IFB Industries Limited (NSE: IFBIND) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
Soumitra Goswami — Chief Financial Officer
Bikramjit Nag — Chairman
Kartik Muchandi — Head, Finance & Accounts and HAD, Marketing
Collegal Srinivasan Govindaraj — Executive Director, Manufacturing, Home Appliance Business
Analysts:
Krishnan Sambamoorthy — Analyst
Manoj Gori — Analyst
Anand Mundra — Analyst
Nattasha Jain — Analyst
Resham Jain — Analyst
Nisarg Vakharia — Analyst
Shreyansh Jain — Analyst
Moksha Shah — Analyst
Vivek Kumar — Analyst
Abhishek Ghosh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to IFB Industries Q3 FY ’25 Earnings Conference Call, hosted by Nirmal Bang Institutional Equities.
This conference call may contain forward-looking statements about the company, which are based on belief, opinion and expectation of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
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 touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Krishnan Sambamoorthy from Nirmal Bang Institutional Equities. Thank you, and over to you, sir.
Krishnan Sambamoorthy — Analyst
Thank you, sir. On behalf of Nirmal Bang Institutional Equities, we welcome you all to the third-quarter FY ’25 results con-call of IFB Industries. The management is represented by Mr. Bikramjit Nag, Chairman; Mr. P.H. Narayanan, MD, Engineering Division; Mr. C.S. Govindaraj, ED, Manufacturing, HAD; Mr. Soumitra Goswami, CFO; Mr. Jayanta Chanda, CFO, Engineering; Mr. Kartik Muchandi, Head, Finance and Accounts and Marketing; and Mr. Ranjan Mohan, National Sales Head, Home Appliances.
Over to the management for opening comments, following which we will have the Q&A.
Soumitra Goswami — Chief Financial Officer
Good afternoon, everybody. I’m Soumitra Goswami, the Chief Financial Officer of IFB Industries Limited. I welcome you all for IFB Industries Limited investors call for third-quarter for FY ’24-’25. I have with me Mr. Bikramjit Nag, Chairman of IFB Industries Limited; Mr. P.H. Narayanan, Managing Director of our Engineering Division; Mr. Jay Chanda, CFO of our Engineering Division; Mr. C.S. Govindaraj, Executive Director, Manufacturing of our Appliance Division; Mr. Kartik Muchandi, Head of Finance of our Marketing Division of Appliance Division; Mr. Ranjan Mohan Mathur, who is Head of Sales of our Appliance Division.
Now I will inform you about the quarter three results. Revenue for the quarter was INR1,232 crore against last year’s INR1,140 crore with a growth of 8% and in value terms, the growth amount is INR91 crore over last year. PBJIT for that period was INR90 crores and its percentage to revenue for 3rd-quarter was INR7.28 crores as compared to last year’s INR70 crore, which was a percentage term is 6.17%. PVDIT amount came across a growth of 27% year-on-year and muted revenue growth in November impacted the margin a little bit for the quarter. Fixed expenditure for the quarter was well behind budget. PBT for the period was INR45 crore against last year of INR32 crores, which is a growth of 31%. Q3 PAT was INR34 crores as compared to last year’s INR24 crores, which is a growth of 42% over last year.
The figures of YTD December 2024 period are the following. Revenue for the YTD period is INR3,665 crores against last year’s INR3,277 crores, which is a growth of 12%. PBIT for the period was INR255 crores and its percentage to revenue was 6.96% as compared to last year’s INR186 crore, which was 5.67% on revenue. Amount came across a growth of INR69 crore over last year, which is a growth of 37%. Growth is attributable to higher revenue, which hits expenditures contained within budget. PBT for the YDT period was INR142 crores, which is 3.9% on revenue as compared to last year’s INR74 crores, which was 2.3% on revenue. Growth in PBT was 92%. Pat for the period was INR107 crores, which is 2.9% on revenue in comparison with last year’s INR55 crores, which is 1.7% on revenue. Growth in PAT is 94%.
With this, I will request to start the question-and-answer session.
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 R&1 on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen we’ll wait for a moment while the question queue assembles.
First question is from the line of Manoj Gori from Equirus Capital. Please go-ahead.
Manoj Gori
Yeah, thanks for the opportunity. This question is for Mr. Nag. My question is, if I — when we did our Channel checks during the October, November month and when we spoke with some of the large formats, national chain players, they had indicated like sales were relatively good for IFB. In fact, they had also talked about some of the third-party market-share data where it said like IFV washing machine sales growth was into low-double-digit.
And what we had assumed is like probably our primary growth should be higher than our secondary sales growth, given that we had pushed limited inventories or stock in the September quarter. But when I look at the presentation, probably that doesn’t fall in-place without channel checks. So just need some clarity over there like why there is such a mismatch versus our number and third-party data aggregators?
Bikramjit Nag
Our understanding is that — hi, sorry. Our understanding is October was good, September, October was good. But November, December things just they were like subdued. They are not able to understand why even from third-parties. The reason why 3rd party was muted to such an extent we are really not able to understand. Secondaries was okay but primary just cooled off. And…
Manoj Gori
If you look at, we did not push any stock in the September quarter because of the supply-chain issues. So our primary sales for the festive season would have been more into October month where the festive season was well — was…
Bikramjit Nag
The primary for November, December got hit and we are not able to understand why as yet. But if you speak to the same third-parties, I think the report comes out every two months. I think you will see…
Manoj Gori
October and November combined data, which shows low double-digit growth for IFB in washing machines, including your top loads and front loads. So I was just saying…
Bikramjit Nag
Our October was good. Our October was good. Our October was good, very good in fact, but September — but November was an issue.
Manoj Gori
Okay.
Bikramjit Nag
November and December both have been an issue. So we are not able to really understand why, but it is across industry is what I’m told that washer has been hit and AC has seems to pend growth. So, I’m not able to correlate this. Normally, they say during December period and all a lot of the dealers, they switched their working capital and all, but that — but that cannot be the reason. That cannot be the reason alone. But for some like reason, washer sale has been hit. And we are still analyzing the data, but we are not able to get a proper answer why, but it’s across — but it’s across it’s across regions.
Manoj Gori
Okay. So my second question would be on the margin side. So in the month of November, when we had our call scheduled for 2Q earnings, like we were very confident that October month where the growth was relatively better, we were expecting margins to be relatively stronger. Now it’s one year since we have been talking about margin improvement.
Bikramjit Nag
And this is what….
Manoj Gori
Visibility so-far. And now, we are talking about majority of the benefit to kick-in by 4th-quarter of FY ’26.
Bikramjit Nag
No, I’m telling you what has happened. October was very good. But November, December because the washer sales fell where the margins are high and AC, AC sales went up where the margins are lower. Therefore there was a mismatch. If the water sales were as per target, we would not have had a problem. The problem is what like surprised us was that AC that your water — water sales fell, this is not something that we had expected. And we are just not able to understand why.
And if you see, there were some commodity price increases, aluminum copper, etc. I had also spoken, I think about two quarters back regarding bringing in a consultant on this cost side and we said we were talking to and to and Marshall, if you recall. And then I think one of the investors had said that you close this fast, we did a lot of work internally also, but the commercials took a lot of time. So, Marshall was closed-end of last week. Instead of, we have like chosen Alvarez and Marshalls and the cost-down thing that we are working on is pretty large target of approximately INR200 cr over 18 month period with significant savings coming within the first like 12 months. This is — this is in a — this is in addition to whatever we do on our own. So that sign-off has taken place and the project starts on the 15th of February. The and Marshall team come into the headquarters, which is Goa on 15th of February, I think.
Manoj Gori
Right. And as per your initial discussions with these agencies…
Bikramjit Nag
17th of February, sorry, Monday, yeah.
Manoj Gori
So as per your initial discussions, what are the key areas probably they have highlighted or identified where you believe that the cost efficiencies would be visible.
Bikramjit Nag
One is the weight of the machine one is weight of the machine one is and weight, logistics rationalizing of schemes then they’ve also chosen — then they’ve also spoken on certain issues on design optimization of certain things. Then they’ve also spoken on where we over engineered certain things. And this both and point, they have both benchmarked our machines vis-a-vis others and they’ve showed us in various areas where we have over designed scope over engineering. But these are things that have to go through testing and validation. But on the first, on a first cut basis, the work, the work that they have done is good.
Manoj Gori
Right. And sir, so obviously, as you stated, like there will be lot of testing and obviously it’s a long process. So if any improvement which we can expect because we have been hearing for a year of margin improvement. But so probably from when should we expect any sort of improvement in margins on Y-o-Y basis, whether it should be during FY ’25 or probably it will start from 4th-quarter of ’26?
Bikramjit Nag
No, I think margin improvement as we had discussed was supposed to happen by this quarter, last quarter, this quarter. And that has not happened because according to me, according to us, the washer sale has fallen. If you see the margin drop, the margin drop is primarily the main reason for the margin drop is washer sales. If washer sales stayed as per target, the margin would have been better. The margin might not have been double-digit, but margin would have been better, much, much better than whatever we have like presented. So, the issue is that.
The cost — the basic cost-down, things would have added further to the margin. I’m trying to say that. Now we believe that washer sales should be back on-track, but January was not back on-track. January was not good, but we hope February and March will be good. We are not able to understand why suddenly washer across brand has taken a bit. Our news is that, and the margin is in washers. But in AC, the cost-down proposal in AC that we worked on, those things got delayed till February, that will come in on March. Kartik, I’m — am I right in saying that? When does the AC cost-down kick-in?
Kartik Muchandi
Yes, it will kick-in fully by March.
Bikramjit Nag
So, the AC cost-down, which was supposed to be last quarter was postponed till February, I think. And so, if that starts kicking-in by February-March, then in AC, we start the volume will give us margin.
Manoj Gori
Right. Got it, sir. Sir, one last question if I can.
Bikramjit Nag
But, but, but [Foreign Speech] second. But what happens is we need water sales to come up. This, this has taken me at least by like surprise. Sales has to fix this.
Manoj Gori
Understood, sir. Sir, last question from my end. So if we look at room ACs, how things have panned out with the channel in terms of association with the regional retailers or with e-com players and even with pan-India retailers, how things have progressed and probably you would have get — you would have got some commitments or probably visibility in terms of volumes for the upcoming summer?
Bikramjit Nag
Movements that we have so-far for this quarter and corresponding quarter, our capacity should be sold for AC, and — yeah.
Manoj Gori
Okay. Right. Got it, sir. Thank you, sir. Thank you for the answer.
Bikramjit Nag
Thank you. Surprisingly, surprisingly, sorry, I’ll just take a second. You know, surprisingly, we saw that in the industrial washing machine segment, the — we have a lot of orders which are hanging, meaning someone has given us an order, but is not like lifting the material, etc., etc. But in industrial our margin has gone up but the sales has also fallen but the margin has gone to over 18% in the month of December and January. So, we are just trying to analyze the data now.
Manoj Gori
Sure, sir. Sure. Yeah. Thank you.
Bikramjit Nag
Thank you.
Operator
Thank you. Next question is from the line of Anand Mundra from SOAR Wealth. Please go-ahead.
Anand Mundra
Hello, sir. Sir, large part of question is answered about the cost. Sir, one more thing, sir, we are still doing built-in dishwasher over the chimneys. These are very small segment with respect to the size of the company and I’m sure they would be loss-making. Any thoughts of cutting down the small businesses so that we can focus on larger appliances?
Bikramjit Nag
No, these are good, good like margin products. We’ve not done value match. We have to fix it. Because long-term, we see that more-and-more building is coming up in India, people will want fully equipped kitchens and in build becomes a huge segment going like forward. So we should be in it.
Anand Mundra
But sir, I’m looking this segment from last multiple years, sir, this segment has not grown much for us, sir.
Bikramjit Nag
Yes, for us it’s not grown, but for others, it’s not done done well. Now we made a separate team to really look at this, etc., etc. So we have to succeed in this. Just because we have not done well doesn’t mean we keep giving up things. Management in which has failed, management has to succeed.
Anand Mundra
On the overall scheme of things, I was thinking at INR5,000 crore size of business, whether this will materially impact the financials of the company going-forward.
Bikramjit Nag
Yes. Your point is correct. But we — we need to be in this — and opportunities come up. Suddenly may maybe an opportunity will come to buy-out someone or this that we don’t know what will happen in the future. But this is a segment that will grow and we must be in this segment with 15% share, 15% to 20% share. That’s our long-term plan, but — yeah.
Anand Mundra
Understood. Sir, one more clarification, cost-reduction plan of INR200 crores. So this is part of the P&L item which you are saying we would be able to reduce over the next 12 months?
Bikramjit Nag
Yes, that is a no, it is 12 to 18 months I said, but substantially it should come in 12 months.
Anand Mundra
So, our P&L will reduce by INR200 crores in terms of cost, sir?
Bikramjit Nag
It should add to, it should add to our P&L. But in terms of cost, yes, I have understood your question. In terms of cost, it should reduce, adding to our P&L. Kartik, am I right in phrasing it?
Kartik Muchandi
Yeah. And sir, up to quarter two of financial year ’26, 15% to 30% reduction will come and 100% realization will happen by end of FY ’26. But as well as the impact will come only after that.
Anand Mundra
Okay. Sir [Speech Overlap]
Bikramjit Nag
One sec. Kartik, there are like 2 parts in it. One is things like weight and all which they have identified and one is things that we have identified over the last 7, 8 months.
Kartik Muchandi
Yes, sir.
Bikramjit Nag
Correct?
Kartik Muchandi
Yes, sir.
Bikramjit Nag
So when we put both those things together, between now and March of ’26 how much is going to come in? Because this one is our internal thing and one is what we do with and Marshal?
Kartik Muchandi
Yes, if we implement everything then close to INR200 crores will come.
Anand Mundra
Okay, sir, how much salary cost salary would be part of this cost or what — which is the largest cost for this INR200 crores?
Bikramjit Nag
It is not salary. So we have not touched that at all as yet. We are looking into that on how to rationalize. So for example, for example let us say in Goa which is the head office, in a certain in a certain department we have 33 people spread between the two plants which is AC and your washer so now with them sitting together that should come down by maybe 40% so all those things will be rationalized by like 31st of March decisions will be taken.
Anand Mundra
Okay. So, if salary is not the largest and this is the largest…
Bikramjit Nag
And for that work, we are also using ENY or for certain aspects.
Anand Mundra
Okay. So, sir, if you can give breakup of this 200 crore, which is largest cost, sir which will be saved?
Bikramjit Nag
Kartik, Mr. Govindaraj?
Collegal Srinivasan Govindaraj
Yeah, I can answer that. The material cost will be about INR140 crores on that the weight reduction and then the electronics sourcing and then the benchmarking with other competition and taking ideas from that should reduce the material cost by INR140 crores. The logistics cost about INR20 crores. So we have got a clear breaking between INR200 crores. Out of INR200 crores, we have got about INR150 crores to INR170 crores.
Anand Mundra
Okay. Understood, sir. Sir, last question on refrigerator plant, are we at breakeven level, sir, at the subsidiary level or there are losses?
Bikramjit Nag
No, there are some losses. We are not because we have to be EBITDA wise, I think we are okay, but PBT-wise we are not okay. So we need more sales and hopefully by April we should be at about 35,000 to 40,000 a month and hopefully by June we should be close to PBT, PVT breakeven.
Anand Mundra
Okay. And sir, what is the capacity, sir there?
Bikramjit Nag
About a million.
Anand Mundra
About a million per year?
Bikramjit Nag
Yeah, 1.1 million.
Anand Mundra
So, at 50% utilization, we would be PBT breakeven, you are saying.
Bikramjit Nag
We should be, yeah, correct.
Anand Mundra
Okay. Thanks. Thank you, sir. Thanks a lot.
Bikramjit Nag
Thank you.
Operator
Thank you. Next question is from the line of Nattasha Jain from PhillipCapital. Please go-ahead.
Nattasha Jain
Yeah, thank you for the opportunity. Good evening, sir. Sir, my first question is on the opening remarks that you made. So you said that Washers, the demand has been slowing down and we’re not able to. Sir, we’ve also observed on-the-ground that people are postponing their spend for other white goods to buy AC. So is that a trend that you’re likely seeing? And will that actually harm the other white goods in the coming season because people will switch to AC? And having said that, do you see your AC demand increasing?
Bikramjit Nag
I mean, hopefully we don’t see that because if that happens we have a problem. Having said that, having said that the fact that AP sales are growing logically should have nothing to do with somebody wanting to buy a washing machine because washing machine is a need. AC is much more of a luxury item. So this has taken us by surprise. We are not able to understand this fully, but we are really studying this.
But to answer your question, if AC sale goes up, can we cater to the demand, etc., etc., we are looking into that. We actually believe our like capacities will be sold, and we are also working out for next year taking into account the present trend continues, do we need to do some things for enhancement of capacity. Now our capacity is about 500,000 a year. And if we are close to that, therefore, next year, we have to think. And then this thing on cost-down and all that we are working on for AC, which comes into effect from February, March this year, this will really help us to make margin in AC. And the good thing is that in AC the product which was not doing well for a while has now taken off.
Nattasha Jain
Understood sir I mean I agree to your point, but like you mentioned that Washers is a necessity while it is, the only challenge I see is probably we have more of premium offerings. So in times when the demand slows down…
Bikramjit Nag
No, I don’t think so. If you see — if you see LG, Samsung, etc., they are all doing premiumization. LG is giving up the 7 segment etc., 6.5, 7 segment. So I don’t think the issue is that the issue is people are postponed purchase, but we are not understanding why. Or maybe we are not able to-market it as effectively as we should in order to entice people to buy. Maybe we should spend more on that.
Nattasha Jain
Fair enough, sir. So while you touched the point on marketing or related question on that, so I remember a couple of quarters back we had suggested that while the products are very good, the company lacks a little on the marketing side. And probably that feedback has been taken positively because when we went on-the-ground, we did see greater improved traction for marketing for IFB compared to previous quarters. Just wanted to know, sir, where are we in that leg? And are we…
Bikramjit Nag
We are going to come out with the brand and the product campaign maybe in the next two weeks, both for washer and for AC and for refrigerator. [Speech Overlap] It will be a pan-India thing but okay, whilst I’m saying that, whilst I’m saying that I think tactically we may focus on the top-10 states for us.
Nattasha Jain
Got it. And sir, could you quantify your geographic revenue mix?
Bikramjit Nag
I think that you mean north, south, east,west like that or you want it state-wise? When you’re talking geography mix, when you’re talking geography mix, are you talking north, south, east and west or are you talking state wise?
Nattasha Jain
I’m talking north, south, east and west, broadly revenue contribution from those four.
Bikramjit Nag
I think Kartik can give that better, if you can, Kartik.
Kartik Muchandi
Yeah, sir, I’ll provide it offline.
Bikramjit Nag
Okay.
Nattasha Jain
Sure. Thank you, sir. I’ll fall back in the queue.
Bikramjit Nag
Thank you.
Operator
Thank you. Next question is from the line of Resham Jain from DSP Asset Managers. Please go-ahead.
Resham Jain
Hi, sir, good evening. So I have three questions. First one is with respect to washing machine, so we have launched multiple new products over the last three, six months in higher KG products and obviously, market has been little subdued. So one is macro factor which one can understand. But on the company side, given that there are certain product gaps earlier, I presume that could have offset some of the growth factor to some extent. So that is my first question, sir.
Bikramjit Nag
So, the question is whether we have product gaps or the question is where the product gaps have been done away with?
Resham Jain
No, I’m saying that despite filling the product gaps over the next three months, over the previous three, six months, despite macro not being favorable, which is for the industry, IFB per se could have done better.
Bikramjit Nag
So, we have done better, but we could have done a lot, lot better in some of the capacities. The data shows on certain — on certain capacities we’ve not done as well as we should have done. So that micro analysis is leading us to reassess state-wise, what are the missing points and those are being plugged. That doing the capexes and launching those models have actually helped us, yes.
Resham Jain
Okay, got it. And sir, the related question is between top-load and front road, obviously, we are leaders in front-load. But in top-load, which is the largest pie of the washing machine market, if company need to grow much faster, then probably top-load is where faster growth would come in. Is that the right understanding?
Bikramjit Nag
See the top-load market is a much, much, much, much bigger market. Then the front-load automatic market. The top-load fully automatic market is a much, much larger market. So if you look at that, our internal assessment tells us there is no reason why we should not do 50,000, 60,000 a month versus today’s present about 30,000 a month, 30, 32,000 a month during the October period, I think we touch close to 40 but so our internal assessment is that. So we have to do a lot more work on-the-ground to really ramp-up volumes in top-load.
Resham Jain
Understood, sir.
Bikramjit Nag
And since the investments we’ve made already in the design, etcetera, etcetera and the models are out, the more we sell, the more the money we make eventually and the margins will like go up. So we need to do a better job on-the-ground.
Resham Jain
Understood, sir. Sir, the second question is with respect to IFB points and we visited some of your IFB points in some cities and we felt after interacting that some of this IFB point doesn’t have significant footfalls. So according to you, out of, I don’t recall the exact number of IFB points, but how many of the IFB points on a standalone basis, let’s say, are profitable and how many are not? Do you have that data?
Bikramjit Nag
Yes, we have that. I think for us I think about 25%, 20% to 25% is an issue, but it’s an issue because of some local, state-level management issues which need to be solved vis-a-vis point running and functioning. Now we’ve had a change in management and IFB point has been given to someone else and some restructuring is taking place. And we’ve seen traction. I think, Kartik, please, let me know. I think December, January for IFB point as a percentage has been better.
Kartik Muchandi
Yes, sir. It has improved over the last year.
Bikramjit Nag
Yes, it has improved and we need to do a lot, lot more. And see IFB point, apart from anything is a very good marketing tool for us. But we need to do a much, much — a much, much better job at marketing this. What is happening is in many of the markets you will see and since you’ve gone around the market, I’m — I’m like stating this. One of the reasons for lower footfall is you have a bigger store next to an ILB point and in the bigger store, the same product is being sold at INR500 cheaper. Now that logically should not happen. So that logically should not happen. But if our own company does things like that foolishly, then these things will happen. So we have to clamp like down all this and promote our people, and that’s the direction that I have given to Mister, which you must-carry out.
Resham Jain
Okay. Understood, sir. Sir, the last — and the final question is with respect to AC, where we heard that there has been certain issue on the compressor sourcing side. Some of the brands and OEMs were facing some issues on the compressor sourcing. So how are we prepared for the same, let’s say, for the current upcoming summer season?
Bikramjit Nag
This you’re talking on the BIS data.
Resham Jain
No, sir, the compressor which are being sourced from China.
Bikramjit Nag
This is because of the BIS rules. Are you talking because of that?
Collegal Srinivasan Govindaraj
Sir, can I answer?
Resham Jain
I’m not fully aware, sir, but what we heard is that compressor sourcing is little challenging.
Bikramjit Nag
I think that we are covered. I think Mr. Govindaraj, you can answer that.
Collegal Srinivasan Govindaraj
Yeah, I will answer this question. Of course, we are also expecting a demand-supply gap in compressor, but we have already taken care of that. We have totally covered up till end of March. And on month of April also we have started working compressor from China, there are some issues to some manufacturers in India, but I think we are covered up till May and June. We have already placed the orders and our person is there to monitor this and we don’t foresee any.
Resham Jain
Okay. Great, sir. Thank you very much and all the best.
Collegal Srinivasan Govindaraj
Thank you.
Bikramjit Nag
Thank you.
Operator
Thank you. Next question is from the line of Nisarg Vakharia from NV Alpha Fund. Please go-ahead.
Nisarg Vakharia
Good evening, everyone. Two, three questions. The first question is that long back when our AC sales had not ramped-up, we used to say that the AC sales are the sales because of which we lose margins. Now, all set-aside, if I see this quarter, Y-on-Y, your EBITDA has expanded from INR65 crores to INR89 crores. And this is despite the fact that you have sold lower washing machines and higher ACs. So is it safe to assume that your losses in the AC business have completely stopped and you are now corporate making there?
Bikramjit Nag
You see, we are not having losses. Kartik, can you answer that?
Kartik Muchandi
EBITDA-positive from negative, we have move to EBITDA-positive in this financial high.
Nisarg Vakharia
Okay. Second is that Y-on-Y, the EBITDA margins have expanded because of two reasons. One is there is a reduction in unallocable expenses. So INR11 crores is that number. And second is INR6 crores, your depreciation has increased y-on-Y. Can you please clarify on both these points what this are?
Soumitra Goswami
This is Soumitra Goswami. Increase in depreciation cost, I will be explaining. Depreciation cost for the quarter has increased by INR6 crores as compared to corresponding quarter of last year. This increase is due to the fact there are two things which has happened in this quarter. First of all, we have added asset of around INR55 crores and this has contributed around INR4.3 crore of depreciation. And also there are some addition of fixed asset during the YPD period, which is amount around INR61 crores. This has increased the depreciation figure by around INR1.7 crores. The INR4.3 crore and INR1.7 taken together, depreciation cost has increased by INR6 crores as compared to last year. And in interest cost also has increased marginally, that is INR1 crore only. That is also due to addition of lease debt because our borrowing has gone down. So interest cost in relation to borrowing has gone down drastically in both quarters as well as in YTD period.
Nisarg Vakharia
Yes, sir, I was actually referring — so thank you for explaining the depreciation increase. I was referring to the unallocable expense, which has reduced Y-on-Y.
Soumitra Goswami
So unallocable expenses in relation to what? Which category for the company-level?
Nisarg Vakharia
You give products, you give segment level margins. Below the segment level margins, there is a column called unallocable expenditure. Now if you see that, that is reduced by INR11 crores.
Soumitra Goswami
But Kartik, in the segment profitability, in segment. So it’s profitability, there is no, no unallocable expenditure. Everything is allocated, including depreciation, cost, everything is allocated, including our overhead expenditure also. The product profitability statement is coming to me every month for the month and also for the YTD period. So, I don’t know…
Nisarg Vakharia
Let me explain my question better. But I understand. I am saying that if you look at the unallocable expenses, FY ’24 for the full-year, that number was INR44 crores, okay. In FY ’25, that number has become half. So it is a good thing. I am and how has that happened?
Soumitra Goswami
No, I am telling you only one thing. I think there is some mistake in understanding, you can call me offline. There is no unallocable expenditure in the product profitability statement. Nothing is there. I don’t know where from you have got the INR40 crores figure. So if you can call me offline, then we can discuss in detail. There is no problem. There is no on expenditure.
Nisarg Vakharia
I will call you offline, sir.
Soumitra Goswami
Yes, no problem. No problem.
Nisarg Vakharia
Thank you.
Operator
Thank you. Next question is from the line of Shreyansh Jain from Swan Investments. Please go-ahead.
Shreyansh Jain
Hello?
Operator
Yes, Mr. Shreyansh, please go-ahead.
Shreyansh Jain
Yes, hi. Thank you for the opportunity. Sir, my first question is on the AC business. So, you’re saying we are EBITDA-positive. And also in the presentation, we are talking about improving our market-share from, say, 3% to 6%. And in our previous calls, you had also guided for, say, about doing about 4 lakhs 4.5 lakh units of ACs in FY ’25. Now if I just go back and back-calculate the nine months before ACs, we would have ideally done about 2.25 lakh units of ACs. So I think Q4, we — I don’t know-how much we can do in Q4, but you slightly be behind your guidance of 4 lakhs 4.5 lakh ACs for FY ’25. So how are we looking at this whole piece? And when you’re targeting 6% market-share, do we do we — I mean, I’m just trying to understand qualitatively the product acceptance or is it just the industry tailwind that’s there that’s helping us. So can you please help…
Bikramjit Nag
I think it’s the tailwind that the industry has, but the product — the product has been received well over the last few years and I think that has obviously helped because if your product quality was bad, then the tailwind would not help you. As far as the volumes go, in the first-six months, we never did in the first seven months, we’ve not done as well as we should have done. But the last two, two odd months has been good, two to three months, three months if you take January also and looking at February-March will be below our overall thing that we had given earlier but if you see why we are saying our capacities will be fully sold-out, is it we take a five-month period, etc., going-forward, whatever we see, our view is that if you look at it from now till June. I think we’ll have a issue on we will I think we’ll be near about full capacity and of course the product quality has played a part in that apart from tailwind.
Shreyansh Jain
Okay. And so how are we priced versus competition in the AC?
Bikramjit Nag
So our pricing is I think higher than see we are relooking at our overall strategy on this and we are trying to take prices up and sell more of two ton in water and all of that and whatever cost-down etc., we are having we are not going to pass-on and I think we want to play to a brand prism and we don’t want to discount vis-a-vis, LG, higher-end, etc., but today if you take a like-to-like model then LG higher-end is priced higher than us but we would like to bridge that gap over-time.
Shreyansh Jain
Okay. And my second part…
Bikramjit Nag
Vis-a-vis Samsung and all, I think we are okay.
Shreyansh Jain
Okay. And my second part to this AC business is the — as we target 5 lakh ACs next year and somewhere in the call, we mentioned that we are EBITDA-positive. So next year, should we actually look at 4%, 5% of EBIT margins for this segment or how should we look at the profitability piece?
Bikramjit Nag
Kartik?
Kartik Muchandi
Yes, yeah, we could be near that.
Shreyansh Jain
Okay. Sir, my second question is on the refrigerator business. So I think you gave volumes in terms of production, but if you can help us on what kind of revenues we’re doing in this business or some sense on the volume…
Bikramjit Nag
Gives this to you offline because that’s another company as you know. Amount of sales we do within IFB is less, but refrigeration Limited is a separate company. How much IFB selling exactly we will give it to you offline.
Shreyansh Jain
Sure. Sir, my last question is on the washing machine piece, right? So October, you said we did fairly well. So can you just quantify what kind of growth rates we would have witnessed in October and also somewhere in the presentation you’ve mentioned that we faced a situation where we couldn’t cater to the demand. Now I think when I go back, this is happening a lot of times with us when there is a very strong demand, we’ve not been able to cater to that demand and probably because that we lose some bit of sales. So how do you look at this whole thing, sir? Because when demand…
Bikramjit Nag
So, there is a trade-off. So let’s say now, let’s say now we built-up stock for washer and AC, AC we sold washer — washer we have not sold and we are like stuck with inventory. Okay. So we always make an assessment three months, let’s say, and we all buy raw-material, we convert to finished goods, etc. But if sales and if sales and purchase don’t work hand-in-hand, then either you lose some sales or you are stuck-up with inventory. So I think better planning has to go into this. I think but, as I said earlier, we are not able to understand why pardon slow-down in and now we are stuck with stock so there is an issue. But for the ACC — for the AC season, we started building up stock.
You see, so if you see our figures now, the inventory has gone up substantially because of AC and some bit because of washers which were not sold. But AC is a planned stock buildup but washer is not. Washer is a failure to do sales because of market issues which we are not able to understand why. So, to answer your question, again, maybe I can use the term better year planning, but why this has happened this time, honestly, I just don’t know for the washer — for the water part.
Shreyansh Jain
Okay. Sir, my last question is, we’ve seen — we’ve noticed that there is some layoffs in the employee front. So there is about 60 70 odd employees that have reduced. So I’m just trying to understand, is there — you also mentioned the two plants now that you’re going to look at 40% leverage coming in from there. So this 9.9% employee cost as a percentage of sales, is there — is there leverage here? Can we…
Bikramjit Nag
Percentage of sales can come down in two-ways. Suddenly, suddenly sales grow by 30% 35%, percentage will come down, okay. But in absolute terms, it should come down. The issue is that.
Shreyansh Jain
I’m just trying to understand, is there space there? I mean are we looking at…
Bikramjit Nag
There is always space to look at things in absolute terms. We need to be more innovative in consolidating roles. And I keep telling my team who is on this call that they should do it. And if they see what is happening in the US and the way certain things are done, we should learn from that. You see, we are having two plants a kilometer away, two sets of accountants sitting, two sets of purchased people sitting. This is, this is not needed. This is just not needed and if you take the refrigerator plant which is separate like company also, certain things can be done like together. So I think we will restructure this. We are using ENOI for a finance transformation thing and we will come up with this within the next two weeks.
Shreyansh Jain
Okay, okay. And sir, just last one on the accounting front. When we open IBP point, what is the cost that we have to incur say in terms of capex for inventory and capex?
Bikramjit Nag
About no, the — I mean a lot of the cost is born by the franchisee. If it is franchisee health, franchisee-led. If it’s done by us, it comes to around INR20 odd lakhs, approximately.
Shreyansh Jain
Okay. So out-of-the 475, how many are on our books and how many are on franchisees?
Bikramjit Nag
I think about — Kartik, how much is it?
Kartik Muchandi
180 are Co.
Bikramjit Nag
180 franchisees. Okay. So, it’s 300 and 180, let’s say.
Shreyansh Jain
Okay. And incrementally all of this is coming on 44.
Bikramjit Nag
Yes.
Shreyansh Jain
Okay, okay. All right. Thank you, sir and all the best.
Bikramjit Nag
Thank you.
Operator
Thank you. We have a follow-up question from the line of Manoj Gori from Equirus Capital. Please go-ahead.
Manoj Gori
Sir, just continuing with the previous question where you said like you are stuck with washers. Is it alarming enough that probably you need to give incremental discounts to the channel because if you look at next washing machine season would be into monsoon and we are not too far away from that?
Bikramjit Nag
No. No, we don’t need to know. We don’t need to do all that too much. But we are looking at what can we do to directly entice the customer and not the challenge.
Manoj Gori
So, some sort of schemes might be launched for the customer.
Bikramjit Nag
So we are looking into that, yes, we may do that.
Manoj Gori
Sure, sure.
Bikramjit Nag
That too in select market, not across-the-board.
Manoj Gori
Right, sir. Got it, sir. Thank you.
Bikramjit Nag
Thank you.
Operator
Thank you. We have our next question from the line of Moksha Shah from Agility Advisors. Please go-ahead.
Moksha Shah
Hello, sir.
Bikramjit Nag
Hi.
Moksha Shah
Hi, sir. Thank you for the opportunity. So I just had one question. In previous calls, the company has mentioned the plans to manufacture products for the railways and also enter the Electronics division. So can you please share some more thoughts on this side? Are there any acquisitions which we are specifically targeting for the same?
Bikramjit Nag
No. On acquisitions so-far, whatever we’ve got so-far and work is going on is on the auto component side. In railways and electronics, we’ve not found suitable company as yet, but we are doing to work to develop product — products for both railways as well as the electronic industry. We are talking to the customers directly, some of the customers, well-known brands to whom we can supply certain things that work is progressing well but it’s taking time because of the development cycle, etc.
Moksha Shah
Okay. Thank you.
Bikramjit Nag
Thank you.
Operator
Thank you. We have our next question from the line of Vivek Kumar from Bestpals Research [Phonetic]. Please go-ahead.
Vivek Kumar
Sir, are you able to hear me, sir?
Bikramjit Nag
Yes, please.
Vivek Kumar
Sir, I wanted to ask a question on this both refrigerator and ACV. Already have market shares in and print loaders. So what is it — how are you going to garner market-share because when you go to big retail outlets, you see too many people competing for this AC. As of now, we have tailwinds, but let’s say tailwinds — our growth rate stops a little bit and how will we still manage to fill our capacities because you already know your capacities are filled now because of the tailwinds and also product being good? But if you see there’s lot of competition in both ACs and refrigerators. So how are you going to think about it over the long-run that when growth rate normalizes, still we will fill our capacities and get our margins and maintain some market-share? So if you can better guide us in what are you thinking about?
Bikramjit Nag
I think — I think as far as AC goes, I think we are on the right track and we struggled for nearly five years, 4.5 years. As far as refrigerator goes, we’ve just launched a marketing thing in the market I mean a marketing campaign for customers, wherein we have increased the warranty on our refrigerators, etcetera, we are the first ones to offer a 4-year warranty on refrigerator and that has created a noise in the market and we have done that because we believe that the quality of the product is good. The company factory people of the development people really believe in that.
And while the refrigerator, everyone gives buy and one plus one warranty, etc. I think we’ve gone for a four-year clean warranty. Correct? Correct, Mr. Govindaraj?
Collegal Srinivasan Govindaraj
Yes, sir. Yeah, we’re going…
Bikramjit Nag
This has been launched only — this was launched, I think, on Monday, Saturday or Monday, I think and it it’s being received very well by customers, also by the retailers. And it is helping us gain a lot of traction to sell. So we have to find innovative ways to sell our product to the same channel to whom we are selling front-load, top-load and AC. Now with or without tailwind, we have to succeed. There is no choice for us and we have to keep finding innovative ways on-the-ground to like do all this.
Vivek Kumar
Because why I’m asking this is, let’s say you go buy a customer when he goes to buy a refrigerator, there’s only so much space a retailer will have for refrigerator. You can’t have like other products where you can put 10 brands, 15 brands. So you need to get that space means customer needs to ask for your product like fast-moving only will be put by the retailer because you can’t take risk of putting all the brands that are on.
Bikramjit Nag
Correct. Correct. So we have to create demand for our brand.
Vivek Kumar
Sir, and lastly, in the, you said we have struggled and but now you are very confident of linear capacity. So what did you do and differently that we have struggled and now we are no more studying like what step did you take-in the last two, three years?
Bikramjit Nag
We struggled for 4.5 years. We’ve lost a lot of money and we did a lot of work-in the market on-the-ground with our team, with the retailers and that is paying-off now but it’s been very, very slow and a very tedious process for us. [Speech overlap] Sorry?
Vivek Kumar
Even if the tailwind or the growth rate, you will still be able to pull your capacities, you are confident…
Bikramjit Nag
I think so. I think so. I think so. I think more than anything, I think the team is very confident of the product and so are the retailers. Now the retailers have gained a lot of confidence in this.
Vivek Kumar
Okay. So any region where you see all the more like your market-share is more in some one part of the country. Okay, sir, this is my last question. Any area where you are doing much better in?
Bikramjit Nag
No, in both AC and rest, we are doing better in the East. We are doing well in the east. We are doing well in north, in north too, which is the Chandigarh, Punjab region, etcetera. We are doing very well so it’s in, it’s in like pockets and in some like places we are not doing well at all. For example, Andhra Pradesh,, we are not doing well at all. So we have to go state-by-state and fix things and improve things and in certain states it’s fixed.
Vivek Kumar
And your content long-run you will do in these two states in these kind of states also Andhra and kind of states also?
Bikramjit Nag
I mean, do we have a choice? We have to do well, we have no choice.
Vivek Kumar
Thank you very much. Thank you.
Bikramjit Nag
Thank you.
Operator
Thank you. We have our next question from the line of Abhishek Ghosh from DSP Mutual Funds. Please go-ahead.
Abhishek Ghosh
Yeah, hi, sir. Thanks for the opportunity. Sir, just fine yeah, sir, just in terms of the finalization of the CEO for the home appliances division and just wanted to understand where are we in that?
Bikramjit Nag
Yeah, very good question. You know, we’ve gone through close to 400 and we short pasted a few but at the final thing it did not happen not for anything else, but because we did not think they were suitable for an end-to-end role. The problem we are facing which I think I touched upon last-time but I do not remember is that you know the ones who are good at sales and marketing have come across as being weak on the factory side and the development side. And our products are actually technology products. So we need someone with a for both and that is taking some time, but I hope to close it soon.
Abhishek Ghosh
Okay, but you want just one CEO who will take care of the boat and you don’t want to spread the responsibilities in terms of marketing and the factory part of it.
Bikramjit Nag
That is already done. So sales and marketing is run by Mr. Mathur, Factory is run by Mr. Govindaraj, but the CEO must understand overall business, which means he must-have some knowledge of everything otherwise we will have a problem.
Abhishek Ghosh
Okay, okay. I wish you all the best. That’s sir. Sir, the other question is on terms of the new models that you have launched and…
Bikramjit Nag
Washer or AC?
Abhishek Ghosh
Washers.
Bikramjit Nag
Yeah.
Abhishek Ghosh
We have launched it in October. How is the channel feedback for that, and…
Bikramjit Nag
I think what I would request all of you to do is to go into the market and give us this feedback, whatever you honestly see or hear from the market, but the feedback and that has been given to me at least is that the channel feedback on the models is very, very different. But why this sudden slowdown has happened? There I’m not getting an answer at all. That has surprised me on the washer side.
Abhishek Ghosh
Okay. Okay. The best. We will revert on it. Thank you.
Bikramjit Nag
Thank you.
Operator
Thank you. Ladies and gentlemen, that would be the last question for today. And I now hand the conference over to the management for closing comments. Over to you, sir.
Bikramjit Nag
Soumitra, anything you have to say?
Soumitra Goswami
Thank you, everybody for participating in this call. We will meet again after quarter-four. Thanks once again.
Bikramjit Nag
Thank you.
Operator
Thank you. On behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you for joining us and you may now disconnect your lines.