Blue Star Limited — Q3 FY26

Blue Star Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=2KLIIv8ZSMY Published: 3 months ago

0:01 1 second Ladies and gentlemen, good morning and welcome to the Blueest Star Limited Q3 and 9month FI26 earning conference call. 0:09 9 seconds We have with us today from the management Mr. By Aarajan, managing director Blueestar Limited and Mr. Nikl Soani, 0:18 18 seconds group chief financial officer, Blueest Star Limited. 0:22 22 seconds As a reminder, all participant line will be in the listenonly mode and there will be an opportunity for you to ask questions after the presentation 0:29 29 seconds conclude. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please 0:38 38 seconds note that this conference is being recorded. I now hand the conference over to Mr. Btiagrajan. Thank you and over to you sir. 0:47 47 seconds Uh good morning ladies and gentlemen. 0:49 49 seconds It's a pleasure and privilege to interact with you. Uh you might have seen the press release uh yesterday 0:58 58 seconds after the board meeting. uh I had been indicating uh from November onwards uh that this quarter is also going to be in 1:07 1 minute, 7 seconds a subdued one and if at all one can expect uh some revival in the room air conditioners growth uh with the energy 1:16 1 minute, 16 seconds label change that was scheduled on 1st of January 2006 and u therefore you will see the results 1:25 1 minute, 25 seconds almost uh it it is same as what I had indicated it is a modest revenue growth 1:32 1 minute, 32 seconds uh a flat or a slight modest increase in the operating profit. Even the carry forward order books uh indicated a 1:40 1 minute, 40 seconds modest growth. Um the highlight uh you know while uh NICL will deal with it. Uh 1:47 1 minute, 47 seconds the silver lining is that uh the room air conditioner business seemed to be 1:54 1 minute, 54 seconds returning to the growth path and uh building up to the uh Q4 onset of summer 2:01 2 minutes, 1 second season and uh the cost control measures that we had implemented that uh seemed 2:09 2 minutes, 9 seconds to be resulting in the managing the margins well. 2:14 2 minutes, 14 seconds uh otherwise uh it's a quarter which uh which one would like to uh forget and 2:21 2 minutes, 21 seconds move forward the three quarters and look at an excellent uh Q4 that's where uh we 2:28 2 minutes, 28 seconds are in other words uh 2025 uh was a year I I think after many many 2:37 2 minutes, 37 seconds years of uh quarter after quarter significant growth uh we faced these challenges. Having said all this, I 2:46 2 minutes, 46 seconds believe uh that we are doing better than the industry peers and we would have u 2:56 2 minutes, 56 seconds shown higher margins. We would have gained market share modestly some 3:02 3 minutes, 2 seconds decimal points. Um and we would like to now focus on Q4 and uh 5 uh 27. That's 3:12 3 minutes, 12 seconds where we are. And with that, I will hand it over to Nicl uh for highlighting the 3:20 3 minutes, 20 seconds details of Q3 as well as 9 months entered uh uh December 2025 uh recent. Okay. Thank Thank you Mr. 3:31 3 minutes, 31 seconds Sagar Rajan and uh good morning ladies and gentlemen. Uh let me take you through the financial highlights for the third quarter. So during quarter 3 FY26 3:41 3 minutes, 41 seconds the company has recorded modest revenue growth despite preenting market inventory. The good news is that for the first time in this fix the room air 3:50 3 minutes, 50 seconds conditioner business has witnessed modest growth pointing to challenge building up the inventory ahead of the energy level change deadline of January 3:59 3 minutes, 59 seconds 26. Financial highlights for the quarter ended December 31, 2025 on a consolidated basis are summarized as 4:06 4 minutes, 6 seconds follows. Revenue from operations for Q3 FI26 grew 4.2% to rupees 2925 crores as 4:14 4 minutes, 14 seconds compared to rupees 2807 crores in Q3 FI25. 4:20 4 minutes, 20 seconds uh IITa excluding other income for the third quarter FY26 improved to rupees 221 crores IITA margin of 7.5% as 4:29 4 minutes, 29 seconds compared to rupees 209 crores IITA margin of 7.5% also in last year's quarter 3 PBT before share profit loss 4:38 4 minutes, 38 seconds of J and exceptional can you hear me yeah so 4:46 4 minutes, 46 seconds yes sir so PBT before share of profit and loss of JV and exceptional items was marginally lower at rupees 165 crores in 4:55 4 minutes, 55 seconds quarter 3 of FY26 as compared to rups 167 crores in quarter 3 of last year. 5:01 5 minutes, 1 second Tax expense for the quarter 3 was at rupees 27 crores as compared to rupees 47 crores in Q3 of last year. Pursuant 5:10 5 minutes, 10 seconds to the notification of the labor codes as required by ICI guidance note, the company has recognized an incremental impact of graduity and leashment 5:19 5 minutes, 19 seconds amounting to rupees 56 crores on an estimated basis. This non-recurring item is shown as an exceptional item in consolidated statement of profit and 5:28 5 minutes, 28 seconds loss account for the quarter ended December 31, 2025. 5:32 5 minutes, 32 seconds Consequently, the net profit was at rupees 80.5 crores in Q3 of FI26 as compared to rupees 132.5 crores in Q3 of FI25. 5:44 5 minutes, 44 seconds Carried forward order book as of December 31, 2025 grew by 1.3% to rupees 6,898 5:52 5 minutes, 52 seconds crores as compared to rups 6,810 crores as of December 31, 2024. carried forward 5:59 5 minutes, 59 seconds order book as of March 31, 2025 stood at rupees 6,263 crores. The capital employed as of 6:06 6 minutes, 6 seconds December 31, 2025 increased to rups 3,551 crores as compared to rups 2,763 crores as of December 3124. 6:18 6 minutes, 18 seconds net borrowings as at rupees 352 crores as on December 31 2025 as compared to a 6:26 6 minutes, 26 seconds net cash position of rupees 102 crores as of December 31 2024 coming to business highlights for the 6:35 6 minutes, 35 seconds third quarter segment one electromechanical projects commercial air conditioning segment one revenue 6:41 6 minutes, 41 seconds grew 8.6% 6% to rupees 1,696 crores in Q3 of FI26 as compared to rups 6:49 6 minutes, 49 seconds 1,562 crores in Q3 of FI25. 6:54 6 minutes, 54 seconds Segment result was rupees 115 crores that is 6.8% of revenue in Q3 of FI26 as 7:02 7 minutes, 2 seconds compared to rupees 119 crores which was 7.6% of revenue in Q3 of FI25. 7:09 7 minutes, 9 seconds Order inflow for the quarter was lower by 16.5% compared to previous quarter. Uh the 7:17 7 minutes, 17 seconds quarter order book was rupes 1459 crores in Q3 of FI26 as against rupees 1748 crores in Q3 of FI25. 7:28 7 minutes, 28 seconds Coming to electromechanical projects business in the third quarter equity momentum from buildings, data centers and factories was encouraging but a few 7:37 7 minutes, 37 seconds large order finalizations were deferred to next quarter. Hospitals and malls have witnessed strong growth potential 7:44 7 minutes, 44 seconds including in tier three cities supporting a favorable medium-term outlook. Commercial office demand remains healthy in select pockets while 7:53 7 minutes, 53 seconds data center and factory segments continue to see stable and robust inquiry traction supporting a steady order momentum. We continue to remain 8:03 8 minutes, 3 seconds selective about new order bookings as we focus on effective capital deployment. 8:08 8 minutes, 8 seconds Since the infrastructure project profitability is lower than commercials, buildings, factories and data center verticals. As we approach closure of 8:17 8 minutes, 17 seconds these projects, the segment margin gets impacted to that extent. Carried forward order book of electromechanical projects 8:24 8 minutes, 24 seconds business was at rupes 4,777 crores as on December 3125 as compared to rups 5,146 8:33 8 minutes, 33 seconds crores as on December 3124. A negative growth of 7.2%. 2%. 8:39 8 minutes, 39 seconds Commercial air conditioning systems. The commercial air conditioning systems business saw a healthy order bookings in this quarter supported by strong demand. 8:48 8 minutes, 48 seconds While the re revenue during this quarter was subdued as some product deliveries was shifted to next quarter. The strong order book gives confidence in the 8:56 8 minutes, 56 seconds future prospects international business. Given that the tariff related uncertainties p posess, the future prospects of the US business 9:04 9 minutes, 4 seconds are highly dependent upon the outcome of the India US trade deal. Despite this headwind, our foray into the US and 9:11 9 minutes, 11 seconds Europe is progressing well. On account of the above change in the business mix, segment one margins were lower at 6.8% 9:19 9 minutes, 19 seconds of revenue in Q3 of FI26 from 7.6% in Q3 of FI25. 9:26 9 minutes, 26 seconds Segment two that is unitary products the revenue was flat at rupees 1,154 crores in the current quarter as 9:35 9 minutes, 35 seconds compared to rups 1,164 crores in the quarter 3 of last year. 9:40 9 minutes, 40 seconds Segment result was rups 98 crores which was 8.5% of revenue in Q3 of FY26 as 9:48 9 minutes, 48 seconds compared to rups 95 crores 8.1% of revenue in quarter 3 of last year. 9:56 9 minutes, 56 seconds Coming to room air conditioners, as anticipated, the energy level change with effect from January 126 helped in 10:03 10 minutes, 3 seconds reduction of inventory and we witnessed revival of growth. The company would have gained market share slightly during this quarter. The cost reduction 10:11 10 minutes, 11 seconds initiatives undertaken since Q1 of FY26 have contributed to the improved margins. The production of new range of 10:19 10 minutes, 19 seconds products as per the new energy level norms has begun and the company is preparing for the summer season 2026. We 10:27 10 minutes, 27 seconds have taken short-term long-term measures to achieve supply chain resilience. The depreciation of INR and rising commodity prices will compare us to revise the 10:35 10 minutes, 35 seconds prices upwards in Q4 of FY26. The dealer network expansion is progressing as per the plan. 10:43 10 minutes, 43 seconds As far as commercial refrigeration business goes, contrary to the expectations that the commercial refrigeration business will rebound during the festival season onwards, the 10:52 10 minutes, 52 seconds market remained muted. Consequently, all the product lines other than the storage water coolers degree. The anticipation is that the demand will revive only 11:01 11 minutes, 1 second during the summer season. Due to focus on cost optimization and overall cost management, the segment margins improved 11:08 11 minutes, 8 seconds to 8.5% in Q3 of FI26 as compared to 8.1% in Q3 of FI25. 11:16 11 minutes, 16 seconds Coming to segment three that is professional electronics and systems, the revenue deg 11:23 11 minutes, 23 seconds crores in Q3 of FI26 as compared to rupees 81 crores in Q3 of FI25. Segment 11:30 11 minutes, 30 seconds result was rupees 6.8 8 crores which was 9.1% of revenue in Q3 of FI26 as 11:37 11 minutes, 37 seconds compared to rupees 6.2 crores which was 7.7% of revenue in Q3 of FI25. 11:43 11 minutes, 43 seconds The uncertainties around the regulatory policy framework pertaining to the MET tech solutions business are yet to be resolved. Consequently, the business has 11:51 11 minutes, 51 seconds slowed down. However, industrial solutions continue to grow driven by strong demand in the automotive and steel industries and data sec security solutions maintain steady performance. 12:03 12 minutes, 3 seconds Coming to business outlook, while three quarters of this fiscal have been challenging, the signs of market revival 12:10 12 minutes, 10 seconds are encouraging. The company expects Q4 FI26 to be a strong quarter for room air conditioner, commercial air conditioning 12:18 12 minutes, 18 seconds and refrigeration products. In electromechanical projects business, the demand from factories and data center vertical continues to be healthy. In 12:26 12 minutes, 26 seconds anticipation of a robust growth in FY27, the company is focused on expanding distribution reach and continues to invest in R&D, manufacturing and 12:35 12 minutes, 35 seconds digitalization while persisting with cost optimization methods. 12:41 12 minutes, 41 seconds We now with that ladies and gentlemen, I'm done with the opening remarks. I would like 12:48 12 minutes, 48 seconds to now pass it back to the moderator who will open the floor to questions. We'll try and answer as many questions as we can and to the extent that we are unable 12:58 12 minutes, 58 seconds to we'll get back to you via email. With that, we are open for questions. 13:03 13 minutes, 3 seconds Thank you so much sir. Ladies and gentlemen, we'll now begin with the question and answer session. Anyone who wishes to ask a question may press star 13:11 13 minutes, 11 seconds N1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. 13:23 13 minutes, 23 seconds Ladies and gentlemen, we'll wait for a moment while the question assembles. 13:30 13 minutes, 30 seconds Our first question come from the line of Natasha Jan from Philip Capital. Please go ahead. 13:36 13 minutes, 36 seconds Thank you for the opportunity and congratulations team on a good quality set of numbers. Very quick three questions. First your UCP topline is 13:44 13 minutes, 44 seconds flattish, high margin commercial business is muted and yet you have posted margin improvement. So can you call out the kind of cost 13:52 13 minutes, 52 seconds rationalization that you have done this quarter? Yeah, that's the first one. 13:57 13 minutes, 57 seconds So thank you Nash. The uh first thing is that as you're aware this question will keep coming. It's blended uh revenue and 14:06 14 minutes, 6 seconds results pertaining to room air conditioners and commercial refrigeration. 14:11 14 minutes, 11 seconds As far as revenue is concerned, uh commercial refrigeration there seem to be a problem that is connected with uh 14:19 14 minutes, 19 seconds you know we keep wondering why that is happening. Uh it is basically because of 14:25 14 minutes, 25 seconds the FMCG related demand uh that has not come back at all. So the ice cream QSR 14:34 14 minutes, 34 seconds uh and other segments will have to go into expansion mode. 14:39 14 minutes, 39 seconds uh we we thought with the substantial reduction in GST for uh food uh and the 14:46 14 minutes, 46 seconds processed food products uh there should be huge demand growth uh and at least we 14:53 14 minutes, 53 seconds have not seen till now uh that parting so the room air conditioners is the one 15:01 15 minutes, 1 second which has helped us to uh get you know we have not only grown in revenue which 15:07 15 minutes, 7 seconds the break up I won't be able to disclose uh you all will uh get it once the GFK 15:14 15 minutes, 14 seconds uh numbers get published. Uh the margin improvement is basically our own uh uh 15:23 15 minutes, 23 seconds decision uh not to get into discounting in order to improve the numbers. Uh 15:31 15 minutes, 31 seconds first of all you are aware that uh 1st of January was the energy label change. 15:37 15 minutes, 37 seconds Now uh the inventory pressure was there in the for all the brands and as I had 15:44 15 minutes, 44 seconds indicated in uh the Q2 results uh our inventory situation was much lesser we 15:52 15 minutes, 52 seconds stopped producing the products in order that we won't be saddled with inventory in if you are saddled with inventory you 16:00 16 minutes will be heavily discounting in order to get rid of the stock before the deadline and for the benefit of others. A 16:08 16 minutes, 8 seconds fivestar would have become fourstar, four star would have become three star, so on and so forth. And obviously three 16:15 16 minutes, 15 seconds star being the highest selling uh SKU, we would have got into trouble if we are 16:23 16 minutes, 23 seconds going to produce inventory in anticipation of the market demand. It took that decision much earlier not to 16:32 16 minutes, 32 seconds slow down the production and move towards the new energy level products. 16:38 16 minutes, 38 seconds The second part is connected with the variable cost connected with the room air conditioner business. we had been 16:47 16 minutes, 47 seconds moderating ever since uh May 2025 and uh those are resulting in uh 16:56 16 minutes, 56 seconds improved uh margins. Um now you have uh I will I will have to also deal with 17:02 17 minutes, 2 seconds what will happen in Q4. uh I think in January there would have been enough inventory which the brands would have 17:10 17 minutes, 10 seconds pushed into the channel and I do not see uh January to be a great month. It 17:18 17 minutes, 18 seconds should pick up in February. All depends on how the summer season is going to begin. In the meanwhile, three things 17:26 17 minutes, 26 seconds have happened. Number one, due to GST, there would have been a 10% reduction to the consumer. 17:34 17 minutes, 34 seconds The energy label change would have pushed up the prices depending on the SKU depending on the brand. I'm talking about blue star it would have increased 17:43 17 minutes, 43 seconds the prices at least 5% to 7% this what would have happened then you have got the commodity 17:52 17 minutes, 52 seconds prices and the exchange rate all this put together the price is going to be much higher so GFC reduction is 18:01 18 minutes, 1 second available whereas the other three the energy lab will change plus you have got the commodity prices which are uh which 18:10 18 minutes, 10 seconds are continuing to shoot up and the exchange rate. All these put together will result in my estimation is that 18:19 18 minutes, 19 seconds somewhere around at least 10% of net increase to the consumers whereas the consumer would have been 18:27 18 minutes, 27 seconds believing that there is a 10% reduction than last year they are going to get it because the GST reduction will translate into which is not going to be the case. 18:38 18 minutes, 38 seconds So therefore uh we will need much more discipline going forward in Q4 and in the summer 18:45 18 minutes, 45 seconds season itself that we have to watch how the demand will be depend which which is 18:51 18 minutes, 51 seconds dependent entirely on summer season to how the pricing will be in the marketplace from February onwards. 19:00 19 minutes January is anyway a world inventory would have moved in second half of February almost what it is. Uh the good 19:09 19 minutes, 9 seconds news is the demand seem to have revived and uh there will be pent-up demand as well and uh we our intention is to 19:18 19 minutes, 18 seconds maintain this kind of margin levels in Q4 as well for the simple reason see 19:26 19 minutes, 26 seconds again I'm uh disclosing the uh the costs uh that are being owned by the industry 19:35 19 minutes, 35 seconds number one is connected with the consumer finance itself that it is 40% of the sales and it will continue to 19:42 19 minutes, 42 seconds grow the consumer finance cost burden which you share with the dealers. The second part is connected with the 19:50 19 minutes, 50 seconds e-waste uh liability as you move every year that uh you know for blue star it will be 2016 numbers multiplied by 70% 20:00 20 minutes of that that will become a liability that is what it is and in the industry in the marketplace a fiveyear warranty 20:09 20 minutes, 9 seconds seem to be a thing and 5 to 10 year warranty cost that is the other part of it and in shop demonstrators is an 20:17 20 minutes, 17 seconds additional cost. So with all this uh the the meaningfully one should be running 20:24 20 minutes, 24 seconds the business for delivering an ROC and I think that uh 8.5% 20:32 20 minutes, 32 seconds kind of a margin is bare minimum one should look at it if it is a great summary year one should uh try to do 9.5 in the best interest of the category. 20:45 20 minutes, 45 seconds Thank you. 20:47 20 minutes, 47 seconds This is extremely helpful. Uh just one clarification. So you mentioned that 10% will be the net increase to consumers right this is after incorporating the 20:56 20 minutes, 56 seconds GST discount approximately approximately the all the time this will this can vary in the sense that you consume the old raw 21:04 21 minutes, 4 seconds material you keep buying the raw material the volat volatility is very high in the marketplace uh of the 21:13 21 minutes, 13 seconds commodity prices and the exchange rate and you are building up to the summer season your consumption of the raw material will 21:21 21 minutes, 21 seconds depend on also I think it it should be around 10%. I'm not categorically saying in the region of around 10% increase is inevitable. 21:32 21 minutes, 32 seconds Understood sir. And one last question. 21:35 21 minutes, 35 seconds So um I mean the entire thesis is based on a good summer right? So let me just ask you slightly reverse question. Uh 21:42 21 minutes, 42 seconds just hypothetically speaking if calendar day 26 is also bad in terms of summer then how does blue star navigate the challenges? What are the other sharp 21:51 21 minutes, 51 seconds growth levels which can keep us afloat despite RAC and commercial not working in case of a bad summer? Thank you. 21:58 21 minutes, 58 seconds So this very first thing is that the history shows that you will not um it it 22:05 22 minutes, 5 seconds has not two consecutive s summers have not happened like that but the pentup demand given that the category penetration is very low uh it should be 22:14 22 minutes, 14 seconds much better than last year. Okay. the people are not going to be postponing forever. We we are still our market size 22:22 22 minutes, 22 seconds is nowhere comparable to China. So that should be that that should be kept in 22:28 22 minutes, 28 seconds mind. Then I had said that the weather proofing uh blue star is a program which 22:35 22 minutes, 35 seconds means uh you need to look at uh the B2B uh businesses as well like uh the uh 22:43 22 minutes, 43 seconds commercial refrigeration is not that seasonal dependent. There is it it is also it is not that much impacted. There 22:51 22 minutes, 51 seconds is some impact out of summer season getting washed out there. But commercial air conditioning uh part of it is 22:59 22 minutes, 59 seconds another portfolio where we have a strong presence and in electromechanical projects whether it is connected with the traditional segments the buildings 23:08 23 minutes, 8 seconds or the factories and data centers we should not have anywhere infrastructure comes it with its own uh risk. Uh so the 23:17 23 minutes, 17 seconds weatherproofing uh blue star is connected with portfolio how you manage the second part is connected with how 23:24 23 minutes, 24 seconds much of expenditure you can uh keep it variable for example 23:31 23 minutes, 31 seconds uh advertising if anticipation of the summer we will begin in the middle of March with the you know with the IPL 23:40 23 minutes, 40 seconds I'm saying one example uh with with the IPL matches beginning you will end up spending you will commit for that and 23:49 23 minutes, 49 seconds hoping that April will be better April second half will be better something like that but then you last year that's 23:57 23 minutes, 57 seconds what happened you spend the money nothing will happen and you can't set it right so we do have uh the 24:06 24 minutes, 6 seconds variable expenses how you can manage the third part is the localization is happening in a significant manner 24:15 24 minutes, 15 seconds Whether it is the finished goods or whether it is connected with the component ecosystem. 24:23 24 minutes, 23 seconds Uh therefore you will be in a position to manage the inventory. See the 2025 24:30 24 minutes, 30 seconds summer wash out was managed for better than 2023 summer wash out. In 2023 the 24:39 24 minutes, 39 seconds inventory lasted for a much longer period. So therefore uh the the weather proofing blue star we call it internally 24:48 24 minutes, 48 seconds uh that is a program but having said that I'm again saying the two summers uh cannot be we have not seen it but even 24:56 24 minutes, 56 seconds if the if the summer is going to be bad that demand will not be that bad. First of all remember this the when you 25:04 25 minutes, 4 seconds compare next year you will compare with the bad year. So obviously uh the 25:12 25 minutes, 12 seconds results will be but internally we will be looking at how we do with FI24 rather than sorry with the FI25 rather than FI26. 25:22 25 minutes, 22 seconds That's answer. I'm I'm answering the initial questions elaborately so that these questions do not come up later. Thank you. 25:30 25 minutes, 30 seconds Thank you so much sir. All the best. Thank you. 25:36 25 minutes, 36 seconds Thank you ladies and gentlemen. In order to ensure that the management will be able to address all the question from the 25:44 25 minutes, 44 seconds participant, we request you to kindly limit your question to two question per participant. If you have a follow-up question, please rejoin the queue. 25:54 25 minutes, 54 seconds Our next question come from the line of Rahul Lagarwal from Essets. Please go ahead. 26:00 26 minutes Yeah. Hi, good morning Mr. Dagar Rajan and Nik. Firstly, just a clarification on NASA's question. The 10% net hike 8 to 10% is basically after the GST cut. 26:11 26 minutes, 11 seconds It's adjusted for the GST cut. 26:13 26 minutes, 13 seconds Yeah. Yeah. Yeah. The look the has been very clear that uh the 26:22 26 minutes, 22 seconds any reduction will be passed on to the consumer. Any increase will be passed on to the consumer if you have to maintain the margins. So GST deduction will be completely it was completely passed on. 26:34 26 minutes, 34 seconds Then you have got the energy label change pushing up the prices. Then you have got the commodity prices. Then you 26:40 26 minutes, 40 seconds have got exchange rate. Uh so it it is uh so there is understood. 26:48 26 minutes, 48 seconds Yeah understood sir. So basically now getting to questions just couple of them. Firstly on the growth outlook uh so you know on segment one and segment 26:56 26 minutes, 56 seconds two and segment one essentially on you know the projects and CAC typically we discuss 12 to 15% kaggers is what the 27:04 27 minutes, 4 seconds growth rate should be I think if I look at past 3 years we've done you know way better than that 20% kind of growth uh just wanted to understand uh in your 27:12 27 minutes, 12 seconds sense how should we model like a medium-term growth here right because projects have been doing extremely well for you plus uh commercial plus 27:20 27 minutes, 20 seconds international I think mix of the segments is actually doing better. So some color on that will be helpful over a 2 to three year time frame. I uh the 27:28 27 minutes, 28 seconds problem as I'll say the the the thing was that for for varied reasons 27:35 27 minutes, 35 seconds uh FI26 uh is muted the order finalization uh and we didn't see the liquidity in 27:43 27 minutes, 43 seconds the market and uh you are aware that we we are extremely cautious in getting into infrastructure projects because 27:52 27 minutes, 52 seconds infrastructure projects are of low margin. 27:56 27 minutes, 56 seconds long duration and as these projects get to the closure stage which will be 2 three years later usually uh you will 28:04 28 minutes, 4 seconds start uh booking many costs and therefore we have been very very cautious in in chasing market share out 28:13 28 minutes, 13 seconds there commercially air conditioning is connected with uh multiple sectors uh factories 28:20 28 minutes, 20 seconds uh the shop showroom boutiques hospitals uh so on and so forth. But uh 28:27 28 minutes, 27 seconds unfortunately the shop showroom, boutique, retail uh all these segments we have not witnessed any great growth 28:36 28 minutes, 36 seconds in FI 26. Uh but in FI27 the there are 28:42 28 minutes, 42 seconds signs that it will come back in a good manner. Keeping all this in mind I think 28:49 28 minutes, 49 seconds if you ask me uh at at the moment I will take it a c of around 8 to 10% 28:58 28 minutes, 58 seconds then look at and revising it depending on how first 6 months of next fiscal goes 29:06 29 minutes, 6 seconds sir 9 month growth rate is almost 20% right which one the 9 month growth rate for segment one 29:13 29 minutes, 13 seconds is almost 20% right correct any depending order book was there but the but the thing is that I 29:21 29 minutes, 21 seconds will slow it down for 6 months because you have seen order inflow has not been good right 29:29 29 minutes, 29 seconds okay got it and secondly sir on the commercial ref similar question 9 month growth rate if you could just comment on growth rates for 9 months for commercial 29:37 29 minutes, 37 seconds refs and how should we build the medium-term kagger for this segment thank you so much you don't have the breakup of that 29:45 29 minutes, 45 seconds actually to for me to disclose but the category uh is supposed to grow at a c 29:55 29 minutes, 55 seconds of anywhere between 12 to 15% given the processed food uh penetration or diary 30:02 30 minutes, 2 seconds or anything pharma anything you take it uh we are we are a very very small market size country given our size uh 30:10 30 minutes, 10 seconds but the the it was a bad year again fi26 six uh there you can take it 12 to 15% 30:19 30 minutes, 19 seconds CG is uh is a good modeling and uh room air condition despite the failed sum up 30:26 30 minutes, 26 seconds I will still model it on anywhere uh between 18 to 20%. 30:35 30 minutes, 35 seconds Thank you so much sir. Wish you all the best. Thank you. 30:40 30 minutes, 40 seconds Thank you so much. Our next question come from the line of Aneruda Joosi from IC Securities. Please go ahead. 30:48 30 minutes, 48 seconds Yeah. Uh thanks sir. Thanks for the opportunity. So in the opening comments you indicated about u uh there are uh 30:57 30 minutes, 57 seconds while 9 months were muted for uh UCP but there are demand drivers now. So if you can elaborate a bit more on this means 31:05 31 minutes, 5 seconds uh like which regions you are seeing the growth east, west, north, south or rural uh versus uh urban uh are you seeing 31:14 31 minutes, 14 seconds growth in coming back in metros or in terms of the product profile uh whether the growth is more in premium versus the 31:22 31 minutes, 22 seconds value for money air conditioner. So uh if you can share more details on uh uh these aspects. 31:31 31 minutes, 31 seconds No all regions have done well. It is not one region has done well like that and 31:37 31 minutes, 37 seconds obviously the tire 345 are the ones which will continue to drive the growth. 31:44 31 minutes, 44 seconds Uh I think that is true for many categories because the penetrations are relatively lower there. uh but it will 31:52 31 minutes, 52 seconds depend on the agricultural income actually and uh the that is the driver 31:58 31 minutes, 58 seconds of the rural economy of uh India. Uh I have been saying this the tire three 32:05 32 minutes, 5 seconds four five consumers uh and the tire uh three four five geographies will constitute uh close to 70%. Thank you. 32:17 32 minutes, 17 seconds Uh that is reflected in uh the consumer finance schemes being availed that is reflected in the question that you asked 32:26 32 minutes, 26 seconds it is the entrylevel products and whether it is airline whether it is car whether it is two-heer 32:34 32 minutes, 34 seconds or whether it is uh mobile uh Wi-Fi services you will see this that Indian 32:42 32 minutes, 42 seconds market is driven by aspirational middle class it It is highly price sensitive. 32:48 32 minutes, 48 seconds It is entry level value for money products and uh you see number one 32:55 32 minutes, 55 seconds number two in many categories in it. It is a fact and that should be true for air conditioners as well. 33:09 33 minutes, 9 seconds Thank you. Okay. Sure sir. Uh just last question. 33:13 33 minutes, 13 seconds Um Mr. Mohit Sud is appointed as the executive director of uh UCT segment. So 33:21 33 minutes, 21 seconds for a period of five years so heartiest congratulations to Mr. Mohit and uh what 33:27 33 minutes, 27 seconds will be the uh five year KAS in terms of uh for Mr. Mohit from the board whether 33:34 33 minutes, 34 seconds it will be driving market shares driving profitability or uh entry in new products etc. So uh if if you can 33:44 33 minutes, 44 seconds elaborate on that. Yeah, that's it from my side. Thanks. 33:48 33 minutes, 48 seconds No, the annual uh KAS are set by the NRC approved by the board. So that is that 33:57 33 minutes, 57 seconds will keep happening. That's a internal process. 34:02 34 minutes, 2 seconds uh the broad uh drivers uh of the for the company will translate into KAS 34:11 34 minutes, 11 seconds right that what is company strategy that determines the strategy of uh that that 34:18 34 minutes, 18 seconds that drives the KAS of uh let alone Mohit whether it is be or me or Mohit uh 34:27 34 minutes, 27 seconds or the entire top management uh the company strategic KAS and operational 34:33 34 minutes, 33 seconds KAS that's what will determine ours now broadly uh if you want to understand uh 34:41 34 minutes, 41 seconds what we are looking at is our track record has been growing faster than the market and gaining market share we have 34:50 34 minutes, 50 seconds not yet reached our first goal of reaching 15% market share that uh we are somewhere uh we have crossed 14 and uh 34:59 34 minutes, 59 seconds even in a challenging year I I think we have gained marginally the market share. 35:04 35 minutes, 4 seconds So that we need to do. The second important part is uh that growth has to 35:11 35 minutes, 11 seconds be a profitable growth which means the margin guidelines that I mentioned somewhere around 8.5% 35:19 35 minutes, 19 seconds ebit margin is absolutely important and in ro blue star is is a is a benchmark 35:28 35 minutes, 28 seconds an outlier in the industry that we we look at anywhere between 25 to 30% 35:34 35 minutes, 34 seconds or that that is an important uh KA the there are other numerous KAS right like 35:43 35 minutes, 43 seconds for example my brand silence uh that brand has to be uh made relevant to the 35:50 35 minutes, 50 seconds new consumers and uh it should continue to be strongen in terms of salient uh 35:58 35 minutes, 58 seconds the next is that uh the customer experience which uh differentiates us uh that is an important strategy of 36:06 36 minutes, 6 seconds producer that to provide a world-class uh customer experience. Um so broadly 36:14 36 minutes, 14 seconds the company strategy is this and that will translate into including 36:20 36 minutes, 20 seconds uh things such as that I will be ahead of the curve uh in terms of uh sustainability initiatives like if it is 36:29 36 minutes, 29 seconds a energy labeling if it is connected with refrigerant uh new refrigerant migration 36:36 36 minutes, 36 seconds uh carbon footprint we have been ahead of the curve that's what uh we would be. 36:42 36 minutes, 42 seconds So this is where uh this is what will determine uh all our uh top management um K. Thank you. 36:53 36 minutes, 53 seconds Yeah, sure sir. Uh just last thing uh in this uh entire trade inventory summer etc. uh the uh issue which is forgotten 37:02 37 minutes, 2 seconds is the compressor uh from 1st of July again uh uh we will uh the industry as well as bluear will have to uh 37:11 37 minutes, 11 seconds manufacture compressors in India. So how do you see the preparedness of blue star on this uh aspect? Thanks. So the the 37:20 37 minutes, 20 seconds thing is that uh first of all the it is not blue star has to manufacture the whether there is enough component ecosystem that is 37:29 37 minutes, 29 seconds available uh for us to source and I have stated till at least 2028 and we need to reach 37:38 37 minutes, 38 seconds a particular scale for considering uh manufacturing of compressors but supply chain resilience is an important 37:45 37 minutes, 45 seconds program and I think we are very secured with the domestic manufacturing capacities that are coming up from many players. 37:58 37 minutes, 58 seconds Thank you. 37:59 37 minutes, 59 seconds Yeah, thank you. Thank you sir. Very helpful. Thank you. 38:06 38 minutes, 6 seconds Our next question come from the line of Sonali S from Jeff India. Please go ahead. 38:12 38 minutes, 12 seconds So thank you for the opportunity and congratulations on a good operational result. So my first question is could 38:19 38 minutes, 19 seconds you help quantify maybe on an industry level or the company specific level whichever you are more comfortable with 38:26 38 minutes, 26 seconds the inventory situation for aircons now versus say start of October 38:34 38 minutes, 34 seconds thank you but I don't think we deserve any congratulations it's a very you know morage to growth it's it's not a great 38:43 38 minutes, 43 seconds result I would say uh but we would may have done better and the industry our 38:49 38 minutes, 49 seconds hope. Uh the uh inventory level uh my uh my estimate 38:56 38 minutes, 56 seconds is that uh it may 10 weeks uh for the industry uh and it may be lower for us. 39:07 39 minutes, 7 seconds I I think it may be five to 6 weeks is my estimate but the hours I am sure industry I'm guessing it that's what it should be. 39:17 39 minutes, 17 seconds and u from I second part I couldn't follow that from October onwards there has been substantial reduction now I 39:26 39 minutes, 26 seconds would say you see inventory will not be zero in any case it has to be some two to four weeks inventory will always be there in our case I think there there 39:35 39 minutes, 35 seconds are there is at least some two to three weeks of more inventory is there but it is always manageable that's what it is 39:44 39 minutes, 44 seconds the industry Again, you know, first of all, you you had produced anticipating a great summer. Then during the GST 39:53 39 minutes, 53 seconds transition, there was a bottleneck, a blackout period. Then uh you were left with a winter season uh coming in uh and 40:03 40 minutes, 3 seconds energy level change. So there is a there was a pressure. But the I would consider inventory as a great bottleneck uh for 40:13 40 minutes, 13 seconds February, March. The one and the only event uh that we should be watching out 40:19 40 minutes, 19 seconds for is onset of summer. If the summer settles in, there is nothing to worry about. 40:27 40 minutes, 27 seconds So just a clarification over here, five to 6 weeks is company plus channel, right? And secondly, what is the normal inventory level? Four weeks. 40:38 40 minutes, 38 seconds Yeah, it will be around four weeks and a year. you know normally but from January onwards we will start building up 40:47 40 minutes, 47 seconds inventory for the fourthcoming season okay and because you won't be able to meet the demand in March last week or or 40:56 40 minutes, 56 seconds March 2nd of April May so we wouldn't have we we we will be even comfortable 41:03 41 minutes, 3 seconds with in our case 8 weeks of inventory being there in January uh 10 weeks of inventory being there in 41:11 41 minutes, 11 seconds February, 12 weeks in the month of uh March if the summer is going to be 41:17 41 minutes, 17 seconds definitely going to be stronger but um you are not you will be very cautious 41:24 41 minutes, 24 seconds having gone through the past right and also the systems have changed now you got a local component ecosystem and your 41:31 41 minutes, 31 seconds own manufacturing units you are not dependent on some China imports of finished goods and I would say that in 41:38 41 minutes, 38 seconds the buildup to the summary even 8 weeks is okay. 41:43 41 minutes, 43 seconds Got it sir. So my second question is regarding the price hikes that you mentioned that about 10% price hike. Sir 41:51 41 minutes, 51 seconds uh would it be able to bifurcate this price hike between a the hike because of energy efficiency and secondly because 42:01 42 minutes, 1 second of the rising input cost. I believe energy efficiency has already entailed a 7 to 8% price hike. So is it fair to 42:08 42 minutes, 8 seconds assume that just 2 3% have been passed on to the consumers because of the price hike? 42:15 42 minutes, 15 seconds No no no first of all this will vary for this is not a universal norm depending on the product design it can vary from 42:23 42 minutes, 23 seconds manufacturers to manufacturers. So don't don't take it as I'm talking for the industry. My estimate is that there are 42:30 42 minutes, 30 seconds certain products in our in our portfolio that the the new energy label uh would 42:38 42 minutes, 38 seconds have uh costed only 5%, there are models which are energy label is pushing up the 42:45 42 minutes, 45 seconds price between 7 and 8 uh in our portfolio. The other part of it is is 42:52 42 minutes, 52 seconds entirely dependent on uh when you bought the inventory and what pipeline you have got because week to week it is changing. 43:01 43 minutes, 1 second So it is very difficult to estimate. So I am broadly I'm saying around some uh 7% may be due to energy label change and 43:11 43 minutes, 11 seconds you may have uh around uh 8 to 10% arising out of commodity then 10% 43:19 43 minutes, 19 seconds reduction you have got in GST so therefore net I'm saying ballpark is 10% but very difficult to estimate at this 43:26 43 minutes, 26 seconds point of time again you can't be we you know we are not a forex uh dealer to be determining daily rate. When you 43:34 43 minutes, 34 seconds announce the price, it will be for a uh at least 3 month period, right? Or two and a half month period. You can't be 43:42 43 minutes, 42 seconds altering prices every day. So, you have to pass a judgment and increase the prices. 43:49 43 minutes, 49 seconds Won't be able to manage. He can't tell sell it on price. They have to tomorrow change it etc. because the customer who is bought will be fighting. So therefore 43:59 43 minutes, 59 seconds uh I am saying we will be looking at uh price increase soon as the inventories get liquidated. 44:08 44 minutes, 8 seconds Say any quantification ballpark of as to how much price increase would you want to pass on the input cost pressures? 44:16 44 minutes, 16 seconds I I think it'll I am telling it maybe in the order of uh 10 10% more. 44:24 44 minutes, 24 seconds That is right. 44:26 44 minutes, 26 seconds I we will determine it and let us say there is a US deal is signed the dollar 44:33 44 minutes, 33 seconds may come down and what are all going to happen I don't know because every day is something is changing but if you ask me 44:41 44 minutes, 41 seconds to take a call today it is it is important to increase the price by 10%. 44:47 44 minutes, 47 seconds Got it sir. Thank you very much. All the best. 44:52 44 minutes, 52 seconds Thank you. Next question come from the line of Cayor Panda from ICC Predential AMC. Please go ahead. 45:00 45 minutes Uh thank you. Uh sir first question on the uh uh the margin that you mentioned uh 8 and a half% kind of margin for UCP. 45:10 45 minutes, 10 seconds Uh I think in last con you I mean looking at the slowdown you guided for 7% around margin for the segment. uh so 45:19 45 minutes, 19 seconds now this is more of 8.5 aspiration uh or do you think you can achieve that in Q4 and FI27 despite all the uh inflationary 45:28 45 minutes, 28 seconds challenges uh so what I indicated two parts number one is what could be the margin for Q4 45:35 45 minutes, 35 seconds you have seen the Q3 margin and you have to look at the uh next next 45:42 45 minutes, 42 seconds year steady state that's what it means uh it's it's not fully is going to be changing to this definitely not you 45:51 45 minutes, 51 seconds can't make up for the summer right but FI27 45:58 45 minutes, 58 seconds Q4 of FI26 and the FI27 the margin uh outlook is 8.5%. 46:07 46 minutes, 7 seconds unless until summer is going to be so very uh harsh summer it can go up to 9 46:15 46 minutes, 15 seconds and then I'm not forecasting anything now it can be looked at closer to March 46:23 46 minutes, 23 seconds and uh my estimate is that one should if you do 8.5% that's a reasonable 46:31 46 minutes, 31 seconds margin looking at it today especially with the higher prices. So, so just one clarification on this. 46:38 46 minutes, 38 seconds The assumption is that uh the operating leverage of good summer and good volume growth would uh uh would allow you to 46:47 46 minutes, 47 seconds take the price that you mentioned and there were 8.5% kind of margin not at all you have seen our margin it 46:55 46 minutes, 55 seconds it's above eight already in Q3 and Q4 irrespective of the summer season 47:03 47 minutes, 3 seconds irrespective of the uh price increase uh 8.5 is doable. 47:12 47 minutes, 12 seconds FI 27 8.5 should be the target. If the summer 47:19 47 minutes, 19 seconds season is extremely good, it can go up to 9. We don't know now that call has to be taken. Price hike has to be taken in 47:28 47 minutes, 28 seconds any case. It it is not optional in a in a category in which the margin 47:36 47 minutes, 36 seconds is in the order of 8 to 8.5 you can't absorb this kind of commodity 47:43 47 minutes, 43 seconds price increase or the exchange rate issues that is not your option you you have my 47:53 47 minutes, 53 seconds mind it has to be done understood and just last Remember 48:00 48 minutes remember one more thing while the base code related cost is uh in the exceptional items it is a permanent 48:09 48 minutes, 9 seconds burden. So your conversion cost service cost warranty service cost uh uh all 48:16 48 minutes, 16 seconds will have to be bone and it has to be passed on. There is another element of cost. 48:26 48 minutes, 26 seconds We can't ignore that because this quarter it is under exceptional items right it is going to push up the cost of 48:33 48 minutes, 33 seconds the product or the services. Understood. 48:42 48 minutes, 42 seconds Uh what can happen is and and it is a level playing field. It is not that one brand 48:50 48 minutes, 50 seconds can absorb another brand can observe the industry level in different intervals. 48:55 48 minutes, 55 seconds The timing may be different. All will have to what it means is that the overall prices will go up. 49:05 49 minutes, 5 seconds Consequently, whether the demand will be lower and if one is saying 19% CG whether because of this CG will reduce 49:13 49 minutes, 13 seconds to 17 or 16 we can see that can happen. 49:18 49 minutes, 18 seconds But I don't think there is a choice. If it is a very high margin industry, one can have the discretion I am not passing on absorbing which is not the case. 49:31 49 minutes, 31 seconds Understood. Uh and second question on the uh uh segment one uh where 49:38 49 minutes, 38 seconds considering the order book uh uh you are saying for the full year FI27 the growth should be in single digit. uh it may be 49:46 49 minutes, 46 seconds by choice because of the better quality of order book but uh then it should see lower growth because of the lower order book and will that have an impact on the 49:55 49 minutes, 55 seconds guided margin ridge thank you no I don't think there is a there is a reason to worry about margin there there 50:03 50 minutes, 3 seconds again in the commercial air conditioning products prices have to be increased in 50:10 50 minutes, 10 seconds electromechanical projects the price escalations have to be obtained for a higher labor cost because it's a people 50:18 50 minutes, 18 seconds business there and uh there is indeed a wage code related uh burden that is 50:25 50 minutes, 25 seconds existing. The last point is uh the uh whether the the infra projects uh you 50:34 50 minutes, 34 seconds know roughly onethird of our revenue is infra projects and quite a few projects will come to a closure now 50:43 50 minutes, 43 seconds uh because these are all metro railway projects or water railway electrification etc. So when these 50:51 50 minutes, 51 seconds projects is nearing a closure usually the costs go up and you it pulls down 50:59 50 minutes, 59 seconds the overall margin. So you would have seen already the margin is lower than uh 51:05 51 minutes, 5 seconds last year in Q3. Uh I think uh this will be a trend for next two three quarters 51:12 51 minutes, 12 seconds because the infra projects are coming to a closure and uh otherwise I don't see a concern for huge correction in the market. 51:25 51 minutes, 25 seconds No sir. Thank you and all the best. Thank you. 51:31 51 minutes, 31 seconds Thank you. Our next question come from the line of Anupam Gowami from Sud Life. Please go ahead. 51:43 51 minutes, 43 seconds Uh Mr. Anupam, please proceed with the question. 51:50 51 minutes, 50 seconds Mr. Sanam please proceeded with the question and move forward to the next participant. 52:00 52 minutes Next question come from the line of reu from IFL capital. Please go ahead. 52:07 52 minutes, 7 seconds Yeah. Hi uh good afternoon team. Um while other words have been answered um if you can just help us understand a bit more um in terms of updates um with 52:15 52 minutes, 15 seconds respect to how are we working on new product development or JV tie-ups for the data center market uh chillers as 52:23 52 minutes, 23 seconds well as the track solutions so the uh you know we are a very large 52:31 52 minutes, 31 seconds uh player in uh chillers so therefore I don't think we need an external collaboration for developing a chiller 52:40 52 minutes, 40 seconds for the data center market. Uh so we we we have I think 52:48 52 minutes, 48 seconds those developments are going on. The second part is connected with certain other solutions uh meant for data center 52:57 52 minutes, 57 seconds segment which is actually called the liquid cooling or the CDU uh cooling 53:04 53 minutes, 4 seconds distribution unit. Um these uh we are exploring multiple uh tie-ups across 53:12 53 minutes, 12 seconds multiple geographies uh which are classified in nature because we have signed non-disclosure 53:20 53 minutes, 20 seconds agreements and uh I think we will you know this is the same as once in uh 3 4 53:27 53 minutes, 27 seconds years something new happens and you need to figure out at that point of a time clarity completely doesn't emerge but 53:35 53 minutes, 35 seconds have a track record has been that uh we are able to catch up like the VRF at 53:42 53 minutes, 42 seconds some point of a time what we will do for VRF was a question and uh it happened 53:49 53 minutes, 49 seconds indeed that's the market but we for one part of the data in the market we need that so we are right 53:59 53 minutes, 59 seconds and for our own in-house products by when would be commercially I think the many models are under 54:08 54 minutes, 8 seconds advanced stages let us say uh 12 months got it thank you 54:15 54 minutes, 15 seconds and and in the MEP part of data sensor or the EPC part of it we are we are the 54:24 54 minutes, 24 seconds leaders and correctly already executing them even in the semiconductor related space of air conditioning which also 54:33 54 minutes, 33 seconds sophisticated electromechanical projects that happen. 54:37 54 minutes, 37 seconds Uh we are market leaders. We are building our leadership in that sector as well. And uh so these two uh combined 54:47 54 minutes, 47 seconds with factories the these are the the factories is uh is a regular one data 54:54 54 minutes, 54 seconds center or semiconductor we we are building leadership in a significant manner in EPC part of it. Because of 55:02 55 minutes, 2 seconds that uh we we believe that pillars again uh we will be able to 55:10 55 minutes, 10 seconds uh build the market share and be a leader there or be a choice of the 55:17 55 minutes, 17 seconds customer preferred choice of the customer uh but the products are to be tested 55:24 55 minutes, 24 seconds thoroughly that's what is happening got it thanks much Steve thank 55:34 55 minutes, 34 seconds Thank you. Our next question come from the line of Naveen Bed from Noama Asset Management. Please go ahead. 55:42 55 minutes, 42 seconds Oh, thank you. My questions have been answered. Thank you. 55:48 55 minutes, 48 seconds Thank you. Our next question come from the line of Deepak from Unifi Capital. Please go ahead. 55:56 55 minutes, 56 seconds Uh thank you for I'm sorry. I'm sorry Deepak to interrupt you but you it's very disturbance from 56:03 56 minutes, 3 seconds your end is it better now? Yes yes yes please go ahead. 56:10 56 minutes, 10 seconds Yeah okay thank you. Um so we we're fairly new to the business but we have uh two questions if you could please help us. The first is just on the EMP 56:18 56 minutes, 18 seconds segment uh we we noted that you've given a single digit growth guidance. Could you give us some nuance as to um what is generally the split of this business and 56:26 56 minutes, 26 seconds which pocket you're seeing some slowdown in and why is it that these margins tend to uh come down close to the closure of 56:34 56 minutes, 34 seconds these projects one is it it includes multiple things right it includes the electromechanical 56:42 56 minutes, 42 seconds projects and the commercial air conditioning broadly okay I for obvious reasons I can't tell you 56:49 56 minutes, 49 seconds the break up of that But the entire thing is slow. In other words, the B2B business orderly inflow has been muted 56:57 56 minutes, 57 seconds for a very long time and for various reasons and there is a GSC related some 57:04 57 minutes, 4 seconds distribution was there. Then there was uh there is liquidity issues as well. Uh other than some infra projects none of 57:13 57 minutes, 13 seconds them have the auto finalization have not been happening. Having said that uh January has begun very well and uh many 57:23 57 minutes, 23 seconds uh inquiries are coming up for finalization. So that should be happening. But when your pending order 57:30 57 minutes, 30 seconds book is lower your growth will in the subsequent month will be impacted. 57:36 57 minutes, 36 seconds Correct? That that is why I said that one should look at a single digit growth or just a 10% growth. That's all one should look at it. 57:46 57 minutes, 46 seconds uh the impact is uh I'm repeating again the it is there is there is a infra segment there 57:55 57 minutes, 55 seconds is a building segment there is factories data center segment out of which infra is lowest profitable segment within that 58:05 58 minutes, 5 seconds then that those infra projects takes many years three to five years like you you're aware we are part of Mumbai metro 58:12 58 minutes, 12 seconds for example Bangalore metro we are executing uh there are some railway electrification projects, there are certain uh water distribution projects. 58:23 58 minutes, 23 seconds All these uh when it is moving towards the cost overrun 58:31 58 minutes, 31 seconds uh can happen as as it is coming to a close you are in a great hurry to close and hand over then at that point of a 58:41 58 minutes, 41 seconds time the margin will further come down that is where we are. So that is the only reason 58:47 58 minutes, 47 seconds otherwise there is the the other parts are all doing well. Understood. So should I understand this? 58:55 58 minutes, 55 seconds I mean in summary uh the basis the current order book you feel next year it's going to be single digit for the reasons you explained and would would 59:04 59 minutes, 4 seconds you say this is the bottoming out for order inflows and inflows could start improving from here or do you think inflows will also continue to stay at these levels? 59:11 59 minutes, 11 seconds looking at the uh customers uh behavior and what has happened in January I think 59:20 59 minutes, 20 seconds uh it is it has bottomed out and it is taking off uh the that's what is my our sense see 59:29 59 minutes, 29 seconds the the it cannot be you know in any business it cannot be down when the penetration levels are lower forever it 59:36 59 minutes, 36 seconds cannot be down it it has to revive at some point of time That is what is happening. 59:43 59 minutes, 43 seconds We uh like uh like I can I can tell you that uh close to uh in January itself 59:51 59 minutes, 51 seconds um we will have uh close to 400 crores worth of orders already which is a which 59:59 59 minutes, 59 seconds is a record month again. So I think it is taking off after a subdued period. 1:00:07 1 hour, 7 seconds Okay sir that's that's very clear and just my second question is uh the margins in the unitary product segment 1:00:14 1 hour, 14 seconds are very strong right if you had to call out one or two uh primary drivers as to why you've been able to sustain these margins uh you know despite how these 1:00:23 1 hour, 23 seconds last few quarters have been uh what would those be I don't think it is very strong it it is 1:00:30 1 hour, 30 seconds good uh the as I told you that our guideline has been 8.5 should 1:00:36 1 hour, 36 seconds And uh the reason being that uh we were very clear that we will not uh force 1:00:44 1 hour, 44 seconds ourselves into an inventory pressure. So we stopped or controlled production and therefore you could uh you were not 1:00:53 1 hour, 53 seconds desperate to liquidate the stocks at a lower price. That is first part of it. 1:00:58 1 hour, 58 seconds Second part of it is connected with the variable cost ever since April when the summer was not happening. Those measures 1:01:07 1 hour, 1 minute, 7 seconds were implemented meticulously and uh like the 1:01:14 1 hour, 1 minute, 14 seconds uh marketing uh spends or the employee sales incentives itself will be lower as 1:01:22 1 hour, 1 minute, 22 seconds well because it some part of the compensation is uh through 1:01:28 1 hour, 1 minute, 28 seconds uh the uh quantities sold. And the third part is that uh systematically 1:01:37 1 hour, 1 minute, 37 seconds uh ensuring that you are your input costs are controlled that that's why it happened and it is a continuous process 1:01:46 1 hour, 1 minute, 46 seconds this challenge will continue and we have to deliver. 1:01:50 1 hour, 1 minute, 50 seconds Understood, sir. And lastly, any uh initial trends that you're getting from the channel uh retail side on how um 1:01:58 1 hour, 1 minute, 58 seconds these summer months are shaping up in Q4 and probably what it might what they're thinking for Q1. Thank you. 1:02:05 1 hour, 2 minutes, 5 seconds All that we know is that compared to the previous months, it is better. So, it is not spectacular 1:02:12 1 hour, 2 minutes, 12 seconds and uh we have to see when the summer sets in. As of now it is not setting in 1:02:19 1 hour, 2 minutes, 19 seconds the area seem to be very pleasant winter continues and let us see when it is going to set in. 1:02:30 1 hour, 2 minutes, 30 seconds Understood. Thank you very much sir. 1:02:36 1 hour, 2 minutes, 36 seconds Thank you. Our next question come from the line of Nshadi from Adita Bela Mutual Fund. Please go ahead. 1:02:44 1 hour, 2 minutes, 44 seconds Um thank you. Uh just one clarification again on the project business that uh if 1:02:50 1 hour, 2 minutes, 50 seconds um uh EMP um is slowing and uh commercial AC um is growing faster uh 1:02:58 1 hour, 2 minutes, 58 seconds should we should we expect a margin improvement uh in this business u in FI27? 1:03:06 1 hour, 3 minutes, 6 seconds No. Yeah, it is not all that I mention it is not it is becoming zero. Right. 1:03:11 1 hour, 3 minutes, 11 seconds you do have significant amount of projects are you we are talking about a growth whether it will be a significant growth it is again 1:03:20 1 hour, 3 minutes, 20 seconds I'm saying that will be a growth the c of 8 to 10% so there is it is not 1:03:28 1 hour, 3 minutes, 28 seconds stopped okay that is first part of it second part is that there are factories 1:03:37 1 hour, 3 minutes, 37 seconds data center and buildings these are good margin projects and pro margin may not 1:03:45 1 hour, 3 minutes, 45 seconds improve dramatically but it is not going to deteriorate. On the other hand in projects uh will be at a peak of its 1:03:55 1 hour, 3 minutes, 55 seconds execution because we want to expedite the closure and in the process uh the it's a lower profitable segment. 1:04:06 1 hour, 4 minutes, 6 seconds commercial air conditioning order inflow was muted now it is picking up so if you ask me broadly 1:04:14 1 hour, 4 minutes, 14 seconds the margins whether FI27 should be better than FI 26 that's what one can 1:04:22 1 hour, 4 minutes, 22 seconds guess but always you have seen that we were exceeding the estimates that the 1:04:31 1 hour, 4 minutes, 31 seconds percent used to be this right that how come 8% margin you are delivering Our guideline has been that we will be 1:04:38 1 hour, 4 minutes, 38 seconds some 7 and 12% margin 7 to 7 and a half is supposed to be the margin sometime it used to be 1:04:46 1 hour, 4 minutes, 46 seconds eight so in the order of seven in FY 27 modeling you can assume that should 1:04:53 1 hour, 4 minutes, 53 seconds happen it is not going to become some 8 and because some project is slowing down it has not slowed down some part there is a 1:05:01 1 hour, 5 minutes, 1 second slowdown that's about all we are not changing In other words, I'm summarizing for the benefit of everyone. The output 1:05:10 1 hour, 5 minutes, 10 seconds for Q4 is 7% 6.5 to 7% closer to 7 maybe for segment 1:05:19 1 hour, 5 minutes, 19 seconds one and it should be 8.5 for segment two that is the guideline. 1:05:25 1 hour, 5 minutes, 25 seconds And uh from a uh 3 to four years point of view uh should we expect a higher TGR 1:05:33 1 hour, 5 minutes, 33 seconds growth from a commercial uh EC uh subsegment versus EMP or should uh both grow parallelly? uh 1:05:41 1 hour, 5 minutes, 41 seconds by all estimates the the commercial or the any B2B part of the business it is 1:05:49 1 hour, 5 minutes, 49 seconds expected to grow only at 10 to 12% CAGR room air conditioners is durable and its 1:05:58 1 hour, 5 minutes, 58 seconds penetration level is very low so it is projected at a CAGR of 19%. 1:06:06 1 hour, 6 minutes, 6 seconds for you know if it is a bad summer year it'll be worse that's about all so this is not going to change I I don't see 1:06:14 1 hour, 6 minutes, 14 seconds some significant 20% growth nor we are into any inorganic growth at all see when there 1:06:22 1 hour, 6 minutes, 22 seconds is a market is going to be like this for us to grow it has to be inorganic growth there is nothing and it is not we were 1:06:29 1 hour, 6 minutes, 29 seconds not present in some segment now I am going to enter that segment there is no such thing we in all parts of the segment. 1:06:40 1 hour, 6 minutes, 40 seconds Right. Anything you want to talk about? 1:06:41 1 hour, 6 minutes, 41 seconds Uh on the export side um we are you know tracking quite well. We have reached to u uh not sizable but um at least two 200 1:06:51 1 hour, 6 minutes, 51 seconds cr rupes of odd run rate we have reached on a quarterly basis. How big? Sorry Nad but uh please rejoin the qu for more question. 1:07:00 1 hour, 7 minutes So the the thing is that first of all FDA are getting signed. It has not meaningfully translated into any 1:07:09 1 hour, 7 minutes, 9 seconds significant business. Our our interest has been with Europe which anyway the heat pump market is very slow. It has 1:07:18 1 hour, 7 minutes, 18 seconds not taken off at all. But the um on the other hand the US market is uh US market 1:07:26 1 hour, 7 minutes, 26 seconds is because of this trade barriers that's where it is now it is suiting us actually because you can keep developing 1:07:36 1 hour, 7 minutes, 36 seconds more products and you have got domestic challenges as well right so the the thing is if the market would have opened 1:07:44 1 hour, 7 minutes, 44 seconds up there is a huge demand and we have to go ahead and do all this we would have but as of Now we are very clear that we are not entering there with our own 1:07:52 1 hour, 7 minutes, 52 seconds brand. We are investing on our own R&D and manufacturing in order to become globally competitive and we have 1:08:02 1 hour, 8 minutes, 2 seconds developed products which are successfully tested abroad. The customers whom we acquired they are all 1:08:08 1 hour, 8 minutes, 8 seconds very happy but the conditions are in Europe market has not opened up. The European market consumers expect some 1:08:17 1 hour, 8 minutes, 17 seconds subsidy from the government to switch over to heat pump or green products and in the US there is a trade barrier. So 1:08:25 1 hour, 8 minutes, 25 seconds therefore it is fine we are moving steadily and we are building that foundation. The direction is as follows. 1:08:33 1 hour, 8 minutes, 33 seconds When China grew in exports it was not that China was going and marketing anywhere. The people the way went to China to shop. 1:08:44 1 hour, 8 minutes, 44 seconds same way we should build the capability where somebody should say can you make for us that is the situation or a 1:08:51 1 hour, 8 minutes, 51 seconds position we would like to build that's where we are so 200 cr 300 cr 4 400 cr dollar doesn't matter at this point of 1:08:58 1 hour, 8 minutes, 58 seconds time we know very well we are poor in our export footprint but I can tell you in three year time uh I think 15% of our 1:09:07 1 hour, 9 minutes, 7 seconds revenue should come from exports thank Thank you. Thank you. 1:09:17 1 hour, 9 minutes, 17 seconds Thank you ladies and gentlemen. Due to the interest of the time we will take the last question from Manoj Kuri from 1:09:24 1 hour, 9 minutes, 24 seconds Capital. Only one question. Mr. Manoj please go ahead. 1:09:28 1 hour, 9 minutes, 28 seconds Yes. Thanks for the opportunity sir. So I just need one clarification. Uh most of the questions have been well 1:09:36 1 hour, 9 minutes, 36 seconds answered. Uh just one clarification on the project business. So 8 to 10% range that we are talking about is for the 1:09:44 1 hour, 9 minutes, 44 seconds entire EMP business right and not only for the infra business no electromechanical project business in totality. 1:09:55 1 hour, 9 minutes, 55 seconds Yes. 1:09:55 1 hour, 9 minutes, 55 seconds And even commercial air conditioning business. 1:10:02 1 hour, 10 minutes, 2 seconds Got it sir. Thank you sir and wish you all the best sir. Thank you. 1:10:10 1 hour, 10 minutes, 10 seconds Thank you very much ladies and gentlemen. With this we conclude this quarter's earning call. Do feel free to revert to us in case any of your 1:10:18 1 hour, 10 minutes, 18 seconds questions were not fully answered and we'll be happy to provide you additional details by email or in person. Thank you. 1:10:26 1 hour, 10 minutes, 26 seconds Thank you so much sir. On behalf of Blueest Star Limited that conclude this conference. Thank you for joining us. 1:10:31 1 hour, 10 minutes, 31 seconds And you may now disconnect your