PG Electroplast Ltd (NSE: PGEL) Q3 2026 Earnings Call dated Feb. 03, 2026
Corporate Participants:
Vikas Gupta — Managing Director, Operations
Pramod Chimmanlal Gupta — Chief Financial Officer
Analysts:
Unidentified Participant
Shalin Choksy — Analyst
Koushik Mohan — Analyst
Vishal Dudhwala — Analyst
Keyur Pandya — Analyst
Bhavya Gandhi — Analyst
Tanay Shah — Analyst
Achal Lohade — Analyst
Mohit Jain — Analyst
Mythili Balakrishnan — Analyst
Abhay Jain — Analyst
Neil Mehta — Analyst
Amey Suresh Tupe — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to PG Electroplast Q3FY26 earnings conference call hosted by GM Financial Institutional securities Limited. 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. This call may contain forward looking statements based on the currently held beliefs of the management of the company which are expressed in good faith and in 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. These forward looking statements represent only the company’s current intentions, beliefs or expectations. And any forward looking statements speaks only as of the date on which it was made. The company assumes no obligation to revise or update any forward looking statements. I now hand the conference over to Mr. Charlene Chokshi from JM Financial. Thank you. And over to you Sir.
Shalin Choksy — Analyst
Thank you, Ikra. Good morning everyone. On behalf of GM Financial Institutional Securities, I welcome you all to the Q3FY26 earnings call of PG Electroplast Limited. We have with us the management represented by Mr. Vikas Gupta, Managing Director and Mr. Pramod Gupta, Chief Financial Officer. With this I will hand over the call to the management for its opening remarks post which we can open up the floor for questions and answers. Thank you. And over to you, Mr. Gupta.
Vikas Gupta — Managing Director, Operations
Thank you, Charlene. Good morning to everyone and 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 we had a good quarter in both room ACs and the washing machine sales. The room AC business picked up in terms of sales. We had a 80% plus YoY growth in our and in our washers. We grew our business by 45% with this quarterly performance. We have been able to grow our RSE business by 27% in nine months of FY26 despite the industry posting almost 15 to 20% decline in the same period. Our washing machine business also has shown a robust growth of 46% in the nine months of FY26.
Our television joint venture Goodworth Electronics has also ramped up well and posted a revenue of 670 crores in the nine months of FY26 with the EBITDA of almost around 16.7 crores. We remain optimistic that that the room AC business will see an increased penetration led growth with the recent rationalization of gst. And we believe that in the medium term growth in room AC business will be robust. We are expanding our capacities in room air conditioners, washing machines and air coolers. And the client engagement across large and emerging brands remains strong. We are maintaining the guidance we had shared last quarter.
We will be using this year to consolidate, focus on operational levers and execute our platform and capacity investments with 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 the India’s consumer durable market and in EGL’s position as to be a key enabler in that space. Our focus remains unchanged to scale profitably, stay capital efficient and deliver consistent value to all our stakeholders. With this now, I hand over the call to my colleague Mr. Pramod Gupta, our CFO to elaborate on the financials.
Thank you.
Pramod Chimmanlal Gupta — Chief Financial Officer
Thank you. Hello and good morning everyone. I’m sure all of you have seen the financials in detail already. Let me take you through the quarter three numbers. Consolidated revenues were at 1412 crores which was a growth of 46% over Q3 last year. Of this the product business contributed 1140 crores for 80.7% of the total revenue. The AC business contributed 932.5 crores which was a growth of 80.5% over the same period last year we had Also and this AC business accounted 66% of the total revenue. Washing machine business was up 45% at 194 crores during the quarter.
Our 100% subsidiary PG Technoplast reported revenues of 1067 crore during the quarter. Now coming to the profitability, EBITDA for The quarter stood 126 crores and net profit was at 60.3 crores. Now in this EBITDA we had a forex loss of 8.2 crores versus the same quarter last year a loss of 1.4 crores. We have also made a provision of 1.35 crores for the impact of new labor code which is a part of employee expense in the quarter. Looking from the balance sheet point of view, we remain quite liquid and our balance sheet is healthy. We have currently cash and equivalents of 483crores.
Return on capital employed stands at 18.6% and our net fixed asset turnover remains healthy over 6x. We are maintaining our guidance which we have given in the first quarter 26 of 5700 to 5800 crores of sales, about 300 crores of profit. We are continuing with our investments in Greater Noida, Supa Rajasthan and Sri CT faculties and the capex will be around 700 to 750 crores. Again reiterating that our long term investment, operational model and growth priorities remain unchanged. With that I would like to open the floor for questions.
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 N1 on their touchtone telephone. If you wish to remove yourself from the question queue you may press star N2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kaushik Mohan from Ashika Group. Please go ahead.
Koushik Mohan
Hi sir, Congratulation for the good set of numbers sir, I just wanted to understand what was our volume growth in this YOVA and qoq.
Pramod Chimmanlal Gupta
This number I will give you offline right now. I don’t have this number handy but you can take it offline.
Koushik Mohan
Okay sir. And also on the balance sheet I can see that we have an inventory of 1280 crores. So do we have a breakup of how much is a finished and how much is the raw material in this band?
Pramod Chimmanlal Gupta
Yeah, raw material inventory is almost close to 1103. 60 odd crores and only 120 crores is just finished.
Good. Which would have been the production probably of the last few days in the AC business. So largely it is the, the raw material inventory which we’re carrying.
Koushik Mohan
And so how are we seeing future growth on on AC sales or the washing machine sales and everything. Like how is the growth over the market side in the inventory side and everything for the clients?
Pramod Chimmanlal Gupta
Washing machine business continues to see strong momentum. We are continuing to grow at about 40 45% growth and we hope to maintain that momentum even in 4th Q on AC side given the fact that there is a very huge channel inventory which is still there and temperature has still not started rising in the southern India where typically the summer starts early, we are cautiously optimistic and we hope that this summer season goes well and we are prepared for that.
But we, we will say that last quarter numbers were largely because of the fact that there was a huge channel filling which was taken care taken by some of the brands because of the rating change etc. And that drove the numbers. But we will have to watch out for how the summer season starts in month of February, late February or Early March to give a clear guidance on the the AC business. But we stand by our guidance and we think that we should be able to reach 5,700 to 5,800 crore sales for the full year.
Koushik Mohan
Got it. Thanks. I’ll come back in the queue. Thank you.
operator
Thank you.
operator
The next question is from the line of Vishal Dhutwala from three Netra asset managers. Please go ahead.
Vishal Dudhwala
Am I audible, sir? Hello.
Pramod Chimmanlal Gupta
Hello.
Vishal Dudhwala
Am I audible, sir?
Vikas Gupta
Yes. Yes.
Vishal Dudhwala
Yeah. So first of all congratulations on a good set of number. So I have couple of questions. First portion, can you quantify your refrigerator units? Like how many units will you produce annually basis?
Pramod Chimmanlal Gupta
Vikasji, can you take this?
Vikas Gupta
So Vishalji, we are putting up a capacity of 1.2 million referees in our three city factory. So that should be up and running by the fourth quarter of the FY27. And so that will be the installed capacity. And in the first year we hope to have a loading of almost around 30 to 40% on the. On that capacity.
Vishal Dudhwala
Okay. And second like as you mentioned that we are on a line of guidance. So if we calculate Q1, Q2 Q3 pad. So we have roughly done 130132 crore of PAT and we require for Q4 160 to 170 crore in Q4. So I just want to know how will we gonna do that? .
Pramod Chimmanlal Gupta
Typically our fourth quarter is the strongest quarter. Even in the last year, last financial year, if you see out of the total pad of 290 crores we actually delivered 146 crores in the fourth quarter itself. And there are multiple factors which work in the favor in the fourth quarter. One is obviously the seasonality of the AC and cooler business. And typically a lot of operating leverage also kicks in during this quarter. So we are hopeful that the trend will probably continue. And there is no reason to doubt that because summer is setting in and we are hopeful that the the plans that we have we will be able to achieve that.
Vishal Dudhwala
But as you mentioned, like you will focus for RAC business in end of the fab. So, so
Vikas Gupta
No, no, I’m saying I never said we will focus on end of the Feb. I’m just saying everybody will get to know how the AC season will pan out only towards the end of February. But the the season is continuing. We have good amount of orders, we are making the ACs as per the plan and we are very sure of the numbers which we have guided you form.
Vishal Dudhwala
Okay. And the third thing, like I want to know that every OEM player are Currently renegotiating their pricing with the OEM players. So how your margin will be secured as OEM player have very clean margin.
Pramod Chimmanlal Gupta
Right now. I’ll be very upfront with you. Percentage margins is not what we focus on. We actually focus on percent per piece margin which is what is what we get to make an ac. And there we are not going to be compromising because of the, the price increase in the commodity. Typically commodity prices are a pass on and therefore maybe with a lag of 10, 15 days or a month maximum, we hope to pass on the price increase.
In fact, whatever inventory we had from the previous year, we are almost exhausted with that and whatever new buying which we have done in October, November, December. Based on that, we have actually asked for the price increase and negotiated with most of the brands for the January February dispatches. And we remain optimistic that we should be able to maintain the piece margin in terms of overall absolute amount which we demand from our customers.
Vishal Dudhwala
So sir, don’t you think like if. You won’t compromise on your pricing you. Can loss your market share to another OEM players?
Pramod Chimmanlal Gupta
Well, we think there are not. Pricing is not the only reason on which the customer typically decides on, on the business. There are multiple factors apart from the pricing. And given the cost leadership which we have, I think that and, and the quality and the, the. The other factors which we give to the customer. The stickiness is rather high and we have seen in the past five years since the time we have started our AC business we have not lost a single client. And in most of the clients our market share has actually increased over a period of time.
Vishal Dudhwala
Okay, okay, there was last question. So do we have the same clientele. As RSV for the refrigerator or can. You just give some light on order book of RH refrigerator?
Vikas Gupta
So basically we are in discussion with all our clients wherever there is a overlap in the product categories. Like there are clients for our virtual machine sense air conditions which are already into the repeater market. So we are in discussions with them. So it is still very early for us to comment on that. But we will keep you updated once you are able to close some kind of a contract with some clients. But we are hopeful to do that in near future.
Vishal Dudhwala
Okay, okay, that’s it from my side.
operator
Thank you. The next question is from the line of carrier Pandya from ICICI Prudential Life Insurance. Please go ahead.
Keyur Pandya
Thank you for the opportunity. Sir, two questions. First on the RAC side you mentioned Q3 sales was boosted by say pre buying from the brand. Has that continued In Jan Fab as well in backdrop of continuously increasing RM prices, I mean metal prices. So just first question on that and second on slightly medium term that at around 1.5 million room ACs you are probably 10% of the overall market share of the AC market and around 20% of the overall outsourced market share. Now from here on is it fair to assume that difficult to gain market share at a very sharp pace.
And in that backdrop what are the growth drivers which are very large? I mean for example TV or washing machine at relatively low scale versus AC may grow at faster pace but not enough to offset absolute growth. So just something on medium term growth drivers, these two questions.
Pramod Chimmanlal Gupta
Yeah, so as I was saying earlier to one question that there is a channel inventory which is on the slightly higher side and obviously because of the higher inventory in the system, brands are right now having a little muted outlook in the sense that they are going little slow. But we have seen a decent order book and we continue to have a good order book. And we are already, you know, seen a 27 growth in the first nine months in the AC business. And we are optimistic that whatever assumptions we have made, which is about 18 to 20% growth in the AC business for the full year, we should be able to achieve that number irrespective of whatever is happening to the market in the next two months.
And we have a good visibility and order book to the same tune coming to the medium term outlook. Yes, you’re right, we have become sizable. We are almost 11 to 12% of the overall manufacturing of AC in India currently and we do have a largest market share. But if you see in the last three, four years because of the PLI and because of the other things, there has been, there has been a good capacity addition which has happened in the brands and a lot of insourcing has also shifted. And in fact in the last two years everybody used to talk about insourcing versus outsourcing.
But given the fact that this AC business remains seasonal, in our opinion the economics is actually not in favor of doing insourcing. And it makes more sense to actually outsource the AC manufacturing. And therefore in the medium to long term we think, and we believe firmly that economics will prevail. And once this PLI and all these things get over, then the capital allocation in most of the cap companies, even the brands will be towards, you know, doing value creation which may not be necessarily happening today by setting up the own capacities. Because the insourcing actually is a very expensive proposition because of the fact that the business seasonality still remains very high and outsourcing at least partially makes much more sense and we think that will continue.
So net, net. What I’m trying to say is that there are two or three growth driver for us still which is one is obviously you know that outsourcing should increase over a period of time. Second and bigger thing is that we think the market growth itself probably should accelerate over a period of time from here because the penetration levels are low and we are probably now for the first time seeing, you know that the continued growth and then last year GST cut also came. So all these things make us hopefully that penetration levels will increase, start increasing.
So overall medium term we remain very positive on the, on the AC business as such. Also I want to highlight one thing. You know you need to do the comparison of AC market with probably China which is much colder country than us and they consume every year 10 over 10 crore acs and, and they make close to 20 crore ac and the largest there makes about close to 5 crores every year. And so that percentage gain or percentage market share probably is not the right way to look at it here. The basic thing that we will have to work is towards basically the product development innovations and cost leadership.
So in, in our terms we call it cost leadership and product leadership and we are every year working to improve both those things. So I think as the penetration grows we continue to remain demonstrate that we can probably continue to show better than the industry growth. Obviously the, the data that we have enjoyed over the last three, four years may not be as high. Like for example even this year the industry is probably seeing 10 to 15% decline at least in the first nine months and we have still posted 27% growth. So that kind of a growth may not happen.
But we still hope that we can probably do better than the industry growth in the coming years also because outsourcing will increase. That is on the AC side. Yes, we are taking lot of other measures to actually improve the medium term growth. Refrigerator is one such aspect. Washing machine is growing faster than the company’s overall growth rate. We are working towards electronic components and there are certain other initiatives also which are in the works which I cannot disclose right now. But we are aware and we are working towards it. But our growth is mostly organic.
We tend to actually believe lot more in organic growth and given the kind of dynamics which we have, we will be continuing to focus on those aspects. Capital efficiency remains very key to our capital allocation decisions and therefore we do tend to actually go overboard on the Inorganic initiatives in our company. We think that the product lines where we are working in India the penetration levels are still low. And we can continue to show very very healthy growth for at least next three to five years. And we can continue to grow at a healthy pace.
Keyur Pandya
Thanks for the detailed answer. Just one follow up. So ref would probably at from zero base can continue to grow at fast pace. Washing machine what is this line of sight for growth say not for just for Q4 but say FY27 or faucet that matter FY28 also. But at least for 27 that is first and second this land finalization in Maharashtra under the subsidiary next generation. Any specific purpose? I mean the extent the quantum of land is much higher. So if you can just give more detail on utilization or uses of that land. Thank you and all the very best.
Pramod Chimmanlal Gupta
Vikasji. Can you take the first question and then I’ll talk.
Vikas Gupta
So regarding washing machines, we are seeing again there is a movement towards the outsourcing especially in the semi automatic category. As this segment is very price sensitive and it’s a mass segment product. We are seeing a trend where the brands are starting to outsource. So the semi automatic market as a whole may not be growing but we feel because of the outsourcing phenomena increasing there will be a growth in the manufacturing semiautomatic washing machines with the players like us. And on the top of that we are already working on the fully automatic top load platforms and we are going to start our work on the front load washing machines as well.
So we have a decent visibility and we are very confident that we should be able to maintain a strong growth rate in the FY27 also which will be similar to what we have achieved in the past years.
Pramod Chimmanlal Gupta
Coming to the piece of land that we have taken. As we have been saying that we think that the potential of growth in each of the categories where we are working is very still very high because penetration level remain low. And we think that India will eventually go China way in terms of penetration. And some of these product lines especially AC washing machines and the capacity which we have to plan for the next phase of growth actually have to be keeping in the mind the kind of potential that we see. So as I was saying, you know that today we are just making 115 billion ac.
Is that the market that we have today for the industry and the largest player which probably us or one of the competition is actually making just about 18 to 20, sorry, 1.8 to 2 million ac. But if this industry continues to grow and we have done some simulation at RN. We think that we reach maybe 3 to 4 crore acs by 3132. And even if we maintain our market share we will have to probably be making probably close to 50 to 60 lakh acs over a period of time. Now if that is the kind of capacity which we have to plan then the kind of land and you know the other utilities which we have to plan has to be multiple times of what we are doing today.
So keeping that in mind now the the internal thought process in the company is to work towards larger campus where we can actually have a lot of backward integration through and that will drive the cost leadership in the company. And also we will be able to work on you know technologies and innovations on that in these large campuses where we can have fully integrated manufacturing facilities. So that is the thought process and that is why we are we have taken these two land parcels. One is Sri City which is 52 acres and this is a 72 acre parcel in Ahmednagar.
Vikas Gupta
Just to add to what Pramodi has said Just to add to that please understand we have already like our land utilization in the current factories in invest in district of Ahmednagar is already saturated. And what we feel as Pramodi said that we for the next phase of growth for coming five to seven years we will require a large parcel of land. And as a company what we are trying to position is we are trying to create three large manufacturing hubs. One in north, one in the second one in west and the third one in south.
So all these locations will be the going forward the multi product locations where we will be producing all our product categories going forward. So to have a better utilization of the assets and to have economies of scale at all these three locations and where we can offer the products that we manufacture from these three locations to have a better cost efficiency in the terms of logistics cost for all our customers. That is also one of those ideas.
Keyur Pandya
Thanks a lot sir and all the best. Thank you.
Pramod Chimmanlal Gupta
Thank you.
operator
Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Management Ltd. Please go ahead.
Bhavya Gandhi
Yeah, thanks for the opportunity. So is it possible to provide the CAPEX split for the 700 crores? How has it progressed as of now? What are the commissioning dates and expected revenue and margins from this capex and when can we expect those revenues to start reflecting in terms of numbers?
Pramod Chimmanlal Gupta
So out of the 750crores 300crores we had earmarked for the the refrigerator facility which we are putting up in the southern India and this will this product. This project is going to actually become operational only in the fourth quarter next year. We just did a groundbreaking there.
Almost close to 200 crore kind of a capex has actually gone in the washing machine capacity and the new campus which we have actually built in greater Noida and that is almost ready and we hope to start doing commercial production very soon in that some work as a trial production etc is going on already there. There is a. Another small campus which we are building in biwadi of about 10 acres where we are actually in the final stages where we have actually going to be putting up the tool room and some of the facilities for basically our plastic molding business especially for the sanitary wear where we are doing some interesting work.
So that campus we hope to start probably by this quarter end and then we have done some Capex in the ongoing facilities in in Supa and Biwadi for AC manufacturing. Both of those are also ready and they will be actually contributing in the fourth quarter. Apart from that there is a land parcel which we have bought in in super for 72 acre close to about 84 crore has been spent on that that we will be probably looking to start construction somet maybe next year. So that is the breakup of the capex. Large part of the capex will actually start contributing in the next one year in our opinion and some of the capex will be operational this year only barring the.
Most of the capex will be operational this year barring the capacity which is coming in the refrigerator in Sri city.
Bhavya Gandhi
So. So just to sum it up for the next year what could the growth number look like? I’m trying to understand.
Pramod Chimmanlal Gupta
It’s too. It’s too early to say. See the issue is this that it will depend on the market conditions. EC still remains a very large portion for us and there the. The. The how the actual summer season pans out this year is going to be quite interesting to watch out because what has happened is that because of the.
The channel inventory things are still not very clear but we remain optimistic that the medium term growth outlook is good and we are not planning for season to season. Obviously we are taking a three to five year view on all the capex which we do and therefore we are optimistic that all the capacity which we are creating will be optimally utilized over a period of next three to four years.
Bhavya Gandhi
Got it. And what could the revenue number look like basis all this capex that we are doing? I understand maybe next year you are not able to Guide.
But once the 750 crore capex rectifies, what could the number look like in terms of revenue? Should we take the asset turn that you mentioned 4 to 5 or how is it like?
Pramod Chimmanlal Gupta
Yeah, typically the, the on a fully operational basis we internally try to have a fixed asset turn of about 4x at least on the overall numbers. And that is what is at least you should assume will reap the contribution which will be coming from the ongoing capex in the next few years.
Bhavya Gandhi
Got it. And on the PLI scheme will it affect in outsourcing players as well? Because I think that is usually a pass through so that benefit also will go away. While you say that insourcing will be reduced, the PLI goes away. Will it impact outsourcing EMS players as well in terms of margin?
Pramod Chimmanlal Gupta
No. See what I’m talking about is today that in the last three, four years there has been a lot of capacity which has come up in the system and the capacity has both come in outsourcing players as well as the brands themselves. And actually if you see on an overall basis there has been a shift towards insourcing because almost the outsourcing imports which were there, they have become zero.
So what has happened is like since 2021 some of that gap which was filled by some of the outsourcing players like us and some of it went actually in the insourcing capacities of the brands. Now what is happening is that some of these brands actually change their, their policies, internal policies to start outsourcing because also they thought that there was an additional advantage which they were getting because of the, the PLI benefits or those things. But what we are seeing and realizing is that the, the most of the brands are not able to utilize the capacities as per plan and most of them for most of them at least our analysis says that the, the manufacturing remains uneconomical in the sense that it is not doing any value creation for them.
So they have created allocated huge amount of capital to that and still most of the manufacturing is just not making sense because they are able to get the product from them, from players like us at 2, 3, 4% cheaper than their factory gate cost. And that is why the outsourcing happens. And therefore this phenomena of putting up the capacities probably at some point in time will start producing in the brands and they will probably start outsourcing more. That is what all I am trying to say and therefore I remain very optimistic that growth opportunities are likely to be good in the medium term.
Also.
Bhavya Gandhi
Got it. Just I mean a follow up that pli does it affect us? Because once the PLI goes or is it only to the brand?
Pramod Chimmanlal Gupta
Nothing like that is going. PLA is going to go away for everyone. But today also when we do the the pricing of the product in none of the product pricing the PLI benefit passing is coming. It is only about the net price at which you are going to product supply the product to the end brand. Now if the brand is finding the price competitive Visa with its own manufacturing or with the other outsourcing company then they try to outsource to companies like us or they will give the business to us or they they may decide whether they want to do it manufacturing.
So that is the way this business works.
Bhavya Gandhi
Got it? Fair enough. Thank you so much. Thank you so much for the elaborate answer. Appreciate. Yeah, that’s it from my.
operator
Thank you. The next question is from the line of Tanesh Shah from Dam Capital. Please go ahead.
Tanay Shah
Yeah, hi sir, Good morning. Congratulations on a great set of numbers. So just one question first on the AC bit, right. You mentioned that the inventory levels are on the higher end. So what according to you is the industry inventory levels let’s say at both on the brand and channel end?
Pramod Chimmanlal Gupta
I think the total number in my estimation is probably close to about 5 million which is there in the channel plus brands. And typically this is slightly on the higher side in comparison to typically what the number is. And one of the reasons has been very, very slow sales in this year even in the off season. So if you see the sellout from the channel to the end customer has actually not picked up even after the, the GST cut and that is what probably is the reason that the, the inventory has actually piled up in the system.
Tanay Shah
Yeah, so. So given that the inventory obviously already is at around 5 million odd and you know, summers yet haven’t picked up, you know, to a great extent, you know what kind of gives us the confidence on you know, the fourth quarter and the first quarter product. I know that you did mention that you have healthy order books but you know, from that sense, you know what is your outlook on you know the RAC for let’s say 4Q and 1Q.
Pramod Chimmanlal Gupta
So 4Q we are maintaining, see despite showing a very robust growth in this quarter of about 80% I’m still maintaining about for a full year guidance of about 15 to 17% growth in the AC business in the sense that first nine months we have seen a growth of 27 and we are still projecting a growth of about if you see the numbers which we have given in Terms of the, the guidance. So we are still talking of a full year guidance of that number. So we are expecting that whatever acceleration now will probably happen is towards the end of the quarter.
In fact we are hoping that because, because see it is also the reaction of the brands. Right now manufacturing is slow because sales are slow generally with most of the brands and with also the outsourcing companies because the sellout is just not picking up the way it should have picked up from the channel. But I am hopeful that because this, this is typically the peak manufacturing season. January, February, March. Now if in January and February you are not doing a peak manufacturing in the industry as a whole, then there will be a huge pressure which will probably come if the, the season is normal in March and April.
And, and, and that is what I think is probably likely to happen once we see the season getting into effect today actually everybody is in a wait and watch mode. Also there is one more reason. Most of the channel is sitting on a very low price inventory. And now given the price of commodity has risen so sharply, the price increases has to be taken by most of the brands as well as I think all the contract manufacturers. Now channel is still reluctant to actually absorb the full price hike because outselling is still not picked up in a very big manner.
So I think once actual out selling happens, which is probably going to happen towards the end of this month in my opinion, then we will actually get to know the full picture and final picture.
Tanay Shah
Right. So I think the summer needs to be very strong for you know, the outlook to fall in our favor. And folk you may just temporarily see some sort of, you know, good.
Pramod Chimmanlal Gupta
Yeah, yeah. See I’ll tell you the reason. You have to look at the response function also see what happened for us. Most of our brands were not doing manufacturing in the month of July, August, September and October. November was slightly slow, but still they were okay. And then December everybody came asking for the product because they had to fill the channel. Now same thing is probably going through in the, in the, in the, with the brands and channel that right now everybody is a bit slow because everybody is waiting and watching. And if you know March is okay and it’s a normal summer, then probably we will see everybody coming and asking for the products maybe in March or April.
Tanay Shah
Got that? Got that. So fair enough, Fair point. That makes sense. So and second is our current capacity right now for AC is around 400.
Pramod Chimmanlal Gupta
It’s about 4 point. Yeah, yeah. 425k a month is what we can make every month.
Tanay Shah
Okay. And we’re expanding that to around 450, correct?
Pramod Chimmanlal Gupta
No, no, right now it is already expanded. So like there is a 425k, we can make a split AC and about 50,000 window AC is what we can make every month.
Tanay Shah
Understood. And so on the refrigerator piece, right. I mean, could you just speak a little more on, you know, what our plans out here? 1.2 million capacity which you’re sort of putting up, you know, what is the outsourcing opportunity or given that even competition is putting up large capacity cities. So you know, what are the product segments which are targeting DC or ff? You know, just some more color on how we’re looking at the refrigerator piece.
Vikas Gupta
Yeah. So please understand what we feel as it has happened in the, in the washing machines and automatic category as it is happening in the RSE business as well. We feel the outsourcing trend will increase in coming times, especially in the single door direct cool category of refrigerators because again these products are very price sensitive in the mass second products and we feel that it will grow, the outsourcing will grow in this particular segment. And that is the first segment that we are targeting to look into. And we are already developing a product in the single door category which would be up and running as we start the mass production towards the quarter four of FY27.
So we feel going forward that we will be adding frost free two door product also in that lineup. Our location of the plant for manufacturing of refrigerators in southern India we feel is a unique advantageous position for us because there are not many large manufacturing capacities available for refitter in southern India. And logistics and the freight cost plays a very important role in bringing a product all the way from northern India to southern India. So we feel that we will have that kind of attraction from the branch to pick up the inventory from our plant in southern India for southern India markets.
So we are hopeful for the good business coming through in. In lift the category.
Tanay Shah
Fair point, sir. Fair point. Thank you so much for answering my questions and wishing you all the best.
Pramod Chimmanlal Gupta
Thank you.
operator
Thank you. The next question is from the line of Achel from Nuama. Please go ahead.
Achal Lohade
Yeah, good morning sir. Thank you for the opportunity. Just two quick questions. First. In terms of the margin in this quarter 3Q, was it, was it normal or was there any pressure on margin for the third quarter? Sir, for the rec business.
Pramod Chimmanlal Gupta
There was a bit of a pressure on the REC margins because we wanted to actually gain the market share and also because we had a high inventory. So we were a little bit under pressure on that. But I’ll just also like to highlight here one thing that there are two parts to the margin.
One is obviously the gross contribution which you are seeing that is looking on the slightly lower side this quarter because of the fact that we have actually shifted to SAP across the whole organization. And in the previous ERP which we were having, there were certain raw material which we used to classify as consumable, which used to be part of other expenses. They have actually gone up which has actually impacted the AC margins by almost close to 150 basis point and overall margins at the gross level by 120 basis point. This during this quarter. That is one of the reasons why gross contribution is looking up.
But then at the same time because of that the other expenses are looking lower. Now coming to the fact, yes, this quarter, just to, you know, gain the market share and also because the industry and the companies were the, some of the clients were having a little bit of a pain, we have tried to support them wherever possible by compromising a little bit on the margins. But we hope that that situation is over now and now we are comfortable. And also most of the brands are trying to take a price increase and we have also taken a price increase in January and the February delivery.
So that situation is almost over now.
Achal Lohade
Got it. And just a clarification on the, on the channel sales, you did you say channel has seen a 10. The retail sales is actually 10 down in first nine months and for us it’s 27 growth. Have I understood the number right, sir?
Pramod Chimmanlal Gupta
Yeah, yeah. So I think the, the channel sales generally by most of the brands and is down by, in our opinion from the numbers which we have done and by anywhere between about close to 10 to 15% and we have still been able to manage a growth of 27% for the nine months in this year.
Achal Lohade
Got it. Thank you. Those were my two questions. I’ll call back in the queue. Thank you.
Pramod Chimmanlal Gupta
Thank you.
operator
Thank you. The next question is from the line of Mohit Jait from Tara Capital. Please go ahead.
Mohit Jain
Hello, can you hear me, sir?
Pramod Chimmanlal Gupta
Hello? Yeah, I can hear you.
Mohit Jain
So you talked about the channel inventory and the overall inventory and you said for channel plus brand it is at 5 million and which I believe earlier you have in this YouTube call said that as its first member it was around five one and a half to two million for the channel only now with such high inventory and I guess Blue Star has hinted that they needed, they need at least 10% price hike to, you know, pass for the recent increase in the RM and the iron depreciation.
So do you think with such high inventories and with the summers not starting as of now, even slightly delayed in India and northern India is also right now having very cool weather, do you think there’s a likelihood that the price hike may not happen for at least next few months unless the inventories get depleted first?
Pramod Chimmanlal Gupta
I don’t think so. My sense is this that see because the price increase will also happen because most of the brands are now selling only. In fact all the brands are selling only the new be rated products on which they are obviously charging slightly higher price than what they were charging for the like to like basis in the earlier rated thing.
That is one part. And because on the under that gap they will be able to charge some pricing fees. And it’s actually price increase is always, you know, happens or the price adjustment always happens when the sales start to pick up. So as I’m saying, probably yes, right now the price increases may be slow. But as soon as we enter the February and March thing, I think most of the brand will probably enforce. Of course the, the price increase and price increase can happen in many ways. There are several schemes which they keep on running.
Some of those may be withdrawals or there will be some other measures which will take to take a price increase. But price increase is surely likely to come. There’s no choice. Because the kind of movement which we have seen in the commodity, especially copper and aluminum, it’s not possible to actually absorb that kind of a price increase by anybody.
Mohit Jain
Okay. Okay. Thank you sir.
operator
Thank you. The next question is from the line of Krishan from Hari Capital. Please go ahead.
Unidentified Participant
Hi. Good morning sir. So I have one big question. What are the effects in the SC manufacturing business for us in terms of fixed asset and the total acceptance? Just give me a second. I’ll just tell you the AC business, the asset terms also.
Pramod Chimmanlal Gupta
Just a minute. If you have some other question like we can follow up with that. Yeah.
Unidentified Participant
Okay. And with brands having set up significant capacity over the last few years, do they use outsourcing partners for demand beyond their own capacity or is there some other dynamic sector play where utilization is similar for our own plants, branch plants and outsourced plants?
Vikas Gupta
So please understand the outsourcing in RAC segment is not only influenced by the seasonality or the, of the, of the, of this product. There are other factors also which play into the equation. Because it is not possible for the branch to make all the, all the different SKUs, all the different models that they want to give to their channel. Partners because they would like to have different model liners for the different channel sales channels like the for the online sales they would like to have a different model lineup and for the offline sales they would like to have a different lineup of models to avoid any channel conflict.
So that is basically called as a DMDC means the different models for different channels. So in that case also the brands are always looking to outsource because they will also they will try to pick up certain models maybe for the online or for the large format retail chains they will try to pick it up from the contact manufacturers like us. So there are various factors that play into the outsourcing game and I feel the we have already said this thing in our call and there were previous callers also asked this question. So we feel outsourcing is a phenomena that is growing.
It can be seen from the numbers of the the contact manufacturers how the sales and the revenue has grown for the contract manufacturing companies in our space as compared to whatever is the growth of the industry.
Pramod Chimmanlal Gupta
Coming to your first question about the net fixed asset, the total net fixed assets that we have deployed as of December in the AC business are close to about 800 crores and as of 2012 month we are having probably a fixed asset. Turn in on that at about 5.4x on that business.
Unidentified Participant
Okay, thank you.
Pramod Chimmanlal Gupta
Thank you.
operator
Thank you. The next question is from the line of Maithili Balakrishnan from Alchemy. Please go ahead.
Mythili Balakrishnan
Thank you for the opportunity. A couple of questions. Wanted to check with you whether the current quarter had any PLI or any other government benefit that we have received.
Pramod Chimmanlal Gupta
There was no PLI in this quarter. PLI typically comes to us in the fourth quarter and we will be taking that PLI as and when we will get the confirmation from the government on that. And that will be last year’s PLI which will be 37.5 crores which will be coming in the fourth quarter to us.
operator
Most likely we’ll have 37.5 crores as PLI in 4Q. Yes, got it. Any other government scheme like there was a Maharashtra scheme etc which was that there has been nothing per se in our margins. Right.
Pramod Chimmanlal Gupta
There is a 1.2 1.5 crore kind of amount which keeps on coming from the PLI for the PG electroplast which is there in the quarter.
Mythili Balakrishnan
Got it. In terms of the growth plans ahead. Right. I wanted to get a sense of what is happening on the compressor side. Is there any development on that front?
Pramod Chimmanlal Gupta
We are in touch with our partner and we will be updating you as soon as we have any further information on that. But we are very, very hopeful that we should be able to close it very soon.
Mythili Balakrishnan
Got it. And my last question is on this growth, we have done so much significantly ahead of what has happened on the industry side. Just wanted to get a sense from you of you know how you have managed to get this growth. Is it wallet share that you have grown or you know how exactly you have done this? Because this is quite, quite a very, it’s a very good number. When you especially compare it with what has happened in the industry.
Pramod Chimmanlal Gupta
Obviously there are two, three reasons. The brand, some of the brands with who are our key customers there, the outsourcing is probably today much more than the in house manufacturing. That is one, and they have actually continued to do that in the fourth quarter also to fill the channel. Second thing is that probably we have gained market share visa with the other contract manufacturers also. And that is also the reason because of which we have done well. But to put things in perspective this numbers are looking too good. But overall we have done close to 4.8 lakh ac manufacturing in the fourth quarter.
So on overall numbers they are not so big number. But yes, because this is typically a smaller quarter in comparison to fourth quarter. So that’s why the numbers are looking on a percentage term slightly higher.
Mythili Balakrishnan
Good, thank you and all the best for the quarter. Bye.
operator
Thank you. The next question is from the line of Abhay Jain from Heim Securities. Please go ahead.
Abhay Jain
Hi sir. Congratulations for the great set of number. I have only one question. In the recent budget the PLI for the white goods AC and LED lights has been significantly increased to more than 1000 crores. Your view on that regarding PG as it has one of the highest market shares.
Pramod Chimmanlal Gupta
No, no, that is the. The out outlay on the budget. But that PLI was always there. Now see the PLI is entering the fourth year of its being. Now in the fourth year the total outlay to this PLI was 6,000 crore if I’m not wrong. And therefore every year the, the.
The money which has to be distributed to the successful participation participants who meet all the criteria has to go up because it is based on the percentage of sales and sales targets on an incremental basis are going up every year. So that’s why we are seeing a increase in the, the. The outlay by the government in this quarter in this year. But this thousand crore is a part of that overall 6,000 crore which was initially envisaged for the industry at the beginning of the pli.
Abhay Jain
Okay, thank you for the clarity sir and all the best for the future.
Pramod Chimmanlal Gupta
Thank you.
operator
Thank you. The next question is from the line of Ames Suresh Tupe from Bob Capital. Please go ahead.
Amey Suresh Tupe
Oh hello sir.
Pramod Chimmanlal Gupta
Hello.
Amey Suresh Tupe
My first question. Yeah, so my first question is on the rec segment. Like I just wanted to know like the. Did the recent growth came from like existing customers or were there any new client additions? And secondly
Pramod Chimmanlal Gupta
Largely from the existing customers.
Amey Suresh Tupe
Okay. Okay. So no new client additions.
Pramod Chimmanlal Gupta
No, no there are new clients but typically the in the first, very first year new client typically is very very small percentage of the overall numbers. Because see we are doing very large number of AC in the very first year. No customer is actually going to buy few lakh ACS from you.
So typically the see like we are making close to about 17, 18 lakh acs is what we have done in the last financial year and this year will be probably going to close at close to 20 lakh ac in the first year. The, the. Even the biggest brands normally do not you know, do more than 1, 1 and a half lakh EC. Then the smaller number. Smaller brands are typically much smaller in the very first year because they are testing you and they are working with you for the first time. It’s only in the second and third year that the big ramp ups happen.
Amey Suresh Tupe
Okay. And secondly on the type to manufacture POS devices, could you share like how the current order book for POS machines is shaping up and what kind of demand visibility you have there?
Pramod Chimmanlal Gupta
No, I didn’t get discussion.
Vikas Gupta
It’s a point of sale devices. That we have entered into agreement to manufacture for PAC Global. So please understand our models are already under testing and evaluation with the Indian customers and we are hopeful that in coming one or two months we should be able to have the order book from them and we will be sharing the visibility with you in the due course of time on that.
Amey Suresh Tupe
.Oh, okay. Thanks for explaining about that. And one last question, like it’s just a bookkeeping question. Could you confirm the cash flow from operations for 9 month FY26? Hello,
Vikas Gupta
Can you take that the cash flow from the operation offline?
Pramod Chimmanlal Gupta
Yeah, offline. We will have to take it offline. I do not have this number handy with me right now.
Amey Suresh Tupe
Okay, thanks for answering my questions. Thank you.
Pramod Chimmanlal Gupta
Thank you.
operator
Thank you. The next question is from the line of Neil Mehta from Equidistant Security. Please go ahead.
Neil Mehta
Yeah, so thank you for the opportunity sir. Given that the total inventory in the system right now as you mentioned is Already higher. Almost around 4.5 to 5 million including a brand channel. What is driving the decision to further build the raw material inventory which is almost around 11 billion that you mentioned? Is this linked to anticipated demand recovery or you know, supply side risk? And how should we think about inventory convers conversion and total capital? Thank you sir.
Pramod Chimmanlal Gupta
Previous quarter when we started the.
operator
Sorry sir, we are unable to hear you.
Vikas Gupta
I’ll take this.
Pramod Chimmanlal Gupta
Hello.
operator
Yes sir, you are audible. Please go ahead.
Pramod Chimmanlal Gupta
We had an inventory of close to 6 and a half lakh ac for the manufacturing this quarter. We have actually done 4.8 lakh acs already. We did a built and then this quarter. What has happened is on an average the price of the raw material has moved up for the last quarter itself by about 10 to 15%. And we have actually reduced the AC inventory, AC division inventory from the third quarter by almost 78% 8% there. So effectively the number of AC inventory which we are carrying is down by almost 15 17%. So right now we have close to about five and a half lakh inventory which we were carrying as of the.
As of the December 31 in the AC division. Also I want to highlight that typically January, February, March is the peak manufacturing month for us. And during the last year we had a. We. We had a very good growth and we did a manufacturing of almost close to 8 lakh acs in the last quarter. And right now I am carrying an inventory which is very normal given the capacity that I have. We have a capacity as I said of about 4.2 lakh, 4.25 lakhs of ACs as well as about 50,000 window.
operator
Mr. Mehta, you want to ask more question.
Neil Mehta
That is from my side. Thank you sir.
operator
Okay, thank you. Ladies and gentlemen. That was the last question for today on behalf of JM Financial Institutional securities limited that concludes this conference. Thank you all for joining us today. And you may now disconnect your lines.
Pramod Chimmanlal Gupta
Thank you.
Vikas Gupta
Thank you.