Virtuoso expects FY28 compressor utilisation of 40%-60%

Virtuoso expects its 60 lakh-unit compressor capacity to be ready by FY27-end and targets 40%-60% utilisation in FY28. Management said the compressor programme required about Rs 120 crore to Rs 130 crore of capital expenditure, with a large portion already invested and no further compressor spending planned beyond the current programme.

When will Virtuoso's compressor capacity be ready?

Virtuoso expects its 60 lakh-unit compressor capacity to be completed by the end of FY27, followed by 40%-60% utilisation in FY28. Management presented the target as the expected ramp-up for the new line rather than as an immediate full-capacity operating level after completion.

The compressor project has required about Rs 120 crore to Rs 130 crore of capital expenditure, which management identified as the largest capital requirement among the ongoing expansion projects. A large portion has already been invested, and management said the planned, accounted-for or tied-up capital expenditure covers its current requirements, with no new project spending expected during the year.

Virtuoso gave a compressor average selling price, or ASP, of Rs 1,400 to Rs 1,500 per unit. The company did not provide a revenue target for the 60 lakh-unit line, so revenue will depend on its eventual utilisation, product mix and realised pricing within that stated ASP range.

How does Virtuoso's compressor ramp compare with AC expansion?

Virtuoso expects 40%-60% utilisation for the compressor line in FY28, compared with 50%-55% utilisation for the additional air-conditioner capacity in the same year. The two expansion programmes have different completion paths because air-conditioner capacity is being added sequentially through indoor units, or IDUs, and then outdoor units, or ODUs.

Virtuoso said its current air-conditioner capacity is 10 lakh units. For the IDU expansion, 70% of the additional capital expenditure had been completed, while the remaining 30% was expected within the next 1 to 1.5 months. Management clarified that the 70% figure referred to completion of the capital expenditure, not to installed capacity already in operation.

Management said ODU capacity would be commercially available in the next year, after the IDU work. It also said Virtuoso would operate with 10 lakh units of air-conditioner capacity in the first quarter, while the expanded IDU capacity is intended to support the subsequent May quarter. Existing customer demand currently fills available capacity, according to management, with additional customer opportunities expected as new capacity comes on stream.

When will Virtuoso add EMS and freezer capacity?

Virtuoso expects its added electronic manufacturing services, or EMS, capacity to go live by December, initially serving captive requirements instead of contributing materially to external revenue. Management said the facility was in the commissioning stage and would first support the company’s own models and designs, particularly controllers used in air conditioners.

The new EMS facility begins with one line but has provision for expansion to three lines. Management said existing EMS capacity sends about 70% of output to external customers, whereas the newly added capacity will initially be used internally. It identified controllers and switched-mode power supply boxes as relevant electronic products for air conditioners and refrigeration equipment.

Virtuoso said about Rs 3,000 of the cost of a Rs 20,000 air conditioner relates to EMS content. The company currently makes part of that content in-house and purchases the rest, but management said it intends to move most of it in-house once the expanded facility is live. External EMS sales remain part of the plan, but management tied their timing to market acceptance of its designs.

For deep freezers, Virtuoso expects to add 1 lakh units of capacity before the next season, with June or July identified as the expected completion period. Management described current freezer capacity as 1.5 lakh units and said it should rise to 2.5 lakh units after the addition. It also said commercial refrigeration had a strong order book for the coming six months and could reach 70%-80%, or optimal, utilisation of existing capacity.

How is Virtuoso funding the expansion programme?

Virtuoso said the current expansion programme is funded, committed or otherwise tied up, with no fresh capital expenditure requirement identified beyond executing the projects underway. Management had previously guided for Rs 80 crore to Rs 100 crore of capital expenditure for FY27, plus Rs 20 crore to Rs 25 crore of refrigeration product capital expenditure, while separately putting compressor spending at about Rs 120 crore to Rs 130 crore.

Management said external capital could be required if Virtuoso sustains 30%-35% growth. Its stated objective is to keep debt-to-equity below or close to 1, using debt as the first funding option. Management said equity could be raised if debt reaches a saturation point, but it gave no amount or timetable for a potential equity issue.

Virtuoso also said Rs 150 crore of debentures in its subsidiary are held by True North and are intended as bridge capital rather than a conversion instrument. Management expects the debentures to be replaced by bank debt over the next 15 to 16 months. That refinancing timetable sits alongside the FY27-end compressor completion target and the FY28 utilisation ramp.

Conclusion

Virtuoso has set out a linked manufacturing timetable: 60 lakh units of compressor capacity by FY27-end, 40%-60% compressor utilisation in FY28, 50%-55% utilisation for additional air-conditioner capacity in FY28, and an added EMS line by December. The plan combines new finished-product capacity with greater in-house electronic and compressor content, while freezer capacity is scheduled to rise from 1.5 lakh to 2.5 lakh units.

The next disclosed milestones are completion of the remaining 30% of IDU capital expenditure within 1 to 1.5 months, EMS commissioning by December, ODU commercial availability in the next year, and the 1 lakh-unit freezer addition in June or July. Management’s planned replacement of Rs 150 crore of bridge debentures with bank debt over 15 to 16 months is another item to watch alongside progress toward the FY28 utilisation targets.