The Chatter: Bosch, Amara, Zydus & More
Q1 FY27 | Edition #79
Welcome to the 79th edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 5 companies across 4 industries.
Auto Ancillary
Bosch Limited
Amara Raja Energy
Healthcare
Zydus Lifesciences Limited
Financial Services
Manappuram Finance
Engineering & Capital Goods
EPACK Durable
Auto Ancillary
Bosch Limited | Large Cap | Auto Ancillaries
Bosch Limited is a leading provider of technology and services in the areas of Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology. The company is a key supplier to the Indian automotive industry, specializing in fuel injection systems, aftermarket parts, and power tools.
[Concall]
Bosch has achieved a sustainable margin expansion through a multi-pronged approach focusing on localization, productivity, and a richer product mix. This upward trend in profitability is expected to persist as the company continues to optimize its internal operations and sourcing.
“We have done quite a few things consistently over the last several years, at least over the last 2 years, which have led to a sustained improvement in our margins. The first thing is continuous improvement in our operational excellence, which has led to a sustained change. We have had a continuous increase in our localization content, which has contributed quite significantly. Volume growth has been favorable, which is also very good for us. We have had an overall improvement in productivity, which has also been a major contributor. The product mix has also been quite favorable going forward, so that is another positive addition to our margin base. Overall, I would say that we are on an upward trend, and we would say that we will sustain this.”
— Guruprasad Mudlapur, MD & CEO
The company is leveraging the global scale of the Bosch Group’s procurement network to mitigate risks from turbulent sourcing markets. This global integration acts as a buffer against cost volatility, helping protect domestic margins during supply chain disruptions.
“I think we also benefit from the worldwide purchasing organization. As you are all aware, the sourcing market is still quite turbulent. We are supported by a worldwide purchasing organization, which helps us maneuver through this very volatile situation and maintain our margins as best as possible through our sourcing activities. That is the only thing I would add.”
— Tillman Rocke, CFO
Despite the global shift toward electrification, Bosch remains heavily invested in internal combustion engine (ICE) technology to meet ongoing market demand. This balanced approach allows the company to capture growth from traditional volumes while simultaneously offering advanced tech like ADAS and EVs.
“Mukul, I think the answer is quite straightforward for us. We are a technology company, and we will support and continue to support whatever technology the market demands. You listed a few technologies: CNG, electrification, CNG, and several others, including ADAS and everything else. Every one of these is in our portfolio, and we continue to offer them to our OEMs. That said, there is also momentum that will carry combustion technologies forward, including possibly some alternative fuels. This progression will continue in the years to come. This is not stopping. We see volume growth in combustion technologies continuing to happen. There may also be upgraded legislation for combustion technologies as we move forward, and we are certainly leading that development and will continue to provide support.”
— Guruprasad Mudlapur, MD & CEO
The acquisition of the chassis systems business is primarily a strategic expansion into powertrain-agnostic components rather than a cost-saving exercise. This move reduces Bosch Ltd.’s reliance on specific engine types and adds a highly profitable, growth-oriented segment to its consolidated financials.
“The chassis systems business, which we acquired, was already a Bosch system company. In terms of synergy effects, we see very minimal improvement in costs and synergies. There will be some small improvements, but I do not see that as the major benefit. It is a great portfolio addition for Bosch Ltd. because we are adding a powertrain-agnostic product line to Bosch Ltd. That is the bigger focus. The company currently operates with very good performance characteristics and has very good projects acquired for the next several years. It is a highly profitable company with good growth and good market share. That should help Bosch Ltd. significantly going forward.”
— Management, Board of Directors
Strategic joint ventures with TACO and TSFS are nearing operational status following the completion of international regulatory clearances. These partnerships are critical for Bosch’s long-term EV revenue, with e-axle production expected to contribute by late next fiscal year.
“The JVs are in the process of being set up. Both JVs are in the final stages of formalities, which are ongoing. Both the Bosch Group and the Tata Group are operational worldwide, and we need merger-control clearances from several jurisdictions. Some of that administrative and procedural work is still ongoing. The JV with TACO will be set up in Nashik, or will operate out of Nashik. The JV with {? TSFS Group ?} will operate out of Chennai. Revenue from the e-axle JV should start coming out of the JV by late next year.”
— Management, Board of Directors
Amara Raja Energy | Small Cap | Auto Ancillary
Amara Raja Batteries Limited is a technology leader and one of the largest manufacturers of lead-acid batteries in India for industrial and automotive use. The company provides batteries for various applications including Passenger Vehicles, Two Wheelers, Commercial Vehicles, and Industrial needs like UPS, Telecom, Railways, Defence, and Motive. They supply to top OEMs, Aftermarket, Private Labeling, and export to over 50 countries worldwide.
[Concall]
New energy continued to scale rapidly in Q1, supported by more than 50% volume growth in both EV and telecom battery packs.
“For the quarter ended June 30, 2026, we achieved robust growth of around 24% on a consolidated basis, with revenue of around 4,215 crores. Approximately 95% of the revenue came from the lead-acid business, which grew by around 22%. The new energy business grew by more than 70%, recording revenue of around 290 crores.”
“The new energy business continued to deliver strong performance during Q1, with revenue growth supported by increased demand for telecom packs and two-wheeler packs. Both EV and telecom packs demonstrated volume growth of more than 50% on a year-on-year basis.”
— Sujatha Rathetti, Head – Corporate Finance
Cost pass-through is slower in B2B because customer negotiations take time, potentially delaying complete recovery of inflationary pressures.
“The price hikes in the B2B segment will be delayed because negotiations have to happen with various B2B customers. To that extent, there could be an impact that we may have to absorb, but most likely we should be able to recover it, if not fully in Q2, then in the succeeding quarter.”
— Management
Amara Raja is entering a heavy investment phase, with roughly three-fourths of FY27 capex directed toward its new energy expansion.
“During FY27, we estimate that we will spend around 1,700 crores towards our capex projects, with a major outlay towards the new energy business of around 1,300 crores and the remainder towards our lead-acid business, including recycling capex. This capex outlay is mainly towards our upcoming Giga 1 plant, which is expected to commercialize during H1 FY28, and towards other projects, including the Best 10 gigawatt-hour and E-positive plants.
Out of the planned 1,700-crore capex outlay for FY27, we spent around 450 crores during Q1 FY27, with major outlays towards the new energy business.”
— Sujatha Rathetti, Head – Corporate Finance
Amara Raja sees sufficient domestic demand visibility to potentially ramp half of its planned 10 GWh BESS capacity within roughly six months of commissioning.
“Initially, I think there is sufficient visibility with major EPC players that are installing projects for various power-generating stations. We are seeing a reasonable order book in India itself. There may also be export opportunities as we move ahead into other markets.
I do not see a major challenge in reaching a utilization level of around 5 gigawatt-hours within a period of approximately 6 months from the time the factory is completed. From there, it will depend on how the market develops.
The capacity can be made up because the line capacity itself is 10 gigawatt-hours. That is why we proceeded with the 10 gigawatt-hour line capacity. I think we should be able to ramp up, considering the way the requirement for solar energy is developing in this country.”
— Management
Management clarified that its BESS utilisation expectation is based on prevailing market demand and industry order books rather than committed orders.
“No, I am saying that, based on the market demand we are seeing today, there is a possibility that we can reach that kind of level over a period of around 6 months. This is because of the various existing order books we have seen in the country. We should also find a way to seed the market in other geographies so that we increase the utilization level and continue to grow consistently.”
— Management
The planned BESS facility is relatively asset-light, with management estimating ₹250–300 crore of initial investment for 10 GWh capacity.
“The initial capital outlay for the Best project could be in the range of 250-300 crores, and its capacity will be around 10 gigawatt-hours. At the current base price at the containerized solution level, the price could be anywhere between 100 and 120 dollars. In terms of asset turns, it will definitely be higher.”
— Management
Management expects BESS economics to broadly resemble its existing battery-pack operations, with localisation offering potential upside over time.
“In terms of operating margin, it may mimic the way the current pack business is performing, at around 5-6% or 6-7%. As we localize more and more components, the margin profile might change somewhat, but it will continue to have operating margin levels of that kind. The EBITDA margin could be around 7-8%, while a conservative margin could be around 5-6%.”
— Management
Amara Raja views BESS not merely as a pack-assembly opportunity but as a way to build customers and eventually localize cells for energy storage.
“As far as competitive intensity is concerned, I think this project should also, over a period of time, help us bring cell production into the country. In line with the government’s support for localizing supply chains for these BESS systems, I am sure it will help us establish customer relationships for all these products and eventually lead to the cell localization required for this BESS program.
We have to think long-term. The increased demand for energy storage requirements in the country, not only at the grid level but also at the C&I level, will definitely help fill this capacity and should also feed into our cell program expansion.”
— Management
Although the timing of capacity additions may change, the company’s longer-term ambition to capture a meaningful share of India’s lithium cell market remains intact.
“Even today, if you were to assess the risks of the lithium-ion business, I would intuitively say that demand is not the highest risk. It may definitely be in the bottom quartile because demand is coming from both EVs and the ESS segment.
Given our program, we may now prioritize an ESS cell over a standard EV cell because that could increase demand much faster. Therefore, while the milestone for a given capacity can change, our broad strategic direction of targeting approximately 15-20% market share of the available lithium cell market potential remains intact. The timing can change based on demand as well as the product mix required by the market.”
— Management
Geopolitical restrictions have materially changed Amara Raja’s approach to technology sourcing, particularly from China.
“As far as newer technology relationships are concerned, I would not say that we are not considering them. However, we will evaluate them on a need-based basis wherever we believe external help can augment our internal capability. We will work on a case-by-case basis.
At this point, given the geopolitical restrictions, I do not think a broad-based technology arrangement with any company from China is possible.”
— Management
Management expects customer approval cycles for LFP storage applications to be shorter than the extensive homologation required by automotive OEMs.
“Coming to the storage side, any LFP cell that we generate using our own technology can be tested in this plant. If we are able to convince B2B customers regarding their energy storage requirements, the time taken for customer acceptance may be substantially lower than what an EV customer would require. Some of these packs also come with a warranty commitment to energy storage customers.
However, for certain critical installations, such as telecom, customers will ask for extensive testing before accepting any particular cell. Any cells made by any supplier require customer approval, but the time taken by energy storage customers is definitely lower relative to EV customers.”
— Management
Amara Raja sees imported Chinese cells—not other domestic manufacturers—as the real competitive benchmark for India’s emerging battery-cell industry.
“By and large, there could be a market with, at best, three to four players on the cell side. That is our estimate based on the announcements we are seeing today.
From a pricing and competitive perspective, I do not think companies in India will compete primarily with each other. Rather, all of us will have to continue competing with imports entering the country.
To that extent, when competing with China, we are clearly at a price disadvantage. As we discussed in earlier calls, that disadvantage could be in the range of 15-20% today, simply because of the strong supply chain that exists in China and because we are still at a nascent stage of developing this market.
Until we develop sufficient depth in our own supply chain and receive some protection from the government, we should be able to stabilize this industry in the country.”
— Management
Even as cell manufacturing is localized, management acknowledged that critical upstream battery materials remain dependent on China.
“Clearly, on the supply chain, particularly for cathode material, we have to depend on China for procurement. There are no two ways about it.
However, various players in the country are also making efforts to localize parts of that supply chain. We have to wait and see how those plants reach a certain level of maturity.
In the long term, I think the industry as a whole will strive to localize the required supply chain in the country. Otherwise, substantial value cannot be retained within India. The government’s direction and policy push are also moving in that direction.
I am hopeful that, in the long term, we will be able to bring a large portion of the supply chain into the country.”
— Management
Healthcare
Zydus Lifesciences Ltd. | Large Cap | Pharmaceuticals
Zydus Lifesciences is a leading Indian pharmaceutical company that develops and manufactures a broad range of healthcare therapies including generics, biosimilars, and specialty drugs. The organization is currently transitioning from a traditional generics focus toward a research-driven model centered on proprietary innovation and branded formulations.
[Concall]
The company expects its Indian formulations business to significantly outperform the broader domestic pharmaceutical market. Investors should look for mid-teens growth in India to compensate for more moderate single-digit growth in the competitive US generics market.
“I think we continue to stay with our guidance that we will deliver strong double-digit growth for the year. Starting with the first quarter, I think our India business is poised to deliver significantly good traction, better than the market by at least 300 to 500 basis points. So we see mid-teens growth continuing for that business. Our international markets and the US are expected to deliver around single-digit growth. Looking at that, we will still see good revenue growth for the coming year.”
— Dr. Sharvil Patel, Managing Director
Zydus is preparing for a major US launch of Saroglitazar in FY28, noting that early market trends for this therapy area are stronger than previously anticipated. While the first two years will involve heavy investment, the expanding patient pool suggests significant long-term commercial potential for this NCE.
“For Saro, we are building for a FY28 launch right now, in April, and we are investing for that. The first 2 years will be focused on building up the business, so we will not see significant revenue in the first year. As we move into the second and third years, we would see the revenue and market build-up. The first 2 years will therefore look more like an investment phase in terms of how much we invest. From a market perspective, the recent guidance from both the other competitors in the current segment indicates better traction than their earlier guidance, and they have upgraded some of their guidance. This is being driven by a larger patient pool and more patients wanting to access this indication. We are seeing a positive trend in that the market is larger than expected. We are seeing positive signs in terms of how this market is forming, and we are quite excited about the opportunity.”
— Dr. Sharvil Patel, Managing Director
The Indian business is seeing a powerful convergence of high-growth chronic therapies and a successful rollout of complex biologics and NCEs. This diversified growth engine suggests that the current 20% growth rate in domestic formulations is supported by structural demand rather than one-off events.
“There are 2-3 things. First, the overall chronic part of our business is growing at more than 20%. If you look at the July numbers reported by AWACS, you can see strong traction on the chronic side across various therapies, with very meaningful growth, which is helping that growth. Second, we are seeing a very meaningful uptake in Saro and Desidustat, which is adding almost 30% to 45% growth in these businesses. That is also contributing very meaningfully and scaling up, and we see that traction continuing. The third factor is that our biologics have seen extremely good traction across 3 or 4 brands, which have also scaled very significantly after genericization. We are seeing very strong momentum in those brands. Sema is just at the beginning, so it is a small contributor. We rank third or fourth in market share today for our own brand, but overall we are the largest innovative generic Semaglutide product that we have launched. That is also adding to the momentum. I would say that the entire differentiated pipeline and the chronic business are helping this growth, and we see it sustaining going forward.”
— Dr. Sharvil Patel, Managing Director
Zydus is eyeing the large Chinese market for Desidustat, leveraging the success of existing molecules in that therapeutic class. While near-term revenue impacts are minimal, obtaining national reimbursement in China could unlock a significant new international revenue stream.
“The opportunity is very difficult to assess right now. We have not factored in any meaningful scale in terms of the current year. However, as we gain experience with obtaining reimbursement, we can see it doing well because the other molecule is performing very well and has already been launched. I think the other molecule is generating approximately 200+ million dollars in the Chinese market. Therefore, we can see this product also becoming a meaningful contributor to us.”
— Dr. Sharvil Patel, Managing Director
Consistent outperformance in the Indian market suggests that Zydus is successfully capturing market share from competitors across nearly all major therapeutic categories. This broad-based strength reduces the company’s reliance on any single brand or therapy for domestic growth.
“In the pharmaceutical space in India, our branded formulations business sustained market outperformance with strong 20% year-on-year growth during the quarter. This business has, in fact, outperformed market growth consistently over the last three financial years. Growth during the quarter was broad-based, as we grew faster than the market in the super-specialty, chronic, as well as acute segments.”
— Ganesh Nayak, Director
Financial Services
Manappuram Finance | Small Cap | Financial Services
Manappuram Finance Limited is a leading Systemically Important Non-Deposit taking Non-Banking Finance Company (NBFC) in India. Established in 1992, the company offers a wide range of fund based and fee based services such as gold loans and money exchange facilities.
[Concall]
After nearly 12% sequential gold-loan growth in Q1, Manappuram expects the business to grow 25–30% for the full year despite seasonal variations.
“We grew by around 12%, nearly 12%, in Q1. Our expectation for gold loan growth this year is somewhere around 25-30%. Some quarters are in season and some quarters are off-season, so we expect growth to be between 25% and 30%.”
— Management
Following pricing actions taken during Q1, the company expects gold-loan yields to stabilize around 18%, within a relatively narrow range.
“We expect the yield to be somewhere around 18%. It may go down by 25 basis points or go up by 25 basis points. Beyond that, we do not expect anything. It will be around 18%.”
— Management
Gold-loan momentum has continued beyond Q1, with both customer additions and pledged-gold tonnage showing strength in the first two months of Q2.
“If you look at the growth 1 year ago, from a tonnage perspective and a customer perspective, it was somewhat weak. In fact, on the tonnage side, I think we had declined in the first quarter of last year. This first quarter, despite being seasonally slow, we have had good momentum, and we continue to build on that momentum in July and August as well, both from a customer perspective and from a tonnage perspective.”
— Bhuvanesh Tharashankar, President & Group CFO
The branch rollout will remain concentrated in Manappuram’s stronger markets, while eastern India will account for another meaningful portion of expansion.
“Regarding branch openings, we have assessed that the overall growth possibilities are higher. Around 60% will be in South and Central India, that is, the 5 states of South India plus Maharashtra. Approximately 20% would be in the eastern states such as Bihar, West Bengal, and Odisha, where we have seen good potential. The balance will be in the rest of India.”
— Management
Manappuram is repositioning itself firmly around its core gold-loan franchise, with most of the remaining portfolio intended to be prime or secured lending.
“I am very happy to say that our focus will be more on gold loans. We want to maintain around 75-80% of consolidated AUM in gold, and the balance should either be prime or other secured lending, such as mortgage-based MSME lending and affordable housing.”
— Management
After the stress seen in microfinance, the long-term strategy is to grow Ashirvad cautiously while preventing MFI from again becoming an outsized part of the group.
“At the group level, we want to contain microfinance below 10% at the consolidated level. We want to grow it along with overall growth, but in a stable manner where asset quality is the prime concern. We will remain focused on asset quality, and we have always wanted to have prudent growth in the MFI portfolio.”
— Management
While regulation does not impose an LTV ceiling on income-generating gold loans, Manappuram has internally capped exposure at 85%.
“Having said that, for income-generating assets, we may go up to 85%, which is the maximum. These are EMI products or AIE products. Here, even though we have the gold collateral with us, greater emphasis is given to assessing the customer’s cash flow. These are all for business people who would otherwise qualify for EMI products based on cash flow and based on whatever security the letter of interest has for.”
“However, internally we have fixed the cap at a maximum of 85%. That is the maximum.”
— Management
The portfolio has already shifted materially toward larger borrowers, with 49% of gold loans now carrying ticket sizes above ₹3 lakh.
“Up to 1 lakh, it is 21%; 1 to 3 lakh, it is 30%; and above 3 lakh, it is 49%.”
— Management
Management expects reported LTV to normalize in the mid-60s, with recent movements largely reflecting changes in gold prices rather than underwriting behaviour.
“On average, this will be around the 64-65% level, or even the 66% level. March-end’s 57% came mainly because of the price. The price was 14,165. On June 30, that price is 12,954. That is why this is coming at 66%. Normally, if the increase continues, 64-67% is the average LTV range in the normal scenario.”
— Management
Despite increasing competitive intensity in gold loans, the company does not intend to pursue growth through indiscriminate pricing cuts.
“We will maintain a balance. Currently, our pricing is in one of the lowest ranges in the NBFC industry. We cannot be completely away from the market. We have to move according to the market. However, I hope we will be reasonably balanced in that regard.”
— Management
Manappuram managed Q1 funding costs despite elevated short-term rates, but management acknowledged that persistent rate pressure could eventually feed into borrowing costs.
“Bhaskar, in terms of the cost of funds, given the overall environment in which we have seen spikes in rates at the shorter end, we have seen a spike in rates, and we have seen MIBOR also at all-time high levels. Despite that, in the first quarter we were able to manage the cost of funds fairly well and keep it under control.
We continue to monitor the situation and look at the opportunities that arise in the future, and we will work on that. It is very difficult to put a number on where this will settle. However, given that these rates are currently elevated, we could expect some of this to flow into our cost of funds as well. It is very difficult to predict where this will be.”
— Management
New borrowing is being raised broadly around the current average funding cost, although management remains cautious given elevated market rates.
“On an incremental basis, I would say we would be around the 8.8-9% level.”
— Management
Manappuram’s gold franchise has become heavily digital, with online gold loans representing the overwhelming majority of the portfolio.
“Coming to the gold loan business, during the quarter we were able to add about 3.2 lakh new customers, and the outstanding customer count was 26.5 lakhs. Our average gold loan LTV was 65.6% in Q1 FY27. Online gold loan book accounts for about 86% of the total gold loan book.”
— Bhuvanesh Tharashankar, President & Group CFO
As profitability normalizes and the portfolio shifts toward gold and secured lending, Manappuram expects returns to improve steadily, targeting roughly 18% ROE within three years.
“We expect ROA and ROE to consistently grow. In 3 years, our expectation is to take ROE to around 18%.”
— Management
Engineering & Capital Goods
EPACK Durable | Small Cap | Engineering & Capital Goods
EPACK Durable Ltd. is an OEM/ODM manufacturer of consumer durables, best known as a top original design manufacturer of room air conditioners (RACs) and small appliances like induction cooktops, mixers and water dispensers, with integrated facilities across India supplying major brands and growing its product range.
[Concall]
Despite not giving formal revenue guidance, the company expects its RAC business to grow faster than the industry’s estimated ~20% growth in FY27.
“Nishita, in terms of forward-looking top-line numbers, as you know, we do not provide any forward-looking numbers. However, we are very confident about AC. The industry is expected to grow at around 20% this year, so we would definitely surpass the industry growth, as we have done in the past.
Our other sectors and product categories, namely Small and Large Domestic Appliances, are definitely growing at a much faster rate. Therefore, we are looking to grow much faster and much better than last year.”
— Management
The strong RAC performance was primarily volume-led, with roughly 30% growth in units and the balance coming from higher average realisations and commodity pass-throughs.
“Good morning, Tanay. First of all, in terms of the breakup, the total growth reported for RAC is 44%. Approximately 30% of this is volume growth, and 12-15% is typically value growth in terms of the increase in AOPs, including the pass-through of commodity prices. So, the breakup of 44% is 30% volume growth and 14% value growth.”
— Management
Most commodity cost increases have now been passed on to customers, leaving foreign-exchange losses as the more significant drag on Q1 profitability.
“Tanay, first of all, since our contracts with the larger customers are updated every quarter, most of the price increase was normally passed on. There is always a time lag between passing on the price increase and when it actually has an impact, especially amid the turbulence in the global supply chain and the global situation, particularly affecting March and April.
There was a period when the price increase was not fully passed on, but the contractual price increases were passed on, and there is hardly anything remaining to be passed on as of now. What impacted us most in the last quarter was the foreign exchange rate, so that is one line item we would like to flag. The foreign exchange loss is something that impacted us significantly. Otherwise, most commodity increases were effectively passed on after a time lag.”
— Management
Unlike last year’s inventory glut, EPACK believes the AC industry has largely liquidated excess stock and is entering the next cycle with relatively lean channel inventory.
“Tanay, I think, especially for the AC industry, the current situation is one of the most comfortable situations for the entire industry from an inventory point of view, particularly from a finished-goods point of view. Compared to last year, when there was a lot of pain in the industry because of inventory overflow and accumulated inventory, I think this is one of the best times. The trade has mostly liquidated its inventory, and inventory levels are at their lowest or below acceptable levels.
My estimate would be that, taken together, the trade, brands, and everything else, the inventory level would be anywhere around 3.5 to 4 million at maximum. Inventory levels are lower than what they usually are at this point in time.”
— Management
Regulatory changes around BIS and the Quality Control Order forced EPACK to carry elevated inventory, and reducing these levels is now central to improving working capital.
“Tanay, just to add to Rajesh’s comment, the other interesting thing to note is that, especially on account of the BIS and the Quality Control Order, which has been affecting the industry, we have communicated the operational difficulties we have been facing because we have been carrying more than the requisite inventory.
The timeline we had for the compressor, for the PLI, or for the QCO was amended, and then the QCO was amended again. Therefore, the timeline or the time available at the start of the season required us to maintain more than the required inventory. For the last few quarters, inventory levels have been highly elevated on account of this.
This is one area that has led to a greater requirement for working capital. As we move through the season, at the end of the season we are again left with inventory because we build up inventory in anticipation of the upcoming season. Therefore, from a working capital point of view, our key focus remains on normalizing inventory.
Currently, inventories are at a much more comfortable level compared to last year, but they are still slightly elevated. Our efforts continue to normalize them as we move forward.”
— Management
With imports temporarily permitted and domestic capacity ramping up, EPACK does not foresee compressor shortages becoming a meaningful bottleneck for the coming AC season.
“Rabindra, as far as compressors are concerned, the government has allowed the import of compressors until the end of this year. Imports can be made until then. At the same time, domestic capacity has already been installed and additional capacity is in the pipeline, which we believe will be operational by the end of November.
This is largely in line with the overall industry demand, and we do not foresee any significant challenge in procuring compressors to meet demand. We believe that there is sufficient domestic capacity already installed and in the pipeline to meet the industry’s demand.”
— Management
Diversification into washing machines and SDA/LDA is aimed at structurally addressing the historically loss-making Q2 and Q3 quarters.
“Absolutely. Pratap, you are exactly right that Q2 and Q3 have historically been loss-making quarters because of our heavy dependence on air conditioning. The entire SDA and LDA category is intended first to neutralize the loss, and we are on track in terms of scaling up washing machines and the other SDA businesses.
As I said in my opening remarks, we are constantly adding newer categories in SDA as well, which are also non-AC seasonal products. As we continue this journey, we believe that over the next 4 to 6 quarters, we should definitely see the seasonality situation come largely under control in Q2 and Q3. Washing machines are definitely a significant lever.”
— Management
EPACK remains on track with its broader growth plan, but improving revenue mix and eliminating seasonal quarterly losses are key milestones for the business model.
“We are largely on track in terms of our overall guidance. The seasonality factor needs to be minimized, and every quarter we are looking at and working toward achieving a situation in which every quarter is profitable and the revenue mix is maintained.”
— Management
EPACK expects to begin mass production of front-load washing machines around September-October and believes it could become one of India’s first indigenous ODM/OBM manufacturers in the category.
“As far as washing machines are concerned, we are currently manufacturing top-load fully automatic washing machines, which are already in production, and we are serving 3 large national and multinational brands in this category.
What I was mentioning, especially with regard to Hisense, is the front-load washing machine. This is one category in which we would probably be the first indigenous manufacturer to manufacture front-load washing machines as an ODM and OBM. This is currently under pilot production, and we believe it is a newer, more lucrative, and higher-priced category.
For front-load washing machines, we are targeting the start of mass production at the end of September or in October. The other category, namely top-load fully automatic washing machines, is already in production, and we are already serving approximately 5 to 6 multinational brands.”
— Management
The Hisense partnership is already scaling, with EPACK supplying around 60,000 ACs during January-June and generating roughly ₹120 crore from ACs alone.
“60,000—six-zero. The total volume delivered in the first half, from January to June, generated revenue of approximately 120 crores from the AC business alone with Hisense. If we talk about Q1 alone, the Q1 volume was 25,000, with revenue of close to 55 crores. That was the total Hisense growth for the AC business.
For washing machines, as we had mentioned earlier, the target date is the end of Q2. We believe that pilot production of front-load washing machines will start by the end of Q2, and we are on track to begin front-load washing machine production by the end of October.”
— Management
The strategic relationship extends beyond ACs into washing machines and other appliances, with EPACK reiterating its five-year cumulative revenue expectation of ₹8,000 crore.
“Yes. The total expected revenue from the Hisense partnership is 8,000 crores over 5 years. FY27 will be the first year. Cumulatively over the next 5 years, we expect to cross 8,000 crores from AC and other appliances, washing machines, and all products taken together. That is the 5-year cumulative revenue we had expected from Hisense.
The current year, FY27, is the first year. Whatever was estimated for the first year, we are largely on track to achieve. I shared the numbers in the previous question: For this calendar year, we have already achieved close to 220 crores of revenue with Hisense, and we have already crossed close to 60,000 ACs as well.
Therefore, we are largely on track for the current calendar year. In total, over the next 5 calendar years, the expected revenue from the Hisense partnership is 8,000 crores.”
— Management
Excluding PLI benefits, EPACK says its underlying EBITDA margin has been running around 6.5%, with scope for improvement as customer PLI discounts are withdrawn.
“On the EBITDA side, 6.5% has currently been the typical EBITDA margin, net of PLI or excluding PLI, for the last couple of quarters. However, there is clearly potential for growth. Approximately 1.5-2% has been the PLI benefit, which was typically partly shared with and partly retained by the company.”
— Management
Roughly half of the PLI economics had historically been passed on to customers, creating a potential margin lever as those discounts are progressively withdrawn.
“Generally, current EBITDA without PLI is closer to 6.5%. We also receive PLI income, which is practically shared between us and the customers. Over the last 2 years, since we have been receiving PLI, we have been sharing it approximately 50:50 with customers. Therefore, almost 1% was coming to us and 1% was being passed on to customers.
As I mentioned in the earlier question, we have already started negotiations with customers to roll back that PLI discount. We are working toward a situation in which, by the end of this year, we should be able to retain the entire PLI discount that has been passed on until now.”
— Management
Commodity exposure is managed through back-to-back procurement against confirmed customer orders, with quarterly cost increases subsequently passed through.
“Ayush, as far as commodities are concerned, whether copper, aluminum, or any other commodity, we do not do any forward booking in anticipation of orders. Whatever orders we have confirmed, we make back-to-back bookings for them in line with the agreement. Any increase in excess of the quarter’s price is passed on in the next quarter.
As a company policy, we do not undertake any forward trade or open booking in anticipation of a profit. We refrain from undertaking any trade without confirmed orders and back-to-back bookings.”
— Management
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