Elin Electronics Limited (NSE: ELIN) Q1 2026 Earnings Call dated Aug. 07, 2025
Corporate Participants:
Unidentified Speaker
Bhavani Kumawat — Chartered Accountant
Sanjeev Sethia — Director
Akash Sethia — Business Strategy And Investor Relation
Praveen Tandon — Chief Executive Officer
Kamal Sethia — Managing Director
Analysts:
Unidentified Participant
Bajrang Bafna — Analyst
Dhruv Shah — Analyst
Kunal Mehta — Analyst
Sahil Doshi — Analyst
Yashovardhan Banka — Analyst
Dhwanil Desai — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the LN Electronics Q1 FY26 earnings conference call hosted by Access Capital. 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 we are on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavani Kumavat from Access Capital. Thank you. And over to you sir.
Bhavani Kumawat — Chartered Accountant
Thanks Shruti. Good evening everyone. On behalf of Access Capital, I welcome you all to Electronics Limited Q1FY26 earning conference call. Today we have with us management represented by Mr. Komal Sethiya, Managing Director, Mr. Sanjeev Satya, Director, Mr. Praveen Tandon, Chief Executive Officer and Mr. Aga Satya business strategy and IR. We thank Allen Electronics for giving us the opportunity to host the call and would now like to hand over the floor to management for the opening remarks post which will open the floor for Q and A. Thanks and over to sir. Over to you sir.
Sanjeev Sethia — Director
Thank you very much. BHAVANI Good evening ladies and gentlemen. This is Sanjeev Sethia and. And we also have on call today our managing director Mr. Kamal Sethia, our strategy head Akash Setia and our CEO Mr. Praveen Tandak. Thank you for joining our earnings call for first quarter fiscal year March 2026. Coming to our overall performance for the quarter, operating revenues for the quarter was rupees 295 crores against rupees 293 crores in the same period last year up 1% on a yoy basis. Quarter on quarter was down because of seasonality. Our revenue growth was impacted because of two key reasons.
Higher than expected drains that impacted our cooling product businesses Fans, fan motors and AC motors and components thereof. Decline in lighting business from our key customer signify who has created a JV with another contract manufacturer. As you know Dixon, this is as per our guidance shared earlier by us, we will cover the entire lighting business update and way forward later in the call. Consolidated EBITDA for the quarter was rupees 17.6 crore against rupees 13.3 crores in the same period last year. This has been driven by 130 basis points of higher gross margin due to better sales mix and efficiency in procurement and quality.
Also it is pertinent to note that within employee cost there are non recurring items of Rupees 1 crore and therefore recurring EBITDA is Rupees 18.6 crores for the quarter with an adjusted EBITDA margin of 6.3% against a reported margin of 5.9%. Therefore, even with a modest 1% increase in revenue, adjusted EBITDA has increased by 40% showing the strong operating leverage in the business. Consolidated tat for the quarter was rupees 9.4 crores against rupees 5.9 crores in the same period last year. Our liquidity position remains strong with net cash of 103 crores as at June 2025.
Our capex spend in Q1 FY26 was tightly controlled at rupees 6.5 crores. We remain confident to deliver on our stated guidance. I would like to take this chance to reiterate our aspiration and strategy for the coming year. The aspiration is to be one stop shop for all high volume home appliance and durable needs of OEM and our customers. This includes our existing business lighting fans, small appliances and our planned new businesses medium appliances such as air fryers, air coolers, chimneys, OTGs etc. We will continue to look for such products to add in our portfolio over the next several quarters.
Now I would like to share with you the performance and strategy in each of our business verticals going forward. In lighting fans and switch segments, the revenue for the quarter was rupees 80.1 crore against rupees 89.4 crore in the same quarter last year. This was primarily driven by decrease in revenues from lighting which was partially offset by increase in revenue from fans. LED lighting X flashlights declined from Rupees 63.4 crores last quarter to Rupees 39.5 crores in the current quarter. This was largely led by volume decline from our key customers signify they have moved businesses to ITs recently formed JV.
Compared to quarter four fiscal year 25, we have experienced a revenue decline of rupees 10 crores for the quarter or rupees 40 crore annualized as shared in the last quarterly call. This is in line with our estimate of reduction in revenue of Rupees 50 crores on an annualized basis for the year now. Coming to the positive effects of the change in competitive scenario in lighting business, we have added three new customers in the lighting space, one of whom is a top five player in the Indian market. We expect to add another two to three customers by the end of this fiscal year.
While they have started off small, we expect that these customers will ramp up to their peak requirement over the course of next two three quarters. Our outlook is that by the end of quarter four of this fiscal year our monthly run rate as compared to our business which signify our monthly run rate will be substantially higher because of the addition of these new customers. So lighting business which has been flat for us for the last three years, I think from end of this year and the coming fiscal year we should see substantial growth moving to our fan business.
While our ceiling fan business has done well on a year on year basis, it is impacted by higher than expected range. Our revenue for the quarter is up two times year on year while Q2 is seasonally weak for fans. We expect this to pick up strongly again in quarter three and continue to do well in quarter four as well. I would like to highlight that our launch of DLDC products in the last two years with customer Signifi has gone quite well and the market reception has been very encouraging. Signifi itself is very bullish for the fans business in the coming season and we will be adding another three or four new products in this segment with signify.
Traditionally in the off season our fan businesses have seen a major decline but due to the good acceptability of our new designs, the business we have average business is much higher than what we have experienced earlier. So I think our fan business, especially BLDC fan business is going to do fairly well in the coming yes and similarly our TPW business is also picking up. We have we are streamlining our TPW business from Goa to Ghaziabad in the coming season. We expect that this will help us generate increased business as an overall product. We can offer customer much better deal from our Gaziabad unit.
Moving on to the home appliance segment, revenue increased from rupees 63.6 crores last quarter to rupees 68.6 crore this quarter. Kitchen and home care revenue increased by 8% year on year. This was on the back of improvement of revenue from mixer grinders and posters. We are particularly enthused about growth prospects of OFR for the upcoming season given that we started this only last year. This has scaled up well in a short span of time. Personal care segment was up 9% year on year basis. We expect this to further get stronger in the coming quarter. Future growth is going to be driven by this segment on our strong focus on also growing ODM share of the business.
Whereas still nascent, we expect this to grow strongly over the next several quarters. A quick update about the medium appliance category. While these will be built out of Biwadi which will start next fiscal we have already initiated discussions with customers for this for select products such as Chimney. We are in reasonably advanced stage of discussions and are hopeful of getting business from one of the leading OEMs of this segment in the country. For other products such as coolers, we will provide an update in the subsequent quarter. We had shared our optimism in last call about our relatively nascent export business.
We remain in exploratory talk with few AEMs to localize in India and export to the US Western world. While still in early stage, the engagement levels have been encouraging. Further, the government stance on local manufacturing and disincentivizing imports via BIS and QCO makes us further optimistic on our business going forward. Moving on to the FHP motor segment, revenues were flat at rupees 4748 crores. This segment has also been impacted by the rains. We expect this segment to pick up strongly in Q2 and Q4. We see specifically we see the chimney motor business growing very having a very healthy growth in this coming quarter.
And of course what I’m talking about motors is just reflecting on third party sales going forward. We are adding Cooler motors to our category which we expect to launch by the coming October November of this year. We have also started BLDC Motors for Chimney and our first billing will happen in this month. BLDC Chimney is also. Chidney Motors is also a rapidly growing segment and this will also further add to our overall growth in the motor business. There are two other categories which have a fairly large market in India but are currently dominated by imports.
With BIS coming in September of next year we see that there’s an opportunity in these two categories namely Washing machine motors and AC ID OD motors. We are having extensive talks with suppliers of lines of these motors and we will shortly be taking a decision to enter these categories also. Now I would like to set our guidance for the full year FY26. We believe revenue will be in the range of rupees 1350 crores representing a growth of 15% over FY25. EBITDA for the year is forecast at 6 to 6.5% margin. Capex for the year will be 100 to 120 crores split at rupees 60 to 65 crores for phase one of the new plant in Biwadi and rupees 50 crores for growth of the existing business and factories once the new facility is stabilized in two years from starting.
This would also help us drive our return on capital employed since cash sitting idle on our balance sheet has been a Drag on the capital employed. A quick update on the Biwari factory. Construction has commenced in July 25th and we expect the plant to be ready and operational by March or April of 26. We expect revenues of around 140 crores in FY27 and 250 crores in FY28 from this facility. Reiterating that full revenue potential of the plant is 550 to 600 crores. Further, we expect a steady state EBITDA of 7 to 7.5% for this plant.
At these levels, return on capital employed for the plant will be 20%. With this, we conclude our opening remarks. We can now open the floor for question and answers. 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 their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two 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 Kunal Mehta from Sunidi Securities. Please proceed.
Bajrang Bafna
Yeah, this is Bajrang Daphna. Congratulations for good set of numbers though. Top line was flat but you kept on the margin improvement. What we have seen in last quarter. So just a strategic question purely from a macro perspective. We have constantly seen the government is embarking on journey where they are pursuing an agenda that most of the items that India is importing from China almost 70 to 80 products which currently most of the larger brands are importing from China and putting their brand and selling in India. So that thing government wants to end in India and there are multiple articles and multiple announcements that has come from the government side where the deadlines are somewhere ranging from March 26 to almost September 26.
So we just want to understand that what is the ground reality on this? Are the brands are really moving to companies like us, you know, for the contract manufacturing and what is the response that we have seen in last two, three months, you know, whether larger brands are coming forward for contract manufacturing to us and how this particular thing is going to move. If you could elaborate on that will be really helpful for a broader direction for companies like that. Thank you sir.
Sanjeev Sethia
Yeah, sure. So definitely we are seeing this movement happening post implementation of bis. Certain categories if we see where we ourselves have benefited is like steam irons, kettles, OFR heaters. Two categories which I mentioned in my call is like one was a washing machine motor and AC IDOB motor which Have a fairly large market demand in India but Unfortunately more than 80 to 85% to my knowledge of the demand is currently fulfilled by the Chinese companies. So I think we are seeing a lot of movement of companies taking a call of investing in infrastructure in India to get up for the capacities as and when BIS comes in.
So definitely, I mean across product categories like I just mentioned few but. For. Example flashlight torches, another category BIS has just come in for July of this month. There again we are seeing a localization happening. So overall I think there’s actual movement happening on ground. The companies are trying to source more and more from India. That’s our.
Bajrang Bafna
And just one more aspect to this. We are also seeing, you know the most of the global brands are also have a tendency for China plus one where couple of brands wants to move their production on the side to India as well. So are we seeing some inquiries on that side as well where this could be a reality? We know that the tariff issue has recently emerged. You know where India is right now getting charged higher than China. But hopefully going forward this structure will change and probably we will be strategic question. Suppose the China becomes, let’s say the 40% is the final rate and India becomes, let’s say 20% is the final rate.
And if there is a 20% rate differential between India and China, can we see some of the products in our basket becomes viable to the exported to these global brands. Is there a possibility of that sort exist in this sector or not? Just your sense on that, sir.
Sanjeev Sethia
Definitely there’s a possibility. So we have a live example for us. So for the Goa factory we have just started exporting a category of exhaust fans to the American market. Of course like you mentioned, just with the QT’s coming in there is a slide of a question mark and how it goes. But this thing has started happening and we have also got certain queries of companies willing to import from India as part of China plus one. We are hoping that this duty aberration for India is very temporary and it gets resolved soon. But definitely companies are looking at moving supply chains from China and we have an example of their category where we’ve already started exporting.
We’ve already I think about 11 containers of this particular product to our US customers. So it’s happening but probably not at the speed at which the companies want. Because you know there is a reality also that the general manufacturing, you know, ecosphere in China China is far more advanced than what it is availability, whether it’s electronics or other assemblies and thereof in China Availability because of the strong 20 plus years of, you know, manufacturing, the biosphere is much more conducive over there as compared to India. So it’s happening. So it’s developing here but it’s probably a little much lower than what these companies would like.
So my overall take is that yes, that shift is happening. Companies are coming over here but overall I think across India we have to speed up our speed of response so that it happens much faster.
Bajrang Bafna
Got it, got it. Thank you very much. I’ll be in the queue and for further questions and wish you all the best to achieve good success going forward. Sir, thank you very much.
operator
Thank you. Participants who wish to ask a question may please press star and one at this time. The next question is from the line of Dhruv Shah from Ambiga Finance. Please proceed.
Dhruv Shah
Thank you team for the opportunity. I just have one question. So how confident are you on still maintaining the 15% growth considering there has been unseasonal rain in Q1 and you’ll is it. So I just wanted to understand that part of the business.
Akash Sethia
Hi Dhruv. You know thank you for your question. Look like we highlighted reasonably confident that we should be in and around the 1350 crore rupee mark. Not all of this is going to be back ended. You’ll start seeing reasonably strong growth come in from quarter two itself. The structure of the business is such that there is a little bit of seasonality where Q2 and Q4 are higher revenue quarters followed by Q1 and then by Q3. So that’s the nature of the business. So we are reasonably confident that we should hit our guidance and you will see proof of that coming in in Q2 Q2 itself.
Dhruv Shah
Okay Akash. And Akash, just one more thing. We mentioned that by Q4 we should. See a monthly run rate in lighting more than what signify used to give us the revenue. Right?
Akash Sethia
Sure. Yeah, that’s correct.
Dhruv Shah
Okay, great, great. Thank you so much and all the best.
operator
Thank you. Before we take the next question we would like to remind participants that you may press star and one at this time. The next question is from the line of Mavani from Access Capital. Please proceed.
Bhavani Kumawat
Yes sir. Thank you so much for the opportunity. So first portion on the inventory side, just wanted to understand at what kind of inventory we are currently sitting at.
Akash Sethia
Particularly in France. As of June we are operating at approximately 4042 days of inventory. While this is higher than what we would like but the fact of the matter is that Q2 is a big kind of quarter for us. So keeping in mind, the upcoming offtake that we have planned, baseless discussion with our customers. We are carrying slightly higher amount of inventory in order to kind of, you know, meet the. Meet the demand.
Bhavani Kumawat
Sure. So what is the normal level of inventory which generally we keep.
Akash Sethia
So historically this used to be the normal. It was in the range of between 35 and 45 days. However, one of the targets that we have kind of set out for ourselves and we’ve established at the start of the year was to bring down overall working capital levels to about 45, 50 days, kind of on a net basis. So this will largely be driven by improvement in inventory as well as some improvement on the payable side. So it is in that context that I mentioned that inventory is higher than what we would like to. It is not out of the ordinary from a historical perspective, just that not as reduced as we would like relevant in respect to our guidance.
Bhavani Kumawat
Got it. And sir, what is the current capacity utilization across all the segments? If you can just help us.
Akash Sethia
There’s no answer to that because it varies by segment. But if I were to just give you a very, very rough number, it would probably be in the range of early 70s kind of, kind of number. I mean 70, 70 to 75% on. An average
Bhavani Kumawat
across the categories. Okay.
Akash Sethia
Yeah. Obviously some are better, some are, some are lesser.
Bhavani Kumawat
Thank you so much for this. And last one question is particularly just to understand. So sir, how the current demand is shaping up because we are also hearing about that the festive season should do well. So are we witnessing some kind of uptrend over now or there is some ugly signs from your customer that with regards to orders, particularly for the season.
Akash Sethia
No, no, for. I mean, you know, if you’re talking about festive demand, which is, you know, in the current quarter where we are sitting in the run up to Diwali, which is a large part of Q2 and you know, one month that falls in Q3. So far, so good. We are happy to share that. You know, inquiries are good, demand is. Good, orders are good. More importantly. So we, like we said we should be, you know, doing. Doing quite well, you know, in Q2.
Bhavani Kumawat
Understood, understood. So sir, I’ll come back in the queue. Thank you so much.
operator
Thank you. Participants who wish to ask a question, please press star and one. Now the next question is from the line of. From Sunidi Securities. Please proceed.
Kunal Mehta
Hi sir, Very good afternoon. My first question would be. Sir, in this quarter we saw a gross margin improvement about 1.6% YoY. But over last quarter, if you see the employee Benefit expense has gone up from 12.9 to 14.5. Can you just explain this expenditure analysis a little better? Why the gross margin has improved and but why the EFTO benefits have again gone up.
Akash Sethia
Oh, so okay, so I’ll just take it step by step. So gross margins have come up like we have said, two parts. So one is you know, on the sales mix where you know, if you have certain category of products that have a relatively higher gross margin, the share of those products goes up, which in our case is the components business, then obviously overall gross margin tends to move up. Second is like we mentioned, we put in place an operational excellence team that is working on, you know, improving quality, reducing wastage rejection, all of that as well as efficiencies in procurement.
So these are the reasons why gross margin has improved on a YOY and a QOQ basis. Regarding the slight decline in employee metrics, there are two reasons. One is obviously there is an element of increments that have come in. So last quarter was Last fiscal, from 1 April the revenue increments at have come in which is normal for I guess every business. So one is the impact of that. And two, like we pointed out, there is a non recurring element of gratuity to the extent of about one crore rupees that is sitting in this quarter that was not there in the last quarter.
So if I adjust for these then we are good, you’ll see. You know the benefit that we kind of spoke about very clearly visible in upcoming, upcoming quarters. We totally stand by the guidance that we give and those numbers will become kind of clear in the upcoming quarters.
Kunal Mehta
Okay sir, I will come in the queue again.
operator
Thank you. The next question is from the line of Sahil Doshi from Thinkwise.
Sahil Doshi
Good afternoon and congratulations on a great set of operating metrics in this quarter. Firstly, just wanted to clarify on the lighting comment you said at the exit rate we should be at a higher rate this thing. So could you just quantify is it from the March end or how are we looking at?
Sanjeev Sethia
What I meant was in terms of revenue. So if I can quantify it, our average revenues from signify used to be at around 19 to 20 crore kind of number a year for last two. Three years in fact it’s been declining. What I mean is by the end of quarter four upper monthly revenue will be significantly higher than 19 customers. Monthly rate. Drop in the average rate of procurement signify is not becoming absolute zero. They will still be our customers. But our addition of four to six customers by that quarter should give us at least 20 to 30% increase of the nominal buying I used to do from us.
Sahil Doshi
And just to clarify this further in terms of do we have any more clarity from Signify, as in how do they plan the entire transition and do we envisage further losses in the year forward?
Sanjeev Sethia
So we do have clarity. There are basically two types of the business at Signify is divided into two segments. One is what they call the consumer segment and the other is professional segment. Professional segment business as of, you know, as per the information given by them will not be moved to the jv. So that will continue with manufacturers like us and few more like us. So that business stays with us and a portion of the consumer business will move. I believe a major chunk of what had to move has moved. They will still also buy consumer products from us.
So I expect that probably the majority of the movement which has to happen has happened. Maybe it could be a little more. But at the same time, we are confident that the addition of these new customers will more than make up for the loss of business on Signify and then add to our overall revenues so that in the coming fiscal, I think our lighting business is overall should see a significant growth.
Sahil Doshi
Okay, so when you FY26, we should close as a positive growth versus last year is what you would indicate. Basically.
Akash Sethia
FY26 could be touch and go, but FY27 most definitely is going to be a very strong growth over 26. I think look, the way to look at it is, you know, orders have already started to come in, but you will appreciate that when there is a supplier shift, there are, you know, all of the formalities such as BIS and all of that to be done again. Right. Because BIS is a product and concept, not a customer concept. So that has to be redone, which takes some amount of time. When once that is done, you know, the whole shift in supply chain is gradual.
Right. So like I’ve mentioned, we already have three customers who come in, one of whom is a top five in the Indian lighting space. We are very confident that the numbers will come in based on detailed discussions with the new customers. Now whether FY26 overall, you know, will grow or not. Very honestly, as of now, it’s a little bit tough to say, but FY27 definitely will be a very, very strong growth over 26 in terms of the lighting lighting business.
Sahil Doshi
Perfect. Appreciate that. And just I just want to check that. I’m hoping that this will come at a much higher or a better profitability metric as a whole.
Akash Sethia
Look I won’t say much higher, in some cases marginally better, in some cases somewhat similar. So I don’t want to guide you to expect much higher profitability. Yes. What one could expect is that while gross margin should be similar with maybe a marginal upward bias, EBITDA should start to get better because once your overall revenues tend to go up, the concept of operating leverage kicks in.
Sanjeev Sethia
I just add to that there will be another advantage. So some of these customers who we have added or are in the process of, of adding will be lighting first but they are also selling similar appliances of what we make, you know, and so maybe we begin with lighting but once our engagement with them increases, I’m hopeful that we’ll be able to add some other categories with them we’ll be able to cross sell. So I think we’ll see the benefits of, you know, this in our businesses as well.
Sahil Doshi
Understood. And just, just other segments. I just wanted to check. So we’ve seen strong growth in medical diagnostic cartridges for the last two, three quarters. If you can just talk about if there is any traction we are seeing if how this business could evolve over the next two to three years or what is the potential there. And second is on personal care. I think for the last eight quarters we’ve been in the range of around 2530 and you know, the growth seems to have stagnated there. So what’s the outlook here on for both?
Akash Sethia
Sure, I’ll just take it step by step. So on the medical cartridge, please look it’s a fantastic business to be a part of. So firstly, you know we are the only third party manufacturers aside of the principal company that does this. Right. So aside of them doing it themselves only we do it. And this is primarily because of geographical proximity. You know, we are situated in the neighboring region of their factory. Just in terms of how the business works. This is primarily from our principal’s perspective a tender based business. Both the Indian as well as Global governments release tender which these guys participate in based on when they win and if they win, orders kind of get passed on to us.
So you will notice that this is a lumpy business. It’s difficult to predict with a high degree of accuracy in terms of how this will pan out. But we do have visibility for the next six odd months that numbers should broadly continue in terms of the run rate currently are at. Beyond that I don’t have visibility. So I don’t want to give guidance with this specifically. I’ll just pause here if there are any queries around medical. Let’s Just address that first and then move on to the other question.
Sahil Doshi
Sure. That helped Any new wins or you know, can we add capabilities in this business something medical, something.
Akash Sethia
So look, as of now this business is single product, single customer kind of kind of segment. Yeah, we are on the lookout but as of now no real news to share. As and when there is we’ll be of course intimating all our shareholders of the same. Sorry, what was your numbers have been? I won’t say flattish but yeah, not kind of the strong growth that we had experienced maybe you know earlier than six quarters. So we’ve been high single digit kind of kind of number. We are in touch with our customers. What we have understood is that over the course of the next three quarter numbers should improve.
While they will improve specifically for our largest customer here, I think numbers will be in the early double digit kind of or low double digit kind of growth rate. Probably that is something that you should model in not modeling a very very exclusive growth rate for this over the course of the next three odd quarters at least.
Sahil Doshi
Sure, that helps. I’ll just come back in the queue. Thank you so much.
operator
Thank you. The next question is from the line of Kunal Mehta from Sunidi Securities. Please proceed.
Kunal Mehta
Hi, I just wanted to ask one last question which is the working capital days guidance at the end in the last quarter was given 40 to 45 days and as of Q1 now I think it’s a revised little upwards from 45 to 50 days. So maybe if you can just highlight like what led to the revision of this. Is it because of inventory or because of payables?
Akash Sethia
Let me actually just request our CEO you know who’s driving this part to just come in and address this query.
Praveen Tandon
Hi Pranam, good evening.
Kunal Mehta
Yeah hi.
Praveen Tandon
Thank you. Major part as explained by Akash also the quarter has been a little slow on sales as per the season is concerned the rainy seasons and we were not able to get the same numbers. But what projected the growth happened one person. Similarly to secure the quarter two also there were we were advancement of stocks so that we can meet the customer expectation. Third there were a lot of new customers are getting in as we have shared. So a lot of inventories are being ordered basis their requirements. So you’ll see that improvement in the quarter two and overall we’ll be meeting that to that level of 45 to 50 days.
That’s the guidance.
Kunal Mehta
Okay. And one more question. Diwadi construction has started but on the parallel side if you all can provide any update on how have how are the improvements in the approval of the design and all from the customers? So you know, will it, will it have a lag after the facility starts that you always can work on the approvals of the designs and then start production or that all will be done before the factory is already ready?
Akash Sethia
No, no. So I think. So. We just, we mentioned in the first part of the call that specifically two products, so chimneys. We mentioned that, you know, we are in a reasonably advanced stage of product approval with our customer. So there, you know, our estimate is that by the time the factory is ready, you know, we should be ready pretty much immediately for go live in terms of production for some of the other products such as coolers and air fryers, we are probably a little bit slower in terms of the approval and the design stage. But we are in touch with customers on a constant basis for all of that.
So overall the idea is that once the facility is set up, we hit the ground running. We don’t have to then wait for much, much longer to secure, secure improvements.
Sanjeev Sethia
I’ll just add on to this. So our strategy as far as Diwali is concerned and like Ash mentioned will be a combination of certain new products and some product categories will be shifted from our existing Gaziabad factory. So chimneys. We are like Akash mentioned, we are in discussions and we would like to start the production of chimneys in our existing facility. And as the Biwadi factory comes in, it will be a shifting of chimneys, OFR and otg. These categories will be shifted out of our existing factory in Gaziabad to scale up and you know, and hit the ground running in Biwali.
There is no lag that the facility is ready and there is no manufacturing happening and coolers will be started from Biwali factory. But what we are doing right now is based on the design and the prototypes and all which we have under development right now. We will have customer approvals in place so that as soon as the product is ready it can start being. Start being manufactured. So our strategy is based that you know, the Biwadi factory, as soon as it is ready we should start. We should be in a position to start commercial production from there.
I hope it. Yeah.
Kunal Mehta
So yeah. So the 140 crore guidance that you all have given for FY27 includes in me, OFR and OTG in the first phase of, you know, any initiating production. And then FY28 will see coolers and air fryers coming in as well.
Sanjeev Sethia
We expect coolers also start next fiscal. So it includes all four and our facility which we free up, which we free up in our Ghaziabad facility that we are going to use to expand our fan and motor business. Like I mentioned, we are very seriously looking at the washing machine, motor and AC Idu ODU motors and to increase our ceiling fan and TP2W business. So the plan going forward is to increase the fan business in Gaziabad. Fan and motor business in Gaziabad. Free up capacities there and shift our OTG and medium scale appliances in Diwali so that there is to scale up.
These businesses over there as well.
Kunal Mehta
Okay. Okay. Thank you.
operator
Thank you. Before we take the next question, we would like to remind participants that. You may press Star and one at this time. The next question is from the line of Yashavardhan Banka from Tiger Asset. Please proceed.
Yashovardhan Banka
Hello sir. So what are the utilization levels for a new facility that we’re Targeting in say for 26 and FY27 as well?
Akash Sethia
Sorry, your voice was a little bit muffled. Can you just repeat your question please?
Yashovardhan Banka
Sure. Can you hear me now?
Akash Sethia
Yeah, yeah.
Yashovardhan Banka
What are the utilization levels that we. Are targeting for FY26 and FY27 for a new facility?
Akash Sethia
So FY26, the new facility will not be, you know, up and coming. The new facility only gets ready around April 26th. So the new facility for us, like we mentioned, the overall revenue potential of the new facility is Approximately, you know, 550 odd crores. We mentioned that we should be in the 140, 150 crore range. So looking at that, we should be around the 25 odd percent utilization mark for the first year which then goes up to, you know, 50 and 60 over the course of the next couple of years. Right. So that’s regarding the. Regarding our existing facilities, just to give you a ballpark number. We are probably close to 70 odd percent utilized on a blended basis across our. Across our three. Three factory. Existing three factories. Understood?
Yashovardhan Banka
Understood. Also was a bit curious on the medical cartridges part. And who are our competitors? You know, who are, you know, manufacturing the same domestically and globally?
Akash Sethia
No, so this is. Look the way the business is, the principals own, this is a high IP product. The principals own the design. We manufacture it on an OEM kind of. Kind of basis. So there is no real competition. This product itself is either manufactured in house by the principal or outsourced to us. So in a sense that only two factories produce this particular product.
Yashovardhan Banka
Okay, so what is the ballpark disabled market? We are looking out for this particular product.
Akash Sethia
It’s very difficult for Me to give you an exact number because this is like I mentioned, this is a tender based business. So the way our principal wins business primary supplies of this product is to the Indian government, global governments, World Health Organization and so on and so forth. And this is tender based. Right. So these organizations periodically release tenders which then, you know, are bid out once, you know, our principals win a share of the business in the tender is when, you know, orders get released.
Yashovardhan Banka
Understood, Understood. And are we expecting to benefit from. Any of the government policies, say PLI. Or BFPIs for any specific projects?
Akash Sethia
Sorry again, sorry, what was your question? Can you just repeat?
Yashovardhan Banka
So are we expecting to benefit from. Any of the government policies, say PLI. Or BIS for any specific projects?
Akash Sethia
Bis. So of course we are, I mean expecting a big part of our growth over the next two years to be premised on the, on the imposition of BIS and QCO standards across, you know, the various products that we deal in. PLI specifically right now is only in, you know, lighting. If and when there is another PLI that comes in, in the product segments that we are a part of, we happy to evaluate at that point in time.
Yashovardhan Banka
Okay. Okay. And just one last question. Are we sort of facing any risk. You know, moving on, in respect of any of our clients going for any further vertical integration, any of our market lines.
Akash Sethia
Going for. Sorry,
Yashovardhan Banka
vertical integration?
Akash Sethia
I mean, not to the best of our knowledge. No, not really.
Yashovardhan Banka
Okay, okay, understood. Yeah, thank you.
operator
Thank you. The next question is from the line of, from Portal Capital. Please proceed.
Dhwanil Desai
Hi, good afternoon everyone. So this is my first call, so please pardon if this question has been covered and you know, if so, please guide me where I should look for. But the question is more on the business model side of it. So let’s say you wanted to understand what is typically the model in terms of the cost structure and margin. So let’s say if you do the contract manufacturing for a client, is it on an open book basis with a pass through of all the cost and if so as and when you get more efficient, do we have to pass on the benefit to that or that adds up to our margin? How does that work?
Akash Sethia
So yeah, look, costing is more or less transparent. So there is a defined bill of material, there is a defined value addition which in our cases in percentage terms and that leads to the final price. So any price movement that happens, you know, on a periodic basis is passed on. So typically it’s passed on either on a monthly or a quarterly basis to our, to our customers with a lag. So with a Lag of one month or lag of any. Sorry, so this is regarding. What was your second part of the question?
Dhwanil Desai
So any efficiency gains that you, you know, achieve as a part of, you know, your learning and kind of, you know, getting the processes better aligned, is it also, you know, eventually customer will seek more, you know, gain from that, you know, as a path to give you more business.
Akash Sethia
Look, the way the business works is that whether you like it or not, the customer forces you to, you know, be efficient. Because the job of every purch is a company is to come to you every year and ask for a 2%, 3%, 4% price reduction. So, you know, I mean, that’s the nature of the business. They kind of keep you on your toes. And because of that whole, you know, conversation, one is, one is always thinking of ways to get, get more.
Dhwanil Desai
So the reason I’m asking this question is that. So we are guiding for 6, 6.5% margin this year from new 7 and 7 and a half percent kind of a margin we are targeting. So I’m saying, is this the feeling that we have in our business in terms of margin profile, let’s say over a medium term, 3, 4, 5 years, or is there a room for margins to go up from that number?
Akash Sethia
Okay, so philosophically speaking, yes, one could probably aim for a slightly higher margin. But in our experience, you know, in our limited experience, whatever we’ve learned is to guide for something that is achievable. So while we may have higher aspirations in terms of, you know, we want to guide, you know, the investor community and the analyst community for six and a half this year and seven, seven and a half next year, internally, of course, we have a slightly higher aspiration. But I think right now, given that we are coming out of a lull of two years where our margins compressed from 8 all the way down to 4, it’s a little bit premature to talk of aspiration.
Let us first deliver on the 6 and 7 or 7.5 that we’ve spoken about for the next few years. And once we get to that is when we can talk about how higher. High aspirations
Dhwanil Desai
makes perfect sense. And second question is, as you go into medium appliances, you know, how do you generally look at, you know, moving from a smaller realization product, lower realization product, to higher realization product, Is it the value addition part per unit will go up significantly and hence the margins are higher or because the realization are higher, the percentage of that is higher, hence the margins are higher?
Akash Sethia
That’s the latter. So because these are generally higher realization products, Typically, what happens is that, in fact, I would say that overall gross margins will tend to be at the lower end of the spectrum where we currently are. It’s not going to be at the 25, 27% market. It’ll probably be around the 2021, 22% kind of thing, broadly speaking. But because, you know, these are higher realization products, therefore all the other overheads in terms of labor and other overheads on a percentage basis, they are very small. So therefore you have a slightly higher ebitda. So what we’ve mentioned for Bijwadi is that, you know, once the plant is stabilized, we will definitely be achieving north of 7%, seven and a half EBITDA margins.
Dhwanil Desai
Very clear. Thank you and wish you all the best.
Sanjeev Sethia
Sure. And just word for the moderator. I think due to paucity of time, maybe we can just take one or two, you know, more questions. Thank you.
operator
Thank you. Due to time constraints. That was the last question. I now hand the conference over to the management for the closing comments. Over to you, sir.
Kamal Sethia
I’m Kamal Sethia, managing director. Thank you all for your time and being part of our this call earning call and wish you all the best. Have a great day. Thank you so much.
operator
Thank you. On behalf of Axis Capital. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.