Electronics Mart India Limited (NSE: EMIL) Q1 2026 Earnings Call dated Aug. 05, 2025
Corporate Participants:
Unidentified Speaker
Karan Bajaj — Chief Executive Officer
Premchand Devarakonda — Chief Financial Officer
Analysts:
Unidentified Participant
Shubhanu — Analyst
Yash Sonthalia — Analyst
Mehul Desai — Analyst
Umang Mehta — Analyst
Akhil Parekh — Analyst
Jitaksh Gupta — Analyst
Rajiv Bharti — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to the Electronic Smart India Limited Q1FY26 Earnings Conference Confidence Call. 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. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bajaj, CEO and promoter of Electronic Smart India Limited. Thank you. And over to you sir.
Karan Bajaj — Chief Executive Officer
Thank you. Good evening and a very warm welcome to everybody present on the call. Along with me I have Mr. Premier Devaraponda, our Chief Financial Officer. We have uploaded our results and investor presentation for the quarter end 30 July 2025 on both the stock exchanges and the company’s website. Hope everyone had a chance to go to the theme. During Q1FY26 our revenue stood at 1739 crores, EBITDA stood at 110 crores with EBITDA margin of 6.3%. 3nds as margin stood at 4.4%. Q1FY26 turned out to be one of the coolest summer quarters in the recent years driven by unseasonal and widespread rainfall across April and May.
This unusual weather pattern significantly impacted summer appliances demand, particularly in the air conditioners and air cooler category which rely heavily on peak summer temperatures to drive sales. To put this in perspective, in April and May, our key month for AC sales saw nearly 50% higher rainfall than normal in Telangana. Over the full quarter, the state received 235mm of rainfall versus a normalized average of 211mm of rainfall reflecting 11% deviation in Andhra Pradesh. May alone recorded a sharp 148% increase in rainfall compared to the long term average, while June was relatively drier. The overall weather condition during Q1 subdued typical seasonal demand.
Despite the softer summer season, we adapted swiftly to the evolving environment and remained profitable at the company level. Leveraging our diversified product portfolio and strong on ground execution, we were able to pivot focus towards other categories. Our agile inventory management, targeted promotions and customer centric approach enabled us specifically offset the impact of cooling product yields, while our EPICA margins for the quarter appeared softer on a year on year basis. It is important to recognize the Q1 FY25 was an unusual stronger quarter driven by multiple heat waves across northern and southern part of the country which has significantly boosted cooling product sales and overall margins.
Additionally, over the last 12 months we have expanded our retail footprint by adding 44 new stores including eight stores during the quarter one of FY26 alone. This addition of 44 stores represent nearly 20% of our current network. These additions have been primarily in the NBO format. As with any rapid expansion, there is an initial impact on margins due to the fixed cost absorption lag as newer stores typically operate at lower throughput compared to more mature stores. Currently, many of our stores are less than three years old. We believe that as these stores gain traction and build a stronger presence, their unit economics will improve which will eventually boost margins going forward.
As of June 25, our total store count stood at 208 comprising 197 MBOs and 11 EBO stores. A significant portion of our store expansion this quarter was focused on Andhra Pradesh and Telangana with seven out of eight new stores opened up in these states. Unfortunately, this region also experienced a particular cool summer coupled with highly unseasonal rainfall which impacted demand for seasonal products. As a result, EBITDA margins for our south cluster stood at 6.7% primarily due to a lower contribution from air conditioners and lower fixed cost absorption driven by the early stage performance of new stores.
On the other hand, our performance in the NCR region remains strong. MBO sales in the north stood at 159 crores reflecting 21% year on year growth. EBITDA margins for the north cluster improved 3.6% up from 2.6% in the same quarter last year. Moving to category specific performance for the quarter, large appliances contributed 48% to our total sales in Q1 FY26. While this quarter has been an exception in terms of growth due to external weather related factors, our continued focus on driving sales in the premium segment Featuring significantly high ASPs has helped us stay ahead of the curve.
Our strong partnership with pull brands continue to differentiate us and reinforce our position in the premium end of the market. Our second largest category mobile phones contributed to put on 40% of our total revenue in Q1 FY26. We believe the category is poised for a new wave of demand driven by upcoming technology upgrades and feature enhancements. Many OEMs are actively working on next generation AI enabled devices which we expect will not only enhance consumer interest but also lead to an increase in both ASP and volume. Going forward. This position us well to capture growth and upgrade cycle begins to accelerate.
India’s economy outlook remains optimistic with projected GDP growth in the range of approximately 6.2 to 6.8% for the upcoming fiscal year according to various reputable government and international bodies. This anticipated growth is supported by increased government capital spending and a rebound in demand driven by premarization alongside favorable demographics trends and expanding consumer financing. Despite global uncertainty, these factors provide a strong foundation for sustained economic momentum. Further, the Union Budget 25 has provided significant personal income tax relief by raising the taxable income threshold, effectively putting an estimated 1 lakh crore back into the hands of the middle class.
This increase in disposable income is expected to boost consumer spending, especially in the consumer durable sector. With greater purchasing power, households are likely to upgrade and purchase new home appliances and electronics, driving overall demand growth and benefiting both manufacturers and retailers in the industry. Despite the challenges faced during the summer season, we remain optimistic about the upcoming quarters. As our newly added stores begin to ramp up, our focus will be on improving per store unit economics and driving higher throughput. This is expected to support margin improvement through better fixed cost absorption and operating leverages. We also anticipate a strong festive season this year which should further aid overall momentum.
Looking ahead, we plan to open 25 to 30 new stores in FY26 while continuing to optimize the supply chain, enhancing inventory efficiencies and strengthen our footprint in both existing and emerging markets. With this, I request Mr. Prince and Devrakonda, our CFO to update you on the financial performance. Thank you.
Premchand Devarakonda — Chief Financial Officer
Thank you Karen Sir, Good evening and warm welcome to all the participants. Firstly, I would like to share a few updates pertaining to the fire incident that occurred on 29 May 2025. One of our warehouses located in Guntur met with a massive fire accident resulting in damage to the inventory to the tune of 8 crore. These stocks are adequately covered under the incident and we lodged the incident claim well in time which is under the final stage of assessment by the insurer. As the claim is pending for settlement as on date, our management has decided to create a provision and disclose it as an extraordinary item in the statement of competent loss for the quarter.
Secondly, we have reclassified sellout incentives earned under various schemes of the supplier from revenue from operations to reduction from purchase of stock in trade in the financial statement of the current quarter which is in line with applicable accounting standards. As these incentives and discounts are directly associated with inventory purchases and not in exchange for any distinct goods or services by the company to the supplier. The. Consequent adjustments made to the comprehensive financial statement are not considered material to the financial results. Now moving on to the financial performance for the quarter Our Revenue stood at rupees 139 crores. EBITDA for Q1FY26 stood at rupees 110 crores. EBITDA margin for Q1FY26 stood at 6.3%. Pre Index EBITDA for Q1FY 26 stood at rupees 75 crores with a margin of 4.4%. PAT for Q1FY26 stood at Rupees 22 crores. PAD for Q1FY26 including excluding exceptional items stood at rupees 30 crores. Like to like sales growth for the quarter was negative 18% annualized ROCE and ROE for Q1FY26 stood at 13.4% and 7.7% respectively.
The working capital dates as on 30th, June 25th stood at 60 days and pre index cash flow from operations stood at rupees three hundred and ninety crores. With this we can now open the floor for questions. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2 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 is from the line of Shubhanu from Three Head Capital. Please go ahead.
Shubhanu
Hello sir, am I audible?
Karan Bajaj
Yes.
Shubhanu
Why? Your north cluster EBITDA margin on very low than south cluster?
Karan Bajaj
Sir, not as a cluster is a very new cluster that we started off three years back. So if you look at the total number there, the productivity of store throughput per store is divided between all the new stores that we open up. So we are expanding in that periphery. You opened up say stores which are almost say out of the 30 odd stores that are operating in that region, 20 odd stores are less than 24 months in that region. So usually we take around three years plus for a store to get matured and that is where you will see the productivity of the store.
So if you’re adding up stores in an existing cluster like Hyderabad where you already have matured stores, so you will not see an impact on the EBITDA there. But because of the new store addition in the newer cluster, the number of stores are much higher, you will see this kind of a number which is improving and once the stores reach a certain maturity level, you will see the similar number of EBITDA margin that you would see down south as well.
Shubhanu
Mainly high operational cost.
Karan Bajaj
Sorry, can you repeat your question please?
Shubhanu
My understanding is mainly high operational cost.
Karan Bajaj
Exactly. So you can, you can attribute to high operational cost because the throughput cost for today is much lesser than what the existing markets would do for us in saud. So that automatically would sell your rental, your manpower, your electricity, marketing, all expenses would be definitely much higher in terms of the percentage cost there. But once the productivity of the stores reach across 40 or crore then you will see a similar number back home that you do.
Shubhanu
How many stores you are expecting going forward in north cluster?
Karan Bajaj
Sir, right now in the pipeline there are eight more stores. So that will add up. So we are opening up two more stores this month in Delhi and probably two in next month. So you will see around six more stores coming up at least before Diwali in that cluster.
Shubhanu
Okay, understood. Thank you.
Karan Bajaj
Thank you.
operator
Thank you. A reminder to the participants, please press star and one to ask a question. The next question is from the line of Yash Sonathalia from Edelweiss Public Alternatives. Please go ahead.
Yash Sonthalia
Hi team. Thank you for taking my question. So I have two questions. I hope I’m audible.
Karan Bajaj
Yes, you’re audible. Yash.
Yash Sonthalia
Yeah. So my first question is on yoy basis our gross margin has declined by 1%. So I wanted to understand it better by how, how can we break it up between the change in mix of product mix change and the part contributed by the discounts we provided in the quarter?
Karan Bajaj
Yes, it was mainly because of the reduced throughput coming in from the cooling products, mainly air conditioners and coolers. In the last year, in the first quarter these air conditioners and coolers contributed almost 40% to the top line. This time the same thing has dropped down by almost 40%. So as a result because these cooling products will give us the highest gross margin. So because of this drop in the contribution from these cooling products this year the gross margins got impacted. So that was the main reason.
Yash Sonthalia
And any impact or any discounts we provided and loss we take on our books to liquidate the inventory.
Karan Bajaj
No, not yet. See those things. That situation has not yet arrived. So it will take, I mean we’ll see the trend in the upcoming festive season. Then we’ll take a call. As of now there was no. It was total demand slowdown for this product because of the unpowerable weather. That means it was favorable to the farmers but unpowerable to us. So that was the reason as of now we didn’t liquidate any inventories by offering additional discounts.
Yash Sonthalia
Understood. And sir, on the inventory part can you help me understand what was our inventory at Q1 and FY25 and what is the inventory as of now? Just wanted to understand how much of extra inventory we are carrying because of its additional rain in the quarter.
Karan Bajaj
Q1 of F5.
Yash Sonthalia
On yoy basis like how the inventory has increased. Like in Q1FY25 what was our total inventory? And in Q1FY26 what is our inventory where we are standing?
Karan Bajaj
So yes it would be majorly the cooling product category where the inventory would be a little higher. I have around 250 odd crores for air conditioners. Majorly air coolers we don’t carry much stocks because anyways so almost 250 crores of EC inventories little higher which we plan to liquidate up till December this year.
Yash Sonthalia
Understood? Understood. Very clear. And one last question. Like what the sales makes you give on yoy basis? Not only large appliances. I can see small appliances and mobile sales are also down or flat. So are the reasons similar because of range people are not coming, the footfall is lower. Or is there anything else we are also facing in the quarter?
Karan Bajaj
The small appliances would even contribute the category from air coolers. Now air coolers are practically flat this year. I mean like they were practically zero this year. They were very low in terms of sellout. So that category.
Yash Sonthalia
Okay. I thought you have a very miniscule part of air coolers. So that won’t affect impact a lot on small implants.
Karan Bajaj
Quarter one. If you see last year also the numbers quite big significant number.
Yash Sonthalia
Okay. Okay. Got it. Got it. Sir. Thanks a lot for answering my question.
Karan Bajaj
Thank you. Yes, thank you.
operator
Thank you. Before we take the next question we would like to remind participants that you can press star N1 to ask a question. The next question question is from the line of Mehul Desai from JM Financial. Please go ahead.
Mehul Desai
Hi sir. Good evening. My first question is on the top line. Can you just give some flavor on how the exit trends have been in July so far? And how do you look now the balance 9 month of FY26. Do you still think that you know, low double digit kind of revenue growth is possible this year?
Karan Bajaj
Hi Nehal. How are you? All good from our end and things look very good. July has been an exceptionally great month especially for AC and other categories. We were expecting that to happen anyways because organically last quarter didn’t do that well for cooling products. So ACs have seen the major jump this quarter as well. Whereas mobile televisions and aviators all categories have seen a higher double digit growth this year in the month of July and August. Definitely we are quite optimistic because a couple of big festival periods there and especially the 15th of August comes over a weekend this year.
So we’re quite optimistic on that. Sellout mobile phones are doing very well, especially the new Z Fold 7 that we launched recently. That has almost seen a 50% jump from last year what it was. We are anticipating Apple to launch their new product by September last week third to last week. So we are going to see good sales coming in from iPhone 17 as well. And then around 20th of September we start off our festival period. 22nd is the first Navaratre. So you know we see the 1012 days of festival sales dropping in in the second quarter as well.
So we are quite optimistic on how things are shaping up in the quarter two and we’re going to look at at least higher double digit growth this quarter.
Mehul Desai
And for the full year sir, because second half also the base is quite weak for you. So from that perspective I think overall while we were, we used to guide 15% kind of revenue growth.
Karan Bajaj
Yeah, so that will be in line with that only. Yeah, definitely it will be in line with that only we’re expecting that to be probably a little better than what you know, the expectation should be.
Mehul Desai
Okay, understood. And on the margin front the 6% kind of EBITDA margins are sustainable for. I mean you think that should sustain, right? Given that the growth will improve within a week quarter you have sustained 6%. Do you see that you know, in the balance nine months also?
Karan Bajaj
Absolutely. That is how we’re hoping it to pan out in the coming quarters as well. So we are quite optimistic on that as well.
Mehul Desai
And from the inventory perspective from a full year obviously as you said, this 50 crore inventory is there. So from a full year perspective will the inventory days or the overall inventory. Will be higher at the end of. FY26 or you think that should not be a major impact and you will. Be able to liquidate.
Karan Bajaj
So by this end of quarter two and probably the mid of quarter three we should be, you know, liquidating these stocks especially the ones that are holding up our numbers quite high. So that number of inventory days Anyway, organically by the 31st of December it will come down to an organic number less than 60 days.
Mehul Desai
Got it. And sir, other expenses have been lower this quarter. Any is it due to ANP lower. ANPs or I mean what has led. To this 1% decline in other expenses this quarter?
Karan Bajaj
Because other downfalls are major marketing expense that you would do. So the marketing expenses, the quarter one versus quarter one compared to. There was no point of spending money on marketing in a big way like we usually would do because some are the time, you know, you think.
Mehul Desai
Thank you. Thank you so much.
Karan Bajaj
Thank you ma’. Am. Thank you.
operator
Thank you. A reminder to the participants, please press star and one to ask a question. The next question is from the line of Umang Mehta from Kotak Securities. Please go. Go ahead.
Umang Mehta
Yeah, thank you for the opportunity. Karan, just a follow up link to Mehu’s question. So you mentioned that July has seen a decent pickup in ACS and other appliances. Could you comment on the trends on a same store basis? Is it that ACs and other appliances on a same store basis has also seen a decent.
Karan Bajaj
Yeah, yeah. In fact all clusters, not only same store in a certain cluster but but across Hyderabad is a major cluster is definitely seen the highest among the older clusters between Telangana and Andhra.
Umang Mehta
Understood. And you the concern on real estate sales which you had highlighted last quarter, has anything changed on that front? Just I mean from a slightly, maybe medium term perspective.
Karan Bajaj
I didn’t get your question.
Umang Mehta
Among real estate you had highlighted some issues in Hyderabad real estate related, you know market which.
Karan Bajaj
Yeah, so yeah definitely there is a slowdown in the real estate trends across the country. In fact I was talking to somebody in Karnataka also very recently the Bangalore also seeing a similar trend. But you know that is going to pick up and it is seeing again a positive sell through coming through in the real estate as well. So you know, but usually if it starts off now, that impact or the benefit to us comes a little later because till the time the positions are given, handovers are done, customers are moving into the newer apartments or houses.
So that would be a three to six month trend which we will start seeing that number coming for us as well.
Umang Mehta
Okay, great. Thank you. And all the best for the rest of the year.
Karan Bajaj
Thank you ma’. Am. Thank you.
operator
Thank you. Participants, to ask a question please press star and 1. The next question is from the line of Akhil Parekh from BNK Securities. Please go ahead.
Akhil Parekh
Yeah. Hi. Thanks for the opportunity. My first question is on the margins in the north cluster we have seen 100 bits of improvement on a yy basis probably because of operating leverage kicking in. So do you see that 100 bits of improvement to continue for at least next 34 quarters in FY26.
Karan Bajaj
So yeah, so quarter 2, quarter 3 so it will definitely go up from year on. But I would not be able to attribute exactly how much will it grow from year on every quarter to quarter. But eventually by say next year we should be looking at at least a 5% plus EBITDA margin in that faster.
Akhil Parekh
Okay, so end of FY27 you are saying we should be doing 5% in the northwest.
Karan Bajaj
Yes, yes.
Akhil Parekh
And any content in terms of what kind of sales level the north cluster needs to reach to clock the margins which are in line to the south cluster.
Karan Bajaj
For FY26.
Akhil Parekh
770 crore is what north cluster needs to clock to reach six, six and a half percent of EBITDA margins. Is that correct?
Karan Bajaj
5% plus 5% plus.
Akhil Parekh
So 5% plus okay. No, I was asking for to reach.
Karan Bajaj
To reach to in line then it reaches thousand crores by next year. So that is when this number will be in line with what we do in Hyderabad.
Akhil Parekh
Okay, okay, good to hear that. Second on APM Telangana as a market. Right. Last year last two quarters we had highlighted that there were challenges overall in terms of the growth in these two geographies. Has the situation normalized now? And obviously one Q was an aberration because of the early monsoon but X of that do you think now the things would have normalized?
Karan Bajaj
Yes, yes. We’ve seen a positive uptrend in all categories especially mobile phones. Panel. Yeah, so we’ve definitely seen that for the last two months. So even if the you know, June, July, both the months did well there, you know and we’re looking at the positive trend going forward as well in the Hyderabad cluster.
Akhil Parekh
And s And last question on the growth front end you are saying that we still confident of achieving 15% top line growth for FY26 while we had a decline of 10% in 1Q so it means that we should be doing 20% plus for remaining 3/4 of FY26 basically. So you think that is achievable?
Karan Bajaj
100% sir. Because the stores that were in pipeline, especially in the clusters in AP and Telangana are moving towards the matured store trend. So they are delivering all categories are performing well. We are quite optimistic with new technologies coming in like we are seeing now more or higher ASP products selling much sooner than the entry level one. The focus on the premium is definitely helping us out there. IPhone sale in fact for the first quarter also was very positive. Even after no new launches. The 17 is going to get launched by the second third week of September.
So that is definitely going to bring in a big change this year. So the valuation is going to be much higher. Products like Samsung Z folded Very well. So it’s still continuing very well after the launch as well. Audio devices, built in devices, both categories are picking up really well. So I think overall we’re going to see a positive trend this year. We’re quite optimistic on that. And then definitely AC definitely was not under our control that the weather went bad. But definitely there is going to be an upsell coming through in the second quarter or third quarter because there’s going to be a change from January as well as the pricing expected to grow to increase on the EC as a category because there’s going to be a revision on the star rating.
So we are quite optimistic that we’ll be able to sell out ACs. What we couldn’t do in the summer quarter versus in the festive period, definitely it’s going to be much higher than last year.
Akhil Parekh
If I can speak just one more question on the NCR store expansion front going forward we will continue to kind of lease out the stores, right? I mean we are not looking to buy out the stores basically sir.
Karan Bajaj
Not really. Most of the acquisition that we have done in the recent past also are going to the property that we bought out in the recent past are yet to open up stores, yet to start up operations in the next say a month or so.
Akhil Parekh
Okay. My question is we are not looking forward to buy out the properties.
Karan Bajaj
So most of the time location that we planned to initially buy properties, we bought out the property. So now it is more majorly the peripheries and smaller markets where we usually end up pleasing our stores even down south. So that is the strategy that we had, you know, planned for Delhi region. Now.
Akhil Parekh
Okay, that’s all from my side and best luck.
Karan Bajaj
Thank you.
operator
Thank you. The next question is from the line of Jitaksh Gupta from Tikri Investment.
Jitaksh Gupta
Hello. Hi sir. Am I audible?
Karan Bajaj
Hi. Yeah.
Jitaksh Gupta
Yeah. So I just wanted to understand the competitive landscape. The market of the Andhra Pradesh because we see a revenue drop is in double digits. So just wanted to understand the market scenario.
Karan Bajaj
Okay. So majorly any bad quarter in terms of numbers going down, you have to make sure that your market share is intact so growing. So that is one thing that is positive. Clusters where we are new or cities area new in APN Telangana also we are still capturing the market there and our market share is increasing definitely there. We’re sustaining our previous market share numbers for the matured markets like Hyderabad, Barangay, Vijayawada and Visakhapatnam. So those markets are already intact. What happened was for the summer quarter was definitely not expected. You Know the rainfall spoiled the whole season for us.
But as we talk now also we are gaining share in the new market that we’re opening stores in this region. Our biggest competitors in Andhra are Sonovision and that is spread across the whole of Andhra Pradesh state. And the biggest challenge there is that every city would have a regional mom and pop chain with 10 or 5 stores in cities like Gunpur, Vijayawada, Nello or Vimavaram Rajmandri. So when you’re competing with them, it’s a different play altogether. It is not like as simple as what you’re doing with the organized play. So you know the structure, you know what they are playing on the products or the brand.
But with mom and pop stores the play is very different. So it is more like a local approach that has to be in place. So our teams on a daily basis look into that to make sure that you know we don’t lose out a customer or how do we improve our shares in those markets.
Jitaksh Gupta
That’s right sir. Thank you.
Karan Bajaj
Thank you.
operator
Thank you. A reminder to the participants, please press star and one to ask a question. The next question is from the line of Rupesh Tatia from Sri Rama Managers pms. Please go ahead.
Unidentified Participant
Yeah, thank you. Thank you for the opportunity. And, and it’s nice to connect with you. My first questions are. Yeah, my little bit Follow ups on ncr. So NCR buying out of properties phase is now over. I mean whatever, some, there are some pending properties available to open stores but the buying out of properties phase is now over.
Karan Bajaj
Okay.
Unidentified Participant
And then maybe the CFO sir can give because of this buying of properties there was you know a significant jump in the depreciation. I mean if I’m looking at the numbers, FY23 was 85. It went to 130 crore roughly. So where, where will this number, I mean the, the rate of growth of this number should slow down now, right? Is that a fair assumption to make? Or maybe if you can give some number for where would the depreciation be in FY26 sir, here.
Karan Bajaj
When you look at depreciation you have to look at the depreciation on the assets, tangible assets which are in use and the depreciation on account of leasehold. What are the index 116 adjustment. So that will keep on increasing. See you please consider the depreciation would be in line with the top line growth. That means it will remain as a, if you take a percentage. So it will remain more or less in like earlier year because we are, it is not only because of purchase of assets or investment in the assets. It is on account of the India’s 1 monthly sector.
So when we make that India as 116 adjustment we’ll create leasehold assets on this leasehold asset which are depreciation and our expansion plan is in line. I mean if you look. I mean if you look at our expansion plan, year on year we’ll be adding at least 30 stores. Those stores may be leasehold properties but we have to create a leasehold asset in the books. And that’s why please consider depreciation will remain more or less in the same ratio as the current quarters are earlier years.
Unidentified Participant
So. So I. I understand how the leasehold assets are created. Sir. My, my question was from FY23 to FY25 our depreciation grew by 50% whereas our sales grew by 24%. And this variance occurred because we bought large number of properties in Delhi because of nuances of that market. Right. So. But now what you’re saying is from here on depreciation will go in line with sales. That is the correct summary.
Karan Bajaj
Depreciation on leasehold leasehold assets also.
Unidentified Participant
So understand that. I understand leasehold assets also get counted in depreciation. That I understand. But because of the property there was this divergence that was created because we.
Karan Bajaj
Had to buy property Last two financials if you see we valid up the majority of the properties in NCR at a very big cost. So you know that definitely is going to impact. But going forward if you see as you correctly said the major addition from depreciation going up would be from the inds adjustment, not from buying properties.
Unidentified Participant
Correct. That is the clarification I was looking at. And then Taran, what is, what is the peak number of stores we are looking at at NCR? I mean 50. 50 is the number we. We should look at.
Karan Bajaj
Satellites now ye be equally big grow Delhi city coverage central north Southwest. That is the plan.
Unidentified Participant
Okay. Okay. So NCR will, will still continue to grow. Okay and then have you, have you identified a new new region, new state other than NCR or.
Karan Bajaj
Homework is on. I think on the previous few calls also we had discussed the orisite market, a up market here and peripheries of ncr. So those are the markets. So that is the main market that we’re looking at right now.
Unidentified Participant
Okay. Okay. So NCR expansion Orissa and then little bit of western up. These are the next areas. Okay. Okay, perfect. And. And. I mean on what is the debt position at the end of the Q1 short term long term and lease liabilities if you have those numbers available.
Karan Bajaj
This is after the 31st of March total borrowing was around 983 crores which has come down to 689 crores this may say 689 method for land and building and the rest of it was working capital requirement. Hello.
Unidentified Participant
Okay yeah yeah yeah yeah okay the other other thing because we are doing such a significant expansion almost 3040 stores and then this expansion will continue for another 23 years. My at least humble suggestion is that you I mean can you figure out a way to present the data as mature stores in maybe two to three year store newer stores and give some indication of profitability.
Karan Bajaj
Definitely, definitely. So we will mark down stores which are matured which are in the process of getting matured and a newly opened stores so you’ll have a fair idea that you know how much percentage of stores that we are operating out of 208 almost 50% are less than three years. You know 20% are less than 12 months. So you get a fair idea and then from there you can understand the.
Unidentified Participant
Numbers better ah because there are significant front loading of the cost but the revenue is little bit back ended so.
Karan Bajaj
So out of point taken definitely Sagrapo share Kabanaki. Correct. So almost out of the 285 to 90 stores are less than 24 months.
Unidentified Participant
Correct. So almost 40% of the stores are probably not even break even.
Karan Bajaj
Operational break even but maturity 2530 crores.
Unidentified Participant
Okay okay okay that is perfect and then the final is is will be non numbers related question. NCR is different market than Andhra Pradesh Telangana. I think when a customer walks into NCR he’s probably not looking to buy one AC he’s probably looking to buy two 3 ACs. The brands probably are different brands don’t travel. There are reasonable nuances. So I mean I did go and visit some of your stores and in general the feedback is that the employee training probably needs to be picked up a little bit is what I my feeling was I may be wrong or it might be a sample so maybe you can give some color on that.
Karan Bajaj
We’ll definitely improve on that.
Unidentified Participant
Yes sir but you can give some color on that. I mean what are you doing to make sure that you know NCR we are, we are you know best in class in terms of sales and marketing.
Karan Bajaj
Okay so sir as you said first one year of ours operating in NCR was the learning where we stood more premium down south and we would emphasize with limited brands. So that’s why we added up brands like Lloyd, Bluestar, Haier in those categories where it was needed, especially the entry level product category for NCR market. So that was a major change that we did number one. Number two, most of our employees except one category head. The rest of the employees on the floor are from the brands, the respective brands. So at the point taken, because down south definitely throughput is higher, they definitely have better training standards or more matured staff or well trained staff down south in our stores because the productivity is higher whereas not because we just started off right now the brands give us all the employees, all the sales team come in from the respective brand.
But we will talk to them and. Try to fix up. That is a daily engagement that we have with them with the manufacturers to make sure that the training and the quality of manpower is improved in our stores up north as well. So that point taken. I think I’ll go back to them again have a discussion before Diwali to have that improved as well.
Unidentified Participant
Okay. Thank you. Thank you for answering all my.
Karan Bajaj
Thank you sir. Thank you. Thank you. Thank you for your feedback.
operator
Thank you. Participants. To ask a question please press star and 1. The next question is from the line of Rajiv Bharti from Nuama. Please go ahead.
Rajiv Bharti
Thanks for the opportunity. So Princess, we started on north cluster. Can you tell the gross margin last year in north cluster and this quarter also versus Q1.
Karan Bajaj
Gross margin? Yes. Hold on. The gross margins will be in line with what you do in Hyderabad. So that Is will be like 1% 0.5 to 1% lesser than what we’re doing right now in Hyderabad. So it would be in the range of around 13 point to 13.3%.
Rajiv Bharti
So I was just wondering whether the increase in EBITDA margin. Has there been anything to do with gross margin as well or this is purely operating leverage because very highly competitive.
Karan Bajaj
It was mainly because of the improved throughput.
Rajiv Bharti
Okay, sure. So I was wondering because of product mix it should have deteriorated actually the gross margin. And that’s why that EBITDA margin improvement is kind of getting canned because of that. Hello.
Karan Bajaj
Yeah, can you please repeat this?
Rajiv Bharti
Yes. So I was under compression because of weak demand. Your AC sales were weak. So gross margin should have taken a hit. And that’s why the EBITDA margin improvement is actually depleted on its own. Could have been higher if you get get a feel of what is the gross margin. You know.
Karan Bajaj
Category done well. So would have been in better position. Like would have been the EBITDA margins would have been better by at least one person.
Rajiv Bharti
Yeah. So my point is you. You said that, you know, let’s say we’ll get to this 5% margin profile. We are already, I mean nearly there on the 5% mark.
Karan Bajaj
There are be Otaki. Denominator. So you know, overall number based. Coffee.
Rajiv Bharti
So I. I was also saying because on a. As we move through the year the gross margin should actually improve from here onwards if given a normal condition like we have seen.
Karan Bajaj
Correct.
Rajiv Bharti
So you said AC inventory is close. To 250 watt crores. That is what 65,000 units left is it in the system. AC inventory is usually which is 250 crores higher than last year number that way. So what? 90,000 units is it?
Karan Bajaj
Yeah, 89,000 to be precise.
Rajiv Bharti
Yeah. So from let’s say from Q2 to Q4 put together, how many. How many units did you sell last year?
Karan Bajaj
Q2 to Q4. Last year the number was around say 70 to 73,000 units. But. But that was after a bumper summer. So this year we are attributing.
Rajiv Bharti
Okay. And can you talk about let’s say OEM support. What are we getting in this case for the AC merchandise in particular?
Karan Bajaj
Not. Not much. Not much desperation. Manufacturers will support you. But one good positive at the end of this is that the rating changes from December. So from October no manufacturer will have supplies for the older stocks which we will be carrying during Dakshera and Diwali period. Right. So from the 1st of January. The. Price will be much higher than what the rating saving would be on the ap.
Rajiv Bharti
Lastly on the ssg. So AP in particular has seen very sharp decline. Right. So can you comment? Is there competitive intensity there which is hurting us or any other factor which. Is, you know, one of
Karan Bajaj
the number of stores adding up there, the major market decline after.
Rajiv Bharti
Okay. Versus like the Hyderabad also. And my point was that. So you say Hyderabad then Telangana upcountry there the decline, I mean AP in general has an even bigger decline than those two.
Karan Bajaj
Correct? Correct.
Rajiv Bharti
Yeah. So I was wondering is it. Is it specifically something in AP which is hurting us?
Karan Bajaj
No, not really. In fact AP is also doing very well for us. Agarap Daily Traction. AP is also performing. We’re opening more stores there though. Sir. AC was a major contributor for that region. If you ask me. You know, the rains were much heavier. The throughput on other categories also got a little impacted. But it is not that they’re losing market share. In fact we’re gaining market share. And the Penetration in Tier 3 for towns is increasing. We opened new, more stores in Vijayawada Visakhapatnam Guntur Nellore, Raj Mantri the existing markets also so I think that is working towards our favor to grow in that category to grow in that market.
Rajiv Bharti
Sir sure so lastly what are the capex we did this quarter?
Karan Bajaj
Capex this quarter One second I’ll just tell you I don’t have the number on top of my head right now 1 second around 56 crores.
Rajiv Bharti
Thanks a lot and all the best thank you.
Karan Bajaj
Ravib.
operator
Thank you ladies and gentlemen we will take that as the last question I now hand the conference over to management for closing comments.
Karan Bajaj
I would like to thank all of you for joining the call I hope that we were able to answer all your questions and for any further inquiries you may get in touch with our team or Mr. Devin Dhruva from SGA we will be happy to address all your queries thank you once again.
operator
Thank you ladies and gentlemen on behalf of Electronic Smart India limited that concludes this conference thank you for joining us and you may now disconnect your lines.