Voltas Limited (NSE: VOLTAS) Q2 2025 Earnings Call dated Oct. 30, 2024
Corporate Participants:
Jitender Verma — Chief Financial Officer
Manish Desai — Head Corporate Finance
Nikhil Chandarana — Head Corporate Finance
Pradeep Bakshi — Managing Director and Chief Executive Officer
Analysts:
Bhoomika Nair — Analyst
Nitin — Analyst
Saumil — Analyst
Naushad Choudhary — Analyst
Natasha Jain — Analyst
Ravi Swaminathan — Analyst
Keyur Pandya — Analyst
Siddhartha Bera — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Voltas Limited Conference Call hosted by DAM Capital Advisor Limited. [Operator Instructions]
I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisor Limited. Thank you and over to you, ma’am.
Bhoomika Nair — Analyst
Yeah. Good afternoon, everyone, and a warm welcome on behalf of DAM Capital to the Voltas Limited 2Q FY ’25 Earnings Call. We have the management today being represented by Mr. Pradeep Bakshi, Managing Director and CEO; Mr. Jitender Verma, Chief Financial Officer; Mr. Nikhil Chandarana, Head Corporate Finance; and Mr. Vaibhv, Head Treasury. At this point, I’ll hand over the floor to the management for their initial remarks, post which we’ll open up the floor for Q&A.
Thank you, and over to you, sir.
Jitender Verma — Chief Financial Officer
Hi. This is Jitendra Varma. I’ll be taking a few minutes to give you analysis of results, and then we will take the questions and answer along with our MD and CEO, Mr. Pradeep Bakshi, who is also on the call. So as you are all aware that global growth remained resilient despite a sluggish outlook for the Eurozone and China. Stronger-than-expected growth in the United States among advanced economies, along with robust performance in India within developing economies is sustaining overall growth momentum. However, uncertainties stemming from disruptions in production and shipping, geopolitical conflicts and extreme weather events, upcoming US elections may influence the global economy in the near term. Domestically, the economy is projected to grow between 6.5% and 7% in FY ’25. Rural demand is improving, driven by high FMCG sales, while urban consumer sentiment appears to be softening.
The recent surge in inflation can be attributed to a temporary spike in prices. However, core inflation remains within a comfortable range and several food items such as pulses have declined in price due to government initiatives. In the current quarter, considering underlying global and domestic factors, the Reserve Bank of India has shifted its stance to neutral, focusing on inflation targets while supporting growth. Nevertheless, inflation projections may face headwinds from renewed volatility in commodity prices, particularly due to fiscal stimulus in China, which could impact the RBI’s inflation targets and potential rate cuts. Voltas has delivered another remarkable quarter. Two quarters ago, the company achieved the milestone of selling 2 million air conditioners within a 12-month span. Impressively, this achievement was reached in just eight months during this calendar year 2024, highlighting strong market demand for the company’s products and a year-to-date growth of 52% at this time.
During the traditionally lean monsoon season in the current quarter, Voltas reported a 15% growth compared to the same quarter last year despite a higher base. The Unitary Cooling Products division continued to outperform the market, maintaining its growth momentum with an overall volume increase of 56% over the previous six months period. For the six months ending September 30, 2024, the company achieved a 33% increase in consolidated total income, reaching INR7,726 crores, up from INR5,794 crores in the same period last year. Profit before tax surged by 128%, climbing to INR657 crores compared to INR288 crores previously. Net profit after tax also experienced significant growth, reaching INR468 crores, up from INR165 crores in the corresponding period last year. This marks the highest half yearly profit in the company’s history.
Earnings per share for face value per share of INR1 for the six months period ended September 30, 2024, was INR14.15 compared to INR5.02 in the same period the previous year. In the same quarter, consolidated total income grew by 15%, reaching INR2,725 crores compared to INR2,364 crores in the same quarter last year. Profit before tax surged by 142%, increasing to INR205 crores from INR85 crores. Net profit after tax saw a substantial rise, climbing to INR133 crores from INR36 crores in the corresponding quarter last year. Earnings per share for the quarter ended September 30, 2024, was INR4.05 compared to INR1.11 in the same period previous year. During the quarter ending September 30, 2024, the Board of Directors approved a long-term incentive scheme for 2024 aimed at driving company performance and retaining key talent.
This scheme, which commenced in the financial year ’24-’25 would end in the financial year ’26, ’27 has resulted in a provision being added to employee benefits of INR24 crores for the first six months in the current quarter, which moderately impacted the bottom line. These actuarial valuations will be reassessed periodically. Overall, the corporate balance sheet remains healthy. A snapshot of our results for this quarter and for the financial year is already aware to you guys. In segment A, in the Unitary Cooling Products, the second quarter typically marks a lean period. The early heat wave in the Northern regions helped sustain the growth momentum in the company’s air conditioning business. However, persistent rains across country during this quarter slowed industry progress. Despite these challenges, the segment performed relatively well, reporting revenue growth of 30% compared to Q2 FY ’24 and 44% compared to H1 FY ’24.
All products within the room air conditioner category experienced strong demand, driven by consumers’ desire for comfort and convenience. Both window and split air conditioners saw robust growth with demand emerging from across the country. The premium segment, particularly five-star rated products continued to thrive, leading to an improved overall sales mix for Voltas. With the new facility operational, we aim to enhance sales and service through our extensive distribution network. Leveraging our supply chain has enabled us to maintain our leadership position with an exit market share of 21% as of September 2024. Over the past few quarters, we have consistently strengthened our brand proposition and product placement across all channels. During the season, our performance in the RAC segment has remained strong. We also noted significant volume growth in other cooling products, including air coolers and commercial refrigeration items.
The commercial refrigeration industry currently faces headwinds due to a reversal in the capital expenditure cycle after two years to three years of consistent growth. Products such as chest freezers and chest coolers have reported moderate growth. Nonetheless, demand for water coolers and dispensers within this category has remained supportive. Thanks to our new plant and a higher base from the previous year, commercial refrigeration products showed a healthy performance. Our new offerings in cold room and medical refrigerations are gaining traction, bolstered by a solid order book. While revenue growth was commendable, challenges in the market stemming from reduced capital expenditures by customers have led to a decline in margins during this quarter.
The air cooler and water heater categories continued to outperform, achieving substantial growth compared to the previous year. Strong sales in the first half, coupled with healthy order commitments from our channels set the stage for an exciting year. Aggressive initiatives to expand our distribution network, combined with quality products and favorable climatic conditions have helped us establish a robust foothold this season. Our new cooler models were well-received, further fueling growth in this category. Recent reports indicate that our market share has grown to 11.11% exit September, positioning Voltas as the number two brand in September 2024. In the water heater segment, partnerships with distributors and sub-dealers have also contributed to strong performance.
The commercial air conditioning, CAC vertical maintained steady performance during the quarter, driven by sales of VRF, facet and ducted ACs. The higher volume of margin-accretive product sales, value engineering initiatives and the current mix of AMC jobs have positively impacted our bottom-line. Consumer-centric financing schemes significantly contributed to sales growth this season. However, elevated commodity prices and a depreciating USDNR exchange rate have affected profitability. Our investments in BTL advertising have helped keep margins steady, aligning with our expectations. Simultaneously, various value engineering initiatives and cost control measures have contributed to stable margins.
In summary, segment revenue grew remarkably by 45%, reaching INR5,384 crores, up from INR3,723 crores during the same period last year. The segment result increased by 48%, amounting to INR443 crores compared to INR300 crores in the corresponding six months of the previous year. For the quarter ending September 2024, segment revenue grew by 31%, totaling INR1,582 crores compared to INR1,209 crores in the same quarter last year. The segment result for the quarter was INR116 crores, up from INR93 crores in the corresponding quarter last year. On the capacity expansion front, we are pleased to report that production at our new factories in Chennai and Waghodia is progressing as planned. These facilities provide us with strategic advantages in location, enabling us to effectively cater to markets in South and West Asia.
Segment B for Electromechanical Projection Services. This segment — the segment revenue for the quarter was INR880 crores compared to INR924 crores in the previous year’s corresponding quarter. The segment results for the quarter stood at a positive INR46 crores, a significant improvement from a loss of INR49 crores during the same period last year. Over the six-month period, segment revenue increased by 14%, reaching INR1,829 crores compared to INR1,603 crores in the same time frame last year. The segment result also turned positive, amounting to INR114 crores, a substantial turnaround from a loss of INR101 crores last year, primarily due to provisions made on receivables.
During the current quarter, heavy rainfall affected project execution across all verticals, leading to marginal growth for the business. Delay in job progress and collections from government tender jobs impacted profitability. However, domestic business performance for the six months showed improvement. A focus on collection of dues and better working capital management has resulted in strong profit growth. The business anticipates a return to normal execution levels and aims to achieve its targets and growth by the year-end. For the Domestic Projects segment, we secured an order of INR822 crores with the current order book standing at INR5,014 crores. In the international project sector, operations in the UAE and Saudi Arabia continued to perform well, driving the revenue growth.
Strong project execution has ensured robust bottom line performance as well. We have adopted a cautious approach to order booking during the quarter. As of September 30, 2024, the carryforward order book for international business stood at INR2,473 crores, predominantly in the UAE and Saudi regions. The total carryforward order book for the segment was INR7,487 crores as of the same date. Segment C, Engineering Products and Services. This segment faced certain challenges during the quarter. While revenue increased to INR308 crores from INR277 crores the previous year, segment reserves fell to INR84 crores from INR108 crores during the same period last year. For the quarter, segment revenue grew by 9%, reaching INR147 crores compared to INR134 crores in the corresponding quarter last year. The segment result for the quarter was INR40 crores, down from INR54 crores the previous year. The mining and construction vertical showed positive momentum on the new pipeline, ensuring continuity in operations and maintenance jobs, as well as sales of power screen machines.
However, challenges in revenue mix and job renewals at healthy margins limited the ability to translate top line growth into EBIT. The textile industry faced headwinds due to fluctuations in cotton and yarn exports. Consequently, capital expenditure across the sector decreased, leading to reduced utilization level for spinners and a corresponding decline in demand and margins for our regency business. Despite these challenges, our aftersales and post-spinning business showed positive performance. Voltas Beko. Our joint venture, Voltbek Home Appliances Private Limited, also emerged as a beacon of growth, a volume growth of 54% in the first half of the year. This was complemented by a significant increase in market share in the refrigerator and washing machine categories year-over-year.
As of YTD September 2024, our market share improved to 7.5% for washing machines and 5% for refrigerators. The home appliances industry in India experienced steady growth, driven by demand for both large and small appliances. However, as compared to industry, Voltas Beko poised a strong growth by offering an impressive product range to meet consumer needs. The launch of the Harvest Fresh campaign, along with enhanced social media efforts, focus on e-commerce, exhibitions, and dealer meetings significantly boosted overall business performance. Improved traction from modern trade has further supported this growth. In terms of profitability, increased volume has led to a gradual reduction in losses. Voltbek continues to work towards minimizing loss per unit, aiming for EBITDA breakeven in the coming future.
Voltbek remains committed to enhancing its market presence across various product categories through customized market penetration strategies and growth initiatives. These efforts include expanding distribution reach, adopting channel-specific practice to enhance market presence in key regions, and maintaining a strong focus on boosting e-commerce and omnichannel development. On the cost front, localizing production for a larger portion of its product portfolio, implementing product efficiencies, value engineering, and optimizing the product mix have contributed to a positive outlook for the company.
The period from October to December, that is quarter three FY 2025 for the company, is generally a lean season for cooling products due to winter. However, the onset of the festive period may bring an early surge in demand in part of the quarter. It will be interesting to observe the interplay of various factors, including inflation, fluctuations in crude oil prices, currency behavior, and geopolitical challenges. The current economic environment is marked by uncertainty and volatility. Inflation remains a focal point, influencing future monetary and non-monetary actions that will impact overall economic growth and consumer demand in the upcoming quarters. Nevertheless, we remain optimistic given the supportive factors for the businesses we operate in.
Thank you. Maybe we can open it for questions-answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Nitin [Phonetic] from Axis Mutual Fund. Please go ahead.
Nitin
Sir, thank you for taking the question, just as you articulated market share coming back, as you stated in the press release and the primary growth looks pretty promising. Can you talk about a little how the secondary market has gone during this quarter? I understand this is something not a season, but generally, if primary has been on such a higher side, how has the secondary market?
And number two, given festive, you already seen — must have seen last 10, 15 days or 20 days of festive, how has been the response on overall sentiment-wise on the product itself and how you’re doing it? That’s my first question.
Manish Desai
Should I answer?
Nitin
Yes, sir, then I’ll take up the second question. Yeah.
Manish Desai
What do you want? You want to go ahead with the question or I answer one-by-one?
Nitin
Sir, one-by-one, we may get confuse, so we will take.
Manish Desai
Right. Okay. I go ahead. Firstly, you asked about the secondary sales. So this year, right from the March onwards, of course, last seven, eight months, the sales have been. And the market share which we are sharing with you, that’s a secondary sales market share only…
Nitin
Right.
Manish Desai
… which is by third-party syndicated international agency. So that shows that we have continued to do well by clogging in 21% market share, exit September, so this shows the sales has been quite robust. It’s not that we are just pumping material in the market or we are doing only primary. Secondaries have also been happening equally good for the better. Also for your information, you wanted to know as to how Diwali if there facility has been happening around this kind of AC businesses is not — it doesn’t give a great numbers during the festival period.
However, it is more of other appliances, like washing machines and also we continue to do pretty well on our appliances segment, Voltas Beko in the product. And we have clocked very good numbers even during October period also, because Diwali sales start happening from September onwards. It is 30 days in advance. Actually, January the as we say November 1st or three or whatever may be the Diwali, whatever we are counting it. So this last one month, appliances sale has been very big. All appliances across both have done very well.
AC is also have done well compared to last year, we have continued to grow. But more to talk about, we are currently talking about quarter two and half yearly results. So our primaries and secondaries have done well. Yes, of course, in the quarter two because of rains actually in several parts of the country and extended rains I say this time bit of a disruption was there in certain areas. However, overall, we have done pretty well for ourselves as a brand and even industry has done reasonably okay. Everybody has shown growth, whatever numbers we have seen for most of the brands. So that’s the answer for your question.
Nitin
Okay. Sir, why I ask specific AC because when we were talking to a few channel partners and all, surprisingly, they are talking about October festive is some 20%, 25% growth in AC. So I was pretty surprised to hear that. So I thought I’ll ask you if…
Manish Desai
Yes, that’s what I’m saying, but I’m comparing my growth — earlier months right from March until May, June, I was growing 70%, 80%, 100%. Compared to that, 24% is a bit muted growth for me. But yes, looking at the — I don’t count very high on the festival period for the ACs to be honest. All along, I’ve seen for last four decades I’ve been in the market AC and refrigerator are used only largely during summer period only.
Nitin
Yeah. Got it. Sir, second, in terms of…
Operator
I’m sorry to interrupt, sir…
Nitin
Yes.
Operator
Can you please fall back in the question queue.
Nitin
All right. Okay. I’ll come back in the queue.
Operator
The next question is from the line of Saumil [Phonetic] from Kotak Mutual Funds. Please go ahead.
Saumil
Thanks for the opportunity, sir. Two questions. First, in terms of VoltBek now obviously, you have alluded to rising market share both in as well as washing machine. But the losses, while they have come up, will they continue to be at INR30 crores on a quarterly basis. Now two years or three years out at what revenue threshold or at what market share you believe that you can achieve…
Manish Desai
Sorry, I’m getting a lot of echo in this call. Earlier on, we were very clear with the first questions, but now I’m not able to hear. I’m not sure whether my colleagues are able to hear them properly.
Saumil
Sir is it better?
Manish Desai
Pardon. Hello. If somebody can repeat that question to me or maybe in case. Jitender you have been able to hear you would like to start?
Jitender Verma
No, I could not hear. There was a lot of voice from his background. So I could not hear…
Manish Desai
A lot of echo is there in his phone.
Saumil
Sir, is this better?
Manish Desai
No it’s the same.
Saumil
I probably [Indecipherable]
Manish Desai
You can call from the main phone rather than using a speaker or a headphone probably.
Saumil
Hello. Is this better, sir?
Manish Desai
Yes, it’s better.
Saumil
Yes. Sir, two questions. First on in VoltBek. Now obviously, you have alluded to market share going up both in AC refrigerator as well as washing machine. But the losses seems to be at INR30 crores on a quarterly basis. Now at what revenue threshold or at what market share you believe you can achieve a breakeven, sir? That’s my first question. Any broad indication on that?
Manish Desai
So firstly, as we said in initial few years, we are investing into the brand actually, and we are building the revenue and the numbers. Yes, I would believe that very soon, we are likely to reach 10% market share in the washing machines and probably 7%, 8% in the refrigerator segment because we are already 5% and roughly 7.5%, 8%, it’s been hovering around month-on-month basis in the washing machines. And in case you talk about only semi automatic washing machine, it’s been well above 14%, 15% all along across month after month for almost a year now. So I think when we — overall, from the washing machine segment, we — by probably next year, we should see some EBITDA positive. That’s what we had committed to the given the guidelines also, we’ve been working towards it. Probably in a year’s time, we should cross the threshold numbers, which I’m saying, roughly 8% to 10% market share in both the categories.
And from there onwards, probably you will see a better result on that front. Yes, of course, but these are per design — as per design only, the design that we are going to invest into the brand. So you will see that we have been continuously building network. We are continuously building campaign, making the consumers aware about the category, about the products, which we have been offering. Our products have been accepted very well. No complaints whatsoever from any segment. All the channel partners across segments, across channels, including e-commerce, including modern trade, including organized trade, everywhere this product seems to be doing very well. Now hopefully, we’ll get good news very soon.
Nikhil Chandarana
Yes. Saumil, just to add to what Mr. Bakshi has said, we have always been maintaining that somewhere in this year, we should become — we should breakeven in EBITDA, and that is looking highly likely. And as is also evident by the fact that with higher volumes, our losses per unit are also coming down gradually. And if I were to actually put a number, I would say somewhere closer to INR2,500 crores, INR2,600 crores kind of a turnover, we should be definitely breaking even. But don’t take my — this as a gospel truth because there can be many factors which work on this. But generally speaking, at this number, we should be starting to break even and also the market shares of that.
Saumil
Perfect. And sir, my second and last question now, obviously, once the new plant, which is already operational in Tamil Nadu, in year two or year three, what could be the utilization rates in the volumes sold, any broad number? And subsequent to that, what could be the broad margin differential versus where we are today?
Pradeep Bakshi
So let me answer this way. If you look at our sales — current sales, is well past 2 billion in the first 240 days of this year. And we’ve been growing at a pace of almost 50% in this category, the new resolution [Phonetic] which we have set up this Chennai factory. So if we continue to grow with this pace, we are likely to cross 2.5 million, 3 million units soon. So this particular factory, what we have set up is only at the moment, 1 million units. And my existing factory in Pant Nagar is able to produce about 1.4 million, 1.5 million. So put together, as it is, I’m running short of the capacity, and we are augmenting it further. Probably we are very soon going to take it to 1.5 million and 2 million by 2026. So therefore, it will just be sufficient for my needs. So when you are talking about full capacity, it has to any way run on the full capacity and continue to cater to the demand and that’s the ask and obligation on that factory. So you don’t worry, this will be running at full capacity and this full capacity will be utilized also.
Coming back to you say how the profitability is going to improve to this factory. Honestly speaking, I am not looking at — I’m not greedy by setting up this factory. I want to first fulfill the consumer requirement. I want to provide comfort and convenience to my consumers first. And profitability has been reasonably good as of now. And I’m not haggard about that to be honest. First need is to fulfill the requirement and expand the market. That’s what guidance and I’ve been providing you this input all along. Our endeavor is to expand the market continuously because India’s penetration level is pretty very low as compared to similar kind of geography with similar kind of population based and consumption based, China, if you look at.
So we need to expand the market. Our — owner — it’s our ownership on the brand, which is a leading brand to expand the market and to provide the comfort to the consumers that’s the objective of this factory. And we’ve been giving reasonably good profit to the investors. So I don’t think we should be haggard about that.
Saumil
But sir, directionally, fair to assume that the margins will be higher
Operator
Saumil sir, can you please call back
Saumil
No. Its — I think almost. Thank you.
Operator
Thank you. The next question is from the line of Naushad Choudhary from Aditya Birla Sun Life. Please go ahead.
Naushad Choudhary
Yes. Thanks for the opportunity. Two questions, then I’ll come back in queue. Firstly, again, on wall tobacco, I take your point, sir, but just to help us understand more at what gross margin we operate this business and what specific steps are we taking to make it profitable? How much capital we have deployed so far in this business? This is first question.
Pradeep Bakshi
So I think partly we have already between me and my CFO, we’ve answered on to this, how we are — when we make it profitable, etc. I think it was answered. If you are asking about what kind of gross margins we’ve been making in the category, the different products with different kind of gross margins. It ranges between — I think if I’m not mistaken, somewhere Jitender can add to it, roughly around roughly around 10%, 12% to 15%, 18% type margins are there in each of the categories. And as we said is EBITDA positive — EBITDA breakeven we’re going to make probably this year, by this year-end, that’s the endeavor at the moment, and that’s what we are trying for. And profitability, as we said is in terms of revenue, said something INR2,500-odd crores or so, whatever, whenever we said last year, we have done about INR1,500 crores. This year, most probably we will cross — we will be close to the numbers that Jitender said.
And next to next year, we are growing very fast in this category. We are the fastest-growing brand — so you can be rest assured we will be profitable in this category. So this is initial investment in formative years where we need to build a brand because we are a late entrant into the category. You will appreciate that there are multi Koreans and other brands are Chinese brands are available and American brands are available. So we have to make our mark into the industry first. And we have to expand this industry also because this industry has also been not growing with that speed. So our endeavor would be to grow this industry also. We’ve been doing about 13 million, 14 million, 15 million refrigerators all along. You look at 80, how fast is it doing? A couple of years back, we were 5 million, 6 million. We’ve only cross 14 million, 15 million now.
Naushad Choudhary
How much capital we have deployed in the business, sir?
Pradeep Bakshi
I think Jitender correctly, it’s about INR1,300 crores, if I’m not mistaken.
Jitender Verma
Yes, INR1,300 crores.
Pradeep Bakshi
Together both partners, out of which 50% is by Tata, including Voltas and Tata Investment and 50% by the partners. A similar provisions, 49% by — as Deo and cost group by 1%. That’s how it is.
Jitender Verma
Yes, it is INR1,300 crores, yes.
Naushad Choudhary
I have a follow-up on this. I’ll come back. But second question is on the raw material side, sir, if I see from last — from Q1, there is slight gradual inch up in raw material cost. So do you think the market is ready to absorb that cost? Or we may see some challenges in coming quarters in terms of passing on that raw material?
Pradeep Bakshi
The raw material — I’m sure you know that in all the categories, including air conditioners, cylinder, washing machine we get the pricing by some percentage points because raw material cost, yes, you’re right, obviously it’s gone up a bit in the last few months. So we have passed on part of it already. And we will continue to observe, partly, we are trying to cover up through value engineering in a fast pace as to how can we minimize the cost of production. And similarly, part of it in case needs to be passed on, we passed on also, and we will continue to do so depending upon how we can mitigate that. Of course, the brand cannot absorb everything. Something has to be passed on to the market as well.
Operator
Thank you. The next question is from the line of Natasha Jain from Nirmal Bang. Please go ahead.
Natasha Jain
Yes. Hi, sir. Thank you for the opportunity. Sir, my first question is on the domestic side of the EMPS business. Now historically, in the past couple of quarters, we’ve seen quite strong growth and honestly, very bullish commentary as well. But this quarter in the domestic side, the growth has just been 6%. I understand incessant rains could be a factor, but could there be a possibility that there’s some slowdown in certain projects that we are executing? And on a related note, how do you see order book execution for domestic business in the second half? That’s my first question.
Jitender Verma
Natasha, to answer that very quickly, I mean, I think in your question itself, the answer was there, the incessant rains, that is the real reason. And I will, therefore, call it a kind of a one-off thing. And the H1 was good. We don’t have any issues on that. Yes, a slightly bit of a lesser growth than as we have been showing. But H2, we should be able to recoup all these things, because in the projects business, sometimes we don’t have to look at it quarter-to-quarter, because different projects have different kind of speed. And therefore, on a yearly basis, we should be able to recoup. And the order picking on the domestic side also has been really good, and we have picked up some nice good margin orders. And this has also been our strategy to be selective and pickup only those orders, which we believe are having good KYC and all those factors. So we have been on track for that.
Nikhil Chandarana
So let me add to what Mr. Verma has said is, order pad has been reasonably healthy. It is at the same number as it was last year end 31st March. We are about hovering around INR5,000-odd crores worth of order pad with us. And while we have said that during the rainy season, there is always a bit of a disturbance because right of way, etc, etc, at times is not available and therefore, you cannot complete those deadlines, etc. However, if you look at H1 numbers, we’ve been way ahead of our commitments and numbers and targeted numbers in this category. H2 also looks very promising. We have got very healthy orders from Tata Electronics was almost INR1,000-odd crores, which we need to execute during the course of next few months. So I think we have got a very good order pad, and I’m very confident and bullish on that segment as well, domestic business. We will do well in this segment as well.
Natasha Jain
Understood, sir. Sir, that helps. And my second question is on the RAC side. While you’ve mentioned earlier in the call that there was tertiary demand in the sense that end consumer demand did pickup. Sir, I was just wondering in a lean quarter like Q2, when practically your August and most of your July was also completely washed out because of rains, still we’ve had healthy growth in the RAC category. So sir, should we read it as there could be some bit of channel filling also because inventory was low? And if that has happened, how do we see the near term? Because now we’ll enter quarters wherein we’ll sit at very high basis. So what is the kind of growth that we can expect in the second half from RAC as a category?
Jitender Verma
Natasha, we — in my report — in my initial comments, I mentioned that we did exit in September of 21% market share. So when we are reporting that, that’s the secondary data only, which we pickup from the market and that will also show you that secondaries have been doing pretty well. Of course, there would be some stocking up, but those are like normal levels. It is not that people are — or the dealers are building up unprecedented inventories or anything. And this market share data actually alludes to that fact. I’ll let Mr. Bakshi add to your question.
Pradeep Bakshi
Yeah, actually, the market knows, the dealers are very smart people, and they understand what to stock up, what not to stock. The history shows there is a greater demand of appliances, therefore, they invest more into the other appliances than the air conditioners during this period. So I don’t think — but of course, they need to prepare themselves for each category and therefore, air conditioner also, they would have kept in stock, and they have been able to sell and liquidate part of it. I’m not too sure that inventory is being built up in the channel.
And going forward also, right from now another two, three months, February onwards, the season picks up. And, of course, West and South, there is a second summer also in October, November. So October, November, West has done very well for us actually. Why North, of course, I can understand, because of Diwali, festival and all, there is a more focus towards appliances. But West and South, the second summer catches up and there is demand of compressor products there. So I don’t think I’m worried about any stock and I have not been reported as of now by my team that there has been additional stock or high stock in the marketplace. So you can be rest assured that we’ll continue to do well in the next two quarters as well.
Natasha Jain
Understood sir. Thank you so much. Wish your team a very Happy Diwali sir.
Pradeep Bakshi
Thank you so very much.
Operator
The next question is from the line of Ravi Swaminathan from Avendus Spark. Please go ahead.
Ravi Swaminathan
Sir, thanks for taking my question. Most of my questions have been answered. One question on the Engineering Products side. So our profitability, which used to be in that range or band of 33%, 35% at an EBIT level has come off to 27%, 28% in the first half. Is it because of the fact that the profitability in the textile side is generally way better than that of the mining side? That is the major reason, or is there something else that we need to read into it? And how sustainable, or should we read like the margin should be in this band at least this year to 27%, 28%?
Pradeep Bakshi
So textile, it is having a little bit of a challenge at the moment because Bangladesh, because of sanctions there, Bangladesh, a lot of yarn goes to Bangladesh. And that was actually — had come to a halt there. That’s one. Secondly, yarn prices also had suffered. And, therefore, the margins have shrunk during this period. Looking at even the policies, etc, etc, probably we are presuming that the margins are going to be around this level for next few months until situation starts picking up. Yarn prices needs to get corrected. And of course, the Bangladesh starts operating in the normal session. That will be the ray of light for this particular category.
But it’s been a healthy number. We have been delivering about INR100-odd crores for last two years. This year also its slightly lower than the previous number order, or the budgeted numbers. But we are likely to catch up in the game by the year, because we are focusing on vast value-added services, also part sales also doing the energy audit for the textile mill. So my team gets engaged whenever this kind of situation comes. Now we start doing some other things, which continues to give us some revenue and profit, which makes up for the a bit of a loss, which may happen because of all these events. So don’t be worried, actually, we are reasonably placed in this category as well. And by the year-end, we should be well close to our targeted numbers.
Ravi Swaminathan
Understood. Thanks a lot.
Operator
Thank you. The next question is from the line of Keyur Pandya from ICICI Prudential. Please go ahead.
Keyur Pandya
Thank you for the opportunity. Sir, one question. So, on the UCP margin side, I mean, you mentioned last quarter that industry has increased the prices near the end of the season and year-over-year 30% kind of growth. And despite that, if margins are lower Q-on-Q, if you can just throw some light on what is driving the margins in this narrow band? Is it competitive pricing or this opex of the new plant or something else? And in that backdrop, how should we think of margins going ahead also?
Pradeep Bakshi
There are a couple of reasons and then I’ll request my colleague [Indecipherable]. There are reasons for this. One, as we explained in his also that we have additionally provided for long-term incentive for our team because to continue to keep them motivated and highly charged up to continue to keep giving us growth. So that’s an additional number which has come in this quarter. Despite the fact, yes, of course, we have passed on some cost to the market. But same time, this is an additional cost which has come up. And for both — complete H1 has been put into this quarter only because the team got finalized and approved by the Board now only.
So that’s one piece. Secondly, of course, there are some investments we made, but of course, we have not taken any depreciations as of now. I don’t think maybe [Indecipherable] correct me or add to this. So that’s one part. But thirdly, of course, because of lesser volume, — so fixed cost doesn’t get absorbed. There is a number which needs to be operated upon. So quarter one is huge. Quarter two is very less as compared to that. So there are — therefore, you cannot presume similar kind of margins in quarter two. Quarter two margins — if you compare with last year. So last year also, you can see and compare margins were about the same level in this quarter. So I think that’s the answer for myself. Jiten, do you want to add?
Jitender Verma
Yes, sure. See, we have to also see that we are building up for future growth. So therefore, we are investing in ISDs also, which are our in-shop demonstrators. So that’s one part of the thing. And we have kept — even during the lean season, we have continued to work with them. And as Mr. Bakshi said, long-term incentives for our employees like it’s sharing of things with our employees as well. We also mentioned in my speech that the commercial refrigeration bit, which is part of the UCP, didn’t really come up to the party for this quarter, and we are seeing a bit of challenge there. Yes, depreciation impact has been there, but I wouldn’t say that, that’s anything major on the RAC side.
Commodity prices also had been slightly bit up during this period, which we couldn’t pass on, so all that thing impacted. But the margin was not very big drop. And as we have been saying that rather than focusing on these quarterly minor adjustments on these kind of margins, I think we should look at the rupee profit rather than a market percentage. And if you would look at and focus on that rupee profit, we have done pretty well and these numbers are really remarkable in that sense.
Pradeep Bakshi
So some in substance of what both of us have said is we continue to invest in brand promotion and also on building and expanding the market and building the market share and also on our team to keep them motivated, engaged and charged up. We’re investing into all these things and this is what is going to pave the way for our success in the coming year. So that’s what it’s an investment and I don’t think we should be hesitant about that as well. And I’m sure all of you would be happy with the kind of results the team has put up, what our team has put up in the first half is unprecedented. You know, I’ve been for about almost 24-25 years with this organization which is absolutely awesome numbers which the team has been able to put up.
Keyur Pandya
Understood, sir. Just last and second question on the commercial refrigeration, you mentioned that it did not pick up the way it was expected. So is it because of the some product gaps or basically internal reasons or there is slowdown at the macro level or industry level?
Pradeep Bakshi
See, part of this category like you know, Jitendra also said in the beginning, water coolers and water sensors, water cooling products have done well. However, part of this commercial refrigeration which is freezers and bottle coolers etc have not been, you know, doing well. This is the industry and that’s what I have been given and when we get to see results of the other people also we will get to know more about it. But this is the feedback which I have been gathering from the market and from my team.
The demand for this category is being a bit subdued because capex has been put on a bit of a hold at the moment because last few years, you know, it’s a specific sort of a business. People invest into this category two-three-four years and again, a bit of a slowdown like that, you know, just continues the cyclical nature of this business. And therefore, this is a bit of, but however, still we’ve registered some growth in this, not that we’ve de-grown. I think about 30-40% growth we registered in H1. So that’s a bit of a consolation to me overall in this category.
And however, yes, when we compare with air conditioning growth or other appliances growth, which is more than 50% growth, that I agree with you. However, we are happy because probably our market share, we have continued to remain leader in this category. Most of the category teasers, we have been about 35%, between 35% and 37% all along in this category for last several years. Water dispenser, we’ve been more than 55%-60% in this category all along. Water greenhouse, we’ve been more than 40-45% market share. So I think we continue to do well in this category as well. But yes, of course, relative performance, if you compare with other categories, it’s a bit muted one.
Jitender Verma
Yeah, I think that’s the most important point, that it is not that there is a de-growth or anything. It’s not as high growth as in other products. So it stays as the nominal thing. And two, three years, it was a very high growth. And therefore, there is a bit of a slowdown. We are not bothered with it a lot. And the margin, in fact, if I were to just simply mathematically remove the LTI numbers, my margin percentage also would have been higher. But anyway, it is a cost which we have decided to defray to our hardworking teams. So we will keep that, and that will be the feature. And we have also said that these values will be reassessed by the actuarial valuations as every period, as the accounting norms are. So we’ll take that as it comes. Yes.
Operator
Thank you. The next question is from the line of Aditya Bhartia from Investec. Please go ahead. Hello, Mr Aditya, your line has been unmuted. Please go ahead with your question. As there’s no response from the participant, we’ll move on to the next question. It’s from the line of Siddhartha Bera from Nomura. Please go ahead.
Siddhartha Bera
Yes, hi, sir. Thanks for the opportunity and sector greetings for the entire team. Sir, on this margin side, some color in terms of the commercial category. You indicated last quarter, there were some inventory related adjustments and that led to margin pressure. So now with this type of competitive intensity which you are seeing, do you see some improvement for the commercial category also in terms of margins going ahead? Or this is something which may continue to be there in the next few quarters?
Manish Desai
See, we need to understand which commercial category we’re talking about commercial refigation, commercial air conditioning or commercial projects, what exactly the question about, which category were you referring to?
Siddhartha Bera
No. So the problem is basically commercial refrigeration, right? There we have seen some margin softness in the quarter.
Manish Desai
Okay, Jitender, you were answering, do you continue…
Jitender Verma
I said commercial refrigeration last year — last quarter when we talked about, it was a QCO things which have been brought in by the government on components. So therefore, there was some inventory and that inventory needed to be liquidated. So that was the issue in the last quarter. So that’s now gone. That’s not an issue anymore. And from here, we’ll have to see if there is really a slowdown on the capital investments within the industry, whether it be the ice cream manufacturers or whether it be other consumers or other business users of these products. So this quarter, we have seen there is a kind of a slowdown on that investment, and we will wait and watch on this thing, we have some orders which we will be willing to complete, which we’ll be filling going forward.
Pradeep Bakshi
So what we observed during this last two, three quarters in this category, as also mentioned by Naveed [Phonetic], people were holding stock and they were building stocks for the summer season. But as unfortunately, the QCO came in place actually and they wanted to liquidate those inventories, they were best some of the brands. And since they were selling, they were reasonably placed in terms of inventory and all because our sales and secondary sales have been reasonably good. But because the competition, as you rightly said, competition intensity or the anxiety to liquidate those stocks which were not ECO compliant. So, they were trying to liquidate at discounted prices in the marketplace, so which was exerting pressure on all of us to compete, to remain competitive in the marketplace. And therefore, the margins are a bit shrunk in this category — margins are sorry, a bit shrunk in this category for the moment. So I think now we have passed that state. Most of that has been cleared by the brands. And now I think we will start looking at the category also going forward.
Siddhartha Bera
Got it, sir. Sir, lastly, if you can highlight what was the price increase which we have taken to pass on the near-term commodity cost pressure, which you indicated, that will be all from my side.
Jitender Verma
So in which category, sir, you said we have been able to pass on the…
Siddhartha Bera
UCP, sir, you indicated right that…
Jitender Verma
As in visibility as in room 18, 19, firstly, I’ll talk about roughly around 3% to 4% price increase we had passed on in the marketplace in the last quarter, quarter 2. And in probably refrigerator, washing machine also, if I’m not mistaken, roughly around 2.5%, 3% odd margins have been — the commodity price hike has been passed on to the market.
Siddhartha Bera
Got it, sir. Thanks a lot. I’ll come back again.
Operator
Ladies and gentlemen, this was the last question for today’s conference call. I would now like to hand the conference over to Ms. Bhoomika Nair for the closing comments.
Bhoomika Nair
Yes. Very thank you to everyone and particularly the management for giving us an opportunity to host the call. Wishing you all the very best and a very happy Diwali to you and all the participants. Thank you very much, sir.
Jitender Verma
I will take this opportunity — I also like to take this opportunity to wish all of you a very, very happy Diwali and all the festivals around this period. And also, I’d like to thank all the investors and our consumers for this call for posing fit in this brand and continue to allow us to grow this speed. Thank you very much once again.
Manish Desai
Happy Diwali to all of you. Thank you.
Operator
[Operator Closing Remarks]