Voltas (NSE:VOLTAS) Q1 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to q one FY twenty seven earnings conference call of Voltas Limited hosted by Philip Capital India Private Limited. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on a touch tone phone. Please note that this conference is being recorded. I would now hand the conference over to miss Natasha from Philip Capital India Private Limited. Thank you and over to you ma'am. Thank you, miss Khan. Good evening, everyone. I'm Natasha Jen on behalf of Philip Capital. Welcome all of you to the first quarter FY twenty seven earnings conference call of Voltas Limited.

0:52 From the management, we have mister Mukundan Menon, managing director mister K. D. Shreedhar, chief financial officer mister Nikhil R. Chandrana, head corporate finance miss Sumana Tripathi, head FP and and Mr. Manish Sumani, Head of Finance Controlling. I request the management to give their opening remarks, post which we shall open the floor for Q and A. Thank you, and over to you, sir. Yes. Good evening, all. This is Sridhar here, CFO, Voltas. Glad to connect this evening with our earnings call. To give us overall summary, Voltas delivered a strong performance in Q1 FY 'twenty seven, significantly outperforming competition and further strengthening its leadership in the coating segment.

1:37 The company achieved a 17.3% secondary market share in room air conditioning for FY 'twenty seven till for the first quarter and widened its lead over the nearest competitor to four percentage points, reinforcing its position as the undisputed market leader. Strong execution across marketing, product management, channel expansion, manufacturing capacity and supply chain readiness supported the performance. During the April to June quarter, the global economy continued to face geopolitical tensions, elevated energy prices and persistent inflationary pressures. Conflict in The Middle East added to commodity and currency volatility and supply chain uncertainty. Against this backdrop, India continued to demonstrate resilience, supported by domestic consumption, infrastructure investments and strong underlying macroeconomic fundamentals. The Indian consumer durables industry witnessed steady demand during the quarter, continued demand for cooling products, conditioners remained a key growth lever supported by the summer season aided by increased penetration and expanded demand across Tier two and Tier three markets.

2:38 Against this operating environment, Voltas delivered a substantially strong performance compared to the previous year, supported by growth across its key businesses and disciplined operational execution. The company achieved a significant milestone by selling 1,000,000 RECs in just eighty one days, demonstrating the strength of its brand, product portfolio, distribution reach and execution capabilities. Voltas also emerged an important growth lever substantially outgrowing the industry and recording its highest ever quarterly sales in both value and volume. The projects and engineering business provided further resilience and balance underscoring the strength of the Voltas diversified portfolio. For the quarter ended thirty eight June twenty twenty six, Voltas recorded consolidated income of INR 4,765 crores compared to INR 4,021 crores in QY FY 'twenty six.

3:27 Profit before tax was $2.85 crores versus INR $20.03 crores in the previous for the same period last year. Net profit was INR $2.13 crores compared to INR 141 crores last year. Now if you go into the detail of the respective segments. In terms of segment A, segment A delivered a strong growth of 33%, led by exceptional performance in the room air conditioning business. RAC volumes grew by 45% year on year, significantly outperforming the industry and key competitors. As mentioned earlier, the secondary market share was 17.3% for Q1 of 'twenty six and progressively strengthened its competitive position through the quarter. For Q1 'twenty six, the company widened its market share lead over nearest competitor to four percentage points, reinforcing the strength of its brand equity, product positioning, distribution network and execution capabilities.

4:13 A sharper brand and marketing strategy was an important contributor to this performance. The refreshed brand positioning supported by sustained investments across television, digital, retail and consumer touch points, strengthened consumer engagements and brand resilience. The true 1.5 tonne cooling capacity campaign and industry first initiative highlighted the superior 5,000 watt cooling capacity of the Voltas 1.5 ton air conditioners, enabling consumers to make more informed and value driven purchase decisions while enforcing the brand's credentials around powerful cooling and performance. Product management and innovation remain central to the growth strategy. The refreshed RAC portfolio led by AI powered Vertis split AC series introduced in March 2026, offered differentiated features across AI adaptive cooling, AO geo fencing and AI energy manager. A sharper portfolio across capacities, energy ratings and price points enabled Voltas to address evolving consumer requirements, increasing premiumization and growing demand for intelligent and energy efficient cooling solutions.

5:15 The company continued to expand and deepen its channel presence across Tier two and Tier three markets, where RAC penetration remains relatively low. Wider distribution, stronger dealer engagement and increased presence across traditional trade, modern, retail and emerging channels improved product availability and enabled Voltas to capture incremental demand across markets. Another key enabler was the company's manufacturing and supply chain preparedness. Capacity was progressively ramped up ahead of the summer season with the Chennai and Pantenegar facilities operating at high utilization levels. Strong raw material planning, supply readiness, deeper localization and disciplined inventory management ensured product availability during the peak season and enabled the company to effectively service the significant increase in demand. Commercial air conditioning delivered a stable performance and continues to represent a significant long term growth opportunity supported by urbanization, infrastructure development, data center expansion and increased adoption of intelligent building solutions.

6:19 Commercial refrigeration and air coolers recorded a relatively muted performance, primarily due to slower market uptake following price increases. The company continues to focus on institutional sales, channel development, customer diversification and new product interactions to drive improved performance in the coming quarters. Segment A margins improved significantly compared with the previous year despite commodity inflation and currency depreciation. These pressures were partially mitigated through progressive price increases and comprehensive cost optimization program initiated in FY 'twenty six, encompassing strategic sourcing, deeper localization, product design improvements and manufacturing product initiatives. Overall, the combination of sustained brand investments, differentiated products, sharper product management, expanding channel reach, enhanced manufacturing capacity and resilient supply chain execution enabled VOLTAS not only to maintain its leadership but to materially widen its lead over competition.

7:15 Voltas has entered into a binding term sheet with Attenberg Innovation Private Limited for a proposed fifty-fifty joint venture to develop and manufacture high efficiency RAC compressors in India. The proposed venture will strengthen indigenous sourcing, reduce import dependency and enhance long term supply security. The transaction remains subject to satisfactory due diligence, product validation, definitive agreements and necessary approvals. Voltas. Voltas continued its strong growth trajectory in Q1 'twenty seven, substantially outgrowing the industry and recording its highest ever quarterly sales in value and volume. The business achieved a year to date market share of 9.4% in washing machines and 7.4% in refrigerators, further strengthening its position in highly competitive Indian home appliances market. The company maintained its number two position in the semiautomatic machine category, testing highest ever market share of 15.6%.

8:08 The performance was supported by sharper product and premiumization strategy with refreshed product lineups across Frosty refrigerators and fully automatic washing machines. These introduction single old spec presence in higher value segments, improved overall product mix and enhanced its relevance among consumers seeking differentiated features, contemporary design and superior performance. Voltas continued to strengthen its brand and channel strategy through an expanding retail footprint, deeper channel penetration, enhanced in store visibility and stronger consumer engagement across key markets. At the same time, increased focus on localization, strategic sourcing, material optimization, product design and manufacturing efficiencies is expected to progressively strengthen cost competitiveness and profitability. With increasing scale, improved market share and a stronger premium portfolio, VOLTAS' long term strategy supporting portfolio diversification, premiumization and the company's evolution into a comprehensive home appliances player offering integrated cooling and home appliances solutions.

9:14 Segment B, electromechanical projects and services. Segment B continued to play an important stabilizing role in Voltas' diversified portfolio, reinforcing the company's position as a leading engineering and project solution enterprise. During Q1 FY 'twenty seven, the domestic products business maintained strong order momentum, securing strategic wins across key growth sectors, including industrial infrastructure, electronics manufacturing, metro and turnkey projects and data centers. The company continued to selectively pursue fast track and value accretive opportunity, strengthening the quality of the order book and supporting healthy revenue visibility. The business maintained strong execution discipline across projects and geographies with continued focus on timely delivery, project profitability, working capital management and risk controls.

9:59 Within the international projects business, pursuant to the court award received Citra Bank guarantees amounting to 167,000,000 equivalent to INR $4.33 crores were canceled during the quarter. The quarterly financials have more details. While Voltas effectively mitigated risk arising from geopolitical crisis and ensured continuity across key projects and customer engagements, new order book remained delayed following the impact of the conflict in The Middle East. Against this backdrop, the business continued to focus on operational stability and tighter project controls, disciplined risk management and selective pursuit of opportunities. As of 06/30/2026, the total carryover order book value for segment B stood at INR 6,345 crores, providing revenues visibility and underpinning the company's confidence in the long term prospects of both its domestic and international projects businesses.

10:49 Engineering products and services. Segment C delivered high double digit top line growth during Q1 FY 'twenty seven, further strengthening the scale and contribution of Voltas' engineering products and services portfolio. The Mining and Construction Equipment division delivered impressive top line growth supported by sustained demand for crushing and screening equipment, continued execution of operations and maintenance contracts and stable performance from the Mozambique operations. The division also continued to strengthen its higher margin aftermarket and service annuity business through deeper customer engagement, enhanced life cycle support and expanded service capabilities. The Textile Machinery division delivered double digit growth despite a challenging operating environment characterized by geopolitical uncertainty and cautious industry sentiment.

11:35 Encouraging the market has begun to demonstrate early signs of a gradual revival reflected in improved order booking levels. Continued focus on aftersales, spinning accessories and services delivered encouraging results and further strengthened the resilience of the business. Together, segment B and C continue to enhance the resilience and diversification of the Voltas portfolio, providing balance to the consumer businesses while contributing to sustained growth and revenue visibility. Supported by strong summer season and disciplined execution, the company exited the quarter with a strong liquidity position and well controlled working capital profile. Continued focus on inventory, collections and cash flow discipline strengthened the balance sheet and provided the flexibility to support investments in brands, products, channels and manufacturing capabilities while maintaining financial strength.

12:26 Voltas enters the coming quarters from a position of strength, supported by structural initiatives undertaken across businesses. Refreshed product portfolios, sharper product management, sustained brand and marketing investments, channel expansion, enhanced manufacturing readiness, localization and cost optimizations have strengthened the company's competitive position. While Q2 is traditionally a leaner period for the cooling industry and geopolitical uncertainties continue to create commodity currency and supply volatility, Voltas continue remains well positioned to navigate these challenges. In room air conditioners, the focus will remain on consolidating and extending leadership through product innovation, premiumization, sustained brand investments and deeper channel penetration. Commercial air conditioning delivers a stable performance and continues to represent a significant long term opportunity supported by urbanization, infrastructure development, data center expansion and increased adoption of intelligent building solutions.

13:20 Voltas continues to be one of the fastest growing home appliances businesses in the country with product segmentation, premiumization, innovation and channel expansion expected to drive market gains and progressively improve financials. With the projects business, the company remains focused on selective and value accretive orders booking, execution excellence and cash flow discipline and project profitability. The engineering products and services business will continue to build on their growth momentum with increasing emphasis on higher margin aftermarket and service revenues. Across its businesses, profitable growth, market expansion and sustained improvement in profitability remain centered to Voltas' strategy. The company continues to unlock efficiencies through strategic sourcing, localization, product and design optimization, manufacturing excellence, process improvements and increasing benefits of scale. Thank you.

14:26 If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets for laughing a question. Ladies and gentlemen, we'll wait for a moment while the question queue is assembled. The first question is from the line of Indrajit Agarwal from CLSA. Please go ahead. Congratulations on a good number. I have two questions. First, if you can share some contours of the compressor JV, what kind of CapEx can there be? And when can we see commercial production? And how is the CapEx share between the P and P?

15:16 Yes. Evening, everyone. My name is Voltas Limited. And thank you for the question, Indrajit. So this JV that we've signed with Atomberg, it's for manufacturing capacity of around 2,800,000 compressors for air conditioners to begin with. That's what we have sort of tried to achieve. And this is an effort to secure the supply chain for a category, which is a very important category in the overall compressor. So the heart of the air conditioner is the compressor, and we always felt that it is very important to secure this very important part within India because with all the challenges that are happening with respect to the QCO restrictions, the quantum of imports, which are allowed the quota system, there's also something called the transition QCO rules.

16:13 We felt it would be good for us to have a as a leader in the air conditioner market with a very high volume, we did not want to leave this very important component unhinged. So that was the reason we went for this sort of arrangement. In terms of the overall CapEx, we still are it's still in the early stages. We are in the final as we work out the details of the definitive agreement, we'll arrive at that. It's a little early to sort of comment on the total CapEx requirement actually. Sure. Secondly, while our market share in Voltas has been gradually in sync up, do we have an EBITDA breakeven line of sight yet? Or is it still towards the end?

17:05 Were Indrajit, this year this particular year was when we initially were aspiring to get to an EBITDA breakeven. Unfortunately, what has happened with respect to the West Asia crisis took up prices of the commodities quite sharply. And most of the brands, including us, struggled to pass the entire thing on to the market. So we had in a way, I think if we were to assume that we were to reach this year, I think the way it may get sort of pushed over by a few quarters. That's the way we see it. Sure. I have more questions, but I'll join right now. Yes. Thanks, Indrajit. Yes. Thank you.

17:52 The next question is from the line of Achal Lohre from Nomura Institutional Equities. Please go ahead. Yeah. Good evening, team. Thank you for the opportunity. Sir, my first question is, you know, with respect to the the, you know, the volume growth. If you could call out, you know, what has been the volume growth for the industry? We have grown by, you mentioned, 45%. But what has been for the industry? And secondly, how do you see it in terms of the current channel inventory and the way forward for the full year? If you could comment a little bit on same? Yes. On the room air conditioner, Achal, we the industry seems to, on the secondary market share, the secondary sales, what is published by GFK Nielsen, they showed a 15 growth in secondary. That's what they have said. My sense is this primary increase would be anywhere between 20% to 22% in volume terms and maybe around 25%, 26% in value terms, maybe the industry growth. As against that, we have done better, which is reflected in our market share growth, which we have seen our market share significantly growing from 15.9 for the full financial year last year to 17.3.

19:16 So our volume growth was around 44% was our volume growth and our value growth on equivalent basis around 50 odd percentage. Understood. If you could give us some sense in terms of what is the extent of cost inflation and how much price hike we have taken so far and how much we are expecting now? So the cost, yes, so this year I have seen two things happening. One was the there was a table change which happened and that took up the prices of all the three star indices by roughly 5% and the five star by 15%, a weighted average of somewhere around 7%, 8%.

20:04 Then there was the commodity price increase, the depreciation of the rupee plus the increase in the ocean and freight charges, some increase in plastic costs, all that added up to another sort of 4%, 5%. And so overall, all put together, 10% to 12% was the cost, and we have also passed on very close to that number into the market, maybe a percentage or two lesser, if at all, actually, because we had a reasonable stock of these units a little before all these disturbances started. And we also had the we were blessed with the fact that we did not have any disruption in our production during the peak summer months, which is March, April, May, despite all the disturbances, which were there, we managed to keep our production running.

20:58 And we have utilized some of the stocks of the products that we had imported at a little better price before all this hit us. So more or less, we had passed on maybe a couple of percentages, if at all, we would have held on to it. So does that mean we don't necessarily have to take any further price increase? Have I understood right, sir? Yes. So the price increase, generally, we wouldn't we normally what we do, Achal, is that if at all there is some moderation, if the costs keep moving up further, we'll have to obviously take a price increase. We are watching what's happening on the overall Vaseca crisis. If things worsen, obviously, if the costs get impacted, we will necessarily have to take a price increase.

21:44 However, if it is nothing significant, what will happen is to shore up the margins, a little bit of reduction in the channel schemes, that is what we will do. Understood. Just a clarification in terms of the mix for the season, if I were to ask from January to June, what would that be in terms of outsourcing versus insourcing, sir, for us? Yes. So the out of the total air conditioners that we sell, roughly 7%, 8% of the sale or I would say, in the peak season quarter one, maybe around a little more than around 10% of the sale happens to be window air conditioners. Window air conditioners are completely OEM.

22:29 And out of the split ACs, which is a balanced 90%, we have a seventy-thirty mix, actually, 70 five-twenty five mix kind of thing between self manufactured and OEM manufactured. Got it. Just a second question with respect to the compressor joint venture. Yeah. You know, what I wanted to check, is that is that the energy efficient compressor we are talking about? If you could give some sense in terms of a, you know, how soon can this go on stream and what kind of advantage it can bring to us? So the compressor that is getting developed, the platform that is getting developed is for the three Star as well as the five Star, which is a popular category. And we begin with the most voluminous product, the one which is a volume driver, the one point five and three Star and five Star. And all of them have energy efficiency levels, sort of meeting the requirements of the energy table. So really energy efficient machines, which will meet the three star requirement as well as the five star current year requirements, current table requirement, which goes on till next year December, '27 December 28 is another table change.

23:49 All these products are capable of getting upgraded to a better energy efficiency. The energy efficiency of our compressor is driven by the motor and the motor gets upgraded when there's an energy table. So to answer your question, Achal, these are the best in class in terms of energy efficiency today, and it will also can be upgraded to the best in class when the table changes. Right. And in terms of costing, that's my last question. Sorry, sir. Thank you. Yeah. That help in terms of cost cost savings compared to the regular compressor as of now? Yes. So the way we have looked at it is currently, as we had mentioned at the beginning, was even in Mr. Caesar's message. It was essentially to have a supply chain security being the largest manufacturer of air conditioners with a leadership position.

24:44 We have to secure the supply chain, and it was done with that intent. The other most of the other things like cost, all this will be a work in progress because as the product gets sort of commercialized over the next one point five, two years, all these numbers will play out. A little early to comment on that, Achal. Yes. Thank you. The next question is from the line of Aditya Vatia from Investec. Please go ahead. Hi. Good evening, sir. Good evening. So my first question again is on Atomberg JV. How long is it likely to take for for the plant to become operational?

25:34 How would technology be sourced? And until then, how are we going to meet the QCO norms? What are the arrangements that we have done until then? Yes. So Aditya, way we have planned this out from assuming the work starts on this immediately, it's an eighteen month kind of runway that we're looking at before the commercial production starts. So during that period, the plant has to be put, the products have to be manufactured, the pilot batch has to be taken out, The pilot testing of that field testing of the pilot batch has to go on. And then we start the full fledged commercial production. So eighteen months from now is when we're expecting full fledged commercial production of the compressor.

26:21 And the second question was what was it, Aditya, the second question? Until then, how are we going to manage the QCO norms? What are the arrangements that we have done for that? Okay. Okay. So the currently, the QCO norms is that up to 30%, you can import from sort of of your FY 'twenty five numbers, you can import. So that we can continue to import. That is point number one. Point number two, the two big compressor manufacturers, which is highly in GMCC, have built up capacities in India, and we have blocked those capacities for the from India. And so that we take it from there. And our idea is that even after these products come into the thing, our scale will be so much by the time this is commissioned that we will still have a mix of these compressors from these two vendors made in India, along with our own secure supply chain of compressors. So it will be a blend of that. It is not this or that. We will continue to buy from them, and we will also continue to manufacture and secure our supply chain. So it's a double two sided thing. We wanted to ensure that we secure our supply chain, both with suppliers as well as have our own indigenous technology.

27:51 Understood, sir. Then my second question is that you mentioned that besides the BE norm change, there was roughly a 4% odd kind of a price escalation or cost escalation that we saw. Given how sharply some of the commodities moved and rupee depreciated, is it... Is this 4% the hit that we saw with the with the benefit of lower cost inventory? Or are you saying that with with these increased costs, the overall increase in terms of costing is only around 4%? Just want to clarify. So actually, if you've seen the results that we have published, we seem to have sort of done a little better than some of the key competitors. And I think we did a lot of right things. One is we had planned for the season well. As I'd mentioned, there was no disruption in the factory. So the volumes came and the absorption of the cost of the factory also was well done.

28:47 We also have a very active cost takeout project, which is going on. And that has been one of the I think it has helped us in at the right time when things started going wrong, that cost takeout project has started sort of rectifying into some savings. And I think a mixture of the sheer scale, the lack of discontinuity in the manufacturing, the proper absorption of our cost because of the larger volume and lack of disruption, coupled with this cost takeout project, I think a mixture of these four things, I think, played out in our favor, I suppose, Aditya. The next question is from the line of Siddharth Para from Nomura.

29:40 Yeah. Thanks for the opportunity, sir. So first question is on the UCP segment. So, like, you alluded to the fact that while the UC revenues have grown at 50% plus, we our overall revenues are up 30%. So can you please share, like, in the commercial, refrigeration and the CAC segment, what has been the decline? And how do you see the outlook for the Commercial and Electrical segment going ahead given that it has remained under stress for quite some time, so some thoughts there? So Siddharth so what you said is right. The kind of buoyancy that we saw in the room air conditioner segment within UCP was probably not seen in the other two categories, which is commercial refrigeration, which is deep freezer water coolers, water dispensers, nor was it seen in the commercial air conditioning category, which is ducted VRF and chillers.

30:38 So and the light commercial air conditioner. So the it was indeed a muted it was, I think, a reasonable growth in the commercial air conditioner segment, which is the ducted VRF and chiller, but a muted kind of performance in the commercial refrigeration. And what you said is absolutely right. You would have heard from the other major competitors in the commercial refrigeration space, the industry seems to have degrown by around 15% or so. And I think we did a little better than that, I suppose, compared to that. But going forward, I think things will indeed settle down. This was a category where the price increase was significant, like unlike in the room air conditioner category, here the costs went up a little more significantly like for freezers by 10 by of water coolers by around 15% and water dispensers again by 10%.

31:42 So very steep price increases, cost increases forced all the major brands to increase selling prices to that effect. And probably the channel was not fully ready to absorb that cost, so they played the wait and watch thing. But over the last few months, we are seeing them taking to that because there seems to be a normalization and a complete acceptance of the fact that this is a cost pass through and there's no other way to manage. So we are seeing some improvement in the traction this quarter. The next question is from the line of Sameer Gupta from IIFL Capital. Please go ahead.

32:34 Good evening, everyone, and thanks for taking my question. Sir, I'm a little new to the company, so pardon me if some of the questions sound very naive. Just trying to get some color on the margin performance first. So EBIT margin in unitary pooling products is around 5.3%. Now this is on a back of a good summer season, and you alluded to market share gains in the RAC segment. I understand commodity cost inflation would have had a negative impact, but if I look at overall company gross margin, it is flattish. And we have also expected 32% revenue growth to have some kind of operating leverage benefit. So just trying to understand, this is the best quarter of the season, and we are doing a 5% kind of an EBIT margin.

33:22 What can we then assume as a steady state profit expectation for this segment? Yes. So Mr. Gupta, what you said is absolutely right. So this if you look at some of the other this has been a rather difficult quarter for the industry as a whole. The summer the reasonably good summer compared to the very weak summer last year, and that increased the demand, as I mentioned, by around 20 odd, 25% or whatever. However, the commodity price increase, which and the dollar depreciation, which hurt, it hurt everybody. So if you look at the results of most of the competitive brands, five or six of them who are top players in this category of room air conditioner saw a significant shrinkage in their EBIT by almost like 3% down, some of them 4% down. So in comparison to that, we seem to have done better.

34:23 We have in fact, our Q1 to Q1, there is an increase in our EBIT percentage last year to this year. So we have, I think, weathered the storm much better than the rest of the people. And the reason for that is the points that I mentioned a little while earlier, which is to do with the way we manage the factory without a disruption, cost absorption, the sheer scale effect and the fact that we have an active cost on for it. So whether these numbers don't reflect that very high buoyancy in the sales volume completely, I agree, It is primarily because of the dampening effect of the cost increases, which came, which could not get passed down typically into the market, Gupta, actually.

35:13 Got it, sir. So but the problem was in the below the RM cost, like more channels financing or more discounts and schemes because the GM line still seems to be reasonably okay if I look at the full quarter full company performance? Actually, yes, it's essentially at the yes, probably the material cost actually is the one which affected the big time, yes. Okay. Got it, sir. Second question is on the Attenberg JV. So firstly, why is there a I mean I'm sorry if this sounds naive, but why is there a specific import dependence in compressors in this industry? Is it that certain are not available in India or is it just cheaper, you know, procuring it from outside and how does whatever this constraint is get addressed with this JV?

36:10 And secondly, why a JV and not do it organically? Yeah. So the import content in an air conditioner currently... Yeah. See, around four, five years years ago, almost 75% of the BOM of our air conditioner used to be imported. The major components is compressors. There is a copper, there is aluminum, there is controller and there is motors. Most of it used to be imported. Currently, from the 70% import content for here, I'm talking about the industry, not only of Voltas. That 70% has now come down to around 30%, 35% because there is copper getting manufactured here, controllers getting manufactured here, motors getting manufactured here, almost 40% of the compressor requirements of the industry getting manufactured here. So that has brought down the import dependence to around 35 odd percentage.

37:09 So that is point number one. The compressor is a thing that we felt that is very important because while there are many companies who have entered into manufacturing PCBA controller, who entered into manufacturing the special type of tubes, which are used for air conditioner, we call it inner group tubes. For aluminum, there are many manufacturers who have entered into India. We felt that the compressor is the area which is there is a gap between what is being made in India versus what is required by the industry. And being the most important component in the bill of materials, we felt it is important that we have this manufacturing sort of capability built within the organization or through a joint venture.

38:03 The second question you mentioned about whether why can't we do this on our own. In a compressor, the most important item within the compressor is the motor. As it our tie up with Attenberg is Attenberg is the leader in motors, and they compete with the global giants in this category because of the sheer volumes that they have made in the ceiling fan category. So they seem to have cracked the code as far as the most important item on the bill of materials is concerned, which is the motor. This is a capability that a company like Voltas does not have. And because we have never gone into a component manufacturing so far, so this is the first time that we want to secure this and we are doing it. So the answer is that we did not have this capability, and we felt it is better to partner with somebody who is way ahead of the curve and do it along with it.

39:02 Superb, sir. That's very, very helpful. Just a small follow-up here. So, I'll take this to rejoin the queue please for the follow-up question. Sure. I'll do that. Thank you. Thank you so much. Thank you. Thank you so much. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit the question to one question per participant. If you have The next question is from the line of Rahul Agarwal from Ikigai Assets. Sir, Good evening, Rahul. Sir, just sir, just one question I had. You know, obviously, the UCP margin, you know, last year is not something to, you know, look at in terms of sustainable number. Right? I mean, Voltas had a very bad year, yes, last year. Right? Correct. Correct.

39:58 It's obviously obviously, first quarter, this quarter is, you know, better than last quarter, q o q, 30 bps increase, which is good. But I wanted to understand from you, you know, if plants are, you know, at peak season, they are fully utilized. You have gained so much market share of volume growth is, like, 45% on RAC, 44%. If if that's played out, that peak capacity utilization, pricing being not in so much in favor, but you have passed through, Does that mean that, you know, going back to six, 7% is gonna be extremely difficult for the company going forward? And you can talk about either this year or next two years, you know, as you feel comfortable. And second question was also on the project side. I mean, I understand that, you know, there were execution issues. We've seen some top line softness. I don't know why.

40:48 Execution softness. But on margins over here, I thought we are getting into more short term gestation projects. Our margins should get better here because the quality of order book is getting better. Just your comments on next twenty four months, where should we see EBIT margins for UCP and for the project segment? Yes. Also, for the UCP, if you see last year's quarter was a very weak quarter, so 3.7% versus 5.3%. So there's a significant gain in the it's quite an improvement and the numbers would have been a little better if the cost increases had not hit us the way this entire crisis played out and things became very sort of volatile, things would have their entire advantage of the huge scale up could have played out a little better. So whether there's a room for improvement going forward over a long period of time over the next eight quarters or so? The answer is certainly yes, actually, because that eventually we've had margins of upward of 7% in these quarters earlier. So we our aspiration is indeed to improve this quarter to quarter quarter on year improvement that continues. So we are working towards that.

42:13 The second question was more on the project margin actually. So what has happened is the this was a very volatile period, and we could see that things were looking a little hazy in the thing. So we were very calibrated and careful in picking up orders because having an order book at a fixed price without an escalation clause would have hurt us more. So this calibrated order booking and calibrated execution actually is a saving in disguise. So because once you lock in a price with a client, you can't change it irrespective of any of these. So in a way, we see it as a blessing in this case. As things settle down, we are continuing to focus, as you rightly said, Rahul, on being very selective of what projects we are getting.

43:05 We are looking at more of manufacturing data center kind of jobs, MEP jobs. Our focus is shifting to faster decision jobs, more in the private sector, less to do with government where payment delays will bother us. So we are altering a little bit of a course of our entire journey, and this will start playing out well over the next few quarters. Mr. Manon, just one follow-up. This 7% aspiration... No, no, I'm sorry to interrupt. Yes, Just a follow-up. I mean, it's not a new question. Mister Menon. Just one follow-up. On the 7%, could you take us to the bridge in terms of, you know, two, three points which could help us achieve this? Thank you. Yeah. Okay. So just to add to to that question, for example, I think one of the things which I think has paid up for us, I think as Mr. Menon alluded to was in terms of the cost down project, for example, is something that we are actively working on, which should actually help us. The some of the investments in CapEx that we have done, say, about eighteen months back, which is sort of was a bit of a deterrent last year, is playing out favorably for us. So these are some of the things which sort of would help us to sort of get better. Again, the focus, as I think we have said consistently in the past, has been we want to grow top line very aggressively.

44:24 We want to make sure that we continue to gain market share. So I think that's something we want to sort of continue doing. And the profile per se, I think, will sort of take care of itself, I think, and we sort of compare it with the same period last year and sort of look at improvements. I hope that answers the question. Yes, sir. Thank you so much. Thank you for answering all my questions and all the best for the rest of the year. Thank you, Rahul. Thank you. Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Investment Management. Go ahead. Yeah. Hi. Thanks for taking my question. So my question is regarding the outsourcing opportunity versus insourcing. While the outsourced players claim that the outsourcing pie is increasing, just wanted your understanding how is it going? Is it the insourcing which is increasing or the outsourcing is increasing?

45:17 If you can comment on the overall industry, what is the mix and how do you expect this mix to go... Keep going forward? Yeah. In our case, the outsourcing has not increased because we have built a large capacity in Chennai. We have a capacity of around fourteen one point four million in Pantanal, almost the same 1,200,000 kind of thing in Chennai. So for us, I think those plants have been come fully upstream. We don't see our outsourcing increasing. It's a steady level. It's a steady level. Very steady level. Think the proportion, I think Mr. Menon did answer earlier, I think broadly, it will broadly be the same level, yes. Got it, sir. That's it from my end. Thank you so much. Thank you.

46:03 You. The next question is from the line of from HDFC Securities. Please go ahead. Hi. Thank you for the opportunity. And then the last question, have I heard or understand correct, going forward also your outsourcing and sourcing mix will remain similar? And secondly, what is your RAC mix in UCP segment in this quarter? And normally, how would this be for a year? Keshav, the outsourcing will continue in the same ratio. As I said, window air conditions will continue to be 100% outsourced. Between the in the split PC bucket, we will have that 75%, 25% kind of mix. That will continue. Yes. And the proportion has not changed very much. I mean, this obviously, it's a quarter wise, obviously, the proportion within the segment and the REC keeps obviously changing within the quarters.

47:15 The next question is from the line of Sonali Solankar from Jefferies. Sir, I have two questions. Firstly, on the current demand dynamics in terms of AC channel inventory. The demand in July, August so far, maybe in volumes. And the festive season, any initial thoughts that we have, how are the channels behaving, are they restocking, etcetera? And my second question is on FY 'twenty seven, 'twenty eight CapEx estimates for you as a company, especially because of the JV of Atomberg, will the CapEx be also split in fifty-fifty? And from where will Atomberg get the technology for manufacturing compressors?

48:05 Okay. So I think, Sridhar here. So in terms of the initial feedback that we are hearing from the channel, I think the channel I think is broadly a bit fairly cautious, I think in terms of the stocks that we are maintaining. So I think we feel that the channel inventory would be in the range of around four weeks as what we have maintained in the past. I think that's been the thing. And based on the secondaries is where the buildup will happen. So I think for the festive season, I think it's a bit early. It will be more relevant maybe for the home appliances, where I think it will be more relevant. And I think that's something we'll have to monitor over the next four to six weeks, and that's when we will have a better view of it. In terms of the CapEx for 'twenty seven, 'twenty eight, there is no material major CapEx. I think we already had done the CapEx for Chennai a couple of years back, as you know, the benefit that we are sort of yielding now.

48:55 It will be more a maintenance CapEx that we will sort of continue to have. No major sort of commitment from our side. The CapEx from the Atomberg side, yes, should be ideally on a fifty-fifty basis. The exact quantum, etcetera, is getting sort of getting firmed up. Once we have better clarity, we will be able to share it with you. So when we say eighteen months runway for the commercial production means, correct me if I'm wrong, but our majority CapEx for this JV should happen over FY '28 and '29. That's correct? Yeah. That will be a fair assumption. Whatever quantum we agree should be, yeah, should be around that time. That's a fair fair assumption. Understood, sir. Thank you, and all the best. Thank you, Sonali. Thank you. Thank you. The next question is from the line of Ram from JPMorgan.

49:43 Please go ahead. Sir sir, I have two questions. The first is regarding how much is the loss in Voltas in the current quarter? I understand that we are still not making money in that. And the second question is, I mean, will the margins improve in electromechanical projection services? Because in the current quarter, I see on a comparative basis, the results are not good. And what could be the future outlook in this segment? Yes. So I think the share of I think the JV loss for this is mentioned in the financials, so 37,000,000 is what we have booked for our share. I think that's visible in the financials. In terms of the electromechanical, I think the quarter was a bit soft from a top line due to the execution challenges that Mr. Manon, I think, outlined earlier, because of which the top line was a bit lower and also, obviously, the related impact from an EBIT point of view. We see the situation sort of getting gradually better.

50:48 Maybe Q2 also may not be very much better. But I think both that Q3, Q4, I think, is when we feel that it should get really better. And I think that's where the recovery should ideally happen. Okay. Thanks. Thank you, Ugra. Thank you. The next question is from the line of Arjun Shah from three sixty one Capital. Please go ahead. Thank you, sir, for the opportunity and congratulations on good set of results. So just two questions on compressor side. First, what... How much would be the will be the localization of this compressor? Like you said, motors will be manufactured by Atomberg since they have have good technology. I understand that certain parts like magnetics or something, China has an upper hand in terms of some rare earth metals. Do we need to import any components and anything?

51:39 And secondly, in terms of competitiveness or this cost of compressors, while we are doing this to secure compressors for future growth, In terms of cost, how would we be placed in like for Chinese imports or highly or EMCC who are doing there and also in terms of LG or PG who are doing there? So just both the questions on compressors. Thank you, sir. Yeah. As it's actually the the the most important item in the compressor is the motor, so that that Atomberg has sort of mastered it and so that 40, 50% of the bomb is covered from a indigenous manufacturer. There may be some a few things within the compressor, which is imported, that is true. But gradually, that dependence also will come down.

52:28 The rest of the items initially will be imported, but gradually, we will try and indigenize it at cost optimized kind of thing over a period of time. Our expectation is that this will be able to compete with the imports for sure. That is the way we are looking at it. So the way we see it is, one is, it should secure our supply chain in a complete manner that there is very low risk of anything going wrong with the supply chain. Second is, this will certainly not hurt our competitiveness with making the product cost. That's the first trend that we have on this, actually. The next question is from the line of Aditya Mikram from BB Securities.

53:22 So... Hi, sir. I only have one question. In the last one call, you had mentioned that the target to achieve seven to 8% is a gradual process. Currently, as we stand, even on the peak... Even during the peak summer cycle, we have not been able to significantly scale up the EBITDA margin. So do you foresee this getting a little prolonged in terms of achieving that target? Or do you see that there are more benefits and scales? It seems like there is a cautious coming... Commentary coming along all the way. So just wanted to get your thoughts on that because at 5.6, we are... It doesn't look like it would be a...

54:08 And and some of your competitors have called out that it might be tricky to achieve significant increase in margins from where we stand. Yes. A fair question. So if you see the results, I think, I mean, I'm sure you are keeping track of, obviously, some of the peer group also. I think it has been a bit of a difficult quarter in terms of because of the events that are well documented, so don't want to elaborate on that. So because of that, obviously, there was an impact from a cost side. But I think most had a bit of a degrowth while we were able to get better in terms of from a margin profile was the same period last year, I think. So I think some of the initiatives, I think we called out earlier, I think, has become a bit of a differentiator for us and sort of helping and supporting us. We sort of feel that this will help us, this will pan out, continue to help us pan out better.

55:01 And I think we want to make it a sustainable type of thing in terms of working on some of these initiatives, and we feel that it will sort of gradually start getting better. So I think that's broadly where we we see it at this point. Okay. So just to follow-up on that one, so should we assume that the current quarter EBITDA margin is a steady state for at least some time till the time things pan out or till the time things sort out on their own? No. I think if you sort of go through the margin profiles, if you're purely looking at the margin profile, the quarter on quarter margin profiles are fairly variant, if you see. So from that angle, I think we'll have to sort of go on a quarter on quarter basis and see how it sort of goes. Okay. Thanks. Thanks very much. Appreciate it. Thank you.

55:49 We'll take the last question from the line of from Securities. Please go ahead. Good evening, sir. Thank you for the opportunity. Sir, regarding this, again, this compressors, so for how many compressors volume we have now, the joint sensor is envisaged. And whether the what is it? It is a green whether it is a greenfield expansion, greenfield investment by Attenberg and us. And otherwise, whether the Attenberg has already taken some investment, we are just augmenting the investment with the joint venture. And what is the uptake for Voltas from this compressor? And what is the total capacity of the compressor in this stage? If you can deal on this. Thank you.

56:34 So the factory that is being which we'll put up will be gradually ramped up. We will begin with smaller quantities initially, and that beginning will be eighteen months from now. And then we will ramp up over a period of time, starting with maybe less than $1,000,000 then taking it to between 1,000,000 and 2,000,000 and then eventually taking it to 2,500,000 plus. So that is the plan actually. And the technology exists. We have the product has already been made and it is being tested right now actually. The product is it is not that it is the designs are sort of new. This product has been in development for the last year or so.

57:22 Okay. And what is that in terms of pricing, what would it be? So the economic angle, as I think Mr. Minon did elaborate that obviously, key thing was from a supply security point of view that we are sort of looking at and also linked to the QC angle that Mr. Menon mentioned. The economic aspects are still being finalized as we speak, and then we'll come back to you when we have better clarity. As that was the last question for today, I would now hand the conference over to Ms. Natasha Jay for closing comments. Over to you, ma'am. Thank you, Mr. I request Sridhar sir to give his closing remarks, if any. Yes. Thanks, Natasha. Yes, just closing comments from my side.

58:12 Supported by the stronger brands, differentiated products, expanding channels, enhanced manufacturing capabilities, a rapidly scaling home appliances business and disciplined execution across this diversified portfolio, Voltas remains well positioned to strengthen its leadership and deliver sustainable profitable growth over the medium to long term. Thank you all. Thanks for joining the call today. Thank you, everyone, for joining in. Have a great weekend and happy Independence Day to all you. Happy Independence Day to all of you. Thank you. On behalf of Philip Capital India Power Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.