Ladies and gentlemen, good morning, and welcome to the Blue Star Limited Q3 and nine-month FY 2026 earnings conference call. We have with us today from the management, Mr. B. Thiagarajan, Managing Director, Blue Star Limited, and Mr. Nikhil Sohoni, Group Chief Financial Officer, Blue Star Limited. As a reminder, all participant lines will be put in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. B. Thiagarajan. Thank you, and over to you, sir. Good morning, ladies and gentlemen. It's a pleasure and privilege to interact with you. You might have seen the press release, yesterday after the board meeting. I had been indicating, from November onwards, that this quarter is also going to be a subdued one, and if at all, one can expect, some revival in the room air conditioners growth, with the energy label change that was scheduled on first of January 2026. Therefore, you will see the results. Almost, it is same as what I had indicated. It is a modest revenue growth, a flat or a slight modest increase in the operating profit. Even the carry forward order books, indicated a modest growth. The highlight, you know, while Nikhil will deal with it, the silver lining is that the room air conditioner business seem to be returning to the growth path and building up to the Q4 onset of summer season. And the cost control measures that we had implemented that seem to be resulting in the managing the margins best. Otherwise, it's a quarter which which one would like to forget and move forward the three quarters and look at an excellent Q4. That's where we are. In other words, 2025 was a year, I think after many, many years of quarter after quarter significant growth, we faced the challenges. Having said all this, I believe that we are doing better than the industry peers, and we would have shown higher margins, we would have gained market share modestly some decimal points. And we would like to now focus on Q4 and FY 2027. That's where we are. And with that, I'll hand it over to Nikhil for highlighting the details of Q3 as well as nine months ended December 2025 results. Over to Nikhil. Thank you, Mr. Thiagarajan, and good morning, ladies and gentlemen. Let me take you through the financial highlights for the third quarter. During quarter 3 of FY 2026, the company has recorded a modest revenue growth despite challenging market conditions. The good news is that for the first time in this fiscal system, the room air conditioner business has witnessed modest growth owing to channels building up the inventory ahead of the energy label change deadline of January 2026. Financial highlights for the quarter ended December 31, 2025, on a consolidated basis, are summarized as follows: Revenue from operations for Q3 FY 2026 grew 4.2% to INR 2,925 crores, as compared to INR 2,807 crores in Q3 FY 2025. EBITDA, excluding other income for Q3 FY 2026, improved to INR 221 crores, EBITDA margin of 7.5%, as compared to INR 209 crores, EBITDA margin of 7.5% also in last year's Q3. PBT, before share of profit or loss of JV and exceptional item... Can you hear me? Yeah. So- Yes, sir. So PBT, before share of profit and loss of JV and exceptional items, was marginally lower at INR 165 crores in quarter three of FY 2026, as compared to INR 167 crores in quarter three of last year. Tax expense for the quarter three was at INR 27 crores, as compared to INR 47 crores in Q3 of last year. Pursuant to the notification of the labor codes as required by ICAI guidance notes, the company has recognized an incremental impact of gratuity and leave encashment amounting to INR 56 crores on an estimated basis. This non-recurring item is shown as an exceptional item in consolidated statement of profit and loss account for the quarter ended December 31, 2025. Consequently, the net profit was at INR 80.5 crore in Q3 of FY 2026, as compared to INR 132.5 crore in Q3 of FY 2025. Carried forward order book as of December 31, 2025, grew by 1.3% to INR 6,898 crore, as compared to INR 6,810 crore as of December 31, 2024. Carried forward order book as of March 31, 2025, stood at INR 6,263 crore.... The capital employed as of December 31, 2025, increased to INR 3,551 crore, as compared to INR 2,763 crore as of December 31, 2024. Net borrowings as at INR 352 crore as on December 31, 2025, as compared to a net cash position of INR 102 crore as of December 31, 2024. Coming to business highlights for the third quarter, Segment 1: Electromechanical Projects, Commercial Air Conditioning. Segment 1 revenue grew 8.6% to INR 1,696 crore in Q3 of FY 2026, as compared to INR 1,562 crore in Q3 of FY 2025. Segment result was INR 115 crore, that is 6.8% of revenue, in Q3 of FY 2026, as compared to INR 119 crore, which was 7.6% of revenue in Q3 of FY 2025. Order inflow for the quarter was lower by 16.5% compared to previous quarter. The quarter order book was INR 1,459 crores in Q3 of FY 2026, as against INR 1,748 crores in Q3 of FY 2025. Coming to Electro-Mechanical Projects business, in the third quarter, inquiry momentum from buildings, data centers, and factories was encouraging, but a few large order finalizations were deferred to next quarter. Hospitals and malls have witnessed strong growth potential, including in tier three cities, supporting a favorable medium-term outlook. Commercial office demand remains healthy in select pockets, while data center and factory segments continue to see stable and robust inquiry traction, supporting a steady order momentum. We continue to remain selective about new order bookings as we focus on effective capital deployment. Since the infrastructure project profitability is lower than commercials, buildings, factories, and data center verticals, as we approach closure of these projects, the segment margin gets impacted to that extent. Carried forward order book of Electro-Mechanical Projects business was at INR 4,777 crore as on December 31, 2025, as compared to INR 5,146 crore as on December 31, 2024, a negative growth of 7.2%. Commercial air conditioning systems. The Commercial Air Conditioning systems business saw healthy order bookings in this quarter, supported by strong demand. While the revenue during this quarter was subdued, as some product deliveries were shifted to next quarter, the strong order book gives confidence in the future prospects. International business, given that the tariff-related uncertainties persist, the future prospects of the U.S. business are highly dependent upon the outcome of the India-U.S. trade deal. Despite this headwind, our foray into the U.S. and Europe is progressing well. On account of the above change in the business mix, segment one margins were lower at 6.8% of revenue in Q3 of FY 2026, from 7.6% in Q3 of FY 2025. Segment two, that is unitary products, the revenue was flat at INR 1,154 crore in the current quarter, as compared to INR 1,164 crore in quarter three of last year. Segment result was INR 98 crore, which was 8.5% of revenue in Q3 of FY 2026, as compared to INR 95 crore, 8.1% of revenue in quarter three of last year. Coming to room air conditioners, as anticipated, the energy label change with effect from January 1, 2026, helped in reduction of inventory, and we witnessed revival of growth. The company would have gained market share slightly during this quarter. The cost reduction initiatives undertaken since Q1 of FY 2026 have contributed to the improved margins. The production of new range of products as per the new energy label norms has begun, and the company is preparing for the summer season 2026. We have taken short-term, long-term measures to achieve supply chain resilience. The depreciation of INR and rising commodity prices will compel us to revise the prices upwards in Q4 of FY 2026. The dealer network expansion is progressing as per the plan. As far as commercial refrigeration business goes, contrary to the expectations that the commercial refrigeration business will rebound during the festival season onwards, the market remained muted. Consequently, all the product lines, other than the storage water coolers, degrew. The anticipation is that the demand will revive only during the summer season. Due to focus on cost optimization and overall cost management, the segment margins improved to 8.5% in Q3 of FY 2026, as compared to 8.1% in Q3 of FY 2025. Coming to segment three, that is professional electronics and industrial systems, the revenue degrew by 7.1% to INR 75 crore in Q3 of FY 2026, as compared to INR 81 crore in Q3 of FY 2025. Segment result was INR 6.8 crore, which was 9.1% of revenue in Q3 of FY 2026, as compared to INR 6.2 crore, which was 7.7% of revenue in Q3 of FY 2025. The uncertainties around the regulatory policy framework pertaining to the MedTech solutions business are yet to be resolved. Consequently, the business has slowed down. However, industrial solutions continue to grow, driven by strong demand in the automotive and steel industries, and data security solutions maintain steady performance. Coming to business outlook, while three quarters of this fiscal have been challenging, the signs of market revival are encouraging. ...The company expects Q4 FY 2026 to be a strong quarter for room air conditioner, Commercial Air Conditioning, and refrigeration products. In Electro-Mechanical Projects business, the demand for factories and data center vertical continues to be healthy. In anticipation of a robust growth in FY 2027, the company is focused on expanding distribution reach and continues to invest in R&D, manufacturing, and digitalization, while persisting with cost optimization measures. With that, ladies and gentlemen, I'm done with the opening remarks. I would like to now pass it back to the moderator, who will open the floor to questions. We'll try and answer as many questions as we can, and to the extent that we are unable to, we'll get back to you via email. With that, we are open for questions. Thank you so much, sir. Ladies and gentlemen, we'll now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question come from the line of Natasha Jain from Phillip Capital. Please go ahead. Thank you for the opportunity, and congratulations, team, on a good quality set of numbers. Very quick three questions. First, your UCP top line is flattish. I imagine commercial business is muted, and yet you have posted margin improvement. So can you call out the kind of cost rationalization that you have done this quarter? That's the first one. So, thank you, Natasha. The first thing is that, as you're aware, this question will keep coming. It's a blended revenue and results pertaining to room air conditioners and commercial refrigeration. As far as revenue is concerned, commercial refrigeration, there seem to be a problem that is connected with, you know, we keep wondering why that is happening. It is basically because of the FMCG related demand that has not come back at all. So the ice cream, QSR, and other segments will have to go into expansion mode. We thought with the substantial reduction in GST for food and processed food products, there should be huge demand growth, and at least we have not seen till now that part reviving. So the room air conditioners is the one which has helped us to get. You know, we have not only grown in revenue, which the breakup I won't be able to disclose. You all will get it once the GfK numbers get published. The margin improvement is basically our own decision not to get into discounting in order to improve the numbers. First of all, you are aware that first of January was a energy label change. Now, the inventory pressure was there in the for all the brands, and as I had indicated in the Q2 results, our inventory situation was much lesser. We stopped producing the products in order that we won't be saddled with inventory. If you are saddled with inventory, you will be heavily discounting in order to get rid of the stock before the deadline. And for the benefit of others, a five-star would have become four-star, four-star would have become three-star, so on and so forth. And obviously, three-star being the highest selling, SKU, we would have got into trouble if we are going to produce inventory in anticipation of the market demand. We took that decision much earlier, not to, slow down the production and move towards the new energy label products. The second part is connected with the variable cost connected with the room air conditioner business. We had been moderating ever since, May 2025, and, those are resulting in, improved, margins. Now you have, I'll have to also deal with what will happen in Q4. I think in January, there would have been enough inventory which the brands would have pushed into the channel, and I do not see January to be a great month. It should pick up in February. All depends on how the summer season is going to begin. In the meanwhile, three things have happened. Number one, due to GST, there would have been a 10% reduction to the consumer. The energy label change would have pushed up the prices, depending on the SKU, depending on the brand. I'm talking about Blue Star. It would have increased the prices any, at least 5%-7%. This is what would have happened. Then you have got the commodity prices and the exchange rate. All this put together, the price is going to be much higher. So GST reduction is available, whereas the other three, energy label change, plus you have got the, commodity prices, which are continuing to shoot up and the exchange rate. All this put together will result in, my estimation is that somewhere around at least 10% net increase to the consumers. Whereas the consumer would have been believing that there is a 10% reduction than last year, they are going to get it because the GST reduction will translate into, which is not going to be the case. Therefore, we will need much more discipline going forward in Q4 and in the summer season itself, that we have to watch how the, its demand will be dependent, which is dependent entirely on summer season, too, how the pricing will be in the marketplace from February onwards. January is anyway, an old inventory would have moved in. Second half of February onwards, what it is. The good news is the demand seem to have revived, and, we, our intention is to maintain this kind of margin levels in Q4 as well, for the simple reason, the.... Again, I'm disclosing the costs that are being borne by the industry. Number 1 is connected with the consumer finance itself, that it is 40% of the sales, and it will continue to grow the consumer finance, cost burden we share with the dealers. The second part is connected with the e-waste, liability. As you move every year, that, you know, for Blue Star, it will be 2016 numbers multiplied by 70% of that. That will become a liability. That is what it is. And in the industry, in the marketplace, a five-year warranty seem to be a thing, and 5-10-year warranty cost, that is the other part of it. And in-shop demonstrators, is an additional cost. So with all this, the meaningfully, one should be running the business for delivering an ROCE, and I think that, 8.5% kind of a margin is bare minimum, one should look at it. If it is a great summer year, one should, try to do 9.5 in the best interest of the category. Thank you. This is extremely helpful. Just one clarification. Sir, you mentioned that 10% will be the net increase to consumers, right? This is after incorporating the GST discount. Approximately. Approximately, all that I am... This will, this can vary in the sense that you consume the old raw material, you keep buying the raw material. The volatility, volatility is very high in the marketplace of the commodity prices and the exchange rate, and you are building up to the summer season, your consumption of the raw material will depend on also. I think it, it should be around 10%. I'm not categorically saying in the region of around 10% increase is inevitable. Understood. Sir, and one last question: so, I mean, the entire thesis is based on a good summer, right? So let me just ask you a slightly reverse question. Just hypothetically speaking, if calendar 2026 is also bad in terms of summer, then how does Blue Star navigate the challenges? What are the other sharp growth levels which can keep us afloat despite RAC and commercial not working in case of a bad summer? Thank you. So the very first thing is that the history shows that you will not, yeah, it has, it has not two consecutive summers have not happened like that, but the pent-up demand, given that the category penetration is very low, it should be much better than last year. Okay? The people are not going to be postponing forever. We, we are still, our market size is nowhere comparable to China, so that should be, that, that should be kept in mind. Then I said that the weatherproofing, Blue Star is a program, which means you need to look at the B2B businesses as well, like the commercial refrigeration is not that seasonal dependent. It is also, it is not that much impacted. There is some impact out of summer season getting washed out there, but Commercial Air Conditioning, part of it is another portfolio where we have a strong presence. And in Electro-Mechanical Projects, whether it is connected with the traditional segments, the buildings or the factories and data centers, we should not have any... Infrastructure comes its own, with its own, risks. So the weatherproofing, Blue Star is connected with portfolio, how you manage. The second part is connected with how much of expenditure you can keep it variable. For example, advertising. If anticipation of the summer, we will begin in the middle of March with, you know, with the IPL. I'm saying one example, with the IPL matches beginning, you will end up spending, you will commit for that, and hoping that April will be better, April second half will be better, something like that. But then last year, that's what happened. You spend the money, nothing will happen, and you can't get it right. So we do have the variable expenses, how you can manage. The third part is the localization is happening in a significant manner, whether it is the finished goods or whether it is connected with the component ecosystem. Therefore, you will be in a position to manage the inventory. See, the 2025 summer washout was managed far better than the 2023 summer washout. In 2023, the inventory lasted for a much longer period. So therefore, the weatherproofing booster, we call it internally, that is a program. But having said that, I'm again saying, the two summers cannot be. We have not seen it, but even if the summer is going to be bad, the demand will not be that bad. First of all, remember this, when you compare next year, you will compare with the bad year. So obviously, the result will be, but internally, we will be looking at how we do with FY 2024 rather than, sorry, with the FY 2025 rather than FY 2026. That's the answer. I'm answering the initial questions elaborately so that these questions do not come up later. Thank you. Thank you so much, sir. All the best. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participant, we request you to kindly limit your question to two questions per participant. If you have a follow-up question, please rejoin the queue. Our next question comes from the line of Rahul Agarwal from Ikigai Assets. Please go ahead. Yeah, hi, good morning, Mr. Thiagarajan and, Nikhil. Sir, firstly, just a clarification on Natasha's question. The 10% net hike, 8%-10%, is basically after the GST cut, right? It's adjusted for the GST cut. Yeah, yeah, yeah. Look, the- Okay. Management has been very clear that any reduction will be passed on to the consumer, any increase will be passed on to the consumer if you have to maintain the margins. So GST reduction will be completely passed on. It was completely passed on. Then you have got the energy label change, pushing up the prices, then you have got the commodity prices, then you have got exchange rate. So it is, it is. Yeah. So there is- Understood, sir. Yeah. Yeah, understood, sir. So basically, now getting to questions, just a couple of them. Firstly, on the growth outlook, so, you know, on segment one and segment two, and segment one, essentially on, you know, the projects and CSE. Typically, we discuss 12%-15% CAGRs is what the growth rate should be. I think if I look at past three years, we've done, you know, way better than that, 20% kind of growth. Yeah. Just wanted to understand, in your sense, how should we model, like, a medium-term growth here, right? Because projects have been doing extremely well for you. Plus, commercial, plus international, I think a mix of these segments is actually doing better. Some color on that will be helpful over a two to three-year time frame. The problem, as I'll straightaway answer, the thing was that for varied reasons, FY 2026 is muted. The order finalization and we didn't see the liquidity in the market. You are aware that we are extremely cautious in getting into infrastructure projects because infrastructure projects are of low margin, long duration, and as these projects get to the closure stage, which will be two, three years later, usually, you start booking many costs. Therefore, we have been very, very cautious in chasing market share out there. Commercial air conditioning is connected with multiple sectors, factories, the shops, showroom, boutiques, hospitals, so on and so forth. But unfortunately, the shop, showroom, boutique, retail, all these segments have, we have not witnessed any great growth in FY 2026. But in FY 2027, there are signs that it will come back in a good manner. Keeping all this in mind, I think if you ask me, at the moment, I will take it as CAGR of around 8%-10%, then look at and revising it depending on how first six months of next fiscal goes. Sir, nine-month growth rate is almost 20%, right? Which one? The nine-month growth rate for segment one is almost 20%, right? Correct. The pending order book was there, but, but the thing is that I will slow it down for six months, because you have seen order inflow has not been good, right? Okay, got it. And secondly, sir, on the commercial ref, similar question, on 9-month growth rate, if you could just comment on growth rates for nine months for commercial refs, and how should we build the medium-term CAGR for this segment? Thank you so much. You don't have the breakup of that actually to, for me to disclose, but the category is supposed to grow at a CAGR of anywhere between 12%-15%, given the processed food penetration or dairy or anything, pharma, anything you take it. We are a very, very small market size country, given our size. But it was a bad year again, FY 2026. There you can take it 12%-15% CAGR is a good modeling. And room air conditioner, despite the failed summer, I will still model it on anywhere between 18%-20%. Thank you so much, sir. Wish you all the best. Thank you. ...Thank you so much. Our next question comes from the line of Aniruddha Joshi from ICICI Securities. Please go ahead. Yeah, thanks, sir. Thanks for the opportunity. So in the opening comments you indicated about while nine months were muted for UCP, but there are demand drivers now. So if you can elaborate a bit more on this, like, which regions you are seeing the growth, east, west, north, south, or rural versus urban? Are you seeing growth coming back in metros or in terms of the product profile, whether the growth is more in premium versus the value for money air conditioner? So if you can share more details on these aspects. So if all regions have done well, it is not one region has done well like that. And obviously, the tier three, four, five are the ones which will continue to drive the growth. I think that is true for many categories, because the penetrations are relatively lower there. But it will depend on the agricultural income, actually, and that is the driver of the rural economy of India. I have been saying this, the tier three, four, five consumers, and the tier three, four, five geographies, will constitute close to 70%. That is reflected in the consumer finance schemes being availed. That is reflected in the question that you asked. It is the entry-level products. Whether it is airline, whether it is car, whether it is two-wheeler, or whether it is mobile, Wi-Fi services, you will see this, that Indian market is driven by aspirational middle class. It is highly price sensitive, it is entry-level value for money products, and you see number one, number two in many categories, we have seen. It is a fact, and that should be true for air conditioners as well. Thank you. Okay. Sure, sir. Just last question. Mr. Mohit Sud is appointed as the Executive Director of UCP segment, so for a period of five years. So heartiest congratulations to Mr. Mohit. And what will be the five-year KRAs in terms of for Mr. Mohit from the board, whether it will be driving market shares, driving profitability or entry in new products, et cetera. So if, if you can elaborate on that. Yeah, that's it from my side. Thanks. No, the annual KRAs are set by the NRC, approved by the board. So that is-- that will keep happening. That's a internal process. The broad drivers of the company will translate into KRAs, right? That what is company strategy, that determines the strategy of, that drives the KRAs of, let alone Mohit, whether it is me or me, or Mohit, or the entire top management, the company's strategic KRAs and operational KRAs, that's what will determine ours. Now, broadly, if you want to understand, what we are looking at is, our track record has been growing faster than the market and gaining market share. We have not yet reached our first goal of reaching 15% market share, that, we are somewhere, we have crossed 14, and, even in a challenging year, I think we have gained marginally some market share. So that we need to do. The second important part is, that growth has to be a profitable growth, which means the margin guidelines that I mentioned, somewhere around 8.5%, EBIT margin is absolutely important. And in ROCE, Blue Star has, is a, is a benchmark, an outlier in the industry that we, we look at anywhere between 25%-30%, ROCE. That is, that is an important, KRA. There are other numerous, KRAs, right? Like, for example, whether my brand salience, that brand has to be made relevant to the new consumers, and it should continue to be stronger in terms of salience. The next is that the customer experience, which differentiates us, that is an important strategy of Blue Star, that to provide a world-class customer experience. So broadly, the company's strategy is this, and that will translate into, including things such as that I will be ahead of the curve in terms of sustainability initiatives, like if it is an energy labeling, if it is connected with refrigerant, new refrigerant migration, carbon footprint, we have been ahead of the curve. That's what we would see. So this is where, this is what will determine all our top management. Thank you. Yeah, sure, sir. Just last thing, in this entire trade inventory, summer, et cetera, the issue which is forgotten is the compressor. From first of July, again, we will have the industry as well as Blue Star will have to manufacture compressors in India. So how do you see the preparedness of Blue Star on this aspect? Thanks. So the thing is that, first of all, it is not Blue Star as a manufacturer, the whether there is enough component ecosystem that is available for us to source. And I have stated this- Right. Till at least 2028, and we need to reach a particular scale for considering manufacturing of compressors. But supply chain resilience is an important program, and I think we are well secured with the domestic manufacturing capacities that are coming up from many players. Thank you. Yeah. Thank you. Thank you, sir. Very helpful. Thank you. Our next question come from the line of Sonali Salgaonkar from Jefferies, India. Please go ahead. So thank you for the opportunity, and congratulations on a good operational result. So my first question is, could you help quantify, maybe on an industry level or the company-specific level, whichever you are more comfortable with, the inventory situation for air cons now versus, say, start of October? Sonali, thank you, but I don't think we deserve any congratulations. It's a very, you know, modest growth. It's, it's not a great result, I would say. But we may have done better than the industry, our hope. The inventory level, my estimate is that, in maybe 8-10 weeks, for the industry, and it may be lower for us. I think it may be five to six weeks, is my estimate. But the others, I am sure. The industry, I'm guessing it, that's what it should be. And second part, I couldn't follow that. From October onwards, there has been substantial reduction. Now, I would say, you see, inventory will not be zero in any case. It has to be some 2-4 weeks inventory will always be there. In our case, I think there is at least some two to three weeks of more inventory there, but it is always manageable. That's what it is. The industry, again, you know, first of all, you had produced anticipating a great summer. Then during the GST transition, there was a bottleneck, a blackout period. Then you were left with a winter season coming in, and the energy label change. So there was a pressure. But I wouldn't consider inventory as a great bottleneck for February, March. The one, and the only event that we should be watching out for is onset of summer. If the summer sets in, there is nothing to worry about. So just a clarification over here, 5-6 weeks is company plus channel, right? And secondly, what is the normal inventory level? 4 weeks? Yeah, it will be around four weeks. Yeah, but, you know, normally, from January onwards, we will start building up inventory for the forthcoming season, okay? And because you won't be able to meet the demand in March last week or March second of April, May. So we will be even comfortable with, in our case, 8 weeks of inventory being there in January, 10 weeks of inventory being there in February, 12 weeks in the month of March, if the summer is going to be definitely going to be stronger. But you will be very cautious having gone through the past, right? And also the systems are changing now. You've got a local component ecosystem and your own manufacturing units, you are not dependent on some China imports or finished goods. I would say that in the build-up to the summer, even eight weeks is okay. Got it, sir. So my second question is regarding the price hikes that you mentioned, that about 10% price hike. Sir, would it be able to bifurcate this price hike between, A, the hike because of energy efficiency, and secondly, because of the rising input cost? I believe energy efficiency has already entailed a 7%-8% price hike. So is it fair to assume that just 2-3% have been passed on to the consumers because of the price hike? No, no, no. First of all, this will vary for—this, this is not a universal norm. Depending on the product, this timing can vary from manufacturers to manufacturers, so don't, don't take it as I'm talking for the industry. My estimate is that there are certain products in our portfolio that the new energy label would have costed only 5%. There are models which are, energy label is pushing up the price between 7%-8% in our portfolio. Other part of it is entirely dependent on when you bought the inventory and what pipeline you have got, because week to week it is changing. So it is very difficult to estimate. So I am broadly, I'm saying around some 7% may be due to energy label change, and you may have around 8%-10% arising out of commodity, then 10% reduction you have got in GSC. So therefore, net, I am saying ballpark is 10%, but very difficult to estimate at this point of time. Again, you can't be, we are, you know, we are not a forex dealer to be determining daily rate. When you announce the price, it will be for at least three months period, right? Or two ina half months period. You can't be altering prices every day, so you have to pass a judgment and increase the prices. Got it, sir. You won't be able to manage. He can't set and sell it on price, day after tomorrow, change it, et cetera, because the customer who has bought will be fighting. So therefore, I am saying we will be looking at price increase soon, as the inventories get liquidated. Sir, any quantification ballpark of as to how much price increase would you want to pass on the input cost pressures? I, I think it will. I am telling it may be in the order of 10. 10% more? That is right. Got it. We will determine it, and let us say there is some U.S. deal is signed, the dollar may come down, and what are all going to happen, I don't know, because every day is something is changing. But if you ask me to take a call today, it is, it is important to increase the price by 10%. Got it, sir. Thank you very much. All the best. Thank you. Next question come from the line of Keyur Pandya from ICICI Prudential AMC. Please go ahead. Thank you. Sir, first question on the margin that you mentioned, 8.5% kind of margin for UCP. I think in last concall you-- I mean, looking at the slowdown you guided for 7% around margin for the segment. So now this is more of 8.5 aspiration, or do you think you can achieve that in Q4 and in FY 2027, despite all the inflationary challenges? So what I indicated, two parts. Number one is, what could be the margin for Q4? You have seen the Q3 margins, and you have to look at the next year steady state. That's what it means. It's not full year is going to be changing to this, definitely not. You can't make up for the summer, right? Mm. But FY 2027? Q4 of FY 2026 and the FY 2027, the margin outlook is 8.5%. Unless until summer is going to be so very harsh summer, it can go up to nine, and then I'm not forecasting anything now. It can be looked at closer to March. And my estimate is that if you do 8.5%, that's a reasonable margin, looking at it today, especially with the higher prices. So, just one clarification on this. The assumption is that the operating leverage of good summer and good volume growth would allow you to take the price hikes that you mentioned, and thereby 8.5% kind of margin? Not at all. I... You have seen our margin. It, it's above eight already in Q3. Q4, irrespective of the summer season, irrespective of the price increase, 8.5 is doable. FY 2027, 8.5 should be the target. If the summer season is extremely good, it can go up to 9. We don't know now, that call has to be taken. Price hike has to be taken in any case. It is, it is not optional. In a category in which the margin is in the order of 8-8.5, you can't absorb this kind of commodity price increase or the exchange rate issues. That is, that is not your option. You, you have, in my mind, it has to be done. Understood. Just last question- Remember, remember one more thing. While the- Mm. Wage Code related cost is, in the exceptional item, it is a permanent burden. So your conversion costs, service costs, warranty, service costs, all will have to be borne and, it has to be passed on. There is another element of cost. We can't ignore that because this quarter it is under exceptional items, right? It is going to push up the cost of the product or the services. Understood. What can happen is... And it is a level playing field. It is not that one brand can absorb, another brand cannot. The industry level, in different intervals, the timing may be different, all will have to... What it means is that the overall prices will go up. Consequently, whether the demand will be lower than if one is saying 19% CAGR, whether because of this, the CAGR will reduce to 17 or 16, we can see. That can happen, but I don't think there is a choice. If it is a very high margin industry, one can have the discretion. I am not passing on absorbing, which is not the case. Understood. And second question on the segment one, where considering the order book, you are saying for the full year FY 2027, the growth should be in single digit. It may be by choice because of the better quality of order book, but then it should see lower growth because of the lower order book, and will that have any impact on the guided margin reach? Thank you. No, I don't think there is a reason to worry about margin there. There again, in the Commercial Air Conditioning products, prices have to be increased. In Electro-Mechanical Projects, the price escalations have to be obtained for a higher labor cost because it's a people business there, and there is indeed a wage code-related burden that is existing. The last point is whether the infra projects is, you know, roughly one-third of our revenue is infra projects, and quite a few projects will come to a closure now because these are all metro railway projects or water, railway electrification, et cetera. So when these projects is nearing a closure, usually the costs go up and it pulls down the overall margin. So you would have seen already the margin is lower than last year in Q3. I think this will be a trend for next two, three quarters, because the infra projects are coming to a closure. And Good. Otherwise, I don't see a concern for huge correction in the margin. Noted, sir. Thank you, and all the best. Thank you. Thank you. Our next question comes from the line of Anupam Goswami from SBI Life. Please go ahead. Mr. Anupam, please proceed with the question. Mr. Anupam, please proceed with the question. You can go. I'll move forward to the next participant. Next question come from the line of Renu Baid from IIFL Capital, please go ahead. Yeah, hi. Good afternoon, team. While other queries have been answered, if you can just help us understand a bit more in terms of updates with respect to how we are working on new product development or JV tie-ups for the data center market, chillers as well, as well as the HVAC solutions? So the, you know, we are a very large, player in, chillers, so therefore, I don't think we need an external collaboration for developing a chiller for the data center market. So we have those developments are going on. The second part is connected with certain other solutions, meant for data center segment, which is actually called the liquid cooling or the CDU, Cooling Distribution Unit. These, we are exploring multiple, tie-ups across multiple geographies, which are classified in nature because we have signed, non-disclosure agreements. And, I think we will... You know, this is the same as once in 3, 4 years, something new happens, and you need to figure out at that point of a time, clarity completely doesn't emerge, but our track record has been that we are able to catch up, like the VRF. At some point of a time, what we will do for VRF was a question, and it happened. Indeed, that's the market, but we, for one part of the data center market, we need time. So we are- Right. For our own in-house products, by when would we be commercially ready? I think the many models are in advanced stages, let us say, 12 months. Got it. Thank you, please. And, and- Thank you. In the MEP part of data center or the EPC part of it, we are the leader. And- Correctly, already executing then. Even in the semiconductor-related space of air conditioning, which are sophisticated Electro-Mechanical Projects that happen, we are market leaders. We are building our leadership in that sector as well. And, so these two, combined with factories, these are the factories. The factories is a regular one. Data center or semiconductor, we are building leadership in a significant manner in EPC part of it. Because of that, we believe that pillars again, we will be able to build the market share and be a leader there or be a choice of the customer, preferred choice of the customer. But the products are to be tested thoroughly. That's what is happening. Got it. Thanks much. See you and best wishes. Thank you. Thank you. Our next question comes from the line of Naveen Baid from Nuvama Asset Management. Please go ahead. Oh, thank you. My questions have been answered. Thank you. Thank you. Our next question comes from the line of Deepak from Unifi Capital. Please go ahead. Thank you, sir. Very interesting. I'm sorry. I'm sorry, Deepak, to interrupt you, but you're... It's very disturbance from your end. Is it better now? Yes, yes. Please go ahead. Yeah. Okay. Thank you. So we are, we're fairly new to the business, but we have two questions, if you could please help us. The first is just on the MEP segment. We noted that you've given a single-digit growth guidance. Could you give us some nuance as to what is generally the split of this business, and which pocket you're seeing some slowdown in? And why is it that these margins tend to come down close to the closure of these projects? Number one is, it, it includes multiple things, right? It includes the Electro-Mechanical Projects and the Commercial Air Conditioning, broadly, okay? Mm-hmm. And then, for obvious reasons, I can't tell you the breakup of that, but the entire thing is slow. In other words, the B2B business, order inflow has been muted for a very long time, and for various reasons. And there is a TCS related, some disruption over there. Then there was, there is liquidity issues as well. Other than some infra projects, none of them have the order finalization have not been happening. Having said that, January has begun very well, and, many, inquiries are coming up for finalization, so that should be happening. But when your pending order book is lower, your growth will, from the subsequent month, will be impacted, correct? That is, that is why I said that one should look at a single-digit growth or a just a 10% growth. That's all one should look at it. Uh- Got- The impact is, I'm repeating again, there is a infra segment, there is a building segment, there is factory data center segment, out of which infra is, lowest profitable segment within that. Then, those infra projects takes many years, 3-5 years. Like, you're aware, we are part of Mumbai Metro, for example. Bangalore Metro, we are executing. There are some railway electrification projects. There are certain, water distribution projects. All these, when it is moving towards the cost overrun, can happen as it is coming to a closure. You are in a great hurry to close and hand over. Then, at that point of a time, the margin will further come down. That is where, we are. So that is the only reason. Otherwise, the other parts are all doing well. Understood. So should I understand this... I mean, in summary, the basis the current order book, you feel next year it's going to be single digit for the reasons you explained. And would you say this is the bottoming out for order inflows, and inflows could start improving from here? Or do you think inflows will also continue to stay at these levels? See, looking at the customer's behavior and what has happened in January, I think it is, it has bottomed out, and it is taking off. That's what is my, our sense. See, it cannot be, you know, in any business, it cannot be down when the penetration levels are lower. Forever, it cannot be down. It has to revive at some point of time. That is what is happening. Like, like I can tell you that, close to, in January itself, we will have close to INR 400 crore worth of orders already, which is a record month again. So I think it is taking off after a subdued period. Okay, sir. That's, that's very clear. Just my second question is, the margins in the unitary product segment are very strong, right? If you had to call out one or two, primary drivers as to why you've been able to sustain these margins, you know, despite how these last few quarters have been, what would those be? I don't think it is very strong. It is good. As I told you, that our guideline has been 8.5, should be. The reason being that, we were very clear that we will not force ourselves into an inventory pressure. So we stopped our controlled production, and therefore you are not desperate to liquidate the stocks at a lower price. That is first part of it. Second part of it is connected with the variable costs ever since April, when the summer was not happening, those measures were implemented meticulously. And like the marketing spends or the employee sales incentives itself will be lower as well, because some part of the compensation is through the quantities sold. Third part is that systematically ensuring that your input costs are controlled. That's why it happened, and it is a continuous process. This challenge will continue, and we have to deliver. Understood, sir. And lastly, any initial trends that you're getting from the channel, retail side on how these summer months are shaping up in Q4, and probably what they're thinking for Q1? Thank you. All that we know is that, compared to the previous months, it is better. So it is not spectacular. And we have to see when the summer sets in. As of now, it is not setting in. The weather everywhere seem to be very pleasant, winter continues, and let us see when it is going to set in. Understood. Thank you very much, sir. Thank you. Our next question come from the line of Naushad Sheikh from Aditya Birla Mutual Fund. Please go ahead. Thank you. Just one clarification again on the project business, sir. If MEP is slowing and commercial AC, you know, is growing faster, should we expect a margin improvement in this business in FY 2027? No. Yeah, it is not. All that I mentioned, it is not, it is becoming zero, right? You do have significant amount of projects out there. We are, we are talking about a growth, whether it will be a significant growth. It is again, I'm saying that it will be a growth at a CAGR of 8%-10%. So there is, it is not stopped, okay? Yes. That is first part of it. Second part is that there are factories, data center and buildings. These are good margin projects, and profit margin may not improve dramatically, but it is not going to deteriorate. On the other hand, infra projects will be at the peak of its execution because we want to expedite a closure. And- Okay. -in the process, it's a lower profitable segment. Commercial air conditioning, order inflow is muted, now it is picking up. So if you ask me broadly- Yeah, yeah. the margins, whether FY 2027 should be better than FY 2026, that's what one can guess. But always you have seen that we were exceeding the estimates, that the percents used to be this, right? That how come 8% margin you are delivering? Our guideline has been that we will be some 7.5% margin. 7%-7.5% is supposed to be the margin. Sometimes it used to be 8%. So in the order of 7 in FY 2027 modeling, you can assume that should happen. It is not going to become some 8.5% because some projects is slowing down. It has not slowed down. Some parts, there is a slowdown. That's about all. Mm. We are not changing. In other words, I am summarizing for the benefit of, everyone. Mm. The outlook for Q4 is 7%, 6.5%-7%, closer to 7, maybe for segment one, and it should be 8.5 for segment two. That is the guideline. From three to four years point of view, should we expect higher CAGR growth from a commercial AC sub-segment versus MEP, or should both grow parallelly? By all estimates, the commercial- Uh. or the any B2B part of the business, it is expected to grow only at 10%-12% CAGR. Okay. Room air conditioners is durable, and its penetration level is very low, so it is projected at a CAGR of 19%. Or, you know, if it is a bad summer year, it will be worse. That's about all. So this is not going to change. I don't see some significant 20% growth, nor we are into any inorganic growth at all. See, if the market is going to be like this for us to grow, it has to be inorganic growth. There is nothing, and it is not, we were not present in some segment, now I am going to enter that segment. There is no such thing. We have been in all parts of the segment. Right. Anything you want to talk about on the export side? We are, you know, tracking quite well. We have reached to not sizable, but at least INR 200 crore or so we have reached on a quarterly basis. How big are- I'm very sorry, Naushad, but please rejoin the queue for more question. I'll answer this with this close. So the thing is that, first of all, FTAs are getting signed. It has not meaningfully translated into any significant business. Our interest has been with Europe, which anyway, the heat pump market is very slow. It has not taken off at all. But on the other hand, the U.S. market is, because of this trade barriers, that's where it is. Now, it is suiting us, actually, because you can keep developing more products, and we have got domestic challenges as well, right? So the thing is, if the market would have opened up, there is a huge demand, and we have to go ahead and do all this, we would have. But as of now, we are very clear that we are not entering there with our own brand. We are investing on our own R&D and manufacturing in order to become globally competitive, and we have developed products which are successfully tested abroad. The customers whom we acquired, they are all very happy. But the conditions are, in Europe, market has not opened up. The European market consumers expect some subsidy from the government to switch over to heat pump or green products. And in the US, there is a trade barrier. So therefore, it is fine. We are moving steadily, and we are building that foundation. The direction is as follows: when China grew in exports, it was not that China was going and marketing anywhere. The people, they went to China to shop. Same way, we should build a capability where somebody should say, "Can you make for us?" That is a situation or a position we would like to build. That's where we are. So INR 200 crore, INR 300 crore, $400 crore, doesn't matter at this point of time. We know very well we are poor in our export footprint, but I can tell you, in 3 year time, I think 15% of our revenue should come from exports. Thank you. Thank you. Thank you. Ladies and gentlemen, due to the interest of the time, we will take the last question from Manoj Gori from Equirus Capital. Only one question. Mr. Manoj, please go ahead. Yes. Thanks for the opportunity, sir. Sir, I just need one clarification. Most of the questions have been well answered. Just one clarification on the project business. So 8%-10% range that we are talking about is for the entire MEP business, right? And not only for the infra business. No, Electro-Mechanical Projects business in totality. Yes. That's all, sir. Even Commercial Air Conditioning business. Got it, sir. Thank you, sir, and wish you all the best, sir. Thank you. Thank you very much, ladies and gentlemen. With this, we conclude this quarter's earnings call. Do feel free to revert to us in case any of your questions were not fully answered, and we'll be happy to provide you additional details by email or in person. Thank you. Thank you so much, sir. On behalf of Blue Star Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.