PG Electroplast Ltd (NSE: PGEL) Q1 2026 Earnings Call dated Aug. 08, 2025
Corporate Participants:
Unidentified Speaker
Vishal Gupta — Managing Director
Pramod Chimmanlal Gupta — Chief Financial Officer
Analysts:
Unidentified Participant
Saumil Mehta — Analyst
Ashish Jain — Analyst
Koushik Mohan — Analyst
Vipraw Srivastava — Analyst
Krunal Pandya — Analyst
Mahesh Kaushal — Analyst
Archit Singhal — Analyst
Arshia Khosla — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the PG Electroplast Q1FY26 earnings conference call hosted by Access Capital Limited. This presentation has been prepared for inform informational purposes only. This presentation does not constitute a prospectus, offering, circular or offering memorandum and is not an offer or initiation to buy or sell any security nor shall part of or all of this presentation from the basis of or to be relied or in connection with any contract or investment decision in relation to any securities. This presentation contains forward looking statements about the company which are expressed in good faith and in the management’s opinion are reasonable.
The forward looking statements may involve known and unknown risks, uncertainty and other factors which may cause the actual results, financial condition, performance or achievements of the company or industry to differ materially from those in forward looking statements. Those forward looking statements represent only the company’s current beliefs, intentions or expectations. 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 0 on your Touchstone phone. Please note that this conference has been recorded.
I now hand the conference over to Mr. Deepak Agarwal. Thank you. And over to you sir.
Unidentified Speaker
Thanks. Good afternoon everyone. On behalf of Access Capital, I welcome you all to PG Electroplast Q1FY26 earning con call. Today we have with us management represented by Mr. Vishal Gupta, Managing Director, Finance, Mr. Vikas Gupta, Managing Director, Operations and Mr. Pramod Gupta, Chief Financial Officer. So without taking much of time, I will hand over the floor to the management for the opening remarks post which we’ll open the floor for Q and a. Thanks. And over to you sir.
Vishal Gupta — Managing Director
Thank you. Thank you, Deepak. Good afternoon everyone. Thank you for sparing your valuable time and joining this call today. Hope all of you are doing well. Let me start by saying that this quarter was softer than what we have expected. We have just come off a year of very strong growth, strong demand and strong execution. And naturally we were confident heading into FY26 and our guidance reflected that optimism. What changed quite quickly and unexpectedly was the weather. The monsoon arrived earlier than usual and the room ET season ended abruptly. Sellout in the trade channel was lower than forecasted and inventory levels stayed higher for longer.
In hindsight, we weren’t fully prepared for that kind of shift in this quarter. Given this and the visibility we now have for the next couple of months. We have recalibrated our guidance for the full year. We believe this is a responsible thing to do to stay transparent and aligned with where the market is today. That said, it’s also important to look at what didn’t change our room AC business still grew 15% y o y basis in this quarter despite the season cutting short. Washing machines grew by 36% with strong volume growth from new platforms. Our new plant in Biwadi is already ramped up.
Now our order book is healthy, we are expanding capacities in RECs, washing machines and coolers and client engagement across large and emerging brands remains strong. FY26 will now likely shape up to be a more measured year and that’s fine. We will use this time to consolidate, focus on operational levers and execute our platform and capacity investments with more discipline. These are the foundations we need to get in place for the next phase of growth. We remain confident in the long term opportunity in India’s consumer durable market and in PGL’s positioning to be a key enabler in that space.
Our focus remains unstrained to scale profitability to stay capital efficient and deliver consistent value to our stakeholders. With this now, I will hand over the call to my colleague Mr. Pramod Gupta, our CFO to elaborate on the financials.
Pramod Chimmanlal Gupta — Chief Financial Officer
Hi, good afternoon everyone. I’m sure all of you have seen the financials in detail already. Thank you Vishalji for giving the introduction. Let me give take you through the numbers for quarter one, consolidated quarterly revenue stood at 1504 crores, which is a 14% increase over Q1 last year. Of this the product business contributed 1159 crores or 77% of the total revenue. AC business contributed 1015 crores, a growth of nearly 15% and accounted for around 68% of the total revenue. Washing machines were up 36%. Cooler saw sales were slightly lower on account of the shortened season.
Our 100 subsidiary PG Technoplast reported revenues of 1211 crores during the quarter. Coming to the profitability EBITDA for the current quarter stood at 139 crores and it was up 3.5% year on year. Net profit was at 66.7 crores compared to 84.9 crores in Q1.25. The drop in net profit is mostly due to negative operating leverage from OEC volumes or planned AC volumes and some input cost pressures. Due to the abrupt end of the season, we were left with high inventory levels this quarter. To manage our cash flow, we had to get a lot of our receivable discounted which led to an additional outflow of almost 20 crores of financing cost.
Our overhead remained high during the quarter as we got caught off guard. We are working on optimizing our overhead cost. From a balance sheet standpoint, the company remains on a strong footing. We have cash and equivalents of around 911 crores and return on capital stands at 25.2% on trailing 12 month basis. Our fixed asset turn remain healthy at over 5x. Now coming to the revised guidance for FY26 we expect PGEL standalone revenues to be in the range of 5,700 to 5,800 crores crores. Net profit is expected to be between 300 to 310 crores. At the group level, including our joint venture Goodworth Electronic, we expect consolidated revenues of 6550 to 6650 crores in sales.
We have also pushed our capex plan some of our capex plans to next year. We are continuing with our investment in Greater Noida, Supa, Rajasthan and south India with FY26 capex to be between 700 to 750 crores down down from 800 to 900 crore planned earlier. As always, we are watching market trends closely and we will adapt if needed. But our long term investment, operating model and growth priorities remains unchained. With this, I’ll be happy to take any questions. Please open the floor for Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on their Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Somil Mehta from Kotak amc. Please proceed.
Saumil Mehta
Yeah, thanks for the opportunity Sir. Two questions from my side. Now obviously this season is going to be weak but in terms of our discussion with the larger clients, what sort of prices pricing actions are we taken? You know are have they asked for a better pricing for us given they themselves are under stress and in that backdrop how should the overall margin profile look for the upcoming season for us? That’s my first question.
Vishal Gupta
I will tell you right now. You know pricing is not being discussed right now. There are so many other issues which are being discussed with the clients because the kind of inventory what we have, you know, accumulated for our clients and you know those materials have not been taken by them. So we are discussing those things right now. Pricing things are not in decision right now because even if you are able to offer some discount, there is no demand for the material because the channel is totally choked up with the inventory. So that is something which is not being discussed right now.
Margin profile will remain under pressure. That is why the guidance has been revised because we believe that there might be some pressure on the pricing. That is why we have factored in those things in our guidance.
Saumil Mehta
And is there any early indication of cancellation of orders? And if yes, will it come from the larger clients or midsize clients? Any, any rough indication or estimates what we are projecting for this year? What happened was the lot of cancellations happened for the month of June, July and August. In fact all the plans which were there, they were cancelled to the tune of 50 to 70% across most of the client for the month of June, July and August. And the situation for the next year or the next season we will get to know only post September or maybe sometime in mid October because by that time whole industry is expecting that there will be some introduction in the channel inventory and then they’ll be able to plan for the next season.
Right now most of the brands as well as consumer contract manufacturer are actually slowing down the production and that to. To probably get rid of the inventory in the channel and the inventory that they have for the finished wood. Because this year there is a inventory, there is a rating cycle change and the current inventory which people will be having, especially the brands and the contract manufacturers will be difficult to sell post January 1st. Sure. And my last question, any update on the compressor tie up? We were going to announce that very soon. At what stage of negotiation that is and ballpark any change in economics from where we were earlier looking for that.
Jv, that’s my last question. Thank you.
Vishal Gupta
So as far as the economics is there, there is no change. But there is some delay in the getting some clearance from the governments on this, especially from China government on this project. So we are just waiting for that. There has been a delay but in next one or two months we will have some more clarity on this.
Saumil Mehta
Sure, sure. Thank you so much.
operator
Thank you. We take the next question from the line of Vishal Dudwala from three Netra set managers. Please proceed.
Unidentified Participant
Thank you for the opportunity. Sir. Am I audible? You are audible. So can you throw some light on your refrigerator business in upcoming this year like installed capacity or utilization or the expected revenue contribution plus any signed clientele for this. Because you will be there.
Vishal Gupta
We are in an advanced discussion with our clients and we are in process of acquiring a land parcel in Southern India. We should be able to finalize that in within this month. And we have already onboarded a team for development of the complete project. So the timeline for that project will be tentatively take almost around 12 to 14 months from now to start the mass production. So the revenue will start kicking in and it will have a numbers that will accrue in the FY27 only. We are in active discussion with the clients which are already our common clients in in our air conditioner business as well as in washing machine business.
So we have an overlap of clients there and we are confident that we should be able to buy with one significant client in coming days and weeks.
Unidentified Participant
Okay, and the second thing, can you just tell us how much expectation in expansion of the RAC air cooler and washing machine capacity?
Vishal Gupta
So. So rac the capacity extension has been little bit curtailed but the land and building where we have already started the capex we are not holding back but some plant and machineries orders have been held back and we are, we’ll closely watch the season how this 2020 season will pan out. After that we’ll decide whether we have to further expand the capacities or not.
Unidentified Participant
Okay. So in case of washing machines, in case of washing machines we are seeing a robust growth and we are further expanding our capacity in washing machine and so we will make our capacity. We’ll take it to a level of more than 2 million washing machines in the current financial year. And what about your air cooler?
Vishal Gupta
Air cooler also sir, this year season has been quite muted so we already have enough capacity for that and you know, creating capacity for air coolers the lead time is very less. So I don’t see major challenge. Whenever there is demand we can ramp up the capacity very fast in air cooler.
Unidentified Participant
Okay, and one last question from the costing side like easy costing and how much they have inventory in the costing of inventory?
Vishal Gupta
Sorry, I didn’t get your question. Can you repeat.
Unidentified Participant
So question is like about the easy costing. Hello, question is about of AC costing.
Vishal Gupta
Right? So what was the question? Can you repeat your question please?
Unidentified Participant
Okay, like unit economics of your inventory about your ac.
Vishal Gupta
We don’t have any. Finished good inventory. Large part of the inventory, almost 97, 98 of the inventory is actually the raw material for the making ac. We don’t actually everything is built to order basically depending upon the order from the brands we make and they are typically we don’t keep inventory of more than a week or so. So right now we do not have much finished good inventory. It’s largely the raw material inventory which we have. Okay, that’s it from my side as. Of now, I will break in the few.
Unidentified Participant
Thank you.
operator
Thank you. Before we proceed with the next question, I would like to request participants that please limit your questions to two per participants as there are several participants waiting for their turn. The next question is from the line of Ashish Jain from Macquarie in India. Please proceed.
Ashish Jain
Hi sir. Good afternoon sir. My first question is some of the comments you made in terms of your AC capacity expansion. We are putting on hold and all this seem like quite serious comments, right? Because we are building business for the next three, five, ten years and one bad season and you know, we are revisiting or even pushing out our expansion. Can you just talk a bit more about that? And secondly, I think earlier we made a comment that we had to do some debtor discounting, you know, for cash management. And also. Sorry, I hope I heard it right but can you just elaborate a bit more on that as well?
Vishal Gupta
So first question I will take. Second question probably you will answer. So I will tell you. As I told earlier in the call, we are not holding back our creation of extra land parcels and creation of buildings where the lead time is much higher. Plant dimensionary lead time is four to six months. So whenever there is a requirement that can be always, you know, taken in four to six months lead time you can manage that capacity. The longer lead time is the land and the building which, which we are not going back those investments and cash flow.
So in order to conserve also, you know, cash flows, we have tried to conserve some, hold back some capex in order to conserve cash flows also.
Ashish Jain
Second question coming to management of cash flow C we had already ordered inventory for the season which it was based on the ordering from the clients. But as in the months of May, June, July, we saw that the orders were not getting cancelled. Basically orders are getting cancelled and we were not able to convert that. But we had to pay the tables basically to the vendors. So what we did was basically whatever sales we had and we started getting those discounted from the bank to pay the pay to the basically our vendors. And that has actually led to some additional cost because we are having a lot of raw material inventory.
If you see the balance sheet which has been given on the presentation this year we are carrying close to 1300 crores of inventory. Visa was last year 1356 out of which almost close to 1200 crore inventory is in AC business. And last year the same number was only 368 crores thousand crores of additional inventory we are carrying and that actually led to our cash flow getting bit strained because we have cash. But that cash is for a very specific purpose because of the CAPEX planned which we have and the objective of the QIP issue which we had taken.
So this inventory number is as of June you are saying over the 1350. Pardon? The inventory number you said is as of June this year or March number you say? No, I’m saying June this year. June this year. And secondly on the customer side.
operator
I would request you to go back to the queue as there are several participants waiting for their turn. Okay, thank you so much. We take the next question from the line of Aman Soni from Invest Analytics Advisory llp. Please proceed.
Unidentified Participant
Hello. Hello. Yes please go ahead. Continuing with the previous participant we are pushing our investment plan to the next year. But what I am not understanding is because you mentioned it is mainly because of the monsoon season, right? So it should be temporary thing kind of. So in this case if we are shifting our capex so there must be. Some strong reason for it. So are you people witnessing any kind of change in the customer sentiments which are getting affected as a cascading effect of the global headwinds which we are witnessing right now? Is that the case? Is that the code which are, which is resulting in the shifting of the capex? So that’s my first question.
Vishal Gupta
So first of all let me tell you as I told earlier in the call we are very confident about the long term and medium term potential of consumer deliverance business in India. There is no issue in that. Coming back to your point, so let explain, we are already going with the capex. The earlier capex guidance was around 900 crores which has been scaled to 700 to 750 crores. So there is not a very big cutback in the capex. Capex is happening. Some plant and machinery orders are being delayed to next year and the compressor project which was planned was supposed to happen this year.
We are, we are estimating it might slip into the next year, right? So that is why there is a some revision in the CAPEX guidance. We are very confident about the long term and the medium term potential of this business because the penetration of the products where we are operating is very low in India. And second point, the next two three quarters will be little soft. But going after that we see a very strong growth happening again, you know, in this business at least two quarters we look maybe up to November, December, we might see some softness up to November.
After that I think we are going to see a strong pickup, very strong Pickup. I will just explain to you one thing. You know April we saw 70% growth on a month by way basis for the month of April, May we saw a growth of around 18. But June and July has been down by 70%. Y o y D growth is there in June and July. So see how abrupt is the, how volatile is the behavior right now. So we have to close. See we are carrying very large inventory so we have to be, we have to turn cautious right now.
We have to be careful now sir. And but let me assure everyone we are fully geared up and fully prepared for any growth. You know we are very much focused on that and the idea is to keep our focus on capital efficiency. Also you know we are already carrying lot of inventory so we have to be very careful now.
Unidentified Participant
Understood. And you also mentioned about the price erosion thing and that is why we are estimating it in our margins as well. So I want to understand more towards it. Like is it mainly because of we have to clear our inventory or is it like we are seeing more of raw material kind of inflation or. And when, by when like you mentioned after November there will be pickup in demand. So do you see like margins will also start picking up from them.
Vishal Gupta
The margin picture will become clear as the new season negotiations start. Right now the new new seasons negotiations have still not begin. Most of the people and brands are still busy with the last season inventory and the inventory in the channel. So we as a cautious sense are saying that pricing is likely to be under little pressure. But we don’t know exactly how the situation is going to pan out. That will totally depend on the channel inventory and the inventory with the brands till the new season negotiations begin.
Pramod Chimmanlal Gupta
I will further add to one more point. So as we told that June, July has been very soft. So AC being a seasonal business, the only thing which matter is how many months, which months you make money and which months you try to bleed very less. So what we feel this year, the those months where we will have little, you know, soft financials, those number those months will be little more. That is why that guidance has been, you know, revised accordingly for that.
Unidentified Participant
Got it. Thank you very much sir. I enjoy the team.
operator
Thank you. Thank you. We take the next question from the line of Archel from Nuama Institutional Equities. Please proceed.
Unidentified Participant
Yeah. Good afternoon sir. Thank you for the opportunity. Sorry, I’m. I’m just hopping on this industry part. If you could give us a broad. Sense about the industry, you know, from Jan to June because what is happening is the March quarter was phenomenal. And the June quarter has been bit weak. So if you could help us understand Jan to June how the industry volume would have been, how much would have been the outsourcing percentage and how I’ve been on a Jan to June period in terms of volume growth. If you could help us understand that part. First.
Vishal Gupta
The industry did very well from up till April. Actually it although there was a bit of a weakness in the southern market because this year southern market never picked up. But as per our understanding industry was still growing very well till April and overall the sales to the channel were very good in the sense that they probably industry basically brands sold almost close to 20 to 20 to 25% growth. They posted in the month of January, February, March and April. But then from April mid or April and things have started becoming slower and May was a bit of a very bad dampener month because towards the end of the May only the monsoon covered the whole country till actually May 20.
Also the sales in north India were pretty decent and north and west were doing okay. Then Southern and East never picked up this year. So there was a bit of a slow response on those markets. But post May I think everything has just collapsed because the channel inventory is high and out sales from the channel were very slow in the month of June and July and that started reflecting on the the sales from contract manufacturers to the brands and it is now getting reflected in the numbers also although I will say still that the contract manufacturers have till now posted better numbers.
Probably the growth from for The AC business AC, fully fully built AC or as we call finish wood ACs have been still in the even in the quarter of April. May, June is positive to the tune of 10 to 15% by the contract manufacturing industry. But the brands have mostly posted a negative or a decline from last year anywhere between 10 12% to 30% till now. And I think we will have to watch out for the quarter ending September and maybe December and how the inventory actually reduces is going to be important.
Unidentified Participant
Understood. Again I’m going back to the question, you know in terms of for six months if you could give a holistic number, how, how much would have been. Our growth for us? Like if I see it’s 103% YY in fourth quarter for RAC and it’s 15 for the first quarter, does that mean that our volume growth is 50, 60% or 70% tax?
Vishal Gupta
Yeah, our growth will be to the tune of about 65% or so in the first half this year. But as I’m saying for the last three Months we have actually for the month of June, July and now even August we are seeing a decline which is to the tune of 60 to 70%. And this is largely because most of the order cancel have been cancelled because there is inventory with the channel as well as the brands.
Unidentified Participant
Right. And if you could help us understand in terms of the channel inventory because we get to hear that channel inventory for a particular brand is very, very negligible or probably just a month extra considering the monsoon season. So any, any color you could provide in terms of the channel inventory and also with the brands, any, any ballpark number at the industry level.
Pramod Chimmanlal Gupta
If you have. I think overall industry level, the inventory level are probably close to two to two and a half million which should at this point in time should have been less than a million. That’s all I can say. But then there is an additional inventory of finished good with the brands also which in our estimate is to the tune of about 2 million. Are you saying it? It adds as large as what is with the channel is with the brand. Have I understood right? Yes. Right. Does that mean sir, like you know, is there a downside risk to your numbers in that case given the brands are stuff with so much inventory that you know you could have further downside risk to the profit number. What you are guiding for.
Vishal Gupta
We have taken these numbers are on a very realistic basis actually and they are based on some estimations and some calculations and we are very confident of achieving these numbers. We think that these numbers are base minimum which we should be able to do.
Unidentified Participant
Got it sir. Thank you and wish you all the best. I’ll fall back in the queue.
Vishal Gupta
Thank you. Thank you.
operator
Thank you. We take the next question from the line of Kaushik Mohan from Ashika Group. Please proceed.
Koushik Mohan
Hi sir. So I just wanted to understand from. The last guidance that we have, from. The for that guidance to this guidance.
Vishal Gupta
We have reduced it around 90 crores almost. So is that how much in that 90 crores has been perturbed to inventory.
Koushik Mohan
Costing that we’re taking and how much is for the financing costing that we are taking?
Vishal Gupta
Because it’s both the side that is affecting us. Right. So almost close to 40 to 50 crore will be because of the inventory additional inventory which we are carrying. We have about thousand crore of additional inventory which we think we will be able to reduce only in a meaningful way post October November. So for six to seven months you can imagine, imagine the cost of carrying seven almost thousand crores of inventory which we are carrying. Okay.
Koushik Mohan
And remaining around the 40 to 50.
Vishal Gupta
Crores will go for the costing side. Not costing. There’s an operating leverage. See in our business the way it works is that AC business is highly seasonal so you make good money in the season when your plants are running at a good utilization level and you actually lose money because in the off season because you are never able to cover your fixed cost in a good season. Typically these bad months or the lost months are lower number and good months where you are running your plan at optimal utilization are high. Here that situation has changed say and we are seeing probably a higher number of lost months because of the very high inventory and very low offtake from say June till November maybe.
And therefore we are guiding for taking that operating leverage, negative operating leverage into account. We are guiding for a new set of revised profit numbers. Got it. Answer.
Koushik Mohan
On the capex side we are doing around 700 to 750 crore on this year. Like how much is going it for the existing business and how much is. Going for the new businesses that we. Are going to cater for?
Vishal Gupta
Almost 400 to 450 is for the existing business and 300 crores is going for the new business which is refrigerator. Got it. Answer.
Koushik Mohan
With the new business coming into line do we have how much kind of the mix in the revenue are we expecting in next year? So the contribution of the AC in the overall pie comes down. Do we have anything on that side?
Vishal Gupta
Overall contribution of AC will be probably coming down because we are hoping other businesses to to expand faster but nonetheless for the next couple of years, maybe this year and next year you should assume that the number or the change that will happen is not going to be very significant. The first next year is going to be the first year. It’s going to be a ramp up year and I don’t think we should assume more than 200 crores of contribution from the refrigerator. 28 should be a year when we will see probably full year for refrigerator and full ramp up capacity utilization in in the refrigerator business.
Good.
Koushik Mohan
Sir, with the current balance sheet and with the new capital one question. I’m sorry with the balance sheet and with the CapEx what we have we. Are going to do what is the. Optimum top line that we can expect. Sir, when we if we are keeping still at a 5x of the fixed. Assets or like what what kind of.
Vishal Gupta
A top top plan that we can visualize you should assume about 4.5 to 5x on a fully ramped up basis on a net block. That is typically the asset turn we try to achieve in our business. So to begin with it should be at least about 4.5. And then as the ramp up happens and these capacity get optimally utilized, we should be probably close to 5x in the. On the. On the to be ramped up basis. Got it. I’ll come back in the queue. Got it.
operator
Thank you. Before we proceed with the next question, a reminder to the participants, please limit your questions to two per participant. The next question is from the line of Neil Mehta from Equity Securities. Please proceed.
Unidentified Participant
Yeah. Hi sir. Am I audible?
operator
Yes. Yeah.
Unidentified Participant
Yeah. Sir, thank you for the opportunity. Sir, I just wanted to understand one thing. That current inventory levels are at almost 1400 crores. How much?
Vishal Gupta
Generally it will take time to liquidate those inventory because I’m assuming in third quarter because of the star rating, new kind of orders will be assigned. So like.
Pramod Chimmanlal Gupta
No, no. I just want to correct you here. That assumption is wrong. Sure. There will be good amount of orders for five star fees of the old rating. And most of the components are going to be anyhow used even in the new star rating ac. So that obsolescence risk is very minimal, maybe very, very small. Maybe not even 0.2% or 0.3% at best of this 1200 crores of inventory in the AC business which we have.
Unidentified Participant
Okay. So I assume no in incremental capital we have to deploy for those orders, right?
Vishal Gupta
Yeah. Also I want to highlight one thing. That in the month of May, April and May, we were running at almost close to 400 crore plus run rate in AC business. So for both months when, when the season was going on, we can actually do a production of more than 500 crores of AC with our existing capacity. So this inventory levels which are looking high right now are there because there has been order cancellations for the month June and July and August and therefore especially the month of June. As the month of May and June would have been normal, then the inventory levels would have been much lower.
Unidentified Participant
Okay, sir, got it. And so just one last question from my side. So is there any change in unit economics of the compressor plan as of now or like if it’s the same.
Vishal Gupta
No, there has been no change in the unit economics. It’s just that the partner is taking some time to get some clearance from their government. Okay, got it.
Unidentified Participant
That’s it for myself. Thank you so much.
Vishal Gupta
Thank you.
operator
Thank you. We take the next question from the land of Tanish Vora from Pumarta Investment Advices Private Limited. Please proceed.
Unidentified Participant
Hello sir. Good afternoon. Actually I wanted to ask two questions. One is upon how Long will it take for you to actually work with maximum utilization after the capex is done so that we can achieve the ratio of five which you mentioned earlier. And the second question is we have. Seen inconsistently promoter holding going down. Is there any particular reason for that?
Vishal Gupta
I’ll take the first question. Typically whenever you start a new business or new capacity it is typically one to one and a half years before the optimal capacity utilization levels are reached because the new product, it takes time for getting the product validated and product approved with the new with all the customers and then finally to ramp up the capacity. Coming to the second question, if you see the. As you were saying the promoter holding has come down. Promoter in the last 57 years have only sold only once. That was in last year last in the month of May.
This year before that we have raised capital thrice in this company one and once in 21 and then 23 and then 24 December. So because of those capital raises and QIP and money raised in the company there has been a promoter holding which got diluted. Okay, thank you.
Unidentified Participant
If I can ask one more question. I wanted to know what is the. Guidance which you will give in the next year. The.
Vishal Gupta
Too early to talk about the next year right now because even the this the next season has to start and that will start from November, December. So let’s see how the things pan out this year and how the second half goes. We will be talking about the next year maybe sometime in April.
Unidentified Participant
Okay, thank you. All the best. Thank you.
operator
Thank you. We take the next question from the line of Vipro Srivastava from Philip Capital. Please proceed.
Vipraw Srivastava
Thank you. Thanks for allowing me. Sir, quickly on the ESOP option your voice was breaking. Can you just repeat your question? What I’m saying is how much is the e cost for Q1 FY26. Just a minute, I’ll just let you know. Just give me two minutes, I’ll take it. You can in the meantime ask me any other questions if you have. Sure sir. So quickly on the quarter two Sir, I mean August has been weak but are you expecting revival in September and October? I think we will have probably arrival revival probably from the month of November. October is going to be a festival month.
Typically in festival month we don’t see much uptick. What has been our experience is that if the season is good typically then the the uptick happens in the month of October, November and if season is little slow then it happens in November, December. Right sir. So that’s all from mine, just the ESOP cost stats only is of course I’ll give you. In the meantime we can continue with the next question. I’m just asking my team to figure that out. So yes, I am done sir. So you can let me know.
Vishal Gupta
Chair based expense this quarter was 3.27 crores. Okay sir. Thank you.
Vipraw Srivastava
Thanks a lot. Thank you.
Vishal Gupta
Thank you. Thank you.
operator
Thank you. We take the next question from the line of Kur Pandya from ICICI Prudential Life Insurance Ltd. Please proceed.
Krunal Pandya
Thank you. So just want to understand first on the non RAC side so how do you see any impact on the washing machine business and if not what kind of growth? So what are the expansion plans? That is first and second water growth do you expect in the washing machine business? That is first and second on the compressor side. I mean it has got delayed for quite some time. So if you can just let us know what kind of capital has already been deployed and do you think that it, I mean what timeline do you expect or do you think is there any risk to are sunk cost? That is the second question.
Thank you and all the best.
Vishal Gupta
Can you take the first question? Second question I’ll take.
Pramod Chimmanlal Gupta
So regarding washing machine business, fortunately we are seeing a very robust demand like as shown in our quarter one numbers. The growth is more than 35 in that and we are, we are very hopeful that we should be able to have a growth of almost from 40 to 45% in our virtual machine business for FY26. So we are expanding our capacity, we are launching new platforms, we are adding new clients. So we are very confident on the virtual machine.
Vishal Gupta
Coming to the compressor. We are seeing certain delays but we are very hopeful and we are very confident that this business we will be able to do probably it will flip the CAPEX part will slip through the next year. Some part of it we are hoping. We have already done a capex of close to 1.2 billion rupees in constructing the building. Building is almost completed right now. We will be making it if in the coming months we will be utilizing it for our other purposes maybe for keeping some of the inventory and maybe in the season.
But as soon as our partner gets go ahead we will ordering the equivalent plant and equipment and then probably within six months we’ll start installing that. So we are not seeing any risk for basically any issue of the of the content for the building that we have constructed. And by the way that building can also be repurposed for other issues, other. Things if we need that building is just this building is part of our existing campus facing manufacturing. So this building is being used currently for AC products only right now.
Krunal Pandya
Understood. I just want to clarify that.
Vishal Gupta
You got it clear? Absolutely clear. So just so tentatively what timeline we should work with for compressor business. So you know we have been always very transparently sharing the feedback. I, I was in China three back and had a discussion with them. So you know it’s held up at their end right now. Everything is ready. All plant machinery, technicals, all commercials are closed. We are just waiting for that approval. Once we have that approval I think then we’ll put the ball rolling.
Krunal Pandya
Noted. So thanks a lot and all the best. Thank you.
Vishal Gupta
Thank you.
operator
Thank you. We take the next question from the line of Rajendra Singh and individual investor. Please proceed. I would request Mr. Rajendra to please unmute himself and then speak. Rajendra, we aren’t able to hear you. Sir, I would request you to join back the queue. Till then we’ll proceed with the next question. The next question is from the line of Vipro Srivastava from Philip Capital. Please proceed.
Unidentified Participant
Yeah, thank you for allowing me a follow up. Quickly sir, any other QT categories you plan to enter apart from refrigerator and compressors? We keep on evaluating several proposals and several opportunities. But then as we have been highlighting we have a very strict capital allocation criteria and guardrail. And based on those guardrails, only if we approve the new capacities or any new category. We are in the process of evaluating certain categories and as and when we decide decide to go ahead in any of them, we will be able to, you know, give you the information.
Right sir. And so lastly one more on the TV segment where PGS is really with China. So obviously large players in the industry has had a weak commentary. But what’s your view on this? How is it ramping up as far as PG is concerned?
Vishal Gupta
So for us the television business is looking very strong and we have given a guidance of almost around 850 to 900 crores of revenue as compared to last year revenue of 540 crores. So we are maintaining that and we are currently having a very strong order book and the current festival season looking very robust in that.
Unidentified Participant
Noted. Thank you.
operator
Thank you. We take the next question from the line of Mahesh Kaushal from MN Investment. Please proceed.
Mahesh Kaushal
Hi sir. Thanks for the opportunity. So just wanted to check, you know, in May end we offloaded a substantial stake that was a promoter entity. And then from June, July onwards we get such numbers. So just wanted to understand what is the, what was the thought process Then and is there something that is being missed? I mean everything fell off a cliff. Post that. So just wanted to get your sense on that that what happened and what was the thought process then.
Vishal Gupta
Actually as I have stated earlier also in the month of April we saw 70% growth. You know, so we were seeing very strong traction in this business. As I’ve already stated earlier also in this call it was looking very great but suddenly there was has been a drop in the demand and there is a. Actually it’s kind of fallen off the cliff, you know, it has just evaporated.
Mahesh Kaushal
You were not aware of anything in May and that’s the question, sir. Yes sir. That is why we are caught up with so much inventory. That is why we are caught up with, you know, the cost and all those things have gone for a ride. Only because I will tell you what was happening, you know, till end of April or middle of May. You know, clients were hoping that season will open up and people were still continuing the manufacturing. And then suddenly by end of May they took a call that they have to control their inventories. It was very sudden, sir.
Vishal Gupta
I’ll just tell you the reason. See this year till May, in even in May and the north market was doing fine. North and west were doing fine. There was a high temperature. See typically May is the highest selling month in any year for the AC business. This year as the monsoon started getting earlier, first the southern market closed and then abruptly in a very short period of time in May end itself. The whole of the cooling business actually saw. And because the monsoon covered whole of India by May end and that led to lot of cancellations in June.
So we had budgeted when we were giving a guidance, even in the 12th of May was our result. We had budgeted that there will be a slowdown because there was a slow southern markets in the first half of the season. But we did not expect the season to get abruptly ended in month of June itself. And over that July and August have also seen very, very low offtake. In fact, I can tell you in month of April we had a 70% growth. I O y even in month of May we had a 19% growth. In month of June we had a 70% decline.
And in the month of July also we had a 70% decline on a yoy basis in AC business. Okay, fair enough sir.
Mahesh Kaushal
Thanks.
operator
Thank you. We take the next question from the line of Archit Singhal from Barclays. Please proceed.
Archit Singhal
Yeah, thanks for the opportunity. So two questions from my side. Firstly, I mean hypothetically if we were to believe that next year the season would be strong then would we be able to more than make up for the loss in FY26? I mean loss in terms of guidance next year. Yes, if the season will be strong we will be able to make more than makeup. See if you look at our track record in the last four years we have shown exceptional growth rate in our AC business. We have had an exceptional aggregation track record. In fact in a category like AC we have been growing at 100% plus last year and that our AC finish business grew 120% plus.
In fact fourth quarter also we grew 100% plus in the AC business because there was an opportunity and we could see now the environment is such that there is an inventory in the channel right now. The country with the brands also market is very slow right now. So till the time this inventory gets cleared we cannot comment or commit on the numbers. But yes, if there will be an opportunity, be rest assured we will be the first one to bounce back and the bounce back will be very sharp. Point number one. Point number two is long term.
We still remain very bullish and very optimistic in this business. We continue to make significant investments and we are planning very significant. I’ll say ramp up of the capacities or building up of capacities in the coming years we are expanding our capacities in both north as well as western area. We are looking at building a new campus, a very large campus for AC manufacturing in western India and in north that in Biwari we are already going ahead with the capex in the existing plant. So we have not have any change on our long term view of the.
Of the. Of the sector of the company. It’s just that this year we have got off guard caught on the wrong side with huge inventory in the channel and with us also. So we want to be little cautious for this year. Understood. And second question, I mean like you mentioned about the long term thoughts.
Vishal Gupta
So second question is I think on the. In the last call we mentioned the cross block should increase from 1200 to 2200 cr in the next two years.
Archit Singhal
And you also mentioned asset turn of. On 4.5x or so.
Vishal Gupta
So fair to understand FY28 if everything. Remains and we should clock our revenue of 9000 crore or is that that is what is the internal target that we have for ourselves and we want we are doing our all our capex and whatever working we are doing internally we are doing based on those assumptions only. So our long term assumptions do not change because one season has gone wrong.
Archit Singhal
Understood.
Vishal Gupta
And if that Happens, I mean achieve that revenue guidance. The margins which we can achieve in FY28 should better than the FY25 margin because of operating leverage, right? Hopefully yes, not FY25, but yes, we should be able to match or should be near to FY25 margins. Let’s see how it pans out. But yes, we should be able to reach at least 25F by 25 margins. Thank you. That’s it for. Thank you.
operator
Thank you. We take the next question from the Lena Pruchita card game from Iwell. Please proceed.
Unidentified Participant
Hello sir. Very good afternoon. So mainly my question was on the other expenses side, right? So we’ve seen like a huge bump up from the last two quarters in the other expenses side. So how do we see this panning across for the remaining quarters of this year?
Vishal Gupta
What happened was, as I was telling you, that we were caught off guard and we did not actually control our cost and we were still having good commitments and orders which were cancelled at the last moment. So some of those costs are on the higher side. In the coming quarters you will see a good control on some of these costs. We remain very confident that we will be able to control some of these costs in the coming quarters.
Unidentified Participant
So what is your. If you could just broadly tell me as a percentage of revenue, how do you see this other expenses for the whole year?
Vishal Gupta
In the past they have been in the range of about 4 to 5%, 4 to 4 and a half percent. And in the long term that is what we should be seeing the. In the normalized year, that is what should be the number, this other expense number.
Unidentified Participant
Sorry, for this year. Are you not guiding anything this that. I’m saying in the medium term that should be the number on a full year basis that, that four to four and a half percent should be the other expense number which should prevail. Okay, okay. And what about the employee cost, sir? Or how do you see that growing? Should this, you know, kind of reflect our revenue growth? Like in terms of that this year.
Vishal Gupta
The employee cost is looking higher and it will remain probably slightly on the higher side because of the lower growth and the kind of expenses which we are having because of the increases as well as the people which we have added, but it will also get normalized in a normal season which we hope will happen probably from the next year.
Unidentified Participant
Okay, okay, okay. So on the EBITDA margin side, like we’ll see around the 200bps decline, right this year?
Vishal Gupta
Well, we have not built in that steep decline. But yes, there will be A decline on a full year basis. Actually if you see this year from the initial build, initial guidance, additional expenses of close to 50 crores odd will be there on the interest cost because the inventory will be carrying and then there is a some cost which will be there additionally. But still we think we should be able to control the margins in the range of about 1 to 1.25 to 1.5% from the last year at the EBITDA level.
Unidentified Participant
Okay, okay, understood, understood. That’s it. So thank you so much. Thank you.
operator
Thank you. The next question is from the line of Chaveli from an individual investor. Please proceed. I would request Chaveli to unmute and then speak due to no response from Chaveli. Please join back. We’ll proceed with the next question. The next question is from the line of Karthik Soni, Tom Sony and associates. Please proceed.
Unidentified Participant
Namaste.
operator
Yes, we can hear you. Please go ahead.
Unidentified Participant
I have two questions. Downtown OTA but similar.
Vishal Gupta
I think except for Blue Star and I think Hitachi, everybody else has posted more than 20% decline in in their sales in the quarter in this quarter. And second thing is even in these companies especially, I mean they have some other businesses also which have been able to probably help them withstand such a huge decline. By the way, voltage results have just come in probably they have also shown a good decline in the unitary cooling product business here. And I think overall margin, overall the brands have seen in our opinion at least 20 to 25% decline in the month of April, May, June in the sales to the channel.
June was a total washout for most of the brands in our opinion.
Unidentified Participant
Okay, so follow up question. So diversification. What have we have we planned to.
Vishal Gupta
Yes, yes we are planning a lot of diversification and the results of those will be visible to you in the coming years. Okay. Right? Yes sir. As I can see March 31st balance sheet cash position of me around 980 or 980 crores first year. And so you have. Cash position is still 900 crores. We have 910 crores of cash and balance sheet. But short term debt has increased for us from March to now and so. That. About 200 crores. Okay.
Unidentified Participant
Okay. And also the Capex plan is still about. This is a follow up question. The Capex times are still the 750, 800 crores.
Pramod Chimmanlal Gupta
Yes, we earlier were planning 800 to 900 crores. Now it is about 700 to 750 crores. And, and, and that is from account no additional debt. No, we don’t have. We don’t require debt. We have cash in the balance sheet and we will have internal. This inventory will get. This inventory will surely get over by month of January or February. December. So that’s a long time to hold up. We are aware of that, sir. It’s a long time and that’s why we have cut on the guidance.
Unidentified Participant
Okay. Thank you sir. All the very best.
Vishal Gupta
Thank you.
operator
Thank you. The next question is from the line of Arisha Khosla from Nirmal Bagh Institutional Equities. Please proceed. Yeah, hi sir, I’m sorry if I’m repeating my question. I. The call just dropped in between. I.
Arshia Khosla
Have you given any guidance for my 27 on the top line as well as some marginal items?
Vishal Gupta
No, nothing. We have not talked about 27. So any category that you would like to give from 25 to 27. I mean what kind of growth are we. No, no. 27 is too far fetched right now. We will be still focusing a lot on 26.
Arshia Khosla
Understood, sir. Understood. Yeah, that’s it. Thanks.
Vishal Gupta
Thank you.
operator
Thank you. Due to. Due to no questions from the participants, I would now like to hand the conference to the management for closing comments.
Vishal Gupta
Thank you all for joining the conference. Please feel free to contact me or the company for any further questions you may have. Thank you. Thank you all.
operator
On behalf of Axis Capital Limited. That concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.