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IFB Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '23 Earnings Conference Call for IFB Industries Limited, hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Prasheel Gandhi from Nirmal Bang Equities Private Limited. Thank you, and over to you, sir.
Thank you, Rita, and good afternoon, everyone. Nirmal Bang Equities Private Limited welcome you all to 2Q FY '23 Earnings Conference Call for IFB Industries. From the management team, we have Mr. Prabir Chatterjee, Director and CFO; Mr. Rajshankar Ray, MD and CEO, Home Appliance Business; and Mr. Arup Das, Head of Marketing, Engineering Division; and Mr. Anand Reddy, Head of Motor Division.
I now hand over the call to management for opening remarks, post which we can take Q&A for the participants. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. I welcome you for IFB Industries investors call for the second quarter FY '23. Joining me today are Mr. Rajshankar Ray, MD & CEO of Home Appliances Division; Mr. Arup Das, Head Marketing, Engineering Division; and Mr. Anand Reddy, CEO of Motor Division.
Growth during this quarter is 13% and YTD growth for the first half was significantly higher compared to last year. Company has reported a total income of INR 11,01.92 crores for the quarter with a growth of 13% over the same quarter last year. During second quarter, EBITDA was INR 74 crore, which is in line with last year. Lower margin percentage is roughly due to lower-than-expected revenue in Home Appliance Division along with higher material costs and operating expenses. The effect of commodity prices started coming down and the effect of which is expected to be realized in third quarter. YTD revenue during first half was INR 2,151 crores with a growth of almost 40%. EBITDA margin during the period was significantly higher at INR 112 crores compared to INR 44 crores last year in the same period.
With this, I will request you to start the question-answer session, please.
Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Manoj Gori from Equirus Securities.
First, on the demand front. So what we understand is that the festive season also was not so encouraging. So in this case, with RM prices coming down, how do you see the pricing environment across industry and by you as well? Can you throw the light over this?
Yes. So, Rajshankar, [ one minute ]. The reduction in the RM pricing, as far as we are concerned, it will help us to improve the margins. We are not thinking of any pass-through pricing on any of the products as of now. As far as the competition is concerned, my understanding is that for more than 1.5 years now companies like Samsung, LG have taken very aggressive price positions to gain shares. In this quarter, industry-wide, key point being discussed by everyone per se. So I don't see them lowering prices beyond what they have already done. So per se, I think the reduction in commodity prices, as far as we are concerned, is margin exited. I don't see any changes in market price positioning per se. Does that answer your question?
Yes. Sir, so it's just first week of November. So if we look at the September average prices, so can you just quantify like what should be the positive impact on the overall appliance business for us? And how should we look at the gross margins and EBITDA margin for the remainder year FY '23?
If you -- there are 2 exercises, which are running in parallel, which, as we have said previously, our target is to complete everything within Q4. One is the material cost reduction initiatives, which are through either value engineering or through resourcing. And the second is the impact of the reductions in the commodity prices. The combined impact of both, as far as gross margins for us are concerned, is between 3% to 4% at gross margin level.
So probably, what we understand is like the 3% to 4% would be moving to EBITDA levels and probably, we might see somewhere around high single-digit kind of EBITDA margins during Q3 and Q4 depending on the current RM prices and the visibility that you have?
Correct.
Right, sir. Sir, secondly, if you look at from the room AC point of view, obviously, where do you see yourself as a branded -- like what should be the branded volumes this year where we would be exiting and probably -- also on the outsourcing and what we aspire to do next year?
So if you see our overall indication for the full year was about 220,000 to 230,000 for the brand volumes and about 150,000-odd for the OEM volumes. So we will hit the brand volumes. As far as the OEM volumes are concerned, that listing trends of the OEMs of their orders, et cetera, have been discussed for the period from, let's say, in November, to March and then of course, up to June. So as of now, it looks that the volume guidance is maintained. However, we are still to receive from close. So that is something that over the next, let's say, 30 to 45 days with that close.
Right, sir. Sir, lastly, on the OEM manufacturing. So if I'm not wrong probably, we have roughly around 3, 4 clients over there. So any development where we are trying to acquire new clients or building on clients profile. Can you throw some light, like any ongoing discussions with newer brands?
Yes. There are ongoing discussions with about 7 people, including the -- through our people who we supply to already. And as I said, definitely now in the next 40, 45 days, we expect that with the set of them, the season volumes will be totally set.
[Operator Instructions] The next question is from the line of Dhananjai Bagrodia from ASK Investment Managers.
Sir, are you noticing any demand difference really, rural versus urban and entry level versus premium?
If you don't segment in terms of urban and rural, but if you segment by Tier 1, Tier 2, Tier 3, then the growth which has been sort of consistent over the last 2, 2.5 years, the Tier 2, Tier 3 is growing much more rapidly as compared to Tier 1. This has been a consistent trend now and it's almost the third year that this is happening. As far as the entry level versus the premium or the higher end of the segments are concerned, that trend is very clear, that the higher end is growing far more rapidly than the entry level segments.
So why is that? Any thoughts on that?
That's an interesting question. And see, I would put it as an outcome from 2, 3 enablers. I cannot say that prominence is definitely which one it is, but it is probably a basket like this. So one is that the tendency to buy something bigger, whether in washer or for that matter ACs, for example, has always been there. So faster than not has always been favoring higher capacities, for example, as 8-kg capacity in washing machines. That change was building. The pandemic period and the lockdowns and everybody has grown getting involved for the work-at-home, I think, accelerated that change. Because everybody in the family was involved in the process of washing, everyone suddenly realized that there are 2 or 3 multiple washers happening at home, [indiscernible], let's buy a bigger newer machine. A lot of the equipment went through exchange during those lockdown periods. So I think there was a change, that same got accelerated over the last 2 years, driven by lockdown and more people are participating in [indiscernible]. This is 1 reason.
The second is that the availability of finance has definitely helped because it's an entry-level product, is INR 25,000 and the higher end is INR 40,000, then cash difference is INR 15,000, but in EMI terms, it is maybe INR 1,500. So as the finance options have expanded, the ability to buy something higher priced has also become much easier.
The first point is that the availability has also improved. So if I look at IFB, for example, and I look at our higher-end products, and over the last 2, 2.5 years, which we've also shared in the call, is the agenda that we've driven out improving range displays across the market. So if I just look at an 8-kg or a 9-kg washing machine, for example, the number of displays available today is much bigger and better than, let's say, 2 years. So I think as visibility and availability has improved, that has also given access to the higher end. So I would put it as 3 reasons, as a combination probably of all the 3.
So then just to understand, so you said that LG and Samsung, for example, they are really competing on price point. But the availability of finance also significantly help kind of the good products, let's say, a little better, then why they're moving towards more towards LG and Samsung at lower price menus -- EMI basis and where difference doesn't come too much then?
No, I think even in LG, Samsung, I would expect that the trend is that the higher-end is selling more. Are you saying that lower-end is selling more?
No, I'm just -- no. I'm wondering, is it, industry-wise in terms of the -- even at a higher-end -- they're cutting the prices even at higher-end. Is that right?
No. industry is not cutting prices. What I said is that there is a specific reality that Samsung, for example, has taken very aggressive price positions across all categories. Our understanding is that they're doing this to basically buy share. But it is not something that is happening at any particular entry-level price point or higher end price point. It's more a common thing across. So that's a separate thing. That is not related to this point about the higher-end selling more. The higher-end that is selling more, the 3 reasons that I told you actually have nothing to do with price per se because the 3 reasons that I gave you are not particularly price to them. They are driven by other factors, which is something that IFB has experienced. You see, we have not changed pricing. Pricing has only increased. If you look at the figure from Jan '21 until now when the commodity prices actually increased, but we are still seeing a very rapid growth at the high-end.
And, sir, industry-wise, would the demand be where, company is more present in front loading washing machines, with industry demand, what would you think -- what would your analysis in terms of what would be the segmentation industry-wise on front loading washing machines versus top load in volumes or size?
So typically, it is a sort of factor of 1:3, which could vary from 1:2 to 1:4, depending upon which geography in India you were in.
Okay. Sure. And in terms of size?
I was talking about size only. Volume, volumes, 1:3. Do you mean by value?
Yes.
So by value, it will probably be 1:2 or 1:1.7 because for the front loader price points are much higher than the top loader.
And sir, lastly, I'll come back if I have an option. But so what levers do we have to improve our return ratios?
Which ratios, please?
ROEs and ROCs.
So we have 2 levers that we need to fully deliver on. And the first is the volume. So in that, the key agenda that we have spoken about is that there is particular levers that we have. And over the last 2 years or so, our constant agenda has been that we do business with a higher percentage of that universe every month as compared to what we are doing today. Now over the last 2 years, that percentage has improved, but we are still not happy with the pace of that improvement. We think that it will increase much more. So our extraction from our available universe needs to be much higher. This is our first agenda. The second agenda is that the results in the previous fiscal year and also in the first quarter of this year were not improved primarily because of the material cost related things that we had, which we couldn't pass through to the market. And with the material cost reduction program and the softening of the commodities, by the Q4 of this year, on the material cost side, we need to fix the margin structure. So for our return on investment to improve, these are the 2 big agendas for us. Does that answer your question, please?
Sure. [indiscernible] in terms of how we see that in the numbers, that would help, but this has [indiscernible].
And maybe if we can slip in one more. Sir, with, let's say, some larger players like Voltbek also try to make a big dent in the segment. How do we see that in terms of -- as an industry-wide, do we see that, that means some margins in the industry will still always be surprised because we have 2 already large players reducing prices or keeping prices lower. Now we have another player who is trying also gain market share. How would that work industrial-wise?
So my understanding is Voltbek still have to make headway in terms of representation across categories and markets, et cetera. So as of now, there isn't any impact. As far as IFB is concerned, I don't see any impact from them. As far as the industry is concerned, we don't have enough data right now to be able to really answer this possibly.
The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.
Sir, if you look at other peers in the sector who have reported, IFB is possibly an outlier in terms of sequential improvement in gross margins. So is it that we were sort of sitting on low-cost inventory and our high cost inventory was already exhausted or what should be in for the year?
See, I will answer it this way. Our inventories have never really been very high because the key parameter of the market credit for IFB has always been on the -- I mean, the better solutions have always been quite tightly controlled. So inventories per se have not been high. We do have a higher inventory in the AC segment than what we would like. And for the next 2 months, that is something that we need to address. But I think the improvements that we have made has come because this agenda of delivering on the volumes and looking at material cost and doing the best possible exercise on that. I think we are making some progress on that. It's still not complete. There is an agenda that we have to deliver by Q4. But I think our improvement is coming because of these 2 heads, there is progress we are making. So if you look at the revenue growth in the H1, that percentage is better than before because we are covering more of the market universe that we have. We've put in place a lot of measures for our people to visit the market in a much more disciplined manner than before. We're building engagement programs with trade partners. And we just start to do more of that. We still think that we are underleveraged in terms of what is possible for us on the market side, revenue side there. We just have to keep doing what we're doing. Does that answer your question? Or is there some other clarity that you like?
No, no, this is good enough, sir. And sir, historically, if you look at the 5- to 10-year history, we've delivered very well on the revenue growth front. However, our EBITDA margins have been extremely volatile and also much lower as compared to industry standards. Now that we are trying to complete the product portfolio, thanks to good acceptance on the air conditioner side as well. Is it fair to say that we will sort of come back in terms of consistency on the margins as well, and we can be closer to 8% to 9% EBITDA margins maybe in the next 2 years?
Yes. So I don't want to give a figure, but that is something definitely which we have to deliver and Mr. Chatterjee and I have come quite often to this forum. And this idea that our margins are volatile and simply not good enough is a question that we face multiple times. So yes, definitely, this broadening of the product basket is healthy because the overheads are getting distributed over more products, small volumes. And we still have a job to do on the material cost and the market extraction. But if we finish these 2 jobs properly by Q4, which is our internal target, I think this question of the stable margin is something, hopefully, that we can settle by Q4.
And lastly sir, so on the AC side, is it fair to assume a 50-50 mix between your OEM sales and your branded sales?
Yes, it will be about 60-40 or 50-50. Yes. More like 60-40.
And the combined margins would be similar to the company level or would it be lower as compared to the company level margins?
The AC margins currently are lower than the average for the company.
[indiscernible] next year, maybe once we reach, cross INR 500 crores of top line.
I would -- if I compare it to washer margins, then even in the next year, the AC margins will be lesser, but one advantage that the AC bring to the table is that they are actually -- they are soaking up the overhead. And the volumes on the ACs are very high once we get the game right. So in terms of helping the overhead allocation across the company and therefore, helping better margin profile for the company, they have a very important role to play, even though on an individual basis, the margins on that segment will still be lower than the washers. Mr. Chatterjee, would you like to add to this, please?
No, I think you're right. Absolutely right.
Okay. And sir, what would be the biggest turnover coming in from your largest OEM client? What would be the turnover from your largest OEM client in AC?
For this year?
Yes, for this year. maybe first...
Can we answer this question offline because the numbers are still not fully closed. So...
No problem. No problem.
[Operator Instructions]. The next question is from the line of Manoj Gori from Equirus Securities.
One more question with regards to competition. So recently, Whirlpool in their press release has indicated, like they have been starting the commercial operations of the front load washing machines, which again would be a reentry into this category. How do you see -- because normally, when you look at, they are relatively lower price versus LG and Samsung and probably in the front load it would be almost similar to your pricing. Do you see it as a major threat, probably this time, not as a threat, but at least a major competitor or a player that could evolve over the period?
So it is a player that definitely needs to be watched. There are already multiple players for the placement of front loads on the floor of the stores. So this will be another division. But Whirlpool has had some placement of some products for some time now, which is through imports. So the imports being substituted by the manufactured product and how that happens in placement, I think over the next 1 year, we have to keep a watch, but we have to keep a watch definitely.
But on the other hand, so I just wanted to understand from a competition point of view because if you look at LG and Samsung have been aggressive on pricing to gain market share. So probably, if you look at despite the significant pressure from the RM, overall, the price hikes taken were lower than required. Now with the RM benefits, can there be a case where they actually go aggressive again to gain market share and probably whatever benefits that they would be gaining, they would be passing on to the end consumer?
We have to watch for this. Like I said a while back, I personally don't expect further erosion in pricing from them. But we have to wait and see. I think over the next quarter or so, we'll.
Right. But there was nothing visible during the current quarter, and we don't expect anything in the current one. Obviously, the majority of the season has gone through.
Yes. So there is nothing specific as far as the running period was concerned beyond what they were already doing. And I don't expect it. But like you pointed out, we have to keep a watch on this.
Just 1 last question. So obviously, when you look at the company, probably till FY '19, we were one of the fastest growing brand in the Indian home appliances. During 2021, we faced some challenges with regards to competition and also there was COVID impact. This year, obviously, when we look at FY '23 numbers versus FY '19 numbers, probably the CAGR growth is much lower as compared to the historical levels. So going forward, should we expect like probably the 15%, 20% growth that we used to report it become [indiscernible] probably that should be now somewhere around 14%, 15%? Or we should be back on track for the 20% mark?
I think our potential is the figure that you gave. And the key thing is for us to execute this market extraction properly because the [indiscernible] growth is definitely much higher than what we have delivered.
[Operator Instructions] The next question is from the line of Prasheel Gandhi from Nirmal Bang Equities Private Limited.
Sir, a couple of questions. Firstly, on front load washing machine. So we were planning to launch inverters and motor -- inverter motor technology and Wi-Fi enabled, but that timeline has been pushed to first quarter of FY '24. So could you throw light what is the cause of the delay?
Sir, we have already introduced some models which are in the market and some models which will ramp up from November, this month. And some of the models will come in Q1 of next year. So that's why there is no delay. It's only that we've spaced out the entry.
Okay. And so the complete rollout, when can we expect the complete rollout until finish?
Yes, the full range replacement will be over by end of Q1 of the next year.
Okay. Second question related to BLDC motors. I think we have pushed the time line from [ September '22, this year ] to January '23. So could you throw light on why that delay in that segment?
The is Anand here from Motor Division. So basically, we wanted to start manufacturing BLDC motor in September. What happened in between was there were a few other models that the market demanded, for which the toolings and trials took some time. So that's why it's getting delayed till Jan '23.
And so this is for both washing machine and air conditioner, right? So those will be rolled out from January '23?
No. First we will roll out the BLDC motor for washing machine is Jan '23 and then the air conditioner motor will be rolled out somewhere in May, June '23.
A second question regarding this. So we will be also kind of selling direct BLDC motors through our competitors and other OEMs?
Yes, we will be doing that.
So who would be the major OEM that would be trying to sell to?
We are looking at Voltas, Blue Star, Daikin, Panasonic, Samsung and other people.
So what could be the likely mix for it? Like for our own consumption versus OEM?
We are targeting 50-50, 50 for capital consumption and 50% for outside customer.
Second question -- one more question regarding our e-com. Could you highlight what were the e-com sales as a percentage for the quarter?
For the quarter?
Yes.
For the quarter was [ 16.9% ].
And what was the same number last year?
Last year was slightly higher.
Okay. So it is the trend in how e-com sales are coming down. So would we expect the same trend going ahead?
See, we don't look at it so much as a percentage to the total. But if you see, our potential for growth from the offline channel is very high. So if that growth comes in line with potential, then, yes, e-commerce as a percentage will reduce. But in value terms, e-commerce will remain a growth engine. Have I been able to answer this question?
Yes, sir. That was very helpful. Question pertaining to price. So what is the overall prices that we have taken across our portfolio for this quarter?
This quarter, we have not made any price increases.
And sir, final question from my end. We are also planning to enter 28-liter microwave segment. So could you highlight the market potential for that segment?
So if you see, this particular 28-liter capacity point has been monopolized by LG and Samsung until date. And we have been absent. So in their convection range, for example, the 28-liter price point is almost 60%, 65% of their sales. And we are going against that particular segment to reduce introduction.
So what would be the typical market size for this 28-liter?
So if you see in terms of IFB's own volumes, this particular introduction has the potential to increase volume by around 10% to 15%.
We'll move to the next question. That is from the line of Dhananjai Bagrodia from ASK Investment Managers.
Can you hear me? Hello.
Yes.
Yes. Can you her me now?
So sir, basically, we are limiting data. But according to your estimate, what would be the industry size for, let's say for washing machines and what growth rates in terms of volume and value could we see in the next 2 years?
Probably, the total washing machine industry, which is semiautomatic plus front load plus top load, all put together, the general estimate is that this is roughly, let's say, 50 lakhs, 55 lakhs, to maybe 60 lakhs.
It has been growing in a normal year by around 10%, 12%, 15%. And the penetration, it is really because the data are still very low. So there is no reason why this growth rate should not remain like this or even maybe accelerate actually.
Okay. And in terms of these 3, what would be the mix between semiautomatic, top load and front load?
So the front loads will be maybe 1.75 million, 1.6 million approximately. The rest could divide equally between semiautomatics and top loads.
Okay. Okay. 1.6 million, 1.75 million? Okay.
Yes, maybe about -- yes, 1.5 million, 1.6 million.
Okay. Understood. So then remaining out of that 45 million will be divided between this 2, 20 million to 25 million. Okay. And sir, going ahead, if you assume industry grows at 10% to 12% volume growth, but what would -- in terms of value growth, would that be also -- would that be, assuming that, that would be nil? Or would there be some of growth in the value...
No. See, value growth will be more, for 2 reasons because the mix has changed and the higher end is selling more than it used to. So there is a value growth associated with that. And then, of course, there is a price lag on growth. So on both counts, the value growth will be more than the volume growth.
Okay. So we can assume around 12% to 15% total, including volume and value-add mix change as an expectation for the industry.
Yes. I mean that has been the trend. And I think the trend will remain.
Okay, sir. Sure. And sir, lastly, in terms now, we've also spoken about a new product in your report about Washer Dryer and Washer-Dryer-Refresher in 1 segment. Is that something which the innovative product which no one else has? And is that something which we could see opportunity there also?
So the Washer Dryer is a genuinely innovative product. This idea that you can wash, dry and also steam and refresh clothes, which means you don't need to wash clothes, you can just refresh them and genuine [indiscernible] refresh. It's an extremely innovative product and is doing well. We are driving placement increases across India. And we also see good volumes in this.
Okay. But it's relatively a bit too small. I have to speak about what potential it could be and how that could go for us.
So growth. Markets like India is driven a lot by availability. Now I assume that we were able to place this in every single [indiscernible] counter across India, you would actually see very high volumes. That is a task that we have to do. Is there a market for this segment? Definitely, yes.
[Operator Instructions] The next question is from the line of [ Abhinav Jain ] from [ SG ] India.
Three questions. First of all, on the Home Appliance Division. You mentioned that there is a 3%, 4% material margin improvement that you are expecting, one is through internal initiatives [indiscernible] and working on the developed materials and second, there is softening of commodity prices as you have observed. However, my question was that both at an EBITDA level, this will result in a much higher margin improvement given AC volumes will kick in and the full year volume projections are much higher than last quarter. So this could actually -- the EBITDA margin could hit double digits, not just high single digits. That was question number one.
Okay. So the answer to that is potentially yes. On this agenda of completing the material cost growth and getting volumes, especially the AC volume right. That is a job that we have to complete. But the answer to your question is yes, a possible yes.
Okay. And -- is there -- is there a very different element. I'm assuming you could -- a ballpark estimate of cost of finished unit production for competition. So is there in the cost structure at a unit level for a like-for-like product for front loaders? Is it very different across major players like the Samsung and LG?
So I would not call the difference major. But there are differences, yes, because the fact that we commit to a 10-year life span for the product. And if you're a Samsung customer and you want spare parts after 3 years, they will show you a depreciation policy. They don't service products after 3 years, 4 years. But IFB services right up to 10 years and in many cases, beyond tenure. So the inherent quality that we have is superior and therefore, the dealer will reflect that. It could be something as simple as the quality of the rubber that we use or the electronic designs that we have for the voltage variations in India. So we have relatively higher bill of material compared to, let's say, specific competition like LG, Samsung. It is not structurally different, but the elements in it are higher because of the quality levels. Is that what you wanted to know, please?
And you mentioned that Samsung has been very aggressive. So how do they do it? Is it that they reduce the MOP, the market operating price, for the products? Or do we give higher channel incentives? And kind of drive towards the same MOP because it's a race to the bottom in some terms as in if they become aggressive for a longer term, then everybody including IFB will have to respond in. Nobody would like to lose market share in the shorter run. So I just wanted to understand, is it short-term more incentives to the channel that they give more volume discounts or they just reduce the MOP as per the plans and some time keeping the channel margins on a percentage basis then?
It is a combination of both. And we have never responded to this, not before. And specifically, for the last year, 1.5 years, when we have done more of this, we've not responded. So we see our growth rates, they are in spite of this sort of new by them. But what they do is a combination of both the things that you described.
And what's the typical channel margin from a dealer lending price to a MOP in the category that we operate in, both front loaders and ACs as well as others?
This varies from place to place. But a typical channel partner margin could vary anywhere between 5% to 14%, 15% depending on the product category or the geography. There is a wide variation in this, but roughly, this will be the range.
And my second question -- second line of question was on the Motor Division and it's probably somewhat linked to the Appliance division as well. Is there -- are BLDC motors being used in the appliances, both front loaders and in ACs in the industry currently? And what percentage of the overall industry volumes with the BLDC motors? That's number one. And second, let's say, in FY '25, when you are operating at optimal capacity, what sort of external revenues is being targeted through BLDC motor division? Because the numbers at least in volume terms look very high, which is good for us as shareholders. I just wanted to understand what sort of addressable market or what sort of scale on a revenue basis are we hoping to achieve from BLDC sale to external customers?
Anand, you can answer this.
Yes. See, on the external customers, we are targeting 50% of our installed capacity. That is 1 million each. So 5 lakh motors of BLDC for washing machines, which translates to around INR 50 crores of revenue and 5 lakh of air conditioner motor, which translates to roughly around INR 40 crores of revenue. So INR 90 crores revenue we are expecting from outside customers.
And has there been adoption of BLDC motors in these 2 categories already in the industry? And who is supplying them?
See predominantly, it has been catered by import right now.
Okay. So -- and also there is a company called [indiscernible] Motors, and I'm sure there would be other players also developing BLDC motors. So is there -- and so from an industry adoption perspective I think my question was what percentage of overall volumes of ACs and washing machines would have BLDC motors and who are the upcoming industry players? That question was -- I'm sure [indiscernible] that there will be multiple motor suppliers and even capital manufacturing that can take off on the BLDC side.
Yes, there are multiple motor manufacturers who are developing BLDC motors. But I don't think anyone have productionized it on a large scale. So it is being catered by imports mainly as of now. Maybe in 6 to 8 months' time, people will start manufacturing some of the BLDC motors in India.
And what percentage of overall industry volumes will have BLDC in motor technology for AC and washing machine?
That I think Mr. Ray would be right person to answer that.
So if you see washers and you take a 3-year horizon, then in a category like front loaders, probably 80% to 90% will be BLDC. The top load and the semiautomatics will be new. In the case of top loaders, it will probably be anywhere between 30% to 35%. If you look at AC, then the use of BLDC motor will be, at presently, roughly about 10% to 15%.
And this will offer significant electricity savings for the consumers, that main USP of the client?
Yes. It will offer savings on the electricity front [indiscernible] and the government energy regulations are also mandating moving to technology like this.
Sir, if I can ask how stable is that technology given that the field failure rate, and obviously, it depends on the elevation in terms of your technology, quality of magnets. But in your testing, how has been the field failure rate? Obviously, it's not in the field right now, but in the factory. How do you plan to improve that? And is it equal to or less than the conventional motor that we are using, the conventional [indiscernible] conventional motor might be that is being used currently?
We already have models with BLDC in the market. And there are absolutely no problems with quality. So they are as good as the rest of the product. So there's no issue.
Okay. And on the Automotive division side, are there possibilities of getting external sales on the BLDC motors? Or we are just focusing on the Home Appliances side?
See, BLDC motor, we are in discussion with various customers. It's too early to discuss on that right now. Why? Because the market has not yet adapted BLDC technology for Automotive in the last place. But within the next couple of years it will happen for HVAC motor as well as engine cooling motors.
Okay. So right now, the focus is to get INR 90 crores to INR 100 crores of external sales on a full year basis on -- from the Home Appliances side itself?
Right, right.
The next question is from the line of [ Ankit Shah ], an individual investor.
Yes, my question has been answered.
[Operator Instructions] The next question is from the line of [ Abhinav Jain ] from [ SG India ].
So coming back on the question I asked previously. I know, again, there are always [indiscernible] there is no very adverse reaction from competition in terms of aggressive price cuts or unreasonable movement of commodity prices. Is it fair to assume that you would aspire for an early [indiscernible] sort of an EBITDA margin with 50% to 53% -- 50% to 55% of gross margin? And maybe some more cost [indiscernible] given your manufacturing [indiscernible].
Yes, that is the intent.
Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.
Thank you all for joining the call.
Thank you. Ladies and gentlemen, on behalf of Nirmal Bang Equities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.