V-Guard Industries Limited (NSE: VGUARD) Q3 2025 Earnings Call dated Jan. 29, 2025
Corporate Participants:
Mithun K. Chittilappilly — Managing Director
Ramachandran V — Director and Chief Operating Officer
Analysts:
Aditya Bhartia — Analyst
Natasha Jain — Analyst
Rahul Agarwal — Analyst
Achal Lohade — Analyst
Keyur Pandya — Analyst
Archit Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the V-Guard Industries Q3 FY ’25 Earnings Conference Call, hosted by Investec Capital Services Limited.
As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an updator by pressing star Ben Zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Aditya Bhartia from Investec Capital Services Limited. Thank you, and over to you, sir.
Aditya Bhartia — Analyst
Thank you,. Good afternoon, everyone. A warm welcome on behalf of Investec India to the Q3 FY ’25 earnings call of the. We have with us the senior management team, represented by Mr. Mithun Chittilappilly, Managing Director; Mr. Ramachandran, Director and Chief Operating Officer; and Mr. Sudarshan Katsuri, Chief Financial Officer.
Now I hand over the call to the management for initial comments, post which we’ll open the floor for Q&A. Thank you and over to you, sir.
Mithun K. Chittilappilly — Managing Director
Yeah. Thank you, Aditya and Investec team for hosting today’s call. A warm welcome to everyone joining us today to discuss our company’s operating and financial performance for the 3rd-quarter of FY ’25. I trust all of you have the opportunity to review the investor presentation that we had shared earlier.
In Q3 FY ’25, we reported consolidated net revenues of INR1,269 crores, reflecting a Y-o-Y growth of 8.9%. Overall consumer demand remained moderate during the quarter. Our electronics segment continued its strong performance with a revenue growth of almost 28% Y-o-Y, building on a robust half. This segment maintained the momentum well into Q3. In the electrical segment, we registered a growth of 1.2%. Demand for wires, which is the largest category under the electrical segment was impacted due to commodity price fluctuations.
The Consumer durables segment grew by 8.1% Y-o-Y during the quarter. Demand for kitchen appliances continues to be muted, while water heaters also were impacted by late-onset of winter. Sun Flame reported a top-line growth of 4% Y-o-Y Q3, the general trade business registered a healthy growth, while the orders from PSD continued to be lower. In Q3 FY ’25, the market demonstrated a strong performance with 15.8% Y-o-Y revenue growth, contributing now 48.4% of total revenues, while the South market grew by 3.7% Y-o-Y.
Gross margin improvement is sustaining on back of higher share of in-house manufacturing, cost initiate cost-saving initiatives and gradual shift to premium portfolio. We have reported a gross margin of 36.2% in this quarter compared to 33.7% in Q3 last year, an increase of almost 250 bps. EBITDA in excluding other income was INR104 crores in Q3, an increase of 2.5% on a Y-o-Y basis. Higher A&P spend, particularly in led to an EBITDA margin of 8.2%, which is 50 basis-points below 8.7% in the previous year. Employee costs rose significantly Y-o-Y due to significant reversals in the previous year 3rd-quarter. Working capital remained steady, ensuring strong — strong cash-flow generation.
The repayment of long-term debt relating to Sunflam acquisition is progressing as planned. We are on-track to fully repay the loans by the financial year end. Our Board has approved a INR100 crore investment into our VCPL with Consumer Product Limited facility at Hyderabad, which will produce both TPW and. It will be funded in phases through internal accruals.
Overall, our performance for the nine months is in-line with our annual plan. We look-forward to the upcoming summer season with the expectation to deliver a robust performance.
With that, I conclude my opening remarks and I would like to thank Aditya and the team at Investec for hosting this call and would like to request the moderator to open the floor for Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Natasha Jain from PhillipCapital. Please go-ahead.
Natasha Jain
Thank you for the opportunity and good afternoon, sir, and congratulations on a good set of numbers. Sir, my first question is on your Southern region growth. Now the growth has considerably moderated compared to the past quarter run-rates. So any reason — any particular reason why such a low-growth here in the southern region?
Mithun K. Chittilappilly
So the South market has a larger contribution from the wires segment. So a lot of our categories, especially the well-established and older categories, we have a very decent share of revenues coming from. But in the case of wires due to the way the market is structured, the price competitiveness, our inability to offer differential pricing, et-cetera, our revenue — a lot of it still comes from South. So the decline in wire has impacted South market more adversely than North, non-South.
Natasha Jain
Understood. Sir, our channel checks also suggest that I think barring Andhra Pradesh, central government has curtailed certain spending, which has led to slowdown in southern markets. So is that also any — is that a phenomenon that you are also observing underground?
Mithun K. Chittilappilly
Ram, you want to take this?
Ramachandran V
Yeah. So fundamentally, we — what we are observing is like you know, the wire performance is more linked to commodity volatility and typically whenever there is no slow — I mean whenever there is a commodity increase or decrease, there is upstocking or downstocking that happens, right? And this is related to that. If you look at our broader portfolio, which is a non-wire portfolio, we’ve had the challenges mainly in water heater because the winter has been not as expected, particularly October and November. It was a related winter.
So the summer category sales have been good than winter category sales have been weak, okay. The only area where we have observed underlying consumer demand challenges is in kitchen. A kitchen as a category now I think in the third consecutive year, we are seeing some challenges in growth, yes. Also, I think if you look at the southern states, yes, AP and Telangana seems to have a bit more challenge in terms of demand compared to the other three states. That’s what we have witnessed over the last three, four months.
Natasha Jain
Got it, sir. Thank you so much. Sir, my second question, so just in continuation to that. So 4th-quarter, you mentioned about wires, that’s a high contributor in your southern region. So 4th-quarter, are we seeing some kind of upstocking happening in terms of buyers as a category?
Ramachandran V
So yeah, I think there has been an increase in copper prices in January and there has been a round of price increases that has been announced in the market and that is has you restarted the upstocking for at least in January. So we are only one month finished in the quarter. So it’s very difficult to talk about going to happen in the quarter, but January looks good.
Natasha Jain
Got it. And sir, my second question is on your electronics segment, sir, very good set of numbers. Congratulations once again for that. Can you throw some light as to what was the growth between batteries and stabilizers? And in terms of margins, are we done in terms of getting there where we wanted to, we can still see some kind of expansion going-forward in margins.
Mithun K. Chittilappilly
So the first part is we don’t give out product-wise numbers due to confidentiality. The second part, I’ll give a qualitative answer. Yes, we have invested in manufacturing batteries at our new factory in near Hyderabad and it’s completely now online. All the equipments have been installed and they have started to produce in a good-quality. So definitely that is also helping us. So the margins in batteries have improved considerably because that was our hypothesis to set-up the factory. So in that sense, yes, AJ is helping us in the electronics. But we have noticed that sales have happened across categories with maybe a slightly higher-growth happening in our solar rooftop solution business, which is a very new business. It is small, but it’s growing very fast. So apart from that, there has been growth across other electronic categories.
Natasha Jain
Got it. And sir, in terms of margin expansion, are we there or we can still expect some more expansion here on?
Mithun K. Chittilappilly
So I think we are — we have had continuous improvement in gross margin. I’m talking about a company-wide gross margin. And last two years, we have significantly taken-up and improved our margins. I think most of our investments are over as far as manufacturing is concerned. There is one more plant that is coming up to manufacture PPW funds and fans that we are going to start — that’s already working started and we hope to commission in the next 18 months. So with that little more, maybe there could be some more improvement, but I think largely, I think our gross margins are, you know we have increased — there is — of course, as we go-forward, definitely, we will work on increasing it, but a lot of the initial, you know reasons for us setting up the plant, they’ve all kind of you know, a lot of it has come through. Some is there to come through because like I said, as the factories mature, they will — they will start producing more benefits for the company.
Natasha Jain
Got it. And sir, at least in qualitative sense, can we say that room air-conditioner was one of the stronger drivers for our electronics segment.
Mithun K. Chittilappilly
Yeah, that was in there. So Q1 and Q2, RACs were a very strong driver for, you know, destabilizer business. But our other businesses like inverters and batteries have also done well. Our — like I said, so our rooftop solutions have also done well. So these are the three broad categories within electronics and all of them have done well.
Natasha Jain
Sir, inverters and batteries, I just want to understand, is it a more Tier-2, Tier 3-led demand because metro cities, I have not seen a lot of people picking-up batteries. So is the demand completely coming from rural and Tier-3 below?
Mithun K. Chittilappilly
Yeah. Inverters have a few — higher skew towards — it is not only rural, rural, like if you look at NCR, there are suburbs of NCR where there is power issues. Delhi, there is no problem, but I’m saying suburbs you have like whether it’s and all that, there are power issues there. So I think I wouldn’t Call-IT rural, but yes, it is more rural than skew than other categories. Bad product and pump, these are the two products that are more rural skew.
Natasha Jain
Got it. And sir, one last question, if I may. In terms of kitchen appliances, you did mention that we’re seeing a continuous slowdown. So just want to understand at an industry level, sir, what is happening? Are we just overpenetrated because of COVID? Can we expect some growth in the next year? Because this year the commentary was same that we would expect growth, but none of the listed players really have registered growth. So what’s happening in that category?
Mithun K. Chittilappilly
Yeah. Ram, you want to take this?
Ramachandran V
Yeah. So I think, see, our hypothesis is that probably you know in the COVID period, right, people spent a significant amount of time at-home. I think that is also the period when the growth in kitchen was very, very strong and possibly post post-COVID right and as you know the country came out of it, I think that we are seeing a moderation in-demand, right? The other thing is see particularly small kitchen appliances and all that, these are the highest penetrated items among all what I would say durable purchases, right? It may be a reflection of some amount of stress in the lower-income segments, right, probably as they came out of COVID, some of the household balance sheets may have been damaged and probably their priority is to restore that to good shape and probably the pace at which in the past either they would replace, you know so the replacement cycles have become longer and probably also it helps addition of, let’s say, newer appliances, right, newer categories of appliances which they are not in has slowed down.
I think that can — these two can probably be the only major explanation. In fact, I think last 10, 12 months, even large kitchen appliances have — are seeing slowed up, right? So I think probably these are the two reasons that I could attribute to why we are seeing this phenomenon. Otherwise, fundamentally other consumption categories are growing and what we have witnessed is only when the weather is not favorable, in our case, at least we are having a challenge in water because in October and November when — was still warm, okay. So I think that’s what I would feel. And probably I think it should get better. It stayed down long, yeah.
Natasha Jain
So do you think that competition from the unlisted space has increased in the kitchen appliance side?
Ramachandran V
No, not really, not in the kitchen appliances space, because the kitchen appliance space is already know hyper-competitive, right? So no, I don’t think so definitely, I don’t think so, right, because it is a fairly secular slowdown, right? So it’s hitting everybody, yeah.
Natasha Jain
Understood, sir. Sir, I have more questions on…
Ramachandran V
Stronger brand, it’s not like stronger brands and weaker brands, that phenomenon is not there, right, so and it’s also not — it’s broad, right? It’s on small, it’s on large. So I’m not so sure. I don’t think so.
Natasha Jain
Yeah. Got it, sir. Thank you so much.
Operator
Thank you. The next question is from the line of Rahul Agarwal from Ikigai Asset Management. Please go-ahead.
Rahul Agarwal
Hi, good evening. Thanks for the opportunity. I was looking for some qualitative comments on specific products. Wires, I think you already spoke about. Could you talk about a bit more on switchgear, switches and fans, please? How are the quarter and what are the trends?
Mithun K. Chittilappilly
So switches and switchgear, you know, in that particular category, there has been a decent growth. I think switches, there is some amount of you know, a slowdown, some amount of what you call sluggishness. But switchgear we have done well because I think now is being seen as one of the go-to options. We have started to become large in many of the states. We have spent almost 10 years, I don’t know, I mean we have spent enough time for the trade and consumers to start recognizing us as a brand to be picked-up. Fans, we have done well. We have some we also have some — we had some launches and in ceiling fans in the last three, four quarters, which has been well-accepted. And that’s probably — so it has been decent.
I think overall, these three has been decent. So if you remove in the electrical side, if you remove wires, the growth has been decent. Switches, there has been some little bit of sluggishness, but has done well. But in the case of fans, fan also has done decently well for us, but we are of course smaller in terms of size when you compare with the market leaders.
Rahul Agarwal
And the new factory for fans, should I assume that the facility is fully utilized?
Mithun K. Chittilappilly
Yeah. I think by the time we start manufacturing ceiling fans in Hyderabad, the — we expect the facility to be fully breaching its maximum in terms of capacity. Yes. So is making two types of products, one is the liquid painted and one is the power coated. In, we are having — liquid painted, we are having a capacity constraint. That is why we are building a second plant. Power coating we have spare capacity. So that’s just to be clear.
Operator
Mr. Rahul, does that answer your question?
Rahul Agarwal
Yeah. Just one more question on Sunflame. Just wanted to know any specific defined goals in terms of top-line EBITDA over the next two, three years? Obviously, the current numbers are much below par. Any thoughts, please?
Mithun K. Chittilappilly
So we won’t be able to give out any figures in terms of what we are planning to do with because it’s kind of forward-looking. We still believe that these brand, the strength, it’s very much intact and whatever we are facing is a result of industry-wide issue and a channel-wide issue because in Sunframe also, we have still managed to grow well in the GT business, especially during the Diwali quarter. Exactly canting stores department part is really, you know, having issues because of you know, per a prior-period over-ordering a significant number of new brands and new SKUs getting approved and then there has been overstocking of some things and they are trying to correct their inventory. So it is — we don’t think that there is anything fundamentally wrong with. Is this an industry-wide issue. Ram, you want to take the other part on…
Ramachandran V
Yeah, I think Mithun, more or less in-line with what you said. I think we are growing in — we are growing well in the other three channels, which is GP, commerce and others one. There is a bit of sluggishness coming out-of-the CSV, CPC, but we believe it’s temporary and it should move forward going-forward, yeah. We — yeah, I mean we have a clear plan in terms of how to build and grow some claim. And I think it will — it will be well helped also if the category starts to grow, right? So I think that’s a — particularly, it is difficult to introduce a category to new markets, yeah, for a brand to new markets in a period of slowdown or degrowth, right? So there is that bit of a challenge. The headwinds are strong, right? So that’s a bit of challenge, but I think you think it’s a transient face and I do hope as things recover, I think we should be able to do better with and again.
Rahul Agarwal
Got it, Ram. Thank you so much. All the best.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Achal Lohade from Nuvama Institutional Equities. Please go-ahead.
Achal Lohade
Yeah, good afternoon, everyone. Thank you for the opportunity. Sir, first question is, if you could give a sense in terms of in-sourcing of — across our key categories, that would be my first question, sir. Thank you.
Mithun K. Chittilappilly
So we don’t give out the category aspirator, but I think as a company, we are at about 65% odd percent as a company. 65% of Vizard sales are sales coming from products manufactured in our own plants. And we believe in the next three years or four years, it should hit 75%. 70% to 75%.
Achal Lohade
Okay. But is it fair to say that you know, so is 100%, so stabilizer, I presume we are moving closer to full insourcing. Is that understanding right?
Mithun K. Chittilappilly
No, I don’t think so. I think this wire is the only one which we manufacture 100%. The balance all has a mix of outsourcing, including stabilizers even today.
Achal Lohade
Okay, understood. The second question I had…
Mithun K. Chittilappilly
Just let me elaborate. These categories are highly seasonal. So there is obviously meriton also having, you know some amount of production coming from outsourcing because otherwise our — we are able to vary the production and plants to some degree, but we can’t shut-down the plants fully in off-season. So there are those kind of reasons why we will continue to have a mix of both.
Achal Lohade
Fair point, fair point. The second question I had with respect to Sunclaim, so obviously, in terms of margins, we are seeing for last three, four quarters, the margins have been, you know low. But can you help us understand, you know in terms of how do you see this margin playing out if one were to assume normalized growth playing out? And first of all, what will be that normalized growth?
Mithun K. Chittilappilly
So Sunflame, there are a few reasons why this has happened. One is that once has taken over the brand, we were aware of this when we did our DD that a large part of the NPD work, a large part of the design, product development, etc., was done by the promoter himself. So obviously, we needed to start it with more professionals than what had. Of course, we also started with the view that the team will also contribute for in certain categories, Sun Flame will be the lead category even for Vigart in terms of like whether it’s a chimney or whether it’s a gastrove, etc. So some of the staffing has been done to ensure that we are looking at the very long-term. We are not very worried about what’s going to happen in the next one or two years. We believe that kitchen will continue to grow.
The second is Sunflame had a very thinly staffed phase thing because Sunflame was working only with super stockist for every state. So they had very few people on-the-ground. And we wanted to slowly, you know, introduce Sunflame to the model where we are staffing it with more people and we directly approach retailers and we also work with modern trade where was very weak. So some of these staff costs have started to come in and hit and that — and we are not really seeing the — some of it is showing results also, but I think the decline in CSD is kind of indicating a lot of those growth.
So Ram, you want to add anything?
Ramachandran V
There are other expenses, right, like consulting expenses because we are doing a lot of projects, right, to align the systems and also to develop the going-forward strategy and for integration. So some of these costs are also sitting there. And there is also of course I mean on the overall the way Sun Flame was managed before and the way it’s being managed now, right? And there is a — there is some of that cost also which is. So some of this is transient. I mean, it’s not permanent and will go away. Some costs will go away with integration in the future, okay. And yes, some costs will remain, yeah.
There are — there are also — there have also been some delays in price increases. Yes. We’ve also had to clear out what I would say some of the older platforms which were slower to move and replace them with newer platforms like so that sales growth can start. So some of those kind of expenses are also one-off kind of expenses. So it’s a mixed bag, yeah. And things will definitely get better — much better compared to what you may have seen in the last one or two quarters.
Achal Lohade
And in terms of the growth, first of all, ex-CST would this have grown in high-single-digit or double-digit or…
Ramachandran V
Yeah, it would have grown. It would have grown. Yeah.
Achal Lohade
Okay. So is it fair to say that we can hit back to double-digits in starting from next year?
Ramachandran V
See, yeah, I think it’s very hard to predict, right? See, none of us anticipated that a slowdown will hit here. In fact, the slowdown in kitchen started probably in the quarter of our acquisition there. So none of us anticipated that. I think it’s a forward-looking statement to be able to say what we will do. Yes, of course, our endeavor is to grow the business in, say, mid-teens to-high teens. That’s our endeavor. But I think realizing that endeavor will also require external support, right, a more favorable, what I would say, demand environment, which will certainly make our job easier to achieve this kind of goal there. And we have to grow this business because we have made investment in the business, but I think it is hard to say how it will take shape because it is also a function of external environment.
Achal Lohade
Understood. Okay. And just last question — one question if I may, with respect to solar rooftop. Is it — is it fair to say that over next, let’s say, three to five years, could this be a INR500 crore category, INR700 crore category, is that a roadmap one could imagine or it could be much higher than this?
Mithun K. Chittilappilly
See, we are very cage about giving out any numbers about our products because it is something that we don’t want to give up. But I can say that we entered this business 36 months back-in a serious way. We — you know, we got one of our existing team members to head-up this division and build a team around them and the results have been phenomenal. I think there is a huge demand for a brand, which is giving not only a product but impeccable service. I think where we found a huge gap in the market is that many people are selling this product, but many, very few of them are actually providing good and support. So with regards impeccable reputation for this particular quality, we think that South India has definitely accepted this and we are moving very fast. I don’t want to give out any numbers. So once it hits the, we will tell you how big.
Achal Lohade
Understood. Thank you. I’ll fall-back in the queue for follow-ups. Thank you.
Operator
Thank you. The next question is from the line of Natasha Jain from PhillipCapital. Please go-ahead.
Natasha Jain
Yeah. Thank you for the follow-up, sir. Sir, I missed your commentary on the TPW and ceiling fans. If you can just elaborate in a little detail as to what’s the timeline in terms of when this plant is going to come alive and what’s the capex that we’ve incurred for this?
Mithun K. Chittilappilly
So the capex of INR100 crores will be spent over three financial years. It will — it will be like INR50 crore in year-one that is next financial year and then in phases in the following two financial years. The initial part of the plant will produce table pedestal and wall fans and some part of ceiling fans and the rest will be to scale-up the production. We expect the first phase of the plant to be opened in the next 14 to 18 months. 18 months, 18 months. We have started work. So there is a time required. The groundbreaking was just happened in a few weeks back. So 18 months, we will — we expect commercial production to start. And this plant will be in Hyderabad, near Hyderabad.
Natasha Jain
Okay, all right. And sir, in terms of margin improvement, how we have seen your margins improve in electronics because of backward integration? Likewise, have — do you have any numbers that you can share in terms of where consumer durable margins are expected to then move-in the medium to long-term because of the backward integrated plan?
Mithun K. Chittilappilly
Yeah. So I think in electronics, there has been a substantial work that was done and our hypothesis to set-up the factories also to actually substantially get the improvement in margins, especially inverter battery space. Our stabilizer already we had decent margins. But in the case of fan, the issues that pre-200 — I mean, since till last year, last financial year, we were importing a bulk of our ceiling plants from Vietnam and China. First, it was China and when China got a kind of anti-dump duty, people move to Vietnam. But I think we are now very clear on how this will go. So this is roughly 25% 30% of our business and we want to have supply security.
We don’t want to keep you importing stuff because we do believe the government will bring in BIS and then they will eventually block out Vietnam as well. And a lot of the fans are today getting made in India. We have a lot of vendors which are making and wall fans for us, but we are still not very comfortable this way because these are not exclusive vendors. They supply to everyone in the industry. So we want to have our own plant so that we can come out with better products, innovative products, differentiated products, offering better-quality. So that is the reason. So some of this is not done only for margin improvement. It is also done for our own long-term growth of the category.
Natasha Jain
Got it, sir. And I know this is too early to ask, but any mix you can share in terms of our manufacturing into premium and non-premium products here from this new factory?
Mithun K. Chittilappilly
I think it’s too early to say that. I think what we can tell you is that after we set-up our first seal fan factory in about three, four years back, our share of premium products in fan is substantially increased and we have one of the best product mixes in the industry today and we hope to replicate that with this factor as well.
Natasha Jain
Got it, sir. I just leave the queue with the feedback we got for Viguard fans on-the-ground. So we’ve got feedback in terms of the quality and the aesthetic appeal of your premium funds that you’ve recently rolled-out. So yeah, the distributors are quite happy. Thank you so much, sir.
Mithun K. Chittilappilly
Thank you.
Ramachandran V
Thank you.
Operator
Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential Life Insurance Limited. Please go-ahead.
Keyur Pandya
Thank you. Hi, team. So first on the margin side, so we have been investing in many of the aspects, whether it is manufacturing or branding and because of that gross margin has not cyclical down to EBITDA margin. So just want to understand that whatever gains we have seen in terms of higher gross margin or in terms of higher electronics EBIT margin as well, I mean, where — when do you see, say, electrical and margins improving and what would be the — I mean, drivers if you can just throw some light on those two segments margin and thereby overall margins.
Mithun K. Chittilappilly
So I would like to take a different view. If you look at five years back, you know, the difference between and market leaders in terms of EBITDA was 4%, 5%. We got margin was 9% and market leaders were at about 14 odd percent. Today, the gap has come down to 1% or 2% — not even 2%, I think 1% or something like that. So please also see this in the light of what has happened in the industry post-COVID, how more competitive it has become, how harder it has become for us to take price hikes and all that. So some of these things are also happening because the entire environment has changed.
And if you look at many of our peers, you will see a sharp decline over the last five years in terms of EBITDA. So on one-hand, yes, we are improving margin, but there is also additional costs related to that in terms of, you know, setting up the manufacturing and there is a journey for, you know, maturing the plant and all that. In our view, I think of this year, I think when we see actually the improvement in gross margin is 1.5% net of all the additional costs in the factory. But even that has not happened to trickle-down, that is primarily because of some one-off issues, one-off write-backs we had last year in Q3.
So just I want you to put in perspective that if you look at last five years where how much — we have not seen us improving margins, but the gap with the market leaders are very, very narrow today.
Keyur Pandya
I mean, just one follow-up, so then is it fair to believe that the margins would stay here only for you or a — or aspiration for near-term is to remain here only or…
Mithun K. Chittilappilly
We have always said we would like to get to 10% odd EBITDA margins and we are working on it. But many things are there, many headwinds are there. But I think this quarter especially it was a — it was — it was that there is a lack of operating leverage, a large — one of the largest category, which is wires has degrown in this quarter, which has pulled down the overall growth. So some of it is due to operating leverage as well. But I think we are — we do believe that next financial year, we should probably come out of most of these issues unless we have some crazy inflation again happening, which I don’t see — I don’t see any high inflation happening from here on.
Keyur Pandya
Okay. Sir, second question is on the demand-side. So we are seeing this stocking and destocking and restocking based on the copper prices. But just want to understand how is the End-User wire demand? I mean, just anecdotally based on increased real-estate activity, are you seeing steady demand or improved improving trends or the slowdown is — I mean the negative growth also indicates similar growth in the End-User market as well. Just color on how the end-user demand is?
Mithun K. Chittilappilly
I think we got is primarily a consumer retail company. So our project sales are less than 5% of our wide sales. So really the — but of course, real-estate demand affects the entire market because when real-estate does not as well, the brands which are active, they are also coming to the retail and you know they create some kind of competition so as far as the end-consumer is concerned, if you look at the individual home by you know individual home you know guys who build individual houses, not like you know, multiple units. They don’t seem to time this. They come and buy whenever they want to buy and they don’t really — so the End-User really does not — they don’t practice like the retailers do.
But if you’re looking at a large developer like building like 2,000, 3,000 apartments in a year or whatever. And those kind of guys definitely they will — they will also see how the commodity is moving and just like us, they will also time their purchases. So — and it’s also depending on — I mean, it depends also on whether they’re able to like just to reduce the — just to wait for 2%, 3% reduction in wire prices, they may not delay their purchase by four, five months because the projects will also get delayed. So I think that the — usually the retailers are the most sensitive, you know with this price changes in copper and then followed by developers and then probably the last person to bother about it would be the individual consumer.
Keyur Pandya
So do you mean End-User demand continues to be healthy?
Mithun K. Chittilappilly
End-User demand, see, I think whatever slowdown we are talking about, I mean, this is not a slowdown only for kitchen, right? So there is slowdown in FMCG, there is slowdown. So what is happening is yes, organized real-estate is growing. But if you look at real-estate as a whole pie, if you put organized plus, if you look at the entire pie, you are not seeing any crazy demand for cement and all that, right? Cement demand is weak. So what does I tell you, cement and steel demand is weak that what means is that the entire the market — the entire market is not growing. It’s just that existing guys, existing small builders who used to submit 20 plus, 30 flats in a project, they have all folded up and now it is only big builders. So basically the market that is consolidating and probably the earlier guys, they were not doing business in an organized way. So it was never tracked.
Keyur Pandya
Okay. Okay. Sir, thanks a lot. We’ll get back-in the queue.
Operator
Thank you. Before we take the next question, a reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Archit Shah from B&K Securities. Please go-ahead.
Archit Shah
Thank you for the opportunity. Am I audible, sir?
Mithun K. Chittilappilly
Yeah.
Archit Shah
Yeah. So first question is regarding margins. So you said your 65% of your sales is now from in-house manufacturing. Now let’s say once your TPW in-house comes online and you start utilizing fully and once you reach 75%, what kind of margins on blended basis overall can we expect going-forward, let’s say, in FY ’27 onwards? Assuming that, that will be the time when all your 75% will be fully from manufacturing — manufacturing.
Mithun K. Chittilappilly
So I think every time when decides to set-up or ask this question internally whether to make or to buy, we do a complete detailed working on the IRR of the project. So we do only projects that are IRR and ROC accretive. That’s all I can say. I cannot give you a guidance on how much our margins will go up or improve and except. I think a lot of our journey is already done. But I think many of our plants are not working 100% capacity. So we really hope that in the next two to three years, what you get to see is their operating leverage of plants kicking-in and there could be some benefit.
But like I said, we are not targeting margins more than — today, we are only targeting the margins to — our goal is to hit the 10% EBITDA margins because we find that most of our market leaders are also not able to go beyond that. So we have to understand the environment is also competitive. So our first phase would be to target a 10% margin and that’s where we are at.
Archit Shah
Okay. So directionally at least it will improve from FY ’24, FY ’25 levels, but 10% is what you are currently targeting.
Mithun K. Chittilappilly
Yes.
Archit Shah
Okay. And sir, second question is some bookkeeping question sir, since 4Q FY ’24, we have seen this unallocated corporate expense increase multifold, like it on consol basis, it was at least around INR5 crores in 3Q, then than INR30 crores and it has been at this level since in last four quarters. So can you explain like what has led to this increase?
Mithun K. Chittilappilly
Yeah, one minute.
Archit Shah
Okay. Okay.
Ramachandran V
Fine, fine. So there were some one-offs in that the revaluation gain of Giga came in during that quarter. So that’s probably why.
Mithun K. Chittilappilly
So last year, our other expenditures were you know it is artificially kept lower by a revaluation gain in one of the investments in a subsidiary about INR14 crores. I think INR17 crores, INR17 crores. So yeah, you’ll probably have to add INR17 crores to the previous year to get the INR2 lakh.
Archit Shah
And sir, on these 3/4 of FY ’25 also, it has been at around INR363 crore and INR34 crores for each quarter. So is this that new normal like these are going to be our unallocated expenses, expenses?
Ramachandran V
That is the normative level.
Archit Shah
Okay. Okay. That’s it, sir. Thank you, sir. Thank you so much.
Operator
Thank you. The next follow-up question is from the line of Keyur Pandya from ICICI Prudential Life Insurance Limited. Please go-ahead.
Keyur Pandya
Thanks for the opportunity again, sir, two questions, two-line items. First is employee cost and second is A&P. So significant increase in both the line items. So just want to understand strategy or thoughts on how we should see these line items growing from here on? And specifically to employee cost, was it for specific SBU or headquarter or I mean where it is being targeted.
Mithun K. Chittilappilly
Okay. So A&P cost has been that we had done activity in Sun Flame for Diwali. I think of the previous year that is last financial year, things were things continue to be rough for kitchen, but last financial year we had not done any much activity because we were focusing on the integration part and our product refresh and all that. So this year, there was some activity that was done. And not only in, there was a 10%, 15% increase in Vigar zone A&P spend. We got brand spend. So this is as far as the NP is concerned.
As far as the employee expenditure is concerned, last year, I think there was almost I last year, almost INR30 crore — INR25 crore worth of reversals in Q3. That’s primarily two things. One is that in last financial year for Q1 and Q2, we have provided for variable pay for employee costs, for employees and that was reversed in Q3 because by 30th September or by — by Q3, we were — we kind of realized that we are not going to hit the parameters to achieve variable pay. Whereas this year, I think — and for the first-nine months, we are on-track to achieve the AOP and try to pay-out the variable pay. So that is one, it’s bulk of it, the difference.
The other thing is this year is again the first year of new ESOP grant. Last year it was you know BSO — there was no debt. So I think INR67 crores of this INR25 crore is belonging to the last INR20 crores — 25 plus INR7. So INR7 crore as a ESOP grant expenditure that has come. That is not going to remain INR7 crores a year. It is probably the first year it’s going to be elevated and it tapers down in year two, year three. And the other one was the last — in last year the variable was reversed in Q3. So what you’re seeing in employee cost almost as a INR30 crores to INR32 crores versus expenditure sitting in this year, which is more than last year here.
Keyur Pandya
And from hereon?
Mithun K. Chittilappilly
It is a one-off. I think only variable will be happening at this. Yeah, it’s a one-off next. You may not because the previous year quarters will also probably have some of this.
Keyur Pandya
Okay. Okay. Thanks a lot. Thank you.
Operator
Thank you. Thank you. Ladies and gentlemen, you may press star and one to ask a question. A reminder to all the participants that you may press star and one to ask a question. The next follow-up question is from the line of Achal Lohade from Nuvama Institutional Equity. Please go-ahead.
Achal Lohade
Sir, just to clarify on question, is this ESOP charge INR7 crore, is it per quarter for the full-year you mentioned?
Ramachandran V
That is for the INR11 crore is for the quarter, right? Yeah.
Achal Lohade
Sorry, INR7 crores for the quarter, so INR21 crore for the 3/4, is that only now.
Mithun K. Chittilappilly
So on the ESOP grant issue only happens. So like our — I mean like our ESOP cycle for bulk of the people who are under ESOP starts — the cycle happens in Q3 for whatever reason because it’s the third round or something like that. So it happened it happened.
Ramachandran V
Let me explain it this way, the cost for the quarter this year versus last year, difference is INR7 crores.
Mithun K. Chittilappilly
Yeah, for ESOP.
Ramachandran V
It’s not — it is not just the cost itself is INR7 crore.
Mithun K. Chittilappilly
The delta itself is INR7 crores.
Achal Lohade
Right. In the base quarter, I see somewhere around INR83 crores of employee cost. That had some reversal mentioned, right?
Mithun K. Chittilappilly
Achal last year ESOP had — there was a reversal.
Achal Lohade
Correct.
Mithun K. Chittilappilly
This year there is an additional cost. So the total delta is INR7 crores.
Achal Lohade
Understood. That’s. Thank you so much.
Operator
Thank you. The next question is from the line of Aditya from Investec Capital Services. Please go-ahead. Mr. Aditya your line has been unmuted. Please go-ahead.
Aditya Bhartia
Hi, sir. So you spoke about competitive intensity in the sector going up and thereby margins for the entire industry pretty much coming down. How are you seeing this shaping up going-forward? Would you anticipate margins to be moving up to 10% to 11% kind of a range that you used to speak about without constraint other income?
Mithun K. Chittilappilly
Yeah. Ram, you want to take this?
Ramachandran V
Yeah. I think the — I think, see, look, we will continue to endeavor to expand our margins maybe 0.5% every year. But on the other side, this is also competitive and that’s a point that Nitin was making, which is basically you know the profitability for the industry overall has been under stress and the margins — overall margins have come down for our competitors also, mainly because partly growth has been muted and partly commodity inflation, the pricing transmission has been weak, yeah. So these are two factors which have, you know, caused this situation, right?
Yeah, we continue. I mean, we have plants and we continue to grow and that’s the reason why because we have these plants, we have been able to hold out our EBITDA margin, although you know the general environment has been one where over four, five years, there has been erosion. So I think we continue to remain you know, optimistic to be able to — we would like to grow quarter quarters, 0.5% every year. I think that still remains our objective, yeah. But as I said, it is, you know, it has to be seen in an external context also, yeah.
There are some efficiencies which will come through, you know, from our manufacturing programs and all because there is some operating leverage which is likely and as we go-forward because many of these plants are still stabilizing. But that might — you know, that’s there. But I think that we will also have to improve premiumization and we will also have to do a better job with pricing transmission, right? And both these are competitive also.
Aditya Bhartia
Sure, sir. And sir, like earlier we used to speak about there being a scope of increasing margins in categories like batteries, but now you mentioned that a part of that benefit has already been extracted. Do you see further scope of expansion in certain specific categories or it is now going to be — I mean, we have categories broadly at normal levels and it’s going to be broad-based expansion.
Mithun K. Chittilappilly
So okay. So let me let me answer like this. The benefits in electronics is largely come through. I think because the battery plant is online and it’s delivering and the plant for electronic products is also online and delivering. So this has come through. What has not achieved scale and benefit transmission as the kitchen plant in. So obviously, the plant is yet to be inaugurated and we are inaugurating it next month. So the kitchen plant will take some time to stabilize. And of course, the second factory for fans that is and is also yet to be commissioned. So these are the — these are the — these are the items where I think there is some operating leverage possibility happening.
So maybe electronics margins may not be there, but in kitchen appliances, which is in consumer durables and fans, again, I think it’s in consumer durables, both these there is scope for some improvement in margins. So with this, I think CD that consumer durable segment margins, we also hope to take it back to recovered levels.
Aditya Bhartia
Great, great, great, sir. And one last question. The manufacturing facilities, which we had started in the last two or three years, roughly at what utilization would they be operating and do you see a big scope of operating leverage benefit coming through as utilization keeps improving or largely this is now in the pace?
Mithun K. Chittilappilly
So like I said, in the electronics segment with this stabilizer and inverter plant and the battery plant, all of them are in electronics. A lot of the benefits have already started to come in and it’s what we have seen in the last 18 months. Some more benefit could be there in the battery because battery plant is still new and there could be some optimization, some work would be done. But I think it’s — — it’s largely, I think come through with some benefit yet to flow-through, whereas in consumer durables, I think there is still scope for this to happen.
Aditya Bhartia
Understood, understood, sir. That’s very helpful. Thank you so much.
Operator
Thank you. Ladies and gentlemen, you may press star and one to ask a question a reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. As there are no further questions from the participants, I would now like to hand the conference over to Mr. Aditya Bhartia from Investec Capital Services Limited for closing comments.
Aditya Bhartia
I would just like to thank the management team of V-Guard for giving us a chance to host this call. It was a very interesting and informative call. Thank you so much, sir, and thank you everyone for joining us. Sir, do you have any closing comments?
Mithun K. Chittilappilly
Yeah. Thank you all for taking our time to join our earnings call. I would like to thank Aditya Bhartia and team at Investec for hosting this call. On behalf of the V-Guard family, I would like to wish all of you a very wonderful year ahead. We look forward to interacting with all of you in the next quarter. Thank you.
Operator
On behalf of Investec Capital Services Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines.