seven. I would like to thank ICICI Securities for arranging today's earnings call. The key financial highlights for the quarter one of financial year 'twenty seven are as follows. For the first quarter under review, revenue from operations stood at $8.86 crore, which grew by around 34% on a year on year basis.

1:52 During the current quarter, the company has not accrued any PLI income. However, the company had accrued the PLI income of INR 13.31 crore during the first quarter of financial year twenty twenty six. The EBITDA for the quarter was INR 55 crores, increased by around 0.70% on a year on year basis. The EBITDA margin reported at 6.21% as against 8.24%. The net profit was INR 11.8 crores. An important comparability on the income before going further, I would like to flag one item that affects how should we read the margin comparison. The company has not accrued any PLA income in the current quarter of financial year 'twenty seven, whereas we have accrued around INR 13.3 crore of PLA income for the previous quarter on a year on year basis.

2:47 This margin was set in the quarter revenue and because it carries no associated cost, followed almost entirely into EBITDA. If you strip that INR 13.3 crore out of both the revenue and EBITDA Based for financial year 2026, last year underlying EBITDA margin was closer to 6.4% and not 8.24%. On like to like basis, our year on year margin improvement this quarter is closer to 15 basis points and not two zero three. Now I would request our Managing Director and CEO, Mr. Ajay Idi Singhaniya, to brief you on the operational highlights. Over to you, sir. Thank you, Rajesh. Good morning, everyone. EPACK Durable continues to strengthen its position as a leading appliances original design manufacturer.

3:37 While room renovations remain an important part of our portfolio, we are steadily expanding into higher growth, better margin categories as part of our long term diversification strategy. Over the last few quarters, we have made significant progress scaling our small domestic appliances and large domestic appliances as well as component business, which are seeing encouraging customer traction and growing order pipeline. This is gradually delivering a more balanced revenue mix and reducing our dependence on limited set of customers for finished product. Our focus remains on broadening the customer base, deepening relationships with existing customers, scaling new product categories, improving resilience, supporting margin stability, lowering customer growth and building a stronger foundation for sustainable profitable growth.

4:25 As results are already shared by Rajeev, I'm pleased to report a strong start to FY 'twenty seven with company delivering its highest ever quarterly revenue of INR $8.86 crore with a growth of almost 34% year on year. This reflects healthy momentum across the portfolio. Our core RSA business continued to grow strongly by small and large domestic appliances as well as components scaled up encouraging pace led by air dryers and washing machines. The growth was broad based and reflects continued benefit of our diversification strategy. We now serve more than 72 customers across 90 product categories, thereby sharply reducing our customer concentration and materially derisking our revenue base even as absolute revenue from these customers has grown significantly.

5:15 We have added three new product categories in this quarter alone, while four new categories are in pipeline for later in the year. On branded side, our partnership Hyphen continues to build well. Through the season of up to June, which is January to June, we produced close to 60,000 air condition under this partnership. It contributed approximately INR 65 crores of revenue in just quarter one of this financial year. While the quarter saw some pressure on margin and prevailing commodity and currency conditions, our focus remains on sustaining growth momentum by improving operating efficiencies and spending profitability as we scale. Our read on quarter is straightforward. We are winning share, scaling the top line strongly and near term profitability is being held back by the investment cycle and increasing food costs rather than by weakening in demand or competitiveness.

6:10 The task ahead is to convert this scale into operating leverage. Our priorities are threefold. First, scale the growth engines, sustain RFE margins while ramping washing machine and LG capacitors, which remain our fastest growing and most margin accretive categories. Second, different strategic partnerships and position EPACK as preferred manufacturing partner across multiple product categories with our key customers, enabling deeper integration and long term contracts. Third, EBIT margin converts scale into operating leverage as new facilities absorb volume, localization deepens and our value addition and product mix normalizes towards higher margin categories. We have new product, new customer pipeline across SD, LD and components heading into the rest of FY twenty twenty seven, and we remain confident in long term growth opportunity across our business, supported by our expanding product portfolio, trending order book, new customer acquisitions and ongoing capacity expansion.

7:09 With this, we now open the floor for Q and A. Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sukrit Patil with EyeSight Fintrade. Please go ahead. Good morning to the team. I have two questions. The first question to mister Ajay is just want to understand the forward guidance.

7:57 Beyond the regular outlook, what are the top two to three education priorities you're focusing on in the next few quarters? And alongside that, what do you see as the biggest risk in demand shifts, regulatory changes or competitive pressure? And how are you preparing to manage them while strengthening EPACK position in the appliance manufacturing? That's my first question.. Thanks. So please, can you please repeat? There's a lot of echo in your voice, or I think you're on the road or something. Yeah. I'll I'll... Yeah. I'll just repeat my my question. Just want to understand beyond the regular outlook, what are the top two to three execution priorities you're focusing on in the next few quarters? And alongside that, what do you see as the biggest risk in demand shifts, regulatory changes or competitive pressure? And how are you preparing to manage them while strengthening EPACK's position in the appliance manufacturing space? Just to understand all looking guidance on this. That's your first question. I'll ask if you can please now.

9:03 Also, Keith, although your question is not very clear, there's a lot of voice modulation is happening because of the background. I try to answer it what I understood. So in terms of the outlook for the appliances industry for the coming two, three quarters, definitely, first of all, air condition is having the payments still continue, and we see long term growth story for air conditioned outdoor manufacturing product category. On top of it, the other appliances in which we are expanding very aggressively, like the small, the large domestic appliances, Each of the newer categories, whichever we are adding, we see strong growth momentum, a lot of customer traction. And as we continue to add newer customer across categories, we believe that the growth momentum for the smaller domestic appliances and especially for large domestic appliances like washing machine, there is a long term growth potential and the growth momentum is going to be much more than even the issues.

10:01 My second question to Mr. Mitral is, from a financial point of view, what key risks or challenges do you anticipate in the coming quarters? And what specific measures have been taken to manage margins, cash flow and strengthen the balance sheet, especially in areas like raw material, cost volatility, receivables or compliance? Thank you. This top line you have already seen, we have around 54% in this current quarter. As far as this cash flow situation is cash flow situation of the company is stable, and we don't see that there would be any requirement to increase our working capital or the requirement with respect to the growth in the business. Generally, with respect to the cash to cash cycle, we have the working capital raise around $50.60 depending on the season of the company.

11:00 The next question comes from the line of Tanisha with TAM Capital. I have a couple of questions, and congratulations on a strong top line. I wanted to understand if you can break up the 44% growth that you reported in RHC between volume and value? So first of all, in terms of breakup, total growth for RHC reported is 44%. Approximately 30% of which is volume growth and 12% to 15% is typically the value growth in terms of the increased AOPs and the pass on of commodities. So a breakup of 44% is 30% volume growth and 14% volume growth.

11:54 Sure. And so this 30% volume growth would be largely driven by our anchor customer, correct? Absolutely. Understood. And while you spoke about this 12% to 15% pricing growth, what percentage pricing has to yet be let's say, the cost escalation yet has to be passed on in terms of pricing to our customers, which would then sort of normalize our margins? So, Sandeep, since we are doing it's contract wherein the prices are updated every quarter. So the price increase for the previous quarter was already passed. And there any significant increase since then for the current quarter. So there's clearly anything remaining I'm sorry to interrupt, sir. Your voice is breaking up every... Sir, your voice is breaking up every now and then. I would request you to come closer to the microphone. Thank you.

12:46 So, I'm audible now? Much better. If you could just start again. Yes, please. Okay. So, first of all, since... Based on our contract to the larger customers, the prices are updated every quarter. And hence, most of the price increase was normally passed on. There is always a time lag between passing the price increase and when it actually impacts, especially in the turbulence of the global supply chain and the global scenario, especially impacting March. So there was a time where the price increase is not totally passed on. But yes, contractually, it is being passed on, and there's hardly anything balanced with partners of now. What impacted us most for the last quarter was especially the ForEx exchange rate. So that is one line item we like to flag, which like the ForEx loss is something which has impacted us largely. But otherwise, most of the commodities help after a time lag is typically passed on.

13:47 Understood. So we're saying that chunk of the pricing has been passed on in terms of commodity increases, and ForEx is something which impacted our margins. Absolutely. Understood. So the other question which I had is now, obviously, given that the season is largely behind us, what are the current inventory levels? Are they comfortable? Or any insights on that in terms of demand trends, inventory levels, etcetera? So, Denis, I think especially for the AC industry, this current situation is one of the most comfortable situation for the entire inventory point of view, especially from finished goods point of view. Compared to last year, wherein we were there was a lot of pain in the industry because of the inventory overflow and the incrementing, I think this is one of the best year or time wherein The trade has mostly liquidated inventory and the inventory levels are at the lowest than the acceptable level. So my estimate here would be all put together, the trade and the brands and everything put together, the inventory level would be anywhere at 3,500,000 to $4,000,000 maximum. So inventory levels are lower than what actually is at this point of time.

14:59 Perfect. Perfect. And one last thing is, how has our working capital and debt moved, let's say, between 4Q and 1Q year on? Rajesh, if you could possibly help us with that. I think I already explained that working capital days, yes, because if you see in the first quarter, the working capital data is a little lower because you see the balance sheet that is completely on the proportionate basis. Particularly, if you see the working capital with respect to APR and the country, it's coming from sixty days. And it it was a little low price compared to the March March end.

15:47 So, Bharat, just to add on to Rajesh ji's comment. Two things interesting to note here is especially on account of the BIS and the business which are happening, I think industry has communicated its pain that we have been carrying more than the requisite inventories. So that the like at times, we have known that the compression the PCO getting amended and then again the copper is still getting amended. So the timeline or the time available at the peak season mandates us to maintain more than the required inventory. So last few quarters, we see the inventory levels have been highly escalated on account of this. So this is one area which has led to a greater requirement of the working capital.

16:36 So as we move through the season, definitely end of the season, we again are left with inventories because when we build up inventories in anticipation of upcoming season. So for us, the key focus area remains a working capital of view is to normalize the inventory. Currently, inventories are at much comfortable level as compared to the last year, but then still slightly escalated. So our efforts continue to normalize them as we move forward. Understood, sir. Understood. And just on this note, since you mentioned about compressors, do you expect any sort of trouble, let's say, down the line into the new calendar year, given that the BIS would be expiring in March 27? Or do you feel like there is sufficient capacity which are coming on stream by the end of this year, which should take care of our domestic demand?

17:25 Especially in terms of compression, the QCO allows us to import for the next few months. But at the same time, the domestic capacity ramp up has happened significantly. And as an industry, we believe that there is a sufficient capacity to cater to the industry for the coming season. So we don't see much of a challenge as far as completions are concerned. The next question comes from the line of Nishita with Sapphire Capital. Yes. Nishita, you're sounding quite muffled.

18:12 Please use your phone on the handset mode in case if it's on hands free. Yeah. Is it better now? Yes. It is good. Yeah. Yeah. So I had a few questions. My first question is that in the presentation, you mentioned that our is lower and it's been impacted due to high depreciation and cost. I just wanted to understand is the cost that we had in Q1? And should we take that as a base depreciation and finance cost for the whole year? Or is it going to take year round? Nishita, to answer your questions, the Q1 numbers for the depreciation are more or less aligned with the risk. So it has increased as compared to Q4. So because the new capacities have been good to use.

19:05 So there isn't any significant impact in pipeline of CWF in pipeline for the last of the year. So we can safely assume that there is not any significant upside to the current depreciation level. Okay. And what about the finance cost? Finance cost has also gone up slightly because I told you that the requirement with respect to the scale of the operations, company has company has seen a growth of 40% in this current quarter as compared to previous one. Accordingly, there is an increase in the working capital requirement, and the finance cost has also grown up by around by around three to four as compared to the previous one. Like going forward, can we expect the spend to come down?

19:52 Nishita, as I was answering to the earlier question, for us, the area of improvement with regards to working capital of finance first currently is the inventories, I mean, normalization of the inventories, but it has happened largely over the last few quarters of this week. But yes, a lot of work still needs to be done there. So yes, there is an opportunity and scope to improve the finance cost. Okay. Okay. Understood. Understood. And my next question is on CapEx. What was our CapEx spending in Q1? What is it going to be for the whole year? So for Q1 ended, there hasn't been any significant impact. Roughly INR 10 crores is what has been booked.

20:40 And going forward, based on our earlier plan, which was announced last we were looking at a total CapEx of around INR $4.50 crores, of which currently INR $3.30 crores to INR $3.40 crores has been already booked and INR $4.50 crores is something which is currently in CWMP. Yes. So you were talking on CapEx? Yes. You mentioned that we've already booked INR 40 crores to 50 crores in CWIP? Yes. So Nishita, I was answering your question on CapEx. So out of a total budget of $4.50 odd crores, which we announced in the beginning of FY '26, out of which $3.40 to $3.50 is something which is already booked. An additional ten third of EPACK has been booked in the last quarter, even of FY '27. And almost INR 40 to 45 crore is something which is in CWIP.

21:28 So we are estimating a total additional CapEx of around INR 60 to INR 70 crore for the balance of the year. Okay. Understood. And my last question would be on so we've seen very good top line growth in Q1 around 34%. So what sort of growth can we see for the full year FY 'twenty seven? And, like, do... Is there any scope to improve our EBITDA margins from the current level, or are they going to stay in the same range of 6% for the whole year? This is in terms of top line forward looking numbers, as you know, we don't don't share any forward looking numbers. But, yes, for EPACK, very confident that this year, the industry is expected to grow at around 20%.

22:14 So we would definitely surpass the industry growth as we have done it in Q1. And our other sectors, our other product categories, the small and the large domestic appliances are definitely growing at a much faster rate. So yes, we are looking to grow much faster, much better than the last year. On EBITDA side, currently, yes, 6.5% has been the typical EBITDA net of PLI or excluding PLI for last couple of quarters. But herein, the important thing to note is approximately 1.5 to 2% has been the PLI benefit, which was particularly partly passed on, partly retained by the company. So since current year is the last year of PLI benefit available for EPACK, we have already started ruling back the discounts or benefit what were shared with the customer.

23:03 And we are looking at almost completely reversing the PLI discount cost on to the brand customers by the end of the year. So we are hopeful that by the end of the year, the entire PLI discount would be reversed, and next year onwards, we'll be able to see more of a normalized EBITDA. Okay. Understood. Yeah. Thank you so much. The next question comes from the line of Rabindra Naik with Nirmal Bank Securities. Am I audible? Yes. Hello? Am I audible, sir? Yes, yes. Yes, Ramit. Yes. So actually, in this quarter, what is the total volume that we have done in first quarter?

23:57 And if you can give the, you know, opportunity for some of the fully built up unit and the the indoor and outdoor units, sir, how much we have done in this quarter in total 622 gross sales, that would be helpful. So I will come... I wanna go to the next question after that. Thank you. So,, we don't typically give out the number of units sold. But like I was answering the earlier question, in terms of the number of units sold, the growth for... Especially for air condition is 30%. Sir, I think Sir, I cannot listen you properly. Voice is completely echoing. I'm not able to hear you. Arun, am I audible now?

24:50 Sir, you are audible. Yes, sir. Okay. So in terms of the number of units, we have never historically given out the number of units sold data. But it's like I was answering the previous question, in terms of the number of units sold, the growth for last quarter is 30% vis a vis the 26, and overall revenue growth is 44% as far as the air condition is concerned. Okay. And, sir, regarding the compressor issue, actually, you actually did this question in the past from the previous participant, but I cannot hear you properly. So can you please repeat your comment and what is the compressor outlook for the industry? And what is the compressor for we have booked for now for our requirement in '27. And one of your competitor has actually mentioned in the call that the the is going to be effective from April 1 for next year. So how you are placed for the completion booking and how the industry is placed for the completion booking? If you can give us a comment, that would be helpful, sir.

25:55 Mr. Ravindra, as far as compression is concerned, the government has allowed import of compressors till end of this year. So that is when till the imports can be done. At the same time, the domestic capacity is already installed and in pipeline, which we believe will be operational by end of December. Is mostly in line with the overall industry demand. Hence, we don't foresee any significant challenge in terms of procuring compressors. So we we see that there is enough domestic capacity already installed and in pipeline, which is sufficient for the industry's demand. To your next question in terms of PR setting up compressor capacity, we don't comment on the year strategy. But as far as EPACK is concerned, we are not looking at setting up any compressor capacity in near term. And we believe we believe that we have strategic tie ups with both the large compressor suppliers, and we will continue to harness our relationships with them.

27:02 Okay. Okay. And sir, this disputed same receivable that you mentioned in note, is it related to air conditioner? Can you please repeat your question? The disputed sales that is around a 190 crores that you reported in that, you know, notes and accounts. Is it related to the air conditioner business? Right? So let me... Are you on loudspeaker or something? We are not actually able to understand. Okay. So... Okay. Sir, regarding this, you know, for the... I'm just coming to the light and domestic appliances, small and large domestic appliances.

27:53 Can you please give us a bit of break up of the how much it is for, you know, from the light and the small? So so mister, to what best I could understand your question is... I think you're on the loudspeaker. What best would The growth of the domestic domestic appliances for the last quarter is 68%. So there has been a growth of 68% in the small and large domestic appliances compared to Q1 of FY twenty six. Thank you. The next question comes from the line of Ayush Jain with Equity Advisory Services. Please go ahead. Yeah. Hello. Good morning. Hello. Please go ahead, Ayush.

28:38 Yeah. Good morning. I just wanted to know about the xRDC on outlook and capacity utilization for the whole year. Hello? Yes. Hello? In terms of capacity utilization across three plant categories, which we had, for Q1, was closer to 90%. And as far as we see is confirmed, we have seen a significant improvement in utilization of from previous reported of less than 25. We've achieved almost close to 50% for the q one. Pardon? How much? Closer to 50% is what we have seen utilization of three city. The other two older plants, there are the for Q1 where the utilization level was more than 85%.

29:31 Okay. And this is of xRDC. Right? Hello? Including rRDC. I just wanted to know xRDC xRDC, actually. So there is no split because the manufacturing facilities are fungible. So it... It's not just the assembly line. It's the overall manufacturing because we have huge amount of backward integration components getting manufactured within the same facility. So when we talk about digitalization, we talk as a whole. Okay. And this kind of level is sustainable for the whole year? This is the q one number. Q one effort 27. Yeah. Q one number for the the outlook for the whole year, actually. So last year's effort in the six numbers, the overall client utilization of Diwadi and again was close to 55, and that was less than 25%.

30:26 For for this year, your outlook for FY '27? So so we are we are looking at at overall utilization of all three plants put together at more than 60%. More than 60%, including. Right? Yes. Average utilization of all the three plants. Okay. I'm just looking for operating leverage part on the three city plant. If it goes above either 60% utilization of the whole year, there can be substantial upside on both the top line and the bottom line, right? So how can when can we expect the same for the strategic plan to get really onboard on the company's accounts? So I used like I was mentioning, the ramp up of is something which is gradually improving very fast. So compared to last year, we already are doubling the utilization and the seasonal utilization at least.

31:25 And And the company with its current robust order book is very confident that the utilization is going forward, especially for simplicity where there has been a concern over the last few quarters, improving significantly. And the overall annual utilization definitely achieving around 55 to 60% is one figure that we are targeting it. And as we move closer to it by the end of this financial year, we will continue to monitor it and then definitely increase it. So the overall outlook of the company is to bring all the three plants at improved utilization by the product mix, especially the non AC business. So the whole idea behind ramping up the non EC business is to improve utilization for the non EC season. With this approach, we are very confident that the overall utilization of the three plants will improve significantly.

32:22 Okay. Okay. And then next question is on the line of Hisense, your JV with Hisense. How is it coming up? So in my opening remarks, like I mentioned, for the entire season, which is January to June, we delivered close to 60,000 air conditions to HySynth with a revenue 60,000 to HySynth. $66.00 was Okay. Delivered for the first half, which is January to June, a revenue of 120 odd crores from AC business alone with Hisense. And if we talk over just q one, q one, the volume was 24... 35,000 with a revenue of 265 crores. So that was the total growth for AC business. And for washing machine, as we have mentioned earlier, end of Q2 is the targeted when we believe the front row washing machines pilot productions will start, and we are on track to begin the front row washing machine productions by end of October.

33:27 End of October. Okay. Is doing a lot of marketing, and they are about to... They have huge plans for India. Right? So you're... You've been a preferred partner with them. Do you see the top line to grow, like, two, three times in three years time, your top line with Hyphen? Definitely, yes. With especially with regards to HySENSE, from the day we spend the MOU and all the announcements till date we have done, we see that the growth envisioned and the time lines agreed are being adhered largely and the plans are intact and in place. And as HySense continues to grow into a larger significant appliances brand in country in line with their vision, we believe that our growth will continue and we'll scale new and exit them in the coming years.

34:28 Okay. And then the last question is since copper prices are increasing like anything, right? And it doesn't seem in the near term, it will stabilize. So how do you hedge or do you do some thing with that? So you maintain inventory for the raw material or something like that? Okay. Ashish, as far as commodities is concerned, whether it is ForEx or Copper or or any other commodities, we we don't do any forward booking in anticipation of orders. Whatever orders are there from the customer, there's a back to back booking done for them in line with the agreements. And whatever increase decrease that is over the quarter gets passed on in the next quarter.

35:16 So as a company policy, we we don't do any forward trade or or or unknown booking in anticipation of booking any profits. So so we we refrain from doing any trade without the confirmed orders and acceptance of the customer. Okay. Okay. Okay. Thank you. Thank you, The next question comes from the line of Pratab Maliwal with Mount Intra Finance. Hi. Am I audible? Yes. Yes, madam. Yes. Hi. Thanks for taking my question. I just wanted to ask, can we take up the revenues from the SVA.

36:08 You tell me what the current revenues we have from washing machine? And how this is expected to scale up with the Hyphen's production from Q2 onwards? That's my first question. Okay. So I can answer your questions in a way which makes it simpler. The total revenue out of $8.86 crores, approximately $6.60 is something which comes from and the balance is non EC, which is a mix of SD, LDA, and the components. So so that reduces answer I have. This is the numbers available with me currently. And as the... I don't have numbers right now with me, especially for washing machine.

36:54 As the LDA from approx 80 crores last year has grown INR $2.30 crores. So that's the small in our domestic appliances. Yes. Sir, what I'm trying to understand is, if I look at the last two quarters, Q2 has been a loss making quarter for us at the back level and the EBITDA margins have been zero to 2% last two quarters, the September quarter, if I look at. What I'm trying to understand now that we're getting into washing machine, which I believe would be higher margin, as you said, which should also reduce our seasonality in the top line and the margin accretive. So going forward, structurally, can our Q2 September quarter become not just better in terms of top line seasonality and in terms of profitability as well on a structural basis is what I'm trying to understand.

37:39 Absolutely. So I think, Pratav, you're bang on target. So yes, Q2 and Q3 historically has been the loss making quarters because of heavy dependence on air conditions. So the entire strategy around SDLEA is first to neutralize the loss, and we are on track in terms of scaling up the washing machines and the other SDLEA businesses. And like I shared in the opening remarks, we are constantly adding up newer categories in the SDL, which is, again, the non ECCs and product. So as we continue our journey, we believe that over the next four to six quarters, we should definitely see the bidding situations coming largely under control for Q2 and So so the washing machine definitely is a big lever for us in this journey. And as we see scaling up of washing machine currently, like, especially q two, as I mentioned, yes, q two and q three are significantly good for washing machines and the other SGA category.

38:42 But it is a journey which we have embarked, and we hope to see the results coming in line with what we are expecting over the next four to six quarters. But this q two, I believe you mentioned that we'll be doing the pilot production of the end of q two. So for this current year q two, will it again, will we kind of lose all our margins and go into part negative? Any... I'm not asking for a guidance, but any directional color if you push for that? In terms of washing machine, we are currently manufacturing the top load fully automatic, which is already under production, and we are serving three large national brands, multinational brands in this category. What I was mentioning, especially with regards to Hyphen is the front load washing machine. So that's one category in which probably we would be the one of the first starters to manufacture front load washing machines as an OEM OEM. So that is something which is currently under pilot production, and we believe that that is a newer category, a much more lucrative and a higher price category. So front load is something end of September and October is what we're targeting to start the mass production. The other getting the washing machine, especially the top load fully automatic is already under production, and we are already serving some micro customers there.

39:57 Understood. So so what I'm trying to understand here is that our target for FY 'twenty nine that you've given, the 5,400 target, are we still on track? I mean, I know that Q1 was largely on track, but it requires a revenue CAGR of approximately 35% or more. So we should have a plan of significant scale up going ahead. So are we largely on track of it? Yes. So we are largely on track in terms of our overall guidance that the seasonality impact needs to be minimized. And every quarter, we are looking at this we working to achieve a scenario wherein every quarter is profitable or every quarter, the revenue mix is maintained. Okay. And sorry to ask on the issue again, but due to do we anticipate being fact positive? No guidance needed, just directionally this due to do we believe we can be fact positive, which so we can see the results of the business model actually turning around.

40:54 So just any color there. But that's the result. I can amount to a forward looking statement, but, like, I think I I I already answered. It's historically q two and q three have been the loss making process. And our efforts are on. We are working on this. It's a journey. It will take some time. So four to six quarters, definitely, we believe we should be in a situation wherein we can completely stop this bidding situation. Okay. Understood. And just last question from my side. The depreciation input that you had given to the line wasn't clear. Believe this quarter, we had INR 16 crores, 17 crores. Did you mention that we don't expect it to increase? Just any detail on the line, what would be great to understand our outlook on that. In terms of depreciation, yes, the current depreciation for Q1, we don't see any significant increase over the next three quarters. There is a margin investment, which will be booked every quarter. So overall, during the whole balance of like a year, balance nine months of this year, we see an additional EPACK being booked up closer to 60 to 70 crores, which will be done in parts over each quarter. But yes, overall EPEX of INR 60 crores to 70 crores is in pipeline, which will get ultimately booked by end of this year.

42:07 Sir, finally, sorry, just one last question. What was the reason for the large rise in the other expenses? Over 50% it rose this quarter? Other expenses. So I said, increase in other expenses. Increase in other expenses, as already mentioned, because in this current quarter, there is a product loss, which has been filed in the books. That is around 6 to 7 crores. Otherwise, there is no other reason. Okay. Thanks for answering all my questions. Thank you. The next question comes from the line of Karan Gupta with Asset C Meta Investment. Again, on the other expenses part, I couldn't hear properly.

42:56 So what was the reason for the spike? I I told that we are other expenses has gone up by basically one reason that I think that around 7 crores for the quarter on quarter basis. And because the... You know that the fixed value or the production value of the company has gone up by more than more than 35% overall. Accordingly, the latest cost has gone up. Raising cost? Raising Raising cost. Okay. Okay. The second one on the channel inventory. Last quarter, you said that most of the old rated inventories are at the channel end.

43:46 And you don't have any old rated ACs, room ACs now. So this growth is purely the new rated as per the BE norms compliant products, right? As you said, 44% of growth, right? And what was the at the channel end? The channel end growth or the old rated products are already flushed out or it is already or it is in the channel inventory? Karim, I don't expect the new growth is new rated or what? Okay. So Karim, first of all, to answer your question, as a manufacturer, we are we were mandated to start production of new rated the new BE rated products with the February first of January. So yes, the entire growth, both for last quarter as well as the Q1 quarter is attributed to the new rated product. So the manufacturers were not allowed to manufacture anything old rated since beginning from first of January two thousand twenty seven... Twenty six. So the entire to the new rated product one.

45:02 In terms of channel inventory, the channel was allowed to sell more rated product till end of June. So based on our understanding, it's purely in understanding and estimate, we believe that has largely liquidated the entire OLED product, and this is why there has been a growth of the new V rated product. So our estimation and approximation is that, yes, the OLED that we product has been mostly flushed out from inventory. If somebody somewhere has something, I I can't estimate. But, yes, largely, it has been flushed out because for the past six months, the new rated products are fully manufactured and sold to the. So I hope that answers your question. Yes. Yes. Fair enough. Fair enough.

45:49 The SDA, LDA side, again, on the overall inventory, what is the inventory in the quarter one? Just to understand, is there any inventory buildup is happening on the SD, LD side? So Karim, for SD and LD, it's a very large category with more than 100 SKUs. So you have thousands of SKUs in SD and SG category put put together. And typically, as we all know, the festive season is the season. So it's October, November is the season wherein the entire season happens. My only estimate or my only answer is a bit that this is the time wherein the ramp up and the stock inventory building is happening with this product categories.

46:41 Any estimation, any single category for any single SKU for this product category, I think, is beyond my estimation because there's there's. No. I mean, non AC inventory or AC inventory. That's the typical bifurcation I want broadly. See, my only... Okay. To answer your question, as far as EPACK is concerned, our in house inventory, again, because AC is one category which is larger and and more in terms of value both in the dependence on import is still there. So we have got a commodity here. So our in house inventories, probably 70 to 75% would be AC inventory and 30% would be the non AC inventory.

47:30 So so that's the only kind of number I think I can share with you as far as I invest in your case. Non AC? Yeah. 2530% non AC. Okay. Okay. On the margin side, this product's SDA, as you said, washing machine in the LDA side is comparatively higher margin. But overall, SDA, LDA and component segment, because now the SDA, LDA and component is again onethree of your overall pie. What we can do from here on to reduce the seasonality in quarter two, quarter three, we need to ramp up this portion of the pie higher than the AC side, right? So just to understand the margin profile of these two segments and what you can expect next quarter two, three or overall the FY 'twenty seven, the growth of this segment.

48:37 And also you can share the reason of components, the growth of 23%. Karin, first of all, yes, I acknowledge that the overall margins as far as non ethically both as the LDA is concerned. So as the LDA is comparatively more than that of PC by almost, let's say, 1.5 to two basis points. So that's the additional kind of gross margin. It's not a typical level because EBITDA is a blended EBITDA and a lot of manufacturing facilities are shared. But at gross margin level, yes, the SG and gross margin is typically even a half to two basis point more than that of an lease. And hence, our entire focus on improving SDALT is driven by that effect.

49:24 And as we continue the growth journey for SDALT, we are again reaffirming that like, we have done almost close to 60% of growth in SDLDA, the non AC business over the last quarter. Our growth momentum is going to be much more as compared to AC. So AC will definitely continue to grow, but at the same time, we see the largest scope of growth in SDLDA in. Okay. And the component part, the growth? The component itself, we keep growing. Currently, the components stated are largely AC components, controllers, and cross look and copper tubing. So so they, again, are kind of seasonal. So here is, again, we are exploring opportunities to cater to non AC components, but currently, yes, it is in line with the AC group.

50:14 Okay. Okay. And the last one on the SDS side, how many OEMs as a customer we acquired because this particular segment is again consumer durable part is again very competitive as multiple players in the kitchenware segment also. So just wanted to know how much or how many customers that we acquiring or growing our customer base in the SGA segment? So Karin, as you can see in our investor deck, closing of FY 'twenty six, we had 72 customers all put together in VCs and non VCs. And you can put the categories. We have added roughly two customers, whereas there are a couple of two, three more which are in pipeline.

51:02 So currently, at this time, we have closer to seventy seventy three customers and 19 product lines are already productionized and two to three more lines are for which PT has or the pilot production has already been done. So by end of this year, we are looking to have closer to 75 customers and 20 product lines. The next question comes from the line of Ayush Jain with Equity Advisory Services. The next question comes from the line of Ganesh, an individual investor. Go ahead.

51:55 First of all, for the excellent set of top end. My first question is on this reason for your Telenet Institute package on Aframantha Pradesh government. Can you throw some light on that, sir? Already we have spent a substantial amount from November 24, I guess. So can you able to hear me now? Yes. Now better. Yes. Sir, my first question is on this recent MOD visit for from Andhra Pradesh for this Telenmaid Institute package. Can you throw some light on that, sir? Okay. Mr. Ganesh, with regards to our MOU with Andhra Pradesh government, the MOU is about the investments we have committed over next five years starting with the effective till when so that's amounting of INR 185 crores beginning starting the investment recognized is from beginning of 'twenty four, end of 'twenty four.

53:08 Okay. Okay. For for for thousand crores of CapEx. Right? Yeah. $10.85 crores. Okay. Okay. Okay. Okay. For which we have been we have already been allocated a land of close to 55 acres, and we are looking at ramping up newer capacities as we move forward. So there's something in the pipeline, not in the immediate term future, more of a longer term future. Okay. Okay. As like PLA schemes, we'll be getting benefited from the next course of few years, sir? So this is state incentive available from state of Andhra Pradesh. So approximately, not exactly, but approximately, it's 50% of EPACK, which will flow back as subsidy over next ten years, investment subsidy. So there is a state government team with refunds closer to 50% of the total EPACK at investment subsidy over ten years.

54:04 Okay. Okay. Okay. And second question is on the EBITDA margin, sir. EBITDA margin, as we I think as you stated earlier, it was 7.5%. That's a project anticipated without PLA, right, sir? That's an aspiration EBITDA level? Yes. Ganesh, the current EBITDA without PLA is closer to 6.5%. And we get a PLA income, which is particularly shared between us and the customers. So over the last... Since we have been getting fee like for last four years, we have been sharing almost 50, 50, 50 customers. So almost 1% was coming to us and 1% was getting passed on to the customers. So like I mentioned in my earlier question, we have already started negotiating with the customers and ruling back the PLA discount.

54:53 And we are working in a condition wherein by end of this year, we should be able to roll back the entire PLA discount, which has been passed on to the banks. Okay. Okay. So whether we are eligible for, I think, FY 'twenty one is the last year for a PLA? For EPACK, yes. The current year, FY 'twenty six, 'twenty seven is the last year. Okay. Okay. Okay. Okay. And then we have projected that this 8,000 crores revenue from items would be for the next five years, right? With this year, can we expect FY 'twenty three, can you be to achieve this 5,000,000 crores revenues, sir? As already mentioned, we have invested in current quarter amounting to 10 crore. And we have mentioned in the also total investment was around 450 to 470 crore.

55:44 And the remaining investment we will be doing in the current financial year. We are already having around 60 crore rupees in AWIC, which will get capitalized in the next two quarters. My question is on the revenue from CCT, the Zizeit plant. We have projected around 8,000 crores from next five years. With this scale, could we able to achieve this 5,000 crores target by FY twenty eight, sir? It's just an aspiration, I'm asking. Okay. Okay. Mister Ganesh, the total expected revenue high sense partnership was Sir, you're not audible. I'm sorry to interrupt. Sir, you're not audible. Please come a little closer to the microphone. Mister Girishu, yes.

56:30 The expected revenue from was 8,015 five years. So FY 2627 being the first year. So the cumulative over next five years is what we are expecting to cross INR 8,000 crores with AC and other appliances, washing machines and all put together. So that's a five year cumulative revenue what we had expected from HySENSE. Currently, FY 'twenty six is the first FY 'twenty six, 'twenty seven is the first year. And whatever was estimated for the first year, we are largely on track, and I shared the numbers in the previous question that for this calendar year, we have already done close 220 crores of revenue with HySense. And we have already sold close to 60,000 ACs to them. Yes. We are largely on track for the current calendar year. And totally next five calendar years, the revenue expected from HySense partnership is 8,000 crores.

57:27 Okay then. Thank you. You. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing remarks. Thank you all for participating in the earnings call today. I hope you've been able to answer your questions that is strictly. I again thank ICICI for arranging this earnings call today. Thank you all. Thank you, sir. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.