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Lux Industries Ltd
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Ladies and gentlemen, good day, and welcome to Lux Industries Limited Q3 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on 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, Promoter and President Marketing from Lux Industries Limited. Thank you, and over to you, sir.
Good afternoon, and a very warm welcome to everyone. I have with me Mr. Udit Todi, President Strategy; our CFO, Mr. Saurabh Kumar Bhudolia; and SGA, our Investor Relation advisers. Firstly, I welcome Mr. Bhudolia, who has recently joined us as the CFO. By qualification, he is a chartered content with a career spanning over 15 years with extensive experience in corporate finance, business partnering, financial planning and analysis, strategic planning, audit and risk management. His previous experience includes his critical role with Future Lifestyle Fashion Limited as the Chief Financial Officer. Prior to Future Lifestyle Fashions, he was at the core of the finance function with Mondelez International, Sula Vineyards Private Limited and Tata Steel. Mr. Bhudolia will be taking over this role from Ajay Kumar Patodia, who has been the CFO of the company for the last 15 years. We welcome Mr. Saurabh to Lux Industries and wish him the very best. Moving on with the call, I hope you and your near ones are safe and healthy. We have uploaded the results and investor presentation, and I hope you have gone through the very same. For those who have not, you can view them on our website.The innerwear industry is constantly evolving, and we have always been at its forefront by offering wide range of differentiated and innovative products across multiple segments. Also with the rise in the work-from-home model, a new segment of athleisure has come into prominence, which offers much tremendous scope for growth, especially with the current positioning of the company.Over the years, we have witnessed an evident shift in the industry, right from changing consumer needs and preference, expansion of markets to more recently a reduction in the spending power and the supply chain bottlenecks. However, our decades of experience in the industry, team of experienced professionals, strong business model, extensive network of dealers and other supply chain elements, coupled with the state-of-art manufacturing facilities has helped us to adapt to these changes and respond suitably to fulfill the needs of our customers on an ongoing basis.Furthermore, the rural market, which was practically untapped in the women's innerwear segment are now opening over time with greater exposure and acceptance. Another exciting and new endeavor is the opening of our EBOs network, which is called Cozi World, a unique and pioneering concept of standalone stores showcasing the entire range of brands from the house of Lux Industries. We are operating 3 stores currently with plans to add on another 6 by the end of March in Tier 1, 2 and 3 markets and aim to increase the number of stores substantially in the next 2 to 3 years.To conclude my remarks, I believe that customers are now referring to choose a recognized and branded product over an unbranded one, coupled with major events like demonetization, GST adoption and more recent COVID-19, which has had a massive impact on all the business and led to a shakedown in the unorganized sector. This has helped us to increase our market share.Now I will ask Mr. Udit Todi, who is spearheading the strategy for the company, to share his thoughts.
Hello. Good afternoon and a very warm welcome to everyone. I hope everyone is keeping safe. Coming to our performance for the quarter and 9 months ended December 31, 2020, we have delivered our best-ever quarter with record revenue and a strong EBITDA growth. All this despite considering several operational challenges amidst the phased reopening of the economy, increase in raw material prices and container shortages. This outcome has been characterized by a simultaneous combined effect of price and volume growth across our category segments.On the supply chain aspect, we have one of the largest distribution networks in this industry, having strong presence in north, east and west parts of the country with plans under consideration for expansions in the south, wherein the growth potential seems extremely promising. We have been in constant contact with our distributors, dealers and retailers, who have managed to provide us with valuable data points to sense the market pulse and the uplift in consumer sentiment with the economic customers moving to the mid-premium segment and the mid-premium customers steadily opting for the premium segment.We are witnessing a continually rising demand trajectory in the rural and semi-urban areas, with the urban areas being the laggard due to the phased reopening, but showing green shoots as we step into the final quarter of the financial year. Lux has always been at the forefront in undertaking innovative ways of marketing and promoting and advertising its products.For the 9 months gone by, our advertising expenses stood at INR 41 crores, which is in line with our FY '21 guidance of 4% of our revenue. We expect our ad expense to reinstate back to 7% to 8% of our revenue from next year. Along with marketing efforts going digital, the company has embarked on the path of adding value through key business initiatives.Tie-ups with various online partners like Amazon, Myntra, Paytm, Flipkart and others have resulted in around 4,000 orders per day. The response has been very encouraging. Our endeavor is to enhance product offerings and continue the growth momentum over the next few years.Our proposed scheme to merge J. M. Hosiery Company and Ebell Fashions Private Limited with Lux Industries Limited is also coming to a closure with the merger to be completed soon, post which both the companies will be subsumed. This merger will strengthen our position and will help us fulfill financial objectives, not only in terms of growth, but also in terms of strength and efficiency of our balance sheet. This merger will help unlock substantial value for our stakeholders and streamline the business.With this, I would now request Mr. Bhudolia to take you through the financial performance.
Thank you, Uditji. So like our company reported a strong quarter. Our revenue for quarter 3 FY 2021 stood at INR 393 crores versus INR 306 crores last year, giving a growth of around 29%. Our EBITDA stood at INR 80 crores as compared to INR 55 crores of last year same quarter. We have been able to maintain our EBITDA margin at 20% plus as compared to 18% in quarter 3 FY 2020. Our PAT for the quarter stood at INR 55 crores versus INR 33 crores in quarter 3 FY 2020. PAT margin for the quarter ended stood at 14%, showing an improvement of around 300 plus basis points compared to 10.9% in the same period last year.Coming to quarterly performance of J. M. Hosiery, the company achieved a revenue of around INR 93 crores in quarter 3 current year as compared to INR 64 crores in same quarter last year, giving a growth of around 45%, while Ebell Revenue (sic) [ Fashions ] registered a revenue growth of 18% to INR 78 crores in current quarter versus INR 66 crores last -- same quarter last year.Now coming to our 9-month performance. Our revenue stood at INR 1,028 crores vis-à-vis INR 924 crores registering a year-to-year growth of 11%. Our sales and marketing expenses stood at INR 41 crores, which is approximately 4% of our revenue.Just a few minutes back as Uditji said we have like closed the -- we have closed our marketing and advertisement expenditure at around 4%. EBITDA for 9 months FY '21 stood at INR 201 crores as compared to INR 144 crores for 9 months in FY 2020, giving a growth of 40% on year-on-year basis. PAT for 9 months FY 2021 stood at INR 137 crores as compared to INR 93 crores for 9 months in FY 2020, giving a growth of 47% year-on-year basis. PAT margin stood at 13.3%, a stellar improvement of 330 basis points as compared to 10% for 9 months in FY 2020.Coming to 9 months performance for the group companies, J. M. Hosiery and Ebell, J. M. has clocked a revenue of INR 252 crores, while Ebell Fashions revenue stood at INR 147 crores, thus making the group turnover of around 1,400 plus crores.On the working capital front, constant efforts to reduce the working capital cycle and in turn to improve operating cash flows are now yielding results. For the quarter ended December 31, 2020, our working capital cycle has reduced to INR 404 crores as compared to INR 494 crores in March 2020. Going forward, our aim is to reduce our working capital even further.I would also like to give an update on our debt position. As on December 31, 2020, the company is practically debt-free and continues to be a net cash company. Even on a group level, considering the 2 merging companies, Ebell and J. M., our company will continue to maintain its status quo of being a net cash company.So with this, now we will allow -- we will now open the floor for question and answers.
Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Nihal Jham from Edelweiss.
Congratulations, Saket and others, on this wonderful performance. My first question was that if I look at the growth that the company has delivered in Q3, even for 9 months, it is obviously very strong underlying and much better than what I would compare with peers. What sense I wanted to get on is that, is it that in the markets that you are operating in, the end customer demand is also similar? Or is there a clear-cut case of market share gain? And if that is the case, just if you could highlight the reasons for this?
So for us, this year, it has been a clear-cut case of market share gain and so has been the previous quarter results also. So on an average, if you compare us to the listed peers, which are there in the market as well as with the unorganized sector, you'll see that our growth rates have exceeded even against the listed peers as well as the unorganized sector.So it's a clear-cut case of market share gain, and the primary reasons for these being that our winter wear category has shown very good growth results, and so has our basic categories, such as Lux Venus and Lux Cozi. So we think we are very happy that -- in fact, if you would look at the results of the 29% growth, which you have seen in quarter 3, our volume growth is also almost same, which is at 29%. So almost the entire growth is coming from the volume growth itself.
That's helpful, Udit. But just to -- can you be a little more specific that is it you're saying primarily the winter wear category, which has shown growth, which is much higher than the overall company growth of 27%?
No. If you think -- no. So quarter 3 is very heavy on winter wear sales. Otherwise, if you look -- even if you look at the 9 monthly results, even at the 9-monthly results, the volume growth is almost at par with value growth. So it's almost the entire growth is coming from the volume growth only. And we have grown across all categories, in fact, except for maybe exports, which have been slightly sluggish this year due to the pandemic situation. But otherwise, we have witnessed growth across all categories.
Would it be possible to give us -- and so what was the growth only the winter wear category and the contribution in Q3?
So for which category, I'm sorry?
Winter wear specifically. What has been the growth and contribution in Q3?
So in the winter wear category, in Q3, we have clocked about INR 100 crores in the current quarter vis-à-vis about INR 80 crores, INR 85 crores in the corresponding period.
Sure. If I...
And winter wear as a category is also a category, which commands higher margins.
Yes. But if I just compare the fact that if I look at the winter wear growth, that is actually around 20%, between 15%, 20%, and the company growth is at 27%. So is it that the core categories have done much better or there are certain specific other smaller categories, which have seen an exponential growth in Q3?
So -- Saurabh here. So see, again, it's a very valid question. The thing is like in Lux, there are 3 different brands and categories, which have grown like to the mix lever that is Lux Cozi, Venus and then the Inferno. As explained by Udit, like Inferno, we have grown in the range of around, say, 20% plus whereas in Cozi and Venus, we got a growth upwards to 35% plus. So in Cozi, like to be very specific, the growth is around 35% to 40%, whereas in Venus, we have growth of around 45% plus.
That's very helpful. Now getting to the specifics that -- what are the steps that were taken? And what are the initiatives that are seeing us gain market share across all 3, say, Cozi, Venus and winter wear?
Could you please repeat your question once again?
Sure. I'm so sorry. I was asking that what I wanted to just get a sense of is that what are the initiatives we have been taking or specifically taken over the last 3, 6 months, which has helped us gain market share compared to the other peers also and the unorganized segment?
See, it is like in the last few months, there has been an increase in demand across the whole industry. Now it depends on which brand has more pull factor in its product. So we see that as we have invested last 10, 15 years much in the brand and -- the investment in the brand as well as the service, which we have provided to our customers, we are reaping the benefit out of that in the coming -- in the last few quarters. And whenever the competition would be intense like this, we would assume that we would come out on top of it.
Saket, that's helpful. Just one last question for my side, if you could give the absolute volume number for this and last quarter, that would be helpful.
So the absolute volume number for quarter 3 FY '20 was 4.56 crore pieces. And for FY '21, it is 5.87 crore pieces.
We'll move on to the next question that is in the line of Bhargav Buddhadev from Kotak Mutual Fund.
Congrats team for a very strong performance. My first question is on gross margins. So essentially, given that yarn prices have been going upward, what kind of pricing actions have you taken, if you can quantify, please? And essentially, have you sort of passed on the entire increase in yarn prices, the increase in the finished good prices?
So how our selling is working that whenever there is an increase in price, yarn price, we pass on the price to our consumers. And whenever there's a decrease, we'll pass on the same benefit to our consumers key to the gross margin level at each brand or each product almost the same. So the yarn prices have started increasing from the month of November, December, so which would impact the quarter 4 sales practically. So the increment in our product prices have already started towards the end of December, and the majority increase has been happening in the quarter 4 of this fiscal year.
Okay. So essentially, starting April, we should see the entire flow-through of raw material price into our finished goods. So is that a fair assumption?
Yes. Quarter 4, you would we will see the reflection of it. And quarter 1 of next financial year, we can see the whole increment in price across all product categories.
Secondly, in Lyra, what would be the share of leggings now? And what is the plan for Lyra maybe over the next 3 to 5 years, to scale it up?
So right now, the contribution of leggings in the entire sale would roughly be about 90% -- 85% to 90%. And the way we are growing is that the other categories in which we have already entered, for example, women's innerwear, women's athleisure, T-shirts, pajamas, track pants and such categories, so these are the categories where we are investing more and more. And we believe that these will be the growth drivers also.And going forward in the next 3 to 5 years, we believe that the overall contribution from these newer categories, which is athleisure and innerwear, basically women's lingerie and women's athleisure, these are the 2 categories, which we are focusing upon. And going forward, we believe that right now, which is contributing about 10%, 15% to sales, we'll take it up to about 30%, 35% of sales.
So right now, Lyra would be close to about INR 350 crores to INR 400 crores brand, right?
No. So FY '20, we had completed about INR 250 crores to INR 270 crores of top line. That was FY '20. FY '21, obviously, because of the pandemic situation, womenswear has taken a bigger hit than menswear. So this year, right now, if you look at 9-month level, at 9-month level, we would be slightly on the decline side.
No, no, I'm trying to annualize the current run rate, so if we to forget the 9 months...
So if you're talking about current monthly run rate...
Yes, yes.
So yes, if you look at current monthly run rate, we are already clocking a growth of, on an average, 10% to 15% every month vis-à-vis corresponding period.
So by when do we sort of see this growth accelerating? I mean, you mentioned about the new innerwear categories, which you are exceeding. Do you think FY '22 can be a year where we can sort out see 2025...
We believe that in the coming 3 years, FY '22, '23 and '24, these 3 years, we -- if you look at FY '22, you will -- we will already witness an increase of percentage contribution coming in from the newer categories. With every passing year, we believe that -- for example, we are setting ourselves a target of 5 percentage increase in revenue share. So if we have to move from, say, about 10% to 25%, we are targeting 5% every year.
Okay. Okay. Great. In your presentation, you have also mentioned about EBOs. So as of now, you have 3, and you plan to add another 6, and you plan to reach about 50 by next year. What gives you confidence to start investing in EBOs because that sort of requires partnering with franchisees. And are you being able to get that confidence from your franchisee partners to scale this up to maybe say 50 by 50?
So we've launched our EBOs under the name of Cozi World. So the concept is that within the Cozi World, we'll be presenting all the bouquet of brands, which the Lux Group currently holds and give the customer a one-stop shop for their basic necessities. So if we talk about current EBO strength, we already have about 5 to 6 EBOs. And going forward, we are only opening EBOs mostly through the franchisee route. And we're already having a lot of franchisee inquiries already.In fact, the COCO stores are only limited to 2 to 3 stores. All the other stores, which are, even now currently in the current quarter, being opened up are all being opened up under franchisee FOFO models. So this gives us a lot of confidence that going forward, franchisee interest will definitely be there.Talking about investments, so most of the investment is done by the franchisee, whether it is investment in stock, investment in furniture, most of these investments are undertaken by the franchisee itself. So when it comes to the company, company's investment is very limited. So we believe that even if we are growing through this modern trade/EBO route, it will not be affecting our balance sheet in any way.
And would it be fair to say that all new launches or maybe the premium portfolio would be the ones, which will be primarily pushed in EBOs and hence competition with MBOs may not be on a like-for-like basis?
So the idea here is like with the EBO, we want to start our journey towards the retail and with a minimum exposure in the CapEx or in the working capital. As Udit has explained, we are planning to open all the EBOs trough FOFO models. So the idea over here is to create the brand perspective to put all the premium brands in the EBO and to make the customer a bit educated these are all the brands and things can be available under the roof of Lux Industries.And from here, we can explore the opportunities that if required we can move forward -- we can take a next step forward towards MBO. But for now for another 2 years, we want to restrict ourselves to the EBO, and we want to see the journey and from there, we will take a call.
Okay. And lastly, on capital allocation, we now have a net cash of about INR 140-odd crores, and this is only sort of increase, given working capital is now on the tight control. So how do we plan to spend this money over the next 2 to 3 years?
So see, again, for capital, anyway, as we know that COVID has taught us that cash is everything. So we want to be very conservative while utilizing the cash. But definitely, we will use the cash for the purpose of dividend, subject to getting the approval from the Board. And second, again, we want to put the cash for the business -- for the purpose of business growth. So the strategy is still getting firm. As soon as we will be ready with the strategy and the business plan, we will come back and we'll share the information with the market.
The next question is from the line of Shalini Gupta from Quantum Securities.
Sir, I just wanted to -- I have 2, 3 questions. So one is that you have generally been very bullish on the premium segment. Sir, if you could give a sense of how much this segment contributes now? And also, what kind of growth we have seen in the 9 months because in the -- for the rest of the industry, I mean, basically, urban has been slow to come back. And so premium growth has been a bit -- has been lagging. So if you could just speak about that.
So in the premium segment, we have 2 brands currently where we are operating. One is brand ONN and the other one is brand one8. So brand ONN for the first quarter has seen a very limited sale due to the COVID situation. And in quarter 2, we will be able to achieve our last year sales figure of quarter 2. And in quarter 3, we have seen a growth of around 15%. In the coming quarter, we can see a good growth of around 25%.So given the growth idea for around 9 months, we have been at a negative growth. But seeing the growth trend happening over a month-on-month basis, we are very positive to have a good growth over the next financial year. The same is happening in the brand one8. But one8 being a very new brand -- as last year, the base was very low. So currently, we are having a growth of around 80% to 90% in quarter 3.
Okay. And, sir, the other segment you've been very bullish on and you referred to it in the presentation today also is athleisure. And what surprises me is that a lot of people for -- in spite of the fact that a lot of people will be at home, somehow athleisure sales have not really picked up for a lot of people. So if you could just speak about how much your athleisure sales are and contribute to the turnover? And what kind of growth have you clocked?
So athleisure, mainly the sales happens from -- in the brand GenX, which happens in the company, J. M. Hosiery, which is the unlisted entity and getting merged into Lux. And as we have shown the number that quarter 3 was -- GenX dropped a growth of around 45%. Last year, corresponding quarter, it was INR 64 crores, and this year, quarter 3, it is at INR 93 crores.So majority of the athleisure sale is happening out there as well as ONN and Lyra also has a particular segment of athleisure. So overall, at a group level, last year, we were at around INR 120 crores to INR 140 crores of turnover in the athleisure segment. And this year, as the year is progressing, we are seeing a very good growth in that segment happening.
Okay. And sir, lastly, I mean, if you could -- okay, if you could just say what is the contribution of the premium segment, just premium innerwear to your sales? Not in -- there'll be some segments of thermal, women and all that, which are part of premium. But just premium in men's innerwear.
So the premium men's innerwear would have a nice one -- sale at a consolidated level of around INR 50 crores of turnover. It is just the premium men's innerwear category.
Okay. Okay. And sir, what is your EBITDA margin guidance for financial year '22 because this year has been very strong for various reasons. I mean, one main reason being that you've cut back on your advertising spend and you yourselves said that you'll be -- advertising spend will be going back to 7% levels, as they used to be. So what kind of EBITDA margin should we pencil in?
So we would try to maintain an EBITDA level margin of 18% because in this year, you have seen the gross margins going down because of the basic and the economy range and the mid-level range of products growing exponentially than the premium product range, which gives us a better margin. So next year, I think so, the premium segment as well as the export segment would also contribute equally to the growth of the company or better than the basic range. So we expect the gross margins to improve next year, which would reflect, again, in the EBITDA level margin.
Okay. And as for your third quarter, volume growth has been around 27%. You said that basically, the top line growth is mostly volume-driven. And you yourself said that a lot of this is driven by the economy segment and the mid-premium. So if you could just say how much do each of these segments, economy and mid-premium, contribute to your top line growth?
So if I would give you the volume-wise in quarter 3, Lux Venus had a volume growth of around 43%, whereas Lux Cozi had a volume growth of around 36%. And together, the sales is approximately -- or the volume is approximately 75% of the total turnover in terms of volume.
Yes, yes, yes. 75% of total. Okay. And your -- the average selling price, obviously, has not gone up because a lot of the turnover growth has been driven by volumes?
Yes.
Okay. Yes, sir. I mean, would you be able to quantify this average selling price?
Yes. So the quantity is 5.87 crore pieces and the turnover is INR 393 crores. I think so we can get mathematics out from there.
The next question is from the line of Prerna Jhunjhunwala from B&K Securities.
Congratulations on strong set of numbers, sir. Sir, just wanted to understand the distribution network expansion in the quarter on a Q-on-Q or a Y-o-Y basis, so mainly our MBO network or distributors, regions, et cetera.
So I think in the current scenario of the COVID-19 situation, there has been a very negligible growth in the distribution expansion because right now the distributors are very precarious in choosing the brands. So they are -- in fact, many distributors are, in fact, reducing the brands, which are less demanding in the market and they're keeping only strong brands with them. So these 9 months have been very difficult for any brand to enter into a new distribution or -- in a new distribution category or evolving as distribution network.
Okay. And if I want to understand your EBO network expansion, what kind of area are you looking at existing places where you are distributing currently, which are strong in nature or more or less southern where we want to establish our presence. Could you just help us understand our EBO network expansion strategy?
So we are trying to expand EBOs in -- there has been no particular decision so as to expand in areas where we've been weak. We've been expanding everywhere. We've been just keeping in mind that we are keeping -- choosing places where the rentals are low. We are not choosing premium markets. We are keeping the mass crowd in mind where we -- whenever we are choosing a location. So we have been opening EBOs keeping that economics in mind that at the end of the day, we need to make money out of it.
Okay. Okay. So it is not likely to cannibalize your existing network is just what I wanted to understand.
So basically, the customers which end up -- which land up in an EBO or in a modern trade is very different from a customer who would walk into another MBO or a general mon-and-pop store. So the 2 universes are quite different and very rarely they overlap. So we are very sure that the EBOs and modern trade presence, which we're trying to make, will definitely attract and draw new customers on board with us.
Okay. And sir, what is the contribution of e-commerce revenue to our revenue -- total revenue?
So at the group level -- so right now, e-commerce has been quite a new -- nascent thing for us. So at the group level, we have clocked about INR 15 crores to INR 20 crores of sale, which is roughly about 1% of our top line. And we believe that there is a lot of headroom for growth going forward, and that, in fact, has been one of our core focus areas. And we believe that in the next 2 to 3 years, we will be exponentially growing in the e-commerce category, and we've taken concerned efforts for that. And we have set up an entirely new team to help the e-commerce strategy. And we believe that in the next 3, 4 years, we'll at least be at 4 to 5x where we are standing right now.
4 to 5x, means our share and will our...
Our share of e-commerce in the overall pie will definitely increase.
See, the idea over here is that still like we are in the learning phase, and we are making a complete -- we are still in a phase where we are creating the groundwork to make us e-commerce a separate vertical. So we want to get into a single-fit picking and the marketplace organization. And for that purpose, we are hiring the skilled people who can create this complete different vertical for us. And from there, we are clearly looking that it can become INR 100 crore, INR 150 crore kind of business gradually in another 3 to 4 years.
Okay. Okay. And sir, just wanted to understand your product mix. An earlier participant also asked the same. But putting it differently, I just wanted to understand your revenue shares with respect to innerwear versus outerwear or innerwear versus athleisure versus winter wear, so -- and how is it shaping up going forward? Do you see athleisure gaining a lot of share? Or it will come back to normalcy with people resuming offices, et cetera? Sir, some color on that would help.
Yes. So the company is operating across multiple brands, and every brand has their own share of innerwear and outerwear. So at the group level, we do not have an exact figure as to what the overall innerwear versus outerwear versus winter wear versus athleisure looks like. But yes, just to give you a color, just to give you a flavor as to how it looks right now, we're seeing that the growth definitely on the outerwear side/athleisure side is much higher compared to the innerwear category, obviously, because the ASP is also a much, much higher competition in a category.If we talk about the T-shirt or pajama or a track pant, the average selling point is much higher compared to a vest or a brief. So -- and thanks to the pandemic situation, also, people have started using more and more such products. So the growth on this side is definitely far more superior. And going forward also, this has -- these are the categories where we actually want to grow and make our presence felt. Because for us, these are newer categories, smaller contributions to the top line. So for us to grow these categories at a much faster rate will be much easier.
Okay. Sir, just an extension to this question of athleisure. How is the competition in this segment? Because I believe there are a lot of regional players in the market in this category? So scope for branded players is very high. But how is the competition there? And how difficult it is to scale up in this business over the next 4 to 5 years?
See, the way we are seeing the market currently, definitely, there are the number of competitors. But as the company has placed itself in all the 3 verticals, economy, mid-premium and premium, so from economy point of view, we are always trying to create -- we are always trying to increase our market share, which will give me a boost in my top line, whereas in premium, we are trying to boost our profitability. So with the kind of nature of business, we are -- definitely, we would be having a larger reach as compared to the regional player. And with that perspective, we think that we are one step ahead as compared to any other regional or the national player in the athleisure category in India.
Okay. And the last question is on one8. Sir, any update on revenue or profitability there? How is the brand shaping up? And what are the key factors that you are -- that is driving it? And any key challenges that you would like to highlight?
Okay. So the revenue from one8 for the first 9 months would be approximately INR 6 crores to INR 7 crores of the turnover.
Okay. And what about the traction in this brand?
See, the traction in the brand is very strong as last year just the one8 innerwear, we -- the whole year, we clocked a turnover of around -- roughly around INR 3 crores. And from INR 3 crores for the first 9 months, we have reached around INR 7 crores, and we intend to close it at INR 10 crores this financial year. So roughly 3, 3.5x, but the base is very small, so it is not wise to count the percentage game right now.
But this INR 10 crores is coming after considering the lockdown of 3, 4 months, where actually there was 0 sales. So if it would have been a full year, then I believe that turnover would be in the range of INR 12 crores to INR 15 crores.
We move on to the next question. That is from the line of V.P. Rajesh from Banyan Capital.
Just 1 question. You said about the distributors...
Sorry to interrupt, Mr. Rajesh. Sir, your voice is breaking up.
Is it better now?
A little bit better, sir.
Okay. So my question was that given what you said about the distributors, is it fair to conclude that the market share is shifting from the unorganized guys to organized guys like you?
Yes. It shifted.
Okay. And do you think this will continue and, therefore, the organized players will become what percentage of the overall market, let's say, in the next 2, 3 years?
See, it is very difficult to say that at what date will the unorganized segment diminish, but you would say for the next few quarters coming in, the unorganized share would definitely go down and the organized would gain the market share.
Okay. And just finally, do you see the unorganized players then coming back, maybe, let's say, 6, 9 months or a year down the line, given what happened around demon? I'm just curious about that.
Actually, once when the shelf space is captured in a retail outlet, it is very difficult to capture that shelf space with the unorganized segment as well as, as I said before, sometimes the distributors have become very choosy right now with the brand in which they are working in. So they are betting on a powerful brand rather than an unorganized brand. So the distributors are itself moving towards that -- the brand, which has a better pull, they would continue to work in that brand. The same concept is going on with the retailers, this is on the demand side.Whereas on the supply side in unorganized segment, after COVID has taken place as well as the increase in yarn prices, only the organized players are there, which are working in full-fledged condition, whereas the unorganized manufacturers, which are generally on -- which generally work on a cash rotation basis, has -- it has been very difficult for them to survive through this pandemic.
[Operator Instructions] The next question is from the line of Kedar B from Compositer PMS.
My first question is about the EBOs that we've already opened. So would it be possible for you to give some sort of an early sense of the unit economics involved? So for example, what sort of monthly run rate are we doing? What kind of inventory levels are we actually stocking up at each store, something on those lines?
So right now, it would be not wise to see which products are moving and at what rate it is moving because it has been just around 2 to 3 months, full month's working for the EBO. So it's -- so we should go through a complete season, which involves summer as well as winter. Right now, we are seeing the winter wear product moving faster than summer wear product. But we know that in future, summer wear would also gain more share in the pipe. So it would be unwise to calculate at what run rate right now are the EBOs clocking sales until we complete a full season.
Okay. Okay. Because the -- historically, if I just look at the numbers at a company level, we've been sitting on almost 75 to 90 days of inventory. That's around 2.5 to 3 months. So would it be a reasonable assumption to kind of make that, that will be the sort of inventory holding? Or would it be natively different though I know it's kind of latest?
See, it's still -- if you've seen, the company, as a whole, we are still achieving the whole stock turn. And definitely, at the start of the call, we discussed the company is still working towards further decreasing working capital. And definitely, we will unblock the bottlenecks if we found anything and efficiency will be put on the table. So for now, yes, this is the inventory level, and there are all the efforts to, again, reduce the working capital blockage and inventory by another 3% to 4%.
Okay. Okay. That helps. So at what point of time will we actually start considering, let's say, a foray into the large-format stores as well, now that we are also looking at EBO?
We have just started our journey towards the EBO. And still, we need to cover our learning curve. Once we are ready, definitely, we'll explore the opportunity for MBO as well. But yes, it will take its own time.
Okay, sir, okay, sir, that helps. So my second question is on the newer categories, that is the women's innerwear plus the athleisure segment. So even over there, the inventory levels, how are they compared to our standard legacy products, is it on the higher side or are we able to maintain the same level as we've traditionally done?
So you're talking about the Ebell Fashions, correct?
I'm talking of the newer categories that you sort of explained on one of the previous participant's questions. So that's the athleisure segment plus Ebell plus also the women's innerwear segment.
See, if you look at women's innerwear, obviously, because it's a newer category for us, so right now, we are building -- we are sitting on higher stock levels, obviously, because we are also seeing high growth rate going forward. So initially, whenever a brand is getting built up, your initial stock levels are higher and sales are lower. And as the sales picks up, the inventory remains the same, and talking about -- overall, if you look at Ebell Fashions, when the stock levels are pretty much on the lower side at an overall balance sheet category -- balance sheet level.
Okay. Okay. And final question from my side. So the way you sort of described that you have a specific team that is in place to look at your foray into e-commerce as a channel, so any plans of doing something on similar lines once we have a critical mass on the EBO or the LFS side? Or do you think the current team is probably good enough to handle the expansion on that front?
So we already have a separate team, which is taking care of e-commerce, and the similar team will also be handling operations for the EBO channel as well. So it will more or less be a common team with -- where we'll be adding on a couple of members, those who are talented in the e-commerce sector, specifically. But overall, more or less, the team would be the same. And we've already taken on people those who have a very solid e-commerce background. So we are very sure that in the next -- in the coming few years, they'll give us good results.
The next question is from the line of [ Deepak Madhurdas from LSC Securities ].
I would like to congrats you for a good set of numbers. Sir, there are just 2 questions, sir. One is the scheme of amalgamation, like how long do you think will this be complete, sir?
So as we mentioned, we are hopeful that in the next 2 to 3 months, we should be able to complete the process. They're already halfway through the required regulatory approval, and we believe we are just a couple of steps away, and what we are trying for is that we should close it as soon as possible. And fingers crossed, if everything goes as per the schedule, then we believe that the current fiscal year ended balance sheet should come out as a merged balance sheet.
Okay. Okay. Okay. Got it, sir. Sir, one small query on the balance sheet front. If you see note #29 of your other expenses, that is page #182, sir, there is a small outgo of INR 5 lakh paid towards royalty charges. Can I just -- can you please explain what is this for?
So this royalty charges is from Lux to Biswanath Hosiery as Biswanath Hosiery owns the brand Lux. There has been a perpetual agreement between Biswanath Hosiery and Lux Industries Limited on a very minimalistic basis of royalty. So this is that royalty given.
So if you see in this entire scheme of events where Lux has clocked a turnover of about INR 1,200 crores, a royalty of INR 5 is something which is quite negligible.
Yes, yes, correct. Yes, that's correct. I just wanted to just understand like all the other -- all the brands and other things, we are not paying any royalty for that, no? That is the only thing I just wanted to understand.
No, no, no.
Yes, that was the only concern like the royalty payment was there, so anyway. Yes. That's all for me.
The next question is from the line of [ Rishyant Agash from Brivo Commercial ] 50:20.
Most of my questions have been answered, sir. Just a bookkeeping question, sir. So what is the debt and cash as on December 2020?
So the -- as on December 2020, Lux Industries Limited net cash position is positive. At a gross level, like we have a debt of around INR 40 crores. Out of INR 40 crores, INR 25 crores is in term loan and INR 15 crore is towards the EPC borrowing. Other than that we are -- at a gross level, we have INR 140 crores of the positive cash balance, which is lying in the system. And mainly this cash has been generated from: basket one, that is a generation of the positive EBITDA; basket 2, after releasing from the working capital.
The next question is from the line of Anjali, an individual investor.
My question is around the working capital. I know it reduced in this quarter. Could you just elaborate on the component in inventory, what has reduced with inventory trade receivables? And what do we foresee to further reduce?
Sorry, in working capital, if you see my debtor days have come down from 91 -- from 88 days to 68 -- sorry, 91 days to 68 days. Inventory days has come down from 97 days to 79 days, and creditor days have come down from 43 days to 41 days. So almost creditor level is lying same, whereas in debtor and inventory, the days have come down drastically despite COVID.
And what's the reason for that?
So see, in debtors, they are better now. We have put up a system like to monitor the complete credit control system. We are renegotiating the credit days with the debtors and we are offering the better pricing vis-à-vis with the better turnover, whereas in inventory we have created a complete integrated model so that inventory should not lie beyond a particular day to my warehouse, it should reach out to the distributor and such as that we have completely integrated our production plans versus my supply chain process.
Understood. Understood. And you mentioned that there are efforts to reduce it by 3%, 4% more. Where would that be further coming from?
So the idea over here is the inventory -- still there are few brands where still we feel that the inventory level is quite high, which is in the ratio of around 3% to 4%, which we want to cut further, so that efficiency should come on the table. Whereas in debtors, still there are few debtors we are renegotiating our terms. And once it is done, it will also add value to the balance sheet.
Ladies and gentlemen, that was our last question. I now hand the conference over to Mr. Udit Todi for his closing comments.
Thank you, everyone, for participation in our earnings call. We have uploaded the presentation on our company's website for your reference. In case of any further queries, you may get in touch with our Investor Relations adviser, which is Strategic Growth Advisors. And feel free to get in touch with us in case you have any further queries. Thank you.
Ladies and gentlemen, on behalf of Lux Industries Limited, it concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.