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Lux Industries Ltd
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[Audio Gap]Q1 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Saket Todi, Executive Director from Lux Industries Limited. Thank you, and over to you, sir.
Good evening, and thank you, everyone, for joining for the earnings conference call for the quarter ended 30th June, 2021. Along with me, I have Mr. Udit Todi, Executive Director; our CFO, Saurabh Kumar Bhudolia; and SGA, our Investor Relation advisers. I hope you have received our quarterly results and investor presentation by now. For those who have not, you can view them on our website. I hope you and your family are keeping safe amid of the ongoing COVID-19 wave. And I'm happy to share that despite facing a challenging environmental caused by the second wave of COVID-19 pandemic, our company has delivered robust revenue growth of 32% in Q1 FY '22. We at Lux Industries have been proactive to understand the significance of the guidelines issued by the authorities and have adhered to all the necessary COVID-19 protocols. During this challenging situation, we at Lux have extended all possible support to all our employees and have rolled out mass vaccination drive for them, their family members as well as the people residing in the nearby areas of our manufacturing units. We always emphasized on health and well being of our employees, including the family members, and this vaccination drive will create a safe and healthy working environment for all our stakeholders. In the current quarter of COVID-19, the curve is flattening, and we are operating at an optimum capacity and have started our regular manufacturing activities. Given the recovery of the economy in Q2 FY '22, the resilient industry growth over the last few quarters, better availability of vaccines and declining cases, we're optimistic for the upward trajectory to continue and expect a further revival of demand and consumption in the economy. Now coming to our performance for the quarter ended 30th June 2021, we are pleased to report a resilient performance that was mainly driven by the increased consumption of our products in the semi-urban and the rural market, where we have a strong presence. In addition, we are witnessing a structural shift of consumer preference in the use of the innovative products from unorganized sector to the organized sector and sustained traction for a mid-premium and premium categories. We have also been seeing the positive momentum in our online and export segments. For Q1 FY '22, we witnessed healthy revenue growth from our economy segment, which registered a growth of 32% and stood at INR 421 crores as compared to INR 319 crores in Q1 FY '21. This was led by approximately 9% growth in volumes while the ASP saw a growth of 24%, which was well above the industry average. We have also been able to increase our share of pie where Lux enjoys approximately 15% of the market share in the organized men in other category. We at Lux have been catering to a large part of consumption basket and have product pricing from -- ranging from INR 24 to [ INR 1,790 ]. Our mid-premium segment registered a growth of 30% and the volume growth here was at 12%, whereas the ASP growth was 20%. In our premium category, the growth registered is at 136%. We expect a revenue share of INR 500 crores from our premium-wear category by FY '25. For the first quarter, the advertising expense stood at INR 26 crores, which is approximately 6% of our Q1 revenue. As guided earlier for FY '22, we will gradually be reinstating our ad spend back to 7% to 8% of our revenue. But seeing the pandemic situation of the current year, we might even revise it back to 6% to 7%. Advertisement and marketing has been one of the key pillars in building our brand equity. Starting FY '17 till quarter 1 FY '22, we have invested INR 667 crores, which is approximately 8% of our revenues, and we have been able to generate INR 16.47 on every rupee ad spend. With this, I will now ask Mr. Udit Todi to share his thoughts.
Hello. Good afternoon, and a very warm welcome to everyone. I hope everyone is keeping safe and healthy during this situation. The results of the first quarter FY '22 demonstrates the resilience of the company's diversified portfolio that caters to large parts of the consumption basket. We have achieved better-than-expected performance for the quarter ended 30th June '21, not only from a top line point of view but also from the profitability point of view. Despite being present in an industry where there are a large number of unorganized and small-scale manufacturing units, we have been able to establish and leverage our parent brand Lux in a way that we have not only been able to gain market share from the unorganized sector, but also penetrate in the organized sector space. To date, Lux is present across various market segments, which has led to risk mitigation, higher growth and increased penetration across various market segments. We also have plans to explore categories like women's innerwear, women's athleisure, T-shirts, pajamas, track pants, et cetera. The merged entity will not only provide us greater financial agility but also help us to gear for the next leg of growth. On the supply chain aspect, we have one of the largest distribution networks in this industry, having a strong presence in Northeast and Western parts of the country. Our distribution network of approximately 1,170 distributors, 12 depots and 2-lakh plus retail outlets across India has helped us in the last mile delivery of our products also during this pandemic. Going ahead, it will be our effort to further invest and improve our distribution and expand presence in the South India market. We have a fill rate of 95% against the industry average of 80%. We continue to endeavor healthy profitability ratios by focusing on better product mix and rational cost optimization. Over the last quarter -- over the last few quarters, we have been able to continuously optimize our working capital cycle. Our working capital days as of 30th June, '21, stood at 165 days, which is lower by 13 days as compared to 30 June, 2020. As the business is very much seasonal in nature, so in the near term we expect it to be in the similar range of March '21, which was approximately 120 days. We expect healthy growth in our revenues in FY '22 as we are placed to capitalize on the ongoing upturn in the hosiery industry and going forward, we will continue to provide newer products that are fashionable with the best quality and comfort. With this, I would now request Mr. Bhudolia to take you through the financial performance.
Thank you, Udit. Our company reported a strong performance for the quarter 30 June, 2021. Our revenues for Q1 FY '22 stood at INR 421.09 crore versus INR 319.25 crores, registering a stellar growth of 32%. Contribution from premium brands stood at INR 57 crores, while mid-premium and economic category contributed a revenue of INR 195 crores and INR 165 crores, respectively. Our well-thought business acumen has helped us deliver consistent profitability and margins without compromising on our growth. Our EBITDA for the quarter stood at around INR 91 crore as compared to INR 57 crores in Q1 FY '21, a strong growth of 59%. Our EBITDA margin has shown a significant improvement of 373 basis points, which stood at 21.6%. Our PAT for the quarter stood at INR 63.72 crore versus INR 37 crores in quarter 1 FY '21, which registered a growth of 73%. PAT margin for the quarter stood at 15%, showing an improvement of 360 basis points compared to 11.5% in the same period last year. Our revenue contribution from export sales is at 9%, while domestic sales contribute to 91%. We have a strong export presence in around 46-plus countries. The reason why revenue split is as follows: Led by Northern India and Eastern India with 27% share; followed by Western India, 25%; and Central India, 19%. While revenue split from segment stood as follows: Mid-premium 47%, economic 39% and premium 14%. We have sufficient cash reserves, which will not only be utilized to meet the company's growth requirement, but also to reward our shareholders on a timely basis. Over the years, our prudent financial decisions have not only helped us reduce debt but also become a net cash company. Please note, the numbers highlighted in the speech and the presentation are consolidated numbers, post-completion of merger with our group companies. On the CSR front, for the quarter, the company has until now contributed around INR 17.2 lakhs, while we are expecting a budgeted number of CSR for the complete year should be in the range of INR 4.5 crores, out of which company has already given a commitment to support Tata Medical Center for INR 2.5 crores for 1 operation theater, including infrastructure and medical equipments. With this, we will now open the floor for question and answer.
[Operator Instructions] The first question is from the line of Shalini Gupta from [ Ashika ] Securities.
Sir, I had a couple of questions. One is like, I believe GenX is your only -- is your main athleisure brand. And that is like INR 21 crores brand in the quarter. So I mean, if you could just say what has been the growth in the brand in GenX and therefore athleisure?
You see, our athleisure is not only GenX. In our mass menswear category, GenX has a major part in the men's athleisure wear. Then of womenswear, we supply athleisure to the brand Lyra. And in the men's premium wear, we supply athleisure to the -- in the brand ONN. So there are 3 brands. So we do not have, at present, the athleisure wise breakup of all the 3 brands constituted together. But yes, we are seeing a very good traction in athleisure wear and the overall growth in athleisure is above the average growth rate of the company.
Okay. And sir, my second question is that in premium category, Lux Premium is that INR 8 crore -- INR 38 crores. And I think that is almost entirely exported. So I mean net of that, we have a very small premium portfolio as in like for the quarter, it would be INR 30 crores. So as we have been targeting the premium category for the [Technical Difficulty] as we've been saying that, that is going to be one of the focus area for us. But are you satisfied with the kind of figures that you are seeing, as in the premium product of INR 20 crores in the quarter versus your overall -- overall figures -- overall sales figure?
Shalini, there are -- let's allow us to split the question in 2 different parts. You are right that we were having only 3 brands, one8, ONN and Lux Premium, which is nothing but mainly the export business what we do have. These 3 brands constitute put together giving me a premium category. So the idea over here is like one8 and ONN, both are very much a growing brand. And definitely, company is looking for that in the near future, both the brands will become a 3-digit number. ONN has almost reached to INR 80 crores to INR 90 crores, and we are very much sure that over a period of 2 to 3 years, it will become around INR 150 crore brand. But apart from this category, as this categorization has been done, this is by keeping in the mind that what kind of customers we are going to service the product. But in case we bifurcate the brand, this is my margin structure then around 5 brands, which is a very high potential margin driver, which is one8, Lux Premium, ONN, Inferno and Lyra. So this will become a kind of my margin driver brand falls under the premium category. So if you'll refer my Slide #9, then it will give you a realistic picture that apart from the customer servicing, if we are going with the margin structure, then out of total same brands out of 10 brands, 5 brands are coming under premium, balance 5s coming mid-premium and the economy.
Okay. Sir, can you just repeat [ these are ] brands minus Lyra?
Sorry, your voice is breaking in between.
It is clearly mentioned on Slide #9, you can just have a look at Slide #9 and it will be quite visible to you.
Okay. And sir, my other question was that, I mean, so like we are seeing -- am I clear now? Hello.
Yes, you are.
Okay. So my question was that we have seen a lot of growth coming to us from the unorganized sector, and which I would assume is because of the unorganized sector facing a lot of liquidity problems due to COVID. But now for how long do you expect this kind of growth to continue? Because I think probably in the next 4 to 5 months, the liquidity issues for the unorganized sector are going to ease. So if you could just share your thoughts on this.
No, see there are 2 things. One is the demand in the rural market and the other thing is the liquidity issue. So regarding the demand, as we are seeing the demand is pretty much stable in the rural market. But now the production of the supply or the service from the unorganized sector, due to COVID is not being taken place properly. Due to which the whole demand is being shifted to the organized sector who can supply the product in the pandemic time of COVID. So that is why we are seeing a very good traction in the rural market, where we are seeing the shift going from the unorganized sector to the organized sector. Now coming to the liquidity issue, yes, there is a liquidity issue in the rural market. And in the next 4 to 5 months, it is assumed that it will ease out very well. But as we are seeing as our brand is being demanded in the unorganized in the rural market, the first payment from our retailers to the distributors or from the distributors to the company is coming to us. So we aren't facing as much liquidity or payment issues from our dealers and distributors [indiscernible] might be with our peers. But yes, there is a liquidity issue, which will get solved in the next few months.
The next question is from the line of Vaishnavi Mandhaniya from Anand Rathi.
So basically, can you provide us with the breakup of the gross margin expansion between -- I mean, the reason for why the gross margin expansion was so high in this quarter?
So there are multiple reasons associated to it. First thing is definitely, there is a change in the mix. So if you see my high-margin portfolio from the number perspective has grown from like with a growth rate of around 136%. So that is the prima faciecally is one of the reasons, which is contributing me the higher rate of the gross margin. Second is the price hike between last year, this year, around 2 to 3x, we have already taken the price hike. And by keeping the things in mind that inventory or the raw material price is going up, we have already taken our exposure quite a bit early to stock the raw material stock in our godown. So we got a dual advantage that we got a raw material at a lower cost, vis-à-vis we have increased the price. So we were in a position to sell the goods at a higher price in the market.
Okay. So what would be the split between the impact of both of these as to how much would you attribute the gross margin expansion to the change in mix versus to the price hike?
So approximately because of the mix change, there will be an increase of around 200 to 250 basis points from the mix change in the gross margin level. Whereas the remaining 400 basis points would be coming from the increase in the price.
Okay. Also, are other cost items, right, like the ad spends, employee expenses, other expenses, et cetera, were significantly higher this quarter on a Y-o-Y basis, right? So should we expect a similar run rate going forward for the rest of the years as well?
Yes, definitely. So this quarter, like my ad expenditure is standing at around 6%, which we are expecting to continue. If you'll see in my last few quarters and the years performing generally, we carry our ad expenditure at a rate of 7% to 8%. But this year, we are expecting it should continue at 6%. So everything has been factored. And we -- the company is very much expecting that this is the best possible cost at which company should run.
Okay. And so then EBITDA margin at 21%, 20% -- 20% to 21% is sustainable going forward?
Yes, definitely, it is very much sustainable. Even if you see my EBITDA margin of March '21, which is in the similar line. So since last 2 quarters, I think we are very much delivering the number in the similar range. And we do expect that for the coming few quarters, these numbers should continue in the similar range.
But then if the price hikes come into the base similar of the price hikes last year, then it's only penalization that will drive margins, is that right?
No see the price hike, the actual effect of the price hike was from the quarter 4 of the last financial year. So for the first 3 quarters, there will be a high ASP growth in comparison to the last -- first 3 quarters of the last financial year. But if the cost of the products has increased by -- for example, the cost of the product has increased by 10%, then we have increased -- we have tried to increase the price by 11% to 12%. So there has been an incremental increase in price above the cost of a product. So that is the gain which we are gaining in our gross margin, plus there's a mix change.
Okay. Okay. So 20% to 21% EBITDA margin is sustainable?
Yes, very much.
The next question is from the line of [ Himanshu Aire ] from [ ES ] Securities.
Congratulations on great performance. So firstly, just a clarification. This 20% to 24% price hike pricing growth that you're talking about, are these actual increase in realizations or price hikes that you have taken? Or is there some mix impact there as well that within the mid-premium, you have sold the higher realization products more?
So, [ Himanshu ], as you see the product, we have already stated this previously also that the mix has changed. And when the mix changes, so for example, last year this time, say, ONN as a premium-wear brand or Lyra as a ladieswear brand was not selling much because of the lockdown scenario. The urban area was not much open, which in this current lockdown, we saw that as soon as the lockdown was lifted, ladieswear, men's premium wear, everything started to sell. So obviously, the product mix changed. So earlier, outerwear was not selling much, whereas this year outerwear is also selling much. So yes, when the product changes, there is a change in ASP as well. And at the same time, there has also been an increase throughout the range of products because of the increase in raw material prices.
Okay. So -- but if you can give a number as to what would be the price hike, say, versus last year on a same product?
It is difficult to put an exact number to it. But just to give you a sense, about -- in the 24%, I'm believing about 15% should have been due to the price hike, whereas about 10% should be due to change in products.
Understood. Understood. Got it. Second question would be to understand your philosophy with regards to gross margin. Like in the current environment, we've grown well gross margins -- I mean, over the last couple of years, we've seen a significant expansion. So do you think we are at the risk of losing out on some growth prospects or market share going forward, given that we are running at a much higher gross margin level now? Or, I mean, do you think you could have taken a slightly lesser price hike and maybe driven growth? So just wanted to understand whether your aggressive price hikes in your view are impacting growth in any way or not?
So, [ Himanshu ], if you see, even if you look at the growth figure this quarter, we've achieved about 32% top line growth. And even if you look at the overall industry growth, we are pretty sure that the industry will not be growing at this higher rate. So we are definitely gaining market share. There is no 2 ways about that. And even despite the price hike, we have always kept this at the back of our head, that at no point of time are we willing to lose out on market share. So whatever price hikes are taken are always taken keeping in mind that market share is something which we have to gain not lose. And we have consistently done that over the past few quarters. So -- I mean, we can be rest assured from that point of view, that all the price hikes which are taken are taken -- the decisions are taken after seeing the market situation. And keeping in mind the fact that we should not lose out on our growth. And we've -- I mean, overall, if you even look at the current quarter, the growth has come in quite well only.
Understood. Understood. Then just a follow up on that growth that you're talking about for the current quarter. I mean, we've seen a lot of companies talking about the stress in the month or especially in the month of May, where semi-urban and rural markets also were impacted by the pandemic. So what explains this strong growth? I mean, do you think that we could have done even better than this, if not for this pandemic? Because your numbers don't seem to be impacted by this to a large extent.
So see, there are 2 ways to look at that. A, definitely had the pandemic not been there, the top line would have been considerably higher. We have lost out on a good number of working days. And B, if you also look at the fact that last year, again, during the lockdown, the flavor of the lockdown was very different. Last year in the lockdown, urban cities were not quite open. Whereas in the current lockdown scenario, we have seen demand coming in from the urban side as well. So due to a low base effect also in the premium-wear category, if you see, there has been a kind of a low base effect, due to which you can see the significant amount of growth coming in on the premium side.
Understood. Just my final question would be on the working capital front. Again, we have seen a very strong improvement out there. So I just wanted to understand, I mean, are there any structural changes that you have done in the way you work with the -- with your dealers, et cetera, in terms of receivables? And are you -- I mean, working with a much lesser level of inventory? So -- just wanted to understand how much improvement over the long term we can see? I mean what's a steady-state number for you on this side?
So, [ Himanshu ], as you will see, like in the market itself, we have achieved a working capital days of around 122 days. And still, like we are very much expecting that similar kind of number we should deliver in the current year. Yes, definitely there is some level of the scope to improve the working capital -- working capital further, but it will take its own time. Immediately, if you will ask me between 12 to 15 months, any kind of working capital further improvement, which is very difficult but it's challenging.
The next question is from the line of Ankit Kedia from PhillipCapital.
I have 2 questions. First is on the inventory. You mentioned you are sitting on the low-cost inventory, which would have helped in margin expansion. So how much more inventory do we have in the system? And have you started to buy the high cost inventory now?
So still, Ankit, so see still we have a similar level of the inventory, which we are carrying. So it is a kind of vicious cycle. Like we are always buying the inventory at the lower price, whereas we are increasing the price of our products. So once we take the hike -- so once we buy the inventory basis that will decide how much is the price hike we are going to do for the future, right? So on a continuous basis, my consumption will be at a lower cost as compared to the price at which I'm selling the product in the market.
Sure. But I just wanted to understand, yarn prices up by 20%, 30% in the last 6 months. So currently, are we -- what is the old cost at December or January inventory is still there in the system? Because we have taken a price hike in the month of March, incrementally now as you all alluded already, the price hike is much more than the raw material price increase we are taking. So I believe the next price hike will come after 5, 6 months and not immediately, the raw material prices stabilizes from here on. And hence, I just wanted to know what is the low-cost inventory in the system?
Just to add on to it, for the next 2 quarters, majority of our sales come from the winter wear products. And in the winter wear, we started manufacturing from December last year. So whatever yarn, which we have procured for manufacturing in December was at low cost, then January, the cost increased more than sequentially, it has increased more over the next 6 months from December. So and -- but the product -- of the winter wear products, which we are selling right now, is at the cost, is at the price which is currently prevailing in the market. So we'll get that advantage over the next 2 quarters in the winter wear segment at least, that our cost of production will be very low. And in comparison to that, our gross margins would increase. And similarly, now coming to the innerwear segment. Yes, innerwear segment for the next 2 to 3 months, we would easily assume that we will be able to consume all our yarns at a lower price. And the pricing in the market is being done according to the current market price.
Sure. That's helpful. My second question is on the premium products. What is the strategy there? We are setting up a distributor network instead of a wholesale channel for the premium portfolio. So which markets are we targeting? Are the counters similar to our entry-level product counters? Or what in the next 3 years, from the south market or from the other markets, how are we looking to penetrate the stronghold of some of the other competitors who are there in the distribution network?
Yes, see our premium wear product is majorly sold in a distribution-led channel rather than a wholesale-led channel. So the sales team of the company are responsible for selling the goods in the market rather than the wholesalers wholesaling it. So that is a structural difference in selling the products, number one. And secondly, we are planning to enter into the South Indian market on a very organized basis. So it is a long-term program. And I think -- so you can see South India getting compared to the other parts of the country in the next 4 to 5 years.
So just to take the point ahead, what is the current distributors strength we have? And also from the EBO channel, the strategy which we have, how will that club in with the premiumization? Just to -- so in 3 years' time, what could be the share of premium products we are looking at predominantly? Because that mix change will also help in the margin expansion.
So, Ankit, currently, we have around 1,170 plus distributor, close to 1,200. And over a period of 2 to 3 years, we are expecting that our premium segment should give us a revenue in the range of around INR 500 crores.
[Operator Instructions] The next question is from the line of [ Dhruv Bhatia ] from BOI AXA.
Sir, first question is I want to take it to the Slide 9 of your presentation. This presentation of the PBT margins we've broken out between certain of the brands, versus the last presentation, it seems to suggest that the PBT margin band, which you have given for brands like one8, Lux Premium, ONN, about 22% to 26% versus the last quarter where you had mentioned the band to be 18% to 21%. Same was 15% to 21% for GenX and [ Lux only ] versus last quarter. So I mean all the 3 brand segmentation, you have inched up the margin band. Could you just talk about why that has been so and why you're not then guiding for better EBITDA margin as well for the company?
So no, this basket has been changed mainly because of the incremental margin, because earlier the products, which were delivering, say, 12%, 13%, 14%, now it is coming under the 15% basket. And similarly about the different other basket from 15% to 21% and 22% to 26%. So it is mainly because of the price hike. And my price hike, as just a few minutes back, we have explained, it is incremental as compared to my increase in the cost.
But, I mean, does that mean that the price hike that we have taken is more than the raw material cost increase?
Yes, yes, definitely. This is what we are saying. The price hike taken in -- my price hike taken as compared to my cost is quite incremental in the nature.
So does that mean that the EBITDA margin guidance that you are giving that it will be a similar 20%, 21% band is still a very conservative number that you are working with?
No. We think this is the best possible number at which we are running the business because the price hike, what we are taking versus the goods at which we are buying our raw material, both has a difference of around 2% to 3%. And this difference will continue for further few quarters and the similar level of the EBITDA margin we can deliver.
Okay. And the second and last question is, if I look at your mid-premium segment in the last quarter, the revenue was about INR 313 crores, this quarter INR 195 crores, a blip of almost about 38%. Could you break up this brand has actually building significantly because Lux Inferno was a part of last quarter number and obviously, this quarter is showing 0. And hence, much -- the higher decline on a sequential basis in the [ Lux premium ]?
So see, Inferno as a product is a winter wear product, so the sales will come in quarter second and quarter third. So that is why Lux Inferno right now is standing at 0. And if I talk about the growth of each individual brand in the mid-premium category. So just to give you a flavor that say, because of the -- as I said, because of the low base effect, you could see astounding figures. So for example, Lyra would have grown by about 180%. And GenX has been fairly flattish because last season also, we did quite a good amount of sales. Lyra has grown quite fast. And talking about Cozi, Cozi has grown by about 17% to 18%. And Inferno has, because it is not the season for Inferno, we do not see any figure for that.
I was actually asking from a sequential point of view, what has led to a 38% blip in mid-premium segment?
I'm sorry, what has led to?
The mid-premium segment, if I see the sequential decline in revenue is about 38%. So which brand has actually led to such a sharp decline in sequential numbers?
So I believe you're comparing it with the March quarter numbers.
That's right.
Yes. So you also have to take into account 2 factors. One is the seasonality of the business. And second of all, the March quarter was a complete quarter where we got a full 90 days of working. Whereas if you look at the current quarter, the number of days of working due to the lockdown scenario was about 60 to 70 days.
[Operator Instructions] The next question is from the line of [indiscernible] from [ SG Hava ] and Company.
Do we have a coherent strategy for selling to our own website or to selling to e-commerce channels? Or even how are we doing with the modern trade? And are we employing any influencers on the social media channels like Instagram or [indiscernible] promote our products?
So we have just recently off late, we have created a separate vertical for our e-commerce sales and a separate vertical for our EBO sales. So these are 2 separate verticals, which the company has created with a separate team and a dedicated effort in that direction. So the team is already working both in the EBO direction as well as the e-com direction. E-com, we have set -- we have set an internal target that in the next 3 years we'll reach a run rate of INR 100 crores per year ex-factory sales. I'm not talking about GMV sales. So -- and given the effort and what the team is already doing, we are pretty sure we should be able to achieve that in the next 3 years. And that will be on account of both third-party websites such as Flipkart Myntra, and at the same time, our own website. So that is the strategy which we are doing on that front. And again, modern trade, again, as a channel for us is a very important channel, and we will be -- definitely, we are already present in the modern trade vertical as well, and that is one area which we need to scale up, which we are looking at.
So have you done any special hiring? Because this would require a totally different skill sets from the traditional management [ corner ] and so are we really -- because a lot of other brands like bewakoof.com are now planning to go into extensions in innerwear and stuff. That could really -- we could capture a lot of space there.
So as we are speaking like we have already done, we -- like we have already created a separate dedicated team, including a lot of new hirings as well as the combination of the old team members for the purpose of online and the EBO. So our complete team of around 12 to 15 members has been deployed or has been this vertical has been created just to focus on the online and the brand outlets business for Lux.
[Operator Instructions] The next question is from the line of [ Satish Devani ] from -- he's an individual investor.
When can we expect dividend to be declared as you have reserve declaration in the March quarter? Hello?
Yes. So we are -- so in our next Board meeting we are planning to go with the Board, and we'll give our proposal, and this is the Board direction, which we'll go for the -- we will take the decision for the purpose of dividend.
The next question is from the line of Ankit Kedia from PhillipCapital.
Then on the cost savings for the 2 companies we have merged of the promoter group. So how much of that synergy benefit is already there in this quarter? And over the next 2 to 3 quarters, how much more synergy benefits could come in the system?
So, Ankit, around 100, 200 basis points of the cost saving has already been factored in the P&L, and we believe that this is the range which will continue for the few quarters.
Already this quarter, we have seen that benefit of 100 bps in our margins.
You are right.
The next question is from the line of [indiscernible], individual investor. [Operator Instructions] We have a question from the line of Arpit Shah from Stallion Asset.
Congratulations for a good set of numbers. I just have one question. What would be sales from the wholesale channel versus the distribution channel currently?
Can you come again with the question?
Yes. How much would be the sales coming from distribution channel versus the wholesale channel for the company?
So all our premium wear products are majorly sold in the distribution-led channel and the semi-premium and the economic products are being sold from the wholesale-led channel.
And do you have plans moving the economy products to the distribution channel, because I think actually unlock a lot of working capital for the [ company ]?
No. Actually, all these 3 categories are being very specific to their selling channels, and there is no thoughts of changing the selling channel as of now.
So around 120 days, that would be working capital FY '22 [indiscernible]?
Yes, the working capital was at 120 days, and we will try to improve it as much as possible.
And an earlier participant has already commented, we have probably to be a lot higher than what we are [ implying ] [indiscernible] a lot higher than what we have shown on your Slide 9, so—
Sorry, you are not audible. There is a lot of disturbance from your side.
Right. Mr. Shah your voice is muffled, would request you to connect back. [Operator Instructions] As there are no further questions, I would now like to hand the conference over to management for their closing comments.
I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with us or Strategic Growth Advisors, our IR advisers. Thank you once again.
Thank you very much. On behalf of Lux Industries Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.