IFB Industries Limited (NSE: IFBIND) Q2 FY23 Earnings Concall dated Nov. 07, 2022
Corporate Participants:
Anand Reddy — Chief Executive Officer of Motor Division
Prabir Chatterjee — Director and Chief Financial Officer
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Analysts:
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Manoj Gori — Equirus Securities — Analyst
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
Abhinav Jain — SG India — Analyst
Ankit Shah — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q2 FY ’23 Earnings Conference Call for IFB Industries Limited hosted by Nirmal Bang Equities Private Limited. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prasheel Gandhi from Nirmal Bang Equities Private Limited. Thank you and over to you sir.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Thank you, Lisa and good afternoon everyone. Nirmal Bang Equities Private Limited welcomes you all to 2Q FY ’23 earnings conference call for IFB Industries. From the management team, we have Mr. Prabir Chatterjee, Director and CFO; Mr. Rajshankar Ray, MD and CEO Home Appliances Division; and Mr. Arup Das, Head of Marketing, Engineering Division; and Mr. Anand Reddy, CEO of Motor Division. I now hand over the call to management for opening remarks, post which we can take Q&A from the participants. Thank you and over to you, sir.
Prabir Chatterjee — Director and Chief Financial Officer
Thank you. Good afternoon everyone. I welcome you for IFB Industries investors call for the second quarter FY ’23. Joining me today are Mr. Rajshankar Ray, MD and CEO of Home Appliances Division; Mr. Arup Das, Head of Marketing, Engineering Division; and Mr. Anand Reddy, CEO of Motor Division. Growth during this quarter is 13% and YTD growth for the [Indecipherable] was sequentially higher compared to last year. Company has reported a total income of INR1,101.92 crores for the quarter with a growth of 13% over the same quarter last year. During the second quarter, EBITDA was INR74 crore, which is in line with last year.
Lower margin percentage is actually due to lower-than-expected revenue with Appliances Division along with higher material costs and operating expenses. Effect of commodity price has started coming down and effect of which is expected to be realized in the third quarter. YTD revenue during first half was INR2,151 crore with a growth of about 40%. EBITDA margin during the period was significantly higher at INR112 crore compared to INR44 crore last year for the same period. With this, I will request you to start the question-and-answer session please.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Manoj Gori from Equiris Securities. Please go ahead.
Manoj Gori — Equirus Securities — Analyst
Yeah, thanks for the opportunity. Sir, first on the demand front. So what we understand is that the festive season also was not so encouraging. So, in this case, with RM prices coming down, how do you see the pricing environment across industry and by you as well. Can you throw some light over there?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yeah, so Rajshankar here, Manoj. The reduction in the RM pricing as far as we are concerned will help us to improve the margins. We are not thinking of any pass-through pricing on any other products as of now. As far as the competition is concerned, my understanding is that for more than a year and a half now, companies like Samsung, LG have taken very aggressive price positions to gain shares, which is quite a industry-wide point being discussed by everyone per se. So, I don’t see them lowering prices beyond what they have already done. So per se, I think the reduction in commodity prices as far as we are concerned is margin accretive. I don’t see any changes in market price position per se. Does that answer your question?
Manoj Gori — Equirus Securities — Analyst
Yes, so it is just first week of November. So if you look at the September average prices, so can you just quantify like what should be the positive impact on the overall appliance business for us and how should we look at the gross margins and EBITDA margins for the remainder year FY ’23?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
If you — there are two exercises which are running in parallel, which as you had shared previously, our target is to complete everything within Q4. One is the material cost reduction initiatives, which are through either value engineering or through resourcing. And the second is the impact of the reductions in the commodity prices. The combined impact of both as far as gross margins for us are concerned is between 3% to 4% at gross margin level.
Manoj Gori — Equirus Securities — Analyst
So probably what we understand is like the 3% to 4% would be moving to EBITDA level and probably we might see somewhere around high-single digit kind of EBITDA margins during Q3 and Q4 depending on the current RM prices and the visibility that you have.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Correct.
Manoj Gori — Equirus Securities — Analyst
Right, sir. Sir, secondly if you look at from the room AC point of view, so obviously where do you see yourself as a branded — like what should be the branded volumes this year where we would be exiting and probably also on the outsourcing part and what we aspire to do next year?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So if you see our overall indication for the full-year was about 220,000 to 240,000 for the brand volumes and about 150,000-odd for the OEM volumes. So we will hit the brand volumes. As far as the OEM volumes are concerned, the exact lifting [Phonetic] plans of the OEMs and their orders et cetera are being discussed for the period from let’s say November up to March and then of course up to June. So, as of now, it looks that the volume guidance is maintained. However, we are still to receive from POs. So that is something that over the next let’s say 30 to 45 days will get closed.
Manoj Gori — Equirus Securities — Analyst
Right sir. Sir, lastly on the OEM manufacturing. So if I’m not wrong, probably we have roughly around three, four clients over there. So any development where we are trying to acquire new clients or building on clients profile. Can you throw some light like on any ongoing discussions with newer brands?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes, there are ongoing discussions with about seven people including the three-odd people who we supply to already and as I said between now and the next 40, 45 days, we expect that with a set of them, the season volumes will be totally set.
Manoj Gori — Equirus Securities — Analyst
Right, sir. Sir, that’s all from my end. Thanks a lot and wish you all the best, sir.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Thank you.
Operator
[Operator Instructions] The next question is from the line of Dhananjai Bagrodia from ASK Investment Managers. Please go ahead.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Are you noticing any demand difference between rural versus urban and entry-level versus premium?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
If you don’t segment in terms of urban and rural, but if you segment by Tier 1, Tier 2, Tier 3, then the growth which has been sort of consistent over the last two, 2.5 years, the Tier 2, Tier 3 is growing much more rapidly compared to Tier 1. This has been a consistent trend now and it’s almost the third year that this is happening. As far as the entry-level versus the premium for the higher end of the segments are concerned, that trend is very clear that the higher-end is growing far more rapidly than the entry-level price points.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
So why is that? Any thoughts on that?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
That’s an interesting question and see I would put it as an outcome from two, three enablers. I cannot say with firmness exactly which one it is, but it is probably a basket like this. So one is that the tendency to buy something bigger whether in washers or for that matter ACs for example has always been there. So parts of the north have always been favoring higher capacities, for example, eight kilogram capacities in washing machines. That trend was built in the pandemic period and the lockdowns and everybody at home getting involved for the work at home I think accelerated that trend because everybody in the family was involved in the process of washing, everyone suddenly realized that there were two or three multiple washes happening at home, who needs a two in one [Phonetic], let’s buy a bigger, newer machine. Lot of the equipment went through exchange during those lockdown periods. So I think there was a trend. That trend got accelerated over the last two years driven by lockdowns and more people at home participating in chores at home. This is one reason.
The second is that the availability of finance has definitely helped because if an entry-level product is INR25,000 and a higher-end is INR40,000, then in cash, that difference is INR15,000 but in EMI terms it is maybe INR1,500. So as finance options have expanded, the ability to buy something higher priced has also become much easier. The third point is that the availability has also improved. So if I look at IFB for example and I look at our higher-end products and over the last two, 2.5 years which we’ve also shared in theses calls is vendor that we’ve driven out improving range displays across the market. So if I just look at our eight kilogram, nine kilogram washing machine for example, the number of displays available today is much bigger and better than let’s say two years back. So I think our visibility and availability has improved, that has also driven access to the higher-end. So I would put it at three reasons as a combination probably about the three.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
So just to understand, you said LG and Samsung for example, they are really competing on price point but then if availability of finance has also significantly helped and if the products are let’s say a little better than why are moving more towards LG and Samsung and lower price points, because of EMI basis then that difference doesn’t come to much then.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
No, I think even in LG, Samsung, I would expect that the trend is that the higher-end selling is more than that. Are you saying that their lower-end is selling more?
Dhananjai Bagrodia — ASK Investment Managers — Analyst
No, I’m wondering is it industry-wide in terms of even at a higher-end, everybody — they’re cutting the price even on a higher-end? Is that right?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
No, industry is not cutting prices. What I said is that there is a specific reality that Samsung for example has taken very aggressive price positions across all categories. Our understanding is that they are doing this to basically buy share. It is not something that is happening at any particular entry level price point or higher-end price point, it’s more a common thing across. So that’s a separate thing. That is not related to this point about the higher-end selling more. The higher-end, that is selling more, the three reasons that I told you actually have nothing to do with price per se because of three reasons that I gave you are not particularly priced to them, they are driven by other factors, which is something that IFB has experienced. See, we have not changed pricing. Pricing has only increased if you look at the period from Jan ’21 till now when the commodity prices actually increased, but we are still seeing a very rapid growth in the high-end.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
And sir industry-wise would the demand be where company is more present in front-loading washing machines, what’s the industry demand. What would your analysis be in terms of what would be the segmentation industry-wise on front loading washing machine versus top load in volume or size.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Typically it is sort of factor of 1:3, which could vary from 1:2 to 1:4 depending upon which geography in India you were in.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Okay, sure. And in terms of size?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
I was talking about size only, volume, volumes, 1:3. Did you mean by value? So by value it will probably be 1:2 or 1:1.7 because of course the front-loader is so much higher than the to loaders.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Okay, okay fine sir. Okay, sir. Lastly, I’ll come back to this if I have an option. What levers do we have to improve our return ratios?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Which ratios please?
Dhananjai Bagrodia — ASK Investment Managers — Analyst
ROEs and ROCs.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So we have two levers that we need to fully deliver on and the first is the volume. So in that the key agenda that we have spoken about is that there is a particular universe that we have and over the last two years or so, our constant agenda has been that we do business with a higher percentage of that universe every month as compared to what we are doing today. Now, over the last few years that percentage has improved, but we are still not happy with the pace of that improvement. We think that it will increase much more. So our extraction from our available universe needs to be much higher. This is our first agenda.
The second agenda is that the results in the previous fiscal year and also in the first quarter of this year were not good primarily because of the material cost related fees that we had which we couldn’t pass-through to the market and with the material cost reduction program and the softening of the commodity by the Q4 of this year on the material cost side, we need to fix the margin structure. So for our return on investment to improve, these are the two big agendas for us. Does that answer your question?
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Sure [Indecipherable] but this has helped the broad thesis. And maybe just to slip in one more. So some larger players like Whirlpool [Phonetic] also trying to make a big dent in the segments, how do we see that in terms of as an industry-wide, do we see that then means of margins in the industry will still always be suppressed because we have two already large players reducing prices — keeping prices lower. Now we have another player who’s trying to also gain market share. How that works for the industry wise.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So my understanding is Whirlpool [Phonetic] team has to make headway in terms of representation across categories and markets et cetera. So as of now there isn’t any impact. As far as IFB is concerned, I don’t see any impact from them. As far as industry is concerned, we don’t have enough data right now to be able to really answer this possibly.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Okay, thank you. I’ll come back with some more questions. Thank you.
Operator
Thank you. The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund. Please go ahead.
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
Yeah, good afternoon and thank you for the opportunity. Sir, if you look other peers in the sector who has reported, IFB is possibly an outlier in terms of sequential improvement in gross margins. So is it that we were sort of sitting on low-cost inventory and our high-cost inventory was already exhausted or what should be inferred here?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
See, I will answer it this way. Our inventories have never really been very high because the key parameter of the market credit for IFB has always been under. I mean the debtor positions have always been quite tightly controlled. So inventories purchase has not been high. So we do have a higher inventory in the AP segment than what we would like and for the next two months that is something that we need to address, but I think the improvements that we’ve made has come because this agenda of the delivering on the volumes and looking at material cost and doing the best possible exercise on that, I think we are making some progress on that. It’s still not complete and there is an agenda that we have to deliver by Q4 but I think our improvement is coming because on these two head, so there is progress we are making. So if you look at the revenue growth in the H1, that percentage is better than before because we are covering more of the market universe that we have. We’ve put in place a lot of measures for our people who visit the market in a much more disciplined manner than before. We are building engagement programs with trade partners and we just have to do more of that. We still think that we are under leveraged in terms of what is possible for us on the market side, revenue side and we just have to keep doing what we are doing. Does that answer your question or is there some other clarity that you’d like?
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
No, no, this is good enough sir. And sir, historically if you look at our five to 10-year history we’ve delivered very well on the revenue growth front. However, our EBITDA margins have been extremely volatile and also much lower as compared to industry standards. Now that we are trying to complete the product portfolio thanks to good acceptance on the air conditioner side as well, is it fair to say that we will sort of come back in terms of consistency on the margins as well and we can be closer to 8% to 9% EBITDA margins, maybe in the next two years?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yeah so I don’t want to give a figure, but that is something definitely which we have to deliver and Mr. Chatterjee and I have come quite often to this forum and this idea that our margins are volatile and simply not good enough is a question that we faced multiple times. So, yes, definitely this broadening of the product basket because the overheads are getting distributed over more products, more volumes and we still have a job to do on the material cost and the market extraction but if we finish these two jobs properly by Q4 which is our internal target I think this question of the stable margin is something actually that we can settle by Q4.
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
And lastly sir, on the AC side, is it fair to assume a 50:50 mix between your OEM sales and your branded sales?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes it will be about 60:40 or 50:50, yes. More like 60:40.
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
And the combined margins would be similar to the company-level or would be lower as compared to the company level margins.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
The AC margins currently are lower than the average for the company —
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
Next year, maybe once we cross INR500 crores of top line?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
If I compare it to washer margins, then even in the next year the AC margins will be lesser, but one advantage that the ACs bring to the table is that they have actually, they are soaking up the overhead and the volumes on the ACs are very high once we gain price. So in terms of helping the overhead allocation across the company and therefore helping better margin profiles for the company, they have a very important role to play even though on an individual basis, the margins on a segment may still be lower than the washers. Mr. Chatterjee, would you like to add to this please?
Prabir Chatterjee — Director and Chief Financial Officer
No, I think you are right. Should be right.
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
And sir, what would be the biggest turnover coming in from one — from your largest OEM client? What would be a turnover from your largest OEM client in AC?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
For this year?
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
Yeah for this year, maybe first —
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Can we answer this question offline because the numbers are still not fully closed, so —
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
No problems, no problems. Okay, thank you and all the best. presence okay thank you and all the best.
Operator
[Operator Instructions] The next question is from the line of Manoj Gori from Equirus Securities. Please go ahead.
Manoj Gori — Equirus Securities — Analyst
Yes thanks for the opportunity. Sir one more question with regards to competition. So recently Whirlpool in their press release had indicated like they have been starting the commercial operations of the front load washing machines which again would be a re-entry into this category. How do you see because normally when you look at we are relatively lower-price versus LG and Samsung and probably in the front-load, it would be almost similar to your pricing. Do you see it as a major threat probably this time, not as a threat but at least a major competitor or a player that would evolve over the period.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So it is a player that definitely needs to be watched. There are already multiple players for the placement of front loads on the floor of the stores, So this will be another revision, but Whirlpool has had some placement of front loaders for some time now which was through imports. So the imports being substituted by the manufactured product and how that happens in placement I think over the next one year we have to keep a watch but we have to keep a watch definitely.
Manoj Gori — Equirus Securities — Analyst
Right, sir but on the other hand, so I just wanted to understand from a competition point of view because if you look at LG and Samsung have been aggressive on pricing to gain market share. So probably if you look at despite the significant pressure from VRM the overall the price hike is taken or lower than required. Now with the RM benefits, can there be a case where they actually grew aggressive to gain market share and probably whatever benefits that they would be gaining, they would be it to the end consumer.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
We have to watch for this. Like I said a while back, I personally don’t expect further erosion in pricing from them, but we have to wait and see. I think over the next quarter or so, we’ll know.
Manoj Gori — Equirus Securities — Analyst
Right, but there was nothing visible during the current quarter and we don’t expect anything in the current quarter. Obviously, the majority of the season has gone through.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes, there was nothing specific as far as this Diwali period was concerned beyond what they were already doing and I don’t expect it but like you pointed out. we have to keep a watch on this.
Manoj Gori — Equirus Securities — Analyst
Right sir. Sir just one last question. So obviously when you look at the company probably till FY ’19 we were one of the fastest-growing brand in the Indian home appliances. During 2021, we faced some challenges with regards to competition and also there was COVID impact. This year obviously when we look at FY ’23 numbers versus FY ’19 numbers probably the CAGR growth is much slower as compared to the historical levels. So going forward, should we expect like probably the 15%, 20% growth that we used to report at the company level, probably that should be now somewhere around 14%, 15% or we should be back on track for that 20% margin.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
I think our potential is the figure that you gave and the key thing is for us to execute this market extraction properly because the headroom for growth is definitely much higher than what we had delivered.
Manoj Gori — Equirus Securities — Analyst
Right sir. Sir, that was very helpful. Thanks a lot.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
[Operator Instructions] Your next question is from the line of Prasheel Gandhi from Nirmal Bang Equities Private Limited. Please go ahead. Hi, thank you for the opportunity. Sir, a couple of questions. First is on our front load washing machines. So we were planning to launch the inverter motor technology and Wi-Fi enabled but that timeline has been pushed to first quarter of FY ’24. Could you throw light what is the cause of the delay?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So we have already introduced some models which are in the market and some models which will ramp up from November this month and some of the models will come in Q1 of next year. So first there is no delay, it’s only that we spaced out the entry.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Okay and so the complete roll out, when can I expect the complete roll out to finish?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yeah, the full range replacement will be over by end of Q1 of the next year.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Okay, thank you sir, that was very helpful. A second question related to [Indecipherable]. I think we have pushed the timeline from September of ’22 of this year to January ’23. So could you throw a light on why is that delay in that segment?
Anand Reddy — Chief Executive Officer of Motor Division
This is Anand here from motor division. Basically we wanted to start manufacturing the BLDC motor in September. What happened in between was there were few other models that the market demanded for which the toolings and trials took some time. So that’s why it is getting delayed till Jan ’23.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
And so this is for both washing machine and air conditioners, right? Both will be rolled out from January ’23.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
No, first we will roll out the BLDC motor for washing machine in Jan ’23 and then the air conditioner motor will be rolled out somewhere in May and June ’23.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Thank you sir. That was my — a second question regarding this. So will we be also kind of selling direct BLDC motors through our competitors and other OEMs?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes, we will be doing that.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
So who would be the major OEM that would be trying to sell to?
Anand Reddy — Chief Executive Officer of Motor Division
We are looking at Voltas, Blue Star, Daikin, Panasonic, Samsung and other people.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
So what could be the likely mix for this like for our own consumption versus OEM sales.
Anand Reddy — Chief Executive Officer of Motor Division
We are targeting 50:50. 50% for captive consumption and 50% for outside customer.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Thank you sir. One more question regarding our e-comm sales. So could you highlight what were the e-comm sales as a percentage of product sales for the quarter.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
For the quarter.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Yes.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
For the quarter, it was 16.9%.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
And what was the same number last year?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Last year was slightly higher.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Okay so is it a trend that all e-com sales are coming down. So would you expect the same trend going ahead?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
See, we don’t look at it so much as a percentage to the total, but if you see, our potential for growth from the offline channels is very high. So if that growth comes in line with potential, then yes, e-commerce as a percentage will reduce but in value terms, e-commerce will remain a growth engine. Have I been able to answer this question?
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Yes sir, yes sir. That was very helpful. Question pertaining to price. So what is the overall price increase that we’ve taken across our portfolio for this quarter.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
This quarter we have not made any price increases.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
And sir our final question from my end, we are also planning to enter our 28 liter microwave segment. So could you highlight the market potential for that segment?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So. If you see this particular 28 liter capacity point has been monopolized by LG and Samsung till date and we have been absent. So in their convection range for example this 28 liter price point is almost 60%, 65% of their sales and we are going against that particular segment with this introduction.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
So what was the typical market size for this 28 liters?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So if you see in terms of IFB’s own volumes, this particular introduction has the potential to increase volumes by around 10% to 15%.
Prasheel Gandhi — Nirmal Bang Equities Private Limited — Analyst
Thank you sir. That was very helpful.
Operator
We’ll move to the next question. That is from the line of Dhananjai Bagrodia from ASK Investment Managers. Please go ahead. Dhananjai your line is in the talk mode. Please go ahead.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Can you hear me? Hello.
Operator
Yes.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Yes, can you hear me now? So sir, basically, we have limited data, but according to your estimate, what would be the industry size for, let’s say for washing machines and what growth rates in terms of volume and value could we see in the next two years?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So the total washing machine industry, which is semi-automatic plus front load plus top load all put together, the general estimate is that this is roughly, let’s say, INR50 lakhs, INR55 lakhs, going up to maybe INR60 lakhs. It has been growing in normal years by around 10%, 12%, 15% and the penetration, if you really look at the data, it is still very low. So there is no reason why this growth rate should not remain like this or even maybe accelerate actually.
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
Okay. And in terms of these three, what would be the mix between semi-automatic, top load and front load?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So the front loads would be maybe 1.75 million, 1.6 million [Phonetic] approximately. The rest could divide equally between semi-automatics and top loads.
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
Okay. Okay. 1.6 million, 1.75 million? Okay.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes, maybe about — yes, 1.5 million, 1.6 million.
Bhargav Buddhadev — Kotak Mutual Fund — Analyst
Okay. Understood. So then remaining out of that 45 million will be divided between this 20 million to 22.5 [Phonetic] million. Okay. And sir, going ahead, if you assume industry grows at 10% to 12% volume growth, but what in terms of value growth, would that be also assuming that, that would be nil or would there be some of growth in the value —
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
No, see, value growth will be more, for two reasons because the mix has changed and the higher end is selling more than it used to. So there is a value growth associated with that. And then, of course, there is a price led value growth. So on both counts, the value growth will be more than the volume growth.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Okay. So we can assume around 12% to 15% total, including volume and value-add mix change as an expectation for the industry.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes. I mean that has been the trend and I think the trend will remain.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Okay, sir. Sure. And sir, lastly, in terms now, we’ve also spoken about a new product in your report about washer dyer and Washer-Dryer-Refresher in one segment. Is that something which the innovative product which no one else has? And is that something which we could see opportunity there also?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So the washer dryer is a genuinely innovative product. This idea that you can wash, dry and also steam and refresh clothes, which means you don’t need to wash clothes, you can just refresh them and genuine cleaning, it’s not a cosmetic refresh. It’s an extremely innovative product and is doing well. We are driving placement increases across India and we also see good volumes in this.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Okay. But it’s relatively a bit too small. I have to speak about what potential it could be and how that could go for us.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So growth in a market like India is driven a lot by availability. Now I assume that we were able to place this in every single relevant counter across India, you would actually see very high volumes. That is a task that we have to do. Is there a market for this segment? Definitely, yes.
Dhananjai Bagrodia — ASK Investment Managers — Analyst
Okay, sure, thank you sir.
Operator
[Operator Instructions] The next question is from the line of Abhinav Jain from SG India. Please go ahead.
Abhinav Jain — SG India — Analyst
Sure, thank you so much. Three questions. First of all, on the Home Appliances division, you mentioned that there is a 3%, 4% material margin improvement that you are expecting, one is through internal initiatives on [Indecipherable] and working on the developed materials and second, there is softening of commodity prices as you have observed. However, my question was that both at an EBITDA level, this will result in a much higher margin improvement given AC volumes will kick in and the full year volume projections are much higher than last quarter. So the EBITDA margin could hit double-digits, not just high-single digits. That was question number one.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Okay. So the answer to that is potentially yes. On this agenda of completing the material cost growth and getting volumes, especially the AC volume right. That is a job that we have to complete, but the answer to your question is yes, a possible yes.
Abhinav Jain — SG India — Analyst
Okay. Is there a very different — I’m assuming you would know a ballpark estimate of cost of finished unit production for competition. So is there the cost structure at a unit level for a like-to-like product for front loaders? Is it very different across major players like the Samsung and LG?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So I would not call the difference major, but there are differences, yes, because the fact that we commit to a 10-year life span for the product. If you’re a LG or a Samsung customer and you want spare parts after three years, they will show you a depreciation policy. They don’t service products after three years, four years, but IFB services right up to 10 years and in many cases, beyond 10 years. So the inherent quality that we have is superior and therefore, the bill of materials reflects that. It could be something as simple as the quality of the rubber that we use or the electronic designs that we have for the voltage variations in India. So we have relatively higher bill of materials compared to, let’s say, specific competition like LG, Samsung. It is not structurally different, but the elements in it are higher because of the quality levels. Is that what you wanted to know, please?
Abhinav Jain — SG India — Analyst
And you mentioned that Samsung has been very aggressive. So how do they do it? Is it that they reduce the MOP, the market operating price, for the products or they give higher channel incentives and kind of drive towards the same MOP because it’s a race to the bottom in some terms as in if they become aggressive for a longer-term, then everybody including IFB will have to respond in. Nobody would like to lose market share in the shorter run. So I just wanted to understand, is it short-term more incentives to the channel that they give more volume discounts or they just reduce the MOP for the tie-ups, for some time keeping the channel margins on a percentage basis same?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
It is a combination of both and we have never responded to this, not before and specifically, for the last year, 1.5 years, when we have done more of this, we’ve not responded. So if you see our growth rates, they are in spite of this sort of move by them, but what they do is a combination of both the things that you described.
Abhinav Jain — SG India — Analyst
And what’s the typical channel margin from a dealer landing price to a MOP in the category that we operate in, both front loaders and ACs as well as others?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
This varies from place to place. But a typical channel partner margin could vary anywhere between 5% to 14%, 15% depending on the product category or the geography. There is a wide variation in this, but roughly, this will be the range.
Abhinav Jain — SG India — Analyst
And my second line of question was in the Motors Division and this is probably somewhat linked to the Appliance division as well. Are BLDC motors being used in the appliances, both front loaders and in ACs in the industry currently? And what percentage of the overall industry volumes would be BLDC motors? That’s number one.
And second, let’s say, in FY ’25, when you are operating at optimal capacity, what sort of external revenues is being targeted through BLDC motor division? Because the numbers at least in volume terms look very high, which is good for us as shareholders, but just wanted to understand what sort of addressable market or what sort of scale on a revenue basis are we hoping to achieve from BLDC sale to external customers?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Anand, you can answer this.
Anand Reddy — Chief Executive Officer of Motor Division
Yes. See, on the external customers, we are targeting 50% of our installed capacity. That is 1 million each. So 5 lakh motors of BLDC for washing machines, which translates to around INR50 crores of revenue and 5 lakh of air conditioner motor, which translates to roughly around INR40 crores of revenue. So INR90 crores revenue we are expecting from outside customers.
Abhinav Jain — SG India — Analyst
And has there been adoption of BLDC motors in these two categories already in the industry and who is supplying them?
Anand Reddy — Chief Executive Officer of Motor Division
See predominantly, it has been catered by import right now.
Abhinav Jain — SG India — Analyst
Okay. So there is a company called [Indecipherable] Motors and I’m sure there would be other players also developing BLDC motors. So is there — and so from an industry adoption perspective again my question was what percentage of overall volumes of ACs and washing machines would have BLDC motors and who are the upcoming industry players? My question was — I’m sure the volumes are so high that there will be multiple motor suppliers and even captive manufacturing that can take off on the BLDC side.
Anand Reddy — Chief Executive Officer of Motor Division
Yes, there are multiple motor manufacturers who are developing BLDC motors, but I don’t think anyone have productionized it on a large scale yet. So it is being catered by imports mainly as of now. Maybe in six to eigth months’ time, people will start manufacturing some of the BLDC motors in India.
Abhinav Jain — SG India — Analyst
And what percentage of overall industry volumes will have BLDC as its main motor technology for ACs and washing machine?
Anand Reddy — Chief Executive Officer of Motor Division
That I think Mr. Ray would be right person to answer that.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
So if you see washers and you take a two-year horizon, then in a category like front loaders, probably 80% to 90% will be BLDC. The top load and the semi-automatics will be new. In the case of top loaders, it will probably be anywhere between 30% to 35%. If you look at ACs, then the use of BLDC motors is at presently roughly about 10% to 15%.
Abhinav Jain — SG India — Analyst
And this will offer significant electricity savings for the consumers, that main USP of the client?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes. It will offer savings on the electricity front, the noise levels are lesser and the government energy regulations are also mandating moving to technology like this.
Abhinav Jain — SG India — Analyst
Sir, if I may ask how stable is that technology given we’ve heard the field failure rate, and obviously, it depends on the evolution in terms of your technology, quality of magnets, but in your testing, how has been the field failure rate? Obviously, it’s not in the field right now, but in the factory. How do you plan to improve that and is it equal to or less than the conventional motor that we are using, the conventional belt type or winding, whatever is the conventional motor might be that is being used currently?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
We already have models with BLDC in the market. And there are absolutely no problems with quality. So they are as good as the rest of the product. So there’s no issue.
Abhinav Jain — SG India — Analyst
Okay and on the automotive division side, are there possibilities of getting external sales on the BLDC motors or we are just focusing on the Home Appliances side?
Anand Reddy — Chief Executive Officer of Motor Division
See, BLDC motors, we are in discussion with various customers. It’s too early to discuss on that right now. Why? Because the market has not yet adapted BLDC technology for Automotive in a large scale, but in the next couple of years it will happen for HVAC motor as well as engine cooling motors.
Abhinav Jain — SG India — Analyst
Okay. So right now, the focus is to get INR90 crores to INR100 crores of external sales on a full year basis from the Home Appliances side itself?
Anand Reddy — Chief Executive Officer of Motor Division
Right, right.
Abhinav Jain — SG India — Analyst
Thank you so much.
Operator
The next question is from the line of Ankit Shah, an individual investor.
Ankit Shah — — Analyst
Yeah, my question has been asked. So, thanks.
Operator
[Operator Instructions] The next question is from the line of Abhinav Jain from SG India. Please go ahead.
Ankit Shah — — Analyst
Thank you so much. Sir coming back on the question I asked previously. I know, again, there are always variables, but second part is if there is no very adverse reaction from competition in terms of aggressive price cuts or unreasonable movement of commodity prices. Is it fair to assume that you would aspire for an early single-digit sort of an EBITDA margin with 50% to 53% — 50% to 55% of gross margin and maybe some more cost being thrown in given your manufacturing ACs in-house now?
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Yes, that is the intent.
Ankit Shah — — Analyst
Okay, sure. Thank you.
Operator
Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.
Rajshankar Ray — Managing Director and Chief Executive Officer – Home Appliances Division
Thank you all for joining the call.
Operator
[Operator Closing Remarks]