Virtuoso Optoelectronics Ltd (BSE: 543597) Q2 2025 Earnings Call dated Nov. 21, 2024
Corporate Participants:
Sajid Shaikh — Chief Financial Officer
Sukrit Bharati — Managing Director
Unidentified Speaker
Vinay Pandit — Investor Relations
Analysts:
Garvit Goel — Analyst
Amit Agicha — Analyst
Ron S. — Analyst
Ayush Sabu — Analyst
Kunal Tokas — Analyst
Manan Madlani — Analyst
Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, I welcome you all to the H1 FY ’25 Post Earnings Conference Call of Virtuoso Optoelectronics Limited. Today on the call from the management team, we have with us Mr. Sukrit Bharati, Managing Director; and Mr. Sajid Shaikh, Chief Financial Officer.
As a disclaimer, we would like to inform all of you that this call may contain forward-looking statements, which may involve risk and uncertainties, also a reminder that this call is being recorded. I would now request the management to brief us about the business and performance highlights for the half year that went by, the plans and growth plans and vision for the coming year, post which we will open the floor for Q&A. Over to the management team.
Sajid Shaikh — Chief Financial Officer
Yes, good morning, everyone. So, this is Sajid here. I think the presentation has already been shared. I’d just like to take you all through the highlights. So as a company, the plan, the path that we had chosen for ourselves for this year, I think, we are well on that path. We have been able to clock a number of INR310 crores as far as top-line is concerned in the first six months. Originally, as per our plan, we were supposed to hit a number of INR280 crores to INR300 crores. So, we are well on course and a little above that number.
The other developments are also on track. Deep freezer plant is already operational now, we are only waiting for the certification. So that process is going on, and we are hoping that all the certifications should be in place by December, mid-December to end December. And once we have that in place, commercial billing for that unit will also start. The ramping up of ODU is also underway, and I think by the end of this year we should be able to hit the number of 5 lakh to 6 lakh in terms of the capacity for outdoor units.
Apart from that, we are also venturing into compressor manufacturing, so that we hope to start by Q1 next year, but the investments have started. And so, as already mentioned in the presentation, we are starting with a 2.5 million kind of capacity to start with, which will, one — take care of our captive consumption, and at the same time we’ll also look out for customers within the country. So, these are some of the highlights, and so the floor is open. We are open to answer any questions that you have.
Questions and Answers:
Operator
Sure. [Operator Instructions] We will take the first question from Garvit Goel. Garvit, please go ahead.
Garvit Goel
Am I audible?
Sajid Shaikh
Yes, you are, very much.
Garvit Goel
Good morning, sir. Congrats for a good set of numbers. My first question is, like, I want to get addressed on the delay in the listing of the preferential shares that were allotted in the month of March. So as per regulatory norms, preferential shares should typically be listed within 20 days of allotment. However, despite that significant time having passed, this year remains unlisted, which has led to our funds being tied up for an extended period of time. So, could you please provide a clear explanation for this delay, like, the current status of the listing process and the definitive timeline for when we can expect these shares to be listed on the exchange?
Sajid Shaikh
All right. So, I think, this is a question which has come from almost all the people that have invested with us. And so just to put things straight on the record, we had scouted for investments, and once we got a confirmation from BSE, in terms of getting their in-principle approval, that is the time that we had actually called for the money. So, the money was called for, the shares were issued from our side as far as we are concerned, and we had filed for PAS 3 also. So, all the compliances that need to be done from our side have been done. The only challenge that arose was when we applied for listing of the shares. That is the time that BSE came back to us and said that since our paid-up capital is going beyond the threshold of INR25 crores, we will have to migrate necessarily to the main board. Now, at this point in time, there were two conflicting or contradictory regulations that we kind of got squeezed between. One of them, as I said, is that we were crossing the threshold of INR25 crores, so we could not stay on the SME board. The other is that, because we had not completed the mandatory period of three years on the SME board, we could not migrate. And that is where this unforeseen kind of a delay has come into the picture.
Now to handle this, we took suggestions, we had various advises that were taken from law firms etc., and two other people that we thought that they’ll be able to give. I mean, they were able to give the advice to us. And eventually what we have done is on 24th of October, we have filed for a waiver under regulation 300 that will give us a relaxation for this mandatory three-year period. So, we have asked SEBI to give us a waiver on that front, so that we can migrate early. Now that application, if we get a positive response on that and we get a result in our favor, then we should be able to migrate to the Main Board, which will, I mean, automatically ensure that the listing happens. That is one. Now in case that doesn’t happen, the last, so to say the last limit for this entire issue would be that next year, September 15th, we are due to migrate organically. We will be completing the three-year period for which is required and hence that will happen. But we are trying our level best to see that we should be able to kind of get it resolved earlier because we also appreciate the fact that investors have their moneys locked in and the shares are not tradable as of yet.
Sukrit Bharati
Just to add to that point, see there are two processes that run in parallel being a listed company. One is the process, which happens as per Companies Act, and one process which is run under the guidelines of SEBI by the stock markets. So, in our case, like Sajid was mentioning, it is we are somewhere in between. So as far as Companies Act is concerned, all the compliances have been completed. As far as listing compliances are concerned, we took without approval from exchange, we cannot go ahead with ROC compliances. So, we took permission, we went ahead with ROC compliances and then they realized that we are in a spot which is in between their regulations. So, the contradictory regulation that currently BSE has is that, if your paid-up capital becomes more than INR25 crores, you have to mandatorily migrate to Main Board. The other regulation that they have is that which was earlier two years that you have to stay on the SME board for two years, now it’s become three years. So, we have completed two years, but they extended it to three years a few months back. So, we are in that place where we have permission, but we’ve not completed three years, and our paid up capital is crossing INR25 crores. So as far as shares are concerned, the shares have been issued in our books and, of course, they are not listed yet because of this spot, but procedurally everything from our end has been completed. And the regulation of 20 days that you are mentioning is that within 20 days of allotment of shares we need to file for listing approval with the stock market, which we did. The only problem is there is no deadline to how long will it take for them to actually list the shares. So, there is no TAT defined on that side as far as the law is concerned. So, procedurally, we have done everything we could up till date. Of course, we understand your challenges and we want to resolve it as early as possible because I think it is our responsibility. For that we are pushing as much as we can, but, like we mentioned, I mean, we are trying with SEBI to give us the exemption. And, of course, we are continuously following up with BSE also. But it is BSE saying that until and unless SEBI gives them an approval, they cannot do it. So that is where we are currently seeing what we can do to resolve. We understand the challenges, but please understand this was beyond our control, and we will always keep trying to do whatever we can to resolve it at the earliest.
Garvit Goel
Understood sir. And sir, like you mentioned, we have made an application to SEBI. So, by when do we expect the result of this application from their end?
Sukrit Bharati
So again, there is no — I mean so their normal TAT is that for every activity they have three to four weeks. So, the first three to four weeks they call data from whatever we understand is they first call from data from BSE to understand what has happened in their end. Then they will call us for a probably a physical meeting if required, and then they will decide on what course. So normally, I mean, conservatively I think it is about a two-three month process, but there is no defined timeline for it.
Garvit Goel
And when we made this application in the month of October, right?
Sajid Shaikh
Yes, 24th of October.
Garvit Goel
And if they — we got a denial from their end then there is no solution. It is like you mentioned, there will be the organic migration that will happen in September ’25, right?
Sukrit Bharati
We can, we can go to SAT, but yes, the other option is September.
Garvit Goel
Okay, you can go to SAT as well. But again, that will also take your three to four months, right?
Sajid Shaikh
Correct. Correct.
Sukrit Bharati
By the time September will anyways be there. So going to SAT will not really save a lot of time but we will see based on how things progress.
Garvit Goel
Got it sir. Secondly sir, like if you see your margins, EBITDA margins specifically, I was looking at it, in 2020 we were at the levels of 12%, and over the years we — these margins came down to 9% currently. So, despite we are at 10 times the level of sales that we were having in 2020, margins are getting depleted. So, can you comment upon the reason for the same, why the operating leverage did not kick in? And then how do you see the margin shaping up from here onwards?
Sukrit Bharati
So, please understand in 2019 we were only majorly in lighting products, and we have of course since then added a lot of appliance products to our portfolio. So, lighting is a lower value product but has higher margins. And in appliances, the EBITDA margins are of course lower because we are in OEM ODM as far as that segment is concerned. So further, the product mix dictates the EBITDA margin. So, for example, ODU has a lower EBITDA margin than IDU in AC, the indoor unit and outdoor unit. Because the value addition varies from product to product. The new categories that we are entering will have better EBITDA margins. So, EBITDA margins that we believe we’ll be in is between 8% to 10% is the range of most of our products. Blended EBITDA margin that we normally sit in. And we are I think on the upper end of that spectrum. So, this is higher than what we had initially projected. So, I think we are on the right track.
Garvit Goel
Got it. So that means you are saying 8% to 10% is what you are targeting for, right?
Sukrit Bharati
What if — yes, what effectively is possible in this segment.
Garvit Goel
Understood. And like in your opening remarks, you also mentioned about entering into compressors. And a few days back I was reading an article over like some shortage of the ACs and the components expected due to BIS refusal of the Chinese suppliers in the calendar year ’25. So how do you see this as an opportunity for us?
Sukrit Bharati
So, we were evaluating compressors for almost a year. Initially the investments that we had envisaged were much higher, and we were trying to figure out how we can do it at an investment range which is viable for us. And we’ve been able to figure out a solution, which is how we are getting into reciprocatory compressors at the first stage. And this can be a — this will be a large category for us going forward because like you mentioned, BIS for different Chinese manufacturers is expiring during this year and early next year. Sorry — during next year, in early 2026. So, India the, the compressors that we are — the compressor category that we are getting into initially, India requires about 20 million which is 2 crore compressors of this type. We are setting a up a capacity to make 28 lakh — which can make 28 lakh compressors per annum at peak capacity. So almost about 15% of the market, 15% to 20% of the market will be able to cater of this segment, and if we get good traction of course we can expand. But this is also a good opportunity that has come both because of the government push and because of the investment viability that we’ve been able to put together. So hopefully this will add a lot of value in the coming years.
Garvit Goel
Understood, sir. And so, one last question on Voltas. Like Voltas is taking back some of the capacity in house manufacturing. So what kind of risk that we are exposed to because of the dissection from Voltas?
Sukrit Bharati
Like we’ve been mentioning in most of our calls and discussions, so we believe that, I mean our projection for the next couple of years are clear. And so, we see growth in AC segment coming steadily. Of course, how much growth will vary depending on demand and supply in the market. But we don’t see a challenge in the next couple of years as far as AC market is concerned.
Garvit Goel
So how much Voltas contribute right now in first half to our total revenues?
Sukrit Bharati
I don’t have that number top of the hand, but almost 70%, 75%. 70% I think would be it.
Garvit Goel
So are we looking on adding on the new customers or what is the current scenario, like Voltas is taking up the capacity. So obviously, after two years it will be a big risk for us, right? 70% to 75% is a big number.
Sukrit Bharati
So, so we, so we will, right now as you said, capacity is already booked by Voltas. Once we have spare capacity, and once we get a feeler, I mean we are also increasing our capacity and if we feel that there is a gap that’s getting created, we will of course look to add more customers. But as of now our full capacity is booked by Voltas.
Garvit Goel
Perfect sir. Thank you. I will join back the queue, sir. Thank you.
Operator
Thank you, Garvit. Since lot of participants have raised hand, we’ll restrict ourselves to two questions per participant. So, we’ll take the next question from Amit Agicha. Amit, you can go ahead please.
Amit Agicha
Good morning. Am I audible? Thank you for the opportunity and congratulations for good set of numbers, and I’m impressed with the presentation. And most of the things I explained here and my EBITDA question has already been answered. So, my one question is connected to the strategy to penetrate international markets and competition from China. Is any government incentive helping in expansion plans for exports?
Sukrit Bharati
There is, I mean, there are small government incentives for export, but there is no, I mean, there is no specific advantage as of now that at least we have, or we are aware of, that will help us in developing exports. But also, you need to understand that developing product for a new market is a long process. So, we have already started that process last year. We have also started doing some exports. But to get the right product market fix will take some time, that is one. Second is the product variety also that we had till last year was relatively restrictive which is now opening up, so we have more avenues to reach out and export. So, I think that is also looking positive in the coming years.
Amit Agicha
Any percentage terms like what is the revenue in exports?
Sukrit Bharati
I mean as of last year I think it was a very small percentage, hardly one to one and half percent. This year also it will be a similar percentage. But so, what we are first trying to do is trying to understand which is the right product and right market because if we misfire then it is a — it becomes us, it’s like taking two steps or three steps back. So instead of that we want to trade carefully. Plus, expansion in the local market is happening very aggressively. So, we need to balance both. So, export is a long-term strategy that we are working on, but domestic is the immediate opportunity.
Amit Agicha
Thank you, that was helpful and all the best for the future. Thank you.
Operator
Thank you. Amit. We’ll take the next question from Ron S. in line from chat. Ron, you can unmute and ask your question please.
Ron S.
Sure. Thank you and congratulations on a great set of numbers. Sukrit, any update on washing machines? I think we were in the phase of finalizing few marquee clients, didn’t see anything in the presentation.
Sukrit Bharati
So, washing machine is on track, but we will be able to confirm it only by, I mean, in the fourth quarter presentation. It’s still on cards, but we’ll be able to give you a better picture by the fourth quarter.
Ron S.
Sure, sure. And going back to the compressor diversification that we are doing now. So, a recent report mentions that 85% of the compressors are still imported for ACs and 70% to 75% of the compressors are still imported for refrigerators. So, the refractory reciprocatory compressors that we are getting in, so how large is the market? You mentioned 2 crore. These are specifically for the ACs or refrigerators or both…
Sukrit Bharati
Domestic and commercial refrigerators. So, in compressors there are two prominent technologies as of now. One is the reciprocatory and one is rotary. So, AC has migrated to rotary over the last few years. Reciprocatory is still very prominently used in refrigeration and domestic and commercial. So that is why we decided to first get into reciprocatory. Also, reciprocatory, the investments are lower than rotary to set up the facility. And because it was a new venture for us, we wanted to take calculated risk and we wanted to maintain our ROI, ROCE. So, we decided to then go ahead with reciprocatory. Further, because we have a captive requirement by next year of about 5 lakhs to 7 lakhs of reciprocatory compressors, we’ll be able to cater to it if, even if the government does not extend BIS.
Ron S.
Okay, okay. So, which also means that we will be looking at clients beyond Voltas for this sector, right?
Sukrit Bharati
Of course, yes.
Ron S.
Okay. So, have we made any inroads in that space? Like any new additions to the clients for the compressors?
Sukrit Bharati
I mean, still a new development. We look at compressor commercialization in H1 next year. So, should we have confirmed POS? Of course, we’ll, we’ll not be able to share those details with you.
Ron S.
Sure, sure, sure. My next question, in the pecking order, if I recall, which were kind of eluded sometime back, we are the number fourth player after Amber, PG and EPACK in terms of production of AC. I understand by now you would have started getting a sense for next year. So, do you see this being upgraded? I mean, is there an aspiration to get into the number three spot by next year?
Sukrit Bharati
So, aspirations, of course. But strategically what we are trying to do is a couple of things. One is like we’ve been doing, we are adding products to our portfolio, because we don’t want to just bank on one product for the entire growth to come from. So that is point number one. So, growth is also expected from commercial refrigeration now, water dispensers, compressors. So, we are looking at multiple segments that need to grow because if you want to have long-term sustained growth, you need to have multiple engines that keep firing. That is point number one. Because AC, even if you increase capacity and then you suddenly realize that the year or the summer was not favorable, then suddenly there is a big vacuum. So that was strategy number one, which we have implemented and we are going strong on. Coming to AC, specifically, we are, of course, increasing our capacity every year, and next year also we plan to increase our capacity for both IDU and ODU. Now with this capacity increase, we will, of course, look at existing customers and see if they want a bigger share. If not, if there is a capacity gap, then we will look at other options and also export. But the idea is that we want to organically keep going AC. We don’t want to make a big investment and then try to fill it up. We will take a more organic approach for the next one or two years in AC as far as growth is concerned.
Ron S.
Appreciate that. One last question. I think sometime back you had mentioned about aspirational conservative target of INR1,000 crore by FY ’26. So, with this compressor business coming in, do we see a revision in the guidance?
Sukrit Bharati
We do, but give us some time, we’ll come back to you.
Ron S.
Sure. Appreciate all your responses and wishing you all the best. Thank you so much, Sukrit.
Operator
Thank you, Ron. We’ll take the question from chat. It’s from Ayush Sabu. He’s asking could you please give us an insight into our expansion in remote manufacturing. What would be potential revenue contribution from it and margin profile?
Sukrit Bharati
Right. So, remotes, also the EBITDA levels are similar as AC. It’s not a very high EBITDA product, but it is a strong backward integration because remote also in India is limited to two or three players, and a lot of remote is still being imported. So, government has increased duty also on remote and it is expected to come under QCO, which is under controlled quality objectives of the government. So, import is going to become more and more challenging of that product. So having an in-house capability makes logical sense, one. And second is it is an expansion in the electronic EMS space for us. So, it is growing our EMS segment further. So, remote, we are going to manufacture for captive requirement and also, we are going to start supplying to our existing customers. So that is what we are doing. As far as revenue is concerned, we are looking at a revenue of maybe INR15 crores to INR20 crores coming from remotes in the next year.
Ayush Sabu
Okay, sir. Thank you. That was helpful. Also is it possible to get the like quarter wise volumes for like revenue for each of our product verticals like for IDU, ODU and even the commercial operation going forward?
Sukrit Bharati
So, I mean, as a percentage we are looking at an AC. I mean, if we are targeting a revenue of INR1,000 crores, INR1,200 crores, maybe next year, next financial year, anywhere between INR1,000 crores and INR1,200 crores. So, the revenue breakup that we are looking at is about 50% coming from ACs, about 25% coming from commercial refrigeration and water dispensers, about 15% coming from lighting and the remaining 10% will start coming from components, which includes compressors, and this number will further lean towards components because of compressors. So, compressors percentage will go up to almost 20%, 25% in ’27.
Ayush Sabu
Okay, got it. Thank you. That was very helpful. But is it possible like in our quarterly results, in our quarterly updates to get a revenue breakup for these segments like going forward?
Sukrit Bharati
We will consider. We’ll try to share that with you.
Ayush Sabu
Okay, that will be really helpful for analyzing the volume sales.
Sukrit Bharati
Sure.
Operator
Thanks, Ayush. We’ll take the next question from the line of Kunal Tokas. Kunal, you can unmute and go ahead please.
Kunal Tokas
Am I audible?
Sukrit Bharati
Your voice is a little bit lower. Can you come closer to the mic? Yeah, it’s audible.
Kunal Tokas
Okay. So just two quick questions. First is on the interest costs that has paid flat despite both short term and long-term debt either decreasing or staying flat. So, what was the reason for that and what is the full year outlook?
Sukrit Bharati
So, if you see debt has remained similar, and that is why interest cost is also similar over last year. There is not too much change in numbers. And interest cost, of course, I mean so this year with expansions coming in for long term debt will keep varying. But I mean the other offset that we had this year was there was some other income coming in from interest that we earned because of the preferential money that came in, which was sitting for some time till it got deployed. So that interest has also come in. So, if you set off that interest, then the interest this year was much lower. But apart from that, interest cost bill will slightly increase over the next year, year and a half. But as a percentage it will come down next year because the revenue growth will be higher than the increase in interest cost.
Kunal Tokas
All right, sir, thank you.
Operator
We’ll take one a question from chat from Nishan Joshi, who is asking which market that is domestic or export are you seeing for compressor, as well as what expectation do the company have regarding its capacity utilization for compressor facility in FY ’26. It would be great if you can share the margins on sector.
Sukrit Bharati
So, compressor EBITDA margins are also 7%, 8% as a product category, point number one. Point number two, first year we are not looking at very high-capacity utilization. We are looking at maybe a 15%, 20% capacity utilization in the first year, and the second year onwards, I think that number should jump, because the validation time for compressors is longer. So, second year we can look at a number of anywhere between 50% and 70%.
Operator
Thank you, sir. We’ll take the next question from the line of Manan Madlani. Manan, you can go ahead please.
Manan Madlani
Hi sir. So, my question was regarding the gross margin. So, if I look at last three years, our gross margin in the first half, it’s been lowest since last three years at 12.1%. It is excluding the other income. So, could you provide me reasons for this? Is it because of the product mix change or is that something to do with lower realization?
Sukrit Bharati
A couple of things. One is of course the ODU is increasing. So, the product mix has an impact on it. So, the ODU has a lower EBITDA product. And that is why gross margins are lower or lower gross margin product, point number one. Point number two — our expenses in terms of team have also gone up because we are, I mean the team addition at senior management level has also happened for us to be ready to be able to venture into these multiple categories. So, that also till these products come in as a percentage was slightly higher this half which will regularize by H1 next year. And third reason of course is the second quarter is a slower quarter for us because it is not a season for us, which also has an impact on overall percentage of expenditure. But these three factors effectively dictated the change in gross margin. But at the product level, there was no specific impact and the margins are intact.
Manan Madlani
Okay, so should we assume that the margin will improve from here onwards?
Sukrit Bharati
We should, yes. For this quarter it will be better. For this half it will be better.
Manan Madlani
Okay. And what was the utilization rate for IDUs and ODU separately?
Sukrit Bharati
So, during season we were almost at 70, 80. I mean we were at peak capacity. I mean for both IDU and ODU, because ODU ramp up of capacity is happening continuously almost because we see a larger demand coming from ODUs. So, but the second quarter of course everybody starts reducing inventory. So, second quarter in utilization was almost 30%. But first quarter, we were almost at full utilization, 80% plus.
Manan Madlani
Okay, and last question. In the PPT you mentioned that there is some production going for the electronics and controllers which will be used for EV chargers. Can you throw some light on that?
Sukrit Bharati
We have. So, there’s a company, there’s a customer that we have who’s making EV chargers for which controller boards we are manufacturing from them — manufacturing for them. And so that is going on. As they ramp up, our volumes will also ramp up.
Manan Madlani
Okay, and what margins are we getting for this product?
Sukrit Bharati
EBITDA margins are between 13% to 15%.
Manan Madlani
Okay. And revenue potential for this.
Sukrit Bharati
I mean, it heavily depends on how the customer does. But I mean, not, not a very big percentage of the overall sales.
Manan Madlani
Okay, thank you. That’s it from my side. I’ll join back in the queue.
Operator
Thank you. Manan. We’ll take a question from the chat, that’s from Vedant Baghri. He wanted to understand on the new plant in Chennai by Voltas and us, also what percent of value add is being outsourced by Voltas, and what will be our share in the same.
Sukrit Bharati
Right. So as of now, percentage wise, of course, small, we plan to increase this. But we will set up a small facility in Chennai for components to sort of understand that market and get a foothold into that segment. So, right now the value addition per unit is about INR150 to INR200 that we are looking at from that facility. But if things go well, then that will increase over the next year or so.
Operator
Thank you sir. We’ll take the next question from the line of Balamuralikrishna [Phonetic]. You can go ahead, please.
Analyst
Yeah. Good morning. So I think that in INR50 crores of PLI benefits are there. Could you please give some breakup of that so when we can get that benefits yearly breakup?
Sukrit Bharati
So the first year benefit was INR3 crores, which we have received. The second year benefit was INR6 crores, which we are expecting this year. This year’s benefit is INR7.5 crores and the next two years at INR10 crores. But in PLI, we’ve also applied for enhancement of PLI sanction from INR50 crores to INR100 crores, and that application is in process.
Analyst
Okay. And in the past presentation, I see that Cross Flow Flans we are going to expand by ’25 and by 800,000 and the dispenser 250,000. But in the recent presentation, I see that by FY ’26, Cross Flow Flans will be 600,000 and dispenser will be 200,000. So I think have you diminished our plans of expansion?
Sukrit Bharati
So we have — so what we were doing earlier was dispenser capacity was earlier fungible with ODU. We have created a separate capacity for it now, which is exclusive to dispenser because we see a larger number coming from dispensers. That is point number one.
Point number two, for Cross Flow Flans we are matching our IDU capacity. So I think there is a gap. Cross Flow Flans is 800,000. I think there is a mistype. So whatever is the IDU capacity, we are matching that capacity for Cross Flow Flans. So IDU is going up to 800,000 next year. So we’ll take Cross Flow Flans also to 800,000. We’ll do 100% of our captive requirement.
Analyst
Okay. And as of now, we have 800,000 IDU, sir?
Sukrit Bharati
We have 600,000. We are ramping up to 800,000 next year.
Unidentified Participant
Okay, understood. So and regarding this toy components and EV charger components. So what could be the potential of these components? Revenue potential. So how much we are doing as of now?
Unidentified Speaker
So toy components we continue to do revenue. I believe in our component business the revenue within the component business, the revenue is 4, 5% right now of toys and 3, 4% of the EV business. So they’re still small segments. We are not expecting large numbers to come from there. But these are some segments that we want to be part of and we’re getting the opportunity. So we are doing it. But there is no specific expenditure that we are doing toward these segments as of now.
Unidentified Participant
Okay. Understood. So regarding this customer base. So as of now I think we have only two customers for AC business. I think we are fully occupied with them. So any further as we are doing capture.
Analyst
Okay, understood. So — and regarding the toy components and the EV charger components, so what would be the potential of these components — revenue potential? So how much we are doing as of now?
Sukrit Bharati
So, toy components, we continue to do. Revenue I believe in our component business, the revenue — within the component business, the revenue is 4%, 5% right now of toys and to 3%, 4% of the EV business. So there are still small segments. We are not expecting large numbers to come from there. But these are some segments that we want to be part of, and we are getting the opportunity, so we are doing it. But there is no specific expenditure that we are doing towards these segments as of now.
Analyst
Okay. Understood. So regarding this customer base, so as of now, I think we have only two customers for AC business. I think we are fully occupied with them. So any further — as we are doing capacity additions, so any further new customers we are acquiring and they are in pipeline and under discussion, if you throw some light on that?
Sukrit Bharati
Yes. So we are talking to two or three large customers for commercial ref. We are also in discussion with a large customer for water dispenser. We have also started supplying to Vijay Sales under Vise brand for dispensers and other products. So in lighting also, we’ve added more customers.
So overall, we are adding — wherever we have capacity, we have started adding customers so that we can fulfill their requirements also. But, yes, as we go forward, this product mix and customer mix both will keep getting better in terms of diversification.
Analyst
Okay. So the revenue projections for this FY ’26 is I understood that it is INR1,000 crores to INR1,200 crores. So FY ’25, how much we can expect? And do you have any further projections for beyond FY ’26 as you are ramping capacity? And any plan for the further capacity addition on the AC units ODU or IDU beyond FY ’26?
Sukrit Bharati
So this year’s projection of INR700 crores to INR750 crores stand. Hopefully, we’ll be able to better it slightly. But this year’s projection stand, and we are on track for that. Next year’s projection of INR1,000 crores to INR1,200 crores is what we are saying as of now, but we’ll be able to further clarify on it once these capacities come online and once we have customer commitments.
Analyst
So any further capacity addition plans beyond this 800,000 IDU?
Sukrit Bharati
In AC, this is the plan. Of course, as we said right now, we have added capacity in commercial refrigeration, which is a completely new capacity. We are looking at compressors, which is a completely new capacity. So, yes, these are the major capacity additions happening. And we’ve added new manufacturing units. So now we have eight units, including the Chennai unit. So of course, there is expansion happening almost everywhere. But in large expansions, freezers and compressors are the two that we have.
Analyst
So for — as the new products are getting on board, so can we expect any 1% or 2% increment in the margins, maybe 11%, 12% we can expect in FY ’25 or ’26?
Sukrit Bharati
We are expecting improvement in margins, but — like I said, we’ll have to give it some time, let these products start maturing, we’ll be able to give better guidelines then.
Analyst
Okay sir. That’s all. Thanks a lot. All the best.
Sukrit Bharati
Thank you.
Operator
Thank you. [Operator Instructions] We’ll take next question from chat from participants asking what is the reason for moderate growth in top line during half year of H1 FY ’25 versus our peers?
Sukrit Bharati
So the growth that we have, I mean, we had anticipated — the growth that we have done is more than what we had projected, point number one. Point number two, like I mentioned, we were already at peak capacity in Q1. So there is not too much scope that we had to grow. If there was more capacity, probably in Q1, we would have grown more.
But, I mean, like I mentioned before in the call, that is more of an opportunistic growth that happened, and it is not something that you can attribute to planning, which is why there was — I mean, so our peers where there was more available capacity, growth, they got a bigger boost of the growth because of the season being extremely hot. But plan-wise, we have better our original plan. So I think we are on track. But capacity constraint is not something that we can solve overnight. It takes time.
Operator
Thank you, sir. We’ll take the next question from the line of Sharan Nandi [Phonetic]. Sharan, you can unmute and go ahead, please.
Analyst
Thanks for the opportunity. Most of my questions are answered. So still I have a couple of questions. So one is, do you have any exposure to U.S. market? And are you exporting any products to U.S.?
Sukrit Bharati
Right, sir. So we had taken UL registration for LED, and we had tied up for LED lighting in the U.S. market pre-COVID. But unfortunately, the company that we have tied up with did not do so well in COVID there, and we were not able to ramp it up. So apart from that, we have not sort of explored the U.S. market so much as far as appliances are concerned because their entire electrical system is on 110 volts and we are on 220 or 230 volts. So it requires a complete redesign of product and components. So we’ve not explored it so much yet, but we are open to it.
Analyst
Yeah. Why I asked that question is because Trump coming in and there are a lot of talks about tariff war. So if there was — if there is an exposure already with your company, then wanted to check how that tariff war is going to affect.
Sukrit Bharati
Interestingly, only today, I was thinking that compressors, why can we not export from here rather than them going from the U.S. but I don’t know the market enough to be able to comment on.
Analyst
Sure. And sir, like apart from — in the EMS business, apart from existing verticals related to AC and remote and other components, there are a lot of talks going on about semiconductor and electronic manufacturing in India in all major sectors like defense and marine and many other sectors, even IoT, right? So what are some of the new areas which you are exploring? And when are you thinking that those will come into picture or you’ll start working on those?
Sukrit Bharati
Sir, opportunity-wise, of course, we are open to multiple opportunities in the EMS space. But to commit a time line is very difficult or which category exactly will click is very difficult to commit as of now. But whatever happens, any development, we’ll keep you posted.
Analyst
Okay, but currently, where are we? Like are we having discussion with some of the big players in those sectors or?
Sukrit Bharati
We are discussing, but nothing to — I mean nothing I can tell you or nothing that we are sure will convert because we’re still early discussions.
Analyst
Okay. And can you throw some light on the BLDC motor, like is it for which product and how big is that market?
Sukrit Bharati
So we are not making the full motor. We are only making the controllers, components for BLDC motors. So BLDC components also that we are making is majorly for the AC market as of now. We are also looking to start the controller board, which are used in BLDC fans. That is also one segment that you are discussing about in EMS. So that is also something that is under development. But better numbers, we’ll be able to give you in due course.
Analyst
And one last question, sir. Since there is a talk going on about Voltas reducing your capacity, they’re doing their own in-house. At that time, can there be a discussion about you making an AC for another vendor as well? Is it going to be possible?
Sukrit Bharati
Of course, of course. If there is — if Voltas believes that they will not be able to book our capacity, then we will, of course, look at other customers.
Analyst
And you can have Voltas with whatever capacity they approve and new customer in AC both as well together, right?
Sukrit Bharati
Correct. Correct. Correct.
Analyst
Okay sir, thanks for answering questions and wish you all the best.
Sukrit Bharati
Thank you so much.
Operator
Thank you Sharan. We’ll take the next question from chat from Sahil Jain [Phonetic]. He’s asking, as the company is growing at a fast pace, and we are very aggressive for further growth, which is a good sign. Are we looking forward to optimize our working capital days?
Sukrit Bharati
We are. But with the addition of new products, initially until they stabilize, it’s difficult to — so the problem that we have — one problem that is there is our products are seasonal and the inventory goes up and comes down based on season requirements. That is one challenge. The second challenge is that with the addition of new products and categories, initially, the inventory level is higher until the production regularizes.
So because we are in multiple phases of expansion, there are slight variations. But overall, if you see the inventory days are improving, and we want to continue doing that. So the trend will be a downward trend, which means that the number of days will keep reducing. But there will be small spikes here and there because of product.
Operator
Thank you, sir. We’ll take the next question from the line of Siddharth Jain [Phonetic]. Siddharth, you can go ahead, please. Siddharth, you can unmute and ask a question. Okay. I think we’ll go to the next question. We’ll take the question from Prashil Gandhi [Phonetic]. Prashil, you can go ahead, please.
Analyst
Hi sir. Just one question. You highlighted that Voltas had booked your factory. So is it for FY ’25 or subsequent years as well?
Sukrit Bharati
Sorry?
Analyst
You highlighted.
Sukrit Bharati
For the next couple of years from whatever our discussion with them is, over the next couple of years, we don’t see a challenge.
Analyst
So that would be till FY ’26, ’27, safe to assume that?
Sukrit Bharati
Yes, it is, correct.
Analyst
Sure, sir. Thank you very much.
Sukrit Bharati
Thank you.
Operator
Thanks, Siddharth. We’ll take the next question from chat. This is from Akash Goel [Phonetic]. He’s asking would the AC expansion come in time for peak demand for coming summer?
Sukrit Bharati
AC expansion that we’re doing now is more for the next season and not for the current season because the current season, we are — by next month onwards, we will start peaking our capacity. So — because the season for us starts effectively in November — in November, December. And by — I mean, so because the market manufacturing is three months in advance to sales. So for us, the season is already starting next month or this month.
Operator
Thank you, sir. And another question is, given the issue of listing of preference share, is there a challenge we see in warrants money coming in?
Sukrit Bharati
No, warrants will — we will call for warrant money on schedule. There will be no change there.
Operator
All right, sir. We’ll take the next question from Sid K [Phonetic]. Sid, you can go ahead, please.
Analyst
Yeah. Hi. Thanks for the opportunity. My first question is regarding the full year guidance. Are we sticking to 700 plus?
Sukrit Bharati
Yes.
Analyst
And what will be the margins? Can we assume more than 8%?
Sukrit Bharati
Yes.
Analyst
Okay. And just one basic question. Like how does the industry actually work like because the capacity of indoor and outdoor, there’s a mismatch, like 4 lakh and 6 lakhs, right, for us. But are these units sold together?
Sukrit Bharati
So they are. But initially, when we started, we started only with IDUs. And that time, our customer was making ODUs in their own factory. They were not making IDUs. IDUs were imported at that time. So over the years, of course, the capacity has balanced. And now the demand for sets is increasing, which is why our ODU capacity increase or ramp-up is faster. So we need to match and make the full sets.
Analyst
Okay. So is it safe to assume that no vendor is actually picking up a single unit?
Sukrit Bharati
No customer. So the customers still are. It is not that they are not, but that will keep reducing over the next couple of years.
Analyst
Okay. So like once we match the outdoor unit, it will be fine.
Sukrit Bharati
Correct. So I mean — so the challenge that happens is every time the design of indoor unit and outdoor unit based on balancing and tooling varies. So there is always a possibility that for a large company, they might want to get IDU made of a specific design, ODU made of a specific configuration. If all that configuration is available in one place, which capability we are creating, then that is ideal. Till that capability is not there in a specific location, you can always mismatch.
Analyst
Okay. So is it safe to say that this capability will be there in FY ’26?
Sukrit Bharati
Yes. It’s already there, and we are further tuning it. So we’ll have — it will be fully there in ’26.
Analyst
And this will help our margins as well?
Sukrit Bharati
So blended margin of — I mean, so AC, like I said, IDU had better EBITDA. ODU had lower EBITDA. But blended margins will be similar. I don’t see a major change going forward also.
Analyst
Okay. And full year, what is the revenue we are expecting this year from refrigeration?
Sukrit Bharati
Refrigeration this year, I mean, we’ll effectively get only one quarter of sales, but we are looking at anywhere between INR50 crores and INR80 crores to come in from ref.
Analyst
INR50 crores to INR80 crores. Okay. And margins will be similar, like 9%, 10%.
Sukrit Bharati
Hopefully better, slightly better.
Sajid Shaikh
INR10 to INR12 lakh.
Analyst
Okay. And the PLI INR6 crores also we are expecting in Q4? Correct, yes.
Sajid Shaikh
Correct, yeah.
Analyst
Thank you. Thank you. And all the best.
Sajid Shaikh
Thank you sir.
Operator
We’ll take the next question from chat from Kunal [Phonetic]. He’s asking Virtuoso is looking to manufacture deep freezers. Are you looking at making Visi Coolers as well? What can be the opportunity size that you can target?
Sukrit Bharati
So opportunity-wise, the deep freezer market or the commercial refrigeration market is effectively growing at 24%, 25% CAGR. So the growth rate there is very aggressive. And in India today, about freezer specific, if you — about 17 lakh to 18 lakh freezers are sold every year or sold last year.
And this number is growing by 25%. So average cost of a freezer would be about INR12,000 ex factory. So that is the opportunity size. And for us, we have started with the capacity. And by next year, we’ll have a capacity of 400,000 pieces. So even if we are at a 60%, 70% utilization, we are looking at a number of anywhere between INR300 crores and INR500 crores to come from freezers in the next couple of years.
And the second part of the question, yes, we are looking at expanding into other segments of commercial refrigeration, including Visi Coolers, but we’ll be able to share time lines with you in due course.
Operator
We’ll take the next question from the line of Siddharth Jain [Phonetic].
Analyst
Hi. Am I audible this time?
Sukrit Bharati
Yes. Yeah.
Analyst
Hi. So first, how much are we investing into this compressor business?
Sukrit Bharati
We are, as of now, investing about INR35 crores to INR40 crores in compressors. And based on that, we’ll evaluate how it goes. And if things are well, then we’ll look to invest more.
Analyst
So this INR35 crores to INR40 crores will suffice for this 2.5 million capacity that we are coming up?
Sukrit Bharati
Correct. And not fully backward integrated, but yes, to at least start production.
Analyst
Understood. And what can be the asset turns in this business?
Sukrit Bharati
So, $28 million effectively means INR300 crores to INR350 crores top line for us.
Analyst
Okay. Understood. So also the — somebody had asked about remote. So like you said that remote is more like a backward integration for us for the ACs. But do we plan to get into adjacencies also like other product remotes as well?
Sukrit Bharati
We — yes, we are talking. But first, we want to start with AC, stabilize it, and then we’ll probably add more customers. But we are looking at starting for BLDC fan remotes also.
Analyst
Got it. Got it. Just one update. Are we — like in the previous calls, we had mentioned that from the commercial rep, we’ll be doing a revenue of around INR30 crores to INR50 crores this year, around INR150 crores next year. So are we on track for that?
Sukrit Bharati
Yes, yes, we are.
Analyst
Understood. And just one data point. How much was the bill discounting that we did in the first half?
Sukrit Bharati
I don’t have that figure off hand. I’ll have to get back to you.
Analyst
Got it. Last thing from my side. We have changed the depreciation method from this year onwards. So if we would have continued with the older method, that is the WDV, what would have been the depreciation amount if you have the calculation? About INR3 crores more than what it is today, roughly. Got it. Fair enough. That’s it. I mean that’s it from my side. Thank you guys. All the best.
Sukrit Bharati
Thank you. Thank you.
Operator
We’ll take the follow-up question from Amit Taneja [Phonetic]. Amit, you can go ahead, please.
Analyst
Thank you for the opportunity again. Actually, I missed the figures of the PLI at INR3 crores was for the first year, INR6 crores for the second year, and you were saying something I missed out. Can you please repeat?
Sukrit Bharati
INR3 crores, INR6 crores, INR7.5 crores then INR10 crores.
Analyst
Okay. And how much is yet to be received?
Sukrit Bharati
So we’ve only received INR3 crores so far.
Analyst
Thank you. That was helpful. Thank you.
Operator
Thanks Amit. We’ll take the next follow-up question from Amit Mandani — sorry, Manan Mandani [Phonetic]. You can go ahead, please.
Analyst
Thanks for the opportunity. Sir, you mentioned something about Vijay Sales, about water dispenser. Can you repeat that?
Sukrit Bharati
We’ve started supplying water dispensers in their — in Vijay Sales brand wise to them.
Analyst
Okay. Any quantifiable number?
Sukrit Bharati
I mean we started shipping one, two containers every month to them. But still — I mean, they are also establishing the market. We are also proving the product. So it is ongoing. The real numbers in dispensers are expected next year for which we, like I mentioned, created — we’ve effectively created separate capacity now. So dispensers should scale accordingly.
Analyst
Okay. And last question, say, hypothetically, two to three years down the line, given we have achieved the scale that we are targeting. And if number 1 player or number 2 player wants to acquire us and if there is a correct number for us, would we consider that?
Sukrit Bharati
As of now, I’m not considering it, but we’ll see how things progress.
Analyst
Okay. That’s it from my side. I wish you all the best. Thank you.
Operator
Thank you. Manan. We’ll take the next follow-up question from Balamuralikrishna [Phonetic]. You can go ahead, please.
Analyst
Thanks for the follow-up. Sir, could you please repeat the current capacity? I just want to see whether it’s matched with the presentation. So IDU 800,000, what do you for.
Sukrit Bharati
IDU last year, we had 600,000. We are ramping up to 800,000. ODU, we had — we ramped up to 400 in H Q1, and we are going to 600,000 and effectively 800,000 by end of next year is the plan ODU to match IDU. And yes, I mean those are the two main categories. Freezers, we have to go up to 400,000 next year.
Analyst
So can we expect any additions by the end of this year from the current capacity?
Sukrit Bharati
In which capacity? Sorry? Hello?
Analyst
Sorry. Yes. Can we expect any additions by the end of this year from the current capacity?
Sukrit Bharati
I don’t understand. By addition, what do you mean? I mean what?
Analyst
So I think as of now, we have IDU of 600,000 again. So for FY ’26, we are targeting 800,000.
Sukrit Bharati
This year, like I mentioned earlier, this year, that capacity will not be put to use effectively. It will come into use only in the next season.
Analyst
Okay, understood. Okay, that’s all.
Operator
Thank you. Thank you Bala. We’ll take the next question from chat from Aysuh Sabu [Phonetic]. He’s asking what could be the potential revenue contribution from BLDC Pan remotes and any time line for?
Sukrit Bharati
BLDC fan remote is a very low-cost product. Even if you make 50 lakh remotes, you do a INR25 crore top line. So top line-wise, it is a very small product.
Operator
All right sir, thank you. We’ll take the next follow-up question from Ron S [Phonetic]. Ron, you can go ahead, please.
Analyst
Thank you for the opportunity. Again. Sukrit, did I hear it correct? You mentioned for the compressor INR35 crores to INR40 crores investment, and we are looking at a turnover of INR300 crores to INR350 crores. So that equates to an asset turn of almost 8.
Sukrit Bharati
So I’ll clarify that. That is correct. Numbers are correct. You heard correct. The only challenge is that in compressors, we are now — we are right now not doing the full backward integration in-house. Once you do the full backward integration in-house, then this asset turn will come down to 3 times or 2.5 times. So the challenge with compressors is that — so the earlier challenge that we were facing is that with an asset turn of 2.5 times, we did not want to enter that category.
But — so now what we have done is we’ve broken it down into multiple phases. And if the phases start kicking and we are able to get good EBITDAs and especially with there being a vacuum, which we are anticipating, which can get created or which is getting created as of now. So if that vacuum helps us in covering our cost properly, then we can look at investing in backward integration and be a fully backward integrated compressor manufacturer.
Analyst
Sure, sure. One last question. I was listening to the MD of Blue Star, and he was mentioning that the aspirational middle class, they are the 90% of them are the first-time buyers of ACs. Now is there a request from Voltas to kind of cater to this pool basically at a lower price point? Any such request that you have got for the next season?
Sukrit Bharati
There are. There are certain plans that I think — I mean there are certain products probably which are under development where cost is being optimized. Of course, it is a regular process to keep optimizing product cost. But the idea is that AC should be price competitive. And if the entry barrier is lower, then more customers can — I mean, jump onto the bandwagon. So that is the idea, and that is the road map for us also.
Analyst
Okay, appreciate that. Thank you. Thank you so much.
Operator
Thank you Ron. We’ll take the next question from Bala [Phonetic] from Orient Capital. Bala, you can unmute and go ahead, please.
Analyst
Good afternoon sir. Thank you so much for taking my questions. Sir, regarding like then [Indecipherable] mentioned, the industry has moved from rotary compressors to — sorry, reciprocating compressors to rotary compressors, but we are doing reciprocatory compressors. I just want to understand the price difference between those compressors and what is the energy level difference? And what kind of IRR we are expecting in those reciprocatory investment side?
Sukrit Bharati
So with the current investment and probably with the vacuum, we are looking at a 25% IRR in our investment. That is point number one. Point number two is that rotary compressors are almost 2.5 times the price of reciprocatory compressors. And the complexity level in terms of accuracy — tolerance accuracy is equally complicated. So rotary compressors is a larger investment also a 2.5 times, 3 times investment also as far as the initial investment is concerned.
So, COP-wise, COP for reciprocatory compressor, which is the coefficient of performance for reciprocating compressor is between 1.2 to 1.9 as of now in the fixed category. inverter is slightly higher. For rotary compressors, it’s much higher. It is 3 plus.
So AC being a product which is demanding higher efficiency move to rotary. Larger capacity air conditioners, which are being exported to Middle East, still use a lot of reciprocatory compressors. So — but domestic split ACs have moved to rotary. But the entire refrigeration market and freezer market is on reciprocatory, and we don’t see a significant change happening there in the next few years.
Operator
Got it sir. Thank you. Thank you, Bala. We’ll take the next follow-up question from Siddharth Jain [Phonetic]. Siddharth, you can go ahead, please.
Analyst
Thank you once again. So one — so if you could just give some more color on this compressor. First, because I believe our refrigeration that we plan to get into is largely for the clients who are for export oriented. So is that — so the compressors also will be for the domestic clients or we’ll be looking to target export clients only?
Sukrit Bharati
Freezer, of course, primary customer base is domestic. And some part is geared towards export. Compressor majorly domestic until less like we were discussing an opportunity for some country comes up because of sanctions or anything of that sort. But as of now, primarily domestic.
Analyst
Understood. And where will this capacity be put up?
Sukrit Bharati
In Nashik itself.
Analyst
Nashik itself. All right, that’s it. Thank you.
Operator
Thank you. Thank you Siddharth. We’ll take the next follow-up question from Sharan Nandi [Phonetic]. Sharan, you can go ahead, please.
Analyst
Not a question. So I just would like to know the process for retail investors like me and many of us, how we can visit your factory in Nashik and meet management, especially Sukrit sir. So I’m a big fan of you and also I have been following you for many years. And because not like retailers won’t get that opportunity to visit, right? So I just wanted to check what is the process and do we get an opportunity.
Sajid Shaikh
Sir, appreciate your words. I think Kaptify can coordinate a visit because they keep having investor visits where we’ll tell them to reach out to you. And whenever the next visit is scheduled, if you can spare time, then you’re most welcome to visit us.
Analyst
Okay. And it will be done with a group of investors, is it?
Sukrit Bharati
Mostly, yes.
Analyst
Okay, sure sir. Thank you and appreciate it.
Sukrit Bharati
Thank you so much.
Operator
Thank you. So this was the last question for the day. I now hand over the call back to Vinay sir. Over to you, sir.
Vinay Pandit
Thanks. Thanks, Sukrit, Sajid, would you like to give any closing comments before we end the call?
Sukrit Bharati
All right. Thank you so much for everybody for taking the time and joining us. We hope to have your continued support, and we hope to continue delivering on the commitments that we are making. With the opportunity at hand in India as a country and the pace at which things are moving, we hope that we can build a robust and fast-growing company. And we are excited about the product categories that we are entering, and we see a lot of potential. Let’s hope with support of all of you and our team and our customers, we are able to achieve those targets. Thank you so much for taking the time. Thank you.
Operator
[Operator Closing Remarks]