Ice Make Refrigeration Q1 FY27 earnings call

Ice Make Refrigeration Limited reported a robust 60.4% year-on-year increase in consolidated revenue from operations, reaching ₹178.88 crores in Q1 FY27. This growth was fueled by healthy demand across refrigeration and cold chain segments, with new categories like chest freezers and continuous panels gaining market acceptance. Despite strong top-line momentum, profitability was significantly impacted, resulting in an EBITDA margin of 1.7% (down from 4.1% in Q1 FY20) and a profit after tax loss of ₹1.65 crore for the quarter.

A key strategic development is the proposed ₹180 crore investment by Japan's Galilei Holdings Co. Ltd. This investment includes a 60:40 joint venture, with Ice Make holding a 40% stake (investing ₹35.3 crore). The JV aims to combine Galilei's technology and global expertise with Ice Make's manufacturing and market presence, initially focusing on commercial refrigeration products like upright and table refrigerators. Production for the JV is targeted to commence by February 2028, with the real impact on the business expected in 1+ years.

The company's profitability in Q1 FY27 was under pressure due to elevated commodity and raw material prices, exacerbated by global uncertainties like war and dollar strengthening. Additionally, investments made to build future capacity and capabilities contributed to margin compression. Management indicated that while price hikes of 10-11% were implemented, they were insufficient to fully offset the 15-18% industry-wide price rise. They anticipate raw material price volatility to continue through Q2 and Q3 FY27 but expect margin improvement in H2 FY27, targeting an EBITDA margin of 6-6.5% for the full financial year.

Ice Make maintains a strong pending order book of ₹222 crores as of Q1 FY27. Key contributors to this order book include Ammonia Refrigeration (₹87 crores), Project (₹45 crores), Cold Room (₹39 crores), and Commercial Refrigeration (₹29 crores). The company noted that new verticals, specifically continuous panels and commercial freezers, contributed approximately ₹62 crore (35-36%) to the Q1 FY27 revenue, demonstrating their growing market traction. Management is confident that the current order book supports achieving their goals for the financial year.

The ₹180 crore Galilei investment is earmarked for several strategic initiatives. Approximately ₹58 crore will be allocated to Ice Make's capacity building, with funds expected within the next month and deployment over 5-6 months, yielding benefits in the next financial year. Other uses include completing the corporate office, Centre of Excellence, and R&D laboratory, as well as repaying ₹40 crore of existing debt and allocating ₹39 crore for working capital needs. The company is also exploring selective inorganic growth opportunities through acquisitions.

The company's strategy focuses on building a comprehensive refrigeration solutions platform across various sectors. For new product segments like Visi coolers, the priority is to establish the brand in the retail market first, which offers better margins, before venturing into the capital-intensive sponsored market. This disciplined approach aims for profitable, sustainable, and scalable growth, supported by strong execution, improved capacity utilization, and effective cost management.

Management announced a change in its accounting policy for depreciation. This adjustment was made to align the cost reflected on the books with the benefits derived from the company's significant capital expenditure, which is expected to drive future top-line revenue. The revised policy, thoroughly discussed and adopted by the board, also brings the company's accounting practices closer to those of its competitors, ensuring a more synchronized financial reporting with its investment strategy.