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Lux Industries Ltd
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Ladies and gentlemen, good day and welcome to the Lux Industries Limited Q4 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 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, Mr. Todi.
Good afternoon and thank you, everyone, for joining the earnings conference call for the quarter and the year ended 31st March 2022. Along with me, I have Mr. Udit Todi, Executive Director; our CFO, Mr. Saurabh Kumar Bhudolia; Mr. Jitendra Kumar Shah, V.P. Finance; and SGA, our Investor Relation advisers.
I hope you have received our results and investor presentation by now. For those who have not, you can read them on our website.
We have witnessed healthy demand across all our product categories in FY '22. This growth was largely driven by our power brands, especially ONN and Lyra and as well supported by our flagship brand Lux Cozi, the brand which has delivered consistent growth over the past many years.
For the first time, our premium brand, ONN, has surpassed the revenue mark of INR 100 crores, registering a revenue of INR 120 crores, a growth of approximately 52% over the same last year. While Lyra, our women's flagship brand, has surpassed the revenue mark of INR 300 crores, registering a revenue of INR 302 crores, a growth of approximately 34% over same last period last year. Lux Cozi registered -- delivered a strong growth number of INR 619 crores, a growth of 12% over the same period last year.
We are seeing a shift towards aspirational buying in our industry, becoming more than a necessity. Over time, we have noticed a shift in consumer purchasing behavior with a growing desire for mid and premium category products. There is a notable shift away from choosing plain white vests towards a greater spectrum of purchase preference with patterns, textures, colors and fabrics becoming more and more popular.
Lux being one of the largest branded innerwear players has consistently assessed the market pulse and responded by introducing creative product lines in the mass, mid and premium categories. We are confident about the future owing to a strong demand scenario, our diversified ultra product portfolio across all price points and our expansion into women's wear market.
The company has posted robust performance over the -- or for the year ended 31st March 2022 despite the industry experiencing multiple challenges, especially in the last quarter of FY '22. The company has reported the highest ever revenue of INR 2,312 crores, a growth of approximately 18% over the same last period.
The company has reported solid top line and bottom line growth driven primarily by pricing power and increased demand for branded products from tier 1, tier 2, tier 3 cities, indicating recovery from the pandemic. The company has undertaken several price increase during the year, which have led to an ASP increase of 19% on our premium wear category, 14% in our mixed innerwear category, and 25% in our economic wear category.
Sales of our economy segment, which includes brands like Lux Venus, Lux Karishma, has increased by 19%, while sales of mid-premium segment, which includes brands like Lux Cozi, Lux Inferno, Lux Cott’s Wool, Lyra and GenX, has increased by 13%. Our share of exports has gone up to -- which -- for the year FY '22 stood at 7% of our total revenues.
Our sales in the premium category, which include brand like One8, ONN and Lux Premiums, has seen a stellar growth of 36% and now contributes 14% of the company's revenue as compared to 12% same period last year, indicating our brand-building initiative are paying off.
We are pleased to report company's EBITDA for the year, which grew by approximately 25% and stood at INR 490 crores as compared to INR 390 crores same period last year despite disruption in supply chains, increase in raw material price and part of the third wave of COVID in quarter 4 FY '22.
EBITDA margin stood at INR -- at 21.2%, an increase in 121 basis points as compared to the same period last year. This improvement was largely facilitated by the command of pricing and the company's effective inventory and supply chain management across our vendor network, which helped then to mitigate the risk of price inflation to an extent. For FY '22, our ASP increased by approximately 19%, while our volumes have seen a marginal dip of only 1% compared to the same last year.
Now coming to our marketing and advertising spend. For FY '22, we have done several marketing campaigns depending on market transition and the [indiscernible] in terms of expanding our reach and tapping into new audiences. For FY '22, we have invested approximately INR 153 crores in advertising and promotion, which is 6.6% of our revenue, while we have spent over INR 794 crores over the last period, which is approximately 8% of our revenue. This has helped us to generate a revenue of INR 14.96 for every rupee spent. From FY '23 onwards, we plan to progressively restore our ad spending.
We are committed to remain flexible in the medium and the long term to handle the challenges and deliver consistent, competitive and cash-accretive growth in the quarters to come.
With this now I will ask Mr. Udit Todi, who oversees the company's strategy, to share his thoughts.
Good afternoon and a very warm welcome to everyone. During the quarter, the company debuted its luxury product line under its women's flagship brand, Lyra, and promoted it through a targeted television campaign. Previously, the majority of this market was unorganized and import dependent, but there has been a significant shift towards branded products for bearing the right fit and comfort.
The company is transforming Lyra from a single-product category, which was primarily leggings, to a multi-product, multi-category women's wardrobe brand with this launch. Increased penetration in the women's wear category will not only assist Lux in creating brands across genders but has also contributed to increased sales and profitability.
Lyra, our womenswear brand, accounted for approximately 13% of our overall revenue of INR 2,312 crores in FY '22.
Our men's premium wear brand, ONN, has reported a net sales of INR 120 crores with an overall growth of 52% over the same period last year. With an increased penetration and having balanced focus between outer and innerwear both, ONN has established its own visibility in men's premium wear segment.
In FY '22, the company was able to manufacture approximately INR 34 crores garment pieces across brands through its 7 state-of-the-art plants and has a market share of approximately 15% in the organized men's innerwear market. Our expansion strategy is in place to improve manufacturing and supply chain capacity in order to capture market share in the women's and kid's segment as well.
In terms of supply chain, we have one of the largest distribution networks, which is our company's core strength. We have been able to maintain long-term relationships with our distributors, dealers and retailers, thanks to our strong brand equity and goodwill. We are the largest domestic innerwear player volume with a strong presence in the country's North, East and West.
As on 31st March '22, we have been associated with 1,170-plus dealers, where we have less than 1% distribution attrition rate. For faster distribution of products across the country, we have set up 11 depots and 19 warehouses spread across 12 states across the country. We aim to further strengthen and streamline our distribution network to reach the untapped and undertapped markets of South India, where our sales contribution right now stands at 4%.
We are also extending our e-commerce presence by partnering with prominent e-commerce companies like Amazon, Flipkart, Myntra and Agio. We already ship over 4,000 orders daily, each day, and intend to achieve INR 100 crores in online sales revenue over the next 3 years.
With this, I will now request Mr. Bhudolia to take you through the financial performance.
Thank you, Udit. The company has posted robust performance for the quarter and the year ended 31st March 2022, backed by the accelerated demand across categories.
Our revenues for the quarter stood at INR 593 crores as against to INR 601 crores, registering a de-growth of approximately 1% compared to the same period last year. During the quarter, the industry encountered multiple challenges, including Omicron COVID-19 wave early in the quarter and higher raw material prices due to supply chain disruption as well as rising demand for cotton in international markets.
Our EBITDA for the quarter stood at INR 113 crores as against INR 129 crores during the same period last year. The EBITDA margin is at 19.07%. Our quarterly profit stood at INR 73 crores as against INR 91 crores in the same period last year. PAT margin for the quarter stands at 12.33%.
Now coming to the yearly performance, our revenues for FY '22 stood at INR 2,313 crores as compared to the INR 1965 crores in FY '21, registering a growth of approximately 18%. The reason why revenue contribution for FY '22 is as follows: North India is having a contribution of around 36%, while East India and West India are at 22%, well supported by Central India and South India with 16% and 4%, respectively; while revenue split from segment stood as follows: mid-premium is giving a revenue contribution of 54% -- sorry, while revenue split from segment stood as follows: mid-premium, 54%, economy 32% and premium 14%.
EBITDA for FY '22, which stood at INR 490 crores as compared to INR 393 crores in FY '21, with a growth of approximately 25% Y-o-Y. The EBITDA margin has seen an improvement by 121 basis points, which stood at 21.2% versus 19.99% in FY '21. PAT for FY '22 stood at INR 338 crores as compared to INR 269 crores in FY '21, recording a growth of approximately 25% same period last year. The PAT margin stood at 14.5% (sic) [ 14.6% ], an improvement of 91 basis points as compared to 13.7% in FY '21.
Debt-equity ratio stood at 0.26x. Interest coverage ratio stood at 29x. Our working capital cycle is stood at 188 days as of 31st March 2022 and was slightly on a higher end. This is mostly due to management's deliberate decision to stocking the raw materials, leading to a higher number of inventory days.
Our inventory day stands at 132 days as compared to 90 days same period last year. The company, on the other hand, is continuously monitoring and managing all levers to optimize its working capital cycle and to reduce working capital days in the coming few quarters.
As of the closing date, the company's cash and cash equivalent balance with a positive cash balance of -- with a gross cash balance of INR 140 crores.
Before we open the floor to questions and answers, I would like to emphasize that as a responsible company, we are always striving to increase our stakeholders' accountability. In all of our business operations and transactions, we are guided by our long-standing dedication to the highest ethical standards and transparency.
With this, we will now open the floor for question and answers.
[Operator Instructions] We take the first question from the line of Bhargav B from Kotak.
Yes. My first question is that we've seen extremely strong performance in 9 months. However, in the fourth quarter, there has been a significant -- different performance, especially double-digit volume decline and also significant deterioration in balance sheet quality with that cash cycle deteriorating about 190 days. If you can just sort of briefly explain in terms of what led to this kind of a performance, that would be helpful.
See -- if you'll see the top line, the top line is almost flattish in the quarter 4. And definitely, we were very much conservative and we were very proactive to manage our working capital, and that was the reason we have not allowed to dilute our credit control cycle, which we have already put on the data. That was one reason we capped top line in our control.
And from the working capital cycle days, anyway the way we have explained, there was a lot of ambiguity in the market. And in recent past, we have seen that there is a sharp increase in the raw material prices. So company has taken a calculated decision that instead of keeping the money in the FDs or in the investments, we wanted to invest our money in the inventory so that actually the margin can be protected. And in the coming few quarters, we can see the good result out of that. That was the only reason we have stock in the inventory, by seeing the near future requirements. And this is that -- how much the margin we can save by keeping the working capital cycle on a bit of higher days.
So when do we expect improvement in terms of working capital cycle? Because earlier, we were net cash. I think we are now net debt as well.
So as Saurabh has already mentioned, so see, during the last quarter, overall across the industry, the raw material prices have shot up very high. So even in the -- even if you happened to follow the news, there was a ministerial-level meeting headed by Piyush Goyal where they were deciding how to continue -- what steps can the government take with regards to the cotton prices. So the cotton price is right now standing at about INR 400 to INR 450 a kg, which, on an average last year, say, about 12 months back, used to hover around INR 250, INR 300.
So the prices are on a very sharp rise, and the customers generally take some amount of time to adopt to the new price regime. So although all the -- across our brands also, we have taken a price [ hangar ] and are in the process of taking a price hike.
So on, a, account of cotton prices moving up sharply, the cash requirement and the working capital requirement of the company have gone up significantly. And b, because of an inflationary trend in the cotton prices, so generally, if you used to keep a stock of, say, 15 to 20 days of yarn in hand, now we are maintaining a 30-day to 35-days stock of yarn in hand.
So both the accounts -- because of the number of days of inventory and because of per unit price of cotton, both of these accounts, the price being high, so the working capital requirement of the company has really shortened. And that is why you see that from a net cash, we were into a net debt situation.
But as you -- if you look at it from a long-term perspective, or from a medium-term perspective, all of this raw material which is of a lower price, which we right now have in hand, later on will ultimately confirm to -- or will convert to profitability for this one because even the average price of this yarn compared to right now what the prevailing price of the yarn is, we are standing to benefit. So as a prudent measure, we were taking this step that we have to, first of all, have enough yarn stock in hand and also enjoy the increase in price of the yarn.
Sir, what I was referring to our debtor days, which have also jumped up 17 to about 103 days. So we are earlier keeping a very tight control on the receivables cycle.
Correct. Correct, correct, Bhargav. So just as I had already mentioned, quarter 4 for across the industry, if you look at it, the mid segment and the economy segment have grown slow and have, in fact, seen a very slight volume de-growth. Whatever growth is being visible is because of price hikes. So cotton prices being so high, the customers are taking some amount of time to adjust to the new prices. So that is why -- because of slightly sluggish sales, that is why we are seeing the debtor days going up slightly. And...
And last -- sure. No, go on, go on, please.
Yes, please. Please, please go ahead. You were saying something.
Yes. So on the 11th of March, there was this BSE notification that said that the Board has granted new actions to Mr. Pradip Kumar Todi and Mr. Udit Todi. So if you can just elaborate on this because our shareholders didn't get the message properly.
See, so the idea was -- so see, at that point of time, that notice has been served by SEBI on the company. And actually, from the prudence point of view, Mr. Udit Todi and Pradip Todi being the related parties, they have served their notice to the company that until the time the investigation is not getting over, they do not want to participate in the agenda in which these discussions are going to be discussed.
So that was a temporary -- so because of that temporary, they have taken an absence to conduct or to participate in the Board of -- meetings about the matter of this insider trading and their [ movings], which was served by SEBI, is going to be discussed -- was getting discussed.
So there is no change in those, right? I mean the family is together and the roles are intact, right? We can assume that it's business as usual, especially given that now the confirmatory order has come in favor of the company?
So no. Again, if you'll see in terms -- until now, there were no allegations on the company. It was 14 parties which were involved. SEBI wanted to have a complete investigation against those 14 parties. And even if you refer to confirmatory order which we have received on 27th of May 2022, and they have now modified their restriction imposed in the interim order, and the only restriction remains is that they cannot deal in the scrip of the company, that is Lux Industries Limited. Otherwise, now they are allowed to deal in any other scrip of the -- any other listed entity until further order pending completion of the investigation.
So in terms of business roles, there is no change in business roles as far as responsibilities are concerned, right, within the family?
No, no, no. No. So initially, they took the leave of after because they wanted to have the independent view going, and they -- and to maintain the good corporate governance, I think that was the [indiscernible] independently they have chosen, and they have stopped the -- they have given this directive to the company.
We take the next question from the line of [ Amit Shah ] from [ Deep Research Capital ].
Hello? Hello? Am I audible?
Yes, you're audible.
Yes.
Hey, I have just one question. Actually, the market chatter does suggest there's some kind of brand separation that just happen among the two families. So some of the brands have -- got to Ashok T's family and some of the brands have come to the Pradip T's family. So just a follow-up on that. If that is true, then that [indiscernible] is going to happen to both the families. So how will the company operate? Or would there be an ultimate structure to support the sale? How will everything look like if the market chatter is true?
I don't think there is any kind of official statement from the company's side on this topic. And I believe this is more of a rumor and a speculation in the market. Unless and until we don't get a clarity, we do not want to comment on this question.
Is it something which has been in discussion for a while on the Board level?
No.
We have the next question from the line of [ Lushob Shah ] from [ Anovati Advisors ].
Sir, just one question on the inventory part. Sir we have largely built up the raw materials inventory. So would it be possible to break up of how much would be the basic? How much would be the finished goods in terms of the total inventory breakup?
Yes, that breakup is immediately not available. We'll share it we have IR. And in turn, they can share the data with you.
Perfect. But largely, it would be the basic raw material. That -- I just wanted to understand that part.
It is a mix of all the three factors put together between raw material, WIP and the finished goods. But yes, definitely, the inventory has gone up because we have increased our inventory days in the raw material largely.
[Operator Instructions] We take the next question from the line of Anurag Jain from [ Greenlands ] (sic) [ Green Lantern ] Capital.
Am I audible? So again -- yes, am I audible?
Yes. Yes, you are.
Yes. So my question again is on working capital. So actually, we got it, credit days, debtor days, everything has worsened. So while I can understand that you would have supported our vendors' payments -- or our distributors, but even our vendors also need -- sort of made early payments.
The other part was on the inventory really. So you then -- cotton prices are so high. And we are actually seeing some kind of a demand destruction happening and some resistance impacting on cotton and yarn prices. Is it prudent to sort of hold, I mean, such high levels of inventory at this point in time? So just want your thoughts.
Could you please repeat the last part of your question?
Yes. So what I was saying was that cotton prices have gone up so much.
Yes.
There's kind of demand destruction that's happening, and it's difficult to pass on the price increases to the market. In such a scenario of cotton prices, the likelihood is that they would come down at some point in time. Does it make sense to hold on to such huge levels of inventory at this point in time? Would it rather be advisable to be lean on the inventory?
So we have taken a very calculated decision. And when we see that the yarn prices are on the uprise, we would rather want to hold on to that yarn price rather than buy it at the highest price. And so whatever -- as I had earlier mentioned, whatever yarn prices -- or whatever yarn also that we are holding on our inventory, the value of those yarn prices, if I do a mark-to-market position, we would tend to gain. So had we not purchased the yarn at that point of time, we would have to purchase it at a much higher price.
So the purchase of yarn was done quite sensibly, and we still believe that it was a very good decision on part of the company that we still -- actually, there are two things. One is price and the other is availability. So at times, even at whatever X amount of price you pay, the yarn is not available because most of it ends up getting exported. So in order to maintain our supply chain throughout so that the supply chain is working smoothly and, on top of that, you also get to know that the yarn prices are on the rise, so you have to take care of both of these factors. And on both of these factors, the company, in fact, took a very sensible decision and stood to gain.
Got that. Got that. So at some point in time, will you take a call to normalize these inventory levels and so...
So the -- when the -- going forward, how will the yarn prices play out, it's difficult to comment. Right now, it's vending at a lifetime high, and there are no -- we do not see any signs of it coming down for at least the next month or so. So -- and beyond that, it's difficult to comment.
I understand.
Ultimately, it's a global commodity, and global commodities are -- there are many factors influencing the price of a global commodity. So...
Yes, it's most difficult.
It's difficult to comment.
The only thing in my head was just that at lifetime high prices, you are holding very huge inventories. That was the only thing I had. That's all from my side.
We take the next question from the line of Dhiral from PhillipCapital.
So my question is, if I look at our competitors, so despite price hike, they have been able to show the volume growth in FY '22, so -- which this is not the case for us.
So Dhiral, even -- if you'll see, if you're comparing us with our peers, like we have managed to actually sustain our margins. So we wanted to be very clear that unless and until we are not very much profitable, we are not going to run behind the top line. But if you'll compare with our peers, they have lost a considerable amount to secure their margin, whereas Lux is considerably almost flat as far as margin is concerned. So we get more eager to have a profitable growth instead of just having a top line and to manage the margin.
So this will remain same even for FY '23? Or are we looking for any volume growth?
Sorry. Come again, Dhiral?
So this will remain even for FY '23? Or -- but are you now focused on the profitable growth or we would be looking at volume growth also?
No. Definitely, that will...
That will completely -- yes, I'm sorry. That would completely depend on the cotton prices as it would pan out in the coming financial year. If there is a continuous increase in the cotton prices, as it was in the last financial year, we would -- our new focus would be to retain the margins. But if the cotton prices stabilizes in the next few quarters, then our focus would shift that to be the same margins and we can have a volume growth. While at peers, who are at a lower margin, it would be difficult for them to increase their margins to our standards and have a volume growth. Then the cotton price will be stabilized. But in the last 4 to 5 quarters, what we are seeing is a continued upward trend in the price of the cotton. And we believe that some way or the other, it might take 2 months, it might take 6 months, it might take 12 months, when the cotton prices get stabilized, then we would have the long-term benefit from it.
Okay. Got your point, sir. So for FY '23, are you also looking for improvement in margins as we did in FY '22?
See, as -- well, we believe that...
So for quarter 4, then [indiscernible]...
[indiscernible] margins would be...
Go ahead, go ahead.
So for the improvement in margin -- or stable margin would be improved, that would be generally from the mix change. But the margins would remain the same of every single segment. But whatever it will be from the mix that we have seen in the last financial year, that the premium segment has been growing at a much higher rate than the economy the mid-premium segments. So we all know, that the premium segment command the better margins than the economy segment. So due to this mix shift, there has been a good margin increase also. And in the coming years, we can expect the same scenario happening. And if the cotton prices get stabilized, then we will see a good volume growth as well.
Okay. And sir, what was the Q4 volume decline?
Our quarter 4 volume decline is in the single digit only. But we have -- we are just -- or we've seen the numbers. We'll share the numbers with our IR team.
Okay. And sir, what will be the ad spend for FY '23/'24?
For FY '23/'24 going ahead, see, as a policy, we always maintain to try to keep it at around, say, 7% to 8%, and that is what we are targeting to do in the coming year as well.
Okay. And sir, lastly, what was the online sales contribution FY '22 as we are targeting INR 100 crore kind of a -- over the next 3 years?
So we have already established a run rate of around more than INR 50 crores. So I believe on a 12-month basis, in another 12 to 18 months' time, we should be in a position to get a run rate of INR 100-plus crore kind of number.
And we take the next question from the line of [ Vishal Hanariya ] (sic) [ Vishal Bagadia ] from Roha Asset Managers.
Sir, my question is on the ASP side. We are seeing that cost pressures are still going on. So in the new fiscal, since the half of the quarter has gone by, have we seen any price increase? And on the future for the near term in this year, are we expecting any further price increases?
So as the cotton prices are already on the highest, we are definitely -- have already taken a price hike, and we will be taking a price hike also again depending on how the cotton prices move. So for example, we'll be taking up -- we are already in the process of taking up prices in the current quarter as well. So yes, if I look at the entire overall fiscal next year, we always try and maintain our EBITDA margin intact, and that is how we try and increase our prices.
So if you can quantify what is the price that we have taken in the quarter, April and months -- April and May months, sorry, as a percentage.
So I said we will be going to take a price hike in the current quarter. It's not exactly April and May. Yes, we are going to take a price hike within this quarter.
Okay. And sir, my second question is on the long run, we had such a target that we'll go to about INR 5,000 crores in the coming 3 to 4 years' time. So how are we seeing that as of now... [Technical Difficulty] Sorry. Yes, yes repeating my question, so on the long run, we had set a target of about -- reaching the top line of about INR 5,000 crores in 3 to 4 years' time. So how are we seeing -- looking at the demand in the market going forward, will -- are we on track? Or we should be able to achieve it on the lower side like in 2.5, 3 years' time? Because we have been aggressive on our growth strategy as of now. We are improving our brands, the product mix. So can you just enlighten more on that?
You see, 2, 2.5, 3 years will be a shorter -- I don't think it will be possible in the next 2 years or something. It would -- but overall on the demand side, the demand overall in the economy is quite good because there is a sense of consumerism which is going on in the Indian economy. Even if you look at post COVID, people are traveling like anything, flights are full, hotels are full. And people just want to spend and splurge because everyone has now understood that there is a -- the savings quotient is going down, and people are wanting to spend more.
So yes, ultimately, deep down fundamentally, the demand side is there. What -- the only constraint or only restriction which we see is that because the cotton prices have gone up significantly, so it might just come with a lag effect. People get -- people take some amount of time to get used to the new prices. And it is not that we increase -- we can just pass on the prices immediately. The price increase are always passed on with a lag effect. And the customer also tends to adjust to the new price regime with a lag effect.
So this time lag is something which is the only constraint. But yes, deep down in the kind of products which we are offering, they are not fashion wear products. They are basic essentials. So these are certain types -- type of products which the consumers will have to consume whether today or tomorrow. They can postpone their consumption, but they cannot avoid their consumption.
So sir, we can say about 3 -- about 4 years, we'd be a good target for INR 5,000 crores of top line?
So it is difficult to put a number -- exact number to it. But yes, we are looking at a healthy growth rate, and we're looking to beat the -- we're looking at capturing more market share and beating the industry growth rate. That is something which we are targeting ourselves at. But how the industry pans out in the next few years is difficult to comment. What we are aggressively looking at is capturing more market share.
We take the next question from the line of Rajiv from DAM Capital.
Sir, if you can help with the volume numbers across the 3 segments for the quarter because your Slide #35 has the full year number. If you can give...
Yes, full year number is there. The quarter numbers, we'll share with our IR and, in turn, they can share it with you.
Do you have it handy for Lyra, for example? That segment has done well for the...
So we have the full year number with us. At full year, we -- at the volume level, we have grown about 22%. And we do not have the quarterly numbers with us. But quarterly, yes, in the -- we've seen a good growth coming in. But we don't have the exact figures with us right now. But on a fiscal year-to-year level, we have grown about 22% overall, from fiscal year ended March '22 over fiscal year ended March '21.
But specifically, if we list Lyra from FY '22 as compared to FY '19 levels and then we compare against other listed peers in the bottom wear segment, do we think we are slightly doing under -- or a shade under the other player?
No. Certainly, I will tell you if you're the kind of peer which you are referring to, so we are operating in two very different spheres. They are mostly, I believe, into organized retail, whereas we are more into the general trade as well as a bit of organized retail. So the kind of markets we are catering to are very different. But yes -- see, for example, during COVID, our sales did not take a hit much because we were in the general trade as well, whereas people, those who are only into organized retail, have taken a big hit. So there are pros and cons to it both.
And yet, we are not only into bottom wear, we are -- as you mentioned, we have also forayed into the lingerie space. And we see promising results coming out from the lingerie space because, as we have always mentioned in our previous con calls, this is one space which we believe is very undertapped and which is still in the hands of unorganized players. So as -- nonbranded players.
So we believe that if this entire category sees brands coming in at a reasonable price point, not at a price point which many people can't afford, if you look at a reasonable price point, say about approximately, say, on an average of INR 300 to INR 350, that is a price point which we believe that a lot of traction will come in. And that is one of the spaces which we feel is very, very exciting going ahead.
So yes, bottom wear is definitely growing and doing quite well. And at the same time, we are also looking at the lingerie space as well as the loungewear space.
This 22% growth will again be largely led by price, right, as we have seen for the segment?
No, no, no. So what -- so I will break up. For the year ended, Lyra would have grown 22% on volume -- volume-wise. And if I look at turnover-wise, they have grown 34%. So that would translate to 12% value growth, 22% volume and 12% value. So overall 34% growth.
Okay. Sure. And if I look at your premium segment, I mean, last year, it -- I mean, the margins you used to share for this segment used to be 18% to 21% bracket and then you shifted that to 20% to 26%. I mean possibly, some of the price hikes would have been -- and this time around, you have grown at 36%, but there is no increase in the margin profile of this segment. Shouldn't this be going up?
That's bracket only. And you can even see the margins for the year-on-year basis is coming under that bracket. So last year, March '21, versus this year, March '22, the margin is almost in the same range. So we changed the bracket only in case of there is -- on treatment of a brand under that bracket. Otherwise, we keep the brands under the similar kind of range.
Okay. And -- but the -- usually, most retailers try not to touch their entry-level prices, right? For example, your economic segment, that [Technical Difficulty]
Hello?
Yes.
Yes. So coming on to the economic segment, usually most retailers don't touch their entry-level segments, their entry-level prices. There also, we have seen a very significant jump in the price. Or am I reading it wrong that the entry level has not been touched, but the overall portfolio has seen a...
I could not get your -- understand the question properly with regards to the economic segment. What is it exactly that you're asking?
The ASPs. The ASPs have grown up, I think, close to 30% in the last 2 years, 30%, 31% put together. Usually, most retailers don't touch the entry-level prices where customers get intimidated or...
On the economic segment, even if you'll see there is an overall sales growth of 19% on an annualized basis, and even this growth has come after taking an ASP growth of close to 25% for the year.
No, I'm -- yes, correct. So I'm saying that 25% on the economic segment, wouldn't it hurt? So the...
No, no, no. As -- so see, cotton being a basic commodity, the prices of cotton grew up. All the other manufacturers within that space will have to increase their price. They will be left with no option because if you're selling an economic product, your margins are already quite reasonable. And if the yarn prices are going up, then you're not left with an option but to increase your prices.
So if -- it is not that only we have increased our prices. If everyone, if every player in that particular segment happens to increase their price, then the customer has to end up -- the retailer and the customer ends up accepting that price.
So I guess my point is this volume decline which you are seeing minus 5%, is it going to somebody else or the -- I mean, is it responsible...
No, no. It's not. In terms of -- even if I look at the volume market share of that particular segment, it is not that we have lost any market share in that particular price point. It is just that overall in the economy, there was a decrease in consumption because, as I said, people tend to take on the price hike with a lag effect.
Sure. And then the -- then you're saying that in the economic side and on terms of price hikes, there'll be more coming through in the current fiscal as well?
I'm sorry?
I mean there'll be more price hikes which will come through in the current fiscal year?
There will be further price hikes coming in because as -- the way the yarn prices are behaving, it is quite wild. It's on a complete wild run. And the way the cotton prices are right now, every player in this sector will have to compensarily (sic) [ compensatorily ] end up increasing their prices. There's -- no one is left with an option.
And you haven't written down trading in the sense people going back to -- from a brand to a nonbrand because of...
No, it is not that people move from a brand to a nonbrand. What people might perhaps do -- is it for something which we are yet to see? But what people might perhaps do is they might move from a mid-premium product to an economy product. But they tend to stick to their brand. It is difficult for a customer to move from a branded to a nonbranded product. Within the same brand, they might end up -- depending on the prices and depending on their preferences, they might end up choosing a more cheaper product.
We take the next question from the line of from Ronak Vora from AUM Advisors.
Sir, what kind of demand environment are we witnessing in Q1 and Q2 as of now? Are we seeing that our inventory is getting picked up? And will that lead to lower inventory levels going ahead?
So see, it's quite difficult to comment on current quarter figures. But yes, overall, we would say that it's a mix kind of a response. It is still -- the yarn prices at which we were in Q4, we are spending at a much higher yarn price in Q1. So as I said that, again, when we take a price hike, again the customers tend to respond it with a lag effect. The yarn price is only keeping -- it's reaching a lifetime high every day. So at whatever price you end up buying, you end up tending to be a gainer really.
And just on the pricing environment, the environment that I want to understand is the volume environment. Are we seeing better volumes month-on-month levels? Are they still remaining flattish or in a down trend?
So see, the volumes, I would say, are decent. They're not bad. But yes, it's difficult to give an exact picture of the current quarter.
We take the next question from the line of Dana Prerna Jhunjhunwala from Elara Capital.
Sir, I have a few questions. One is out of your total ASP growth of 19%, how much will be the total price hike that would be contributing to it?
So yes, there has been a slight product mix change also. We've moved the premium product portfolio. It has done much better. But I would still contribute most of the ASP growth coming in from the price hike. The bulk of it would be price hike, and a bit of it would be due to mix change.
So can I assume 15%, 16%?
Yes.
Okay. And sir, you have mentioned -- your presentation is very detailed. And just going through it, and wanted to understand this accelerating digital adoption. So what exactly are you doing here in terms of digital adoption? Could you please explain that slide?
So allow me to bifurcate this in two parts. One is from the governance point of view that we are in the process of digitalizing all our SOPs. There is a workflow system where the entire system can be connected with one wire and everyone can see that -- how the data is moving and how the approval mechanism should work in the system.
The second part is from the business point of view, that -- how we can more integrate with our retailers. So we are working on a few of the system where we can directly have a reach to understand which retailer is working for me, which retailer is not. In this area, how much is that? So how many penetration we have done? And what is the scope to grow again further? So we have bifurcated the things in two parts: one, to have a smooth workflow; the second, how to scale up the business with the help of the data.
Okay. And you've mentioned about detailed IT investment road map for the next 10 years. So how much would you be investing as a ballpark number? And what -- as a result of this investment, what is the likely improvement in the distribution network that you would be looking at?
So see, company has always been very upbeat about investing in digital, investing in IT and investing in systems. We have always -- even with regards to SAP implementation and with regards to our distribution management and with regards to sales trend monitoring. So there are different fields where the company is investing in the IT.
And see, right now, it won't be exactly correct to spell out all the details. But yes, what we can safely understand is that we would -- right now, from a manual-driven process, we want everything gradually and gradually to move to an automated kind of a process where things and decisions are -- and the data is presented in such a format where things are decisions are taken quite automatically rather than with manual intervention. That is the thought. And with that thought, we are proceeding and investing in the IT.
Fantastic. Sir, you've -- 18 EBOs now. What has been experience? And what are the key learnings? And how are you going to scale up this format going forward?
So we found a mixed -- we've got have a mixed sort of a response with the EBOs. And so some of the stores have performed fantastically. Some of the stores have been laggards. So we've seen both kind of responses. So right now, it's a learning process for us as well, and we are just trying to fine-tune the locations where we want to open.
Okay. Okay. Understood. So -- but then there is no aggressive target to increase in EBOs? It's still under a learning process, right? [Technical Difficulty] Hello?
The line for the management is broken. Please stand by while connect them back to the conference.
Yes. So we are on an EBO expansion strategy?
[indiscernible]. So yes, we are seeing -- we've seen a mixed sort of a response. And going ahead, when we open a new EBO store, the company now has a learning from its past experience as to what sort of stores, what type of stores we need to open. So hopefully, in the coming few quarters, when we open new stores, the results will be better.
Okay. And sir, last two questions. One is on the exports market. You've done extremely well on exports side with INR 169 crores of sales. How much growth can we expect in the next 4, 5 years -- 3 to 5 years, whatever period you're comfortable with, to -- in that category? Because, I mean, I believe that segment has done extremely well over the last few years despite COVID-related restrictions and stuff. INR 169 crores is very good because you were around INR 100 crores, INR 110 crores 2, 3 years back -- 3 years prior to COVID.
So we believe that going forward, we are expecting the export sector to grow around 15% to 20%.
Okay. And sir, last question on inflation. We've seen a tremendous price hike in last 1 year -- 1, 1.5 years in the economy -- I mean, economy segment, largely led by either supply chain or raw material or any other factors. Now when eventually these things cool down, historically do price hikes -- are they rolled back? Or we continue with the same price levels and these remain fixed?
No. So see, going forward, as the prices go higher, then we try to increase our product prices and vice versa. When the cotton prices go down. So it is not that the prices will stick to what they were. The prices will also come down slightly.
Okay. Okay. But the entire pass-on will not happen? So you'll retain some of the price hike?
You tend to -- that depends -- that actually depends on what the market scenario is and how the market is playing out. So right now, see, as I said, a lot of people have already postponed their consumption. So if the demand -- it all depends. If demand comes in together, then the entire price hike is not rolled back. But it actually depends on the market situation. But yes, if the yarn prices come down, then we also tend to decrease our prices. That has historically been the trend.
Okay. Sir, last question on your winterwear. Generally, you start to winterwear production this time. So how has been the demand in the winterwear from your distribution network? And...
So see, last year -- last fiscal year, the winterwear was a super flop season, and that was across the entire nation be it apparel, be it cosmetics, be it any other category which caters to the winterwear products. The overall winterwear demand was quite subdued due to the seasonal play. And this year also, we are expecting that -- we are expecting this year's winter season to be quite good, but it is actually something which is very, very season dependent and very weather dependent. So it will be very difficult for any player in this economy to comment as to how the winter will play out, though it is something which -- the season only know, the weather gods only know how will the weather turn out to be.
The -- as far as our products are concerned, our product is right now also the top-selling product in our category. But if the winter season happens to fail, then it's in no one's hand. But if the winter season turns out to be good -- because generally, historically, there are no two back-to-back years in the winter fail. If last year the winter was bad, then generally what happens, the next year's winter turns out to be good. There are no two back-to-back failed seasons. So we are expecting this year winter to be good. And in winter, we are the market leaders with our products like y Lux Inferno and Lux Cott’s Wool. In both of these categories, we are a market leader.
It is just for the season to decide as to how severe the cold ends up to be and at what point -- in what point of time the winter kicks in, the cold [indiscernible] comes in. Last year, the season started to happen, I think, end of December or early Jan, which was quite late for the winter season. So if the winter sets in around mid-November, it's very good for everyone. If the winter sets in around mid-December or early Jan, then the season tends to fail.
Due to time constraints, I would now like to hand the conference over to the management for their closing comments.
I take this opportunity to thank everyone for joining the call. I hope we've been able to address all your queries. For any further information, kindly get in touch with us or Strategic Growth Advisors, our IR advisors. Thank you, everyone.
Thank you. On behalf of Lux Industries Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.