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Dollar Industries Ltd
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Ladies and gentlemen, good day, and welcome to Dollar Industries Limited Q3 FY '22 Earnings Conference Call, hosted by SMIFS Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Ginodia from SMIFS Limited. Thank you, and over to you, Mr. Ginodia.
Thank you, Nirav. Good evening, everyone. On behalf of SMIFS Limited, I welcome you all to Quarter 3 FY '22 Post Results Conference Call of Dollar Industries Limited. We are pleased to host the top management of the company. Today, we have with us Mr. Ankit Gupta, President Marketing; and Mr. Ajay Kumar Patodia, Chief Financial Officer of the company.We will start the call with some initial comments on results from the management team, and then we will open the floor for question and answers. Now I will hand over the call to Mr. Ankit Gupta. Over to you, sir.
Good evening, ladies and gentlemen. On behalf of the entire management team at Dollar, I welcome you all to the Q3 and 9 months FY '22 post results conference call. We are glad that the company and its workforce has delivered on our commitments to shareholders, which is evident from its Q3 and 9 months financials. Now throwing some light on the cotton market, which has become very volatile in the last 9 months. The prices of cotton has increased tremendously, and therefore, the yarn prices have taken a huge hike from -- in the month of November and December. We have also taken a price hike in December 2021, and another hike will be taken in February 2022.Updating you on our Project Lakshya, we have till date brought in 115 number of distributors, which is up from 91 distributors in the previous quarter. And at the beginning of the year, it was 51 distributors. This is in line with our efforts to move from the push-based model to a replenishment-based model. Overall, we expect to achieve greater market penetration, stronger primary led -- stronger primary sales led by secondary, faster increase in numbers of SKUs and distributor level and at the retail level and also which will lead to faster recovery of dues. We have prioritized the implementation of Lakshya project in the states of Andhra Pradesh, Bihar, Odisha and Northeast. Our efforts in the last quarter towards channel financing arrangement for our distributors is now giving positive results. Our dealers, our distributors have happily accepted the new financial arrangement that we have done for them, and they are keen to grow their business with us. Until now, we have received around 100 leads out of the total distributor strength of 1,000 plus. We have successfully brought 55 distributors under the distributor financing scheme. And we hope to take this number to around 150 to 200 distributors by the end of this fiscal. Adding to this, our initial results from EBO exclusive brand outlet in the last quarter has shown favorable results. It is -- this particular exclusive brand outlet is on a FOFO model, and we expect that it will generate incremental sales once the pandemic situation also gets normalized.During this fiscal, we actually planned to open 8 to 10 exclusive brand outlets. But due to pandemic, the things have gotten a bit slow. And it has been planned in the state of Uttar Pradesh and Rajasthan. And after that, we'll move on to the other states gradually. So we are making a cluster of exclusive brand outlets, and slowly we'll move to Pan-India.Dollar Industries Limited has always tried to provide its consumers a complete range of products, whether it be men, women or kids segment at affordable prices and a good quality product. Thereby, we are planning to launch a complete range of athleisure products in Dollar Woman, which was not complete until now. And this particular launch will happen somewhere in the first quarter of the next fiscal. And for the timing the [ brassiere ] products, which we were planning to launch in the month of January, now the launch will be done in the month of March due to the -- the delay was majorly due to the restrictions in different states, which hampered the production levels. Initially, the [ brassiere ] product, we will launch in the state of Uttar Pradesh, Delhi and cover the entire East India. And gradually within 6 to 7 months after seeing the response and the feedback from the market, we'll launch the product to the -- on a Pan-India basis. A small update on our joint venture with G.O.A.T Brand Pte Limited. It will be a 51%, 49% joint venture partnership under the same name of Pepe Jeans Innerfashion Private Limited. So G.O.A.T Brand acquired the 50% shares of Pepe and an additional 1% equity, but without additional voting rights in the JV. Dollar Industries shall be a 49% partner in this JV. The new JV will be equivalent to a multi-brand distributor, dealing with all kinds of men, women and kids undergarments, athleisure, sportswear, loungewear, leisurewear, sleepwear, loungewear made out of natural fibers and manmade fibers. We are very positive that the new partnership will help us in boosting our sales through various channels, which -- but majorly direct-to-consumer channels. With this, now I hand over to Mr. Ajay Patodia, our CFO, to give you a brief on the financial performance of the company.
Thank you, Ankit, sir. Good evening, everyone. Welcome to Third Quarter Earning Call of Dollar Industries Limited for FY '22. Now moving on to the financials for quarter 3, December '21. The company total revenue for 9 months stood at INR 980 crore. And for quarter 3 in 3 months, it is around INR 383.55 crore as compared to INR 729.99 crore for 9 months FY '21 and INR 312.44 crore for quarter 3 FY '21. There is a growth of 34.25% for 9 month and 22.76% for quarter 3 FY '22. The EBITDA of the company for 9 months stood at INR 164.07 crore and for quarter 3 FY '22 stood at INR 65.80 crore as compared to INR 108.32 crore for 9 month FY '21 and INR 43.81 crore for quarter 3 FY '21, a growth of 51.47% for 9 month and 50.19% for quarter 3 FY '22.The profit reported of the company for 9 months stood at INR 146.99 crore and INR 59.60 crore for Q3 FY '22 as compared to INR 90.24 crore for 9 months FY '21 and INR 38.27 crore for quarter 3 FY '21, a growth of 62.90% for 9 month and 55.75% for quarter 3 FY '22. The profit after tax of the company for 9 month stood at INR 108.76 crore and INR 44.40 crore for Q3 FY '22 as compared to INR 67.18 crore for 9 months FY '21 and INR 28.38 crore for Q3 FY '21, a growth of 61.89% for 9 month and 56.47% for quarter 3 FY '22. Now moving on to the brand wise contribution for 9-month FY '22. Big Boss stood at 42%. That is for mid-segment, regular. That is the economic segment stood at 34%; Dollar Socks, 2%; Force Go Wear, 1%; Force NXT, that is our premium product, 3%. You may see that is the Woman brand, around 8%; Pepe, 0.12%; and for Thermal, it is around 10%. And if we discuss about the quarter 3 FY '22, the Big Boss stood at around 43%; Regular at around 34%; Dollar Socks, 2%; Force Go Wear, 1%, Force NXT, 2%; Missy, 7%; and Thermal, around 10%.By this, now I open the forum for question and answer.
[Operator Instructions]. The first question is from the line of [ Devesh ] from [ DS ] Investments.
Yes. Congratulations for good set of numbers. Quick -- 2 quick questions. One was, if you could comment around winter wear performance because this sort of was outside the performance from all other categories, right? It sort of degrew for us. And the second would be that our aspirational target of INR 2,000 crore, requires a substantial jump between this financial year to next 2 financial years. Would there be some additional categories outside what we have or a broader strategy in terms of how you see us getting to that line?
So if we talk about the winter sales, the winter was not that good in the month of November, December when usually the sales happen. But still, we managed to have a growth of 3%. We actually expected it would be somewhere around 18% to 20% this year. And -- but the winter was really very unexpected this time. And that's why we had a growth of 3% in our Thermal wear. Apart from that, the target, the long-term vision, which is like achieving INR 2,000 crores by FY '25, yes, we are on the same track currently. And that's why you'll see that in 9 months ended also, we have a 34% growth. And some may ask that this particular growth may be contributed only to the price hikes that the company has been taking or the industry have been taking from past 1, 1.5 years. But just to point out, in 9 months ended, we did a volume growth of 14% as well. So that is a huge win for us because at this kind of a market also, when first quarter was under restrictions from -- in different in different cities, in different states, everyone has their own restrictions, still we managed to gather 14% volume growth overall in 9 months ended. In Q3, we had a volume growth of around 11%. So apart from the price hikes that we are taking, we are also doing a volume growth of equal level. So I think we are in line to achieve what we have set for the target that we have set for this.
Got it. Got it. So it would be safe to assume that next 2 years, the growth pattern would have equal -- roughly equal contribution from volume as well as the price/mix, right?
We really want that to happen. So let's hope that there's no fourth or fifth or sixth wave. So I don't know what's happening in the country, like the Omicron, suddenly, it came. It was a great buzz, disturbed our like last 15 days of December, still disturbing our January month. Let's hope for the best. [indiscernible] the positivity. The death rates and all the parameters are quite low in this third wave.
[Operator Instructions]. The next question is from the line of Apurva Shah from PhillipCapital.
Ami I audible?
Your voice is a bit muffled. Like you need to put your speakers closer a bit.
Is it better?
Sir, may I request you to speak through the handset, instead of using any device.
Just give me a moment. Now is it better?
Much better, sir. Thank you.
Yes. Just 2 couple of questions. So can you just take us through the industry, what is happening in the industry? Because despite of such a price hike, we have been continuously gaining or maybe like the volume, sir, is also increasing. So can you just throw some light on how organized versus unorganized and how we are like able to capture the market? And if in case we have some data about the market share for the total industry or maybe for organized, that would be really helpful.
So Apurva, currently, we don't have that kind of knowledge or information with us that will give you a hint whether the unorganized have transformed into organized or whether we have taken a market share of unorganized players. Yes, the market is really very slow. And in fact, for unorganized players, it has been very difficult in terms of production also, managing their working capital, the production level, managing the labors because every now and then the labors run away to their villages and never to come back. So that's the kind of situation which is happening in the industry. Plus with the rise in prices of the raw material, which is a major contributor to our product, like yarn. The yarn contribution to our product is almost 45%. So there has been a major hike in the yarn prices as well. During the month of December, it was pretty stagnant that time, but in the month of January, again, the prices have increased for the yarn. So the things are very shaky right now. It's very dynamic. I think it would be too early to comment on whether the unorganized players are vanishing from the market or we are capturing the market share of the unorganized players or organized players. It would be really very early to make that kind of a statement.
Understood. So Ankit, I got your point. So second question is on the Project Lakshya coming to our company. So I think that is like the results are reflecting in the maybe last 2, 3 quarters. So I just wanted to understand better the Project Lakshya because as of now we have introduced in, I think, 5 or 6 states. So if we want to dissect the growth, so do you have any idea here, like out of that, the 34% growth in the 9 months period, probably what could be the additional revenue because of Project Lakshya? Because see, we are targeting to double the distributor maybe from 115 to maybe 200 to 250 next -- by FY '23. So I just wanted to understand Project Lakshya better because I think whatever you said earlier, I think that is now reflected in the numbers, but how shall be projecting for the future, that's what I would like you to understand.
So currently, if we look at the 9 months numbers, 7% of the revenue has been contributed by the distributors who are under this particular project. So to be precise it is 7.5%. So we already have 115 distributors. And by the end of the fiscal, we'll be somewhere around 125, 130 distributors onboard under this particular project. And for the next fiscal, if everything goes well, we'll be on track to onboard around 200 to 250 distributors into this particular project. We also want to finish it a bit early. So we have started the -- we have started rolling out in a few more states, like we have started marketing in Andhra Pradesh, we have started marketing in Northeast, the entire 7 states. Then we have started Bihar, Haryana, and Odisha is getting started this particular month, like -- sorry, February 1 week, it's getting started. So we have started making teams everywhere, right? So all those states that we can give them -- we are allowing them to enter and make new distributors in -- majorly in the gray areas that we have or the vacant space that we have. So we do not want any major dent on our sales, and that's why we are covering the gray and the vacant areas first. And then we are touching the actual distributors that we have, like the current distributors that we have.
So Ankit, the way we report the numbers, so the 7.4% number, so is it fair to say that was a negligible number prior to Project Lakshya, and that 7.4% of our total domestic sales, that is only contributed because of Project Lakshya? We'll try to conclude that as well?
No, not really, Apurva, because some of the distributors in this particular project are old distributors as well. So I would say that 60% of the distributors are new. And not even 60%, like I would say, 65% of the distributors are new and 35% of the distributors are old distributors. So basis that you may divide, but for exact number, like how much incremental sales that we have got from Lakshya, I don't have that number handy right now. For that, we can get back to you later, like after this call, maybe.
No problem. No problem. And just a final question on the other expenses. So I think that is coming down quarter-on-quarter basis, so maybe from 18% to maybe 18%, 20% to current 13, 14 percentage band. So I can understand because of like the restriction -- pandemic-led restriction and maybe curb on the advertisement, I think that expense is on the lower side. So what would be that sustainable number? And what could be the sustainable margins?
So the thing is, Apurva, this year also, we have curbed down our advertisement expenditure to around 5.5%, 6%. And by the year-end, maybe it will be -- this particular fiscal, it would be somewhere around 5.5%, this particular fiscal. Next fiscal, it would be like -- we will maintain around 6%, 6.5%. We will try to maintain 6%, 6.5%. That should be the sustainable level where we should maintain.
And what about the EBITDA margin?
So EBITDA margin this year, we have given a guidance of 15% to 16%. But 9 months ended, it's around 16.5%.
So Ankit, this is the confusion because...
9 months ended is 16.74%. So going ahead in 3 years' time, we want to be at around 18%, 19% EBITDA level.
[Operator Instructions]. The next question is from the line of Ankit Babel from Subhkam Ventures.
A couple of questions. Sir, how is the inventory level in the Thermal wear segment at company level and at the trade channel? Because your target was very high, but actual sales was low. So how has been the inventory as on date, sir, because there would have been some offtake in January because the winter got delayed and there was good performance in the month of January. So as on date, how is the inventory level at your end and at your trade channel end?
So Ankit, the thing is that for Thermal, our sales gets completed by the month of November, maximum. In November also, we try to fulfill the repeat orders. And -- but this time due to bad winter, what happened was we were -- we have quite a few stock with us for Thermal, which is somewhere around 2% to 3% stock levels would contribute -- is contributed by the Thermal. As far as the distributor channel, it's been talked about or the retail channel has been talked about. So month of January was a bit of relief for us because some of the distributor stocks have been liquidated in the market to the retail point. And in fact, the consumers have also bought from the retail outlet. So this will allow us to have a good sale in next year, like next second or third quarter of the next fiscal.
Yes, sure. That's what I wanted to understand. So the next year sales won't be impacted because of high inventory?
Should not impact, but like -- we don't know by how much this winter season will expand or will we have extended winter. But January has been a good winter season like all over the country. And with -- and it was majorly contributed because of the rain, which poured like for 2 to 3 days everywhere, right?
Yes. Okay. And sir, what will be your sustainable gross margins in the next couple of years or whenever you reach your target of INR 2,000 crore revenue? It has been fluctuating between 35% to 40%. So what is the sustainable margins you people are looking at?
Ankit, currently, our gross margin is down 36%. And in the quarter level, it is around 35%. And we hope to maintain the same next 2 to 3 years, or the margin may increase by 36% to 37%. So our target for EBITDA is around 7% to 8%. So if our margin is around 36%, 37%, we can achieve our target.
Okay. And sir, lastly, in the previous conference calls and various meetings, you have mentioned that you will try to, I mean, give the absolute amount of marketing costs table. And so therefore, every year, the marketing cost as a percentage of sales will start coming down. But now you are saying that you will maintain it at 5% to 6% of revenue, which means that absolute might go up. So has there been any change in the strategy?
So the thing is, Ankit, like from last quarter itself, we mentioned it in a percentage basis. Like during the pandemic season, we actually mentioned in an absolute amount that INR 55 crore to INR 60 crore of total expenditure will do on advertisement. And similarly, last year also, we -- last fiscal also we committed on an absolute amount. You're absolutely correct about that. But as a percentage of sales, it was coming around 5.5%, 6%. And at a sustainable level with all the categories that we are launching right now and focusing on the Athleisure segment as well because it has become really very big in our country during this pandemic. And it has a very good -- we see a very good future out there. So we'll be -- maybe we will come out with a very good TV commercial for Athleisure only. So that's why I was saying that it might -- so next fiscal, it might go up from like go up to 6.5%.
Okay. So your target for absolute amount of marketing cost has increased. They are in line with the revenue growth, which you are expecting?
Yes. But when we talk about like 3 years later, when we are at a level of INR 2,000 crores, that percentage might not be 6.5%. That might come down to like, what, 5% or something.
[Operator Instructions]. The next question is from the line of Gaurav Jogani from Axis Capital.
Sir, my first question is with regards to the target that you have set out for the INR 2,000 crore odds revenue. So if you can briefly, sir, give a breakup as to how much of this would be led by way of store additions or network additions? And how much of it will be relating to the other factors as in the SSG or the throughput improvement from the existing distributors? So if you can give a sense of that, it will be really helpful.
So the thing is that today also, our major sales are happening through the distributor channel. Online sales or modern retail contributes around 3% of our total sales currently, 3%, 3.5%. Over 2.5, 3 years' time period, we see that the modern retail channel going up to maximum 6%, 6.5% of the total sales. And the rest would be contributed by the domestic channel sales only, which is through our distributor system. So now we are trying to increase our sales by tapping into the vacant area, the gray areas that we have, appointing new distributors for each vertical, whether it be women wear or menswear or for our premium segment, which is Force NXT. So by increasing the distributors depth in the market, earlier, we used to track it district-wise, now we are tracking it taluka-wise. So that's the kind of mindset change that we are doing in our sales team. And everyone is very much motivated to appoint new and new distributors and tap the entire market.
Sure, sir. So the universe -- what would be the entire universe of these MBOs? I think we are reaching right now 1 lakh-odd MBO outlets as of now roughly. And what would be the target reach that we are targeting 2 to 3 years hence?
I think 3 to 4 years' time, we want to reach around 4 lakh retail outlets. I won't be able to comment upon the universe. But like people or the consultancy firms to whomever we have come in touch with, the universe is somewhere around 8 to 10 lakh retail outlets.
But sir, that is like 3x. I mean you are now, right now, at 1 lakh. And then going -- so that would be -- that would roughly mean that you would be adding 1 lakh outlets every year. So isn't that a steep target that you're taking for sale?
Not every year. I said in 4 years' time.
Yes, yes. So basically, I'm just saying that right now, you're 1 lakh, and maybe if you go to 4 lakh...
Currently, I think we're serving around 130,000 retail outlets. So we really target to reach around 4 lakh retailers because in 3 to 4 years' time, we'll be like converted into a Lakshya project. Like majorly, all the -- most of the distributors would be under this particular project only. So that's where we want to be.
Sure, sure. So sir, in that case, the growth could largely also be led by because your outlet reach is doubling in the next, I mean, 3 to 4 years, so this alone, I think, could lead it. But sir, again, I mean, so are you planning to increase the number of distributors also? Or this would be done by the existing set of distributors from what you have as of now? Because given that you'll double it...
Sorry. We'll be increasing our distributor levels also. With the increase in retail outlets, we'll be increasing our distributor -- number of distributors also in all the area. Apart from that, when we talk about the number of retail outlets we have presented or the number of retail outlets we want to tap into. So the retail outlet works at 3 levels. So one there is universe, then there are retailers, who want to work with you, and then there are retailers who work with you every month. So there is a concept of enrolled retailers, there's a concept of active retailers, and then there is a concept of retailers. So out of -- like today, if I'm saying that I'm available at 1.5 lakh retail outlets or 135,000 retail outlets, the actual retail outlets would be somewhere around 60,000, 65,000 every month from me, which is actually generating business for me. And there are retailers who buy like once a quarter or twice a quarter, something like that. So if I'm talking about 4 lakh retail outlets, the active retail outlets, I want to be into who buys from me every month will be somewhere around 2 lakhs, 2.5 lakhs.
Sure, sure, sure. And sir, in terms of the increasing the depth, you also mentioned that you'll be increasing the depth of the products that you have. So I mean how are we planning to do this? I mean when we go to an outlet, because generally, if I'm not wrong, correct me if I'm wrong, our products are more mass oriented, I would say to that extent. So to do that, these outlets that we saw will be able to carry this type of an assortment? And second, if we increase the depth, is there again any chance of inventory going up in the near term?
See, we have menswear, we have kidswear, we have women's, we have Thermal. Now we have -- we launched -- 2, 2.5 years back, we launched Athleisure segment category, which is doing really good. In women's, we have intimate wears, leggings and all. It was brassiere or lingerie which was missing. So we are just trying to complete the categories that we are into.
Sure, sir. That, I understand. My question is actually a bit different. What I'm trying to tell you is that as we increase the depth of the products that we have, is there a chance that our inventory days or levels might go up because every outlet might not be specialized in selling every kind of product? So I was just understanding on that grounds.
We don't really plan to increase our inventory days, to be very honest. We'll try to work on that level only because the thing is that the vector consultancy after streamlining our sales point of view, they'll also start working on the back end as well, which will -- so our production will also be based on the replenishment model. We will continue with the base stock. And a similar kind of a stock will be there in the pipeline as well, which is WIP. And the order will be generated for production only when there's a sale of that particular product and at reach rate. So it will be completely automized in 2, 2.5 years' time.
Sure. And sir, one last bit from my end is that your performance was quite good, in that sense you registered a 23% Y-o-Y growth. And the bulk of it -- I mean, it was 50%, 50% wherein 11% was led by volume and the remaining was led by the pricing growth. So is there an impact that we have seen because of the sharp rise price increases in the demand conditions? Because the price rise is very sharp. I do understand that this is because of the yarn price increases that you are forced to take this price increase. But any impact on the demand that you have seen because of this?
So what happened is whenever there is a price hike, so people try to prepurchase the products like the channel partners, whether it be the distributor or the retailer. That happens. That is very natural in our kind of industry. But overall, we have seen the demand going up for our products, to be very honest, like for Dollar products. Otherwise, we wouldn't have been able to do such a good volume growth. In 9 months ended, we have done 14%. It wouldn't have been possible if the demand wouldn't have gone high.
Yes, sure, sir. I understand that. Like you rightly mentioned the there was some preponement of the buying because of the expectation of the prices going up. But then again, in the next quarter or the subsequent quarters, would that might impact demand because now they would have stocked some of these products. And unless and until they liquidate this product in the secondary market, they would not require to buy new products more from you. So in the coming quarters, maybe there would be a slight impact on the demand?
No. We don't think so because the thing is the prices have been increasing since last year, September. So it's already been 1.5 years that the price has been increasing last year. By last year, I mean 2020. So every month, we have been increasing prices. Every 2 months, 3 months, we have been increasing prices. So -- and yet we have seen growth every quarter. So I don't think that would really hamper my fourth quarter. So we are on track to do -- to achieve more than 20% growth this particular year.
The next question is from the line of [ Venkat ] from 3Sigma Financials.
Excellent number of -- excellent numbers actually, congratulations on that. Sir, a couple of questions I have. When you say raw material prices, are we talking about cotton prices? Or what is actually increasing so quickly and so frequently? Which particular raw material actually?
Sorry, your voice was a bit muffled. I couldn't hear properly.
Yes, yes. So you were mentioning about the raw material prices going up so often. So what are our primary that are actually going up so often?
So literally, the hike in prices of the yarn. And we also buy yarn majorly for our product. But for us, spinning units, which is around 22,000 spindles, we start from the purchase of cotton as well. So per bale or per candy, which used to be around INR 45,000, INR 50,000 per bale, it has now increased to INR 75,000 per bale. So that's the kind of increase that we are seeing in the cotton prices and the yarn prices.
Okay. Okay. So sir, my next question is you were talking about modern trade, which is about [ 3% ] right? So would modern trade include the -- what we call organized retail and what you call omnichannel or online sales, is that what it is?
So modern retail includes everything, which is large format stores; the big chain stores, which do shop-in-shop; the online sales, which is direct-to-consumer. So all the channel taken together constitutes modern trade.
Okay. Fantastic. So sir, from a regional point of view, say for instance, North zone, West zone, South Zone and this East zone, less exports. So if you -- can you -- will it be possible to give a breakup on how these zones actually work?
So in North zone, our contribution in the North zone is around 43%; East zone is 26%; West zone is 24%, West and Central taken together; South is weak for us, which is around 7% of our total sales.
Okay. So we'll be strengthening our South zone, right? South region, rather.
That's why we are focusing for -- in Lakshya project, we are focusing on the Southern part of India. So we started off with Karnataka, then we tapped Telengana, Telengana rollout is going on. And now we are starting off with Andhra Pradesh. Once these 3 states gets completed, then we'll touch on Tamil Nadu and Kerala as well.
So how would the profile look afterwards, sir, once the Southern zone also completes? So whatever targets you are mentioning, so we are going to meet those targets?
So I think, South has a potential of going from 7% to easily 10%, 12% it can go in like 3 years' time.
Okay. And then what is the percentage of export, sir?
So exports is around 9% of our total sales. So domestic -- so our modern trade is around 3%, export is 9%. Apart from that, [ 88% ] is our domestic sales.
So modern trade happens directly from the company itself, right? You don't have any agents?
Yes, directly from the company.
[Operator Instructions]. The next question is from the line of Ankit Babel from Subhkam Ventures.
Sir, a few questions. Sir, currently, your presence is at around 1.3 lakh retail outlets, which you plan to take it to 4 lakhs in the coming 4 years. Now assuming, say, by next year, you increased it to 2 lakhs, which is around the 50% growth in your retail outlet presence. Now assuming that the potential of these new outlets is similar to your current one, so mathematically, your revenue should also increase by 50%. But so -- what is the maths in this calculation, sir?
So Ankit, the question that you have asked is we are making an assumption that has increased from 1 lakh to 2 lakhs in day 1 -- day 0. And I get the full year for the sales, right? And that's how you're coming to 50% growth of the sales. But it will be a gradual process. And you won't see 50% growth in sales even if at the end of the fiscal, we move up to 2 lakh retail outlets.
Okay. So let's simplify it. Suppose if by the end of FY '23, you take it to, say, INR 2 lakhs. So your FY '24, there should be a 50% growth compared to FY '22. So I'm taking that 2-year period. So is this mathematically right? Or there is some other calculation involved here?
So it won't be mathematically right because -- I would say why. Every retail outlet in every district or every taluka has a different way of working. So for example, in Rajasthan, the average purchase ticket value of a retailer per month is somewhere around INR 7,500, INR 8,000. Whereas in Karnataka, it is around INR 9,500. But if you go to Gujarat, it's around INR 5,000, INR 6,000. So you can't actually tell whether it will be a completely proportional basis -- the growth would be completely on proposal basis. It will really depend where the growth has happened or which part of the country we have tapped in. So currently, we have taken up states, which is majorly weaker states for us. So there might -- we might increase the retail outlets to 2 lakh or 2.5 lakhs by FY '23 or FY '24. But what will -- but that does not guarantee, that actually does not guarantee that our sales will increase to that particular level.
But sir, that diversity of ticket size would be there even in your current presence of 1.3 lakh. Somebody would be buying INR 5,000. Somebody would be buying INR 7,000.
There are wholesalers as well, right? In our Lakshya project, we are not encouraging the wholesalers. But in the current model, where we have distributors, they have semi-wholesalers under them. Apart from the retail outlets, they have semi-wholesalers also. There are wholesale markets also which are selling, right? So that -- so that will -- so we have to take that also into account. And going by this logic, if I'm saying that I want to do it 4 lakh retail outlets by like in 3 to 4 years, then my target should be INR 3,000 crores, INR 4,000 crores, but I'm setting the target to INR 2,000 crores only because that's the practical way to go about it.
Okay. Sir, my second is that you currently have around 1,000 distributors, which again would be growing every year. And out of that, only 115 distributors are enrolled for Project Lakshya. So do you feel that all your 1,000 distributors would eventually get enrolled for Project Lakshya? Or what are your targets? Practically, how many distributors you feel would adopt for this Lakshya project over a period of time?
Ankit, to be very honest, we want to convert each and every distributor to this particular model.
Okay. But how is the response?
The response is good. And suppose that you want to make -- if we want to, let's take Ahmedabad District in Gujarat. So we have taken a call that in Ahmedabad, our Project Lakshya will be implemented, there will be no other distributors who are not into Project Lakshya. So we give first right of refusal to our current distributors. If the current distributor refuses, then only we make a new distributor out there. So that's how we are working. But if we take a call that we want to implement that particular project in a particular district, then it will be done.
But has there been any protest by even a single distributor, so far?
Initially, the distributors are very skeptical because they have to work in a very organized manner, which currently, maybe they are not doing it, right? Most of the distributors are not organized. But in this particular project, the distributor has to get organized, he has to hire 1 or 2 people under them. So it's a process. So people do retaliate. People -- the distributors are skeptical about it. But once they start the program, once they are like 4 months, 5 months into it, then they actually understand the benefit of it. So in Rajasthan, we are getting a very good response.
Okay. So sir, earlier, because of COVID, there were some disruptions, and your sales team and everybody couldn't be on road to deal with these distributors to get enrolled. But now if everything is open, can we see that the pace of this enrollment can actually increase? And say, next 2 years only, you can actually get all your -- or most of your distributors to this Project Lakshya? And can the pace of enrollment increase, say, in coming years?
Definitely. Definitely. The pace of the enrollment will increase definitely. There is no denying about it. But yes, the project will not be completed in 2 years' time. That's also a fact.
Okay. And sir, last question, very near term. So when I was observing your historical numbers, one observation, which came, was the FY '16 to FY '19, where the numbers are available, your Q4 number is always higher than the Q3 number, the revenue. So is that trend will continue going forward considering the seasonality?
If we talk about last fiscal, it didn't happen.
Sir, but that was a COVID period.
Yes. So currently, we are into COVID period. I actually don't know. But yes, Q4 is always higher than Q3, that has been the historical data. And going ahead also, we think that Q4 will be higher than Q3. Maybe not this fiscal due to COVID, but yes, but other time of the year.
The next question is from the line of Suhrid Deorah from Paladin Capital.
I'm sorry, I joined the call a little late, and I'm not very familiar with the business. So I have a couple of basic questions. Could you help me understand on an ongoing basis, what kind of volume growth do you see? What is the split between volume and pricing growth on average? And how you see it going forward in the next few years?
In this quarter, our volume growth is around 11%. And over 9 months, our total growth is 34%. Out of 34%, our volume growth is around 14%.
Right. I saw the presentation. I was just wondering on an ongoing basis, going forward, what do you think those numbers could look like?
Pardon, can you repeat the question? Actually, your voice is muffled.
Yes. I was saying I'm aware of the numbers for the current quarter and for the 9 months. I'm saying on an ongoing basis, what kind of volume growth you typically see for the future years, '23, '24, '25?
For next 2 to 3 years, the volume growth that we are targeting is around somewhere around 12% to 14%.
And typically, you take 5%, 6% price increase in [indiscernible] every year?
Seeing the trend currently, I think that's likely. Plus there will be change in the category mix also because the Athleisure is of higher ASP. So -- and we are getting very good growth in our Athleisure segment, which is now contributing around 11% of our total sales in [indiscernible] 9 months ended figures. So seeing -- going by that, if we are able to change the product categories also, so you will see a change in our overall ASP just due to the change in the product mix. So we are targeting in that sense also.
And it seems like over the last 10 years or so, your gross margins have expanded substantially. Is that because you are now changing the mix and then the new price levels are substantially more profitable?
So if you are talking about last 10 years, it majorly due to higher penetration into the market, deeper penetration by giving extra schemes or incentives to our channel partners. So that was the reason we were able to benefit in the market faster than others. And apart from that, we like 5 to 6 years back, we launched our women segment, then premium segment came into picture in 2017, '18. Apart from that, we were already doing casual wear, which was track pants, T-shirts, bermudas by the name of Force Go Wear. But now we are shifting on gradually going -- doing Force Go Wear and creating Big Boss, Athleisure only, like Dollar Man Athleisure. So the sales are being shifted from Force Go Wear to Athleisure, plus the -- we are tapping into the growth as well.
Ladies and gentlemen, due time constraint, that will be the last question for today. I now hand the conference over to Mr. Saurabh Ginodia for closing comments.
Thank you, Ankit Ji and Ajay Ji for giving all your valuable inputs and time on today's conference call and also giving us the opportunity to host this earnings call. Sir, I would request if you have any closing comments to make, and then we can close the call.
So I take this opportunity to thank everyone for joining in the call. I hope we have been able to address all your queries. If you have any other questions or any other query, kindly get in touch with us. Thank you once again. Stay healthy. Stay safe.
Thank you.
Thank you very much. On behalf of SMIFS Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.