Voltas Ltd
NSE:VOLTAS
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Voltas Ltd
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Good evening all. Thank you, India. And we have with us the management of Voltas, represented by Mr. Anil George, Chief Financial Officer; Mr. Manish Desai, Head Corporate Finance; and Vaibhav Vora, Manager Corporate Finance. We'll have the initial remarks and the overview by the management, followed by a Q&A. Over to you, sir, for the opening remarks.
Thank you very much for joining us this afternoon. I will just give a brief note on the analysis of results for the quarter and 9 months ended 31st December 2020. The quarter gone by has been rather eventful with multiple developments. North American markets cheered the results of the U.S. elections and patiently watched the twists and turns that followed thereafter. In Europe, lengthy negotiations between the EU and Britain were finally concluded, and Brexit became a reality. In the Middle East, the U.S. successfully brokered a deal between key regional players, easing political tension and paving the path for normalized relations. On the pandemic side, total reported cases of COVID was in excess of 82 million by 31st December, and the world sees a sigh of relief as news of viable vaccines trickled in. Meanwhile, a 3.5% GDP growth was predicted across the globe in calendar year 2020, with the exception of China with registered positive growth of around 2.3%. Looking forward at the year 2021, the IMF has projected reasonably cheerful rebound growth numbers of 5.5% for the world in aggregate. More interestingly, India led the pack with a double-digit growth of 11.5%, overshadowing China, which is projected to grow by 8.1%. Back home, the Indian government anticipates a degrowth of 7.5% for FY '21, but forecasts a V-shaped recovery and a growth of around 10.5% in FY '22. The said forecast resonates well with general business and consumer confidence indicators. Manufacturing and service PMI have picked up. GST collections are at an all-time high, crossing INR 1 lakh crores for the fourth month in succession. Auto sales have achieved double-digit growth, and job markets are showing signs of steady recovery. Optimism is also evident across equity markets, supported as they are by significant FII inflows and the growing number of retail participants. In this overall context, Q3 witnessed a healthy upswing in the growth of the business. Sales across all the 3 segments have improved as compared to the corresponding quarter of the previous year. At the same time, substantial increase in commodity prices, such as copper, aluminum, steel, plastic and oil and fee freight, was a cause of worry. On the exchange front, the USD remains largely range bound. Consolidated total income of the company grew by 32% to INR 2,046 crores in Q3. YTD degrowth, although reduced by around 11%, unfortunately remains given the lingering consequence of a locked out Q1. Profit before tax was higher by 39% at INR 166 crores as compared to INR 119 crores in the corresponding quarter last year. Profit after tax was similarly higher by 46% at INR 129 crores versus INR 88 crores of the previous year. Earnings per share, face value per share being INR 1 and not annualized, as at the 31st December 2020, was at INR 3.87, better than the figure of the INR 2.63 registered last year. The corporate balance sheet continues to remain healthy with minimal borrowings, which are required mostly for our overseas operations. While operational cash flow during the first 9 months of the year have been relatively weak given the context of the lockdown and the AC sales lost out during high season, adequate availability of cash on our balance sheet is a definite strength in these difficult times. A snapshot of our results for this quarter is being presented. And there you can see that the total income from operations has improved from INR 1,487 crores to INR 1,970 crores, and the profit before tax in total has gone up from INR 119 crores to INR 166 crores. Let me now comment upon the individual segments, Segment A, Unitary Cooling Products. Record sales of INR 833 crores in the Unitary Cooling segment, representing a 40% increase over the corresponding non-COVID quarter of the previous year, is indicative of the considerable brand pull and traction enjoyed by Voltas. Aided by pent-up demand, channel partners were also keen to secure their share of inventory amidst years of supply chain disruptions and price escalations. Top line growth apart, divisional bottom line has accelerated even further by 72%. This is the conscious result of driving better product mix amidst cost efficiencies coupled with lower holding costs of carryforward inventories. Appropriate focus on the inverter subcategory with competitive pricing and larger number of SKUs has yielded a favorable outcome. Inverter growth was 75% ahead of the previous year and now contributes over 60% of all ACs sold compared to the 49% for the similar period in the previous year. That apart, Voltas has also achieved leadership position in the inverter category with an excess market share of 21.8% as of December 2020. In terms of the overall AC market, we continue to retain our undisputed leadership with a YTD market share of 26% at multi-brand outlets. As concerns on global warming from increased energy consumption grow, protecting and preserving our environment continues to form a prominent part of Voltas' commitment to sustainability. We're happy to report that Voltas has won the prestigious National Energy Conservation Award, outperforming other brands in fixed-speed and variable-speed AC categories. It may be noted that Voltas has won the National Energy Conservation Award for the fourth time over the past 7 years, indeed, a testimony to our leadership in technology as well. The commercial refrigerator segment has delivered a stellar performance in Q3 by registering 101% growth in volume. Stronger emphasis on building relationships with B2B partners, combined with channel expansion and revival of demand from some OEMs, has yielded good results. At the last conference, we had commented upon the substantial buildup of air cooler inventory with the trade, owing to the lockdown, which had disrupted the very limited seasonal window available for its sale. Despite this industry constraints, the performance of the air cooler vertical was satisfactory with a growth of 11% over the previous year. Increased number of variants and SKUs together with appropriate trade schemes has helped secure a wider distribution footprint across the sub-dealer network. Based on November 2020 exit numbers, we are now at the #2 position, having achieved a market share of 13.2%. Looking ahead and the broader context of the commodity price increase, changes in custom duty rates and enhanced supply chain costs, the business has taken a 5% to 6% price increase across all UCP categories. This, along with accelerated efforts to sensibly limit imports and maximize local sourcing, is expected to provide appropriate forward protection for our margins. Allow me to move on to segment B, Electro-Mechanical Projects and Services. Segment revenue for the quarter increased to INR 1,017 crores as compared to the corresponding quarter of INR 808 crores, increase being largely across international operations. Segment result was albeit lower at INR 32 crores, reflecting a conservative margin recognition policy amidst liquidity stress resulting in delayed collection against the receivables. Carryforward order book of the segment stood higher at INR 7,275 crores as compared to the INR 7,024 crores last year. Over INR 700 crores of fresh orders were added across both domestic and international markets, helping provide suitable revenue visibility in the periods ahead. The carryforward order book for domestic projects at INR 4,794 crores contained a bouquet of orders across water, HVAC, rural electrification and urban infra activities. The international order book of INR 2,481 crores represents MEP work mainly across UAE, Qatar and Oman. Progress across newer projects in the Middle East has improved given the availability of labor and better access to project sites, post initiation of the mass vaccination program. However, some of the older projects continue to be delayed, resulting in cost overruns from extended physical presence at site and cost provisions to cover completion to defect liability periods. At the same time, payments are often delayed, triggering time-based ECL provisions. Meanwhile, the steady increase in oil price and the lifting of trade barriers with Qatar should improve business sentiment and open up further opportunities in the Middle East. As always, we will continue to follow a selected cum cautious approach while bidding for fresh orders. Adding to our technical cum execution credentials, Voltas was recently recognized as the MEP contractor of the year, together with our COEX project being recognized as the MEP project for the year 2020. On the domestic front, inquiries, particularly for infrastructure projects, including metros, electricals, water treatment, et cetera, have picked up. The allocation of INR 5.5 lakh crores in the recently unveiled union budget is also widely expected to help provide investments with resultant infrastructure construction activity. In addition, there is an increasing demand for solutions in the indoor air quality space, including UVGI products, automated duct cleaning, filtration, et cetera. Finding opportunities for renewal amidst the stress and trauma of COVID-19, the company has initiated various process improvements, cost control measures and restructuring activities, which will augur well for the future of the business. In tandem, we continue to focus on collection of outstanding, securing favorable commercial settlements and proactively limiting our financial exposure to minimum possible levels. Segment C, Engineering Products and Services. Segment revenue and results for the quarter were at INR 121 crores and INR 32 crores, registering growth in excess of 40% as compared to the previous year's performance. The Mozambique operation, Vale, has remained largely unaffected and continues to contribute handsomely to the performance of the mining and construction vertical. At the same time, the push by the government of India on infra projects have reenergized the demand for crushing and screening equipment, although the announcement opening up commercial mining is yet to manifest its desired potential. While capital expenditure on textile machinery remains low, the business has partly compensated the shortfall by directing its attention to the aftersales business in both the spinning and post-spinning segments. Pronouncements in the recent budget has been helpful to the textile business in general, and there is a degree of muted optimism on the fortunes of the industry over the periods ahead. A brief comment on Voltas Beko. The factory at Sanand has completed its first year of operation. Despite various disruptions and multiple limitations on production and supply chain caused by the COVID pandemic, the factory successfully produced over 210,000 units of high-quality DC refrigerators in its first year. The product has been very well accepted in the market. And we are happy to evidence significant demand pull from the trade. While the current emphasis is, therefore, on maximizing production to meet the increasing demand for DC refrigerators, plans have been made to begin manufacture frost-free refrigerators over the coming months, followed by top load, fully automatic washing machine and dishwashers. In introducing differentiated India customer-relevant products into the market, we continue to derive considerable strength from the technical prowess of our joint venture partner, Arçelik. In terms of distribution, billing points have been scaled up to exceed 1,000 numbers. Accelerated introduction of exclusive outlets and experience zones, along with cost-effective digital marketing, should help in increasing reach and augmenting the brand awareness. As of date, both Voltas and Voltbek have a joint presence in 195 EBOs, up from around 90 in the previous year. Meanwhile, distribution and other synergies with Voltas continue to be aggressively leveraged. Costs are well in line with the budget, and the business is confident of meeting its targets, including that of the 10% market share by year 2024, '25. Other matters and outlook. The company had earlier notified an in-principle proposal to internally restructure and segregate its B2C and B2B businesses in separate entities, so as to drive independent focus and facilitate their respective growth. Subject to various approvals, the thought was to transfer the B2B businesses to an existing 100% wholly owned subsidiary, RIEL, which was to be suitably renamed. At its recent meeting, the Board has now formally approved the transfer of its domestic project business relating to MEP, HVAC and water projects, M&CE business and TMD to its fully owned subsidiary, Universal MEP Projects & Engineering Services Limited, which was formerly known as RIEL, or Rohini Industrial Electricals Limited, by a slump sale to a business transfer agreement to be executed by 31st March 2021. The transaction is expected to be completed by September 2021, and the purchase consideration is estimated to be in the region of INR 1,000 crores to INR 1,200 crores. Looking ahead at Q4, which marks the beginning of the high season for AC sales, we remain cautiously optimistic. In general, a pickup in the pace of activity can be reasonably expected over the coming quarters, and we expect to maintain our growth and momentum. I will now open the floor and then hand over the floor back to ICICI.
[Operator Instructions] Our first question is from the line of Ravi Swaminathan from Spark Capital.
My first question is with respect to the PLI scheme. Would Voltas be interested in applying for the PLI scheme? What are the benefits we are likely to see? And would we be looking at exports on the PLI scheme?
Yes. Actually, while the scheme has been announced in general and we know that it will be on an incremental basis on CapEx and increase in revenue, the contours are yet to be fully known. We don't estimate a very sizable kind of inflow from the PLI scheme as of the moment. But only time will tell after the Ts have been crossed and the Is have been dotted and we read the fine print. But whatever is possible -- because we are going to be making in India and we will be expanding our own manufacturing, so we expect to take and gain advantage from the PLI scheme. But I would be hesitant to say that there is a very big, substantial chunk of money that's waiting as performance-linked incentives that we paid over to the company is concerned.
Got it, sir. Got it. And my second question is with respect to the product price increase that we have taken, close to 5% to 6%. Given the fact that the copper prices, et cetera, have continued to raise in the month of January, are we looking at further price increases? And the existing price increase, is it sufficient enough to cover the cost?
You see, at the moment, each company has its own unique situation. And that unique situation is defined by supply chain, the level of inventory that you are already holding, the contracts that you have taken going forward, et cetera, et cetera, you know it all. At this point of time, based on what we have seen and what our estimations are, we believe that 5% to 6% will be sufficient. However, looking at the future, we do not really know how the commodity prices will react, what further things might happen, et cetera. At any rate, our promise to the market has always been that we will continue to grow our market share, but at the same time, we will do it sensibly without actually moving too much on the margin front. The good news is that we have sufficient margin. So if need be, we can always do something and still recover later. But in an ideal, ideal situation, we try to balance it in such a way that we are able to continue the accretion of margins and, at the same time, be able to grow our market. So time will tell. But at the moment, we have taken about 5% to 6%. If more price increases are required, we will do that. And as a market leader, we certainly are expected to do that also in an overall context.
Our next question is from the line of Venugopal Garre from Bernstein. We'll move to a next question. That's from the line of Siddhartha Bera from Nomura.
Congrats for a great set of results. Sir, my first question is, again, on this PLI benefits. So on the export side, do you think there is a reasonable opportunity for us to go and sell products if there is incentive from the government, which we can look to address and because a lot of our peers are looking at -- looking to doing that with new factories and all? So do you think that can be a big opportunity for us?
Siddharth, Manish over here. So in terms of the export, yes, the potential is very good. But you remember very well and we keep saying that the technical specs across different countries in the world are different. Furthermore, the home production itself when looked from the demand perspective, we are so much in an underpenetrated kind of state, whereby the opportunity in the domestic market is quite [indiscernible]. Having said that, even government has realized that it is not like a mobile kind of PLI scheme, which they have to link incrementally to the exports revenue. Because here, the first challenge for the government is to have a setup of the eco chain in a country as far as the components are concerned where the dependence for the entire industry is quite high, followed by make available the entire units at a competitive rate to the domestic market. So we are seeing that the PLI scheme will have some reference to the export, but it will not mirror the way in which they put the mobile and other PLI scheme which the government has announced. In terms of the potential is concerned, we are having our focus and we keep doing -- going to the other countries to carry out the exports. We have seen good amount of revenue going into 2021. And we'll keep our eyes and ears close to the market and definitely meet the requirements of the countries or this place where we can do export.
Understood, sir. Second is on Voltas Beko. If you can throw some light on -- you highlighted that you have increased the billing points. And also some more color on how the production is shaping up. I think it was about 35,000 in Q2. So how is it shaping up? And how is the presence across channels, how has it improved? And so some color will help a lot.
As I said, at this particular point of time, our main -- it's a good problem to have. And that good problem is that we are not able to manufacture as much as we could possibly sell. So we are consciously -- we have slowed down the expansion. So we -- in theory, you could say that we could touch more and more of the outlets that are selling Voltas products. But the truth is that we don't have sufficient products available, especially in DC refrigerators or imported items, to be able to meet all of that demand. So we -- our focus is on increasing the production. The focus is making sure that the touch points that we have gotten to, which is roughly about 6,000 and 1,000 billing points, those are sufficiently well serviced. The product quality has been very well accepted. And I would say that this factory has settled down extremely well. And as I said in my earlier comments, we really have a lot to thank our partners who bring in excellent quality of technology and research and development and help us with customizing the product to Indian needs. So our DC refrigerator has lots of other things that you might not really find in the run-of-the-mill DC refrigerator. And that would be our positioning as we go forward. In terms of pricing, et cetera, we have taken a similar kind of pricing that has -- that we have taken across the products -- for AC products. And I think you will wait and see that this is really building for the future. And internally, we are very hopeful about what Voltas Beko holds for us.
Our next question is from the line of Atul Tiwari from Citi.
Sir, one question to better understand this sale of MEP business to 100% long term. So the press release mentioned domestic MEP business is being sold. So any kind of color on the international MEP business? Will it also be part of this transaction? Or will it continue to remain as it is? And can you throw some light on that aspect as well?
Atul, in fact, we lost your voice in between. So...
Yes. So sir -- yes, so sir, actually, sir, my question was on the domestic versus international B2B businesses. So the press release seems to suggest that only domestic B2B businesses are being housed in this 100%-owned subsidiary. So what about international B2B businesses?
You're absolutely right that it is only the domestic businesses that are being housed in the wholly owned subsidiary. International businesses continue to remain in Voltas main company, but still we are able to see how best to integrate it. In India, actually, the focus, it gets a little diverted, as we had mentioned, because we are running after B2B, we are running after B2C. The purpose of doing this is to ensure that both these B2C and the B2B businesses are able to flourish and grow with appropriate management attention coming to them specifically. And in this transfer also, I must mention that the -- in the domestic businesses, we have moved it into a wholly owned subsidiary -- already existing wholly-owned subsidiary called Rohini where the electrical businesses are already housed. So in -- so when you talk about domestic businesses, electrical businesses are not getting moved then. Also, what -- as we look at it, we are moving in the textile machinery business and the mining and construction, which are also B2B compliant into this. So the local businesses are what are being housed here.
So sir, just another follow-up on that one. So why not move even international B2B businesses to a subsidiary and have the stand-alone on the main company and not focusing...
Yes. It is something that could happen, but we want to take it in stages. We are not -- because there are lots of other things. And because in the international, there are many JVs that we operate through also because of the basic needs. So there are other kinds of complications which we'll have to work our way through. Ideally, what you're saying is absolutely right. And this is what we will be focusing on and working towards over a longer period of time.
Okay. And sir, my final one is on the outlook for the UCP segment. How is the demand panning out currently? Any color on the market situation and pre-filling of channel for this summer season?
As I mentioned, we have had good sales in quarter 3, mainly because there was also an element of pent-up demand and an element of people really are being apprehensive about the price increase that would be coming around the corner. So we have had good, good quarter in Q3, and many of the industry have done reasonably well. Although we seem to have -- in the AC segment, we are far out than other people. When you look at the quarter 4, the quarter 4 is generally a good quarter as the weather starts striking in and you also have the heat-based sales that will take place. So far, we have been doing all right, but I don't want to be forecasting and I don't give forward guidance on what it is. But suffice it to say that whatever happens in the industry, we will be ahead of our competition in the growth that we see. And we are really hoping that the -- right now, I think we can see a lot of the COVID concerns and constraints starting to diminish or -- and I believe that as we look into both quarter 4 as well as quarter 1 of next year with the weather giving its normal bit of assistance, we'll be reasonably okay and good.
We'll take our next question from the line of Chirag Shah from CLSA.
Just going back on the restructuring point. Just wanted to understand how will the cash consideration to be paid by the subsidiary be funded?
Yes. There are various ways that it can be done. But ideally, ideally, Rohini [ and Universal ] is a separate company, and it has its own equity. It has its own capital. There's nothing stopping them from issuing shares and write shares and which can be subscribed to. So it's not -- it should not cause so much of a problem.
Got it. But at any point in time, would we be considering separately listing Rohini?
No, not -- there are no problems at this particular -- there are no thoughts on that at this point of time because it's a wholly owned subsidiary, and we wish to keep the business with us. And the only thing that we are doing right now is to move it into a separate subsidiary where we will be able to get full attention for the B2B business.
Understand. And just lastly, on the gross margin pressure that we saw this quarter. Can you just explain a bit around which segments saw the gross margin pressure? And of course, commodity prices have increased, but just a color on these segments impacted the most.
Various commodities have gone up in significant numbers. And I think that I would really say that on an average -- just one more to look at, and let us say, take, for example, something like copper per tonne. In March 2020, it was roughly about USD 5,180 per tonne, which has now moved in December '20, end of December moved to something like USD 7,750. Similarly, steel, which was at around USD 551 per tonne moved to something like about $880 per tonne by December '20. So similarly, lots of things have gone up. Now we had an advantage, and I think most of the industry also had the advantage because the inventory procured at the earlier cost continued because Q1 sales did not take place the way that anyone -- that we wanted it to. It was a washout Q1 completely. So that inventory remains and gave us advantage. At the same time, given the COVID situation, there were savings in marketing expenditure. There was other kind of synergies that were exploited. And all told, we were able to not only keep the margin, we were actually able to improve the margin. Going ahead, the situation can be slightly different because as new inventory comes in at new prices, what happens is that you will have a problem on the margin if you don't take care of it. And that is why we have proactively led the market and taken the price increase of 5% to 6%. As I mentioned earlier, for us, market share is not something that you can put into the bank. It is the profit generated out of margins by selling your products that you can put in the bank. So we consciously and all the time, balance market share vis-a-vis margin. And that's how we have been doing it. And if anything is an indication, please look at our record over the past 8 years, and you would see that margins have always been maintained at sensible levels along with the growth in the market share.
Perfect. That's super helpful. And just one last question on the Voltas Beko JV. You mentioned an aspirational target of getting to a 10% market share by FY '25. Any thoughts on when the JV would achieve EBITDA breakeven from that perspective?
It coincides mostly with this. But I don't want to get into specifics of that. One of the things that you should note is that we are well within our budgets as of date. And you just need to look at the item there in the balance sheet, which talks about the profit and loss of share of Arçelik JV, and you will see that the number is very similar to what we had in the previous year, which indicates that the Voltas Beko is, well, it's grabbing market share and incidentally it's got something like close to a 2% market share in frost-free, washing machines, et cetera, and a 0.7% market share in DC refrigerator where it was just launched about 8 months back. So it's good going is what I would say.
Our next question is from the line of Shreyas Bhukhanwala from Canara Robeco Mutual Fund.
Just 2 questions. One is likely on the longer term related to capital allocation. So post the restructuring, UCP is basically on a stand-alone would have a good amount of cash on books post -- once the transaction is done. So any initial thoughts on how do we plan to deploy this?
Yes. There are a number of investment opportunities, particularly in and around surrounding the make in India. It is very clear now that on a longer-term basis, we cannot continue to import. So we'll have to look at manufacturing more aggressively in India itself. And that kind of manufacturing may extend itself to compressors, to motors, to various other things depending on what we really feel cannot be economically and profitably sustained over a period of time. So that is the context in which we are looking at the -- at plan and which is just almost done in South India, where we will be starting to manufacture. At the same time, we will be tying up with other people to ensure that there is a need and in supply chain availability for the input items to support the growth of our air conditioning and the refrigerator industry.
Got you. And secondly, sir, on the EMP side. So on the profitability front, as you did mention that there has been ECL provision which were there because of the delayed payments. But lower margins, was it also attributable to the projects not crossing the threshold limit since we had a lot -- majority of the products in last year's second half?
Very good question. And from the way that you've asked your question, I can glean that you understand projects very well. Yes, in certain cases, when you take projects, till the projects cross the 20% threshold limit, and this is relevant for -- especially for the new projects, you do not record margins. So you might have a case where the turnover comes in, but the margins are not accretive.
Our next question is from the line of Nitin Arora from Axis Mutual Funds.
Sorry, just continuing with the MEP question. Any guidance, sir, that we should look at? I understand what you explained from an accounting perspective. But any guidance or direction we should look in the MEP margin going forward?
I would actually not want to guide. But over a period of time, our ambition really is to be able to work our margins to at least 6%, 7%. That's what we want to do. And I'm sure that, that will happen, also, over a period of time. Given the fact that we are now very careful in the kind of projects that we take in and we are being -- for example, the projects that we have taken in India, all of them have brought some kind of back-to-back financing with either the World Bank or JICA or some other external agency by which we make sure that these infrastructure projects, we will be able to get paid. We do not do business with large private players because in projects, profit is made when the cash is received and not by writing it into books. So I believe that over a period of time, we will be able to work this forward, particularly in -- given the COVID situation, we have had some problems in the Middle East, where -- and it's only now that oil prices have started picking up. But earlier on, there were problems in the oil prices -- pricing also. And as a consequence, many of the clients were actually holding back payments and not certifying our bills. So these are transitionary issues, which I think will get sorted out. And also, I would say that as and when we are able to collect against some of the easier provisions, It is a straight drop down into the bottom line.
But is it right to conclude that none of the projects, whether it's Middle East and India, are in a very bad shape in terms of acquisition? I understand a cash flow mismatch can happen and eventually can improve.
Let me be honest with you on that. If I were doing 20 projects, I don't think any project company in the world can really say that all the 20 projects are performing superbly well or well -- are earning margins much ahead of what they had budgeted and none of them has lost. In the project business, some projects go into loss, some projects go into profit, some go into a horrendously attractive profits. The average of all these things is what you see in the number as a return on the segment base. And that is how we manage it. And it is very difficult to have -- and it's not like a product business where you sell a particular AC and you know very clearly that, look, a margin of X percent in terms of gross margin has come in. Projects don't operate that way. So -- but that's the reality of the matter. But also with all these investments, with all the things that are happening in the environment and infrastructure being such a key prerequisite for development today, I think that if you manage it maybe even conservatively but sensibly, projects have a good future in terms of being able to add both to the revenue as well as to the bottom line.
Our next question is from the line of Gopal from SBI Life.
Am I audible, sir?
Yes.
Yes. Sir, what we have been witnessing in last couple of months that on the import side, there has been increases in the freights and few industries are taking issue in terms of component import. So if you can just help us understand are -- we are also facing a similar issue in some of the industry. Are there any critical components which are undersupplied and could be a potential risk for the industry and for us?
So Gopal, what is happening is, as you're aware that the entire industry as such is depending on the imports of certain critical components for the air conditioner. The components like compressor, controls -- controllers and others, we do not have a supply eco chain in India. So we -- all industry as such are depending upon outside India. Now having said that, we all know yes, neighbor approach and other initiatives taken by the government and the pandemic situation with the entire credit volume introduced. We have seen such kind of import freights particularly has shoot up like anything. I'm sure that when you heard about the others, it has gone up by at least 3 or 4x more than what otherwise would have been. Similarly, in terms of the disruption from the Chinese side or from the other countries where the manufacturers are depending upon the components, they did also face the labor and other kind of capacity constraints. So in and all, the prices have suddenly gone up. And that was the reason why Mr. George a few minutes back has said, proactively, we have taken a call in order to increase our margin -- or increase in the price so as to protect our margin. But in and all, the -- our situation is, I can say, because of the carryforward inventory, what the manufacturers they're carrying along with them, we may not see a disruptive situation what we have seen a couple of years back, whereby we had the situation of not fulfilling the demand for the customer when the season was on the side of picking up. So that's what we have to say right now. We have to see, we have to wait and watch how the thing gets set up -- or gets step up. But in terms of the requirement, currently, we say we have been adequately stocked in terms of seasonal requirement, which we're seeing in the quarter 4 and thereafter in '21/'22.
Is the situation improving month-on-month? Or is it the same?
It is improving, but it is remaining really volatile in a way that now we know whenever Chinese have gone into lunar year, so the shipments got booked from their end when the shipment is about to sail from their port. So in a way, we are seeing -- now this month, we are not seeing much kind of disruption because you can see the visibility of what ships are holding materials moving from there. But let's open -- Chinese from that side, and we can see -- we have to estimate that the things gets normalized because situations are improving month-on-month compared to what we have seen in quarter 2.
Okay. The second question which I had was on the initial input which we have got from the government is that we are expecting additional revenue of like INR 17,000 crores over the next 5 years and some INR 8,000-odd crores investment for AC and LED. So we don't have the breakup between AC and LED, but whatever your assessment is on this and how tactical these are. Because if we understand it right, the industry currently in India, it is in the range of INR 10,000 to 13,000 crores. So in such kind of base, how tactical these targets are?
So Gopal, if I recollect properly, our ministry did give a separate allocation for the air conditioner. And to my best sharing, it was somewhere around INR 6,500 crores over a period of 5 years. So if I look from the industry market or the industry size today, it is roughly around INR 18,000 crores or so, leaving aside some kind of degrowth work you've seen in the current year, which is an exception basis of the pandemic situation. So if I look from the INR 18,000 crores market and if I look for a INR 6,500 crores of realized scheme over 5 years, we can reasonably estimate that volume is achievable. However, we need to see how the contours of the transitions or the scheme is getting worked out. Because what the government and what the industrial are pushing for is on development of the component ecosystem in India because that is missing quite. Definitely, it will be there on the complete unit as well, which has to be balanced out between the components and the complete unit. But in and all, it will be a mix of incremental CapEx and the revenue, which the company is going to generate from the cut-off year. And we are expecting that the government will come out with the announcement soon by 1st April 2021. That's what we heard from -- last from them because they have to allocate for year of '21 to start executing this PLI scheme going forward.
The INR 6,500 crores is CapEx or incentive?
Incentive. That's what we heard. I have to reconfirm the numbers, but that has been come out very clearly and part of the PLI makeup. INR 6,500 crores to INR 6,800 crores something. But it's certainly less than INR 7,000 crores.
Okay. And the last question which I had was on this demerger scheme. So we are indicating like INR 1,000 crores kind of revenue on the project, INR 1,000 kind of project revenue for last financial year. Whereas if I see on the stand-alone side, the revenues of the project business is INR 2,800 crores last year. Am I missing something?
No. Firstly, I think if you read the fine print, as I mentioned, the electrical part of the business is already resident in the wholly owned subsidiary. So there is no transferring anything from Voltas into RIEL.The second part of it is that there are a number of projects that are being done in Voltas and which we will not be transferring at all to RIEL, we will -- which are near finishing, et cetera. We are not going to be running into assigning all those contracts, et cetera, et cetera. So there are not a lot of these adjustments that need to take place. So you cannot just look at it -- in the future, yes. If you look at the year 2020 -- FY '22, our intention is certainly to take new projects only in Universal/RIEL, formerly known as. But as of now, there are so many projects that -- many projects that will end by September 2021. These are not necessarily -- you don't want to be shifting a project and going to all the rigmarole of transferring it to the new company that's -- before they actually -- they're completed and finished. So there are lots of adjustments. Let me just assure you that this valuation has been done by 1 of the big 4 and has been seen and reviewed appropriately. So there are a lot of these adjustments.
So is it right to assume that from, say, FY '22 onwards, in the Volta stand-alone, only the UCP revenues will be there?
FY '22. Because by the time these things finished, we'll be signing the documents, maybe the PPA documents because there are lots of things that need to be transferred, understood, legal things that have to be done. 31st March is what we are scheduling. And we are saying that by September 2021, we should be able to effect the full transfer. So thereafter, you're right, so if you really look at maybe FY '23, I would say that we're reasonably confident that the entire project business would be in the -- in Universal, and the UCP business will be the one that would be in Voltas.
Sir, lastly, about this stand-alone business, if I see the project margins for this entire 9 months is negative and even for this quarter, it is negative. Any specific provisioning we have done for stand-alone? I assume it is India where most of the projects are like cost pass-through.
There are also JVs and other things that makes up in this. So the stand-alone by itself loses its significant in effect.
Our next question is from the line of Abhilasha Satale from Dalal & Broacha.
Sir, I'll just ask a couple of questions. This -- I've seen that Voltbek on quarter-on-quarter basis has increased from INR 7 crores to INR 20 crores. So is it only because of the rise in top line or the increased depreciation? What are the factors associated to it?
Largely, around the Voltbek, if you're looking from the Voltbek results, it remained almost same in the compared to previous quarter. When I say corresponding previous quarter, in the current quarter.
Okay. Yes. But the scale has improved on year-on-year business.
Very well, we have to create a brand [indiscernible], so the amount of expense will go towards brand expenses and marketing expenditure. So even though with the scale in the volume and the revenue, some amount of loss is expected to carry forward but to continue in these financials. However, we have set ourselves a target of EBITDA breakeven by '24, '25. Our efforts are there to meet those targets along with the market share target of 10%.
Our next question is from the line of Dhruv Jain from AMBIT.
Sir, I had 1 question with respect to the supply chain that you mentioned that you are wanting to manufacturing there. So going forward, what is the kind of mix that you would want to maintain for in-house versus ODM. And a question linked to that, in the south facility, what is the kind of backward integration that you are planning?
In fact, I could not get your full question, Dhruv. Can you just repeat it because I lost your voice in between?
How about right now? Can you hear me right now?
Sorry to interrupt. Mr. Jain, I think you are on a speaker mode. If you can switch it to handset, we'll be able you hear you.
Can you hear me right now?
Yes.
Sir, so you spoke about manufacturing in India and Voltas doing extension manufacturing. So just wanted to know what is the kind of mix that we would want to maintain for in-house versus, say, ODM or OEM. And also a question linked to that, what is the kind of backward integration that you are planning in your south facility?
Okay. So as far as the backward integration is considered -- concerned, we evaluate, in fact, as we discussed in our last conference call as well. Manufacturing, as such, at our large scale, we are not seeing that we should tap upon it immediately. Having said that, we have the now our own model the for indoor units. So certainly, one backward implementation in terms of having the assembly in line in the -- for the indoor units is much feasible, followed by certain components which required to have, I can say -- resulting to improving our supply chain efficiency, we'll certainly house under the new factory. As far as the mix between the in-house and the outsourcing is concerned, it is continuously evolving. We always remain capital-light. However, we do allocate capital sensibly in order to achieve, but in order to ensure that we are always getting the advantage of our supply base setting up near around. So it is like I can say, we cannot say anything -- the perfect mix kind of in-housing or outsourcing. We'll always look into the maximum advantage which can flow to us, which will not only improve our efficiency in supply chain but to ensure the quality as well from the suppliers. So I can say, but then extent of manufacturing will certainly be higher in our new plant compared to what we have currently. Some of the components will also find a place in our new factory, which is about to come up in the next 15 to 18 months' time frame.
We reached to a point of 5 p.m. now. So if we didn't give an answer, we are open thereafter as well, you can raise with me subsequently. Any other participants?
Sure, sir. I would now like to hand the floor back to Mr. Renjith Sivaram.
Yes. Thank you, management of Voltas for answering all the questions, and thank you, participants for all the insights and questions. On behalf of ICICI Securities, I thank you all for attending this conference. And sir, do you have any closing remarks to make?
Thank you very much. And in case there are any questions that are still lingering in your mind, please do contact Manish Desai or Vaibhav Vora, and we will provide you with the answers. And thank you very much for being with us in this conference. Bye.