V-Guard Industries Limited — Q2 FY26 earnings call

Call held 30 Oct 2025

Management summary

V-Guard Industries reported a modest 3.6% YoY revenue growth to INR1,340 crores in Q2 FY26, impacted by headwinds like higher-than-average rainfall, weak demand, and GST transition. While gross margins improved by 140 bps to 37.6%, EBITDA marginally declined by 1% YoY, leading to a 40 bps contraction in EBITDA margin to 8.1%. PAT increased by 3% to INR65 crores, with management acknowledging a challenging year and revising down their annual growth expectations from 15%.

Highlights

  • Consolidated net revenue from operations for Q2 FY26 was INR1,340 crores, an increase of 3.6% over the corresponding period of the previous quarter.

  • The Electronics segment delivered a growth of 5.3% Y-o-Y in Q2 FY26.

  • The Electricals segment registered a revenue growth of 4.7% in Q2 FY26.

  • The Consumer Durables segment reported a revenue growth of 1% Y-o-Y in Q2 FY26.

  • Sunflame reported top line growth of 3.4% on a Y-o-Y basis in Q2 FY26.

  • Gross margin for Q2 FY26 was 37.6%, an increase of 140 basis points compared to 36.2% in Q2 FY25.

  • EBITDA (excluding other income) for Q2 FY26 stood at INR109 crores, declining marginally by about 1% Y-o-Y.

  • EBITDA margin reduced by 40 basis points to 8.1% in Q2 FY26 compared to 8.5% in Q2 FY25.

  • Consolidated PAT for Q2 FY26 was INR65 crores, an increase of 3% compared to INR63 crores in the same period last year.

Concerns

  • Monsoon Impact & Weak Demand

Key financials

  1. Revenue ₹1,340 Cr +3.6%YoY
  2. Gross Margin 37.6% +1.4%YoY
  3. EBITDA ₹109 Cr -1%YoY
  4. EBITDA Margin 8.1% -0.4%YoY
  5. PAT ₹65 Cr +3%YoY

What they filed

Q1 FY27: revenue up 23.5%, net profit up 92.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,229 1,185 1,480 1,406 1,272 +3%1,326 +12%1,687 +14%1,737 +24%
EBITDA91 83 121 94 85 −7%96 +16%143 +18%155 +65%
Net profit52 48 78 56 66 +27%42 −12%95 +22%108 +93%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Electronics
    5.3% Revenue Growth
  • Electricals
    4.7% Revenue Growth
  • Consumer Durables
    1% Revenue Growth
  • Sunflame
    3.4% Top Line Growth

Guidance & targets

Capacity

  • Battery Manufacturing Capacity Capacity · next 2 years · High confidence 70%-80%

    Previously 40%-50% → 70%-80%

    So today, our capacity is roughly about 40% to 50% of our total sales. We have a plan to actually increase capacity and then probably take this to at least 70% to 80%, over the next 2 years.

    — Mithun K. Chittilappilly

Profitability

  • Sunflame EBIT Margin Profitability · 2 to 3 years · Medium confidence 12%
    Yes. So I think in 2 years, we are expecting to hit about 12%; our 12% EBIT is what we should expect in 2 to 3 years' time. It'll go up in phases.

    — Mithun K. Chittilappilly

  • EBITDA Margin Profitability · FY27 · Medium confidence 9.5% to 10%
    Okay. And for the EBITDA margin, can we assume around 9.5% to 10% for FY '27? ... FY '27, yes. Yes. We should hope to get a decent top line growth.

    — Mithun K. Chittilappilly

Margin

  • Electronics Segment Normative Margin Margin · ongoing · High confidence 17%-18%
    17% to 18% is the normative margin for the segment. When you go into H2, there will be other factors, the mix will change and all that. But you can assume 17% to 18% range.

    — Sudarshan Kasturi

  • Consumer Durables (Fans) Margin Margin · next 2 to 3 years · Medium confidence 5% to 6%

    Previously 1% → 5% to 6%

    I think in the next 2 to 3 years, we should start to see it go to like the 5% to 6% level from the current 1% level.

    — Mithun K. Chittilappilly

Capex

  • Total Capex Capex · current year and next year · High confidence INR120-130 crores
    So capex will be between INR120 crores to INR130 crores in the current year and next year.

    — Mithun K. Chittilappilly

Market Share

  • Non-South Revenue Contribution Market Share · another 4 years' time · Medium confidence 60%

    Previously 50%-odd → 60%

    I think right now, the contribution of non-South to our revenue is roughly in the region of around 50%-odd. And we look to expand this to 60% by, in another 4 years' time...

    — Ramachandran V

Pricing

  • Fans Price Hike (new BEE norms) Pricing · after Jan 1 · High confidence 5% to 8%
    I think the increase is going to happen in the economy segment. And what I am told is it's between 5% to 8% to make it compliant. So, the current 1-star we will have to redesign and add a cost of about 5% to 8% to make it 1-star for the new regime after Jan 1.

    — Mithun K. Chittilappilly

Revenue

  • Annual Growth Revenue · this year · High confidence not possible to achieve 15%

    Previously 15%-odd → not possible to achieve 15%

    No, I think when we started the year, we said that we hope to grow by 15%-odd, but that definitely looks unlikely. We wouldn't like to give any guidance at this time... But definitely, achieving 15% growth this year wouldn't be possible.

    — Mithun K. Chittilappilly

Risks & concerns

  • Monsoon Impact & Weak Demand

    high

    Higher-than-average rainfall and weak demand impacted Q2 FY26 revenue growth across segments, particularly Stabilizers, Inverters, Fans, Air Coolers, and Electricals due to reduced construction activity.

    Management acknowledged

  • GST Transition Impact

    medium

    GST transition was a headwind in Q2, though reforms are expected to boost consumption in coming quarters; benefits of GST cuts on Battery and Solar are passed to consumers.

    Management acknowledged

  • Competitive Water Heaters Market

    medium

    The Water Heaters category remains 'ultracompetitive' with 20-30 brands, requiring differentiated product offerings.

    Management acknowledged

  • Inventory Buildup in Summer Categories

    medium

    There is a 'little bit of extra inventory' in Air Conditioner Stabilizers, Air Coolers, and TPW Fans, expected to be flushed out in the next 2-3 quarters.

    Management acknowledged

  • Tepid Festive Season & Muted Kitchen Demand

    medium

    The festive season was 'tepid' and the Kitchen portfolio has seen 'muted demand' over the last 3-4 years, indicating underlying consumption challenges.

    Management acknowledged

Areas of evasion (2)

  • Product-wise revenue numbers
  • Quantitative synergy benefits from Sunflame integration

Q&A highlights

3 direct
Electronics Segment Growth & Margins Direct
As a policy, we don't give out product-wise numbers, but I can definitely say that the Stabilizer product as a whole has declined in revenues, largely led by the decline in Air Conditioner Stabilizers... Yes, gross margin difference is due to, mainly due to the product mix.

Reveals that Stabilizer decline, especially AC Stabilizers, impacted Electronics segment growth and margins, offset partially by Inverter and Solar growth.

Asked by Ravi Swaminathan

Sunflame Margin Expansion Direct
last year numbers were extremely low because of a lot of transition issues and transition costs and everything. So it's slowly coming back to the normal.

Explains that Sunflame's margin improvement is a normalization from previous low base due to integration costs, rather than extraordinary demand.

Asked by Natasha Jain

Impact of GST Cuts vs. Fan Price Hikes & Distribution Strategy Direct
for our categories, we have primarily had GST cut into two areas. One is for Battery... The second is on the Solar business... everything here also pretty much has been passed on. I don't think because of GST, you will see any benefit... The price hike will basically happen in the 1- and 2-star categories... it's between 5% to 8% to make it compliant... we are underpenetrated in terms of reach in non-South... we look to expand this to 60% by, in another 4 years' time.

Clarifies that GST benefits are passed to consumers, new Fan norms will lead to 5-8% price hikes in economy segment, and outlines the ongoing strategy to expand non-South market share to 60% of revenue.

Asked by Aniruddha Joshi

2 min read 7 chapters

Detailed narrative

Q2 FY26 Performance Overview

V-Guard reported a modest consolidated net revenue of INR1,340 crores in Q2 FY26, marking a 3.6% Y-o-Y increase. Gross margins improved by 140 basis points to 37.6% compared to Q2 FY25, and by 70 bps sequentially from Q1 FY26. However, EBITDA declined marginally by 1% Y-o-Y to INR109 crores, resulting in a 40 bps reduction in EBITDA margin to 8.1%. Consolidated PAT grew 3% Y-o-Y to INR65 crores.

Segmental Performance & Challenges

The Electronics segment grew 5.3% Y-o-Y, Electricals by 4.7%, and Consumer Durables by 1% Y-o-Y. Sunflame's top line grew 3.4% Y-o-Y. Growth was impacted by headwinds including higher-than-average rainfall, weak demand, and initial effects of GST transition. The Stabilizer business, particularly AC Stabilizers, declined, while Inverter and Solar businesses grew well. The Pump business remained flat due to good monsoon.

Margin Dynamics

Gross margin improvement to 37.6% was attributed to a healthy product mix and the benefit of inventory during rising copper prices for the Wires business. The Electronics segment's gross margin difference was mainly due to product mix and lower factory capacity utilization compared to the previous year. Management expects the Electronics segment's normative margin to hover between 17% to 18%.

Strategic Initiatives: Backward Integration & Sunflame Integration

V-Guard has initiated Phase 1 of Battery manufacturing, aiming to increase in-house capacity from 40-50% to 70-80% of total sales over the next two years, expecting further margin improvement. The integration of Sunflame is progressing, with service integration complete and financial benefits already visible. Sunflame's EBIT margin is targeted to reach 12% in 2-3 years, normalizing from previous low levels due to transition costs.

Distribution Expansion & Non-South Market Focus

The company continues to expand its distribution network, aiming to add about 5,000 partners annually. Non-South markets currently contribute around 50% of revenue, with a target to increase this to 60% in another four years. Management acknowledged underpenetration in non-South regions, including Maharashtra, and is working to improve reach.

New Business Categories & Future Outlook

V-Guard is exploring opportunities in Solar Pump business and plans to enter it next year, having previously avoided it due to its government and tendering-based nature. They are also focused on Solar Rooftop Inverters and Panels. The company expects to launch V-Guard-Gegadyne Batteries with V-Guard Inverters by Q4 FY26 or Q1 FY27, which are expected to offer superior performance (longer life, less temperature, safer) compared to Lead Acid and Lithium batteries.

Seasonal Demand & Inventory Management

The prolonged monsoon impacted demand for summer products like Fans and Air Coolers, leading to some inventory buildup in AC Stabilizers, Air Coolers, and TPW Fans, which is expected to flush out in the next 2-3 quarters. The festive season was described as 'tepid.' Management hopes for a colder winter in Q3 to boost Water Heater sales.

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