Linc Ltd
NSE:LINC
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
192.4
765.35
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Linc Ltd
Earnings Call Analysis
Summary
Q4-2024
Linc Limited reported revenues of INR 508 crores in FY24, marking a modest 4.3% year-over-year growth. In Q4 alone, operating income surged by 14% quarter-on-quarter, primarily driven by the high-margin Pentronic range, which expanded by 21% for the year and contributed about 34% to total revenue. The company anticipates a revenue growth of 17% to 20% from FY24 as the new base year. Despite a dip in legacy product sales, Linc plans to revitalize this segment while focusing on premiumization. A dividend of INR 5 per share was also announced, affirming their commitment to shareholder returns.
You don't have any saved screeners yet
Good day, ladies and gentlemen. It's my pleasure to welcome you on behalf of Linc Limited and SKP Securities Linc Limited's Q4 FY '24 and full year FY '24 earnings webin. We have with us Mr. Deepak Jalan, Managing Director; and Mr. N. K. Dujari, Director of Finance; and representatives of [indiscernible] Advisers LLP, adviser, the company's IR advisers. This webinar is being recorded for compliance reasons, and during the discussion, there may be certain forward-looking statements, which must be viewed in conjunction with the risks that the company faces.
I now hand over now to Mr. Jalan for his opening remarks, which will be followed by a Q&A session. Thank you, and over to you, Deepakji.
Thank you. Good afternoon, ladies and gentleman. Thank you for joining us today for the investor call of Linc Limited for the fourth quarter and the full fiscal year of 2024. We are pleased to share that FY '24 has been a milestone year for us with our revenues crossing the significant INR 500 crores mark, although reflecting the modest year-on-year growth of 4%. The year has truly highlighted some of our strategic initiatives and the resilience of our business model.
In Q4, we witnessed an increase in operating income up 14% quarter-on-quarter and 3% on a year-on-year basis. This growth has been driven largely by our flagship atonic range which was in line with our expectations. Over the course of the year, the Pentronic range grew by over 21% in value and contributed approximately 34% to our total revenue. The final quarter saw even more impressive growth with a 32% increase quarter-on-quarter and a 30% rise year-on-year. This exceptional performance of the Pentonic portfolio underscore the success of our strategic focus on premiumization and high margin for us.
I would also like to address an important aspect of our product strategy. While our Pentonic portfolio has seen remarkable growth, we recognize that some of our legacy products experienced a decline in volume. This was partly due to a strategic share towards higher-margin products. However, it is crucial to maintain a balanced approach to our product offerings to sustain our overall market share. Moving forward, we are committed to revitalizing these legacy products. We plan to enhance our focus on maintaining their volumes, ensuring that we'll continue to meet the diverse needs of our customers and maintain our strong position across all price segments in the market.
This balanced approach will help solidify our market presence and drive sustainable growth. While our overall exports experienced a downturn compared with the previous year, we are encouraged by the strong recovery in Q4, showing a [ 34% ] growth quarter-on-quarter and a 10% increase year-on-year. The appointment of distributor in the North America has expanded our reach into key markets, including Mexico and Canada and is already showing promising results. This is in line with our ongoing efforts to deepen our penetration in some of the neighboring countries as well as other significant markets like Brazil and East Africa through our subsidiary in Kenya. This year, we have also been excited to introduce several new products including the Pentonic GRP at INR 40, which was launched in Q4 finally. And the rollout of some new variants in the Pentonic brand portfolio. Although the response to some of these variants was mix, we are optimistic about the upcoming launch of the Pentronic CLR broadband at INR 20 and the Pentonic evo champion at
[Technical Difficulty]
Our commitment to innovation remains strong with a range of new products planned for the second half of this year. On the distribution front, we have refined our strategy to maximize revenue per touch point rather than nearly expanding the number of touch points. This approach has helped us improve our market presence, particularly in the southern and western regions of India, where our revenue share has increased significantly over the past 5 years.
Finally, I'm pleased to inform that our Board of Directors have announced a dividend of INR 5 per share, maintaining our commitment to rewarding our shareholders. This represents a payout of about 22% pending approval at our upcoming AGM. In closing although we face challenges, our strategic initiatives focused on premiumization, market expansion and product innovation have positioned us well for sustainable growth. We appreciate your continued support and look forward to another exciting year ahead.
I would now like to hand over the call to Mr. Dujari to provide updates on financial numbers. Thank you.
Thank you, Mr. Jalan. Good afternoon, ladies and gentlemen. I appetite your presence at the FY '24 Linc Limited earnings webinar. Before we proceed to the Q&A session, allow me to provide a concise overview of the financial figures for the year gone by. During FY '24, the company's revenues from operations grew by 4.3% to INR 508 crores from INR 487 crores in FY '23. Operating income for the quarter stood at INR 141 crores, a 2.6% improvement over quarter 4 FY '23 and 13.6% growth over Q3 of this fiscal.
Gross profit for the current year stood at INR 159 crores, increasing 4.7% over the previous year. The GP margin for the year remained stable at 31%. Quarter 4 FY '24 gross profit stood at INR 46 crores and the margins so 32.5%. The margin increased by 103 bps over the previous quarter but fell by 178 bps as compared to quarter 4 FY '23. This fall was on account of price in minimum wages in Gujarat, leading to higher level costs.
FY '24 EBITDA margin at 11.1% underwent a reduction of 150 bps from its FY '23 levels. This contraction stemmed from an increase of over 13% in [indiscernible] expenses as compared with 4% growth in revenue. FY '24, PAT stood at 6.6%. The company consistently utilized its key cash flow projectory resulting in substantial reduction of its net debt over the past 5 years. Net debt stood at negative INR 8 crores as of 31st March 2024. As we continue to statically develop our operational infrastructure, I'm excited to announce our planned expansion in Kolkata adjacent to our existing facility.
This aspiration involves an investment of approximately INR 35 crores for the infrastructure. We plan to finance this expansion entirely through internal underscoring our strong financial health and commitment to sustainable growth. In line with our strategic priorities, we have decided to defer the planned expansion at our Gujrat facility by approximately 1 to 2 years. This will allow us to focus on modernizing and enhancing our facilities in Kolkata first. The expansion here is designed to be modular, which will enable us to scale our capacity based on evolving market demand efficiently. Looking ahead, I would also like to [indiscernible] our revenue growth guidance. As previously stated, we expect to achieve a growth rate of 17% to 20% in the medium term. However, we now use FY '24 as our new base year for this projection.
This guidance reflects our confidence in the strength of our business model and the effectiveness of our strategic initiatives. Thank you for your continued trust and partnership as we get [indiscernible] exciting development.
So, I think we have a for Q&A.
[Operator Instructions] We have a question from [indiscernible].
So I have a couple of questions. My first question is, we have invested -- we have bought a 60% stake in Kenyan manufacturers. So I just wanted to understand the exact amount that we have paid because the notification mentioned we have only paid $100. So can you please clarify what exactly the payment we have done and what is the nature of this transaction?
The $100 is towards [ buying ] the 60% capital of the company. And we have given a loan of $350,000 for revamping the operations.
For the company.
We expect an overall investment of around $5 $0.5 million in this Kenyan subsidary, which will be in the form of loans only. Capital is right now invested at $100.
So we got the 60% stake only for $100 if I'm getting this right.
There's some stability also, but that is not that significant. But actually, the loan is part of that transaction that it was such as structured in that manner.
Okay. Got it. And the second question is if you could quantify in terms of the potent revenue potential that we have from the North American and African markets, both separate because we've gotten recently a new distributor to increase our reach in the North American market and simultaneously in the African market, if you could also just quantify in terms of the potential that we see.
So we may not like to share the exact numbers, but we'll definitely give you some perspective. And Rohit, who looks after exports is here to explain to you the potential for these 2 titans. Rohit, can you.
Yes. So for North America, like we appointed a national distributor just last year. So we are expecting, I would say, multiplier growth over a period of next 3 to 5 years from where we are today. And this is purely our own brand Pentronic brand business that we're talking about, not any private table for any chain stores in the U.S. And we are looking at a well-penetrated network across online and offline stores. So that's the plan for U.S. and, of course, similar penetration, we are looking into Canada and Mexico as well. About Africa, if we talk about the Kenya subsidiary plans. So there is a real called [indiscernible] and Kenya is a member the treaty. So from Kenya, our idea is to export to the East African markets. So if we name it, they would be Egypt, Ethopia, Kenya, Tanzangya, Uganda, these 5 countries put together has a 350 million population and our exports to this side of Africa is negligible as of today.
So given the population number, you can imagine the market size and potential, and we are looking at significant growth in the near and the medium.
Sure. So another -- just a follow-up on the same the African market, like you mentioned, these countries like Egypt, Tanzangya, Uganda. So I just wanted to know, while the revenue potential, I do understand, but I would assume these countries would be very price sensitive. So would we be that price competitive to gain or maintain our margins like we have on a company level.
So if we look at each of these countries in these 5 countries, they actually -- they are very unique in its way look at Egypt. So Egypt as a country cannot import goods from India or China because of anti-dumping. So Egypt can only consume either local manufacturing or from [indiscernible]. Now if we exports from Kenya to any one of the countries in the treaty. So you are actually exporting without any duty and tariffs. So which actually is in the range of 35% to, I would say, almost 80%, 90%. If you are exporting from India, the landed cost will include the import duty status, which from Kenya will actually be negligible.
So that we will definitely be able to be more competitive when exporting out of Kenya, of course, our manufacturing costs will be slightly higher as compared to India. But if we look at the duties and the tariffs, I think we'll be able to be more competitive from Kenya than from India.
We take the next question from Javier Sonora.
Can you hear me?
Yes, [indiscernible]. Please go ahead.
Yes. Just 1 question. I think in your opening remarks, you had mentioned that there was a degrowth in linked volumes due to cost strategic initiative of prioritizing higher margin products. So can you just talk about how the future of Linc will be in the next 3 to 5 years. Will we continue with this thing? And where do we want to place Linc in the contribution of our sales currently about 40%. So what can we see in the next 3 to 5 years?
So Javier, of course, as I mentioned that this year, we had a lack of focus on our legacy products, and particularly some of those products where our margins were quite low. So it's not that all the products had a decline. Some of them had a significant decline. And so we realize that even though we had lower margins in those products, it was important for us to protect -- at least protect the volumes of those legacy products. And so that's why we decided that from now, we will try to hold on to those volumes so that whatever. Actually, what happened in the last year whatever growth we got from Pentonic was negated by the decline in the legacy -- some of the legacy products.
So that was not a really very healthy situation. So going forward, as I mentioned that we are going to protect the volumes. And we are also introducing not many products, but at least another 1 or 2 products in this year in Pentronic in Linc portfolio to compensate the loss, which happened in the last year. So although having said that, the Medtronic portfolio share is going to continue to grow in our overall rents.
Understood. Have you set any kind of target for Pentonic in the next 3 years, the contribution currently, if it's at 35%, do we see it inching up to 50% of the portfolio?
So call, as I mentioned, that Pantonic portfolio contributes about 34% of our overall revenue. And going forward, definitely it will [indiscernible] another 2 to 3 years' time, it will easily cross 50% contribution.
We take the next question from [indiscernible].
Good afternoon to the management team, and thanks for the opportunity. I want to know how the markets have been in the entire fan category or the writing instrument that is 1. Curious to know how we perform vis-a-vis the market because this has been a quarter where it's an exam quarter and followed by the back-to-school quarter. Also, very intuitively, I want to know why do we have new launches in second half rather than in the first half of the calendar year. It's a heavy quarter, right, the back-to-school quarter. So that's one. Second is, if you could elaborate more on the CapEx plans that should be interesting.
All right. [indiscernible] right? So first the quarter 4, as I mentioned in my opening remarks, historically, quarter 4 is the highest quarter for us in view of the exam period. So that's the reason you can see that this was our highest quarter. Although compared to last year's same quarter, the growth is moderate. But even having said that, this has been our ever-higher quarter. So there has been a 14% growth quarter-on-quarter, as I mentioned. So that's about the exam period. Then coming to the new launches in the second half. So of course, I already mentioned that we have at least 3 products ready for launch in the first quarter as well as in the second quarter.
So across these 2 quarters, we have 3 products -- at least 3 products we launched. And this first quarter, particularly June and July are back-to-school season for us. So it is important. As you said, it is important to have new products during this period, and we are ready for that. So what I meant to say that we have a couple of launches in the second half also. So as a strategy, we like to launch at least 1 product at least 1 winner product every quarter. So that is in line with our overall strategy that we have more products lined up for the second half also.
Okay. And on the CapEx plan, if the -- I mean, if you could highlight.
Certainly. So on the CapEx plan, as [indiscernible] can see our numbers. This year has been quite moderate in terms of both volume and value. So the need for capacity expansion, I mean, in-house capacity expansion was deferred by a year or so. And of course, we have the flexibility of outsourcing from our dedicated vendor. Yes. So we decided to hold on to the manufacturing new manufacturing facility at [indiscernible], Gujarat. So we, of course, we acquired the lab and is ready. So whenever we feel the need of capacity expansion, we can start the structure. But we thought that in the meantime, we had already acquired land in Kolkata next to our existing facility and we thought that Kolkata facilities needed some modernization because this was our first factory and there was an organic capacity expansion. So it needed modernization. So we thought that we will build the infrastructure at Kolkata, which will call for about INR 35 crores of CapEx. Just for the infrastructure, we -- and so next year, we'll have -- we will invest in plant and machinery to increase our capacities. But for the time being, the growth plan, which we have for this year, we already have capacities lined up, both in-house capacity as well as from outsourcing. So yes right now for this year, the CapEx is going to be INR 35 crores for the infrastructure of [indiscernible] facility and another INR 10 crores for a regular routine CapEx. And all these would be from internal approvals.
Okay. And can I ask 1 more question?
Okay, go ahead.
Yes. So sir, what is the competitive intensity on the ground? I mean, curious to know the market.
[indiscernible] This category -- the intensity has been always very competitive. It's not something which we are experiencing, I mean, experience last year. So it has been a competitive category. There is a low [indiscernible]. So we are trying to overcome which we have already done, actually, so we try to overcome these challenges or this scenario by innovating on our products and all of the products under the Pentronic portfolio are uniquely designed. And so, so far, we have received a good response from -- for most of our new products under Pentonic portfolios. So yes, I do agree admit that it's a very competitive category, and we have to navigate. And I think with our experience, we have learned how to navigate even in this scenario. But of course, there's always a pressure on our margins. And still, we have tried to have better margins in our Pentronic portfolio particularly.
We'll take the next question from [indiscernible].
Sir, my question was with respect to competitive intensity base, and that has been answered mostly. Just 1 point over here. Sir, we had a 5% growth for FY '24. So what was the industry growth for the financial year?
So the industry growth is estimated around that only about 5% to 6%. And yes. So we are also waiting to have more clarity once our peers' results are out, but that is the estimate which we have.
So we have more or less been able to retain the markets are basically across the markets.
At least in terms of value.
Yes. that, yes. That's good. Secondly, with respect to, you said that 3 years from now, your Pentronic portfolio will be 50%, and that is definitely a good news because that's a high-margin business for us. So what will be your target gross margin by [indiscernible], not asking for a number, but -- you're doing a 32% right now. So 3 years from now, this 34% [indiscernible] mix, 50%. What would be your gross margin by then?
Gross margin will not have that substantial impact because of Pentonic. The reason is that we have got [indiscernible] range also where we are -- it's a purely trading product and margins are not that significant, and we have got aggressive targets for [indiscernible]. So we expect the margin to go up by around 5%, maybe around [ 35%, 36% ] over the next 2 years 2 to 3 years.
But sir, as you see that intensity of the competition even though, as I have mentioned in my previous calls, that any product under Pentronic, which we launched, has nothing less than 40% gross margin. But as the past increases, we have to support some of our existing products. So that keeps service some of our margins. So even though we have aspirations of having higher EBITDA margins like what our peers are delivery. We would like to be a little caucious on giving guidance on that. But definitely, as you know, that we achieved about 12% in the last financial year, 12% of EBITDA. Definitely, we believe that there is a room for improvement on that number given the revenue growth plans which we have.
Great. Great. And finally, sir, so basically, the medium-term growth guidance of 17% to 20% revenue growth. So what will basically be the driver for this? Will the [indiscernible] which is.
Yes, let me say to you see the main growth drivers. But definitely, the number would be the premiumization. The second driver is going to be the adjacent categories, as I mentioned, that I think that -- right now, we are largely in the popular category like ballpen and gel pens. But we are absent in categories like children's markers, permanent markers, highlighters, and some such a decent categories, so which we are going to launch in the first half, etcetwhich I didn't mention. So adjustment categories are also going to help us achieve our objective. And thirdly, of course, the export business, as Rohit mentioned that the last year, we appointed a distributor in North America who is going to drive our export business, particularly in that part of the world.
So we have very aggressive projections with our North American distributor. So combined, these factors are going to help us grow across the dairy business, the stationary business is also going to grow. So yes, so these are going to be visually driving the role.
We'll take the next question from [indiscernible].
Congratulations for the results. So my question is for Pentonic. So sir, what is the average shelf life at your marketplace and the stationary or shop for Pentonic?
I could not really understand your question, but what I understood was that, okay, let me explain to you that our classic Pentonic ballpen is priced at INR 10 and then we also have a gel pen of INR 10. So these are end user prices. So [indiscernible].So you asked for the shelf life.
Yes, yes.
Okay. So the share life of the call point and ices 2 to 3 years, we [indiscernible] 2 years. And -- but it can even go up to 3, 4 years and gel pen typically we guarantee 1 year, but it can go up to 2 years. So this is the shelf life.
No, sir, actually, you didn't get the question, maybe I will repeat it. Shelf life in the sense I'm asking for a stationary shop for how much time does it keep your Pentronic pen for a particular category for how much time, we keep it in our shelf. So let's say, if your launches are too delayed, so for every launches, you take 1 month, 2 months, 3 months, you take time. So shelf life for Pentronic eventually get less and shelf life for the peers get more. So in that sense, I'm asking what is your shelf life for Linc or a Pentonic in marketplace and stationery shops in order to get the penetrations in market?
I think talking about a space.
Shelf space or in how much time does the retailer move the stock.
Yes, yes, yes.
It's a rotation from our retailer and [indiscernible] say, for example, our sales team, they visit the retailers on a monthly basis right? So typically -- so it depends upon the category of out right? So if it's big outlet, our frequency of visit is more. So maybe the stock turnover happens every 15, 20 days. For smaller outlets, if they have a monthly frequency, it takes say about a month. I don't know if I have been able to answer.
Yes. And sir, if the launches are so delayed and there are like less launches. So don't you think that the shelf place will be occupied by your peers if you don't be aggressive on that side?
Yes, that's 1 definitely a challenge. So what we see, we already have a large portfolio combined Linc and Pentronic. So even though -- even if the new launch is delayed, we'll try to occupy the shelf space with our existing products. So -- and as you know, every satiety outlet, they have limited space. So of course, yes, our [indiscernible] is always to keep maximum space occupied, whether with existing products or with the new products. So if less new product is launched, definitely, the retailers removes [indiscernible] some products from the shelf. It could be a link product or it could be a competition product. So Yes, this is a situation. And -- but nevertheless, we will make up our delayed launches in this financial year, and we have a very aggressive launch plan.
We take the next question from [indiscernible] Patel.
Sir, my question is, can you please elaborate on why the Q4 growth was slow, the Q4 being the best quarter for us.
So Mr. Patel, I already clarified in my opening remarks that while we had a decent growth in Pentronic portfolio, we had a significant decline in our legacy products where we had low margins. So -- and that was, of course, due to the lack of focus on our -- at our end. So whatever gain whatever being gained by Pentronic growth was kind of neutralized by the decline in the low added products. So yes, so that was the main reason. And yes, of course, as I mentioned, we believe that we also need to protect our legacy products.
Some part would also be attributable to the industry my understanding is correct industry slowdown.
Sorry, can you repeat.
I'm saying the slow growth, some part of that will also be attributable to the industry is what I'm asking. Industry.
Well, this is something we're discussing internally is there decline in the industry growth rate, but I believe, particularly in India, with the increase in the literacy and the population. I don't see any shift or any change in the category growth at least as of now. But there is a feeling that this particular year has been -- has been quite modest for most of the pen companies. So yes, there can be a little slowdown, but I don't really see any reason for that.
What would be the reason for this product? Anything if you can share?
So well, 55% of the pen consumption is among the school and colleges students. And so I don't see any any reason of decline in the demand or in the consumption at on that front. And the remaining 45% consumption is either in the offices or in the service sector or at the corporate level and in the corporate sales. So there could be some big line in this space. But I don't see any [indiscernible] decline even in this space. So yes, there would be some decline here. Yes, this is our estimation.
Last question. So are you expecting this industry growth of 4%, 5% to go to 8%, 9%, 10% starting FY '25?
Mr. Patel, I think that would be too ambitious to say that the industry growth rate can go up to 8% to 9%. I think that in terms of volume, the growth rate is going to be around 5% or anything between 4% to 6%. But definitely, with the premiumization, it is possible to achieve a higher growth in terms of value. So that's our take on the industry growth rate.
We take the next question from Tanuj Chaba,
Hello, sir. Congratulations and thanks for the opportunity for this call. Sir, my question was regarding the industry growth that you had just mentioned. So the industry growth in volume is going to be about 5% as what you foresee, but we are now focusing more on our value-added higher-margin products like the Pentronic. And you had mentioned that it would reach about 50% of your top line. So why is it that with lower volume growth and higher premiumization, our margins are only growing by about 4%, whereas the contribution from high-margin products is going up by 15% to 16%. So if you could just throw some more light on that.
As we mentioned in our opening remarks, this year, the margin was affected by a wage hike in Gujarat, minimum wage hike in Gujrat. This wage hike was deferred for 3 years, about 3 years for the Coventry. So suddenly, there was a certain increase of around 30% in a minimum wages. So going forward, we don't expect this kind of increase in the minimum wages. So going forward, we should be able to show some better gross profit.
So as you can see from the numbers, there has been a steep increase in our employee benefits which includes the wages or cost. So that's quite a [indiscernible] in the rate of 25%, 30%. Yes, about 25%. A little more than 25%. So that's the kind of unusual increase and that is the main reason of a subdued overall margin.
Okay. Okay. And my other question was regarding the [indiscernible] investment that we have made. So what kind of -- how can you -- I mean, can you just translate that in terms of revenue instead of some numbers? Or what kind of contribution we can expect?
This is -- pardon me, this is regarding the CapEx or this regarding some investments we are making in Kenya.
Sir, Kenyan investment, sorry, I [indiscernible].
So Rod will give us some.
Sure.
So currently, since we just acquired this company, so the operation scale is very small on -- but I don't want to put exactly a number -- numbers to it, but we're looking at good multiplier growth again here as well because, as I mentioned, the population is about 350 million, and our revenue from this region has been negligible. So we just made an entrant and I would -- anything and I would also like to add that we'll be having a decent product mix not at the entry level, but as a mass segment and at the mass premium segment. So that should take care of the top line and also the bottom line aspect of the subsidiary.
And just to give you a number, which we like our adjusting revenue from Kenya subsidiary is on an annualized basis, it is about INR 14 crores to INR 15 crores in terms of Indian rupees. So that's the current revenue and [indiscernible] revenue.
We take the next question from Sakshi Sara.
Yes. So I wanted to understand that what do you see the export contribution going to in the coming few years? And also, what would your export margins be?
Well, currently, as you know, that our export exports are about 19% of our company revenue and the initiatives which we have taken in the last couple of years and with markets like North America growing, we can look at at least quarter in at about 25%, 25% -- more than 25%, but at 25% in year in next 2 to 3 years time.
Okay. And what about the export margin?
Export margins have clarified in all my previous calls that the export margins are generally at least 5% more than the domestic margins. In some markets, it is even more. But in some markets, it is even at par with the domestic market. But in general, you can say that at least 5% more on average.
Okay. All right. And on the children [indiscernible], are you going to have an enhanced production? Or will it be outsource.
So at least at the initial stage is mostly outsource.
Okay. But going forward, we would think of having our own production line as well?
Right. Yes, of course. Once we -- once we build decent volumes or optimum volumes, and we can look at it own manufacturing.
We'll take a question from [indiscernible].
Can you hear me? Am I audible?
Yes.
I just wanted to understand. I'm looking at Slide #12 of your presentation, And I see over the last 3 quarters, the share of corporate increasing from 5% to 18.2% in your trade channel mix. So I just wanted some color as to what kind of sales contribution can we expect it to stabilize? And are we seeing some growth prospects over there in the future as well.
So [indiscernible], the corporate sales, let me clarify that is quite erratic because in some, let's say, the corporate decides to have some cross promotion program for their products, and we grab the order. So a single corporate orders and in the range of a few crores or rupees. So -- but it is not certain that we will -- we can get such orders every year. So we've been [indiscernible] this year that we had this large corporate order. And so that is the reason that you can see a big jump compared to last year in this quarter. So -- but typically, the contribution from corporate, we estimate anything between 5% to 10% and that is on a long term or on a yearly basis, you will see it will range between 5% to 10%. Although in this quarter, it has a significant contribution of 24%.
[Technical Difficulty]
Understood. My second question is with respect to the average realization, per pen. So I see in FY '24, it is about INR 5.67 and Pentronic realization is about INR 5.83. So I just want to understand in the medium term of about 2 to 3 years, where can we see the average utilization go end to go? Because you talked about Pentronic being at least 50% of the product mix. So I just wanted some color on that.
So yes, Dana, you can see the graph, which is steadily increasing over the years. And I have really not calculated our future risk selling price. But I think we will maintain similar momentum going forward at least in the medium term.
Okay. So can we expect it to reach about INR 5.83 the number that we see in Pentonic 2 years from now, that could be.
Yes, I think definitely.
We'll take the next question from [indiscernible].
We move to the next question. [indiscernible] please unmute yourself and go ahead.
Am I audible.
Yes, you are.
Sir, I just wanted to ask the INR 35 crores CapEx that we're doing, what kind of pens that will be manufactured there? And is it safe to assume that each and every industry player is moving out of the INR 5 sub- INR 10 category, given the fact that 55% of the users are still school and college going people. So due to that, will there be a churn if that happens.
Yes. You may -- if you have been following us, our focus is definitely on value-added products, so high-value products with higher margin. So that is our clear objective that whatever new investment we make, whether -- I mean new investments we made, it will be largely higher [indiscernible] products and not anything below INR 10. So that is very clear. But as I also mentioned that we would like to protect our legacy products for which we don't need any new investment. So that's the.
Understood. So on the INR 35 crore investment, what MAX top line are we expecting? What are the asset turns.
See, so largely -- this is -- you can say that not largely, but partially this investment is towards the modernization of our over facility at Kolkata because we started manufacturing at Kolkata. So you have been organic growth in the factory. So partially, it will be modernization and partially it will be for new products, but at least in this financial year, since it will take about a year's time, to complete or have to complete the construction. So we have not yet planned any, I mean, CapEx plan for new capacity. So that will be done [indiscernible] at the middle of this financial year.
Understood. My last question was, you mentioned about aeration of premiumization does the industry undergo a drastic change in say, upward rerating in realizations every 2 to 3 years? Or is it a continuous change? Like we've had a very steep change from FY '21 to '23, but 2024 has been modest. So should we expect a bigger change of delta in the coming 2 to 3 years, let's say, rerating or in the next -- every 3 years, does it increase drastically?
So just let me give you one perspective, which would be very impressing. Before Pentronic was launched in 2018 the average revaluation for Linc was are now 3.5 for at least 10 years, I would say. It was almost -- for 10 years, it was around 3.5 only. But Pentronic set a new trend in the category or you can say, in the industry of premiumization. And as a result, the average realization, not just for Linc but for even our peers started growing. So I think right now, the momentum is I mean, continuing, and we've seen that this will continue in similar fashion, maybe a little bit here and there. But yes, we are making towards a better average realization every year.
We take the next question from [indiscernible].
Am I audible?
Yes, you are. Please go ahead.
Sir, in terms of the competition, has there been any shift in the market share?
Well, as per the feedback which we have in the last year, more or less of all companies are having -- I mean, maintained their market share. So there has not been real shift as such.
Sir. So my second question would be on the capacity side. So the capacity that we have for our traditional Linc products and the capacity for our Pentonic products, can you please provide a brief understanding on that? And does it remain fungible between the 2? Or these are exclusively allocated capacities that cannot be interchanged?
So there are 2 angles to the capacity. One is the old capacity, which is not [indiscernible] and the other is the injection molded capacity or you can call it molding capacity, which is fungible. So let's say, if we have capacity of one crore Linc products. And if we have a capacity of 1 crore Pentonic products. So I'm talking of more capacity. So -- and if we have, let's say, moldicapacity or let's say, just 1.5 crores. So we can make 1 crore Pentonic pen and 50 lakh Linc pens or 1 crore Linc pens or 50 Pentronic pens. So if we have to increase our capacity of Penton, we have to increase our more capacity. So Yes. So I hope I'm clear. Otherwise, I can explain again.
Right. So no, no, I understand. Sir, what would that realistic figure look like for our current capacity? I mean, how much of Pentonic, Linc products can be produced?
So today, I'm talking of purely [indiscernible] capacity because the moly capacity is quite fungible and flexible. So in terms of more capacity for Pentonic portfolio, we can produce about 16 million per month. So which is highly underutilized -- let me clarify that. And so far Linc is concerned, we have a capacity of almost 50 million to 60 million again. So almost similar capacity. But yes yes, more or less, yes.
This capacity remains nonfungible, right?
Yes. Right. We are not utilizing 100% of both.
Yes. So what would this utilization figure look like for the current financial year? Any brief ideas not exact figure.
So briefly -- so this year, we sold about 73 crores pens of which to how much percentage is so about 34% is Pentonic and the remaining is Linc. But that is in terms of value. So in terms of volumes. So let me give you that figure. So 37% volume [indiscernible] that number, Linc we sold 44 million. This is annually and Pentonic sold about 274 million. Yes. So 441 million and 274 million. So photonic 274 million Pentonic and Linc 241 million.
Yes, we have enough time to take 1 more question from from Tate Daria,and then we take a question on the Q&A.
Am I audible?
Yes, you are. Please go ahead.
So I wanted to just confirm, I think you mentioned revenue growth of around 17% to 20%. So are we still on track INR 750 crores revenue for FY '26?
Pratik, as Mr. Dujarimentioned in his remarks, we are, of course, still looking at 17% to 20% revenue growth. It's just that the base year, which we were expecting to be FY '23 or rather FY '22, we would like to change the base to fy '24. As you can see that it has been quite moderate. So it would not be really possible to have that kind of a growth as the CAG on FY '22 numbers. So yes, on FY '24 numbers, we are hopeful of delivering that kind of growth.
Okay. Fair enough. Got it. Second question I have is more in terms of strategic question on the business front. You mentioned that you are trying to protect your legacy product volume and which is on the lower margin side and which will probably impact our margins going ahead also. So just wanted to understand, wouldn't it not make sense to aggressively push for Pentronic rather than focusing on, say.
Yes. Yes, you are right, Pradeep. So I told [indiscernible] on a lighter note. I'm just telling you I told my son Rohit to take care of this [indiscernible] below INR 10 segment, to pay attention to this portfolio to protect the volumes. While I do not want to -- and I would like to rather continue to focus on growing the Pentonic portfolio. So this is how we are looking at it. So as I -- of course, so the focus on Pentonic is definitely greater given the kind of margins we are on that. So which is not really going to dilute any attention to the below-target product, which have lower margins. It's not really going to dilute any of our efforts on growing [indiscernible].
Fair enough. Okay. All right. Can I squeeze in one more question?
Yes.
Sure. Okay. On capacity expansion. So I think you mentioned that your utilization -- current utilization levels in terms of manufacturing remain low. So what is the rationale to go ahead with CapEx given that your current capacity utilization are already at low levels.
So see, Pratik, I think we are a forward-looking company, and we believe that, yes, FY '24 has been mediocre for us, but it's not going to be -- the future is not going to be the same. And we want to be -- we want to keep ourselves prepared for a larger growth. So that's why we are keeping the infrastructure ready and the investment in product capacity would be done in a modular fashion as per the need.
Deepakji, may I take a few questions that have been posted on the [indiscernible]? [indiscernible] asked, what is your view on domestic market? How is it shaping in the current year? This question is in context to our sales from general trade, which is sharply down from INR 89 crores to INR 72 crores.
Yes. So Mr. [indiscernible], as I already explained that we got a [indiscernible] legacy products. And while Pentronic still grew. So that is the main reason. So that's the main reason for this pull down in our general trade sales. So that is the entire effect of loss in the legacy products.
Rahul Dani, just wanted to understand the reason for increase in other income, is it a one-off? And what is the outsourced capacity versus in-house capacity?
So other income is definitely one off large part of the other income is one-off. So we got a refund not refinery. And we got some interest on the back state [indiscernible], which we had plan in access to that environment, and we had some write-back of some excess provision of the previous year. So we don't expect this to continue for the future, but definitely, there will be some other other income category can be there, but not to that tax.
Yes. Yes. So a large part of it is one-off, right?
The second part was what is the outsourced capacity versus in-house capacity?
So particularly, I would say today, of course, I talked about the more capacity of about Linc and Pentronic combined INR 120 crores pens annually. But so holding capacity would be around INR 100 crores between our source and in-house, which is about 50-50, 50% for both.
[indiscernible] De broker from FY '13 to FY '19, our top line CAGR was about 3.3%. What was the reason for such subdued growth? And what gives us the confidence that the same will not happen in the future? What were our learnings.
Right. So -- and as I explained to 1 of the participants that the average realization per pen prior to Pentonic which was go in 2018. So for almost 10 years, our average realization per pain was averaging around INR 3.50 only. And so the industry was really not able to increase the prices because INR 5 and INR 10 were quite strong price points and there was more space for in between price. So we were trying to develop products which would be diretiated and which could bring this I mean we could really overcome this situation. And -- but unfortunately, we could not really develop the products which would be breakthrough for us. So finally, after a few attemps in 2018, Pentronic was born, which was actually a breakthrough product for us. And so which has been a game changer for leak as well as for the industry. And so it has given us a lot of confidence that we can upgrade our customers from 5 to 10 and 10 to 20 and so on. So something which did not happen for almost 20 years, I mean, between 1998 and 2018, there was almost no price increase in our category. So particularly typically, 10 years prior was [indiscernible] really very bad. So but now the momentum has started and is going to continue.
It's an anonymous attendee asking how is the feeling for Q1 as of today.
So Q1 so far has been -- I mean, it's just been one month and -- which is typically a low month for us. So we have a double-digit growth in the first month, and we have a good task for Q1 because last year, it was -- I mean it had a high base -- so -- but yes, we are confident that with the help of the new products and increase in our exports will definitely be able to deliver a good quarter 1. Yes.
Okay. The last 2 questions or follow-up questions. as [indiscernible] Sir, in the past, you were having a word with the Mitsubishi with some strategic partnership. What is the progress on that?
So we are doing good with the Mitsubishi [indiscernible] company, and we are trying to grow the brand to a INR 100 crore level in next 2 years. So that's about the Unipol brand. And of course, we like to work closer with them going forward. So we are at discussion level with them on that front that we have what more we can do together. Yes. So right now, this is about it.
[indiscernible], we will look at diversifying aggressively into nonwriting instruments segments, like how our peers have to -- have we talked on these lights.
Certainly, in the near future because we believe that we are -- there is a lot of room for us to even get into the adjacent category, like I mentioned, the market range, the color range for the children like crayons and modeling, et cetera. And then apart from that, we have a large range of stationary in Delhi. So likes of calculators, the desk cognizers. So we have a large range of stationary apart from pens now. So right now, at least in the medium term, our focus would be to increase penetration of those categories. So we would not like to go for any unrelated diversification at least as of now.
And the last question for the afternoon. [indiscernible] in the area as a follow-up are refocusing on Middle East, Eastern markets.
Middle eastern markets Rohjt would you like to answer.
Yes. So there is -- so we have -- Middle East used to be actually a good base for us. But over the years, because of economical and political disturbances, it's really affected. So there is, of course, effort to reach our high -- like the base figures, but there is no strategic focus in Middle East for the time being.
[indiscernible] if there are any unanswered questions, request you to share them with me on my e-mail. I have shared the email ID with you. I hand over to Deepakji for any closing remarks.
No. Naveen, thank you for hosting us, and I have let me be very sand that we are not really very happy with the numbers of FY '24, but although we are disappointed by the numbers, but definitely, we are quite excited and optimistic because we know the lineup of new products which we have. And so yes, we are looking for a good FY '25. That's what I would like to tell our [indiscernible].
On behalf of all of us at SKP Securities, thank you very much deeper to Jari and Rohit for taking the time out to interact with the investors. Thank you, Sanjay, for joining us online and friends about -- look out to you having you and hosting the management of aa Limited again for the next quarterly results. Thank you, and have a wonderful evening.
Thank everyone.