Oppo mobile manufacturing entered execution.

Given that there was a push in the third quarter on account of BEE and then there was low-cost inventory, how should we see fourth quarter? And calendar '26, given that there is high amount of inflation and the entire GST benefit probably is written off and the cost could be even higher than that. How should we read calendar '26 from an RAC point of view?

See, this is how we look at room AC sector in the country. And as an industry, we feel that if you see quarter 1 was -5%, -10%, then quarter 2 was -35%. We saw a little growth in the industry in quarter 3 with the primary sales moving ahead in lieu of the energy rating. So we feel that the industry should be flattish this year, whereas we have again and again maintained our guidance, and we are hopeful to deliver about 14% to 15% kind of a growth. Let me give you a little background on air conditioning industry, Natasha, that in last 25 years, we have seen 7 bad seasons in this industry and 2 COVID waves hit us, both in March. So 9 bad years for the industry in last 25 years. 25 years back, market size was 0.5 million number, just 5 lakh numbers. And now we are at 15 million -- 14 million to 15 million number, 1.4 crores to 1.5 crore number. So I expect that in future also these kind of issues will keep on coming on the currency and commodity issues, be it table revisions. But looking into the households, looking into the per capita income growth, looking into the adequacy of power and the desire of comfort living, I believe that this industry should grow in the range of 12% to 15%, at least for next 4, 5 years. And there on, once we cross INR4,000 per capita income, this will further grow at 20% to 25% range. This has been historic in all the countries. So we believe that on the calendar year '26 basis, industry should be in the range of at least 12% to 15% growth path.

This would be value growth that you're talking about or just RAC volume?

No, I'm talking about volume growth. Value may be a little higher because of higher increase in the cost.

Mitsubishi Electric had announced that they are doing a INR2,100 crores capex and backward integrating into RAC and compressors. Given that all Japanese and Korean brands are our prime customers, how should we read this from Amber's point of view? Does it entail any risk for us?

No, there is no risk, Natasha, since you have all seen that 2021 when PLI got announced all 6 major brands announced, which are all our customers, their own factories. And industry -- I mean, markets did assume that Amber will not do well and our stock price was hit unnecessarily. But we could see that Amber moved into a different category. We started offering our products in the component shape, and we kept on growing more than the industry space. So this Mitsubishi Electric, yes, it's our client. This was told by them 2 years back, and we have already gone into supplying the components for the factory, which was inaugurated. We are very much part of this. And our association continues from here on with Mitsubishi Electric Group.

You mentioned that the industry should grow at 12% to 15% CAGR going forward. With the PLI now getting over and over the last 4 or 5 years we've seen that the brand's share of overall manufacturing has gone up, should the EMS share now move up given the PLI is getting over and growth for you guys should be AC plus industry because you have EMS gains share?

Dhruv, as Amber's B2B capability on components and on the finished goods capability side, we have seen this kind of shift in-house outsourcing 3 times now in the last 25 years. Whenever this kind of shift has happened, we've moved in tandem to the industrial industries or our brands or our customers' policy change. And we have established 24 factories now in vicinity to customers. So any customer who would like to manufacture on their own, we are very happy to supply them the components. If Toyota puts up a factory, they will do engines on their own, car chassis on their own, car bodies on their own and assembly line on their own. But will Toyota ever produce tires for their own? Audiovisual systems, glasses, seats, bumpers. So similarly, in our category also, whenever a brand puts up a factory, they do some kind of a backward integration plus assembly and plus labs, but other components are required to be supplied just in time by suppliers like us. Moving forward, this trend will continue. We don't control the change of policy of a customer, whether they want to in-source or outsource. We are there as a backbone of them as a supply chain solution provider. Plus, what we are doing over and above is we are expanding our product portfolio into the commercial air conditioning space. We have already successfully launched our Tower series, Cassette series, Ductable series from 3 ton to 17.5 tons. So all these three things put together, I think we will continue to outnumber industry. Maybe in a year, 2 years' time, 3 years' time, we may move in tandem to the industry. But eventually, we have seen that we have surpassed the industry by the numbers -- good numbers every time.

Despite the QIP, we have seen the finance cost go up marginally on a Q-o-Q basis. Could you help us understand the reason for the same?

So finance cost has increased because of -- you know that there was some changes happening in the energy rating, and we have built some inventory at a lower cost in terms of copper as well as compressor, which has increased the cost of finance cost. Plus we have acquired Shogini on the 1st of December, and we have paid around -- INR575 crores payout to acquire that entity. So finance cost includes that as well. And also, we increased our stake in Unitronics post our first acquisition on 9th of October, when we acquired 40.2% and now we are at 45.5%. So that has led to an increase in finance cost. But you will see that it will start coming down in the current quarter.

The Consumer Durable division with a growth of about 26% year-on-year on sales, it's far ahead of most of the peers. What drove this?

Well, Sonali, a couple of things. We've increased our wallet share in some customers. And our non-AC components is actually paying dividends now. That's -- and plus the new product categories, which we have launched. So all put together is delivering this number. I think our team has worked very diligently on all fronts to increase product portfolio, to increase the wallet share in existing customers, to work on non-AC components, where injection molding has done pretty well. We have started supplying to customers in telecom sector and to energy meter customers. And plus, of course, the refrigerator and washing machine and microwave oven customers are also gaining traction. And our ductable ranges of commercial ACs are also growing. So all put together has led to this kind of a number.

After the liquidation that we saw in December, what is the current inventory level? And are there any initial trends you fathom of the upcoming summer?

Well, inventory is varying from customer to customer. I think -- but overall, at an industry level, if we sum it up, I think industry is -- reached to almost a normalized inventory level at the moment. So if there is a spike in summer, we will see a good summer ahead.

What is the capex outlook for '26 and also '27, if you could help. And how should we look at the journey of Shivalik from here on now that we have taken the impairment loss?

So current year capex, we are expecting it should be around INR800 crores. And for the next year, the expenditure, which will be capitalized should be around, INR1,100 crores to INR1,200 crores. And for Shivalik, now we have explained that there will not be any further loss in the Shivalik because we have taken a complete impairment of the investment. And we don't see now anything coming from the Shivalik, and we'll be focusing on our Indian operations and expanding the same.

When we look at your guidance of 13% to 15%, that implies a mid-single-digit kind of growth for RACs in fourth quarter. So would you still think that the industry would actually end up being flattish or negative in the fourth quarter as a result?

Well, I mean, I think if you sum it up, Indrajit, for all the 4 quarters, quarter 1, I explained it was -5%. Quarter 2 was -35. Quarter 3 has been a little slightly above 0, it's like 3 and 5 number. So quarter 4 should be flattish, at least, I mean, even if they do well, overall, it will come to be like a flattish number. That is our estimate looking into it. And I believe that I have always guided that in air conditioners due to the heat waves, the sales move up 1-month ahead or it gets postponed. So I would urge everybody not to look at RAC sector on a quarterly basis rather than on a complete financial year basis. I think that will be a relevant way to look at the RAC sector stocks.

Sudhir ji talked about inventory buildup of copper and compressors ahead of the BEE table change. What does that regulation state in terms of when you can still manufacture old BEE norm air conditioners?

Yes. So basically, the norm is that the manufacturing cannot happen for the old products post 1st January, whereas the manufacturer can supply the old inventory for 3 months. Coming to the retail part, the retailers are allowed to sell the old inventory for 6 months. So that is how the government's norms are. So we cannot manufacture. So first -- before 31st, we've stopped -- we have to stop all the old models.

So the inventory that we have built up will be utilized in the next months. We will see that the inventory drawdown when we see March quarter results. Is that understanding correct?

That's right. Yes.

Could you give a rough breakdown of consumer durables between AC, AC components and non-AC components?

It's -- right now, it varies, Pulkit, from quarter-to-quarter. This time, this quarter, it has been about 60-40. 60% has been finished goods and 40% have been components.

And sir, within components, AC and non-AC?

Now almost we have reached a 50-50 split.

Is it fair to assume that consumer durables, especially air conditioner margins could be under pressure next year given the magnitude of commodity price increase that we have seen? Or do you think it's going to be a complete pass-through, though with a lag of 1 quarter?

So I think from a B2B company's perspective, it will happen with a quarter lag. Whereas I think for our customers, because the BEE table has changed, it's an opportunity for them to change maybe from February or March onwards. There will be slight margin impact, but not a very big impact for us.

We've acquired Power-One now and even Unitronics. How are we looking to scale these businesses up? And to what opportunity can we possibly take it to?

See, Power-One and Unitronics, both are in the industrial power electronics space. Unitronics, we feel that there is a geography expansion scope, bring those products to India. Second is the product expansion space. They do not -- have not manufactured any PLCs, HMIs used for the heating ventilation air conditioning applications. So we've -- after acquisition, we've already sent them samples and the team has visited India. And now they have started their R&D work. I think within 15 to 18 months' time, we are hopeful that we will add new product category on the heating ventilation, which will be launched worldwide because Unitronics, almost 55% to 60% growth comes -- sales comes from US markets and remaining comes from the European markets. So India will be their expansion on geography. Second will be product expansion strategy. And third will be, of course, due to the Amber's balance sheet, there will be some purchase leverage, which will come. And fourth is the backward integration. Unitronics, they only assemble the products because they are the designers of the products, they develop the software and they assemble the products in Israel. But they buy the printed circuit boards from outside. They buy printed circuit board assemblies from outside, even the injection molding required from outside. So that is what we are exploring right now gradually that the growth of Unitronics can be catered by India by supplying these components as a backward integration. Coming to Power-One products, which are UPS, solar inverters, both off-grid, on-grid and battery energy storage systems and EV chargers. So it's both B2B and B2G business. They apply in tenders, they apply directly to OEMs. And what we are doing right now is, again, similar case, they were assembling, not manufacturing components. So there is a scope of ILJIN and Amber put together supplying the boxes, the sheet metal boxes, injection molding components and PCB and PCBA. But these both -- the TAM of both the products, power electronics, the audience of Power-One products and Unitronics product is almost about -- current level is $6.5 billion. PCBA, we are doing, we are doing printed circuit boards. We are doing power electronics and industrial automation. If you sum it up, the TAM of all the 4 today, out of $155 billion electronics getting consumed in the country at the moment, the TAM of these 4 things are about $16 billion to $17 billion.

Out of 79% of growth, if you can give some colour on how much is organic and how much is the inorganic growth in that?

In 9 months financial, about 12% is the inorganic growth contribution. Out of INR2,100-odd number, almost about INR240 crores is the inorganic and rest is organic.

Out of the 20% growth in Railway Subsystem and Defence and all three segments - railway, metro and defence contribution - how is the defence contribution in the growth as well as if you can give the order book bifurcation of INR2,600 crores, how much is the defence?

Defence, we started our endeavour in defence vertical about 4 years back, and we are seeing some green shoots right now. Earlier, we were doing about INR4 crores to INR7 crores in Sidwal for defence applications. But this year, we expect that we will do about INR50-odd crores in the defence order book. But as far as the INR2,600 crores is concerned, I think almost about railway contribution will be about 46%. Metro is about 35% and defence will be about 10% in this -- at the moment. But what we are doing is we have been visited by very marquee defence customers, and that continues. We hope that in next 2 financial years, defence vertical will start contributing at least 20% in the Sidwal's books.

Can you please quantify what would be the impact of margin because of copper and PCB prices in this quarter? And when will it get normalized?

Well, in Consumer Durable division, we think that it will be maybe 0.25% kind of 0.25% to 0.5%, but which will be definitely -- we will change the costing. And as we have done in past, that happens at a quarterly lag that we come back. On the CCL front, only in the PCB sector, not in PCBA, not in the power electronics and other places, but only in the PCBA, right now, there is an impact of about 5% on the pricing. But the customers have started giving the revised approvals, and we are hopeful that this will be completely passed on by next quarter -- after the next quarter.

Summarize across 3 segments the project status in terms of execution, how do you think you will spend money over the next 2 years, what are the time lines for these projects, and for all 3 segments if you could give the growth outlook for fiscal '27, '28 and ballpark number on margins?

So I'll give you detailed analysis on the projects -- ongoing projects in the electronics sector. The first expansion we are doing in Hosur, in Tamil Nadu, where the groundbreaking ceremony happened and it was blessed by the Chief Minister of Tamil Nadu for the groundbreaking. Construction is moving perfectly on time as guided. We should be starting our trial production in September of this 2026. And by January 2027, we should be coming in the mass production scale. That is on the Hosur side. There is an investment coming up for total investment, land we already acquired last year. The building -- major building part will come now. And I think on the complete capex, about -- close to about INR700 crores, INR800 crores will come this year on the machine building -- building plus the plant and machinery. Now coming to Korea Circuits, the KCC, which has been allotted, we have been allotted the land. We have deposited 10% of the land, and they have yet to give us the possession. The allotment has been done. I think coming weeks, we should be able to get the possession. And then that's when by March, we expect that we should be able to do the groundbreaking, March or April as our maps get approved. Total 15 months' time for the construction. First phase of investment is INR1,200 crores, which is -- and it's a 70-30 JV. So we are expecting about 60-40 or 70-30 kind of ratio for equity and debt. And that's where our partners are also going to infuse funds. And after 15 months, there will be trial production period of 3 months. So you can imagine that after 18 months, we will start the commercial production of that. Offtake agreement has already been signed. The first 2 years, complete capacity offtake will be done by KCC themselves. So we are not bothered about the top line as soon as we start the project. Then there is another expansion going on in the Pune for organic expansion. We bought adjoining land in Pune, and that's the construction going on. I believe the construction will be over in the March or April. And May will be when it will start. Fourth investment, which we are doing is in Sidwal, which is almost -- the building is ready. Machine installation is happening in the greenfield facility for doors, gangways and pantries and heating, ventilation, air conditioning. I expect that by March, the trial production will start and April or May will be the commercial production start for that plant. For Yujin, the factory is already done. Now we have applied to RDSO for requisite approvals. Because these are all safety products, it will take time for approvals. We expect that in H2 of next financial year, we should be able to do the trial production. In consumer durable, we expect to do about 15% kind of a growth despite markets being flattish. And electronics is doing pretty good. We expect that it will be a good growth story for next year also because of all the projects adding up. And in Sidwal, we are on a good growth path. I believe we should see somewhere about 40% growth kind of a story in Sidwal next year itself. And we have guided and we maintain our guidance that we will reach a number of double -- doubling the revenue of Sidwal in next 2 financial years.

In the context that the defence sector took about 4 years to get up to INR50 crores, can you give a sense of where the data center products could progress? And is that also going to take 4, 5 years to get there or could it be much faster?

Well, I think that's a great announcement done in this budget, which it was a surprise for all of us. So we were very excited to hear that. I think it will take about 3 to 4 years for companies to shift their data centers here and take a leverage of this incentive scheme, which Government of India has given for 20 years. But it is positive for companies like us because we've already developed our products of in-row and in-rack cooling products. Liquid cooling and immersive cooling is under development at the moment, so -- which we feel that it will be developed by next 12 months' time period, and that's where we'll do the kind of trial productions. But in the in-row and in-rack, we have cracked two good customers. And they gave us a very small share of business for the first year, which was about 5% to 7% of their requirement. But now next year, we expect little to grow a little bit bigger. So to summarize your question, I think somewhere about third year, we should see a good traction on the data center in Sidwal coming up.

In a recent exchange notification, we have mentioned that for this 100 acres land, we'll be doing the INR6,800 crores worth of investment for 2 manufacturing facilities. Now since we know the details on the Korea Circuit with a INR3,200 crores capex, may we know the details of the balance figure around INR3,600 crores? And secondly, since we have got an ECMS approval for Shogini, what are the timelines for this INR500 crores expansion?

So on the YEIDA front, first of all, I would like to tell all the participants that the expansion which we have received, we will be getting two sets of incentives, one from ECMS scheme on the HDI, which is about 48%. And second is from the government of UP, which is about 42%. Now 42% is minus the land on building plant and machinery, 48% is only on the plant and machinery. So net capex, which will eventually be happening will be much lesser than what we are putting up in the initial phase. Initially, yes, we will have to do capex, but these are very good incentive schemes, which government, both central as well as the state governments have given. Secondly, we will be getting about 30% top-up on the central scheme incentive by UP government, but everything will happen after the fifth year after we complete the whole INR3,200 crore expansion. So similar, the scheme is very long. Scheme is about 7-, 8-year scheme. On the Korea Circuit, it will happen earlier. It will happen in 3 to 4 years' time in the phases. As we explained, that first phase will be INR1,200 crores. As far as Shogini is concerned, it is INR500 crores of application. And we have 4 to 5 years to do that number for -- that the eligibility is 4 to 5 years. So at the moment, we are not anticipating any big capex. It's about, I think, INR55 crores to INR60-odd crores capex, which we'll be doing in coming financial year.

Power-One and Unitronics are already very high-margin accretive businesses already operating at roughly 28% for Unitronics. With your plans for further backward integration where we'll be integrating our PCB and PCB assembly solutions, do you think there is further scope of margin expansion into these businesses?

Well, it varies. I mean, I think 28% is -- was in one of the quarters. In other quarter, there was 22%, depending on which geography is selling what products. But on an average, it is 24%, 25% on a maintainable basis. At the moment, I'm not anticipating a little -- we are going a little slow because this is our first full acquisition outside India. I believe -- our team is already there in -- from India for our purchase leverage project task force formation. And we believe that it will take about 1-year or 1.5 years for us to demonstrate purchase leverage capabilities coming on the table because of Amber and also because of the backward integration. But answer is yes, there is a possibility of margin expansion. And that's both because of the purchase leverage as well as because of the new product segment. But to demonstrate on the balance sheet, I think it will require a little patience for at least 1.5 years from now.